<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (fee required)
For the fiscal year ended October 31, 1994
-----------------
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (no fee required)
For the Transition period from to
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Commission file number 1-6196
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PIEDMONT NATURAL GAS COMPANY, INC.
(Exact name of registrant as specified in its charter)
North Carolina 56-0556998
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1915 Rexford Road, Charlotte, North Carolina 28211
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (704) 364-3120
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange on
Title of each class which registered
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Common Stock, no par value New York Stock Exchange
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 such 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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
State the aggregate market value of the voting stock held by nonaffiliates
of the registrant as of January 11, 1995.
Common Stock, no par value - $488,285,050
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding at January 11, 1995
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Common Stock, no par value 26,689,590
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of Shareholders on
February 24, 1995, are incorporated by reference into Part III.
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PIEDMONT NATURAL GAS COMPANY, INC.
1994 FORM 10-K ANNUAL REPORT
---------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Part I. Page
----
<S> <C> <C>
Item 1. Business 1
Item 2. Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 7
Part II.
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 8
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 8. Financial Statements and Supplementary Data 18
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 36
Part III.
Item 10. Directors and Executive Officers of the Registrant 37
Item 11. Executive Compensation 39
Item 12. Security Ownership of Certain Beneficial Owners
and Management 39
Item 13. Certain Relationships and Related Transactions 40
Part IV.
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 41
Signatures 46
</TABLE>
<PAGE> 3
PART I
Item 1. Business
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Piedmont Natural Gas Company, Inc. (the Company), originally
incorporated in 1950, is an energy and services company primarily engaged in
the transportation and sale of natural gas and the sale of propane to 560,000
residential, commercial and industrial customers in North Carolina, South
Carolina and Tennessee.
The Company's utility operations serve over 512,000 natural gas
customers. The Company and its non-utility subsidiaries and divisions are also
engaged in acquiring, marketing and arranging for the transportation of natural
gas to large volume purchasers, in retailing residential and commercial gas
appliances and in the sale of propane to over 47,000 customers in and adjacent
to the Company's three-state service area.
In the Carolinas, the service area is comprised of numerous cities,
towns and communities including Anderson, Greenville and Spartanburg in South
Carolina and Charlotte, Salisbury, Greensboro, Winston-Salem, High Point,
Burlington and the Hickory area in North Carolina. In Tennessee, the service
area is the metropolitan area of Nashville, including portions of eight
adjoining counties. The Company's propane market is in and adjacent to its
natural gas market in all three states.
On February 25, 1994, the Company's shareholders approved a change in
the state of incorporation from New York to North Carolina. The
reincorporation was effected March 1, 1994, by merging the Company, a New York
corporation, into a wholly-owned subsidiary, PNG Acquisition Company, a North
Carolina corporation. In connection with the merger, each share of the
Company's Common Stock, $.25 par value per share, was exchanged for one share
of Common Stock, no par value, of PNG Acquisition Company. Immediately
following the merger, the name of the surviving corporation was changed to
Piedmont Natural Gas Company, Inc.
Operating revenues shown in the consolidated financial statements
represent revenues from utility operations only. Such revenues totaled $575.4
million for the year ended October 31, 1994, of which 41% was from residential
customers, 29% from commercial customers, 29% from industrial customers and 1%
from various sources. Revenues from non-utility operations, less related costs
and income taxes, are shown in the consolidated financial statements in other
income. Non-utility revenues as a percentage of total revenues, including
utility operations, were 8% in 1994. No single non-utility activity accounted
for greater than 6% of total revenues. Income from non-utility activities as a
percentage of total net income was 12% in 1994. No single non-utility activity
accounted for more than 8% of net income.
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The Company is principally engaged in the gas distribution industry
and has no other reportable industry segments.
The Company's utility operations are subject to regulation by the
North Carolina Utilities Commission (NCUC) and the Tennessee Public Service
Commission (TPSC) as to the issuance of securities, and by those commissions
and by the Public Service Commission of South Carolina (PSCSC) as to rates,
service area, adequacy of service, safety standards, extensions and abandonment
of facilities, accounting and depreciation. The Company is also subject to or
affected by various federal regulations.
The Company holds non-exclusive franchises for natural gas service in
all communities where required, with expiration dates from 1995 to 2044. The
earliest date at which a franchise for a major service area expires is 1999.
In the Company's opinion, the franchises are adequate for the operation of its
gas distribution business and do not contain restrictions which are of a
materially burdensome nature. In most cases, the loss of a franchise would not
have a material effect on the Company's operations. The Company has never
failed to obtain the renewal of a franchise; however, this is not necessarily
indicative of future action.
The Company's utility business and its non-utility propane activities
are seasonal in nature as variations in weather conditions generally result in
greater earnings during the winter months. The Company normally injects
natural gas into storage during periods of warm weather (principally April 1
through October 31) for withdrawal from storage during periods of cold weather
(principally November 1 through March 31) when sufficient quantities of flowing
pipeline gas are not available to meet customer demand. During 1994, the
amount of natural gas in storage varied from 4.4 million dekatherms (one
dekatherm equals 1,000,000 BTUs) to 16.4 million dekatherms, and the aggregate
commodity cost of this gas in storage varied from $10.5 million to $35.6
million.
The following is a five-year comparison of gas sales and
other statistics for the years ended October 31, 1990 through 1994:
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES (in thousands):
Sales and Transportation:
Residential $236,232 $217,545 $180,479 $154,945 $152,885
Commercial 165,805 154,894 126,417 117,764 123,463
Industrial 165,989 173,943 146,964 133,367 121,959
Public Housing 4,082 4,087 3,963 3,736 3,859
For Resale 815 1 - - 44
Miscellaneous 2,431 2,290 2,079 1,736 1,605
-------- -------- -------- -------- --------
Total $575,354 $552,760 $459,902 $411,548 $403,815
======== ======== ======== ======== ========
GAS DELIVERED - DEKATHERMS (in thousands):
Residential 35,380 33,554 29,685 25,991 26,193
Commercial 28,931 28,179 25,876 23,869 24,900
Industrial 60,966 57,505 58,740 54,255 51,456
Public Housing 713 723 765 748 793
For Resale 140 192 - - 8
------- ------- ------- ------- -------
Total 126,130 120,153 115,066 104,863 103,350
======= ======= ======= ======= =======
</TABLE>
2
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<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
NUMBER OF CUSTOMERS BILLED (12 month average):
Residential 411,027 387,126 365,717 341,808 320,874
Commercial 56,147 54,451 52,603 50,561 48,805
Industrial 1,953 1,767 1,739 1,776 1,767
Public Housing (units) 9,834 9,268 9,964 10,403 10,556
-------- -------- ---------- -------- --------
Total 478,961 452,612 430,023 404,548 382,002
======== ======== ========== ======== ========
AVERAGE PER RESIDENTIAL CUSTOMER:
Gas Used - Dekatherms 86.08 86.67 81.17 76.04 81.63
Revenue $ 574.74 $ 561.95 $ 493.49 $ 453.31 $ 476.46
Revenue Per Dekatherm $ 6.68 $ 6.48 $ 6.08 $ 5.96 $ 5.84
COST OF GAS (in thousands):
Natural Gas Purchased $242,609 $267,217 $ 211,492 $ 173,451 $ 190,703
Liquefied Petroleum Gas (LPG) 204 - 138 55 87
Transportation Gas Received (Not
Delivered) (616) (216) 627 187 62
Natural Gas Withdrawn from
(Injected into) Storage, net 4,106 (894) (10,344) 1,141 3,841
Other Storage 1,058 316 901 620 1,953
Other Adjustments 93,214 62,465 50,955 65,847 39,614
-------- -------- ---------- --------- ---------
Total $340,575 $328,888 $ 253,769 $ 241,301 $ 236,260
======== ======== ========== ========= =========
COST OF GAS PER DEKATHERM OF GAS SOLD $ 3.29 $ 3.11 $ 2.64 $ 2.90 $ 2.87
SUPPLY AVAILABLE FOR DISTRIBUTION - DEKATHERMS
(in thousands):
Natural Gas Purchased 106,556 106,507 101,539 85,286 84,296
LPG 52 - 49 34 34
Transportation Gas 22,299 14,281 19,181 21,631 20,867
Natural Gas Withdrawn from (Injected
into) Storage, net (1,646) (41) (4,072) (1,340) (697)
Other Storage 25 33 221 54 32
Company Use (159) (171) (148) (128) (135)
------- ------- ---------- --------- ---------
Total 127,127 120,609 116,770 105,537 104,397
======= ======= ========== ========= =========
UTILITY CAPITAL EXPENDITURES (in thousands) $105,787 $ 84,242 $ 73,776 $ 68,803 $ 71,246
GAS MAINS - MILES OF 3" EQUIVALENT 16,300 15,900 15,620 15,300 14,600
DEGREE DAYS - SYSTEM AVERAGE:
Normal 3,630 3,637 3,648 3,669 3,670
Actual 3,567 3,659 3,369 2,934 3,250
Percentage of Actual to Normal 98% 101% 92% 80% 89%
PROPANE OPERATIONS:
Revenues (in thousands) $ 34,972 $ 32,120 $ 29,689 $ 25,226 $ 26,706
Volumes Sold (gallons in millions) 41.3 37.2 34.1 27.8 31.7
Customers (at year end) 46,900 42,600 40,200 36,800 32,700
</TABLE>
During 1994, the Company delivered 126.1 million dekatherms of natural
gas to its customers, of which 22.5 million dekatherms were transported for the
Company's largest industrial customers. This compares with 120.2 million
dekatherms delivered in 1993, of which 14.5 million dekatherms were
transported.
Sales to temperature-sensitive customers, whose consumption varies
with the weather, were 65 million dekatherms in 1994, compared with 62.5
million dekatherms in 1993. Weather which was 2% warmer than normal was
experienced in 1994, compared with 1% colder-than-normal weather in 1993. The
Company sold or transported 61 million dekatherms to industrial users in 1994,
compared with 57.5 million dekatherms in 1993. Industrial sales are the most
price-sensitive of the Company's markets and are largely a function of the
Company's ability to obtain reliable supplies of natural gas competitively
priced with other industrial fuels.
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Except as set forth below, all natural gas distributed by the Company
is transported to the Company by one of five interstate pipelines,
Transcontinental Gas Pipe Line Corporation (Transco), Tennessee Gas Pipeline
Company (Tennessee Pipeline), Texas Eastern Transmission Corporation (Texas
Eastern), Columbia Gas Transmission Company (Columbia Gas) and Columbia Gulf
Transmission Corporation (Columbia Gulf).
As of November 1, 1994, suppliers have contracted to provide the
following daily pipeline capacity in dekatherms of natural gas:
<TABLE>
<S> <C>
Transco 344,300
Tennessee Pipeline 74,100
Texas Eastern 1,700
Columbia Gas (through arrangements with Transco and Columbia Gulf) 23,000
Columbia Gulf 5,000
Conoco, Inc. (limited term) (transported through Transco) 11,100
-------
Total 459,200
=======
</TABLE>
The Company has the following additional daily peaking capacity in
dekatherms of natural gas to meet the firm demands of its markets. This
availability varies from 10 days to 151 days.
<TABLE>
<S> <C>
Liquefied natural gas 220,000
Liquefied petroleum gas 6,000
Transco 86,000
Columbia Gas 42,000
Tennessee Pipeline 55,900
New Jersey Natural Gas Company (limited term) 30,000
Other 45,000
-------
Total 484,900
=======
</TABLE>
From time to time, the Company is able to purchase gas from South
Carolina Pipeline Corporation (SC Pipeline), an intrastate pipeline in South
Carolina, at market prices on a month by month basis.
The Company utilizes a "best cost" gas purchasing philosophy that
seeks to purchase gas on a short- or long-term basis by weighing cost against
supply security and reliability factors. Of the 106.6 million dekatherms of
natural gas purchased by the Company in 1994, approximately 15% was purchased
under short-term contracts of less than one year, 14% under contracts of from
one to three years and 71% under contracts of over three years. The majority
of these purchases was from non-pipeline sources.
The Company owns or has under contract 19.7 million dekatherms of
storage capability, either in the form of underground storage or liquefied
natural gas. This capability is used to supplement regular pipeline supplies
on colder winter days when demand increases.
For further information on gas supply and regulation, see "Gas Supply
and Rate Proceedings" included in Management's Discussion and Analysis of
Financial Condition and Results of Operations in Item 7 of this report.
4
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Currently, approximately 35% of the Company's annual gas deliveries
are being made to industrial or large commercial customers who have the
capability to burn a fuel other than natural gas. The alternate fuels are
primarily fuel oil or propane and, to a much lesser extent, coal or wood. The
ability to maintain or increase deliveries of gas to these customers depends on
a number of factors, including governmental regulations, the availability of
gas from suppliers and the price of gas as compared with alternate fuels.
Filed tariffs with the NCUC, the PSCSC and the TPSC permit the Company
to reduce its filed rates to meet competition. During 1994, the Company
negotiated $11.6 million of rates to industrial and large commercial customers
in North Carolina and South Carolina. The Company was able to recover these
negotiated rates by purchasing and arranging interstate pipeline transportation
for gas purchased at lower costs than that included in the Company's filed
tariffs under procedures approved by the Federal Energy Regulatory Commission
and state regulatory agencies. The ability to continue to offset revenue
losses if prices of competitive fuels fall below the price of natural gas in
the Company's tariffs depends on a number of factors, including the ability to
obtain competitively priced gas from suppliers, the ability to obtain
transportation for gas purchased from suppliers other than regulated pipelines,
the ability of customers to obtain pipeline transportation for customer-owned
gas and continued regulatory approval of these procedures.
Although local distribution companies, such as the Company, are
generally concerned about the impact of the ability of a large commercial or
industrial customer to bypass their systems, the Company does not view bypass
from existing commercial and industrial customers as a major issue. For a
customer economically to bypass the Company's distribution system under current
conditions, the customer would need to have a large gas load, greater than
4,000 dekatherms per day, and/or close proximity to an interstate pipeline.
With the exception of one customer located in Nashville, Tennessee, the Company
does not believe any of its existing customers have the conditions that are
conducive to bypass. However, the Company has a contract with this customer to
provide services at rates which the Company believes makes it not economically
feasible for the customer to choose to bypass.
In the residential and small commercial markets, natural gas competes
primarily with electricity for such uses as cooking and water heating and with
electricity and fuel oil for space heating.
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<PAGE> 8
During 1994, the Company's largest customer contributed $15.8
million, or 2.5%, to revenues.
The amount of research and development costs incurred in connection
with Company-sponsored research is immaterial. The Company contributes to gas
industry-sponsored research projects; however, the amounts contributed to such
projects are minimal.
Compliance with federal, state and local environmental protection laws
had no material effect on capital expenditures, earnings or competitive
position during 1994. For further information on environmental issues, see
"Environmental Matters" included in Management's Discussion and Analysis of
Financial Condition and Results of Operations in Item 7 of this report.
As of October 31, 1994, the Company had 1,968 employees, compared with
1,947 employees as of October 31, 1993.
Item 2. Properties
- --------------------
The Company's properties consist primarily of distribution systems and
related facilities to serve its utility customers. The Company has constructed
and owns approximately 459 miles of lateral pipelines up to 16 inches in
diameter which connect the distribution systems of the Company with the
transmission systems of its pipeline suppliers. Natural gas is distributed
through approximately 16,300 miles (three-inch equivalent) of distribution
mains. The lateral pipelines and distribution mains are located on or under
public streets and highways, or private property with the permission of the
individual owners.
The Company either owns or leases for varying periods district and
regional offices for its utility and non-utility operations.
Information concerning oil and gas drilling and producing activities
is not presented as these activities are not material to the Company's results
of operations or financial position. During 1994, the Company sold its
exploration and development properties. The disposition of these properties
did not have a material effect on the Company's operations.
Item 3. Legal Proceedings
- ---------------------------
There are a number of lawsuits pending against the Company for damages
alleged to have been caused by negligence of the Company's employees. The
Company has liability insurance which it believes is adequate to cover any
material judgments which may result from these lawsuits.
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Item 4. Submission of Matters to a Vote of Security Holders
- -------------------------------------------------------------
None.
7
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
- ------------------------------------------------------------------------------
(a) The Company's Common Stock is traded on the New York Stock
Exchange (NYSE). The following table provides information with respect to the
high and low sales prices on the NYSE (symbol PNY) for each quarterly period
for the years ended October 31, 1994 and 1993.
<TABLE>
<CAPTION>
1994 High Low 1993 High Low
---- ---- --- ---- ---- ---
<S> <C> <C> <C> <C> <C>
January 31 25 1/2 19 3/8 January 31 20 1/2 18 7/8
April 30 23 3/8 19 5/8 April 30 24 5/8 19 3/8
July 31 21 7/8 19 3/8 July 31 24 3/4 21 3/8
October 31 21 3/4 19 1/2 October 31 26 3/8 24
</TABLE>
(b) As of January 11, 1995, the Company's Common Stock was held by
12,498 shareholders of record.
(c) Information with respect to dividends paid on the Company's
Common Stock for the years ended October 31, 1994 and 1993, is as follows:
<TABLE>
<CAPTION>
Dividends Paid Dividends Paid
1994 Per Share 1993 Per Share
------ -------------- ------ --------------
<S> <C> <C> <C>
January 31 24.5c. January 31 23 c.
April 30 26 c. April 30 24.5c.
July 31 26 c. July 31 24.5c.
October 31 26 c. October 31 24.5c.
</TABLE>
The Company's note agreements under which long-term debt was
issued contain provisions which restrict the amount of cash dividends that may
be paid on Common Stock. As of October 31, 1994, all of the Company's retained
earnings was free of such restrictions.
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Item 6. Selected Financial Data
- --------------------------------
Selected financial data for the years ended October 31, 1990 through
1994, is as follows:
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(in thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
Margin $234,779 $223,872 $206,133 $170,247 $167,555
Operating Revenues $575,354 $552,760 $459,902 $411,548 $403,815
Net Income $ 35,506 $ 37,534 $ 35,310 $ 20,552 $ 25,733
Earnings per Share of Common Stock $ 1.35 $ 1.45 $ 1.39 $ .88 $ 1.22
Cash Dividends Declared Per Share of
Common Stock $ 1.025 $ .965 $ .91 $ .87 $ .83
Average Shares of Common Stock Outstanding 26,346 25,960 25,345 23,282 21,131
Total Assets $887,770 $796,453 $723,955 $665,853 $614,368
Long-Term Debt (less current maturities) $313,000 $278,000 $231,300 $220,525 $173,654
Rate of Return on Average Common Equity 12.10% 13.65% 14.02% 9.45% 13.63%
Long-Term Debt to Capitalization Ratio 50.89% 49.38% 46.62% 48.02% 46.95%
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations
- ---------------------
Liquidity and Capital Resources
The Company has committed bank lines of credit totaling $57 million to
finance current cash requirements. Additional uncommitted lines are also
available on an as needed, if available, basis. Borrowings under the lines
include bankers' acceptances, transactional borrowings and overnight cost-plus
loans based on the lending bank's cost of money, with a maximum rate of the
lending bank's commercial prime interest rate. The gas distribution business
is highly seasonal and requires the use of short-term debt to meet seasonal
working capital requirements and to temporarily finance construction pending
the issuance of long-term debt or common equity. Borrowings against the lines
of credit during 1994 ranged from zero to a high of $68.5 million in September.
The Company had $318 million of long-term debt outstanding at October
31, 1994. Annual sinking fund requirements and maturities of this debt are $5
million in 1995, $7 million in 1996, $10 million in 1997, 1998 and 1999 and
$276 million thereafter. Long-term debt retired in 1994 totaled $5 million.
On September 19, 1994, the Company sold $40 million of 8.45%
Medium-Term Notes due 2024 under a $150 million shelf registration. Proceeds
from the sale were used to reduce short-term debt and finance capital
expenditures. The notes are to be redeemed in a single payment at maturity.
At October 31, 1994, the Company's capitalization ratio consisted of
51% long-term debt and 49% common equity. The
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embedded cost of long-term debt at October 31, 1994, was 8.73%. The actual
return on average common equity in 1994 was 12.10%.
Cash provided from operations and from financing was sufficient to
fund investing activities, largely utility and non-utility construction,
payments of debt principal and interest and dividend payments to shareholders.
Although local gas distribution companies (LDCs), such as the Company,
are generally concerned about the impact of the ability of a large commercial
or industrial customer to bypass their systems, the Company does not view
bypass from existing commercial and industrial customers as a major liquidity
issue. For a customer economically to bypass the Company's distribution system
under current conditions, the customer would need to have a large gas load,
greater than 4,000 dekatherms per day, and/or close proximity to an interstate
pipeline. With the exception of one customer located in Nashville, Tennessee,
the Company does not believe any of its existing customers have the conditions
that are conducive to bypass. The Company has a contract with this customer to
provide services at rates which the Company believes makes it not economically
feasible for the customer to choose to bypass.
Capital expenditures for 1994 totaled $105.8 million for utility
operations and $2.8 million for non-utility activities. Capital expenditures
totaling $119.3 million for utility operations and $3.7 million for non-utility
activities are budgeted for 1995. Cash requirements to fund these expenditures
and to fund interest and sinking fund payments and dividends are expected to be
provided by internally generated cash, issuance of Common Stock through
dividend reinvestment and stock purchase plans, short-term bank borrowings,
issuance of long-term debt and sale of equity securities.
On February 25, 1994, the Company's shareholders approved a change in
the state of incorporation from New York to North Carolina. The
reincorporation was effected March 1, 1994, by merging the Company, a New York
corporation, into a wholly-owned subsidiary, PNG Acquisition Company, a North
Carolina corporation. In connection with the merger, each share of the
Company's Common Stock, $.25 par value per share, was exchanged for one share
of Common Stock, no par value, of PNG Acquisition Company. Immediately
following the merger, the name of the surviving corporation was changed to
Piedmont Natural Gas Company, Inc.
Gas Supply and Rate Proceedings
Except as set forth below, all natural gas distributed by the Company
is transported to the Company by one of five interstate pipelines,
Transcontinental Gas Pipe Line Corporation (Transco), Tennessee Gas Pipeline
Company (Tennessee Pipeline),
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<PAGE> 13
Texas Eastern Transmission Corporation (Texas Eastern), Columbia Gas
Transmission Corporation (Columbia Gas) and Columbia Gulf Transmission
Corporation, under tariffs regulated by the Federal Energy Regulatory
Commission (FERC).
The majority of the Company's natural gas supply is purchased from
sources in non-regulated transactions. The Company has supply agreements with
some of the interstate pipelines which are primarily non-regulated; however,
certain portions of the agreements are regulated by the FERC. The regulations
under which the Company purchases and transports gas are in various stages of
litigation or appeal to the courts. The final resolution of these matters
could affect the rates paid by the Company to these interstate pipelines for
past and future purchases and transportation of gas, the amount of refunds to
which the Company may be entitled with respect to past amounts paid and the
terms under which the Company may purchase and transport gas in the future.
Based on past rate recovery decisions of the North Carolina Utilities
Commission (NCUC), the Public Service Commission of South Carolina (PSCSC) and
the Tennessee Public Service Commission (TPSC), the Company expects to recover
all such gas and transportation costs in its rates.
From time to time, the Company is able to purchase gas from South
Carolina Pipeline Corporation (SC Pipeline), an intrastate pipeline in South
Carolina, at market prices on a month by month basis.
The interstate gas pipeline industry was required to undergo a
restructuring under FERC Order No. 636. Pursuant to Order No. 636, interstate
pipelines were required to change their traditional role of gas merchants to
LDCs by "unbundling" the gas sales, transportation and storage services
provided by them and transporting gas to their customers. The FERC has
approved mechanisms for the pipelines to recover from customers certain
"transition costs" related to unbundling. The major component of these
transition costs for most pipelines is the cost of realigning existing gas
supply contracts (Gas Supply Realignment or GSR Costs).
In the Company's opinion, present rules and regulations of the NCUC,
PSCSC and TPSC permit the Company to pass through to its customers any
transition costs, including GSR costs. The Company has no assurance that the
regulators will interpret these rules and regulations in the same manner as the
Company or that these rules and regulations will not be modified or amended in
the future. Effective November 1, 1993, the Company began recovering
transition costs assessed by Tennessee Pipeline through purchased gas
adjustment procedures approved by the TPSC. Since Transco realigned most of
its gas supply contracts when it unbundled services several years ago,
transition costs from Transco are expected to be minor. The FERC has ruled
that Columbia Gas may not recover substantial portions of its GSR
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<PAGE> 14
costs; however, the FERC's ruling is subject to various appeals. In addition,
the Company does not expect to be assessed substantial GSR costs by its other
interstate pipeline suppliers.
Prior to 1990, the Company purchased gas for its North Carolina and
South Carolina operations under a firm contract with SC Pipeline. In 1989, the
PSCSC issued an order permitting SC Pipeline to recover take-or-pay costs from
its customers with each customer's share being based on past purchasing
practices (deficiency based allocation method). The decision of the PSCSC was
appealed through the various courts which reversed the order, stayed its
implementation, deemed that the deficiency based allocation method of recovery
constituted retroactive ratemaking and remanded the methodology of recovery to
the PSCSC. In April 1994, the PSCSC ordered that SC Pipeline could only
recover take-or-pay costs on a prospective basis.
Prior to 1994, certain procedures of the NCUC with respect to the
recovery of the wholesale cost of gas were challenged by a group of the
Company's industrial customers in North Carolina. During 1994, the Company
refunded certain amounts, for which adequate reserves had been previously
provided, as required by the NCUC.
The Company is permitted to recover 100% of its prudently incurred gas
costs, subject to annual prudence reviews covering an historical twelve-month
period, in all three states in which the Company operates. During the year,
the TPSC found the Company to be prudent in its gas purchasing practices and
allowed 100% recovery of its gas costs. Prudency reviews in North Carolina and
South Carolina have not been concluded; however, no adverse impact is
anticipated based on the proceedings to date.
Since 1992, certain supplier refunds attributable to North Carolina
operations have been held by the Company for possible inclusion in an expansion
fund as legislated by the General Assembly of North Carolina to extend natural
gas service to unserved areas of the state. As ordered by the NCUC, these
refunds were deposited in a separate bank account and invested in short-term
U.S. Treasury securities pending the establishment of an expansion fund.
Additionally, other supplier refunds are being held by the Company for possible
inclusion in an expansion fund. Such refunds, including interest earned to
date, are included in restricted cash. In July 1994, the North Carolina
Supreme Court affirmed the order of the NCUC which authorized the establishment
of an expansion fund.
In September 1994, the Company filed a petition with the NCUC for a
certificate of public convenience and necessity to serve four counties in North
Carolina not presently receiving natural gas service and an application to
establish an expansion fund and place $14.8 million of supplier refunds into
the fund
12
<PAGE> 15
for such expansion. A similar application to serve these counties has been
filed by a company not currently operating in North Carolina. Hearings on
these matters have been scheduled by the NCUC, and the outcome is not presently
determinable.
In February 1994, the NCUC approved a settlement agreement in a
general rate proceeding that provided for an increase in margin of $1.2 million
during the period February 1 through October 31, 1994. In October 1994, the
NCUC issued an order permitting the Company to increase its rates in North
Carolina, effective November 1, 1994, by $5.2 million annually and its margin
by $15.5 million. In addition, the order indicated that the NCUC will reopen
the record for the purpose of receiving evidence concerning Cardinal Pipeline
Company, L.L.C., and the approval of rates to cover investment and operating
costs. See Other Matters.
In October 1994, the TPSC issued an order permitting the Company to
increase its rates in Tennessee, effective October 28, 1994, by $6.8 million
annually and its margin by $8.8 million.
Impact of Inflation
Inflation impacts the Company primarily in the prices it pays for
labor, materials and services. Since the Company can adjust its rates to
recover these costs only through the regulatory process, increased costs can
have a significant impact on the results of operations. Under present
regulatory commission orders, the Company passes on to its customers
substantially all changes in the cost of gas through purchased gas adjustment
procedures.
Results of Operations
Net income for 1994 was $35.5 million, compared with $37.5 million in
1993 and $35.3 million in 1992. The decrease in net income in 1994, compared
with 1993, was primarily due to increases in operating and maintenance
expenses, general taxes and utility interest charges, partially offset by
higher rates billed, increased delivered volumes to residential and industrial
customers and increased earnings from propane operations. The increase in net
income in 1993, compared with 1992, was primarily due to higher rates billed
and increased delivered volumes due to colder weather, partially offset by
increases in operating expenses. Volumes of gas delivered to customers
increased to 126.1 million dekatherms in 1994, compared with 120.2 million
dekatherms in 1993 and 115.1 million dekatherms in 1992. Compared with the
prior year, weather in the Company's service area was 3% warmer in 1994 and 9%
and 15% colder in 1993 and 1992, respectively.
Operating revenues were $575.4 million in 1994, $552.8 million in 1993
and $459.9 million in 1992. The increases over
13
<PAGE> 16
the previous years were primarily due to higher rates billed, increased
delivered volumes, particularly increased sales to weather-sensitive
residential and commercial customers on which a higher margin is earned, and a
6% increase in 1994 and a 5% increase in 1993 compared with the previous years,
respectively, in the average number of customers billed. The weather
normalization adjustment mechanism (WNA) in effect in all three states is
designed to offset the impact that unusually cold or warm weather has on
customer billings and the Company's operating margin. The WNA has been in
effect in North Carolina and Tennessee for the past three years. The WNA
became effective in South Carolina in December 1993. Weather which was 2%
warmer than normal was experienced in 1994, compared with 1% colder-than-normal
weather in 1993 and 8% warmer-than-normal weather in 1992.
For competitive reasons, the Company has for several years negotiated
rates to industrial customers with alternate fuel capabilities. The Company
has been able to offset such lower negotiated rates through decreases in the
cost of gas paid to suppliers. Therefore, negotiation has resulted in reduced
revenues but has not reduced margin. The Company negotiated $11.6 million of
rates in 1994 to North Carolina and South Carolina customers. The ability to
offset negotiated margin reductions through savings in the cost of gas is
subject to continuing regulatory approval.
Cost of gas was $340.6 million in 1994, $328.9 million in 1993 and
$253.8 million in 1992. The increase in 1994, compared with 1993, was
primarily due to an increase in delivered volumes. The increase in 1993,
compared with 1992, was primarily due to increases in delivered volumes,
capacity costs, demand charges and commodity prices. Increases or decreases in
purchased gas costs had no significant impact on margin as they were passed on
to customers or used to offset negotiated margin reductions as noted above.
Margin was $234.8 million in 1994, $223.9 million in 1993 and $206.1
million in 1992. The increases over the previous years were primarily due to
growth in the customer base and industrial customer usage. The margin earned
per dekatherm of gas delivered remained unchanged in 1994, compared with 1993,
and increased by $.07 in 1993 over 1992.
Other operations and maintenance expenses increased from $92.6 million
to $108.2 million over the three-year period 1992 to 1994. The increases were
primarily due to increases in the cost of maintenance and repair of mains,
rents, utilities, uncollectibles, payroll and employee benefits.
Depreciation expense increased from $20 million to $24.6 million over
the three-year period 1992 to 1994 due to the growth in plant in service.
14
<PAGE> 17
General taxes increased from $21 million to $26.6 million over the
three-year period 1992 to 1994 primarily due to increases in property taxes
resulting from property tax rate increases and additions to taxable property
and to increases in gross receipts taxes resulting from increased revenues.
Other income, net of income taxes, was $4.2 million in 1994, $2.9
million in 1993 and $3.5 million in 1992. The fluctuations were primarily due
to variations from year to year in the allowance for equity funds used during
construction and earnings from propane operations and other non-utility
activities.
Utility interest charges were $24.5 million in 1994, $21.9 million in
1993 and $21.5 million in 1992. The increase in 1994, compared with 1993, was
primarily due to increases in the balances of long-term debt outstanding even
though at lower overall interest rates, amortization of debt expenses due to
the issuance of debt in the last two years and interest charged on refunds due
customers due to greater amounts outstanding. The increase in 1993, compared
with 1992, was primarily due to increases in the balances outstanding during
the year on long-term and short-term debt although at interest rates which were
lower in 1993. These increases were partially offset by a decrease in interest
charged on refunds due customers due to lower amounts payable.
Environmental Matters
The Company has owned or operated manufactured gas plant (MGP)
facilities at 11 sites in its three-state service area. Four of these sites
are still owned by the Company and the remaining seven are owned by other
individuals or companies. Eight of the 11 sites involve other parties who
either owned the property or operated the facilities. Currently, five of the
eight sites in North Carolina are on the Comprehensive Environmental Response,
Compensation and Liability Act Information System target list of the
Environmental Protection Agency on the recommendation of the North Carolina
Department of Environment, Health, and Natural Resources (the Department).
This list identifies these sites for a preliminary assessment as to the danger
posed to health and the environment. The North Carolina Superfund Section is
in various stages of analyses on these five sites. The Company has not
received any notification from the Department nor does it have other
information which indicates significant remedial measures with respect to any
of these sites. The Company has not been notified by any governmental agency
in South Carolina or Tennessee with respect to MGPs in those states.
In 1992, the Department launched an initiative to encourage former
owners and/or operators of MGP facilities to assess these sites and remediate
where necessary. In late 1993, the North Carolina Manufactured Gas Plant
Group, a group of former MGP
15
<PAGE> 18
owners/operators in which the Company plays an active role, and the state
finalized the first step in a cooperative effort to develop a uniform and
reasonable framework and program for addressing the state's MGP sites. The
MGP Group and the state have completed the negotiation of a model document that
sets out the procedures for investigating an MGP site. The state has requested
that the former owners/operators of one site at which the Company was involved
for a brief period agree to the use of these procedures. The Company is
currently discussing the state's request for that specific site with the state
and with another former owner/operator. The Company is also discussing cost
sharing arrangements with other potentially responsible parties.
Further evaluations of the MGP sites will determine any remediation
requirements and associated costs and the involvement of the Company in the
sharing of these costs. The Company cannot presently determine the liability
with respect to individual MGP sites since site specific evaluations have not
been performed and cost-sharing arrangements with other responsible parties
have not been finalized.
The Company is in the process of evaluating and remediating sites with
respect to its present or former ownership of underground tanks. As of October
31, 1994, comprehensive evaluations of underground tank sites were
substantially complete. Of the 11 sites in North Carolina and South Carolina,
six will require corrective action and varying degrees of remediation. The
Department has established a trust fund which reimburses the owner or operator
for the costs of evaluating and remediating the underground tank sites in
excess of a designated variable dollar amount per site.
Based on a generic MGP site study and estimates determined in the
underground storage tank comprehensive site evaluations, the Company has
recorded a liability and an associated regulatory asset of $1.7 million for
potential future environmental costs. The three state regulatory commissions
regulating the Company have authorized deferral accounting, or the creation of
a regulatory asset, for expenditures made in connection with environmental
matters. A determination as to whether or not environmental expenditures, net
of recoveries from other responsible parties, will be recovered from ratepayers
will be made at the appropriate time in general rate case proceedings. In
North Carolina, current procedures permit the Company to recover 100% of its
prudently incurred MGP clean-up costs but do not permit the recovery of any
carrying costs on such amounts from the time the amounts are expended until the
time they are collected. Based on regulatory accounting directives and the
emerging trend in the industry for regulators to permit substantial recovery of
such costs, the Company believes that the resolution of these matters will not
have a material adverse
16
<PAGE> 19
effect on the Company's financial position or results of operations.
Accounting Pronouncements
The Company will adopt Statement of Financial Accounting Standards No.
112, "Employers' Accounting for Postemployment Benefits" (FAS 112), in its
fiscal year beginning November 1, 1994. FAS 112 requires, among other things,
the accrual for benefits provided to former or inactive employees after
employment but before retirement and to their beneficiaries and covered
dependents. Adoption of FAS 112 is not expected to have a material impact on
the Company's financial position or results of operations.
Other Matters
The Company, in cooperation with another utility, formed Cardinal
Pipeline Company, L.L.C. (Cardinal), in March 1994. Cardinal is a North
Carolina limited liability company which is owned approximately 36% by Piedmont
Intrastate Pipeline Company, a wholly-owned subsidiary of the Company. In July
1994, the NCUC granted Cardinal a certificate of public convenience and
necessity to construct, own and operate a 24-inch natural gas pipeline from a
connection with an interstate pipeline in Rockingham County, North Carolina, to
Alamance County, North Carolina, where it connects with facilities owned by the
Company and with facilities owned by the other utility company. The other
utility is the operator of the pipeline. The pipeline was placed in service on
December 31, 1994.
The Company, with two other energy marketing firms, formed Resource
Energy Services Company, L.L.C. (RES), in January 1994. RES is a North
Carolina limited liability company which is owned 51% by Piedmont Energy
Company, a wholly-owned subsidiary of the Company. RES offers natural gas
acquisition, transportation and storage services to industrial users and
utilities in the mid-south and southeastern areas of the United States.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
The Company's consolidated financial statements and schedules required
by this Item are listed in Item 14(a)1 and 2 in Part IV of this report.
17
<PAGE> 20
CONSOLIDATED BALANCE SHEETS
October 31, 1994 and 1993
ASSETS
<TABLE>
<CAPTION>
1994 1993
---- ----
(in thousands)
<S> <C> <C>
Utility Plant:
Utility plant in service $939,717 $852,104
Less accumulated depreciation 243,325 222,423
-------- --------
Utility plant in service, net 696,392 629,681
Construction work in progress 38,501 24,823
-------- --------
Total utility plant, net 734,893 654,504
-------- --------
Other Physical Property, at cost (net of
accumulated depreciation of $11,753,000 in 1994
and $10,296,000 in 1993) 25,188 23,406
-------- --------
Current Assets:
Cash and cash equivalents 6,523 3,555
Restricted cash 14,961 6,988
Receivables (less allowance for doubtful
accounts of $947,000 in 1994 and
$776,000 in 1993) 22,597 23,773
Inventories:
Gas in storage 44,725 41,031
Materials, supplies and merchandise 7,401 6,197
Deferred cost of gas 5,162 7,592
Refundable income taxes 10,194 6,393
Other 5,830 13,431
-------- --------
Total current assets 117,393 108,960
-------- --------
Deferred Charges and Other Assets:
Unamortized debt expense (amortized
over life of related debt on a
straight-line basis) 2,758 2,781
Other 7,538 6,802
-------- --------
Total deferred charges and other assets 10,296 9,583
-------- --------
Total $887,770 $796,453
======== ========
</TABLE>
18
<PAGE> 21
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
1994 1993
---- ----
(in thousands)
<S> <C> <C>
Capitalization:
Stockholders' equity:
Cumulative preferred stock - no par
value - 175,000 shares authorized $ - $ -
Common stock - no par value - 50,000,000
shares authorized; outstanding, 26,576,543
shares in 1994 and 26,152,354 shares in 1993* 187,592 179,130
Retained earnings 114,400 105,890
-------- --------
Total stockholders' equity 301,992 285,020
Long-term debt 313,000 278,000
-------- --------
Total capitalization 614,992 563,020
-------- --------
Current Liabilities:
Current maturities of long-term debt and sinking
fund requirements 5,000 5,000
Notes payable 63,500 42,000
Accounts payable 35,903 53,290
Customers' deposits 8,496 7,790
Deferred income taxes 11,314 8,758
Taxes accrued 8,019 9,702
Refunds due customers 22,124 1,877
Other 9,687 4,892
-------- --------
Total current liabilities 164,043 133,309
-------- --------
Deferred Credits and Other Liabilities:
Unamortized federal investment tax credits 10,055 10,614
Accumulated deferred income taxes 72,158 79,243
Other 26,522 10,267
-------- -------
Total deferred credits and other liabilities 108,735 100,124
-------- -------
Total $887,770 $796,453
======== ========
</TABLE>
*Prior period amounts have been restated to reflect, effective March 1, 1994,
the exchange of each share of common stock, $.25 par value per share, for one
share of common stock, no par value.
19
<PAGE> 22
STATEMENTS OF CONSOLIDATED INCOME
For the Years Ended October 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(in thousands except per share amounts)
<S> <C> <C> <C>
Operating Revenues $575,354 $552,760 $459,902
Cost of Gas 340,575 328,888 253,769
-------- -------- --------
Margin 234,779 223,872 206,133
-------- -------- --------
Other Operating Expenses:
Operations 92,686 84,527 79,295
Maintenance 15,526 14,969 13,326
Depreciation 24,571 22,161 20,050
Income taxes 19,561 21,572 19,055
General taxes 26,565 24,068 21,049
-------- -------- --------
Total other operating expenses 178,909 167,297 152,775
-------- -------- --------
Operating Income 55,870 56,575 53,358
-------- -------- --------
Other Income:
Non-utility activities, net of
income taxes 3,997 2,679 2,869
Other income, net of income taxes 180 187 594
-------- -------- --------
Total other income 4,177 2,866 3,463
-------- -------- --------
Income Before Utility Interest Charges 60,047 59,441 56,821
-------- -------- --------
Utility Interest Charges:
Interest on long-term debt 23,816 21,230 20,181
Allowance for borrowed funds used
during construction (credit) (1,272) (1,080) (842)
Other interest 1,997 1,757 2,172
-------- -------- --------
Total utility interest charges 24,541 21,907 21,511
-------- -------- --------
Net Income $ 35,506 $ 37,534 $ 35,310
======== ======== ========
Average Shares of Common 26,346 25,960 25,345
Stock Outstanding
Earnings Per Share of Common Stock $ 1.35 $ 1.45 $ 1.39
</TABLE>
20
<PAGE> 23
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Years Ended October 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $35,506 $37,534 $35,310
------- ------- -------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 28,256 25,211 23,056
Deferred income taxes (4,529) 10,416 15,551
Amortization of investment
tax credits (559) (577) (589)
Allowance for funds used during
construction (2,272) (1,738) (1,465)
Other, net - 117 119
Changes in assets and liabilities:
Restricted cash (7,973) 3,842 (10,830)
Receivables 1,176 7,274 14,765
Inventories (4,898) (1,705) (10,618)
Deferred cost of gas 2,430 (3,714) (2,275)
Other assets, net 2,754 (16,037) 3,661
Refunds due customers 20,247 (6,160) (18,338)
Other liabilities, net 2,265 (2,040) 26,920
------ ------ -------
Total adjustments 36,897 14,889 39,957
------ ------- -------
Net cash provided by operating activities 72,403 52,423 75,267
------ ------- -------
Cash Flows from Investing Activities:
Utility construction expenditures (103,534) (82,652) (72,555)
Other (3,867) (2,308) (3,255)
-------- ------- -------
Net cash used in investing activities (107,401) (84,960) (75,810)
-------- ------- -------
Cash Flows from Financing Activities:
Increase in bank loans, net 21,500 9,000 6,000
Proceeds from issuance of
long-term debt 40,000 90,000 35,000
Retirement of long-term debt (5,000) (49,025) (24,032)
Issuance of common stock through
dividend reinvestment and
employee stock plans 8,462 7,652 6,300
Dividends paid (26,996) (25,043) (23,127)
------- ------- -------
Net cash provided by financing
activities 37,966 32,584 141
------- ------- -------
Net Increase (Decrease) in Cash and
Cash Equivalents 2,968 47 (402)
Cash and Cash Equivalents at
Beginning of Year 3,555 3,508 3,910
------- ------- -------
Cash and Cash Equivalents at End of Year $ 6,523 $ 3,555 $ 3,508
======= ======= =======
</TABLE>
21
<PAGE> 24
<TABLE>
<S> <C> <C> <C>
Cash Paid During the Year for:
Interest $24,372 $23,649 $23,433
Income taxes $27,114 $21,463 $11,980
</TABLE>
STATEMENTS OF CONSOLIDATED RETAINED EARNINGS
For the Years Ended October 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Balance at Beginning of Year $105,890 $ 96,637 $ 84,454
Net Income 35,506 37,534 35,310
-------- -------- --------
Total 141,396 134,171 119,764
-------- -------- --------
Deduct:
Dividends declared on common
stock ($1.025 a share in 1994,
$.965 in 1993 and $.91 in 1992) 26,996 25,043 23,127
Stock split - 3,238 -
-------- -------- --------
Total 26,996 28,281 23,127
-------- -------- --------
Balance at End of Year $114,400 $105,890 $ 96,637
======== ======== ========
</TABLE>
22
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
A. Operations and Principles of Consolidation.
Piedmont Natural Gas Company, Inc. (the Company), an investor-owned
public utility, distributes gas to residential, commercial and industrial
customers in the Piedmont region of North Carolina and South Carolina and the
metropolitan Nashville, Tennessee, area. The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries, Piedmont
Exploration Company, Inc., Piedmont Energy Company, Piedmont Intrastate
Pipeline Company and PNG Energy Company and its wholly-owned subsidiaries,
Piedmont Propane Company and PNG Exploration Company. Significant intercompany
amounts have been eliminated in consolidation where appropriate.
B. Utility Plant and Depreciation.
Utility plant is stated at original cost. The cost of additions to
utility plant includes direct labor and materials, allocable overheads and an
allowance for funds used during construction (AFUDC). As prescribed in the
applicable regulatory system of accounts, AFUDC is the allowance for borrowed
and equity funds used to finance construction. The weighted average accrual
rate was 9.30% for 1994, 10.52% for 1993 and 10.64% for 1992. The portion of
AFUDC attributable to equity funds is included in other income, and the portion
attributable to borrowed funds is shown as a reduction of utility interest
charges. The costs of units of property retired are removed from utility plant
and such costs, plus removal costs, less salvage, are charged to accumulated
depreciation.
Depreciation expense is computed using the straight-line method
applied to average depreciable costs. The ratio of depreciation provisions to
average depreciable property balances was 2.79% for 1994, 2.77% for 1993 and
2.76% for 1992.
C. Inventories.
Inventories are maintained on the basis of the average cost charged
thereto.
D. Deferred Purchased Gas Adjustment.
The Company's rate schedules include purchased gas adjustment
provisions that permit the recovery of purchased gas costs. The purchased gas
adjustment factor is revised periodically without formal rate proceedings to
reflect changes in the cost of purchased gas. Charges to cost of gas are
based on the amount recoverable under approved rate schedules. The net of any
over or under recovered amounts is included in refunds due customers.
E. Income Taxes.
Deferred income taxes are provided for differences between book and
tax income, principally attributable to accelerated tax depreciation, the
recording of revenues and cost of gas and accrued long-term incentive
compensation. Investment tax credits allowed on certain qualified property
were deferred and are being amortized to income over the estimated useful life
of the related property.
23
<PAGE> 26
Effective November 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." See Note 8.
F. Operating Revenues.
The Company recognizes revenues from meters read on a monthly cycle
basis which results in unrecognized revenue from the cycle date through month
end. The cost of gas delivered to customers but not yet billed under the cycle
billing method is deferred.
G. Earnings Per Share.
Earnings per share are computed based on the weighted average number
of shares of Common Stock outstanding during each year.
H. Regulation.
Certain income, expense and capital items may be treated differently
for ratemaking purposes by the state regulatory commissions which establish
rates charged to customers.
I. Statement of Cash Flows.
For purposes of reporting cash flows, the Company considers all highly
liquid debt instruments purchased with an original maturity of three months or
less to be cash equivalents.
J. Segment Reporting.
The Company is principally engaged in the gas distribution industry
and has no other reportable industry segments.
K. Reclassifications.
Certain financial statement items for 1993 and 1992 have been
reclassified to conform with the 1994 presentation.
2. Reincorporation
On February 25, 1994, the Company's shareholders approved a change in
the state of incorporation from New York to North Carolina. The
reincorporation was effected March 1, 1994, by merging the Company, a New York
corporation, into a wholly-owned subsidiary, PNG Acquisition Company, a North
Carolina corporation. In connection with the merger, each share of the
Company's Common Stock, $.25 par value per share, was exchanged for one share
of Common Stock, no par value, of PNG Acquisition Company. Immediately
following the merger, the name of the surviving corporation was changed to
Piedmont Natural Gas Company, Inc.
3. Regulatory Matters
The Company's utility operations are subject to regulation by the
North Carolina Utilities Commission (NCUC) and the Tennessee Public Service
Commission (TPSC) as to the issuance of securities, and by those commissions
and by the Public Service Commission of South Carolina (PSCSC) as to rates,
service area, adequacy of service, safety standards, extensions and abandonment
of facilities, accounting and depreciation.
24
<PAGE> 27
Pursuant to Order No. 636 of the Federal Energy Regulatory Commission
(FERC), interstate pipelines were required to change their traditional role of
gas merchants to local distribution companies (LDCs) by "unbundling" the gas
sales, transportation and storage services provided by them and transporting
gas to their customers. The FERC has approved mechanisms for the pipelines to
recover from customers certain "transition costs" related to unbundling. The
major component of these transition costs for most pipelines is the cost of
realigning existing gas supply contracts (Gas Supply Realignment or GSR costs).
In the Company's opinion, present rules and regulations of the NCUC,
PSCSC and TPSC permit the Company to pass through to its customers any
transition costs, including GSR costs. Effective November 1, 1993, the Company
is recovering transition costs assessed by Tennessee Gas Pipeline Company
through purchased gas adjustment procedures. Since Transcontinental Gas Pipe
Line Corporation (Transco) realigned most of its gas supply contracts when it
unbundled services several years ago, transition costs from Transco are
expected to be minor. The FERC has ruled that Columbia Gas Transmission
Corporation may not recover substantial portions of its GSR costs; however, the
FERC's ruling is subject to requests for rehearing and appeal. In addition,
the Company does not expect to be assessed substantial GSR costs by its other
interstate pipeline suppliers.
Prior to 1994, certain procedures of the NCUC with respect to the
recovery of the wholesale cost of gas were challenged by a group of the
Company's industrial customers in North Carolina. During 1994, the Company
refunded certain amounts, for which adequate reserves had been previously
provided, as required by the NCUC.
Since 1992, certain supplier refunds attributable to North Carolina
operations have been held by the Company for possible inclusion in an expansion
fund as legislated by the General Assembly of North Carolina to extend natural
gas service to unserved areas of the state. As ordered by the NCUC, these
refunds were deposited in a separate bank account and invested in short-term
U.S. Treasury securities pending the establishment of an expansion fund.
Additionally, other supplier refunds are being held by the Company for possible
inclusion in an expansion fund. Such refunds, including interest earned to
date, are included in restricted cash. In July 1994, the North Carolina
Supreme Court affirmed the order of the NCUC which authorized the establishment
of an expansion fund.
In September 1994, the Company filed a petition with the NCUC for a
certificate of public convenience and necessity to serve four counties in North
Carolina not presently receiving natural gas service and an application to
establish an expansion fund and place $14,800,000 of supplier refunds into the
fund for such expansion. A similar application to serve these counties has
been filed by a company not currently operating in North Carolina. Hearings on
these matters have been scheduled by the NCUC, and the outcome is not presently
determinable.
25
<PAGE> 28
In February 1994, the NCUC approved a settlement agreement in a
general rate proceeding that provided for an increase in margin of $1,200,000
during the period February 1 through October 31, 1994. In October 1994, the
NCUC issued an order permitting the Company to increase its rates in North
Carolina, effective November 1, 1994, by $5,200,000 annually and its margin by
$15,500,000. In addition, the order indicated that the NCUC will reopen the
record for the purpose of receiving evidence concerning Cardinal Pipeline
Company, L.L.C., and the approval of rates to cover its investment and
operating costs. See Note 9.
In October 1994, the TPSC issued an order permitting the Company to
increase its rates in Tennessee, effective October 28, 1994, by $6,800,000
annually and its margin by $8,800,000.
4. Long-Term Debt
Long-term debt at October 31, 1994 and 1993, is summarized as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
(in thousands)
<S> <C> <C>
Senior Notes:
9.19%, due 2001 $30,000 $30,000
10.02%, due 2003 34,000 36,000
10.06%, due 2004 18,000 19,000
10.11%, due 2004 36,000 38,000
9.44%, due 2006 35,000 35,000
8.51%, due 2017 35,000 35,000
Medium-Term Notes:
6.23%, due 2003 45,000 45,000
6.87%, due 2023 45,000 45,000
8.45%, due 2024 40,000 -
-------- --------
Total 318,000 283,000
Less current maturities 5,000 5,000
-------- --------
Total $313,000 $278,000
======== ========
</TABLE>
Annual sinking fund requirements and maturities through 1999 are
$5,000,000 in 1995, $7,000,000 in 1996 and $10,000,000 in 1997, 1998 and 1999.
On September 19, 1994, the Company sold $40,000,000 of 8.45%
Medium-Term Notes due 2024 under a $150,000,000 shelf registration. Proceeds
from the sale were used to reduce short-term debt and finance capital
expenditures. The notes are to be redeemed in a single payment at maturity.
The Company's note agreements under which the Company's long-term debt
was issued contain provisions which restrict the amount of cash dividends that
may be paid on Common Stock. At October 31, 1994, all of the Company's
retained earnings was free of such restrictions.
26
<PAGE> 29
5. Capital Stock
The changes in Common Stock for the years ended October 31, 1992, 1993
and 1994, are summarized as follows. See Note 2.
<TABLE>
<CAPTION>
Common Stock
--------------------------------------
Shares Amount
-------- --------
(in thousands except shares data)
<S> <C> <C>
Balance, October 31, 1991 24,727,934 $154,264
Conversions of Convertible Debentures 338,738 2,380
Issue to Employee Stock Purchase
Plan (SPP) 27,564 412
Issue to Dividend Reinvestment and
Stock Purchase Plan (DRIP) 352,238 5,887
Issue to Participants in the
Long-Term Incentive Plan 349,450 5,310
---------- --------
Balance, October 31, 1992 25,795,924 168,253
Stock Split (excluding $13,000
applicable to SPP and DRIP prior
to the split) - 3,225
Issue to SPP 24,862 474
Issue to DRIP 331,568 7,178
---------- --------
Balance, October 31, 1993 26,152,354 179,130
Issue to SPP 28,630 524
Issue to DRIP 395,559 7,938
---------- --------
Balance, October 31, 1994 26,576,543 $187,592
========== ========
</TABLE>
At October 31, 1994, 1,963,273 shares of Common Stock were reserved
for issuance as follows:
<TABLE>
<S> <C>
SPP 27,422
DRIP 685,301
Long-Term Incentive Plan 1,250,550
---------
Total 1,963,273
=========
</TABLE>
6. Financial Instruments and Related Fair Value
The Company has committed bank lines of credit totaling $57,000,000 to
finance current cash requirements. Additional uncommitted lines are also
available on an as needed, if available, basis. Borrowings under the lines,
with maturity dates of less than 90 days, include bankers' acceptances,
transactional borrowings and overnight cost-plus loans based on the lending
bank's cost of money, with a maximum rate of the lending bank's commercial
prime interest rate. At October 31, 1994, the lines of credit were on either a
fee basis or compensating balance basis, with average annual balance
requirements of $600,000.
27
<PAGE> 30
At October 31, 1994, outstanding notes payable consisted of
$60,000,000 in bankers' acceptances and $3,500,000 in overnight cost-plus
loans. The weighted average interest rate on such borrowings was 5.13% for
1994, compared with 3.23% for 1993.
The Company's principal business activity is the sale and
transportation of natural gas to customers located in North Carolina, South
Carolina and Tennessee. At October 31, 1994, gas receivables totaled
$14,516,000 and other receivables totaled $9,028,000. The uncollected balance
of installment receivables transferred with recourse in 1992 was $22,138,000
and $22,131,000 at October 31, 1994 and 1993, respectively. The Company has
provided an adequate allowance for any receivables which may not be ultimately
collected, including the receivables transferred with recourse.
The following estimated fair values of financial instruments have been
determined using available market information and commonly accepted valuation
methodologies. Judgment is necessary in interpreting market data to develop
estimates of fair value. Accordingly, the estimates presented are not
necessarily indicative of the amounts the Company could realize in a current
market exchange. The use of different market assumptions or estimation
methodologies may have a material effect on the estimated fair values. The
estimated fair values of the Company's financial instruments at October 31,
1994 and 1993, are as follows:
<TABLE>
<CAPTION>
1994 1993
------------------- ------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ----- -------- ------
(in thousands)
<S> <C> <C> <C> <C>
Cash and cash
equivalents (1) $ 6,523 $ 6,523 $ 3,555 $ 3,555
Restricted cash (1) 14,961 14,961 6,988 6,988
Receivables (1) 22,597 22,597 23,773 23,773
Long-term debt (2) 318,000 310,479 283,000 322,266
Notes payable (1) 63,500 63,500 42,000 42,000
Accounts payable (1) 35,903 35,903 53,290 53,290
</TABLE>
(1) The carrying amount in the consolidated balance sheets
approximates fair value because of the short maturity of these instruments.
(2) The fair value is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities.
7. Employee Benefit Plans
The Company has a defined-benefit pension plan for the benefit of
substantially all full-time regular employees of the Company and its
subsidiaries. Plan benefits are generally based
28
<PAGE> 31
on credited years of service and the level of compensation during the five
consecutive years of the last ten years prior to retirement during which the
participant received his or her highest compensation. It is the Company's
policy to fund the plan in an amount not in excess of the amount that is
deductible for income tax purposes under applicable federal regulations. Plan
assets consist primarily of marketable securities with a minor investment in
commercial real estate and cash equivalents.
The plan is amended from time to time in accordance with changes in
tax law. The unrecognized prior service costs, if any, resulting from such
amendments are amortized over the average remaining service life of active
employees.
A reconciliation of the funded status of the plan to the amounts
recognized in the consolidated financial statements at October 31, 1994 and
1993, is presented below:
<TABLE>
<CAPTION>
1994 1993
---- ----
(in thousands)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 50,765 $ 62,808
======== ========
Accumulated benefit obligation $ 57,548 $ 67,529
======== ========
Projected benefit obligation for services
rendered to date $(86,004) $(96,299)
Plan assets at fair value 91,796 93,228
-------- --------
Plan assets in excess of (less than)
projected benefit obligation 5,792 (3,071)
Unrecognized net gain from past experience
different from that assumed and effects
of changes in assumptions (15,239) (3,655)
Prior service cost not recognized in
net periodic pension cost 5,055 1,924
Remaining unrecognized net obligation at date
of initial adoption 136 151
-------- --------
Accrued pension cost $ (4,256) $ (4,651)
======== ========
</TABLE>
Net periodic pension cost, excluding trustee fees and other expenses,
for the years ended October 31, 1994, 1993 and 1992, includes the following
components:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Service cost $4,475 $3,974 $3,280
Interest cost 6,359 6,599 6,004
Return on plan assets (161) (11,666) (6,227)
Net asset gain (loss) deferred (7,105) 4,659 (171)
Other 432 454 198
------ ------ ------
Net periodic pension cost $4,000 $4,020 $3,084
====== ====== ======
</TABLE>
29
<PAGE> 32
<TABLE>
<S> <C> <C> <C>
Actuarial assumptions used were:
Weighted average discount rate 7.75% 6.75% 7.5%
Rate of increase in future compensation
levels 5.5 % 5.0 % 5.5%
Expected long-term rate of return 8.5 % 8.5 % 8.5%
</TABLE>
The Company provides certain postretirement health care and life
insurance benefits to substantially all full-time regular employees of the
Company and its subsidiaries. Effective November 1, 1993, the Company adopted
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" (FAS 106). Prior to adoption, the costs of such benefits, which were
$946,000 in 1993 and $794,000 in 1992, were currently expensed as health care
claims and premiums for health and life insurance were paid. As of October 31,
1994, the liability associated with such benefits was partially funded in
irrevocable trust funds which can only be used to pay the benefits.
A reconciliation of the funded status of the plan to the amount
recognized in the consolidated financial statements at October 31, 1994, is
presented below:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Accumulated postretirement benefit obligation:
Retirees $(7,510)
Fully eligible active plan participants (6,570)
Other active plan participants (3,343)
-------
Total (17,423)
Plan assets at fair value 2,027
-------
Accumulated postretirement benefit obligation
in excess of plan assets (15,396)
Unrecognized net gain from past experience
different from that assumed and from changes
in assumptions (2,272)
Unrecognized transition obligation 17,668
-------
Accrued postretirement benefit cost $ -
=======
</TABLE>
Net periodic postretirement benefit cost for the year ended October 31,
1994, includes the following components:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Service cost $ 600
Interest cost 1,335
Amortization of transition obligation 975
------
Net periodic postretirement benefit cost $2,910
======
Actuarial assumptions used were:
Weighted average discount rate 8.0 %
Weighted average rate of return on plan assets 8.5 %
Health care cost trend rate 5.25%
</TABLE>
30
<PAGE> 33
A one-percentage point increase in the assumed health care cost trend
rate would increase the accumulated postretirement benefit obligation at
October 31, 1994, by $1,645,000 and the aggregate of the service and interest
cost components of net periodic postretirement benefit cost by $129,000.
The Company is recovering FAS 106 costs from ratepayers in North
Carolina, effective March 1, 1994, and in Tennessee, effective October 28,
1994, pursuant to rate orders in general rate proceedings. The Company has an
order from the PSCSC allowing deferral of such costs attributable to South
Carolina operations for recovery in a future general rate proceeding.
The Company maintains salary investment plans which are profit sharing
plans under Section 401(a) of the Internal Revenue Code of 1986, as amended
(the Tax Code), and which include qualified cash or deferred arrangements under
Tax Code Section 401(k). Employees of the Company and its affiliated companies
who have completed six months of service are eligible to participate.
Participants are permitted to defer a portion of their base salary to the
plans, with the Company matching a portion of the participants' contributions.
All contributions vest immediately. For the years ended October 31, 1994, 1993
and 1992, the Company contributed $1,824,000, $1,674,000 and $1,531,000,
respectively, to the plans.
The Company will adopt SFAS No. 112, "Employers' Accounting for
Postemployment Benefits" (FAS 112), in its fiscal year beginning November 1,
1994. FAS 112 requires, among other things, the accrual for benefits provided
to former or inactive employees after employment but before retirement and to
their beneficiaries and covered dependents. Adoption of FAS 112 is not
expected to have a material impact on the Company's financial position or
results of operations.
8. Income Taxes
The components of income tax expense for the years ended October 31,
1994, 1993 and 1992, are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
Federal State Federal State Federal State
------- ----- ------- ----- ------- -----
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Income taxes charged
to operations:
Current $14,224 $3,213 $10,131 $2,017 $ 5,301 $ (169)
Deferred 2,334 349 8,080 1,921 10,779 3,733
Amortization of
investment tax
credits (559) - (577) - (589) -
------- ------ ------- ------ ------- ------
Total 15,999 3,562 17,634 3,938 15,491 3,564
------- ------ ------- ------ ------- ------
</TABLE>
31
<PAGE> 34
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Income taxes charged
to other income:
Current 1,765 446 1,108 332 1,080 85
Deferred (524) 159 354 61 712 327
------- ------ ------- ------ ------- ------
Total 1,241 605 1,462 393 1,792 412
------- ------ ------- ------ ------- ------
Total income tax
expense $17,240 $4,167 $19,096 $4,331 $17,283 $3,976
======= ====== ======= ====== ======= ======
</TABLE>
A reconciliation of income tax expense at the federal statutory rate
to recorded income tax expense for the years ended October 31, 1994, 1993 and
1992, is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Federal taxes at 35% for 1994, 34.83%
for 1993 and 34% for 1992 $19,920 $21,233 $19,232
State income taxes, net of federal benefit 2,709 2,823 2,624
Amortization of investment tax credits (559) (577) (589)
Implementation of FAS 109 for
non-regulated subsidiaries (723) - -
Other, net 60 (52) (8)
------- ------- -------
Total income tax expense $21,407 $23,427 $21,259
======= ======= =======
</TABLE>
Effective November 1, 1993, the Company adopted SFAS No. 109,
"Accounting for Income Taxes" (FAS 109), on a prospective basis. FAS 109
requires a liability approach for financial accounting and reporting of income
taxes. While classification of certain items in the consolidated balance
sheets has changed, principally due to deferred taxes recorded at higher
historical tax rates, there was no material effect on the Company's results of
operations.
At October 31, 1994, deferred income tax balances consisted of the
following temporary differences:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Excess of tax over book depreciation and tax and
book asset basis differences $83,748
Revenues and cost of gas 11,876
Long-term incentive plan (3,885)
Alternative minimum tax (3,637)
Regulatory asset related to FAS 109 tax gross-up (5,122)
Other, net 492
-------
Net deferred income taxes $83,472
=======
</TABLE>
Total deferred income tax liabilities were $95,972,000 and total
deferred income tax assets were $12,500,000 at October 31, 1994.
The components of the deferred income tax provisions for the years
ended October 31, 1993 and 1992, are summarized as follows:
32
<PAGE> 35
<TABLE>
<CAPTION>
1993 1992
---- ----
(in thousands)
<S> <C> <C>
Excess of tax over book depreciation $ 7,635 $ 7,064
Revenues and cost of gas 2,693 9,285
Long-term incentive plan (1,498) 1,879
Alternative minimum tax 459 (2,447)
Other, net 1,127 (230)
------- -------
Total deferred provisions $10,416 $15,551
======= =======
</TABLE>
9. Non-Utility Activities
For several years, PNG Energy Company acquired and marketed natural
gas for the Company's system supply and other natural gas distribution
companies. PNG Energy Company also acted as an agent for several of the
Company's large industrial customers to arrange for the purchase and
transportation of natural gas. Such activities are now being conducted
primarily by Resource Energy Services Company, L.L.C., as explained below.
Revenues earned by the Company for transporting this gas are included in
utility operating revenues.
During 1994, the Company sold the exploration and development
properties of Piedmont Exploration Company, Inc. (PEC), and PNG Exploration
Company. Customers in North Carolina and South Carolina participated in the
cost of and related benefits from certain commission-approved programs of PEC
at levels ranging from 46% to 75%. The disposition of these properties did not
have a material effect on the Company's operations.
Piedmont Energy Company is a 51% member of Resource Energy Services
Company, L.L.C., a North Carolina limited liability company formed in January
1994. The new company offers natural gas acquisition, transportation and
storage services to industrial users and utilities in the mid-south and
southeastern areas of the United States.
The Company, in cooperation with another utility, formed Cardinal
Pipeline Company, L.L.C.(Cardinal), in March 1994. Cardinal is a North
Carolina limited liability company which is owned approximately 36% by Piedmont
Intrastate Pipeline Company. In July 1994, the NCUC granted Cardinal a
certificate of public convenience and necessity to construct, own and operate a
natural gas pipeline from a connection with an interstate pipeline to
facilities owned by the Company and facilities owned by the other utility
company. The other utility will be the operator of the pipeline.
Through various operating divisions, the Company markets propane and
propane appliances to residential, commercial and industrial customers within
and adjacent to the Company's three-state natural gas service area. The
Company is also engaged in various other non-utility activities, including the
sale and financing of gas appliances and jobbing work performed on customer-
owned property.
33
<PAGE> 36
Operating revenues shown in the consolidated financial statements
represent revenues from utility operations only. Non-utility revenues as a
percentage of total revenues, including utility operations, were 8% in 1994 and
1993 and 9% in 1992. No single non-utility activity accounted for greater than
6% of total revenues in any year. Income from non-utility activities as a
percentage of total net income was 12% in 1994, 7% in 1993 and 8% in 1992. No
single non-utility activity accounted for more than 8% of net income in any
year.
10. Environmental Matters
The Company has owned or operated manufactured gas plant (MGP)
facilities at 11 sites in its three-state service area. Four of these sites
are still owned by the Company and the remaining seven are owned by other
individuals or companies. Eight of the 11 sites involve other parties who
either owned the property or operated the facilities. Currently, five of the
eight sites in North Carolina are on the Comprehensive Environmental Response,
Compensation and Liability Act Information System target list of the
Environmental Protection Agency on the recommendation of the North Carolina
Department of Environment, Health, and Natural Resources (the Department).
This list identifies these sites for a preliminary assessment as to the danger
posed to health and the environment. The North Carolina Superfund Section is
in various stages of analyses on these five sites. The Company has not
received any notification from the Department nor does it have other
information which indicates significant remedial measures with respect to any
of these sites. The Company has not been notified by any governmental agency
in South Carolina or Tennessee with respect to MGPs in those states.
Further evaluations of the MGP sites will determine any remediation
requirements and associated costs and the involvement of the Company in the
sharing of these costs. The Company cannot presently determine the liability
with respect to individual MGP sites since site specific evaluations have not
been performed and cost-sharing arrangements with other responsible parties
have not been finalized.
The Company is in the process of evaluating and remediating sites with
respect to its present or former ownership of underground tanks. As of October
31, 1994, comprehensive evaluations of underground tank sites were
substantially complete. Of the 11 sites in North Carolina and South Carolina,
six will require corrective action and varying degrees of remediation. The
Department has established a trust fund which reimburses the owner or operator
for the costs of evaluating and remediating the underground tank sites in
excess of a designated variable dollar amount per site.
Based on a generic MGP site study and estimates determined in the
underground storage tank comprehensive site evaluations, the Company has
recorded a liability and an associated regulatory asset of $1,670,000 for
potential future environmental costs. The three state regulatory commissions
regulating the Company have authorized deferral accounting, or the creation of
a regulatory asset, for expenditures made in connection with environmental
matters. A
34
<PAGE> 37
determination as to whether or not environmental expenditures, net of
recoveries from other responsible parties, will be recovered from ratepayers
will be made at the appropriate time in general rate case proceedings. In
North Carolina, current procedures permit the Company to recover 100% of its
prudently incurred MGP clean-up costs but do not permit the recovery of any
carrying costs on such amounts from the time the amounts are expended until the
time they are collected. Based on regulatory accounting directives and the
emerging trend in the industry for regulators to permit substantial recovery of
such costs, the Company believes that the resolution of these matters will not
have a material adverse effect on the Company's financial position or results
of operations.
INDEPENDENT AUDITORS' REPORT
Piedmont Natural Gas Company, Inc.
We have audited the accompanying consolidated balance sheets of
Piedmont Natural Gas Company, Inc. and subsidiaries (the Company) as of October
31, 1994 and 1993, and the related statements of consolidated income, retained
earnings and cash flows for each of the three years in the period ended October
31, 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of the Company at October 31,
1994 and 1993, and the results of its operations and its cash flows for each of
the three years in the period ended October 31, 1994 in conformity with
generally accepted accounting principles.
As discussed in Note 8 to the consolidated financial statements,
effective November 1, 1993, the Company changed its method of accounting for
income taxes to conform with Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes."
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
December 16, 1994
35
<PAGE> 38
QUARTERLY FINANCIAL DATA
Quarterly financial data for the years ended October 31, 1994 and
1993, is summarized as follows:
<TABLE>
<CAPTION>
Earnings
Operating Operating Net Per Share of
Revenues Margin Income Income Common Stock
- -------------------------------------------------------------------------------------------------------
(in thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
1994
- ----
January 31 $233,108 $87,489 $30,630 $27,743 $1.06
April 30 $204,810 $81,987 $27,975 $22,988 $ .87
July 31 $ 70,641 $32,472 $ (468) $(7,239) $(.27)
October 31 $ 66,795 $32,831 $(2,267) $(7,986) $(.30)
1993
- ----
January 31 $202,628 $82,609 $30,891 $27,204 $1.05
April 30 $205,051 $77,822 $26,830 $22,574 $ .87
July 31 $ 74,646 $32,519 $ 940 $(5,277) $(.20)
October 31 $ 70,435 $30,922 $(2,086) $(6,967) $(.27)
</TABLE>
The pattern of quarterly earnings is the result of the highly seasonal
nature of the business as variations in weather conditions generally result in
greater earnings during the winter months. Earnings per share are calculated
based on the weighted average number of shares outstanding during the quarter.
The annual amount may differ from the total of the quarterly amounts due to
changes in the number of shares outstanding during the year.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------------------------------------------------------------------------
Financial Disclosure
- --------------------
None.
36
<PAGE> 39
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
Information required under this item with respect to directors is
contained in the Company's proxy statement filed with the Securities and
Exchange Commission (SEC) on or about January 24, 1995, and is incorporated
herein by reference.
The names, ages and positions of all of the executive officers of the
Company as of October 31, 1994, are listed below along with their business
experience during the past five years.
So far as practicable, all elected officers are elected at the first
meeting of the Board of Directors held following the annual meeting of
shareholders in each year and hold office until the meeting of the Board of
Directors following the annual meeting of shareholders in the next subsequent
year and until their respective successors are elected and qualify. All other
officers hold office during the pleasure of the Board of Directors. There are
no family relationships among these officers. There are no arrangements or
understandings between any officer and any other person pursuant to which the
officer was selected except for employment agreements with Messrs. Maxheim and
Denny.
<TABLE>
<CAPTION>
Business Experience
Name, Age and Position During Past Five Years
- ---------------------- ----------------------
<S> <C>
John H. Maxheim, 60 Elected in 1984.
Chairman of the Board, President
and Chief Executive Officer
*Everette C. Hinson, 64 Elected in 1979.
Senior Vice President-Finance
Ray B. Killough, 46 Elected in 1993.
Senior Vice President-Operations Prior to his election, he
was Vice President-
Engineering.
Ware F. Schiefer, 56 Elected in 1992.
Senior Vice President-Marketing Prior to his election,
and Gas Supply he was Senior Vice
President-Gas Supply and
Transportation.
</TABLE>
37
<PAGE> 40
<TABLE>
<S> <C>
Ted C. Coble, 51 Elected in 1982.
Vice President and Treasurer, and
Assistant Secretary
Stephen D. Conner, 46 Elected in 1990. Prior
Vice President-Corporate to his election, he was
Communications Director-Corporate
Communications.
J. William Denny, 59 Elected in 1985.
Vice President-Nashville Division;
President of the Nashville
Gas Company Division
Charles W. Fleenor, 44 Elected in 1987.
Vice President-Gas Supply
Paul C. Gibson, 55 Elected in 1986.
Vice President-Rates
Barry L. Guy, 50 Elected in 1986.
Vice President and Controller
Donald F. Harrow, 39 Elected in 1992.
Vice President-Governmental Relations From 1991 until his
election, he was
Director-Governmental
Relations. Prior to
1991, he was Vice
President of Public
Affairs for the Charlotte
Chamber of Commerce,
Charlotte, North
Carolina.
Dale C. Hewitt, 49 Elected in 1993.
Vice President-North Carolina From 1988 until his
Operations election, he was District
Manager of the Company's
Greensboro, North
Carolina, operations.
William L. Lindner, 63 Elected in 1973.
Vice President-Technology
Kevin M. O'Hara, 36 Elected in 1993.
Vice President-Corporate Planning From 1991 to 1993, he was
Director-Information
Services Plans and
Controls. Prior to 1991,
he was Manager-
</TABLE>
38
<PAGE> 41
<TABLE>
<S> <C>
Information Services
Plans and Controls.
William R. Pritchard, Jr., 51 Elected in 1986.
Vice President-Information
Services
Ralph P. Stewart, 54 Elected in 1986.
Vice President-Employee Relations
Bartlett C. Winkler, 58 Elected in 1992.
Vice President-Marketing Prior to his election, he
was Vice President-
Residential and
Commercial Sales.
William D. Workman, III, 54 Elected in December 1993,
Vice President-South Carolina effective January 1994.
Operations From 1991 until his
election, he was Senior
Director for Facilities
and Civic Affairs for
Fluor Daniel, Inc.,
Greenville, South
Carolina. Prior to
1991, he was Senior
Consultant-Project
Development Group of that
company.
</TABLE>
*Retired November 30, 1994.
Item 11. Executive Compensation
- --------------------------------
Information required under this item is contained in the Company's
proxy statement filed with the SEC on or about January 24, 1995, and is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners
Information with respect to security ownership of certain beneficial
owners is contained in the Company's proxy statement filed with the SEC on or
about January 24, 1995, and is incorporated herein by reference.
(b) Security Ownership of Management
Information with respect to security ownership of directors and
officers is contained in the Company's proxy statement filed
39
<PAGE> 42
with the SEC on or about January 24, 1995, and is incorporated herein by
reference.
(c) Changes in Control
The Company knows of no arrangements or pledges which may result in a
change in control.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
Information with respect to certain transactions with directors is
contained in the Company's proxy statement filed with the SEC on or about
January 24, 1995, and is incorporated herein by reference.
40
<PAGE> 43
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- --------------------------------------------------------------------------
(a) 1. FINANCIAL STATEMENTS
The following consolidated financial statements of the Company and its
subsidiaries and the related independent auditors' report for the year ended
October 31, 1994, are included in Item 8 of this report as follows:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Balance Sheets - October 31, 1994 and 1993 18
Statements of Consolidated Income - Years Ended
October 31, 1994, 1993 and 1992 20
Statements of Consolidated Cash Flows - Years Ended
October 31, 1994, 1993 and 1992 21
Statements of Consolidated Retained Earnings - Years
Ended October 31, 1994, 1993 and 1992 22
Notes to Consolidated Financial Statements 23
Independent Auditors' Report 35
</TABLE>
(a) 2. SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
-------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report 48
II Valuation and Qualifying Accounts 49
</TABLE>
Schedules other than those listed above and certain other information
are omitted for the reason that they are not required or are not applicable, or
the required information is shown in the financial statements or notes thereto.
(a) 3. EXHIBITS
--------
Where an exhibit is filed by incorporation by reference to a
previously filed registration statement or report, such
registration statement or report is identified in parentheses.
Upon written request of a shareholder, the Company will
provide a copy of the exhibit at a nominal charge.
3.1 Copy of Articles of Incorporation of the Company, filed in the
Department of State of the State of North Carolina on December
13, 1993 (Exhibit No. 2, Registration Statement on Form 8-B,
dated March 2, 1994).
3.2 Copy of By-Laws of the Company as amended (Exhibit No. 2,
Registration Statement on Form 8-B, dated March 2, 1994).
41
<PAGE> 44
4.1 Copy of Note Agreement, dated as of August 30, 1988, between
the Company and Jefferson-Pilot Life Insurance Company, et al
(Exhibit 4.26, Form 10-K for the fiscal year ended October 31,
1988).
4.2 Copy of Note Agreement, dated as of June 15, 1989, between the
Company and The Mutual Life Insurance Company of New York
(Exhibit 4.27, Form 10-K for the fiscal year ended October 31,
1989).
4.3 Copy of Note Agreement, dated as of August 31, 1989, between
the Company and Teachers Insurance and Annuity Association of
America (Exhibit 4.28, Form 10-K for the fiscal year ended
October 31, 1989).
4.4 Copy of Note Agreement, dated as of July 30, 1991, between the
Company and The Prudential Insurance Company of America
(Exhibit 4.29, Form 10-K for the fiscal year ended October 31,
1991).
4.5 Copy of Note Agreement, dated as of September 21, 1992,
between the Company and Provident Life and Accident Insurance
Company (Exhibit 4.30, Form 10-K for the fiscal year ended
October 31, 1992).
4.6 Form of Indenture, dated as of April 1, 1993, between the
Company and Citibank, N.A., Trustee (Exhibit 4.1, Registration
Statement No. 33-60108).
4.7 Copy of Medium-Term Note, Series A, dated as of July 23, 1993
(Exhibit 4.7, Form 10-K for the fiscal year ended October 31,
1993).
4.8 Copy of Medium-Term Note, Series A, dated as of October 6,
1993 (Exhibit 4.8, Form 10-K for the fiscal year ended October
31, 1993).
4.9 Copy of Medium-Term Note, Series A, dated as of September 19,
1994.
10.1 Copy of Employment Agreement between Tennessee Natural
Resources, Inc., and J. William Denny, dated April 27, 1984
(Exhibit 10.17, Registration Statement No. 33-4767).
10.2 Copy of Termination and Severance Pay Agreement between the
Company, Tennessee Natural Resources, Inc., and John C.
Bolinger, Jr., dated February 7, 1985 (Exhibit 10.14,
Registration Statement No. 33-4767).
42
<PAGE> 45
10.3 Copy of the Company's Executive Long-Term Incentive Plan, as
amended through December 2, 1994.
10.4 Copy of Employment Agreement between the Company and John H.
Maxheim, dated February 26, 1993 (Exhibit 10.4, Form 10-K for
the fiscal year ended October 31, 1993).
10.5 Copy of Articles of Organization of Cardinal Pipeline Company,
L.L.C., dated April 5, 1994 (Exhibit 10.1, Form 10-Q for the
quarterly period ended April 30, 1994).
10.6 Copy of Operating Agreement of Cardinal Pipeline Company,
L.L.C., dated March 23, 1994 (Exhibit 10.2, Form 10-Q for the
quarterly period ended April 30, 1994).
10.7 Copy of Construction, Operating and Management Agreement by
and between Public Service Company of North Carolina, Inc. and
Cardinal Pipeline Company, L.L.C., dated March 23, 1994
(Exhibit 10.3, Form 10-Q for the quarterly period ended April
30, 1994).
10.8 Copy of Service Agreement under Rate Schedule LG-A, dated
January 15, 1971, between the Company and Transcontinental Gas
Pipe Line Corporation (Exhibit 67, Registration Statement No.
2-59631).
10.9 Copy of Service Agreement under Rate Schedule GSS, dated May
2, 1972, between the Company and Transcontinental Gas Pipe
Line Corporation (Exhibit 67, Registration Statement No.
2-59631).
10.10 Copy of Service Agreement under Rate Schedule WSS, dated
August 6, 1981, between the Company and Transcontinental Gas
Pipe Line Corporation (Exhibit 10.5, Registration Statement
No. 33-4767).
10.11 Copy of Firm Seasonal Gas Transportation Agreement (Southern
Expansion, FT 53,000 mcf), dated June 29, 1990, between the
Company and Transcontinental Gas Pipe Line Corporation
(Exhibit 10.25, Form 10-K for the fiscal year ended October
31, 1990).
10.12 Copy of Service Agreement (5,900 Mcf per day), dated August 1,
1991, between the Company and Transcontinental Gas Pipe Line
Corporation (Exhibit 10.20, Form 10-K for the fiscal year
ended October 31, 1991).
10.13 Copy of Service Agreement (6,222 Mcf per day), dated August 1,
1991, between the Company and Transcontinental Gas Pipe Line
Corporation (Exhibit 10.16, Form 10-K for the fiscal year
ended October 31, 1992).
43
<PAGE> 46
10.14 Copy of Service Agreement Rate Schedule FS (20,000 Mcf per
day), dated August 1, 1991, between the Company and
Transcontinental Gas Pipe Line Corporation (Exhibit 10.17,
Form 10-K for the fiscal year ended October 31, 1992).
10.15 Copy of Service Agreement Rate Schedule FS (43,640 Mcf per
day), dated August 1, 1991, between the Company and
Transcontinental Gas Pipe Line Corporation (Exhibit 10.18,
Form 10-K for the fiscal year ended October 31, 1992).
10.16 Copy of Gas Transportation Agreement (FT, 24,505 Mcf per day,
NIPPS), dated January 30, 1992, between the Company and
Transcontinental Gas Pipe Line Corporation (Exhibit 10.19,
Form 10-K for the fiscal year ended October 31, 1992).
10.17 Copy of Service Agreement (FT, 205,200 Mcf per day), dated
February 1, 1992, between the Company and Transcontinental Gas
Pipe Line Corporation (Exhibit 10.20, Form 10-K for the fiscal
year ended October 31, 1992).
10.18 Copy of Service Agreement (FT-NT, 12,785 Mcf/day, Texas
Gas/CNG), dated July 20, 1992, between the Company and
Transcontinental Gas Pipe Line Corporation (Exhibit 10.25,
Form 10-K for the fiscal year ended October 31, 1993).
10.19 Copy of Amendment to Service Agreement (Southern Expansion, FT
53,000 mcf), dated February 1, 1993, between the Company and
Transcontinental Gas Pipe Line Corporation (Exhibit 10.27,
Form 10-K for the fiscal year ended October 31, 1993).
10.20 Copy of Service Agreement (Contract #800059) (SCT, 1,677
Dt/day), dated June 1, 1993, between the Company and Texas
Eastern Transmission Corporation (Exhibit 10.28, Form 10-K for
the fiscal year ended October 31, 1993).
10.21 Copy of Gas Storage Contract (for Use Under Rate Schedule FS)
(Contract No. 2399) (FS, 2,901,943 Dt), dated September 1,
1993, between the Company and Tennessee Gas Pipeline Company
(Exhibit 10.29, Form 10-K for the fiscal year ended October
31, 1993).
10.22 Copy of Gas Transportation Agreement (for Use Under FT-A Rate
Schedule) (Contract No. 237) (FTA, 130,000 Dt/day), dated
September 1, 1993, between the Company and Tennessee Gas
Pipeline Company (Exhibit 10.30, Form 10-K for the fiscal year
ended October 31, 1993).
10.23 Copy of Gas Storage Contract (for Use Under Rate Schedule FS)
(Contract No. 2400) (FS, 672,091 Dt total capacity), dated
September 1, 1993, between the Company and Tennessee
44
<PAGE> 47
Gas Pipeline Company (Exhibit 10.31, Form 10-K for the fiscal
year ended October 31, 1993).
10.24 Copy of FTS Service Agreement (23,000 Dt/day), dated November
1, 1993, between the Company and Columbia Gas Transmission
Corporation.
10.25 Copy of Service Agreement under Rate Schedule FSS (2,263,920
Dt total capacity), dated November 1, 1993, between the
Company and Columbia Gas Transmission Corporation.
10.26 Copy of Service Agreement under Rate Schedule SST (Winter:
10,000 Dt/day; Summer: 5,000 Dt/day), dated November 1, 1993,
between the Company and Columbia Gas Transmission Corporation.
10.27 Copy of FTS Service Agreement (10,000 Dt/day), dated November
5, 1993, between the Company and Columbia Gas Transmission
Corporation.
12 Computation of Ratio of Earnings to Fixed Charges.
23 Independent Auditors' Consent.
27 Financial Data Schedule.
99 Annual Report on Form 11-K.
(b) Reports on Form 8-K
-------------------
None.
45
<PAGE> 48
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PIEDMONT NATURAL GAS COMPANY, INC.
-------------------------------------
(Registrant)
Date January 25, 1995 By: /s/ John H. Maxheim
------------------- --------------------------------
John H. Maxheim
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John H. Maxheim Chairman of the Board, January 25, 1995
- --------------------- President and Chief
John H. Maxheim Executive Officer, and
Director
/s/ Ted C. Coble Vice President and January 25, 1995
- --------------------- Treasurer, and
Ted C. Coble Assistant Secretary
(Principal Financial
Officer)
/s/ Barry L. Guy Vice President and January 25, 1995
- --------------------- Controller (Principal
Barry L. Guy Accounting Officer)
</TABLE>
46
<PAGE> 49
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Jerry W. Amos Director January 25, 1995
- ------------------------------
Jerry W. Amos
/s/ John C. Bolinger, Jr. Director January 25, 1995
- ------------------------------
John C. Bolinger, Jr.
Director January 25, 1995
- ------------------------------
C. M. Butler III
/s/ Sam J. DiGiovanni Director January 25, 1995
- ------------------------------
Sam J. DiGiovanni
/s/ Muriel W. Helms Director January 25, 1995
- ------------------------------
Muriel W. Helms
/s/ John F. McNair III Director January 25, 1995
- ------------------------------
John F. McNair III
/s/ Walter S. Montgomery, Jr. Director January 25, 1995
- ------------------------------
Walter S. Montgomery, Jr.
/s/ Donald S. Russell, Jr. Director January 25, 1995
- ------------------------------
Donald S. Russell, Jr.
/s/ John E. Simkins, Jr. Director January 25, 1995
- ------------------------------
John E. Simkins, Jr.
</TABLE>
47
<PAGE> 50
INDEPENDENT AUDITORS' REPORT
- ----------------------------
Piedmont Natural Gas Company, Inc.
We have audited the consolidated financial statements of Piedmont Natural Gas
Company, Inc. and subsidiaries (the Company) as of October 31, 1994 and 1993,
and for each of the three years in the period ended October 31, 1994, and have
issued our report thereon dated December 16, 1994. Such consolidated financial
statements and report are included herein. Our audits also included the
supplemental consolidated financial statement schedule of the Company listed
in Item 14. This consolidated financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion on this consolidated financial statement schedule based on our
audits. In our opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
December 16, 1994
48
<PAGE> 51
Schedule II
PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Valuation and Qualifying Accounts
For the Years Ended October 31, 1994, 1993 and 1992
- -----------------------------------------------------------------------------------------------------
Balance at Additions Balance
Beginning Charged to Deductions at End
Description of Period Costs and Expenses (A) of Period
- -----------------------------------------------------------------------------------------------------
(in thousands)
Allowance for doubtful accounts:
<S> <C> <C> <C> <C>
1994 $ 776 $2,357 $2,186 $ 947
1993 1,120 1,849 2,193 776
1992 709 1,655 1,244 1,120
</TABLE>
(A) Uncollectible accounts written off, net of recoveries and adjustments.
49
<PAGE> 52
Piedmont Natural Gas Company, Inc.
Form 10-K
For the Fiscal Year Ended October 31, 1994
Exhibits
4.9 Copy of Medium-Term Note, Series A, dated as of September 19, 1994.
10.3 Copy of the Company's Executive Long-Term Incentive Plan, as
amended through December 2, 1994.
10.24 Copy of FTS Service Agreement (23,000 Dt/day), dated November 1,
1993, between the Company and Columbia Gas Transmission
Corporation.
10.25 Copy of Service Agreement under Rate Schedule FSS (2,263,920 Dt
total capacity), dated November 1, 1993, between the Company and
Columbia Gas Transmission Corporation.
10.26 Copy of Service Agreement under Rate Schedule SST (Winter: 10,000
Dt/day; Summer: 5,000 Dt/day), dated November 1, 1993, between the
Company and Columbia Gas Transmission Corporation.
10.27 Copy of FTS Service Agreement (10,000 Dt/day), dated November 5,
1993, between the Company and Columbia Gas Transmission
Corporation.
12 Computation of Ratio of Earnings to Fixed Charges.
23 Independent Auditors' Consent.
27 Financial Data Schedule (for the SEC use only).
99 Annual Report on Form 11-K.
<PAGE> 1
Exhibit 4.9
REGISTERED REGISTERED
PIEDMONT NATURAL GAS COMPANY, INC.
No. FXR-3 MEDIUM-TERM NOTE, SERIES A CUSIP No. 72018QAC5
(Fixed Rate)
This Security is a Book-Entry Debt Security within the meaning of the Indenture
hereinafter referred to and is registered in the name of a Depository or a
nominee of a Depository. This Security is exchangeable for Securities
registered in the name of a person other than the Depository or its nominee
only in the limited circumstances described in the Indenture, and no transfer
of this Security (other than a transfer of this Security as a whole by the
Depository to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository) may be registered except
in such limited circumstances.
Unless this Certificate is presented by an authorized representative of The
Depository Trust Company (55 Water Street, New York, New York) to the issuer or
its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or such other name
as requested by an authorized representative of The Depository Trust Company
and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the
registered owner hereof, Cede & Co., has an interest herein.
PRINCIPAL AMOUNT: *40,000,000.00* ISSUE PRICE:
(U.S. Dollars) (If other then 100 % of the
Principal Amount)
ISSUE DATE: Sep 19 1994 STATED MATURITY: Sep 19 2024
INTEREST RATE: 8.4500000 COMPUTATION PERIOD:
INTEREST PAYMENT DATE(S): 1/1 7/1 RECORD DATE(S):
REDEMPTION DATE(S): N/A REDEMPTION PERCENTAGE(S): N/A
REDEMPTION DATE(S) REDEMPTON PERCENTAGES
(OPTION OF HOLDER): N/A (OPTION OF HOLDER): N/A
NOTICE PERIOD: ORIGINAL ISSUE DISCOUNT
SECURITY: N/A
If applicable, the following
will be completed for the
purpose of applying the United
States federal tax original
issue discount ("OID") rules:
OTHER PROVISIONS:
TOTAL AMOUNT OF OID:
YIELD TO MATURITY:
INITIAL ACCRUAL PERIOD OID:
<PAGE> 2
PIEDMONT NATURAL GAS COMPANY, INC., a corporation duly organized and
existing under the laws of the State of New York (herein called the "Company",
which term includes any successor person under the Indenture hereinafter
referred to), for value received, hereby promises to pay to Cede & Co., as
nominee for the Depository Trust Company, or registered assigns, the Principal
Amount specified above on the Stated Maturity specified above and to pay
interest thereon (computed, unless a different Computation Period is Specified
above, on the basis of a 360-day year of twelve 30-day months) from and
including the Issue Date specified above or from and including the most recent
Interest Payment Date to which interest on this Security has been paid or duly
provided for to, but excluding, the Interest Payment Date, on the Interest
Payment Date(s) specified above in each year (or if any such date is not a
Business Day (as defined on the reverse hereof), the next succeeding Business
Day) (each an "Interest Payment Date") and the date on which the principal of
this Security becomes due and payable as herein provided, whether at the Stated
Maturity or upon declaration of acceleration, call for redemption or otherwise
("Maturity"), at the rate per annum equal to the Interest Rate specified above,
until the principal hereof is paid or duly made available for payment. The
interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in such Indenture, be paid to the person in
whose name this Security is registered at the close of business on the
fifteenth day next preceding such Interest Payment Date, unless a different
Record Date is specified above (the "Record Date"); provided, however, that
interest payable at Maturity will be payable to the person to whom principal
shall be payable; and provided, further, that if the Issue Date is after a
Record Date and before the next succeeding Interest Payment Date the first
payment of interest shall be payable on the second Interest Payment Date
following the Issue Date to the person in whose name this Security is
registered at the close of business on the Record Date immediately preceding
such Interest Payment Date. Any such interest which is payable, but not so
punctually paid or duly provided for, on any Interest Payment Date will
forthwith cease to be payable to the holder on such Record Date and such
defaulted interest may either be paid to the person in whose name this Security
is registered at the close of business on a subsequent record date for the
payment of such Defaulted Interest to be fixed by the Trustee referred to on
the reverse hereof, notice whereof shall be given to holders of Securities of
this series not less than 15 days prior to such subsequent record date, such
subsequent record date to be not less than five days preceding the date of
payment of such defaulted interest or in any other lawful manner acceptable to
the Trustee.
Payment of the principal of and premium (if any) and interest on this
Security will be made in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts. Payment of interest on this Security (other than interest payable at
Maturity) will be made by check mailed to the address of the holder as such
address shall appear in the Debt Security Register; provided, however, that (i)
if this Security is a Book-Entry Debt Security the Depository, as holder of
this Security, shall be entitled to receive payment of interest by wire
transfer of immediately available funds, and (ii) a holder of $1,000,000 or
more in aggregate principal amount of Securities of this series of like tenor
and terms shall be entitled to payments of interest, other than interest
payable at Maturity, via wire transfer of immediately available funds provided
arrangements for such payments have been made with the Trustee 15 days prior to
the applicable Interest Payment Date. Notices regarding changes of address
shall be effective upon recordation in the Debt Securities Register. Payment
of the principal of, premium (if any) and interest on this Security payable at
Maturity will be made in immediately available funds upon surrender of this
Security at the corporate trust office of the Trustee in the Borough of
Manhattan, The City of New York, or such other office or agency of the Company
maintained for such purpose in the Borough of Manhattan, The City of New York.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY
SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL
PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
Unless the certificate of authentication hereon has been executed by
the Trustee by the manual signature of an authorized signatory, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
<PAGE> 3
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by manual or facsimile signature under its corporate seal.
Dated: Sept 19, 1994
PIEDMONT NATURAL GAS COMPANY, INC.
[CORPORATE SEAL) By: /s/ E. C. Hinson
-------------------------------
E. C. HINSON
Senior Vice President - Finance
Attest:
By: /s/ T. C. Coble
-------------------
T. C. COBLE
Assistant Secretary
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the series designated therein referred to in the
within-mentioned Indenture.
CITIBANK, N.A.
As Trustee
By: /s/ Ray Roman
--------------------
RAY ROMAN
Authorized Signatory
<PAGE> 4
This security is one of a duly authorized issue of securities of the
Company (the "Securities") issued and to be issued in one or more series under
the Indenture, dated as of April 1, 1993 (the "Indenture"), between the Company
and Citibank, N.A., as Trustee (herein called the "Trustee, which term includes
any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee and the holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered.
This Security is one of the series designated on the face hereof, initially
limited to an aggregate principal amount not to exceed $150,000,000 (or if
Securities of this series are to be Original Issue Discount Securities, such
principal amount as shall result in an aggregate initial offering price of
Securities equivalent to not more than $150,000,000). The foregoing limit may
be increased in the future by the Company. Except as may be otherwise stated
on the face hereof, the Securities of this series are issuable only as
registered Securities, without coupons, in denominations of $100,000 and
integral multiples of $1,000 in excess thereof. Except as otherwise stated on
the face hereof with respect to default interest and interest payable at
Maturity, the person in whose name this Security is registered at the close of
business on the Record Date with respect to an Interest Payment Date shall be
entitled to receive the interest payable on such date notwithstanding the
cancellation of this Security upon any registration of transfer or exchange
hereof subsequent to such Record Date and prior to such Interest Payment Date.
The Securities of this series may be issued from time to time in various
principal amounts, may mature at different times, may bear interest at
different rates, may be subject to different redemption provisions, if any, and
may otherwise vary. As provided in the Indenture and subject to certain
limitations therein set forth, Securities of this series are exchangeable for a
like aggregate principal amount of Securities of this series and of like tenor
of a different authorized denomination, as requested by the holder surrendering
the same.
The Securities are general, direct, unconditional and unsecured
obligations of the Company.
If this Security is designated on the face hereof as an Original Issue
Discount Security, then, notwithstanding anything to the contrary contained in
this Security, upon the redemption or acceleration of maturity of this Security
there shall be payable in lieu of the Principal Amount, an amount equal to the
"Amortized Face Amount" of this Security. The "Amortized Face Amount" shall be
the amount equal to (a) the Principal Amount multiplied by the Issue Price
specified on the face hereof (expressed as a percentage of the Principal
Amount), plus (b) that portion of the difference between the Issue Price and
the Principal Amount that has been amortized at the Stated Yield (as defined
below) of this Security (computed in accordance with generally accepted United
States bond yield computation principles) at the date as of which the Amortized
Face Amount is calculated, but in no event shall the Amortized Face Amount
exceed the Principal Amount hereof. As used in the previous sentence "Stated
Yield" means the Yield to Maturity specified on the face hereof (or if not so
specified, the yield to maturity compounded semi-annually and computed in
accordance with generally accepted United States bond yield computation
principles) for the period from the Issue Date to the Stated Maturity on the
basis of the Issue Price and the Principal Amount.
"Business Day" means any day that is not a Saturday or Sunday and that
in New York, New York is not a day on which banking institutions are generally
authorized or obligated by law to close.
If one or more Redemption Dates (or ranges of Redemption Dates) is
specified on the face hereof, this Security is subject to redemption upon not
less than 30 nor more than 60 days' notice by mail, on any such date (or during
any such range), as a whole, or from time to time in part, at the election of
the Company, at a Redemption Price determined as provided in the next
succeeding sentence, together with accrued interest to the Redemption Date but
interest installments whose Stated Maturity is prior to the Redemption Date
will be payable to the holder hereof of record at the close of business on the
Record Dates referred to on the face hereof, all as provided in the Indenture.
If applicable, the "Redemption Price" for any such redemption shall be the
amount determined by multiplying the Redemption Percentage specified on the
face hereof with respect to the relevant Redemption Date (or range of such
dates), by the portion of the principal amount hereof (or, if this Security is
an Original Issue Discount Security, the portion of the Amortized Face Amount
hereof) to be redeemed; provided, however, that
<PAGE> 5
in no event shall the Redemption Price be less than 100% of the portion of the
principal amount hereof (or, if this Security is an Original Issue Discount
Security, the portion of the Amortized Face Amount hereof) to be redeemed.
Notice of redemption having been given as aforesaid, this Security (or
the portion of the principal amount hereof so to be redeemed) shall, on the
Redemption Date, become due and payable at the Redemption Price herein
specified, and from and after such date (unless the Company shall default in
the payment of the Redemption Price and accrued interest) shall cease to bear
interest. In the case of any partial redemption of Securities of this series
at the option of the Company, the Securities of a particular tenor with like
terms to be redeemed shall be selected by the Trustee not more than 60 days
prior to the Redemption Date by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
of the principal amount of Securities. In the event of any redemption of this
Security in part only, a new Security or Securities of this series of like
tenor and terms for the unredeemed portion hereof will be issued in the name of
the holder hereof upon the surrender and cancellation hereof.
If one or more Redemption Dates (Option of Holder) (or ranges of such
dates) is specified on the face hereof, this Security is subject to redemption
on any such date (or during any such range) or, if such date is not a Business
Day, on the first Business Day following such date, as a whole or from time to
time in part, at the election of the holder hereof, at a Redemption Price
determined as provided in the last sentence of this paragraph together with
accrued interest to the Redemption Date, but interest installments whose Stated
Maturity is on or prior to the Redemption Date will be payable to the holder
hereof of record at the close of business on the Record Date referred to on the
face hereof. Such election shall be effected by the holder hereof delivering
to the Company at the principal corporate trust office of the Trustee in the
Borough of Manhattan, the City of New York not less than 30 nor more than 60
days prior to the date on which this Security is to be redeemed, or during such
other Notice Period specified on the face hereof, a notice requesting such
redemption in the form described below specifying the date upon which this
Security is to be redeemed. Any notice given by a holder pursuant to this
paragraph shall consist of either (i) this Security with the form entitled
"Option to Elect Redemption" set forth at the end of this Security duly
completed or (ii) a telegram, facsimile transmission or a letter from a member
of a national securities exchange, or the National Association of Securities
Dealers, Inc. or a commercial bank or trust company in the United States
setting forth the name of the holder hereof, the principal amount of this
Security, the principal amount of this Security to be redeemed, the certificate
number or a description of the terms of this Security, a statement that the
option to elect redemption is being exercised thereby and a guarantee that this
Security, together with the duly completed form entitled "Option to Elect
Redemption" below, will be received by the Trustee not later than the fifth
Business Day after the date of such telegram, facsimile transmission or letter;
provided, however, that such telegram, facsimile transmission or letter shall
only be effective if this Security and form duly completed are received by the
Trustee by such fifth Business Day. Exercise of the redemption option by the
holder hereof will be irrevocable. If applicable, the "Redemption Price" for
any such redemption shall be determined by multiplying the Redemption
Percentage (Option of Holder) specified on the face hereof with respect to the
relevant Redemption Date (Option of Holder) (or range of such dates) by the
portion of the principal amount hereof (or, if this Security is an Original
Issue Discount Security, the portion of the Amortized Face Amount hereof) to be
redeemed; provided, however, that in no event shall the Redemption Price be
less than 100% of the portion of the principal amount hereof (or, if this
Security is an Original Issue Discount Security, the portion of the Amortized
Face Amount hereof) to be redeemed.
The indenture contains provisions for defeasance at any time of the
entire indebtedness on this Security upon compliance by the Company with
certain conditions set forth therein.
If an Event of Default with respect to the Securities of this series
shall occur and be continuing, the principal of the Securities of this series
(or, in the case of Original Issue Discount Securities the Amortized Face
Amount thereof) may be declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the holders of the Securities of each series to be
affected under the Indenture at
<PAGE> 6
any time by the Company and the Trustee with the consent of the holders of 66
2/3% in principal amount of the Securities at the time outstanding of all
series to be affected. The Indenture also contains provisions permitting the
holders of a majority in principal amount of the Securities of each series at
the time outstanding, on behalf of the holders of all Securities of such
series, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the holder of this Security shall be conclusive
and binding upon such holder and upon all future holders of this Security and
of any Security issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or waiver is
made upon this Security.
As set forth in, and subject to, the provisions of the Indenture, no
holder of any Security of this series will have any right to institute any
proceeding with respect to the Indenture or for any remedy thereunder, unless
such holder shall have previously given to the Trustee written notice of a
continuing Event of Default with respect to this series, the holders of not
less than 25% in principal amount of the outstanding Securities of this series
shall have made written request, and offered reasonable indemnity to the
Trustee to institute such proceeding as trustee, and the Trustee shall not have
received from the holders of a majority in principal amount of the outstanding
Securities of this series a direction inconsistent with such request and the
Trustee shall have failed to institute such proceeding within 60 days;
provided, however, that such limitations do not apply to a suit instituted by
the holder hereof for the enforcement of payment of the principal of and
premium (if any) or interest on this Security on or after the respective due
dates expressed herein.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and premium (if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Debt
Security Register, upon surrender of this Security for registration of transfer
at this office or agency of the Company in any place where the principal of and
premium (if any) and interest on this Security are payable, duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Debt Security Registrar duly executed by, the holder hereof or
his attorney duly authorized in writing, and thereupon one or more new
Securities of this series and of like tenor, of authorized denominations and
for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
As provided in the Indenture and subject to certain limitations
therein set forth, the Securities of this series are exchangeable for a like
aggregate principal amount of Securities of this series and of like tenor of a
different authorized denomination, as requested by the holder surrendering the
same. In the event of any redemption at the option of the Company, the Trustee
shall not be required to (i) register the transfer of or exchange Securities of
this series of like tenor during a period of 15 days next preceding the mailing
of the notice of any redemption, or (ii) register the transfer of or exchange
any Security so selected for redemption, except, in the case of any redemption
in part, the portion of any Security not to be redeemed.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
The Securities of this series may be issued in the form of one or more
Book-Entry Debt Securities to The Depository Trust Company as Depository for
the Securities of this series or its nominee and registered in the name of the
Depository or such nominee. If the face of this Security contains a legend
indicating that this Security is a Book-Entry Debt Security so registered, the
transfer and exchange hereof is subject to the additional limitations set forth
in such legend and in the Indenture.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the person in whose name this Security is registered as the absolute
owner hereof for all purposes, whether or not this Security is overdue, and
neither the Company, the Trustee nor any such agent shall be affected by notice
to the contrary.
<PAGE> 7
All terms used in this Security which are defined in the Indenture shall have
the meanings assigned to them in the Indenture.
------------------------------
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants in common
UNIF GIFT MIN ACT - Custodian
--------------- ----------
(Custodian) (Minor)
Under Uniform Gifts to Minor Act ( )
-------
(State)
Additional abbreviations may also be used though not in the above list.
-------------------------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s)
unto
- --------------------------------------------------------------------------------
(Please insert Social Security or other identifying number of assignee)
- --------------------------------------------------------------------------------
(Please print or typewrite name and address including postal zip code of
assignee)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing
- --------------------------------------------------------------------------------
attorney to transfer said Security on the books of the Company, with full power
of substitution in the premises.
Dated: X
------------------- -------------------------------------------------
NOTICE: The signature to this assignment must
correspond with the name as written upon the face
of the within instrument in every particular,
without alteration or enlargement or any change
whatever.
<PAGE> 8
OPTION TO ELECT REDEMPTION
The undersigned hereby irrevocably requests and instructs Piedmont Natural Gas
Company, Inc. to redeem the within Security (or portion thereof specified
below) pursuant to its terms at the Redemption Price, to the undersigned at
- --------------------------------------------------------------------------------
(Please print or typewrite name and address including postal zip code of the
undersigned)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If less than the entire principal amount of the within Security is to
be redeemed, specify the portion thereof which the holder elects to have
redeemed:
- --------------------------------------------------------------------------------
and specify the denomination or denominations (which shall not be less than the
minimum authorized denomination) of the Securities to be issued to the holder
for the portion of the within Security not being redeemed (in the absence of
any such specification, one such Security will be issued for the portion not
being redeemed):
- --------------------------------------------------------------------------------
Dated: X
---------------- --------------------------------------------------
NOTICE: The signature on this Option to Elect
Redemption must correspond with the name as
written upon the face of the within instrument
in every particular, without alteration or
enlargement or any change whatever.
<PAGE> 1
Exhibit 10.3
PIEDMONT NATURAL GAS COMPANY, INC.
EXECUTIVE LONG TERM INCENTIVE PLAN
Effective March 1, 1986
As Amended February 27, 1987
Brooks, Pierce, McLendon, Humphrey & Leonard
Greensboro, North Carolina
<PAGE> 2
PIEDMONT NATURAL GAS COMPANY, INC.
EXECUTIVE LONG TERM INCENTIVE PLAN
1.0 Purpose. The purpose of the Piedmont Natural Gas Company, Inc.
Executive Long Term Incentive Plan (the "Plan") is to provide Executives of
Piedmont Natural Gas Company, Inc. and its subsidiaries (the "Company") with
incentive compensation conditioned upon the achievement of financial and other
performance objectives, effective with performance cycles beginning in 1986.
2.0 Awards.
2.1 The Board of Directors (the "Board") of the Company may grant
awards of units ("Units") in each of the years 1986 through 1996 in such
amounts and to such of the eligible Executives as it may determine in its sole
discretion (subject to the limitation in Section 4.0 below).
Except as otherwise provided herein, awards will be distributed only
after the end of a performance period ("Performance Period") of two or more
years beginning with the year in which the awards are granted. The Performance
Period is to be set by the Board for each year's awards.
The percentage of the Units awarded under this Section 2.1 or credited
pursuant to Section 6.0 that will be distributed to Executives shall depend on
the levels of financial performance and other performance objectives achieved
during each year of the Performance Period; provided that the Board may adopt
one or more performance categories or eliminate all performance categories
other than financial performance. Financial performance shall be based on the
consolidated results of the Company and it subsidiaries prepared on the same
basis as the financial statements published for financial reporting purposes
and determined in accordance with Section 10.1. Other performance categories
adopted by the Board shall be based on measurements of performance as the Board
shall deem appropriate; provided that the Board, if it determines in its sole
discretion that it is necessary or advisable under the circumstances, may
determine that distribution of awards to persons employed shall be based on
financial performance and other performance categories, if any.
Distributions of the Units awarded will be based on financial
performance with results from other performance categories applied as a factor,
not exceeding one (1), against financial results. The annual financial and
other performance results will be averaged over the Performance Period and
translated into percentage factors according to graduated criteria established
by the Board for the entire Performance Period. The resulting percentage
factors shall determine the percentage of Units to be distributed.
1
<PAGE> 3
No distributions of Units, based on financial performance and other
performance, shall be made if a minimum average percentage of the applicable
measurement of performance, to be established by the Board, is not achieved for
the Performance Period. The performance levels achieved for each Performance
Period and percentage of Units to be distributed shall be conclusively
determined by the Board.
2.2 Persons granted awards under the Plan are called "Participants".
The percentage of Units awarded which Participants become entitled to receive
based on the levels of performance will be determined as soon as practicable
after each Performance Period and are called "Retained Units".
2.3 As soon as practical after determination of the number of
Retained Units, such Retained Units shall be distributed in the form of a
combination of shares and cash consisting of a number of the Company's common
shares ("Shares") equal to sixty percent (60%) of the number of Retained Units
and cash equal in value to forty percent (40%) of the number of Retained Units
(determined in accordance with Section 8.6). The Units awarded but which
Participants do not become entitled to receive shall be cancelled.
2.4 Notwithstanding any other provision in the Plan, the Board, if
it determines in its sole discretion that it is necessary or advisable under
the circumstances, may adopt rules pursuant to which Executives by virtue of
hire, promotion or upgrade, or transfer from another company in which the
Company has or had a direct or indirect ownership interest, or special
individual circumstances, may be granted the total award of Units or any
portion thereof, with respect to one or more Performance Periods that began in
prior years and at the time of the awards have not yet been completed.
3.0 Eligibility.
3.1 Eligibility is extended to employees of the Company who are in
active service at the time awards are granted and who are determined by the
Board to be eligible for awards under the Plan. Employees are not rendered
ineligible by reason of being a member of the Board of the Company. The Board
may grant awards to employees on leave of absence and to employees absent on
account of disability and receiving Sickness or Accident Disability Benefits
who at the time such leave of absence or disability commenced would have been
eligible, subject to such conditions, if any, as the Board may establish.
4.0 Limitations.
2
<PAGE> 4
4.1 The aggregate number of Units, including those Units credited
pursuant to Section 6.0, which may be awarded to all Participants under this
Plan in any year shall not exceed 1/2 of 1% of the total number of Shares
outstanding at the time the Units are awarded. No award of Units to a
Participant shall entitle the Participant to any right as a stockholder of the
Company.
5.0 Special Distribution Rules.
5.1 Death. In case of the death of a Participant prior to the end
of any Performance Period, whether before or after any event set forth in 5.2
below, the number of Units awarded to the Participant for such Performance
Period shall be reduced pro rata based on the number of months remaining in the
Performance Period after the month of death. The remaining Units, reduced in
the discretion of the Board to the percentage indicated by the levels of
performance achieved prior to the date of death, if any, shall be distributed
within a reasonable time after death. All other Units awarded to the
Participant for such Performance Period shall be cancelled.
5.2 Retirement, Disability. If a Participant terminates employment
prior to the end of any Performance Period under circumstances entitling the
Participant to a pension or benefit under any of the following plans, the Units
awarded under this Plan and not yet distributed shall be prorated to the end of
the year in which such termination occurs and distributed at the end of the
Performance Period based upon the Company's performance for such period. The
plans referenced above include:
5.21 Normal or Early Retirement Benefits as specified in the
Company's Defined Benefit Pension Plan; and
5.22 Pensions or benefits of a similar type substituted
under any such plan or a plan substituted for, or supplementing, any
such plan.
Absence of a Participant prior to the end of any Performance Period
under circumstances not outlined above and entitling the Participant to
Sickness Allowance and/or Long Term Disability Benefits under the Company's
plan, or to a benefit of a similar type substituted under or for or
supplementing any such plan, or a benefit under a plan which the Company
determines to be comparable, shall not affect Units previously granted under
the Plan.
5.3 Resignation, Leave of Absence, Other Termination. In case of
any other termination of employment or any leave of absence of a Participant,
prior to the end of any Performance Period, all Units awarded to the
Participant with respect to any such Performance Period shall be immediately
forfeited and cancelled.
3
<PAGE> 5
5.4 Dismissal. All Units awarded to a Participant and not
previously distributed shall be forfeited and cancelled if the Participant is
discharged by the Company for cause or the Board determines that the
Participant engaged in misconduct in connection with the Participant's
employment with the Company. All Units awarded to a Participant and not
previously distributed in accordance with the Plan shall be forfeited and
cancelled in their entirety if the Participant, without the consent of the
Company, and while employed by the Company or after termination of such
employment and prior to distribution of all such Units, becomes associated
with, employed by, renders services to, consults with, acquires ownership of
more than five percent (5%) of any class of stock of, or acquires beneficial
ownership of more than five percent (5%) of the earnings or profits of any
corporation, partnership, proprietorship, trust, or other entity which in the
Board's judgment competes directly or through any affiliate with the Company or
any subsidiary in any of their lines of business. The provisions of this
subsection 5.4 shall be effective with respect to each Participant to the
extent not prohibited by applicable law.
5.5 Promotion. Upon promotion to a position or between positions
deemed by the Board to be in the eligible group, the Board may award to the
Participant the total Units, or any portion thereof, which are associated with
the new position for the current Performance Period.
5.6 Demotion. Notwithstanding any other provision of the Plan, the
Board may reduce or eliminate awards to a Participant who has been demoted, and
where circumstances warrant, may permit continued participation, proration or
early distribution, or a combination thereof, of awards which would otherwise
be cancelled.
6.0 Dividend Equivalent Units. On each record date for dividends
on Shares, an amount equal to the dividend payable on one Share will be
determined and credited (the "Dividend Equivalent Credit") on the payment date
to each Participant's account for each Unit which has been awarded to the
Participant and not distributed or cancelled. Such amount will be converted
within the account to an additional number of Units equal to the number of
Shares that could be purchased at Fair Market Value, as determined in the
following sentence. Fair Market Value shall be the average of the daily high
and low sale prices of Shares on the New York Stock Exchange ("NYSE") for the
period of five trading days ending on such dividend payment date, or the period
of five trading days immediately preceding such dividend payment date if the
NYSE is closed on the dividend payment date. These Units will be treated for
purposes of the Plan in the same manner as those Units granted pursuant to
Section 2.0.
7.0 Adjustments.
7.1 In the event of any stock dividend or split, recapitalization,
merger, consolidation, combination or exchange of shares, distribution to
shareholders, spin-off to shareholders, significant disposition of assets or
4
<PAGE> 6
other similar corporate change, the Board shall be authorized to make such
adjustments, if any, that it deems appropriate in the number or kind of Units
which may thereafter be awarded, and the performance levels established under
Section 2.0 for any Performance Period not then completed; any and all such
adjustments to be conclusive and binding upon all parties concerned.
7.2 If an extraordinary change occurs during a Performance Period
which significantly alters the basis upon which the performance levels were
established under Section 2.0 for that Performance Period, to avoid distortion
in the operation of the Plan, the Board may make adjustments in such
performance levels to preserve the incentive features of the Plan, whether
before or after the end of the Performance Period, to the extent it deems
appropriate in its sole discretion, which adjustments shall be conclusive and
binding upon all parties concerned. Such changes may include, without
limitation, adoption of, or changes in, accounting practices, tax laws and
regulatory or other laws or regulations; economic changes not in the ordinary
course of business cycles; weather conditions; or compliance with judicial
decrees or other legal authorities.
8.0 Other Conditions.
8.1 No person shall have any claim to be granted an award under the
Plan and there is no obligation for uniformity of treatment of eligible
employees or Participants under the Plan. Awards under the Plan may not be
assigned or alienated.
8.2 Neither the Plan nor any action taken hereunder shall be
construed as giving to any employee the right to be retained in the employ of
the Company.
8.3 The Company shall have the right to deduct from any distribution
or payment in cash under the Plan, and the Participant or other person
receiving Shares under the Plan shall be required to pay to the Company, any
federal, state or local taxes required by law to be withheld with respect to
such distribution or payment. The number of Shares to be distributed to any
individual Participant may be reduced by the number of Shares equivalent in
value to the cash necessary to pay any withholding tax where the cash to be
distributed is not sufficient to pay such tax or the Participant may deliver to
the corporation cash sufficient to pay such taxes.
8.4 Any distribution of Shares may be delayed until the requirements
of any applicable laws or regulations or any stock exchange requirements are
satisfied. The Shares distributed under the Plan shall be subject to such
restrictions and conditions on disposition as counsel for the Company shall
determine to be desirable or necessary under applicable law.
5
<PAGE> 7
8.4A Shares of stock will be issued as directed by the Board. The
Fair Market Value will be the average of the high and low daily sale price on
the NYSE on the valuation date, i.e., the first business day of November in the
year of distribution. However, in the case of special distributions, the
valuation date shall be the first business day of the month in which the Board
determines the distribution.
8.5 For the purpose of distribution of Units in cash the value of a
Unit shall be the average of the daily high and low sale prices of the Shares
on the New York Stock Exchange for the period of five trading days ending on
the valuation date, or such other appropriate measurement of fair market value
as shall be selected by the Board. The valuation date shall be the first
business day of November in the year of distribution, except that in the case
of special distributions the valuation date shall be the first business day of
the month in which the Board determines the distribution.
8.6 Notwithstanding any other provision of the Plan, no Dividend
Equivalent Credits shall be made and no distributions of Units shall be made if
at the time a Dividend Equivalent Credit or distribution would otherwise have
been made:
8.61 The regular quarterly dividend on any outstanding
common or preferred Shares of the Company has been omitted and not
subsequently paid or there exists any default in payment of dividends
on any such outstanding Shares,
8.62 The rate of dividends on Shares is lower than at the
time the Units to which the Dividend Equivalent Credit relates were
awarded, adjusted for any change of the type referred to in Section
7.0, or
8.63 Estimated consolidated net income of the Company for
the twelve-month period preceding the month the Dividend Equivalent
Credit or distribution would otherwise have been made is less than the
sum of the amount of the Dividend Equivalent Credits and awards
eligible for distribution under the Plan in that month plus all
dividends applicable to such period on an accrual basis, either paid,
declared or accrued at the most recently paid rate, on all outstanding
preferred and common Shares of the Company.
8.64 The Dividend Equivalent Credit or distribution would
result in a default in any agreement by which the Company is bound.
8.7 In the event net income available under subsection 8.63 above
for Dividend Equivalent Credits and awards eligible for distribution under the
Plan is sufficient to cover part but not all of such amounts, the following
order shall be applied in making payments: (1) Dividend Equivalent Credits,
(2) Units eligible for distribution under the Plan.
6
<PAGE> 8
9.0 Designation of Beneficiaries. A participant may designate a
beneficiary or beneficiaries to receive all or part of the amounts to be
distributed to the Participant under the Plan in case of death. A designation
of beneficiary may be replaced by a new designation or may be revoked by the
Participant at any time. A designation or revocation shall be on a form to be
provided for that purpose and shall be signed by the Participant and delivered
to the Company prior to the Participant's death. In case of the Participant's
death, the amounts to be distributed to the Participant under the Plan with
respect to which a designation of beneficiary has been made (to the extend it
is valid and enforceable under applicable law) shall be distributed in
accordance with the Plan to the designated beneficiary or beneficiaries. The
amount distributable to a Participant upon death and not subject to such a
designation shall be distributed to the Participant's estate. If there shall
be any question as to the legal right of any beneficiary to receive a
distribution under the Plan, the amount in question may be paid to the estate
of the Participant, in which event the Company shall have no further liability
to anyone with respect to such amount.
10.0 Plan Administration.
10.1 The Board shall have full power to administer and interpret the
Plan and to establish rules for its administration. The determination of
financial performance achieved for any Performance Period may but need not be
adjusted to reflect extraordinary financial items and adjustments or
restatements of the financial statements, in the discretion of the Board making
such determination. Any such determination shall not be affected by subsequent
adjustments or restatements. The Board and any designated Committee of the
Board in making any determination under the Plan shall be entitled to rely on
opinions, reports or statements of officers or employees of the Company and of
counsel, public accountants and other professional or expert persons.
10.2 The selection of Participants and granting of awards to
eligible employees who are directors or officers of the Company and all other
determinations or actions required or permitted to be made by the Board shall
be made by such Board, provided that a majority of the Board and a majority of
the directors acting in the matter are "disinterested persons" as defined in
Rules 16b-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934, or by a committee of three or more directors who are such
disinterested persons designated by the Board.
10.3 The Plan shall be governed by the laws of the State or North
Carolina and applicable Federal Law.
11.0 Claims and Appeals. Any claim under the Plan by a Participant
or anyone claiming through a Participant shall be presented to the Incentive
Compensation Committee of the Board in the case of Participants employed by the
7
<PAGE> 9
Company. Any person whose claim under the Plan has been denied may, within 60
days after receipt of notice of denial, submit to the Board a written request
for review of the decision denying the claim. The Board or the Incentive
Compensation Committee of the Board shall determine conclusively for all
parties all questions arising in the administration of the Plan.
12.0 Modification or Termination of Plan. No award may be granted
under the Plan after February 28, 1996. The Board may modify or terminate the
Plan at any earlier time, provided that no modification shall adversely affect
the rights of the Participants with respect to awards previously granted under
the Plan and upon termination, the Plan shall continue to apply with respect to
awards previously granted. Any such modification shall be effective at such
date as the Board may determine. Without the approval or ratification of the
holders of the Shares, no modification shall materially increase the benefits
accruing to Participants under the Plan, materially increase the number of
Units which may be issued under the Plan, or materially modify the requirements
for eligibility for participation in the Plan.
The Vice President-General Services of the Company (or any successor
to that Officer's responsibilities) with the approval of the General Counsel of
the Company (or any successor to that Officer's responsibilities) shall be
authorized to make minor or administrative changes to the Plan or changes to
comply with government regulations. A modification may affect Participants in
the Plan at the time as well as future Participants. Notwithstanding any other
provision in the Plan, the Board, if it determines in its sole discretion that
it is necessary or advisable under the circumstances, may authorize the
proration or early distribution, or a combination thereof, of Units previously
awarded at any time under the Plan to any Participant in the case of
termination of the Plan or withdrawal from the Plan.
13.0 Approval and Effective Date. The effective date of this Plan
shall be the first day of March, 1986, provided the shareholders of the Company
(acting at a duly called meeting of such shareholders) approve this Plan within
twelve (12) months before or after such effective date. If such shareholder
approval comes after such effective date, any Units granted under this Plan
before the date of such approval automatically shall be deemed to be granted
subject to such approval.
8
<PAGE> 10
PIEDMONT NATURAL GAS COMPANY, INC.
Certified Resolutions
Executive Long-Term Incentive Plan
December 3, 1993
- --------------------------------------------------------------------------------
FURTHER RESOLVED, That the Executive Long-Term
Incentive Plan be revised to provide that shares earned be
distributed over a three-year period following the successful
completion of each performance cycle, with one-third being
distributed during each of the three years, and with dividend
equivalent payments continuing on any undistributed units, and
FURTHER RESOLVED, That the Executive Long-Term
Incentive Plan be further revised to provide that the
remaining balance of any earned but undistributed performance
award shall become payable in full upon retirement at age 65,
---------------------------------
I, Martin C. Ruegsegger, do hereby certify, that I am Secretary of
Piedmont Natural Gas Company, Inc., a company duly organized and existing under
the laws of the State of North Carolina; that the above is a true and correct
copy of resolutions adopted by the Directors of said company at a meeting held
December 3, 1993 at which a quorum was present; and that such resolutions have
not been rescinded or modified.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of said company, this 9th day of January, 1995.
/s/ Martin C. Ruegsegger
-----------------------------
Martin C. Ruegsegger
Secretary
<PAGE> 11
PIEDMONT NATURAL GAS COMPANY, INC.
Certified Resolutions
Executive Long-Term Incentive Plan
December 2, 1994
- --------------------------------------------------------------------------------
FURTHER RESOLVED, That the Executive Long-Term
Incentive Plan be revised to provide that award units
earned be distributed as fifty percent stock and fifty
percent cash, with participants retaining the option to
elect a greater percent distribution in stock;
---------------------------------
I, Martin C. Ruegsegger, do hereby certify, that I am Secretary of
Piedmont Natural Gas Company, Inc., a company duly organized and existing under
the laws of the State of North Carolina; that the above is a true and correct
copy of resolutions adopted by the Directors of said company at a meeting held
December 2, 1994 at which a quorum was present; and that such resolutions have
not been rescinded or modified.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of said company, this 9th day of January, 1995.
/s/ Martin C. Ruegsegger
------------------------------
Martin C. Ruegsegger
Secretary
<PAGE> 1
Exhibit 10.24
Service Agreement No. 37803
Control No. 930905-140
FTS SERVICE AGREEMENT
(23,000 Dt / day)
THIS AGREEMENT, made and entered into this lst day of November, 1993,
by and between COLUMBIA GAS TRANSMISSION CORPORATION ("Seller") and PIEDMONT
NATURAL GAS COMPANY ("Buyer").
WITNESSETH: That in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
Section 1. Service to be Rendered. Seller shall perform and Buyer
shall receive service in accordance with the provisions of the effective FTS
Rate Schedule and applicable General Terms and Conditions of Seller's FERC Gas
Tariff, Second Revised Volume No. 1 (Tariff), on file with the Federal Energy
Regulatory Commission (Commission), as the same may be amended or superseded in
accordance with the rules and regulations of the Commission. The maximum
obligation of Seller to deliver gas hereunder to or for Buyer, the designation
of the points of delivery at which Seller shall deliver or cause gas to be
delivered to or for Buyer, and the points of receipt at which Buyer shall
deliver or cause gas to be delivered, are specified in Appendix A, as the same
may be amended from time to time by agreement between Buyer and Seller, or in
accordance with the rules and regulations of the Commission. Service hereunder
shall be provided subject to the provisions of Part 284.223 of Subpart G of the
Commission's regulations. Buyer warrants that service hereunder is being
provided on behalf of Buyer.
Section 2. Term. Service under this Agreement shall commence as of
November 1, 1993, and shall continue in full force and effect until October 31,
2011 and from year-to-year thereafter unless terminated by either party upon
six (6) months' written notice to the other prior to the end of the initial
term granted or any anniversary date thereafter. Pre-granted abandonment shall
apply upon termination of this Agreement, subject to any right of first refusal
Buyer may have under the Commission's regulations and Seller's Tariff.
Section 3. Rates. Buyer shall pay Seller the charges and furnish
Retainage as described in the above-referenced Rate Schedule, unless otherwise
agreed to by the parties in writing and specified as an amendment to this
Service Agreement.
Section 4. Notices. Notices to Seller under this Agreement shall be
<PAGE> 2
addressed to it at Post Office Box 1273, Charleston, West Virginia 253251273,
Attention: Director, Transportation and Exchange and notices to Buyer shall be
addressed to it at P. 0. Box 33068, Charlotte, NC 28233 Attention: Mr. Chuck
Fleenor, until changed by either party by written notice.
Section 5. Prior Service Agreements. This Agreement is being entered
into by the parties hereto pursuant to the Commission's Order No. 636 and its
orders dated July 14, 1993 and September 29, 1993, with respect to Seller's
Order No. 636 compliance filing and relates to the following existing Service
Agreements:
CDS Service Agreement No. 37015, effective November 1, 1989, and CDS
Service Agreement No. 37016, effective November 1, 1989, and CDS
Service Agreement No. 37121, and CDS Service Agreement No. 37122,
effective November 1, 1989 as it may have been amended, providing for
a bundled sales, transportation and storage service under the CDS Rate
Schedule.
The terms of Service Agreement No. 37803 shall become effective as of the
effective date hereof, however, the parties agree that neither the execution
nor the performance of Service Agreement 37803 shall prejudice any recoupment
or other rights that Buyer may have under or with respect to the
above-referenced Service Agreements.
PIEDMONT NATURAL GAS COMPANY
By: /s/ C. W. Fleenor
-------------------
Title: Vice President
COLUMBIA GAS TRANSMISSION CORPORATION
By: /s/ George E. Shriver
---------------------
Title: Dir T & E
<PAGE> 1
Exhibit 10.25
Agreement No. 38015
Control No. 930905-0141
FSS SERVICE AGREEMENT
(2,263,920 Dt Total Capacity)
THIS AGREEMENT, made and entered into this 1st day of November, 1993,
by and between COLUMBIA GAS TRANSMISSION CORPORATION ("Seller") and PIEDMONT
NATURAL GAS COMPANY ("Buyer").
WITNESSETH: That in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
Section 1. Service to be Rendered. Seller shall perform and Buyer
shall receive the service in accordance with the provisions of the effective
FSS Rate Schedule and applicable General Terms and Conditions of Seller's FERC
Gas Tariff, Second Revised Volume No. 1 (Tariff), on file with the Federal
Energy Regulatory Commission (Commission), as the same may be amended or
superseded in accordance with the rules and regulations of the Commission.
Seller shall store quantities of gas for Buyer up to but not exceeding Buyer's
Storage Contract Quantity as specified in Appendix A, as the same may be
amended from time to time by agreement between Buyer and Seller, or in
accordance with the rules and regulations of the Commission. Service hereunder
shall be provided subject to the provisions of Part 284.223 of Subpart G of the
Commission's regulations. Buyer warrants that service hereunder is being
provided on behalf of Buyer
Section 2. Term. Service under this Agreement shall commence as of
November 1, 1993 and shall continue in full force and effect until October 31,
2011 and from year to year thereafter unless terminated by either party upon
six months written notice to the other party prior to the end of the initial
term granted or any anniversary date thereafter. Pre-granted abandonment shall
apply upon termination of this Agreement, subject to any right of first refusal
Buyer may have under the Commission's regulations and Seller's Tariff.
Section 3. Rates. Buyer shall pay the charges and furnish the
Retainage percentage set forth in the above-referenced Rate Schedule and
specified in Seller's currently effective Tariff, unless otherwise agreed to by
the parties in writing and specified as an amendment to this Service Agreement.
Section 4. Notices. Notices to Seller under this Agreement shall be
addressed to it at Post Office Box 1273, Charleston, West Virginia 25325-1273,
Attention: Director, Transportation and Exchange, and notices to Buyer shall be
<PAGE> 2
addressed to it at Post Office Box 33068, Charlotte, North Carolina 28233,
Attention: Chuck Fleenor, until changed by either party by written notice.
Section 5. Prior Service Agreements. This Agreement is being entered
into by the parties hereto pursuant to the Commission's Order No. 636 and its
orders dated July 14, 1993 and September 29, 1993, with respect to Seller's
Order No. 636 compliance filing and relates to the following existing Service
Agreements:
CDS Service Agreement No. 37016, effective November 1, 1989, as it may
have been amended, providing for a bundled sales, transportation and
storage service under the CDS Rate Schedule.
WS Service Agreement No. 37122, effective November 1, 1989, as it may
have been amended, providing for a bundled storage and delivery
service under the WS Rate Schedule.
The terms of Service Agreement No. 38015 shall become effective as of the
effective date hereof, however, the parties agree that neither the execution
nor the performance of Service Agreement No. 38015 shall prejudice any
recoupment or other rights that Buyer may have under or with respect to the
above-referenced Service Agreements.
PIEDMONT NATURAL GAS COMPANY
By: /s/ C. W. Fleenor
-----------------
Title: Vice President
COLUMBIA GAS TRANSMISSION CORPORATION
By: /s/ George E. Shriver
---------------------
Title: Director
<PAGE> 1
Exhibit 10.26
Service Agreement No. 38052
Control No. 930905-243
SST SERVICE AGREEMENT
(Winter: 10,000 Dt / day; Summer: 5,000 Dt / day)
THIS AGREEMENT, made and entered into this lst day of November, 1993,
by and between COLUMBIA GAS TRANSMISSION CORPORATION ("Seller") and NASHVILLE
GAS COMPANY ("Buyer").
WITNESSETH: That in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
Section 1. Service to be Rendered. Seller shall perform and Buyer
shall receive service in accordance with the provisions of the effective SST
Rate Schedule and applicable General Terms and Conditions of Seller's FERC Gas
Tariff, Second Revised Volume No. 1 (Tariff), on file with the Federal Energy
Regulatory Commission (Commission), as the same may be amended or superseded in
accordance with the rules and regulations of the Commission. The maximum
obligation of Seller to deliver gas hereunder to or for Buyer, the designation
of the points of delivery at which Seller shall deliver or cause gas to be
delivered to or for Buyer, and the points of receipt at which Buyer shall
deliver or cause gas to be delivered, are specified in Appendix A, as the same
may be amended from time to time by agreement between Buyer and Seller, or in
accordance with the rules and regulations of the Commission. Service hereunder
shall be provided subject to the provisions of Part 284.223 of Subpart G of the
Commission's regulations. Buyer warrants that service hereunder is being
provided on behalf of Buyer.
Section 2. Term. Service under this Agreement shall commence as of
November 1, 1993, and shall continue in full force and effect until October 31,
2010 and from year-to-year thereafter unless terminated by either party upon
six (6) months' written notice to the other prior to the end of the initial
term granted or any anniversary date thereafter. Pre-granted abandonment shall
apply upon termination of this Agreement, subject to any right of first refusal
Buyer may have under the Commission's regulations and Seller's Tariff.
Section 3. Rates. Buyer shall pay Seller the charges and furnish
Retainage as described in the above-referenced Rate Schedule, unless otherwise
agreed to by the parties in writing and specified as an amendment to this
Service Agreement.
Section 4. Notices. Notices to Seller under this Agreement shall be
addressed to it at Post Office Box 1273, Charleston, West Virginia 25325-1273,
Attention: Director, Transportation and Exchange and notices to Buyer shall be
addressed to it at P. 0. Box
<PAGE> 2
33068, Charlotte, NC 28233 Attention: Mr. Chuck Fleenor, until changed by
either party by written notice.
Section 5. Prior Service Agreements. This Agreement is being entered
into by the parties hereto pursuant to the Commission's Order No. 636 and its
orders dated July 14, 1993 and September 29, 1993, with respect to Seller's
Order No. 636 compliance filing and relates to the following existing Service
Agreements:
CDS Service Agreement No. 37081, effective November 1, 1989, as it may
have been amended, providing for a bundled sales, transportation and
storage service under the CDS Rate Schedule.
WS Service Agreement No. 36082, effective November 1, 1989, as it may
have been amended, providing for a bundled storage and delivery
service under the WS Rate Schedule.
The terms of Service Agreement No. 38052 shall become effective as of the
effective date hereof, however, the parties agree that neither the execution
nor the performance of Service Agreement 38052 shall prejudice any recoupment
or other rights that Buyer may have under or with respect to the
above-referenced Service Agreements.
NASHVILLE GAS COMPANY COLUMBIA GAS TRANSMISSION CORPORATION
By /s/ C. W. Fleenor By /s/ George E. Shriver
------------------- ------------------------
Title Vice President Title Director T & E
<PAGE> 1
Exhibit 10.27
SERVICE AGREEMENT NO. 39653
CONTROL NO. 1993-09-21-0010
FTS SERVICE AGREEMENT
(10,000 Dt / day)
THIS AGREEMENT, made and entered into this 5th day of November, 1993, by and
between:
COLUMBIA GAS TRANSMISSION CORPORATION
("SELLER")
AND
PIEDMONT NATURAL GAS CO
("BUYER")
WITNESSETH: That in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
Section 1. Service to be Rendered. Seller shall perform and Buyer shall
receive service in accordance with the provisions of the effective FTS Rate
Schedule and applicable General Terms and Conditions of Seller's FERC Gas
Tariff, Second Revised Volume No. 1 (Tariff), on file with the Federal Energy
Regulatory Commission (Commission), as the same may be amended or superseded in
accordance with the rules and regulations of the Commission. The maximum
obligation of Seller to deliver gas hereunder to or for Buyer, the designation
of the points of delivery at which Seller shall deliver or cause gas to be
delivered to or for Buyer, and the points of receipt at which Buyer shall
deliver or cause gas to be delivered, are specified in Appendix A, as the same
may be amended from time to time by agreement between Buyer and Seller, or in
accordance with the rules and regulations of the Commission. Service hereunder
shall be provided subject to the provisions of Part 284.223 of Subpart G of the
Commission's regulations. Buyer warrants that service hereunder is being
provided on behalf of BUYER.
Section 2. Term. Service under this Agreement shall commence as of December
01, 1993, and shall continue in full force and effect until MARCH 31, 1994.
Pre-granted abandonment shall apply upon termination of this Agreement, subject
to any right of first refusal Buyer may have under the Commission's regulations
and Seller's Tariff.
Section 3. Rates. Buyer shall pay Seller the charges and furnish Retainage as
described in the above-referenced Rate Schedule, unless otherwise agreed to by
the parties in writing and specified as an amendment to this Service Agreement.
<PAGE> 2
Section 4. Notices. Notices to Seller under this Agreement shall be addressed
to it at Post Office Box 1273, Charleston, West Virginia 25326-1273,
Attention: Director, Transportation and Exchange and notices to Buyer shall be
addressed to it at:
PIEDMONT NATURAL GAS CO
P 0 BOX 33068
CHARLOTTE, NC 28233
ATTN: CHUCK FLEENOR;
until changed by either party by written notice.
Section 5. Superseded Agreements. This Service Agreement supersedes and
cancels, as of the effective date hereof, the following Service Agreements:
N/A.
PIEDMONT NATURAL GAS COMPANY
By /s/ C. W. Fleenor
--------------------
Title Vice President
COLUMBIA GAS TRANSMISSION CORPORATION
By /s/ H. M. Melton, Jr.
-------------------------------
Title Vice President - Transportation
<PAGE> 1
Exhibit 12
PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
For the Years Ended October 31, 1990 through 1994
(in thousands except ratio amounts)
---------------------------------------------------
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Earnings:
Net income from
continuing operations $35,506 $37,534 $35,310 $20,552 $25,733
Income taxes 21,407 23,427 21,259 11,408 14,859
Fixed charges 29,736 26,715 26,246 26,823 25,739
------- ------- ------- ------- -------
Total Adjusted Earnings $86,649 $87,676 $82,815 $58,783 $66,331
======= ======= ======= ======= =======
Fixed Charges:
Interest $27,671 $24,870 $24,570 $25,253 $24,271
Amortization of debt
expense 334 192 180 259 164
One-third of rental expense 1,731 1,653 1,496 1,311 1,304
------- ------- ------- ------- -------
Total Fixed Charges $29,736 $26,715 $26,246 $26,823 $25,739
======= ======= ======= ======= =======
Ratio of Earnings to Fixed
Charges 2.91 3.28 3.16 2.19 2.58
======= ======= ======= ======= =======
</TABLE>
<PAGE> 1
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
Piedmont Natural Gas Company, Inc.:
We consent to the incorporation by reference in Post-Effective Amendment No. 3
to Registration Statement No. 2-67478 of Piedmont Natural Gas Company, Inc., on
Form S-8; in Post-Effective Amendment No. 2 to Registration Statement No.
33-3815 of Piedmont Natural Gas Company, Inc., on Form S-8; in Post-Effective
Amendment No. 1 to Registration Statement No. 33-3816 of Piedmont Natural Gas
Company, Inc., on Form S-8; in Post-Effective Amendment No. 1 to Registration
Statement No. 33-60108 of Piedmont Natural Gas Company, Inc., on Form S-3; in
Registration Statement No. 33-52639 of Piedmont Natural Gas Company, Inc., on
Form S-3; and in Registration Statement No. 33-56425 of Piedmont Natural Gas
Company, Inc., on Form S-3 of our reports dated December 16, 1994, appearing in
this Annual Report on Form 10-K of Piedmont Natural Gas Company, Inc., for the
year ended October 31, 1994.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
January 25, 1995
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PIEDMONT NATURAL GAS FOR THE ONE YEAR ENDED OCTOBER 31,
1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-01-1993
<PERIOD-END> OCT-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 734,893
<OTHER-PROPERTY-AND-INVEST> 25,188
<TOTAL-CURRENT-ASSETS> 117,393
<TOTAL-DEFERRED-CHARGES> 10,296
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 887,770
<COMMON> 187,592
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 114,400
<TOTAL-COMMON-STOCKHOLDERS-EQ> 301,992
0
0
<LONG-TERM-DEBT-NET> 313,000
<SHORT-TERM-NOTES> 63,500
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 5,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 204,278
<TOT-CAPITALIZATION-AND-LIAB> 887,770
<GROSS-OPERATING-REVENUE> 575,354
<INCOME-TAX-EXPENSE> 19,561
<OTHER-OPERATING-EXPENSES> 499,923
<TOTAL-OPERATING-EXPENSES> 519,484
<OPERATING-INCOME-LOSS> 55,870
<OTHER-INCOME-NET> 4,177
<INCOME-BEFORE-INTEREST-EXPEN> 60,047
<TOTAL-INTEREST-EXPENSE> 24,541
<NET-INCOME> 35,506
0
<EARNINGS-AVAILABLE-FOR-COMM> 35,506
<COMMON-STOCK-DIVIDENDS> 26,996
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 72,403
<EPS-PRIMARY> 1.35
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
Exhibit 99
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
____________
FORM 11-K
____________
For Annual Reports of
Employee Stock Purchase, Savings and Similar Plans
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended October 31, 1994
Commission file number 1-6196
A. Full title of the plans and address of the plans, if different from that of
the issuer named below:
Piedmont Natural Gas Company Employee Stock Purchase Plan
Piedmont Natural Gas Company Employee Stock Ownership Plan
B. Name of issuer of the securities held pursuant to the plans and the
address of its principal executive office:
PIEDMONT NATURAL GAS COMPANY, INC.
1915 Rexford Road
Charlotte, North Carolina 28211
<PAGE> 2
PIEDMONT NATURAL GAS COMPANY EMPLOYEE STOCK PURCHASE PLAN
There were no material changes in the provisions of the Piedmont Natural
Gas Company Employee Stock Purchase Plan (ESPP) during the year ended October
31, 1994. Financial statements are not required under Article 6A of Regulation
S-X since the shares purchased by employees under the ESPP are not held by a
trustee. Participating employees are furnished a statement after each stock
purchase date (June 30 and December 31) showing the number of shares and the
purchase price of any stock purchased for them and the balance remaining to
their credit. At October 31, 1994, 607 employees participated in the ESPP.
1
<PAGE> 3
PIEDMONT NATURAL GAS COMPANY EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
October 31, 1994 and 1993
<TABLE>
<CAPTION>
Assets:
1994 1993
---- ----
<S> <C> <C>
Assets held by Wachovia Bank of North Carolina,
N.A., as trustee and custodian:
Common Stock of Piedmont Natural Gas
Company, Inc., at market value - 243,786
and 248,588 shares (cost $2,370,714
and $2,274,740) at 1994 and 1993,
respectively (Note 3) $4,906,193 $6,307,921
Receivable on sale of stock 17,987 86,093
Short-term demand notes, at cost which
approximates market 265 222
Other 35 40
---------- ----------
Total Assets 4,924,480 6,394,276
Liabilities - -
---------- ----------
Net Assets Available for Plan Benefits $4,924,480 $6,394,276
========== ==========
</TABLE>
See notes to financial statements.
2
<PAGE> 4
PIEDMONT NATURAL GAS COMPANY EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
For the Years Ended October 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Dividend and interest income $ 252,624 $ 246,701 $ 229,734
Gain on sale of assets (Note 3) 9,611 56,502 11,115
Net appreciation (depreciation)
on Common Stock (1,322,886) 1,377,667 1,180,779
Withdrawals by participants (Note 1) (323,052) (345,791) (149,188)
Withdrawals by participants due to
diversification (Note 1) (86,093) (18,029) (17,112)
---------- ---------- ----------
Net increase (decrease) (1,469,796) 1,317,050 1,255,328
Net assets available for benefits:
Beginning of year 6,394,276 5,077,226 3,821,898
---------- ---------- ----------
End of year $4,924,480 $6,394,276 $5,077,226
========== ========== ==========
</TABLE>
See notes to financial statements.
3
<PAGE> 5
PIEDMONT NATURAL GAS COMPANY EMPLOYEE STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE PLAN
The Piedmont Natural Gas Company Employee Stock Ownership Plan (ESOP) was
established to enable employees of the Company and its subsidiaries to
acquire Common Stock of the Company. Through 1986, the basis for the
Company's contributions to the ESOP was a tax credit on the amount of
aggregate compensation paid or accrued to all employees under the ESOP. The
Tax Reform Act of 1986 eliminated the tax credit allowance, and no Company
contributions have been made since 1987.
Separate accounts are maintained for each participant to reflect the
allocation of Company contributions and subsequent dividend and investment
income. Any income credited to participants is reinvested in the Company's
Common Stock.
A participant is defined as an active eligible employee with a balance in
his or her ESOP account. An employee is eligible to participate in the ESOP
following the later of the date on which he or she completes at least 1,000
hours of service during a period of 12 consecutive months or attains age 21.
Employees who reached eligibility subsequent to the termination of Company
contributions to the ESOP are not considered participants.
The ESOP provides for immediate vesting. Distributions are made either at
early retirement (age 55 and 10 years of service), at normal retirement (age
65), at actual retirement for a participant who remains employed after
attaining normal retirement age, at permanent disability or at death of the
participant. The Administration Committee of the ESOP may, in its sole
discretion, direct an earlier distribution following a participant's
termination of employment.
A qualified participant, defined as any employee who has reached age 55 and
completed ten years of participation, has the right to diversify a portion
of his or her account balance each year during the qualified election
period.
The Company may terminate the ESOP at any time and may either cause the ESOP
to continue operations until the ESOP trustee has distributed all benefits
or cause the assets of the ESOP to be liquidated and distributed.
2. BASIS OF ACCOUNTING
The financial statements are presented on the accrual basis of accounting.
4
<PAGE> 6
3. GAIN ON SALE OF ASSETS
The gain on sale of assets for the years ended October 31, 1994, 1993 and
1992, is computed as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Gross proceeds $271,116 $334,820 $247,543
Historical cost 261,505 278,318 236,428
-------- -------- --------
Gain on sale of assets $ 9,611 $ 56,502 $ 11,115
======== ======== ========
</TABLE>
4. NET ASSETS AVAILABLE FOR BENEFITS
Net assets available for benefits adjusted for the payable to
participants for withdrawal for the years ended October 31, 1994, 1993
and 1992, are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Net assets available for
benefits at end of year $4,924,480 $6,394,276 $5,077,226
Payable to participants
for withdrawals 20,363 164,818 30,383
---------- ---------- ----------
Net assets available for
benefits adjusted for
payable to participants
for withdrawals $4,904,117 $6,229,458 $5,046,843
========== ========== ==========
</TABLE>
5. TAX STATUS
The ESOP is qualified under Sections 401 and 409 of the Internal
Revenue Code of 1986, as amended (the Tax Code). The trust which is
part of the ESOP is exempt from income taxes under Section 501(a) of
the Tax Code.
The amount of the distribution under the ESOP is taxed to the
recipient as ordinary income, with the taxable amount attributed to
Common Stock distributed to a participant being the lesser of the cost
to the trust or its fair market value on the date of distribution.
Any increase in the value of the Common Stock is not taxed during the
period that the stock is held by the trust nor upon its distribution
to the participant. If stock is sold by a participant after
distribution, the sale is subject to capital gain or loss treatment,
depending on the sales price of the stock.
5
<PAGE> 7
INDEPENDENT AUDITORS' REPORT
Piedmont Natural Gas Company
Employee Stock Ownership Plan:
We have audited the accompanying statements of net assets available for
benefits of the Piedmont Natural Gas Company Employee Stock Ownership Plan (the
Plan) as of October 31, 1994 and 1993, and the related statements of changes in
net assets available for benefits for each of the three years in the period
ended October 31, 1994. These financial statements are the responsibility of
the Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan at October 31, 1994
and 1993, and the Plan's changes in net assets available for benefits for each
of the three years in the period ended October 31, 1994 in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
January 5, 1995
6
<PAGE> 8
INDEPENDENT AUDITORS' CONSENT
Piedmont Natural Gas Company, Inc.:
We consent to the incorporation by reference in Post-Effective Amendment No. 3
to Registration Statement No. 2-67478 of Piedmont Natural Gas Company, Inc., on
Form S-8, and in Post-Effective Amendment No. 1 to Registration Statement No.
33-3816 of Piedmont Natural Gas Company, Inc., on Form S-8 of our report dated
January 5, 1995, appearing in this Annual Report on Form 11-K of the Piedmont
Natural Gas Company Employee Stock Purchase Plan and the Piedmont Natural Gas
Company Employee Stock Ownership Plan for the year ended October 31, 1994.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
January 25, 1995
7
