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 September 30, 1999


                                       or


         [ ]      Transition Report Pursuant to Section 13 or 15(d) of the
                    Securities Exchange Act of 1934




<TABLE>

    Commission                  Registrant, State of Incorporation,                   I.R.S Employer
    File Number                     Address and Telephone Number                   Identification Number
--------------------    -----------------------------------------------------    --------------------------

<S>   <C>                                                                               <C>
      1-7297            Nicor Inc.                                                      36-2855175
                        (An Illinois Corporation)
                        1844 Ferry Road
                        Naperville, Illinois 60563-9600
                        (630) 305-9500
</TABLE>


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 [ ]

Shares of common stock,  par value $2.50,  outstanding at October 31, 1999, were
47,047,097.











<PAGE>


Nicor Inc.                                                               Page i

Table of Contents

Part I - Financial Information

     Item 1.   Financial Statements (Unaudited) ....................    1

               Consolidated Statement of Income:
                  Three and nine months ended
                  September 30, 1999 and 1998 ......................    2

               Consolidated Statement of Cash Flows:
                  Nine months ended
                  September 30, 1999 and 1998 ......................    3

               Consolidated Balance Sheet:
                  September 30, 1999 and 1998, and
                  December 31, 1998 ................................    4

               Notes to the Consolidated Financial Statements ......    5

     Item 2.   Management's Discussion and Analysis of Financial
                  Condition and Results of Operations ..............    7

     Item 3.   Quantitative and Qualitative Disclosures
                  about Market Risk ................................   15


Part II - Other Information

     Item 1.   Legal Proceedings ...................................   15

     Item 6.   Exhibits and Reports on Form 8-K ....................   15

               Signature ...........................................   16

               Exhibit Index .......................................   17




Glossary

Degree day.  The extent to which the daily average temperature falls below 65
             degrees Fahrenheit.
ICC.  Illinois Commerce Commission.
Mcf, Bcf.  Thousand cubic feet, billion cubic feet.
TEU.  Twenty-foot equivalent unit.


<PAGE>


Nicor Inc.                                                               Page 1

PART I - FINANCIAL INFORMATION

Item 1.       Financial Statements

The following condensed  unaudited financial  statements of Nicor Inc. 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 generally
accepted  accounting  principles 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 latest Annual Report on Form 10-K.

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.

<TABLE>

Nicor Inc.                                                                                                  Page 2
-------------------------------------------------------------------------------------------------------------------

Consolidated Statement of Income (Unaudited)
(millions, except per share data)
<CAPTION>

                                                     Three months ended                    Nine months ended
                                                        September 30                          September 30
                                                ------------------------------        -----------------------------
                                                    1999             1998                 1999            1998
                                                -------------    -------------        -------------   -------------

<S>                                                  <C>              <C>                <C>             <C>
Operating revenues                                   $ 227.3          $ 203.2            $ 1,075.5       $ 1,036.9
                                                -------------    -------------        -------------   -------------

Operating expenses
    Cost of gas                                         69.6             52.1                491.0           466.3
    Operating and maintenance                           87.3             81.7                260.2           246.0
    Depreciation                                        19.2             18.7                 98.9            95.7
    Taxes, other than income taxes                      13.1             11.8                 77.5            76.1
                                                -------------    -------------        -------------   -------------
                                                       189.2            164.3                927.6           884.1
                                                -------------    -------------        -------------   -------------

Operating income                                        38.1             38.9                147.9           152.8

Other income (expense), net                              2.0              3.6                 15.2            12.1
                                                -------------    -------------        -------------   -------------

Income before interest on debt
    and income taxes                                    40.1             42.5                163.1           164.9

Interest on debt, net of amounts
    capitalized                                          9.9             11.0                 32.3            34.4
                                                -------------    -------------        -------------   -------------

Income before income taxes                              30.2             31.5                130.8           130.5

Income taxes                                            10.4             10.9                 45.5            45.2
                                                -------------    -------------        -------------   -------------

Net income                                              19.8             20.6                 85.3            85.3

Dividends on preferred stock                              .1               .1                   .3              .2
                                                -------------    -------------        -------------   -------------

Earnings applicable to common stock                   $ 19.7           $ 20.5               $ 85.0          $ 85.1
                                                =============    =============        =============   =============

Average shares of common stock
    outstanding
       Basic                                            47.2             47.7                 47.3            47.9
       Diluted                                          47.3             47.9                 47.5            48.1

Earnings per average share of
    common stock
       Basic                                           $ .42            $ .43               $ 1.80          $ 1.78
       Diluted                                           .42              .43                 1.79            1.77

Dividends declared per share of
    common stock                                       $ .39            $ .37               $ 1.17          $ 1.11


The accompanying notes are an integral part of this statement.
</TABLE>



<TABLE>

Nicor Inc.                                                                                                  Page 3
-------------------------------------------------------------------------------------------------------------------

Consolidated Statement of Cash Flows (Unaudited)
(millions)
<CAPTION>

                                                                                            Nine months ended
                                                                                               September 30
                                                                                      -----------------------------

                                                                                          1999            1998
                                                                                      -------------   -------------
Operating activities
<S>                                                                                         <C>             <C>
    Net income                                                                              $ 85.3          $ 85.3
    Adjustments to reconcile net income to net cash flow
       provided from operating activities:
          Depreciation                                                                        98.9            95.7
          Deferred income tax expense                                                         18.2            12.1
          Change in assets and liabilities:
            Receivables, less allowances                                                     118.4           209.0
            Gas in storage                                                                    37.9             8.2
            Deferred/accrued gas costs                                                       (63.7)           (4.0)
            Accounts payable                                                                  71.0            32.8
            Other                                                                            (40.6)          (50.6)
                                                                                      -------------   -------------
    Net cash flow provided from operating activities                                         325.4           388.5
                                                                                      -------------   -------------

Investing activities
    Capital expenditures                                                                    (101.1)          (94.7)
    Short-term investments                                                                    24.4            (2.4)
    Other                                                                                     (8.9)          (14.3)
                                                                                      -------------   -------------
    Net cash flow used for investing activities                                              (85.6)         (111.4)
                                                                                      -------------   -------------

Financing activities
    Net proceeds from issuing long-term debt                                                 101.5            99.0
    Disbursements to retire long-term debt                                                  (156.6)         (129.9)
    Short-term borrowings (repayments), net                                                 (108.0)         (164.9)
    Dividends paid                                                                           (54.8)          (52.6)
    Disbursements to reacquire stock                                                         (14.6)          (25.4)
    Other                                                                                      (.1)             .4
                                                                                      -------------   -------------
    Net cash flow used for financing activities                                             (232.6)         (273.4)
                                                                                      -------------   -------------

Net increase in cash and cash equivalents                                                      7.2             3.7

Cash and cash equivalents, beginning of period                                                13.0             5.2
                                                                                      -------------   -------------

Cash and cash equivalents, end of period                                                    $ 20.2           $ 8.9
                                                                                      =============   =============

Supplemental information
    Income taxes paid, net of refunds                                                       $ 37.6          $ 32.5
    Interest paid, net of amounts capitalized                                                 33.4            38.6


The accompanying notes are an integral part of this statement.
</TABLE>



<TABLE>

Nicor Inc.                                                                                                  Page 4
-------------------------------------------------------------------------------------------------------------------

Consolidated Balance Sheet (Unaudited)
(millions)
<CAPTION>

                                                              September 30        December 31        September 30
                                                                  1999               1998                1998
                                                             ---------------    ----------------    ---------------
                         Assets

Current assets
<S>                                                                  <C>                 <C>                 <C>
    Cash and cash equivalents                                        $ 20.2              $ 13.0              $ 8.9
    Short-term investments, at cost which
       approximates market                                             31.4                55.8               22.6
    Receivables, less allowances of $7.5,
       $6.3 and $7.2, respectively                                    145.6               264.0              145.6
    Gas in storage, at last-in, first-out cost                         67.6               105.5              119.6
    Deferred gas costs                                                 33.8                   -                  -
    Other                                                              43.9                26.4               33.1
                                                             ---------------    ----------------    ---------------
                                                                      342.5               464.7              329.8
                                                             ---------------    ----------------    ---------------

Property, plant and equipment, at cost
    Gas distribution                                                3,171.3             3,119.7            3,089.6
    Shipping                                                          272.3               258.9              258.2
    Other                                                               2.0                 1.2                1.0
                                                             ---------------    ----------------    ---------------
                                                                    3,445.6             3,379.8            3,348.8
    Less accumulated depreciation                                   1,714.4             1,648.0            1,616.8
                                                             ---------------    ----------------    ---------------
                                                                    1,731.2             1,731.8            1,732.0
                                                             ---------------    ----------------    ---------------

Other assets                                                          203.1               168.1              157.8
                                                             ---------------    ----------------    ---------------

                                                                  $ 2,276.8           $ 2,364.6          $ 2,219.6
                                                             ===============    ================    ===============

             Liabilities and capitalization

Current liabilities
    Long-term obligations due within one year                        $ 73.8               $ 1.2               $ .9
    Short-term borrowings                                             126.5               234.5              114.0
    Accounts payable                                                  341.3               270.3              274.7
    Accrued gas costs                                                     -                29.9               21.1
    Other                                                              36.3                43.0               37.5
                                                             ---------------    ----------------    ---------------
                                                                      577.9               578.9              448.2
                                                             ---------------    ----------------    ---------------

Deferred credits and other liabilities
    Deferred income taxes                                             261.5               238.9              233.1
    Regulatory income tax liability                                    75.7                78.6               79.3
    Unamortized investment tax credits                                 42.7                44.1               44.7
    Other                                                             101.8               101.5              105.8
                                                             ---------------    ----------------    ---------------
                                                                      481.7               463.1              462.9
                                                             ---------------    ----------------    ---------------

Capitalization
    Long-term debt                                                    436.7               557.3              550.2
    Preferred stock                                                     6.3                 6.3                6.3
    Common equity
       Common stock                                                   117.8               118.8              119.1
       Retained earnings                                              656.4               640.2              632.9
                                                             ---------------    ----------------    ---------------
                                                                    1,217.2             1,322.6            1,308.5
                                                             ---------------    ----------------    ---------------

                                                                  $ 2,276.8           $ 2,364.6          $ 2,219.6
                                                             ===============    ================    ===============


The accompanying notes are an integral part of this statement.
</TABLE>



<PAGE>


Nicor Inc.                                                               Page 5

Notes to the Consolidated Financial Statements (Unaudited)

ACCOUNTING POLICIES

Depreciation   for  the  gas   distribution   segment  is  calculated   using  a
straight-line method for the calendar year. For interim periods, depreciation is
allocated based on gas deliveries.

NEW ACCOUNTING PRONOUNCEMENT

In June 1999, the Financial  Accounting Standards Board approved an amendment to
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities.
The  amendment  defers the effective  date of the statement one year,  requiring
adoption no later than the first  quarter of the  company's  2001  fiscal  year.
Implementation  of this  statement is not expected to have a material  impact on
the company's financial condition or results of operations.

BUSINESS SEGMENT INFORMATION

Financial data by business segment is presented below:
<TABLE>
<CAPTION>

                                                Three months ended              Nine months ended
                                                   September 30                    September 30
                                            ---------------------------     ---------------------------
(millions)                                      1999          1998             1999           1998
                                            -------------  ------------     ------------  -------------
Operating revenues
<S>                                         <C>            <C>              <C>           <C>
   Gas distribution                         $      161.8   $     148.0      $     877.9   $      867.0
   Shipping                                         55.5          52.5            164.0          161.2
   Other Nicor ventures                             11.3           2.7             34.9            8.7
   Corporate and eliminations                       (1.3)            -             (1.3)             -
                                            -------------  ------------     ------------  -------------
                                            $      227.3   $     203.2      $   1,075.5   $    1,036.9
                                            =============  ============     ============  =============

Operating income (loss)
   Gas distribution                         $       35.4   $      34.9      $     137.1   $      138.1
   Shipping                                          4.5           5.1             13.9           17.5
   Other Nicor ventures                              (.1)            -              (.1)          (1.1)
   Corporate and eliminations                       (1.7)         (1.1)            (3.0)          (1.7)
                                            -------------  ------------     ------------  -------------
                                            $       38.1   $      38.9      $     147.9   $      152.8
                                            =============  ============     ============  =============
</TABLE>

REGULATORY MATTERS

Performance-Based   Rate   Filing.   In   March   1999,   Nicor   Gas   filed  a
performance-based  rate plan for natural gas supply costs with the ICC. The plan
would establish  economic  incentives for Nicor Gas when purchasing gas supplies
for  customers,  and amounts above or below a market  benchmark  would be shared
with  customers.  The ICC is required to rule on the  proposal by late  November
and, if approved in a manner  acceptable  to Nicor Gas,  the company  intends to
implement the plan next January.

Customer Select(R).  In September 1999, Nicor Gas received approval from the ICC
to expand Customer  Select,  the company's  voluntary pilot program which offers
customers a choice of natural gas commodity  suppliers.  An  additional  170,000
single-family  residential  customers in select  communities will be eligible to
participate in the program in 2000.  During the first two phases of the program,
more than 60,000  residential,  commercial  and industrial  customers  enrolled,
accounting  for  about  25 Bcf in  annual  deliveries  of  natural  gas.  In all
instances, Nicor Gas will continue to deliver natural gas to the customer,


<PAGE>


Nicor Inc.                                                               Page 6

Notes to the Consolidated Financial Statements (Unaudited) (Concluded)

read  customer  meters,  maintain the  distribution  system,  ensure  safety and
respond to service and emergency calls.

LONG-TERM DEBT

In August 1999, Nicor Gas redeemed $50 million of 8.25% First Mortgage Bonds due
in 2024.

In January 1999, Nicor Gas sold $50 million of First Mortgage Bonds at 5.37% due
in 2009 and $50  million  of  unsecured  notes at 5.065% due in 2000 to fund the
redemption of First Mortgage Bonds as follows: $50 million at 5.875% due in 2000
and $50 million at 7.375% due in 2023.

CONTINGENCIES

The company is involved in legal or  administrative  proceedings  before various
courts and agencies with respect to rates, taxes and other matters.

Current  environmental  laws may require cleanup of certain former  manufactured
gas plant sites. To date, Nicor Gas has identified about 40 properties for which
it may,  in part,  be  responsible.  The  majority of these  properties  are not
presently owned by the company.  Information  regarding preliminary site reviews
has  been  presented  to the  Illinois  Environmental  Protection  Agency.  More
detailed  investigations  and  remedial  activities  are either in  progress  or
planned at many of these sites.  The results of  continued  testing and analysis
should  determine to what extent  additional  remediation  is necessary  and may
provide a basis for  estimating  any  additional  future costs  which,  based on
industry experience, could be significant. In accordance with ICC authorization,
the company has been recovering these costs from its customers.

On December 20, 1995,  Nicor Gas filed suit in the Circuit  Court of Cook County
against certain  insurance  carriers seeking  recovery of environmental  cleanup
costs of certain  former  manufactured  gas plant sites.  Presently,  management
cannot predict the outcome of this lawsuit.  Any recoveries from such litigation
or other sources will be flowed back to the company's customers.

Although  unable to  determine  the outcome of these  contingencies,  management
believes that  appropriate  accruals have been  recorded.  Final  disposition of
these  matters  is not  expected  to have a  material  impact  on the  company's
financial condition or results of operations.



<PAGE>


Nicor Inc.                                                               Page 7

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 1998 Annual Report on Form 10-K.

SUMMARY

Nicor's  third  quarter 1999 diluted  earnings per common share were $.42,  down
slightly  from $.43 in 1998.  Net  income  for the  quarter  was $19.8  million,
compared with $20.6 million in 1998.

For the nine months ended September 30, 1999,  diluted earnings per common share
increased  to $1.79,  from $1.77 a year ago, as common  stock  repurchases  have
reduced  the number of shares  outstanding.  Net income was  unchanged  at $85.3
million as lower operating results were offset by nonoperating factors.
<TABLE>

Operating income (loss) by major business segment was:
<CAPTION>

                                                Three months ended              Nine months ended
                                                   September 30                    September 30
                                            ---------------------------     ---------------------------
   (millions)                                   1999          1998             1999           1998
                                            -------------  ------------     ------------  -------------
<S>                                         <C>            <C>              <C>           <C>
   Gas distribution                         $       35.4   $      34.9      $     137.1   $      138.1
   Shipping                                          4.5           5.1             13.9           17.5
   Corporate and other                              (1.8)         (1.1)            (3.1)          (2.8)
                                            -------------  ------------     ------------  -------------
                                            $       38.1   $      38.9      $     147.9   $      152.8
                                            =============  ============     ============  =============
</TABLE>

The  following  summarizes  operating  income  comparisons  for  major  business
segments:

o    Gas  distribution  operating income for the nine months ended September 30,
     1999,  decreased $1 million.  Though  deliveries of natural gas increased 4
     percent during the first nine months of this year,  the positive  impact of
     higher  deliveries was more than offset by other factors,  including higher
     operating and maintenance expense and depreciation.

o    Shipping  operating  income  decreased $.6 million for the quarter and $3.6
     million  for  the  nine  months  ended  September  30,  1999.  Quarter  and
     year-to-date  results were negatively impacted by competitive  pressures on
     pricing - primarily in the Eastern Caribbean, higher operating expenses and
     a decline in charter income.  These factors more than offset the additional
     revenues generated from increased volumes shipped.

RESULTS OF OPERATIONS

Details of various  financial and operating  information by segment can be found
in the tables on pages 13 and 14. The following discussion  summarizes the major
items impacting Nicor's earnings.



<PAGE>


Nicor Inc.                                                               Page 8

Item 2.       Management's Discussion and Analysis of Financial Condition
              and Results of  Operations (Continued)
<TABLE>

Operating revenues. Operating revenues by major business segment were:
<CAPTION>

                                                Three months ended              Nine months ended
                                                   September 30                    September 30
                                            ---------------------------     ---------------------------
   (millions)                                   1999          1998             1999           1998
                                            -------------  ------------     ------------  -------------
<S>                                         <C>            <C>              <C>           <C>
   Gas distribution                         $      161.8   $     148.0      $     877.9   $      867.0
   Shipping                                         55.5          52.5            164.0          161.2
   Corporate and other                              10.0           2.7             33.6            8.7
                                            -------------  ------------     ------------  -------------
                                            $      227.3   $     203.2      $   1,075.5   $    1,036.9
                                            =============  ============     ============  =============
</TABLE>

For the three-month  period, gas distribution  revenues increased from the prior
year due  primarily  to higher  natural  gas prices,  which are passed  directly
through to  customers.  Revenues  generated  from Nicor's  wholesale gas trading
business  accounted for the increase in corporate and other.  For the nine-month
period,  consolidated revenues increased $38.6 million due to revenues generated
from  Nicor's  wholesale  gas trading  business  and higher  revenues in the gas
distribution  segment.  Gas  distribution  revenues  increased  as the impact of
colder weather more than offset lower natural gas prices.

Gas distribution margin. Gas distribution margin,  defined as operating revenues
less cost of gas and revenue taxes,  which are both passed  directly  through to
customers, and margin per Mcf delivered are shown in the following table:
<TABLE>
<CAPTION>

                                                Three months ended              Nine months ended
                                                   September 30                    September 30
                                            ---------------------------     ---------------------------
                                                1999          1998             1999           1998
                                            -------------  ------------     ------------  -------------
<S>                                         <C>            <C>              <C>           <C>
   Margin (millions)                        $       92.6   $      89.6      $     353.0   $      341.3
   Margin per Mcf delivered                         1.32          1.28              .98            .98
</TABLE>

Margin rose $3 million in the  three-month  period due, in part, to the positive
impact of colder weather.  Margin per Mcf delivered increased in the quarter due
mainly to a decline in  lower-margin  deliveries for electric power  generation.
For  the  nine-month  period,  margin  increased  $11.7  million  due to  higher
deliveries which were attributable to 10 percent colder weather, increased usage
among existing customers and the addition of new customers.

Operating and  maintenance.  Operating and  maintenance  expense  increased $5.6
million  in the  three-month  period  due  primarily  to  higher  volume-related
expenses in the shipping segment and increased credit and collection  activities
in the gas  distribution  segment.  For the  nine-month  period,  operating  and
maintenance  expense increased $14.2 million due primarily to higher information
technology  costs and  increased  credit and  collection  activities  in the gas
distribution segment and higher volume-related costs in the shipping segment.

Nonoperating  items.  Other income  decreased  $1.6  million in the  three-month
period due to a decline in real estate sales. For the nine-month  period,  other
income  increased $3.1 million as the impact of lower real estate sales was more
than offset by several positive factors, including a gain on the sale of Nicor's
interest in an electronic  energy trading system and higher  interest income due
to increased investment levels. The company continues to assess its nonstrategic
real estate  holdings,  and is evaluating the potential to maximize the value of
these holdings  through  additional  property sales or development over the next
several years.


<PAGE>


Nicor Inc.                                                               Page 9

Item 2.       Management's Discussion and Analysis of Financial Condition
              and Results of  Operations (Continued)

Interest  expense  decreased  in both  periods due to lower  interest  rates and
reduced average borrowing levels.

FINANCIAL CONDITION AND LIQUIDITY

Operating.  Net cash flow from operating  activities decreased $63.1 million for
the nine months ended  September  30, 1999,  due primarily to changes in working
capital items in the gas distribution segment. Working capital can swing sharply
due to certain gas distribution factors including weather, the price of gas, the
timing of collections from customers and gas purchasing  practices.  The company
generally relies on short-term  financing to meet temporary increases in working
capital needs.

Investing.  During 1999, Nicor invested an additional $12 million in cargo
container leasing.

Financing.  Nicor and its gas distribution subsidiary maintain short-term credit
agreements with major domestic and foreign banks.  At September 30, 1999,  these
agreements,  which serve as backup for the issuance of commercial paper, totaled
$342.5  million  and  the  company  had  $126.5  million  of  commercial   paper
outstanding.

In August 1999, Nicor Gas redeemed $50 million of 8.25% First Mortgage Bonds due
in 2024.

In January 1999, Nicor Gas sold $50 million of First Mortgage Bonds at 5.37% due
in 2009 and $50  million  of  unsecured  notes at 5.065% due in 2000 to fund the
redemption of First Mortgage Bonds as follows: $50 million at 5.875% due in 2000
and $50 million at 7.375% due in 2023.

In the second  quarter of 1999,  Nicor  completed  the $50 million  common stock
repurchase  program  initiated  in June 1997 and  announced  another $50 million
common stock repurchase program.  Purchases under the new program are being made
as market conditions  permit through open market  transactions and to the extent
cash flow is available after other  investment  opportunities.  During the first
nine months of 1999, the company  purchased and retired 393,300 common shares at
an aggregate cost of about $15 million.

Effective with the dividend paid on May 1, 1999,  Nicor's quarterly  dividend on
common stock was  increased to 39 cents per share.  This payment  represents  an
annual rate of $1.56 per share,  which is 5.4 percent  higher than the $1.48 per
share established with the May 1, 1998 dividend.

YEAR 2000 READINESS

The Year 2000 issue arose because many existing  computer  programs use only the
last two digits to refer to a year. If date-sensitive  devices  incorrectly read
the year 2000 and  assume it to be 1900,  many  computer  systems  and  software
applications,  as well as  embedded  chips,  could  fail  or  produce  erroneous
results.

This disclosure contains forward-looking statements. In connection with the Safe
Harbor provisions of the Private  Securities  Litigation Reform Act of 1995, the
company  cautions that,  while it believes such  statements to be reasonable and
makes them in good faith,  actual results may vary.  Nicor's ability to meet its
objectives  identified  below is dependent upon several  factors,  including the
timely provision of


<PAGE>


Nicor Inc.                                                              Page 10

Item 2.       Management's Discussion and Analysis of Financial Condition
              and Results of  Operations (Continued)

necessary upgrades and modifications by suppliers and contractors.  In addition,
Nicor  cannot  guarantee  that third  parties on whom it depends  for  essential
services will remediate their critical systems and processes in a timely manner.
Each  component of the company's Year 2000 project has progressed as planned and
the  company  believes  it is taking all  necessary  steps to be able to operate
successfully in the year 2000 and beyond. The following summarizes the company's
preparedness for the year 2000.

Nicor Gas. In 1996, Nicor Gas established a company-wide initiative to identify,
evaluate and address Year 2000 issues.  A team has been  assembled that includes
an officer-level steering committee, full-time staff members and representatives
from key  areas of the  company.  In  addition  to this team of  employees,  the
company has utilized  consultants to assist in the Year 2000 project and belongs
to an  industry  alliance  that  facilitates  the sharing of  information  among
companies.  The  company's  Year  2000  effort  encompasses  mainframe  systems,
client-server  and desktop  systems,  telecommunications,  embedded  systems and
third  parties.  This  effort  consists  of  the  following  phases:  inventory,
assessment, remediation, testing and contingency planning.

Mainframe  Systems.  Nicor  Gas'  mainframe  hardware  and  most  core  business
applications,  which include customer  service,  billing and payroll,  fall into
this  category.   System  inventory,   assessment,   remediation,   testing  and
contingency  planning are  complete.  A number of systems have been  replaced by
Year 2000 compliant  systems on client-server  platforms.  During the second and
third quarter of 1999, the company performed  additional testing of all critical
systems at a remote site. In addition, outside consultants completed independent
verification  of program code for the company's  critical  mainframe  systems to
confirm proper remediation.  The few minor errors that were identified have been
corrected and tested.

Client-server  and Desktop  Systems.  Nicor Gas has  completed an inventory  and
assessment of its client-server and desktop systems. Many of the systems are new
and were designed to be compliant. Remediation and testing are complete with the
exception  of a few  minor  applications  that  are  dependent  on  upgrades  or
modifications  by software  vendors.  These minor items will be completed by the
end of 1999.  Functional  areas have developed and tested  contingency  plans to
perform their responsibilities in the event of disruption.

Telecommunications. The company has completed all phases of its Year 2000 effort
relating   to   telecommunication   issues,   which   involve   data  and  voice
communications.  In addition to the  telecommunication  issues over which it has
direct control,  the company has worked closely with  telecommunication  service
providers to develop and execute test  procedures  and to formulate  contingency
plans.

Embedded Systems. The company has performed a system-level inventory of embedded
systems,  which  include  items  such as process  controls  in the  storage  and
transmission  operations,  building  security,  air  conditioning,  heating  and
elevator systems.  A more detailed inventory and assessment of about 2,200 items
at the component  level in critical areas has been  completed and  independently
verified  and  validated  by  outside  consultants.  Less than 5 percent  of the
inventoried  items  appeared  to require  remediation.  All such items have been
remediated  and tested.  In  critical  gas supply and  storage  areas,  disaster
recovery  plans exist which have been  updated and tested for various  potential
Year 2000 scenarios.



<PAGE>


Nicor Inc.                                                              Page 11

Item 2.       Management's Discussion and Analysis of Financial Condition
              and Results of  Operations (Continued)

Third  Parties.  Nicor Gas has  contacted  entities with which it has a material
relationship to determine their state of readiness.  These entities include, but
are not  limited to,  natural  gas  suppliers,  interstate  pipelines,  electric
utilities,  telecommunication service providers, banks, industrial customers and
other suppliers of goods and services. In addition, the company has met directly
with interstate  pipelines,  natural gas suppliers and certain large  industrial
customers.  Based  upon  ongoing  communications,  Nicor Gas will  consider  new
business  relationships,  as  necessary,  with  alternative  product and service
providers,  to the  extent  alternatives  are  available.  Contingency  plans to
address  potential  disruption  of the receipt of goods and  services  have been
completed.

Costs.  Nicor Gas has incurred  operating expenses of approximately $4.5 million
through September 30, 1999, and estimates less than an additional $1 million may
be incurred in connection  with its Year 2000 efforts.  These amounts  represent
costs  incurred  that are related to hardware  and  software  modifications  and
replacements,  internal  information  technology resources devoted solely to the
effort,  and outside  consultants.  The company has also  incurred  less than $1
million in capital  improvement  costs to date that would have been  required in
the normal course of business, but were incurred sooner than originally planned.
The company estimates that any additional  capital  improvement costs to support
this project will not be significant.

Risks.  The company  relies on the  producers  of natural gas and  suppliers  of
interstate  transportation  capacity  to deliver  natural  gas to the  company's
distribution system. External  infrastructure,  such as electric,  telephone and
water service,  is necessary for the company's  basic  operations as well as the
operations of many of its customers.

The company believes the most significant potential risks involve its ability to
use  electronic  devices to control  and operate its  distribution  system,  its
ability  to  respond  appropriately  to  customers'  calls for  information  and
assistance,  and its  ability to  maintain  its  internal  network  of  computer
systems. The company's Year 2000 project was designed to concentrate its efforts
on these critical areas.

Should any third party with which the company has a material  relationship fail,
or should Nicor Gas' actions  prove to be less than  completely  effective,  the
impact  could  become a  significant  challenge  to the  company to operate  its
distribution  system and  communicate  with its customers.  It could also have a
material adverse financial impact,  including but not limited to: lost operating
revenues,  increased  operating  costs and  claims  from  customers  related  to
business interruption.  Because of the uncertainties related to this matter, the
company continues to update, test and refine its contingency plans.

Contingency  Planning.  The company's Year 2000 contingency planning encompasses
business  continuity  both  within  the  company  and in the  external  business
environment. As part of normal business practice, the company maintains plans to
follow  during  emergencies.  For  example,  many of the  components  in the gas
distribution  system  can be  manually  overridden,  and  customer  calls can be
handled at alternate  sites.  The company has updated and tested its contingency
plans that address  scenarios that could emerge and expects  further  refinement
and testing of these plans throughout the remainder of 1999.

During the third quarter of 1999,  Nicor Gas conducted a Year 2000  preparedness
drill to test and further evaluate its contingency  plans and to demonstrate its
ability to respond to  potential  issues  effectively  and  quickly.  The drill,
conducted with interstate  pipelines and other natural gas utilities,  simulated
the  loss  of  communications,   electricity  and  gas  supply.  The  drill  was
successful.

Nicor Inc.                                                              Page 12

Item 2.       Management's Discussion and Analysis of Financial Condition
              and Results of  Operations (Continued)

Other Nicor Affiliates. Affiliates other than Nicor Gas are also managed as part
of the Year 2000 project with similar action plans. Most of the Year 2000 issues
in these businesses are similar to those of Nicor Gas. These  affiliates,  being
relatively  small  ventures,  appear to be impacted in only minor ways, with the
exception  of  Tropical  Shipping.   Tropical   Shipping's  overall  remediation
activities  are  complete.  Although the company has  particular  concerns  with
Caribbean  interisland  communications,  it believes it has taken the  necessary
steps to address this issue. Costs for remediation are not significant.

OTHER

Performance-Based   Rate   Filing.   In   March   1999,   Nicor   Gas   filed  a
performance-based  rate plan for  natural  gas supply  costs  with the ICC.  For
further information see Regulatory Matters beginning on page 5.

Customer Select(R).  In September 1999, Nicor Gas received approval from the ICC
to expand Customer  Select,  the company's  voluntary pilot program which offers
customers a choice of natural gas commodity  suppliers.  For further information
see Regulatory Matters beginning on page 5.

Nicor Energy.  In September  1999,  Nicor Energy was certified as an Alternative
Retail Electric Supplier by the ICC. Certification allows Nicor Energy to supply
electricity  to Illinois  businesses as part of a statewide  program that allows
business  customers to remain with their current  utility or to switch  electric
commodity  suppliers.  Nicor Energy has already contracted to supply electricity
to several hundred customers.

Power Generation.  In June 1999, Nicor announced that it will not participate in
or make any  financial  investment  in the Rocky  Road  Power  Plant  project in
northern  Illinois.  Rocky  Road is a  250-megawatt,  natural  gas-fueled  power
generation facility.  Nicor Gas is providing gas transportation  services to the
facility.

New Accounting  Pronouncement.  In June 1999, the Financial Accounting Standards
Board  approved an amendment to defer the  effective  date of Statement No. 133,
Accounting  for  Derivative  Instruments  and  Hedging  Activities.  For further
information see New Accounting Pronouncement on page 5.

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 December 31, 1998.


<TABLE>

Nicor Inc.                                                                                                 Page 13
-------------------------------------------------------------------------------------------------------------------

Item 2.        Management's Discussion and Analysis of Financial Condition
               and Results of Operations (Continued)

GAS DISTRIBUTION STATISTICS

Changes in weather can materially affect operating results.  Operating revenues,
deliveries, customers and other statistics are presented below.
<CAPTION>

                                                     Three months ended                    Nine months ended
                                                        September 30                         September 30
                                                ------------------------------       ------------------------------
                                                    1999             1998                1999             1998
                                                -------------    -------------       -------------    -------------

Operating revenues (millions):
    Sales
<S>                                                  <C>               <C>                <C>              <C>
       Residential                                   $ 103.6           $ 96.0             $ 576.1          $ 562.2
       Commercial                                       16.3             17.2               118.0            138.0
       Industrial                                        2.4              2.3                17.4             20.9
                                                -------------    -------------       -------------    -------------
                                                       122.3            115.5               711.5            721.1
                                                -------------    -------------       -------------    -------------
    Transportation
       Residential                                        .7                -                 1.0                -
       Commercial                                       13.6             11.8                51.8             40.1
       Industrial                                       11.3              9.2                33.0             28.2
                                                -------------    -------------       -------------    -------------
                                                        25.6             21.0                85.8             68.3
                                                -------------    -------------       -------------    -------------
    Revenue taxes and other                             13.9             11.5                80.6             77.6
                                                -------------    -------------       -------------    -------------
                                                     $ 161.8          $ 148.0             $ 877.9          $ 867.0
                                                =============    =============       =============    =============

Deliveries (Bcf):
    Sales
       Residential                                      15.1             15.1               141.9            128.8
       Commercial                                        2.4              2.7                28.9             31.8
       Industrial                                         .5               .5                 4.6              5.4
                                                -------------    -------------       -------------    -------------
                                                        18.0             18.3               175.4            166.0
                                                -------------    -------------       -------------    -------------
    Transportation
       Residential                                        .2                -                  .2                -
       Commercial                                        9.3              8.1                55.5             44.2
       Industrial                                       42.4             43.5               129.4            136.6
                                                -------------    -------------       -------------    -------------
                                                        51.9             51.6               185.1            180.8
                                                -------------    -------------       -------------    -------------

                                                        69.9             69.9               360.5            346.8
                                                =============    =============       =============    =============

Customers at end of period (thousands):
    Sales
       Residential                                   1,733.7          1,718.8
       Commercial                                      104.0            124.5
       Industrial                                        7.0              8.9
                                                -------------    -------------
                                                     1,844.7          1,852.2
                                                -------------    -------------
    Transportation
       Residential                                      16.6                -
       Commercial                                       58.4             36.5
       Industrial                                        6.7              5.0
                                                -------------    -------------
                                                        81.7             41.5
                                                -------------    -------------

                                                     1,926.4          1,893.7
                                                =============    =============

Other statistics:
    Degree days                                           67               18               3,432            3,123
    Colder (warmer) than normal                        (23.9)%          (79.5)%             (12.8)%          (20.6)%
    Average gas cost per Mcf sold                     $ 3.31           $ 2.71              $ 2.61           $ 2.79
</TABLE>

<TABLE>

Nicor Inc.                                                                                                 Page 14
-------------------------------------------------------------------------------------------------------------------

Item 2.        Management's Discussion and Analysis of Financial Condition
               and Results of Operations (Concluded)

SHIPPING STATISTICS
<CAPTION>

                                                     Three months ended                    Nine months ended
                                                      September 30                         September 30
                                                ------------------------------       ------------------------------
                                                    1999             1998                1999             1998
                                                -------------    -------------       -------------    -------------

TEUs shipped (thousands):
<S>                                                     <C>              <C>                 <C>              <C>
    Southbound                                          30.3             27.5                90.2             85.5
    Northbound                                           4.4              4.3                13.6             11.5
    Interisland                                          1.9              2.1                 6.4              7.1
                                                -------------    -------------       -------------    -------------

                                                        36.6             33.9               110.2            104.1
                                                =============    =============       =============    =============

Other statistics:
    Revenue per TEU                                  $ 1,512          $ 1,511             $ 1,487          $ 1,508
    Ports served                                          23               23
    Vessels owned                                         13               14
</TABLE>


<PAGE>


Nicor Inc.                                                              Page 15

Item 3.       Quantitative and Qualitative Disclosures about Market Risk

For quantitative and qualitative  disclosures about market risk, see Market Risk
on page 12, which is incorporated herein by reference.


PART II - OTHER INFORMATION

Item 1.       Legal Proceedings

For information  concerning legal proceedings,  see Regulatory Matters beginning
on  page 5 and  Contingencies  on page  6,  which  are  incorporated  herein  by
reference.

Item 6.       Exhibits and Reports on Form 8-K

   (a)        See Exhibit Index on page 17 filed herewith.

   (b)        The company did not file a report on Form 8-K during the third
                quarter of 1999.



<PAGE>


Nicor Inc.                                                              Page 16

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 Inc.




Date      November 10, 1999                       By  DAVID L. CYRANOSKI
      ------------------------------                  -----------------------
                                                       David L. Cyranoski
                                                    Senior Vice President,
                                             Secretary, Treasurer and Controller



<PAGE>


Nicor Inc.                                                              Page 17

Exhibit Index

     Exhibit
     Number        Description of Document

     27.01        Financial Data Schedule.