-----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, TG3mLVRJ3m1blB6aABUdXXM+9WRfD/8Tv79VBSYekGZ4PNO50bnwkn/8MSDdmeaB qohuBzJOoTiMpjkzFVFzVg== 0000077231-96-000027.txt : 19960812 0000077231-96-000027.hdr.sgml : 19960812 ACCESSION NUMBER: 0000077231-96-000027 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960809 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENNSYLVANIA ENTERPRISES INC CENTRAL INDEX KEY: 0000077231 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 135605391 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11325 FILM NUMBER: 96606477 BUSINESS ADDRESS: STREET 1: 39 PUBLIC SQ STREET 2: WILKES BARRE CENTER CITY: WILKES BARRE STATE: PA ZIP: 18711-0601 BUSINESS PHONE: 7178298843 MAIL ADDRESS: STREET 1: 39 PUBLIC SQUARE CITY: WILKES BARRE STATE: PA ZIP: 18711-0601 10-Q 1 PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES TABLE OF CONTENTS PAGE PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Income for the three and six months ended June 30, 1996 and 1995 . . . . . . . . . . . 2 Consolidated Balance Sheets as of June 30, 1996, and December 31, 1995 . . . . . . . . . . . . . . . . . . 3 Consolidated Statements of Cash Flows for the six months ended June 30, 1996 and 1995 . . . . . . . 5 Notes to Consolidated Financial Statements. . . . . . . . . 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . . 10 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. . . . . 19 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 19 -1- PART I. FINANCIAL INFORMATION PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES Consolidated Statements of Income
Three Months Ended Six Months Ended June 30, June 30, 1996 1995* 1996 1995* (Thousands of Dollars) OPERATING REVENUES: Gas sales and services $ 27,597 $ 27,305 $ 99,748 $ 98,105 Pipeline construction and services 2,641 55 4,539 65 Other 19 37 57 109 Total operating revenues 30,257 27,397 104,344 98,279 OPERATING EXPENSES: Cost of gas 13,786 14,049 55,707 57,889 Other operation expenses 9,343 6,078 18,333 12,057 Maintenance 1,492 1,312 2,706 2,280 Depreciation 2,088 1,786 4,106 3,580 Income taxes (376) (990) 5,529 3,507 Taxes other than income taxes 2,929 2,684 6,745 6,578 Total operating expenses 29,262 24,919 93,126 85,891 OPERATING INCOME 995 2,478 11,218 12,388 OTHER INCOME (DEDUCTIONS), NET 1,445 (49) 2,236 200 INCOME BEFORE INTEREST CHARGES 2,440 2,429 13,454 12,588 INTEREST CHARGES: Interest on long-term debt 2,323 3,362 5,191 6,848 Other interest 239 521 457 843 Allowance for borrowed funds used during construction (50) (13) (96) (22) Total interest charges 2,512 3,870 5,552 7,669 INCOME (LOSS) FROM CONTINUING OPERATIONS (72) (1,441) 7,902 4,919 LOSS WITH RESPECT TO DISCONTINUED OPERATIONS (Note 2) (21) - (386) (3,704) INCOME (LOSS) BEFORE SUBSIDIARY'S PREFERRED STOCK DIVIDENDS (93) (1,441) 7,516 1,215 SUBSIDIARY'S PREFERRED STOCK DIVIDENDS 383 692 1,020 1,383 NET INCOME (LOSS) $ (476) $ (2,133) $ 6,496 $ (168) COMMON STOCK Earnings (loss) per share of common stock: Continuing operations $ (.09) $ (.37) $ 1.27 $ .62 Discontinued operations - - (.07) (.65) Net income (loss) before premium on repurchase/redemption of subsidiary's preferred stock (.09) (.37) 1.20 (.03) Premium on repurchase/redemption of subsidiary's preferred stock (.26) - (.24) - Earnings (loss) per share of common stock $ (.35) $ (.37) $ .96 $ (.03) Weighted average shares outstanding 5,044,134 5,737,156 5,412,580 5,695,312 Cash dividends per share $ .55 $ .55 $ 1.10 $ 1.10 *Reclassified to conform with 1996 consolidated financial statement presentation. The accompanying notes are an integral part of the consolidated financial statements.
-2- PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
June 30, December 31, 1996 1995* (Thousands of Dollars) ASSETS UTILITY PLANT: At original cost $ 302,356 $ 295,895 Accumulated depreciation (79,011) (76,882) 223,345 219,013 OTHER PROPERTY AND INVESTMENTS: Nonutility property and equipment 12,033 11,553 Accumulated depreciation (5,507) (5,394) Other 996 983 7,522 7,142 CURRENT ASSETS: Cash and cash equivalents 73,475 629 Accounts receivable - Customers 14,677 21,066 Others 575 815 Reserve for uncollectible accounts (1,114) (788) Unbilled revenues 2,359 10,319 Materials and supplies, at average cost 3,177 2,876 Gas held by suppliers, at average cost 12,110 15,140 Natural gas transition costs collectible 2,295 4,612 Deferred cost of gas and supplier refunds, net 10,615 - Prepaid expenses and other 3,148 3,486 121,317 58,155 DEFERRED CHARGES: Regulatory assets - Deferred taxes collectible 29,778 30,015 Other 3,612 3,013 Unamortized debt expense 2,309 2,630 35,699 35,658 NET ASSETS OF DISCONTINUED OPERATIONS (Note 2) - 204,250 TOTAL ASSETS $ 387,883 $ 524,218 *Reclassified to conform with 1996 consolidated financial statement presentation. The accompanying notes are an integral part of the consolidated financial statements.
-3- PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
June 30, December 31, 1996 1995* (Thousands of Dollars) CAPITALIZATION AND LIABILITIES CAPITALIZATION (Note 3): Common shareholders' investment $ 124,200 $ 162,739 Preferred stock of PGE - Not subject to mandatory redemption, net 19,222 33,615 Subject to mandatory redemption 729 1,680 Long-term debt 104,158 106,706 248,309 304,740 CURRENT LIABILITIES: Current portion of long-term debt 11,000 116,001 Preferred stock subject to repurchase or mandatory redemption 456 80 Notes payable 5,000 10,180 Accounts payable 15,119 18,531 Deferred cost of gas and supplier refunds, net - 434 Accrued general business and realty taxes 602 1,493 Accrued income taxes 41,648 526 Accrued interest 903 2,307 Accrued natural gas transition costs 1,770 2,278 Other 4,117 3,534 80,615 155,364 DEFERRED CREDITS: Deferred income taxes 45,966 48,835 Accrued natural gas transition costs 207 1,144 Unamortized investment tax credits 4,853 4,938 Operating reserves 3,283 3,709 Other 4,650 5,488 58,959 64,114 COMMITMENTS AND CONTINGENCIES (Note 5) TOTAL CAPITALIZATION AND LIABILITIES $ 387,883 $ 524,218 *Reclassified to conform with 1996 consolidated financial statement presentation. The accompanying notes are an integral part of the consolidated financial statements.
-4- PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1996 1995 (Thousands of Dollars) CASH FLOW FROM OPERATING ACTIVITIES: Income from continuing operations, net of subsidiary's preferred stock dividends $ 6,882 $ 3,536 Effects of noncash charges to income - Depreciation 4,145 3,596 Deferred income taxes, net 173 (121) Provisions for self insurance 591 526 Other, net 993 1,410 Changes in working capital, exclusive of cash and current portion of long-term debt - Receivables and unbilled revenues 14,915 16,919 Gas held by suppliers 3,030 7,187 Accounts payable (2,770) (4,176) Deferred cost of gas and supplier refunds, net (9,680) 14,019 Other current assets and liabilities, net 3,148 (8,838) Other operating items, net (4,024) 520 Net cash provided by continuing operations 17,403 34,578 Net cash provided (used) by discontinued operations (24,175) 3,764 Net cash provided (used) by operating activities (6,772) 38,342 CASH FLOW FROM INVESTING ACTIVITIES: Additions to utility plant (8,823) (8,304) Net proceeds from sale of discontinued operations 261,752 - Other, net 69 (246) Net cash provided (used) by investing activities 252,998 (8,550) CASH FLOW FROM FINANCING ACTIVITIES: Issuance of common stock 148 2,876 Repurchase of common stock (37,999) - Dividends on common stock (5,890) (6,265) Repurchase/redemption of preferred stock of PGE (14,968) (80) Issuance of long-term debt - 13 Repayment of long-term debt (53,262) (210) Net decrease in bank borrowings (60,123) (26,070) Other, net (1,286) (18) Net cash used for financing activities (173,380) (29,754) NET INCREASE IN CASH AND CASH EQUIVALENTS 72,846 38 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 629 330 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 73,475 $ 368 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest (net of amount capitalized) $ 6,414 $ 13,461 Income taxes $ 22,533 $ 8,175 The accompanying notes are an integral part of the consolidated financial statements.
-5- PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) GENERAL Nature of the Business. Pennsylvania Enterprises, Inc. ("the Company") is a holding company whose principal subsidiary, PG Energy Inc. ("PGE"), a regulated public utility formerly known as Pennsylvania Gas and Water Company, distributes natural gas to a ten-county area in northeastern Pennsylvania, a territory that includes 116 municipalities, in addition to the cities of Scranton, Wilkes-Barre and Williamsport. The Company, through its other subsidiaries, Pennsylvania Energy Resources, Inc. ("PERI"), Theta Land Corporation and Keystone Pipeline Services, Inc. ("Keystone"), a wholly-owned subsidiary of PERI, is also engaged in various non-regulated activities, including energy-related services and pipeline construction and service activities, which prior to 1996 were not significant to the operations of the Company as a whole. Pennsylvania Energy Marketing Company, which was also a subsidiary of the Company, was merged into PERI on May 31, 1996. Principles of Consolidation. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, PGE, PERI and Theta. The consolidated financial statements also include the accounts of Keystone beginning December 4, 1995, the date Keystone was acquired by PERI. All material intercompany accounts have been eliminated in consolidation. PGE is a regulated public utility subject to the jurisdiction of the Pennsylvania Public Utility Commission ("PPUC") for rate and accounting purposes. The financial statements of PGE that are incorporated in these consolidated financial statements have been prepared in accordance with generally accepted accounting principles, including the provisions of Financial Accounting Standards Board ("FASB") Statement 71, "Accounting for the Effects of Certain Types of Regulation," which give recognition to the rate and accounting practices of regulatory agencies such as the PPUC. Interim Financial Statements. The interim consolidated financial statements included herein have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. 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 such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. The results for the interim periods are not indicative of the results to be expected for the year, primarily due to the effect of seasonal variations in weather on PGE. However, in the opinion of management, all adjustments, consisting of only normal recurring accruals, necessary to present fairly the results for the interim periods have been reflected in the consolidated financial statements. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. Use of Accounting Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses -6- during the reporting period. These estimates involve judgments with respect to, among other things, various future economic factors which are difficult to predict and are beyond the control of the Company. Therefore, actual amounts could differ from these estimates. (2) DISCONTINUED OPERATIONS Pursuant to an Asset Purchase Agreement dated April 26, 1995 (the "Agreement"), among the Company, PGE, American Water Works Company, Inc. ("American") and Pennsylvania-American Water Company ("Pennsylvania-American"), a wholly-owned subsidiary of American, the Company and PGE sold substantially all of the assets, properties and rights of PGE's water utility operations to Pennsylvania-American on February 16, 1996. Under the terms of the Agreement, Pennsylvania-American paid PGE $414.3 million consisting of $262.1 million in cash and the assumption of $152.2 million of PGE's liabilities, including $141.0 million of its long-term debt. PGE continued to operate the water utility business until February 16, 1996. The sale price reflected a $6.5 million premium over the book value of the assets sold. However, after transaction costs and the net effect of other items, principally the write-off of certain deferred regulatory assets and deferred credits and the impact of pension and other postretirement benefit expenses relative to an early retirement plan, the sale resulted in an after tax loss of approximately $6.2 million, net of the income from the water operations during the phase-out period (which for financial reporting purposes was April 1, 1995, through February 15, 1996). The sale involved a gain for income tax purposes primarily because of the accelerated depreciation that had been claimed by PGE with respect to the water utility plant that was sold. It is estimated that the income taxes payable on the sale, for which deferred income taxes had previously been provided, will be approximately $58.6 million, of which $22.3 million had been paid as of June 30, 1996. The cash proceeds from the sale of approximately $203.5 million, net of the estimated $58.6 million of income taxes, are being used by the Company and PGE to retire debt, to repurchase stock (see Note 3 of these Notes to Consolidated Financial Statements), for construction expenditures and for other working capital purposes. With the sale of PGE's water utility operations, the principal assets of the Company and PGE now consist of PGE's gas utility operations and approximately 46,000 acres of land. The accompanying consolidated financial statements reflect PGE's water utility operations as "discontinued operations" effective March 31, 1995. Interest charges relating to indebtedness of PGE were allocated to the discontinued operations based on the relationship of the gross water utility plant that was sold to the total of PGE's gross gas and water utility plant. This is the same method as was utilized by PGE and the PPUC in establishing the revenue requirements of both PGE's gas and water utility operations. None of the dividends on PGE's preferred stock nor any of the Company's interest expense were allocated to the discontinued operations. -7- Selected financial information for the discontinued operations is set forth below: Net Assets of Discontinued Operations [CAPTION] As of December 31, 1995 (Thousands of Dollars) [S] [C] Net utility plant $ 368,742 Current assets (primarily accounts receivable and accrued revenues) 12,756 Deferred charges and other assets 25,752 Total assets acquired by Pennsylvania-American 407,250 Liabilities assumed by Pennsylvania-American - Long-term debt 141,097 Other 5,983 147,080 Net assets acquired by Pennsylvania-American 260,170 Estimated liability for income taxes on sale of discontinued operations (56,710) Estimated net income of discontinued operations during the remainder of the phase-out period 790 Total net assets of discontinued operations $ 204,250 Loss With Respect to Discontinued Operations
Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 (Thousands of Dollars) Income from discontinued operations, net of related income taxes of $1,403,000* $ - $ - $ - $ 2,127 Estimated loss on disposal of discontinued operations, net of income during the phase-out period (21) - (386) (5,831) Loss with respect to discontinued operations $ 21 $ - $ 386 $ 3,704
* Reflects income only through March 31, 1995, the effective date of the discontinuance of PGE's water utility operations for financial statement purposes. (3) REPURCHASES OF STOCK During the quarter ended June 30, 1996, the Company repurchased 970,894 shares of its common stock for an aggregate consideration of $38.0 million, and PGE repurchased 128,984 shares of its 9% cumulative preferred stock for an aggregate consideration of $14.0 million and 18,524 shares of its 4.10% cumulative preferred stock for an aggregate consideration of $927,000, largely pursuant to self tender offers. On June 17, 1996, PGE also repurchased 8,608 shares of its 5.75% cumulative preferred stock (including 800 shares redeemed in accordance with annual sinking fund provisions) for an aggregate consideration of $758,000. -8- (4) ACCOUNTING CHANGES Long-Lived Assets. In March 1995, FASB Statement 121, "Accounting for the Impairment of Long-Lived Assets", was issued. The provisions of this statement, which are effective for fiscal years beginning after September 15, 1995, require that long-lived assets, identifiable intangibles, capital leases and goodwill be reviewed for impairment whenever events occur or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. In addition, FASB Statement 121 requires that regulatory assets meet the recovery criteria of FASB Statement 71, "Accounting for Effects of Certain Types of Regulation", on an ongoing basis in order to avoid a writedown. The provisions of FASB Statement 121, which the Company and PGE adopted effective January 1, 1996, did not have a material impact on the financial position or results of operations of either the Company or PGE since the carrying amount of all assets, including regulatory assets, are considered recoverable. Accounting for Stock-Based Compensation. In October, 1995, FASB Statement 123, "Accounting for Stock-Based Compensation," was issued. The Company adopted this statement in the first quarter of 1996, but will continue to use the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," supplemented by the required footnote disclosures of FASB Statement 123. Adoption of FASB Statement 123 had no effect upon the Company's financial position or results of operations. (5) COMMITMENTS AND CONTINGENCIES Valve Maintenance On November 16, 1993, the PPUC staff issued an Emergency Order, subsequently ratified by the PPUC (the "Emergency Order"), requiring PGE to survey its gas distribution system to verify the location and spacing of its gas shut off valves, to add or repair valves where needed and to establish programs for the periodic inspection and maintenance of all such valves and the verification of all gas service line information. On March 31, 1995, the PPUC adopted an Order approving a plan submitted by PGE for complying with the Emergency Order. The Company does not believe that PGE's compliance with the terms of such Order will have a material adverse effect on its financial position or results of operations. Environmental Matters PGE, like many gas distribution companies, once utilized manufactured gas plants in connection with providing gas service to its customers. None of these plants has been in operation since 1960, and several of the plant sites are no longer owned by PGE. Pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), PGE filed notices with the United States Environmental Protection Agency (the "EPA") with respect to the former plant sites. None of the sites is or was formerly on the proposed or final National Priorities List. The EPA has conducted site inspections and made preliminary assessments of each site and has concluded that no further remedial action is planned. While this conclusion does not constitute a legal prohibition against further regulatory action under CERCLA or other applicable federal or state law, the Company does not believe that additional costs, if any, related to these manufactured gas plant sites would be material to its financial position or results of operations since environmental remediation costs generally are recoverable through rates over a period of time. -9- PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS DISCONTINUED OPERATIONS Pursuant to an Asset Purchase Agreement dated April 26, 1995 (the "Agreement"), among the Company, PG Energy Inc. ("PGE"), American Water Works Company, Inc. ("American") and Pennsylvania-American Water Company ("Pennsylvania-American"), a wholly-owned subsidiary of American, the Company and PGE sold substantially all of the assets, properties and rights of PGE's water utility operations to Pennsylvania-American on February 16, 1996. Under the terms of the Agreement, Pennsylvania-American paid PGE $414.3 million consisting of $262.1 million in cash and the assumption of $152.2 million of PGE's liabilities, including $141.0 million of its long-term debt. PGE continued to operate the water utility business until February 16, 1996. The sale price reflected a $6.5 million premium over the book value of the assets being sold. However, after transaction costs and the net effect of other items, principally the write-off of certain deferred regulatory assets and deferred credits and the impact of pension and other postretirement benefit expenses relative to an early retirement plan, the sale resulted in an after tax loss of approximately $6.2 million, net of the income from the water operations during the phase-out period (which for financial reporting purposes was April 1, 1995, through February 15, 1996.) The cash proceeds from the sale of approximately $203.5 million, net of an estimated $58.6 million of income taxes, are being used by the Company and PGE to retire debt, to repurchase stock, for construction expenditures and for other working capital purposes. With the sale of PGE's water utility operations, the principal assets of the Company and PGE now consist of PGE's gas utility operations and approximately 46,000 acres of land. In accordance with generally accepted accounting principles, the Company's consolidated financial statements reflect PGE's water utility operations as "discontinued operations" effective March 31, 1995, and the following sections of Management's Discussion and Analysis generally relate only to the Company's continuing operations. For additional information regarding the discontinued operations, see Note 2 of the accompanying Notes to Consolidated Financial Statements. -10- RESULTS OF CONTINUING OPERATIONS The following table expresses certain items in the Company's consolidated statements of income as percentages of total operating revenues for each of the three and six-month periods ended June 30, 1996, and June 30, 1995:
Percentage of Operating Revenues Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 OPERATING REVENUES: Gas sales and services..................... 91.2% 99.7% 95.6% 99.8% Pipeline construction and services......... 8.7 0.2 4.3 0.1 Other...................................... 0.1 0.1 0.1 0.1 Total operating revenues................. 100.0 100.0 100.0 100.0 OPERATING EXPENSES: Cost of gas................................ 45.6 51.3 53.4 58.9 Other operation expenses................... 30.9 22.2 17.6 12.3 Maintenance................................ 4.9 4.8 2.6 2.3 Depreciation............................... 6.9 6.5 3.9 3.6 Income taxes............................... (1.3) (3.6) 5.3 3.6 Taxes other than income taxes.............. 9.7 9.8 6.4 6.7 Total other operating expenses........... 96.7 91.0 89.2 87.4 OPERATING INCOME............................. 3.3 9.0 10.8 12.6 OTHER INCOME (DEDUCTIONS), NET............... 4.8 (0.2) 2.1 0.2 INTEREST CHARGES (1)......................... 8.3 14.1 5.3 7.8 INCOME (LOSS) FROM CONTINUING OPERATIONS..... (0.2) (5.3) 7.6 5.0 LOSS WITH RESPECT TO DISCONTINUED OPERATIONS. (0.1) - (0.4) (3.8) INCOME (LOSS) BEFORE SUBSIDIARY'S PREFERRED STOCK DIVIDENDS............................ (0.3) (5.3) 7.2 1.2 SUBSIDIARY'S PREFERRED STOCK DIVIDENDS(1).... 1.3 2.5 1.0 1.4 NET INCOME (LOSS)............................ (1.6) (7.8) 6.2 (0.2)
(1) None of the Company's interest expense nor any of the subsidiary's preferred stock dividends was allocated to the discontinued operations. Three Months Ended June 30, 1996, Compared With Three Months Ended June 30, 1995 Operating Revenues. Operating revenues increased $2.9 million (10.4%) from $27.4 million for the three-month period ended June 30, 1995, to $30.3 million for the three-month period ended June 30, 1996, primarily as a result of $2.6 million of revenues in the second quarter of 1996 from the pipeline construction and service activities of Keystone Pipeline Services, Inc. ("Keystone"), which was acquired in December, 1995. Also contributing to the higher revenues was a $300,000 increase in gas sales and services as a result of a 175 million cubic feet (5.6%) increase in consumption by PGE's residential and commercial heating customers. Heating degree days during the second quarter of 1996 were 114 (15.0%) higher than in the second quarter in 1995 and 14.0% above normal. The effects of the increased sales to heating customers were partially offset by a reduction in the purchased gas cost component of PGE's tariffs (the "gas cost rate"). See "-Rate Matters." -11- Operating Expenses. Operating expenses, including depreciation and income taxes, increased $4.3 million (17.4%) from $24.9 million for the three-month period ended June 30, 1995, to $29.3 million for the three-month period ended June 30, 1996. As a percentage of operating revenues, total operating expenses increased from 91.0% during the second quarter of 1995 to 96.7% during the second quarter of 1996. The cost of gas decreased $263,000 (1.9%) from $14.0 million for the three- month period ended June 30, 1995, to $13.8 million for the three-month period ended June 30, 1996, primarily because of the aforementioned reduction in PGE's gas cost rate (see "-Rate Matters"), the effects of which were largely offset by the increased sales to PGE's residential and commercial heating customers. Other than the cost of gas and income taxes, operating expenses increased by $4.0 million (33.7%) from $11.9 million for the three-month period ended June 30, 1995, to $15.9 million for the three-month period ended June 30, 1996. This increase was largely attributable to a $3.3 million (53.7%) increase in other operation expenses, primarily as a result of $2.5 million of expenses relative to Keystone's pipeline construction and service activities, and a $769,000 (14.1%) increase in expenses with respect to PGE's operations, which was principally attributable to payroll and payroll-related costs. Payroll and payroll-related costs increased largely because of charges, which had formerly been allocated to PGE's discontinued operations, now being absorbed by its continuing operations. Also contributing to the higher operating expenses were a $180,000 (13.7%) increase in PGE's maintenance expenses, principally as a result of charges relative to the maintenance of gas valves, and increased depreciation expense of $302,000 (16.9%), primarily as a result of $117,000 of depreciation relative to Keystone and $186,000 attributable to additions to PGE's utility plant. Income taxes for the three-month period ended June 30, 1996, increased by $614,000 (62.0%) from a credit of $990,000 in 1995 to a credit of $376,000 in 1996 due to a lower level of loss before income taxes (for this purpose, operating income net of interest charges). Operating Income. As a result of the above, total operating income decreased by $1.5 million (59.8%) from $2.5 million for the three-month period ended June 30, 1995, to $995,000 for the three-month period ended June 30, 1996, and decreased as a percentage of total operating revenues for such periods from 9.0% in 1995 to 3.3% in 1996. Other Income (Deductions), Net. Other income, net increased $1.5 million from a deduction of $50,000 for the three-month period ended June 30, 1995, to income of $1.4 million for the three-month period ended June 30, 1996, largely as a result of investment income totaling $1.1 million relative to the temporary investment of a portion of the proceeds from the sale of PGE's regulated water utility operations. Interest Charges. Interest charges decreased by $1.4 million (35.1%) from $3.9 million for the three-month period ended June 30, 1995, to $2.5 million for the three-month period ended June 30, 1996. This decrease was largely attributable to the lower level of indebtedness resulting from the repayment of PGE's $50.0 million term loan and all of its then outstanding bank borrowings on February 16, 1996, with proceeds from the sale of its regulated water utility operations on such date. -12- Income (Loss) From Continuing Operations. The loss from continuing operations decreased $1.4 million from $1.4 million for the quarter ended June 30, 1995, to $72,000 for the quarter ended June 30, 1996. This decrease was largely the result of the matters discussed above, principally the increase in other income (deductions), net and the decrease in interest charges, the effects of which were partially offset by the increased operating expenses. Subsidiary Preferred Stock Dividends. Dividends on preferred stock decreased $309,000 (44.7%) from $692,000 for the three-month period ended June 30, 1995, to $383,000 for the three-month period ended June 30, 1996, largely as a result of the repurchase by PGE of 128,984 shares of its 9% cumulative preferred stock, 8,608 shares of its 5.75% cumulative preferred stock and 18,524 shares of its 4.10% cumulative preferred stock during the second quarter of 1996. Net Income (Loss). The decrease in net loss of $1.7 million from $2.1 million for the three-month period ended June 30, 1995, to $476,000 for the three-month period ended June 30, 1996, as well as the decrease of $.28 in the loss per share of common stock before premium on repurchase/redemption of subsidiary's preferred stock, from $.37 per share for the quarter ended June 30, 1995, to $.09 per share for the quarter ended June 30, 1996, were largely the result of the factors discussed above. The effect of the decrease in net loss on earnings per share was largely offset by a $.26 per share charge for the premium on the repurchase of subsidiary's preferred stock which acted to increase the loss per share of common stock for the quarter ended June 30, 1996, to $.35 per share. While premiums on the repurchase of preferred stock are charged to retained earnings and are not a determinant of net income, the premiums associated with repurchases must be taken into account in calculating the earnings (loss) per share of common stock. Six Months Ended June 30, 1996, Compared With Six Months Ended June 30, 1995 Operating Revenues. Operating revenues increased $6.1 million (6.2%) from $98.3 million for the six-month period ended June 30, 1995, to $104.3 million for the six-month period ended June 30, 1996, primarily as a result of $4.5 million of operating revenues relative to the pipeline construction and service activities of Keystone, which was acquired in December, 1995. Also contributing to the increase in operating revenues was a higher level of revenues attributable to PGE's gas sales and services, primarily as a result of a 1.8 billion cubic feet (13.6%) increase in sales to residential and commercial heating customers. There was a 623 (17.5%) increase in heating degree days from 3,570 (90.3% of normal) during the first six months of 1995 compared to 4,193 (106.0% of normal) during the first six months of 1996. The effects of the increased sales to heating customers were largely offset by reductions in the purchased gas cost component of PGE's tariffs (the "gas cost rate"). See "-Rate Matters." Operating Expenses. Operating expenses, including depreciation and income taxes, increased $7.2 million (8.4%) from $85.9 million for the six-month period ended June 30, 1995, to $93.1 million for the six-month period ended June 30, 1996. As a percentage of operating revenues, total operating expenses increased, from 87.4% during the six-month period ended June 30, 1995 to 89.2% during the six-month period ended June 30, 1996. -13- The cost of gas decreased $2.2 million (3.8%) from $57.9 million for the six-month period ended June 30, 1995, to $55.7 million for the six-month period ended June 30, 1996, primarily because of the aforementioned reductions in PGE's gas cost rate (see "-Rate Matters"), the effects of which were partially offset by the increased sales to residential and commercial heating customers. Other than the cost of gas and income taxes, operating expenses increased by $7.4 million (30.2%) from $24.5 million for the six month period ended June 30, 1995, to $31.9 million for the six month period ended June 30, 1996. This increase was largely attributable to a $6.3 million (52.1%) increase in other operation expenses, primarily as a result of $4.5 million of expenses relative to Keystone's pipeline construction and service activities, and a $1.5 million (13.3%) increase in expenses with respect to PGE's operations, which was primarily the result of higher payroll and payroll-related costs. Payroll and payroll-related costs increased largely because of charges, which had formerly been allocated to PGE's discontinued operations, now being absorbed by its continuing operations. Also contributing to the higher operating expenses was a $526,000 (14.7%) increase in depreciation expense as a result of $234,000 of depreciation relative to Keystone and $293,000 of depreciation attributable to additions to PGE's utility plant, as well as a $426,000 (18.7%) increase in maintenance expenses caused by charges relating to the maintenance of gas valves by PGE. Income taxes increased $2.0 million (57.7%) from $3.5 million in the first six months of 1995 to $5.5 million in the first six months of 1996 due to an increase in income before income taxes (for this purpose, operating income net of interest charges). Operating Income. As a result of the above, total operating income decreased by $1.2 million (9.4%) from $12.4 million for the six-month period ended June 30, 1995, to $11.2 million for the six-month period ended June 30, 1996, and decreased as a percentage of total operating revenues for such periods from 12.6% in 1995 to 10.8% in 1996, primarily because of the higher level of operating expenses. Other Income (Deductions), Net. Other income (deductions), net increased $2.0 million from $199,000 for the six-month period ended June 30, 1995, to $2.2 million for the six-month period ended June 30, 1996, largely as a result of investment income totaling $1.8 million relative to the temporary investment of a portion of the proceeds from the sale of PGE's regulated water utility operations. Interest Charges. Interest charges decreased by $2.1 million (27.6%) from $7.7 million for the six-month period ended June 30, 1995, to $5.6 million for the six-month period ended June 30, 1996. This decrease was largely attributable to the lower level of indebtedness resulting from the repayment of PGE's $50.0 million term loan and all of its then outstanding bank borrowings on February 16, 1996, with proceeds from the sale of its regulated water utility operations on such date. Income (Loss) From Continuing Operations. Income from continuing operations increased $3.0 million (60.7%) from $4.9 million for the six months ended June 30, 1995, to $7.9 million for the six months ended June 30, 1996. This increase was largely the result of the matters discussed above, principally the increase in other income (deductions), net and the decrease in interest charges. -14- Subsidiary's Preferred Stock Dividends. Dividends on preferred stock decreased $363,000 (26.2%) from $1.4 million for the six-month period ended June 30, 1995, to $1.0 million for the six-month period ended June 30, 1996, largely as a result of the repurchase by PGE of 128,984 shares of its 9% cumulative preferred stock, 8,608 shares of its 5.75% cumulative preferred stock and 18,524 shares of its 4.10% cumulative preferred stock, $100 par value, during the second quarter of 1996. Net Income (Loss). The increase in net income of $6.7 million from a loss of $169,000 for the six-month period ended June 30, 1995, to income of $6.5 million for the six-month period ended June 30, 1996, as well as the increase in earnings per share of common stock of $.99 from a loss of $.03 per share for the six months ended June 30, 1995 to earnings of $.96 per share for the six months ended June 30, 1996 (after a $.24 per share charge for the premium on repurchase of subsidiary's preferred stock), were the result of the higher income from continuing operations and the reduced dividends on subsidiary's preferred stock, as discussed above, and the decrease of $.58 per share, from $.65 per share for the six-month period ended June 30, 1995, to $.07 per share for the six-month period ended June 30, 1996, in the loss with respect to discontinued operations. RATE MATTERS Proposed Rate Increase. On May 24, 1996, PGE filed an application with the Pennsylvania Public Utility Commission ("PPUC") seeking an increase in its base gas rates, designed to produce $14.1 million in additional annual revenue, to be effective July 23, 1996. On June 20, 1996, the PPUC suspended this rate increase for seven months (until February 23, 1997) in order to investigate the reasonableness of the proposed rates. It is not presently possible to determine what action the PPUC will ultimately take in this matter. Annual Gas Cost Adjustment. Pursuant to the provisions of the Pennsylvania Public Utility Code (the "Code") relating to the annual purchased gas cost rate of larger gas distribution companies, such as PGE, the PPUC, by Order adopted May 11, 1995, authorized PGE to decrease the gas costs contained in its gas tariffs from $3.68 per thousand cubic feet to $2.42 per thousand cubic feet effective May 15, 1995, in order to refund overcollections from customers caused by lower than anticipated purchased gas costs and the receipt of supplier refunds during 1995. This change in gas rates on account of purchased gas costs was designed to produce a decrease in revenue of $8.2 million from its effective date through December 1, 1995. In accordance with the same provisions of the Code, the PPUC, by Order adopted November 9, 1995, authorized PGE to increase its gas cost rate to $2.75 per thousand cubic feet effective December 1, 1995. This change in gas rates on account of purchased gas costs is designed to produce a $9.6 million increase in annual revenue. The changes in gas rates on account of purchased gas costs have no effect on PGE's earnings since the changes in revenue are offset by corresponding changes in the cost of gas. Quarterly Gas Cost Adjustment. Effective September 14, 1995, the PPUC adopted regulations providing for the quarterly adjustment of the annual purchased gas cost rate of larger gas distribution companies, including PGE. Such adjustments are allowed when the actual purchased gas costs vary from the estimated costs reflected in the respective company's tariffs by 2% or more. In accordance with the regulations regarding quarterly gas cost rate adjustments, PGE increased its gas cost rate to $2.88 per thousand cubic feet effective June 1, 1996. Except for reducing the amount of any over or undercollections of gas costs, the changes in gas rates pursuant to these regulations will not have any material effect on PGE's financial position or results of operations, and PGE will still be required to file an annual purchased gas cost rate. -15- Recovery of FERC Order 636 Transition Costs. On October 15, 1993, the PPUC adopted an annual purchased gas cost ("PGC") order (the "PGC Order") regarding recovery of Federal Energy Regulatory Commission ("FERC") Order 636 transition costs. The PGC Order stated that Account 191 and New Facility Costs ("Gas Transition Costs") are subject to recovery through the annual PGC rate filings made with the PPUC by PGE and other larger local gas distribution companies. The PGC Order also indicated that while Gas Supply Realignment and Stranded Costs ("Non-Gas Transition Costs") are not natural gas costs eligible for recovery under the PGC rate filing mechanism, such costs are subject to full recovery by local distribution companies through the filing of a tariff pursuant to either the existing surcharge or base rate provisions of the Code. The PGC Order further stated that all such filings would be evaluated on a case-by-case basis. PGE was billed a total of $1.3 million of Gas Transition Costs by its interstate pipelines. Of this amount, $858,000 was recovered by PGE over a twelve-month period ended January 31, 1995, through an increase in its PGC rate, $252,000 is being recovered by PGE in its annual PGC rate that the PPUC has approved effective December 1, 1995, and the recovery of the remaining $213,000 is being sought by PGE in its PGC rate that will be effective December 1, 1996. By Order of the PPUC entered August 26, 1994, PGE began recovering the Non- Gas Transition Costs that it estimates it will ultimately be billed pursuant to FERC Order 636 through the billing of a surcharge to its customers effective September 12, 1994. It is currently estimated that $8.7 million of Non-Gas Transition Costs will be billed to PGE, generally over a four-year period extending through the fourth quarter of 1997, of which $6.8 million had been billed to PGE and $6.4 million had been recovered from its customers as of June 30, 1996. PGE has recorded the estimated Non-Gas Transition Costs that remain to be billed to it and the amounts remaining to be recovered from its customers. LIQUIDITY AND CAPITAL RESOURCES Sale of Water Utility Operations On February 16, 1996, PGE sold its regulated water operations and certain related assets to Pennsylvania-American for $414.3 million, consisting of $262.1 million in cash and the assumption of $152.2 million of PGE's liabilities, including $141.0 million of its long-term debt. The Company and PGE are using the $203.5 million of cash proceeds from the sale, after the payment of an estimated $58.6 million of federal and state income taxes (of which $22.3 million had been paid as of July 31, 1996), to retire debt, to repurchase stock, for construction expenditures and for other working capital purposes. In this regard, PGE repaid its $50.0 million term loan due 1996 and all of its then outstanding bank borrowings on February 16, 1996, and the Company and PGE temporarily invested the balance of the proceeds. During the quarter ended June 30, 1996, the Company repurchased 970,894 shares of its common stock for an aggregate consideration of $38.0 million, and PGE repurchased 128,984 shares of its 9% cumulative preferred stock for an aggregate consideration of $14.0 million and 18,524 shares of its 4.10% cumulative preferred stock for an aggregate consideration of $927,000, largely pursuant to self tender offers. On June 17, 1996, PGE also repurchased 8,608 shares of its 5.75% cumulative preferred stock (including 800 shares redeemed in accordance with annual sinking fund provisions) for an aggregate consideration of $758,000. Additionally, on July 8, 1996, the Company announced that its Board of Directors had authorized (i) the repurchase of up to 400,000 shares of its common stock from time to time in open market transactions or otherwise and -16- (ii) an oddlot buyback program of its common stock. In accordance with such authorization, the Company repurchased 32,837 shares of its common stock during July, 1996, for an aggregate consideration of $1.3 million. As of July 31, 1996, the Company had temporary cash investments totaling approximately $71.0 million, which are expected to be utilized during the balance of the year for additional repurchases of stock, the payment of taxes, the repayment of bank borrowings by PGE, as explained below, and other working capital purposes. With the repayment of its term loan and all its bank borrowings on February 16, 1996, and the availability of cash proceeds from the sale of its regulated water operations, PGE terminated its $60.0 million bank credit agreement. PGE currently has five bank lines of credit with an aggregate borrowing capacity of $45.5 million (See "-Liquidity"), which is deemed adequate for its immediate needs. In addition, PGE is currently seeking approval of the PPUC to borrow up to $70.0 million from the Company for periods of up to two years, to the extent the Company has funds available to so lend PGE. Upon receiving approval of the PPUC, PGE intends to borrow funds from the Company to repay its bank borrowings (which totaled $23.5 million as of July 31, 1996) and for construction expenditures and other working capital purposes. PGE plans to arrange new and replacement bank lines of credit when the funds that are available for borrowing from the Company are no longer adequate for its needs and as it requires additional funding for working capital and other purposes. Liquidity The primary capital needs of the Company are the funding of PGE's construction program and the seasonal funding of PGE's gas purchases and increases in its customer accounts receivable. PGE's revenues are highly seasonal and weather-sensitive, with approximately 75% of its revenues normally being realized in the first and fourth quarters of the calendar year when the temperatures in its service area are the coldest. Additionally, as the Company's non-regulated activities expand, capital will be required for those activities, especially the residential and commercial development that is planned for certain Company-owned land. The two projects that are currently planned by the Company are in the initial planning and design phases, and the amount and type of funding that those projects will require has not yet been determined. Nonetheless, it is expected that they will be funded by a combination of capital provided by the Company, bank borrowings and other debt financing. The cash flow from PGE's operations is generally sufficient to fund a portion of its construction expenditures. However, to the extent external financing is required, it is the practice of PGE to use bank borrowings to fund such expenditures, pending the periodic issuance of stock and long-term debt. Bank borrowings are also used by PGE for the seasonal funding of its gas purchases and increases in customer accounts receivable. In order to so finance construction expenditures and to meet its seasonal borrowing requirements, PGE has made arrangements for a total of $45.5 million of unsecured revolving bank credit and plans to arrange other bank lines of credit as its needs require (See "-Sale of Water Utility Operations"). Specifically, PGE currently has five bank lines of credit with an aggregate borrowing capacity of $45.5 million which provide for borrowings at interest rates generally less than prime and which mature during mid-1997. As of July 31, 1996, PGE had $23.5 million of borrowings outstanding under these bank lines of credit. Additionally, upon approval of the PPUC, PGE intends, as indicated above, to borrow funds from the Company during 1996, and also 1997, to repay -17- bank borrowings and for construction expenditures and other working capital requirements, to the extent that the Company has funds available for lending to PGE. Any such interim borrowings by PGE from the Company will be repaid with proceeds from bank borrowings by PGE. The Company believes that PGE will be able to raise in a timely manner such funds as are required for its future construction expenditures, refinancings and other working capital requirements. Likewise, the Company believes that its non-regulated subsidiaries will be able to raise such funds as are required for their needs, including that required for the residential and commercial real estate development that is planned. Long-Term Debt and Capital Stock Financings Both the Company and PGE periodically engage in long-term debt and capital stock financings in order to obtain funds required for construction expenditures, the refinancing of existing debt and various working capital purposes. No long-term debt or capital stock financings were consummated by either the Company or PGE during the three-month period ended June 30, 1996. The Company also obtains external funds from the sale of its common stock through its Dividend Reinvestment and Stock Purchase Plan (the "DRP"), its 1992 Stock Option Plan and its Employees' Savings Plan. The Company has, however, temporarily suspended the sale of stock to both the DRP and Employees' Savings Plan as a result of the proceeds received from the sale of PGE's water utility operations, and the two plans are currently obtaining shares of Company common stock for participants through open market purchases. During the six-month period ended June 30, 1996, the Company realized $340,000, $258,000 and $195,000 from the issuance of common stock under the DRP, 1992 Stock Option Plan and Employees' Savings Plan, respectively. Construction Expenditures and Related Financings Expenditures for the construction of utility plant by PGE totaled $8.6 million during the first six months of 1996 and are currently estimated to be $21.0 million during the remainder of the year. Such expenditures are being financed with proceeds from the sale of PGE's regulated water operations, internally-generated funds and bank borrowings, pending the periodic issuance of stock and long-term debt. Current Maturities of Long-Term Debt and Preferred Stock As of June 30, 1996, $80,000 of PGE's preferred stock and $11.0 million of PGE's bank borrowings were required to be repaid within twelve months. An additional $376,000 of PGE's preferred stock, which was repurchased in July, 1996, was also reflected as a current liability as of June 30, 1996. Forward-Looking Statements Certain statements made above relating to plans, conditions, objectives and economic performance go beyond historical information and may provide an indication of future results. To that extent, they are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, and each is subject to factors that could cause actual results to differ from those in the forward-looking statement. -18- PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders (a) The Annual Meeting of Shareholders of the Company was held on June 26, 1996. (b) The following persons were elected directors of the Company with the voting as indicated: No. of Shares No. of Shares Name Voted in Favor Withheld Kenneth L. Pollock 4,178,262 70,197 William D. Davis 4,192,824 55,635 Dean T. Casaday 4,193,171 55,288 Robert J. Keating 4,178,900 69,559 James A. Ross 4,188,213 60,246 John D. McCarthy 4,182,305 66,154 Ronald W. Simms 4,185,383 63,076 Kenneth M. Pollock 4,180,311 68,148 Paul R. Freeman 4,183,931 64,528 John D. McCarthy, Jr. 4,182,776 65,683 Richard A. Rose, Jr. 4,185,751 62,708 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 11-1 Statement Re Computation of Per Share Earnings -- filed herewith. 27-1 Financial Data Schedule -- filed herewith. (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter for which this report is filed. -19- PENNSYLVANIA ENTERPRISES, INC. 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. PENNSYLVANIA ENTERPRISES, INC. (Registrant) Date: August 9, 1996 By: /s/ Thomas J. Ward Thomas J. Ward Secretary Date: August 9, 1996 By: /s/ John F. Kell, Jr. John F. Kell, Jr. Vice President, Financial Services (Principal Financial Officer and Principal Accounting Officer) -20- EX-27 2
UT THIS STATEMENT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET, STATEMENTS OF INCOME AND CASH FLOW, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS. 0000077231 PENNSYLVANIA ENTERPRISES, INC. 6-MOS DEC-31-1995 JUN-30-1996 PER-BOOK 223,345,000 7,522,000 121,317,000 35,699,000 0 387,883,000 48,358,000 21,382,000 54,460,000 124,200,000 729,000 19,222,000 104,158,000 5,000,000 0 0 11,000,000 456,000 0 0 123,118,000 387,883,000 104,344,000 5,529,000 87,597,000 93,126,000 11,218,000 2,236,000 13,454,000 5,552,000 7,516,000 1,020,000 6,496,000 5,890,000 4,837,000 (6,772,000) .96 .96
EX-11 3
EXHIBIT 11-1 PENNSYLVANIA ENTERPRISES, INC. Statement Re Computation of Per Share Earnings for the Three and Six Month Periods Ended June 30, 1996 and 1995 Three Months Ended Six Months Ended 1996 1995 1996 1995 Income (loss) before subsidiary's preferred stock dividends $ (93,000) $ (1,441,000) $ 7,516,000 $ 1,215,000 Subsidiary's preferred stock dividends 383,000 692,000 1,020,000 1,383,000 Net income (loss) $ (476,000) $ (2,133,000) $ 6,496,000 $ (168,000) Earnings (loss) per share of common stock $ (.09) $ (.37) $ 1.20 $ (.03) Computations of additional common shares outstanding Average shares of common stock 5,044,134 5,737,156 5,412,580 5,695,312 Incremental common shares applicable to options, based on the daily average market price 8,551 2,577 7,653 82 Average common shares as adjusted 5,052,685 5,739,733 5,420,233 5,695,394 Average shares of common stock 5,044,134 5,737,156 5,412,580 5,695,312 Incremental common shares applicable to options, based on the more dilutive of daily average or ending market price 9,498 1,439 8,289 1,700 Average common shares fully diluted 5,053,632 5,738,595 5,420,869 5,697,012 Earnings (loss) per share of common stock Average common shares as adjusted $ (.09) $ (.37) $ 1.20 $ (.03) Average common shares fully diluted $ (.09) $ (.37) $ 1.20 $ (.03)
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