-----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, UFFzeFO2gFlYmQChwsM8qYNW7vSoYyJlXgKBisADvZaPfuPfgzywbZxzEvOiHBmV Bkdl8kGCTbv3nvtcN45M8A== 0000008192-98-000010.txt : 19980306 0000008192-98-000010.hdr.sgml : 19980306 ACCESSION NUMBER: 0000008192-98-000010 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980305 ITEM INFORMATION: FILED AS OF DATE: 19980305 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATLANTIC CITY ELECTRIC CO CENTRAL INDEX KEY: 0000008192 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 210398280 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-03559 FILM NUMBER: 98557813 BUSINESS ADDRESS: STREET 1: 6801 BLACK HORSE PIKE CITY: EGG HARBOR TOWNSHIP STATE: NJ ZIP: 08232 BUSINESS PHONE: 6096454100 MAIL ADDRESS: STREET 1: PO BOX 1264 CITY: PLEASANTVILLE STATE: NJ ZIP: 08232 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATLANTIC ENERGY INC CENTRAL INDEX KEY: 0000806393 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 222871471 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-09760 FILM NUMBER: 98557814 BUSINESS ADDRESS: STREET 1: 6801 BLACK HORSE PIKE CITY: EGG HARBOR TOWNSHIP STATE: NJ ZIP: 08234 BUSINESS PHONE: 6096454518 MAIL ADDRESS: STREET 1: 6801 BLACK HORSE PIKE CITY: EGG HARBOR TOWNSHIP STATE: NJ ZIP: 08234 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 8-K Current Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 Date of Report March 5, 1998 Registrant; Commission State of Incorporation IRS Employer File No. Address and Telephone No. Identification No. 1-9760 Atlantic Energy, Inc. 22-2871471 (New Jersey) 6801 Black Horse Pike Egg Harbor Township, NJ 08234 (609) 645-4500 1-3559 Atlantic City Electric Company 21-0398280 (New Jersey) 6801 Black Horse Pike Egg Harbor Township, NJ 08234 (609) 645-4100 PAGE Item 1. Changes in Control of Company On August 12, 1996, Delmarva Power & Light Company (DP&L) and Atlantic Energy, Inc. (Atlantic) announced plans to merge. All required regulatory approvals were obtained on, or prior to February 26, 1998 and the merger became effective March 1, 1998. Atlantic is an investor-owned holding company which owns Atlantic City Electric Company (ACE), an electric utility, and subsidiaries engaged in nonutility businesses. ACE serves approximately 481,000 customers in a 2,700 square mile area in southern New Jersey. Atlantic's 1997 operating revenues and net income were $1,102.4 million and $74.4 million, respectively, and its total assets were $2,723.9 million as of December 31, 1997. Atlantic's assets consist principally of electric generating, transmission, and distribution plant and its assets will continue to be used in the electric business. Conectiv, a corporation formed to accomplish the merger, holds the stock of DP&L and ACE under the Public Utility Holding Company Act of 1935 as of March 1, 1998. Each outstanding share of DP&L's common stock, par value $2.25 per share, is being exchanged for one share of Conectiv's common stock, par value $0.01 per share. Each share of Atlantic's common stock, no par value per share, is being exchange for 0.75 shares of Conectiv's common stock and 0.125 shares of Conectiv's Class A common stock, par value $0.01 per share. Class A common stock gives holders of Atlantic common stock a proportionately greater opportunity to share in the growth prospects of, and a proportionately greater exposure to the uncertainties associated with deregulation of, the regulated electric utility business of ACE. Earnings applicable to Class A common stock will be equal to 30% of the net of (1) earnings attributable to ACE's regulated electric utility business, as the business existed on August 9, 1996, less (2) $40 million per year. Earnings applicable to Conectiv common stock will be the consolidated earnings of Conectiv less earnings applicable to Class A common stock. The merger will be accounted for under the purchase method of accounting, with DP&L as the acquirer. The total consideration being paid to Atlantic's common stockholders (in the form of Conectiv common stock and Class A common stock), as measured by the average daily closing market price of Atlantic's common stock for the three trading days immediately preceding and the three trading days immediately following the public announcement of the merger, is $921.0 million. The consideration paid plus estimated acquisition costs and liabilities assumed in connection with the merger are expected to exceed the net book value of Atlantic's net assets by approximately $200 million, which will be recorded as goodwill. The goodwill will be amortized over 40 years. PAGE Item 4. Change of Registrant's Independent Accountants (1) As of March 1, 1998, the date of the aforementioned merger, Atlantic City Electric Company (ACE) is now a subsidiary of Conectiv. Pursuant to this change in control the following hereby applies: (i) The accounting firm of Deloitte & Touche LLP, Two Hilton Court, P.O. Box 319, Parsippany, NJ, is hereby dismissed as independent accountants to ACE. (ii) For the past two years Deloitte & Touche LLP has not issued an adverse opinion or a disclaimer of opinion, nor was an opinion qualified or modified as to uncertainty, audit scope, or accounting principles on ACE's reports on the financial statements. (iii) This decision to change accountants was approved by the Audit Committee of the Board of Directors of Conectiv acting on behalf of its subsidiary, ACE. (iv) Also in the past two years, prior to this dismissal, there have been no disagreements with Deloitte & Touche LLP on any matters of accounting principles or practices, financial statement disclosures, auditing scope or procedures. (v) During the past two years the accountants have not advised ACE that (A) the internal controls necessary for the registrant to develop reliable financial statements did not exist; (B) that information had come to the accountant's attention that led them to no longer be able to rely on management's representations, or that has made the accountant's unwilling to be associated with the financial statements prepared by management; (C) the accountant's have not advised ACE of the need to expand significantly the scope of its audit, or that any information has come to the accountant's attention that if further investigated may materially impact the fairness or reliability of the audit report or the underlying financial statements or would cause the accountants to be unwilling to rely on managements representations or to be unwilling to be associated with the financial statements. (2) As of March 1, 1998, the date of the change in control, the accountants hereby appointed by the Audit Committee of the Board of Directors of Conectiv acting on behalf its subsidiary, ACE, are Coopers & Lybrand L.L.P., 2400 Eleven Penn Center, Philadelphia, Pennsylvania. PAGE Item 5. Other Events Pursuant to the Merger and Reorganization of Delmarva Power & Light Company and Atlantic Energy, Inc. which was completed on March 1, 1998, the Board of Directors of Atlantic City Electric Company (ACE) has been changed. The following individuals have been elected as directors to serve until his or her successor is appointed or his or her earlier resignation or removal. Atlantic City Electric Company Howard E. Cosgrove Director/Chairman Meredith I. Harlacher, Jr. Director Thomas S. Shaw Director Barry R. Elson Director Barbara S. Graham Director The following individuals have been appointed by the Directors of ACE to the office opposite their name. Atlantic City Electric Company Howard E. Cosgrove Chief Executive Officer Meredith I. Harlacher, Jr. President and Chief Operating Officer Barbara S. Graham Senior Vice President and Chief Financial Officer Barry R. Elson Executive Vice President Thomas S. Shaw Executive Vice President Louis M. Walters Treasurer and Assistant Secretary James E. Franklin II Chief Legal Officer and Secretary PAGE Item 7 Financial Statements and Exhibits See Exhibit Index Attached PAGE *********************************** SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Atlantic Energy, Inc. Atlantic City Electric Company (Registrant) By: /s/ J. E. Franklin II J. E. Franklin II Vice President, Secretary and General Counsel of Atlantic Energy, Inc. Senior Vice President, Secretary and General Counsel of Atlantic City Electric Company Date: March 4, 1998 PAGE Exhibit Index 16 Letter re change in certifying accountant 99 Letter to Members of the Financial Community EX-16 2 Exhibit 16 LETTER re CHANGE IN CERTIFYING ACCOUNTANT March 4, 1998 Securities and Exchange Commission Mail Stop 9-5 450 5th Street, N.W. Washington, D.C. 20549 Dear Sirs/Madams: We have read and agree with the comments in Item 4 of Form 8-K of Atlantic Energy, Inc. and Atlantic City Electric Company dated March 4, 1998. Yours truly, /s/ Deloitte & Touche LLP Deloitte & Touche LLP Parsippany, New Jersey EX-99 3 Exhibit 99 March 5, 1998 To Members of the Financial Community: Effective March 1, 1998, Delmarva Power & Light Company and Atlantic Energy Inc. formed Conectiv, a new kind of power company. With the receipt of SEC approval under the Public Utility Holding Company Act last week, we are now one family of companies under Conectiv. We will have a market capitalization of over $2.3 billion, and will serve over 1 million electric customers and 100,000 gas customers in Delaware, New Jersey, Maryland and Virginia. Our regional focus will extend beyond into those neighboring states in the northeast where we can capitalize on competitive opportunities for energy, HVAC services, and telecommunications and continue to provide the excellent customer care both Atlantic and Delmarva have been long noted for. We commenced trading on the New York Stock Exchange on March 2, 1998 under the ticker symbols CIV (Common Stock) and CIV A (Class A). As we begin our new company, we plan to meet with the financial community to outline Conectiv s strategic objectives and the progress we ve made to date. Included below are some key areas which we plan to cover. Strategic Focus Conectiv is committed to creating shareholder value, measured in terms of top quartile total shareholder return, with a minimum 5% growth in annual earnings and an overall total return of at least 12%. We will differentiate ourselves based upon a focused, competency based strategy; a manageable level of capital investment required to produce those returns, of which almost all funds are generated internally; and a management team with the breadth and depth of experience to manage the portfolio of Conectiv business assets. Conectiv will manage its portfolio using three strategic business groups, which are led by executives with broad experience: Conectiv Energy Supply, led by Tom Shaw, Executive Vice President of Conectiv; Conectiv Energy Delivery, led by Meredith I. Harlacher, Jr., President of Conectiv, and Conectiv Enterprises, led by Barry Elson, Executive Vice President of Conectiv. Our regulated delivery and energy supply businesses generate strong cash flow, and provide more than adequate coverage of our dividend. PAGE The Enterprises business group includes five retail business lines: Conectiv Communications (telecommunications); Conectiv Services (HVAC); Conectiv Energy (retail energy); Conectiv Thermal Systems (district heating/cooling); and Conectiv Solutions (energy services). With the exception of retail energy, these businesses will have higher gross margins, slightly different measures of value than the utility industry and are expected to produce revenues of over $750 million by 2000, with a cumulative capital investment by that time of between $300 million and $400 million. 1997 Successes During the last year, we have worked in both companies to bring two organizations together, obtain the needed regulatory approvals, investing in new processes for competing in deregulating markets, while achieving significant progress in forging ahead with our strategy of bringing new products and services to serve the regional marketplace. 1997 saw significant progress attained in the Conectiv brand awareness campaign, increased market share in regional retail pilot electric and gas programs, the launch of Conectiv Communications as the only facilities-based local service alternative on the Delmarva peninsula, and dramatic revenue growth (from $33 million to $95 million on an annual basis) from Conectiv Services through the acquisition and integration of several additional regional HVAC contractors. Looking ahead, we plan to continue to make investments in these business lines, as well as the Supply and Delivery groups, with expected consolidated capital and acquisition expenditures of over $1.5 billion during the five year period. We plan to fund that growth internally, and will issue new debt securities primarily to cover scheduled redemptions during that time. 1998 will be a watershed year and contain several key events which will help mark the beginning of Conectiv. In the first quarter of 1998, we plan to take a one-time charge for merger- related costs, which will amount to between $0.33 and $0.36 per share of Conectiv Common Stock. We are committed to achieving the merger synergies which have been identified. We truly expect that additional savings can be gained, and have developed a "100 day plan" to drive the staffing levels where they should be and achieve our vision of producing value for our investors. Critical to Conectiv's future success is the outcome of the restructuring proceedings now pending in New Jersey, to be followed by proceedings in Delaware and Maryland in the next few years. We plan to aggressively pursue favorable outcomes in those states so that our generation assets are free to compete in the energy markets. Continued growth of Conectiv Enterprises--our retail businesses-- is also of paramount importance during 1998 and 1999. Those businesses are in a start-up mode and we expect the pressure on earnings to subside as these businesses continue to grow. We believe that our investments in these new businesses made during 1997, funded largely by Delmarva, will pay off over the long term. As we go forward as Conectiv in 1998, we plan to provide you with periodic updates on selected performance measures. Those measures are in the areas of merger synergies, electric restructuring, and growth and profitability measures in our Enterprises business group, which we believe will demonstrate the progress we are making in those critical areas. We look forward to speaking with you about Conectiv. Sincerely, /s/ Barbara S. Graham Barbara S. Graham Senior Vice President and Chief Financial Officer The Private Securities Litigation Reform Act of 1995 (Litigation Reform Act) provides a new safe harbor for forward looking statements to encourage such disclosures without the threat of litigation, provided those statements are identified as forward- looking and are accompanied by meaningful, cautionary statements identifying important factors that could cause the actual results to differ materially from those projected in the statement. Forward looking statements are made in this report. Such statements are based on management s beliefs as well as assumptions made by and information currently available to management. When used herein, the words "will", "anticipate", "estimate", "expect", "objective" and similar expressions are intended to identify forward-looking statements. In addition to any assumptions, and other factors referred to specifically in connection with such forward-looking statements, factors that could cause actual results to differ materially from those contemplated in any forward looking statements include, among others, the following: deregulation and the unbundling of energy supplies and services; an increasingly competitive energy marketplace; sales retention and growth; federal and state regulatory actions; operating restrictions; and credit market concerns. The Company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise. The foregoing review of factors pursuant to the Litigation Reform Act should not be construed as exhaustive or as any admission regarding the adequacy of disclosures made by the Company prior to the effective date of the Litigation Reform Act. Conectiv Sources and Uses of Cash: 1998-2002
Conectiv 5-Year 1998 1999 2000 2001 2002 Total Cash Requirements Capital and Acquisition Expenditures $290,346 $335,003 $301,196 $321,895 $266,095 $1,514,535 Changes in Working Capital 24,803 15,482 26,048 26,202 23,090 115,625 Total Cash Required $315,149 $350,485 $327,244 $348,097 $289,185 $1,630,160 Internally Generated Funds $281,785 $263,120 $296,573 $334,441 $381,732 $1,557,651 External Financings 134,907 149,732 79,398 68,752 18,198 450,987 Redemption of Securities (101,543) (62,367) (48,727) (55,096) (110,745) (378,478) Total Sources of Cash $315,149 $350,485 $327,244 $348,097 $289,185 $1,630,160 Ticker Symbol CIV
PAGE Capital and Acquisition Expenditures: 1998-2002
Conectiv 5-Year 1998 1999 2000 2001 2002 Total Total Capital & Acquisition Expenditures* $290,346 $335,003 $301,196 $321,895 $266,095 $1,514,535 Energy Supply(1) $53,961 $82,660 $59,288 $96,081 $61,729 $353,719 Energy Delivery (1) $131,067 $142,207 $147,994 $136,267 $134,552 $692,087 Enterprises $97,818 $102,636 $86,414 $82,047 $62,314 $431,229 Conectiv Services $31,510 $27,740 $2,923 $1,174 $1,183 Conectiv Communications $32,770 $34,201 $38,609 $36,606 $25,091 Conectiv Solutions $7,276 $40,211 $28,278 $31,718 $36,001 Conectiv Energy $945 $484 $121 $209 $39 Conectiv Thermal (2) $25,317 16,483 $12,340 Enertech $7,500 $7,500 $7,500 $7,500 $7,500 $37,500 NOTE: (1) Energy Supply and Energy Delivery include one-half of common plant expenditures (2) Represents budgeted common equity contribution *Excludes AFUDC
Ticker Symbol CIV -----END PRIVACY-ENHANCED MESSAGE-----