UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO _______
COMMISSION FILE NUMBER 1-3551
EQUITABLE RESOURCES, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-0464690
(State of incorporation or organization) (IRS Employer Identification No.)
One Oxford Centre, Suite 3300, 301 Grant Street,
Pittsburgh, Pennsylvania 15219
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (412) 553-5700
------------
420 Boulevard of the Allies, Pittsburgh, Pennsylvania 15219
(Former name, former address and former
fiscal year, if changed since last report)
------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of issuer's classes of common
stock, as of the close of the period covered by this report.
Outstanding at
Class March 31, 1999
Common stock, no par value 34,107,000 shares
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
Index
Page No.
Part I. Financial Information:
Item 1. Financial Statements (Unaudited):
Statements of Consolidated Income for the Three
Months Ended March 31, 1999 and 1998 1
Statements of Condensed Consolidated Cash Flows
for the Three Months Ended March 31, 1999 and 1998 2
Condensed Consolidated Balance Sheets, March 31,
1999, and December 31, 1998 3 - 4
Notes to Condensed Consolidated Financial Statements 5 - 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 17
Part II. Other Information 18
Signature 19
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
Statements of Consolidated Income (Unaudited)
(Thousands Except Per Share Amounts)
Three Months Ended
March 31,
1999 1998
------------------------------------
<S> <C> <C>
Operating revenues $ 420,053 $ 283,449
Cost of sales 292,945 158,981
------------- ------------
Net operating revenues 127,108 124,468
------------- ------------
Operating expenses:
Operation and maintenance 23,003 21,552
Exploration 501 982
Production 5,913 6,864
Selling, general and administrative 20,527 27,010
Depreciation, depletion and amortization 20,940 19,739
------------- ------------
Total operating expenses 70,884 76,147
------------- ------------
Operating income 56,224 48,321
Equity in nonconsolidated subsidiaries 673 419
Gain/(loss) on sale of assets - (1,398)
------------- ------------
Earnings from continuing operations, before interest & taxes 56,897 47,342
Interest charges 9,263 9,166
------------- ------------
Income before income taxes 47,634 38,176
Income taxes 17,895 13,524
------------- ------------
Net income from continuing operations 29,739 24,652
Loss from discontinued operations - net of tax - (4,604)
------------- ------------
Net income $ 29,739 $ 20,048
============= ============
Average common shares outstanding 35,258 36,934
Earnings (loss) per share of common stock:
Basic/Diluted:
Continuing operations $ 0.84 $ 0.66
Discontinued operations - (0.12)
------------- ------------
Net income $ 0.84 $ 0.54
============= ============
The accompanying notes are an integral part of these
condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Thousands)
Three Months Ended
March 31,
1999 1998
------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income/(loss) from continuing operations $ 29,739 $ 24,652
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion, and amortization 20,940 19,652
Amortization of net contract costs 892 2,318
Deferred income taxes (benefits) (33) 4,252
Changes in other assets and liabilities (30,960) (828)
---------------- ----------------
Net cash provided by (used in) continuing operating activities 20,578 50,046
Net cash provided by (used in) discontinued operations - (2,390)
---------------- ----------------
Net cash provided by (used in) operating activities 20,578 47,656
---------------- ----------------
Cash flows from investing activities:
Capital expenditures (21,489) (25,656)
Capital expenditures on discontinued operations in year of disposal - (4,011)
Proceeds from sale of short-term investments 136,330 -
Purchases of short-term investments (137,473) -
---------------- ----------------
Net cash used in investing activities (22,632) (29,667)
---------------- ----------------
Cash flows from financing activities:
Retirement of long-term debt - (5,000)
Increase (decrease) in short-term loans 57,996 (28,790)
Dividends paid (10,544) (21,878)
Proceeds from issuance of common stock - 1,405
Purchase of treasury stock (44,603) -
---------------- ----------------
Net cash provided by (used in) financing activities 2,849 (54,263)
---------------- ----------------
Net increase (decrease) in cash and cash equivalents 795 (36,274)
Cash and cash equivalents at beginning of period 8,973 69,442
---------------- ----------------
Cash and cash equivalents at end of period $ 9,768 $ 33,168
================ ================
Cash paid (received) during the period for:
Interest (net of amount capitalized) $ 11,682 $ 16,850
================ ================
Income taxes $ (716) $ 1,509
================ ================
The accompanying notes are an integral part of these
condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
ASSETS March 30, December 31,
1999 1998
-----------------------------------------
(Thousands)
-----------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 9,768 $ 8,973
Short-term investments 94,614 93,471
Accounts receivable 213,616 199,363
Unbilled revenues 44,893 41,616
Inventory 14,562 33,743
Deferred purchased gas cost 16,939 39,445
Prepaid expenses and other 48,882 34,831
--------------- ---------------
Total current assets 443,274 451,442
--------------- ---------------
Property, plant and equipment 1,975,726 1,956,763
Less accumulated depreciation and depletion (781,718) (762,320)
--------------- ---------------
Net property, plant and equipment 1,194,008 1,194,443
--------------- ---------------
Other assets 223,957 214,971
--------------- ---------------
Total $ 1,861,239 $ 1,860,856
=============== ===============
The accompanying notes are an integral part of these
condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
LIABILITIES AND STOCKHOLDERS EQUITY March 30, December 31,
1998 1998
--------------------------------------
(Thousands)
--------------------------------------
<S> <C> <C>
Current liabilities:
Current portion long-term debt $ 74,475 $ 74,136
Short-term loans 173,699 115,703
Accounts payable 106,318 147,951
Other current liabilities 101,465 104,170
-------------- --------------
Total current liabilities 455,957 441,960
-------------- --------------
Long-term debt 281,350 281,350
Deferred and other credits 312,317 304,127
Commitments and contingencies - -
Preferred trust securities 125,000 125,000
Capitalization:
Common stockholders' equity:
Common stock, no par value, authorized 80,000
shares; shares issued March 31, 1999, 37,252;
December 31, 1998, 37,252 283,985 280,400
Treasury stock, shares at cost March 31, 1999,
3,145; December 31, 1998, 1,396 (83,901) (39,298)
Retained earnings 486,521 467,326
Accumulated other comprehensive income (loss) 10 (9)
-------------- --------------
Total common stockholders' equity 686,615 708,419
-------------- --------------
Total $ 1,861,239 $ 1,860,856
============== ==============
The accompanying notes are an integral part of these
condensed consolidated financial statements.
</TABLE>
<PAGE>
Equitable Resources, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
A. The accompanying financial statements should be read in conjunction with
the Company's 1998 Annual Report and Form 10-K.
B. In the opinion of Company's management, the accompanying unaudited
condensed consolidated financial statements contain all adjustments
necessary to present fairly the financial position as of March 31, 1999
and 1998, and the results of operations and cash flows for the three
months then ended. All adjustments are of a normal, recurring nature
unless otherwise indicated.
C. The results of operations for the three-month period ended March 31, 1999
and 1998, are not indicative of results for a full year because of the
seasonal nature of the Company's natural gas distribution and energy
marketing operations.
D. In April 1998 management adopted a formal plan to sell the Company's
natural gas midstream operations. The operations include an integrated
gas gathering, processing and storage system in Louisiana and a natural
gas and electricity marketing business based in Houston. The condensed
consolidated financial statements include these as discontinued
operations. In December 1998, the Company completed the sale of these
operations to various parties for $338.3 million, which included working
capital adjustments.
Net loss from discontinued operations was $4.6 million for the three
months ended March 31, 1998. These results were reported net of income
tax benefit of $2.3 million. Interest expense allocated to discontinued
operations was $1.8 million in the first three months of 1998.
E. In April 1998, $125 million of 7.35% Trust Preferred Capital Securities
were issued. The capital securities were issued through a subsidiary
trust, Equitable Resources Capital Trust I, established for the purpose
of issuing the capital securities and investing the proceeds in 7.35%
Junior Subordinated Debentures issued by the Company. The capital
securities have a mandatory redemption date of April 15, 2038; however,
at the Company's option, the securities may be redeemed on or after April
23, 2003. Proceeds were used to reduce short-term debt outstanding.
Interest expense for the three-months ended March 31, 1999, includes $2.3
million of preferred dividends related to the trust preferred capital
securities.
F. At March 31, 1999, 8,754,000 shares of Common Stock were reserved as
follows: 460,000 shares for issuance under the Key Employee Restricted
Stock Option and Stock Appreciation Rights Incentive Compensation Plan,
1,715,000 shares for issuance under the Long-Term Incentive Plan, 76,000
shares for issuance under the Non-Employee Directors' Stock Incentive
Plan, 9,000 shares for issuance under the Company's Dividend Reinvestment
and Stock Purchase Plan and 6,494,000 shares for possible use in
connection with future acquisitions.
<PAGE>
Equitable Resources, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
G. Segment Disclosure
The Company reports operations in four segments. The Equitable Utilities
segment's activities comprise the operations of the Company's
state-regulated local distribution company, in addition to gas
transportation, storage and marketing activities involving the Company's
interstate natural gas pipelines. The Equitable Production segment's
activities comprise the exploration, development, production, gathering
and sale of natural gas and oil, and extraction and sale of natural gas
liquids. NORESCO's activities comprise cogeneration and power plant
development, the development and implementation of energy and water
efficiency programs, performance contracting and central facility plant
operations. The Equitable Energy segment provides marketing, supply and
transportation services for the natural gas market.
Operating segments are evaluated on their contribution to the Company's
consolidated results, based on earnings before interest and taxes.
Interest charges and income taxes are managed on a consolidated basis and
allocated pro forma to operating segments. Headquarters costs are billed
to operating segments based on a fixed allocation of the annual
headquarters' operating budget. Differences between budget and actual
headquarters expenses are not allocated to operating segments, but
included as a reconciling item to consolidated earnings from continuing
operations.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
----------------------------------------
(Thousands)
<S> <C> <C>
Revenues from external customers:
Equitable Utilities $ 151,332 $ 146,936
Equitable Production 38,323 39,898
NORESCO 37,977 18,285
Equitable Energy 192,421 78,330
---------------- ---------------
Total $ 420,053 $ 283,449
================ ===============
Intersegment revenues:
Equitable Utilities $ 3,210 $ 5,051
Equitable Production 3,034 12,651
Equitable Energy 17,539 20,232
---------------- ---------------
Total $ 23,783 $ 37,934
================ ===============
Segment profit (loss):
Equitable Utilities $ 44,224 $ 34,441
Equitable Production 8,089 14,089
NORESCO 3,349 9
Equitable Energy 1,423 (1,785)
---------------- ---------------
Total operating segments 57,085 46,754
Less: reconciling items
Headquarters operating expenses (gains) not
allocated to operating segments 188 (588)
Interest expense 9,263 9,166
Income tax expenses 17,895 13,524
---------------- ---------------
Net income from continuing operations $ 29,739 $ 24,652
================ ===============
</TABLE>
<PAGE>
Equitable Resources, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
H. Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
which is required to be adopted in years beginning after June 15, 1999.
The Company has not yet determined when it will adopt the provisions of
this statement, which may be implemented at the beginning of any fiscal
quarter. SFAS No. 133 will require the Company to recognize all
derivatives on the balance sheet at fair value. Derivatives that are not
hedges must be adjusted to fair value through income. If the derivative
is a hedge, depending on the nature of the hedge, changes in the fair
value of derivatives will either be offset against the change in fair
value of the hedged assets, liabilities or firm commitments through
earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a derivative's
change in fair value will be immediately recognized in earnings.
The Company has not yet determined what the effect of SFAS No. 133 will
be on the earnings and financial position of the Company.
I. Reclassification
Certain previously reported amounts have been reclassified to conform
with the 1999 presentation.
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
OVERVIEW
Equitable's consolidated net income for the quarter ended March 31,
1999, was $29.7 million, or $0.84 per share, compared with net income of $20.0
million, or $0.54 per share, for the quarter ended March 31, 1998. The 1998
quarter included a loss on the Company's discontinued midstream operations of
$4.6 million, or $0.12 per share. These operations were sold in December 1998.
The 1999 first quarter net income of $29.7 million, or $0.84 per share,
represents a 27 percent increase over net income from continuing operations of
$24.7 million, or $0.66 per share, for the first quarter 1998. The earnings
improvement for the 1999 period was primarily attributable to lower selling,
general and administrative expenses across all of the Company's business
segments. Weaker prices for produced natural gas, oil and natural gas liquids
(NGLs) largely offset higher weather-related gas sales in the Company's utility
service territory and increased gas production.
During the three months ended March 31, 1999, the Company repurchased
1.8 million shares of common stock at an average price of $26.08 per share.
Including shares repurchased in the fourth quarter of 1998, the Company has
repurchased 3.1 million shares, 55 percent of the amount authorized by the Board
of Directors in October 1998.
RESULTS OF OPERATIONS
EQUITABLE UTILITIES
Equitable Utilities' operations comprise the sale and transportation of
natural gas to retail customers at state-regulated rates, interstate
transportation and storage of natural gas subject to federal regulation and the
marketing of natural gas.
The pipeline operations of Equitrans, L.P. and Three Rivers Pipeline
Corporation are subject to rate regulation by the Federal Energy Regulatory
Commission (FERC). Equitrans filed a rate case in April 1997 and began
collecting revenues based on rates subject to refund in August 1997. The rate
case was designed to address the recovery of certain gas facility costs related
to the implementation of Order 636. On April 29, 1999, the FERC approved,
without modification, the joint stipulated settlement agreement resolving all
issues in its proceeding.
Unlike a previously rejected settlement, the approved settlement
provides for prospective collection of gathering charges. In addition, the
settlement provides Equitrans the opportunity to retain all revenues associated
with interruptible transportation and negotiated rate agreements as well as
moving its gathering charge toward a cost-based rate. On an annualized basis,
the approved settlement, which is anticipated to become final before the end of
the second quarter, provides for revenues of $1 million in excess of the level
recorded in the first quarter of 1999.
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
EQUITABLE UTILITIES (Continued)
Three Months Ended
March 31,
EQUITABLE UTILITIES 1999 1998
- --------------------------------------------------------------------------------
(Thousands, except prices
& degree days)
Operating revenues:
Residential gas sales $ 90,524 $ 104,801
Commercial gas sales 12,449 10,650
Industrial and utility gas sales 7,389 11,612
Marketed gas sales 1,791 2,599
Transportation service 36,162 18,543
Storage service 2,461 2,445
Other 3,766 1,338
---------- ----------
Total revenues 154,542 151,988
Cost of energy purchased 71,169 75,598
Revenue related taxes 4,872 5,380
---------- ----------
Net operating revenues 78,501 71,010
Operating expenses:
Operations and maintenance 19,340 18,617
Selling, general and administrative 8,808 12,633
Depreciation, depletion and amortization 6,129 5,319
---------- ----------
Total operating expenses 34,277 36,569
---------- ----------
Earnings before interest and taxes $ 44,224 $ 34,441
========== ==========
Sales quantities (Mcf):
Residential gas sales 9,516 10,670
Commercial gas sales 1,322 1,112
Industrial and utility gas sales 3,575 4,618
Marketed gas sales 1,033 1,217
Transportation deliveries 18,282 10,935
Average selling prices (per Mcf):
Residential gas sales $ 9.513 $ 9.822
Commercial gas sales 9.417 9.577
Industrial and gas sales 2.067 2.515
Marketed gas sales 1.734 2.136
Heating degree days (normal - 3,016) 2,914 2,310
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
EQUITABLE UTILITIES (Continued)
Three Months Ended March 31, 1999
vs. Three Months Ended March 31, 1998
Equitable Utilities had earnings before interest and taxes (EBIT) for
the March 1999 quarter of $44.2 million compared to $34.4 million for the 1998
period. The segment's results for the latest quarter benefited from higher net
revenues principally due to weather 26% colder than the first quarter of 1998
and lower general and administrative costs.
Net operating revenues for the three months ended March 31, 1999,
increased 11% to $78.5 million, primarily as a result of a 17% increase in
distribution system throughput volumes due to colder weather ($6.8 million) and
higher distribution margins from new ancillary services and tariff changes ($2.1
million). These increases were partially offset by a provision for refund
related to the Equitrans' rate case ($1.9 million). As noted above, the rate
case is anticipated to become final in the second quarter of 1999.
The decrease in operating expenses in the current period reflects lower
utility and corporate overhead expenses ($3.8 million), as the benefits are
realized from the fourth quarter 1998 restructuring of corporate office and
utility business functions.
EQUITABLE PRODUCTION
The Production operations comprise the exploration and production of
natural gas, natural gas liquids and crude oil through operations focused in the
Appalachian and Gulf of Mexico regions.
In 1998, the managerial responsibility for the operations conducted by
two subsidiaries, Kentucky West Virginia Gas Company and Nora Transmission
Company, were transferred from Equitable Utilities to Equitable Production under
a services agreement. The financial results for both periods are reclassified to
reflect the new structure.
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
EQUITABLE PRODUCTION (Continued)
Three Months Ended
March 31,
EQUITABLE PRODUCTION 1999 1998
- --------------------------------------------------------------------------------
(Thousands, except prices)
Operating revenues:
Produced natural gas $ 26,220 $ 31,766
Transportation 6,609 6,618
Natural gas liquids 4,003 5,829
Crude oil 1,672 4,166
Marketed natural gas 1,943 1,957
Other 910 2,213
---------- ---------
Total revenues 41,357 52,549
Cost of energy purchased 4,332 6,275
---------- ---------
Net operating revenues 37,025 46,274
Operating expenses:
Operating and maintenance 3,663 2,935
Production 5,913 6,864
Dry hole 29 104
Other exploration 472 878
Selling, general and administration 5,224 7,807
Depreciation, depletion and amortization 13,635 12,199
---------- ---------
Total operating expenses 28,936 30,787
Gain (loss) on sale of assets - (1,398)
---------- ---------
Earnings from continuing operations,
before interest and taxes $ 8,089 $ 14,089
========== =========
Sales quantities:
Produced natural gas (Mcf) 15,383 12,994
Transportation deliveries (Mcf) 9,615 10,722
Natural gas liquids (gallons) 18,774 18,211
Crude oil (Bbls) 164 264
Marketed gas sales (Mcf) 1,402 987
Average selling prices:
Produced natural gas (per Mcf) $ 1.704 $ 2.445
Natural gas liquids (per gallon) 0.213 0.320
Crude oil (per barrel) 10.195 15.780
Marketed gas sales (per Mcf) 1.386 1.983
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
EQUITABLE PRODUCTION (Continued)
Three Months Ended March 31, 1999
vs. Three Months Ended March 31, 1998
Equitable Production had EBIT for the March 1999 quarter of $8.1 million
compared to $14.1 million for the 1998 quarter. The segment's results were
adversely affected by significantly lower market prices for natural gas, crude
oil and natural gas liquids, the impact of which was slightly offset by
increased natural gas production and lower total operating expenses.
Net operating revenues for the three months ended March 1, 1999,
decreased $9.2 million compared to the first quarter of 1998 primarily due to
reductions of 30%, 35% and 33% in Equitable Production's average prices for
natural gas, crude oil and natural gas liquids, respectively.
The price declines continue to be a reflection of the overall commodity
market. The revenue impact of the 1999 decline in natural gas prices ($9.1
million) is partially offset by volume increases ($3.6 million). Overall,
natural gas production increased 18% in 1999 compared with 1998 due to a 2.4 bcf
increase in Gulf production. The increased production volume is related to
additional Gulf wells at West Cameron 540 and West Cameron 180/198, which
commenced production subsequent to March 31, 1998. The decline in crude oil
production reflects the depletion of West Cameron 580 and certain West Cameron
180/198 wells.
Total operating expenses for the current quarter decreased $1.9 million
compared to the same quarter in 1998 despite increased depreciation, depletion
and amortization, which was higher because of increased natural gas production.
Administrative and overhead expenses declined $2.6 million as a result of
management and staff headcount reductions and other corporate restructuring
activities, which occurred in the fourth quarter of 1998. Production costs
decreased $0.4 million in the Appalachian region, as a result of decreased
well-tending staff and reduced severance taxes due to lower commodity prices.
Production costs decreased $0.6 million in the Gulf region in 1999, as the 1998
period included high start-up costs for certain properties acquired at the end
of 1997.
The loss on sales of assets in 1998 included a $0.9 million reserve for
loss on the sale of the Company's Colombian operations sold in 1998 and an
additional $0.5 million reserve on the previously recorded sale of the Company's
Western properties.
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
NORESCO
NORESCO provides energy and energy related products and services that
are designed to reduce its customers' operating costs and improve their
productivity. NORESCO's customers include commercial, governmental,
institutional and industrial end-users. The majority of NORESCO's revenue and
earnings comes from energy saving performance contracting services. NORESCO
provides the following integrated energy management services: project
development and engineering analysis; construction; management; financing;
equipment operation and maintenance; and energy savings metering, monitoring and
verification. NORESCO also manages the segment's facilities management division,
which develops and operates private power, cogeneration and central plant
facilities in the U.S. and selected international markets.
Three Months Ended
March 31,
NORESCO 1999 1998
- --------------------------------------------------------------------------------
(Thousands)
Energy service contracting revenues $ 37,977 $ 18,285
Energy service contract cost 29,501 13,030
---------- ---------
Gross margin 8,476 5,255
---------- ---------
Operating expenses:
Selling, general and administrative 4,690 4,580
Depreciation, depletion and amortization 1,110 1,085
---------- ---------
Total operating expenses 5,800 5,665
Other income 673 419
---------- ---------
Earnings before interest and taxes $ 3,349 $ 9
========== =========
Three Months Ended March 31, 1999
vs. Three Months Ended March 31, 1998
NORESCO's gross margin increased to $8.5 million for the quarter ended
March 31, 1999, compared to $5.3 million for the same period in 1998. This
segment's energy management and performance contracting operations now hold a
larger mix of commercial government and international projects. During the
quarter, several significant contracts were signed. Construction completed
during the quarter more than doubled compared to the first quarter of 1998. The
gross margin rate as a percent of sales declined to 22% compared to 29% during
1998 due to increased competition and contract mix. At March 31, 1999,
construction backlog totaled approximately $110 million.
Operating expenses for this segment remained relatively unchanged, as
increased marketing and development expenses were offset by reductions in
administrative expenses due to office consolidations and the integration of
formerly distinct facilities management divisions.
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
EQUITABLE ENERGY
Equitable Energy is a nonregulated residential, commercial and
industrial marketer of natural gas. Services and products offered by Equitable
Energy include commodity procurement and delivery, physical gas management
operations and control, and customer support services.
Three Months Ended
March 31,
Equitable Energy 1999 1998
- --------------------------------------------------------------------------------
(Thousands)
Operating revenues:
Marketed natural gas (millions) $ 209,835 $ 98,561
Other 125 -
---------- ---------
Total revenues 209,960 98,561
Cost of energy purchased 206,853 96,632
---------- ---------
Net operating revenues 3,107 1,929
---------- ---------
Operating expenses:
Selling, general and administrative 1,635 3,417
Depreciation, depletion and amortization 49 297
---------- ---------
Total operating expenses 1,684 3,714
---------- ---------
Earnings (loss) before interest and taxes $ 1,423 $ (1,785)
========== =========
Three Months Ended March 31, 1999
vs. Three Months Ended March 31, 1998
Net operating revenues increased to $210.0 million for the quarter ended
March 31, 1999, compared to $98.6 million for the same period in 1998. During
the latest quarter, Equitable Energy marketed 84 billion cubic feet (bcf) of
natural gas compared to 36 bcf for last year's quarter. The increased volume is
a result of the addition of residential customer choice programs in Pennsylvania
and Ohio (3 bcf) and increased utility/marketing company volumes transported
during the 1999 winter heating season (46 bcf). The marketing company sales
represent high volume, comparatively low margin transactions, which complement
Equitable Energy's base commercial and residential sales. Many of these trading
company contracts expired at the end of March 1999 and may or may not be
renewed.
Equitable Energy operating expenses for the latest quarter were more
than 50 percent below those of the first quarter of 1998, reflecting a
significant staff reduction and office closing completed as part of the
corporate-wide restructuring in the fourth quarter of 1998.
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
CAPITAL RESOURCES AND LIQUIDITY
Cash Flows
Cash required for operations is impacted primarily by the seasonal
nature of Equitable Resource's natural gas distribution operations and the
volatility of oil and gas commodity prices.
Cash provided by operating activities totaled $20.6 million in the three
months ended March 31, 1999, compared to cash provided by operating activities
of $47.7 million in the 1998 period. Cash flows from operations decreased in
1999 primarily as a result of the following: a net $10 million increase in
accounts receivable at the Company's distribution operations due to increased
revenues, coupled with decreased collections; a decrease of $17 million in
accounts payable in production due to decreased capital expenditures for
drilling in the Gulf and final payment on working capital adjustments for the
December 1998 sale of the Company's midstream operations; an increase of $12
million in unbilled revenues at Noresco due to increased construction activity;
and the payment of $5 million of severance accrued at December 31, 1998 under
the corporate restructuring program. During the first quarter of 1999, there
were no material changes in the restructuring charge accrued in prior periods.
Equitable Resource's financial objectives require ongoing capital
expenditures for growth projects in continuing operations of the Equitable
Production segment, as well as replacements, improvements and additions to plant
assets in the Equitable Utilities segment. Such capital expenditures during the
1999 quarter were approximately $21.5 million, including $11.5 million and $4.3
million for exploration and production projects in the Gulf of Mexico and
Appalachian regions, respectively. A total of $119 million has been authorized
for the 1999 capital expenditure program. The Company expects to continue to
finance its 1999 capital expenditure program with cash generated from operations
and with short-term loans.
Capital Resources
Equitable Resources has adequate borrowing capacity to meet its
financing requirements. Bank loans and commercial paper, supported by available
credit, are used to meet short-term financing requirements. Interest rates on
these short-term loans averaged 4.8% during the first quarter of 1999. Equitable
Resources maintains a revolving credit agreement with a group of banks providing
$500 million of available credit. Adequate credit is expected to continue to be
available in the future.
In the fourth quarter of 1998, the Company completed the sale of its
midstream operations for $338 million. A portion of the proceeds to the Company
were used to retire a portion of the Company's outstanding long- and short-term
debt and to fund the repurchase of common stock. At March 31, 1999, $95 million
of proceeds is invested in short-term debt securities, of which $75 million will
be used to retire additional long-term debt maturing in July 1999.
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
YEAR 2000
State of Readiness
The Company initiated an enterprise-wide project in 1996 to address the
Year 2000 issue. A management team was put in place to manage this project and a
detailed project plan has been developed to address the three identified primary
risk areas: process controls and facilities, business information systems
applications and issues relative to third party product and service providers.
This plan is continuously updated and reviewed regularly with senior management
and the Board of Directors. The Company is on schedule to complete remediation
and testing of all critical components as planned.
To date the Company has completed the inventory and assessment phases
covering all process controls (embedded chips), facilities and systems
applications. The remediation and testing of process controls, using both
internal resources and contracted engineers, is well underway (93% complete) and
on schedule. The testing and remediation of systems applications are on schedule
with approximately 90% of the critical applications remediated and tested.
Equitable anticipates that all critical systems will be Y2K compliant by
September 1999.
Additionally, the Company has developed a formal communications process
with external parties with whom it does business to determine the extent to
which they have addressed their Year 2000 compliance. The Company will continue
to evaluate responses as they are received. Actions to remediate potential
problems (up to and including shifting business to Year 2000 compliant vendors
from those with problems) will take place in 1999.
Costs
The total cost of the Company's Year 2000 project is still being
evaluated. Until all process control systems have been tested and documented,
the full cost of remediation of this part of the project will not be known. The
cost to date, however, is $3.7 million and the total cost estimate for the
balance of the project is an additional $1.2 million. All of the costs have been
or will be charged to operating expense except $0.5 million of systems upgrades,
which will be capitalized and charged to expense over the estimated useful life
of the associated hardware and software. Additional costs could be incurred if
significant remediation activities are required with third party suppliers (see
below). The estimated costs to convert remaining systems is not expected to be
material to results of operations in any future period.
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
YEAR 2000 (Continued)
Risks and Contingencies
The Company continues to evaluate risks associated with the potential
inability of outside parties to successfully complete their Year 2000 effort,
and contingency plans are being developed and/or adapted as appropriate. While
the Company believes it has taken the necessary steps to provide for the
continued safe and reliable operation of its natural gas delivery system into
the Year 2000, monitoring the progress of critical suppliers is an ongoing
process. A worst-case scenario would involve the failure of one or more of the
gas marketers or pipelines supplying the Company's distribution operations. If
this occurs, the Company would either supply its customers from existing
internal supply sources or attempt to purchase supply on the "spot" market,
probably at somewhat higher prices. Unless supply shortfalls were of a long
duration or occurred during a period of extreme weather conditions when spot
supplies might not be as readily available, it would be unlikely that the
distribution company would have to curtail deliveries to its customers. If it
appears that this scenario is more than a remote possibility additional
contingency plans will be put into place.
INFORMATION REGARDING FORWARD LOOKING STATEMENTS
Disclosures in this report may include forward-looking statements related
to such matters as anticipated financial performance, business prospects,
capital projects, new products and operational matters. The Company notes that a
variety of factors could cause the Company's actual results to differ materially
from the anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that may affect the
operations, performance, development and results of the Company business
include, but are not limited to, the following: weather conditions, the pace of
deregulation of retail natural gas markets, the timing and extent of changes in
commodity prices for natural gas and crude oil, changes in interest rates, the
timing and extent of the Company's success in acquiring natural gas and crude
oil properties and in discovering, developing and producing reserves, the
inability of the Company or others to remediate Year 2000 concerns in a timely
fashion, delays in obtaining necessary governmental approvals, the impact of
competitive factors on profit margins in various markets in which the Company
competes and other factors detailed in the Company's filings with the Securities
and Exchange Commission.
<PAGE>
PART II. OTHER INFORMATION
Item 5. Other Information
On April 28, 1999, the Board of Directors, at a regular meeting
of the Board, approved resolutions amending the Company's
By-Laws (Sections 1.08 and 3.07) in order 1) to clarify the
procedures to be followed and provide for an advance notice in
connection with shareholder proposals to be presented at the
annual and all special meetings of shareholders and, 2) to make
the advance notice period for shareholder nominations of
directors consistent with the notice period required for
shareholder proposals. The amended by-laws are included in this
filing as Exhibit 3.02.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.02 Equitable Resources, Inc. By-laws (Amended through
April 28, 1999).
(b) Reports on Form 8-K during the quarter ended March 31, 1999:
None.
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EQUITABLE RESOURCES, INC.
--------------------------------------------
(Registrant)
/s/ David L. Porges
--------------------------------------------
David L. Porges
Senior Vice President
and Chief Financial Officer
Date: May 14, 1999
EQUITABLE RESOURCES, INC.
BY-LAWS
(Amended through April 28, 1999)
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1.01 All meetings of the shareholders shall be held at
the principal office of the Company or such other places, either within or
without the Commonwealth of Pennsylvania, as the Board of Directors may from
time to time determine.
Section 1.02 An annual meeting of shareholders shall be held
in each calendar year at such time and place as the Board of Directors shall
determine. If the annual meeting shall not be called and held during such
calendar year, any shareholder may call such meeting at any time thereafter.
Section 1.03 At each such annual meeting, the class of
Directors then being elected shall be elected to hold office for a term of three
(3) years, and until their successors shall have been elected and qualified. All
elections of Directors shall be conducted by three (3) Judges of Election, who
need not be shareholders, appointed by the Board of Directors. If any such
appointees are not present, the vacancy shall be filled by the presiding officer
of the meeting. The President of the Company shall preside and the Secretary
shall take the minutes at all meetings of the shareholders. In the absence of
the President, the Chairman of the Executive Committee shall preside. In the
absence of both, the presiding officer shall be designated by the Board of
Directors or, if not so designated, by the shareholders of the Company, and if
the Secretary is unable to do so, the presiding officer shall designate any
person to take the minutes of the meeting.
Section 1.04 The presence, in person or by proxy, of the
holders of a majority of the voting power of all shareholders shall constitute a
quorum except as otherwise provided by law or by the Restated Articles of the
Company. If a meeting is not organized because a quorum is not present, the
shareholders present may adjourn the meeting to such time and place as they may
determine, except that any meeting at which Directors are to be elected shall be
adjourned only from day to day, or for such longer periods not exceeding fifteen
(15) days each, as may be directed by a majority of the voting stock present.
Section 1.05 Shareholders entitled to vote on any matter shall
be entitled to one (1) vote for each share of capital stock standing in their
respective names upon the books of the Company to be voted by the shareholder in
person or by his or her duly authorized proxy or attorney. The validity of every
unrevoked proxy shall cease eleven (11) months after the date of its execution
unless some other definite period of validity shall be expressly provided
therein, but in no event shall a proxy, unless coupled with an interest, be
voted on after three (3) years from the date of its execution. All questions
shall be decided by the vote of shareholders entitled to cast at least a
majority of the votes which all shareholders present and voting (excluding
abstentions) are entitled to cast on the matter, unless otherwise expressly
provided by law or by the Restated Articles of the Company.
Section 1.06 Special meetings of shareholders may be called by
the Board of Directors or by the President.
Section 1.07 Notice of the annual meeting and of all special
meetings of shareholders shall be given by sending a written or printed notice
thereof by mail, specifying the place, day, and hour of the meeting and, in the
case of a special meeting of shareholders, the general nature of the business to
be transacted, to each shareholder at the address appearing on the books of the
Company, or the address supplied by such shareholder to the Company for the
purpose of notice, at least five (5) days before the day named for the meeting,
unless such shareholders shall waive notice or be in attendance at the meeting.
Section 1.08 At any annual meeting or special meeting of shareholders, only
such business as is properly brought before the meeting in accordance with this
paragraph may be transacted. To be properly brought before any meeting, any
proposed business must be either (i) specified in the notice of the meeting (or
any supplement thereto) given by or at the direction of the Board of Directors,
(ii) otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (iii) if brought before the meeting by a shareholder,
then (x) the shareholder must have been a shareholder of record on the record
date for the determination of shareholders entitled to vote at such meeting, and
(y) written notice of such proposed business must have been delivered or mailed
by first class United Stated mail, postage prepaid, to the Secretary, and
received not less than 90 days or more than 120 days prior to such meeting;
provided, however, that if less than 100 days' notice or prior public disclosure
of the date of the meeting is given to shareholders, such proposal shall have
been mailed or delivered to the Secretary not later than the close of business
on the 10th day following the day on which the notice of the meeting was mailed
or such public disclosure was made, whichever occurs first. Such notice shall
set forth the nature of and reasons for the proposal in reasonable detail and,
as to the shareholder giving the notice, (i) the name and address, as they
appear on the Company's books of such shareholder and (ii) the class and number
of shares of the Company which are beneficially owned by such shareholder.
ARTICLE II
GENERAL PROVISIONS
Section 2.01 The principal office of the Company shall be in
the City of Pittsburgh, Pennsylvania, and shall be kept open during business
hours every day except Saturdays, Sundays, and legal holidays, unless otherwise
ordered by the Board of Directors or the President.
Section 2.02 The Company shall have a corporate seal which
shall contain within a circle the following words: "Equitable Resources, Inc.,
Pittsburgh, Pennsylvania" and in an inner circle the words "Corporate Seal."
Section 2.03 The fiscal year of the Company shall begin with
January 1 and end with December 31 of the same calendar year.
Section 2.04 The Board of Directors shall fix a time, not more
than seventy (70) days prior to the date of any meeting of shareholders, or the
date fixed for the payment of any dividend or distribution, or the date for any
allotment of rights, or the date when any change or conversion or exchange of
shares will be made or go into effect, as a record date for the determination of
the shareholders entitled to notice of, or to vote at, any such meeting, or
entitled to receive payment of any such dividend or distribution, or to receive
any such allotment of rights, or to exercise the rights in respect of any such
change, conversion, or exchange of shares.
ARTICLE III
BOARD OF DIRECTORS
Section 3.01 Regular meetings of the Board of Directors shall
be held at least six (6) times each year, immediately after the annual meeting
of shareholders and at such other times and places as the Board of Directors
shall from time to time designate by resolution of the Board. Notice need not be
given of regular meetings of the Board held at the times and places fixed by
resolution of the Board.
If the Board shall fail to designate the specific time and
place of any regular meeting, such regular meeting shall be held at such time
and place as designated by the President and, in such case, oral, telegraphic or
written notice shall be duly served or sent or mailed by the Secretary to each
Director not less than five (5) days before the meeting.
Section 3.02 Special meetings may be held at any time upon the
call of the President, or the Chairman of the Executive Committee in the absence
of the President, at such time and place as he may deem necessary, or by the
Secretary at the request of any two (2) members of the Board, by oral,
telegraphic or written notice duly served or sent or mailed to each Director not
less than twenty-four (24) hours before the meeting.
Section 3.03 Fifty percent (50%) of the Directors at the time
in office shall constitute a quorum for the transaction of business. Vacancies
in the Board of Directors, including vacancies resulting from an increase in the
number of Directors, shall be filled only by a majority vote of the remaining
Directors then in office, though less than a quorum, except that vacancies
resulting from removal from office by a vote of the shareholders may be filled
by the shareholders at the same meeting at which such removal occurs. All
Directors elected to fill vacancies shall hold office for a term expiring at the
annual meeting of shareholders at which the term of the class to which they have
been elected expires.
Section 3.04 One (1) or more Directors may participate in a
meeting of the Board or of a committee of the Board by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and all Directors so
participating shall be deemed present at the meeting.
Section 3.05 The full Board of Directors shall consist of not
less than five (5) nor more than twelve (12) persons, the exact number to be
fixed from time to time by the Board of Directors pursuant to a resolution
adopted by a majority vote of the Directors then in office.
Section 3.06 The Board of Directors may elect one (1) of its
members (who shall not be an officer of the Company during his tenure) as its
Chairman, if the By-Laws of the Company do not then provide for the election of
a Chairman of the Board who shall be the Chief Executive Officer of the Company.
A Chairman so elected shall confer with the President as to the content of
agendas for such meetings and shall consult with the President as to matters
affecting or relating to the Board of Directors. The Chairman so elected shall
serve until the first meeting of the Board following the next annual meeting of
the shareholders. The Board shall also fix the annual rate of compensation to be
paid to the Chairman in addition to compensation paid to all non-officer members
of the Board. The Chairman, or in the absence of the Chairman, the President,
shall preside at all meetings of the Board, preserve order, and regulate debate
according to the usual parliamentary rules. In the absence of the Chairman or
the President, a Chairman pro tem may be appointed by the Board.
Section 3.07 Only persons who are nominated in accordance with
the following procedures shall be eligible for election as directors. Nomination
for election to the Board of Directors of the Company at a meeting of
shareholders may be made by the Board of Directors or by any shareholder of the
Company entitled to vote for the election of directors at such meeting who
complies with the notice procedures set forth in this Section 3.07. Such
nominations, other than those made by or on behalf of the Board of Directors,
shall be made by notice in writing delivered or mailed by first class United
States mail, postage prepaid, to the Secretary, and received not less than 90
days nor more than 120 days prior to such meeting; provided, however, that if
less than 100 days' notice or prior public disclosure of the date of the meeting
is given to shareholders, such nomination shall have been mailed or delivered to
the Secretary not later than the close of business on the 10th day following the
day on which the notice of the meeting was mailed or such public disclosure was
made, whichever occurs first. Such notice shall set forth (a) as to each
proposed nominee (i) the name, age, business address and, if known, residence
address or each such nominee, (ii) the principal occupation or employment of
each such nominee, (iii) the number of shares of stock of the Company which are
beneficially owned by each such nominee, and (iv) any other information
concerning the nominee that must be disclosed as to nominees in proxy
solicitations pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (including such person's written consent to be named as a
nominee and to serve as a director if elected); and (b) as to the shareholder
giving the notice (i) the name and address, as they appear on the Company's
books, of such shareholder and (ii) the class and number of shares of the
Company which are beneficially owned by such shareholder. The Company may
require any proposed nominee to furnish such other information as may reasonably
be required by the Company to determine the eligibility of such proposed nominee
to serve as a director of the Company.
The Chairman of the meeting may, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so determine, he shall
so declare to the meeting and the defective nomination shall be disregarded.
Section 3.08 No Director of this Company shall be permitted to
serve in that capacity after the date of the annual meeting of shareholders next
following his or her seventy-fourth (74th) birthday. No person who is an
employee or officer of the Company, except the Chief Executive Officer, shall be
eligible to serve as a Director of the Company after he or she has retried from
service as an employee or officer.
Section 3.09 No Director shall be personally liable for
monetary damages as such (except to the extent otherwise provided by law) for
any action taken, or any failure to take any action, unless such Director has
breached or failed to perform the duties of his or her office under Title 42,
Chapter 83, Subchapter F of the Pennsylvania Consolidated Statutes (or any
successor statute relating to Directors' standard of care and justifiable
reliance); and the breach or failure to perform constitutes self-dealing,
willful misconduct or recklessness.
If the Pennsylvania Consolidated Statutes are amended after
May 22, 1987, the date this section received shareholder approval, to further
eliminate or limit the personal liability of Directors, then a Director shall
not be liable, in addition to the circumstances set forth in this section, to
the fullest extent permitted by the Pennsylvania Consolidated Statutes, as so
amended.
The provisions of this section shall not apply to any actions
filed prior to January 27, 1987, nor to any breach of performance of duty, or
any failure of performance of duty, by any Director occurring prior to January
27, 1987.
ARTICLE IV
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 4.01 Directors, officers, agents, and employees of the
Company shall be indemnified as of right to the fullest extent not prohibited by
law in connection with any actual or threatened action, suit or proceeding,
civil, criminal, administrative, investigative or other (whether brought by or
in the right of the Company or otherwise) arising out of their service to the
Company or to another enterprise at the request of the Company. The Company may
purchase and maintain insurance to protect itself and any such Director,
officer, agent or employee against any liability asserted against and incurred
by him or her in respect of such service, whether or not the Company would have
the power to indemnify him or her against such liability by law or under the
provisions of this section. The provisions of this section shall be applicable
to persons who have ceased to be Directors, officers, agents, and employees and
shall inure to the benefit of the heirs, executors, and administrators of
persons entitled to indemnity hereunder.
Indemnification under this section shall include the right to
be paid expenses incurred in advance of the final disposition of any action,
suit or proceeding for which indemnification is provided, upon receipt of an
undertaking by or on behalf of the indemnified person to repay such amount if it
ultimately shall be determined that he or she is not entitled to be indemnified
by the Company. The indemnification rights granted herein are not intended to be
exclusive of any other rights to which those seeking indemnification may be
entitled and the Company may enter into contractual agreements with any
Director, officer, agent or employee to provide such individual with
indemnification rights as set forth in such agreement or agreements, which
rights shall be in addition to the rights set forth in this section.
The provisions of this section shall be applicable to actions,
suits or proceedings commenced after the adoption hereof, whether arising from
acts or omissions occurring before or after the adoption hereof.
ARTICLE V
STANDING COMMITTEES
Section 5.01 The Board of Directors shall have authority to
appoint an Executive Committee, a Finance Committee, an Audit Committee, and
such other committees as it deems advisable, each to consist of two (2) or more
Directors, and from time to time to define the duties and fix the number of
members of each committee. In the absence or disqualification of any member of
any such committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not constituting a quorum, may unanimously
appoint another Director or Directors to act at the meeting in the place of any
such absent or disqualified member or members.
ARTICLE VI
OFFICERS
Section 6.01 The officers of the Company shall be chosen by
the Board of Directors and shall be a President, a Secretary, and a Treasurer.
The Board of Directors may also choose such Vice Presidents, including one (1)
or more Executive Vice Presidents and Senior Vice Presidents, and one (1) or
more Assistant Secretaries and Assistant Treasurers as it may determine.
Section 6.02 The Board of Directors shall, at the first
meeting of the Board after its election, elect the principal officers of the
Company, and may elect additional officers at that or any subsequent meeting.
All officers elected by the Board of Directors shall hold office at the pleasure
of the Board.
Section 6.03 At the discretion of the Board of Directors, any
two (2) of the offices mentioned in Section 6.01 hereof may be held by the same
person except the offices of President and Secretary.
Section 6.04 The salaries of all officers of the Company,
other than Assistant Secretaries and Assistant Treasurers, shall be fixed by the
Board of Directors.
Section 6.05 The officers of the Company shall hold office
until the next annual meeting of the Board and until their successors are chosen
and qualify in their stead or until their earlier resignation or removal. Any
officer or agent may be removed by the Board of Directors whenever in its
judgment the best interests of the Company will be served thereby. Such removal,
however, shall be without prejudice to the contract rights of the person so
removed. If the office of any officer becomes vacant for any reason, the vacancy
may be filled by the Board of Directors.
PRESIDENT
Section 6.06 The President shall be the Chief Executive
Officer of the Company; shall preside at all meetings of the shareholders and at
all meetings of the Board of Directors; shall have general and active management
of the business of the Company; and shall see that all orders and resolutions of
the Board of Directors are carried into effect. In addition to any specific
powers conferred upon the President by these By-Laws, he shall have and exercise
such further powers and duties as from time to time may be conferred upon or
assigned to him by the Board of Directors.
SECRETARY
Section 6.07 The Secretary shall attend all meetings of the
shareholders and Board of Directors; shall record all votes and the minutes of
all proceedings in a book to be kept for that purpose; and shall perform like
duties for all committees of the Board, if so designated by the Board. The
Secretary shall keep in safe custody the seal of the Company and when authorized
by the Board of Directors, affix the seal of the Company to any instrument
requiring it and, when so affixed, it shall be attested by the signature of the
Secretary or by the signature of the Treasurer or an Assistant Secretary. The
Secretary shall have custody of all contracts, leases, assignments, and all
other valuable instruments unless the Board of Directors or the President shall
otherwise direct. The Secretary shall give, or cause to be given, notice of all
annual meetings of the shareholders and any other meetings of the shareholders
and, when required, notice of the meetings of the Board of Directors; and, in
general, shall perform all duties incident to the office of a secretary of a
corporation, and such other duties as may be prescribed by the Board of
Directors or the President.
Section 6.08 The Board of Directors may elect one (1) or more
Assistant Secretaries who shall perform the duties of the Secretary in the event
of the Secretary's absence or inability to act, as well as such other duties as
the Board of Directors, the President, or the Secretary may from time to time
designate.
TREASURER
Section 6.09 The Treasurer shall have charge of all moneys and
securities belonging to the Company subject to the direction and control of the
Board of Directors. The Treasurer shall deposit all moneys received by the
Company in the name and to the credit of the Company in such bank or other place
or places of deposit as the Board of Directors shall designate; and for that
purpose the Treasurer shall have power to endorse for collection or payment all
checks or other negotiable instruments drawn payable to the Treasurer's order or
to the order of the Company. The Treasurer shall disburse the moneys of the
Company upon properly drawn checks which shall bear the signature of the
Treasurer or of any Assistant Treasurer or of the Cashier (who shall be
appointed by the Assistant Treasurer with the approval of the Treasurer). All
checks shall be covered by vouchers which shall be certified by the Controller
or the Auditor of Disbursements or such other employee of the Company (other
than the Cashier) as may be designated by the Treasurer from time to time. The
Treasurer may create, from time to time, such special imprest funds as may, in
the Treasurer's discretion, be deemed advisable and necessary, and may open
accounts with such bank or banks as may be deemed advisable for the deposit
therein of such special imprest funds, and may authorize disbursements therefrom
by checks drawn against such accounts by the Treasurer, any Assistant Treasurer,
or such other employee of the Company as may be designated by the Treasurer from
time to time. The Treasurer shall perform such other duties as may be assigned
from time to time by the Board of Directors, the President or the Chief
Financial Officer.
Section 6.10 No notes or similar obligations shall be made
except jointly by the President or the Chief Financial Officer and the Treasurer
or an Assistant Treasurer, except as otherwise authorized by the Board of
Directors.
Section 6.11 The Board of Directors may elect one (1) or more
Assistant Treasurers who shall perform the duties of the Treasurer in the event
of the Treasurer's absence or inability to act, as well as such other duties as
the Board of Directors, the President, the Chief Financial Officer or the
Treasurer may from time to time designate.
VICE PRESIDENTS
Section 6.12 Vice Presidents shall perform such duties as may
be assigned to them from time to time by the Board of Directors or the President
as their positions are established or changed. During the absence or inability
of the President to serve, an Executive Vice President or Senior Vice President
so designated by the Board of Directors shall have all the powers and perform
the duties of the President.
GENERAL
Section 6.13 Fidelity bond coverage shall be obtained on such
officers and employees of the Company, and of such type and in such amounts as
may, in the discretion of the Board of Directors, be deemed proper and
advisable.
ARTICLE VII
CERTIFICATES OF STOCK
Section 7.01 The shares of the capital stock of the Company
shall be represented by certificates of stock signed by the President or a Vice
President, and countersigned by the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer, and sealed with the corporate seal of the
Company. Said certificates shall be in such form as the Board of Directors may
from time to time prescribe. The Board of Directors may from time to time
appoint an incorporated company or companies to act as Transfer Agent and
Registrar of the stock certificates of the Company, and in the case of the
appointment of such Transfer Agent, the officers of the Company shall sign and
seal stock certificates in blank and place them with the transfer books in the
custody and control of such Transfer Agent. If any stock certificate is signed
by a Transfer Agent or Registrar, the signature of any such officer and the
corporate seal upon any such certificate may be a facsimile, engraved or
printed.
Section 7.02 New certificates for shares of stock may be
issued to replace certificates lost, stolen, destroyed or mutilated upon such
terms and conditions as the Board may from time to time determine.
ARTICLE VIII
AMENDMENTS
Section 8.01 (a) The Board of Directors may make, amend, and
repeal the By-Laws with respect to those matters which are not, by statute,
reserved exclusively to the shareholders, subject always to the power of the
shareholders to change such action as provided herein. No By-Law may be made,
amended or repealed by the shareholders unless such action is approved by the
affirmative vote of the holders of not less than eighty percent (80%) of the
voting power of the then outstanding shares of capital stock of the Company
entitled to vote in an annual election of Directors, voting together as a single
class, unless such action has been previously approved by a two-thirds vote of
the whole Board of Directors, in which event (unless otherwise expressly
provided in the Articles or the By-Laws) the affirmative vote of not less than a
majority of the votes which all shareholders are entitled to cast thereupon
shall be required.
(b) Unless otherwise provided by a By-Law, by the Restated
Articles or by law, any By-Law may be amended, altered or repealed, and new
By-Laws may be adopted, by vote of a majority of the Directors present at any
regular or special meeting duly convened, but only if notice of the specific
sections to be amended, altered, repealed or added is included in the notice of
meeting. No provision of the By-Laws shall vest any property or contract right
in any shareholder.
ARTICLE IX
PENNSYLVANIA CORPORATION LAW
Section 9.01 Subchapter G--Control Share Acquisitions--and
Subchapter H--Disgorgement by Certain Controlling Shareholders Following
Attempts to Acquire Control--of Title 15, Chapter 25, of the Pennsylvania
Consolidated Statutes, shall not be applicable to the Company.
(Amended through April 28, 1999)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1999
<CASH> 9,768
<SECURITIES> 0
<RECEIVABLES> 227,246
<ALLOWANCES> 13,630
<INVENTORY> 14,562
<CURRENT-ASSETS> 443,274
<PP&E> 1,975,726
<DEPRECIATION> 781,718
<TOTAL-ASSETS> 1,861,239
<CURRENT-LIABILITIES> 455,957
<BONDS> 281,350
0
0
<COMMON> 200,084
<OTHER-SE> 486,531
<TOTAL-LIABILITY-AND-EQUITY> 1,861,239
<SALES> 0
<TOTAL-REVENUES> 420,053
<CGS> 0
<TOTAL-COSTS> 292,945
<OTHER-EXPENSES> 66,039
<LOSS-PROVISION> 4,845
<INTEREST-EXPENSE> 9,263
<INCOME-PRETAX> 47,634
<INCOME-TAX> 17,895
<INCOME-CONTINUING> 29,739
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,739
<EPS-PRIMARY> 0.84
<EPS-DILUTED> 0.84
</TABLE>
