Exhibit 13
MANAGEMENTS DISCUSSION OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(GRAPH APPEARS HERE)
(GRAPH APPEARS HERE)
On March 6, 1996, AGL Resources Inc. (AGL Resources) became the holding company
for Atlanta Gas Light Company (AGLC), a natural gas distribution utility; AGLC's
wholly owned natural gas utility subsidiary, Chattanooga Gas Company
(Chattanooga); and AGLC's nonregulated subsidiaries: AGL Energy Services, Inc.;
AGL Investments, Inc.; Georgia Gas Company; Georgia Gas Service Company; Georgia
Energy Company; and Trustees Investments, Inc. During fiscal 1996 ownership of
AGLC's nonregulated businesses was transferred to AGL Resources and its various
subsidiaries. (See Note 1 in Notes to Consolidated Financial Statements.) Unless
noted specifically or otherwise required by the context, references to AGLC or
the utility include the operations and activities of AGLC and Chattanooga.
The following discussion and analysis reflects the results of operations
and financial condition of AGL Resources for the three years ended September 30,
1996, and factors expected to impact its future operations.
RESULTS OF OPERATIONS
Fiscal 1996 Compared with Fiscal 1995
Operating Revenues
Operating revenues increased 14.8% in 1996 compared with 1995 primarily due to
(1) an increase in the cost of the gas supply recovered from customers under the
purchased gas provisions of the utility's rate schedules, (2) increased volumes
of gas sold to firm service customers as a result of weather that was 50% colder
in 1996 than in 1995 and (3) an increase of approximately 41,000 in the number
of customers served.
Cost of Gas
Cost of gas increased 26% in 1996 compared with 1995 primarily due to (1) an
increase in the cost of the gas supply recovered from customers under the
purchased gas provisions of the utility's rate schedules and (2) increased
volumes of gas sold to firm service customers as a result of weather that was
50% colder in 1996 than in 1995.
The utility's cost of natural gas per therm was 32.2 cents in 1996 and 29.7
cents in 1995. Variations in the cost of purchased gas are passed through to
customers under the purchased gas provisions of the utility's rate schedules.
Overrecoveries or underrecoveries of purchased gas costs are charged or credited
to cost of gas and are included in current assets or liabilities, thereby
eliminating the effect that recovery of gas costs otherwise would have on net
income.
Operating Margin
Operating margin increased 1.8% in 1996 compared with 1995 primarily due to (1)
recovery of increased expenses related to an Integrated Resource Plan (IRP),
which are recovered through an IRP Cost Recovery Rider approved by the Georgia
Public Service Commission (Georgia Commission), (2) a revenue increase granted
by the Tennessee
Regulatory Authority (TRA), formerly the Tennessee Public
Service Commission, effective November 1, 1995, and (3) an increase of
approximately 41,000 in the number of customers served.
Restructuring Costs
In November 1994 AGL Resources announced a corporate restructuring plan in
response to increased competition and changes in the federal and state
regulatory environments in which AGLC operates. Restructuring costs of $61.4
million related to early retirement and severance programs and $8.9 million
related to office closings and costs to exit AGLC's appliance merchandising and
real estate investment operations were recorded during 1995. There were no
restructuring costs recorded in 1996.
During the fourth quarter of fiscal 1996, AGL Resources reviewed its remaining
liabilities with respect to its corporate restructuring plan. As a result, AGL
Resources adjusted its restructuring accruals and reduced operating expenses by
$2.7 million, before income taxes. The remaining balance of restructuring
liabilities as of September 30, 1996, and 1995, was $1 million and $4.8 million,
respectively.
Other Operating Expenses
Operation and maintenance expenses increased 2.6% in 1996 compared with 1995
primarily due to (1) an increase of $3.6 million in expenses related to an
Integrated Resource Plan (IRP) and (2) an increase of $1.2 million in franchise
expenses. IRP and franchise expenses are recovered from customers through rate
recovery riders approved by the Georgia Commission. As a result, IRP program
costs and franchise expenses do not affect net income. Operation and maintenance
expenses excluding IRP and franchise expenses increased slightly primarily due
to (1) increased uncollectible accounts expenses and (2) expenses associated
with the formation of AGL Resources. The increase in operation and maintenance
expenses excluding IRP and franchise expenses was offset partly by decreased
labor-related expenses.
Depreciation expense increased 6.8% in 1996 compared with 1995 primarily due to
increased depreciable plant in service. The composite straight-line depreciation
rate was approximately 3.2% for utility property other than transportation
equipment during 1996 and 1995.
Taxes other than income taxes decreased $0.7 million primarily due to decreased
ad valorem taxes.
Other Income
Other income increased $12.2 million in 1996 compared with 1995 primarily due to
(1) income in 1996 from a gas marketing joint venture, (2) income from carrying
costs on increased deferred purchased gas undercollections and (3) recoveries of
environmental response costs from insurance carriers and third parties.
Interest Expense
Total interest expense increased $1.6 million in 1996 compared with 1995
primarily due to increased amounts of short-term debt outstanding. The increase
was offset partly by decreased amounts of long-term debt outstanding.
Income Taxes
Income taxes increased $30.8 million in 1996 compared with 1995 primarily due to
increased taxable income.
Net Income and Dividends
On November 3, 1995, the Board of Directors declared a two-for-one stock split
of the common stock effected in the form of a 100% stock dividend to
shareholders of record on November 17, 1995, and paid on December 1, 1995. All
references to number of shares and to per share amounts have been restated
retroactively to reflect the stock split.
Net income for 1996 was $75.6 million, compared with $26.4 million in 1995.
Earnings per share of common stock were $1.37 in 1996, compared with $0.50 in
1995. Dividends per share of common stock were $1.06 in 1996, compared with
$1.04 in 1995. The increases in net income and earnings per share were primarily
due to (1) corporate restructuring costs of $43.1 million, after income taxes,
recorded in 1995, (2) increased other income and (3) increased operating margin
as a result of an increase of approximately 41,000 in the number of customers
served. The increases in net income and earnings per share were offset partly by
increased depreciation expense. The increase in earnings per share also was
offset partly by an increase in the number of common shares outstanding.
Fiscal 1995 Compared with Fiscal 1994
Operating Revenues
Operating revenues decreased 11.4% in 1995 compared with 1994 primarily due to
(1) a decrease in the cost of the gas supply recovered from customers under the
purchased gas provisions of the utility's rate schedules and (2) decreased
volumes of gas sold to firm service customers as a result of weather that was
17% warmer in 1995 than in 1994. The decrease in operating revenues was offset
partly by an increase of approximately 37,000 in the number of customers served.
Cost of Gas
Cost of gas decreased 22.4% in 1995 compared with 1994 primarily due to (1) a
decrease in the cost of the gas supply recovered from customers under the
purchased gas provisions of the utility's rate schedules and (2) decreased
volumes of gas sold to firm service customers as a result of weather that was
17% warmer in 1995 than in 1994.
The utility's cost of natural gas per therm was 29.7 cents in 1995 and 37.7
cents in 1994. Variations in the cost of purchased gas are passed through to
customers under the purchased gas adjustment provisions of the utility's rate
schedules.
Operating Margin
Operating margin increased 6.1% in 1995 compared with 1994
primarily due to an increase of approximately 37,000 in the number of customers
served.
Restructuring Costs
In November 1994 AGL Resources announced a corporate restructuring plan in
response to increased competition and changes in the federal and state
regulatory environments in which AGLC operates.
The restructuring plan provided for reengineering AGLC's business processes and
streamlining AGLC's statewide field organizations. As a result of restructuring,
AGLC combined offices and established centralized customer service centers.
During 1995, AGLC reduced the average number of employees by approximately 500
through voluntary retirement and severance programs, and attrition.
Restructuring costs of $61.4 million related to early retirement and severance
programs and $8.9 million related to office closings and costs to exit AGLC's
appliance merchandising and real estate investment operations were recorded
during 1995.
Other Operating Expenses
Operation and maintenance expenses increased 1.7% in 1995 compared with 1994
primarily due to an increase of $17 million in expenses related to an IRP, which
are recovered through an IRP Cost Recovery Rider approved by the Georgia
Commission. As a result, IRP program costs do not affect net income. Operation
and maintenance expenses excluding IRP expenses decreased 5.4% in 1995 compared
with 1994 primarily due to (1) decreased labor costs as a result of the
restructuring plan, (2) decreased uncollectible accounts expenses and (3)
decreased regulatory commission expenses.
Depreciation expense increased 5.6% in 1995 compared with 1994 primarily due to
increased depreciable plant in service. The composite straight-line depreciation
rate was approximately 3.2% for utility property other than transportation
equipment during 1995 and 1994.
Taxes other than income taxes decreased $0.4 million primarily due to decreased
payroll taxes as a result of AGL Resources' restructuring plan. The decrease in
taxes other than income taxes was offset partly by increased ad valorem taxes.
Other Income
Other income decreased $3.1 million in 1995 compared with 1994 primarily due to
(1) decreased income from propane operations as a result of warmer weather and
(2) decreased income from merchandise operations.
Interest Expense
Total interest expense decreased $0.1 million in 1995 compared with 1994
primarily due to increased allowance for funds used during construction -- debt.
Interest on long-term debt decreased $0.5 million in 1995 compared with 1994 due
to decreased amounts of long-term debt outstanding. The decreased interest
expense on long-term debt was offset by a $0.4 million increase in other
interest expenses primarily due to increased interest rates on short-term debt.
Income Taxes
Income taxes decreased $19.6 million in 1995 compared with 1994 primarily
due to decreased taxable income.
Net Income and Dividends
Net income for 1995 was $26.4 million, compared with $58.7 million for 1994.
Earnings per share of common stock were $0.50 in 1995, compared with $1.17 in
1994. Dividends per share of common stock were $1.04 for 1995 and 1994. The
decreases in net income and earnings per share were primarily due to the cost of
the restructuring plan. The decreases in net income and earnings per share were
offset partly by (1) increased operating margin as a result of an increase of
approximately 37,000 in the number of customers served and (2) decreased other
operating expenses as a result of the restructuring plan. Excluding charges
recorded during 1995
related to the restructuring plan, net income and earnings per share would have
been approximately $69.5 million and $1.32, respectively.
Impact of Inflation
Inflation impacts the prices AGL Resources must pay for labor and other goods
and services required for operation, maintenance and capital improvements. The
utility's rate schedules include purchased gas adjustment provisions that permit
the increases in gas costs to be passed on to its customers. Increases in costs
not recovered through the purchased gas adjustment provisions and other similar
rate riders must be recovered through timely filings for rate relief.
FINANCIAL CONDITION
Financing
Common Stock
On June 16, 1995, approximately 3 million shares of common stock were issued and
sold at $16.81 per share, resulting in net proceeds of $48.6 million. Proceeds
from that sale of common stock were used to finance capital expenditures and for
other corporate purposes. AGL Resources issued 762,553; 1,092,486; and 1,144,270
shares of common stock during fiscal 1996, 1995 and 1994, respectively, for its
Dividend Reinvestment and Stock Purchase Plan, Retirement Savings Plus Plan,
Long-Term Stock Incentive Plan, Nonqualified Savings Plan and the Non-Employee
Directors Equity Compensation Plan, which increased common equity by
approximately $14 million, $18 million and $20 million, respectively.
Long-Term Debt
During fiscal 1994, $194.5 million in principal amount of medium-term notes,
Series C, was issued, with maturity dates ranging from 10 to 30 years and with
interest rates ranging from 5.9% to 7.2%. The notes are issued under an
Indenture dated December 1, 1989, and are unsecured and rank on a parity with
all other unsecured indebtedness. Net proceeds from the notes were used to repay
short-term debt, to refund $125 million in principal amount of First Mortgage
Bonds and for other corporate purposes. Approximately $105 million in principal
amount of medium-term notes, Series C, was unissued as of September 30, 1996,
and 1995.
Short-Term Debt
Because AGL Resources' primary business is highly seasonal, short-term debt is
used to meet seasonal working capital requirements. In addition, capital
expenditures are funded temporarily with short-term debt. Lines of credit with
various banks provide for direct borrowings and are subject to annual renewal.
The current lines of credit vary from $75 million in the summer months to $253
million for peak winter financing. Short-term debt increased $101 million from
the amount outstanding as of September 30, 1995, to $152 million as of September
30, 1996, primarily as a result of the increased use of short-term debt to
temporarily fund capital expenditures. For additional information concerning
short-term debt, see Note 8 in Notes to Consolidated Financial Statements.
Capital Requirements
Capital expenditures for construction of distribution facilities, purchase of
equipment and other general improvements were $132.5 million during 1996.
Capital requirements are estimated to be approximately $350 million for the
three years ending September 30, 1999. During the same period, approximately
$1.2 million will be required to fund preferred stock purchase fund obligations.
Funding for those expenditures will be provided through a combination of
internal sources and the issuance of short-term and long-term debt and equity
securities.
The cost of natural gas stored underground increased $32.8 million to $144
million as of September 30, 1996, primarily due to an increase in the cost of
the gas that was injected into storage.
Ratios and Coverages
On September 30, 1996, AGL Resources' capitalization ratios consisted of 46.1%
long-term debt, 4.9% preferred stock and 49.0% common equity. The times interest
earned and ratio of earnings to fixed charges increased in 1996 compared with
1995 primarily due to increased earnings. The times interest earned and ratio of
earnings to fixed charges decreased in 1995 compared with 1994 primarily due to
decreased earnings.
The weighted average cost of long-term debt decreased from 7.7% on September 30,
1994, to 7.6% on September 30, 1996. The decrease was due to the redemption of
$15 million in principal amount of 8.85% medium-term notes. The weighted average
cost of preferred stock was 7.5% on September 30, 1994, 1995 and 1996. The
return on average common equity was 11.6% for 1994; 4.9% for 1995; and 13.2% for
1996. Net income in 1995 included a charge for restructuring of $43.1 million,
after income taxes.
Regulatory Activity
Order 636
In 1992 the Federal Energy Regulatory Commission (FERC) issued Order 636, which,
among other things, mandated the unbundling of interstate pipeline sales service
and established certain open access transportation regulations that became
effective beginning in the 1993-1994 heating season.
In Order 636 FERC acknowledged that, without special recovery mechanisms,
certain costs that previously were recovered in the pipelines' rate for bundled
sales services no longer could be recovered by the pipelines in a restructured
environment. Those costs, referred to as transition costs, include such things
as unrecovered gas costs, gas supply realignment (GSR) costs and various
stranded costs resulting from unbundling. Accordingly, Order 636 included a
recovery mechanism that allows the pipeline companies to pass through to their
customers any prudently incurred transition costs attributable to compliance
with Order 636.
On July 16, 1996, the United States Court of Appeals for the District of
Columbia Circuit issued its ruling in United Distribution Cos. v. FERC,
concerning appeals from Order 636. The court generally upheld FERC's orders
against a broad array of challenges, but remanded the orders to FERC for
reconsideration of certain issues, including FERC's decision to permit pipelines
to pass all of their GSR costs through to their customers and its decision to
require interruptible transportation customers to bear 10% of GSR costs. FERC
has not yet issued an order on remand, and thus it is not known whether FERC
will change its GSR policies. The court's order is subject to further
proceedings before the District of Columbia Circuit, and possibly the United
States Supreme Court.
AGLC, based on filings with FERC by its pipeline suppliers, estimates that its
portion of such costs from all of its pipeline suppliers would be approximately
$109.9 million. Such filings currently are pending before FERC for final
approval, and the transition costs are being collected subject to refund.
Approximately $80.6 million of such costs have been incurred by AGLC as of
September 30, 1996, recovery of which is provided under the purchased gas
provisions of AGLC's rate schedules.
Transition costs have not affected the total cost of gas to the utility's
customers significantly because (1) purchases of wellhead gas supplies are based
on market prices that are below the cost of gas previously embedded in the
bundled pipeline sales service rates and (2) many elements of transition costs
previously were embedded in the rates for the pipelines' bundled sales service.
Regulatory Reform Initiatives
Two regulatory reform initiatives are pending in Georgia, both designed to
increase competition and reduce the role of regulation within the natural gas
industry. The first such initiative is the subject of a proceeding before the
Georgia Commission; the second initiative is before study committees of the
Georgia General Assembly.
With respect to the first initiative, on November 20, 1995, the Georgia
Commission issued a Natural Gas Notice of Inquiry soliciting comments on how to
introduce more competition into natural gas markets within Georgia. Following
written comments and oral presentations from numerous parties, on May 21, 1996,
the Georgia Commission adopted a Policy Statement that, among other things, sets
up a distinction between competitive and natural monopoly services; favors
performance-based regulation in lieu of traditional cost-of-service regulation;
calls for unbundling interruptible service; directs the Georgia Commission Staff
to develop standards of conduct for utilities and their marketing affiliates;
and invites pilot programs for unbundling services to residential and small
business customers.
Consistent with specific goals in the Georgia Commission's Policy Statement, on
June 10, 1996, AGLC filed a comprehensive plan for serving interruptible markets
called the Natural Gas Service Provider Selection Plan (the Plan). The Plan
proposes further unbundling of services to provide large customers more service
options and the ability to purchase only those services they require. Proposed
tariff changes would allow AGLC to cease its sales service function and the
associated sales obligation; implement delivery-only service for large customers
on a firm and interruptible basis; and provide pooling services to marketers.
The Plan also includes proposed standards of conduct for utilities and marketing
affiliates of utilities. Hearings on the proposal have been scheduled for
December 1996 and January and February 1997. A decision is expected from the
Georgia Commission prior to March 1, 1997.
The second major initiative to increase competition and decrease the role of
regulation in Georgia is before study committees of the Georgia General
Assembly. The 1996 Georgia General Assembly considered, but delayed
action on, The Natural Gas Fair Pricing Act, which would have allowed local gas
companies to negotiate contract prices and terms for gas services with large
commercial and industrial customers absent Georgia Commission-mandated rates.
The Georgia General Assembly stated through resolutions a desire to fashion a
more comprehensive approach to deregulation and unbundling of natural gas
services in Georgia. Those resolutions, adopted during the 1996 session, created
Senate and House committees to study and recommend a comprehensive course of
action by December 31, 1996, for deregulating natural gas markets in Georgia.
The separate Senate and House study committees conducted meetings during
September, October and November 1996, with the goal of crafting a comprehensive
deregulation bill for the 1997 General Assembly, which convenes in January 1997.
The natural gas deregulation plan under consideration by the committees would
unbundle services to all of AGLC's natural gas customers, would continue AGLC's
role as the intrastate transporter of natural gas, would allow AGLC to assign
firm delivery capacity to certificated marketers who would sell the gas
commodity, and would create a secondary transportation market for interruptible
transportation capacity.
Although AGL Resources cannot predict the outcome of those two regulatory reform
initiatives, it supports both the plan under consideration by the Georgia
Commission and the plan under consideration by the Georgia General Assembly.
AGLC currently makes no profit on the purchase and sale of gas because actual
gas costs are passed through to customers under the purchased gas provisions of
AGLC's rate schedules. Earnings are provided through revenues received for
intrastate transportation of the commodity. Consequently, allowing AGLC to cease
its sales service function and the associated sales obligation would not
adversely affect AGLC's ability to earn a return on its distribution system
investment. In addition, allowing gas to be sold to all customers by numerous
marketers, including nonregulated subsidiaries of AGL Resources, would provide
new earnings opportunities.
Gas Cost Recovery Filing
Pursuant to legislation enacted by the Georgia General Assembly, each
investor-owned local gas distribution company is required to file on or before
August 1 of each year, a proposed gas supply plan for the subsequent year, as
well as a proposed cost recovery factor to be used during the same time period.
Costs of natural gas supply, interstate transportation and storage incurred
pursuant to an approved plan may be recovered under the purchased gas provisions
of the utility's rate schedules.
On August 1, 1996, AGLC filed its 1997 Gas Supply Plan, which consists of gas
supply, transportation and storage options designed to provide reliable service
to firm customers at the best cost. On September 13, 1996, the Georgia
Commission approved the entire supply portfolio contained in the 1997 Gas Supply
Plan.
As part of the 1997 Gas Supply Plan, AGLC is authorized to continue limited gas
supply hedging activities. The 1997 hedging program has been expanded beyond the
program approved in the 1996 Gas Supply Plan. The financial results of all
hedging activities are passed through to firm service customers under the
purchased gas provisions of the utility's rate schedules. Accordingly, there is
no earnings impact as a result of the hedging program.
Rate Filings
On May 1, 1995, Chattanooga filed a rate proceeding with the TRA seeking an
increase in revenues of $5.2 million annually. On September 27, 1995, a
settlement agreement was reached that provides for an annual increase in
revenues of approximately $2.5 million, effective November 1, 1995.
1997 Gas Supply Plan
10 therms = 1 dekatherm Production
Firm Area Supplemental Total
Transportation Wellhead Underground Underground Liquefied Peak-Day
Capacity Gas Supply Storage Storage Natural Gas Supply
Atlanta Gas Light Company (dekatherms) (dekatherms) (dekatherms) (dekatherms) (dekatherms) (dekatherms)
Southern ................. 778,037 414,753 168,500
Transco .................. 137,989 103,356 280,241
Tennessee / East Tennessee 63,860 32,864
Southern / South Georgia . 12,115 6,906 708
Total .................... 992,001 520,655 557,879 449,449 665,000 2,106,450
Chattanooga Gas Company
East Tennessee ........ 46,350 23,857
Southern .............. 22,462 14,346
Total ................. 68,812 34,696 38,203 0 90,000 158,812
On August 3, 1993, Chattanooga made a rate filing with the TRA seeking an
increase in revenues of $5.7 million annually. On December 31, 1993, a
settlement agreement was reached that provided for an annual rate increase of
$3.5 million, effective February 1, 1994.
Weather Normalization
The Georgia Commission and the TRA have authorized weather normalization
adjustment riders (WNARs), which are designed to offset the impact that
unusually cold or warm weather has on customer billings and operating margin.
Because fiscal 1996 was colder than normal, the WNARs reduced net income and net
cash flow from operating activities to normal levels. Fiscal 1995 and 1994 were
warmer than normal, and the WNARs, therefore, increased net income and net cash
flow from operating activities to normal levels for those periods. The WNARs
decreased net income by $4.4 million in 1996, and increased net income by $27.3
million in 1995 and $12.6 million in 1994.
Environmental Matters
AGLC has identified nine sites in Georgia where it currently owns all or part of
a manufactured gas plant (MGP) site. In addition, AGLC has identified three
other sites in Georgia that AGLC does not now own, but that may have been
associated with the operation of MGPs by AGLC or its predecessors. There are
three sites in Florida that have been investigated by environmental authorities
in connection with which AGLC may be contacted as a potentially responsible
party. Preliminary assessments and subsequent site investigations have revealed
environmental impacts at and near some of those sites.
Under a thorough analysis of potentially applicable requirements, AGLC has
estimated that, under the most favorable circumstances reasonably possible, the
future cost of investigating and remediating the former MGP sites, excluding
sites for which no remediation is expected or the cost of which cannot be
estimated, could be as low as $30.4 million. Alternatively, AGLC has estimated
that, under the least favorable circumstances reasonably possible, the future
cost of investigating and remediating the same former MGP sites could be as high
as $110.8 million, excluding sites for which no remediation is expected or the
cost of which cannot be estimated. AGLC cannot estimate at this time the amount
of any other future expenses or liabilities, or the impact on those estimates of
future environmental or regulatory changes, that may be associated with or
related to the MGP sites, including expenses or liabilities relating to any
litigation. At the present time, no amount within the $30.4 million to $110.8
million range can be identified as a better estimate than any other estimate.
Therefore, a liability at the low end of this range and a corresponding
regulatory asset have been recorded in the financial statements.
The Georgia Commission has approved the recovery by AGLC of environmental
response costs, pursuant to AGLC's Environmental Response Cost Recovery Rider
(ERCRR). For purposes of the ERCRR, environmental response costs include
investigation, testing, remediation and litigation costs and expenses or other
liabilities relating to or arising from MGP sites. In connection with the ERCRR,
the staff of the Georgia Commission has undertaken a financial and management
process audit related to the MGP sites, cleanup activities at the sites and
environmental response costs that have been incurred for purposes of the ERCRR.
On October 10, 1996, the Georgia Commission issued an order to prohibit funds
collected through the ERCRR from being used for the payment of any damage award,
including punitive damages, as a result of any litigation associated with any of
the MGP sites in which AGLC is involved. AGLC is currently pursuing judicial
review of the October 10, 1996, order.
AGLC is currently a party to claims and litigation related to the former MGP
sites. During fiscal 1996 AGLC recovered $14.7 million from its insurance
carriers and other potentially responsible parties. In accordance with
provisions of the ERCRR, AGLC recognized other income of $2.9 million and
established regulatory liabilities for the remainder of those recoveries. AGLC
intends to continue to pursue insurance coverage and contributions from
potentially responsible parties.
Competition
AGLC competes to supply natural gas to interruptible customers who are capable
of switching to alternative fuels, including propane, fuel and waste oils,
electricity and, in some cases, combustible wood by-products. AGLC also competes
to supply gas to interruptible customers who might seek to bypass its
distribution system.
AGLC can price distribution services to interruptible customers four ways.
First, multiple rates are established under the rate schedules of AGLC's tariff
approved by the Georgia Commission. If an existing tariff rate does not produce
a price competitive with a customer's relevant competitive alternative, three
alternate pricing mechanisms exist: Negotiated Contracts, Interruptible
Transportation and Sales Maintenance (ITSM) discounts, and Special Contracts.
On February 17, 1995, the Georgia Commission approved a settlement that permits
AGLC to negotiate contracts with customers who have the option of bypassing
AGLC's facilities (Bypass Customers) to receive natural gas from other
suppliers. The bypass avoidance contracts (Negotiated Contracts) can be
renewable, provided the initial term does not exceed five years, unless a longer
term specifically is authorized by the Georgia Commission. The rate provided by
the Negotiated Contract may be lower than AGLC's filed rate, but not less than
AGLC's marginal cost of service to the potential Bypass Customer. Service
pursuant to a Negotiated Contract may commence without Georgia Commission
action, after a copy of the contract is filed with the Georgia Commission.
Negotiated Contracts may be rejected by the Georgia Commission within 90 days of
filing; absent such action, however, the Negotiated Contracts remain in effect.
None of the Negotiated Contracts filed to date with the Georgia Commission have
been rejected.
The settlement also provides for a bypass loss recovery mechanism to operate
until the earlier of September 30, 1998, or the effective date of new rates for
AGLC resulting from a general rate case.
In addition to Negotiated Contracts, which are designed to serve existing and
potential Bypass Customers, AGLC's ITSM Rider continues to permit discounts for
short-term transactions to compete with alternative fuels. Revenue shortfalls,
if any, from interruptible customers as measured by the test-year interruptible
revenues determined by the Georgia Commission in AGLC's 1993 rate case will
continue to be recovered under the ITSM Rider.
The settlement approved by the Georgia Commission also provides that AGLC may
file contracts (Special Contracts) for Georgia Commission approval if the
service cannot be provided through the ITSM Rider, existing rate schedules, or
Negotiated Contract procedures. A Special Contract, for example, could involve
AGLC providing a long-term service contract to compete with alternative fuels
where physical bypass is not the relevant competition.
Pursuant to the approved settlement, AGLC has filed and is providing service
pursuant to 46 Negotiated Contracts. Additionally, the Georgia Commission has
approved Special Contracts between AGLC and five interruptible customers.
On July 22, 1996, Chattanooga filed a plan with the TRA that, if approved, would
permit Chattanooga to negotiate contracts with customers in Tennessee who have
long-term competitive options, including bypass. On November 7, 1996, the TRA
hearing officer recommended approval of a settlement that permits Chattanooga to
negotiate contracts with large commercial or industrial customers who are
capable of bypassing Chattanooga's distribution system. The settlement provides
for approval on an experimental basis, with the TRA to review the measure two
years from the approval date. The pricing terms provided in any such contract
may be neither less than Chattanooga's marginal cost of providing service nor
greater than the filed tariff rate generally applicable to such service.
Chattanooga can recover 50% of the difference between the contract rate and the
applicable tariff rate through the balancing account of the purchased gas
adjustment provisions of Chattanooga's rate schedules.
Accounting Developments
In October 1995 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). The adoption of the new recognition provisions for
stock-based compensation expense included in SFAS 123 are optional; however, the
pro forma effects on net income and earnings per share, had the recognition
provisions been adopted, are required to be disclosed in the fiscal 1997
financial statements. AGL Resources will continue to follow the requirements of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," in its accounting for employee stock options; therefore, no impact
on the consolidated financial statements is expected.
Statements of Consolidated Income
For the years ended September 30,
In millions, except per share amounts 1996 1995 1994
--------------------------------
Operating Revenues ................................ $1,220.2 $1,063.0 $1,199.9
Cost of Gas ....................................... 720.3 571.8 736.8
--------------------------------
Operating Margin .................................. 499.9 491.2 463.1
--------------------------------
Other Operating Expenses
Operation ................................ 220.8 213.5 207.0
Restructuring costs ...................... 70.3
Maintenance .............................. 29.4 30.4 32.8
Depreciation ............................. 62.5 58.5 55.4
Taxes other than income taxes ............ 24.9 25.6 26.0
--------------------------------
Total other operating expenses .. 337.6 398.3 321.2
--------------------------------
Operating Income .................................. 162.3 92.9 141.9
--------------------------------
Other Income ...................................... 14.3 2.1 5.2
--------------------------------
Income Before Interest and Income Taxes ........... 176.6 95.0 147.1
--------------------------------
Interest Expense and Preferred
Stock Dividends
Interest on long-term debt ............... 42.2 42.7 43.2
Other interest ........................... 6.9 4.8 4.4
Dividends on preferred stock of subsidiary 4.4 4.4 4.5
Total interest expense and
preferred stock dividends .... 53.5 51.9 52.1
--------------------------------
Income Before Income Taxes ........................ 123.1 43.1 95.0
--------------------------------
Income Taxes ...................................... 47.5 16.7 36.3
--------------------------------
Net Income ........................................ $ 75.6 $ 26.4 $ 58.7
--------------------------------
Earnings Per Share of Common Stock (Note 5) ....... $ 1.37 $ 0.50 $ 1.17
--------------------------------
Weighted Average Number of Common
Shares Outstanding (Note 5) .............. 55.3 52.4 50.2
- ------------------------------------------------------------------------------------------
See notes to consolidated financial statements ....
Statements of Consolidated Cash Flows
For the years ended September 30,
In millions 1996 1995 1994
---------------------------
Cash Flows from Operating Activities
Net income .............................................. $ 75.6 $ 26.4 $ 58.7
Adjustments to reconcile net income to
net cash flow from operating activities
Depreciation and amortization .................. 67.5 62.5 59.2
Noncash restructuring costs .................... 52.9
Deferred income taxes .......................... 25.7 (1.2) 13.6
Other .......................................... 0.4 3.8 6.3
---------------------------
169.2 144.4 137.8
Changes in assets and liabilities
Receivables .................................... (29.6) 14.6 9.4
Inventories .................................... (35.8) 43.3 (38.5)
Deferred purchased gas adjustment .............. (11.0) (13.8) 20.8
Accounts payable ............................... 1.4 14.7 (6.0)
Other-- net .................................... (12.3) 2.4 4.7
---------------------------
Net cash flow from operating activities 81.9 205.6 128.2
---------------------------
Cash Flows from Financing Activities
Sale of common stock, net of expenses ................... 1.8 50.4 2.4
Short-term borrowings, net .............................. 101.0 (44.4) (36.0)
Redemptions and purchase fund
requirements of preferred stock
and long-term debt ............................. (15.0) (125.7)
Sale of long-term debt .................................. 194.5
Dividends paid on common stock .......................... (49.1) (44.3) (42.9)
---------------------------
Net cash flow from financing activities ........ 53.7 (53.3) (7.7)
---------------------------
Cash Flows from Investing Activities
Utility plant expenditures .............................. (132.0) (120.8) (122.0)
Cash received from joint venture ........................ 3.1
Investment in joint ventures ............................ (1.0) (32.6)
Other ................................................... (0.7) 1.5 1.5
---------------------------
Net cash flow from investing activities ........ (130.6) (151.9) (120.5)
---------------------------
Net increase in cash and cash equivalents ...... 5.0 0.4
Cash and cash equivalents at
beginning of year ..................... 3.7 3.3 3.3
---------------------------
Cash and cash equivalents at end of year ...... $ 8.7 $ 3.7 $ 3.3
---------------------------
Cash Paid During the Year for
Interest ................................................ $ 49.2 $ 48.4 $ 51.1
Income taxes ............................................ $ 19.3 $ 28.6 $ 18.0
- --------------------------------------------------------------------------------------------------
See notes to consolidated financial statements ...................
Consolidated Balance Sheets
Assets September 30,
In millions 1996 1995
--------------------
Current Assets
Cash and cash equivalents ..................................... $ 8.7 $ 3.7
Receivables
Gas (less allowance for uncollectible
accounts of $2.2 in 1996 and $2.4 in 1995) .. 62.4 30.3
Merchandise (less allowance for uncollectible
accounts of $.4 in 1996 and $1.9 in 1995) ... 2.5 5.3
Integrated Resource Plan loans (less allowance
for uncollectible accounts of $.2 in 1996 and
$.1 in 1995) ................................ 3.4 1.3
Other ................................................ 4.8 9.6
Unbilled revenues ............................................. 20.5 17.5
Inventories
Natural gas stored underground ....................... 144.0 111.2
Liquefied natural gas ................................ 16.8 14.3
Materials and supplies ............................... 8.1 8.0
Other ................................................ 3.0 2.6
Deferred purchased gas adjustment ............................. 4.7
Other ......................................................... 10.3 10.9
--------------------
Total current assets ................................. 289.2 214.7
--------------------
Property, Plant and Equipment
Utility plant ................................................. 1,969.0 1,919.9
Less accumulated depreciation ................................. 607.8 583.3
--------------------
Utility plant-- net .................................. 1,361.2 1,336.6
--------------------
Nonutility property ........................................... 80.5 16.6
Less accumulated depreciation ................................. 26.3 2.9
--------------------
Nonutility property-- net ............................ 54.2 13.7
--------------------
Total property, plant and equipment-- net ............ 1,415.4 1,350.3
--------------------
Deferred Debits and Other Assets
Unrecovered environmental response costs ...................... 38.0 34.9
Investment in joint ventures .................................. 35.5 32.6
Unrecovered Integrated Resource Plan costs .................... 10.0 9.9
Unrecovered postretirement benefits costs ..................... 9.7 7.2
Unamortized cost to repurchase long-term debt ................. 3.5 4.9
Other ......................................................... 23.4 20.1
--------------------
Total deferred debits and other assets ............... 120.1 109.6
--------------------
Total Assets ......................................... $1,824.7 $1,674.6
- -------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
Liabilities and Capitalization September 30,
In millions 1996 1995
----------------------
Current Liabilities
Accounts payable-- trade ................................ $ 73.7 $ 72.3
Short-term debt ......................................... 152.0 51.0
Customer deposits ....................................... 27.8 29.5
Interest ................................................ 25.7 25.4
Other accrued liabilities ............................... 22.5 11.9
Take-or-pay charges payable ............................. 8.0
Deferred purchased gas adjustment ....................... 6.3
Other ................................................... 20.8 26.5
----------------------
Total current liabilities ...................... 322.5 230.9
----------------------
Accumulated Deferred Income Taxes ................................ 168.5 138.8
----------------------
Long-Term Liabilities
Accrued environmental response costs .................... 30.4 28.6
Accrued pension costs ................................... 4.9 10.3
Accrued postretirement benefits costs ................... 36.2 30.1
----------------------
Total long-term liabilities .................... 71.5 69.0
----------------------
Deferred Credits
Unamortized investment tax credit ....................... 28.8 30.3
Regulatory tax liability ................................ 19.3 23.3
Other ................................................... 12.8 12.0
----------------------
Total deferred credits ......................... 60.9 65.6
----------------------
Commitments and Contingencies (Notes 9 and 11)
Capitalization
Long-term debt .......................................... 554.5 554.5
Preferred stock
Cumulative preferred stock of subsidiary
Redeemable ............................ 55.5 55.5
Nonredeemable ......................... 3.0 3.0
Common stockholders' equity (See accompanying
statements of consolidated common stock equity.) 588.3 557.3
----------------------
Total capitalization .................................... 1,201.3 1,170.3
----------------------
Total Liabilities and Capitalization ............................. $1,824.7 $1,674.6
----------------------
Statements of Consolidated Common Stock Equity
For the years ended September 30,
In millions, except per share amounts 1996 1995 1994
----------------------------
Common Stock (Note 5)
$5 par value; authorized 100.0 shares;
outstanding, 55.7 in 1996, 54.9 in 1995
and 50.8 in 1994
Beginning of year ........................................ $ 137.3 $ 127.1 $ 124.2
Issuance of common stock
Stock dividend ......................... 137.5
Public sale ............................ 7.5
Benefit, stock compensation,
dividend reinvestment and
stock purchase plans .......... 3.6 2.7 2.9
----------------------------
End of year .............................................. 278.4 137.3 127.1
----------------------------
Premium on Capital Stock (Note 5)
Beginning of year ........................................ 297.7 241.3 224.2
Issuance of common stock
Stock dividend ......................... (137.5)
Public sale ............................ 41.1
Benefit, stock compensation,
dividend reinvestment and
stock purchase plans .......... 10.4 15.3 17.1
----------------------------
End of year .............................................. 170.6 297.7 241.3
----------------------------
Earnings Reinvested
Beginning of year ........................................ 122.3 150.1 143.6
Net income ...................................... 75.6 26.4 58.7
Cash dividends
Common stock ($1.06 a share in 1996,
$1.04 a share in 1995 and 1994) (58.6) (54.2) (52.2)
----------------------------
End of year .............................................. 139.3 122.3 150.1
----------------------------
Total common stock equity ....................... $ 588.3 $ 557.3 $ 518.5
- ---------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Principles of Consolidation
AGL Resources Inc. (AGL Resources) is a Georgia corporation incorporated on
November 27, 1995, for the primary purpose of becoming the holding company for
Atlanta Gas Light Company (AGLC), AGLC's wholly owned natural gas utility
subsidiary, Chattanooga Gas Company (Chattanooga), and AGLC's nonregulated
subsidiaries. The holding company formation was completed upon receipt of
shareholder approval on March 6, 1996, when each share of AGLC common stock was
converted into one share of AGL Resources common stock, and AGLC became the
primary subsidiary of AGL Resources. AGLC comprises substantially all of AGL
Resources' assets, revenues and earnings. The consolidated financial statements
of AGL Resources include the financial statements of AGLC, Chattanooga and the
nonregulated subsidiaries as though AGL Resources had existed in all periods
shown and had owned all of AGLC's outstanding common stock prior to March 6,
1996. Intercompany balances and transactions have been eliminated.
Subsidiaries
AGL Resources engages in natural gas distribution through AGLC and AGLC's wholly
owned subsidiary, Chattanooga. AGLC is a public utility that distributes and
transports natural gas in Georgia and Tennessee and is subject to regulation by
the Georgia Public Service Commission (Georgia Commission) and the Tennessee
Regulatory Authority (TRA), formerly the Tennessee Public Service Commission,
with respect to its rates for service, maintenance of its accounting records and
various other matters. The consolidated financial statements are prepared in
accordance with generally accepted accounting principles, which give appropriate
recognition to the rate-making and accounting practices and policies of the
Georgia Commission and the TRA.
AGL Resources engages in nonregulated business activities through its wholly
owned subsidiaries, AGL Energy Services, Inc., a gas supply services company;
AGL Investments, Inc. (AGL Investments), a subsidiary established to develop and
manage certain nonregulated businesses; The Energy Spring, Inc., a retail energy
marketing company; and their subsidiaries.
Ownership of AGLC's nonregulated business, Georgia Gas Company (natural gas
production activities), has been transferred to AGL Energy Services, Inc.
Ownership of AGLC's other nonregulated businesses, Georgia Energy Company
(natural gas vehicle conversions), Georgia Gas Service Company (retail propane
sales) and Trustees Investments, Inc. (real estate holdings), has been
transferred to AGL Investments. AGLC's interest in Sonat Marketing Company L.P.
has been transferred to AGL Gas Marketing, Inc., a wholly owned subsidiary of
AGL Investments. In addition, AGL Investments has established two wholly owned
subsidiaries: AGL Power Services, Inc., which owns a 35% interest in Sonat Power
Marketing L.P., and AGL Consumer Services, Inc., an energy-related consumer
products and services company.
AGL Resources Service Company (Service Company) was formed during fiscal 1996 to
provide corporate support services to AGL Resources and its subsidiaries. The
transfer of related assets from AGLC to Service Company and other nonregulated
subsidiaries was effected through a noncash dividend during the fourth quarter
of fiscal 1996. Expenses of Service Company are allocated to AGL Resources and
its subsidiaries.
Regulation The consolidated financial statements reflect regulatory actions by
the Georgia Commission and the TRA that result in the recognition of revenues
and expenses in different time periods than enterprises that are not rate
regulated. In accordance with Statement of Financial Accounting Standards No.
71, "Accounting for the Effects of Certain Types of Regulation" (SFAS 71),
regulatory assets and liabilities are recorded and represent regulator-approved
deferrals resulting from the rate-making process. SFAS 71 assets and liabilities
recorded on September 30 consist of the following:
(Millions of dollars) 1996 1995
---------------
Assets:
Unrecovered environmental
response costs ........ $ 38.0 $ 34.9
Unrecovered integrated
resource plan costs ... 10.0 9.9
Unrecovered postretirement
benefits costs ........ 9.7 7.2
Deferred purchased gas
adjustment ............ 4.7
Unamortized cost to
repurchase long-term
debt .................. 3.4 4.9
---------------
Total .................... $ 65.8 $ 56.9
===============
Liabilities:
Unamortized investment
tax credit ............ $ 28.8 $ 30.3
Regulatory tax liability . 19.3 23.3
Deferred purchased gas
adjustment ............ 6.3
Environmental response
cost recoveries from
third parties ........ 7.4
Environmental response
cost recoveries from
third parties --
customer portion ...... 4.5
Other .................... 3.7 15.0
---------------
Total .................... $ 63.7 $ 74.9
===============
Utility Plant and Depreciation
Utility plant is stated at original cost. Direct labor and material costs of
plant construction and related indirect construction costs, including
administrative, engineering and general overhead, taxes, and an allowance for
funds used during construction (AFUDC), are added to utility plant. The portion
of AFUDC attributable to equity funds is included in other income, and the
portion attributable to borrowed funds is shown as a reduction in interest
charges in the statements of consolidated income. The AFUDC rate of 9.32% in
fiscal 1996, 1995 and 1994, was the cost of capital approved by the Georgia
Commission in a prior rate proceeding.
The original cost of utility property retired or otherwise disposed of, plus the
cost of dismantling, less salvage, is charged to accumulated depreciation.
Maintenance, repairs and minor additions, renewals, and betterments to property
are charged to operations.
The composite straight-line depreciation rate was approximately 3.2% for utility
property other than transportation equipment during 1996, 1995 and 1994.
Transportation equipment is depreciated over a period of five to 10 years.
Deferred Purchased Gas Adjustment
The utility's rate schedules include purchased gas adjustment provisions that
permit the recovery of purchased gas costs. The purchased gas adjustment factor
is revised periodically to reflect changes in the cost of purchased gas without
formal rate proceedings. Any overrecoveries or underrecoveries of gas costs are
charged or credited to cost of gas and are included in current assets or
liabilities.
As part of the 1997 Gas Supply Plan, AGLC is authorized to continue limited gas
supply hedging activities. The 1997 hedging program has been expanded beyond the
program approved in the 1996 Gas Supply Plan. Accounting for hedging activities
is provided in accordance with Statement of Financial Accounting Standards No.
80, "Accounting for Futures Contracts." The financial results of all hedging
activities are passed through to firm service customers under the purchased gas
provisions of the utility's rate schedules. Accordingly, there is no earnings
impact as a result of the hedging program.
Operating Revenues
Revenues from AGL Resources' utility business are based on rates approved by the
Georgia Commission and the TRA. Customers' base rates may not be changed without
formal approval of the Georgia Commission or the TRA. Revenues are recognized on
the accrual basis, which includes estimated amounts for gas delivered but not
yet billed.
The Georgia Commission and the TRA have authorized weather normalization
adjustment riders. Such riders are designed to offset the impact that unusually
cold or warm weather has on operating margin.
Certain interruptible customers purchase gas directly from gas producers and
marketers. The Georgia Commission and the TRA have approved programs whereby
transportation charges are billed on those purchases.
Income Taxes
Deferred income taxes result from temporary differences between book and taxable
income and principally relate to depreciation.
Investment tax credits have been deferred and are being amortized by credits to
income in accordance with regulatory treatment over the estimated lives of the
related properties.
Statement of Cash Flows
For purposes of reporting cash flows, AGL Resources considers all highly liquid
investments purchased with a maturity of three months or less to be cash
equivalents.
Noncash investing and financing transactions include the issuance of common
stock for the Dividend Reinvestment and Stock Purchase Plan, Retirement Savings
Plus Plan, Long-Term Stock Incentive Plan, Nonqualified Savings Plan and the
Non-Employee Directors Equity Compensation Plan of $14.1 million in 1996, $16.2
million in 1995, and $17.6 million in 1994.
Use of Estimates
Preparing financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions. Those
estimates and assumptions affect the reported amounts of assets and liabilities,
disclosure on contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Other
Gas inventories are stated at cost on a principally first-in, first-out method.
Materials and supplies inventories are stated at lower of average cost or
market.
Consistent with the rate treatment prescribed by the Georgia Commission and the
TRA, vacation pay and short-term disability benefits for AGLC are expensed when
those benefits are paid.
The computation of earnings per share of common stock is based on the weighted
average number of common shares outstanding during each year as adjusted for the
two-for-one stock split on December 1, 1995. (See Note 5.)
Certain reclassifications have been made in 1995 and 1994 to conform with the
1996 financial statement presentation.
Recently Issued Accounting Pronouncements
In October 1995 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). The adoption of the new recognition provisions for
stock-based compensation expense included in SFAS 123 is optional; however, the
pro forma effects on net income and earnings per share, had the recognition
provisions been adopted, are required to be disclosed in the fiscal 1997
financial statements. AGL Resources will continue to follow the requirements of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," in its accounting for employee stock options; therefore, no impact
on the consolidated financial statements is expected.
2. Income Tax Expense
Deferred tax balances are measured at the tax rates that will apply during the
period the taxes become payable and are adjusted whenever new rates are enacted.
Due to the regulated nature of the utility's business, a regulatory liability
has been recorded in accordance with Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes." The regulatory liability is being
amortized over approximately 30 years.
Components of income tax expense shown in the consolidated income statements are
as follows:
(Millions of dollars) 1996 1995 1994
--------------------------
Included in expenses:
Current income taxes
Federal ............... $ 20.3 $ 16.9 $ 20.9
State ................. 3.0 2.6 3.3
Deferred income taxes
Federal ............... 21.6 (1.0) 12.0
State ................. 4.1 (0.2) 1.6
Amortization of investment
tax credits ........... (1.5) (1.6) (1.5)
--------------------------
Total .................... $ 47.5 $ 16.7 $ 36.3
==========================
A reconciliation between the statutory federal income tax rate and the effective
rate is as follows:
(Millions of dollars) 1996
- -----------------------------------------------
% of
Pretax
Amount Income
- -----------------------------------------------
Computed tax expense ...... $ 43.1 35.0
State income tax,
net of federal income
tax benefit ............ 4.3 3.5
Amortization of
investment tax credits . (1.5) (1.2)
Other-- net ............... 1.6 1.3
- -----------------------------------------------
Total income tax expense $ 47.5 38.6
===============================================
(Millions of dollars) 1995
- -----------------------------------------------
% of
Pretax
Amount Income
- -----------------------------------------------
Computed tax expense ....... $ 15.1 35.0
State income tax,
net of federal income
tax benefit ............. 1.3 3.0
Amortization of
investment tax credits .. (1.6) (3.7)
Other-- net ................ 1.9 4.4
- -----------------------------------------------
Total income tax expense $ 16.7 38.7
===============================================
(Millions of dollars) 1994
- -----------------------------------------------
% of
Pretax
Amount Income
- -----------------------------------------------
Computed tax expense ....... $ 33.3 35.0
State income tax,
net of federal income
tax benefit ............. 3.2 3.4
Amortization of
investment tax credits .. (1.5) (1.6)
Other-- net ................ 1.3 1.4
- -----------------------------------------------
Total income tax expense $ 36.3 38.2
===============================================
Components that give rise to the net deferred income tax liability as of
September 30 are as follows:
(Millions of dollars) 1996 1995
- ---------------------------------------------------
Deferred tax liabilities:
Property -- accelerated
depreciation and other
property-related items .... $ 204.4 $ 187.1
Other ........................ 17.2 15.8
- ---------------------------------------------------
Total deferred tax liabilities 221.6 202.9
- ---------------------------------------------------
Deferred tax assets:
Deferred investment
tax credits ............... 11.1 11.7
Alternative minimum tax ...... 11.8 12.3
Other ........................ 30.2 40.1
- ---------------------------------------------------
Total deferred tax assets .... 53.1 64.1
- ---------------------------------------------------
Net deferred tax liability ... $ 168.5 $ 138.8
===================================================
3. Corporate Restructuring
In November 1994 AGL Resources announced a corporate restructuring plan and
began its implementation during fiscal 1995. As a result of the restructuring,
AGLC combined offices, established centralized customer service centers and
reduced the average number of employees through voluntary retirement, severance
programs and attrition. Restructuring costs of $43.1 million, after income
taxes, were recorded during 1995. The principal effects of the restructuring
charges were to increase obligations with respect to pension benefits and
postretirement benefits other than pensions.
During the fourth quarter of fiscal 1996, AGL Resources reviewed its remaining
liabilities with respect to its corporate restructuring plan. As a result, AGL
Resources adjusted its restructuring accruals and reduced operating expenses by
$2.7 million. The remaining balance of restructuring
liabilities as of September
30, 1996, and 1995 was $1 million and $4.8 million, respectively.
4. Employee Benefit Plans
Effective July 1, 1996, the Board of Directors authorized the transfer of the
sponsorship of all employee benefit plans from AGLC to AGL Resources.
Substantially all employees of AGL Resources and its subsidiaries are eligible
to participate in the benefit plans.
AGL Resources has a noncontributory defined benefit retirement plan. The plan's
assets consist primarily of marketable securities, corporate obligations, U.S.
government obligations, insurance contracts, real estate investments and cash
equivalents. The plan provides pension benefits that are based on years of
service and the employee's highest 36 consecutive months' compensation out of
the last 60 months worked. AGL Resources' funding policy is to make the annual
contribution required by applicable regulations and recommended by its actuary.
AGL Resources has an excess benefit plan that is unfunded and provides
supplemental benefits to certain officers after retirement. In September 1994,
AGL Resources established a voluntary early retirement plan for certain officers
of AGL Resources that is unfunded and provides supplemental pension benefits to
participants who elected early retirement. The annual expense and accumulated
benefits of such plans are not significant.
Net periodic pension costs for the plans include service cost, interest cost,
return on pension assets and straight-line amortization of unrecognized initial
net assets over approximately 16 years. Net periodic pension costs include the
following components:
(Millions of dollars) 1996 1995 1994
- ------------------------------------------------------------------
Service cost ...................... $ 4.0 $ 4.5 $ 5.5
Interest cost ..................... 15.8 14.9 13.2
Actual return on assets ........... (19.3) (17.0) (3.3)
Net amortization and
deferral ....................... 6.3 5.9 (6.2)
- ------------------------------------------------------------------
Net periodic
pension cost ................ $ 6.8 $ 8.3 $ 9.2
- ------------------------------------------------------------------
Actuarial assumptions used include:
Discount rate ..................... 7.8% 8.3% 8.3%
Rate of increase in
compensation levels ............ 4.5% 5.0% 5.0%
Expected long-term
rate of return
on assets ...................... 8.3% 8.3% 8.3%
==================================================================
The following schedule sets forth the plans' funded status as of June 30, 1996,
and 1995, and amounts recognized in the consolidated balance sheets as of
September 30, 1996, and 1995:
(Millions of dollars) 1996 1995
- -----------------------------------------------------
Actuarial present value
of benefit obligations
Vested benefit obligation ..... $ 180.5 $ 175.6
- -----------------------------------------------------
Accumulated benefit||
obligation ................. $ 183.2 $ 178.3
- -----------------------------------------------------
Projected benefit obligation .. $ (212.9) $ (207.4)
Plan assets at fair value ..... 181.8 163.9
- -----------------------------------------------------
Plan assets less than projected
benefit obligation ........ (31.1) (43.5)
Unrecognized net loss ......... 26.8 34.1
Remaining unrecognized
net assets at date of
initial adoption ........... (4.5) (5.2)
Unrecognized prior
service cost ............... 3.9 4.3
- -----------------------------------------------------
Accrued pension costs ......... $ (4.9) $ (10.3)
=====================================================
During 1995 a curtailment loss of $6 million and a loss associated with
incentive benefits of $25.3 million were incurred as a result of a corporate
restructuring plan. (See Note 3.) The effect of the curtailment loss and
incentive loss was to increase the accumulated benefit obligation and projected
benefit obligation by $25.3 million and $31.3 million, respectively.
AGL Resources' Retirement Savings Plus Plan (RSP Plan), a 401(k) plan, provides
participants a mechanism for making contributions for retirement savings. Each
participant may contribute amounts up to 15% of eligible compensation. AGL
Resources makes a contribution equal to 65% of the participant's contribution
not to exceed 3.9% of the participant's compensation for the plan year. The
contribution was $3.2 million for 1996, $3.3 million for 1995 and $3.4 million
for 1994.
AGL Resources' Nonqualified Savings Plan (NSP), an unfunded, nonqualified plan
similar to the RSP Plan, was established on July 1, 1995. The NSP provides an
opportunity for eligible employees to make contributions for retirement savings.
AGL Resources' contributions during 1996 and 1995 to the NSP were not
significant.
In January 1988, in connection with a Leveraged Employee Stock Ownership Plan
(LESOP), AGL Resources purchased 2 million shares of its common stock for $11.75
per share, with the proceeds of a loan secured by such common stock. AGL
Resources has not guaranteed the repayment of the loan. The loan is expected to
be repaid from regular cash dividends on AGL Resources' common stock paid to the
LESOP and from contributions to the LESOP, as approved by AGL Resources' Board
of Directors. Contributions to the LESOP were $0.7 million for 1996, $0.8
million for 1995 and $0.8 million for 1994. The principal balance of the loan
was $2.9 million as of September 30, 1996, and $5.3 million as of September 30,
1995. The loan is payable on December 31, 1997.
AGL Resources' Long-Term Stock Incentive Plan (LTSIP) provides that incentive
and nonqualified stock options, restricted stock and stock appreciation rights
may be granted to key employees of AGL Resources and its subsidiaries. The
exercise price of any shares under option must be at least equal to the fair
market value on the date of the grant. The options granted become exercisable
six months after the date of grant and generally expire 10 years after the date
of grant.
Option transactions during the three years ended September 30, 1996, are as
follows:
Shares Exercise Price
- -------------------------------------------------
Outstanding
September 30, 1993 388,344 $ 13.75-21.13
Granted .......... 234,994 18.56
Exercised ........ (4,000) 13.75
Forfeited ........ (21,626) 20.44-20.81
- -------------------------------------------------
Outstanding
September 30, 1994 597,712 $ 13.75-21.13
Granted .......... 325,576 16.00-19.25
Exercised ........ (46,264) 13.75-18.94
Forfeited ........ (11,508) 15.94-20.44
- -------------------------------------------------
Outstanding
September 30, 1995 865,516 $ 13.75-21.13
Granted .......... 299,340 19.75-20.88
Exercised ........ (107,648) 13.75-19.31
Forfeited ........ (43,532) 18.56-20.50
- -------------------------------------------------
Outstanding
September 30, 1996 1,013,676 $ 13.75-21.13
=================================================
As of September 30, 1996, and 1995, there were 1,008,498 and 714,336 options,
respectively, which were exercisable. As of September 30, 1996, 2,859,285 shares
were reserved under the LTSIP.
In addition to providing pension benefits, AGL Resources provides certain health
care and life insurance benefits for retired employees. Substantially all
employees become eligible for those benefits if they reach retirement age while
working for AGL Resources.
In 1993 the Georgia Commission approved a five-year phase-in of Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" (SFAS 106) that defers a portion of
SFAS 106 expense for future recovery. A regulatory asset has been recorded for
the deferred portion of SFAS 106 expense. In 1993 the TRA approved the recovery
of SFAS 106 expense that is funded through an external trust.
Net periodic postretirement benefits costs for fiscal 1996 and 1995 include the
following components:
(Millions of dollars) 1996 1995 1994
- -----------------------------------------------------
Service cost ........... $ 0.8 $ 0.9 $ 1.0
Interest cost .......... 8.8 7.6 6.5
Actual return on assets (0.6) (0.3)
Amortization of
transition obligation 4.2 4.2 4.1
- -----------------------------------------------------
Net postretirement
benefits costs ...... $ 13.2 $ 12.4 $ 11.6
=====================================================
Approximately $10.7 million, $8.7 million and $8.0 million of net periodic
postretirement benefits costs for fiscal 1996, 1995 and 1994, respectively, were
recovered from the utility's customers. The remaining $2.5 million, $3.7 million
and $3.6 million for 1996, 1995 and 1994, respectively, were deferred for future
recovery through amortization and recognized as a regulatory asset in the
financial statements consistent with regulatory decisions. AGL Resources has
funded, through an external trust, SFAS 106 expense recovered from its utility
customers in excess of the pay-as-you-go amounts.
The following schedule sets forth the plan's funded status as of September 30,
1996, and 1995:
(Millions of dollars) 1996 1995
- -------------------------------------------------
Retirees .................. $ 85.8 $ 94.1
Fully eligible active
plan participants ...... 6.4 9.3
Other active plan
participants ........... 13.3 14.5
- -------------------------------------------------
Total accumulated
postretirement benefit
obligation ............. 105.5 117.9
Plan assets at fair value . 10.4 8.0
- -------------------------------------------------
Accumulated postretirement
benefit obligation
in excess of plan assets 95.1 109.9
Unrecognized transition
obligation ............. (69.5) (73.6)
Unrecognized gain (loss) .. 10.6 (6.2)
- -------------------------------------------------
Accrued postretirement
benefits costs ......... $ 36.2 $ 30.1
=================================================
During 1995 a curtailment loss of $22.9 million was incurred as a result of a
corporate restructuring. (See Note 3.) The assumed health care cost trend rate
used in measuring the accumulated postretirement benefit obligation for
pre-Medicare eligibility is 11% in 1996, decreasing 0.5% per year to 6% in the
year 2006 and an additional 0.25% to 5.75% in 2007. The rate for post-Medicare
eligibility is 9.5% in 1996, decreasing 0.5% per year to 5.5% in the year 2004
and an additional 0.25% to 5.25% in 2005. Increasing the assumed health care
cost trend rate by 1% would increase the accumulated postretirement benefit
obligation as of September 30, 1996, by approximately $6 million and the accrued
postretirement benefits cost by approximately $0.5 million for fiscal 1996. The
assumed discount rate used in determining the postretirement benefit obligation
was 7.75% in 1996 and 1995.
5. Common Stock
On March 6, 1996, the Board of Directors of AGL Resources adopted the Rights
Agreement by and between AGL Resources and Wachovia Bank of North Carolina,
N.A., as rights agent. In connection with the agreement, the Board of Directors
declared a dividend of one preferred stock purchase right on each outstanding
share of common stock. The rights dividend was paid on March 22, 1996, to
shareholders of record on that date. The rights, as distributed, are not
exercisable until a distribution date, but in any event, no later than March 6,
2006. A distribution date will occur on the earlier of 10 days following the
public announcement that a person or group of persons has acquired beneficial
ownership of 10% or more of the outstanding shares of common stock or 10 days
following the commencement of or announcement of an intention of an acquiring
person to make a tender or exchange offer, the consummation of which would
result in such acquiring person owning 10% of the outstanding shares of common
stock.
In the event a distribution date occurs, the holder of a right can purchase from
AGL Resources one one-hundredth of a share of Class A Junior Participating
Preferred Stock at a purchase price of $60. Each share of preferred stock is
entitled to a minimum preferential quarterly dividend of $1 per share, but not
less than an aggregate
dividend of 100 times the dividend declared on each share of common stock. Upon
liquidation, the holders of preferred stock will be entitled to a preferential
liquidation payment of $100 per share (plus accrued and unpaid dividends) but
not less than an aggregate payment of 100 times the payment on each share of
common stock. Each share of preferred stock will have 100 votes and will vote
together with common stock on any merger or consolidation or other transaction
in which shares of common stock are converted or exchanged, and each share of
preferred stock will receive 100 times the amount received per share of common
stock. One one-hundredth of a share of preferred stock purchasable upon exercise
of a right is intended to approximate the value of one share of common stock.
In the event that a distribution date occurs and AGL Resources is acquired in a
merger or other business combination, each holder of a right thereafter will
have the right to receive, upon exercise of the right at the then current
exercise price, that number of shares of common stock of the acquiring company,
which number of shares at the time of the transaction will have a market value
of two times the exercise price of the right. In addition, at any time after a
distribution date, the Board of Directors of AGL Resources may exchange the
rights for one share of common stock or one one-hundredth share of preferred
stock per right.
AGL Resources, at any time prior to a distribution date acting through its Board
of Directors, may redeem, in whole but not in part, each right at a purchase
price of $.01 per right. Immediately upon redemption of the rights, the right to
exercise will terminate.
On November 3, 1995, the Board of Directors declared a two-for-one stock split
of the common stock effected in the form of a 100% stock dividend to
shareholders of record on November 17, 1995, and payable on December 1, 1995.
AGL Resources recorded a decrease to premium on capital stock and an increase to
common stock of $137.5 million to transfer the amount of the par value of the
stock dividend to common stock. All references to number of shares and to per
share amounts have been restated retroactively to reflect the stock dividend.
On June 16, 1995, approximately 3 million shares of common stock were issued and
sold at $16.81 per share, resulting in net proceeds of $48.6 million. Proceeds
from that sale of common stock were used to finance capital expenditures and for
other corporate purposes.
AGL Resources also issued 762,553; 1,092,486; and 1,144,270 shares of its common
stock during the years ended September 30, 1996, 1995, and 1994, respectively,
to its Dividend Reinvestment and Stock Purchase Plan, RSP Plan, LTSIP, NSP and
the Non-Employee Directors Equity Compensation Plan.
As of September 30, 1996, 3,523,053 shares of common stock were reserved for
issuance pursuant to the Dividend Reinvestment and Stock Purchase Plan, RSP
Plan, LTSIP, NSP and the Non-Employee Directors Equity Compensation Plan.
6. Preferred Stock
AGLC is required under its charter to offer to purchase or call for redemption
4,100 shares of preferred stock for each of the five years ending September 30,
2001. The issues are callable at the option of AGLC, in whole or in part, upon
30 days' notice. Shares reacquired by AGLC to satisfy future requirements and
reported as if canceled were 6,715; 7,715; and 8,715, as of September 30, 1996,
1995, and 1994, respectively.
AGLC's charter contains provisions limiting the issuance of additional shares of
preferred stock. The most restrictive of those provisions requires gross income,
as defined, for a specified 12-month period to be at least equal to 1.5 times
the sum of annualized interest requirements on outstanding indebtedness and the
dividend requirements on outstanding preferred stock, including the preferred
stock being issued. Based on earnings for fiscal 1996, gross income was 2.47
times the sum of interest and preferred stock dividend requirements.
As of September 30, 1996, AGL Resources had 10 million shares of authorized, but
unissued, Class A Junior Participating Preferred Stock, no par value, and 10
million shares of authorized, but unissued, preferred stock, no par value. As of
September 30, 1996, Atlanta Gas Light Company had 10 million shares of
authorized, but unissued, preferred stock, no par value.
The outstanding preferred stock, net of current maturities, as of September 30
is as follows:
(Millions of dollars) 1996 1995
- -----------------------------------------------------
$100 par or stated value
(callable at option of AGLC)
Redeemable
preferred stock
4.72% -- Current call
price $103.00 ................. $ 1.5 $ 1.5
7.70%-- Current call
price (a) ..................... 44.5 44.5
7.84% -- Current call
price $101.96 ................. 4.6 4.6
8.32% -- Current call
price $102.08 ................. 4.9 4.9
Nonredeemable
preferred stock
4.50% -- Current call
price $105.25 ................. 2.0 2.0
5.00% -- Current call
price $105.00 ...... ......... 1.0 1.0
- -----------------------------------------------------
Total ............................ $ 58.5 $ 58.5
=====================================================
(a) Not redeemable prior to December 1, 1997. Redeemable at par thereafter.
The outstanding shares of preferred stock, net of previously reacquired shares
and shares reacquired during the year for purchase fund requirements, are as
follows:
1996 1995 1994
- -------------------------------------------
4.50% Series
Outstanding 20,000 20,000 20,000
4.72% Series
Outstanding 15,285 15,285 15,285
5.00% Series
Outstanding 10,000 10,000 10,000
7.70% Series
Outstanding 445,000 445,000 445,000
7.84% Series
Outstanding 47,645 47,797 47,802
Reacquired 152 5 1,500
8.32% Series
Outstanding 49,854 50,004 50,004
Reacquired 150 215
- -------------------------------------------
Total
Outstanding 587,784 588,086 588,091
Reacquired 302 5 1,715
===========================================
7. Long-Term Debt
Medium-term notes Series A, Series B and Series C were issued under an Indenture
dated December 1, 1989. The notes are unsecured and rank on a parity with all
other unsecured indebtedness. During 1994, $194.5 million in principal amount of
such notes was issued. The annual maturities of long-term debt for the five
years ending September 30, 2001, are $50 million in 2000 and $20 million in
2001.
The outstanding long-term debt, net of current maturities, as of September 30 is
as follows:
(Millions of dollars) 1996 1995
- --------------------------------------
Medium-term notes
Series A (1) .... $ 60.0 $ 60.0
Series B (2) .... 300.0 300.0
Series C (3) .... 194.5 194.5
- --------------------------------------
Total ........ $ 554.5 $ 554.5
======================================
(1) Interest rates from 8.90% to 9.10% with maturity dates from 2000 to 2021
(2) Interest rates from 7.15% to 8.70% with maturity dates from 2000 to 2023.
(3) Interest rates from 5.90% to 7.20% with maturity dates from 2004 to 2024.
8. Short-Term Debt
Lines of credit with various banks provide for direct borrowings and are subject
to annual renewal. The current lines of credit vary throughout the year from $75
million in the summer months to $253 million for peak winter financing. Certain
of the lines are on a commitment fee basis. As of September 30, 1996, $59.3
million was available on lines of credit.
Short-term borrowings consisted of the following:
(Millions of dollars) 1996 1995 1994
- ---------------------------------------------------------------------------
Short-term debt
outstanding at
end of year .......................... $ 152.0 $ 51.0 $ 95.4
Maximum amounts
of short-term debt
outstanding at any
month end during
the year ............................. 156.3 155.0 229.4
Average amounts
of short-term debt
outstanding during
the year (a) ......................... 87.5 51.5 69.3
- ---------------------------------------------------------------------------
Weighted Average
Interest Rates ............................ 1996 1995 1994
- ---------------------------------------------------------------------------
Short-term debt
outstanding at
end of year .......................... 5.7% 5.9% 5.1%
Average amounts
of short-term debt
outstanding during
the year (a) ......................... 5.8% 5.7% 3.6%
============================================================================
(a) Average amount outstanding during the year calculated based on daily
outstanding balances. Weighted average interest rate during the year calculated
based on interest expense and average amount outstanding during the year.
9. Commitments and Contingencies
In connection with its utility business, AGL Resources has agreements for firm
pipeline and storage capacity that expire at various dates through 2012. The
aggregate amount of required payments under such agreements totals approximately
$1.1 billion, with annual required payments of $225 million in 1997, $218
million in 1998, $156 million in 1999, $107 million in 2000 and $78 million in
2001. Total payments of fixed charges under all agreements were $225 million in
1996, $230 million in 1995 and $232 million in 1994. The purchased gas
adjustment provisions of the utility's rate schedules permit the recovery of gas
costs from customers.
In 1992 the Federal Energy Regulatory Commission (FERC) issued Order 636, which,
among other things, mandated the unbundling of interstate pipeline sales service
and established certain open access transportation regulations that became
effective beginning in the 1993-1994 heating season. Order 636 permits the
utility's pipeline suppliers to pass through any prudently incurred transition
costs, such as unrecovered gas costs, gas supply realignment costs and stranded
costs. The utility estimates its portion of such costs from all of its pipeline
suppliers would approximate $109.9 million based on filings with FERC by the
pipeline suppliers. Approximately $80.6 million of such costs have been incurred
by the utility as of September 30, 1996, recovery of which is provided under the
purchased gas provisions of its rate schedules.
As part of the 1997 Gas Supply Plan, AGLC is authorized to continue limited gas
supply hedging activities. The 1997 hedging program has been expanded beyond the
program approved in the 1996 Gas Supply Plan. The financial results of all
hedging activities are passed through to firm service customers under the
purchased gas provisions of the utility's rate schedules. Accordingly, there is
no earnings impact as a result of the hedging program. Contracts outstanding as
of September 30, 1996, and during the year then ended, were not significant.
As of September 30, 1996, approximately 25% of AGL Resources' and its
subsidiaries' labor force was covered by collective bargaining agreements. A
collective bargaining agreement with the General Teamsters Local Union No. 528
expired on September 15, 1996. A new, four-year contract was finalized on
October 13, 1996. In addition, a new, five-year agreement with the Utility
Workers' Union of America, Local Union No. 461, became effective October 15,
1996.
Total rental expense for property and equipment was $7 million in 1996, $6.3
million in 1995 and $6.5 million in 1994. Minimum annual rentals under
noncancelable operating leases are as follows: 1997 -- $6.1 million; 1998 --
$5.6 million; 1999 -- $4.6 million; 2000 -- $4.1 million; 2001 -- $3.4 million;
and thereafter -- $6.3 million.
AGL Resources and its subsidiaries are involved in litigation arising in the
normal course of business. (See Note 11 regarding Environmental Matters.)
Management
believes that the ultimate resolution of such litigation will not have a
material adverse effect on the consolidated financial statements.
10. Customers' and Suppliers' Refunds
Pursuant to orders of FERC, the utility has received refunds from its interstate
natural gas suppliers. Those refunds are a result of FERC orders adjusting the
price of various pipeline services purchased by the utility from its suppliers
in prior periods. The utility passes the refunds on to its customers under
purchased gas provisions of rate schedules approved by the Georgia Commission
and the TRA.
On August 23, 1995, the Georgia Commission approved a $38.5 million plus
interest refund of deferred purchased gas costs. The refund resulted from the
overrecovery of gas costs through the purchased gas provisions of the utility's
rate schedules. The refund was credited to customers' bills in September 1995.
On September 7, 1994, the Georgia Commission approved a $13.5 million refund of
deferred purchased gas costs. The refund resulted from the overrecovery of gas
costs through the purchased gas provisions of the utility's rate schedules. The
refund was credited to customers' bills in September 1994.
11. Environmental Matters
AGLC has identified nine sites in Georgia where it currently owns all or part of
a manufactured gas plant (MGP) site. In addition, AGLC has identified three
other sites in Georgia that AGLC does not now own, but that may have been
associated with the operation of MGPs by AGLC or its predecessors. There are
three sites in Florida that have been investigated by environmental authorities
in connection with which AGLC may be contacted as a potentially responsible
party. Preliminary assessments and subsequent site investigations have revealed
environmental impacts at and near some of those sites.
Under a thorough analysis of potentially applicable requirements, AGLC has
estimated that, under the most favorable circumstances reasonably possible, the
future cost of investigating and remediating the former MGP sites, excluding
sites for which no remediation is expected or the cost of which cannot be
estimated, could be as low as $30.4 million. Alternatively, AGLC has estimated
that, under the least favorable circumstances reasonably possible, the future
cost of investigating and remediating the same former MGP sites could be as high
as $110.8 million, excluding sites for which no remediation is expected or the
cost of which cannot be estimated. AGLC cannot estimate at this time the amount
of any other future expenses or liabilities, or the impact on those estimates of
future environmental or regulatory changes, that may be associated with or
related to the MGP sites, including expenses or liabilities relating to any
litigation. At the present time, no amount within the $30.4 million to $110.8
million range can be identified as a better estimate than any other estimate.
Therefore, a liability at the low end of this range and a corresponding
regulatory asset have been recorded in the financial statements.
The Georgia Commission has approved the recovery by AGLC of environmental
response costs, pursuant to AGLC's Environmental Response Cost Recovery Rider
(ERCRR). For purposes of the ERCRR, environmental response costs include
investigation, testing, remediation and litigation costs and expenses or other
liabilities relating to or arising from MGP sites. In connection with the ERCRR,
the staff of the Georgia Commission has undertaken a financial and management
process audit related to the MGP sites, cleanup activities at the sites and
environmental response costs that have been incurred for purposes of the ERCRR.
On October 10, 1996, the Georgia Commission issued an order to prohibit funds
collected through the ERCRR from being used for the payment of any damage award,
including punitive damages, as a result of any litigation associated with any of
the MGP sites in which AGLC is involved. AGLC is currently pursuing judicial
review of the October 10, 1996, order.
AGLC is currently a party to claims and litigation related to the former MGP
sites. During fiscal 1996 AGLC recovered $14.7 million from its insurance
carriers and other potentially responsible parties. In accordance with
provisions of the ERCRR, AGLC recognized other income of $2.9 million and
established regulatory liabilities for the remainder of those recoveries. AGLC
intends to continue to pursue insurance coverage and contributions from
potentially responsible parties.
12. Fair Value of Financial Instruments
AGL Resources has estimated the fair value of its financial instruments, the
carrying value of which differed from fair value, using available market
information and appropriate valuation methodologies. Considerable judgment is
required in developing the estimates of fair value presented herein and,
therefore, the values are not necessarily indicative of the amounts that could
be realized in a current market exchange.
The carrying amount and the estimated fair value of such financial instruments
as of September 30, 1996, and 1995, consist of the following:
Carrying Estimated
(Millions of dollars) Amount Fair Value
- ----------------------------------------------------
1996
Long-term debt
including current
portion .................. $ 554.5 $ 566.6
Redeemable
cumulative preferred
stock of AGLC,
including current
portion ................. 55.8 56.9
- ----------------------------------------------------
1995
Long-term debt
including current
portion ................. $ 554.5 $ 571.5
Redeemable
cumulative preferred
stock of AGLC,
including current
portion .................. 55.8 56.6
- ----------------------------------------------------
The estimated fair values are determined based on the following:
Long-term debt -- interest rates that are currently available for issuance of
debt with similar terms and remaining maturities.
Redeemable cumulative preferred stock -- quoted market price and dividend rates
for preferred stock with similar terms.
The fair value estimates presented herein are based on information available to
management as of September 30, 1996. Management is not aware of any subsequent
factors that would affect the estimated fair value amounts significantly.
13. Joint Ventures
During June 1996 Sonat Power Marketing, Inc., and AGL Power Services, Inc., a
wholly owned subsidiary of AGL Investments, Inc., together formed a joint
venture, Sonat Power Marketing L.P. AGL Power Services invested approximately $1
million for a 35% ownership interest in the partnership. Sonat Power Marketing
L.P. provides power marketing and all related services in key market areas
throughout the United States.
During August 1995 AGLC signed an agreement with Sonat Inc. (Sonat) to form a
joint venture to acquire the business of Sonat Marketing Company, a wholly owned
subsidiary of Sonat. The joint venture, Sonat Marketing Company L.P. (Sonat
Marketing), offers natural gas sales, transportation, risk management and
storage services to natural gas users and producers in key natural gas producing
and consuming areas of the United States.
AGLC invested $32.6 million for a 35% ownership interest in Sonat Marketing.
AGLC's 35% investment is being accounted for under the equity method. The excess
of the purchase price over the estimated fair value of the net tangible assets
of approximately $23 million has been allocated to intangible assets consisting
of customer lists and goodwill; those assets are being amortized over 10 and 35
years, respectively.
AGL Investments has certain rights for a period of five years to sell its
interest in Sonat Marketing to Sonat at a predetermined fixed price, as defined,
or for fair market value at any time.
During fiscal 1996 and September 1995, AGL Resources purchased gas totaling
$247.5 million and $23.7 million, respectively, from Sonat Marketing and its
affiliates. As of September 30, 1996, and 1995, AGL Resources had outstanding
obligations payable to Sonat Marketing of $18.8 million and $23.7 million,
respectively.
14. Quarterly Financial Data (Unaudited)
Quarterly financial data for fiscal 1996 and 1995 are summarized as follows:
(Millions, except
per share data) Operating Operating
Quarter Ended Revenues Income
(Loss)
- ---------------------------------------------
1996
December 31, 1995 ........ $ 328.8 $ 59.2
March 31, 1996 ........... 478.8 79.0
June 30, 1996 ............ 241.1 17.2
September 30, 1996 ....... 171.5 6.9
- ---------------------------------------------
1995 (a)
December 31, 1994 ........ $ 328.8 $ 14.7
March 31, 1995 ........... 448.2 67.3
June 30, 1995 ............ 177.5 13.3
September 30, 1995 (b) .. 108.5 (2.4)
- ---------------------------------------------
Earnings
(Loss)
Net Per Share of
Income Common Stock
Quarter Ended (Loss) (c)
- ---------------------------------------------
1996
December 31, 1995 ..... $ 29.1 $ 0.53
March 31, 1996 ........ 45.0 0.81
June 30, 1996 ......... 3.6 0.06
September 30, 1996 (d) (2.1) (0.04)
1995 (a)
- ---------------------------------------------
December 31, 1994 ..... $ 0.7 $ 0.01
March 31, 1995 ........ 36.2 0.70
June 30, 1995 ......... 0.3 0.01
September 30, 1995 .... (10.8) (0.20)
- ---------------------------------------------
(a) Quarterly operating income (loss) for 1995 includes the effects charges for
of restructuring costs as follows: $44.5 million for the quarter ended December
31, 1994; $23.0 million for the quarter ended March 31, 1995; $1.7 million for
the quarter ended June 30, 1995; and $1.1 million for the quarter ended
September 30, 1995.
Quarterly net income (loss) and earnings per share data for 1995 include the
effects of charges for restructuring costs as follows: $28.4 million and $0.56
for the quarter ended December 31, 1994; $13.0 million and $0.25 for the quarter
ended March 31, 1995; $1.1 million and $0.02 for the quarter ended June 30,
1995; and $0.6 million and $0.01 for the quarter ended September 30, 1995.
Earnings per share have been adjusted to reflect the effects of a two-for-one
stock split. (See Note 5.) The wide variance in quarterly earnings results from
the highly seasonal nature of AGL Resources' primary business.
(b) During the fourth quarter of fiscal 1995, AGLC recorded a refund to its
customers of $38.5 million plus interest. (See Note 10.)
(c) Earnings per share are calculated based on the weighted average number of
shares outstanding during the quarter. That total differs from the earnings per
share, as shown on the statements of consolidated income, which is based on the
weighted average number of shares outstanding for the entire year.
(d) During the fourth quarter of fiscal 1996, AGL Resources increased net income
and earnings per share by $1.6 million and $.03, respectively, as a result of a
review of remaining liabilities in connection with a corporate restructuring
plan. (See Note 3.)
In addition, net income and earnings per share were increased during the fourth
quarter of fiscal 1996 by $1.6 million and $.03, respectively, in connection
with recoveries from insurers in accordance with provisions of an environmental
response cost recovery rider. (See Note 11.)
Independent Auditors' Report
To the Shareholders and Board of Directors of AGL Resources Inc.: We have
audited the accompanying consolidated balance sheets of AGL Resources Inc. and
subsidiaries as of September 30, 1996 and 1995, and the related statements of
consolidated income, common stock equity, and cash flows for each of the three
years in the period ended September 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits in accordance with generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion. In our opinion, such
consolidated financial statements present fairly, in all material respects, the
financial position of AGL Resources Inc. and subsidiaries as of September 30,
1996 and 1995, and the results of its operations and its cash flows for each of
the three years in the period ended September 30, 1996, in conformity with
generally accepted accounting principles.
Atlanta, Georgia
November 5, 1996 DELOITTE & TOUCHE LLP
Management's Responsibility for Financial Reporting
The consolidated financial statements and related information are the
responsibility of management. The financial statements have been prepared in
conformity with generally accepted accounting principles appropriate in the
circumstances. The financial information contained elsewhere in this Annual
Report is consistent with that in the financial statements. The Company
maintains a system of internal accounting controls designed to provide
reasonable assurance that assets are safeguarded from loss and that transactions
are executed and recorded in accordance with established procedures. The concept
of reasonable assurance is based on the recognition that the cost of maintaining
a system of internal accounting controls should not exceed related benefits. The
system of internal accounting controls is supported by written policies and
guidelines. The financial statements have been audited by Deloitte & Touche LLP,
independent auditors. Their audits were made in accordance with generally
accepted auditing standards, as indicated in the Independent Auditors' Report,
and included a review of the system of internal accounting controls and tests of
transactions to the extent they considered necessary to carry out their
responsibilities. The Board of Directors pursues its responsibility for reported
financial information through its Audit Committee. The Audit Committee meets
periodically with management and the independent auditors to assure that they
are carrying out their responsibilities and to discuss internal accounting
controls, auditing and financial reporting matters.
David R. Jones J. Michael Riley
President and Chief Executive Vice President and Chief Financial
Officer Officer
SELECTED FINANCIAL DATA
For the years ended September 30,
In millions, except per share amounts 1996 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------------
Income Statement Data
Operating revenues ............................. $ 1,220.2 $ 1,063.0 $ 1,199.9 $ 1,130.3 $ 994.6 $ 963.8
Cost of gas .................................... 720.3 571.8 736.8 701.0 590.5 579.9
- ----------------------------------------------------------------------------------------------------------------------------------
Operating margin ............................... 499.9 491.2 463.1 429.3 404.1 383.9
- ----------------------------------------------------------------------------------------------------------------------------------
Other operating expenses
Operation .................................... 220.8 213.5 207.0 187.6 170.7 165.2
Restructuring costs .......................... 70.3
Maintenance .................................. 29.4 30.4 32.8 30.9 29.5 28.6
Depreciation ................................. 62.5 58.5 55.4 58.8 54.9 50.2
Taxes other than income taxes ................ 24.9 25.6 26.0 23.9 23.2 19.2
- ----------------------------------------------------------------------------------------------------------------------------------
Total other operating expenses ............. 337.6 398.3 321.2 301.2 278.3 263.2
- ----------------------------------------------------------------------------------------------------------------------------------
Operating income ............................... 162.3 92.9 141.9 128.1 125.8 120.7
- ----------------------------------------------------------------------------------------------------------------------------------
Other income ................................... 14.3 2.1 5.2 6.6 2.8 2.0
- ----------------------------------------------------------------------------------------------------------------------------------
Income before interest and income taxes ........ 176.6 95.0 147.1 134.7 128.6 122.7
- ----------------------------------------------------------------------------------------------------------------------------------
Interest expense and preferred stock dividends . 53.5 51.9 52.1 51.0 48.4 48.0
- ----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes ..................... 123.1 43.1 95.0 83.7 80.2 74.7
- ----------------------------------------------------------------------------------------------------------------------------------
Income taxes ................................... 47.5 16.7 36.3 30.5 25.8 26.4
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income ..................................... 75.6 26.4 58.7 53.2 54.4 48.3
Common dividends paid .......................... 58.6 54.2 52.2 51.1 49.6 47.4
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings reinvested ............................ $ 17.0 $ (27.8) $ 6.5 $ 2.1 $ 4.8 $ 0.9
==================================================================================================================================
Common Stock Data(1)
Weighted average shares outstanding ............ 55.3 52.4 50.2 49.2 48.2 46.6
Earnings per share ............................. $ 1.37 $ 0.50 $ 1.17 $ 1.08 $ 1.13 $ 1.04
Dividends paid per share ....................... $ 1.06 $ 1.04 $ 1.04 $ 1.04 $ 1.03 $ 1.02
Dividend payout ratio .......................... 77.4% 208.0% 88.9% 96.3% 91.2% 98.1%
Book value per share(2) ........................ $ 10.56 $ 10.15 $ 10.20 $ 9.90 $ 9.70 $ 9.42
Market value per share(2) ...................... $ 19.13 $ 19.31 $ 15.31 $ 18.81 $ 18.81 $ 17.19
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Balance Sheet Data(2)
Total assets ................................... $ 1,824.7 $ 1,674.6 $ 1,642.9 $ 1,533.0 $ 1,428.6 $ 1,350.3
Long-term liabilities
Take-or-pay charges payable .................. $ 5.0 $ 15.0
Accrued environmental response costs ......... $ 30.4 $ 28.6 $ 24.3 $ 19.6 $ 25.0
Accrued pension costs ........................ $ 4.9 $ 10.3
Accrued postretirement benefits costs ........ $ 36.2 $ 30.1 $ 3.6
Deferred credits ............................. $ 60.9 $ 65.6 $ 66.6 $ 42.3 $ 43.8 $ 47.6
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Capitalization
Long-term debt ............................... $ 554.5 $ 554.5 $ 569.5 $ 500.7 $ 476.5 $ 458.3
Preferred stock of subsidiary -- redeemable .. 55.8 55.8 55.8 56.0 11.5 12.8
-- nonredeemable 3.0 3.0 3.0 3.0 3.0 3.0
Common equity ................................ 588.3 557.3 518.5 492.0 472.1 448.2
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Total ...................................... $ 1,201.6 $ 1,170.6 $ 1,146.8 $ 1,051.7 $ 963.1 $ 922.3
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Financial Ratios(2)
Capitalization
Long-term debt ............................... 46.1% 47.4% 49.6% 47.6% 49.5% 49.7%
Preferred stock of subsidiary -- redeemable .. 4.6 4.8 4.9 5.3 1.2 1.4
-- nonredeemable 0.3 0.2 0.3 0.3 0.3 0.3
Common equity ................................ 49.0 47.6 45.2 46.8 49.0 48.6
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Total ...................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
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Return on average common equity ................ 13.2% 4.9% 11.6% 11.0% 11.8% 11.4%
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Times charges earned before income taxes(3)
Total interest ............................... 3.58 1.99 3.08 2.86 2.66 2.56
Total interest and preferred dividends ....... 3.28 1.83 2.82 2.63 2.60 2.50
Fixed(4) ..................................... 3.47 1.95 3.00 2.80 2.62 2.53
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(1) Adjusted for two-for-one stock split paid in the form of 100% stock
dividends on December 1, 1995. (2) Year end. (3) Interest charges exclude the
debt portion of allowance for funds used during construction. (4) Fixed charges
consist of interest on short- and long-term debt, other interest and the
estimated interest component of rentals.
GAS SALES AND STATISTICS
For the years ended September 30,
In millions, except per share amounts 1996 1995 1994 1993 1992 1991
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Operating Revenues (millions of dollars)
Sales of gas
Residential .................................. $ 708.8 $ 610.6 $ 700.7 $ 658.2 $ 575.7 $ 550.2
Commercial ................................... 288.8 243.2 285.8 268.1 231.5 226.0
Industrial ................................... 178.8 169.4 172.1 154.2 140.9 144.1
Transportation revenues ........................ 21.5 23.9 22.6 33.8 36.6 37.8
Miscellaneous revenues ......................... 19.7 15.9 18.7 16.0 9.9 5.7
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Total utility operating revenues ........... 1,217.6 1,063.0 1,199.9 1,130.3 994.6 963.8
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Other operating revenues ................... 2.6
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Total operating revenues ................. $ 1,220.2 $ 1,063.0 $ 1,199.9 $ 1,130.3 $ 994.6 $ 963.8
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Utility Throughput
Therms sold (millions)
Residential .................................. 1,165.4 916.8 1,003.1 1,001.4 915.4 819.5
Commercial ................................... 538.2 454.0 478.9 478.5 433.9 402.8
Industrial ................................... 449.6 526.0 424.8 388.7 445.0 455.1
Therms transported ............................. 738.7 722.8 697.4 795.6 901.8 862.6
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Total utility throughput ................. 2,891.9 2,619.6 2,604.2 2,664.2 2,696.1 2,540.0
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Average Utility Customers (thousands)
Residential .................................... 1,289.4 1,250.4 1,215.2 1,182.7 1,152.2 1,124.0
Commercial ..................................... 102.5 100.0 98.0 95.7 93.7 92.0
Industrial ..................................... 2.6 2.6 2.5 2.5 2.5 2.5
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Total .................................... 1,394.5 1,353.0 1,315.7 1,280.9 1,248.4 1,218.5
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Sales, Per Average Residential Customer
Gas sold (therms) .............................. 904 733 825 847 794 729
Revenue (dollars) .............................. 550.00 488.32 576.61 556.52 499.65 489.50
Revenue per therm (cents) ...................... 60.8 66.6 69.9 65.7 62.9 67.1
Degree Days -- Atlanta Area
30-year normal ................................. 2,991 2,991 2,991 3,021 3,021 3,021
Actual ......................................... 3,191 2,121 2,565 2,852 2,552 2,273
Percentage of actual to 30-year normal ......... 106.7 70.9 85.8 94.4 84.5 75.2
Gas Account (millions of therms)
Natural gas purchased .......................... 1,632.9 1,406.9 1,453.6 1,629.9 1,555.4 1,563.0
Natural gas withdrawn from storage ............. 596.0 520.7 500.3 276.4 263.3 148.2
Gas transported ................................ 738.7 722.8 697.4 795.6 901.8 862.6
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Total send-out ........................... 2,967.6 2,650.4 2,651.3 2,701.9 2,720.5 2,573.8
Less
Unaccounted for .............................. 60.4 20.4 37.2 29.0 16.2 24.4
Company use .................................. 15.3 10.4 9.9 8.7 8.2 9.4
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Sold and transported to utility customers 2,891.9 2,619.6 2,604.2 2,664.2 2,696.1 2,540.0
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Cost of Gas (millions of dollars)
Natural gas purchased .......................... $ 547.1 $ 389.4 $ 550.1 $ 595.7 $ 487.9 $ 502.5
Natural gas withdrawn from storage ............. 171.6 182.4 186.7 105.3 102.6 77.4
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Cost of gas-- utility operations ............... 718.7 571.8 736.8 701.0 590.5 579.9
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Cost of gas -- other ........................... 1.6
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Total cost of gas ........................ $ 720.3 $ 571.8 $ 736.8 $ 701.0 $ 590.5 $ 579.9
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Utility Plant -- End of Year (millions of dollars)
Gross plant .................................... $ 1,969.0 $ 1,919.9 $ 1,833.2 $ 1,740.6 $ 1,634.8 $ 1,517.0
Net plant ...................................... $ 1,361.2 $ 1,336.6 $ 1,279.6 $ 1,217.9 $ 1,157.4 $ 1,081.4
Gross plant investment per customer
(thousands of dollars) ....................... $ 1.4 $ 1.4 $ 1.4 $ 1.4 $ 1.3 $ 1.2
Capital Expenditures (millions of dollars) ....... $ 132.5 $ 121.7 $ 122.5 $ 122.2 $ 132.9 $ 141.9
Gas Mains-- Miles of 3" Equivalent ............... 29,045 28,520 27,972 27,390 26,936 26,623
Employees-- Average .............................. 2,942 3,249 3,764 3,764 3,794 3,820
Average Btu Content of Gas ....................... 1,024 1,027 1,032 1,027 1,024 1,025
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Shareholder Information
Stock Listing
AGL Resources Inc.'s common stock is traded on the New York Stock Exchange
(NYSE) under the symbol ATG. It appears in newspaper financial section stock
listings as AGL Res.
Ownership
Approximately 55.7 million outstanding shares of AGL Resources' common stock are
owned by 16,760 shareholders of record in 50 states, the District of Columbia
and eleven foreign countries.
Market Prices and Dividends
The following table reflects the quarterly high and low closing sales prices, as
reported in the listing of the NYSE composite transactions for shares of common
stock for fiscal 1996 and 1995, and the quarterly dividends paid per share.
Dividends
Paid
Quarter Ended High Low Per Share
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1996
September 30, 1996 .... $ 20.88 $ 17.38 $ .265
June 30, 1996 ......... 19.00 17.13 .265
March 31, 1996 ........ 20.25 17.63 .265
December 31, 1995 ..... 19.88 18.88 .265
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1995
September 30, 1995 .... $ 17.63 $ 15.19 $ .26
June 30, 1995 ......... 18.25 16.81 .26
March 31, 1995 ........ 19.31 17.06 .26
December 31, 1994 ..... 19.44 17.31 .26
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Annual Meeting
The 1997 Annual Meeting of Shareholders will be held February 7, 1997, at AGL
Resources' offices, 303 Peachtree Street, N.E., Atlanta, Georgia. Proxies for
the meeting of shareholders are being solicited by the Board of Directors. A
formal notice of the meeting, proxy statement and proxy card have been mailed
with the 1996 Annual Report.
Shareholder Reports, Form 10-K and Inquiries
Additional copies of this report and the Form 10-K Annual Report to the
Securities and Exchange Commission (excluding exhibits) can be obtained by
writing to or calling the Corporate Secretary's Office, AGL Resources Inc., Post
Office Box 4569, Atlanta,GA 30302-4569, (404) 584-3794. Shareholder inquiries
also may be directed to the Corporate Secretary's office or to our toll-free
shareholder service number: (800) 633-4236.
Dividend Reinvestment and Stock Purchase Plan
AGL Resources' Dividend Reinvestment and Stock Purchase Plan provides common
shareholders with an economical and convenient method for purchasing additional
shares of common stock without paying any brokerage fees or service charges.
Dividends reinvested through the plan are used to purchase shares of common
stock directly from AGL Resources. For a plan prospectus and enrollment
application, shareholders should contact Wachovia Shareholder Services at the
address below.
Transfer Agent, Registrar and Dividend Disbursing
Agent AGL Resources' transfer agent is Wachovia Bank of North Carolina, N.A.
Correspondence and requests for transfer should be directed to
Wachovia Shareholder Services
Post Office Box 8217
Boston, MA 02266-8217
(800) 633-4236
Direct deposit of cash dividends and automated stock purchase services are
available from the transfer agent above.
Financial Inquiries
Financial analysts
and professional investment managers are invited to contact
J. Michael Riley
Vice President and Chief Financial Officer
AGL Resources Inc.
Post Office Box 4569
Atlanta, GA 30302-4569
(404) 584-3954
OFFICERS OF AGL RESOURCES INC. AND SUBSIDIARIES
EXECUTIVE OFFICERS OF AGL RESOURCES INC.
David R. Jones (36) President and Chief Executive Officer
Charles W. Bass (26) Executive Vice President and Chief Operating Officer
Thomas H. Benson (26) Executive Vice President, and
Chief Operating Officer of Atlanta Gas Light Company
Robert L. Goocher (24) Executive Vice President, and
Chief Operating Officer of AGL Resources Service
Company
GENERAL OFFICERS OF AGL RESOURCES INC.
Stephen J. Gunther (11) Vice President, and
President 0f AGL Energy Services, Inc.
Clayton H. Preble (26) Vice President, and
President of The Energy Spring, Inc.
Richard H. Woodward (26) Vice President, and
President of AGL Investments, Inc.
Peter L. Banks (14) Vice President, External Affairs
Mark D. Caudill (4) Vice President, Regulatory Affairs
H. Edwin Overcast (7) Vice President, Strategic Planning and Rates
Melanie M. Platt (1) Corporate Secretary
J. Michael Riley (23) Vice President and Chief Financial Officer
James S. Thomas, Jr. (10) Vice President, Legal
ATLANTA GAS LIGHT COMPANY
Isaac Blythers (23) Vice President, Metro Region
Jerry B. Brown (21) Vice President, Georgia Region
Michael D. Hutchins (23) Vice President, Operations and Engineering
Charlie J. Lail (32) Senior Vice President, Operations Improvement
Catherine Land-Waters (14) Vice President, Customer Service
AGL RESOURCES SERVICE COMPANY
Verlene P. Cobb (33) Vice President, Corporate Communications
James W. Connally (26) Vice President, Human Resources
Gerald A. Hinesley (17) Controller
John H. Mobley, Jr. (1) Vice President, Information Systems
Charles C. Moore, Jr. (28) Treasurer
Marvin M. Wyatt, Jr. (26) Vice President, Operations Support
CHATTANOOGA GAS COMPANY
Harrison F. Thompson (26) President
Number in parentheses denotes full years of service as of September 30, 1996.
Graph appearing on page 22 reflects consolidated operating revenues, operating
expenses and operating expenses as a percentage of operating revenues for the
fiscal years ended September 30,1994 through 1996, inclusive. Data presented is
as follows:
In millions of dollars 1994 1995(a) 1996
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Operating Revenues 1,200 1,063 1,220
Operating Expenses 1,058 970 1,058
%Operating Expenses to
Operating Revenues 88% 91% 87%
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(a) Operating expenses include restructuring costs of $70.3 million
Graph appearing on page 22 reflects common stock market value, book value and %
market to book value for the fiscal years ended September 30, 1994, through
1996, inclusive. Data presented is as follows:
In dollars per share 1994 1995 1996
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Market value per share $15.31 $19.31 $19.13
Book value per share 10.20 10.15 10.56
% market value to book
value 150% 190% 181%
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