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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004
or
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-7296
NORTHERN ILLINOIS GAS COMPANY
(Doing business as Nicor Gas Company)
(Exact name of registrant as specified in its charter)
Illinois 36-2863847
(State of Incorporation) (I.R.S. Employer
Identification Number)
1844 Ferry Road
Naperville, Illinois 60563-9600 (630) 305-9500
(Address of principal executive offices) (Registrant's telephone number)
The registrant meets the conditions set forth in General Instruction
H(1)(a) of Form 10-Q and is therefore filing this Form with a reduced disclosure
format.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in rule 12b-2 of the Act). Yes [ ] No [X].
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. Common stock, par value $5,
outstanding at April 23, 2004, were 15,232,414 shares, all of which are owned by
Nicor Inc.
Nicor Gas Company Page i
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Table of Contents
Part I - Financial Information
Item 1. Financial Statements - (Unaudited) .............................. 1
Consolidated Statements of Operations:
Three months ended
March 31, 2004 and 2003 ......................................... 2
Consolidated Statements of Cash Flows:
Three months ended
March 31, 2004 and 2003 ......................................... 3
Consolidated Balance Sheets:
March 31, 2004 and 2003, and
December 31, 2003 ............................................... 4
Notes to the Consolidated Financial Statements .................... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .............................13
Item 4. Controls and Procedures .........................................20
Part II - Other Information
Item 1. Legal Proceedings ...............................................21
Item 6. Exhibits and Reports on Form 8-K ................................21
Signature .........................................................22
Exhibit Index .....................................................23
Glossary
Degree day......The extent to which the daily average temperature falls below
65 degrees Fahrenheit. Normal weather for Nicor Gas' service
territory is about 6,000 degree days per year.
ICC.............Illinois Commerce Commission, the agency that regulates
investor-owned Illinois utilities.
FERC............Federal Energy Regulatory Commission, the agency that regulates
the interstate transportation of natural gas, oil and
electricity.
Mcf, MMcf, Bcf..Thousand cubic feet, million cubic feet, billion cubic feet.
PBR.............Performance-based rate, a regulatory plan that provided
economic incentives based on natural gas cost performance.
Nicor Gas Company Page 1
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The following condensed unaudited consolidated financial statements of Nicor Gas
have been prepared by the company pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC). Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
condensed or omitted pursuant to SEC rules and regulations. The condensed
financial statements should be read in conjunction with the financial statements
and the notes thereto included in the company's 2003 Annual Report on Form
10-K/A (Amendment No. 1).
The information furnished reflects, in the opinion of the company, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair statement of the results for the interim periods presented. Results for the
interim periods presented are not necessarily indicative of the results to be
expected for the full fiscal year due to seasonal and other factors.
Nicor Gas Company Page 2
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Consolidated Statements of Operations (Unaudited)
(millions)
Three months ended
March 31
--------------------
2004 2003
--------- ---------
Operating revenues (includes revenue taxes
of $70.9 and $62.4, respectively) $ 1,035.1 $ 1,096.7
--------- ---------
Operating expenses
Cost of gas 792.2 862.9
Operating and maintenance 63.3 58.5
Depreciation 37.3 36.0
Taxes, other than income taxes 74.6 65.9
Mercury-related costs (recoveries), net (.1) (.3)
Income taxes 20.6 23.3
--------- ---------
987.9 1,046.3
--------- ---------
Operating income 47.2 50.4
--------- ---------
Other income (expense), net
Interest income .3 .5
Other, net (.4) (.3)
Income taxes on other income .1 -
--------- ---------
- .2
--------- ---------
Interest expense
Interest on debt, net of amounts capitalized 9.9 8.5
Other .8 .6
--------- ---------
10.7 9.1
--------- ---------
Net income 36.5 41.5
Dividends on preferred stock - .1
--------- ---------
Earnings applicable to common stock $ 36.5 $ 41.4
========= =========
The accompanying notes are an integral part of these statements.
Nicor Gas Company Page 3
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Consolidated Statements of Cash Flows (Unaudited)
(millions)
Three months ended
March 31
------------------
2004 2003
-------- -------
Operating activities
Net income $ 36.5 $ 41.5
Adjustments to reconcile net income to net cash flow
provided from operating activities:
Depreciation 37.3 36.0
Deferred income tax expense 4.3 3.6
Changes in:
Receivables, less allowances (8.8) (189.6)
Gas in storage 201.1 13.0
Deferred/accrued gas costs 38.0 (93.3)
Prepaid pension costs (1.1) -
Other assets 16.0 18.3
Accounts payable (94.6) 34.2
Temporary last-in, first-out liquidation 195.9 258.6
Other liabilities 5.1 (9.6)
Other .4 .3
-------- -------
Net cash flow provided from operating activities 430.1 113.0
-------- -------
Investing activities
Capital expenditures (32.3) (34.9)
-------- -------
Net cash flow used for investing activities (32.3) (34.9)
-------- -------
Financing activities
Short-term borrowings (repayments), net (519.0) (125.0)
Dividends paid (15.0) (21.1)
-------- -------
Net cash flow used for financing activities (534.0) (146.1)
-------- -------
Net decrease in cash and cash equivalents (136.2) (68.0)
Cash and cash equivalents, beginning of period 141.0 182.2
-------- -------
Cash and cash equivalents, end of period $ 4.8 $ 114.2
======== =======
The accompanying notes are an integral part of these statements.
Nicor Gas Company Page 4
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Consolidated Balance Sheets (Unaudited)
(millions)
March 31 December 31 March 31
2004 2003 2003
--------- ---------- --------
Assets
Gas distribution plant, at cost $ 3,719.2 $ 3,694.8 $ 3,589.9
Less accumulated depreciation 1,368.2 1,349.6 1,305.6
---------- -------- --------
2,351.0 2,345.2 2,284.3
---------- -------- --------
Current assets
Cash and cash equivalents - affiliates - 97.5 72.6
Cash and cash equivalents - other 4.8 43.5 41.6
Receivables, less allowances of $27.3,
$19.4 and $23.3, respectively 410.4 384.9 572.8
Receivables - affiliates 7.7 24.4 9.9
Gas in storage, at last-in, first-out
(LIFO) cost 8.0 209.1 5.6
Deferred gas costs - - 26.0
Deferred income taxes 40.5 41.9 30.9
Other 17.2 27.5 10.2
---------- -------- --------
488.6 828.8 769.6
---------- -------- --------
Prepaid pension costs 178.2 177.1 177.1
Other assets 60.3 66.6 66.5
---------- -------- --------
$ 3,078.1 $ 3,417.7 $ 3,297.5
========== ======== ========
Capitalization and Liabilities
Capitalization
Long-term obligations
Long-term bonds and notes $ 494.9 $ 495.1 $ 396.3
Mandatorily redeemable preferred stock 5.1 5.1 -
---------- -------- --------
500.0 500.2 396.3
---------- -------- --------
Preferred stock
Mandatorily redeemable preferred stock - - 5.6
Non-redeemable preferred stock 1.4 1.4 1.4
---------- -------- --------
1.4 1.4 7.0
---------- -------- --------
Common equity
Common stock 76.2 76.2 76.2
Paid-in capital 108.1 108.1 108.0
Retained earnings 465.7 442.3 450.9
Accumulated other comprehensive
income (loss) (1.5) (1.5) (1.1)
---------- -------- --------
648.5 625.1 634.0
---------- -------- --------
1,149.9 1,126.7 1,037.3
---------- -------- --------
Current liabilities
Long-term obligations due within one year .5 .5 100.5
Short-term borrowings 56.0 575.0 190.0
Accounts payable 213.2 307.8 495.9
Temporary LIFO liquidation 195.9 - 258.6
Accrued gas costs 85.0 47.0 -
Dividends payable 13.0 15.0 15.1
Other 40.2 31.5 48.8
---------- -------- --------
603.8 976.8 1,108.9
---------- -------- --------
Deferred credits and other liabilities
Accrued future removal costs 682.0 670.0 635.0
Deferred income taxes 417.5 414.5 257.5
Regulatory income tax liability 47.5 48.4 61.3
Unamortized investment tax credits 34.9 35.6 37.0
Other 142.5 145.7 160.5
---------- -------- --------
1,324.4 1,314.2 1,151.3
---------- -------- --------
$ 3,078.1 $ 3,417.7 $ 3,297.5
========== ======== ========
The accompanying notes are an integral part of these statements.
Nicor Gas Company Page 5
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Notes to the Consolidated Financial Statements (Unaudited)
The following notes should be read in conjunction with the financial statement
notes included in the Nicor Gas 2003 Annual Report on Form 10-K/A (Amendment No.
1). Nicor Gas is a wholly owned subsidiary of Nicor Inc. (Nicor). Results for
the interim periods presented are not necessarily indicative of the results to
be expected for the full fiscal year due to seasonal and other factors.
1. ACCOUNTING POLICIES
Gas in storage. Gas in storage inventory is carried at cost applying a last-in,
first-out (LIFO) method on a calendar-year basis. For interim periods, the
difference between estimated replacement cost and the LIFO cost for quantities
of gas temporarily withdrawn from storage is recorded in cost of gas and in
current liabilities as a temporary LIFO liquidation.
Regulatory assets and liabilities. Nicor Gas is regulated by the Illinois
Commerce Commission (ICC), which establishes the rules and regulations governing
utility rates and services in Illinois. The company applies accounting standards
that recognize the economic effects of rate regulation and, accordingly, has
recorded regulatory assets and liabilities. The company had regulatory assets
(liabilities) as follows (in millions):
March 31 December 31 March 31
2004 2003 2003
----------- ------------ -----------
Accrued future removal costs $ (682.0) $ (670.0) $ (635.0)
Deferred (accrued) gas cost (85.0) (47.0) 26.0
Regulatory income tax liability (47.5) (48.4) (61.3)
Deferred environmental costs 31.8 37.0 39.1
Unamortized losses on reacquired
debt 20.7 20.9 18.8
Other .2 - -
----------- ------------ ----------
$ (761.8) $ (707.5) $ (612.4)
=========== ============ ==========
Deferred environmental costs and unamortized losses on reacquired debt are
classified in other noncurrent assets. At December 31, 2003, accrued future
removal costs for all periods presented were reclassified from accumulated
depreciation to a noncurrent liability to conform to new guidance issued to the
utility industry. Accrued future removal costs at March 31, 2003 have similarly
been reclassified to conform to that presentation.
Revenue taxes. Nicor Gas classifies revenue taxes billed to customers as
operating revenues and related taxes due as operating expenses. Revenue taxes
included in operating expense for the quarters ended March 31, 2004 and 2003
were $69.5 million and $61.5 million, respectively.
2. NEW ACCOUNTING PRONOUNCEMENTS
Consolidation of Variable Interest Entities. In December 2003, the Financial
Accounting Standards Board (FASB) issued Interpretation 46(R), Consolidation of
Variable Interest Entities (FIN 46R). FIN 46R addresses the application of
Accounting Research Bulletin 51, Consolidated Financial Statements, to certain
entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support. FIN 46R was effective for Nicor Gas on January 1, 2004, and had no
impact on the company's financial position or results of operations.
Nicor Gas Company Page 6
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Notes to the Consolidated Financial Statements (Unaudited) (continued)
3. ACCRUED UNBILLED REVENUES
Receivables include accrued unbilled revenues of $95.5 million, $139 million and
$164.2 million at March 31, 2004, December 31, 2003, and March 31, 2003,
respectively. Nicor Gas accrues revenues for estimated deliveries to customers
from the date of their last bill until the balance sheet date.
4. OTHER INCOME (EXPENSE), NET
Other income (expense), net consisted of the following (in millions):
Three months ended
March 31
------------------
2004 2003
-------- --------
Interest income $ .3 $ .5
Other income .3 .1
Other expense (.7) (.4)
Related income tax benefit (expense) .1 -
-------- --------
$ - $ .2
======== ========
5. COMPREHENSIVE INCOME
Total comprehensive income, as defined by FAS 130, Reporting Comprehensive
Income, is equal to net income plus other comprehensive income and was as
follows (in millions):
Three months ended
March 31
------------------
2004 2003
-------- --------
Net income $ 36.5 $ 41.5
Net other comprehensive income
(loss), after tax - (.2)
------- --------
Total comprehensive income $ 36.5 $ 41.3
======== ========
Net other comprehensive income (loss) consists primarily of unrealized gains and
losses from derivative financial instruments accounted for as cash flow hedges.
Nicor Gas Company Page 7
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Notes to the Consolidated Financial Statements (Unaudited) (continued)
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The recorded amount of short-term investments and short-term borrowings
approximates fair value because of the short maturity of the instruments.
Long-term debt outstanding, including current maturities, is recorded at the
principal balance outstanding. The principal balance of Nicor Gas' First
Mortgage Bonds outstanding was $500 million at March 31, 2004 and December 31,
2003, and $450 million at March 31, 2003. Based on quoted market interest rates,
the fair value of the company's First Mortgage Bonds outstanding, including
current maturities, was approximately $546 million, $530 million and $487
million at March 31, 2004, December 31, 2003 and March 31, 2003, respectively.
7. POSTRETIREMENT BENEFITS
Nicor Gas maintains a noncontributory defined benefit pension plan covering
substantially all employees hired prior to 1998. Pension benefits are based on
years of service and highest average salary for management employees and job
level for unionized employees. The benefit obligation related to collectively
bargained benefits considers the company's past practice of regular benefit
increases to reflect current wages. Nicor Gas also provides health care and life
insurance benefits to eligible retired employees under a plan that includes a
limit on the company's share of cost for most future retirees. The company's
postretirement benefit costs have been considered in rate proceedings on the
accrual basis.
About one-fourth of the net periodic benefit cost or credit related to these
plans has been capitalized as a cost of constructing gas distribution facilities
and the remainder is included in gas distribution operating and maintenance
expense. Net periodic benefit cost (credit) included the following components
(in millions):
Pension
benefits Other benefits
--------------- ----------------
2004 2003 2004 2003
------- ------- ------- -------
Three months ended March 31
Service cost $ 2.2 $ 1.8 $ .6 $ .5
Interest cost 4.0 4.1 2.5 2.8
Expected return on plan assets (8.0) (7.2) (.2) (.3)
Recognized net actuarial loss .5 1.1 1.2 .7
Amortization of unrecognized
transition obligation - - - .8
Amortization of prior service
cost .2 .2 - -
------- ------- ------- -------
Net periodic benefit cost (credit) $(1.1) $ - $ 4.1 $ 4.5
======= ======= ======= =======
In 2003, the company amended the retiree health care plan as it applies to
non-unionized employees to improve consistency of benefits among participant
groups and reduce the company's share of plan costs effective January 1, 2004.
The resultant cost reduction is reflected in the 2004 net periodic benefit costs
presented above. In April 2004, the plan was amended to make cost-sharing
changes for unionized employees. The impact of the April 2004 amendment is
expected to be immaterial.
Nicor Gas Company Page 8
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Notes to the Consolidated Financial Statements (Unaudited) (continued)
8. RELATED PARTY TRANSACTIONS
In the ordinary course of business, under the terms of an agreement approved by
the ICC, Nicor Gas enters into transactions with Nicor and its other wholly
owned subsidiaries for the use of facilities and services. The charges for these
transactions are cost-based, except where the charging party has a prevailing
price for which the facility or service is provided to the general public. In
addition, Nicor charges Nicor Gas and its other wholly owned subsidiaries for
the cost of corporate overheads. For the three months ended March 31, 2004 and
2003, Nicor Gas had net charges to affiliates of $4.1 million and $3.7 million,
respectively.
Nicor Solutions, a subsidiary of Nicor, offers utility-bill management products
to customers of Nicor Gas. Under these products, Nicor Solutions pays Nicor
Gas for the utility bills issued to the utility-bill management customers.
For the three months ended March 31, 2004 and 2003, Nicor Gas recorded revenues
of $35.1 million and $12.7 million, respectively, associated with the payments
Nicor Solutions makes to Nicor Gas on behalf of its customers.
Under the terms of an ICC order, Nicor Gas routinely enters into transactions
with Nicor Enerchange, a wholesale natural gas marketing subsidiary of Nicor,
for the purchase and sale of natural gas, transportation and storage services.
For the three months ended March 31, 2004 and 2003, net charges (from) to Nicor
Enerchange were $(8.3) million and $.6 million, respectively.
In the first quarter of 2004 and 2003, Horizon Pipeline, a 50-percent-owned
joint venture of Nicor, charged Nicor Gas $2.7 million and $2.6 million,
respectively, for natural gas transportation under rates that have been accepted
by the Federal Energy Regulatory Commission.
In each of the first quarters of 2004 and 2003, Nicor Technologies, a subsidiary
of Nicor, charged Nicor Gas $.9 million for engineering and corrosion services.
9. GUARANTEES
Nicor Gas had outstanding letters of credit and surety bonds totaling
approximately $5 million at March 31, 2004 and 2003. The letters of credit and
surety bonds typically act as a guarantee of payment or performance to certain
third parties in accordance with specified terms and conditions.
Nicor Gas Company Page 9
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Notes to the Consolidated Financial Statements (Unaudited) (continued)
10. CONTINGENCIES
The following contingencies of Nicor Gas are in various stages of investigation
or disposition. Although in some cases the company is unable to estimate the
amount of loss reasonably possible in addition to any amounts already
recognized, it is possible that the resolution of these contingencies, either
individually or in aggregate, will require the company to take charges against,
or will result in reductions in, future earnings. It is the opinion of
management that the resolution of these contingencies, either individually or in
aggregate, could be material to earnings in a particular period but is not
expected to have a material adverse impact on Nicor Gas' liquidity or financial
condition.
Performance-Based Rate (PBR) Plan. Nicor Gas' PBR plan for natural gas costs
went into effect in 2000 and was terminated by the company effective January 1,
2003. Under the PBR plan, Nicor Gas' total gas supply costs were compared to a
market-sensitive benchmark. Savings and losses relative to the benchmark were
determined annually and shared equally with sales customers. The PBR plan is
currently under Illinois Commerce Commission (ICC) review.
There are allegations that the company acted improperly in connection with the
PBR plan, and the ICC and others are reviewing these allegations. On June 27,
2002 the Citizens Utility Board (CUB) filed a motion to reopen the record in the
ICC's proceedings to review the PBR plan (the ICC Proceedings). As a result of
the motion to reopen, Nicor Gas, the Cook County State's Attorney Office
(CCSAO), the staff of the ICC and CUB entered into a stipulation providing for
additional discovery. The Illinois Attorney General's Office has also intervened
in this matter. In addition, the Illinois Attorney General's Office issued Civil
Investigation Demands (CIDs) to CUB and the ICC staff. The CIDs ordered that CUB
and the ICC staff produce all documents relating to any claims that Nicor Gas
may have presented, or caused to be presented, false information related to its
PBR plan. Parties who were plaintiffs in a dismissed class action proceeding
against the company could potentially intervene in these proceedings. The
company has committed to cooperate fully in the reviews of the PBR plan.
In response to these allegations, on July 18, 2002, the Nicor Board of Directors
appointed a special committee of independent, non-management directors to
conduct an inquiry into issues surrounding natural gas purchases, sales,
transportation, storage and such other matters as may come to the attention of
the special committee in the course of its investigation. The special committee
presented the report of its counsel (Report) to Nicor's Board of Directors on
October 28, 2002.
In response, the Nicor Board of Directors directed the company's management to,
among other things, make appropriate adjustments to account for, and fully
address, the adverse consequences to ratepayers of the items noted in the
Report, and conduct a detailed study of the adequacy of internal accounting and
regulatory controls. The adjustments were made in financial statements resulting
in a $24.8 million liability at March 31, 2004. Included in such $24.8 million
liability is a $4.1 million loss contingency. In addition, Nicor Gas estimates
that there is $26.9 million due to the company from the 2002 PBR plan year,
which has not been recognized in the financial statements due to uncertainties
surrounding the PBR plan. The net of these items and interest income on certain
components results in a $2.8 million reimbursement the company is seeking as of
March 31, 2004, pending resolution of the proceedings discussed below. The
company took steps to correct the weaknesses and deficiencies identified in the
detailed study of the adequacy of internal controls.
Nicor Gas Company Page 10
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Notes to the Consolidated Financial Statements (Unaudited) (continued)
Pursuant to the agreement of all parties, including the company, the ICC
re-opened the 1999 and 2000 purchased gas adjustment filings for review of
certain transactions related to the PBR plan and consolidated the reviews of the
1999-2002 purchased gas adjustment filings with the PBR plan review.
On February 5, 2003, the CCSAO and CUB filed a motion for $27 million in
sanctions against the company in the ICC Proceedings. In that motion, CCSAO and
CUB alleged that Nicor Gas' responses to certain CUB data requests were false.
Also on February 5, 2003, CUB stated in a press release that, in addition to $27
million in sanctions, it would seek additional refunds to consumers. On March 5,
2003, the ICC staff filed a response brief in support of CUB's motion for
sanctions. On May 1, 2003, the Administrative Law Judges issued a ruling denying
CUB and CCSAO's motion for sanctions. CUB has filed an appeal of the motion for
sanctions with the ICC, and the ICC has indicated that it will not rule on the
appeal until the final disposition of the ICC proceedings. It is not possible to
determine how the ICC will resolve the claims of CCSAO, CUB or other parties to
the ICC Proceedings.
In November 2003, the ICC staff, CUB, CCSAO and the Illinois Attorney General's
Office (IAGO) filed their respective direct testimony in the ICC Proceedings.
The ICC staff is seeking refunds to customers of approximately $108 million and
CUB and CCSAO were jointly seeking refunds to customers of approximately $143
million. The IAGO direct testimony alleges adjustments in a range from $145
million to $190 million. The IAGO testimony as filed is presently unclear as to
the amount which IAGO seeks to have refunded to customers. On February 27, 2004
the above referenced intervenors filed their rebuttal testimony in the ICC
Proceedings. In such rebuttal testimony, CUB and CCSAO amended the alleged
amount to be refunded to customers from approximately $143 million to $190
million. Nicor Gas filed rebuttal testimony in January 2004, which is consistent
with the findings of the special committee Report and, as noted above, seeks a
reimbursement to Nicor Gas of approximately $2.8 million. The parties to the ICC
Proceedings have agreed to a stay of the evidentiary hearings on this matter in
order to undertake additional third party discovery.
Nicor Gas is unable to predict the outcome of any of the foregoing reviews or
the company's potential exposure thereunder. Because the PBR plan and historical
gas costs are still under ICC review, the final outcome could be materially
different than the amounts reflected in the company's financial statements as of
March 31, 2004.
SEC and U.S. Attorney Inquiries. In 2002, the staff of the United States
Securities and Exchange Commission (SEC) informed the company that the SEC is
conducting a formal inquiry regarding the PBR plan. A representative of the
Office of the United States Attorney for the Northern District of Illinois has
notified the company that that office is conducting an inquiry on the same
matter that the SEC is investigating, and a grand jury is also reviewing this
matter. In April 2004, Nicor was advised by the SEC Division of Enforcement that
it intended to recommend to the SEC that it bring a civil injunctive action
against Nicor, alleging that Nicor violated Sections 17(a) of the Securities Act
of 1933 and Sections 10(b) and 13(a) of the Securities Exchange Act of 1934 and
Rules 10b-5, 12b-20, 13a-1 and 13a-13 thereunder. The SEC may also seek
injunctive relief, disgorgement and civil penalties. The SEC staff invited Nicor
to make a formal response (known as a Wells Submission) with respect to the
proposed recommendation. Nicor Gas is unable to predict the outcome of these
inquiries or Nicor Gas' potential exposure related thereto and has not recorded
a liability associated with the outcome of this contingency.
Nicor Gas Company Page 11
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Notes to the Consolidated Financial Statements (Unaudited) (continued)
Mercury. Nicor Gas has incurred, and expects to continue to incur, costs related
to its historical use of mercury in various kinds of company equipment.
Nicor Gas is a defendant in several private lawsuits, all in the Circuit Courts
of Cook and DuPage Counties, Illinois, claiming a variety of unquantified
damages (including bodily injury, property and punitive damages) allegedly
caused by mercury-containing regulators. Under the terms of a class action
settlement agreement, Nicor Gas will continue, until 2006, to provide medical
screening to persons exposed to mercury from its equipment, and will use its
best efforts to replace any remaining inside residential mercury regulators by
2005. The class action settlement permitted class members to "opt out" of the
settlement and pursue their claims individually. Nicor Gas is currently
defending claims brought by 31 households.
As of March 31, 2004, Nicor Gas had remaining an estimated liability of $21.5
million, representing management's best estimate of future costs, including
potential liabilities relating to remaining lawsuits, based on an evaluation of
currently available information. Actual costs may vary from this estimate. The
company will continue to reassess its estimated obligation and will record any
necessary adjustment, which could be material to operating results in the period
recorded.
Nicor Gas continues to pursue recovery from insurers and independent contractors
that had performed work for the company, but believes that it has now collected
the majority of such recoveries. When received, these recoveries are recorded as
a reduction to gas distribution operating expense. Nicor Gas recovered
approximately $18 million and $20 million of pretax mercury-related costs, net
of legal fees, from insurers and independent contractors in 2003 and 2002,
respectively. Nicor Gas recovered approximately $.1 million and $.3 million of
pretax mercury-related costs, net of legal fees, from insurers and independent
contractors in the first quarter of 2004 and 2003, respectively.
The final disposition of these mercury-related matters is not expected to have a
material adverse impact on the company's financial condition.
Manufactured Gas Plant Sites. Manufactured gas plants were used in the 1800's
and early to mid 1900's to produce manufactured gas from coal, creating a coal
tar byproduct. Current environmental laws may require the cleanup of coal tar at
certain former manufactured gas plant sites.
To date, Nicor Gas has identified about 40 properties for which it may, in part,
be responsible. Most of these properties are not presently owned by the company.
Information regarding preliminary site reviews has been presented to the
Illinois Environmental Protection Agency (IEPA) for certain properties. More
detailed investigations and remedial activities are complete, in progress or
planned at many of these sites. The results of the detailed site-by-site
investigations determine the extent additional remediation is necessary and
provide a basis for estimating additional future costs which, based on industry
experience, could be significant. In accordance with ICC authorization, the
company is and has been recovering these costs from its customers, subject to
annual prudence reviews.
Nicor Gas Company Page 12
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Notes to the Consolidated Financial Statements (Unaudited) (concluded)
In December 2001, a purported class action lawsuit was filed against Exelon
Corporation, Commonwealth Edison Company and Nicor Gas in the Circuit Court of
Cook County alleging, among other things, that the ongoing cleanup of a former
manufactured gas plant site in Oak Park, Illinois is inadequate. Since then,
additional lawsuits have been filed related to this same former manufactured gas
plant site. These lawsuits seek, in part, unspecified damages for property
damage, nuisance, and various personal injuries that allegedly resulted from
exposure to contaminants allegedly emanating from the site, and punitive
damages. Management cannot predict the outcome of this litigation or the
company's potential exposure thereto and has not recorded a liability associated
with this contingency.
In April 2002, Nicor Gas was named as a defendant, together with Commonwealth
Edison Company, in a lawsuit brought by the Metropolitan Water Reclamation
District of Greater Chicago (the MWRDGC) under the Federal Comprehensive
Environmental Response, Compensation and Liability Act seeking recovery of past
and future remediation costs and a declaration of the level of appropriate
cleanup for a former manufactured gas plant site in Skokie, Illinois now owned
by the MWRDGC. In January 2003, the suit was amended to include a claim under
the Federal Resource Conservation and Recovery Act. The suit was filed in the
United States District Court for the Northern District of Illinois. Management
cannot predict the outcome of this litigation or the company's potential
exposure thereto and has not recorded a liability associated with this
contingency.
Since costs and recoveries relating to the cleanup of manufactured gas plant
sites are passed directly through to customers in accordance with ICC
regulations, subject to an annual ICC prudence review, the final disposition of
manufactured gas plant matters is not expected to have a material impact on the
company's financial condition or results of operations.
Other. In a recent Illinois Supreme Court decision, the court affirmed the
appellate court's decision to permit proceedings to move forward against Nicor
Gas relating to a home explosion, which resulted in a fatality, allegedly caused
by a faulty gas appliance connector installed by the homeowner. Although unable
to determine the ultimate outcome of the above-referenced proceeding, the
resolution is not expected to have a material adverse impact on the company's
financial condition or results of operations. The company is unable to predict
any potential operational impact of the Illinois Supreme Court decision on
Nicor. In addition to the matters set forth above, the company is involved in
legal or administrative proceedings before various courts and agencies with
respect to general claims, rates, taxes, environmental and other matters.
Although unable to determine the ultimate outcome of these other contingencies,
management believes that it has recorded appropriate liabilities when reasonably
estimable.
Nicor Gas Company Page 13
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion should be read in conjunction with the Management's
Discussion and Analysis section of the Nicor Gas 2003 Annual Report on Form
10-K/A (Amendment No. 1). Results for the interim periods presented are not
necessarily indicative of the results to be expected for the full fiscal year
due to seasonal and other factors.
RESULTS OF OPERATIONS
Net income for the first quarter of 2004 decreased to $36.5 million from $41.5
million in the first quarter of 2003 due mainly to lower operating income.
Operating income decreased $3.2 million in 2004 due primarily to higher
operating and maintenance expenses ($4.8 million) and higher depreciation
expense ($1.3 million), partially offset by lower income taxes ($2.7 million)
and a slight increase in margin ($1.1 million).
Operating revenues. Operating revenues decreased to $1,035.1 million in the
first quarter of 2004 from $1,096.7 million in 2003 due primarily to warmer
weather (approximately $50 million). Revenues also decreased due to lower
natural gas costs ($4.8 million), which are passed directly through to customers
without markup subject to Illinois Commerce Commission (ICC) review.
Margin. Nicor Gas utilizes a measure it refers to as "margin" to evaluate the
operating income impact of gas distribution revenues. Gas distribution revenues
include natural gas costs, which are passed directly through to customers
without markup, subject to ICC review, and revenue taxes, for which Nicor Gas
earns only a small administrative fee. These items often cause significant
fluctuations in gas distribution revenues, and yet they have virtually no direct
impact on gas distribution operating income. Therefore, Nicor Gas excludes these
items in evaluating performance. A reconciliation of gas distribution revenues
and margin follows (in millions):
Three months ended
March 31
----------------------
2004 2003
---------- ---------
Revenues $ 1,035.1 $ 1,096.7
Cost of gas (792.2) (862.9)
Revenue tax expense (69.5) (61.5)
---------- ---------
Margin $ 173.4 $ 172.3
========== =========
Margin increased slightly in 2004 due primarily to increased natural gas
deliveries unrelated to weather ($1.8 million) and increased customer finance
and late payment charges ($1 million) related to higher amounts past due. These
improvements were partially offset by smaller contributions from the Chicago Hub
($1 million) and the negative impact of warmer-than-normal weather in 2004 ($1.1
million). While 2003 volumes were higher than normal due to colder weather,
there was no margin impact because Nicor Gas had hedged the impact of weather in
the first quarter of 2003.
Nicor Gas Company Page 14
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Operating and maintenance expense. Operating and maintenance expense increased
$4.8 million in the first quarter of 2004 to $63.3 million. The increase from
the prior-year period was due primarily to higher bad debt expense ($4.3
million) and an increase to the estimated liability for legal defense costs
related to the PBR plan review ($2.5 million). These negative factors were
partially offset by the absence of weather protection expenses in 2004 ($1.4
million).
Interest expense. Interest expense for the three-month period ended March 31,
2004 increased $1.6 million to $10.7 million due to an increase in average
borrowing levels and a slight increase in average interest rates.
Nicor Gas Company Page 15
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Operating Statistics
Three months ended
March 31
-------------------
2004 2003
-------- -------
Operating revenues (millions)
Sales
Residential $ 720.0 $ 765.8
Commercial 158.0 171.9
Industrial 22.7 26.8
--------- ---------
900.7 964.5
--------- ---------
Transportation
Residential 8.1 7.1
Commercial 25.2 25.9
Industrial 10.9 11.3
Other 5.1 5.1
--------- ---------
49.3 49.4
--------- ---------
Other revenues
Revenue taxes 70.9 62.4
Environmental cost recovery 6.6 15.7
Chicago Hub 1.4 2.4
Other 6.2 2.3
--------- ---------
85.1 82.8
--------- ---------
$ 1,035.1 $ 1,096.7
========= =========
Deliveries (Bcf)
Sales
Residential 99.9 107.6
Commercial 21.6 23.4
Industrial 3.2 3.7
--------- ---------
124.7 134.7
--------- ---------
Transportation
Residential 8.8 8.1
Commercial 37.4 39.7
Industrial 36.9 36.5
--------- ---------
83.1 84.3
--------- ---------
207.8 219.0
========= =========
Customers at end of period (thousands)
Sales
Residential 1,759.0 1,748.9
Commercial 115.8 111.0
Industrial 7.4 7.1
--------- ---------
1,882.2 1,867.0
--------- ---------
Transportation
Residential 144.4 122.4
Commercial 58.6 61.2
Industrial 6.2 6.6
--------- ---------
209.2 190.2
--------- ---------
2,091.4 2,057.2
========= =========
Other statistics
Degree days 3,030 3,254
Colder (warmer) than normal (2)% 6%
Average gas cost per Mcf sold $ 6.30 $ 6.36
Nicor Gas Company Page 16
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
FINANCIAL CONDITION AND LIQUIDITY
Operating cash flows. The gas distribution business is highly seasonal and
operating cash flow may fluctuate significantly during the year and from
year-to-year due to factors such as weather, natural gas prices, the timing of
collections from customers, and natural gas purchasing and storage practices.
The company relies on short-term financing to meet seasonal increases in working
capital needs. Cash requirements generally increase over the third and fourth
quarters due to increases in natural gas purchases, gas in storage and accounts
receivable. As discussed in the 2003 Form 10-K/A (Amendment No. 1), the year-end
gas in storage balance was higher than a year earlier due to an increased
quantity of owned gas. Over the first and second quarters, positive cash flow
generally occurs from the sale of gas in storage and the collection of accounts
receivable. This cash is typically used to reduce short-term debt to near zero
during the second quarter. Net cash flow provided from operating activities
increased $317.1 million to $430.1 million in the 2004 first quarter from $113
million in the year-earlier period due to changes in working capital items.
Financing activities. Nicor Gas maintains short-term line of credit agreements
with major domestic and foreign banks. These agreements, which serve as backup
for the issuance of commercial paper, allow for borrowings of up to $500 million
through September 2004. The company had $56 million of commercial paper
borrowings outstanding at March 31, 2004. The company is in compliance with the
covenants relating to its short-term line of credit agreements at March 31,
2004. The company expects that funding from commercial paper and related backup
line of credit agreements will continue to be available in the foreseeable
future and sufficient to meet estimated cash requirements.
CRITICAL ACCOUNTING ESTIMATES
See Management's Discussion and Analysis - Critical Accounting Estimates in the
2003 Annual Report on Form 10-K/A (Amendment No. 1) for a detailed discussion of
the company's critical accounting policies.
FACTORS THAT MAY AFFECT BUSINESS PERFORMANCE
Weather. Natural gas deliveries are temperature-sensitive and seasonal since
about one-half of all deliveries are used for space heating. Typically, about 70
percent of deliveries and revenues occur from October through March.
Fluctuations in weather have the potential to significantly impact year-to-year
comparisons of operating income and cash flow.
In the first quarter of 2003, Nicor Gas purchased earnings protection against
the impact of significantly warmer-than-normal or colder-than-normal weather. No
such protection was in effect in the first quarter of 2004. It is estimated that
a 100-degree-day variation from normal weather may affect Nicor Gas' net income
by about $1 million. The company will continue to evaluate its coverage options
to determine whether it wishes to purchase any external weather protection.
Labor negotiations. On April 7, 2004, Nicor Gas announced that the International
Brotherhood of Electrical Workers Local 19 ratified a new five-year labor
agreement which expires on February 28, 2009. This agreement covers
approximately 1,500 physical and clerical employees of Nicor Gas.
Nicor Gas Company Page 17
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Property sale. Property sale gains and losses vary from year-to-year depending
upon property sales activity. The company continues to assess its ownership of
real estate holdings and anticipates an increase in property sale activity in
2004.
Contingencies. The following contingencies of Nicor Gas are in various stages of
investigation or disposition. Although in some cases the company is unable to
estimate the amount of loss reasonably possible in addition to any amounts
already recognized, it is possible that the resolution of these contingencies,
either individually or in aggregate, will require the company to take charges
against, or will result in reductions in, future earnings. It is the opinion of
management that the resolution of these contingencies, either individually or in
aggregate, could be material to earnings in a particular period but is not
expected to have a material adverse impact on Nicor Gas' liquidity or financial
condition.
Performance-based rate plan. Nicor Gas' PBR plan for natural gas costs went into
effect in 2000 and was terminated by the company effective January 1, 2003.
Under the PBR plan, Nicor Gas' total gas supply costs were compared to a
market-sensitive benchmark. Savings and losses relative to the benchmark were
determined annually and shared equally with sales customers. The PBR is
currently under Illinois Commerce Commission (ICC) review.
There are allegations that the company acted improperly in connection with the
PBR plan, and the ICC and others are reviewing these allegations. On June 27,
2002 the Citizens Utility Board (CUB) filed a motion to reopen the record in the
ICC's proceedings to review the PBR plan (the ICC Proceedings). As a result of
the motion to reopen, Nicor Gas, the Cook County State's Attorney Office
(CCSAO), the staff of the ICC and CUB entered into a stipulation providing for
additional discovery. The Illinois Attorney General's Office has also intervened
in this matter. In addition, the Illinois Attorney General's Office issued Civil
Investigation Demands (CIDs) to CUB and the ICC staff. The CIDs ordered that CUB
and the ICC staff produce all documents relating to any claims that Nicor Gas
may have presented, or caused to be presented, false information related to its
PBR plan. Parties who were plaintiffs in a dismissed class action proceeding
against the company could potentially intervene in these proceedings. The
company has committed to cooperate fully in the reviews of the PBR plan.
In response to these allegations, on July 18, 2002, the Nicor Board of Directors
appointed a special committee of independent, non-management directors to
conduct an inquiry into issues surrounding natural gas purchases, sales,
transportation, storage and such other matters as may come to the attention of
the special committee in the course of its investigation. The special committee
presented the report of its counsel (Report) to Nicor's Board of Directors on
October 28, 2002. The findings of the Report include:
o Certain transactions increased customer costs in the aggregate amount of
approximately $15 million.
o No improper Nicor affiliated-party transactions or improper hedging
activities were identified.
o Inadvertent accounting errors occurred, sometimes to the benefit of customers
and sometimes to the benefit of Nicor Gas.
o No criminal activity or fraud was identified.
In response, the Nicor Board of Directors directed the company's management to,
among other things, make appropriate adjustments to account for, and fully
address, the adverse consequences to ratepayers of the items noted in the
Report, and conduct a detailed study of the adequacy of internal accounting and
regulatory controls. The adjustments were made in financial statements resulting
in a $24.8 million
Nicor Gas Company Page 18
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
liability at March 31, 2004. Included in such $24.8 million liability is a $4.1
million loss contingency. In addition, Nicor Gas estimates that there is $26.9
million due to the company from the 2002 PBR plan year, which has not been
recognized in the financial statements due to uncertainties surrounding the PBR
plan. The net of these items and interest income on certain components results
in a $2.8 million reimbursement the company is seeking as of March 31, 2004,
pending resolution of the proceedings discussed below. The company took steps to
correct the weaknesses and deficiencies identified in the detailed study of the
adequacy of internal controls.
Pursuant to the agreement of all parties, including the company, the ICC
re-opened the 1999 and 2000 purchased gas adjustment filings for review of
certain transactions related to the PBR plan and consolidated the reviews of the
1999-2002 purchased gas adjustment filings with the PBR plan review.
On February 5, 2003, the CCSAO and CUB filed a motion for $27 million in
sanctions against the company in the ICC Proceedings. In that motion, CCSAO and
CUB alleged that Nicor Gas' responses to certain CUB data requests were false.
Also on February 5, 2003, CUB stated in a press release that, in addition to $27
million in sanctions, it would seek additional refunds to consumers. On March 5,
2003, the ICC staff filed a response brief in support of CUB's motion for
sanctions. On May 1, 2003, the Administrative Law Judges issued a ruling denying
CUB and CCSAO's motion for sanctions. CUB has filed an appeal of the motion for
sanctions with the ICC, and the ICC has indicated that it will not rule on the
appeal until the final disposition of the ICC proceedings. It is not possible to
determine how the ICC will resolve the claims of CCSAO, CUB or other parties to
the ICC Proceedings.
In November 2003, the ICC staff, CUB, CCSAO and the Illinois Attorney General's
Office (IAGO) filed their respective direct testimony in the ICC Proceedings.
The ICC staff is seeking refunds to customers of approximately $108 million and
CUB and CCSAO were jointly seeking refunds to customers of approximately $143
million. The IAGO direct testimony alleges adjustments in a range from $145
million to $190 million. The IAGO testimony as filed is presently unclear as to
the amount which IAGO seeks to have refunded to customers. On February 27, 2004
the above referenced intervenors filed their rebuttal testimony in the ICC
Proceedings. In such rebuttal testimony, CUB and CCSAO amended the alleged
amount to be refunded to customers from approximately $143 million to $190
million. Nicor Gas filed rebuttal testimony in January 2004, which is consistent
with the findings of the special committee Report and, as noted above, seeks a
reimbursement to Nicor Gas of approximately $2.8 million. The parties to the ICC
Proceedings have agreed to a stay of the evidentiary hearings on this matter in
order to undertake additional third party discovery.
Nicor is unable to predict the outcome of any of the foregoing reviews or the
company's potential exposure thereunder. Because the PBR plan and historical gas
costs are still under ICC review, the final outcome could be materially
different than the amounts reflected in the company's financial statements as of
March 31, 2004.
SEC and U.S. Attorney Inquiries. In 2002, the staff of the United States
Securities and Exchange Commission (SEC) informed the company that the SEC is
conducting a formal inquiry regarding the PBR plan. A representative of the
Office of the United States Attorney for the Northern District of Illinois has
notified the company that that office is conducting an inquiry on the same
matter that the SEC is investigating, and a grand jury is also reviewing this
matter. In April 2004, Nicor was advised by the SEC Division of Enforcement that
it intended to recommend to the SEC that it bring a civil injunctive
Nicor Gas Company Page 19
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (concluded)
action against Nicor, alleging that Nicor violated Sections 17(a) of the
Securities Act of 1933 and Sections 10(b) and 13(a) of the Securities Exchange
Act of 1934 and Rules 10b-5, 12b-20, 13a-1 and 13a-13 thereunder. The SEC may
also seek injunctive relief, disgorgement and civil penalties. The SEC staff
invited Nicor to make a formal response (known as a Wells Submission) with
respect to the proposed recommendation. Nicor Gas is unable to predict the
outcome of these inquiries or Nicor Gas' potential exposure related thereto and
has not recorded a liability associated with the outcome of this contingency.
Mercury. Future operating results may be impacted by adjustments to the
company's estimated mercury liability or by related recoveries. Additional
information about mercury contingencies is presented in the Notes to the
Consolidated Financial Statements - Note 10 Contingencies - Mercury.
Manufactured gas plant sites. The company is conducting environmental
investigations and remedial activities at former manufactured gas plant sites.
Additional information about these sites is presented in the Notes to the
Consolidated Financial Statements - Note 10 Contingencies - Manufactured Gas
Plant Sites.
Other contingencies. The company is involved in legal or administrative
proceedings before various courts and agencies with respect to general claims,
rates, taxes, environmental and other matters. See the Notes to the Consolidated
Financial Statements - Note 10 Contingencies.
Market risk. The company is exposed to market risk in the normal course of its
business operations, including the risk of loss arising from adverse changes in
natural gas commodity prices and interest rates. There has been no material
change in the company's exposure to market risk since the filing of the 2003
Annual Report on Form 10-K/A (Amendment No. 1).
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This document includes certain forward-looking statements about the expectations
of Nicor Gas. Although Nicor Gas believes these statements are based on
reasonable assumptions, actual results may vary materially from stated
expectations. Such forward-looking statements may be identified by the use of
forward-looking words or phrases such as "anticipate," "believe," "expect,"
"intend," "may," "planned," "potential," "should," "will," "would," "project,"
"estimate," or similar phrases. Actual results may differ materially from those
indicated in the company's forward-looking statements due to the direct or
indirect effects of legal contingencies (including litigation) and the
resolution of those issues, including the effects of an ICC review and SEC and
U.S. Attorney inquiries, and undue reliance should not be placed on such
statements. Other factors that could cause materially different results include,
but are not limited to, weather conditions; natural gas prices; health care
costs; insurance costs or recoveries; legal costs; borrowing needs; interest
rates; credit conditions; economic and market conditions; energy conservation;
legislative and regulatory actions; tax rulings or audit results; asset sales;
significant unplanned capital needs; future mercury-related charges or credits;
changes in accounting principles, methods, judgments or estimates; performance
of major suppliers and contractors; labor relations; and acts of terrorism.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this filing. Nicor Gas undertakes
no obligation to publicly release any revision to these forward-looking
statements to reflect events or circumstances after the date of this filing.
Nicor Gas Company Page 20
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Item 4. Controls and Procedures
The company carried out an evaluation under the supervision and with the
participation of the company's management, including its Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
the company's disclosure controls and procedures as of the end of the period
covered by this Quarterly Report on Form 10-Q (the "Evaluation").
In designing and evaluating the disclosure controls and procedures, management
recognizes that any disclosure controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and management is required to apply its judgment in
evaluating the cost-benefit relationship of possible disclosure controls and
procedures. Based on the Evaluation, the company's Chief Executive Officer and
Chief Financial Officer concluded that the company's disclosure controls and
procedures, as of the end of the period covered by this Quarterly Report on Form
10-Q, were effective at the reasonable assurance level to ensure that
information required to be disclosed by the company in reports that it files or
submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in SEC rules and
forms.
There has been no change in the company's internal controls over financial
reporting during the company's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the company's internal
control over financial reporting.
Nicor Gas Company Page 21
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Management's Discussion and Analysis - Contingencies and the Notes to the
Consolidated Financial Statements - Note 10 Contingencies, which are
incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K
(a) See Exhibit Index on page 23 filed herewith.
(b) The company did not file a report on Form 8-K during the first quarter
of 2004.
Nicor Gas Company Page 22
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Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Nicor Gas Company
April 30, 2004 /s/ JEFFREY L. METZ
--------------- -----------------------------
(Date) Jeffrey L. Metz
Vice President and Controller
Nicor Gas Company Page 23
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Exhibit Index
Exhibit
Number Description of Document
- ---------- -----------------------------------------------------
3.01 * Articles of Incorporation of the company. (File
No. 1-7296, Form 10-K for 1980, Exhibit 3-01.)
3.02 * Amendment to Articles of Incorporation of the
company. (File No. 1-7296, Form 10-Q for June 1994,
Exhibit 3.01.)
3.03 * By-Laws of the company as amended by the company's
Board of Directors on January 15, 2004. (File No.
1-7296, Form 10-K for 2003, Exhibit 3.03.)
12.01 Computation of Consolidated Ratio of Earnings to Fixed
Charges.
31.1 Rule 13a-14(a)/15d-14(a) Certification.
31.2 Rule 13a-14(a)/15d-14(a) Certification
32.1 Section 1350 Certification.
32.2 Section 1350 Certification.
* These exhibits have been previously filed with the Securities and Exchange
Commission as exhibits to registration statements or to other filings with
the Commission and are incorporated herein as exhibits by reference. The
file number and exhibit number of each such exhibit, where applicable, are
stated, in parentheses, in the description of such exhibit.
Upon written request, the company will furnish free of charge a copy of any
exhibit. Requests should be sent to Investor Relations at the corporate
headquarters.