-----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, TAQMQ27vuYjUPkoUlikd2J424LEtdX4SOmAW2IjtA9XQBH2gJvrx/Lb/nmzKbsau V2AZM7q9nYsXEwRyZk2b0A== 0000077242-98-000006.txt : 19980506 0000077242-98-000006.hdr.sgml : 19980506 ACCESSION NUMBER: 0000077242-98-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980505 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PG ENERGY INC CENTRAL INDEX KEY: 0000077242 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 240717235 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03490 FILM NUMBER: 98610753 BUSINESS ADDRESS: STREET 1: 39 PUBLIC SQ STREET 2: WILKES BARRE CTR CITY: WILKES-BARRE STATE: PA ZIP: 18711-0601 BUSINESS PHONE: 7178298843 FORMER COMPANY: FORMER CONFORMED NAME: PENNSYLVANIA GAS & WATER CO DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SCRANTON SPRING BROOK WATER SERVICE CO DATE OF NAME CHANGE: 19660908 10-Q 1 PG ENERGY INC. TABLE OF CONTENTS PAGE PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Income for the three months ended March 31, 1998 and 1997. . . . . . . . . . . 2 Consolidated Balance Sheets as of March 31, 1998 and December 31, 1997 . . . . . . . . . . . . . . . . . . 3 Consolidated Statements of Cash Flows for the three months ended March 31, 1998 and 1997. . . . . . 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 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 14 -1- PART I. FINANCIAL INFORMATION PG ENERGY INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, 1998 1997 (Thousands of Dollars) OPERATING REVENUES $ 65,015 $ 79,939 Cost of gas 37,825 49,139 OPERATING MARGIN 27,190 30,800 OTHER OPERATING EXPENSES: Operation 6,763 6,462 Maintenance 1,127 1,126 Depreciation 2,439 2,211 Income taxes 4,196 5,831 Taxes other than income taxes 4,014 4,306 Total other operating expenses 18,539 19,936 OPERATING INCOME 8,651 10,864 OTHER INCOME (DEDUCTIONS), NET (127) 239 INCOME BEFORE INTEREST CHARGES 8,524 11,103 INTEREST CHARGES: Interest on long-term debt 2,625 2,191 Other interest 124 204 Allowance for borrowed funds used during construction (23) (66) Total interest charges 2,726 2,329 NET INCOME 5,798 8,774 DIVIDENDS ON PREFERRED STOCK 321 353 EARNINGS APPLICABLE TO COMMON STOCK $ 5,477 $ 8,421 Earnings per share of common stock $ 1.65 $ 2.54 Weighted average number of shares outstanding 3,317,978 3,314,155 Cash dividends per share $ - $ - The accompanying notes are an integral part of the consolidated financial statements.
-2- PG ENERGY INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
March 31, December 31, 1998 1997 (Thousands of Dollars) ASSETS UTILITY PLANT: At original cost $ 355,243 $ 351,106 Accumulated depreciation (90,607) (88,129) 264,636 262,977 OTHER PROPERTY AND INVESTMENTS 4,106 4,459 CURRENT ASSETS: Cash and cash equivalents 1,336 304 Accounts receivable - Customers 26,409 23,551 Parent 991 - Affiliates, net 424 63 Others 604 280 Reserve for uncollectible accounts (1,436) (1,168) Accrued utility revenues 6,801 11,680 Materials and supplies, at average cost 2,911 2,716 Gas held by suppliers, at average cost 7,985 21,933 Deferred cost of gas and supplier refunds, net 1,593 6,316 Prepaid expenses and other 5,506 1,633 53,124 67,308 DEFERRED CHARGES: Regulatory assets - Deferred taxes collectible 30,761 30,592 Other 6,316 4,415 Unamortized debt expense 1,116 1,164 Other 175 225 38,368 36,396 TOTAL ASSETS $ 360,234 $ 371,140 The accompanying notes are an integral part of the consolidated financial statements.
-3- PG ENERGY INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
March 31, December 31, 1998 1997 (Thousands of Dollars) CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common shareholder's investment $ 113,215 $ 107,425 Preferred stock of PG Energy - Not subject to mandatory redemption, net 15,864 15,864 Subject to mandatory redemption 640 640 Long-term debt Parent 21,000 23,500 Other 105,000 106,000 255,719 253,429 CURRENT LIABILITIES: Current portion of long-term debt 16,337 24,776 Preferred stock subject to repurchase or mandatory redemption 80 80 Notes payable 245 2,170 Accounts payable - Suppliers 9,415 14,515 Parent - 199 Accrued general business and realty taxes 755 2,797 Accrued income taxes 7,685 4,946 Accrued interest 1,266 1,844 Accrued natural gas transition costs 842 1,087 Other 1,092 1,188 37,717 53,602 DEFERRED CREDITS: Deferred income taxes 52,971 52,207 Unamortized investment tax credits 4,553 4,596 Operating reserves 2,779 2,825 Other 6,495 4,481 66,798 64,109 COMMITMENTS AND CONTINGENCIES (Note 4) TOTAL CAPITALIZATION AND LIABILITIES $ 360,234 $ 371,140 The accompanying notes are an integral part of the consolidated financial statements.
-4- PG ENERGY INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1998 1997 (Thousands of Dollars) CASH FLOW FROM OPERATING ACTIVITIES: Net income $ 5,798 $ 8,774 Effects of noncash charges to income - Depreciation 2,459 2,225 Deferred income taxes, net 595 351 Provisions for self insurance 150 140 Other, net 554 350 Changes in working capital, exclusive of cash and current portion of long-term debt - Receivables and accrued utility revenues 618 (9,903) Gas held by suppliers 13,948 17,391 Accounts payable (4,938) (9,181) Deferred cost of gas and supplier refunds, net 4,478 8,751 Other current assets and liabilities, net (4,042) 1,295 Other operating items, net (237) (585) Net cash provided by operating activities 19,383 19,608 CASH FLOW FROM INVESTING ACTIVITIES: Additions to utility plant (4,477) (6,529) Acquisition of regulated business - (2,009) Other, net 33 423 Net cash used for investing activities (4,444) (8,115) CASH FLOW FROM FINANCING ACTIVITIES: Issuance of common stock 640 - Repurchase of preferred stock - (82) Dividends on common and preferred stock (321) (356) Repayment of long-term debt (2,500) (2,941) Net decrease in bank borrowings (11,725) (7,874) Other, net (1) 38 Net cash used for financing activities (13,907) (11,215) NET INCREASE IN CASH AND CASH EQUIVALENTS 1,032 278 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 304 690 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,336 $ 968 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest (net of amount capitalized) $ 3,187 $ 1,716 Income taxes $ 388 $ 610 The accompanying notes are an integral part of the consolidated financial statements.
-5- PG ENERGY INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of the Business. PG Energy Inc. ("PG Energy"), a wholly-owned subsidiary of Pennsylvania Enterprises, Inc. ("PEI"), and its wholly-owned subsidiary Honesdale Gas Company ("Honesdale") acquired on February 14, 1997, are regulated public utilities subject to the jurisdiction of the Pennsylvania Public Utility Commission (the "PPUC") for rate and accounting purposes. Together PG Energy and Honesdale distribute natural gas to a thirteen-county area in northeastern Pennsylvania, a territory that includes the cities of Scranton, Wilkes-Barre and Williamsport. Principles of Consolidation. The consolidated financial statements include the accounts of PG Energy and also its subsidiary, Honesdale, beginning February 14, 1997, the date Honesdale was acquired by PG Energy. All material intercompany accounts have been eliminated in consolidation. Both PG Energy and Honesdale (collectively referred to as the "Company") are subject to the jurisdiction of the PPUC for rate and accounting purposes. The financial statements of the Company 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 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 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. -6- (2) RATE MATTERS Rate Increase. By Order adopted December 19, 1996, the PPUC approved an overall 5.3% increase in PG Energy'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 PG Energy's residential heating customers, which totaled $1.7 million through March 31, 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 LDCs be adjusted on an annual basis, and, in the case of larger LDCs such as PG Energy, 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 PG Energy has been permitted to make the following changes since January 1, 1997, to the gas costs contained in its tariff rates: [CAPTION] Change in Calculated Effective Rate per MCF Increase (Decrease) Date From To in Annual Revenue [S] [C] [C] [C] March 1, 1998 $4.05 $3.95 $ (2,100,000) December 1, 1997 4.49 4.05 (12,100,000) March 1, 1997 4.18 4.49 8,300,000 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) ACCOUNTING CHANGES Reporting Comprehensive Income. Effective January 1, 1998, the Company adopted the provisions of FASB Statement 130 "Reporting Comprehensive Income." However, because there were no items comprising other comprehensive income, the adoption of FASB 130 had no effect on the Company's financial statements for the first quarter of 1998. (4) COMMITMENTS AND CONTINGENCIES Environmental Matters. PG Energy, 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 1972, and several of the plant sites are no longer owned by PG Energy. Pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), PG Energy 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. Notwithstanding this determination by the EPA, some of the sites may ultimately require remediation. One site that was owned by PG Energy from 1951 to 1967 and at which it operated a manufactured gas plant from 1951 to 1954 was subject to -7- remediation in 1996. The remediation at this site, which was performed by the party from whom PG Energy acquired the site in 1951, required the removal of materials from two former gas holders. The cost of such remediation is purported to have been approximately $525,000, of which the party performing the remediation is seeking to recover a material portion from PG Energy. PG Energy, however, believes that any liability it may have with respect to such remediation would be considerably less than the amount that the other party is seeking. While the final resolution of the matter is uncertain, PG Energy does not believe that it will have any material impact on its financial position or results of operations. Although the conclusion by the EPA that it anticipates no further remedial action with respect to the sites at which PG Energy operated manufactured gas plants 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- PG ENERGY INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF CONTINUING OPERATIONS The following table expresses certain items in the consolidated statements of income of PG Energy Inc. ("PG Energy") as percentages of operating revenues for each of the three-month periods ended March 31, 1998 and 1997: [CAPTION] Three Months Ended March 31, 1998 1997 [S] [C] [C] OPERATING REVENUES.................................... 100.0% 100.0% Cost of gas......................................... 58.2 61.5 OPERATING MARGIN...................................... 41.8 38.5 OTHER OPERATING EXPENSES: Operation........................................... 10.4 8.1 Maintenance......................................... 1.7 1.4 Depreciation........................................ 3.7 2.7 Income taxes........................................ 6.5 7.3 Taxes other than income taxes....................... 6.2 5.4 Total operating expenses.......................... 28.5 24.9 OPERATING INCOME...................................... 13.3 13.6 OTHER INCOME (DEDUCTIONS), NET........................ (0.2) 0.3 INTEREST CHARGES...................................... (4.2) (2.9) NET INCOME ........................................... 8.9 11.0 DIVIDENDS ON PREFERRED STOCK.......................... (0.5) (0.5) EARNINGS APPLICABLE TO COMMON STOCK................... 8.4% 10.5% o Three Months Ended March 31, 1998, Compared With Three Months Ended March 31, 1997 Operating Revenues. Operating revenues decreased $14.9 million (18.7%) from $79.9 million for the quarter ended March 31, 1997, to $65.0 million for the quarter ended March 31, 1998, primarily as a result of a 1.7 billion cubic feet (16.2%) decrease in sales by PG Energy to its residential and commercial heating customers. This reduction in sales was attributable to the unseasonably warm weather during the quarter and lower levels in PG Energy's gas cost rate (see "- Rate Matters"). There was a 457 (15.3%) decrease in heating degree days from 2,990 (93.7% of normal) during the first quarter of 1997 to 2,533 (79.4% of normal) during the first quarter of 1998. Cost of Gas. The cost of gas decreased $11.3 million (23.0%) from $49.1 million for the first quarter of 1997 to $37.8 million for the first quarter of 1998, primarily because of the aforementioned decrease in sales to PG Energy's residential and commercial heating customers and lower levels in PG Energy's gas cost rate (see "-Rate Matters"). -9- Operating Margin. The operating margin decreased $3.6 million (11.7%) from $30.8 million in the first quarter of 1997 to $27.2 million in the first quarter of 1998, primarily because of the aforementioned reduction in sales to residential and commercial heating customers. As a percentage of operating revenues, the margin increased from 38.5% in the first quarter of 1997 to 41.8% in the first quarter of 1998 as a result of the proportionately lower cost of gas during the period. Other Operating Expenses. Other operating expenses decreased $1.4 million (7.0%) from $19.9 million for the quarter ended March 31, 1997, to $18.5 million for the quarter ended March 31, 1998. This decrease was primarily attributable to a $1.6 million (28.0%) decrease in income taxes from $5.8 million for the first quarter of 1997 to $4.2 million for the first quarter of 1998 due to a decrease in income before income taxes (for this purpose, operating income net of interest charges), and a $292,000 (6.8%) decrease in taxes other than income taxes resulting from a lower level of gross receipts tax related to PG Energy's decrease in sales. The effects of these decreases were partially offset by a higher level of operation expense and a $228,000 (10.3%) increase in depreciation expense as a result of additions to PG Energy's utility plant. As a percentage of operating revenues, other operating expenses increased from 24.9% during the quarter ended March 31, 1997, to 28.5% during the quarter ended March 31, 1998, primarily as a result of the significant decrease in operating revenues during the period. Operating Income. As a result of the above, operating income decreased by $2.2 million (20.4%) from $10.9 million for the first quarter of 1997 to $8.7 million for the first quarter of 1998, and also decreased as a percentage of total operating revenues for such periods from 13.6% in the first quarter of 1997 to 13.3% in the first quarter of 1998. Other Income (Deductions), Net. Other income (deductions), net decreased $366,000 from income of $239,000 for the three-month period ended March 31, 1997, to a deduction of $127,000 for the three-month period ended March 31, 1998, largely because the first quarter of 1997 included a gain on the condemnation of certain property for highway construction. Interest Charges. Interest charges increased by $397,000 (17.0%) from $2.3 million for the first quarter of 1997 to $2.7 million for the first quarter of 1998. This increase was largely attributable to bank borrowings by PG Energy to finance construction expenditures and for other working capital needs. Net Income. The decrease in net income of $3.0 million (33.9%) from $8.8 million for the first quarter of 1997 to $5.8 million for the first quarter of 1998, was largely the result of the lower levels of operating and other income and increased interest charges, as discussed above. Dividends on Preferred Stock. Dividends on preferred stock decreased $32,000 (9.1%) from $353,000 for the first quarter of 1997 to $321,000 for the first quarter of 1998, primarily as a result of the repurchase of 30,560 shares of PG Energy's 4.10% cumulative preferred stock in 1997. Earnings Applicable to Common Stock. The decrease in earnings applicable to common stock of $2.9 million (35.0%) from $8.4 million for the three-month period ended March 31, 1997, to $5.5 million for the three-month period ended March 31, 1998, as well as the decrease in earnings per share of common stock of $.89 (35.0%) from $2.54 per share for the three-month period ended March 31, 1997, to $1.65 per share for the three-month period ended March 31, 1998, were the result of the reduced net income as discussed above. -10- RATE MATTERS Rate Increase. By Order adopted December 19, 1996, the Pennsylvania Public Utility Commission (the "PPUC") approved an overall 5.3% increase in PG Energy'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 PG Energy's residential heating customers, which totaled $1.7 million through March 31, 1997, was deferred, without carrying charges, until July, 1997. Proposed Rate Increase. On March 16, 1998, PG Energy filed an application with the PPUC seeking an increase in its base gas rates, designed to produce $15.0 million in additional annual revenue, to be effective May 15, 1998. On April 23, 1998, the PPUC suspended this rate increase for seven months (until December 15, 1998) 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. 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 PG Energy, 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, PG Energy has been permitted to make the following changes since January 1, 1997, to the gas costs contained in its gas tariff rates: [CAPTION] Change in Calculated Effective Rate per MCF Increase (Decrease) Date From To in Annual Revenue [S] [C] [C] [C] March 1, 1998 $4.05 $3.95 $ (2,100,000) December 1, 1997 4.49 4.05 (12,100,000) March 1, 1997 4.18 4.49 8,300,000 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. LIQUIDITY AND CAPITAL RESOURCES Liquidity The primary capital needs of the Company continue to be the funding of its construction program and the seasonal funding of its gas purchases and increases in its customer accounts receivable. The Company'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. -11- The cash flow from the Company'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 the Company to use bank borrowings to fund such expenditures, pending the periodic issuance of stock and long-term debt. Bank borrowings are also used for the seasonal funding of the Company's gas purchases and increases in its customer accounts receivable. In order to temporarily finance construction expenditures and to meet its seasonal borrowing requirements, the Company has made arrangements for a total of $79.5 million of unsecured revolving bank credit, which is deemed adequate for its immediate needs. Specifically, PG Energy currently has eight bank lines of credit with an aggregate borrowing capacity of $78.5 million which provide for borrowings at interest rates generally less than prime and which mature at various times during 1998 and 1999. Honesdale has a $1.0 million revolving bank line of credit which provides for borrowing at the prime rate (currently 8.50%) and which matures in June, 1998. The Company intends to renew or replace these lines of credit as they expire. As of May 1, 1998, the Company had $7.7 million of borrowings outstanding under these bank lines of credit. In addition, PG Energy can borrow up to $70.0 million from PEI through December 31, 1999 (at interest rates generally less than prime), to repay bank borrowings and for construction expenditures and other working capital requirements, to the extent that PEI has funds available for lending to PG Energy. As of May 1, 1998, PG Energy had $21.0 million outstanding under its borrowing arrangement with PEI. Such interim borrowings by PG Energy from PEI will be repaid with proceeds from bank borrowings by PG Energy. PG Energy plans to arrange new and replacement bank lines of credit when the funds that are available for borrowing from PEI are no longer available and as it requires additional funding for working capital and other purposes. The Company believes it will be able to raise in a timely manner such funds as are required for future construction expenditures, refinancings and other working capital requirements. Long-Term Debt and Capital Stock Financings The Company periodically engages 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 the Company during the three-month period ended March 31, 1998. PG Energy also obtains external funds from the sale of its common stock to PEI in connection with PEI's Dividend Reinvestment and Stock Purchase Plan (the "DRP") and Customer Stock Purchase Plan (the "Customer Plan"). During 1998 (through May 1) PG Energy realized $2.6 million and $855,000 from the issuance of common stock to PEI in connection with the DRP and the Customer Plan, respectively. Construction Expenditures and Related Financings Expenditures for the construction of utility plant totaled $4.4 million during the first three months of 1998 and are currently estimated to be $31.9 million during the remainder of the year. It is anticipated that such expenditures will be financed with internally generated funds and bank borrowings and by the periodic issuance of stock and long-term debt. -12- Current Maturities of Long-Term Debt and Preferred Stock As of March 31, 1998, $16.3 million of long-term debt, and $80,000 of PG Energy's preferred stock was required to be repaid within twelve months. Year 2000 The Company is currently replacing its financial and customer information systems with purchased software packages. The installation of these new systems will resolve the primary year 2000 issues. The new financial systems are anticipated to be operational by the end of 1998 and the new customer information system is now anticipated to be operational in 1999. The Company has completed a review of the program coding of other significant in-house developed applications and determined that they are presently year 2000 compliant. Additionally, the Company is reviewing its installed base of personal computers to identify non-compliant machines that would be in service at year 2000. The Company, as a contingency, is also presently evaluating the feasibility of modifying its existing customer information system to make it year 2000 compliant in the event its new customer system is not fully operational in 1999, as now scheduled. 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 the expansion of the Company's nonregulated activities. The Company undertakes no obligation to publicly release any revision to these forward-looking statements to reflect events or circumstances after the date of this filing. -13- PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 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. -14- PG ENERGY 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. PG ENERGY INC. (Registrant) Date: May 5, 1998 By: /s/ Thomas J. Ward Thomas J. Ward Secretary Date: May 5, 1998 By: /s/ John F. Kell, Jr. John F. Kell, Jr. Vice President, Financial Services (Principal Financial Officer and Principal Accounting Officer) -15- 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. 0000077242 PG ENERGY INC. 3-MOS DEC-31-1997 MAR-31-1998 PER-BOOK 264,636,000 4,106,000 53,124,000 38,368,000 0 360,234,000 33,332,000 33,128,000 46,755,000 113,215,000 640,000 15,864,000 126,000,000 245,000 0 0 16,337,000 80,000 0 0 87,853,000 360,234,000 65,015,000 4,196,000 52,168,000 56,364,000 8,651,000 (127,000) 8,524,000 2,726,000 5,798,000 321,000 5,477,000 0 4,837,000 19,383,000 1.65 1.65
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