-----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, JOmhpTT3SRHm46ntsoewMlTZ1iO2NvqJEtINJ4wEiy1GJu1LYlPKGrXrPJ3UGOp8 CdEajEGIEh2/Sq2qXEzBaw== 0000077231-97-000024.txt : 19970807 0000077231-97-000024.hdr.sgml : 19970807 ACCESSION NUMBER: 0000077231-97-000024 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970806 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENNSYLVANIA ENTERPRISES INC CENTRAL INDEX KEY: 0000077231 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 231920170 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11325 FILM NUMBER: 97652074 BUSINESS ADDRESS: STREET 1: ONE PEI CTR STREET 2: WILKES BARRE CTR 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. 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, 1997 and 1996 . . . . . . . . . . . 2 Consolidated Balance Sheets as of June 30, 1997, and December 31, 1996 . . . . . . . . . . . . . . . . . . 3 Consolidated Statements of Cash Flows for the six months ended June 30, 1997 and 1996 . . . . . . . 5 Notes to Consolidated Financial Statements. . . . . . . . . 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . . 9 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. . . . . 17 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 18 -1- PART I. FINANCIAL INFORMATION PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES Consolidated Statements of Income
Three Months Ended Six Months Ended June 30, June 30, 1997 1996 1997 1996 (Thousands of Dollars) OPERATING REVENUES: Regulated $ 33,210 $ 25,457 $ 113,149 $ 94,872 Nonregulated - Gas sales and services 5,991 2,140 13,366 4,876 Pipeline construction and services 2,627 2,641 4,780 4,539 Other 36 19 60 57 Total operating revenues 41,864 30,257 131,355 104,344 OPERATING EXPENSES: Cost of gas 22,726 13,786 79,434 55,707 Operation and maintenance 10,976 10,835 21,308 21,039 Depreciation 2,379 2,088 4,678 4,106 Income taxes 83 (992) 5,682 4,913 Taxes other than income taxes 3,338 2,929 7,664 6,745 Total other operating expenses 39,502 28,646 118,766 92,510 OPERATING INCOME 2,362 1,611 12,589 11,834 OTHER INCOME, NET 339 829 728 1,620 INCOME BEFORE INTEREST CHARGES 2,701 2,440 13,317 13,454 INTEREST CHARGES: Interest on long-term debt 2,099 2,323 4,141 5,191 Other interest 166 239 401 457 Allowance for borrowed funds used during construction (33) (50) (99) (96) Total interest charges 2,232 2,512 4,443 5,552 INCOME (LOSS) FROM CONTINUING OPERATIONS 469 (72) 8,874 7,902 LOSS WITH RESPECT TO DISCONTINUED OPERATIONS - (21) - (386) INCOME (LOSS) BEFORE SUBSIDIARY'S PREFERRED STOCK DIVIDENDS 469 (93) 8,874 7,516 SUBSIDIARY'S PREFERRED STOCK DIVIDENDS 318 383 671 1,020 NET INCOME (LOSS) $ 151 $ (476) $ 8,203 $ 6,496 COMMON STOCK (Note 3): Earnings (Loss) Per Share of Common Stock: Continuing operations $ .02 $ (.05) $ .85 $ .64 Discontinued operations - - - (.04) Income (loss) before discount (premium) on repurchase/redemption of subsidiary's preferred stock .02 (.05) .85 .60 Discount (premium) on repurchase/redemption of subsidiary's preferred stock .08 (.13) .09 (.12) Earnings (loss) per share of common stock $ .10 $ (.18) $ .94 $ .48 Weighted average number of shares outstanding 9,643,642 10,088,268 9,629,606 10,825,160 Cash dividends per share $ .30 $ .275 $ .59 $ .55 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, 1997 1996 (Thousands of Dollars)
ASSETS UTILITY PLANT: At original cost $ 336,020 $ 319,205 Accumulated depreciation (85,080) (79,783) 250,940 239,422 OTHER PROPERTY AND INVESTMENTS: Nonutility property and equipment 13,443 12,502 Accumulated depreciation (4,631) (4,674) Other 1,920 1,720 10,732 9,548 CURRENT ASSETS: Cash and cash equivalents 764 1,126 Accounts receivable - Customers 22,770 22,464 Others 1,208 565 Reserve for uncollectible accounts (1,827) (1,233) Unbilled revenues 3,081 12,966 Materials and supplies, at average cost 3,187 2,865 Gas held by suppliers, at average cost 12,024 20,265 Natural gas transition costs collectible 1,633 2,525 Deferred cost of gas and supplier refunds, net 4,983 19,316 Prepaid expenses and other 2,055 1,438 49,878 82,297 DEFERRED CHARGES: Regulatory assets - Deferred taxes collectible 30,460 29,771 Other 4,654 4,274 Unamortized debt expense 1,338 1,498 Other 505 - 36,957 35,543 TOTAL ASSETS $ 348,507 $ 366,810 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, 1997 1996 (Thousands of Dollars) CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common shareholders' investment $ 122,205 $ 117,651 Preferred stock of PGE - Not subject to mandatory redemption, net 15,877 18,851 Subject to mandatory redemption 640 739 Long-term debt 103,266 75,000 241,988 212,241 CURRENT LIABILITIES: Current portion of long-term debt 9,087 38,721 Preferred stock subject to repurchase or mandatory redemption 80 115 Notes payable 3,500 10,000 Accounts payable 17,019 19,945 Accrued general business and realty taxes 1,428 2,350 Accrued income taxes 5,479 14,525 Accrued interest 1,294 1,243 Accrued natural gas transition costs 1,184 2,095 Other 3,648 3,904 42,719 92,898 DEFERRED CREDITS: Deferred income taxes 50,673 49,270 Unamortized investment tax credits 4,682 4,767 Operating reserves 2,892 3,086 Other 5,553 4,548 63,800 61,671 COMMITMENTS AND CONTINGENCIES (Note 5) TOTAL CAPITALIZATION AND LIABILITIES $ 348,507 $ 366,810 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, 1997 1996 (Thousands of Dollars) CASH FLOW FROM OPERATING ACTIVITIES: Income from continuing operations, net of subsidiary's preferred stock dividends $ 8,203 $ 6,882 Effects of noncash charges to income - Depreciation 4,711 4,145 Deferred income taxes, net 389 173 Provisions for self insurance 406 591 Other, net 895 993 Changes in working capital, exclusive of cash and current portion of long-term debt - Receivables and unbilled revenues 10,220 14,915 Gas held by suppliers 8,241 3,030 Accounts payable (5,802) (2,770) Deferred cost of gas and supplier refunds, net 14,602 (9,680) Other current assets and liabilities, net (11,307) 3,148 Other operating items, net (924) (4,024) Net cash provided by continuing operations 29,634 17,403 Net cash used by discontinued operations - (24,175) Net cash provided by (used for) operating activities 29,634 (6,772) CASH FLOW FROM INVESTING ACTIVITIES: Additions to utility plant (13,923) (8,823) Proceeds from sale of discontinued operations - 261,752 Acquisition of regulated business (2,009) - Other, net (1,108) 69 Net cash provided by (used for) investing activities (17,040) 252,998 CASH FLOW FROM FINANCING ACTIVITIES: Issuance of common stock 1,211 148 Repurchase of common stock - (37,999) Repurchase/redemption of subsidiary's preferred stock (3,108) (14,968) Dividends on common stock (5,682) (5,890) Repayment of long-term debt (446) (53,262) Net decrease in bank borrowings (5,753) (60,123) Other, net 822 (1,286) Net cash used for financing activities (12,956) (173,380) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (362) 72,846 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,126 629 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 764 $ 73,475 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest (net of amount capitalized) $ 3,963 $ 6,414 Income taxes $ 14,674 $ 22,533 The accompanying notes are an integral part of the consolidated financial statements.
-5- PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of the Business. Pennsylvania Enterprises, Inc. ("the Company") is a holding company which, through its subsidiaries, is engaged in both regulated and nonregulated activities. The Company's regulated activities are conducted by its principal subsidiary, PG Energy Inc. ("PGE"), a regulated public utility, and PGE's wholly-owned subsidiary, Honesdale Gas Company ("Honesdale"), also a regulated public utility which was acquired on February 14, 1997. Together PGE and Honesdale distribute natural gas to a twelve-county area in northeastern Pennsylvania, a territory that includes 129 municipalities, in addition to the cities of Scranton, Wilkes-Barre and Williamsport. The Company, through its other subsidiaries, PG Energy Services Inc. ("Energy Services"), formerly known as Pennsylvania Energy Resources, Inc., Theta Land Corporation and Keystone Pipeline Services, Inc. ("Keystone"), a wholly-owned subsidiary of Energy Services, is engaged in various nonregulated activities, including the marketing and sale of natural gas and propane and other energy-related services, as well as the construction, maintenance and rehabilitation of natural gas distribution pipelines. Additionally, Theta is presently initiating several residential and commercial real estate development projects on Company-owned land for which construction is currently expected to commence in late 1997. Principles of Consolidation. The consolidated financial statements include the accounts of the Company and its subsidiaries, PGE, Energy Services (including Keystone) and Theta. The consolidated financial statements also include the accounts of Honesdale beginning February 14, 1997, the date Honesdale was acquired by PGE. All material intercompany accounts have been eliminated in consolidation. Both PGE and Honesdale are subject to the jurisdiction of the Pennsylvania Public Utility Commission ("PPUC") for rate and accounting purposes. The financial statements of PGE and Honesdale 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 the sale of natural gas. However, in the opinion of management, all adjustments, consisting of only normal recurring accruals, necessary to present -6- 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 during the reporting period. These estimates involve judgments with respect to, among other things, various future economic factors and regulatory matters which are difficult to predict and are beyond the control of the Company. Therefore, actual amounts could differ from these estimates. (2) RATE MATTERS Rate Increase. By Order adopted December 19, 1996, the PPUC approved an overall 5.3% increase in PGE's base gas rates, designed to produce $7.5 million of additional annual revenue, effective January 15, 1997. Under the terms of the Order, the billing for the impact of the rate increase relative to PGE's residential heating customers, which totaled $2.4 million through June 30, 1997, was deferred, without carrying charges, until July, 1997. Gas Cost Adjustments. The provisions of the Pennsylvania Public Utility Code require that the tariffs of local gas distribution companies ("LDCs") be adjusted on an annual basis, and, in the case of larger LDCs such as PGE, on an interim basis when circumstances dictate, to reflect changes in their purchased gas costs. The procedure includes a process for the reconciliation of actual gas costs incurred and actual revenues received and also provides for the refund of any overcollections, plus interest thereon, or the recoupment of any undercollections of gas costs. In accordance with these procedures PGE has been permitted to make the following changes since January 1, 1996, to the gas costs contained in its gas tariff rates: [CAPTION] Change in Effective Rate per MCF Calculated Increase Date From To in Annual Revenue [S] [C] [C] [C] March 1, 1997 $4.18 $4.49 $ 8,300,000 December 1, 1996 3.01 4.18 32,400,000 September 1, 1996 2.88 3.01 3,600,000 June 1, 1996 2.75 2.88 3,400,000 The changes in gas rates on account of purchased gas costs have no effect on earnings since the change in revenue is offset by a corresponding change in the cost of gas. (3) COMMON STOCK Common Stock Split. Pursuant to resolutions adopted by the Company's Board of Directors on February 19, 1997, a Certificate of Amendment was filed with the Secretary of State of the Commonwealth of Pennsylvania on March 20, 1997, amending the Company's Restated Articles of Incorporation to (i) increase the -7- number of authorized shares of its common stock from 15 million shares to 30 million shares and (ii) reduce the stated value of such shares from $10.00 per share to $5.00 per share. This amendment had no effect on the Company's capital accounts. On February 19, 1997, the Board of Directors also declared a two-for- one split of the Company's common stock effective March 20, 1997. The number of shares of common stock reflected in these consolidated financial statements and the earnings per share of common stock for both the three and six-month periods ended June 30, 1996, were restated to give retroactive effect to this stock split. (4) ACCOUNTING CHANGES Earnings Per Share. In February, 1997, FASB Statement 128, "Earnings per Share" was issued. The provisions of this statement, which supersedes Accounting Principles Board Opinion No. 15, "Earnings per Share", simplify the computation of earnings per share. FASB Statement 128 will be effective for financial statements for both interim and annual periods ending after December 15, 1997. The Company does not expect the adoption of FASB Statement 128 to have a material effect on its calculation of earnings per share. Reporting Comprehensive Income. In June, 1997, FASB Statement 130 "Reporting Comprehensive Income", was issued. The provisions of this statement, which are effective for fiscal years beginning after December 15, 1997, establish standards for reporting and display of comprehensive income and its components in financial statements. The reporting provisions of FASB Statement 130, which the Company will adopt in 1998, are not expected to have a material impact on the reported results of operations of the Company. Disclosures about Segments of an Enterprise and Related Information. In June, 1997, FASB Statement 131, "Disclosures about Segments of an Enterprise and Related Information" was issued. The provisions of this statement, which are effective for fiscal years beginning after December 15, 1997, establish standards for reporting information about operating segments in annual financial statements and selected segment information in interim financial reports issued to shareholders. The Company expects to adopt the reporting provisions of FASB Statement 131 in 1998. (5) COMMITMENTS AND CONTINGENCIES 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. -8- PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS STOCK SPLIT On February 19, 1997, the Board of Directors of Pennsylvania Enterprises, Inc. (the "Company") declared a two-for-one split of the Company's Common Stock effective March 20, 1997, as more fully discussed in Note 3 of the accompanying Notes to Consolidated Financial Statements. All per share data included in this Form 10-Q has been restated to reflect this two-for-one split. RESULTS OF CONTINUING OPERATIONS The following table expresses certain items in the Company's consolidated statements of income as percentages of operating revenues for each of the three and six-month periods ended June 30, 1997 and 1996:
Percentage of Operating Revenues Three Months Ended Six Months Ended June 30, June 30, 1997 1996 1997 1996 OPERATING REVENUES: Regulated.................................. 79.3% 84.1% 86.1% 90.9% Nonregulated - Gas sales and services................... 14.3 7.1 10.2 4.7 Pipeline construction and services....... 6.3 8.7 3.6 4.3 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................................ 54.3 45.6 60.5 53.4 Operation and maintenance.................. 26.2 35.8 16.2 20.2 Depreciation............................... 5.7 6.9 3.6 3.9 Income taxes............................... 0.2 (3.3) 4.3 4.7 Taxes other than income taxes.............. 8.0 9.7 5.8 6.4 Total operating expenses................. 94.4 94.7 90.4 88.6 OPERATING INCOME............................. 5.6 5.3 9.6 11.4 OTHER INCOME, NET............................ 0.8 2.7 0.5 1.5 INTEREST CHARGES (1)......................... (5.3) (8.3) (3.4) (5.3) INCOME (LOSS) FROM CONTINUING OPERATIONS..... 1.1 (0.3) 6.7 7.6 LOSS WITH RESPECT TO DISCONTINUED OPERATIONS. - (0.1) - (0.4) INCOME (LOSS) BEFORE SUBSIDIARY'S PREFERRED STOCK DIVIDENDS............................ 1.1 (0.4) 6.7 7.2 SUBSIDIARY'S PREFERRED STOCK DIVIDENDS (1)... (0.7) (1.2) (0.5) (1.0) NET INCOME (LOSS) ........................... 0.4 (1.6) 6.2 6.2
(1) None of the Company's interest expense and none of the subsidiary's preferred stock dividends was allocated to the discontinued operations. -9- o Three Months Ended June 30, 1997, Compared With Three Months Ended June 30, 1996 Operating Revenues. Operating revenues increased $11.6 million (38.4%) from $30.3 million for the quarter ended June 30, 1996, to $41.9 million for the quarter ended June 30, 1997, largely as a result of a $7.8 million (30.5%) increase in regulated operating revenues and a $3.9 million (180.0%) increase in gas sales and services by PG Energy Services Inc. ("Energy Services") a nonregulated affiliate of the Company formerly known as Pennsylvania Energy Resources, Inc. The $7.8 million (30.5%) increase in regulated operating revenues from $25.5 million for the quarter ended June 30, 1996, to $33.2 million for the quarter ended June 30, 1997, was primarily the result of a 186 million cubic feet (5.7%) increase in sales to residential and commercial heating customers of PG Energy Inc. ("PGE") that was largely attributable to cooler weather. There was an increase of 92 (10.6%) heating degree days from 872 (114.0% of normal) during the second quarter of 1996 to 964 (126.0% of normal) during the second quarter of 1997. Also contributing to the increase were higher levels in PGE's gas cost rate and the effect of the rate increase granted PGE by the Pennsylvania Public Utility Commission (the "PPUC") which became effective on January 15, 1997 (see "Rate Matters"), as well as the operating revenues of Honesdale Gas Company ("Honesdale"), which was acquired by the Company on February 14, 1997, totaling $760,000. The $3.9 million increase in nonregulated gas sales and services from $2.1 million for the quarter ended June 30, 1996, to $6.0 million for the quarter ended June 30, 1997, was primarily the result of a 1.1 million cubic feet (255.8%) increase in sales of natural gas by Energy Services during the quarter. Operating Expenses. Operating expenses, including depreciation and income taxes, increased $10.9 million (37.9%) from $28.6 million for the second quarter of 1996 to $39.5 million for the second quarter of 1997. As a percentage of operating revenues, total operating expenses decreased slightly from 94.7% during the second quarter of 1996 to 94.4% during the second quarter of 1997, largely as a result of a proportionally greater increase in revenues. Cost of gas increased $8.9 million (64.8%) from $13.8 million for the second quarter of 1996 to $22.7 million for the second quarter of 1997, primarily because of the aforementioned increase in sales by both PGE and Energy Services, the higher levels in PGE's gas cost rate (see "-Rate Matters") and $527,000 of gas costs related to Honesdale. Other than the cost of gas and income taxes, operating expenses increased by $841,000 (5.3%) from $15.9 million for the second quarter of 1996 to $16.7 million for the second quarter of 1997. This increase was partially attributable to a $409,000 (14.0%) increase in taxes other than income taxes resulting from a higher level of gross receipts tax because of the increased sales by PGE and the sales of Honesdale. Operation and maintenance expense increased $141,000 (1.3%) largely as a result of increased payroll and other costs attributable to the expansion of the Company's nonregulated activities. Also contributing to the higher operating expenses was a $291,000 (13.9%) increase in depreciation expense, primarily as a result of additions to utility plant. -10- Income taxes for the three-month period ended June 30, 1997, increased by $1.1 million from a credit of $992,000 in 1996 to an expense of $83,000 in 1997 due to a higher level of income before income taxes (for this purpose, operating income net of interest charges). Operating Income. As a result of the above, operating income increased by $751,000 (46.6%) from $1.6 million for the three-month period ended June 30, 1996, to $2.4 million for the three-month period ended June 30, 1997, and increased as a percentage of total operating revenues for such periods from 5.3% in the three-month period ended June 30, 1996, to 5.6% in the three-month period ended June 30, 1997. Other Income, Net. Other income, net decreased $490,000 from $829,000 for the three-month period ended June 30, 1996, to $339,000 for the three-month period ended June 30, 1997, largely because the second quarter of 1996 included income from the temporary investment of certain proceeds from the sale of PGE's regulated water utility operations in February, 1996. Interest Charges. Interest charges decreased $280,000 (11.1%) from $2.5 million for the second quarter of 1996 to $2.2 million for the second quarter of 1997. This decrease was largely attributable to the the Company's defeasance of its 10.125% Senior Notes on September 30, 1996. Income (Loss) From Continuing Operations. Income from continuing operations increased $541,000 from a loss of $72,000 for the three-month period ended June 30, 1996, to income of $469,000 for the three-month period ended June 30, 1997. This increase was largely the result of the matters discussed above, principally the increase in operating revenues, the effect of which was partially offset by increased operating expenses. Subsidiary's Preferred Stock Dividends. Dividends on preferred stock decreased $65,000 (17.0%) from $383,000 for the three-month period ended June 30, 1996, to $318,000 for the three-month period ended June 30, 1997, primarily as a result of the repurchase by PGE in 1996 of 134,359 shares of its 9% cumulative preferred stock, 9,408 shares of its 5.75% cumulative preferred stock and 20,330 shares of its 4.10% cumulative preferred stock, largely during the second quarter of that year, as well as its repurchase of an additional 30,090 shares of the 4.10% cumulative preferred stock in 1997. Net Income (Loss). The increase in net income of $627,000 from a loss of $476,000 for the second quarter of 1996 to income of $151,000 for the second quarter of 1997, as well as the increase in earnings per share of common stock of $.28 from a loss of $.18 per share for the second quarter of 1996 (after reflecting a $.13 per share premium on redemption of preferred stock) to earnings of $.10 per share for the second quarter of 1997 (after reflecting an $.08 per share discount on the repurchase of preferred stock) were the result of the higher income from continuing operations and the reduced dividends on subsidiary's preferred stock, as discussed above. The $.13 per share charge for the premium on the repurchase of subsidiary's preferred stock in the second quarter of 1996 acted to increase the loss per share of common stock for the quarter ended June 30, 1996, to $.18 per share. The discount on redemption of preferred stock in the second quarter of 1997 acted to increase the earnings per share for the quarter by $.08 per share to $.10 per share. While discounts and premiums on the repurchase of preferred stock are reflected in retained earnings and are not a determinant of net income, the discounts and premiums associated with repurchases must be taken into account in calculating the earnings (loss) per share of common stock. -11- o Six Months Ended June 30, 1997, Compared With Six Months Ended June 30, 1996 Operating Revenues. Operating revenues increased $27.0 million (25.9%) from $104.3 million for the six months ended June 30, 1996, to $131.4 million for the six months ended June 30, 1997, largely as a result of an $18.3 million (19.3%) increase in regulated operating revenues and an $8.5 million (174.1%) increase in nonregulated gas sales and services by Energy Services. The $18.3 million (19.3%) increase in regulated operating revenues from $94.9 million for the six months ended June 30, 1996, to $113.1 million for the six months ended June 30, 1997, was primarily the result of higher levels in PGE's gas cost rate and the effect of the rate increase granted PGE by the PPUC which became effective on January 15, 1997 (see "Rate Matters"). The effect of the increases in rates was partially offset by a 1.0 billion cubic feet (6.9%) decrease in sales to PGE's residential and commercial heating customers. There was a decrease of 238 (5.7%) heating degree days from 4,192 (106.0 % of normal) during the first six months of 1996 to 3,954 (100.0% of normal) during the first six months of 1997. Operating revenues of Honesdale totaling $1.6 million from its February 14, 1997, acquisition date through June 30, 1997, also contributed to the increased regulated operating revenues. The $8.5 million increase in nonregulated gas sales and services from $4.9 million for the six months ended June 30, 1996, to $13.4 million for the six months ended June 30, 1997, was primarily the result of a 2.6 million cubic feet (255.6%) increase in sales of natural gas by Energy Services during the period. Operating Expenses. Operating expenses, including depreciation and income taxes, increased $26.3 million (28.4%) from $92.5 million for the first six months of 1996 to $118.8 million for the six months of 1997. As a percentage of operating revenues, total operating expenses increased from 88.6% during the first six months of 1996 to 90.4% during the first six months of 1997, largely as a result of an increase in the cost of gas. Cost of gas increased $23.7 million (42.6%) from $55.7 million for the first six months of 1996 to $79.4 million for the first six months of 1997, primarily because of higher levels in PGE's gas cost rate (see "-Rate Matters"), the aforementioned increase in sales by Energy Services and the higher level of gas costs that Energy Services incurred as a result of market prices in January, 1997. Also contributing to the increase was $1.1 million of gas costs related to Honesdale from its February 14, 1997, acquisition date through June 30, 1997. Other than the cost of gas and income taxes, operating expenses increased by $1.8 million (5.5%) from $31.9 million for the first six months of 1996 to $33.6 million for the first six months of 1997. This increase was partially attributable to a $919,000 (13.6%) increase in taxes other than income taxes resulting from a higher level of gross receipts tax because of the increased sales by PGE and the sales of Honesdale from its acquisition date. Operation and maintenance expense increased $269,000 (1.3%) largely as a result of increased payroll and other costs attributable to the expansion of the Company's nonregulated activities. Also contributing to the higher operating expenses was a $572,000 (13.9%) increase in depreciation expense, primarily as a result of a $608,000 (15.7%) increase in depreciation attributable to additions to PGE's utility plant. Income taxes increased $769,000 (15.7%) from $4.9 million in the first six months of 1996 to $5.7 million in the first six months of 1997 due to an increase in income before income taxes (for this purpose, operating income net of interest charges). -12- Operating Income. As a result of the above, operating income increased by $755,000 (6.4%) from $11.8 million for the six-month period ended June 30, 1996, to $12.6 million for the six-month period ended June 30, 1997, and decreased as a percentage of total operating revenues for such periods from 11.4% in the six- month period ended June 30, 1996, to 9.6% in the six-month period ended June 30, 1997, largely as a result of the proportionately higher ratio of cost of gas to operating revenues. Other Income, Net. Other income, net decreased $892,000 from $1.6 million for the six-month period ended June 30, 1996, to $728,000 for the six-month period ended June 30, 1997, largely because the first six months of 1996 included income from the temporary investment of certain proceeds from the sale of PGE's regulated water utility operations in February, 1996. Interest Charges. Interest charges decreased $1.1 million (20.0%) from $5.6 million for the first six months of 1996 to $4.4 million for the first quarter of 1997. This decrease was largely attributable to the the Company's defeasance of its 10.125% Senior Notes on September 30, 1996. Income From Continuing Operations. Income from continuing operations increased $972,000 (12.3%) from $7.9 million for the six-month period ended June 30, 1996, to $8.9 million for the six-month period ended June 30, 1997. This increase was largely the result of the matters discussed above, principally the increase in operating revenues and decrease in interest charges, the effects of which were partially offset by increased operating expenses. Subsidiary's Preferred Stock Dividends. Dividends on preferred stock decreased $349,000 (34.2%) from $1.0 million for the six-month period ended June 30, 1996, to $671,000 for the six-month period ended June 30, 1997, primarily as a result of the repurchase by PGE in 1996 of 134,359 shares of its 9% cumulative preferred stock, 9,408 shares of its 5.75% cumulative preferred stock and 20,330 shares of its 4.10% cumulative preferred stock, largely during the second quarter of that year, as well as its repurchase of an additional 30,090 shares of the 4.10% cumulative preferred stock in 1997. Net Income. The increase in net income of $1.7 million from $6.5 million for the first six months of 1996 to $8.2 million for the first six months of 1997, as well as the increase in earnings per share of common stock of $.46 from $.48 per share for the first six months of 1996 (after reflecting a $.12 per share premium on redemption of preferred stock) to $.94 per share for the first six months of 1997 (after reflecting a $.09 per share discount on redemption of 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 absence of any loss with respect to discontinued operations. Also contributing to the increase in earnings per share of common stock was the reduction in the weighted average number of shares outstanding as a result of the repurchase of shares, largely during the second quarter of 1996, with proceeds from the sale of PGE's water utility operations in February, 1996. RATE MATTERS Rate Increase. By Order adopted December 19, 1996, the PPUC approved an overall 5.3% increase in PGE's base gas rates, designed to produce $7.5 million of additional annual revenue, effective January 15, 1997. Under the terms of the Order, the billing for the impact of the rate increase relative to PGE's residential heating customers, which totaled $2.4 million through June 30, 1997, was deferred, without carrying charges, until July, 1997. -13- Gas Cost Adjustments. The provisions of the Pennsylvania Public Utility Code require that the tariffs of local gas distribution companies ("LDCs") be adjusted on an annual basis, and, in the case of larger LDCs such as PGE, on an interim basis when circumstances dictate, to reflect changes in their purchased gas costs. The procedure includes a process for the reconciliation of actual gas costs incurred and actual revenues received and also provides for the refund of any overcollections, plus interest thereon, or the recoupment of any undercollections of gas costs. In accordance with these procedures, PGE has been permitted to make the following changes since January 1, 1996, to the gas costs contained in its gas tariff rates: [CAPTION] Change in Effective Rate per MCF Calculated Increase Date From To in Annual Revenue [S] [C] [C] [C] March 1, 1997 $4.18 $4.49 $ 8,300,000 December 1, 1996 3.01 4.18 32,400,000 September 1, 1996 2.88 3.01 3,600,000 June 1, 1996 2.75 2.88 3,400,000 The changes in gas rates on account of purchased gas costs have no effect on earnings since the change in revenue is offset by a corresponding change in the cost of gas. Recovery of FERC Order 636 Transition Costs. By Order of the PPUC entered August 26, 1994, PGE began recovering the Non-Gas Transition Costs (i.e. Gas Supply Realignment and Stranded Costs) that it estimates it will ultimately be billed pursuant to Federal Energy Regulatory Commission Order 636, through the billing of a surcharge to its customers effective September 12, 1994. It is currently estimated that $10.8 million of Non-Gas Transition Costs will be billed to PGE, generally over a six-year period extending through January 1, 1999, of which $9.0 million had been billed to PGE and recovered from its customers as of June 30, 1997. 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 Liquidity The primary capital needs of the Company continue to be 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 nonregulated activities expand, increased capital will be required for those activities, especially the residential and commercial real estate development projects that are planned for certain Company-owned land. The 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 finalized. However, it is currently anticipated that such expenditures will be funded by a combination of capital provided by the Company, bank borrowings and other debt financing. -14- 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 temporarily finance construction expenditures and to meet its seasonal borrowing requirements, PGE has made arrangements for a total of $83.5 million of unsecured revolving bank credit, which is deemed adequate for its ongoing needs. Specifically, PGE currently has eight bank lines of credit with an aggregate borrowing capacity of $83.5 million which provide for borrowings at interest rates generally less than prime, which mature at various times during 1997 and 1998 and which PGE intends to renew or replace as they expire. As of August 1, 1997, PGE had $46.3 million of borrowings outstanding under these bank lines of credit. The Company believes that PGE, as well as Honesdale, will be able to raise in a timely manner such funds as are required for their future construction expenditures, refinancings and other working capital requirements. Likewise, the Company believes that its nonregulated 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 which is planned. Long-Term Debt and Capital Stock Financings Both the Company and its subsidiaries, most notably 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 six-month period ended June 30, 1997. However, PGE plans to issue $50.0 million of unsecured term notes during the third quarter of 1997, of which $25.0 million will be issued to a syndicate of banks and $25.0 million will be issued to accredited private placement investors. The proceeds from these long-term debt financings will be used to repay a portion of PGE's bank borrowings. The Company also obtains external funds from the sale of common stock through its Dividend Reinvestment and Stock Purchase Plan (the "DRP"), its 1992 Stock Option Plan and its Employees' Savings Plan. During the six-month period ended June 30, 1997, the Company realized $848,000, $27,000 and $380,000 from the issuance of common stock under the DRP, 1992 Stock Option Plan and Employees' Savings Plan, respectively. Capital Expenditures and Related Financings Capital expenditures totaled $15.5 million during the first six months of 1997, including $13.9 million of expenditures for the construction of utility plant. The Company estimates that its capital expenditures will total $26.7 million for the remainder of the year, consisting of $19.8 million relative to utility plant and $6.9 million with respect to the Company's nonregulated activities, including $4.9 million for residential and commercial real estate development. It is anticipated that such capital expenditures will be financed with internally generated funds and bank borrowings, and to the extent necessary by the issuance of stock and long-term debt. -15- Current Maturities of Long-Term Debt and Preferred Stock As of June 30, 1997, $9.1 million of PGE's long-term debt and $80,000 of its preferred stock was required to be repaid within twelve months. 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, such as the nature of Pennsylvania legislation restructuring the natural gas industry and general economic conditions and uncertainties relating to new projects like the residential and commercial development projects on Company-owned land. -16- 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 May 14, 1997. (b) The following persons were elected directors of the Company with the voting as indicated: [CAPTION] No. of Shares No. of Shares Name Voted in Favor Withheld [S] [C] [C] Kenneth L. Pollock 4,152,009 54,854 William D. Davis 4,156,840 50,023 Thomas F. Karam 4,159,248 47,615 Robert J. Keating 4,153,246 53,617 James A. Ross 4,156,854 50,009 John D. McCarthy 4,155,216 51,647 Ronald W. Simms 4,157,829 49,034 Kenneth M. Pollock 4,154,395 52,468 Paul R. Freeman 4,159,690 47,173 John D. McCarthy, Jr. 4,154,766 52,097 Richard A. Rose, Jr. 4,158,121 48,742 (c) The Company's shareholders also approved the Company's Stock Incentive Plan (the "Plan") as set forth in Exhibit A to the Proxy Statement (dated March 26, 1997) for the Annual Meeting. The Plan authorizes the granting of awards to employees (including officers) of the Company and certain related companies in the form of any combination of (1) options to purchase shares of Common Stock, (2) shares of restricted Common Stock, (3) bonus stock, and (4) dividend equivalent units. The Plan also provides for the discretionary grant of stock options to directors who are not employees or officers of the Company or certain related companies. The aggregate number of shares of Common Stock which may be issued under the Plan is 460,000. There were 3,521,456 votes for the Plan, 517,404 votes against it, 87,705 abstentions, and 80,298 broker non-votes. -17- Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10-1 Director Deferred Compensation Plan dated as of April 23, 1997 -- filed herewith. 11-1 Statement Re Computation of Per Share Earnings -- filed herewith. 27-1 Financial Data Schedule -- filed herewith. (b) Reports on Form 8-K The Company filed a report on Form 8-K dated May 28, 1997, pursuant to Item 4. Changes in Registrant's Certifying Accountant, reporting the appointment of the accounting firm of Price Waterhouse LLP as independent accountants. -18- 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 6, 1997 By: /s/ Thomas J. Ward Thomas J. Ward Secretary Date: August 6, 1997 By: /s/ John F. Kell, Jr. John F. Kell, Jr. Vice President, Financial Services (Principal Financial Officer and Principal Accounting Officer) -19- 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-31-1996 JUN-30-1997 PER-BOOK 250,940,000 10,732,000 49,878,000 36,957,000 0 348,507,000 48,307,000 21,336,000 52,562,000 122,205,000 640,000 15,877,000 103,266,000 3,500,000 0 0 9,087,000 80,000 0 0 93,852,000 348,507,000 131,355,000 5,682,000 113,084,000 118,766,000 12,589,000 728,000 13,317,000 4,443,000 8,874,000 671,000 8,203,000 5,682,000 4,837,000 29,634,000 .94 .94
EX-10 3 PENNSYLVANIA ENTERPRISES, INC. DIRECTOR DEFERRED COMPENSATION PLAN Section 1. Purpose and Effective Date (a) Purpose. The purpose of the Pennsylvania Enterprises, Inc. Director Deferred Compensation Plan (the "Plan") is to enable Pennsylvania Enterprises, Inc. (the "Company") to attract and retain directors of outstanding ability by allowing them to defer and accumulate Director's Fees and to strengthen the existing mutuality of interests between such Directors and the Company's stockholders by enabling the Directors to defer their Director's Fees in the form of Stock Units valued by reference to the market price of the Company's common stock ("Stock"). For purposes of this Plan, (i) "Director's Fees" means the annual retainer fee for service as a director and fees for attendance at meetings of the Boards of Directors and committees of the Boards of the Company and those of its subsidiaries that elect to participate in the Plan; and (ii) "Director" means a member of the Board of Directors of the Company who is not a full-time employee of the Company or any of its subsidiaries. (b) Effective Date. The Plan is effective as of April 1, 1997. Section 2. Deferral of Payments (a) Deferral Election. At any time prior to the beginning of a calendar year, a Director may elect (the "Deferral Election") that, in lieu of payment in cash, all or any specified portion of the Director's Fees to be earned by him during such calendar year shall be credited in the form of Stock Units to a bookkeeping account maintained by the Company on such Director's behalf. A Director shall also have the right to make a Deferral Election during the 30 days following (i) the effective date of the Plan, or (ii) the date on which he first becomes eligible to receive Director's Fees. Any Deferral Election made pursuant to the preceding sentence shall be made with respect to all or any specified portion of the Director's Fees to be earned in the remainder of the calendar year following such Deferral Election. At the time of making a Deferral Election, a Director shall specify whether settlement of the Stock Units credited to his account with respect to the particular Deferral Election shall be made in cash or in Stock (as described in Section 4(b)). (b) Renewal of Elections. Once a Deferral Election has been made, it shall be automatically renewed from year to year unless the Director elects to change or revoke such election. However, each Deferral Election shall be irrevocable as to Director's Fees earned prior to the commencement of the calendar year next following any change or revocation. The Director's account shall be maintained in subaccounts to the extent necessary to reflect different settlement options elected in different years. Section 3. Credits to Account (a) Crediting of Stock Units. Director's Fees which are the subject of a Deferral Election shall not be paid in cash, but shall instead be converted into a number of Stock Units (expressed to three decimal places) determined by dividing the amount of Director's Fees that would have been paid to the Director on the particular day by the Market Price of a share of Stock on such day. For purposes of the Plan, the "Market Price" of the Company's Stock shall be the mean between the highest and lowest quoted selling price of the Stock, on the principal exchange on which the Stock is listed, on the date in question, or, if no such sale of Stock occurs on such day, the mean between the high and low prices of the Stock on the nearest trading date before such date. (b) Crediting of Additional Stock Units in lieu of Dividends. Each Director's account shall be credited with additional Stock Units with respect to each cash dividend paid on outstanding shares of Stock, as follows. The number of additional Stock Units to be credited to the Director's account shall be the aggregate number derived by (1) multiplying the declared dividend rate per share of Stock by the number of Stock Units then credited to the Director's account under the Plan as of the dividend record date for such dividend, and (2) dividing the resulting figure by the Market Price of a share of Stock on the dividend payment date. Section 4. Payment of Deferred Amounts (a) Settlement Date. Settlement of the Stock Units credited to a Director's account shall be made as of the first business day following the Director's termination of service as a director. (b) Form of Settlement. With respect to Stock Units which the Director has elected to have settled in cash, there shall be delivered to the Director, within 30 days of the settlement date, cash in an amount equal to the number of full and fractional Stock Units being settled multiplied by the Market Price on the settlement date. With respect to Stock Units which the Director has elected to have settled in Stock, there shall be delivered to the Director, within 30 days of the settlement date, a number of shares of Stock equal to the number of full Stock Units being settled (with cash in lieu of any fractional Stock Unit based on the Market Price on the settlement date). Section 5. Change of Control (a) Settlement upon Change of Control. Notwithstanding any other provision of the Plan or of any Deferral Election, in the event of a Change of Control, all Stock Units credited to a Director's account shall be settled as of the date of the Change of Control for cash based on the Change of Control Price. (b) Change of Control Definition. A "Change of Control" shall be deemed to occur on: (i) the date that any person or group deemed a person under Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934 (the "Exchange Act") other than the company and its subsidiaries as determined prior to that date, in a transaction or series of transactions has become the beneficial owner, directly or indirectly (with beneficial ownership determined as provided in Rule 13d-3, or any successor rule, under the Exchange Act) of 20% or more of the outstanding securities of the Company having the right under ordinary circumstances to vote at an election of the board; (ii) the date on which one-third or more of the members of the Board shall consist of persons other than Current Directors (for these purposes, a "Current Director" shall mean any member of the Board as of the effective date of the Plan and any successor of a Current Director whose nomination or election has been approved by a majority of the Current Directors then on the Board); or (iii) the date of approval by the stockholders of the Company of an agreement providing for the merger or consolidation of the Company with another corporation where (A) the stockholders of the Company, immediately prior to the merger or consolidation, would not beneficially own, immediately after the merger of consolidation, shares entitling such stockholders to 50% or more of all votes (without consideration of the rights of any class of stock to elect directors by a separate class vote) to which all stockholders of the corporation issuing cash or securities in the merger of consolidation would be entitled in the election of directors, or (B) where the members of the Board, immediately prior to the merger or consolidation, would not, immediately after the merger or consolidation, constitute a majority of the board of directors of the corporation issuing cash or securities in the merger; or (iv) the date of approval by the stockholders of the Company of the sale or other disposition of all or substantially all of the assets of the Company. (c) Change of Control Price. "Change of Control Price" means the highest price per share of Stock paid in any transaction reported on any national securities exchange where the Stock is traded, or paid or offered in any transaction related to a Change of Control, at any time during the 90-day period ending with the Change of Control. Section 6. Unfunded Arrangement Neither this Plan nor the account established on behalf of any Director shall be funded. Rather, all accounts established under the Plan and all entries thereto shall constitute bookkeeping records only and shall not relate to any specific funds of the Company. Settlement with respect to Stock Units credited to a Director's account shall be made from the general assets of the Company. Notwithstanding the foregoing, the Company shall have the right in its sole discretion to provide for the funding of its obligations under the Plan through a trust or otherwise. Section 7. Administration and Other Matters (a) Administration. The Plan shall be administered by the board of Directors of the Company, who shall have full authority to interpret the Plan and make all factual determinations necessary therefor. No member of the board of Directors shall be liable for any act done or determination made in good faith. The construction and interpretation of any provision of the Plan by the Board of Directors, and any determination by the Board of Directors of amounts to which a Director is entitled under the Plan, shall be final and conclusive. (b) Amendments. The Board of Directors May terminate, modify or amend this Plan, effective prospectively, provided, however, that, except as provided in Section 6(h), the Plan shall not be subject to termination, modification or amendment with respect to the Stock Units credited to any Director's account, including the right to the crediting of additional Stock Units pursuant to Section 3(b), unless the affected Director consents. (c) Non-Alienation. No Director (or estate of a Director) shall have the power to transfer, assign, anticipate, mortgage or otherwise encumber any rights or any amounts payable hereunder; nor shall any such rights or payments be subject to seizure for the payment of any debts, judgments, alimony, or separate maintenance, or be transferable by operation of law in the event of bankruptcy, insolvency, or otherwise. (d) Expenses. The expenses of administering the Plan shall be borne by the Company and shall not be charged against any Director's account. (e) Withholding. The Company shall have the right to deduct from all payments any taxes required to be withheld with respect to such payments. (f) Effect of Determination. If any amounts deferred pursuant to the Plan are found in a "determination" (within the meaning of Section 1313(a) of the Internal Revenue Code of 1986, as amended) to have been includable in gross income by a director prior to payment of such amounts under the Plan, such amounts shall be immediately paid to such Director, notwithstanding his Deferral Elections. (g) Effect on Other Plans. All amounts which are credited to a Director's account pursuant to Section 3(a) (but not section 3(b)) shall, solely for purposes of calculating benefits under the Company's Director Retirement Plan, be deemed to have been paid to the Director on the date such amounts would have been paid absent a Deferral Election. (h) Adjustment in Certain Events. In the event of any Stock dividend, Stock split, spin-off, distribution of assets, or other change in corporate structure affecting the Stock, appropriate adjustment, as may be determined by the Board of Directors of the Company in its sole discretion, shall be made in the number of Stock Units credited to accounts under the Plan and the securities and/or cash to be delivered in settlement of such Stock Units. IN WITNESS WHEREOF, this Plan has been duly executed by an authorized officer of the Company on this _______ day of __________________, 1997. PENNSYLVANIA ENTERPRISES, INC. _____________________________________ Thomas F. Karam President and Chief Executive Officer EX-11 4
EXHIBIT 11-1 PENNSYLVANIA ENTERPRISES, INC. Statement Re Computation of Per Share Earnings for the Three and Six Month Periods Ended June 30, 1997 and 1996 Three Months Ended Six Months Ended 1997 1996 1997 1996 Income (loss) before subsidiary's preferred stock dividends $ 469,000 $ (93,000) $ 8,874,000 $ 7,516,000 Subsidiary's preferred stock dividends 318,000 383,000 671,000 1,020,000 Net income (loss) $ 151,000 $ (476,000) $ 8,203,000 $ 6,496,000 Earnings (loss) per share of common stock $ .02 $ (.05) $ .85 $ .60 Computations of additional common shares outstanding Average shares of common stock 9,643,642 10,088,268 9,629,606 10,825,160 Incremental common shares applicable to options, based on the daily average market price 58,349 17,102 51,908 15,306 Average common shares as adjusted 9,701,991 10,105,370 9,681,514 10,840,466 Average shares of common stock 9,643,642 10,088,268 9,629,606 10,825,160 Incremental common shares applicable to options, based on the more dilutive of daily average or ending market price 62,827 18,996 50,341 16,578 Average common shares fully diluted 9,706,469 10,107,264 9,679,947 10,841,738 Earnings (loss) per share of common stock Average common shares as adjusted $ .02 $ (.05) $ .85 $ .60 Average common shares fully diluted $ .02 $ (.05) $ .85 $ .60
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