-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O6WPc5azdRa6mpd+qdjql1+HQvsmerQgfQgzNiQcIJnuGnUhnPe/8h+PPd7zQ6rA B0vGIMvrIMpg/iJn3KXQ6g== 0000310103-97-000007.txt : 19970520 0000310103-97-000007.hdr.sgml : 19970520 ACCESSION NUMBER: 0000310103-97-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONNECTICUT ENERGY CORP CENTRAL INDEX KEY: 0000310103 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 060869582 STATE OF INCORPORATION: CT FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08369 FILM NUMBER: 97606585 BUSINESS ADDRESS: STREET 1: 855 MAIN STREET CITY: BRIDGEPORT STATE: CT ZIP: 06604 BUSINESS PHONE: 2033828111 MAIL ADDRESS: STREET 1: 855 MAIN ST CITY: BRIDGEPORT STATE: CT ZIP: 06604 10-Q 1 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, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 1-8369 CONNECTICUT ENERGY CORPORATION (Exact name of registrant as specified in its charter) Connecticut 06-0869582 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 855 Main Street Bridgeport, Connecticut 06604 (Address of principal executive offices) (Zip Code) (800) 760-7776 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Indicate by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at May 7, 1997 ----- -------------------------- Common Stock, $1 par value 9,128,883
PART I. FINANCIAL INFORMATION CONNECTICUT ENERGY CORPORATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share) (Unaudited) Three Months Ended Six Months Ended Mar. 31, Mar. 31, ------------------ ------------------ 1997 1996 1997 1996 ---- ---- ---- ---- Operating Revenues............................. $ 106,866 $ 120,189 $ 181,739 $ 189,964 Purchased gas.................................. 55,736 66,766 96,045 104,259 --------- --------- --------- --------- Gross margin................................... 51,130 53,423 85,694 85,705 Operating Expenses: Operations................................... 13,490 14,294 26,638 26,593 Maintenance.................................. 1,013 1,063 1,928 2,111 Depreciation................................. 3,911 3,737 7,822 7,474 Federal and state income taxes............... 8,842 9,449 12,195 12,620 Municipal, gross earnings and other taxes.... 6,074 6,773 10,305 10,552 --------- --------- --------- --------- Total operating expenses....................... 33,330 35,316 58,888 59,350 --------- --------- --------- --------- Operating income............................... 17,800 18,107 26,806 26,355 Other (income) deductions, net................. (855) 122 (591) 252 Interest Expense: Interest on long-term debt and amortization of debt issue costs........... 3,081 2,701 6,163 5,403 Other interest, net.......................... 363 649 614 1,036 --------- --------- --------- --------- Total interest expense......................... 3,444 3,350 6,777 6,439 --------- --------- --------- --------- Net Income..................................... $ 15,211 $ 14,635 $ 20,620 $ 19,664 ========= ========= ========= ========= Net income per share........................... $ 1.67 $ 1.64 $ 2.28 $ 2.21 ========= ========= ========= ========= Dividends paid per share....................... $ 0.33 $ 0.325 $ 0.66 $ 0.65 --------- --------- --------- --------- Weighted average number of common shares outstanding during period............. 9,084,861 8,903,982 9,050,085 8,887,454 --------- --------- --------- --------- See Notes to Consolidated Financial Statements.
CONNECTICUT ENERGY CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share) Mar. 31, Sept. 30, 1997 1996 --------- --------- (Unaudited) Assets ------ Utility Plant: Gross utility plant......................................... $385,090 $376,109 Less: accumulated depreciation.............................. 123,703 118,348 -------- -------- Net utility plant........................................... 261,387 257,761 Nonutility property, net...................................... 2,847 2,804 -------- -------- Net utility plant and other property.......................... 264,234 260,565 -------- -------- Current Assets: Cash and cash equivalents................................... 8,023 5,121 -------- -------- Accounts receivable......................................... 71,727 33,615 Less: allowance for doubtful accounts....................... 2,084 2,742 -------- -------- Net accounts receivable................................... 69,643 30,873 -------- -------- Accrued utility revenues, net............................... 6,852 2,608 Unrecovered purchased gas costs............................. 92 --- Inventories................................................. 10,056 15,331 Prepaid expenses............................................ 1,136 1,841 -------- -------- Total current assets.......................................... 95,802 55,774 -------- -------- Deferred Charges and Other Assets: Unamortized debt expenses................................... 6,124 6,238 Unrecovered deferred income taxes........................... 43,387 41,435 Other....................................................... 39,049 35,216 -------- -------- Total deferred charges and other assets....................... 88,560 82,889 -------- -------- Total assets.................................................. $448,596 $399,228 ======== ======== See Notes to Consolidated Financial Statements.
CONNECTICUT ENERGY CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share) Mar. 31, Sept. 30, 1997 1996 --------- --------- (Unaudited) Capitalization and Liabilities ------------------------------ Common Shareholders' Equity: Common Stock: authorized--20,000,000 shares, par value $1 per share, issued and outstanding--9,126,937 shares; 9,012,267 shares......................................... $ 9,127 $ 9,012 Capital in excess of par value............................. 93,430 91,079 Unearned compensation...................................... (1,069) --- Retained earnings.......................................... 52,509 37,870 -------- -------- Total common shareholders' equity............................ 153,997 137,961 -------- -------- Long-term debt............................................... 134,528 138,727 -------- -------- Total capitalization......................................... 288,525 276,688 -------- -------- Current Liabilities: Short-term borrowings...................................... 30,400 19,200 Current maturities of long-term debt....................... 4,654 595 Accounts payable........................................... 13,577 14,250 Refunds due customers...................................... 3,091 202 Federal, state and deferred income taxes................... 13,222 2,424 Property and other accrued taxes........................... 8,966 5,555 Interest payable........................................... 3,483 3,569 Customers' deposits........................................ 1,998 1,826 Refundable purchased gas costs............................. --- 520 Other...................................................... 4,026 3,545 -------- -------- Total current liabilities.................................... 83,417 51,686 -------- -------- Deferred Credits: Deferred income taxes and investment tax credits........... 68,091 65,381 Other...................................................... 8,563 5,473 -------- -------- Total deferred credits....................................... 76,654 70,854 -------- -------- Total capitalization and liabilities......................... $448,596 $399,228 ======== ======== See Notes to Consolidated Financial Statements.
CONNECTICUT ENERGY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited) Six Months Ended Mar. 31, --------------------- 1997 1996 ---- ---- Net cash provided by operating activities.............................. $ 7,040 $19,711 ------- ------- Cash Flows from Investing Activities: Capital expenditures................................................. (11,560) (8,503) Contributions in aid of construction................................. 34 31 Payments for retirement of utility plant............................. (157) (33) Energy ventures...................................................... --- (2,100) Other................................................................ --- 3 ------- ------- Net cash used by investing activities.................................. (11,683) (10,602) ------- ------- Cash Flows from Financing Activities: Dividends paid on common stock....................................... (5,981) (5,779) Issuance of common stock............................................. 2,466 1,449 Repayments of long-term debt......................................... (140) (140) Increase (decrease) in short-term borrowings......................... 11,200 (3,600) ------- ------- Net cash provided (used) by financing activities....................... 7,545 (8,070) ------- ------- Net increase in cash and cash equivalents.............................. 2,902 1,039 Cash and cash equivalents at beginning of period....................... 5,121 4,635 ------- ------- Cash and cash equivalents at end of period............................. $ 8,023 $ 5,674 ======= ======= Supplemental Disclosures of Cash Flow Information Cash paid during the period for: Interest............................................................. $ 7,320 $ 6,447 Income taxes......................................................... $ 641 $ 675 See Notes to Consolidated Financial Statements.
CONNECTICUT ENERGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands) 1. The unaudited consolidated financial statements presented herein should be read in conjunction with the consolidated financial statements of Connecticut Energy Corporation ("Connecticut Energy" or "Company") for the fiscal year ended September 30, 1996 as presented in the Annual Report on Form 10-K. In the opinion of management, the accompanying financial information reflects all adjustments which are necessary to provide a fair presentation of the interim periods shown. All such adjustments are of a normal recurring nature. In preparing the financial statements in conformity with generally accepted accounting principles ("GAAP"), the Company uses estimates. Estimates are disclosed when there is a reasonable possibility for change in the near term. For this purpose, near term is defined as a period of time not to exceed one year from the date of the financial statements. The Company's financial statements have been prepared based on management's estimates of the impact of regulatory, legislative and judicial developments on the Company or significant groups of its customers. The recorded amounts of certain accruals, reserves, deferred charges and assets could be materially impacted if circumstances change which affect these estimates. 2. The Company's principal subsidiary, The Southern Connecticut Gas Company ("Southern"), prepares its financial statements in accordance with the provisions of Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation" ("SFAS 71"), which requires a cost- based, rate-regulated enterprise such as Southern to reflect the impact of regulatory decisions in its financial statements. The Connecticut Department of Public Utility Control's ("DPUC") actions through the ratemaking process can create regulatory assets in which costs are allowed for ratemaking purposes in a period other than the period in which the costs would be charged to expense if the reporting entity were unregulated. In the application of SFAS 71, Southern follows accounting policies that reflect the impact of the rate treatment of certain events or transactions that are permitted to differ from GAAP. The most significant of these policies include the recording of deferred gas costs, deferred conservation costs, deferred hardship heating customer accounts receivable arrearages, deferred environmental evaluation costs and an unfunded deferred income tax liability, with a corresponding unrecovered asset, to account for temporary differences previously flowed through to ratepayers. Southern had net regulatory assets as of March 31, 1997 and September 30, 1996 of $55,668 and $59,281, respectively. These amounts are included in deferred charges and other assets and deferred credits in the consolidated balance sheets and are solely due to the application of the provisions of SFAS 71. During fiscal 1996, the DPUC approved regulations designed to increase competition in the natural gas industry in Connecticut by giving commercial and industrial gas customers the ability to purchase gas from independent brokers and marketers and by allowing local gas distribution companies to charge firm transportation rates for use of their distribution systems. The firm transportation rates are designed to provide Southern with the same margins provided by the bundled services. While the DPUC's actions encourage a competitive environment by deregulating certain activities, the Company believes that it continues to meet the requirements of SFAS 71. 3. Due to the seasonal nature of gas sales for space heating purposes by Southern, the results of operations for the six months ended March 31, 1997 are not indicative of the results to be expected for the fiscal year ending September 30, 1997. 4. Certain prior year amounts have been reclassified to conform with the current format of financial statement presentation. 5. Deferred charges and other assets include amounts related to the following: Mar. 31, Sept. 30, As of 1997 1996 - ----------------------------------------------------------------------------- Hardship heating customer accounts receivable arrearages $11,479 $11,753 Energy assistance funding shortfall 1,095 1,502 Prepaid pension and postretirement medical contributions 14,397 11,395 Conservation costs 4,440 3,954 Environmental evaluation costs 818 915 Nonqualified benefit plans 2,323 1,160 Gas holder costs 431 554 Investment in energy ventures 1,931 1,960 Other 2,135 2,023 ------- ------- $39,049 $35,216 ======= ======= Southern has been allowed to recover various deferred charges in rates over periods ranging from three to five years in accordance with the DPUC's Decision in Southern's latest rate case. 6. Deferred credits include amounts related to the following: Mar. 31, Sept. 30, As of 1997 1996 - ----------------------------------------------------------------------------- Interruptible margin sharing $ 510 $ 556 Nonqualified benefit plans 2,781 2,574 Insurance reserve 1,026 722 Hardship heating customer assistance grant program 1,057 75 Economic development initiatives 1,006 675 FERC Order No. 636 transition costs 1,853 187 Other 330 684 ------ ------ $8,563 $5,473 ====== ====== 7. Southern has identified coal tar residue at three sites in Connecticut resulting from coal gasification operations conducted at those sites by Southern's predecessors from the late 1800s through the first part of this century. Many gas distribution companies throughout the country carried on such gas manufacturing operations during the same period. See section in Management's Discussion and Analysis entitled "Environmental Matters" for further detail. 8. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"), which will be effective for the interim period ending December 31, 1997. This statement establishes standards for the computation and presentation of earnings per share ("EPS") by all entities with publicly held common stock or potential common stock. The statement replaces the presentation of primary EPS with a presentation of basic EPS. It also requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. The adoption of SFAS 128 is required by October 1, 1997, and the Company intends to adopt this statement prospectively. The impact of this standard is not expected to have a material effect on the Company's reported EPS. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Connecticut Energy Corporation ("Connecticut Energy" or "Company") and its subsidiaries and their representatives may, from time to time, make written or oral statements, including statements contained in the Company's filings with the Securities and Exchange Commission ("SEC") and in its annual report to shareholders, including its Form 10-K for the fiscal year ended September 30, 1996 and this quarterly report on Form 10-Q, which constitute or contain "forward-looking" information as that term is defined in the Private Securities Litigation Reform Act of 1995. All statements other than the financial statements and other statements of historical facts included in this quarterly report regarding the Company's financial position and strategic initiatives and addressing industry developments are forward-looking statements. Where, in any forward-looking statement, the Company, or its management, expresses an expectation or belief as to future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished. Factors which could cause actual results to differ materially from those stated in the forward-looking statements may include, but are not limited to, general and specific economic, financial and business conditions; federal and state regulatory, legislative and judicial developments which affect the Company or significant groups of its customers; the impact of competition on the Company's revenues; fluctuations in weather from normal levels; changes in development and operating costs; the availability and cost of natural gas; the availability and terms of capital; exposure to environmental liabilities; the costs and effects of unanticipated legal proceedings; the successful implementation and achievement of internal performance goals; the impact of unusual items resulting from ongoing evaluations of business strategies and asset valuations and changes in business strategy. RESULTS OF OPERATIONS Net Income - ---------- Connecticut Energy's consolidated net income for the three and six months ended March 31, 1997 and 1996 is detailed below: Three Months Ended Six Months Ended March 31, March 31, ------------------ ---------------- (in thousands, except per share) 1997 1996 1997 1996 ---- ---- ---- ---- Net Income $15,211 $14,635 $20,620 $19,664 ======= ======= ======= ======= Net Income per Share $ 1.67 $ 1.64 $ 2.28 $ 2.21 ======= ======= ======= ======= Weighted Average Shares Outstanding 9,085 8,904 9,050 8,887 ------- ------- ------- ------- Net income for the three and six months ended March 31, 1997 increased approximately 4% and 5%, respectively, compared to the three and six months ended March 31, 1996. Gross margin for the three months ended March 31, 1997 was approximately 4% lower compared to the three months ended March 31, 1996 principally due to a timing difference in accrued unbilled revenues. The decrease in gross margin was more than offset by lower expenses in the areas of operations, maintenance, taxes and short-term interest as well as by the receipt of interest income from one of Southern's interstate pipeline suppliers related to Southern's prepayment of transition costs associated with Federal Energy Regulatory Commission ("FERC") Order No. 636. The increase in net income for the six months ended March 31, 1997 was principally attributed to lower expenses for maintenance, taxes and short-term interest as well as the receipt of interest income on prepaid transition costs as described above. Higher expenses for depreciation and long-term debt interest partially offset these positive effects on net income. Total Sales and Transportation Volumes - -------------------------------------- Total volumes of gas sold and transported by the Company's principal subsidiary, The Southern Connecticut Gas Company ("Southern"), for the three and six months ended March 31, 1997 were 14,829 and 26,604 MMcf, respectively, representing increases of approximately 12% and 10% compared to the corresponding 1996 periods. These increases were primarily attributable to increased on-system interruptible sales and off-system sales and transportation volumes, which offset the effects of lower firm sales volumes principally due to warmer weather during the 1997 periods. Additionally, this category includes volumes associated with service under Southern's firm transportation tariffs, which commenced during the quarter ended June 30, 1996. Firm Sales and Transportation Volumes - ------------------------------------- Firm sales and transportation volumes for the three and six months ended March 31, 1997 decreased approximately 14% and 8%, respectively, compared to the corresponding 1996 periods. The decreases were primarily due to weather which was approximately 12% and 10% warmer, respectively, than the three and six months ended March 31, 1996. Growth in Southern's customer base and the continued conversions of nonheating customers to heating customers partially offset the overall decrease in this category. Interruptible Sales and Transportation Volumes - ---------------------------------------------- Margins earned on volumes delivered to interruptible customers vary depending upon the relationship of the market price for alternate fuels to the cost of natural gas and related transportation. Additionally, on-system margins earned, net of gross earnings tax, from interruptible services in excess of an annual target were being allocated through a margin sharing mechanism between Southern and its firm customers. Beginning June 1, 1996, excess on-system margins earned that would have been returned to Southern's firm customers have been redirected, with Connecticut Department of Public Utility Control ("DPUC") approval, to fund certain economic development and hardship assistance programs. The chart below depicts volumes of gas sold to and transported for on-system interruptible customers, off-system sales volumes and off-system transportation volumes under a special contract with The Connecticut Light and Power Company for its Devon generating station as well as gross margins earned and retained due to the margin sharing mechanism on these services for the three and six months ended March 31, 1997 and 1996, respectively: Three Months Ended Six Months Ended March 31, March 31, ------------------- ---------------- (dollars in thousands) 1997 1996 1997 1996 ---- ---- ---- ---- Gross Margin Earned $3,650 $3,058 $ 7,046 $5,896 ====== ====== ======= ====== Gross Margin Retained $2,878 $2,829 $ 3,950 $3,811 ====== ====== ======= ====== Volumes Sold and Transported (MMcf) 5,332 2,179 10,293 6,485 ------ ------ ------- ------ Gross margin retained represents the difference between gross margin earned and margin to be returned through the margin sharing mechanism. Gross margins earned and retained by Southern were higher for the three and six months ended March 31, 1997 compared to the corresponding 1996 periods principally due to higher margins earned from on-system interruptible and off-system sales. Margins from these sales were higher primarily due to higher levels of interruptible sales and services as a result of the warmer weather in the 1997 periods. Higher margins to be returned for the three and six months ended March 31, 1997 were principally due to the change in sharing mechanism for certain off-system services as of April 1, 1996, which increased the allocation of margins to be returned to firm customers from 50% to 85%. Volumes for the three and six months ended March 31, 1997 were higher compared to the corresponding 1996 periods primarily due to increases in on-system interruptible sales and off-system sales and transportation volumes related to the warmer weather during the 1997 periods. Gross Margin - ------------ Gross margin for the three months ended March 31, 1997 was approximately 4% lower than gross margin for the three months ended March 31, 1996. This variance in margins was primarily the result of a timing difference in accrued unbilled revenues, which will reverse in subsequent periods. Gross margin for the six months ended March 31, 1997 was relatively unchanged compared to the corresponding 1996 period. Southern's firm rates include a Weather Normalization Adjustment clause ("WNA") which allows Southern to charge or credit the non-gas portion of its firm rates to reflect deviations from normal weather. Because weather during the three and six months ended March 31, 1997, was approximately 9% and 5% warmer than normal, respectively, the operation of the WNA collected approximately $4,113,000 and $3,080,000, respectively, from firm customers during those periods. This compares to a return to firm customers during the three and six months ended March 31, 1996 of approximately $1,613,000 and $2,511,000, respectively. Southern's firm rates also include a Purchased Gas Adjustment clause ("PGA") which allows Southern to flow through to its customers, through periodic adjustments to amounts billed, increased or decreased costs incurred for purchased gas compared to base rate levels without affecting gross margin. The operation of Southern's PGA increased revenues and gas costs for the three and six months ended March 31, 1997 by approximately $3,993,000 and $5,279,000, respectively. For the three and six months ended March 31, 1996, PGA adjustments increased revenues and gas costs by approximately $5,746,000 and $6,035,000, respectively. Operations Expense - ------------------ Operations expense for the three months ended March 31, 1997 decreased approximately 6% compared to the corresponding 1996 period primarily due to lower uncollectibles expense related to the absence of certain amortizations allowed by the DPUC. The amounts allowed, relating to Southern's 3-Way Payment Plan, were amortized over a three year period which ended December 31, 1996. Lower insurance reserves and regulatory commission expense also contributed to the decrease in operations expense for the 1997 quarter. Operations expense for the six months ended March 31, 1997 remained relatively unchanged compared to the six months ended March 31, 1996. Depreciation Expense - -------------------- Depreciation expense for the three and six months ended March 31, 1997 increased approximately 5% compared to the corresponding 1996 periods. The increases were primarily due to additions to plant in service by Southern. Federal and State Income Taxes - ------------------------------ The total provision for federal and state income taxes for the three and six months ended March 31, 1997 decreased approximately 6% and 3%, respectively, compared to the corresponding 1996 periods. These decreases were primarily due to a lower effective tax rate related to the flow-through effect of deferred gas costs which decreased taxable income and, to a lesser extent, a reduction in the statutory state income tax rate. Municipal, Gross Earnings and Other Taxes - ----------------------------------------- Municipal, gross earnings and other taxes decreased approximately 10% for the three months ended March 31, 1997 compared to the corresponding 1996 period. This was primarily due to a decrease in gross earnings tax resulting from lower operating revenues in the 1997 quarter. Other (Income) Deductions, Net - ------------------------------ Other income for the three and six months ended March 31, 1997 was higher compared to the corresponding 1996 periods due to the receipt of approximately $974,000 in interest income from one of Southern's interstate pipeline suppliers related to Southern's prepayment of transition costs associated with FERC Order No. 636. Interest Expense - ---------------- Total interest expense increased approximately 3% and 5% for the three and six months ended March 31, 1997, respectively, compared to the corresponding 1996 periods primarily due to higher long-term debt costs associated with the issuance of $20,000,000 in secured Medium-Term Notes in August 1996. Higher short-term debt costs due to higher average short-term borrowings were offset by lower interest expense on deferred gas cost and margin sharing balances in the 1997 periods compared to the 1996 periods. LIQUIDITY AND CAPITAL RESOURCES Operating Activities - -------------------- The seasonal nature of Southern's business creates large-short- term cash demands primarily to finance gas purchases, customer accounts receivable and certain tax payments. To provide these funds, as well as funds for capital expenditure programs and other corporate purposes, Connecticut Energy and Southern have credit lines with a number of banks as detailed below: Shared Connecticut Connecticut Energy/ Energy Southern Southern Total ----------- -------- ------------------- ----- Committed Lines $5,000,000 $32,000,000 $20,000,000 $57,000,000 Uncommitted Lines --- $10,000,000 $ 8,000,000 $18,000,000 At March 31, 1997, the Company had unused lines of credit of $44,600,000. Because of the availability of short-term credit and the ability to issue long-term debt and additional equity, management believes it has adequate financial flexibility to meet its anticipated cash needs. Operating cash flows for the six months ended March 31, 1997 were lower compared to the corresponding 1996 period principally due to the effect of warmer weather on the operation of the PGA, timing of the payments in general accounts payable, lower accrued tax balances and increased cash requirements related to the timing of funding of certain employee benefit plan contributions. Partially offsetting the overall reduction in operating cash flows was the receipt of approximately $974,000 in interest income related to Southern's prepayment of transition costs. The decrease in operating cash flows for the 1997 period was also offset by the receipt of approximately $3,014,000 in interstate pipeline refunds and approximately $1,666,000 in previously paid transition costs, which have not yet been returned to firm customers, and balances related to margins earned, which will be used to fund certain economic development initiatives in Bridgeport and to provide grants to customers to reduce Southern's hardship arrearage balances. Investing Activities - -------------------- Capital expenditures approximated $11,526,000 and $8,472,000 for the six months ended March 31, 1997 and 1996, respectively. Capital expenditures for the six months ended March 31, 1997 were approximately 36% higher than the 1996 period due to the impact of less severe winter weather on construction activity. On an annual basis, Southern relies upon cash flows from operating activities to fund a portion of these expenditures, with the remainder funded by short-term borrowings and, at some later date, long-term debt and capital stock financings. Financing Activities - -------------------- On April 23, 1997, the Company filed a Registration Statement with the SEC for a proposed offering of up to 1,750,000 shares of its common stock. It is a shelf registration pursuant to which new equity capital will be raised in increments, from time to time, depending upon market conditions and proceeds will be used for the repayment of short-term debt and for other general corporate purposes. The method, timing and amounts of any future financings by the Company or its subsidiaries will depend on a variety of factors, including capitalization ratios, coverage ratios, interest costs, the state of the capital markets and general economic conditions. Rate Matters - ------------ On April 23, 1997, the DPUC issued a final Decision in Docket No. 96-01-28, DPUC Review of the Purchased Gas Adjustment Clause. In -------------------------------------------------- this docket, the DPUC conducted a review to determine what modifications, if any, should be made to the PGA clause utilized by Connecticut's three local gas distribution companies ("LDCs"). This review was conducted to consider the impact of deregulation on the gas industry. In its Decision, the DPUC determined that the PGA clause should continue because it has been found to be an effective tool in controlling volatility in earnings resulting from the instability of gas prices. The DPUC also ruled that the LDCs will continue to be allowed to recover wellhead to city gate purchased gas costs and certain producer reservation fees within their PGA clause and determined that gross earnings tax is another valid expense appropriate for recovery. In the same manner, a decrease in any of these expenses incurred by the LDCs will be refunded to customers through the operation of the PGA. A technical meeting will be scheduled by June 1, 1997 for the purpose of determining the effective date of including gross earnings tax within the PGA. Other modifications specified in this Decision include the standardization of PGA filings and a change in the frequency of PGA review from monthly to semi-annually beginning in October 1997. Environmental Matters - --------------------- Southern has identified coal tar residue at three sites in Connecticut resulting from coal gasification operations conducted at those sites by Southern's predecessors from the late 1800s through the first part of this century. Many gas distribution companies throughout the country carried on such gas manufacturing operations during the same period. The coal tar residue is not designated a hazardous material by any federal or Connecticut agency, but some of its constituents are classified as hazardous. On April 27, 1992, Southern notified the Connecticut Department of Environmental Protection ("DEP") and the United States Environmental Protection Agency of the presence of coal tar residue at the sites. On November 9, 1994, the DEP informed Southern that it had performed a preliminary review of the information provided to it by Southern and had determined that, based on current priorities and limited staff resources, a comprehensive review of site conditions and subsequent participation by the DEP "are not possible at this time." Until the DEP conducts a comprehensive review, no discussions with it addressing the extent, timing and type of remedial action, if any, can occur. Given the DEP's response, management cannot at this time predict the costs of any future site analysis and remediation, if any, nor can it estimate when any such costs, if any, would be incurred. While such future analytical and cleanup costs could possibly be significant, management believes, based upon the provisions of the Partial Settlement in Southern's latest rate order, that Southern will be able to recover these costs through its customer rates. Although the method, timing and extent of any recovery remain uncertain, management currently does not expect that the incurrence of such costs will materially adversely impact the Company's financial condition or results of operations. PART II- OTHER INFORMATION Items 3 and 5 are inapplicable. Item 1. Legal Proceedings ----------------- In a class action styled Connecticut Heating & Cooling Contractors Association, Inc. v. Connecticut Natural Gas Corp., Connecticut Superior Court - Middlesex, two trade associations and two plumbing and heating contractors in November 1995 sued Southern as well as the other Connecticut LDCs for violations of the Connecticut Unfair Trade Practices Act and tortious interference with business expectancies in connection with the LDCs' provision of service and maintenance to heating, cooling and ventilating systems and appliances. An Amended Complaint was filed in response to motions filed by the defendants in which one of the two contractor plaintiffs was removed from the case. The plaintiffs seek declaratory and injunctive relief. The plaintiffs seek treble damages in excess of $15,000, punitive damages and attorneys' fees. Southern and one of the other defendants filed a Motion to Strike the Complaint on the grounds of misjoinder of causes of action. The Court granted Southern's Motion to Strike. The plaintiffs then filed a substituted complaint which added conspiracy and antitrust allegations in an effort to cure the defects raised in the Motion to Strike. Southern is preparing a Request to Revise the new complaint and will review it for another Motion to Strike. Southern intends to vigorously defend itself in this suit, which management believes is without merit. In the opinion of management, resolution of this lawsuit is not expected to have a material adverse impact on the Company's financial condition or results of operations. Item 2. Changes in Securities --------------------- During the second quarter, a total of 52,247 shares of unregistered common stock were issued to five senior officers of the Company pursuant to the Company's 1997 Restricted Stock Award Plan. Such shares are exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. Item 4. Submission of Matters to a Vote of Security-Holders --------------------------------------------------- (a) The annual meeting of the registrant was held on January 28, 1997. (b) Election of Directors: Non- For Against Abstain Vote --- ------- ------- ---- J. R. Crespo 7,345,295 122,382 0 0 Richard R. Freeman 7,349,820 117,857 0 0 Newman M. Marsilius III 7,350,747 116,930 0 0 (c) Election to employ the firm of Coopers & Lybrand L.L.P. as the independent accountants to audit the books and affairs of the registrant and its subsidiaries for the 1997 fiscal year: Non- For Against Abstain Vote --- ------- ------- ---- Coopers & Lybrand L.L.P. 7,330,798 57,279 79,600 0 (d) Election to approve 1997 Restricted Stock Award Plan: Non- For Against Abstain Vote --- ------- ------- ---- 1997 Restricted Stock Award Plan 6,574,322 538,754 296,010 58,591 (e) Election to approve Non-Employee Director Stock Plan: Non- For Against Abstain Vote --- ------- ------- ---- Non-Employee Director Stock Plan 6,485,228 596,517 327,341 58,591 Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits: Exhibit 10(a) - Connecticut Energy Corporation 1997 Restricted Stock Award Plan is filed herewith at pages 23 to 35. Exhibit 10(b) - Connecticut Energy Corporation Non- Employee Director Stock Plan is filed herewith at pages 36 to 40. Exhibit 27 - Financial Data Schedule Submitted only in electronic format to the Securities and Exchange Commission. (b) Reports on Form 8-K: There were no reports filed on Form 8-K during the quarter. SIGNATURES 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. CONNECTICUT ENERGY CORPORATION (Registrant) DATE: May 13, 1997 /s/ Vincent L. Ammann, Jr. ------------ ---------------------------- Vincent L. Ammann, Jr. Vice President and Chief Accounting Officer EX-10 2 EXHIBIT A CONNECTICUT ENERGY CORPORATION 1997 RESTRICTED STOCK AWARD PLAN SECTION I. Establishment, Designation and Purpose -------------------------------------- The Board hereby establishes a plan, designated as the Connecticut Energy Corporation 1997 Stock Award Plan (the "Plan"). The purpose of the Plan is to motivate Participants to work to achieve corporate objectives beneficial to the Corporation and its shareholders by awarding to them shares of Stock which become vested upon achievement of the objectives. The Plan should assist the Corporation to retain capable officers and other key employees who are eligible to participate in the Plan, and to attract and retain others who may reasonably expect to become Participants in the Plan after a reasonable period of employment with the Corporation or its Affiliates. Definitions of terms in boldface type are set out in Section XIV. SECTION II. Administration -------------- The Plan shall be administered by the Committee, which is authorized, in its sole discretion, to establish such rules and regulations, consistent with the terms of this Plan, as the Committee deems necessary or advisable for the proper administration of the Plan and to take such other action in connection with or in relation to the Plan as the Committee deems necessary or advisable. Each action of the Committee pursuant to the Plan, including any Award granted thereunder, shall be final and conclusive for all purposes and upon all persons, including, without limitation, the Corporation and its Affiliates, the Committee, the Board, the affected officers or key employees of the Corporation and/or its Affiliates and their respective successors in interest. The Committee shall, in its sole discretion, determine (i) which officers and key employees of the Corporation and its Affiliates (who may also be members of the Board) shall be eligible to receive Awards pursuant to the Plan; (ii) the time or times at which Awards will be granted; (iii) the number of shares of Stock to be awarded; (iv) the time or times within which the Awards may be subject to forfeiture; and (v) all other conditions of each Award. The provisions and amount of the Awards need not be the same with respect to each recipient or with respect to the same recipient for different Performance Periods. SECTION III. Effective Date -------------- The Plan will become effective upon approval by the Board, subject to approval by the shareholders of the Corporation. SECTION IV. Stock ----- The Stock to be issued under the Plan shall be made available from treasury or authorized and unissued shares of Stock of the Corporation. The total number of shares of Stock that may be issued under the Plan may not exceed 300,000 shares, provided, however, that in the event of a stock dividend, stock split, reverse stock split, recapitalization, reorganization, merger, consolidation, spin-off, repurchase, share exchange or similar corporate transaction or event affecting the Stock, the Committee shall make appropriate adjustments as are necessary to the number of shares of Stock available or awarded under the Plan in order to prevent the dilution or enlargement of any rights of any Participant with respect to his or her Stock. Any fractional share resulting from an adjustment pursuant to this section shall be canceled and a cash equivalent shall be credited to the Participant's Account. Shares of Stock issued pursuant to Awards granted under the Plan that are subsequently forfeited pursuant to Section VI shall be reincluded in the number of shares available for issuance under the Plan. SECTION V. Eligibility ----------- Any officer or senior salaried employee of the Corporation or any of its Affiliates may be selected by the Committee to participate in the Plan. A Participant may be the recipient of one or more Awards, as determined from time to time by the Committee. No Participant may acquire pursuant to Awards granted under the Plan more than 180,000 of the shares of Stock available for issue pursuant to the Plan, nor may a Participant receive more than $250,000 in dividends or distributions credited to his or her Account with respect to shares of Stock actually awarded for any one Performance Period. SECTION VI. Awards ------ Awards, except as otherwise specifically provided in the grant thereof, shall be granted to selected Participants for services rendered to the Corporation or to an Affiliate by the Participant and shall be subject to the following terms and conditions: (a) The Committee shall specify the number of shares of Stock to be issued by the Corporation to each Participant as a Target Award for each Performance Period (which may overlap an earlier Performance Period with respect to which the Participant has received a Target or Actual Award). (b) The Committee shall, pursuant to Section IX hereof, establish objective or quantitative performance goals which must be achieved or satisfied for each Participant's Target Award to become an Actual Award. (c) Each time a Target Award is awarded, the Committee shall establish any applicable schedule of performance goals pursuant to which percentages (greater, lesser, or equal to 100%, but in no event greater than 150%) of a Target Award can be earned as an Actual Award. (d) The Restricted Shares awarded as a Target Award shall be issued, subject to and in accordance with the provisions of Section XI hereof, by the Corporation to the Participant, not later than the beginning of the Performance Period (except that as to the Performance Period including the fiscal year in which the Effective Date occurs, the performance goals shall be established, the Target Awards made and Restricted Shares issued within sixty (60) days following the approval of the Plan by the shareholders). (e) Actual Awards earned shall be awarded within sixty (60) days after the end of the applicable Performance Period. (f) If a Change in Control occurs during a Performance Period, all Target Award shares shall become Actual Awards shares effective as of the date of the Change in Control. (g) Actual Awards shall be deemed to have vested on the last day of the Performance Period in which the Actual Award was earned, subject to the following conditions: (i) Any Target Award which has not vested at the time of the Participant's termination of employment with the Corporation or an Affiliate for any reason (including, without limitation, termination by the Corporation with or without cause) other than death, shall be forfeited to the Corporation. (ii) Upon the death of a Participant during a Performance Period, a fraction of the Target Award shares shall be converted to Actual Award shares in which the Participant is vested at death. The numerator of the fraction shall be the number of whole months in the Performance Period, prior to the Participant's death and the denominator of the fraction shall be the number of months in the Performance Period. (iii) Target Awards which are converted to Actual Awards upon a Change in Control shall vest upon the occurrence of a Change in Control. SECTION VII. Nontransferability of Stock --------------------------- Shares of Stock issued as Target Awards shall not be transferable by the Participant to whom they are issued, and such Stock may not be sold, exchanged, transferred, pledged, hypothecated, assigned, or otherwise disposed of at any time prior to the vesting of an Actual Award. Any distributions under the Plan shall be made only to the applicable Participant or his or her estate. No Award, sum or other interest under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt by a Participant or any beneficiary under the Plan to do so shall be void. No interest under the Plan shall in any manner be liable for or subject to the debts, contracts, liabilities or torts of any Participant or his or her estate. SECTION VIII. Registration, Possession, Issuance and Delivery of Shares and Dividends -------------------------------- (a) Each grant of Stock under the Plan shall be immediately registered on the transfer ledgers of the Corporation in the name of the Participant who receives the grant. From the date of such transfer on the books of the Corporation, each Participant shall be entitled to vote such Stock as the record owner thereof. Prior to the end of the Performance Period, such rights to vote shall relate to the shares issued as a Target Award; thereafter, such rights shall be based upon the number of shares, if any, comprising the Actual Award. Possession of the certificate representing shares of Stock shall be retained by the Treasurer of the Corporation for the benefit of each Participant until the provisions of the Plan relating to the removal of restrictions have been satisfied and the Participant has become vested as to particular shares of Stock. Thereupon, the Treasurer of the Corporation shall promptly deliver the certificates for such shares to the Participant. Notwithstanding any other provision of the Plan, the grant, issuance or delivery of any shares of Stock may be postponed for such period as may be required to comply with any applicable requirements of any national securities exchange or any requirements under any other law or regulation applicable to the grant, issuance or delivery of such shares. The Corporation shall not be obligated to grant, issue or deliver any such shares if the grant, issuance or delivery thereof would constitute a violation of any provision of any law or of any regulation of any governmental authority or any national securities exchange. (b) Each Participant will be entitled to receive all cash dividends and other distributions made with respect to the Stock granted under the Plan as a vested Actual Award. Cash dividends on the Stock shall be credited to each Participant's Account if, as and when dividends are declared and paid by the Corporation with respect to its outstanding shares of common stock. In the case of dividends paid in property other than cash, the amount of the dividend shall be deemed to be the fair market value of the property at the time of the payment of the dividend, as determined in good faith by the Committee and shall be credited to the Participant's Account. Pending the satisfaction of performance and vesting conditions, such dividends and distributions shall be credited based on the number of shares conditionally awarded. Only dividends and distributions with respect to shares in an Actual Award which has vested shall be distributed from a Participant's Account to the Participant. As of the date the Account is distributed, such Account shall be credited with interest equal to six percent per annum, compounded quarterly on the average daily balance in such Account, determined retroactively on the basis of the number of shares actually awarded which have subsequently become vested. (c) All of the shares of Stock granted to a Participant under the Plan, together with all cash dividends and interest thereon accumulated in the Participant's Account, shall become free of restrictions imposed by this Section and shall be distributed to the Participant entitled thereto when the Participant's interest therein becomes vested. SECTION IX. Performance Goals ----------------- Performance goals shall be established in writing by the Committee for each Participant for each Performance Period not later than ninety (90) days after the beginning of the Performance Period to which they relate and shall be used by the Committee to determine the number of shares earned as an Actual Award at the end of that Performance Period. The Committee is authorized to revise the criteria upon which Awards are based prior to the commencement of any Performance Period; however, once the Committee has established the Performance Period, the criteria for that Performance Period may not be revised. Conversion of Target Awards to Actual Awards shall be conditioned upon the achievement of (some, all or more than) one or more stated earnings per share ("EPS") and total shareholder return ("TSR") objectives. EPS shall be measured against a specified budgeted amount and TSR shall be measured against the TSR for a selected group of peers (companies whose activities are similar to those that the Corporation engages in). In addition, the performance goals of officers and employees of Affiliates may also include earnings objectives set for the Affiliate(s) by which they are employed. SECTION X. Tax Treatment ------------- Stock awarded to Participants represents compensation to them for their service as employees of the Corporation or its Affiliates. The Corporation shall require the withholding of any and all taxes that the Corporation believes to be required to be withheld by any government or agency thereof. The Corporation, in its discretion, may withhold Stock in lieu of cash, with the Corporation remitting to the appropriate tax authorities the fair market value of the Stock withheld. The Participant or his or her estate shall bear all taxes, irrespective of whether withholding is required. SECTION XI. Amendments, Suspensions and Termination of Plan ----------------------------------------------- The Board or the Committee may terminate the plan, in whole or in part, suspend the Plan, in whole or in part from time to time, and may amend the Plan from time to time, including the adoption of amendments deemed necessary or desirable to qualify the Awards under laws of various states (including tax laws) and under rules and regulations promulgated by the Securities and Exchange Commission with respect to employees who are subject to the provisions of Section 16 of the Exchange Act. The Board or Committee may correct any defect or supply an omission or reconcile any inconsistency in the Plan or in any Award granted thereunder, without the approval of the shareholders of the Corporation, provided, however, that no action shall be taken without the approval of the shareholders of the Corporation which may increase the number of shares of Stock available for Awards or withdraw administration of the Plan from the Committee (except as provided in Section IV), or permit any person while a member of the Committee to be eligible to receive an Award. Without limiting the foregoing, the Board or the Committee may make amendments applicable or inapplicable only to Participants who are subject to Section 16 of the Exchange Act. No amendment, termination or suspension of the Plan shall in any manner affect Awards previously granted without the consent of the Participant to whom shares were previously awarded. The Plan shall terminate upon the earliest occurrence of one of the following events: (i) The issuance of all of the shares of Stock authorized to be issued pursuant to the Plan; (ii) The vote of the Board or the Committee to terminate the Plan; or (iii) Ten (10) years after the Effective Date. SECTION XII. Restrictive Legend and Stock Power ---------------------------------- (a) Each certificate evidencing Restricted Shares shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Stock. Any attempt to dispose of such Stock in contravention of such terms, conditions, and restrictions shall be ineffective. The Committee may adopt rules which provide that the certificates evidencing such shares may be held in custody by a bank or other institution, or that the Corporation may itself hold such shares in custody until the restrictions thereon shall have lapsed and may require, as a condition of any Award, that the recipient Participant shall have delivered to the custodian bank or the Treasurer of the Corporation a stock power endorsed in blank relating to the Stock evidenced by such certificate. (b) As a condition of participation in the Plan, each Participant to whom a Target Award is granted agrees that the certificates for the Restricted Shares may be inscribed with the following legend: "The shares of the Corporation's common stock evidenced by this certificate are subject to the terms and restrictions of the Corporation's 1997 Restricted Stock Plan; such shares are subject to forfeiture or cancellation under the terms of said Plan; and such shares shall not be sold, transferred, assigned, pledged, encumbered or otherwise alienated or hypothecated except pursuant to the provisions of said Plan, a copy of which Plan is available from the Corporation upon request." SECTION XIII. Governing Law ------------- The Plan and all determinations made and actions taken pursuant thereto shall be governed by the laws of the State of Connecticut. SECTION XIV. Glossary -------- (a) "Account" means the internal account maintained by or on behalf of the Corporation in which cash dividends and interest thereon are accumulated for the benefit of each Participant in the Plan. The Accounts established for Participants are merely an administrative convenience and the Corporation shall not be required to segregate any cash or other property of the Corporation. Any amounts which become payable to a Participant shall be paid from the general assets of the Corporation. (b) "Affiliate" shall have the meaning ascribed to that term in Rule 12b-2 of the General Rules as and Regulations under the Exchange Act as in effect on the Effective Date. (c) An "Award" has two components: (i) A "Target Award" which consists of a conditional grant of Restricted Shares to a Participant at the beginning of a Performance Period; and (ii) An "Actual Award", which consists of an unconditional grant of entitlement (upon satisfaction of any applicable vesting conditions) to shares equal in number to none, some, all or more than all (but in no event, more than 150%) of the Restricted Shares issued as a Target Award as to which the performance goals have been satisfied. (d) "Board" means the Board of Directors of the Corporation. (e) A "Change in Control" of the Corporation shall be deemed to have occurred if: (i) Any Person is or becomes an Acquiring Person; (ii) Less than 2/3 of the total membership of the Board shall be Continuing Directors; or (iii) The shareholders of the Corporation shall approve a merger or consolidation of the Corporation or a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all of the Corporation's assets. In connection with the preceding definition of "Change in Control", the capitalized terms appearing in boldface type herein are defined as follows: (iv) "Acquiring Person" means any Person who is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then outstanding voting securities, unless such person has filed with respect to its holdings and continues to hold such securities for investment in a manner qualifying such Person to utilize Schedule 13G and all required amendments thereunder with respect to its holdings and continues to hold such securities for investment in a manner qualifying such person to utilize Schedule 13G for reporting of ownership. (v) "Affiliate" and "Associate" shall have the respective meaning ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act as in effect on the Effective Date hereof. (vi) "Continuing Directors" means any member of the Board who was a member of the Board prior to the date hereof and any successor of a Continuing Director while such successor is a member of the Board who is not an Acquiring Person or an Affiliate or an Associate of an Acquiring Person and who is recommended or elected to succeed the Continuing Director by a majority of the Continuing Directors. (vii) "Person" shall have the meaning assigned to it in Section 13d and 14d of the Exchange Act. (f) "Committee" means the Nominating and Salary Committee appointed by the Board from among its members who are both Outside Directors and Non-Employee Directors, as from time to time constituted. (g) "Corporation" means Connecticut Energy Corporation, a corporation organized and existing under the laws of the State of Connecticut or its successor. (h) "Effective Date" means the date of adoption of the Plan by the Board, subject to the subsequent approval of the Plan by the Corporation's shareholders. (i) "Exchange Act" means the Securities and Exchange Act of 1934, as amended. (j) "Non-Employee Director" means a member of the Board who satisfies the definition of that term as set forth in Rule 16b-3(b)(3)(i) of the Exchange Act rules. (k) "Outside Director" means a member of the Board who satisfies the definition of that term as set forth in Section 162(m) of the Internal Revenue Code of 1986, as amended from time to time, and the Treasury Regulations thereunder. (l) "Participant" means an employee of the Corporation or one of its Affiliates who has been selected by the Committee to receive an Award. (m) "Pension Plan" means The Southern Connecticut Gas Company Pension Plan for Salaried and Certain Other Employees. (n) "Performance Period" means a three-year period comprising three fiscal years of the Corporation. (o) "Plan" means this Connecticut Energy Corporation 1997 Restricted Stock Award Plan. (p) "Restricted Shares" means shares of Stock issued to a Participant as a Target Award subject to the conditions imposed thereon by the Committee until such time as such shares become vested in the Participant. (q) "Stock" means the Corporation's Common Stock, $1.00 par value. (r) To "Vest" means, with respect to a Participant's interest in shares of Stock, that such interest has become nonforfeitable. EXHIBIT B CONNECTICUT ENERGY CORPORATION NON-EMPLOYEE DIRECTOR STOCK PLAN SECTION I. Establishment, Designation and Purpose -------------------------------------- The Board hereby establishes a plan, designated as the Non- Employee Directors Stock Plan of Connecticut Energy Corporation (the "Plan"). The purpose of the Plan is to align the interests of Non-Employee Directors with the Corporation's shareholders by awarding Stock to Non-Employee Directors. The Plan should assist the Corporation in attracting and retaining capable Non-Employee Directors who are committed to furthering the success of the Corporation and its Affiliates in ways that are reflected in the market value of the Corporation's shares. Definitions of words in boldface type are contained in Section XII. SECTION II. Administration -------------- The Plan shall be administered by the Committee, which is authorized, in its sole discretion, to establish such rules and regulations, consistent with the terms of this Plan, as the Committee deems necessary or advisable for the proper administration of the Plan, to administer the Plan and to take such other action in connection with or in relation to the Plan as the Committee deems necessary or advisable. SECTION III. Effective Date -------------- The Plan will become effective upon adoption by vote of the Board, subject to approval by the shareholders of the Corporation. SECTION IV. Stock ----- The Stock to be issued under the Plan shall be made available from treasury or authorized and unissued shares of Stock of the Corporation. The total number of shares of Stock that may be issued under the Plan may not exceed 13,000, provided, however, that in the event of a stock dividend, stock split, reverse stock split, recapitalization, reorganization, merger, consolidation, spin-off, repurchase, share exchange or similar corporate transaction or event affecting the Stock, the Committee shall make appropriate adjustments as are necessary to the number of shares of Stock that may be awarded under the Plan in order to prevent the dilution or enlargement of any rights of any Non-Employee Director. SECTION V. Eligibility ----------- All Non-Employee Directors shall be eligible to participate in the Plan. SECTION VI. Awards ------ Each Non-Employee Director incumbent on the Effective Date will be awarded one hundred (100) shares of Stock on the date of the meeting of the Board following the Corporation's 1997 Annual Meeting of Shareholders. Each year at the meeting of the Board following the Corporation's annual meeting of shareholders, each then-incumbent Non-Employee Director will be awarded 100 shares of Stock. Such Stock may be awarded upon such other conditions or subject to such restrictions, not inconsistent with the provisions of the Plan, as the Committee shall deem appropriate. SECTION VII. Transferability of Stock ------------------------ Unless awarded pursuant to conditions or restrictions specified by the Committee at the time of award, shares of Stock awarded pursuant to the Plan shall not be subject to restrictions on transferability, exchange, sale or assignment. SECTION VIII. Distribution of Stock --------------------- Unless otherwise specified by the Committee at the time of award, shares of Stock shall be issued (and transferred on the books of the Corporation to the names of) to the respective Non-Employee Directors to whom awarded, effective as of the date of award, on or as soon after the date of award as is reasonably feasible. From the date of such transfer on the books of the Corporation, each Non-Employee Director shall be the absolute owner of the Stock issued to him or her, respectively and, as such owner, shall be entitled to receive dividends and to vote such Stock as the record owner thereof. SECTION IX. Tax Treatment ------------- Stock awarded to Non-Employee Directors shall be in addition to, and not in lieu of, compensation to them for their service as directors of the Corporation. For accounting and tax treatment purposes, Stock shall be valued at the closing price of the Stock as reported in the Wall Street Journal (or other reputable publication containing daily price quotations of the Stock) as of the close of trading on the business day next preceding the date of grant of the award (or, in the event of a grant subject to restrictions justifying deferral of inclusion in income, the date as of which such restrictions lapse). SECTION X. Amendments and Termination of Plan ---------------------------------- The Plan may be terminated or amended in whole or in part at any time by the Board; provided, however, that the Board may not, without further approval of the Corporation's shareholders, increase the number of shares of Stock which may be issued under the Plan, (except as may be necessary to effect an adjustment pursuant to Section IV hereof) materially increase the benefits accruing to Non-Employee Directors under the Plan or materially modify the requirements for eligibility to participate in the Plan. The President or any Vice President of the Corporation, with the concurrence of the Vice President and General Counsel, is authorized to make administrative modifications to the Plan deemed necessary or desirable in order to conform provisions of the Plan to the requirements of federal or state laws applicable to the Corporation. No amendment or termination of the Plan shall alter or impair any rights or benefits accruing under the Plan to a Non-Employee Director without the express consent of such Non-Employee Director. The Plan shall terminate upon the earliest occurrence of one of the following events: (i) The issuance of all of the shares of Stock authorized to be issued pursuant to Section IV of the Plan; (ii) The vote of the Board to terminate the Plan; or (iii) Ten (10) years after the Effective Date. SECTION XI. Governing Law ------------- The Plan and all determinations made and actions taken pursuant thereto shall be governed by the laws of the State of Connecticut. SECTION XII. Glossary -------- (i) "Affiliate" shall have the meaning ascribed to that term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act as in effect as of the Effective Date. (ii) "Board" means the Board of Directors of the Corporation. (iii) "Committee" means the Nominating and Salary Committee appointed by the Board from among its members, as from time to time constituted. (iv) "Corporation" means Connecticut Energy Corporation, a corporation organized and existing under the laws of the State of Connecticut or its successors. (v) "Effective Date" means the date of adoption of the Plan by the Board, subject to the subsequent approval of Plan by the Corporation's shareholders. (vi) "Exchange Act" means the Securities and Exchange Act of 1934, as amended. (vii) "Non-Employee Director" means a member of the Board who is not an employee of the Corporation or of any of its Affiliates and who was not employed by the Corporation or any of its Affiliates for a period twelve (12) months preceding such individual's election to the Board. (viii) "Plan" means the Non-Employee Directors Stock Compensation Plan of Connecticut Energy Corporation. (ix) "Stock" means the Corporation's Common Stock, $1.00 par value. EX-27 3
UT 1,000 6-MOS SEP-30-1997 MAR-31-1997 PER-BOOK 261,387 2,847 95,802 88,560 0 448,596 9,127 92,361 52,509 153,997 0 0 134,528 30,400 0 0 4,654 0 0 0 125,017 448,596 181,739 12,195 142,738 154,933 26,806 591 27,397 6,777 20,620 0 20,620 5,981 6,163 7,040 2.28 0
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