Item 1. BUSINESS............................................... 1
Item 2.
ITEM 2. PROPERTIES
Gas. The gas systems of the Regulated Subsidiaries consist of approximately 2,439 miles of distribution lines, eleven city gate and 81 major regulating stations and miscellaneous related and additional property. The Regulated Subsidiaries believe that their gas utility properties are adequately maintained and in good operating condition in all material respects.
Most of PG Energy's gas utility properties are subject to a first mortgage lien pursuant to the Indenture of Mortgage and Deed of Trust dated as of March 15, 1946, as supplemented by thirty supplemental indentures from PG Energy to U.S. Bank Trust, National Association, as Trustee.
Land. As of February 24, 1999, PG Energy owned approximately 44,000 acres of undeveloped land, while Theta owned approximately 1,000 acres of land and Power Corp. owned approximately 150 acres of land, certain of which is being prepared for development. All such land is situated in northeastern Pennsylvania, primarily Luzerne and Lackawanna Counties.
Cogeneration Facility. Power Corp owns a 25-megawatt cogeneration facility located in Lackawanna County, Pennsylvania which it acquired in November, 1997. This facility, which became operational in July, 1998, burns both methane and natural gas. Power Corp also owns a methane recovery facility at a nearby landfill which supplies methane gas burned at its cogeneration facility.
Other than the aforementioned facilities owned by Power Corp, neither the Nonregulated Energy Products and Services operating segment nor the Pipeline Construction and Services segment has materially important physical properties.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
There are no legal proceedings other than ordinary routine litigation incidental to the business of the Company or its subsidiaries.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1998, there were no matters submitted to a vote of security holders of the registrant through the solicitation of proxies or otherwise.
PART II
ITEM 5.
ITEM 5.MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on the New York Stock Exchange under the symbol "PNT." Quotations are shown in the Wall Street Journal as "PennEntr" and in The New York Times as "PennEnt." As of February 24, 1999, there were approximately 8,300 holders of record of the Company's common stock.
Listed below are the price ranges of the Company's common stock and the dividends per share of common stock paid during the years ended December 31, 1998 and 1997. The prices shown represent the high and low transaction prices for the respective quarters without retail mark-up, mark-down or commission.
Price Range Cash ------------------------------- High Low Dividends ------------- ------------- -------------
First quarter $ 26.563 $ 23.125 $ .30 Second quarter 29.000 22.813 .30 Third quarter 27.688 21.125 .30 Fourth quarter 25.938 21.688 .30 Total $ 1.20
First quarter (1) $ 24.063 $ 21.375 $ .29 Second quarter 27.750 21.250 .30 Third quarter 30.500 25.250 .30 Fourth quarter 32.750 24.250 .30 Total $ 1.19
(1) After restatement for the two-for-one split of the Company's common stock effective March 20, 1997, as more fully discussed in Note 4 of the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.
Information relating to restrictions on the payment of dividends by the Company is set forth in Note 7 of the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Selected consolidated financial data for the Company and its subsidiaries for each of the five years in the period ended December 31, 1998, is set forth below. This data should be read in conjunction with the Consolidated Financial Statements contained in Item 8 of this Form 10-K:
See page 18 for an explanation of footnotes.
*Reclassified to conform with 1998 consolidated financial statement presentation.
See page 18 for an explanation of footnotes.
(1) None of the Company's interest charges and none of PG Energy's Preferred Stock dividends was allocated to the discontinued operations through the February 15, 1996, date of disposition of the discontinued operations. Prior to that time interest charges relating to indebtedness of PG Energy were allocated to the discontinued operations based on the relationship of the gross water utility plant of the discontinued operations to the total of PG Energy's gross gas and water utility plant. This was the same method as was utilized by PG Energy and the PPUC in establishing the revenue requirements of its utility operations.
(2) See Note 2 of the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.
(3) Reflects a two-for-one stock split of the Company's common stock effective March 20, 1997, as more fully discussed in Note 4 of the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.
(4) Net of (i) liabilities assumed by Pennsylvania-American (ii) estimated liability for income taxes on sale of discontinued operations, (iii) with respect to the year ended December 31, 1995, the anticipated income from the discontinued operations during the phase-out period for financial statement purposes of April 1, 1995, through February 15, 1996, and (iv) with respect to the years 1994 and 1993, other net assets of the discontinued operations (which were written off as of March 31, 1995). See Note 2 of Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.
ITEM 7.
Item 7 of this Form 10-K) which are difficult to predict and are beyond the control of the Company. Therefore, actual amounts could differ from these estimates.
Utility Plant and Depreciation. Utility plant is stated at cost, which represents the original cost of construction, including payroll, administrative and general costs, and an allowance for funds used during construction.
The allowance for funds used during construction ("AFUDC") is defined as the net cost during the period of construction of borrowed funds used and a reasonable rate upon other funds when so used. Such allowance is charged to utility plant and reported as a reduction of interest expense (with respect to the cost of borrowed funds) in the accompanying consolidated statements of income. AFUDC varies according to changes in the level of construction work in progress and in the sources and costs of capital. The weighted average rate for such allowance was approximately 8% in both 1998 and 1997 and 9% in 1996.
The Company provides for depreciation on a straight-line basis. Exclusive of transportation and work equipment, the Regulated Subsidiaries' annual provision for depreciation, as related to the average depreciable original cost of utility plant, was 2.65% in 1998, 2.81% in 1997 and 2.60% in 1996.
When depreciable utility property is retired, the original cost of such property is removed from the utility plant accounts and is charged, together with the cost of removal less salvage, to accumulated depreciation. No gain or loss is recognized in connection with retirements of depreciable utility property, other than in the case of significant involuntary conversions or extraordinary retirements.
Nonutility Property and Equipment and Depreciation. Nonutility property and equipment is recorded at cost, including applicable construction period interest. When nonutility property and equipment is sold or retired, the asset and applicable accumulated depreciation are eliminated from the accounts and a gain or loss is reflected in other income, net.
The units-of-production method is used to depreciate both Power Corp's cogeneration facility and its methane recovery facility. The straight-line method is used for all other nonutility property and equipment.
Revenues and Cost of Gas. The Regulated Subsidiaries bill customers monthly based on estimated or actual meter readings on cycles that extend throughout the month. The estimated unbilled amounts from the most recent meter reading dates through the end of the period being reported on are recorded as accrued revenues. Energy Services bills its customers on a monthly basis at its contractual rates.
The Regulated Subsidiaries generally pass on to their customers increases or decreases in gas costs from those reflected in its tariff charges. In accordance with this procedure, the Regulated Subsidiaries defer any current under or over-recoveries of gas costs and collect or refund such amounts in subsequent periods. The Regulated Subsidiaries had underrecoveries of gas costs totaling $15.3 million, $17.0 million and $29.6 million as of December 31, 1998, 1997 and 1996, respectively. Energy Services records its gas costs as incurred.
Deferred Charges (Regulatory Assets). The Regulated Subsidiaries generally account for and report costs in accordance with the economic effect of rate actions by the PPUC. To this extent, certain costs are recorded as deferred charges pending their recovery in rates. These amounts relate to previously-issued orders of the PPUC and are of a nature which, in the opinion of the Company, will be recoverable in future rates, based on such rate orders. In addition to deferred taxes collectible, which represent the probable future rate recovery of the previously unrecorded deferred taxes primarily relating to certain temporary differences in the basis of utility plant not previously recorded because of the regulatory rate practices of the PPUC, the following deferred charges are included as "Other" regulatory assets as of December 31, 1998 and 1997:
1998 1997 ------------ ----------- (Thousands of Dollars)
Other postretirement benefits $ 2,887 $ 174 Computer software costs 2,007 1,945 Early retirement plan charges 1,961 618 Rate case expense 554 356 Low income usage reduction program 470 432 Extraordinary charges due to flooding 262 348 Other 457 542 ------------- --------- Total $ 8,598 $ 4,415 ============= ========= The Company also records, as deferred charges, the direct financing costs incurred in connection with the issuance of long-term debt and equitably amortizes such amounts over the life of the securities.
Cash and Cash Equivalents. For the purposes of the consolidated statements of cash flows, the Company considers all highly liquid debt instruments purchased, which generally have a maturity of three months or less, to be cash equivalents. Such instruments are carried at cost, which approximates market value.
Income Taxes. The Company provides for deferred taxes in accordance with the provisions of FASB Statement 109. The components of the Company's net deferred income tax liability relative to continuing operations as of December 31, 1998 and 1997, are shown below:
1998 1997 --------------- --------------- (Thousands of Dollars)
Utility plant basis differences $ 58,922 $ 55,497 Pension benefits 766 341 Deferred charges 629 602 Postretirement benefits (1,230) (700) Operating reserves (969) (1,181) FERC Order 636 transition costs - (394) Other 2,805 (1,654) ------------- ------------ Net deferred income tax liability $ 60,923 $ 52,511 ============= ============
The provision for income taxes relative to continuing operations consists of the following components:
1998 1997 1996 -------- ---------- ---------- (Thousands of Dollars)
Included in operating expenses: Currently payable - Federal .............................. $ 359 $ 3,894 $ 2,513 State ................................ 139 1,359 1,519 ------- ------- ------- Total currently payable ............ 498 5,253 4,032 ------- ------- ------- Deferred, net - Federal .............................. 3,011 2,186 2,059 State ................................ 610 107 (119) ------- ------- ------ Total deferred, net ................ 3,621 2,293 1,940 ------- ------- ------ Amortization of investment tax credits .. (172) (172) (172) ------- ------- ------ Total included in operating expenses 3,947 7,374 5,800 ------- ------- ------ Included in other income, net: Currently payable - Federal .............................. 634 34 806 State ................................ 227 12 (19) ------- ------ ------ Total currently payable ............ 861 46 787 ------- ------ ------ Deferred, net - Federal .............................. (280) (6) -- State ................................ (89) -- -- ------- ------ ------ Total deferred, net ................ (369) (6) -- ------- ------ ------ Total included in other income, net 492 40 787 ------- ------ ------ Total provision for income taxes ... $ 4,439 $ 7,414 $ 6,587 ======= ======= ====== The total provision for income taxes relative to continuing operations shown in the accompanying consolidated statements of income differs from the amount which would be computed by applying the statutory federal income tax rate to income before income taxes. The following table summarizes the major reasons for this difference:
Earnings Per Share. The Company adopted the provisions of FASB Statement 128, "Earnings per Share" in December, 1997. The following tables present a reconciliation of the calculations of basic and diluted earnings per share ("EPS") from continuing operations for the each of the three years ended December 31, 1998, 1997 and 1996, respectively, follows:
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 has no effect on the Company's financial statements for the periods ended December 31, 1998.
Accounting for Derivative Instruments and Hedging Activities. In June 1998, FASB Statement 133, "Accounting for Derivative Instruments and Hedging Activities" was issued. The provisions of this statement, which are effective for fiscal quarters beginning after June 15, 1999, establish accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. While the Company generally has not used derivative instruments, it expects to adopt, to the extent necessary, the provisions of FASB Statement 133 in the third quarter of 1999. The impact of such adoption on the Company's future financial condition and results of operations will depend upon a number of factors, including the extent to which the Company may use derivative instruments, and the designation and effectiveness of such derivative hedging market risk.
(2) DISCONTINUED OPERATIONS
Pursuant to an Asset Purchase Agreement dated April 26, 1995, as amended (the "Agreement"), among the Company, PG Energy, American Water Works Company, Inc. ("American") and Pennsylvania-American Water Company ("Pennsylvania-American"), a wholly-owned subsidiary of American, the Company and PG Energy sold substantially all of the assets, properties and rights of PG Energy's water utility operations to Pennsylvania-American on February 16, 1996. Under the terms of the Agreement, Pennsylvania-American paid PG Energy $414.3 million consisting of $262.1 million in cash and the assumption of $152.2 million of PG Energy's liabilities, including $141.0 million of its long-term debt. PG Energy continued to operate the water utility business until February 16, 1996. The cash proceeds from the sale of approximately $205.4 million, net of $56.7 million of income taxes, were used by the Company and PG Energy to retire debt, to repurchase stock (see Note 4 of these Notes to Consolidated Financial Statements), for construction expenditures and for other working capital purposes.
The sale price reflected a $6.5 million premium over the book value of the assets sold. However, after transaction costs and the net effect of other items, the sale resulted in an after tax loss of approximately $6.2 million, net of the income from the water operations during the phase-out period (which for financial reporting purposes was April 1, 1995, through February 15, 1996).
The accompanying consolidated financial statements reflect PG Energy's water utility operations as "discontinued operations." Interest charges relating to indebtedness of PG Energy were allocated through the date of disposition to the discontinued operations based on the relationship of the gross water utility plant that was sold to the total of PG Energy's gross gas and water utility plant. This is the same method as was utilized by PG Energy and the PPUC in establishing the revenue requirements of both PG Energy's gas and water utility operations. None of the dividends on PG Energy's preferred stock nor any of the Company's interest expense were allocated to the discontinued operations.
(3) RATE MATTERS
Rate Increases. 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 $2.4 million through June 30, 1997, was deferred, without carrying charges, until July, 1997.
By Order adopted October 16, 1998, the PPUC approved an overall 4.1% increase in PG Energy's base rates, designed to produce $7.4 million of additional annual revenue, effective October 17, 1998.
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, 1996, to the gas costs contained in its tariff rates:
Change in Calculated Effective Rate Per MCF Increase (Decrease) ------------------------- Date From To In Annual Revenue - ---------------------------- ---------- ----------- -----------------
December 1, 1998 $4.25 $4.53 $ 7,100,000 September 1, 1998 4.18 4.25 1,900,000 June 1, 1998 3.95 4.18 5,800,000 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 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.
(4) COMMON STOCK
Common Stock Split. On February 19, 1997, the Board of Directors adopted resolutions to amend the Company's Restated Articles of Incorporation to (i) increase the 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 upon the filing of a Certificate of Amendment with the Secretary of the State of Pennsylvania on March 20, 1997. Such actions had no effect on the Company's capital accounts. On February 19, 1997, the Board of Directors also declared a two-for-one stock 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 presented for the year 1996 have been restated to give retroactive effect to this stock split.
Repurchase of Common Stock. During 1996, the Company used proceeds it received in connection with PG Energy's sale of its water utility operations to Pennsylvania-American on February 16, 1996, to repurchase shares of its common stock. Specifically, a portion of these proceeds were used by the Company to repurchase 2,025,928 shares of its common stock during 1996 for an aggregate consideration of $39.8 million, of which 1,781,204 shares were acquired in April pursuant to a self tender offer and 244,724 shares were acquired from time to time through open market purchases and an oddlot buyback program.
Customer Stock Purchase Plan - Restricted Cash - Common Stock Subscribed. The Company reinstated its Customer Stock Purchase Plan (the "Customer Plan") effective February 4, 1998. The Customer Plan provides the residential customers of all the Company's subsidiaries with a method of purchasing newly-issued shares of the Company's common stock at a 5% discount from the market price. On January 1, 1999, the Company issued 19,177 shares of its common stock for an aggregate consideration of $446,000 with respect to payments received pursuant to the Customer Plan during the subscription period ended December 31, 1998. Such payments are reflected under the captions "Restricted cash - common stock subscribed" and "Common shareholders' investment" in these consolidated financial statements as of December 31, 1998. Under the terms of the Customer Plan, 81,134 shares of the Company's common stock were issued during 1998 for a total consideration of $2.0 million.
Dividend Reinvestment and Stock Purchase Plan. Through the Company's Dividend Reinvestment and Stock Purchase Plan ("DRP"), holders of shares of the Company's common stock may reinvest cash dividends and/or make cash investments in the common stock of the Company at a 5% discount from the market price. Under the DRP, 544,496 shares ($12.5 million), 68,678 shares ($1.7 million) and 17,664 shares ($340,000) of common stock were issued during 1998, 1997 and 1996, respectively.
Employees' Savings Plan. Under the Company's Employees' Savings Plan (a section 401(k) plan) which became effective January 1, 1992, the Company issued an additional 30,711 shares ($769,000) in 1998, 30,436 shares ($750,000) in 1997 and 10,198 shares ($195,000) in 1996.
1992 Stock Option Plan. On June 3, 1992, the Company's shareholders approved the Pennsylvania Enterprises, Inc. 1992 Stock Option Plan (the "Plan"). Under the terms of the Plan, a total of 430,000 shares of authorized but unissued shares of the Company's common stock have been reserved and made available for distribution to eligible employees. Stock options awarded under the Plan may be either Incentive Stock Options or Nonqualified Stock Options.
In October, 1995, FASB Statement 123, "Accounting For Stock-Based Compensation," was issued. The Company adopted the disclosure provisions of FASB Statement 123 in 1996, but opted to remain under the expense recognition provisions of Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," in accounting for stock option and stock award plans. No options were granted under the 1992 Stock Option Plan in 1998 or 1997 and for the year ended December 31, 1996, no compensation expense was recognized for options granted under the Plan. Had compensation expense for stock options granted under the Plan been determined based on fair value at the grant dates consistent with the method required by FASB Statement 123, the Company's net income and earnings per share for the year 1996 would have been reduced to the pro forma amounts shown below:
------------------- Net income: As reported $6.6 million Pro forma $5.9 million
Earnings per common share: As reported $ .51 Pro forma $ .44
A summary of the stock option activity during each of the three years in the period ended December 31, 1998, pursuant to the terms of the Plan, all of which were Nonqualified Stock Options, is set forth below:
Number of Weighted shares subject average exercise to option Price -------------- ---------------
Outstanding at December 31, 1995 79,600 $ 15.00 Granted during 1996 340,000 20.38 Exercised during 1996 (37,400) 15.00 ------------- Outstanding at December 31, 1996 382,200 19.79 Exercised during 1997 (3,600) 15.00 ------------- Outstanding at December 31, 1997 378,600 19.83 Cancelled during 1998 (30,000) 20.75 Exercised during 1998 (7,000) 15.00 ------------- Outstanding at December 31, 1998 341,600 19.85 ============= Options exercisable at December 31, 1998 251,600 $ 19.53 Options available for future grant at December 31, 1998 30,800
There were no options granted under the Plan in 1998 or 1997. The weighted average fair value of options granted in 1996 of $3.66 was estimated as of the date of grant using the Black-Scholes stock option pricing model, based on the following weighted average assumptions: quarterly dividend yield of 1.25%, annual expected return of 5.3%, annual standard deviation (volatility) of 20.5%, risk free interest rate of 6.91%, and expected term of 7 years.
The following table summarizes information regarding the stock options outstanding at December 31, 1998, pursuant to the terms of the Plan:
Stock Incentive Plan. On May 14, 1997, the Company's shareholders approved the Pennsylvania Enterprises, Inc. Stock Incentive Plan (the "Incentive Plan"). Under the terms of the Plan, a total of 460,000 shares of authorized but unissued shares of the Company's common stock have been reserved and made available for distribution to eligible employees, officers, and directors. Awards under the Incentive Plan may take the form of stock options, restricted stock, and other awards where the value of the award is based upon the performance of the Company's stock. During 1998, nonqualified Stock Options for the purchase of 195,000 shares of stock were issued to certain officers and directors. 130,000 options were granted subject to the achievement of specified financial and operational goals for the Company during 1998 and 1999. 60,000 options were granted subject to the achievement of specified financial and operations goals for the Company during 2001 and 2002. 5,000 options were cancelled during 1998. In addition, since certain of these goals were not met in 1998, 65,000 of these options will not vest or become exercisable and have not been included in either the stock option tables above or the diluted earnings per share calculations included in Note 1 of these Notes to Consolidated Financial Statements.
Shareholder Rights Plan. The Company has a Shareholder Rights Plan under which each holder of a share of common stock is granted a right ("Right or "Rights"), under certain circumstances, to purchase from the Company one-half of a share of common stock. No less than two Rights, and only integral multiples of two Rights, may be exercised by holders of Rights at an exercise price of $50 per share of common stock (equivalent to $25 for each one-half share of common stock), subject to certain adjustments. The Rights will become exercisable only if a person or group acquires 15% or more of the Company's common stock, or commences a tender or exchange offer which, if consummated, would result in that person or group owning at least 15% of the common stock. Prior to that time, the Rights will not trade separately from the common stock.
If a person or group acquires 15% or more of the Company's common stock, all other holders of Rights will then be entitled to purchase, by payment of the $50 exercise price upon the exercise of two Rights, the Company's common stock (or a common stock equivalent) with a value of twice the exercise price. In addition, at any time after a 15% position is acquired and prior to the acquisition by any person or group of 50% or more of the outstanding common stock, the Company's Board of Directors may, at its option, require each outstanding Right (other than Rights held by the acquiring person or group) to be exchanged for one share of common stock (or one common stock equivalent).
If, following an acquisition of 15% or more of the Company's common stock, the Company is acquired by any person in a merger or other business combination transaction or sells more than 50% of its assets or earning power to any person (other than the sale of PG Energy's water utility operations to Pennsylvania-American), all other holders of Rights will then be entitled to purchase, by payment of the $50 exercise price upon the exercise of two Rights, common stock of the acquiring company with a value of twice the exercise price.
The Company may redeem the Rights at $.0025 per Right at any time prior to the time that a person or group has acquired 15% or more of its common stock. The Rights, which expire on May 16, 2005, do not have voting or dividend rights and, until they become exercisable, have no dilutive effect on the earnings per share of the Company.
(5) PREFERRED STOCK
Preferred Stock of PG Energy Subject to Mandatory Redemption. Holders of the 5.75% cumulative preferred stock have a noncumulative right each year to tender to PG Energy and to require it to purchase at a per share price not exceeding $100, up to (a) that number of shares of the 5.75% cumulative preferred stock which can be acquired for an aggregate purchase price of $80,000 less (b) the number of such shares which PG Energy may already have purchased during the year at a per share price of not more than $100. During 1998, 1997 and 1996, PG Energy repurchased 4,804, 992 and 9,408 shares, respectively, of its 5.75% cumulative preferred stock (including 800 shares redeemed in each of the years in accordance with annual sinking fund provisions) for an aggregate consideration of $444,000 in 1998, $99,000 in 1997 and $838,000 in 1996.
As of December 31, 1998, the sinking fund requirements relative to PG Energy's 5.75% cumulative preferred stock (the only series of preferred stock subject to mandatory redemption that was outstanding as of such date) were $80,000 for each of the years 2000 through 2002. At PG Energy's option, the 5.75% cumulative preferred stock may currently be redeemed at a price of $102.00 per share ($244,392 in the aggregate).
Preferred Stock of PG Energy Not Subject to Mandatory Redemption. During the year ended December 31, 1996, PG Energy repurchased 134,359 shares of its 9% cumulative preferred stock, $100 par value, for an aggregate consideration of $14.5 million, largely pursuant to a self tender offer conducted during March and April, 1996. On December 1, 1998, PG Energy redeemed the remaining 115,641 outstanding shares of its 9% cumulative preferred stock at a price of $104 per share, which included a voluntary redemption premium of $4.00 per share ($463,000 in the aggregate), plus accrued dividends.
During the year ended December 31, 1996, PG Energy repurchased 20,330 shares of its 4.10% cumulative preferred stock, $100 par value, for an aggregate consideration of $1.0 million, largely pursuant to a self tender offer conducted during March and April, 1996. During the year ended December 31, 1997, PG Energy repurchased 30,560 shares of its 4.10% cumulative preferred stock for an aggregate consideration of $2.1 million, largely pursuant to a self tender offer conducted during April and May, 1997. During the year ended December 31, 1998, PG Energy repurchased 800 shares of its 4.10% cumulative preferred stock for an aggregate consideration of $53,000, pursuant to unsolicited offers from shareholders. At PG Energy's option, the 4.10% cumulative preferred stock may currently be redeemed at a redemption price of $105.50 per share or for an aggregate redemption price of $5,096,705.
Dividend Information. The dividends on the preferred stock of PG Energy in each of the three years in the period ended December 31, 1998, were as follows:
Series 1998 1997 1996 - --------------- --------------- --------------- ------------- (Thousands of Dollars)
4.10% $ 200 $ 228 $ 348 5.75% 36 44 72 9.00% 955 1,040 1,310 ------------ -------------- ------------ Total $ 1,191 $ 1,312 $ 1,730 ============ ============== ============ Dividends on all series of PG Energy's preferred stock are cumulative and PG Energy may not declare dividends on its common stock if any dividends on shares of preferred stock then outstanding are in default.
(6) LONG-TERM DEBT
Long-term debt consisted of the following components at December 31, 1998 and 1997:
Term Loan Agreements. Borrowings under the Company's $20.0 million term loan dated May 31, 1994, which matures on May 31, 1999, bear interest at London Interbank Offered Rates ("LIBOR") plus one-half of one percent. Under the terms of the loan, the Company can choose interest rate periods of one, two, three or six months.
On September 12, 1997, PG Energy borrowed $25.0 million pursuant to a five-year term loan agreement dated August 14, 1997 (the "Term Loan Agreement"), which matures on August 14, 2002. Borrowings under the Term Loan Agreement bear interest at LIBOR plus one-quarter of one percent. Under the terms of the Term Loan Agreement, PG Energy can choose interest rate periods of one, two, three or six months. PG Energy utilized the proceeds from such loan to repay $25.0 million of its bank borrowings.
PG Energy 6.92% Senior Notes. On September 30, 1997, PG Energy issued $25.0 million of its 6.92% Senior Notes due September 30, 2004 (the "6.92% Senior Notes"). The proceeds from the issuance of the 6.92% Senior Notes were used by PG Energy to repay $25.0 million of its bank borrowings.
10.125% Senior Notes/Extraordinary Loss. On May 26, 1996, the Company repurchased $1.3 million principal amount of its 10.125% Senior Notes due June 15, 1999 (the "Senior Notes") which the holders thereof elected pursuant to terms of the Senior Notes to require the Company to repurchase as a result of the sale of PG Energy's water utility operations on February 16, 1996. On September 30, 1996, the Company defeased the remaining $28.7 million principal amount of the Senior Notes and recorded an extraordinary loss of $1.1 million ($1.6 million, net of $575,000 of related income tax benefits).
Maturities and Sinking Fund Requirements. As of December 31, 1998, the aggregate annual maturities and sinking fund requirements of long-term debt for each of the next five years ending December 31, were:
Year Amount
1999 $ 81,348,000 (a) 2000 $ 3,000,000 (b) 2001 $ - 2002 $ 55,000,000 (c) 2003 $ -
(a) Represents the $20.0 million of borrowings outstanding as of December 31, 1998, under the Company's Term Loan Agreement due May 31, 1999, PG Energy's 9.23% Series First Mortgage Bonds in the principal amount of $10.0 million due September 1, 1999, and $51.3 million of PG Energy's bank borrowings outstanding as of December 31, 1998. (b) Represents the $3.0 million of Power Corp's bank borrowings outstanding as of December 31, 1998.
(c) Represents the $25.0 million of borrowings outstanding as of December 31, 1998, under PG Energy's Term Loan Agreement due August 14, 2002, and PG Energy's 8.375% Series First Mortgage Bonds in the principal amount of $30.0 million due December 1, 2002.
(7) DIVIDEND RESTRICTIONS
There are no dividend restrictions in the Company's Restated Articles of Incorporation. However, the preferred stock provisions of PG Energy's Restated Articles of Incorporation and certain of the agreements under which the Company and PG Energy have issued long-term debt provide for certain dividend restrictions. As of December 31, 1998, $5,416,000 of the consolidated retained earnings of the Company were restricted against the payment of cash dividends on common stock under the most restrictive of these covenants.
(8) BANK NOTES PAYABLE
The Company, through certain of its subsidiaries, primarily PG Energy, currently has arrangements for nine revolving bank lines of credit with an aggregate borrowing capacity of $74.0 million which provide for borrowings at interest rates generally less than prime and which mature at various times during 1999.
Because of limitations imposed by the terms of PG Energy's preferred stock, PG Energy is prohibited, without the consent of the holders of a majority of the outstanding shares of its preferred stock, from issuing more than $12.0 million of unsecured debt due on demand or within one year from issuance. PG Energy had no borrowings due on demand or within one year from issuance outstanding as of December 31, 1998.
Information relating to the Company's bank lines of credit and borrowings under those lines of credit is set forth below: As of December 31, ------------------------------- 1998 1997 1996 (Thousands of Dollars) Borrowings under lines of credit Short-term ............................... $ 6,200 $ 2,170 $10,000 Long-term ................................ 54,348 26,776 38,721 ------- ------- ------- $60,548 $28,946 $48,721 ======= ======= =======
Unused lines of credit Short-term ............................... $ 1,800 $ 5,830 $ -- Long-term ................................ 11,652 35,724 16,779 ------- ------- ------- $13,452 $41,554 $16,779 ======= ======= =======
Total lines of credit Prime rate ............................... $ -- $ 1,000 $ -- Less than prime rate ..................... 74,000 69,500 65,500 ------- ------- ------- $74,000 $70,500 $65,500 ======= ======= ======= Short-term bank borrowings Maximum amount outstanding ............... $ 6,300 $10,000 $10,000 Daily average amount outstanding ......... $ 2,510 $ 3,740 $ 1,392 Weighted daily average interest rate ..... 6.275% 6.343% 6.241% Weighted average interest rate at year-end 5.804% 6.536% 6.206% Range of interest rates .................. 5.577- 5.800- 5.875- 8.500% 8.500% 6.438%
(9) POSTEMPLOYMENT BENEFITS
The Company has a trusteed, noncontributory, defined benefit pension plan which covers substantially all employees of the Company, except those of Keystone and Honesdale. Pension benefits are based on years of service and average final salary. The Company's funding policy is to contribute an amount necessary to provide for benefits based on service to date, as well as for benefits expected to be earned in the future by current participants.
In addition to pension benefits, the Company provides certain health care and life insurance benefits ("other postretirement benefits") for retired employees. All of the Company's employees, except those of Keystone and Honesdale, may become eligible for those benefits if they reach retirement age while working for the Company. The Company records the cost of retiree health care and life insurance benefits as a liability over the employees' active service periods instead of on a benefits-paid basis.
Effective with its January 15, 1997, base rate increase (see Note 3 of these Notes to Consolidated Financial Statements), PG Energy began funding and recovering in rates its accumulated benefit obligations with respect to other postretirement benefits. In addition, the PPUC Order adopted December 19, 1996, specified that any excess or deficiency in other postretirement benefits costs over the amount of such costs included in rates be deferred and included in a future rate filing. As of December 31, 1998, all other postretirement benefits costs relative to 1998 and prior years, including $1.9 million of other postretirement benefits costs incurred during the period January 1, 1993, through January 15, 1997, are being recovered by PG Energy in its base gas rates which the PPUC approved effective October 17, 1998.
Under the terms of the agreement regarding the sale of PG Energy's water utility operations to Pennsylvania-American, on February 16, 1996, Pennsylvania-American assumed the accumulated pension benefit obligations and the obligation to provide retiree health and life insurance benefits relating to employees of PG Energy who accepted employment with Pennsylvania-American (the "Transferred Employees"), as well as the obligation to provide retiree health care and life insurance benefits to 45% of PG Energy's retired employees as of that date. In this regard, pension plan assets in an amount equal to the actuarial present value of accumulated plan benefits relative to the Transferred Employees, with interest from February 16, 1996, were transferred to the American pension plan in June, 1996. In addition, other postretirement benefits plan assets in an amount proportional to the actuarial present value of accumulated plan benefits relative to the Transferred Employees and 45% of PG Energy's retired employees as of February 16, 1996, were transferred to trusts established by Pennsylvania-American in 1997.
In January, 1998, as part of its cost reduction efforts, the Company offered an Early Retirement Plan (the "1998 ERP") to its 41 active employees who would be at least 59 years of age or older as of March 31, 1998, and had a minimum of five years of service as of February 28, 1998. A total of 27 employees elected to accept this offer and retire as of March 1, 1998, resulting in the recording, as of March 1, 1998, of an additional pension liability of $1.4 million and an additional other postretirement benefits liability of $563,000. These liabilities, which reflect increased costs associated with the 1998 ERP, were offset by assets representing the future rate recovery of such liabilities which was granted by the PPUC in connection with PG Energy's rate increase that became effective October 17, 1998.
The assumptions used in determining pension and other postretirement benefit obligations were:
1998 1997 1996
Discount rate 7.00% 7.00% 7.75% Expected long-term rate of return on plan assets 9.00% 9.00% 9.00% Projected increase in future compensation levels 5.00% 5.00% 5.00%
The following items were the components of net pension and other postretirement benefits costs, relative to continuing operations, including amounts capitalized:
The following table sets forth the funded status and change in funded status for the pension and other postretirement benefits plans:
It was also assumed that the per capita cost of covered health care benefits would increase at an annual rate of 7 1/2% in 1999 and that this rate would decrease gradually to 5-1/2% for the year 2003 and remain at that level thereafter. The health care cost trend rate assumption has a significant effect on the amounts reported for health care plans. To illustrate, assuming that the health care cost trend rate changed by one percentage point each year would have the following impact:
One Percentage Point Increase Decrease (Thousands of Dollars) Effect on total service and interest cost components $ 36 $ 34 Effect on other postretirement benefits obligation 371 359
(10) CAPITAL EXPENDITURES
The Company estimates the cost of its 1999 capital expenditure program will be $22.5 million, consisting of $18.4 million relative to the construction programs of the Regulated Subsidiaries and $4.1 million with respect to the Company's nonregulated activities. 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.
(11) 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 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. PG Energy paid $175,000 to the party performing the remediation in settlement of a claim for PG Energy's share of such remediation costs. 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.
(12) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
o Long-term debt. The fair value of long-term debt has been estimated based on the quoted market price as of the respective dates for the portion of such debt which is publicly traded and, with respect to the portion of such debt which is not publicly traded, on the estimated borrowing rate as of the respective dates for long-term debt of comparable credit quality with similar terms and maturities.
o Preferred stock subject to mandatory redemption. The fair value of PG Energy's preferred stock subject to mandatory redemption has been estimated based on the market value as of the respective dates for preferred stock of comparable credit quality with similar terms and maturities.
The carrying amounts and estimated fair values of financial instruments at December 31, 1998 and 1997, were as follows:
The Company believes that the regulatory treatment of any excess or deficiency of fair value relative to the carrying amounts of these items, if such items were settled at amounts approximating those above, would dictate that these amounts be used to increase or reduce the Regulated Subsidiaries rates over a prescribed amortization period. Accordingly, any settlement would not result in a material impact on the financial position or the results of operations of either the Company or the Regulated Subsidiaries.
(13) OPERATING SEGMENTS
During the fourth quarter of 1998, the Company adopted the reporting provisions of FASB Statement 131, "Disclosures about Segments of an Enterprise and Related Information." The Company has three principal operating segments:
o Regulated Energy Products and Services, primarily the purchase, distribution and sale of natural gas in thirteen counties in northeastern Pennsylvania by the Regulated Subsidiaries ("Energy Products and Services - Regulated")
o Nonregulated Energy Products and Services, primarily the sale of natural gas, propane, electricity and other energy-related products and services by Energy Services generally in a twenty-six county area in northeastern and central Pennsylvania, and by Power Corp. ("Energy Products and Services - Nonregulated")
o Pipeline Construction and Services, primarily the construction, maintenance and rehabilitation of utility facilities throughout the Eastern United States by Keystone ("Pipeline Construction and Services").
The accounting policies of the segments are the same as those described in Note 1 to these consolidated financial statements.
1998 1997 1996 (Thousands of Dollars)
Operating revenues: Energy products and services - Regulated ...................... $ 158,951 $ 190,567 $ 160,594 Nonregulated ................... 37,517 26,343 13,192 Pipeline construction and services 12,215 11,210 10,733 Intercompany eliminations ......... (1,351) (74) (39) --------- --------- --------- Total ......................... $ 207,332 $ 228,046 $ 184,480 --------- --------- --------- Operating income (loss): Energy products and services - Regulated ...................... $ 18,028 $ 21,963 $ 16,716 Nonregulated ................... 190 (373) 961 Pipeline construction and services 231 95 180 Intercompany eliminations and corporate expenses ............. (250) (130) 403 --------- --------- --------- Total ......................... $ 18,199 $ 21,555 $ 18,260 --------- --------- ---------
Depreciation expense: Energy products and services - Regulated ...................... $ 9,627 $ 8,986 $ 7,612 Nonregulated ................... 214 69 11 Pipeline construction and services 605 409 210 --------- --------- --------- Total ......................... $ 10,446 $ 9,464 $ 7,833 --------- --------- --------- Income tax expense (benefit): Energy products and services - Regulated ...................... $ 4,237 $ 7,321 $ 6,364 Nonregulated ................... 2 456 544 Pipeline construction and services 34 (40) 99 Corporate and other ............... (326) (363) (1,207) --------- --------- --------- Total ......................... $ 3,947 $ 7,374 $ 5,800 --------- --------- --------- Capital expenditures: Energy products and services - Regulated ...................... $ 28,189 $ 30,225 $ 29,231 Nonregulated ................... 14,768 480 387 Pipeline construction and services 1,368 2,635 1,347 Corporate and other ............... 486 929 629 --------- --------- --------- Total ......................... $ 44,811 $ 34,269 $ 31,594 --------- --------- --------- Identifiable assets: Energy products and services - Regulated ...................... $ 390,797 $ 371,140 $ 354,579 Nonregulated ................... 29,352 14,130 9,522 Pipeline construction and services 8,125 7,096 5,306 Intercompany eliminations and other (2,072) (3,536) (2,597) --------- --------- --------- Total ......................... $ 426,202 $ 388,830 $ 366,810 --------- --------- ---------
(14) QUARTERLY FINANCIAL DATA (UNAUDITED)
(a) The total of the earnings per share for the quarters does not equal the earnings per share for the year, as shown elsewhere in the consolidated financial statements and supplementary data of this report, as a result of the activity related to the issuance and/or repurchase of shares of common stock at various dates during 1997 and 1996.
Because of the seasonal nature of the Regulated Subsidiaries gas heating business, there are substantial variations in operations reported on a quarterly basis.
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
In its Form 8-K dated May 22, 1997, the Company reported a "Change in Registrant's Certifying Accountant" for its fiscal year beginning January 1, 1997. Because the Form 8-K dated May 22, 1997, did not include a reported disagreement on any matter of accounting principles or practices or financial statement disclosure, no disclosure pursuant to Item 304 of Regulation S-K of the Commission's Rules and Regulations is required in Item 9.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors
The information required by this item concerning directors of the Company has been omitted from this Form 10-K since the Company expects to file its definitive proxy statement not later than 120 days after the close of its fiscal year covered by this Form 10-K.
(b) Identification of Executive Officers
Information concerning the Company's executive officers is set forth in Part I of this Form 10-K under the heading "Executive Officers of the Company."
ITEM 11. EXECUTIVE COMPENSATION
This information has been omitted from this Form 10-K since the Company expects to file its definitive proxy statement not later than 120 days after the close of its fiscal year covered by this Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information has been omitted from this Form 10-K since the Company expects to file its definitive proxy statement not later than 120 days after the close of its fiscal year covered by this Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information has been omitted from this Form 10-K since the Company expects to file its definitive proxy statement not later than 120 days after the close of its fiscal year covered by this Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements The following consolidated financial statements, notes to consolidated financial statements and reports of independent accountants for the Company and its subsidiaries are presented in Item 8
Item 8 of this Form 10-K.
3. Exhibits See "Index to Exhibits" located on page 69 for a listing of all exhibits filed herein or incorporated by reference to a previously filed registration statement or report with the Securities and Exchange Commission.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K - continued
(b) Reports on Form 8-K No reports on Form 8-K were filed during the last quarter of 1998.
(c) Executive Compensation Plans and Arrangements
The following listing includes the Company's executive compensation plans and arrangements in effect as of December 31, 1998:
Exhibit Number
10-23 Form of Change in Control Agreement between the Company and certain of its Officers -- filed as Exhibit 10-38 to the Company's Annual Report on Form 10-K for 1989, File No. 0-7812.
10-24 First Amendment to Form of Change in Control Agreement, dated as of May 24, 1995, between the Company and certain of its Officers -- filed as Exhibit 10-29 to the Company's Annual Report on Form 10-K for 1995, File No. 0-7812.
10-25 Agreement, dated as of March 15, 1991, by and between the Company, PG Energy and Robert L. Jones -- filed as Exhibit No. 10-38 to the Company's Annual Report on Form 10-K for 1990, File No. 0-7812.
10-26 Employment Agreement effective September 1, 1995, between the Company and Dean T. Casaday -- filed as Exhibit 10-2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995, File No. 0-7812.
10-27 Supplemental Retirement Agreement, dated as of December 23, 1991, between the Company and Dean T. Casaday -- filed as Exhibit 10-17 to the Company's Common Stock Form S-2, Registration No. 33-43382.
10-28 First Amendment to the Supplemental Retirement Agreement, dated as of September 1, 1994, between the Company and Dean T. Casaday -- filed as Exhibit 10-37 to the Company's Annual Report on Form 10-K for 1994, File No. 0-7812.
10-29 Pennsylvania Enterprises, Inc. 1992 Stock Option Plan, effective June 3, 1992 -- filed as Exhibit A to the Company's 1993 definitive Proxy Statement, File No. 0-7812.
10-30 Form of Stock Option Agreement, dated as of June 20, 1997, between the Company and certain of its Officers -- filed as Exhibit 10-1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 0-7812.
10-31 Form of Stock Option Agreement, dated as of June 20, 1997, between the Company and certain of its non-employee directors -- filed as Exhibit 10-2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 0-7812.
Exhibit Number
10-32 Pennsylvania Enterprises, Inc. Stock Incentive Plan, effective May 14, 1997 -- filed as Exhibit A to the Company's 1997 definitive Proxy Statement, File No. 0-7812.
10-33 Employment Agreement dated as of August 28, 1996, by and among the Company, PG Energy and Thomas F. Karam -- filed as Exhibit 10-2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, File No. 0-7812.
10-34 Amended Employment Agreement dated as of May 6, 1998, by and among the Company, PG Energy and Thomas F. Karam -- filed as Exhibit 10-4 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, File No. 0-7812.
10-35 Director Deferred Compensation Plan dated as of April 23, 1997 -- filed as Exhibit 10-1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, File No. 0-7812.
10-36 First Amendment to the Director Deferred Compensation Plan, amended and restated effective as of November 19, 1997 -- filed as Exhibit 10-40 to the Company's Annual Report on Form 10-K for 1997, File No. 0-7812.
10-37 1995 Directors' Stock Compensation Plan, effective January 18, 1995 -- filed as Exhibit A to the Company's 1995 definitive Proxy Statement, File No. 0-7812.
10-38 First Amendment to the 1995 Directors' Stock Compensation Plan, amended and restated effective as of November 19, 1997 -- filed as Exhibit 10-42 to the Company's Annual Report on Form 10-K for 1997, File No. 0-7812.
10-39 Form of Stock Option Grant, dated as of May 6, 1998, between the Company and certain of its Officers -- filed as Exhibit 10-1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, File No. 0-7812.
10-40 Form of Stock Option Grant, dated as of May 6, 1998, between the Company and certain of its non-employee directors -- filed as Exhibit 10-2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, File No. 0-7812.
10-41 Stock Option Grant, dated as of May 6, 1998, between the Company and Thomas F. Karam -- filed as Exhibit 10-3 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, File No. 0-7812.
10-42 Director Retirement Plan, effective as of January 1, 1999 -- filed herewith.
(d) Statements Excluded from Annual Report to Shareholders Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 1, 1999 By: /s/ Thomas F. Karam Thomas F. Karam President and Chief Executive Officer (Principal Executive Officer)
Date: March 1, 1999 By: /s/ John F. Kell, Jr. John F. Kell, Jr. Vice President, Financial Services (Principal Financial Officer and Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
INDEX TO EXHIBITS Exhibit Number
(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession:
2-1 Asset Purchase Agreement dated as of April 26, 1995, among the Company, PG Energy, American Water Works Company, Inc., and Pennsylvania-American Water Company -- filed as Exhibit 2-1 to PG Energy's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, File No. 1-3490.
(3) Articles of Incorporation and By-Laws:
3-1 Restated Articles of Incorporation of the Company, as amended -- filed as Exhibit 3-1 to the Company's Senior Note Form S-2, Registration No. 33-47581.
3-2 By-Laws of the Company, as amended and restated on January 20, 1999 -- filed herewith.
(4) Instruments Defining the Rights of Security Holders, Including Debentures:
4-1 Indenture of Mortgage and Deed of Trust, dated as of March 15, 1946, between Scranton-Spring Brook Water Service Company (now PG Energy) and First Trust of New York, National Association, as Successor Trustee to Morgan Guaranty Trust Company of New York -- filed as Exhibit 2(c) to PG Energy's Bond Form S-7, Registration No. 2-55419.
4-2 Fourth Supplemental Indenture, dated as of March 15, 1952 -- filed as Exhibit 2(d) to PG Energy's Bond Form S-7, Registration No. 2-55419.
4-3 Ninth Supplemental Indenture, dated as of March 15, 1957 -- filed as Exhibit 2(e) to PG Energy's Bond Form S-7, Registration No. 2-55419.
4-4 Tenth Supplemental Indenture, dated as of September 1, 1958 -- filed as Exhibit 2(f) to PG Energy's Bond Form S-7, Registration No. 2-55419.
4-5 Twelfth Supplemental Indenture, dated as of July 15, 1960 -- filed as Exhibit 2(g) to PG Energy's Bond Form S-7, Registration No. 2-55419.
4-6 Fourteenth Supplemental Indenture, dated as of December 15, 1961 -- filed as Exhibit 2(h) to PG Energy's Bond Form S-7, Registration No. 2-55419.
4-7 Fifteenth Supplemental Indenture, dated as of December 15, 1963 -- filed as Exhibit 2(i) to PG Energy's Bond Form S-7, Registration No. 2-55419.
4-8 Sixteenth Supplemental Indenture, dated as of June 15, 1966 -- filed as Exhibit 2(j) to PG Energy's Bond Form S-7, Registration No. 2-55419.
Exhibit Number
4-9 Seventeenth Supplemental Indenture, dated as of October 15, 1967 -- filed as Exhibit 2(k) to PG Energy's Bond Form S-7, Registration No. 2-55419.
4-10 Eighteenth Supplemental Indenture, dated as of May 1, 1970 -- filed as Exhibit 2(1) to PG Energy's Bond Form S-7, Registration No. 2-55419.
4-11 Nineteenth Supplemental Indenture, dated as of June 1, 1972 -- filed as Exhibit 2(m) to PG Energy's Bond Form S-7, Registration No. 2-55419.
4-12 Twentieth Supplemental Indenture, dated as of March 1, 1976 -- filed as Exhibit 2(n) to PG Energy's Bond Form S-7, Registration No. 2-55419.
4-13 Twenty-first Supplemental Indenture, dated as of December 1, 1976 -- filed as Exhibit 4-16 to PG Energy's Annual Report on Form 10-K for 1982, File No. 1-3490.
4-14 Twenty-second Supplemental Indenture, dated as of August 15, 1989 -- filed as Exhibit 4-22 to the Company's Annual Report on Form 10-K for 1989, File No. 0-7812.
4-15 Twenty-third Supplemental Indenture, dated as of August 15, 1989 -- filed as Exhibit 4-23 to the Company's Annual Report on Form 10-K for 1989, File No. 0-7812.
4-16 Twenty-fourth Supplemental Indenture, dated as of September 1, 1991 -- filed as Exhibit 4-3 to the Company's Common Stock Form S-2, Registration No. 33-43382.
4-17 Twenty-fifth Supplemental Indenture, dated as of September 1, 1992 -- filed as Exhibit 4-17 to the Company's Annual Report on Form 10-K for 1992, File No. 0-7812.
4-18 Twenty-sixth Supplemental Indenture, dated as of December 1, 1992 -- filed as Exhibit 4-18 to the Company's Annual Report on Form 10-K for 1992, File No. 0-7812.
4-19 Twenty-seventh Supplemental Indenture, dated as of December 1, 1992 -- filed as Exhibit 4-19 to the Company's Annual Report on Form 10-K for 1992, File No. 0-7812.
4-20 Twenty-eighth Supplemental Indenture, dated as of December 1, 1993 -- filed as Exhibit 4-20 to PG Energy's Annual Report on Form 10-K for 1993, File No. 1-3490.
4-21 Twenty-ninth Supplemental Indenture, dated as of November 1, 1994 -- filed as Exhibit 4-21 to PG Energy's Annual Report on Form 10-K for 1994, File No. 1-3490.
4-22 Thirtieth Supplemental Indenture, dated as of December 1, 1995 -- filed as Exhibit 4-22 to PG Energy's Annual Report on Form 10-K for 1995, File No. 1-3490.
NOTE: The First, Second, Third, Fifth, Sixth, Seventh, Eighth, Eleventh and Thirteenth Supplemental Indentures merely convey additional properties to the Trustee.
Exhibit Number
4-23 Rights Agreement dated as of April 26, 1995, between the Company and Chemical Bank, as Rights Agent -- filed as Exhibit 4-1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, File No. 0-7812.
(10) Material Contracts:
10-1 Service Agreement for transportation service under Rate Schedule FT, dated February 1, 1992, by and between PG Energy and Transcontinental Gas Pipe Line Corporation -- filed as Exhibit 10-4 to PG Energy's Annual Report on Form 10-K for 1991, File No. 1-3490.
10-2 Service Agreement for storage service under Rate Schedule SS-2, dated April 1, 1990, between PG Energy and Transcontinental Gas Pipe Line Corporation -- filed as Exhibit 10-8 to the Company's Common Stock Form S-2, Registration No. 33-43382.
10-3 Service Agreement for sales service under Rate Schedule FS, dated August 1, 1991, between PG Energy and Transcontinental Gas Pipe Line Corporation -- filed as Exhibit 10-6 to the Company's Annual Report on Form 10-K for 1991, File No. 0-7812.
10-4 Service Agreement for transportation service under Rate Schedule FT, dated August 1, 1991, between PG Energy and Transcontinental Gas Pipe Line Corporation -- filed as Exhibit 10-10 to the Company's Common Stock Form S-2, Registration No. 33-43382.
10-5 Service Agreement for storage service under Rate Schedule LSS, dated October 1, 1993, by and between PG Energy and Transcontinental Gas Pipe Line Corporation -- filed as Exhibit 10-7 to PG Energy's Annual Report on Form 10-K for 1993, File No. 1-3490.
10-6 Service Agreement for storage service under Rate Schedule GSS, dated October 1, 1993, by and between PG Energy and Transcontinental Gas Pipeline Corporation Company -- filed as Exhibit 10-8 to PG Energy's Annual Report on Form 10-K for 1993, File No. 1-3490.
10-7 Service Agreement for transportation service under Rate Schedule FT, dated April 1, 1995, by and between PG Energy and Transcontinental Gas Pipe Line Corporation -- filed as Exhibit 10-1 to PG Energy's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, File No. 1-3490.
10-8 Service Agreement for transportation service under Rate Schedule FTPO, dated July 10, 1997, effective November 1, 1997, by and between PG Energy and Transcontinental Gas Pipe Line Corporation -- filed as Exhibit 10-10 to PG Energy's Annual Report on Form 10-K for 1997, File No. 1-3490.
10-9 Service Agreement for transportation service under Rate Schedule FTS, dated November 1, 1993, by and between PG Energy and Columbia Gas Transmission Corporation -- filed as Exhibit 10-9 to PG Energy's Annual Report on Form 10-K for 1993, File No. 1-3490.
Exhibit Number
10-10 Service Agreement for transportation service under Rate Schedule SST, dated November 1, 1993, by and between PG Energy and Columbia Gas Transmission Corporation -- filed as Exhibit 10-10 to PG Energy's Annual Report on Form 10-K for 1993, File No. 1-3490.
10-11 Service Agreement for storage service under Rate Schedule FSS, dated November 1, 1993, by and between PG Energy and Columbia Gas Transmission Corporation -- filed as Exhibit 10-11 to PG Energy's Annual Report on Form 10-K for 1993, File No. 1-3490.
10-12 Service Agreement for transportation service under Rate Schedule FTS-1, dated November 1, 1993, by and between PG Energy and Columbia Gulf Transmission Company -- filed as Exhibit 10-12 to PG Energy's Annual Report on Form 10-K for 1993, File No. 1-3490.
10-13 Service Agreement (Contract No. 946) for transportation service under Rate Schedule FT-A, dated September 1, 1993, by and between PG Energy and Tennessee Gas Pipeline Company -- filed as Exhibit 10-1 to PG Energy's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993, File No. 1-3490.
10-14 Service Agreement (Service Package No. 171) for transportation service under Rate Schedule FT-A, dated September 1, 1993, by and between PG Energy and Tennessee Gas Pipeline Company -- filed as Exhibit 10-2 to PG Energy's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993, File No. 1-3490.
10-15 Service Agreement (Service Package No. 187) for transportation service under Rate Schedule FT-A, dated September 1, 1993, by and between PG Energy and Tennessee Gas Pipeline Company -- filed as Exhibit 10-3 to PG Energy's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993, File No. 1-3490.
10-16 Service Agreement (Service Package No. 190) for transportation service under Rate Schedule FT-A, dated September 1, 1993, by and between PG Energy and Tennessee Gas Pipeline -- filed as Exhibit 10-4 to PG Energy's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993, File No. 1-3490.
10-17 Service Agreement (Contract No. 2289) for storage service under Rate Schedule FS, dated September 1, 1993, by and between PG Energy and Tennessee Gas Pipeline -- filed as Exhibit 10-5 to PG Energy's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993, File No. 1-3490.
10-18 Service Agreement for storage service, dated April 15, 1997, effective November 1, 1997, by and between PG Energy and New York State Electric & Gas Corporation -- filed as Exhibit 10-22 to PG Energy's Annual Report on Form 10-K for 1997, File No. 1-3490.
10-19 Service Agreement for transportation service under Rate Schedule FT, dated April 30, 1997, effective November 1, 1997, by and between PG Energy and CNG Transmission Corporation -- filed as Exhibit 10-23 to PG Energy's Annual Report on Form 10-K for 1997, File No. 1-3490.
Exhibit Number
10-20 Bond Purchase Agreement, dated September 1, 1989, relating to PG Energy's First Mortgage Bonds 9.23% Series due 1999 and First Mortgage Bonds 9.34% Series due 2019 among Allstate Life Insurance Company, Allstate Life Insurance Company of New York and PG Energy -- filed as Exhibit 10-34 to the Company's Annual Report on Form 10-K for 1989, File No. 0-7812.
10-21 Term Loan Agreement dated August 14, 1997, among PG Energy, the Banks parties thereto and PNC Bank, National Association, in its capacity as Agent for the Banks -- filed as Exhibit 10-25 to PG Energy's Annual Report on Form 10-K for 1997, File No. 1-3490.
10-22 6.92% Senior Notes Purchase Agreement, dated September 30, 1997, between PG Energy and the Purchasers -- filed as Exhibit 10-26 to PG Energy's Annual Report on Form 10-K for 1997, File No. 1-3490.
10-23 Form of Change in Control Agreement between the Company and certain of its Officers -- filed as Exhibit 10-38 to the Company's Annual Report on Form 10-K for 1989, File No. 0-7812
10-24 First Amendment to Form of Change in Control Agreement, dated as of May 24, 1995, between the Company and certain of its Officers -- filed as Exhibit 10-29 to the Company's Annual Report on Form 10-K for 1995, File No. 0-7812.
10-25 Agreement, dated as of March 15, 1991, by and between the Company, PG Energy and Robert L. Jones -- filed as Exhibit 10-38 to the Company's Annual Report on Form 10-K for 1990, File No. 0-7812.
10-26 Employment Agreement effective September 1, 1995, between the Company and Dean T. Casaday -- filed as Exhibit 10-2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995, File No. 0-7812.
10-27 Supplemental Retirement Agreement, dated as of December 23, 1991, between the Company and Dean T. Casaday -- filed as Exhibit 10-17 to the Company's Common Stock Form S-2, Registration No. 33-43382.
10-28 First Amendment to the Supplemental Retirement Agreement, dated as of September 1, 1994, between the Company and Dean T. Casaday -- filed as Exhibit 10-37 to the Company's Annual Report on Form 10-K for 1994, File No. 0-7812.
10-29 Pennsylvania Enterprises, Inc. 1992 Stock Option Plan, effective June 3, 1992 -- filed as Exhibit A to the Company's 1993 definitive Proxy Statement, File No. 0-7812.
10-30 Form of Stock Option Agreement, dated as of June 20, 1997, between the Company and certain of its Officers -- filed as Exhibit 10-1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 0-7812.
Exhibit Number
10-31 Form of Stock Option Agreement, dated as of June 20, 1997, between the Company and certain of its non-employee directors -- filed as Exhibit 10-2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 0-7812.
10-32 Pennsylvania Enterprises, Inc. Stock Incentive Plan, effective May 14, 1997 -- filed as Exhibit A to the Company's 1997 definitive Proxy Statement, File No. 0-7812.
10-33 Employment Agreement dated as of August 28, 1996, by and among the Company, PG Energy and Thomas F. Karam -- filed as Exhibit 10-2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, File No. 0-7812.
10-34 Amended Employment Agreement dated as of May 6, 1998, by and among the Company, PG Energy and Thomas F. Karam -- filed as Exhibit 10-4 to the Company's Quarterly report on Form 10-Q for the quarter ended June 30, 1998, File No. 0-7812.
10-35 Director Deferred Compensation Plan dated as of April 23, 1997 -- filed as Exhibit 10-1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, File No. 0-7812.
10-36 First Amendment to the Director Deferred Compensation Plan, amended and restated effective as of November 19, 1997 -- filed as Exhibit 10-40 to the Company's Annual Report on Form 10-K for 1997, File No. 0-7812.
10-37 1995 Directors' Stock Compensation Plan, effective January 18, 1995 -- filed as Exhibit A to the Company's 1995 definitive Proxy Statement, File No. 0-7812.
10-38 First Amendment to the 1995 Directors' Stock Compensation Plan, amended and restated effective as of November 19, 1997 -- filed as Exhibit 10-42 to the Company's Annual Report on Form 10-K for 1997, File No. 0-7812.
10-39 Form of Stock Option Grant, dated as of May 6, 1998, between the Company and certain of its Officers -- filed as Exhibit 10-1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, File No. 0-7812.
10-40 Form of Stock Option Grant, dated as of May 6, 1998, between the Company and certain of its non-employee directors -- filed as Exhibit 10-2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, File No. 0-7812.
10-41 Stock Option Grant, dated as of May 6, 1998, between the Company and Thomas F. Karam -- filed as Exhibit 10-3 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, File No. 0-7812.
10-42 Director Retirement Plan, effective as of January 1, 1999 -- filed herewith.
(21) Subsidiaries of the Registrant:
21-1 Subsidiaries of the Registrant -- filed herewith.
(23) Consents of Experts and Counsel:
23-1 Consent of Independent Accountants relative to December 31, 1998 and 1997, Consolidated Financial Statements -- filed herewith.
23-2 Consent of Independent Accountants relative to December 31, 1996, Consolidated Financial Statements -- filed herewith.
(27) Financial Data Schedule:
27-1 Financial Data Schedule -- filed herewith.
NOTES: (a) Deductions represent uncollectible balances of accounts receivable written off, net of recoveries.
(b) Deductions are principally payments made in settlement of claims.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K - continued
(b) Reports on Form 8-K No reports on Form 8-K were filed during the last quarter of 1998.
(c) Executive Compensation Plans and Arrangements
The following listing includes the Company's executive compensation plans and arrangements in effect as of December 31, 1998:
Exhibit Number
10-23 Form of Change in Control Agreement between the Company and certain of its Officers -- filed as Exhibit 10-38 to the Company's Annual Report on Form 10-K for 1989, File No. 0-7812.
10-24 First Amendment to Form of Change in Control Agreement, dated as of May 24, 1995, between the Company and certain of its Officers -- filed as Exhibit 10-29 to the Company's Annual Report on Form 10-K for 1995, File No. 0-7812.
10-25 Agreement, dated as of March 15, 1991, by and between the Company, PG Energy and Robert L. Jones -- filed as Exhibit No. 10-38 to the Company's Annual Report on Form 10-K for 1990, File No. 0-7812.
10-26 Employment Agreement effective September 1, 1995, between the Company and Dean T. Casaday -- filed as Exhibit 10-2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995, File No. 0-7812.
10-27 Supplemental Retirement Agreement, dated as of December 23, 1991, between the Company and Dean T. Casaday -- filed as Exhibit 10-17 to the Company's Common Stock Form S-2, Registration No. 33-43382.
10-28 First Amendment to the Supplemental Retirement Agreement, dated as of September 1, 1994, between the Company and Dean T. Casaday -- filed as Exhibit 10-37 to the Company's Annual Report on Form 10-K for 1994, File No. 0-7812.
10-29 Pennsylvania Enterprises, Inc. 1992 Stock Option Plan, effective June 3, 1992 -- filed as Exhibit A to the Company's 1993 definitive Proxy Statement, File No. 0-7812.
10-30 Form of Stock Option Agreement, dated as of June 20, 1997, between the Company and certain of its Officers -- filed as Exhibit 10-1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 0-7812.
10-31 Form of Stock Option Agreement, dated as of June 20, 1997, between the Company and certain of its non-employee directors -- filed as Exhibit 10-2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 0-7812.
Exhibit Number
10-32 Pennsylvania Enterprises, Inc. Stock Incentive Plan, effective May 14, 1997 -- filed as Exhibit A to the Company's 1997 definitive Proxy Statement, File No. 0-7812.
10-33 Employment Agreement dated as of August 28, 1996, by and among the Company, PG Energy and Thomas F. Karam -- filed as Exhibit 10-2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, File No. 0-7812.
10-34 Amended Employment Agreement dated as of May 6, 1998, by and among the Company, PG Energy and Thomas F. Karam -- filed as Exhibit 10-4 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, File No. 0-7812.
10-35 Director Deferred Compensation Plan dated as of April 23, 1997 -- filed as Exhibit 10-1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, File No. 0-7812.
10-36 First Amendment to the Director Deferred Compensation Plan, amended and restated effective as of November 19, 1997 -- filed as Exhibit 10-40 to the Company's Annual Report on Form 10-K for 1997, File No. 0-7812.
10-37 1995 Directors' Stock Compensation Plan, effective January 18, 1995 -- filed as Exhibit A to the Company's 1995 definitive Proxy Statement, File No. 0-7812.
10-38 First Amendment to the 1995 Directors' Stock Compensation Plan, amended and restated effective as of November 19, 1997 -- filed as Exhibit 10-42 to the Company's Annual Report on Form 10-K for 1997, File No. 0-7812.
10-39 Form of Stock Option Grant, dated as of May 6, 1998, between the Company and certain of its Officers -- filed as Exhibit 10-1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, File No. 0-7812.
10-40 Form of Stock Option Grant, dated as of May 6, 1998, between the Company and certain of its non-employee directors -- filed as Exhibit 10-2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, File No. 0-7812.
10-41 Stock Option Grant, dated as of May 6, 1998, between the Company and Thomas F. Karam -- filed as Exhibit 10-3 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, File No. 0-7812.
10-42 Director Retirement Plan, effective as of January 1, 1999 -- filed herewith.
(d) Statements Excluded from Annual Report to Shareholders Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 1, 1999 By: /s/ Thomas F. Karam Thomas F. Karam President and Chief Executive Officer (Principal Executive Officer)
Date: March 1, 1999 By: /s/ John F. Kell, Jr. John F. Kell, Jr. Vice President, Financial Services (Principal Financial Officer and Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
INDEX TO EXHIBITS Exhibit Number
(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession:
2-1 Asset Purchase Agreement dated as of April 26, 1995, among the Company, PG Energy, American Water Works Company, Inc., and Pennsylvania-American Water Company -- filed as Exhibit 2-1 to PG Energy's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, File No. 1-3490.
(3) Articles of Incorporation and By-Laws:
3-1 Restated Articles of Incorporation of the Company, as amended -- filed as Exhibit 3-1 to the Company's Senior Note Form S-2, Registration No. 33-47581.
3-2 By-Laws of the Company, as amended and restated on January 20, 1999 -- filed herewith.
(4) Instruments Defining the Rights of Security Holders, Including Debentures:
4-1 Indenture of Mortgage and Deed of Trust, dated as of March 15, 1946, between Scranton-Spring Brook Water Service Company (now PG Energy) and First Trust of New York, National Association, as Successor Trustee to Morgan Guaranty Trust Company of New York -- filed as Exhibit 2(c) to PG Energy's Bond Form S-7, Registration No. 2-55419.
4-2 Fourth Supplemental Indenture, dated as of March 15, 1952 -- filed as Exhibit 2(d) to PG Energy's Bond Form S-7, Registration No. 2-55419.
4-3 Ninth Supplemental Indenture, dated as of March 15, 1957 -- filed as Exhibit 2(e) to PG Energy's Bond Form S-7, Registration No. 2-55419.
4-4 Tenth Supplemental Indenture, dated as of September 1, 1958 -- filed as Exhibit 2(f) to PG Energy's Bond Form S-7, Registration No. 2-55419.
4-5 Twelfth Supplemental Indenture, dated as of July 15, 1960 -- filed as Exhibit 2(g) to PG Energy's Bond Form S-7, Registration No. 2-55419.
4-6 Fourteenth Supplemental Indenture, dated as of December 15, 1961 -- filed as Exhibit 2(h) to PG Energy's Bond Form S-7, Registration No. 2-55419.
4-7 Fifteenth Supplemental Indenture, dated as of December 15, 1963 -- filed as Exhibit 2(i) to PG Energy's Bond Form S-7, Registration No. 2-55419.
4-8 Sixteenth Supplemental Indenture, dated as of June 15, 1966 -- filed as Exhibit 2(j) to PG Energy's Bond Form S-7, Registration No. 2-55419.
Exhibit Number
4-9 Seventeenth Supplemental Indenture, dated as of October 15, 1967 -- filed as Exhibit 2(k) to PG Energy's Bond Form S-7, Registration No. 2-55419.
4-10 Eighteenth Supplemental Indenture, dated as of May 1, 1970 -- filed as Exhibit 2(1) to PG Energy's Bond Form S-7, Registration No. 2-55419.
4-11 Nineteenth Supplemental Indenture, dated as of June 1, 1972 -- filed as Exhibit 2(m) to PG Energy's Bond Form S-7, Registration No. 2-55419.
4-12 Twentieth Supplemental Indenture, dated as of March 1, 1976 -- filed as Exhibit 2(n) to PG Energy's Bond Form S-7, Registration No. 2-55419.
4-13 Twenty-first Supplemental Indenture, dated as of December 1, 1976 -- filed as Exhibit 4-16 to PG Energy's Annual Report on Form 10-K for 1982, File No. 1-3490.
4-14 Twenty-second Supplemental Indenture, dated as of August 15, 1989 -- filed as Exhibit 4-22 to the Company's Annual Report on Form 10-K for 1989, File No. 0-7812.
4-15 Twenty-third Supplemental Indenture, dated as of August 15, 1989 -- filed as Exhibit 4-23 to the Company's Annual Report on Form 10-K for 1989, File No. 0-7812.
4-16 Twenty-fourth Supplemental Indenture, dated as of September 1, 1991 -- filed as Exhibit 4-3 to the Company's Common Stock Form S-2, Registration No. 33-43382.
4-17 Twenty-fifth Supplemental Indenture, dated as of September 1, 1992 -- filed as Exhibit 4-17 to the Company's Annual Report on Form 10-K for 1992, File No. 0-7812.
4-18 Twenty-sixth Supplemental Indenture, dated as of December 1, 1992 -- filed as Exhibit 4-18 to the Company's Annual Report on Form 10-K for 1992, File No. 0-7812.
4-19 Twenty-seventh Supplemental Indenture, dated as of December 1, 1992 -- filed as Exhibit 4-19 to the Company's Annual Report on Form 10-K for 1992, File No. 0-7812.
4-20 Twenty-eighth Supplemental Indenture, dated as of December 1, 1993 -- filed as Exhibit 4-20 to PG Energy's Annual Report on Form 10-K for 1993, File No. 1-3490.
4-21 Twenty-ninth Supplemental Indenture, dated as of November 1, 1994 -- filed as Exhibit 4-21 to PG Energy's Annual Report on Form 10-K for 1994, File No. 1-3490.
4-22 Thirtieth Supplemental Indenture, dated as of December 1, 1995 -- filed as Exhibit 4-22 to PG Energy's Annual Report on Form 10-K for 1995, File No. 1-3490.
NOTE: The First, Second, Third, Fifth, Sixth, Seventh, Eighth, Eleventh and Thirteenth Supplemental Indentures merely convey additional properties to the Trustee.
Exhibit Number
4-23 Rights Agreement dated as of April 26, 1995, between the Company and Chemical Bank, as Rights Agent -- filed as Exhibit 4-1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, File No. 0-7812.
(10) Material Contracts:
10-1 Service Agreement for transportation service under Rate Schedule FT, dated February 1, 1992, by and between PG Energy and Transcontinental Gas Pipe Line Corporation -- filed as Exhibit 10-4 to PG Energy's Annual Report on Form 10-K for 1991, File No. 1-3490.
10-2 Service Agreement for storage service under Rate Schedule SS-2, dated April 1, 1990, between PG Energy and Transcontinental Gas Pipe Line Corporation -- filed as Exhibit 10-8 to the Company's Common Stock Form S-2, Registration No. 33-43382.
10-3 Service Agreement for sales service under Rate Schedule FS, dated August 1, 1991, between PG Energy and Transcontinental Gas Pipe Line Corporation -- filed as Exhibit 10-6 to the Company's Annual Report on Form 10-K for 1991, File No. 0-7812.
10-4 Service Agreement for transportation service under Rate Schedule FT, dated August 1, 1991, between PG Energy and Transcontinental Gas Pipe Line Corporation -- filed as Exhibit 10-10 to the Company's Common Stock Form S-2, Registration No. 33-43382.
10-5 Service Agreement for storage service under Rate Schedule LSS, dated October 1, 1993, by and between PG Energy and Transcontinental Gas Pipe Line Corporation -- filed as Exhibit 10-7 to PG Energy's Annual Report on Form 10-K for 1993, File No. 1-3490.
10-6 Service Agreement for storage service under Rate Schedule GSS, dated October 1, 1993, by and between PG Energy and Transcontinental Gas Pipeline Corporation Company -- filed as Exhibit 10-8 to PG Energy's Annual Report on Form 10-K for 1993, File No. 1-3490.
10-7 Service Agreement for transportation service under Rate Schedule FT, dated April 1, 1995, by and between PG Energy and Transcontinental Gas Pipe Line Corporation -- filed as Exhibit 10-1 to PG Energy's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, File No. 1-3490.
10-8 Service Agreement for transportation service under Rate Schedule FTPO, dated July 10, 1997, effective November 1, 1997, by and between PG Energy and Transcontinental Gas Pipe Line Corporation -- filed as Exhibit 10-10 to PG Energy's Annual Report on Form 10-K for 1997, File No. 1-3490.
10-9 Service Agreement for transportation service under Rate Schedule FTS, dated November 1, 1993, by and between PG Energy and Columbia Gas Transmission Corporation -- filed as Exhibit 10-9 to PG Energy's Annual Report on Form 10-K for 1993, File No. 1-3490.
Exhibit Number
10-10 Service Agreement for transportation service under Rate Schedule SST, dated November 1, 1993, by and between PG Energy and Columbia Gas Transmission Corporation -- filed as Exhibit 10-10 to PG Energy's Annual Report on Form 10-K for 1993, File No. 1-3490.
10-11 Service Agreement for storage service under Rate Schedule FSS, dated November 1, 1993, by and between PG Energy and Columbia Gas Transmission Corporation -- filed as Exhibit 10-11 to PG Energy's Annual Report on Form 10-K for 1993, File No. 1-3490.
10-12 Service Agreement for transportation service under Rate Schedule FTS-1, dated November 1, 1993, by and between PG Energy and Columbia Gulf Transmission Company -- filed as Exhibit 10-12 to PG Energy's Annual Report on Form 10-K for 1993, File No. 1-3490.
10-13 Service Agreement (Contract No. 946) for transportation service under Rate Schedule FT-A, dated September 1, 1993, by and between PG Energy and Tennessee Gas Pipeline Company -- filed as Exhibit 10-1 to PG Energy's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993, File No. 1-3490.
10-14 Service Agreement (Service Package No. 171) for transportation service under Rate Schedule FT-A, dated September 1, 1993, by and between PG Energy and Tennessee Gas Pipeline Company -- filed as Exhibit 10-2 to PG Energy's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993, File No. 1-3490.
10-15 Service Agreement (Service Package No. 187) for transportation service under Rate Schedule FT-A, dated September 1, 1993, by and between PG Energy and Tennessee Gas Pipeline Company -- filed as Exhibit 10-3 to PG Energy's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993, File No. 1-3490.
10-16 Service Agreement (Service Package No. 190) for transportation service under Rate Schedule FT-A, dated September 1, 1993, by and between PG Energy and Tennessee Gas Pipeline -- filed as Exhibit 10-4 to PG Energy's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993, File No. 1-3490.
10-17 Service Agreement (Contract No. 2289) for storage service under Rate Schedule FS, dated September 1, 1993, by and between PG Energy and Tennessee Gas Pipeline -- filed as Exhibit 10-5 to PG Energy's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993, File No. 1-3490.
10-18 Service Agreement for storage service, dated April 15, 1997, effective November 1, 1997, by and between PG Energy and New York State Electric & Gas Corporation -- filed as Exhibit 10-22 to PG Energy's Annual Report on Form 10-K for 1997, File No. 1-3490.
10-19 Service Agreement for transportation service under Rate Schedule FT, dated April 30, 1997, effective November 1, 1997, by and between PG Energy and CNG Transmission Corporation -- filed as Exhibit 10-23 to PG Energy's Annual Report on Form 10-K for 1997, File No. 1-3490.
Exhibit Number
10-20 Bond Purchase Agreement, dated September 1, 1989, relating to PG Energy's First Mortgage Bonds 9.23% Series due 1999 and First Mortgage Bonds 9.34% Series due 2019 among Allstate Life Insurance Company, Allstate Life Insurance Company of New York and PG Energy -- filed as Exhibit 10-34 to the Company's Annual Report on Form 10-K for 1989, File No. 0-7812.
10-21 Term Loan Agreement dated August 14, 1997, among PG Energy, the Banks parties thereto and PNC Bank, National Association, in its capacity as Agent for the Banks -- filed as Exhibit 10-25 to PG Energy's Annual Report on Form 10-K for 1997, File No. 1-3490.
10-22 6.92% Senior Notes Purchase Agreement, dated September 30, 1997, between PG Energy and the Purchasers -- filed as Exhibit 10-26 to PG Energy's Annual Report on Form 10-K for 1997, File No. 1-3490.
10-23 Form of Change in Control Agreement between the Company and certain of its Officers -- filed as Exhibit 10-38 to the Company's Annual Report on Form 10-K for 1989, File No. 0-7812
10-24 First Amendment to Form of Change in Control Agreement, dated as of May 24, 1995, between the Company and certain of its Officers -- filed as Exhibit 10-29 to the Company's Annual Report on Form 10-K for 1995, File No. 0-7812.
10-25 Agreement, dated as of March 15, 1991, by and between the Company, PG Energy and Robert L. Jones -- filed as Exhibit 10-38 to the Company's Annual Report on Form 10-K for 1990, File No. 0-7812.
10-26 Employment Agreement effective September 1, 1995, between the Company and Dean T. Casaday -- filed as Exhibit 10-2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995, File No. 0-7812.
10-27 Supplemental Retirement Agreement, dated as of December 23, 1991, between the Company and Dean T. Casaday -- filed as Exhibit 10-17 to the Company's Common Stock Form S-2, Registration No. 33-43382.
10-28 First Amendment to the Supplemental Retirement Agreement, dated as of September 1, 1994, between the Company and Dean T. Casaday -- filed as Exhibit 10-37 to the Company's Annual Report on Form 10-K for 1994, File No. 0-7812.
10-29 Pennsylvania Enterprises, Inc. 1992 Stock Option Plan, effective June 3, 1992 -- filed as Exhibit A to the Company's 1993 definitive Proxy Statement, File No. 0-7812.
10-30 Form of Stock Option Agreement, dated as of June 20, 1997, between the Company and certain of its Officers -- filed as Exhibit 10-1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 0-7812.
Exhibit Number
10-31 Form of Stock Option Agreement, dated as of June 20, 1997, between the Company and certain of its non-employee directors -- filed as Exhibit 10-2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 0-7812.
10-32 Pennsylvania Enterprises, Inc. Stock Incentive Plan, effective May 14, 1997 -- filed as Exhibit A to the Company's 1997 definitive Proxy Statement, File No. 0-7812.
10-33 Employment Agreement dated as of August 28, 1996, by and among the Company, PG Energy and Thomas F. Karam -- filed as Exhibit 10-2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, File No. 0-7812.
10-34 Amended Employment Agreement dated as of May 6, 1998, by and among the Company, PG Energy and Thomas F. Karam -- filed as Exhibit 10-4 to the Company's Quarterly report on Form 10-Q for the quarter ended June 30, 1998, File No. 0-7812.
10-35 Director Deferred Compensation Plan dated as of April 23, 1997 -- filed as Exhibit 10-1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, File No. 0-7812.
10-36 First Amendment to the Director Deferred Compensation Plan, amended and restated effective as of November 19, 1997 -- filed as Exhibit 10-40 to the Company's Annual Report on Form 10-K for 1997, File No. 0-7812.
10-37 1995 Directors' Stock Compensation Plan, effective January 18, 1995 -- filed as Exhibit A to the Company's 1995 definitive Proxy Statement, File No. 0-7812.
10-38 First Amendment to the 1995 Directors' Stock Compensation Plan, amended and restated effective as of November 19, 1997 -- filed as Exhibit 10-42 to the Company's Annual Report on Form 10-K for 1997, File No. 0-7812.
10-39 Form of Stock Option Grant, dated as of May 6, 1998, between the Company and certain of its Officers -- filed as Exhibit 10-1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, File No. 0-7812.
10-40 Form of Stock Option Grant, dated as of May 6, 1998, between the Company and certain of its non-employee directors -- filed as Exhibit 10-2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, File No. 0-7812.
10-41 Stock Option Grant, dated as of May 6, 1998, between the Company and Thomas F. Karam -- filed as Exhibit 10-3 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, File No. 0-7812.
10-42 Director Retirement Plan, effective as of January 1, 1999 -- filed herewith.
(21) Subsidiaries of the Registrant:
21-1 Subsidiaries of the Registrant -- filed herewith.
(23) Consents of Experts and Counsel:
23-1 Consent of Independent Accountants relative to December 31, 1998 and 1997, Consolidated Financial Statements -- filed herewith.
23-2 Consent of Independent Accountants relative to December 31, 1996, Consolidated Financial Statements -- filed herewith.
(27) Financial Data Schedule:
27-1 Financial Data Schedule -- filed herewith.
NOTES: (a) Deductions represent uncollectible balances of accounts receivable written off, net of recoveries.
(b) Deductions are principally payments made in settlement of claims.