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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(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, 1994
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.)
122 SOUTH MICHIGAN AVENUE, CHICAGO, ILLINOIS 60603
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 431-4000
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
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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, 1994.
Documents Incorporated by Reference
None
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CONTENTS
Page
Item No. No.
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PART I
1. Business 3
2. Properties 9
3. Legal Proceedings 10
4. Submission of Matters to a Vote of Security Holders 10
PART II
5. Market for the Company's Common Stock and Related
Stockholder Matters 10
6. Selected Financial Data 11
7. Management's Discussion and Analysis of Results
of Operations and Financial Condition 12
8. Financial Statements and Supplementary Data 18
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 40
PART III
10. Directors and Executive Officers of the Company 41
11. Executive Compensation 43
12. Security Ownership of Certain Beneficial Owners and
Management 48
13. Certain Relationships and Related Transactions 49
PART IV
14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 50
Signatures 56
Exhibit Index 57
-2-
THE PEOPLES GAS LIGHT AND COKE COMPANY
ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED SEPTEMBER 30, 1994
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, production, storage, distribution, sale, and transportation of natural
gas. It has approximately 842,000 residential, commercial, and industrial
retail sales and transportation customers within the City of Chicago (City).
The Company had 3,031 employees at September 30, 1994.
At September 30, 1994, the common stock of the Company and of its
affiliate, North Shore Gas Company (North Shore Gas), was wholly owned by
Peoples Energy Corporation (Peoples Energy).
COMPETITION
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 stagnant
high-rise construction activity, has adversely affected the ability of the
Company to attach commercial high-rise buildings. However, the Company has had
some success in attaching high-rise residential buildings, as gas heating
results in lower operating costs.
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 gas 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.
-3-
ITEM 1. BUSINESS (Continued)
COMPETITION (Continued)
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 Illinois Commerce
Commission (Commission) which allows the Company to renegotiate rates with
customers that are potential bypass candidates.
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 and
Refund Adjustments, 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 schedule is adjusted monthly to reflect increases or
decreases in natural gas supplier charges, purchased storage service costs,
transportation charges, liquefied petroleum gas costs, and feedstock costs for
synthetic natural gas (SNG). In addition, under the tariffs of the Company, the
difference for any fiscal year between costs recoverable through the Gas Charge
and the revenues billed to customers under the Gas Charge is refunded or
recovered over a 12-month billing cycle beginning the following January 1.
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), and the fiscal year-end balance is amortized over the 12-month
period beginning the following January 1. The Company also has been recovering,
through its rates, pipeline charges billed for transition costs resulting from
the implementation of Federal Energy Regulatory Commission (FERC) Order No. 636.
(See Notes 1H, 2A, and 2B of the Notes to Consolidated Financial Statements.)
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 sales 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 advances in new, expanded, or current
natural gas applications, including cogeneration, prime movers, natural gas-
fueled vehicles, and air conditioning.
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* All volumes of natural gas set forth in this report are stated on a 1,000 Btu
(per cubic foot) billing basis.
-4-
ITEM 1. BUSINESS (Continued)
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.
On October 6, 1992, the Commission issued an order approving changes in the
rates of the Company that were designed to increase annual revenues by
approximately $30.6 million, exclusive of additional charges for revenue taxes.
The new rates were implemented on October 10, 1992. The Company was allowed a
10.40 percent return on its original-cost rate base, reflecting a 12.25 percent
cost of common equity. The Commission's order also approved a rate mechanism by
which the Company will recover costs associated with environmental activities,
relating to past manufactured gas operations (see discussion below). (See Note
2A of the Notes to Consolidated Financial Statements.)
On September 30, 1992, the Commission issued an order in its consolidated
proceedings, initiated in March 1991, regarding the appropriate ratemaking
treatment of environmental costs relating to past manufactured gas operations
incurred by Illinois utilities, including the Company and North Shore Gas, in
connection with the investigation and treatment of residues associated with past
manufactured gas operations ("environmental costs"). In its order, the
Commission approved rate recovery of such environmental costs but required that
the recovery occur over a five-year period without recovery of carrying charges
on unrecovered balances. The Commission's order is on appeal before the
Illinois Supreme Court. (See Note 2A of the Notes to Consolidated Financial
Statements.)
On September 15, 1993, the Commission entered an order initiating an
investigation into the appropriate means of recovery by Illinois gas utilities
of pipeline charges for FERC Order No. 636 transition costs. The Commission
issued its orders on rehearing in this proceeding in September 1994. (See
Notes 1H, 2A, and 2B of the Notes to Consolidated Financial Statements.)
On December 16, 1994, the Company filed with the Commission proposed
changes in rates that are designed to increase annual revenues by about
$59.9 million, exclusive of additional charges for revenue taxes. The Company
is seeking a rate of return on original-cost rate base of 10.03 percent, which
reflects a 12.7 percent cost of common equity. The Company expects that the
Commission, following its usual practices, will not issue a decision regarding
the Company's filed rate increase request until November 1995. The Company
cannot predict the outcome of its rate increase request.
-5-
ITEM 1. BUSINESS (Continued)
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 sales
services (gathering, transportation and storage services, and gas supply)
pipelines are regulated by the FERC under the Natural Gas Act (NGA) and the
Natural Gas Policy Act of 1978 (NGPA). (See "Sales and Rates" and "Current Gas
Supply" in Item 1.)
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 3
of the Notes to Consolidated Financial Statements.)
In 1992, the FERC issued Order No. 636 and successor orders that required
substantial restructuring of the service obligations of interstate pipelines.
(See Notes 1H, 2A, and 2B of the Notes to Consolidated Financial Statements.)
ENVIRONMENTAL MATTERS
See Note 3 of the Notes to Consolidated Financial Statements.
CURRENT GAS SUPPLY
The Company has entered into long- and short-term firm gas supply
contracts. When used in conjunction with contract storage, Company-owned
storage, and peak-shaving facilities, as shown in the following table, such
supply is deemed sufficient to meet current and foreseeable peak and annual
market requirements. SNG production is a source of the Company's annual, peak-
season, and peak-day supply. The SNG plant is run at production levels that are
consistent with orders of the Commission. The feedstock for the SNG plant is
procured via firm supply contracts and spot purchases, as required. The current
feedstocks are primarily ethane and refinery fuel gas, with naphtha and natural
gasoline used for peaking.
Although the Company believes North American supply to be sufficient to
meet U.S. market demands for some time, it is unable to quantify or otherwise
make specific representations regarding national supply availability.
-6-
ITEM 1. BUSINESS (Continued)
CURRENT GAS SUPPLY (Continued)
The following tabulation shows the Company's expected peak-day availability
of gas in million cubic feet (MMcf) during the 1994-95 heating season:
Peak-Day Year of
Availability Contract
Source (MMcf) Expiration
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Flow Gas
Firm Gas Purchases 540 (a) 1995-1998(a)
Synthetic Natural Gas 170 (b)
Liquefied Petroleum Gas 40
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750
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Storage
Leased 793(c) 1995-1996(c)
Peoples Gas - Manlove Storage 993(d)
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1,786
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Total expected peak-day
availability 2,536
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<FN>
(a) Consists of firm gas purchases from non-pipeline suppliers delivered via
firm pipeline transportation. Under the 636 Orders' right-of-first-refusal
process, the Company may retain the firm transportation contract capacity
if it matches the best bid made for that capacity in terms of rate (up to
the maximum rate permitted) and contract length (up to 20 years).
(b) The Company's SNG plant has a design peak-day production capability of 170
MMcf. Feedstock contracts for the plant expire during the period 1995-
1997. (See "Synthetic Natural Gas Supply" in Item 1.)
(c) The Company has maximum storage service withdrawal capacity under contracts
with Natural Gas Pipeline Company of America (Natural) of (1) 554 MMcf per
day in the period November 1 through February 15, decreasing to 449 MMcf
per day until February 28 and to 343 MMcf per day for the balance of the
withdrawal season, under a service agreement extending until 1995, (2) 69
MMcf per day under a service agreement extending until 1995, (3) 46 MMcf
per day under a service agreement extending until 1995, (4) 24 MMcf per day
under a service agreement extending until 1995, (5) 59 MMcf per day,
including transportation fuel, under a service agreement extending until
1996 and (6) including transportation fuel, 65 MMcf per day in November,
decreasing to 60 MMcf per day in December, 45 MMcf per day in January and
30 MMcf per day in February and March, under a service agreement extending
until 1995. All daily withdrawals under the foregoing seasonal and
interseasonal agreements are subject to maximum withdrawal constraints.
Before terminating any of the services noted in (1) through (4) above,
Natural must first seek authority from FERC. The services noted in (5) and
(6) are subject to the 636 Orders' right-of-first-refusal process. Under
this process, the Company may retain the storage capacity if it matches the
best bid made for that capacity in terms of rate (up to the maximum rate
permitted under Natural's tariff) and contract length (up to 20 years).
-7-
ITEM 1. BUSINESS (Continued)
CURRENT GAS SUPPLY (Continued)
(d) Manlove Field, the Company's underground storage facility located near
Champaign, Illinois, has a seasonal top-gas capacity (excluding volumes
required to support late-season peaking requirements) of approximately
33,000 MMcf, of which approximately 2,884 MMcf 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 MMcf
and is capable of regasifying 300 MMcf of gas per day. For the 1994-95
heating season, Manlove Field will have a maximum peak-day delivery
capability of approximately 1,080 MMcf (including 87 MMcf for the use of
North Shore Gas).
The sources of gas supply (including gas transported for customers) in
million cubic feet (MMcf) for the Company for the three fiscal years ended
September 30, 1994, 1993, and 1992, were as follows:
1994 1993 1992
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Source:
Natural (a) 14,378 63,996 80,743
Midwestern Gas
Transmission Company (b) -- 7,217 6,538
Other Suppliers (c) 134,104 76,006 62,024
Synthetic Natural Gas (d) 8,350 9,723 8,059
Liquefied Petroleum Gas Produced 30 14 2
Customer-Owned Gas - Received 91,187 91,046 87,433
Underground Storage - Net (2,196) (1,762) (1,688)
Company Use, Franchise Requirements,
and Unaccounted-for Gas (4,261) (4,772) (2,920)
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Total (e) 241,592 241,468 240,191
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<FN>
(a) The DMQ-1 supply contract terminated on November 30, 1993.
(b) The CD-1 supply contract terminated on August 31, 1993.
(c) The Company purchases significant quantities of gas directly from various
suppliers. Commencing December 1, 1993, purchases were more oriented
towards long-term supply contracts than short-term spot gas. However, some
gas supply is still purchased on a short-term basis whenever such purchases
are projected to produce a savings in gas costs without jeopardizing supply
security and reliability.
(d) See "Synthetic Natural Gas Supply" in Item 1.
(e) See "Gas Sold and Transported" in Item 6.
-8-
ITEM 1. BUSINESS (Continued)
SYNTHETIC NATURAL GAS SUPPLY
The Company owns and operates an SNG plant, the McDowell Energy Center,
located near Joliet, Illinois. The plant can use refinery fuel gas and a
variety of natural gas liquids, including ethane, naphtha, natural gasoline,
normal butane, propane, and ethane/propane mix as feedstock for the production
of SNG. While sufficient annual supplies of natural gas are now available, the
SNG plant remains a key part of the Company's annual, peak-season, peak-day, and
longer-term gas supply assurance program.
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, as of September 30, 1994, 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 899,000 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's SNG plant mentioned in Item 1 has a design peak-day
production capability of 170 MMcf of gas. The plant includes feedstock
pipelines, structures, and equipment to transport, store, and process the
feedstock into pipeline-quality gas and to deliver the gas into the Company's
transmission system.
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 at Manlove Field, together with wells,
pipes, compressors, dehydration, metering, and other equipment required to
operate the facility. As of September 30, 1994, the Company had approximately
128,000 MMcf of gas stored in the reservoir, of which approximately 92,000 MMcf
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 MMcf and is capable of regasifying 300 MMcf of gas per day. Such gas,
together with the gas withdrawn from the Manlove Field reservoir, the gas
transmitted by Trunkline Gas Company, and the gas produced at the SNG plant, is
carried to Chicago in Company-owned transmission mains totaling 255 miles.
-9-
ITEM 2. PROPERTIES (Continued)
Most of the principal plants and properties of the Company, other than
mains, services, meters, and regulators, 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 SNG facilities, 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 Bank of America Illinois, (formerly named Continental
Bank, National Association) 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 Notes 2, 3, and 4 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.
-10-
ITEM 6. SELECTED FINANCIAL DATA (a)
For fiscal years ended September 30, 1994 1993 1992 1991 1990
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OPERATING RESULTS (thousands)
Operating Revenues:
Residential $ 820,383 $ 807,674 $ 684,004 $ 695,795 $ 719,805
Commercial 139,078 135,838 115,026 125,836 149,712
Industrial 35,587 36,193 30,985 37,332 54,014
Transportation of customer-owned gas (b) 98,943 106,198 122,326 103,778 100,844
Other 17,181 15,517 14,366 12,880 11,957
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Total Operating Revenues $1,111,172 $1,101,420 $ 966,707 $ 975,621 $1,036,332
Gas costs 566,903 555,256 463,221 490,045 545,183
Revenue taxes 121,773 121,051 109,053 109,854 120,601
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Net Operating Revenues $ 422,496 $ 425,113 $ 394,433 $ 375,722 $ 370,548
Net income applicable to common stock $ 63,825 $ 63,637 $ 57,728 $ 60,220 $ 58,287
Dividends declared on common stock $ 55,343 $ 55,095 $ 10,175 $ 54,102 $ 31,519
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ASSETS AT YEAR-END (thousands)
Property, plant and equipment $1,760,004 $1,702,401 $1,616,046 $1,543,439 $1,481,189
Less - Accumulated depreciation 596,808 557,855 529,540 499,689 472,565
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Net Property, Plant and Equipment $1,163,196 $1,144,546 $1,086,506 $1,043,750 $1,008,624
Total assets $1,548,792 $1,506,107 $1,380,201 $1,345,718 $1,351,340
Capital expenditures - construction $ 74,623 $ 108,863 $ 92,052 $ 83,342 $ 91,576
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CAPITALIZATION AT YEAR-END (thousands)
Common equity $ 531,475 $ 522,993 $ 514,865 $ 467,312 $ 461,194
Preferred stock -- -- 12,850 16,750 20,650
Long-term debt 549,150 447,150 433,500 436,350 467,973
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Total Capitalization $1,080,625 $ 970,143 $ 961,215 $ 920,412 $ 949,817
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CAPITALIZATION AT YEAR-END (percent)
Common equity 49 54 54 51 49
Preferred stock -- -- 1 2 2
Long-term debt 51 46 45 47 49
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Total Capitalization 100 100 100 100 100
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GAS SOLD AND TRANSPORTED (million cubic feet)
Gas Sales:
Residential 122,648 124,190 123,557 119,661 128,298
Commercial 22,565 22,656 22,601 23,865 28,614
Industrial 6,320 6,670 6,505 7,743 10,683
Transportation of customer-owned gas (b) 90,059 87,952 87,528 82,798 75,944
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Total Sales and Transportation 241,592 241,468 240,191 234,067 243,539
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NUMBER OF CUSTOMERS (average)
Residential 786,271 787,672 790,017 789,329 789,604
Commercial 43,299 43,243 43,261 42,596 42,362
Industrial 3,125 3,260 3,243 3,235 3,431
Transportation (b) 8,768 8,335 8,029 8,420 7,805
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Total Customers 841,463 842,510 844,550 843,580 843,202
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DEGREE DAYS 6,701 6,679 6,320 5,927 6,168
Percent of normal (6,536) 103 102 97 91 94
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<FN>
(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.
-11-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
NET INCOME
Net income applicable to common stock increased $188,000, to $63.8 million,
in fiscal 1994 from 1993. Results for the current fiscal year include the
recording of one-half of an Internal Revenue Service (IRS) income tax settlement
that increased net income by $9.7 million. (See Note 7 of the Notes to
Consolidated Financial Statements.) However, this benefit was largely offset by
increased operating costs related to the provision for uncollectible accounts,
labor, and depreciation.
In 1993, net income applicable to common stock increased $5.9 million, to
$63.6 million, due principally to a rate increase that went into effect for the
Company on October 10, 1992. (See Note 2A of the Notes to Consolidated Financial
Statements.) Fiscal 1993 also benefited from colder weather as compared to
fiscal 1992; however, such benefit was offset by a decline in gas deliveries
arising principally from energy conservation measures. Fiscal 1993 was
negatively affected by increased operating expenses other than gas costs,
including an increase in the provision for uncollectible accounts.
A summary of variations affecting income between years is presented below,
with explanations of significant differences following:
Fiscal 1994 Fiscal 1993
over 1993 over 1992
------------------------ ------------------------
Amount Amount
(000's) Percent (000's) Percent
- ------------------------------------------------------------------------------------------------------
Net operating revenues (a) $(2,617) (0.6) $30,680 7.8
Operation and maintenance expenses 9,766 4.4 19,408 9.6
Depreciation expense 3,209 5.9 3,074 6.0
Income taxes (5,538) (16.8) 3,899 13.4
Other income 12,943 289.4 (839) (15.8)
Income deductions 3,477 9.1 (2,392) (5.9)
Net income applicable to common stock 188 0.3 5,909 10.2
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<FN>
(a) Operating revenues, net of gas costs and revenue taxes.
NET OPERATING REVENUES
Gross revenues of the Company are affected by changes in the unit cost of
the Company's gas purchases and do not include the cost of gas supplies for
customers who purchase gas directly from producers and marketers rather than
from the Company. The direct customer purchases have no effect on net income
because the Company provides transportation service for such gas volumes and
recovers margins similar to those applicable to conventional gas sales. Changes
in the unit cost of gas do not significantly affect net income because the
Company's tariffs provide for dollar-for-dollar recovery of gas costs. (See Note
1H of the Notes to Consolidated Financial Statements.) The Company's tariffs
also provide for dollar-for-dollar recovery of the cost of revenue taxes imposed
by the State and City.
-12-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION (Continued)
Since income is not significantly affected by changes in revenue from
customers' gas purchases from producers or marketers rather than from the
Company, changes in gas costs, or changes in revenue taxes, the discussion below
pertains to "net operating revenues" (operating revenues, net of gas costs and
revenue taxes). The Company considers net operating revenues to be a more
pertinent measure of operating results than gross revenues.
Net operating revenues in fiscal 1994 amounted to $422.5 million, virtually
flat as compared with fiscal 1993. Although the weather in January 1994 was
significantly colder than January 1993, the total fiscal 1994 weather impact was
comparable with fiscal 1993. Customers' energy conservation measures had a
negative effect in the current period.
In 1993, net operating revenues increased $30.7 million, to $425.1 million,
due primarily to the impact of the October 1992 rate increase for the Company
that raised net operating revenues by $32.0 million, or $19.6 million after
income taxes.
OPERATION AND MAINTENANCE EXPENSES
Operation and maintenance expenses increased $9.8 million, to $230.9
million, in 1994, due mainly to an increase in the provision for uncollectible
accounts and higher labor costs that arose mainly from weather-related overtime
work and from start-up costs for new customer-service programs. Partially
offsetting these items were a reduced workforce and lower employee benefits
expenses for pensions and group insurance. Fiscal 1994 results reflect an
increase of $9.5 million in the provision for uncollectible accounts, which
includes a $3.7 million increase to adjust the balance sheet allowance. Without
the increase in the provision for uncollectible accounts, operation and
maintenance expenses would have increased by $297,000 over fiscal 1993 levels.
In 1993, operation and maintenance expenses increased $19.4 million, to
$221.2 million, due principally to increased group insurance expenses, primarily
attributable to the accrual of postretirement benefit costs of $9.9 million.
(See Note 6B of the Notes to Consolidated Financial Statements.) This is
consistent with the rate treatment allowed the Company in October 1992. Also,
higher expenses resulted from labor costs, the provision for uncollectible
accounts, and pension costs.
DEPRECIATION EXPENSE
Depreciation expense increased $3.2 million, to $57.8 million, in 1994, and
$3.1 million, to $54.6 million, in 1993, due chiefly to depreciable property
additions.
-13-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION (Continued)
INCOME TAXES
Income taxes, exclusive of the $3.0 million included in other income
related to an IRS settlement, decreased $5.5 million, to $27.4 million, in 1994,
due principally to lower pre-tax income.
In 1993, income taxes rose by $3.9 million, to $33.0 million, due primarily
to higher pre-tax income and the federal tax rate change from 34 percent to 35
percent effective January 1, 1993.
OTHER INCOME
Other income increased $12.9 million, to $17.4 million, in 1994, due
primarily to recording an IRS settlement of approximately $9.7 million after
income taxes. (See Notes 7 and 9 of the Notes to Consolidated Financial
Statements.) Also, the current fiscal year includes higher interest income
reflecting larger cash balances available for investment and additional interest
income from proceeds being held in a trust fund generated from the December 1993
bond issuance. (See Note 12A of the Notes to Consolidated Financial Statements.)
In 1993, other income decreased $839,000, to $4.5 million, due partially to
lower interest income on short-term investments. An offsetting factor was
increased interest on amounts recoverable from customers.
INCOME DEDUCTIONS
Income deductions rose by $3.5 million, to $41.5 million, in 1994, due
primarily to increased interest on long-term debt reflecting additional debt
outstanding. (See Note 12A of the Notes to Consolidated Financial Statements.)
In 1993, income deductions decreased $2.4 million, to $38.0 million, due
chiefly to reduced interest on long-term debt, gas bill credit deposits, budget
accounts, and amounts refundable to customers.
OTHER MATTERS
EFFECT OF WEATHER. Weather variations affect the volumes of gas delivered for
heating purposes and, therefore, can have a significant positive or negative
impact on net income and coverage ratios.
EFFECT OF INFLATION. The Company is affected by inflation through increases in
operating expenses and replacement of utility plant assets at costs higher than
historical costs. Gas costs, the Company's largest operating cost, and revenue
taxes are recovered dollar-for-dollar in rates. Increases in other operating
costs are recovered through rate cases. Although there is a time lag in the
recovery through rate cases of increased cost levels, the effect of this lag is
mitigated by the use of a future test year in rate decisions. The Company
recovers the cost of depreciable utility property through depreciation charges
based on historical costs. Such charges do not reflect current costs or
inflation-adjusted costs of utility plant. However, the Company believes that
the manner of setting utility rates generally affords an opportunity to earn a
fair return on shareholder investment.
-14-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION (Continued)
ACCOUNTING STANDARDS. In March 1993, the Company adopted, effective October 1,
1992, the liability method of accounting for deferred income taxes required by
Statement of Financial Accounting Standards (SFAS) No. 109. (See Note 1G of the
Notes to Consolidated Financial Statements.)
Effective October 1, 1993, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." This statement
requires the accrual of the expected costs of such benefits during the
employees' years of service. (See Note 6B of the Notes to Consolidated Financial
Statements.)
In November 1992, the Financial Accounting Standards Board (FASB) issued
SFAS No. 112, "Employers' Accounting for Postemployment Benefits." This
statement requires the accrual of certain benefits provided to former or
inactive employees after employment but before retirement. SFAS No. 112 requires
adoption by the Company no later than fiscal 1995. (See Note 6C of the Notes to
Consolidated Financial Statements.)
FERC ORDER 636 COSTS. In 1992, the FERC issued Order No. 636 and successor
orders that required substantial restructuring of the service obligations of
interstate pipelines. (See Notes 1H, 2A, and 2B of the Notes to Consolidated
Financial Statements.)
On September 15, 1993, the Commission entered an order initiating an
investigation into the appropriate means of recovery by Illinois gas utilities
of pipeline charges for FERC Order No. 636 transition costs. The Commission
issued its orders on rehearing in this proceeding in September 1994. (See Notes
1H, 2A, and 2B of the Notes to Consolidated Financial Statements.)
REENGINEERING STUDY. The Company is undertaking a major project to reengineer
its business processes with the goal of increasing efficiency, responsiveness to
customer needs, and cost effectiveness. The project commenced in September 1994
and is expected to continue for at least two years.
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
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 November and April. 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 $131 million of
which North Shore Gas may borrow up to $30 million. At September 30, 1994, the
Company and North Shore Gas had unused credit available from banks of
approximately $130 million. (See Note 11 of the Notes to Consolidated Financial
Statements.)
-15-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION (Continued)
CASH FLOW ACTIVITIES. Net cash provided by operating activities in 1994
increased by approximately $70.7 million, due mainly to increases related to net
receivables and rate adjustments recoverable or refundable. Such items were
partially offset by decreases associated with deferred credits and accounts
payable. In 1993, net cash provided by operating activities increased by
$13.9 million, due primarily to increases related to deferred credits, deferred
charges, rate adjustments recoverable or refundable, accounts payable, and
accrued taxes. These increases were offset in part by a decrease associated with
net receivables.
Net cash used in investing activities for 1994, 1993, and 1992 mainly
represents the level of capital expenditures in the respective years.
Net cash used in financing activities in 1994 reflects the new debt issues
during the year, primarily used for construction activities. In 1993, net cash
provided by financing activities reflects the debt issuance during the period,
primarily to refund previously issued debt and preferred stock.
INTEREST COVERAGE. Coverage ratios for the Company's fixed charges for fiscal
1994, 1993, and 1992 were 3.28, 3.57, and 3.18, respectively. The current fiscal
year ratio reflects the recording of the fiscal 1994 portion of an IRS
settlement in income. (See Note 7 of the Notes to Consolidated Financial
Statements.) The 1993 ratio includes the effect of the rate increase granted in
October 1992 as well as decreased fixed charges, partially offset by increased
operating expenses.
DEBT RATINGS. The long-term debt of the Company is rated Aa3 by Moody's
Investors Service and AA- by Standard and Poor's Corporation. There has been no
change in these ratings since fiscal 1985. The commercial paper of the Company
has the top rating from the major rating agencies. On October 24, 1994, Standard
and Poor's Corporation affirmed its ratings of the Company's long-term debt and
commercial paper but changed its ratings outlook for the Company to "negative"
from "stable."
ENVIRONMENTAL MATTERS. The Company is conducting environmental investigations
and work at certain sites that were the location of former manufactured gas
operations. (See Note 3 of the Notes to Consolidated Financial Statements.)
REGULATORY ACTIONS. On October 6, 1992, the Commission issued an order
approving changes in rates of the Company that were designed to increase annual
revenues by approximately $30.6 million, exclusive of additional charges for
revenue taxes. (See Note 2A of the Notes to Consolidated Financial Statements.)
In addition, the order approved a rate mechanism by which the Company will
recover costs associated with environmental activities, relating to past
manufactured gas operations. (See Note 3 of the Notes to Consolidated Financial
Statements.)
-16-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION (Continued)
On September 30, 1992, the Commission issued an order in its consolidated
proceedings, initiated in March 1991, regarding the appropriate ratemaking
treatment of environmental costs relating to past manufactured gas operations
incurred by Illinois utilities, including the Company and North Shore Gas. In
its order, the Commission approved rate recovery of such environmental costs but
required that the recovery occur over a five-year period without recovery of
carrying charges on unrecovered balances. The Commission's order is on appeal
before the Illinois Supreme Court. (See Note 2A of the Notes to Consolidated
Financial Statements.)
The Company filed proposed changes in rates with the Commission in December
1994. (See Item 1. Business - State Legislation and Regulation of this report.)
CAPITAL RESOURCES
CAPITAL SPENDING. Capital expenditures for additions, replacements, and
improvements to the utility plant were $74.6 million in 1994, $108.9 million in
1993, and $92.1 million in 1992.
The decline in fiscal 1994 expenditures from 1993 was partly the result of
completing certain major projects that were undertaken to enhance gas supply.
The current year amount reflects a level consistent with the financial goals of
the Company and maintains system safety. Expenditures in 1994 included $9.0
million for the third year of the four-year program to enhance the peak-day
withdrawal capability at the Manlove Field underground storage site.
Expenditures for that project in fiscal 1993 and 1992 amounted to $10.7 million
and $4.0 million, respectively.
Additional expenditures in fiscal 1993 included $7.7 million for a
liquefied natural gas vaporizer replacement project at Manlove Field. Fiscal
1992 expenditures included $5.0 million for the purchase and installation of
high-tech meter-reading devices.
Capital expenditures for fiscal 1995 are expected to be about
$81.6 million, an increase of $7.0 million from the 1994 level. Estimated
expenditures in 1995 include the continuation of the cast iron main replacement
program, $10.4 million for computer and office equipment, and $1.3 million to
complete the underground storage site enhancement.
The Company anticipates that future cash needs for capital expenditures and
sinking fund requirements and 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 equity or first mortgage bonds.
BONDS ISSUED. On December 22, 1993, the City of Chicago issued $102 million, in
aggregate principal amount, of gas supply revenue bonds, which were
collateralized by an equal amount of the Company's 30-year first mortgage bonds.
The proceeds were lent to the Company for the purpose of financing the
construction of certain facilities within the City. (See Note 12A of the Notes
to Consolidated Financial Statements.)
Additional bonds are issuable by the Company, upon approval by the
Commission, subject to limitations imposed by certain restrictive provisions of
the subsidiaries' open-end mortgages and supplements thereto. These restrictions
are not expected to have an impact on the Company's ability to issue additional
debt, as needed.
-17-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
----
Statement of Management's Responsibility 19
Report of Independent Public Accountants 20
Consolidated Statements of Income for fiscal years ended
September 30, 1994, 1993, and 1992 21
Consolidated Statements of Retained Earnings for fiscal
years ended September 30, 1994, 1993, and 1992 21
Consolidated Balance Sheets as of September 30, 1994 and 1993 22
Consolidated Capitalization Statements as of September 30, 1994
and 1993 23
Consolidated Statements of Cash Flows for fiscal years ended
September 30, 1994, 1993, and 1992 24
Notes to Consolidated Financial Statements 25
-18-
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 their 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 their audit were valid and
appropriate.
The Audit Committee of the Board of Directors of Peoples Energy, comprised
of six 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.
-19-
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 as of
September 30, 1994 and 1993, and the related consolidated statements of income,
retained earnings, and cash flows for each of the three years in the period
ended September 30, 1994. These financial statements and the schedules referred
to below are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedules 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 as of September 30, 1994 and 1993, and the results of their operations
and cash flows for each of the three years in the period ended
September 30, 1994, 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 schedules listed
in Item 14(a)2 are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial statements.
These financial statement schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly state, in all material respects, the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois
November 2, 1994
-20-
CONSOLIDATED STATEMENTS OF INCOME
The Peoples Gas Light and Coke Company
- ----------------------------------------------------------------------------------------------------------
For fiscal years ended September 30, 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------
(Thousands)
Operating Revenues:
Gas sales $ 995,048 $ 979,705 $830,015
Transportation of customer-owned gas 98,943 106,198 122,326
Other 17,181 15,517 14,366
- ----------------------------------------------------------------------------------------------------------
Total Operating Revenues 1,111,172 1,101,420 966,707
- ----------------------------------------------------------------------------------------------------------
Operating Expenses:
Gas costs 566,903 555,256 463,221
Operation 196,045 188,742 167,937
Maintenance 34,883 32,420 33,817
Depreciation 57,824 54,615 51,541
Taxes - Income 27,413 32,951 29,052
- State and local revenue 121,773 121,051 109,053
- Other 18,434 18,492 18,049
- ----------------------------------------------------------------------------------------------------------
Total Operating Expenses 1,023,275 1,003,527 872,670
- ----------------------------------------------------------------------------------------------------------
Operating Income 87,897 97,893 94,037
- ----------------------------------------------------------------------------------------------------------
Other Income:
Interest income 4,549 1,402 3,317
Miscellaneous (see Note 9) 12,867 3,071 1,995
- ----------------------------------------------------------------------------------------------------------
Total Other Income 17,416 4,473 5,312
- ----------------------------------------------------------------------------------------------------------
Gross Income 105,313 102,366 99,349
- ----------------------------------------------------------------------------------------------------------
Income Deductions:
Interest on long-term debt 38,029 34,907 36,026
Other interest 2,634 2,408 3,654
Amortization of debt discount and expense 689 616 667
Miscellaneous 136 80 56
- ----------------------------------------------------------------------------------------------------------
Total Income Deductions 41,488 38,011 40,403
- ----------------------------------------------------------------------------------------------------------
Net Income 63,825 64,355 58,946
- ----------------------------------------------------------------------------------------------------------
Preferred stock dividends -- 718 1,218
Net Income Applicable to Common Stock $ 63,825 $ 63,637 $ 57,728
- ----------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
The Peoples Gas Light and Coke Company
- ----------------------------------------------------------------------------------------------------------
For fiscal years ended September 30, 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------
(Thousands)
Balance at Beginning of Year $ 357,686 $ 349,558 $302,005
Add - Net Income 63,825 64,355 58,946
Deduct - Dividends declared on common stock 55,343 55,095 10,175
- Dividends declared on preferred stock -- 718 1,218
- Preferred stock redemption premiums -- 414 --
- ----------------------------------------------------------------------------------------------------------
Balance at End of Year $ 366,168 $ 357,686 $349,558
- ----------------------------------------------------------------------------------------------------------
The Notes to Consolidated Financial Statements are an integral part of these
statements.
-21-
CONSOLIDATED BALANCE SHEETS
The Peoples Gas Light and Coke Company
- ---------------------------------------------------------------------------------------------------------
As of September 30, 1994 1993
- ---------------------------------------------------------------------------------------------------------
(Thousands)
PROPERTIES AND OTHER ASSETS
- ---------------------------------------------------------------------------------------------------------
Capital Investments:
Property, plant and equipment, at original cost $1,760,004 $1,702,401
Less - Accumulated depreciation 596,808 557,855
- ---------------------------------------------------------------------------------------------------------
Net property, plant and equipment 1,163,196 1,144,546
Other investments 6,235 8,295
- ---------------------------------------------------------------------------------------------------------
Total Capital Investments - Net 1,169,431 1,152,841
- ---------------------------------------------------------------------------------------------------------
Current Assets:
Cash 3,173 7,909
Cash equivalents 54,935 --
Other temporary cash investments, at cost
that approximates market value 600 600
Trust fund, utility construction 31,493 --
Receivables -
Customers, net of allowance for uncollectible
accounts of $23,400 and $18,934, respectively 68,786 75,382
Other 3,377 28,274
Accrued unbilled revenues 17,561 26,199
Materials and supplies, at average cost 21,564 23,673
Gas in storage, at last-in, first-out cost 123,584 119,654
Gas costs recoverable through rate adjustments 12,024 43,047
Prepayments 1,649 2,018
- ---------------------------------------------------------------------------------------------------------
Total Current Assets 338,746 326,756
- ---------------------------------------------------------------------------------------------------------
Deferred Charges (see Note 13) 40,615 26,510
- ---------------------------------------------------------------------------------------------------------
Total Properties and Other Assets $1,548,792 $1,506,107
- ---------------------------------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES
- ---------------------------------------------------------------------------------------------------------
Capitalization (see Consolidated Capitalization Statements) $1,080,625 $ 970,143
- ---------------------------------------------------------------------------------------------------------
Current Liabilities:
Interim loans 900 63,200
Accounts payable 95,027 101,682
Dividends payable on common stock 13,898 14,146
Customer gas service and credit deposits 39,543 38,493
Sinking fund payments and maturities, due within one year -
Redeemable cumulative preferred stock -- 3,400
Accrued taxes 26,691 25,249
Gas sales revenue refundable through rate adjustments 41,167 7,262
Accrued interest 10,204 8,271
- ---------------------------------------------------------------------------------------------------------
Total Current Liabilities 227,430 261,703
- ---------------------------------------------------------------------------------------------------------
Reserves and Deferred Credits:
Deferred income taxes - primarily accelerated depreciation 176,416 180,882
Investment tax credits being amortized over
the average lives of related property 35,836 37,478
Other 28,485 55,901
- ---------------------------------------------------------------------------------------------------------
Total Reserves and Deferred Credits 240,737 274,261
- ---------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $1,548,792 $1,506,107
- ---------------------------------------------------------------------------------------------------------
The Notes to Consolidated Financial Statements are an integral part of these
statements.
-22-
CONSOLIDATED CAPITALIZATION STATEMENTS
The Peoples Gas Light and Coke Company
- ---------------------------------------------------------------------------------------------------------
As of September 30, 1994 1993
- ---------------------------------------------------------------------------------------------------------
(Thousands Of Dollars)
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) 366,168 357,686
- ---------------------------------------------------------------------------------------------------------
Total Common Stockholder's Equity 531,475 522,993
- ---------------------------------------------------------------------------------------------------------
Long-Term Debt:
Exclusive of sinking fund payments and maturities
due within one year
First and Refunding Mortgage Bonds -
8% Series U, due June 1, 1999 43,375 43,375
8% Series V, due June 1, 1999 43,375 43,375
Adjustable-Rate Series W (3% and 3.30% through
September 30, 1994 and September 30, 1993, respectively),
due October 1, 1999 10,400 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
10-1/4% Series AA, 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 --
Adjustable-Rate Series EE (2.55% through
November 30, 1994), due December 1, 2023 27,000 --
- ---------------------------------------------------------------------------------------------------------
Total Long-Term Debt 549,150 447,150
- ---------------------------------------------------------------------------------------------------------
Total Capitalization $1,080,625 $970,143
- ---------------------------------------------------------------------------------------------------------
The Notes to Consolidated Financial Statements are an integral part of these
statements.
-23-
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Peoples Gas Light and Coke Company
- ----------------------------------------------------------------------------------------------------------
For fiscal years ended September 30, 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------
(Thousands)
OPERATING ACTIVITIES:
Net Income $ 63,825 $ 64,355 $ 58,946
Adjustments to reconcile net income to net cash:
Depreciation 57,824 54,615 51,541
Deferred income taxes and investment tax
credits - net (11,894) 7,616 14,905
Change in other deferred credits and reserves (21,630) 25,623 13,770
Change in deferred charges (14,105) (333) (10,389)
Other 36 56 195
- ----------------------------------------------------------------------------------------------------------
74,056 151,932 128,968
Change in current assets and liabilities:
Receivables - net 31,493 (46,401) 1,059
Accrued unbilled revenues 8,638 (5,726) 1,895
Materials and supplies 2,109 1,409 (2,925)
Gas in storage (3,930) (2,988) (5,268)
Rate adjustments recoverable or refundable 64,928 (20,596) (42,086)
Accounts payable (6,584) 23,099 12,111
Customer gas service and credit deposits 1,050 (5,062) (3,300)
Accrued taxes 1,442 9,176 1,018
Accrued interest 1,933 245 (445)
Other 369 (272) (78)
- ----------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 175,504 104,816 90,949
- ----------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Capital expenditures - construction (74,623) (108,863) (92,052)
Other assets (1,850) (3,792) (2,246)
Other temporary cash investments -- (200) 100
Other capital investments 2,023 993 1,050
- ----------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (74,450) (111,862) (93,148)
- ----------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Retirement of long-term debt -- (63,245) (31,571)
Redemption of preferred stock (3,400) (11,814) (3,900)
Interim loans - net (62,300) 54,300 8,000
Issuance of long-term debt 102,000 75,000 --
Trust fund, utility construction (31,493) -- --
Dividends paid on preferred stock (71) (949) (1,299)
Dividends paid on common stock (55,591) (51,124) (14,146)
- ----------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Financing Activities (50,855) 2,168 (42,916)
- ----------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 50,199 (4,878) (45,115)
Cash and Cash Equivalents at Beginning of Year 7,909 12,787 57,902
- ----------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 58,108 $ 7,909 $ 12,787
- ----------------------------------------------------------------------------------------------------------
The Notes to Consolidated Financial Statements are an integral part of these
statements.
-24-
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 1994 have been reclassified
to conform with the current-year presentation.
1B Concentration of Credit Risk
The Company provides natural gas service to approximately 842,000 customers
within the City of Chicago. 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, which 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, where indicated, to minimize uncollectible write-offs.
1C Revenue Recognition
Gas sales revenues for retail customers 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.
1D Property, Plant and Equipment
Property, plant and equipment is stated at original cost and includes
appropriate amounts of payroll taxes, employee benefit costs, administrative
costs, and an allowance for funds used during construction.
1E 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.
-25-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The provision for depreciation, expressed as an annual percentage of
original cost of depreciable property, is as follows:
For fiscal years ended September 30, 1994 1993 1992
------------------------------------ ----- ----- -----
Provision for depreciation 3.6% 3.6% 3.6%
1F 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, 1994 1993 1992
------------------------------------ ----- ----- -----
(Thousands)
Income taxes paid $42,670 $22,213 $15,500
Interest paid 38,353 36,912 38,712
1G Income Taxes
The recording of deferred income taxes results from the use of accelerated
depreciation methods and certain other timing differences in recognition of
income and expense for tax and financial statement purposes.
Investment tax credits have been deferred and are being amortized through
credits to income over the book lives of related property.
In March 1993, the Company adopted, effective October 1, 1992, the
liability method of accounting for deferred income taxes required by SFAS No.
109, "Accounting for 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 to reflect the adoption of SFAS No.
109 are, in turn, debited or credited to regulatory assets or liabilities. Such
adjustments had no material impact on financial position or results of
operations of the Company. (See Note 7.)
The preceding deferred-tax and tax-credit accounting conforms with
regulations of the Commission.
-26-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1H Recovery of Gas Costs, Including Charges for Transition Costs
Under the tariffs of the Company, the difference for any fiscal year
between costs recoverable through the Gas Charge and revenues billed to
customers under the Gas Charge is refunded or recovered over a 12-month billing
cycle beginning the following January 1. 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), and the
fiscal year-end balance is amortized over the 12-month period beginning the
following January 1.
The Commission conducts annual proceedings regarding, for each gas utility,
the reconciliation of revenues from the Gas Charge and related costs incurred
for gas. In such proceedings, costs recovered by a utility through the Gas
Charge are subject to challenge. Such proceedings regarding the Company for
fiscal years 1992 through 1994 are currently pending before the Commission.
Pursuant to FERC Order No. 636 and successor orders, pipelines are allowed
to recover from their customers so-called transition costs. These costs arise
from the restructuring of pipeline service obligations required by the 636
Orders. The Company is currently recovering pipeline charges for transition
costs through an existing provision of the Gas Charge. The Commission entered an
order on March 9, 1994, providing for the full recovery of all such charges from
customers. In September 1994, the Commission entered orders on rehearing that
retained the provision for full recovery from customers. (See Notes 2A and 2B.)
1I Gas in Storage
Storage injections are priced at the fiscal-year average of costs of
natural gas purchased and synthetic natural gas (SNG) produced. The Company's
SNG production costs include costs of feedstock plus plant operation and
maintenance costs. 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, 1994 and 1993, exceeded the LIFO cost by approximately
$175 million and $217 million, respectively.
2. RATES AND REGULATION
2A Utility Rate Proceedings
RATE ORDER. On October 6, 1992, the Commission issued an order approving
changes in the rates of the Company that were designed to increase annual
revenues by approximately $30.6 million, exclusive of additional charges for
revenue taxes. The new rates were implemented on October 10, 1992. The Company
was allowed a 10.40 percent return on its original-cost rate base, reflecting a
12.25 percent cost of common equity. The Commission's order also approved a rate
mechanism by which the Company will recover costs associated with environmental
activities, relating to past manufactured gas operations (see discussion below).
The Company and several parties appealed the Commission's order to the Illinois
Appellate Court. In August 1994, the Illinois Appellate Court dismissed the
appeal. That dismissal is now final and non-appealable.
-27-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ENVIRONMENTAL COST RECOVERY. On September 30, 1992, the Commission issued an
order in its consolidated proceedings, initiated in March 1991, regarding the
appropriate ratemaking treatment of environmental costs relating to past
manufactured gas operations incurred by Illinois utilities, including the
Company and North Shore Gas, in connection with the investigation and treatment
of residues associated with past manufactured gas operations ("environmental
costs"). In its order, the Commission approved rate recovery of such
environmental costs but required that the recovery occur over a five-year period
without recovery of carrying charges on unrecovered balances. Reimbursements of
environmental costs from insurance carriers or other entities are to be netted
against costs and reflected in rates over a five-year period. In November 1992,
several parties, including the Company and North Shore Gas, appealed the
Commission's order to the Illinois Appellate Court. On December 29, 1993, the
Third District Appellate Court issued its opinion affirming the Commission's
order in the consolidated proceedings. On April 6, 1994, the Illinois Supreme
Court allowed an appeal of the Appellate Court's decision. Any change made
pursuant to the Supreme Court's order on appeal would have a prospective effect
only.
FERC ORDER NO. 636 COST RECOVERY. On September 15, 1993, the Commission entered
an order initiating an investigation into the appropriate means of recovery by
Illinois gas utilities of pipeline charges for FERC Order No. 636 transition
costs. The Commission issued a final order in this proceeding on March 9, 1994.
The order provides for the full recovery of transition costs from the Company's
gas service customers and transportation customers to the extent they contract
for firm standby service. The Citizens Utility Board and State's Attorney of
Cook County filed an application for rehearing of the March 9 order with the
Commission. On May 4, 1994, the Commission granted rehearing, limited to the
question of the allocation of transition costs. In September 1994, the
Commission entered orders on rehearing. In its orders on rehearing, the
Commission continued to provide for full recovery of transition costs, but
directed that, effective November 1, 1994, gas supply realignment (GSR) costs
(one of the four categories of transition costs) be recovered on a uniform
volumetric basis from all transportation and sales customers. (See Notes 1H and
2B.)
2B FERC Orders 636, 636-A, and 636-B
In 1992, the FERC issued Order Nos. 636, 636-A, and 636-B. There are
numerous appeals of the 636 Orders pending before the Federal Circuit Court of
Appeal for the D.C. Circuit.
The 636 Orders require substantial restructuring of the service obligations
of interstate pipelines. Among other things, the 636 Orders mandated
"unbundling" of existing pipeline gas sales services. Mandatory unbundling
requires pipelines to sell separately the various components of their gas sales
services (gathering, transportation and storage services, and gas supply). These
components were previously combined or "bundled" in gas services such as those
purchased by the Company. To address concerns raised by utilities about
reliability of service to their service territories, the 636 Orders required
pipelines to offer a "no-notice" transportation service under which firm
transporters can receive delivery of gas up to their contractual capacity level
on any day without prior scheduling. Further, the 636 Orders provided for
mechanisms for pipelines to recover prudently incurred transition costs
associated with the restructuring process.
-28-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The FERC initiated individual restructuring proceedings for each interstate
pipeline. Each pipeline submitted a proposal to bring it into compliance with
the requirements of the 636 Orders. The restructured tariffs of Natural Gas
Pipeline Company of America (Natural), the principal pipeline serving the
Company, went into effect December 1, 1993. The restructured tariffs of other
pipelines serving the Company had previously gone into effect. Several appeals
of the orders approving Natural's and other pipelines' restructured tariffs are
pending before the Federal Circuit Court of Appeal for the D.C. Circuit.
As part of the restructuring process, the Company elected necessary levels
of restructured services, including no-notice services, from the menu of
restructured services offered by the various pipelines. Also during 1993, the
Company took the steps necessary to obtain reliable gas supply as a replacement
for the bundled merchant service supply which was no longer available from the
interstate pipelines to any significant extent.
Under the 636 Orders, pipelines must make separate rate filings to recover
transition costs. There are four categories of such costs, the largest of which
for the Company is GSR costs. The Company is subject to charges for transition
cost recovery by Natural. Charges for transition costs commenced on
January 1, 1994. Appropriate accruals for transition costs have been recorded.
The Company is currently recovering transition costs through the Gas Charge. On
September 29, 1994, the FERC approved a Stipulation and Agreement (Agreement)
filed by Natural. The Agreement places a cap of approximately $103 million on
the amount of GSR costs recoverable by Natural from the Company.
The 636 Orders are not expected to have a material adverse effect on
financial position or results of operations of the Company. (See Notes 1H and
2A.)
3. ENVIRONMENTAL MATTERS
The Company, its predecessors, and certain former affiliates operated
facilities in the past for manufacturing gas and storing manufactured gas. 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, if found at the sites.
The current owner of a site in McCook, Illinois, near Chicago, has advised
the Company that the owner has found what appear to be wastes associated with
by-products of the gas manufacturing process under its property. The owner has
asserted that these wastes are the responsibility of the Company. The Company is
currently evaluating this claim.
The Company, in cooperation with the IEPA, is conducting investigations of
certain sites (a total of 29) to determine whether remedial action might be
necessary. The investigations were initiated pursuant to an informal request by
the IEPA. To the best of the Company's knowledge, similar informal requests have
been made by the IEPA to other major Illinois gas and electric utilities. The
Company has engaged environmental consulting firms to assist in the Company's
investigations. At this time, except for the 110th Street Station site
(discussed below), it is not known what, if any, remedial action will be
necessary at the sites or, if necessary, what the cost of any such action would
be. As discussed below, the Company may conduct an RI/FS at the Pitney Court
Station and Division Street sites under the supervision of the IEPA. In
addition, the Company is conducting investigations under the supervision of the
IEPA at the 110th Street Station and Equitable Distribution Station sites.
-29-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In August 1988, the IEPA conducted an inspection at the Company's Division
Street property in Chicago. During the inspection, the IEPA and the Company took
several soil samples for laboratory analysis. The analysis of the samples
collected by the Company indicates the presence of certain substances within the
soil of the Division Street property that could be attributable to former
manufactured gas operations. The Company may conduct an RI/FS of the property
under the supervision of the IEPA.
The current owners of a site in Chicago, formerly called Pitney Court
Station, have advised the Company that they found what appear to be gas
manufacturing wastes underneath their property. The owners have demanded
monetary compensation from the Company because of the presence of such wastes.
The Company has rejected this demand, but may conduct an RI/FS of the site under
the supervision of the IEPA.
The Company has observed what appear to be gas purification wastes on a
site in Chicago, formerly called the 110th Street Station, and property
contiguous thereto. The Company has fenced the site and the contiguous property
and is conducting a study under the supervision of the IEPA to determine the
feasibility of a limited removal action.
The current owners at a site in Chicago, formerly called South Station,
have advised the Company that they have found what appear to be gas
manufacturing wastes underneath their property. The owners have demanded
monetary compensation from the Company because of the presence of such wastes.
The Company is currently evaluating this claim.
The Company recently became aware of a planned residential development at a
site in Chicago, formerly called the Equitable Distribution Station. The current
owners of the site and the Company have agreed that the Company should conduct a
preliminary investigation to determine whether gas manufacturing wastes are
present at the site.
The Company is accruing and deferring the costs it incurs in connection
with all of the sites, including related legal expenses, pending recovery
through rates or from insurance carriers or other entities. As of
September 30, 1994, the total of the costs deferred by the Company, net of
recoveries, was $10.3 million. This amount includes an estimate of the costs of
the investigations initiated at the request of the IEPA at the sites referred to
above. The amount also includes an estimate of the costs of remediation at the
110th Street Station site in Chicago, at the minimum amount of the current
estimated range of such costs. The costs of remediation at the other sites
cannot be determined until more is known about the nature and extent of
contamination and the remedial action, if any, to be required by the IEPA. 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 1938 and 1985 for costs incurred or to be
incurred by the Company in connection with former 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 as of September 30, 1994 have not been
reduced to reflect recoveries from insurance carriers.
-30-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 the sites
will not have a material adverse effect on financial position or results of
operations. The Company is authorized to recover the costs of environmental
activities relating to its former manufactured gas operations under rate
mechanisms approved by the Commission. As of September 30, 1994, the Company had
recovered $185,000 of such costs through rates. (See Note 2A for a discussion of
proceedings regarding the recovery of such costs through utility rates.)
4. GAS OVER-PRESSURE CONDITION
On January 17, 1992, an over-pressure condition occurred in the gas mains
of the Company serving an approximately one-square-mile area of the Near
Northwest Side of the City of Chicago. The over-pressure condition caused a
major explosion and numerous fires. The Company is aware of four deaths and 14
personal injuries allegedly resulting from the explosion and fires. The Company
also has been informed that damage occurred in an estimated 28 buildings. There
was also damage, such as broken windows, wall cracks, and water damage, to
additional buildings.
A number of lawsuits have been filed against the Company as a result of the
over-pressure condition. The lawsuits include wrongful-death claims and several
class actions that seek to certify as a class those persons who suffered bodily
harm and/or property damage. All of the suits allege negligence and seek
compensatory damages. Some of the lawsuits also seek punitive damages. These
suits have not quantified the alleged damages except for certain amounts that
are not material.
In January 1993, the National Transportation Safety Board (NTSB) completed
its report regarding its investigation of the over-pressure incident that
occurred on January 17, 1992. In its report, the NTSB stated that "the probable
cause of the over-pressure accident and the resulting losses was the failure of
Peoples Gas Light Coke Company to adequately train its gas operations section
employees in recognizing and correctly responding to abnormal situations, which
consequently led to the failure of the gas operations section crew to properly
monitor and control the pressure of the gas being supplied to the low-pressure
gas system during a routine inspection."
In June 1993, the Staff of the Illinois Commerce Commission (Commission
Staff) released its report concerning the over-pressure incident. In its
report, the Commission Staff concluded that employee error was the probable
cause of the over-pressurization. The report was critical of the Company's
training of its personnel in its gas operations section and of some of the
Company's practices at the time of the incident.
The Company strongly disagrees with the criticisms by the NTSB and the
Commission Staff of the training given by the Company to personnel in its gas
operations section. The Company also disagrees with some of the findings and
conclusions of the Commission Staff, including several of the Commission Staff's
findings and its theory, analysis, and conclusions pertaining to the probable
cause of the over-pressurization.
-31-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company carries substantial insurance coverage. If liability were
found on the part of the Company, management believes that any costs incurred
for damages will be adequately covered by insurance. However, the Company's
primary insurance carrier has asserted that under Illinois law, liability for
punitive damages is not insurable. The Company has advised the insurance
carrier that it disagrees and intends to assert all of its rights against the
carrier including its right to obtain recovery for punitive damages, if any.
Management is not aware of any conduct on its part or by employees of the
Company that would give rise to punitive damages under Illinois law.
Accordingly, management believes that the incident will not have a material
adverse effect on financial position or results of operations of the Company.
5. LONG-TERM LEASE
In March 1985, the Company sold its headquarters office building and
entered into a lease with an initial 10-year term and two five-year renewal
options at the market rate in effect at each option date. The Company is
accounting for this as an operating lease in accordance with SFAS No. 13,
"Accounting for Leases." The rental obligation consists of a base rent of
approximately $4.3 million per year and additional annual escalations based on
operating costs, taxes, and increases in the Consumer Price Index. Rental
expense under this arrangement was $6.1 million for each of the fiscal years
1994 and 1993.
In October 1993, the Company entered into a new 15-year lease to relocate
its headquarters office on or before March 1, 1995. Rental expense will be
comparable with the present lease.
6. EMPLOYEE BENEFITS
6A Pensions
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 a non-qualified pension plan that provides certain
employees with pension benefits in excess of qualified plan limits imposed by
federal tax law.
Net pension cost for all plans for fiscal 1994, 1993, and 1992 included the
following components:
- --------------------------------------------------------------------------------
1994 1993 1992
- --------------------------------------------------------------------------------
(Millions)
Service cost--benefits earned during year $14.7 $15.9 $13.2
Interest cost on projected benefit obligations 28.0 28.2 29.8
Actual return on plan assets (gain) loss (14.6) (53.6) (49.4)
Net amortization and deferral (23.7) 16.2 11.3
- --------------------------------------------------------------------------------
Net pension cost $ 4.4 $ 6.7 $ 4.9
- --------------------------------------------------------------------------------
-32-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The calculation of pension cost assumed a long-term rate of return on
assets of 7.5 percent for 1992 through 1994.
The following table shows the estimated funded status of the Company's
pension plans at September 30, 1994 and 1993:
- --------------------------------------------------------------------------------
1994 1993
- --------------------------------------------------------------------------------
(Millions)
Plan Assets at Market Value $500.3 $542.7
- --------------------------------------------------------------------------------
Actuarial present value of plan benefits:
Vested 311.2 331.7
Non-vested 35.9 44.0
- --------------------------------------------------------------------------------
Accumulated benefit obligation 347.1 375.7
Effect of projected future compensation increases 94.2 115.8
- --------------------------------------------------------------------------------
Projected Benefit Obligation 441.3 491.5
- --------------------------------------------------------------------------------
Excess of plan assets over projected benefit obligation 59.0 51.2
Less:
Unrecognized transition asset 29.6 32.3
Unrecognized prior service cost (5.3) (5.8)
Unrecognized net gain (loss) 36.4 35.3
- --------------------------------------------------------------------------------
Accrued Pension (Liability) Asset $ (1.7) $(10.6)
- --------------------------------------------------------------------------------
The projected benefit obligation was determined using a discount rate of
6.5 percent for 1994 and 5.75 percent for 1993, and assumed future compensation
increases of 5.0 percent for each year. Plan assets consist primarily of
marketable equity and fixed-income securities.
6B Postretirement Benefits Other Than Pensions
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 and funding requirements under federal law.
The Company adopted SFAS No. 106 effective October 1, 1993. SFAS No. 106
requires the accrual of the expected costs of such benefits during the
employees' years of service.
Net postretirement benefit cost for all plans for fiscal 1994 included the
following components:
- --------------------------------------------------------------------------------
1994
- --------------------------------------------------------------------------------
(Millions)
Service cost--benefits earned during year $ 2.8
Interest cost on projected benefit obligations 7.1
Actual return on plan assets (gain) loss (0.3)
Amortization of transition obligation 4.5
Net amortization and deferral (0.2)
- --------------------------------------------------------------------------------
Net postretirement benefit cost $13.9
- --------------------------------------------------------------------------------
-33-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The calculation of postretirement benefit cost assumed a long-term rate of
return on assets of 7.5 percent.
The Company recognized total postretirement costs of $13.9 million during
fiscal 1994. Of this amount, $7.7 million was funded through trust funds for
future benefit payments. Such costs during fiscal year 1993 were $16.1 million,
of which $9.9 million was funded.
In October 1992, the Company was granted rates by the Commission that
included its estimated postretirement benefit costs determined on the accrual
basis of accounting. (See Note 2A.) The financial reporting for postretirement
benefit costs of the Company is consistent with the related rate treatment. Due
to regulatory treatment, the adoption of SFAS No. 106 did not have a material
effect on financial position or results of operations.
The following table sets forth the estimated funded status for the
postretirement health care and life insurance plans at September 30, 1994:
- --------------------------------------------------------------------------------
1994
- --------------------------------------------------------------------------------
(Millions)
Plan Assets at Market Value $ 20.6
- --------------------------------------------------------------------------------
Accumulated postretirement benefit obligation (APBO):
Retirees 56.3
Fully Eligible Active Plan Participants 15.5
Other Active Plan Participants 26.8
- --------------------------------------------------------------------------------
Total APBO 98.6
- --------------------------------------------------------------------------------
APBO in excess of plan assets (78.0)
Less:
Unrecognized transition obligation (85.6)
Unrecognized net gain 7.3
- --------------------------------------------------------------------------------
Accrued Postretirement Benefit (Liability) Asset $ 0.3
- --------------------------------------------------------------------------------
The total APBO was determined using a discount rate of 7.75 percent and
assumed future compensation increases of 5.0 percent. The unfunded obligation
will be amortized over 20 years. Plan assets consist primarily of marketable
equity and fixed-income securities.
For measurement purposes, a health care cost trend rate of 10.25 percent
was assumed for fiscal 1995, and that rate thereafter will decline to 5.0
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, 1994, by $7.3 million and the aggregate of
service and interest cost components of the net periodic postretirement benefit
cost by $1.0 million annually.
-34-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6C Postemployment Benefits
In November 1992, the FASB issued SFAS No. 112. This statement requires the
accrual of certain benefits provided to former or inactive employees after
employment but before retirement. The Company adopted SFAS No. 112 effective
October 1, 1994. Implementation of this statement will not have a material
effect on financial position or results of operations.
7. TAX MATTERS
Provision for Income Taxes
- ----------------------------------------------------------------------------------------------------------
For fiscal years ended September 30, 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------
(Thousands)
Current:
Federal $32,308 $21,285 $11,771
State 7,133 4,138 2,459
- ----------------------------------------------------------------------------------------------------------
Total current income taxes 39,441 25,423 14,230
- ----------------------------------------------------------------------------------------------------------
Deferred:
Federal (6,665) 6,667 12,547
State (642) 2,348 3,591
- ----------------------------------------------------------------------------------------------------------
Total deferred income taxes (7,307) 9,015 16,138
- ----------------------------------------------------------------------------------------------------------
Investment tax credits - net:
Federal (1,823) (1,848) (1,595)
State 216 413 362
- ----------------------------------------------------------------------------------------------------------
Total investment tax credits - net (1,607) (1,435) (1,233)
- ----------------------------------------------------------------------------------------------------------
Total provision included in income taxes 30,527 33,003 29,135
Less - Included in other income or operation expense 3,114 52 83
- ----------------------------------------------------------------------------------------------------------
Total provision for income taxes $27,413 $32,951 $29,052
- ----------------------------------------------------------------------------------------------------------
-35-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
See Note 1G for discussion of the adoption of SFAS No. 109 effective
October 1, 1992. Set forth in the table below are the temporary differences
which gave rise to the net deferred income tax liabilities:
- --------------------------------------------------------------------------------
As of September 30, 1994 1993
- --------------------------------------------------------------------------------
(Thousands)
Deferred tax liabilities:
Property - accelerated depreciation and
other property related items $204,548 $197,068
Gas costs reconciliation -- 15,352
Other 4,361 3,003
- --------------------------------------------------------------------------------
Total deferred income tax liabilities 208,909 215,423
- --------------------------------------------------------------------------------
Deferred tax assets:
Unamortized investment tax credits (14,213) (14,882)
Uncollectible accounts (9,282) (7,513)
Other (8,998) (12,146)
- --------------------------------------------------------------------------------
Total deferred income tax assets (32,493) (34,541)
- --------------------------------------------------------------------------------
Net deferred income tax liabilities $176,416 $180,882
- --------------------------------------------------------------------------------
The sources of significant timing differences which gave rise to federal
deferred income taxes for the year prior to adoption of SFAS No. 109 was as
follows:
- --------------------------------------------------------------------------------
For fiscal year ended September 30, 1992
- --------------------------------------------------------------------------------
(Thousands)
Accelerated depreciation $ 4,479
Pension expense (1,435)
Gas costs reconciliation 8,792
Other 711
- --------------------------------------------------------------------------------
Total federal deferred income tax expense $12,547
- --------------------------------------------------------------------------------
The following is a reconciliation between the computed federal income tax
expense (tax rate of 35 percent for 1994, 34.75 percent for 1993, and 34 percent
for 1992, times pre-tax book income) and the total provision for federal income
tax expenses:
- --------------------------------------------------------------------------------------------------------------------------------
For fiscal years ended September 30, 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
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 $30,675 35.00 $31,434 34.75 $27,767 34.0
Amortization of investment
tax credits (1,823) (2.08) (1,848) (2.04) (1,595) (2.0)
Amortization of deferred taxes (1,360) (1.55) (1,589) (1.76) (1,864) (2.3)
Nontaxable-tax settlement principal (1,772) (2.02) -- -- -- --
Other, net (1,900) (2.17) (1,893) (2.09) (1,585) (1.9)
- --------------------------------------------------------------------------------------------------------------------------------
Total provision for federal
income taxes $23,820 27.18 $26,104 28.86 $22,723 27.8
- --------------------------------------------------------------------------------------------------------------------------------
-36-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
On September 30, 1993, the Company received notification from the IRS that
settlement of past income tax returns had been reached for fiscal years 1978
through 1990. The IRS settlement resulted in 1994 payments of principal and
interest to the Company in total amount of approximately $25 million, or
$19.4 million after income taxes. The Company has received regulatory
authorization to defer the recording of the settlement amount in income for
fiscal year 1993, and to record its portion of the settlement amount in income
for fiscal years 1994 and 1995. The Company has represented to the Commission
that, having received this accounting authorization, it will not file a request
for an increase in base rates before December 1994. The regulatory treatment of
the IRS settlement having been resolved in November 1993, the Company included
$12.7 million, or $9.7 million after income taxes, in income in 1994. The amount
after income taxes is included in Other Income - Miscellaneous. At September 30,
1994, approximately $12.7 million is included in Reserves and Deferred Credits -
Other. The Company will amortize its remaining portion of the settlement amount
in income in fiscal year 1995, the effect of which will be to offset increases
in costs that the utility will incur during that year.
8. 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.
9. OTHER INCOME - MISCELLANEOUS
For fiscal years ended September 30, 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------
(Thousands)
Amortization of net gain on sale of Peoples Gas Building $ 1,151 $1,151 $1,151
Interest on amounts recoverable from customers 2,083 1,361 --
Amortization of gain on reacquired bonds 321 321 592
Income tax settlement (see Note 7) 12,710 -- --
Income taxes on income tax settlement (see Note 7) (3,016) -- --
Other (382) 238 252
- ----------------------------------------------------------------------------------------------------------
Total Other Income - Miscellaneous $12,867 $3,071 $1,995
- ----------------------------------------------------------------------------------------------------------
10. CAPITAL COMMITMENTS
Total contract and purchase order commitments of the Company at
September 30, 1994, amounted to approximately $5.6 million.
-37-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. SHORT-TERM BORROWINGS AND CREDIT LINES
As of September 30, 1994 1993
- --------------------------------------------------------------------------------
(Thousands)
Bank Loans
Peoples Gas
7.75% due December 22, 1994 $ 900 $ --
- --------------------------------------------------------------------------------
Commercial Paper
Peoples Gas
due October 1, 1993,
through October 21, 1993 -- 63,200
North Shore Gas
due October 1, 1993,
through October 21, 1993 -- 5,400
- --------------------------------------------------------------------------------
Available Lines of Credit at End of Year
Unused bank lines $130,150 $46,400
- --------------------------------------------------------------------------------
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 and commercial
paper issuances cannot at any time exceed total bank credit then in effect.
On February 1, 1994, the Company reduced its lines of credit to
approximately $154 million from $184 million in effect since November 1, 1993.
North Shore Gas was authorized to borrow up to $20 million of the aggregate
$154 million. On July 1, 1994, the Company reduced its lines of credit to
approximately $131 million of which North Shore Gas may borrow up to
$30 million. Agreements covering $93.7 million of the total will expire on June
29, 1995. The agreement covering the remaining $37.4 million will expire on
January 31, 1997. 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. Payment for the lines of credit is
by fee.
12. LONG-TERM DEBT
12A Issuance of Bonds
On December 22, 1993, the City of Chicago issued $102 million, in aggregate
principal amount, of gas supply revenue bonds ($75 million 5-3/4 percent Series
A and $27 million adjustable-rate Series B), which were collateralized by an
equal amount of the Company's 30-year first mortgage bonds. The proceeds were
lent to the Company for the purpose of financing the construction of certain
facilities within the City. The proceeds are being held in a trust fund until
drawn down by the Company for reimbursement of construction expenditures.
In accordance with provisions of the Internal Revenue Code and regulations
thereunder, any arbitrage income must be paid to the federal government.
Additionally, all assets financed through this arrangement must be depreciated
on a straight-line basis for tax purposes.
-38-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12B Interest-Rate Adjustments
The rate of interest on the City of Joliet 1984 Series C Bonds, which are
secured by the Company's Adjustable-Rate Bonds, Series W, is subject to
adjustment annually on October 1. Owners of the Series C Bonds have the right to
tender such bonds at par during a limited period prior to that date. The Company
is obligated to purchase any such bonds tendered if they cannot be remarketed.
All Series C Bonds that were tendered prior to October 1, 1994, have been
remarketed. The interest rate on such bonds is 4.2 percent for the period
October 1, 1994, through September 30, 1995.
The rate of interest on the City of Chicago 1993 Series B Bonds, which are
secured by the Company's Adjustable-Rate Bonds, Series EE, currently 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 2.55 percent for the period
December 1, 1993, through November 30, 1994.
12C Fair Value of Financial Instruments
The estimated fair value of the Company's $549.2 million carrying amount of
long-term debt approximated $585.7 million as of September 30, 1994. As of
September 30, 1993, the estimated fair value of the Company's $447.2 million
carrying amount of long-term debt approximated $478.7 million. The estimated
fair value of the Company's long-term debt is based on quoted market prices or
yields for issues with similar terms and remaining maturities. The carrying
amount of all other financial instruments approximates fair value.
13. DEFERRED CHARGES
As of September 30, 1994 1993
- ------------------------------------------------------------------------------------------------
(Thousands)
Debt expense being amortized over the lives of outstanding issues $11,458 $10,427
Energy Conservation Plan expenses 865 923
Environmental costs, net of recoveries 10,294 9,867
Clearing accounts, primarily applicable to construction projects 914 563
Interest on gas sales revenue refundable 2,407 374
Recoverable gas over-pressure condition costs 2,193 3,426
Transition gas costs from pipeline supplier 9,100 --
Other 3,384 930
- ------------------------------------------------------------------------------------------------
Total Deferred Charges $40,615 $26,510
- ------------------------------------------------------------------------------------------------
-39-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
The fluctuation in quarterly results is primarily due to the seasonal
nature of the gas distribution business. Results for the first quarter of fiscal
1994 include the recording of one-half of an IRS settlement, in income,
increasing net income by $9.6 million.
Net Income
Operating Operating Applicable to
Fiscal Quarters Revenues Income Common Stock
- --------------------------------------------------------------------------------
(Thousands)
1994
Fourth $104,565 $(6,365) $(14,123)
Third 181,164 10,020 1,979
Second 495,246 50,895 41,976
First 330,197 33,347 33,993
1993
Fourth $119,940 $(3,813) $(12,221)
Third 196,970 12,785 4,708
Second 455,612 52,297 43,550
First 328,898 36,624 27,600
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
-40-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
IDENTIFICATION OF DIRECTORS
Company
Name, Principal Occupation, Age at Directorship
and Other Directorships 11-30-94 Since
- --------------------------------------------------- -------- ------------
Kenneth S. Balaskovits 52 1993
Vice President and Controller
of the Company, Peoples Energy,
and North Shore Gas; Director of North Shore Gas.
J. Bruce Hasch 56 1986
President and Chief Operating Officer of
the Company, Peoples Energy, and North Shore Gas;
Director of Peoples Energy and North Shore Gas.
James Hinchliff 54 1985
Senior Vice President and General Counsel
of the Company, Peoples Energy,
and North Shore Gas; Director of North Shore Gas.
Michael S. Reeves 59 1988
Executive Vice President of the Company,
Peoples Energy, and North Shore Gas;
Director of Peoples Energy and North Shore Gas.
Richard E. Terry 57 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 Harris Bankcorp, Inc., Harris Trust
and Savings Bank, and Amsted Industries.
-41-
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY (Continued)
IDENTIFICATION OF EXECUTIVE OFFICERS
Position at Age at Position
Name November 30, 1994 11-30-94 Held Since
- ---------------------- ----------------------------- -------- ----------
Kenneth S. Balaskovits Vice President and Controller 52 1993
Frank H. Blackmore Vice President 59 1989
Emmet P. Cassidy Secretary and Treasurer 61 1989
Patrick J. Doyle Vice President 57 1985
Joan T. Gagen Vice President 43 1994
J. Bruce Hasch President and Chief Operating 56 1990
Officer
James Hinchliff Senior Vice President and 54 1989
General Counsel
John C. Ibach Vice President 47 1992
Thomas J. O'Sullivan Division Vice President 52 1992
Thomas M. Patrick Vice President 48 1989
James D. Pitts, Jr. Vice President 56 1989
Michael S. Reeves Executive Vice President 59 1987
Norman F. Sidler, Jr. Division Vice President 55 1991
Richard E. Terry Chairman of the Board and 57 1990
Chief Executive Officer
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 Messrs. O'Sullivan and Sidler, 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 10 years.
-42-
ITEM 11. EXECUTIVE COMPENSATION
The following tables set forth information concerning annual and long-term
compensation and grants of stock options, stock appreciation rights 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.
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards
------------------- ----------------------
Restricted All Other
Stock Options/ Compen-
Name and Awards(1)(2) SARs sation(3)
Principal Position Year Salary($) Bonus($) ($) (#) ($)
- ------------------------ ---- --------- -------- ------------ -------- ---------
Richard E. Terry 1994 $421,250 $117,100 $113,281 14,400 $12,638
Chairman and 1993 415,000 30,400 110,413 14,600 12,277
Chief Executive Officer 1992 375,000 0 113,944 17,800 11,272
J. Bruce Hasch 1994 304,500 75,300 73,438 9,400 9,135
President and 1993 300,000 19,600 71,844 9,600 9,324
Chief Operating Officer 1992 271,500 0 74,031 11,600 8,688
Michael S. Reeves 1994 229,500 47,800 47,656 6,200 6,885
Executive Vice 1993 226,100 12,400 46,131 6,200 6,783
President 1992 217,400 0 47,638 7,400 6,522
James Hinchliff 1994 229,500 47,800 47,656 6,200 6,885
Senior Vice President 1993 226,100 12,400 46,131 6,200 6,783
and General Counsel 1992 217,400 0 47,638 7,400 6,522
Patrick J. Doyle, Jr. 1994 179,050 29,600 29,688 3,800 5,372
Vice President 1993 176,400 7,700 29,494 4,000 5,292
1992 168,400 0 30,256 4,800 5,052
<FN>
(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, 1994 were as follows: Mr. Terry, 11,080 shares, valued at
$290,850; Mr. Hasch, 7,190 shares, valued at $188,738; Mr. Reeves, 5,070
shares, valued at $133,088; Mr. Hinchliff, 5,070 shares, valued at
$133,088; and Mr. Doyle, 2,955 shares, valued at $77,569. 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 $26.25, the closing price of Peoples
Energy's stock on the New York Stock Exchange on September 30, 1994.
-43-
ITEM 11. EXECUTIVE COMPENSATION (Continued)
(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 Outside Directors Committee)
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 1992 constitutes
12,175 shares, of which 2,435 shares vested in 1993; 2,435 shares vested in
1994; 2,435 shares will vest in 1995; 2,435 shares will vest in 1996; and
the remaining 2,435 shares will vest in 1997. Total restricted stock
awarded to the named individuals for 1993 constitutes 10,050 shares, of
which 2,010 shares vested in 1994; 2,010 shares will vest in 1995; 2,010
shares will vest in 1996; 2,010 shares will vest in 1997; and the remaining
2,010 shares will vest in 1998. Total restricted stock awarded to the
named individuals for 1994 constitutes 9,975 shares, of which 1,995 shares
will vest in 1995; 1,995 shares will vest in 1996; 1,995 shares will vest
in 1997; 1,995 shares will vest in 1998; and the remaining 1,995 shares
will vest in 1999.
(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 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.
-44-
ITEM 11. EXECUTIVE COMPENSATION (Continued)
OPTIONS/SAR GRANTS IN FISCAL 1994
INDIVIDUAL GRANTS
% of Total
Options/SARs
Options/ Granted to Exercise Grant
SARs Employees or Base Date
Granted in Fiscal Price Expiration Present
Name (#)(1) Year (2) ($/Share) Date Value($)(3)
- ----------------- -------- ------------ --------- ---------- -----------
Richard E. Terry 14,400 14% $30.88 06-Oct-03 $57,168
Chairman and
Chief Executive
Officer
J. Bruce Hasch 9,400 9 30.88 06-Oct-03 37,318
President and
Chief Operating
Officer
Michael S. Reeves 6,200 6 30.88 06-Oct-03 24,614
Executive Vice
President
James Hinchliff 6,200 6 30.88 06-Oct-03 24,614
Senior Vice President
and General Counsel
Patrick J. Doyle, Jr. 3,800 4 30.88 06-Oct-03 15,086
Vice President
<FN>
(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 52,700 Options and 52,700 SARs granted to all employees during
fiscal 1994.
(3) Present value is determined using a variation of the Black-Scholes Model.
The model assumes: a) that Options and SARs are exercised two years after
the date of grant -- the average time Options and SARs were held by
recipients under Peoples Energy's 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) that no
adjustments were made for 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 an SAR ultimately depends on the market value of Peoples
Energy's stock at a future date.
-45-
ITEM 11. EXECUTIVE COMPENSATION (Continued)
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 1994
AND FISCAL YEAR-END OPTION/SAR VALUES
Number of Value of Unexercised In-
Unexercised Options/SARs the-Money Options/SARs at
at Fiscal Year-End(#) Fiscal Year-End ($)(1)
Shares --------------------------- ---------------------------
Acquired On Value
Name Exercise(#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------- ----------- ------------ ----------- ------------- ----------- -------------
Richard E. Terry 0 $0.00 14,600 14,400 $0.00 $0.00
Chairman and
Chief Executive
Officer
J. Bruce Hasch 0 0.00 9,600 9,400 0.00 0.00
President and
Chief Operating
Officer
Michael S. Reeves 0 0.00 6,200 6,200 0.00 0.00
Executive Vice
President
James Hinchliff 0 0.00 6,200 6,200 0.00 0.00
Senior Vice President
and General Counsel
Patrick J. Doyle, Jr. 0 0.00 4,000 3,800 0.00 0.00
Vice President
<FN>
(1) At the close of the fiscal year, none of the Options and SARs reported above were in-the-money.
-46-
ITEM 11. EXECUTIVE COMPENSATION (Continued)
PENSION PLAN TABLE
Years of Service
Average Annual --------------------------------------------------------
Compensation 20 25 30 35 40
- -------------- -------- -------- -------- -------- --------
$150,000 $ 55,351 $ 69,189 $ 83,027 $ 92,402 $101,777
200,000 75,351 94,189 113,027 125,527 138,027
250,000 95,351 119,189 143,027 158,652 174,277
300,000 115,351 144,189 173,027 191,777 210,527
350,000 135,351 169,189 203,027 224,902 246,777
400,000 155,351 194,189 233,027 258,027 283,027
450,000 175,351 219,189 263,027 291,152 319,277
500,000 195,351 244,189 293,027 324,277 355,527
550,000 215,351 269,189 323,027 357,402 391,777
600,000 235,351 294,189 353,027 390,527 428,027
650,000 255,351 319,189 383,027 423,652 464,277
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.
As of September 30, 1994, the credited years of retirement benefit service
for the individuals listed in the Summary Compensation Table were as follows:
Mr. Terry, 30 years; Mr. Hasch, 34 years; Mr. Reeves, 38 years; Mr. Hinchliff,
22 years; and Mr. Doyle, 30 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 unfunded pensions. The benefits shown give effect to these
supplemental pension benefits.
-47-
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of November 30, 1994, 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 122 South Michigan Avenue
par value Chicago, Illinois 60603 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, 1994, are as follows:
Shares of Peoples Energy
Common Stock Beneficially
Name Owned as of November 30, 1994 (1)
------------------------ ---------------------------------
Kenneth S. Balaskovits* 7,893 (2)(3)
Patrick J. Doyle, Jr. 12,223 (2)(3)
J. Bruce Hasch* 39,353 (2)(3)
James Hinchliff* 26,826 (2)(3)
Michael S. Reeves* 31,195 (2)(3)
Richard E. Terry* 55,298 (2)(3)
All directors and officers of the Company
as a group, including those named above
(14 in number) 262,279 (1)(2)(3)
<FN>
* Director of the Company
(1) The total of 262,279 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 in the table.
(2) Includes shares that the following have a right to acquire within 60 days
following November 30, 1994, through the exercise of stock options granted
under Peoples Energy's Long-Term Incentive Compensation Plan: Messrs.
Balaskovits, 3,100; Doyle, 3,900; Hasch, 9,500; Hinchliff, 6,200; Reeves,
6,200; Terry, 14,500; and all executive officers of the Company, as a
group, 85,700.
-48-
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(Continued)
(3) Includes shares of restricted stock awarded under Peoples Energy's Long-
Term Incentive Compensation Plan, the restrictions on which had not lapsed
as of November 30, 1994, as follows: Messrs. Balaskovits, 2,320; Doyle,
3,275; Hasch, 8,230; Hinchliff, 5,575; Reeves, 5,575; Terry, 13,425; and
all executive officers as a group, 43,170. 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.
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 1994, the Company furnished
general corporate services in the amount of $3,733,596 and support services in
the amount of $94,560 to Peoples Energy under the Agreement.
-49-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements: Page
----
See Part II, Item 8. 18
2. Financial Statement Schedules:
Schedule
Number
--------
V Property, Plant and Equipment, at Original Cost 51
VI Accumulated Provision for Depreciation of Property,
Plant and Equipment 52
VIII Valuation and Qualifying Accounts 53
IX Short-Term Borrowings 54
X Supplementary Income Statement Information 55
3. Exhibits:
See Exhibit Index on page 57.
(b) Reports on Form 8-K filed during the final quarter of fiscal year 1994:
None.
-50-
Schedule V
THE PEOPLES GAS LIGHT AND COKE COMPANY AND SUBSIDIARY COMPANIES
PROPERTY, PLANT AND EQUIPMENT, AT ORIGINAL COST
(Thousands)
Column A Column B Column C Column D Column E Column F
- ---------------------------------------------------- ------------ --------- ----------- --------- --------
Balance Transfers Balance
at beginning Additions between at end of
Classification of period at cost Retirements accounts period
- ---------------------------------------------------- ------------ --------- ----------- --------- --------
Public utility facilities: Fiscal Year Ended September 30, 1994
------------------------------------
Gas plant in service -
Production plant $ 120,438 $ 258 $ 4 $ -- $ 120,692
Storage plant 191,850 10,804 727 -- 201,927
Transmission plant 82,555 3,984 10 -- 86,529
Distribution plant 1,193,633 55,524 11,413 -- 1,237,744
General plant 85,089 10,067 4,805 -- 90,351
Gas plant leased to others 6,517 -- -- -- 6,517
Construction work in progress 14,421 (6,357) -- -- 8,064
Gas stored underground - non-current 7,329 282 -- -- 7,611
---------- -------- --------- ------ ----------
Total public utility facilities 1,701,832 74,562 16,959 0 1,759,435
Non-utility property 569 -- -- -- 569
---------- -------- --------- ------ ----------
Total property, plant and equipment, at original cost $1,702,401 $ 74,562 (a) $ 16,959 (b) $ 0 $1,760,004
---------- -------- --------- ------ ----------
---------- -------- --------- ------ ----------
Public utility facilities: Fiscal Year Ended September 30, 1993
------------------------------------
Gas plant in service -
Production plant $ 117,748 $ 224 $ 199 $2,665 $ 120,438
Storage plant 168,446 24,492 1,704 616 191,850
Transmission plant 83,262 178 12 (873) 82,555
Distribution plant 1,144,338 67,399 20,061 1,957 1,193,633
General plant 75,360 14,573 4,828 (16) 85,089
Gas plant leased to others 6,509 8 -- -- 6,517
Construction work in progress 12,804 1,617 -- -- 14,421
Gas stored underground - non-current 7,010 319 -- -- 7,329
---------- -------- --------- ------ ----------
Total public utility facilities 1,615,477 108,810 26,804 4,349 1,701,832
Non-utility property 569 -- -- -- 569
---------- -------- --------- ------ ----------
Total property, plant and equipment, at original cost $1,616,046 $108,810 (c) $ 26,804 (b) $4,349 (d) $1,702,401
---------- -------- --------- ------ ----------
---------- -------- --------- ------ ----------
Public utility facilities: Fiscal Year Ended September 30, 1992
------------------------------------
Gas plant in service -
Production plant $ 117,573 $ 302 $ 84 $ (43) $ 117,748
Storage plant 166,931 1,852 337 -- 168,446
Transmission plant 82,770 518 70 44 83,262
Distribution plant 1,085,100 74,886 15,618 (30) 1,144,338
General plant 70,450 8,490 3,598 18 75,360
Gas plant leased to others 6,509 -- -- -- 6,509
Construction work in progress 6,527 6,277 -- -- 12,804
Gas stored underground - non-current 7,010 -- -- -- 7,010
---------- -------- --------- ------ ----------
Total public utility facilities 1,542,870 92,325 19,707 (11) 1,615,477
Non-utility property 569 -- -- -- 569
---------- -------- --------- ------ ----------
Total property, plant and equipment, at original cost $1,543,439 $ 92,325 (e) $ 19,707 (b) $ (11)(f) $1,616,046
---------- -------- --------- ------ ----------
---------- -------- --------- ------ ----------
( ) Denotes red figure.
<FN>
Notes: (a) Includes construction expenditures of $74,623 less amortization of
capital lease of $61.
(b) Represents retirements charged to accumulated provision for
depreciation (Schedule VI)
(c) Includes construction expenditures of $108,864 less amortization of
capital lease of $54.
(d) Implementation of Statement of Financial Accounting Standards Number
109.
(e) Includes construction expenditures of $92,052 plus net capital lease
of $273.
(f) Represents amortization of Capital Lease for Oct. - Dec. 1991.
-51-
Schedule VI
THE PEOPLES GAS LIGHT AND COKE COMPANY AND SUBSIDIARY COMPANIES
ACCUMULATED PROVISION FOR DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
(Thousands)
Column A Column B Column C Column D Column E Column F
- -------------------------- ------------ ---------------------- ---------------------------------------- ------------- ---------
Additions charged to
costs and expenses (a) Deduct Retirements
---------------------- ----------------------------------------
Balance Retirement Stores and Balance
at beginning Depreciation Clearing of property Cost of miscellaneous at end of
Description of period expense accounts at cost dismantling (salvage) Other Charges period
- -------------------------- ------------ ------------ -------- ----------- ----------- ------------- ------------- ---------
Public utility facilities: Fiscal Year Ended September 30, 1994
------------------------------------
Gas plant in service -
Production plant $ 99,487 $ 2,806 $ -- $ 4 $ 11 $ -- $ -- $102,278
Storage plant 73,996 5,856 -- 727 93 (3) 3 79,038
Transmission plant 27,204 1,545 -- 10 44 -- (686) 28,009
Distribution plant 318,014 42,435 -- 11,413 6,134 (44) 926 343,872
General plant 32,339 5,182 3,173 4,805 3 (332) 572 36,790
-------- ------- ------ ------- ------ ------- ----- --------
Total gas plant in service 551,040 57,824 3,173 16,959 6,285 (379) 815 589,987
Gas plant leased to others 6,372 6 -- -- -- -- -- 6,378
-------- ------- ------ ------- ------ ------- ----- --------
Total public utility
facilities 557,412 57,830 3,173 16,959 6,285 (379) 815 596,365
Non-utility property 443 -- -- -- -- -- -- 443
-------- ------- ------ ------- ------ ------- ----- --------
Total accumulated provision
for depreciation $557,855 $57,830 $3,173 $16,959 $6,285 $ (379) $ 815 (b) $596,808
-------- ------- ------ ------- ------ ------ ----- --------
-------- ------- ------ ------- ------ ------ ----- --------
Public utility facilities: Fiscal Year Ended September 30, 1993
------------------------------------
Gas plant in service -
Production plant $ 94,670 $ 2,765 $ -- $ 199 $ 5 $ -- $2,256 $ 99,487
Storage plant 70,076 5,464 -- 1,704 176 -- 336 73,996
Transmission plant 25,516 1,519 -- 12 3 -- 184 27,204
Distribution plant 303,229 40,936 -- 20,061 6,464 (29) 345 318,014
General plant 29,234 3,931 3,637 4,828 7 (388) (16) 32,339
-------- ------- ------ ------- ------ ------- ----- --------
Total gas plant in service 522,725 54,615 3,637 26,804 6,655 (417) 3,105 551,040
Gas plant leased to others 6,372 -- -- -- -- -- -- 6,372
-------- ------- ------ ------- ------ ------- ----- --------
Total public utility
facilities 529,097 54,615 3,637 26,804 6,655 (417) 3,105 557,412
Non-utility property 443 -- -- -- -- -- -- 443
-------- ------- ------ ------- ------ ------- ----- --------
Total accumulated provision
for depreciation $529,540 $54,615 $3,637 $26,804 $6,655 $ (417) $3,105 (b) $557,855
-------- ------- ------ ------- ------ ------ ----- --------
-------- ------- ------ ------- ------ ------ ----- --------
Public utility facilities: Fiscal Year Ended September 30, 1992
------------------------------------
Gas plant in service -
Production plant $ 92,037 $ 2,704 $ -- $ 84 $ 1 $ (16) $ (2) $ 94,670
Storage plant 65,359 5,058 -- 337 4 -- -- 70,076
Transmission plant 24,083 1,523 -- 70 20 -- -- 25,516
Distribution plant 286,208 39,154 -- 15,618 6,685 (41) 129 303,229
General plant 25,187 3,102 3,572 3,598 4 (975) -- 29,234
-------- ------- ------ ------- ------ ------- ----- --------
Total gas plant in service 492,874 51,541 3,572 19,707 6,714 (1,032) 127 522,725
Gas plant leased to others 6,372 -- -- -- -- -- -- 6,372
-------- ------- ------ ------- ------ ------- ----- --------
Total public utility
facilities 499,246 51,541 3,572 19,707 6,714 (1,032) 127 529,097
Non-utility property 443 -- -- -- -- -- -- 443
-------- ------- ------ ------- ------ ------- ----- --------
Total accumulated provision
for depreciation $499,689 $51,541 $3,572 $19,707 $6,714 $(1,032) $ 127 (b) $529,540
-------- ------- ------ ------- ------ ------ ----- --------
-------- ------- ------ ------- ------ ------ ----- --------
( ) Denotes red figure.
<FN>
Notes: (a) See Note 1E of the Notes to Consolidated Financial Statements with respect to the basis for the provision for
depreciation.
(b) Represents the following: 1994 1993 1992
---- ---- ----
Accumulated provision for depreciation applicable to property acquired $581 $ 2 $ 3
Proceeds from sale of property -- 3 9
Capitalized depreciation transferred 129 124 115
Implementation of Statement of Financial Accounting Standards Number 109 -- 3,003 --
Contractor and Insurance Settlements 100 -- --
Sundry Items - Net 5 (27) --
---- ------ ----
$815 $3,105 $127
---- ------ ----
---- ------ ----
-52-
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, 1994
------------------------------------
RESERVES (deducted from assets in balance sheet):
Uncollectible items $18,934 $31,162 $26,696 $23,400
Fiscal Year Ended September 30, 1993
------------------------------------
RESERVES (deducted from assets in balance sheet):
Uncollectible items $16,169 $21,693 $18,928 $18,934
Fiscal Year Ended September 30, 1992
------------------------------------
RESERVES (deducted from assets in balance sheet):
Uncollectible items $16,928 $19,044 $19,803 $16,169
-53-
SCHEDULE IX
THE PEOPLES GAS LIGHT AND COKE COMPANY AND SUBSIDIARY COMPANIES
SHORT-TERM BORROWINGS
Column A Column B Column C Column D Column E (a) Column F (b)
- --------------------- ------------- ---------------- ----------------- ----------------- -----------------
Weighted Average Maximum Amount Average Amount Weighted Average
Category of Aggregate Balance at Interest Rate Outstanding Outstanding Interest Rate
Short-Term Borrowings End of period End of Period During the Period During the Period During the Period
- --------------------- ------------- ---------------- ----------------- ----------------- -----------------
(Thousands) (Thousands)
Fiscal Year Ended September 30, 1994
------------------------------------
Bank Loans $ 900 7.75% $ 900 $ 573 6.66%
Commercial Paper -- -- 106,900 27,361 3.14
Fiscal Year Ended September 30, 1993
------------------------------------
Bank Loans $ -- --% $ 900 $ 417 6.21%
Commercial Paper 63,200 3.21 67,000 17,573 3.24
Fiscal Year Ended September 30, 1992
------------------------------------
Bank Loans $ 900 6.00% $ 900 $ 838 6.74%
Commercial Paper 8,000 3.35 8,000 67 3.35
<FN>
(a) Computed by multiplying the amounts outstanding by the days
outstanding and dividing the results by the number of days used.
(b) Computed by dividing the applicable interest expense by the average
amount outstanding during the period.
-54-
SCHEDULE X
THE PEOPLES GAS LIGHT AND COKE COMPANY AND SUBSIDIARY COMPANIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
Maintenance, depreciation, royalties, advertising costs, and research and
development costs, other than those specifically disclosed in the Consolidated
Statements of Income, are not significant.
Significant taxes charged to costs and expenses, other than payroll and
income taxes, are summarized as follows:
Fiscal Years Ended September 30, 1994 1993 1992
- --------------------------------------------------------------------------------
(Thousands)
Illinois public utility $ 40,999 $ 41,862 $ 39,127
Municipal public utility 79,809 78,265 69,095
Other 10,819 10,746 10,648
-------- -------- --------
Total $131,627 $130,873 $118,870
-------- -------- --------
-------- -------- --------
-55-
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 22, 1994 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 22, 1994.
/s/ RICHARD E. TERRY Chairman of the Board and Chief Executive
- ------------------------------ Officer and Director
Richard E. Terry (Principal Executive Officer)
/s/ KENNETH S. BALASKOVITS Vice President and Controller and Director
- ------------------------------ (Principal Financial and Accounting
Kenneth S. Balaskovits Officer)
/s/ J. BRUCE HASCH Director
- ------------------------------
J. Bruce Hasch
/s/ JAMES HINCHLIFF Director
- ------------------------------
James Hinchliff
/s/ MICHAEL S. REEVES Director
- ------------------------------
Michael S. Reeves
-56-
THE PEOPLES GAS LIGHT AND COKE COMPANY AND SUBSIDIARY COMPANIES
EXHIBIT INDEX
(a) The exhibits listed below are filed herewith and made a part thereof:
Exhibit
Number Description of Document
------- --------------------------------------------------
3(a) Amendment to the By-Laws of the Registrant,
dated February 1, 1992.
3(b) By-Laws of the Registrant, as amended on
February 1, 1992.
3(c) Amendment to the By-Laws of the Registrant,
dated December 7, 1994.
3(d) By-Laws of the Registrant, as amended on
December 7, 1994.
10 Firm Transportation Service Agreement Under Rate
Schedule FT between the Company and Trunkline
Gas Company, dated as of December 1, 1993.
12 Statement re: Computation of Ratio of Earnings to
Fixed Charges.
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(e) Articles of Incorporation of the Registrant, as amended on January
20, 1988 (Registrant Form 10-K for fiscal year ended September 30,
1988, 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 July 15, 1966 (Form 8-
K for the month of July 1966, Exhibit 2); 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 as of April 1, 1972 (File No. 2-43367, Post-
Effective Exhibit 2-2); Supplemental Indenture dated as of July
15, 1973 (File No. 2-48430,
-57-
THE PEOPLES GAS LIGHT AND COKE COMPANY AND SUBSIDIARY COMPANIES
EXHIBIT INDEX (Continued)
4(a) Exhibit 4-2); Supplemental Indenture dated as of June 1, 1984,
cont'd. Exhibit 4-1, Supplemental Indenture dated June 1, 1984, Exhibit
4-2, Supplemental Indenture dated October 1, 1984, Exhibit 4-3
(Form 10-K for fiscal year ended September 30, 1984); Supplemental
Indentures dated March 1, 1985, Exhibits 4-1, 4-2, 4-3, 4-4,
respectively (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 Indenture 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)).
10(a) Office Building Lease Agreement (Registrant Form 10-K for fiscal
year ended September 30, 1985, Exhibit 10).
10(b) Storage Service Agreement Under Rate Schedule S-1 between the
Company and Natural Gas Pipeline Company of America, dated as of
November 30, 1990 (Registrant Form 10-K for the fiscal year ended
September 30, 1993, Exhibit 10(a)); Firm Transportation Service
Agreement Under Rate Schedule FTS between the Company and Natural
Gas Pipeline Company of America, dated as of August 13, 1990
(Registrant Form 10-K for the fiscal year ended September 30,
1993, Exhibit 10(b)); Firm Transportation Service Agreement Under
Rate Schedule FTS between the Company and Natural Gas Pipeline
Company of America, dated as of October 8, 1990 (Registrant Form
10-K for the fiscal year ended September 30, 1993, Exhibit 10(c));
Firm Transportation Service Agreement Under Rate Schedule FTS
between the Company and Natural Gas Pipeline Company of America,
dated as of October 8, 1990 (Registrant Form 10-K for the fiscal
year ended September 30, 1993, Exhibit 10(d)); Firm Transportation
Service Agreement Under Rate Schedule FTS between the Company and
Natural Gas Pipeline Company of America, dated as of
January 1, 1992 (Registrant Form 10-K for the fiscal year ended
September 30, 1993, Exhibit 10(e)); Firm Transportation Service
Agreement Under Rate Schedule FTS between the Company and Natural
Gas Pipeline Company of America, dated as of January 1, 1992
(Registrant Form 10-K for the fiscal year ended September 30,
1993, Exhibit 10(f)); Firm Transportation Service Agreement Under
Rate Schedule FTS between the Company and Natural Gas Pipeline
Company of America, dated as of January 1, 1992 (Registrant
Form 10-K for the fiscal year ended September 30, 1993, Exhibit
10(g)); Firm Transportation Service Agreement Under Rate Schedule
FTS between the Company and Natural Gas Pipeline Company of
America, dated as of February 1, 1992 (Registrant Form 10-K for
the fiscal year ended September 30, 1993, Exhibit 10(h)).
10(c) Lease dated October 20, 1993, between Prudential Plaza Associates,
as Landlord, and the Company, as Tenant (Registrant Form 10-Q for
the quarterly period ended December 31, 1993, Exhibit 10(a)).
10(d) Firm Transportation Service Agreement Under Rate Schedule FTS
between the Company and Natural Gas Pipeline Company of America,
dated as of December 1, 1993 (Registrant Form 10-Q for the
quarterly period ended December 31, 1993, Exhibit 10(b)); Firm
Transportation Service Agreement Under Rate Schedule S-2 between
the Company and Natural Gas Pipeline Company of America, dated as
of December 1, 1993 (Registrant Form 10-Q for the quarterly period
ended December 31, 1993, Exhibit 10(c)).
-58-