PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income for the three and six
months ended June 30, 1996 and 1995 . . . . . . . . . . . 2
Consolidated Balance Sheets as of June 30, 1996,
and December 31, 1995 . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Cash Flows for
the six months ended June 30, 1996 and 1995 . . . . . . . 5
Notes to Consolidated Financial Statements. . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . 10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders. . . . . 19
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 19
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PART I. FINANCIAL INFORMATION
PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995* 1996 1995*
(Thousands of Dollars)
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Gas sales and services $ 27,597 $ 27,305 $ 99,748 $ 98,105
Pipeline construction and services 2,641 55 4,539 65
Other 19 37 57 109
Total operating revenues 30,257 27,397 104,344 98,279
OPERATING EXPENSES:
Cost of gas 13,786 14,049 55,707 57,889
Other operation expenses 9,343 6,078 18,333 12,057
Maintenance 1,492 1,312 2,706 2,280
Depreciation 2,088 1,786 4,106 3,580
Income taxes (376) (990) 5,529 3,507
Taxes other than income taxes 2,929 2,684 6,745 6,578
Total operating expenses 29,262 24,919 93,126 85,891
OPERATING INCOME 995 2,478 11,218 12,388
OTHER INCOME (DEDUCTIONS), NET 1,445 (49) 2,236 200
INCOME BEFORE INTEREST CHARGES 2,440 2,429 13,454 12,588
INTEREST CHARGES:
Interest on long-term debt 2,323 3,362 5,191 6,848
Other interest 239 521 457 843
Allowance for borrowed funds used
during construction (50) (13) (96) (22)
Total interest charges 2,512 3,870 5,552 7,669
INCOME (LOSS) FROM CONTINUING OPERATIONS (72) (1,441) 7,902 4,919
LOSS WITH RESPECT TO DISCONTINUED OPERATIONS
(Note 2) (21) - (386) (3,704)
INCOME (LOSS) BEFORE SUBSIDIARY'S PREFERRED
STOCK DIVIDENDS (93) (1,441) 7,516 1,215
SUBSIDIARY'S PREFERRED STOCK DIVIDENDS 383 692 1,020 1,383
NET INCOME (LOSS) $ (476) $ (2,133) $ 6,496 $ (168)
COMMON STOCK
Earnings (loss) per share of common stock:
Continuing operations $ (.09) $ (.37) $ 1.27 $ .62
Discontinued operations - - (.07) (.65)
Net income (loss) before premium on
repurchase/redemption of subsidiary's
preferred stock (.09) (.37) 1.20 (.03)
Premium on repurchase/redemption of
subsidiary's preferred stock (.26) - (.24) -
Earnings (loss) per share of common stock $ (.35) $ (.37) $ .96 $ (.03)
Weighted average shares outstanding 5,044,134 5,737,156 5,412,580 5,695,312
Cash dividends per share $ .55 $ .55 $ 1.10 $ 1.10
*Reclassified to conform with 1996 consolidated financial statement presentation.
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995*
(Thousands of Dollars)
ASSETS
<S> <C> <C>
UTILITY PLANT:
At original cost $ 302,356 $ 295,895
Accumulated depreciation (79,011) (76,882)
223,345 219,013
OTHER PROPERTY AND INVESTMENTS:
Nonutility property and equipment 12,033 11,553
Accumulated depreciation (5,507) (5,394)
Other 996 983
7,522 7,142
CURRENT ASSETS:
Cash and cash equivalents 73,475 629
Accounts receivable -
Customers 14,677 21,066
Others 575 815
Reserve for uncollectible accounts (1,114) (788)
Unbilled revenues 2,359 10,319
Materials and supplies, at average cost 3,177 2,876
Gas held by suppliers, at average cost 12,110 15,140
Natural gas transition costs collectible 2,295 4,612
Deferred cost of gas and supplier refunds, net 10,615 -
Prepaid expenses and other 3,148 3,486
121,317 58,155
DEFERRED CHARGES:
Regulatory assets -
Deferred taxes collectible 29,778 30,015
Other 3,612 3,013
Unamortized debt expense 2,309 2,630
35,699 35,658
NET ASSETS OF DISCONTINUED OPERATIONS (Note 2) - 204,250
TOTAL ASSETS $ 387,883 $ 524,218
*Reclassified to conform with 1996 consolidated financial statement presentation.
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995*
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
<S> <C> <C>
CAPITALIZATION (Note 3):
Common shareholders' investment $ 124,200 $ 162,739
Preferred stock of PGE -
Not subject to mandatory redemption, net 19,222 33,615
Subject to mandatory redemption 729 1,680
Long-term debt 104,158 106,706
248,309 304,740
CURRENT LIABILITIES:
Current portion of long-term debt 11,000 116,001
Preferred stock subject to repurchase
or mandatory redemption 456 80
Notes payable 5,000 10,180
Accounts payable 15,119 18,531
Deferred cost of gas and supplier refunds, net - 434
Accrued general business and realty taxes 602 1,493
Accrued income taxes 41,648 526
Accrued interest 903 2,307
Accrued natural gas transition costs 1,770 2,278
Other 4,117 3,534
80,615 155,364
DEFERRED CREDITS:
Deferred income taxes 45,966 48,835
Accrued natural gas transition costs 207 1,144
Unamortized investment tax credits 4,853 4,938
Operating reserves 3,283 3,709
Other 4,650 5,488
58,959 64,114
COMMITMENTS AND CONTINGENCIES (Note 5)
TOTAL CAPITALIZATION AND LIABILITIES $ 387,883 $ 524,218
*Reclassified to conform with 1996 consolidated financial statement presentation.
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
(Thousands of Dollars)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Income from continuing operations, net of
subsidiary's preferred stock dividends $ 6,882 $ 3,536
Effects of noncash charges to income -
Depreciation 4,145 3,596
Deferred income taxes, net 173 (121)
Provisions for self insurance 591 526
Other, net 993 1,410
Changes in working capital, exclusive of cash
and current portion of long-term debt -
Receivables and unbilled revenues 14,915 16,919
Gas held by suppliers 3,030 7,187
Accounts payable (2,770) (4,176)
Deferred cost of gas and supplier refunds, net (9,680) 14,019
Other current assets and liabilities, net 3,148 (8,838)
Other operating items, net (4,024) 520
Net cash provided by continuing operations 17,403 34,578
Net cash provided (used) by discontinued operations (24,175) 3,764
Net cash provided (used) by operating activities (6,772) 38,342
CASH FLOW FROM INVESTING ACTIVITIES:
Additions to utility plant (8,823) (8,304)
Net proceeds from sale of discontinued operations 261,752 -
Other, net 69 (246)
Net cash provided (used) by investing activities 252,998 (8,550)
CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of common stock 148 2,876
Repurchase of common stock (37,999) -
Dividends on common stock (5,890) (6,265)
Repurchase/redemption of preferred stock of PGE (14,968) (80)
Issuance of long-term debt - 13
Repayment of long-term debt (53,262) (210)
Net decrease in bank borrowings (60,123) (26,070)
Other, net (1,286) (18)
Net cash used for financing activities (173,380) (29,754)
NET INCREASE IN CASH AND CASH EQUIVALENTS 72,846 38
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 629 330
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 73,475 $ 368
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 6,414 $ 13,461
Income taxes $ 22,533 $ 8,175
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) GENERAL
Nature of the Business. Pennsylvania Enterprises, Inc. ("the Company") is a
holding company whose principal subsidiary, PG Energy Inc. ("PGE"), a regulated
public utility formerly known as Pennsylvania Gas and Water Company, distributes
natural gas to a ten-county area in northeastern Pennsylvania, a territory that
includes 116 municipalities, in addition to the cities of Scranton, Wilkes-Barre
and Williamsport. The Company, through its other subsidiaries, Pennsylvania
Energy Resources, Inc. ("PERI"), Theta Land Corporation and Keystone Pipeline
Services, Inc. ("Keystone"), a wholly-owned subsidiary of PERI, is also engaged
in various non-regulated activities, including energy-related services and
pipeline construction and service activities, which prior to 1996 were not
significant to the operations of the Company as a whole. Pennsylvania Energy
Marketing Company, which was also a subsidiary of the Company, was merged into
PERI on May 31, 1996.
Principles of Consolidation. The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries, PGE, PERI and
Theta. The consolidated financial statements also include the accounts of
Keystone beginning December 4, 1995, the date Keystone was acquired by PERI.
All material intercompany accounts have been eliminated in consolidation.
PGE is a regulated public utility subject to the jurisdiction of the
Pennsylvania Public Utility Commission ("PPUC") for rate and accounting
purposes. The financial statements of PGE that are incorporated in these
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles, including the provisions of Financial
Accounting Standards Board ("FASB") Statement 71, "Accounting for the Effects of
Certain Types of Regulation," which give recognition to the rate and accounting
practices of regulatory agencies such as the PPUC.
Interim Financial Statements. The interim consolidated financial statements
included herein have been prepared by the Company without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading.
The results for the interim periods are not indicative of the results to be
expected for the year, primarily due to the effect of seasonal variations in
weather on PGE. However, in the opinion of management, all adjustments,
consisting of only normal recurring accruals, necessary to present fairly the
results for the interim periods have been reflected in the consolidated
financial statements. It is suggested that these consolidated financial
statements be read in conjunction with the consolidated financial statements and
the notes thereto included in the Company's latest annual report on Form 10-K.
Use of Accounting Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
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during the reporting period. These estimates involve judgments with respect to,
among other things, various future economic factors which are difficult to
predict and are beyond the control of the Company. Therefore, actual amounts
could differ from these estimates.
(2) DISCONTINUED OPERATIONS
Pursuant to an Asset Purchase Agreement dated April 26, 1995 (the
"Agreement"), among the Company, PGE, American Water Works Company, Inc.
("American") and Pennsylvania-American Water Company ("Pennsylvania-American"),
a wholly-owned subsidiary of American, the Company and PGE sold substantially
all of the assets, properties and rights of PGE's water utility operations to
Pennsylvania-American on February 16, 1996. Under the terms of the Agreement,
Pennsylvania-American paid PGE $414.3 million consisting of $262.1 million in
cash and the assumption of $152.2 million of PGE's liabilities, including $141.0
million of its long-term debt. PGE continued to operate the water utility
business until February 16, 1996.
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, principally the write-off of certain deferred regulatory assets and
deferred credits and the impact of pension and other postretirement benefit
expenses relative to an early retirement plan, 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 sale involved a gain for income tax
purposes primarily because of the accelerated depreciation that had been claimed
by PGE with respect to the water utility plant that was sold. It is estimated
that the income taxes payable on the sale, for which deferred income taxes had
previously been provided, will be approximately $58.6 million, of which $22.3
million had been paid as of June 30, 1996.
The cash proceeds from the sale of approximately $203.5 million, net of the
estimated $58.6 million of income taxes, are being used by the Company and PGE
to retire debt, to repurchase stock (see Note 3 of these Notes to Consolidated
Financial Statements), for construction expenditures and for other working
capital purposes. With the sale of PGE's water utility operations, the
principal assets of the Company and PGE now consist of PGE's gas utility
operations and approximately 46,000 acres of land.
The accompanying consolidated financial statements reflect PGE's water
utility operations as "discontinued operations" effective March 31, 1995.
Interest charges relating to indebtedness of PGE were allocated to the
discontinued operations based on the relationship of the gross water utility
plant that was sold to the total of PGE's gross gas and water utility plant.
This is the same method as was utilized by PGE and the PPUC in establishing the
revenue requirements of both PGE's gas and water utility operations. None of
the dividends on PGE's preferred stock nor any of the Company's interest expense
were allocated to the discontinued operations.
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Selected financial information for the discontinued operations is set forth
below:
Net Assets of Discontinued Operations
[CAPTION]
As of December 31, 1995
(Thousands of Dollars)
[S] [C]
Net utility plant $ 368,742
Current assets (primarily accounts
receivable and accrued revenues) 12,756
Deferred charges and other assets 25,752
Total assets acquired by
Pennsylvania-American 407,250
Liabilities assumed by
Pennsylvania-American -
Long-term debt 141,097
Other 5,983
147,080
Net assets acquired by
Pennsylvania-American 260,170
Estimated liability for income taxes on
sale of discontinued operations (56,710)
Estimated net income of discontinued operations
during the remainder of the phase-out period 790
Total net assets of discontinued operations $ 204,250
Loss With Respect to Discontinued Operations
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Income from discontinued operations,
net of related income taxes of
$1,403,000* $ - $ - $ - $ 2,127
Estimated loss on disposal of
discontinued operations, net of
income during the phase-out period (21) - (386) (5,831)
Loss with respect to discontinued
operations $ 21 $ - $ 386 $ 3,704
</TABLE>
* Reflects income only through March 31, 1995, the effective date of the
discontinuance of PGE's water utility operations for financial statement
purposes.
(3) REPURCHASES OF STOCK
During the quarter ended June 30, 1996, the Company repurchased 970,894
shares of its common stock for an aggregate consideration of $38.0 million, and
PGE repurchased 128,984 shares of its 9% cumulative preferred stock for an
aggregate consideration of $14.0 million and 18,524 shares of its 4.10%
cumulative preferred stock for an aggregate consideration of $927,000, largely
pursuant to self tender offers. On June 17, 1996, PGE also repurchased 8,608
shares of its 5.75% cumulative preferred stock (including 800 shares redeemed in
accordance with annual sinking fund provisions) for an aggregate consideration
of $758,000.
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(4) ACCOUNTING CHANGES
Long-Lived Assets. In March 1995, FASB Statement 121, "Accounting for the
Impairment of Long-Lived Assets", was issued. The provisions of this statement,
which are effective for fiscal years beginning after September 15, 1995, require
that long-lived assets, identifiable intangibles, capital leases and goodwill be
reviewed for impairment whenever events occur or changes in circumstances
indicate that the carrying amount of the assets may not be recoverable. In
addition, FASB Statement 121 requires that regulatory assets meet the recovery
criteria of FASB Statement 71, "Accounting for Effects of Certain Types of
Regulation", on an ongoing basis in order to avoid a writedown. The provisions
of FASB Statement 121, which the Company and PGE adopted effective January 1,
1996, did not have a material impact on the financial position or results of
operations of either the Company or PGE since the carrying amount of all assets,
including regulatory assets, are considered recoverable.
Accounting for Stock-Based Compensation. In October, 1995, FASB Statement
123, "Accounting for Stock-Based Compensation," was issued. The Company adopted
this statement in the first quarter of 1996, but will continue to use the
intrinsic value based method of accounting prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees," supplemented
by the required footnote disclosures of FASB Statement 123. Adoption of FASB
Statement 123 had no effect upon the Company's financial position or results of
operations.
(5) COMMITMENTS AND CONTINGENCIES
Valve Maintenance
On November 16, 1993, the PPUC staff issued an Emergency Order, subsequently
ratified by the PPUC (the "Emergency Order"), requiring PGE to survey its gas
distribution system to verify the location and spacing of its gas shut off
valves, to add or repair valves where needed and to establish programs for the
periodic inspection and maintenance of all such valves and the verification of
all gas service line information. On March 31, 1995, the PPUC adopted an Order
approving a plan submitted by PGE for complying with the Emergency Order. The
Company does not believe that PGE's compliance with the terms of such Order will
have a material adverse effect on its financial position or results of
operations.
Environmental Matters
PGE, like many gas distribution companies, once utilized manufactured gas
plants in connection with providing gas service to its customers. None of these
plants has been in operation since 1960, and several of the plant sites are no
longer owned by PGE. Pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), PGE filed notices with the
United States Environmental Protection Agency (the "EPA") with respect to the
former plant sites. None of the sites is or was formerly on the proposed or
final National Priorities List. The EPA has conducted site inspections and made
preliminary assessments of each site and has concluded that no further remedial
action is planned. While this conclusion does not constitute a legal
prohibition against further regulatory action under CERCLA or other applicable
federal or state law, the Company does not believe that additional costs, if
any, related to these manufactured gas plant sites would be material to its
financial position or results of operations since environmental remediation
costs generally are recoverable through rates over a period of time.
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PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DISCONTINUED OPERATIONS
Pursuant to an Asset Purchase Agreement dated April 26, 1995 (the
"Agreement"), among the Company, PG Energy Inc. ("PGE"), American Water Works
Company, Inc. ("American") and Pennsylvania-American Water Company
("Pennsylvania-American"), a wholly-owned subsidiary of American, the Company
and PGE sold substantially all of the assets, properties and rights of PGE's
water utility operations to Pennsylvania-American on February 16, 1996. Under
the terms of the Agreement, Pennsylvania-American paid PGE $414.3 million
consisting of $262.1 million in cash and the assumption of $152.2 million of
PGE's liabilities, including $141.0 million of its long-term debt. PGE
continued to operate the water utility business until February 16, 1996.
The sale price reflected a $6.5 million premium over the book value of the
assets being sold. However, after transaction costs and the net effect of other
items, principally the write-off of certain deferred regulatory assets and
deferred credits and the impact of pension and other postretirement benefit
expenses relative to an early retirement plan, 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 cash proceeds from the sale of approximately $203.5 million, net of an
estimated $58.6 million of income taxes, are being used by the Company and PGE
to retire debt, to repurchase stock, for construction expenditures and for other
working capital purposes. With the sale of PGE's water utility operations, the
principal assets of the Company and PGE now consist of PGE's gas utility
operations and approximately 46,000 acres of land.
In accordance with generally accepted accounting principles, the Company's
consolidated financial statements reflect PGE's water utility operations as
"discontinued operations" effective March 31, 1995, and the following sections
of Management's Discussion and Analysis generally relate only to the Company's
continuing operations. For additional information regarding the discontinued
operations, see Note 2 of the accompanying Notes to Consolidated Financial
Statements.
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RESULTS OF CONTINUING OPERATIONS
The following table expresses certain items in the Company's consolidated
statements of income as percentages of total operating revenues for each of the
three and six-month periods ended June 30, 1996, and June 30, 1995:
<TABLE>
<CAPTION>
Percentage of Operating Revenues
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Gas sales and services..................... 91.2% 99.7% 95.6% 99.8%
Pipeline construction and services......... 8.7 0.2 4.3 0.1
Other...................................... 0.1 0.1 0.1 0.1
Total operating revenues................. 100.0 100.0 100.0 100.0
OPERATING EXPENSES:
Cost of gas................................ 45.6 51.3 53.4 58.9
Other operation expenses................... 30.9 22.2 17.6 12.3
Maintenance................................ 4.9 4.8 2.6 2.3
Depreciation............................... 6.9 6.5 3.9 3.6
Income taxes............................... (1.3) (3.6) 5.3 3.6
Taxes other than income taxes.............. 9.7 9.8 6.4 6.7
Total other operating expenses........... 96.7 91.0 89.2 87.4
OPERATING INCOME............................. 3.3 9.0 10.8 12.6
OTHER INCOME (DEDUCTIONS), NET............... 4.8 (0.2) 2.1 0.2
INTEREST CHARGES (1)......................... 8.3 14.1 5.3 7.8
INCOME (LOSS) FROM CONTINUING OPERATIONS..... (0.2) (5.3) 7.6 5.0
LOSS WITH RESPECT TO DISCONTINUED OPERATIONS. (0.1) - (0.4) (3.8)
INCOME (LOSS) BEFORE SUBSIDIARY'S PREFERRED
STOCK DIVIDENDS............................ (0.3) (5.3) 7.2 1.2
SUBSIDIARY'S PREFERRED STOCK DIVIDENDS(1).... 1.3 2.5 1.0 1.4
NET INCOME (LOSS)............................ (1.6) (7.8) 6.2 (0.2)
</TABLE>
(1) None of the Company's interest expense nor any of the subsidiary's
preferred stock dividends was allocated to the discontinued operations.
Three Months Ended June 30, 1996, Compared
With Three Months Ended June 30, 1995
Operating Revenues. Operating revenues increased $2.9 million (10.4%) from
$27.4 million for the three-month period ended June 30, 1995, to $30.3 million
for the three-month period ended June 30, 1996, primarily as a result of $2.6
million of revenues in the second quarter of 1996 from the pipeline construction
and service activities of Keystone Pipeline Services, Inc. ("Keystone"), which
was acquired in December, 1995. Also contributing to the higher revenues was a
$300,000 increase in gas sales and services as a result of a 175 million cubic
feet (5.6%) increase in consumption by PGE's residential and commercial heating
customers. Heating degree days during the second quarter of 1996 were 114
(15.0%) higher than in the second quarter in 1995 and 14.0% above normal. The
effects of the increased sales to heating customers were partially offset by a
reduction in the purchased gas cost component of PGE's tariffs (the "gas cost
rate"). See "-Rate Matters."
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Operating Expenses. Operating expenses, including depreciation and income
taxes, increased $4.3 million (17.4%) from $24.9 million for the three-month
period ended June 30, 1995, to $29.3 million for the three-month period ended
June 30, 1996. As a percentage of operating revenues, total operating expenses
increased from 91.0% during the second quarter of 1995 to 96.7% during the
second quarter of 1996.
The cost of gas decreased $263,000 (1.9%) from $14.0 million for the three-
month period ended June 30, 1995, to $13.8 million for the three-month period
ended June 30, 1996, primarily because of the aforementioned reduction in PGE's
gas cost rate (see "-Rate Matters"), the effects of which were largely offset by
the increased sales to PGE's residential and commercial heating customers.
Other than the cost of gas and income taxes, operating expenses increased by
$4.0 million (33.7%) from $11.9 million for the three-month period ended June
30, 1995, to $15.9 million for the three-month period ended June 30, 1996. This
increase was largely attributable to a $3.3 million (53.7%) increase in other
operation expenses, primarily as a result of $2.5 million of expenses relative
to Keystone's pipeline construction and service activities, and a $769,000
(14.1%) increase in expenses with respect to PGE's operations, which was
principally attributable to payroll and payroll-related costs. Payroll and
payroll-related costs increased largely because of charges, which had formerly
been allocated to PGE's discontinued operations, now being absorbed by its
continuing operations. Also contributing to the higher operating expenses were
a $180,000 (13.7%) increase in PGE's maintenance expenses, principally as a
result of charges relative to the maintenance of gas valves, and increased
depreciation expense of $302,000 (16.9%), primarily as a result of $117,000 of
depreciation relative to Keystone and $186,000 attributable to additions to
PGE's utility plant.
Income taxes for the three-month period ended June 30, 1996, increased by
$614,000 (62.0%) from a credit of $990,000 in 1995 to a credit of $376,000 in
1996 due to a lower level of loss before income taxes (for this purpose,
operating income net of interest charges).
Operating Income. As a result of the above, total operating income
decreased by $1.5 million (59.8%) from $2.5 million for the three-month period
ended June 30, 1995, to $995,000 for the three-month period ended June 30, 1996,
and decreased as a percentage of total operating revenues for such periods from
9.0% in 1995 to 3.3% in 1996.
Other Income (Deductions), Net. Other income, net increased $1.5 million
from a deduction of $50,000 for the three-month period ended June 30, 1995, to
income of $1.4 million for the three-month period ended June 30, 1996, largely
as a result of investment income totaling $1.1 million relative to the temporary
investment of a portion of the proceeds from the sale of PGE's regulated water
utility operations.
Interest Charges. Interest charges decreased by $1.4 million (35.1%) from
$3.9 million for the three-month period ended June 30, 1995, to $2.5 million for
the three-month period ended June 30, 1996. This decrease was largely
attributable to the lower level of indebtedness resulting from the repayment of
PGE's $50.0 million term loan and all of its then outstanding bank borrowings on
February 16, 1996, with proceeds from the sale of its regulated water utility
operations on such date.
-12-
<PAGE>
Income (Loss) From Continuing Operations. The loss from continuing
operations decreased $1.4 million from $1.4 million for the quarter ended June
30, 1995, to $72,000 for the quarter ended June 30, 1996. This decrease was
largely the result of the matters discussed above, principally the increase in
other income (deductions), net and the decrease in interest charges, the effects
of which were partially offset by the increased operating expenses.
Subsidiary Preferred Stock Dividends. Dividends on preferred stock
decreased $309,000 (44.7%) from $692,000 for the three-month period ended June
30, 1995, to $383,000 for the three-month period ended June 30, 1996, largely as
a result of the repurchase by PGE of 128,984 shares of its 9% cumulative
preferred stock, 8,608 shares of its 5.75% cumulative preferred stock and 18,524
shares of its 4.10% cumulative preferred stock during the second quarter of
1996.
Net Income (Loss). The decrease in net loss of $1.7 million from $2.1
million for the three-month period ended June 30, 1995, to $476,000 for the
three-month period ended June 30, 1996, as well as the decrease of $.28 in the
loss per share of common stock before premium on repurchase/redemption of
subsidiary's preferred stock, from $.37 per share for the quarter ended June 30,
1995, to $.09 per share for the quarter ended June 30, 1996, were largely the
result of the factors discussed above. The effect of the decrease in net loss
on earnings per share was largely offset by a $.26 per share charge for the
premium on the repurchase of subsidiary's preferred stock which acted to
increase the loss per share of common stock for the quarter ended June 30, 1996,
to $.35 per share. While premiums on the repurchase of preferred stock are
charged to retained earnings and are not a determinant of net income, the
premiums associated with repurchases must be taken into account in calculating
the earnings (loss) per share of common stock.
Six Months Ended June 30, 1996, Compared
With Six Months Ended June 30, 1995
Operating Revenues. Operating revenues increased $6.1 million (6.2%) from
$98.3 million for the six-month period ended June 30, 1995, to $104.3 million
for the six-month period ended June 30, 1996, primarily as a result of $4.5
million of operating revenues relative to the pipeline construction and service
activities of Keystone, which was acquired in December, 1995. Also contributing
to the increase in operating revenues was a higher level of revenues
attributable to PGE's gas sales and services, primarily as a result of a 1.8
billion cubic feet (13.6%) increase in sales to residential and commercial
heating customers. There was a 623 (17.5%) increase in heating degree days from
3,570 (90.3% of normal) during the first six months of 1995 compared to 4,193
(106.0% of normal) during the first six months of 1996. The effects of the
increased sales to heating customers were largely offset by reductions in the
purchased gas cost component of PGE's tariffs (the "gas cost rate"). See "-Rate
Matters."
Operating Expenses. Operating expenses, including depreciation and income
taxes, increased $7.2 million (8.4%) from $85.9 million for the six-month period
ended June 30, 1995, to $93.1 million for the six-month period ended June 30,
1996. As a percentage of operating revenues, total operating expenses
increased, from 87.4% during the six-month period ended June 30, 1995 to 89.2%
during the six-month period ended June 30, 1996.
-13-
<PAGE>
The cost of gas decreased $2.2 million (3.8%) from $57.9 million for the
six-month period ended June 30, 1995, to $55.7 million for the six-month period
ended June 30, 1996, primarily because of the aforementioned reductions in PGE's
gas cost rate (see "-Rate Matters"), the effects of which were partially offset
by the increased sales to residential and commercial heating customers.
Other than the cost of gas and income taxes, operating expenses increased by
$7.4 million (30.2%) from $24.5 million for the six month period ended June 30,
1995, to $31.9 million for the six month period ended June 30, 1996. This
increase was largely attributable to a $6.3 million (52.1%) increase in other
operation expenses, primarily as a result of $4.5 million of expenses relative
to Keystone's pipeline construction and service activities, and a $1.5 million
(13.3%) increase in expenses with respect to PGE's operations, which was
primarily the result of higher payroll and payroll-related costs. Payroll and
payroll-related costs increased largely because of charges, which had formerly
been allocated to PGE's discontinued operations, now being absorbed by its
continuing operations. Also contributing to the higher operating expenses was a
$526,000 (14.7%) increase in depreciation expense as a result of $234,000 of
depreciation relative to Keystone and $293,000 of depreciation attributable to
additions to PGE's utility plant, as well as a $426,000 (18.7%) increase in
maintenance expenses caused by charges relating to the maintenance of gas valves
by PGE.
Income taxes increased $2.0 million (57.7%) from $3.5 million in the first
six months of 1995 to $5.5 million in the first six months of 1996 due to an
increase in income before income taxes (for this purpose, operating income net
of interest charges).
Operating Income. As a result of the above, total operating income
decreased by $1.2 million (9.4%) from $12.4 million for the six-month period
ended June 30, 1995, to $11.2 million for the six-month period ended June 30,
1996, and decreased as a percentage of total operating revenues for such periods
from 12.6% in 1995 to 10.8% in 1996, primarily because of the higher level of
operating expenses.
Other Income (Deductions), Net. Other income (deductions), net increased
$2.0 million from $199,000 for the six-month period ended June 30, 1995, to $2.2
million for the six-month period ended June 30, 1996, largely as a result of
investment income totaling $1.8 million relative to the temporary investment of
a portion of the proceeds from the sale of PGE's regulated water utility
operations.
Interest Charges. Interest charges decreased by $2.1 million (27.6%) from
$7.7 million for the six-month period ended June 30, 1995, to $5.6 million for
the six-month period ended June 30, 1996. This decrease was largely
attributable to the lower level of indebtedness resulting from the repayment of
PGE's $50.0 million term loan and all of its then outstanding bank borrowings on
February 16, 1996, with proceeds from the sale of its regulated water utility
operations on such date.
Income (Loss) From Continuing Operations. Income from continuing operations
increased $3.0 million (60.7%) from $4.9 million for the six months ended June
30, 1995, to $7.9 million for the six months ended June 30, 1996. This increase
was largely the result of the matters discussed above, principally the increase
in other income (deductions), net and the decrease in interest charges.
-14-
<PAGE>
Subsidiary's Preferred Stock Dividends. Dividends on preferred stock
decreased $363,000 (26.2%) from $1.4 million for the six-month period ended June
30, 1995, to $1.0 million for the six-month period ended June 30, 1996, largely
as a result of the repurchase by PGE of 128,984 shares of its 9% cumulative
preferred stock, 8,608 shares of its 5.75% cumulative preferred stock and 18,524
shares of its 4.10% cumulative preferred stock, $100 par value, during the
second quarter of 1996.
Net Income (Loss). The increase in net income of $6.7 million from a loss
of $169,000 for the six-month period ended June 30, 1995, to income of $6.5
million for the six-month period ended June 30, 1996, as well as the increase in
earnings per share of common stock of $.99 from a loss of $.03 per share for the
six months ended June 30, 1995 to earnings of $.96 per share for the six months
ended June 30, 1996 (after a $.24 per share charge for the premium on repurchase
of subsidiary's preferred stock), were the result of the higher income from
continuing operations and the reduced dividends on subsidiary's preferred stock,
as discussed above, and the decrease of $.58 per share, from $.65 per share for
the six-month period ended June 30, 1995, to $.07 per share for the six-month
period ended June 30, 1996, in the loss with respect to discontinued operations.
RATE MATTERS
Proposed Rate Increase. On May 24, 1996, PGE filed an application with the
Pennsylvania Public Utility Commission ("PPUC") seeking an increase in its base
gas rates, designed to produce $14.1 million in additional annual revenue, to be
effective July 23, 1996. On June 20, 1996, the PPUC suspended this rate
increase for seven months (until February 23, 1997) in order to investigate the
reasonableness of the proposed rates. It is not presently possible to determine
what action the PPUC will ultimately take in this matter.
Annual Gas Cost Adjustment. Pursuant to the provisions of the Pennsylvania
Public Utility Code (the "Code") relating to the annual purchased gas cost rate
of larger gas distribution companies, such as PGE, the PPUC, by Order adopted
May 11, 1995, authorized PGE to decrease the gas costs contained in its gas
tariffs from $3.68 per thousand cubic feet to $2.42 per thousand cubic feet
effective May 15, 1995, in order to refund overcollections from customers caused
by lower than anticipated purchased gas costs and the receipt of supplier
refunds during 1995. This change in gas rates on account of purchased gas costs
was designed to produce a decrease in revenue of $8.2 million from its effective
date through December 1, 1995. In accordance with the same provisions of the
Code, the PPUC, by Order adopted November 9, 1995, authorized PGE to increase
its gas cost rate to $2.75 per thousand cubic feet effective December 1, 1995.
This change in gas rates on account of purchased gas costs is designed to
produce a $9.6 million increase in annual revenue. The changes in gas rates on
account of purchased gas costs have no effect on PGE's earnings since the
changes in revenue are offset by corresponding changes in the cost of gas.
Quarterly Gas Cost Adjustment. Effective September 14, 1995, the PPUC
adopted regulations providing for the quarterly adjustment of the annual
purchased gas cost rate of larger gas distribution companies, including PGE.
Such adjustments are allowed when the actual purchased gas costs vary from the
estimated costs reflected in the respective company's tariffs by 2% or more. In
accordance with the regulations regarding quarterly gas cost rate adjustments,
PGE increased its gas cost rate to $2.88 per thousand cubic feet effective June
1, 1996. Except for reducing the amount of any over or undercollections of gas
costs, the changes in gas rates pursuant to these regulations will not have any
material effect on PGE's financial position or results of operations, and PGE
will still be required to file an annual purchased gas cost rate.
-15-
<PAGE>
Recovery of FERC Order 636 Transition Costs. On October 15, 1993, the PPUC
adopted an annual purchased gas cost ("PGC") order (the "PGC Order") regarding
recovery of Federal Energy Regulatory Commission ("FERC") Order 636 transition
costs. The PGC Order stated that Account 191 and New Facility Costs ("Gas
Transition Costs") are subject to recovery through the annual PGC rate filings
made with the PPUC by PGE and other larger local gas distribution companies.
The PGC Order also indicated that while Gas Supply Realignment and Stranded
Costs ("Non-Gas Transition Costs") are not natural gas costs eligible for
recovery under the PGC rate filing mechanism, such costs are subject to full
recovery by local distribution companies through the filing of a tariff pursuant
to either the existing surcharge or base rate provisions of the Code. The PGC
Order further stated that all such filings would be evaluated on a case-by-case
basis.
PGE was billed a total of $1.3 million of Gas Transition Costs by its
interstate pipelines. Of this amount, $858,000 was recovered by PGE over a
twelve-month period ended January 31, 1995, through an increase in its PGC rate,
$252,000 is being recovered by PGE in its annual PGC rate that the PPUC has
approved effective December 1, 1995, and the recovery of the remaining $213,000
is being sought by PGE in its PGC rate that will be effective December 1, 1996.
By Order of the PPUC entered August 26, 1994, PGE began recovering the Non-
Gas Transition Costs that it estimates it will ultimately be billed pursuant to
FERC Order 636 through the billing of a surcharge to its customers effective
September 12, 1994. It is currently estimated that $8.7 million of Non-Gas
Transition Costs will be billed to PGE, generally over a four-year period
extending through the fourth quarter of 1997, of which $6.8 million had been
billed to PGE and $6.4 million had been recovered from its customers as of June
30, 1996. PGE has recorded the estimated Non-Gas Transition Costs that remain
to be billed to it and the amounts remaining to be recovered from its customers.
LIQUIDITY AND CAPITAL RESOURCES
Sale of Water Utility Operations
On February 16, 1996, PGE sold its regulated water operations and certain
related assets to Pennsylvania-American for $414.3 million, consisting of $262.1
million in cash and the assumption of $152.2 million of PGE's liabilities,
including $141.0 million of its long-term debt. The Company and PGE are using
the $203.5 million of cash proceeds from the sale, after the payment of an
estimated $58.6 million of federal and state income taxes (of which $22.3
million had been paid as of July 31, 1996), to retire debt, to repurchase stock,
for construction expenditures and for other working capital purposes. In this
regard, PGE repaid its $50.0 million term loan due 1996 and all of its then
outstanding bank borrowings on February 16, 1996, and the Company and PGE
temporarily invested the balance of the proceeds.
During the quarter ended June 30, 1996, the Company repurchased 970,894
shares of its common stock for an aggregate consideration of $38.0 million, and
PGE repurchased 128,984 shares of its 9% cumulative preferred stock for an
aggregate consideration of $14.0 million and 18,524 shares of its 4.10%
cumulative preferred stock for an aggregate consideration of $927,000, largely
pursuant to self tender offers. On June 17, 1996, PGE also repurchased 8,608
shares of its 5.75% cumulative preferred stock (including 800 shares redeemed in
accordance with annual sinking fund provisions) for an aggregate consideration
of $758,000. Additionally, on July 8, 1996, the Company announced that its
Board of Directors had authorized (i) the repurchase of up to 400,000 shares of
its common stock from time to time in open market transactions or otherwise and
-16-
<PAGE>
(ii) an oddlot buyback program of its common stock. In accordance with such
authorization, the Company repurchased 32,837 shares of its common stock during
July, 1996, for an aggregate consideration of $1.3 million. As of July 31,
1996, the Company had temporary cash investments totaling approximately $71.0
million, which are expected to be utilized during the balance of the year for
additional repurchases of stock, the payment of taxes, the repayment of bank
borrowings by PGE, as explained below, and other working capital purposes.
With the repayment of its term loan and all its bank borrowings on February
16, 1996, and the availability of cash proceeds from the sale of its regulated
water operations, PGE terminated its $60.0 million bank credit agreement. PGE
currently has five bank lines of credit with an aggregate borrowing capacity of
$45.5 million (See "-Liquidity"), which is deemed adequate for its immediate
needs. In addition, PGE is currently seeking approval of the PPUC to borrow up
to $70.0 million from the Company for periods of up to two years, to the extent
the Company has funds available to so lend PGE. Upon receiving approval of the
PPUC, PGE intends to borrow funds from the Company to repay its bank borrowings
(which totaled $23.5 million as of July 31, 1996) and for construction
expenditures and other working capital purposes. PGE plans to arrange new and
replacement bank lines of credit when the funds that are available for borrowing
from the Company are no longer adequate for its needs and as it requires
additional funding for working capital and other purposes.
Liquidity
The primary capital needs of the Company are the funding of PGE's
construction program and the seasonal funding of PGE's gas purchases and
increases in its customer accounts receivable. PGE's revenues are highly
seasonal and weather-sensitive, with approximately 75% of its revenues normally
being realized in the first and fourth quarters of the calendar year when the
temperatures in its service area are the coldest.
Additionally, as the Company's non-regulated activities expand, capital will
be required for those activities, especially the residential and commercial
development that is planned for certain Company-owned land. The two projects
that are currently planned by the Company are in the initial planning and design
phases, and the amount and type of funding that those projects will require has
not yet been determined. Nonetheless, it is expected that they will be funded
by a combination of capital provided by the Company, bank borrowings and other
debt financing.
The cash flow from PGE's operations is generally sufficient to fund a
portion of its construction expenditures. However, to the extent external
financing is required, it is the practice of PGE to use bank borrowings to fund
such expenditures, pending the periodic issuance of stock and long-term debt.
Bank borrowings are also used by PGE for the seasonal funding of its gas
purchases and increases in customer accounts receivable.
In order to so finance construction expenditures and to meet its seasonal
borrowing requirements, PGE has made arrangements for a total of $45.5 million
of unsecured revolving bank credit and plans to arrange other bank lines of
credit as its needs require (See "-Sale of Water Utility Operations").
Specifically, PGE currently has five bank lines of credit with an aggregate
borrowing capacity of $45.5 million which provide for borrowings at interest
rates generally less than prime and which mature during mid-1997. As of July
31, 1996, PGE had $23.5 million of borrowings outstanding under these bank lines
of credit. Additionally, upon approval of the PPUC, PGE intends, as indicated
above, to borrow funds from the Company during 1996, and also 1997, to repay
-17-
<PAGE>
bank borrowings and for construction expenditures and other working capital
requirements, to the extent that the Company has funds available for lending to
PGE. Any such interim borrowings by PGE from the Company will be repaid with
proceeds from bank borrowings by PGE.
The Company believes that PGE will be able to raise in a timely manner such
funds as are required for its future construction expenditures, refinancings and
other working capital requirements. Likewise, the Company believes that its
non-regulated subsidiaries will be able to raise such funds as are required for
their needs, including that required for the residential and commercial real
estate development that is planned.
Long-Term Debt and Capital Stock Financings
Both the Company and PGE periodically engage in long-term debt and capital
stock financings in order to obtain funds required for construction
expenditures, the refinancing of existing debt and various working capital
purposes. No long-term debt or capital stock financings were consummated by
either the Company or PGE during the three-month period ended June 30, 1996.
The Company also obtains external funds from the sale of its common stock
through its Dividend Reinvestment and Stock Purchase Plan (the "DRP"), its 1992
Stock Option Plan and its Employees' Savings Plan. The Company has, however,
temporarily suspended the sale of stock to both the DRP and Employees' Savings
Plan as a result of the proceeds received from the sale of PGE's water utility
operations, and the two plans are currently obtaining shares of Company common
stock for participants through open market purchases. During the six-month
period ended June 30, 1996, the Company realized $340,000, $258,000 and $195,000
from the issuance of common stock under the DRP, 1992 Stock Option Plan and
Employees' Savings Plan, respectively.
Construction Expenditures and Related Financings
Expenditures for the construction of utility plant by PGE totaled $8.6
million during the first six months of 1996 and are currently estimated to be
$21.0 million during the remainder of the year. Such expenditures are being
financed with proceeds from the sale of PGE's regulated water operations,
internally-generated funds and bank borrowings, pending the periodic issuance of
stock and long-term debt.
Current Maturities of Long-Term Debt and Preferred Stock
As of June 30, 1996, $80,000 of PGE's preferred stock and $11.0 million of
PGE's bank borrowings were required to be repaid within twelve months. An
additional $376,000 of PGE's preferred stock, which was repurchased in July,
1996, was also reflected as a current liability as of June 30, 1996.
Forward-Looking Statements
Certain statements made above relating to plans, conditions, objectives and
economic performance go beyond historical information and may provide an
indication of future results. To that extent, they are forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, and each is subject to factors that could cause actual results to differ
from those in the forward-looking statement.
-18-
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders of the Company was held on June 26,
1996.
(b) The following persons were elected directors of the Company with the voting
as indicated:
No. of Shares No. of Shares
Name Voted in Favor Withheld
Kenneth L. Pollock 4,178,262 70,197
William D. Davis 4,192,824 55,635
Dean T. Casaday 4,193,171 55,288
Robert J. Keating 4,178,900 69,559
James A. Ross 4,188,213 60,246
John D. McCarthy 4,182,305 66,154
Ronald W. Simms 4,185,383 63,076
Kenneth M. Pollock 4,180,311 68,148
Paul R. Freeman 4,183,931 64,528
John D. McCarthy, Jr. 4,182,776 65,683
Richard A. Rose, Jr. 4,185,751 62,708
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11-1 Statement Re Computation of Per Share Earnings -- filed herewith.
27-1 Financial Data Schedule -- filed herewith.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this report
is filed.
-19-
<PAGE>
PENNSYLVANIA ENTERPRISES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
PENNSYLVANIA ENTERPRISES, INC.
(Registrant)
Date: August 9, 1996 By: /s/ Thomas J. Ward
Thomas J. Ward
Secretary
Date: August 9, 1996 By: /s/ John F. Kell, Jr.
John F. Kell, Jr.
Vice President, Financial Services
(Principal Financial Officer and
Principal Accounting Officer)
-20-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS STATEMENT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET, STATEMENTS OF INCOME AND CASH FLOW, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<CIK> 0000077231
<NAME> PENNSYLVANIA ENTERPRISES, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 223,345,000
<OTHER-PROPERTY-AND-INVEST> 7,522,000
<TOTAL-CURRENT-ASSETS> 121,317,000
<TOTAL-DEFERRED-CHARGES> 35,699,000
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 387,883,000
<COMMON> 48,358,000
<CAPITAL-SURPLUS-PAID-IN> 21,382,000
<RETAINED-EARNINGS> 54,460,000
<TOTAL-COMMON-STOCKHOLDERS-EQ> 124,200,000
729,000
19,222,000
<LONG-TERM-DEBT-NET> 104,158,000
<SHORT-TERM-NOTES> 5,000,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 11,000,000
456,000
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 123,118,000
<TOT-CAPITALIZATION-AND-LIAB> 387,883,000
<GROSS-OPERATING-REVENUE> 104,344,000
<INCOME-TAX-EXPENSE> 5,529,000
<OTHER-OPERATING-EXPENSES> 87,597,000
<TOTAL-OPERATING-EXPENSES> 93,126,000
<OPERATING-INCOME-LOSS> 11,218,000
<OTHER-INCOME-NET> 2,236,000
<INCOME-BEFORE-INTEREST-EXPEN> 13,454,000
<TOTAL-INTEREST-EXPENSE> 5,552,000
<NET-INCOME> 7,516,000
1,020,000
<EARNINGS-AVAILABLE-FOR-COMM> 6,496,000
<COMMON-STOCK-DIVIDENDS> 5,890,000
<TOTAL-INTEREST-ON-BONDS> 4,837,000
<CASH-FLOW-OPERATIONS> (6,772,000)
<EPS-PRIMARY> .96
<EPS-DILUTED> .96
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT 11-1
PENNSYLVANIA ENTERPRISES, INC.
Statement Re Computation of Per Share Earnings
for the Three and Six Month Periods Ended June 30, 1996 and 1995
Three Months Ended Six Months Ended
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Income (loss) before subsidiary's
preferred stock dividends $ (93,000) $ (1,441,000) $ 7,516,000 $ 1,215,000
Subsidiary's preferred stock
dividends 383,000 692,000 1,020,000 1,383,000
Net income (loss) $ (476,000) $ (2,133,000) $ 6,496,000 $ (168,000)
Earnings (loss) per share of
common stock $ (.09) $ (.37) $ 1.20 $ (.03)
Computations of additional common
shares outstanding
Average shares of common stock 5,044,134 5,737,156 5,412,580 5,695,312
Incremental common shares
applicable to options, based on
the daily average market price 8,551 2,577 7,653 82
Average common shares as adjusted 5,052,685 5,739,733 5,420,233 5,695,394
Average shares of common stock 5,044,134 5,737,156 5,412,580 5,695,312
Incremental common shares
applicable to options, based on
the more dilutive of daily
average or ending market price 9,498 1,439 8,289 1,700
Average common shares fully
diluted 5,053,632 5,738,595 5,420,869 5,697,012
Earnings (loss) per share of
common stock
Average common shares as adjusted $ (.09) $ (.37) $ 1.20 $ (.03)
Average common shares fully
diluted $ (.09) $ (.37) $ 1.20 $ (.03)
<PAGE>
</TABLE>
