Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K405 Annual Report -- [x] Reg. S-K Item 405 52± 231K
2: EX-10.A Material Contract 10± 39K
3: EX-10.B Material Contract 10± 40K
4: EX-10.C Material Contract 3± 14K
5: EX-10.D Material Contract 2± 11K
6: EX-10.E Material Contract 5± 20K
7: EX-10.F Material Contract 6± 22K
8: EX-12 Statement re: Computation of Ratios 1 6K
9: EX-21 Subsidiaries of the Registrant 1 5K
10: EX-27 Financial Data Schedule (Pre-XBRL) 2± 9K
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
For the fiscal year ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 2-26983
THE PEOPLES GAS LIGHT AND COKE COMPANY
(Exact name of registrant as specified in its charter)
Illinois 36-1613900
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
24th Floor, 130 East Randolph Drive, Chicago, Illinois 60601-6207
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 240-4000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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 (229.405 of this chapter) 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 non-
affiliates of the registrant:
None.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Common Stock, without par value, 24,817,566 shares outstanding at
November 30, 1998.
Documents Incorporated by Reference
None
CONTENTS
Page
Item No. No.
Part I
1. Business 3
2. Properties 7
3. Legal Proceedings 8
4. Submission of Matters to a Vote of Security Holders 8
Part II
5. Market for the Company's Common Stock and Related
Stockholder Matters 8
6. Selected Financial Data 9
7. Management's Discussion and Analysis of Results
of Operations and Financial Condition 10
7A. Quantitative and Qualitative Disclosures About
Market Risk 16
8. Financial Statements and Supplementary Data 17
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 35
Part III
10. Directors and Executive Officers of the Company 35
11. Executive Compensation 37
12. Security Ownership of Certain Beneficial Owners and
Management 42
13. Certain Relationships and Related Transactions 43
Part IV
14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 43
Signatures 45
Exhibit Index 46
The Peoples Gas Light and Coke Company
ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED SEPTEMBER 30, 1998
PART I
ITEM 1. BUSINESS
GENERAL
The Peoples Gas Light and Coke Company (Company) is a corporation
created by a special act of the General Assembly of the State of Illinois
(State), approved February 12, 1855, as amended on February 7, 1865.
The Company, an operating public utility, is engaged primarily in the
purchase, storage, distribution, sale, and transportation of natural gas.
It has approximately 833,000 residential, commercial, and industrial
retail sales and transportation customers within the City of Chicago
(City). The Company had 2,546 employees at September 30, 1998.
At September 30, 1998, the common stock of the Company and of its
utility affiliate, North Shore Gas Company (North Shore Gas), was wholly
owned by Peoples Energy Corporation (Peoples Energy).
COMPETITION AND DEREGULATION
The Company is authorized by statute and/or certificates of public
convenience and necessity to conduct operations in the territory that it
serves. The Company holds a perpetual, non-exclusive franchise from the
City.
Absent extraordinary circumstances, potential competitors are barred
from constructing competing gas distribution systems in the Company's
service territory by a judicial doctrine known as the "first in the
field" doctrine. In addition, the high cost of installing duplicate
distribution facilities would render the construction of a competing
system impractical.
Competition in varying degrees exists between natural gas and other
fuels or forms of energy available to consumers in the Company's service
area. The capital cost of heating and cooling facilities in new high-
rise buildings is higher for gas than for electricity. This
circumstance, combined with relatively stagnant high-rise construction
activity, has adversely affected the ability of the Company to attach
commercial high-rise buildings.
On December 16, 1997, the State of Illinois enacted legislation to
restructure the electric market in Illinois. Under the legislation,
approximately one-third of non-residential electric customers, including
customers with very large loads, will be able to purchase electric power
from the supplier of their choice beginning on October 1, 1999. All non-
residential customers will have this choice by December 31, 2000. All
residential customers will be given choice on May 1, 2002. Customers who
buy their electricity from a supplier other than the local electric
utility will be required to pay transition charges to the utility through
the year 2006. These charges are intended to compensate the electric
utilities for revenues lost because of customers buying electricity from
other suppliers. The legislation also allows an electric utility to
issue bonds, in aggregate amounts up to 50% of its Illinois
jurisdictional capitalization, to be financed by a specific charge to its
customers. An electric utility also may transfer up to 15% of its assets
to an affiliated or unaffiliated entity without approval from the
Illinois Commerce Commission (Commission). In return for these and other
benefits, electric utilities are required to reduce their rates to
residential customers. The state's two largest electric utilities,
including the utility that serves northeastern Illinois, have reduced
their residential rates by 15% on August 1, 1998 and must reduce their
rates by another 5% on May 1, 2002. The legislation does not require
electric utilities to divest their power generation assets. It is too
early to determine what effects this restructuring of the electric market
will have on the competitive position of the Company.
In addition to restructuring the electric market, the legislation
provides for additional funding for assistance to low-income energy
users, including customers of the Company. The legislation creates a
fund, financed by charges to electric and gas customers of public
utilities and participating municipal utilities and electric co-ops,
which supplements currently available federal energy assistance.
On October 26, 1998, the Company made a filing with the Commission
under which the price for natural gas would be set at a fixed level for
at least the next five years. Under the current system, the Company
makes purchases in the open, unregulated gas market and passes those
costs, as incurred, onto customers through a monthly gas charge. While
the Company makes no profit on the gas, the market price and the price
customers pay can fluctuate significantly due to the effects of supply
and demand. Under the current system, the customer bears the full risk
of the market. The proposed fixed-price gas charge would protect the
Company's gas customers from the market fluctuations and from increases
in gas costs due to inflation and other market forces. The proposal
reflects a fixed gas price of 32.76 cents per therm for customers of the
Company. This fixed unit price is comparable to the average price paid
by the Company's customers over the last two years.
By eliminating the monthly price fluctuations, the Company could
shield customers from price increases, although gas bills would still
reflect customers' increased usage during colder weather. As the Company
would assume and manage this risk, it would have an opportunity to earn a
profit on this initiative.
The Commission has eight months to review the filing during which
period, the Company may update its proposal. At the conclusion of the
review, the Commission may modify the proposal. However, the Company has
the right to accept the outcome or reject it and continue under the
current system.
A substantial portion of the gas that the Company delivers to its
customers consists of gas that the Company's customers purchase directly
from producers and marketers rather than from the Company. These direct
customer purchases have little effect on net income because the Company
provides transportation service for such gas volumes and recovers margins
similar to those applicable to conventional gas sales.
A pipeline may seek to provide transportation service directly to end-
users. Such direct service by a pipeline to an end-user would bypass the
local distributor's service and reduce the distributor's earnings.
However, none of the Company's pipeline suppliers has undertaken any
service bypassing the Company. The Company has a bypass rate approved by
the Commission which allows the Company to renegotiate rates with
customers that are potential bypass candidates. (See Other Matters -
Large-Volume Gas Service Agreements in Item 7.)
SALES AND RATES
The Company sells natural gas having an average heating value of
approximately 1,000 British thermal units (Btu's) per cubic foot.* Sales
are made and service rendered by the Company pursuant to a rate schedule
on file with the Commission containing various service classifications
largely reflecting customers' different uses and levels of consumption.
The Gas Charge is determined in accordance with the provisions in Rider
2, Gas Charge, to recover the costs incurred by the Company to purchase,
transport, manufacture, and store gas supplies. The level of the Gas
Charge under the Company's rate schedules is adjusted monthly to reflect
increases or decreases in natural gas supplier charges, purchased storage
service costs, transportation charges, and liquefied petroleum gas costs.
In addition, under the tariff of the Company, the difference for any
month between costs recoverable through the Gas Charge and revenues
billed to customers under the Gas Charge is refunded to or recovered from
customers. Consistent with these tariff provisions, such difference for
any month is recorded either as a current liability or a current asset
(with a contra entry to Gas Costs).
* All volumes of natural gas set forth in this report are stated on a
1,000 Btu (per cubic foot) billing basis.
(100 cubic feet = 1 therm; 10 therms = 1 Dekatherm - Dth)
The business of the Company is influenced by seasonal weather
conditions because a large element of the Company's customer load
consists of space heating. Weather-related deliveries can, therefore,
have a significant positive or negative impact on net income. (For
discussion of the effect of the seasonal nature of gas revenues on cash
flow, see Liquidity in Item 7.)
The basic marketing plan of the Company is to maintain its existing
share in all market segments and develop opportunities emerging from
changes in the utility environment and technological equipment advances
for new, expanded, or current natural gas applications, including
cogeneration, prime movers, natural gas-fueled vehicles, and natural gas
air-conditioning.
STATE LEGISLATION AND REGULATION
The Company is subject to the jurisdiction of and regulation by the
Commission, which has general supervisory and regulatory powers over
practically all phases of the public utility business in Illinois,
including rates and charges, issuance of securities, services and
facilities, systems of accounts, investments, safety standards,
transactions with affiliated interests, as defined in the Illinois Public
Utilities Act, and other matters.
FEDERAL LEGISLATION AND REGULATION
By Order entered on December 6, 1968 (Holding Company Act Release No.
16233), the Securities and Exchange Commission, pursuant to Section
3(a)(1) of the Public Utility Holding Company Act of 1935 (Act), exempted
Peoples Energy and its subsidiary companies as such (including the
Company) from the provisions of the Act, other than Section 9(a)(2)
thereof.
Most of the gas distributed by the Company is transported to the
Company's distribution system by interstate pipelines. In their
provision of gas services (gathering, transportation and storage
services, and gas supply) pipelines are regulated by the Federal Energy
Regulatory Commission (FERC) under the Natural Gas Act and the Natural
Gas Policy Act of 1978. (See "Sales and Rates" and "Current Gas Supply"
in Item 1.)
ENVIRONMENTAL MATTERS
The Company is subject to federal and state environmental laws. The
Company is conducting environmental investigations and work at certain
sites that were the location of former manufactured gas plant operations.
(See Note 2 of the Notes to Consolidated Financial Statements.)
CURRENT GAS SUPPLY
The Company has entered into various long-term and short-term firm gas
supply contracts. When used in conjunction with contract peaking and
contract storage, company-owned storage, and company-owned peak-shaving
facilities, such supply is deemed sufficient to meet current and
foreseeable peak and annual market requirements.
Although the Company believes North American supply to be sufficient
to meet U.S. market demands for the foreseeable future, it is unable to
quantify or otherwise make specific representations regarding national
supply availability.
The following tabulation shows the expected design peak-day
availability of gas in thousands of dekatherms (MDth) during the 1998-
1999 heating season for the Company:
Design Peak-Day Year of
Availability Contract
Source (MDth) Expiration
Firm direct purchases (1) 551 1999-2001
Liquefied petroleum gas 40
Peaking Service:
Peoples Energy Resources 60 (2)
Storage gas:
Leased (3) 563 1999-2003
Peoples-Manlove (4) 993
Customer-owned gas (5) 300
Total expected design
peak-day availability 2,507
(1)Consists of firm gas purchases from non-pipeline suppliers delivered
utilizing firm pipeline transportation. The majority of the gas
purchase contracts are negotiated annually. The terms of the
transportation contracts vary, with the longest term being 11 years.
(2)The contract with Peoples Energy Resources is for an initial term
expiring November 30, 1999; the contract continues in effect from
year to year thereafter unless canceled by either party upon 12
months' prior notice.
(3)Consists of leased storage services required to meet design day
requirements with contract lengths varying from one to five years.
(4)Manlove Field, the Company's underground storage facility located
near Champaign, Illinois, has seasonal top-gas inventory of approximately
27,000 MDth for system supply, of which approximately 1,566 MDth is
dedicated to North Shore Gas. The Company also owns a liquefied natural
gas (LNG) plant at Manlove Field for the primary purpose of supporting
late-season deliverability from the storage facility. The LNG plant has
a storage capacity of 2,000 MDth and is capable of regasifying 300 MDth
of gas per day. For the 1998-99 heating season, Manlove Field complex
will have a maximum design peak-day delivery capability of approximately
1,056 MDth (including 63 MDth for the use of North Shore Gas).
(5)Consists of gas supplies purchased directly from producers and
marketers by the Company's commercial, industrial, and larger residential
customers.
The sources of gas supply (including gas transported for customers) in
MDth for the Company for the three fiscal years ended September 30, 1998,
1997, and 1996, were as follows:
1998 1997 1996
Gas purchases 120,531 156,097 174,552
Liquefied petroleum gas produced 8 7 114
Customer-owned gas-received 93,758 91,476 93,141
Underground storage-net (2,939) (3,786) 228
Exchange gas-net 4,975 (39) (4,446)
Company use and unaccounted-for gas (3,693) (2,071) (3,169)
Total (a) 212,640 241,684 260,420
(a) See "Gas Sold and Transported" in Item 6.
ITEM 2. PROPERTIES
All of the principal plants and properties of the Company have been
maintained in the ordinary course of business and are believed to be in
satisfactory operating condition. The following is a brief description
of the principal plants and operating units of the Company.
The distribution system of the Company, at September 30, 1998,
consisted of approximately 4,000 miles of distribution mains and
necessary pressure regulators, approximately 495,000 services (pipe
connecting the mains with piping on the customers' premises), and
approximately 882,000 meters installed on customers' premises. The
Company has liquefied petroleum gasification and storage facilities. In
addition, it owns and has a substantial investment in office and service
buildings, garages, repair shops, and motor vehicles, together with the
equipment, tools, and fixtures necessary to conduct utility business.
The Company has gas storage easements covering approximately 32,000
acres located at Manlove Field near Champaign, Illinois, overlying an
aquifer-type underground natural gas storage reservoir, together with
wells, pipes, compressors, dehydration, metering, and other equipment
required to operate the facility. At September 30, 1998, the Company had
approximately 123,000 MDth of gas stored in the reservoir, of which
approximately 98,500 MDth was cushion gas. (Cushion gas is gas injected
into the storage reservoir to hold back surrounding or underlying water
and to provide the pressure necessary to make the wells deliver inventory
gas at desired levels.)
Also located at Manlove Field is an LNG plant, which has a storage
capacity of 2,000 MDth and is capable of regasifying 300 MDth of gas per
day. Such gas, together with the gas withdrawn from the Manlove Field
reservoir, and the gas transmitted by Trunkline Gas Company, is carried
to Chicago in Company-owned transmission mains totaling 254 miles.
Most of the principal plants and properties of the Company, other than
mains, services, meters, regulators, and cushion gas in underground
storage, are located on property owned in fee. Substantially all gas
mains are located in public streets and alleys. A small portion of the
distribution facilities is located on private property under easement
grants. Meters and house regulators in use and a portion of services are
located on premises being served. Certain storage wells and other
facilities of the Manlove Field storage reservoir, and certain portions
of the transmission system are located on land held pursuant to leases,
easements, or permits. Such land rights, as well as the gas storage
easements for the reservoir, have been obtained from the apparent record
owners of the land involved, in some cases without joinder of all such
owners, and all such leases, easements, and permits may be subject to
mortgages or other liens to which the Company is not a party.
Substantially all of the physical properties now owned or hereafter
acquired by the Company are subject to (a) the first-mortgage lien of the
Company's mortgage to U.S. Bank Trust, National Association, as Trustee,
to secure the principal amount of the Company's outstanding first and
refunding mortgage bonds and (b) in certain cases, other exceptions and
defects that do not interfere with the use of the property.
ITEM 3. LEGAL PROCEEDINGS
See Note 2 of the Notes to Consolidated Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company is a wholly owned subsidiary of Peoples Energy.
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ITEM 6. SELECTED FINANCIAL DATA (a)
For fiscal years ended September 30, 1998 1997 1996 1995 1994
OPERATING RESULTS (thousands)
Operating Revenues:
Residential $ 668,811 $ 812,229 $ 757,598 $ 648,762 $ 820,383
Commercial 95,761 127,479 122,825 101,436 139,078
Industrial 17,232 24,609 27,776 20,807 35,587
Transportation (b) 108,994 118,777 114,664 109,626 98,943
Other 16,722 16,390 13,712 18,312 17,181
Total Operating Revenues 907,520 1,099,484 1,036,575 898,943 1,111,172
Less- Gas costs 378,438 519,334 445,724 387,675 566,903
- Revenue taxes 91,724 115,430 110,421 100,562 121,773
- Other 6,850 - - - -
Net Operating Revenues $ 430,508 $ 464,720 $ 480,430 $ 410,706 $ 422,496
Net Income applicable to common stock $ 68,378 $ 85,098 $ 88,752 $ 53,666 $ 63,825
Dividends declared on common stock $ 61,796 $ 72,715 $ 52,117 $ 56,833 $ 55,343
ASSETS AT YEAR-END (thousands)
Property, plant and equipment $1,888,025 $1,819,567 $1,761,007 $1,815,407 $1,760,004
Less - Accumulated depreciation 654,262 614,224 571,255 628,258 596,808
Net Property, Plant and Equipment $1,233,763 $1,205,343 $1,189,752 $1,187,149 $1,163,196
Total assets $1,589,442 $1,557,627 $1,522,762 $1,561,481 $1,548,792
Capital expenditures - construction $ 90,219 $ 75,382 $ 72,194 $ 81,081 $ 74,623
CAPITALIZATION AT YEAR-END (thousands)
Common equity $ 582,519 $ 574,969 $ 564,182 $ 528,308 $ 531,475
Long-term debt 452,000 462,400 462,400 549,150 549,150
Total Capitalization $1,034,519 $1,037,369 $1,026,582 $1,077,458 $1,080,625
CAPITALIZATION AT YEAR-END (percent)
Common equity 56 55 55 49 49
Long-term debt 44 45 45 51 51
Total Capitalization 100 100 100 100 100
GAS SOLD AND TRANSPORTED (MDth)
Gas Sales:
Residential 100,467 121,259 131,339 111,509 122,648
Commercial 16,508 21,463 23,692 19,206 22,565
Industrial 3,360 4,521 5,873 4,357 6,320
Transportation (b) 92,305 94,441 99,516 93,884 90,059
Total Gas Sales and Transportation 212,640 241,684 260,420 228,956 241,592
Margin per Dth delivered $ 2.02 $ 1.92 $ 1.84 $ 1.79 $ 1.75
NUMBER OF CUSTOMERS (average)
Residential 775,968 781,169 783,782 784,290 786,271
Commercial 38,389 42,750 42,888 43,198 43,299
Industrial 2,341 2,816 2,839 2,963 3,125
Transportation (b) 16,069 9,300 9,671 9,308 8,768
Total Customers 832,767 836,035 839,180 839,759 841,463
DEGREE DAYS 5,564 6,806 7,080 5,897 6,701
Percent of normal (6,536) 85 104 108 90 103
(a) The Company is a wholly owned subsidiary of Peoples Energy; therefore,
per-share data are omitted.
(b) Includes commercial, industrial, and larger residential customers.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Net Income
In 1998, net income applicable to common stock decreased $16.7
million, to $68.4 million, due primarily to weather that was 18 percent
warmer than last year. Increases in the costs associated with outside
professional services and depreciation expense also contributed to the
decline of net income. These effects were partially offset by decreases
in the provision for uncollectible accounts and labor costs.
In 1997, net income decreased $3.7 million, to $85.1 million, due
principally to decreased gas deliveries due to weather that was four
percent warmer than in 1996 and conservation. Also hindering fiscal
1997's comparative results was the prior period's gain on the expiration
of gas storage contracts, increased computer support services, and
increased depreciation and amortization expense. Partially offsetting
these decreases, were a decrease in pension expense (see Note 4A of the
Notes to Consolidated Financial Statements), a full years effect of the
Company's November 1995 rate increase, increased other operating revenue
and a tax accrual adjustment.
[Enlarge/Download Table]
A summary of variations affecting income between years is presented
below, with explanations of significant differences following:
Fiscal 1998 Fiscal 1997
over 1997 over 1996
Amount Amount
(000's) Percent (000's) Percent
Net operating revenues (a) $(34,212) (7.4) $(15,710) (3.3)
Operation and maintenance expenses (10,652) (4.9) (15,330) (6.6)
Depreciation and amortization expense 1,677 2.5 3,069 4.9
Income taxes (8,747) (18.8) (2,832) (5.7)
Other income and deductions (543) (1.8) (3,801) (14.0)
Net income applicable to common stock (16,720) (19.6) (3,654) (4.1)
(a) See Management's Discussion and Analysis of Results of Operations and Financial
Condition - Net Operating Revenues.
Net Operating Revenues
Gross revenues of the Company are affected by changes in the unit cost
of the Company's gas purchases and do not include the cost of gas
supplies for customers who purchase gas directly from producers and
marketers rather than from the Company. The direct customer purchases
have no effect on net income because the Company provides transportation
service for such gas volumes and recovers margins similar to those
applicable to conventional gas sales. Except for the effect of customer
conservation that may result from substantial increases in the commodity
cost of gas supplies, changes in the unit cost of gas do not
significantly affect net income because the Company's tariff provides for
dollar-for-dollar recovery of gas costs. (See Item 1 - Competition and
Deregulation and Note 1L of the Notes to Consolidated Financial
Statements.) The Company's tariff also provides for dollar-for-dollar
recovery of the cost of revenue taxes and certain customer charges
imposed by the State and the City.
Since income is not significantly affected by changes in revenue from
customers' gas purchases from producers or marketers rather than from the
Company, changes in gas costs (except for the effect of customer
conservation that may result from substantial increases in the commodity
cost of gas supplies), or changes in revenue taxes and certain customer
charges imposed by the State and the City, the following discussion
pertains to "net operating revenues" (operating revenues, net of gas
costs, revenue taxes and certain customer charges). The Company
considers net operating revenues to be a more pertinent measure of
operating results than gross revenues.
Net operating revenues decreased $34.2 million, to $430.5 million, in
1998. Natural gas deliveries declined 29.0 bcf, to 212.6 bcf, due mainly
to the effect of El Nino which caused weather to be 18 percent warmer
than 1997 and 15 percent warmer than normal.
In 1997, net operating revenues decreased $15.7 million, to $464.7
million. Natural gas deliveries decreased 18.7 bcf, to 241.7 bcf, due to
weather that was four percent warmer than in 1996 and conservation. Net
operating revenues decreased approximately $23.1 million ($13.9 million
after income taxes) as a result of warmer weather and conservation.
However, a full year's effect of the Company's rate increase improved net
operating revenues by approximately $4.0 million ($2.4, million after
income taxes).
See Other Matters - Operating Statistics for details of selected
financial and operating information by gas service classification.
Operation and Maintenance Expenses
Operation and maintenance expenses decreased $10.7 million, to $206.4
million, in 1998, due primarily to a $4.8 million decrease in the
provision for uncollectible accounts, caused by reduced revenues, and to
a reduction in group insurance expense ($2.8 million). In addition,
costs associated with labor declined $2.6 million, along with
reengineering costs ($1.1 million) and pension expense ($1.4 million).
These effects were offset, in part, by an increase in the costs of
outside professional services ($3.5 million). The cost of outside
professional services has increased primarily due to the use of contract
programmers to maintain existing systems while the Company's staff is
involved in the development and implementation of a new customer
information system.
In 1997, operation and maintenance expenses decreased $15.3 million,
to $217.0 million, due primarily to a $17.8 million decrease in pension
expense, caused by changes in settlement accounting attributed to
employees choosing early retirement and actuarial assumptions (see Note
4A of the Notes to Consolidated Financial Statements), and lower
reengineering expenses ($2.1 million). Also contributing to the decrease
were reductions in costs associated with liability insurance premiums and
claim settlements ($1.6 million) and group insurance expense ($1.5
million). These decreases were partially offset by an increase in
payments for outside services ($3.2 million) and higher administrative
and general expenses.
Depreciation and Amortization Expense
Depreciation expense increased $1.7 million, to $67.8 million, and
$3.1 million, to $66.1 million, in 1998 and 1997, respectively, due
largely to depreciable property additions.
Income Taxes
Income taxes, exclusive of the $324,000 included in other income and
deductions, decreased $8.7 million, to $37.9 million, in 1998, due
primarily to lower pre-tax income.
In 1997, income taxes, exclusive of the $1.7 million included in other
income and deductions, declined $2.8 million, to $46.6 million, primarily
due to a tax accrual adjustment.
Other Income and Deductions
In 1998, other income and deductions increased $543,000 from the prior
period primarily due to a decrease in miscellaneous interest revenues and
higher interest expense. Partially offsetting these effects was an
increase in the allowance for funds used during construction.
In 1997, other income and deductions increased $3.8 million, from the
prior year, due principally to the prior period's gain associated with
the expiration of natural gas storage contracts. Partially offsetting
this increase were reductions in interest expense on long-term debt
resulting from early redemption of first mortgage bonds and decreased
interest on amounts refunded to customers.
Other Matters
Effect of Weather. Weather variations affect the volumes of gas
delivered for heating purposes and, therefore, can have a significant
positive or negative impact on net income and coverage ratios.
Accounting Standards. The Company adopted Statement of Position (SOP) 96-
1, "Environmental Remediation Liabilities" in fiscal 1998. (See Note 1N
of the Notes to the Consolidated Financial Statements.)
Large-Volume Gas Service Agreements. The Company has entered into gas
service contracts with certain large-volume customers under a specific
rate schedule approved by the Commission. These contracts were
negotiated to overcome the potential threat of bypassing the utility's
distribution system. The impact on the net income of the Company as a
result of these contracts is not material.
Small-Volume Transportation Service. On June 25, 1997, the Commission
allowed Riders SVT and AGG to go into effect for the Company, thus
initiating a two-year pilot program designed to provide transportation
service to certain small-volume industrial and commercial customers of
the utility as well as to some of its large residential customers. The
Commission also ordered a concurrent investigation of the program to
ascertain if program adjustments or revisions are required. By order
dated August 12, 1998, the Commission found that, with the exception of
one minor modification agreed to by the Company, no revisions were
required.
Fixed Gas Charge Filing. On October 26, 1998, the Company made a filing
with the Commission under which the price for natural gas would be set at
a fixed level for at least the next five years. By eliminating the
monthly price fluctuations, the Company could shield customers from price
increases, although gas bills would still reflect customers' increased
usage during colder weather. As the Company would assume and manage this
risk, they would have an opportunity to earn a profit on this initiative.
(See Competition and Deregulation in Item 1.)
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Operating Statistics. The following table represents gas distribution
margin components:
For fiscal years ended September 30, 1998 1997 1996
Net Operating Revenues (thousands):
Gas sales
Residential $668,811 $ 812,229 $ 757,598
Commercial 95,761 127,479 122,825
Industrial 17,232 24,609 27,776
781,804 964,317 908,199
Transportation
Residential 34,551 34,024 35,281
Commercial 41,728 42,639 44,944
Industrial 23,092 25,839 30,376
Contract Pooling 8,865 15,868 4,063
Other 758 407 -
108,994 118,777 114,664
Other 16,722 16,390 13,712
Total Operating Revenues 907,520 1,099,484 1,036,575
Less- Gas Costs 378,438 519,334 445,724
- Revenues Taxes 91,724 115,430 110,421
- Other (a) 6,850 - -
Net Operating Revenues $430,508 $ 464,720 $ 480,430
Deliveries (MDth):
Gas Sales
Residential 100,467 121,259 131,339
Commercial 16,508 21,463 23,692
Industrial 3,360 4,521 5,873
120,335 147,243 160,904
Transportation (b)
Residential 24,216 25,153 25,106
Commercial 34,163 36,544 37,316
Industrial 33,926 32,510 37,094
Other - 234 -
92,305 94,441 99,516
Total Gas Sales and Transportation 212,640 241,684 260,420
Margin per Dth delivered $ 2.02 $ 1.92 $ 1.84
(a) See Management's Discussion and Analysis of Results of Operations
and Financial Condition - Net Operating Revenues.
(b) Volumes associated with contract pooling service are included in the
respective customer classes.
LIQUIDITY
Source of Funds. The Company has access to outside capital markets and
to internal sources of funds that together provide sufficient resources
to meet its capital requirements. It does not anticipate any changes
that would materially alter its current liquidity position.
Due to the seasonal nature of gas usage, a major portion of cash
collections occurs between December and May. Because of timing
differences in the receipt and disbursement of cash and the level of
construction requirements, the Company may borrow on a short-term basis.
Short-term borrowings are repaid with cash from operations, other short-
term borrowings, or refinanced on a permanent basis with debt or equity,
depending on capital market conditions and capital structure
considerations.
Credit Lines. The Company has lines of credit of approximately
$129.4 million of which North Shore Gas may borrow up to $30.0 million.
At September 30, 1998, the Company and North Shore Gas had unused credit
available from banks of $120.4 million. (See Note 9 of the Notes to
Consolidated Financial Statements.)
Cash Flow Activities. In 1998, net cash provided by operating activities
decreased $11.1 million, due primarily to changes in net income, other
assets and gas sales revenue refundable. These effects were offset by
changes in net receivables, deferred credits and accrued taxes.
In 1997, net cash provided by operating activities increased by $78.2
million, due primarily to changes in other assets, gas costs refundable
and recoverable, and net receivables. Partially offsetting these items
were changes in accounts payable and gas in storage.
Net cash used in investing activities for 1998, 1997, and 1996 mainly
represents the level of capital expenditures in the respective years.
In 1998 and 1997, net cash used in financing activities reflects
dividends paid to the common stockholder. In 1996, net cash used in
financing activities reflects the redemption of previously issued debt.
Interest Coverage. The fixed charges coverage ratios for the Company for
fiscal 1998, 1997, and 1996 were 4.15, 5.01, and 4.84, respectively. The
decrease in the ratio in the current fiscal year is due to the decline in
pre-tax income due to warmer weather. The increase in the ratio in
fiscal year 1997 is due primarily to lower interest expense on amounts
refundable to customers and on long-term debt. The ratio for fiscal year
1996 reflects the redemption of long-term debt and higher pre-tax income
resulting from colder weather and the Commission approved rate increase.
(See Results of Operations - Net Income.)
Debt Ratings. The long-term debt of the Company is rated Aa2 by Moody's
Investors Service and AA- by Standard & Poor's Corporation. Moody's
upgraded its ratings from Aa3 in November 1997. Standard & Poor's
Corporation last changed its ratings in 1985. The commercial paper of
the Company has the top rating from the major rating agencies.
Environmental Matters. The Company is conducting environmental
investigations and work at certain sites that were the location of former
manufactured gas operations. (See Note 2 of the Notes to Consolidated
Financial Statements.)
Year 2000. The Company began its efforts to assess the Year 2000
compliance of its mainframe computer systems in March 1996. The Company
has since developed a comprehensive Year 2000 readiness plan that
incorporates all of its information technology systems, including
computer hardware and software, and its embedded systems equipment,
including telecommunications equipment. The plan also includes a review
by the Company of the Year 2000 compliance efforts of key suppliers and
customers and Year 2000 contingency planning. The system-wide Year 2000
effort being spearheaded by the Company includes Peoples Energy and all
of its other wholly owned subsidiaries, as well as various joint
ventures.
For all internal information technology systems developed by the
Company, Year 2000 compliance efforts proceed through the following
phases: inventory, assessment, remediation, testing, and implementation.
Rather than completing each phase for all systems prior to proceeding to
the next phase, the Company progresses through all phases on a system-by-
system basis, gradually implementing each fully-compliant system.
The Year 2000 compliance phases utilize a combination of consultants
and employees of the Company. Once a fully-tested application has been
implemented, Company employees follow established procedures to maintain
the compliance of the implemented systems. The Company also has retained
a quality assurance expert to ensure that any subsequent modifications to
the application do not impact its compliant status.
As of September 30, 1998, 18 of the Company's 37 mainframe
applications have been fully remediated, tested and implemented, two are
in the testing phase, and nine have been (or are in the process of being)
eliminated. The eight remaining mainframe applications are scheduled to
be replaced by the Company's new mainframe customer information system
and are not expected to be remediated. Additionally, 36 mainframe system
modules have been remediated and are now in the testing phase. Many of
the Company's non-mainframe applications, spreadsheets and interfaces
have also reached the implementation stage; and most others are in the
remediation phase. The Company expects to implement all critical
internal systems (other than the customer information system to be used
by the Company and North Shore Gas) by no later than March 31, 1999;
complete implementation of all non-critical internal systems by April 30,
1999; and complete installation and testing of the customer information
system by the end of fiscal year 1999.
As part of its Year 2000 Project, the Company has also contacted the
vendors of its licensed or purchased hardware and software to determine
the Year 2000 compliance status of their products. As of September 30,
1998, the Company has received responses from 85% of the vendors and is
in the process of replacing, upgrading or eliminating non-compliant
vendor products as appropriate. The Company also plans to have certain
products, such as its desktop computer inventory, compliant-tested in
order to minimize the risks associated with reliance on vendor
representations.
The Company is in the process of determining whether the embedded
systems equipment used by the Company and/or by affiliated companies is
Year 2000 compliant. It has completed an inventory of all equipment
containing embedded systems, including telecommunications equipment and
facilities. The Company has also contracted with a consultant that has
significant utility and engineering expertise to assist with the embedded
systems efforts. The Company is currently in the process of determining
the Year 2000 compliance status of the inventory and expects to complete
this assessment by January 1999. During the assessment phase, the
Company will also begin testing, repairing or replacing any critical
equipment identified as not Year 2000 compliant. The Company's timetable
for implementing compliant equipment will depend on the availability of
compliant equipment.
The Company currently has a written conceptual contingency plan to
address risks to the Company created by the Company's or third parties'
systems and embedded technology that are not Year 2000 compliant. It has
engaged the consultant referenced above to assist in developing detailed
and comprehensive business continuity and contingency plans to address
possible failures in the area of embedded systems equipment. These plans
are scheduled to be completed by December 1998. The Company also plans
to further develop its contingency plans with respect to information
technology-related failures and critical supplier failures.
The Company has contacted key suppliers of all affiliated companies to
determine their Year 2000 compliance efforts. It has received written
assurances from many key suppliers that they are making the necessary
Year 2000 efforts, and it is in the process of following up with other
key suppliers that did not respond to written inquiries.
Essential elements of the Company's business are dependent on certain
key third parties (for example, pipeline suppliers, banks, electric
utilities and telecommunication companies). A material failure by any
such key third party could significantly disrupt the Company's business.
The Company is in the process of detailing and finalizing contingency
plans to address potential disruptions that may be caused by third
parties.
The Company currently estimates that it will incur expenses of
approximately $1.6 million through fiscal year 1999 to complete its Year
2000 compliance efforts, in addition to the $4.0 million already incurred
through September 30, 1998. This estimate does not include costs to
repair or replace critical embedded systems equipment that is non-
compliant, which has yet to be determined. Portions of the costs
incurred by the Company in connection with its Year 2000 compliance
efforts will be billed to its affiliated companies. Management does not
expect the cost of the Company's Year 2000 compliance efforts to have a
material adverse impact on the financial position or results of
operations of the Company or its affiliates.
Market Risk Management. The Company utilizes long-term debt as a primary
source of capital. Both variable and fixed rate debt instruments are
utilized. The variable interest rate on the debt adjusts to reflect
current market conditions annually on December 1. Subject to certain
restrictions on optional redemptions, the fixed rate debt instruments can
be refinanced at lower interest rates if the Company deems it to be
economical. (See Note 10 of the Notes to Consolidated Financial
Statements.)
CAPITAL RESOURCES
Capital Spending. Capital expenditures and investments for the Company
(capital spending) were $93.5 million in 1998, $76.5 million in 1997, and
$74.6 million in 1996.
In fiscal 1998 and 1997 spending increased $17 and $1.9 million,
respectively, from prior years. Both years reflect increases
attributable to the new customer information system, offset, in part, by
the continuation of a cost containment program.
Capital expenditures for fiscal 1999 are expected to be about $99.1
million, an increase of $8.9 million from the 1998 level. The estimate
of expenditures for 1999 includes $18.7 million for the customer
information system and $15.3 million for the Company's remote automated
meter reading project.
Pursuant to notice given to the trustee of the City of Joliet 1984
Series C Bonds, due October 1, 1999, which were secured by the Company's
Adjustable-Rate First and Refunding Mortgage Bonds, Series W, these bonds
were redeemed on October 1, 1998. There are no sinking fund requirements
for long-term debt due in fiscal 1999. (See Notes 10A and 10B of the
Notes to Consolidated Financial Statements.)
The Company anticipates that future cash needs for capital
expenditures and debt maturities will be met through internally generated
funds, intercompany loans from Peoples Energy, borrowing arrangements
with banks and/or the issuance of commercial paper on an interim basis,
and periodic long-term financing involving first mortgage bonds or equity
from Peoples Energy.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and Qualitative Disclosures About Market risk are reported
under "Management's Discussion and Analysis of Results of Operations and
Financial Condition - Market Risk Management."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
Statement of Management's Responsibility 18
Report of Independent Public Accountants 19
Consolidated Statements of Income for fiscal years
Ended September 30, 1998, 1997, and 1996 20
Consolidated Statements of Retained Earnings for
Fiscal years ended September 30, 1998, 1997,
and 1996 20
Consolidated Balance Sheets at September 30, 1998
and 1997 21
Consolidated Capitalization Statements at
September 30, 1998 and 1997 22
Consolidated Statements of Cash Flows for fiscal
years ended September 30, 1998, 1997, and 1996 23
Notes to Consolidated Financial Statements 24
STATEMENT OF MANAGEMENT'S RESPONSIBILITY
The financial statements and other financial information included in
this report were prepared by management, who is responsible for the
integrity and objectivity of the presented data. The consolidated
financial statements of the Company and its subsidiaries were prepared in
conformity with generally accepted accounting principles and necessarily
include some amounts that are based on the best estimates and judgments
of management.
The Company maintains internal accounting systems and related
administrative controls, along with internal audit programs, that are
designed to provide reasonable assurance that the accounting records are
accurate and assets are safeguarded from loss or unauthorized use.
Consequently, management believes that the accounting records and
controls are adequate to produce reliable financial statements.
Arthur Andersen LLP, the Company's independent public accountants
approved by Peoples Energy's shareholders, as a part of its audit of the
financial statements, selectively reviews and tests certain aspects of
internal accounting controls solely to determine the nature, timing, and
extent of audit tests. Management has made available to Arthur Andersen
LLP all of the Company's financial records and related data and believes
that all representations made to the independent public accountants
during its audit were valid and appropriate.
The Audit Committee of the Board of Directors of Peoples Energy,
comprised of five outside directors, meets periodically with management,
the internal auditors, and Arthur Andersen LLP, jointly and separately,
to assure that appropriate responsibilities are discharged. These
meetings include discussion and review of accounting principles and
practices, internal accounting controls, audit results, and the
presentation of financial information in the annual report of Peoples
Energy.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Peoples Gas Light and Coke Company:
We have audited the accompanying consolidated balance sheets and
consolidated capitalization statements of The Peoples Gas Light and Coke
Company (an Illinois corporation, hereinafter referred to as the Company
and a wholly owned subsidiary of Peoples Energy Corporation) and
subsidiary companies at September 30, 1998 and 1997, and the related
consolidated statements of income, retained earnings, and cash flows for
each of the three years in the period ended September 30, 1998. These
financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule 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, the financial statements referred to above present
fairly, in all material respects, the financial position of the Company
and subsidiary companies at September 30, 1998 and 1997, and the results
of their operations and cash flows for each of the three years in the
period ended September 30, 1998, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The financial statement
schedule listed in Item 14(a)2 is presented for purposes of complying
with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. The financial statement schedule has
been subjected to the auditing procedures applied in the audit of the
basic financial statements and, in our opinion, fairly states, in all
material respects, the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Chicago, Illinois
October 30, 1998
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CONSOLIDATED STATEMENTS OF INCOME
The Peoples Gas Light and Coke Company
For fiscal years ended September 30, 1998 1997 1996
(Thousands)
Operating Revenues:
Gas sales $781,804 $ 964,317 $ 908,199
Transportation 108,994 118,777 114,664
Other 16,722 16,390 13,712
Total Operating Revenues 907,520 1,099,484 1,036,575
Operating Expenses:
Gas costs 378,438 519,334 445,724
Operation 165,227 172,333 189,949
Maintenance 41,147 44,693 42,407
Depreciation and amortization 67,752 66,075 63,006
Taxes- Income 37,865 46,612 49,444
- State and local revenue 91,724 115,430 110,421
- Other 25,577 19,040 19,804
Total Operating Expenses 807,730 983,517 920,755
Operating Income 99,790 115,967 115,820
Other Income and (Deductions):
Interest income 1,519 4,152 4,030
Allowance for funds used during construction 1,579 267 23
Interest on long-term debt (31,132) (31,094) (32,889)
Other interest expense (2,654) (2,195) (4,163)
Income taxes (324) (1,657) (4,089)
Miscellaneous - net (see Note 7) (400) (342) 10,020
Total Other Income and Deductions (31,412) (30,869) (27,068)
Net Income Applicable to Common Stock $ 68,378 $ 85,098 $ 88,752
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CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
The Peoples Gas Light and Coke Company
For fiscal years ended September 30, 1998 1997 1996
(Thousands)
Balance at Beginning of Year $409,662 $398,875 $363,001
Add - Net Income 68,378 85,098 88,752
Deduct - Dividends declared on common stock 61,796 72,715 52,117
Increase/(decrease) - Additional minimum liability for
non-qualified pension plan, net of tax 968 (1,596) (761)
Balance at End of Year $417,212 $409,662 $398,875
The Notes to Consolidated Financial Statements are an integral part of
these statements.
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CONSOLIDATED BALANCE SHEETS
The Peoples Gas Light and Coke Co
At September 30, 1998 1997
(Thousands)
Assets
Capital Investments:
Property, plant and equipment, at original cost $1,888,025 $1,819,567
Less - Accumulated depreciation 654,262 614,224
Net property, plant and equipment 1,233,763 1,205,343
Other investments 9,745 5,470
Total Capital Investments - Net 1,243,508 1,210,813
Current Assets:
Cash and cash equivalents 3,134 18,509
Temporary cash investments 500 15,500
Receivables -
Customers, net of allowance for uncollectible
accounts of $22,613 and $28,959, respectively 50,280 67,330
Other 34,051 40,159
Accrued unbilled revenues 17,363 20,109
Materials and supplies, at average cost 12,332 13,225
Gas in storage, at last-in, first-out cost 75,767 67,536
Gas costs recoverable through rate adjustments 3,847 3,328
Regulatory assets (see Note 1H) 6,651 13,139
Prepayments 70,406 39,802
Total Current Assets 274,331 298,637
Other Assets:
Non-current regulatory assets (see Note 1H) 52,670 32,473
Deferred charges 18,933 15,704
Total Other Assets 71,603 48,177
Total Assets $1,589,442 $1,557,627
Capitalization and Liabilities
Capitalization (see Consolidated Capitalization Statements) $1,034,519 $1,037,369
Current Liabilities:
Interim loans 8,900 700
Accounts payable 100,522 113,502
Dividends payable on common stock 13,898 32,015
Customer gas service and credit deposits 43,237 39,753
Sinking fund payments and maturities, due within one year
Long-term debt 10,400 -
Accrued taxes 25,708 19,056
Gas sales revenue refundable through rate adjustments 9,864 14,484
Accrued interest 8,788 8,763
Total Current Liabilities 221,317 228,273
Deferred Credits and Other Liabilities:
Deferred income taxes - primarily accelerated depreciation (see Note 5C) 247,959 229,225
Investment tax credits being amortized over
the average lives of related property 28,951 30,350
Other 56,696 32,410
Total Deferred Credits and Other Liabilities 333,606 291,985
Total Capitalization and Liabilities $1,589,442 $1,557,627
The Notes to Consolidated Financial Statements are an integral part of these
statements.
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CONSOLIDATED CAPITALIZATION STATEMENTS
The Peoples Gas Light and Coke Company
At September 30, 1998 1997
(Thousands, except number of shares)
Common Stockholder's Equity:
Common stock, without par value -
Authorized 40,000,000 shares
Outstanding 24,817,566 shares $ 165,307 $ 165,307
Retained earnings (see Consolidated Statements
of Retained Earnings) 417,212 409,662
Total Common Stockholder's Equity 582,519 574,969
Long-Term Debt:
Exclusive of sinking fund payments and maturities
due within one year
First and Refunding Mortgage Bonds -
Adjustable-Rate Series W (3.875% and 3.95% through
September 30, 1998 and September 30, 1997, respectively)
redeemed October 1, 1998 (see Note 10A) - 10,400
6.875% Series X, due March 1, 2015 50,000 50,000
7.50% Series Y, due March 1, 2015 50,000 50,000
7.50% Series Z, due March 1, 2015 50,000 50,000
8.10% Series BB, due May 1, 2020 75,000 75,000
6.37% Series CC, due May 1, 2003 75,000 75,000
5-3/4% Series DD, due December 1, 2023 75,000 75,000
Adjustable-Rate Series EE (3.90% and 3.70% through
November 30, 1998 and November 30, 1997, respectively),
due December 1, 2023 (see Note 10A) 27,000 27,000
6.10% Series FF, due June 1, 2025 50,000 50,000
Total Long-Term Debt 452,000 462,400
Total Capitalization $1,034,519 $1,037,369
The Notes to Consolidated Financial Statements are an integral part of these statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
The Peoples Gas Light and Coke Company
For fiscal years ended September 30, 1998 1997 1996
(Thousands)
Operating Activities:
Net Income $68,378 $85,098 $ 88,752
Adjustments to reconcile net income to net cash:
Depreciation and amortization 67,752 66,075 63,006
Deferred income taxes and investment tax credits - net 22,464 16,383 14,169
Change in other deferred credits and other liabilities 19,157 2,783 18,923
Change in deferred charges (29,040) (107) (24,968)
Other - - 74
Change in current assets and liabilities:
Receivables - net 23,158 (12,292) (40,390)
Accrued unbilled revenues 2,746 5,425 (7,083)
Materials and supplies 893 792 (174)
Gas in storage (8,231) (11,660) 26,275
Gas costs recoverable (519) 14,092 (15,288)
Regulatory assets 6,488 21,603 (25,427)
Prepayments (30,604) (27,905) (9,970)
Accounts payable (12,980) (8,150) 33,960
Customer gas service and credit deposits 3,484 2,631 2,109
Accrued taxes 6,652 (12,186) 4,280
Gas sales revenue refundable (4,620) 3,750 (57,824)
Accrued interest 25 5 (2,267)
Net Cash Provided by Operating Activities 135,203 146,337 68,157
Investing Activities:
Capital expenditures - construction (90,219) (75,382) (72,194)
Other assets (339) (11) 11,497
Other capital investments (3,307) (1,118) (2,416)
Other temporary cash investments 15,000 (15,000) 100
Net Cash Used in Investing Activities (78,865) (91,511) (63,013)
Financing Activities:
Interim loans - net 8,200 - (200)
Retirement of long-term debt - - (86,750)
Trust fund - bond redemption - - 237
Dividends paid on common stock (79,913) (53,854) (53,109)
Net Cash Used in Financing Activities (71,713) (53,854) (139,822)
Net Increase (Decrease) in Cash and Cash Equivalents (15,375) 972 (134,678)
Cash and Cash Equivalents at Beginning of Year 18,509 17,537 152,215
Cash and Cash Equivalents at End of Year $ 3,134 $18,509 $ 17,537
The Notes to Consolidated Financial Statements are an integral part of
these statements.
The Peoples Gas Light and Coke Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1A Principles of Consolidation
All subsidiaries are included in the consolidated financial
statements. All significant intercompany transactions have been
eliminated in consolidation. Certain items previously reported for
years prior to 1998 have been reclassified to conform with the current-
year presentation.
1B Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
1C Concentration of Credit Risk
The Company provides natural gas service to approximately 833,000
customers within the City. Credit risk for the Company is spread over
a diversified base of residential, commercial, and industrial retail
sales and transportation customers.
The Company encourages customers to participate in its long-standing
budget payment program that allows the cost of higher gas consumption
levels associated with the heating season to be spread over a 12-month
billing cycle. Customers' payment records are continually monitored
and credit deposits are required, when appropriate, to minimize
uncollectible write-offs.
1D Revenue Recognition
Gas sales revenues are recorded on the accrual basis for all gas
delivered during the month, including an estimate for gas delivered
but unbilled at the end of each month.
1E Property, Plant and Equipment
Property, plant and equipment is stated at original cost and
includes appropriate amounts of capitalized labor costs, payroll
taxes, employee benefit costs, administrative costs, and an allowance
for funds used during construction.
1F Accounts Payable
The Company utilizes controlled disbursement banking arrangements
under which certain bank accounts have negative book balances due to
checks in transit. The negative balances are classified as Accounts
Payable.
1G Maintenance and Depreciation
The Company charges the cost of maintenance and repairs of property
and minor renewals and improvements of property to maintenance
expense. When depreciable property is retired, its original cost is
charged to the accumulated provision for depreciation.
The provision for depreciation substantially reflects the
systematic amortization of the original cost of depreciable property
over estimated useful lives on the straight-line method.
Additionally, actual dismantling cost, net of salvage, is included in
the provision for depreciation in the month incurred. The amounts
provided are designed to cover not only losses due to wear and tear
that are not restored by maintenance, but also losses due to
obsolescence and inadequacy.
The provision for depreciation, expressed as an annual percentage
of original cost of depreciable property, is as follows:
For fiscal years ended
September 30, 1998 1997 1996
Provision for
depreciation 3.7% 3.7% 3.6%
1H Regulated Operations
The Company's utility operations are subject to regulation by the
Commission. Regulated operations are accounted for in accordance with
SFAS No. 71, "Accounting for the Effects of Certain Types of
Regulation." This standard controls the application of generally
accepted accounting principles for companies whose rates are
determined by an independent regulator such as the Commission.
Regulatory assets represent certain costs that are expected to be
recovered from customers through the ratemaking process. When
incurred, such costs are deferred as assets in the balance sheet and
subsequently recorded as expenses when those same amounts are
reflected in rates.
The following regulatory assets were reflected in Current Assets
and Other Assets in the Consolidated Balance Sheets at
September 30, 1998 and 1997:
1998 1997
(Thousands)
Environmental costs, net of recoveries (see Note 2) $35,667 $10,821
Transition costs from pipeline supplier - 6,921
Income tax (see Note 1I) 9,131 7,146
Discount, premium, expenses, and loss on reacquired bonds 2,572 2,909
SNG plant - decommissioning 11,929 17,543
Other 22 272
Total regulatory assets $59,321 $45,612
1I Income Taxes
The Company follows the liability method of accounting for deferred
income taxes. Under the liability method, deferred income taxes have
been recorded using currently enacted tax rates for the differences
between the tax basis of assets and liabilities and the basis reported
in the financial statements. Due to the effects of regulation on the
Company, certain adjustments made to deferred income taxes are, in
turn, debited or credited to regulatory assets or liabilities. (See
Note 5C.)
The Company nets its income tax related regulatory assets and
liabilities. At September 30, 1998 and 1997, net regulatory income
tax assets recorded in Other Assets amounted to $9.1 million and
$7.1 million, respectively.
Investment tax credits have been deferred and are being amortized
through credits to income over the book lives of related property.
The preceding deferred-tax and tax-credit accounting conforms with
regulations of the Commission.
1J Gas in Storage
Storage injections are priced at the fiscal-year average of costs
of supply. Withdrawals from storage are priced on the last-in, first-
out (LIFO) cost method. The estimated current replacement cost of gas
in inventory at September 30, 1998 and 1997 exceeded the LIFO cost by
approximately $86.2 million and $88.0 million, respectively.
1K Statement of Cash Flows
For purposes of the balance sheet and the statement of cash flows,
the Company considers all short-term liquid investments with
maturities of three months or less to be cash equivalents.
Income taxes and interest paid (excluding capitalized interest)
were as follows:
For fiscal years ended
September 30, 1998 1997 1996
(Thousands)
Income taxes paid $11,775 $45,781 $35,096
Interest paid 31,185 32,017 36,267
1L Recovery of Gas Costs
Under the tariff of the Company, the difference for any month
between costs recoverable through the Gas Charge and revenues billed
to customers under the Gas Charge is refunded to or recovered from
customers. Consistent with these tariff provisions, such difference
for any month is recorded either as a current liability or as a
current asset (with a contra entry to Gas Costs).
For each gas utility, the Commission conducts annual proceedings
regarding the reconciliation of revenues from the Gas Charge and
related costs incurred for gas. In such proceedings, costs recovered
by a utility through the Gas Charge are subject to challenge. Such
proceedings regarding the Company for fiscal years 1997 and 1998, are
currently pending before the Commission. (See Item 1 - Competition
and Deregulation.)
1M Recovery of Costs of Environmental Activities Relating to Former
Manufactured Gas Operations
The Company is recovering the costs of environmental activities
relating to its former manufactured gas operations, including carrying
charges on the unrecovered balances, under a rate mechanism approved
by the Commission. For each utility with such a rate mechanism, the
Commission conducts annual proceedings regarding the reconciliation of
revenues from the rate mechanism and related costs. In such
proceedings, costs recovered by a utility through the rate mechanism
are subject to challenge. No such proceedings are currently pending
before the Commission.
1N Accounting Standards
The Company adopted SOP 96-1, "Environmental Remediation
Liabilities" in fiscal 1998. The application of the statement did not
have a material effect on the Company's financial condition or results
of operations.
2. ENVIRONMENTAL MATTERS
The Company, its predecessors, and certain former affiliates
operated facilities in the past at multiple sites for the purpose of
manufacturing gas and storing manufactured gas (Manufactured Gas
Sites). In connection with manufacturing and storing gas, various by-
products and waste materials were produced, some of which might have
been disposed of rather than sold. Under certain laws and regulations
relating to the protection of the environment, the Company might be
required to undertake remedial action with respect to some of these
materials. Two of the Manufactured Gas Sites are discussed in more
detail below. The Company, under the supervision of the Illinois
Environmental Protection Agency (IEPA), is conducting investigations
of an additional 27 Manufactured Gas Sites. These investigations may
require the Company to perform additional investigation and
remediation. The investigations are in a preliminary stage and are
expected to occur over an extended period of time.
The Company has observed what appear to be gas purification wastes
on a Manufactured Gas Site in Chicago, formerly called the 110th
Street Station, and property contiguous thereto (110th Street Station
Site). The Company has fenced the 110th Street Station Site and is
conducting a study under the supervision of the IEPA to determine the
feasibility of a limited removal action.
The current owner of a site in Chicago, formerly called Pitney
Court Station, filed suit against the Company in federal district
court under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended. The suit seeks recovery of the
past and future costs of investigating and remediating the site and an
order directing the Company to remediate the site. The Company is
contesting this suit.
The Company is accruing and deferring the costs it incurs in
connection with all of the Manufactured Gas Sites, including related
legal expenses, pending recovery through rates or from insurance
carriers or other entities. At September 30, 1998, the total of the
costs deferred by the Company, net of recoveries and amounts billed to
other entities, was $35.7 million. This amount includes the Company's
best estimate of the costs of investigating and remediating the
Manufactured Gas Sites. The estimate is based upon a comprehensive
review by the Company and its outside consultants of potential costs
associated with conducting investigative and remedial actions at the
Manufactured Gas Sites as well as the likelihood of whether such
actions will be necessary. While the Company intends to seek
contribution from other entities for the costs incurred at the sites,
the full extent of such contributions cannot be determined at this
time.
The Company has filed suit against a number of insurance carriers
for the recovery of environmental costs relating to its former
manufactured gas operations. The suit asks the court to declare that
the insurers are liable under policies in effect between 1937 and 1986
for costs incurred or to be incurred by the Company in connection with
three Manufactured Gas Sites in Chicago. The Company is also asking
the court to award damages stemming from the insurers' breach of their
contractual obligation to defend and indemnify the Company against
these costs. At this time, management cannot determine the timing and
extent of the Company's recovery of costs from its insurance carriers.
Accordingly, the costs deferred at September 30, 1998 have not been
reduced to reflect recoveries from insurance carriers.
Costs incurred by the Company for environmental activities relating
to former manufactured gas operations will be recovered from insurance
carriers or other entities or through rates for utility service.
Accordingly, management believes that the costs incurred by the
Company in connection with former manufactured gas operations will not
have a material adverse effect on the financial position or results of
operations of the Company. The Company is recovering the costs of
environmental activities relating to its former manufactured gas
operations, including carrying charges on the unrecovered balances,
under a rate mechanism approved by the Commission. At September 30,
1998, it had recovered $6.6 million of such costs through rates.
3. LONG-TERM LEASE
The Company entered into a long-term operating lease for its
headquarters office which expires in fiscal 2008.
The rental obligation consists of a base rent of $2.3 million plus
operating expenses and taxes. The base rent escalates two percent
each year through 2003. Base rent in 2004 will be approximately $3.6
million with annual increases of two percent each year through 2008.
Rental expenses for the headquarters office were $6.5 million, $6.4
million, and $6.5 million, for fiscal years 1998, 1997, and 1996,
respectively.
4. RETIREMENT AND POSTEMPLOYMENT BENEFITS
4A Pension Benefits
The Company participates in two defined benefit pension plans
covering substantially all employees. These plans provide pension
benefits that generally are based on an employee's length of service,
compensation during the five years preceding retirement, and social
security benefits. Annual contributions are made to the plans based
upon actuarial determinations and in consideration of tax regulations
and funding requirements under federal law.
The Company also has non-qualified pension plans that provide
employees with pension benefits in excess of qualified plan limits
imposed by federal tax law.
Net pension cost for all plans for fiscal 1998, 1997, and 1996
included the following components:
1998 1997 1996
(Millions)
Service cost - benefits earned during year $ 10.3 $ 10.9 $12.7
Interest cost on projected benefit obligations 25.8 27.5 30.6
Actual return on plan assets (gain) (106.0) (104.0) (64.9)
Net amortization and deferral 58.7 56.5 20.4
Settlement accounting (17.0) (17.7) (7.8)
Net pension cost (credit) $(28.2) $(26.8) $(9.0)
In 1998, 1997 and 1996, the Company recognized net gains of $17.0
million, $17.7 million, and $7.8 million, respectively, from the
settlement of portions of pension plan obligations.
In 1998, a special benefit cost of $1.2 million was recognized to
reflect the cost of an accelerated pension payout to certain former
employees.
The calculation of pension cost assumed a long-term rate of return
on assets of 9.0 percent for 1998 and 1997, and 8.5 percent for 1996.
The settlement accounting cost for all years was determined using a
discount rate of 7.5 percent and assumed future compensation increases
of 4.5 percent per year.
The following table shows the estimated funded status of the
Company's pension plans at September 30, 1998 and 1997:
1998 1997
(Millions)
Plan assets at market value $638.3 $547.7
Actuarial present value of plan benefits:
Vested 266.1 246.9
Non-vested 39.7 30.9
Accumulated benefit obligation 305.8 277.8
Effect of projected future compensation increases 87.4 76.0
Projected benefit obligation 393.2 353.8
Excess of plan assets over projected benefit obligation 245.1 193.9
Less:
Unrecognized transition asset 14.4 18.4
Unrecognized prior service cost (5.1) (5.6)
Unrecognized net gain 170.0 145.4
Non-qualified plan contributions: 7-1-98 to 9-30-98 0.2 1.5
Recognition of non-qualified plan additional minimum liability (2.9) (4.5)
Accrued pension asset $ 63.1 $ 32.7
The projected benefit obligation and plan assets at September 30,
1998 and 1997, are based on a July 1 measurement date using a discount
rate of 7.0 percent for 1998 and 7.5 percent for 1997 and assumed
future compensation increases of 4.5 percent per year. Plan assets
consist primarily of marketable equity and fixed-income securities.
4B Other Postretirement Benefits
The Company also provides certain health care and life insurance
benefits for retired employees. Substantially all employees may
become eligible for such benefit coverage if they reach retirement age
while working for the Company. The plans are funded based upon
actuarial determinations and in consideration of tax regulations. The
Company accrues the expected costs of such benefits during the
employees' years of service.
Net postretirement benefit cost for all plans for fiscal 1998,
1997, and 1996 included the following components:
1998 1997 1996
(Millions)
Service cost - benefits earned during year $ 3.2 $ 2.9 $ 3.1
Interest cost on projected benefit obligation 7.8 7.9 7.1
Actual return on plan assets (gain) (8.8) (6.2) (2.9)
Amortization of transition obligation 4.5 4.5 4.5
Net amortization and deferral 4.4 3.1 1.1
Net postretirement benefit cost $11.1 $12.2 $12.9
The calculation of postretirement benefit cost assumed a long-term
rate of return on assets of 9.0 percent for 1998 and 1997, and 7.5
percent for 1996.
Of the above total postretirement costs recognized for fiscal years
1998, 1997, and 1996, $3.9 million, $5.5 million, and $5.6 million,
respectively, were funded through trust funds for future benefit
payments.
In 1998, a special benefit charge of $132,000 was recognized to
reflect the health and life insurance costs associated with an
accelerated retirement program for certain former employees.
The following table sets forth the estimated funded status for the
postretirement health care and life insurance plans at September 30,
1998 and 1997:
1998 1997
(Millions)
Plan assets at market value $57.6 $44.9
Accumulated postretirement benefit obligation (APBO):
Retirees 64.6 62.7
Fully eligible active plan participants 7.5 13.4
Other active plan participants 27.2 29.2
Total APBO 99.3 105.3
Deficiency of plan assets over the APBO (41.7) (60.4)
Less:
Unrecognized transition obligation
(being amortized over 20 years) (57.6) (72.1)
Unrecognized net gain 22.2 19.3
Contributions: July 1 to September 30 6.3 7.1
Accrued postretirement benefit liability $ - $(0.5)
The total APBO and plan assets at September 30, 1998 and 1997, are
based on a July 1 measurement date, using a discount rate of 7.0
percent for 1998 and 7.5 percent for 1997 and assumed future
compensation increases of 4.5 percent per year. Plan assets consist
primarily of marketable equity and fixed-income securities.
For measurement purposes, a health care cost trend rate of 7.9
percent was assumed for fiscal 1998, and that rate thereafter will
decline gradually to 4.75 percent in 2003 and subsequent years. The
health care cost trend rate assumption has a significant effect on the
amounts reported. Increasing the assumed health care cost trend rate
by one percentage point for each future year would have increased the
APBO at September 30, 1998, by $7.9 million and the aggregate of
service and interest cost components of the net periodic
postretirement benefit cost by $1.2 million annually.
5. TAX MATTERS
5A Provision for Income Taxes
Total income tax expense as shown on the Consolidated Statements of
Income is composed of the following:
For fiscal years ended September 30, 1998 1997 1996
(Thousands)
Current:
Federal $12,864 $26,036 $32,590
State 2,860 5,850 6,859
Total current income taxes 15,724 31,886 39,449
Deferred:
Federal 18,991 14,049 13,121
State 4,864 3,746 3,554
Total deferred income taxes 23,855 17,795 16,675
Investment tax credits - net:
Federal (1,467) (1,524) (2,635)
State 76 112 129
Total investment tax credits - net (1,391) (1,412) (2,506)
Total provision for income taxes 38,188 48,269 53,618
Less - Included in operation expense - - 85
Net provision for income taxes $38,188 $48,269 $53,533
5B Tax Rate Reconciliation
The following is a reconciliation between the computed federal
income tax expense (tax rate of 35 percent times pre-tax book income)
and the total provision for federal income tax expenses:
[Enlarge/Download Table]
For fiscal years ended September 30, 1998 1997 1996
Percent Percent Percent
of of of
Amount Pre-tax Amount Pre-tax Amount Pre-tax
(000's) Income (000's) Income (000's) Income
Computed federal income
tax expense $34,568 35.00 $43,281 35.00 $46,140 35.00
Amortization of investment
tax credits (1,467) (1.49) (1,524) (1.23) (2,635) (2.00)
Other, net (2,713) (2.74) (3,196) (2.59) (429) (0.32)
Total provision for federal
income taxes $30,388 30.77 $38,561 31.18 $43,076 32.68
5C Deferred Income Taxes
Set forth in the table below are the temporary differences which
gave rise to the net deferred income tax liabilities (see Note 1I):
At September 30, 1998 1997
(Thousands)
Deferred tax liabilities:
Property - accelerated depreciation and
other property related items $238,559 $226,537
Other 36,068 33,249
Total deferred income tax liabilities 274,627 259,786
Deferred tax assets:
Uncollectible accounts (9,134) (11,651)
Unamortized investment tax credits (11,484) (12,049)
Other (6,050) (6,861)
Total deferred income tax assets (26,668) (30,561)
Net deferred income tax liabilities $247,959 $229,225
6. ASSETS SUBJECT TO LIEN
The Indenture of Mortgage, dated January 2, 1926, as supplemented,
securing the first and refunding mortgage bonds issued by the
Company, constitutes a direct, first-mortgage lien on substantially
all property owned by the Company.
7. OTHER INCOME AND DEDUCTIONS - MISCELLANEOUS
[Download Table]
For fiscal years ended September 30, 1998 1997 1996
(Thousands)
Interest on amounts recoverable from customers $ 119 $ 126 $ -
Gain on expiration of gas storage contracts - - 11,093
Amortization of gain (loss) on reacquired bonds (268) (165) (65)
Gain/loss on disposition of property (672) (650) -
Earnings from subsidiary companies 348 304 275
Other 73 43 (1,283)
Total other income and deductions - miscellaneous $(400) $(342) $10,020
8. CAPITAL COMMITMENTS
Total contract and purchase order commitments of the Company at
September 30, 1998, amounted to approximately $5.7 million.
9. SHORT-TERM BORROWINGS AND CREDIT LINES
At September 30, 1998 1997
(Thousands)
Bank Loans
Peoples Gas
8.50% due March 27, 1998 $ - $ 700
Commercial Paper
North Shore Gas
due October 1, 1997 $ - $ 2,110
Peoples Gas
due October 1, 1998 2,300 -
due October 23, 1998 6,600 -
Letters of Credit
Peoples Gas $ 100 $ 100
Available lines of credit
Unused bank lines $120,400 $126,490
Short-term cash needs of the Company and North Shore Gas are met
through intercompany loans from Peoples Energy, bank loans, and/or
the issuance of commercial paper. The outstanding total amount of
bank loans, letters of credit and commercial paper issuances cannot
at any time exceed total bank credit then in effect.
At September 30, 1998 and 1997, the Company and North Shore Gas
had combined lines of credit totaling $129.4 million. Of these
amounts, North Shore Gas could borrow up to $30.0 million.
Agreements covering $92.0 million of the total at September 30, 1998
will expire on August 29, 1999; the agreement covering the remaining
$37.4 million will expire on January 31, 2000. Such lines of credit
cover projected short-term credit needs of the Company and North
Shore Gas and support the long-term debt treatment of the Company's
adjustable-rate mortgage bonds. (See Note 10A.) Payment for the
lines of credit is by fee.
10. LONG-TERM DEBT
10A Interest-Rate Adjustments
The rate of interest on the City of Joliet 1984 Series C Bonds,
which were secured by the Company's Adjustable-Rate First and
Refunding Mortgage Bonds, Series W, was subject to adjustment
annually on October 1. Owners of the Series C Bonds had the right to
tender such bonds at par during a limited period prior to that date.
The Company was obligated to purchase any such bonds tendered if they
could not be remarketed. All Series C Bonds were redeemed on October 1,
1998. The rate of interest on the Series C Bonds was 3.875% during
fiscal 1998.
The rate of interest on the City of Chicago 1993 Series B Bonds,
which are secured by the Company's Adjustable-Rate First and
Refunding Mortgage Bonds, Series EE, is subject to adjustment
annually on December 1. Owners of the Series B Bonds have the right
to tender such bonds at par during a limited period prior to that
date. The Company is obligated to purchase any such bonds tendered
if they cannot be remarketed. The interest rate on such bonds is
3.90 percent for the period December 1, 1997, through
November 30, 1998.
The Company classifies these adjustable-rate bonds as long-term
liabilities since it would refinance them on a long-term basis if
they could not be remarketed. In order to ensure its ability to do
so, on February 1, 1994, the Company established a $37.4 million
three-year line of credit with The Northern Trust Company which has
since been extended to January 31, 2000. (See Note 9.)
10B Sinking Fund Requirements and Maturities
At September 30, 1998, long-term debt sinking fund requirements
and maturities for the next five years are:
Fiscal Year Amounts
(Thousands)
1999 $10,400
2000 --
2001 --
2002 --
2003 75,000
10C Fair Value of Financial Instruments
At September 30, 1998, the carrying amount of the Company's long-
term debt of $462.4 million had an estimated fair value of
$494.9 million. At September 30, 1997, the carrying amount of the
Company's long-term debt of $462.4 million had an estimated fair
value of $497.0 million. The estimated fair value of the Company's
long-term debt is based on yields for issues with similar terms and
remaining maturities. Since the Company is subject to regulation,
any gains or losses related to the difference between the carrying
amount and the fair value of financial instruments may not be
realized by the Company's shareholder. The carrying amount of all
other financial instruments approximates fair value. The $.5 million
in temporary cash investments approximates its fair value.
11. QUARTERLY FINANCIAL DATA (UNAUDITED)
All four quarters of fiscal 1998 reflected weather that was
significantly warmer than during the comparable quarters of fiscal
1997. The first quarter of fiscal 1998 also reflected decreased
pension expense caused by changes in settlement accounting attributed
to employees choosing early retirement and actuarial assumptions.
(See Note 4A.)
Net Income
Operating Operating Applicable to
Fiscal Quarters Revenues Income Common Stock
(Thousands)
1998
Fourth $94,788 $(2,805) $ (9,804)
Third 157,364 15,098 7,359
Second 348,402 48,757 40,399
First 306,966 38,740 30,424
1997
Fourth $96,349 $(4,144) $(11,734)
Third 177,308 18,146 10,394
Second 489,348 61,642 54,328
First 336,479 40,323 32,110
12. EVENT (UNAUDITED) SUBSEQUENT TO THE AUDITORS' REPORT DATED
OCTOBER 30, 1998
Environmental Matters
Former Manufactured Gas Plant Operations
The Company has filed suit against a number of insurance carriers
for the recovery of environmental costs relating to the Company's
former manufactured gas operations. In November 1998, the Company
entered into a settlement agreement with one of its insurance
carriers. Given the regulatory treatment discussed in Note 2, the
settlement will not have an effect on income.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
IDENTIFICATION OF DIRECTORS
Company
Name, Principal Occupation, Age at Directorship
and Other Directorships 11-30-98 Since
Donald M. Field 49 1998
Executive Vice President of the Company,
Peoples Energy, and North Shore Gas; Director of
North Shore Gas.
James Hinchliff 58 1985
Senior Vice President and General Counsel
of the Company, Peoples Energy,
and North Shore Gas; Director of North Shore Gas.
James M. Luebbers 52 1998
Vice President and Controller
of the Company, Peoples Energy,
and North Shore Gas; Director of North Shore Gas.
Thomas M. Patrick 52 1997
President and Chief Operating Officer of
the Company, Peoples Energy, and North Shore Gas;
Director of Peoples Energy and North Shore Gas.
Richard E. Terry 61 1982
Chairman of the Board and Chief Executive
Officer of the Company, Peoples Energy, and
North Shore Gas; Director of Peoples Energy
and North Shore Gas. Mr. Terry is also a
director of Amsted Industries, Bankmont
Financial Corp. and its subsidiaries, Harris
Bankcorp, Inc. and Harris Trust and Savings Bank.
IDENTIFICATION OF EXECUTIVE OFFICERS
Position at Age at Position
Name November 30, 1998 11-30-98 Held Since
Katherine A. Donofrio Vice President 41 1997
Willard S. Evans, Jr. Vice President 43 1997
Donald M. Field Executive Vice President 49 1998
Joan T. Gagen Vice President 47 1994
James Hinchliff Senior Vice President and 58 1989
General Counsel
John C. Ibach Vice President 51 1992
Peter H. Kauffman Assistant General Counsel
and Secretary 52 1998
James M. Luebbers Vice President and Controller 52 1998
William E. Morrow Vice President 42 1996
Thomas M. Patrick President and Chief Operating Officer 52 1998
William W. Reynolds Treasurer 40 1998
Desiree G. Rogers Vice President 39 1997
Richard E. Terry Chairman of the Board and 61 1990
Chief Executive Officer
Charles L. Thompson Vice President 51 1998
Directors and executive officers of the Company were elected to
serve for a term of one year or until their successors are duly
elected and qualified, except for Ms. Donofrio, Mr. Evans, and Ms.
Rogers, who were appointed.
There are no family relationships among directors and executive
officers of the Company.
All of the directors and executive officers of the Company have
been continuously employed by the Company and/or its affiliates in
various capacities for at least five years, with the exception of Mr.
Reynolds and Ms. Rogers.
ITEM 11. EXECUTIVE COMPENSATION
The following tables set forth information concerning annual and
long-term compensation and grants of stock options, stock
appreciation rights (SARs) and restricted stock awards under Peoples
Energy's Long-Term Incentive Compensation Plan. All compensation was
paid by the Company and its affiliates (Peoples Energy and North
Shore Gas) for services in all capacities during the three fiscal
years set forth below, to (1) the Chief Executive Officer and (2) the
four most highly compensated executive officers of the Company other
than the Chief Executive Officer.
[Enlarge/Download Table]
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards
Restricted Stock All Other
Name and Awards (1)(2) Options/SARs Compensation
Principal Position Year Salary ($) Bonus ($) ($) (#) (3)($)
Richard E. Terry 1998 600,000 245,000 192,828 20,600 18,000
Chairman and Chief 1997 548,500 237,900 152,663 17,800 16,455
Executive Officer 1996 473,500 191,600 145,722 21,200 14,205
J. Bruce Hasch 1998 359,700 132,200 99,706 10,600 10,791
Former President and 1997 345,900 106,700 84,525 9,800 10,377
Chief Operating Officer (4) 1996 332,600 86,000 80,803 11,800 9,978
James Hinchliff 1998 271,100 75,300 55,497 6,000 8,133
Senior Vice President 1997 260,700 67,700 54,338 6,400 7,821
and General Counsel 1996 250,700 54,500 51,797 7,600 7,521
Thomas M. Patrick 1998 254,800 75,300 55,497 6,000 7,644
President and Chief 1997 231,600 67,700 54,338 6,400 6,948
Operating Officer 1996 186,800 31,900 33,150 4,800 5,604
Kenneth S.Balaskovits 1998 220,900 61,800 44,209 4,800 6,627
Former Vice President 1997 210,400 53,100 43,988 5,200 6,312
and Controller (4) 1996 172,500 25,700 33,150 4,800 5,175
(1) Restricted stock awards are valued at the closing market price
as of the date of grant. The total number of restricted shares
held by the named executive officers and the aggregate market
value of such shares at September 30, 1998 were as follows: Mr.
Terry, 14,685 shares, valued at $528,660; Mr. Hasch, 8,025
shares, valued at $288,900; Mr. Hinchliff, 4,925 shares, valued
at $177,300; Mr. Patrick, 4,125 shares, valued at $148,500; and
Mr. Balaskovits, 3,585 shares, valued at $129,060. Dividends
are paid on the restricted shares at the same time and at the
same rate as dividends paid to all shareholders of common stock.
Aggregate market value is based on a per share price of $36.00,
the closing price of Peoples Energy's stock on the New York
Stock Exchange on September 30, 1998.
(2) Restricted stock awards granted to date vest in equal annual
increments over a five-year period. If a recipient's employment with
the Company terminates, other than by reason of death, disability, or
retirement after attaining age 65, the recipient forfeits all rights
to the unvested portion of the restricted stock award. In addition,
the Compensation-Nominating Committee (and with respect to the CEO,
the Compensation-Nominating Committee, subject to the approval of the
non-employee directors) may, in its sole discretion, accelerate the
vesting of any restricted stock awards granted under the Long-Term
Incentive Compensation Plan. Total restricted stock awarded to the
named individuals for 1996 constituted 12,475 shares, of which 2,495
shares vested in 1997; 2,495 shares vested in 1998; 2,495 shares will
vest in 1999; 2,495 shares will vest in 2000; and the remaining 2,495
shares will vest in 2001. Total restricted stock awarded to the
named individuals for 1997 constituted 11,300 shares, of which 2,260
shares vested in 1998; 2,260 shares will vest in 1999; 2,260 shares
will vest in 2000; 2,260 shares will vest in 2001; and the remaining
2,260 shares will vest in 2002. Total restricted stock awarded to the
named individuals for 1998 constituted 11,900 shares, of which 2,380
shares will vest in 1999; 2,380 shares will vest in 2000; 2,380
shares will vest in 2001; 2,380 shares will vest in 2002; and the
remaining 2,380 shares will vest in 2003.
(3) Company contributions to the Capital Accumulation Plan accounts
of the named executive officers during the above fiscal years.
Employee contributions under the plan are subject to a maximum
limitation under the Internal Revenue Code of 1986. The Company pays
an employee who is subject to this limitation an additional 50 cents
(after October 1, 1998, 60 cents) for each dollar that the employee
is prevented from contributing solely by reason of such limitation.
The amounts shown in the table above reflect, if applicable, this
additional Company payment.
(4) Messrs. Hasch and Balaskovits retired as of November 1, 1998.
[Enlarge/Download Table]
OPTIONS/SAR GRANTS IN FISCAL 1998
Individual Grants
% of Total Options/
Options/SARs SARs Granted to Exercise or Grant Date
Granted Employees in Fiscal Base Price Expiration Present Value
Name (#) (1) Year (2) ($/Sh) Date ($)(3)
Richard E. Terry 20,600 12.3% $37.84 01-Oct-07 $131,428
Chairman and Chief
Executive Officer
J. Bruce Hasch 10,600 6.3 37.84 01-Oct-07 67,628
Former President and
Chief Operating Officer (4)
James Hinchliff 6,000 3.6 37.84 01-Oct-07 38,280
Senior Vice President
and General Counsel
Thomas M. Patrick 6,000 3.6 37.84 01-Oct-07 38,280
President and Chief
Operating Officer
Kenneth S. Balaskovits 4,800 2.9 37.84 01-Oct-07 30,624
Former Vice President
and Controller (4)
(1)The grant of an Option enables the recipient to purchase Peoples
Energy common stock at a purchase price equal to the fair market
value of the shares on the date the Option is granted. The grant
of an SAR enables the recipient to receive, for each SAR granted,
cash in an amount equal to the excess of the fair market value of
one share of Peoples Energy common stock on the date the SAR is
exercised over the fair market value of such common stock on the
date the SAR was granted. Options or SARs that expire
unexercised become available for future grants. Before an Option
or SAR may be exercised, the recipient must complete 12 months of
continuous employment subsequent to the grant of the Option or
SAR. Options and SARs may be exercised within 10 years from the
date of grant, subject to earlier termination in case of death,
retirement, or termination of employment.
(2)Based on 83,800 Options and 83,800 SARs granted to all employees
under Peoples Energy's Long-Term Incentive Compensation Plan
during fiscal 1998.
(3) Present value is determined using a variation of the Black-
Scholes Option-Pricing Model. The model assumes: a) that Options
and SARs are exercised three and one-half years after the date of
grant - the average time Options and SARs were held by recipients
under Peoples Energy Long-Term Incentive Compensation Plan over the
past ten years; b) use of an interest rate equal to the interest rate
on a U.S. Treasury security with a maturity date corresponding to the
assumed exercise date; c) a level of volatility calculated using
weekly stock prices for the two years prior to the date of grant; d)
an expected dividend yield; and e) that no adjustments were made for
non-transferability or risk of forfeiture. This is a theoretical
value for the Options and SARs. The amount realized from an Option
or SAR ultimately depends upon the excess of the market value of
Peoples Energy's stock over the exercise price on the date the option
or SAR is exercised.
(4) Messrs. Hasch and Balaskovits retired as of November 1, 1998.
[Enlarge/Download Table]
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 1998
AND FISCAL YEAR-END OPTION/SAR VALUES
Shares Number of Unexercised Value of Unexercised
Acquired on Options/SARs at Fiscal In-the-Money Options/SARs
(Option/SAR) Value Year-End (#) at Fiscal Year-End ($)
Name Exercise(#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
Richard E. Terry 0 0 46,800 20,600 $187,998 $0
Chairman and
Chief Executive Officer
J. Bruce Hasch 0 0 19,200 10,600 65,866 0
Former President and
Chief Operating Officer (1)
James Hinchliff 0 0 12,600 6,000 43,328 0
Senior Vice President
and General Counsel
Thomas M. Patrick 0 0 16,600 6,000 73,920 0
President and Chief
Operating Officer
Kenneth S. Balaskovits 0 0 5,200 4,800 9,412 0
Former Vice President
and Controller (1)
(1)Messrs. Hasch and Balaskovits retired as of November 1, 1998.
PENSION PLAN TABLE
Years Of Service
Average Annual
Compensation 20 25 30 35 40
$150,000 $ 54,400 $ 68,000 $ 81,600 $ 90,975 $100,350
200,000 74,400 93,000 111,600 124,100 136,600
250,000 94,400 118,000 141,600 157,225 172,850
300,000 114,400 143,000 171,600 190,350 209,100
350,000 134,400 168,000 201,600 223,475 245,350
400,000 154,400 193,000 231,600 256,600 281,600
450,000 174,400 218,000 261,600 289,725 317,850
500,000 194,400 243,000 291,600 322,850 354,100
550,000 214,400 268,000 321,600 355,975 390,350
600,000 234,400 293,000 351,600 389,100 426,600
650,000 254,400 318,000 381,600 422,225 462,850
700,000 274,400 343,000 411,600 455,350 499,100
750,000 294,400 368,000 441,600 488,475 535,350
800,000 314,400 393,000 471,600 521,600 571,600
850,000 334,400 418,000 501,600 554,725 607,850
900,000 354,400 443,000 531,600 587,850 644,100
The above table illustrates various annual straight-life benefits
at normal retirement (age 65) for the indicated levels of average
annual compensation and various periods of service, assuming no
future changes in Peoples Energy's pension benefits. The
compensation used in the computation of annual retirement benefits is
substantially equivalent to the salary and bonus reported in the
Summary Compensation Table. The benefit amounts shown reflect
reduction for applicable Social Security benefits.
Average annual compensation is the average 12-month compensation
for the highest 60 consecutive months of the last 120 months of
service prior to retirement. Compensation is total salary paid to an
employee by the Company and/or its affiliates, including bonuses
under Peoples Energy's Short-Term Incentive Compensation Plan, pre-
tax contributions under Peoples Energy's Capital Accumulation Plan,
pre-tax contributions under Peoples Energy's Health and Dependent
Care Spending Accounts Plan, and pre-tax contributions for life and
health care insurance, but excluding moving allowances, exercise of
stock options and SARs, and other compensation that has been
deferred.
At September 30, 1998, the credited years of retirement benefit
service for the individuals listed in the Summary Compensation Table
were as follows: Mr. Terry, 34 years; Mr. Hasch, 38 years;
Mr. Hinchliff, 26 years, Mr. Patrick, 22 years; and Mr. Balaskovits,
31 years. The benefits shown in the foregoing table are subject to
maximum limitations under the Employee Retirement Income Security Act
of 1974, as amended, and the Internal Revenue Code of 1986, as
amended. Should these benefits at the time of retirement exceed the
then-permissible limits of the applicable Act, the excess would be
paid by the Company as supplemental pensions pursuant to Peoples
Energy's Supplemental Retirement Benefit Plan. The benefits shown
give effect to these supplemental pension benefits.
SEVERANCE AGREEMENTS
Peoples Energy has entered into separate severance agreements
with certain key executives including each of the executives named in
the Summary Compensation Table. The intent of the severance
agreements is to assure the continuity of the administration and
operations of Peoples Energy and its subsidiaries, including the
Company in the event of a Change in Control of the Company (as
described below). The severance agreements were developed in
accordance with the advice of outside consultants.
The term of each severance agreement is for the longer of 36
months after the date in which a Change in Control of Peoples Energy
occurs or 24 months after the completion of the transaction approved
by shareholders described in (iii) below of the description of a
Change in Control. A Change in Control is defined as occurring when
(i) Peoples Energy receives a report on Schedule 13D filed with the
Securities and Exchange Commission pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended, disclosing that any
person, group, corporation, or other entity is the beneficial owner,
directly or indirectly, of 20% or more of the common stock of Peoples
Energy; (ii) any person, group, corporation, or other entity (except
Peoples Energy or a wholly-owned subsidiary), after purchasing common
stock of Peoples Energy in a tender offer or exchange offer, becomes
the beneficial owner, directly or indirectly, of 20% or more of such
common stock; (iii) the shareholders of Peoples Energy approve (a)
any consolidation or merger of Peoples Energy in which Peoples Energy
is not the continuing or surviving corporation, other than a
consolidation or merger in which holders of Peoples Energy's common
stock prior to the consolidation or merger have substantially the
same proportionate ownership of common stock of the surviving
corporation immediately after the consolidation or merger as
immediately before; (b) any consolidation or merger in which Peoples
Energy is the continuing or surviving corporation, but in which the
common shareholders of Peoples Energy immediately prior to the
consolidation or merger do not hold at least 90% of the outstanding
common stock of Peoples Energy; (c) any sale, lease, exchange or
other transfer of all or substantially all of the assets of Peoples
Energy, except where Peoples Energy owns all of the outstanding stock
of the transferee entity or Peoples Energy's common shareholders
immediately prior to such transaction own at least 90% of the
transferee entity or group of transferee entities immediately after
such transaction; or (d) any consolidation or merger of Peoples
Energy where, after the consolidation or merger, one entity or group
of entities owns 100% of the shares of Peoples Energy, except where
Peoples Energy's common shareholders immediately prior to such merger
or consolation own at least 90% of the outstanding stock of such
entity or group of entities immediately after such consolidation or
merger; or (iv) a change in the majority of the members of Peoples
Energy's Board of Directors within a 24-month period, unless approved
by two-thirds of the directors then still in office who were in
office at the beginning of the 24-month period.
Each severance agreement provides for payment of severance
benefits to the executive in the event that, during the term of the
severance agreement, (i) the executive's employment is terminated by
Peoples Energy or the Company, except for "cause" as defined therein;
or (ii) the executive's employment is terminated due to a
constructive discharge, which includes (a) a material change in the
executive's responsibilities, which change would cause the
executive's position with Peoples Energy or the Company to become of
less dignity, responsibility, prestige or scope; (b) reduction, which
is more than de minimis, in total compensation; (c) assignment
without the executive's consent to a location more than 50 miles from
the current place of employment; or (d) liquidation, dissolution,
consolidation, merger, or sale of all or substantially all of the
assets of Peoples Energy or the Company, unless the successor
corporation has a net worth at least equal to that of Peoples Energy
or the Company, as applicable, and expressly assumes the obligations
of Peoples Energy under the executive's severance agreement.
The principal severance benefits payable under each severance
agreement consist of the following: (i) the executive's base salary
and accrued benefits through the date of termination, including a pro
rata portion of awards under Peoples Energy's Short-Term Incentive
Compensation (STIC) Plan; (ii) three times the sum of the
individual's base salary, the average of the STIC Plan awards for the
prior three years and the value of the Long-Term Incentive
Compensation (LTIC) Plan awards in the prior calendar year; and (iii)
the present value of the executive's accrued benefits under the
Peoples Energy's Supplemental Retirement Benefits Plan (SRBP) that
would be payable upon retirement at normal retirement age, computed
as if the executive had completed three years of additional service.
In addition, the executive will be entitled to continuation of life
insurance and medical benefits for the longer of (a) a period of
three years after termination or (b) a period commencing after
termination and ending when the executive may receive pension
benefits without actuarial reduction, provided that Peoples Energy's
obligation for such benefits under the severance agreement shall
cease upon the executive's employment with another employer that
provides life insurance and medical benefits. Each severance
agreement also provides that the executive's Options and SARs shall
become exercisable upon a Change in Control and that all Options and
SARs shall remain exercisable for the shorter of (a) three years
after termination or (b) the term of such Options and SARs. Any
restricted stock previously awarded to the executive under the LTIC
Plan would vest upon a Change in Control if such vesting does not
occur due to a Change in Control under the terms of the LTIC Plan.
Peoples Energy is also obligated under each severance agreement to
pay an additional amount to the executive sufficient on an after-tax
basis to satisfy any excise tax liability imposed by Section 4999 of
the Internal Revenue Code of 1986, as amended. The benefits received
by the executive under each agreement are in lieu of benefits under
Peoples Energy's termination allowance plan and the executive's
benefits under the SRBP. Each executive would be required to waive
certain claims prior to receiving any severance benefits.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
At November 30, 1998, voting securities of the Company were
beneficially owned as follows:
Title of Number of Percent of
Class Name and Address Shares Owned Class
Common Stock Peoples Energy Corporation
without 130 East Randolph Driv
par value Chicago, Illinois 60601-6207 24,817,566 100
SECURITY OWNERSHIP OF MANAGEMENT
No equity securities of the Company are beneficially owned
directly or indirectly by any director or officer of the Company.
Shares of common stock, without par value, of Peoples Energy
beneficially owned directly or indirectly by all directors and
certain executive officers of the Company and all directors and
executive officers of the Company as a group at November 30, 1998,
are as follows:
Shares of Peoples Energy
Common Stock Beneficially
Name Owned at November 30, 1998 (1)
Donald M. Field* 19,467 (2)(3)
James Hinchliff* 34,918 (2)(3)
James M. Luebbers* 6,633 (2)(3)
Thomas M. Patrick* 25,761 (2)(3)
Richard E. Terry* 90,724 (2)(3)
J. Bruce Hasch (4) 48,635
Kenneth S. Balaskovits (4) 12,122
All directors and officers of the Company
as a group, including those named above
(15 in number) 300,989
* Director of the Company
(1) The total of 300,989 shares held by all directors and executive
officers as a group is less than one percent of Peoples Energy's
outstanding common stock. Unless otherwise indicated, each
individual has sole voting and investment power with respect to
the shares of common stock attributed to him or her in the
table.
(2) Includes shares that the following have a right to acquire
within 60 days following November 30, 1998, through the exercise
of stock options granted under Peoples Energy's Long-Term
Incentive Compensation Plan: Messrs. Balaskovits, 5,000; Hasch,
14,900; Hinchliff, 9,300; Patrick, 10,100; Terry, 33,700; and
all executive officers of the Company, as a group, 125,200.
(3) Includes shares of restricted stock awarded under Peoples
Energy's Long-Term Incentive Compensation Plan, the restrictions on
which had not lapsed at November 30, 1998, as follows: Messrs.
Hinchliff, 4,830; Patrick, 5,720; Terry, 15,480; and all executive
officers as a group, 34,585. Owners of shares of restricted stock
have the right to vote such shares and to receive dividends
thereon, but have no investment power with respect to such shares
until the restrictions thereon lapse.
(4) Messrs. Hasch and Balaskovits retired as of November 1, 1998.
CHANGES IN CONTROL
None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company provides general corporate and support services to
Peoples Energy pursuant to an Intercompany Service Agreement
(Agreement), the terms of which were approved by the Commission. In
fiscal 1998, the Company furnished general corporate services in the
amount of $3,693,099 and support services in the amount of $131,978
to Peoples Energy under the Agreement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements: Page
See Part II, Item 8. 17
2. Financial Statement Schedules:
Schedule
Number
VIII Valuation and Qualifying Accounts 44
3. Exhibits:
See Exhibit Index on page 46.
(b) Reports on Form 8-K filed during the final quarter of fiscal
year 1998:
None.
[Enlarge/Download Table]
<CAPTIOM>
Schedule VIII
The Peoples Gas Light and Coke Company and Subsidiary Companies
VALUATION AND QUALIFYING ACCOUNTS
(Thousands)
Column A Column B Column C Column D Column E
Additions Deductions
Charged Charges for the
Balance to costs purpose for which the Balance
at beginning and reserves or deferred at end of
Description of period expenses credits were created period
Fiscal Year Ended September 30, 1998
RESERVES (deducted from assets in balance sheet):
Uncollectible items $28,959 $22,251 $ 28,597 $22,613
Fiscal Year Ended September 30, 1997
RESERVES (deducted from assets in balance sheet):
Uncollectible items $25,279 $27,068 $ 23,388 $28,959
Fiscal Year Ended September 30, 1996
RESERVES (deducted from assets in balance sheet):
Uncollectible items $18,315 $27,345 $ 20,381 $25,279
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the registrant has
duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE PEOPLES GAS LIGHT AND COKE COMPANY
Date: December 17, 1998 By: /s/ RICHARD E. TERRY
Richard E. Terry
Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities indicated on December 17, 1998.
/s/ RICHARD E. TERRY Chairman of the Board and Chief Executive
Richard E. Terry Officer and Director
(Principal Executive Officer)
/s/ JAMES M. LUEBBERS Vice President and Controller and Director
James M. Luebbers (Principal Financial and Accounting Officer)
/s/ DONALD M. FIELD Director
Donald M. Field
/s/ JAMES HINCHLIFF Director
James Hinchliff
/s/ THOMAS M. PATRICK Director
Thomas M. Patrick
The Peoples Gas Light and Coke Company and Subsidiary Companies
EXHIBIT INDEX
(a) The exhibits listed below are filed herewith and made a
part hereof:
Exhibit
Number Description of Document
10(a) U.S. Shippers Service Agreement between the
Company and Northern Border Pipeline Company,
dated August 14, 1997;
10(b) U.S. Shippers Service Agreement between the
Company and Northern Border Pipeline Company,
dated October 27, 1997;
10(c) Storage Rate Schedule DSS Agreement between the
Company and Natural Gas Pipeline Company of
America, dated January 15, 1998;
10(d) Storage Rate Schedule NSS Agreement between the
Company and Natural Gas Pipeline Company of
America, dated January 15, 1998;
10(e) Transportation Rate Schedule FTS Agreement
between the Company and Natural Gas Pipeline
Company of America, dated January 15, 1998;
10(f) Transportation Rate Schedule FTS LN/NB
Agreement between the Company and Natural Gas
Pipeline Company of America, dated January 15,
1998;
12 Statement re: Computation of Ratio of
Earnings to Fixed Charges.
21 Subsidiaries of the Registrant
27 Financial Data Schedule
(b) Exhibits listed below have been filed heretofore with
the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended, and/or the
Securities Exchange Act of 1934, as amended, and are
incorporated herein by reference. The file number and
exhibit number of each such exhibit are stated in the
description of such exhibits.
3(c) Articles of Incorporation of the Registrant,
as amended on April 24, 1995 (Registrant Form
10-K for fiscal year ended September 30, 1995,
Exhibit 3(b)).
4(a)First and Refunding Mortgage, dated January
2, 1926, from Chicago By-Product Coke Company to
Illinois Merchants Trust Company, Trustee,
assumed by the Company by Indenture dated
March 1, 1928 (May 17, 1935, Exhibit B-6a,
Exhibit B-6b A-2 File No. 2-2151, 1936);
Supplemental Indenture dated as of May 20,
1936, from the Company to Continental Illinois
National Bank and Trust Company of Chicago,
Trustee (Form 8-K for the year 1936, Exhibit B-
6f); Supplemental Indenture dated as of March
10, 1950 (Form 8-K for the month of March
1950, Exhibit B-6i); Supplemental Indenture
dated as of June 1, 1951 (File No. 2-8989,
Post-Effective, Exhibit 7-4(b)); Supplemental
Indenture dated as of August 15, 1967 (File
No. 2-26983, Post-Effective, Exhibit 2-4);
Supplemental Indenture dated as of September
15, 1970 (File No. 2-38168, Post-Effective
Exhibit 2-2); Supplemental Indenture dated
October 1, 1984, Exhibit 4-3 (Form 10-K for
The Peoples Gas Light and Coke Company and Subsidiary Companies
EXHIBIT INDEX (Continued)
Exhibit
Number Description of Document
4(a) fiscal year ended September 30, 1984);
Supplemental Indentures dated March 1, 1985,
cont'd Exhibit 4-3, (Form 10-K for fiscal year
ended September 30, 1985); Supplemental Indenture
dated May 1, 1990 (Form 10-K for the fiscal
year ended September 30, 1990, Exhibit 4);
Supplemental Indenture dated as of
April 1, 1993 (Form 8-K dated as of May 5,
1933, Exhibit 1); Supplemental Indentures
dated as of December 1, 1993 (Form 10-Q for
the quarterly period ended December 31, 1993,
Exhibit 4(a)); Supplemental Indenture dated as
of December 1, 1993 (Form 10-Q for the
quarterly period ended December 31, 1993,
Exhibit 4(b)); Supplemental Indenture dated
June 1, 1995. (Form 10-K for fiscal year ended
September 30, 1995.)
10(g) Firm Transportation Service Agreement
Under Rate Schedule FT between the Company and
Trunkline Gas Company, dated as of December 1,
1993 (Registrant Form 10-K for the fiscal year
ended September 30, 1994, Exhibit 10). ETS
Service Agreement between the Company and ANR
Pipeline Company, dated September 21, 1994.
(Registrant Form 10-K for fiscal year ended
September 30, 1995, Exhibit 10(a)); FSS
Service Agreement between the Company and ANR
Pipeline Company, dated September 21, 1994.
(Registrant Form 10-K for fiscal year ended
September 30, 1995, Exhibit 10(b)); Storage
Rate Schedule NSS Agreement between the
Company and Natural Gas Pipeline Company of
America, dated October 19, 1995. (Registrant
Form 10-K for fiscal year ended September 30,
1995, Exhibit 10(c)); Transportation Rate
Schedule FTS Agreement between the Company and
Natural Gas Pipeline Company of America, dated
October 19, 1995. (Registrant Form 10-K for
fiscal year ended September 30, 1995, Exhibit
10(d)); Storage Rate Schedule DSS Agreement
between the Company and Natural Gas Pipeline
Company of America, dated December 1, 1995.
(Registrant Form 10-K for fiscal year ended
September 30, 1995, Exhibit 10(e));
Transportation Rate Schedule FTS Agreement
between the Company and Natural Gas Pipeline
Company of America, dated December 1, 1995.
(Registrant Form 10-K for fiscal year ended
September 30, 1995, Exhibit 10(f)); Firm
Transportation Service Agreement Under Rate
Schedule FT between the Company and Trunkline
Gas Company, dated as of April 1, 1995.
(Registrant Form 10-K for fiscal year ended
September 30, 1995, Exhibit10(g)); Quick
Notice Transportation Service Agreement Under
Rate Schedule QNT between the Company and
Trunkline Gas Company, dated as of December 1,
1995. (Registrant Form 10-K for fiscal year
ended September 30, 1995, Exhibit 10(h));
Quick Notice Transportation Service Agreement
Under Rate Schedule QNT between the Company
and Trunkline Gas Company, dated as of
December 1, 1995. (Registrant Form 10-K for
fiscal year ended September 30, 1995, Exhibit
10(i)); Firm Transportation Service Agreement
under Rate Schedule FTS-1 between the Company
and ANR Pipeline Company, dated as of
September 20, 1995. (Registrant Form 10-K for
fiscal year ended September 30, 1996, Exhibit
10(j)); Firm Transportation Service Agreement
under Rate Schedule FTS between the Company
and Natural Gas Pipeline Company of America,
dated as of February 21, 1996. (Registrant
form 10-K for fiscal year ended September 30,
1996, Exhibit 10(k)); Firm Transportation
Service Agreement under Rate Schedule FTS
between the Company and Natural Gas Pipeline
Company of America, dated as of February 21,
1996. (Registrant form 10-K for fiscal year
ended September 30, 1996, Exhibit 10(l)); Firm
Transportation Service
The Peoples Gas Light and Coke Company and Subsidiary Companies
EXHIBIT INDEX (Continued)
Exhibit
Number Description of Document
Agreement under Rate Schedule FTS between
the Company and Natural Gas Pipeline Company
of America, dated November 13, 1996.
(Registrant Form 10-K for fiscal year ended
September 30, 1997, Exhibit 10(m)); Firm
Transportation Service Agreement under Rate
Schedule FT-A or FT-G between the Company and
Midwestern Gas Transmission Company, dated
November 1, 1997. (Registrant Form 10-K for
fiscal year ended September 30, 1997, Exhibit
10(n)); Firm Transportation Service Agreement
under Rate Schedule FT-A between the Company
and Tennessee Gas Pipeline Company, dated
November 1, 1997. (Registrant Form 10-K for
fiscal year ended September 30, 1997, Exhibit
10(o)).
10(h) Leased dated Ocotber 20, 1993, between
Prudential Plaza Associates, as Landlord, and
the Company, as Tentant (Registrant Form 10-Q
for the quarterly period ended December 31, 1993,
Exhibit 10(a)).
Dates Referenced Herein and Documents Incorporated by Reference
This ‘10-K405’ Filing | | Date | | Other Filings |
---|
| | |
| | 12/1/23 |
| | 5/1/02 |
| | 12/31/00 | | 10-Q |
| | 1/31/00 |
| | 11/30/99 |
| | 10/1/99 |
| | 8/29/99 |
| | 4/30/99 |
| | 3/31/99 | | 10-Q |
Filed on: | | 12/18/98 |
| | 12/17/98 |
| | 11/30/98 |
| | 11/1/98 |
| | 10/30/98 |
| | 10/26/98 |
| | 10/1/98 |
For Period End: | | 9/30/98 |
| | 8/12/98 |
| | 8/1/98 |
| | 3/27/98 |
| | 1/15/98 |
| | 12/16/97 |
| | 12/1/97 |
| | 11/30/97 |
| | 11/1/97 |
| | 10/27/97 |
| | 10/1/97 |
| | 9/30/97 | | 10-K405 |
| | 8/14/97 |
| | 6/25/97 |
| | 11/13/96 |
| | 9/30/96 | | 10-K405 |
| | 2/21/96 |
| | 12/1/95 |
| | 10/19/95 |
| | 9/30/95 | | 10-K405 |
| | 9/20/95 |
| | 6/1/95 |
| | 4/24/95 |
| | 4/1/95 |
| | 9/30/94 | | 10-K |
| | 9/21/94 |
| | 2/1/94 |
| | 12/31/93 | | 10-Q |
| | 12/1/93 |
| | 4/1/93 |
| List all Filings |
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