FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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 0-7812
PENNSYLVANIA ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1920170
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
One PEI Center
Wilkes-Barre, Pennsylvania 18711-0601
(Address of principal executive offices) (Zip Code)
(570) 829-8843
(Registrant's telephone number including area code)
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 the issuer's classes of
common stock, as of the latest practicable date.
Registrant had 10,833,573 shares of common stock, no par value, outstanding
as of April 30, 1999.
<PAGE>
PENNSYLVANIA ENTERPRISES, INC.
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income for the three
months ended March 31, 1999 and 1998............. 2
Consolidated Balance Sheets as of March 31, 1999
and December 31, 1998............................ 3
Consolidated Statements of Cash Flows for
the three months ended March 31, 1999 and 1998... 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 6. Exhibits and Reports on Form 8-K................... 18
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 31,
------------------------------
1999 1998*
-------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Energy products and services -
Regulated ....................................... $ 84,316 $ 65,006
Nonregulated .................................... 17,553 9,479
Pipeline construction and services ................. 2,443 2,404
------------ ------------
Total operating revenues ..................... 104,312 76,889
------------ ------------
OPERATING EXPENSES:
Cost of gas and other energy ........................ 65,753 46,531
Operation and maintenance ........................... 11,519 10,953
Depreciation ........................................ 2,852 2,601
Income taxes ........................................ 6,910 4,156
Taxes other than income taxes ....................... 4,518 4,061
------------ ------------
Total operating expenses ......................... 91,552 68,302
------------ ------------
OPERATING INCOME ........................................ 12,760 8,587
OTHER INCOME (DEDUCTIONS), NET .......................... 114 (3)
------------ ------------
INCOME BEFORE INTEREST CHARGES .......................... 12,874 8,584
------------ ------------
INTEREST CHARGES:
Interest on long-term debt .......................... 2,745 2,588
Other interest ...................................... 199 159
Allowance for borrowed funds used during construction (26) (23)
------------ ------------
Total interest charges ....................... 2,918 2,724
------------ ------------
INCOME BEFORE SUBSIDIARY'S PREFERRED STOCK DIVIDENDS .... 9,956 5,860
SUBSIDIARY'S PREFERRED STOCK DIVIDENDS .................. 52 321
------------ ------------
NET INCOME .............................................. $ 9,904 $ 5,539
============ ============
EARNINGS PER SHARE OF COMMON STOCK:
Basic .............................................. $ 0.94 $ 0.57
============ ============
Diluted ............................................ $ 0.93 $ 0.56
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic .............................................. 10,591,622 9,753,348
============ ============
Diluted ............................................ 10,650,899 9,834,444
============ ============
CASH DIVIDENDS PER SHARE ................................ $ 0.30 $ 0.30
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
* Reclassified to conform with 1999 consolidated financial statement presentation.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1999 1998
----------- ------------
(Thousands of Dollars)
ASSETS
<S> <C> <C> <C> <C> <C> <C>
UTILITY PLANT:
At original cost ................................. $ 379,134 $ 376,685
Accumulated depreciation ......................... (97,781) (95,735)
--------- ---------
281,353 280,950
--------- ---------
OTHER PROPERTY AND INVESTMENTS:
Nonutility property and equipment ................ 32,364 31,816
Accumulated depreciation ......................... (5,710) (5,460)
Other ............................................ 2,288 2,296
--------- ---------
28,942 28,652
--------- ---------
CURRENT ASSETS:
Cash and cash equivalents ........................ 3,244 807
Restricted cash - common stock subscribed (Note 3) 397 452
Accounts receivable -
Customers ..................................... 40,888 26,259
Others ........................................ 672 811
Reserve for uncollectible accounts ............ (2,010) (1,465)
Unbilled revenues ................................ 9,399 12,247
Materials and supplies, at average cost .......... 2,974 3,053
Gas held by suppliers, at average cost ........... 7,066 22,676
Deferred cost of gas and supplier refunds, net ... -- 6,058
Prepaid income taxes ............................. -- 2,090
Prepaid expenses and other ....................... 7,545 2,713
--------- ---------
70,175 75,701
--------- ---------
DEFERRED CHARGES:
Regulatory assets -
Deferred taxes collectible .................... 31,257 31,097
Other ......................................... 8,509 8,598
Unamortized debt expense ......................... 948 1,014
Other ............................................ 148 190
--------- ---------
40,862 40,899
--------- ---------
TOTAL ASSETS ......................................... $ 421,332 $ 426,202
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1999 1998
-------- ----------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common shareholders' investment (Note 3) ..... $146,122 $132,326
Preferred stock of PG Energy -
Not subject to mandatory redemption ....... 4,745 4,831
Subject to mandatory redemption ........... 240 240
Long-term debt ............................... 100,000 98,000
-------- --------
251,107 235,397
-------- --------
CURRENT LIABILITIES:
Current portion of long-term debt ............ 49,836 81,348
Preferred stock subject to repurchase ........ 44 --
Notes payable ................................ 7,050 6,200
Accounts payable ............................. 17,829 22,370
Deferred cost of gas and supplier refunds, net 10,859 --
Accrued general business and realty taxes .... 1,457 1,764
Accrued income taxes ......................... 4,712 --
Accrued interest ............................. 1,303 1,811
Other ........................................ 1,733 1,924
-------- --------
94,823 115,417
-------- --------
DEFERRED CREDITS:
Deferred income taxes ........................ 61,268 60,923
Unamortized investment tax credits ........... 4,381 4,424
Operating reserves ........................... 2,642 2,836
Other ........................................ 7,111 7,205
-------- --------
75,402 75,388
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 6)
TOTAL CAPITALIZATION AND LIABILITIES ............. $421,332 $426,202
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
------------------
1999 1998*
------ -------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income ............................................ $ 9,904 $ 5,539
Gain on sales of other property ....................... (134) --
Effects of noncash charges to income -
Depreciation ...................................... 2,873 2,629
Deferred income taxes, net ........................ 184 595
Provisions for self insurance ..................... 181 202
Other, net ........................................ 831 302
Changes in working capital, exclusive of cash
and current portion of long-term debt -
Receivables and unbilled revenues ............ (11,101) 623
Gas held by suppliers ........................ 15,610 13,948
Accounts payable ............................. (3,625) (3,623)
Deferred cost of gas and supplier refunds, net 16,917 4,478
Other current assets and liabilities, net .... 1,043 (3,443)
Other operating items, net ............................ (910) (402)
-------- --------
Net cash provided by operating activities ... 31,773 20,848
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Additions to utility plant ............................ (3,306) (4,477)
Additions to nonutility property ...................... (493) (4,124)
Proceeds from the sales of other property ............. 200 --
Other, net ............................................ (40) 583
-------- --------
Net cash used for investing activities ....... (3,639) (8,018)
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of common stock .............................. 7,135 807
Repurchase of subsidiary's preferred stock ............ (42) --
Dividends on common stock ............................. (3,200) (2,925)
Issuance of long-term debt ............................ 2,000 --
Net decrease in bank borrowings ....................... (31,578) (10,725)
Other, net ............................................ (12) (1)
-------- --------
Net cash used for financing activities ....... (25,697) (12,844)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ........ 2,437 (14)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR .............. 807 2,202
-------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR .................... $ 3,244 $ 2,188
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) ............... $ 3,181 $ 3,142
======== ========
Income taxes ....................................... $ 25 $ 429
======== ========
* Reclassified to conform with 1999 consolidated financial statement presentation.
</TABLE>
<PAGE>
PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of the Business. Pennsylvania Enterprises, Inc. (the "Company") is
a holding company which, through its subsidiaries, is engaged in both regulated
and nonregulated activities. The Company's regulated activities are conducted by
its principal subsidiary, PG Energy Inc. ("PG Energy"), a regulated public
utility, and PG Energy's wholly-owned subsidiary, Honesdale Gas Company
("Honesdale"), also a regulated public utility. Together PG Energy and Honesdale
distribute natural gas to a thirteen-county area in northeastern Pennsylvania, a
territory that includes the cities of Scranton, Wilkes-Barre and Williamsport.
In 1998 PG Energy and Honesdale collectively accounted for approximately 77% of
the Company's operating revenues.
The Company, through its other subsidiaries, PG Energy Services Inc.
("Energy Services"), PEI Power Corporation ("Power Corp") which was formed in
October, 1997, Theta Land Corporation ("Theta") and Keystone Pipeline Services,
Inc. ("Keystone"), a wholly-owned subsidiary of Energy Services, is engaged in
various nonregulated activities. These activities include the sale of natural
gas, propane, electricity and other energy-related products and services; the
construction, maintenance and rehabilitation of utility facilities, primarily
natural gas distribution pipelines; and the sale of property for residential,
commercial and other development.
Principles of Consolidation. The consolidated financial statements
include the accounts of the Company and its subsidiaries, PG Energy (including
Honesdale), Energy Services (including Keystone), Power Corp and Theta. All
material intercompany accounts have been eliminated in consolidation.
Both PG Energy and Honesdale (collectively referred to as the "Regulated
Subsidiaries") are subject to the jurisdiction of the Pennsylvania Public
Utility Commission (the "PPUC") for rate and accounting purposes. The financial
information of the Regulated Subsidiaries that is incorporated in these
consolidated financial statements has 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 the sale of natural gas. However, in the opinion of management, all
adjustments, consisting of only normal recurring accruals, necessary to present
fairly the results for the interim periods have been reflected in the
consolidated financial statements. It is suggested that these consolidated
financial statements be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's latest annual report
on Form 10-K.
Use of Accounting Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. These estimates involve judgments with respect to,
among other things, various future economic factors and regulatory matters which
are difficult to predict and are beyond the control of the Company. Therefore,
actual amounts could differ from these estimates.
(2) RATE MATTERS
Rate Increase. By Order adopted October 16, 1998, the PPUC approved an
overall 4.1% increase in PG Energy's base rates, designed to produce $7.4
million of additional annual revenue, effective October 17, 1998.
Gas Cost Adjustments. The provisions of the Pennsylvania Public Utility
Code require that the tariffs of local gas distribution companies ("LDCs") be
adjusted on an annual basis, and, in the case of larger LDCs such as PG Energy,
on an interim basis when circumstances dictate, to reflect changes in their
purchased gas costs. The procedure includes a process for the reconciliation of
actual gas costs incurred and actual revenues received and also provides for the
refund of any overcollections, plus interest thereon, or the recoupment of any
undercollections of gas costs.
In accordance with these procedures PG Energy has been permitted to make
the following changes since January 1, 1998, to the gas costs contained in its
tariff rates:
Change in Calculated
Effective Rate per MCF Increase (Decrease)
-----------------------
Date From To in Annual Revenue
- ---------------- ------------ -------- -------------------------
March 1, 1999 $4.53 $4.39 $(3,200,000)
December 1, 1998 4.25 4.53 7,100,000
September 1, 1998 4.18 4.25 1,900,000
June 1, 1998 3.95 4.18 5,800,000
March 1, 1998 4.05 3.95 (2,100,000)
The changes in gas rates on account of purchased gas costs have no effect
on earnings since the change in revenue is offset by a corresponding change in
the cost of gas.
(3) RESTRICTED CASH - COMMON STOCK SUBSCRIBED
The Company's Customer Stock Purchase Plan (the "Customer Plan") provides
the residential customers of all the Company's subsidiaries with a method of
purchasing shares of the Company's common stock without payment of brokerage
commission, service charge or other regular expense. On April 1, 1999, the
Company issued 17,356 shares of its common stock for an aggregate consideration
of $392,000 with respect to payments received pursuant to the Customer Plan
during the subscription period ended March 31, 1999. Such payments are reflected
under the captions "Restricted cash - common stock subscribed" and "Common
shareholders' investment" in these consolidated financial statements as of March
31, 1999.
(4) OPERATING SEGMENTS
The Company has three principal operating segments:
o Regulated Energy Products and Services, principally the purchase,
distribution and sale of natural gas in thirteen counties in
northeastern Pennsylvania by the Regulated Subsidiaries ("Energy
Products and Services - Regulated")
o Nonregulated Energy Products and Services, principally the sale of
natural gas, propane, electricity and other energy-related
products and services by Energy Services, generally in a
twenty-six county area in northeastern and central Pennsylvania,
and by Power Corp. ("Energy Products and Services - Nonregulated")
o Pipeline Construction and Services, principally the construction,
maintenance and rehabilitation of utility facilities throughout
the eastern United States by Keystone ("Pipeline Construction and
Services").
Information regarding the operating segments for the three-month periods
ended March 31, 1999 and 1998, is as follows:
<PAGE>
1999 1998
(Thousands of Dollars)
Operating revenues:
Energy products and services -
Regulated ....................... $ 84,344 $ 65,015
Nonregulated .................... 17,918 9,479
Pipeline construction and services 2,443 2,404
Intercompany eliminations ........ (393) (9)
--------- ---------
Total ......................... $ 104,312 $ 76,889
========= =========
Operating income (loss):
Energy products and services -
Regulated ....................... $ 12,575 $ 8,651
Nonregulated .................... 333 131
Pipeline construction and services (110) (122)
Intercompany eliminations and
corporate expenses .............. (38) (73)
--------- ---------
Total ......................... $ 12,760 $ 8,587
========= =========
(5) ACCOUNTING CHANGES
Accounting for Derivative Instruments and Hedging Activities. In June
1998, FASB Statement 133, "Accounting for Derivative Instruments and Hedging
Activities" was issued. The provisions of this statement, which are effective
for fiscal quarters beginning after June 15, 1999, establish accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. While the
Company generally has not used derivative instruments, it expects to adopt, to
the extent necessary, the provisions of FASB Statement 133 in the third quarter
of 1999. The impact of such adoption on the Company's future financial condition
and results of operations will depend upon a number of factors, including the
extent to which the Company may use derivative instruments, and the designation
and effectiveness of such derivative hedging market risk.
(6) COMMITMENTS AND CONTINGENCIES
Environmental Matters. PG Energy, like many gas distribution companies,
once utilized manufactured gas plants in connection with providing gas service
to its customers. None of these plants has been in operation since 1972, and
several of the plant sites are no longer owned by PG Energy. Pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), PG Energy filed notices with the United States Environmental
Protection Agency (the "EPA") with respect to the former plant sites. None of
the sites is or was formerly on the proposed or final National Priorities List.
The EPA has conducted site inspections and made preliminary assessments of each
site and has concluded that no further remedial action is planned. The
conclusion by the EPA that it anticipates no further remedial action with
respect to the sites at which PG Energy operated manufactured gas plants does
not, however, constitute a legal prohibition against further regulatory action
under CERCLA or other applicable federal or state law, and even in the absence
of any further action by the EPA, some of the sites may ultimately require
remediation. In any event, 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.
<PAGE>
PENNSYLVANIA ENTERPRISES, INC AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- -----------------------------------------------------------------------------
RESULTS OF OPERATIONS
The following table expresses certain items in the Company's consolidated
statements of income as percentages of operating revenues for each of the
three-month periods ended March 31, 1999 and 1998:
Three Months Ended
March 31,
------------------
1999 1998
------ -------
OPERATING REVENUES:
Energy products and services -
Regulated ..................... 80.8% 84.6%
Nonregulated .................. 16.8 12.3
Pipeline construction and services 2.4 3.1
----- -----
Total operating revenues ..... 100.0 100.0
----- -----
OPERATING EXPENSES:
Cost of gas and other energy ..... 63.0 60.5
Operation and maintenance ........ 11.1 14.2
Depreciation ..................... 2.7 3.4
Income taxes ..................... 6.6 5.4
Taxes other than income taxes .... 4.4 5.3
----- -----
Total operating expenses ..... 87.8 88.8
----- -----
OPERATING INCOME ..................... 12.2 11.2
OTHER INCOME, NET .................... 0.1 0.0
INTEREST CHARGES ..................... (2.8) (3.6)
----- -----
INCOME BEFORE SUBSIDIARY'S PREFERRED
STOCK DIVIDENDS .................. 9.5 7.6
SUBSIDIARY'S PREFERRED STOCK DIVIDENDS (0.0) (0.4)
----- -----
NET INCOME ........................... 9.5% 7.2%
===== =====
o Three Months Ended March 31, 1999, Compared With Three Months Ended March
31, 1998
Operating Revenues. Operating revenues increased $27.4 million (35.7%)
from $76.9 million for the quarter ended March 31, 1998, to $104.3 million for
the quarter ended March 31, 1999, largely as a result of a $19.3 million (29.7%)
increase in operating revenues from Regulated Energy Products and Services and
an $8.1 million (85.2%) increase in revenues from Nonregulated Energy Products
and Services.
The $19.3 million (29.7%) increase in operating revenues from Regulated
Energy Products and Services from $65.0 million for the quarter ended March 31,
1998, to $84.3 million for the quarter ended March 31, 1999, was primarily the
result of a 1.8 billion cubic feet (21.2%) increase in natural gas sales by PG
Energy Inc. ("PG Energy") to its residential and commercial heating customers.
This increase in sales was attributable to more seasonable weather during the
first quarter of 1999, as well as higher levels in PG Energy's gas cost rate and
the impact of the rate increase granted PG Energy effective October 16, 1998
(see "-Rate Matters"). The number of heating degree days increased by 452
(17.8%) from 2,533 (79.4% of normal) during the first quarter of 1998 to 2,985
(93.6% of normal) during the first quarter of 1999.
The $8.1 million (85.2%) increase in revenues from Nonregulated Energy
Products and Services was primarily the result of a $4.9 million (54.7%)
increase in gas sales and services by PG Energy Services Inc. ("Energy
Services") from $9.0 million for the quarter ended March 31, 1998, to $14.0
million for the quarter ended March 31, 1999, and a $2.6 million (680.0%)
increase in Energy Services' electricity sales, from $380,000 for the quarter
ended March 31, 1998, to $3.0 million for the quarter ended March 31, 1999.
Energy Services' sales of natural gas increased by 1.6 million cubic feet
(60.2%) and its sales of electricity increased by 58.9 megawatts (412.5%) during
the quarter ended March 31, 1999. Also contributing to the increase in revenues
from Nonregulated Energy Products and Services in the first quarter of 1999 was
the sale of $383,000 of electric energy by PEI Power Corporation ("Power Corp"),
which began generating and selling electricity in July, 1998.
Operating Expenses. Operating expenses, including depreciation and income
taxes, increased $23.2 million (34.0%) from $68.3 million for the first quarter
of 1998 to $91.6 million for the first quarter of 1999. As a percentage of
operating revenues, total operating expenses decreased slightly from 88.8%
during the first quarter of 1998 to 87.8% during the first quarter of 1999.
The cost of gas and other energy increased $19.2 million (41.3%) from
$46.5 million for the first quarter of 1998 to $65.8 million for the first
quarter of 1999, primarily because of the increased sales by PG Energy and
Energy Services, the sales by Power Corp and the higher levels in PG Energy's
gas cost rate (see "-Rate Matters").
Other than the cost of gas and other energy and income taxes, operating
expenses increased by $1.3 million (7.2%) from $17.6 million for the first
quarter of 1998 to $18.9 million for the first quarter of 1999. This increase
was largely attributable to a $566,000 (5.2%) increase in operation and
maintenance expense, primarily as a result of increased payroll and other costs
associated with the expansion of the Company's nonregulated activities, and a
$457,000 (11.3%) increase in taxes other than income taxes resulting from a
higher level of gross receipts tax because of the increased sales of natural gas
by PG Energy and the increased sales of electricity by Energy Services. Also
contributing to the higher operating expenses was a $251,000 (9.7%) increase in
depreciation expense, primarily because of additions to utility plant.
Income taxes increased $2.8 million (66.3%) from $4.2 million for the
quarter ended March 31, 1998, to $6.9 million for the quarter ended March 31,
1999, largely as a result of an increase in income before income taxes (for this
purpose, operating income net of interest charges).
Operating Income. As a result of the above, operating income increased by
$4.2 million (48.6%) from $8.6 million for the three-month period ended March
31, 1998, to $12.8 million for the three-month period ended March 31, 1999, and
also increased as a percentage of total operating revenues for such periods from
11.2% in the three-month period ended March 31, 1998, to 12.2% in the
three-month period ended March 31, 1999.
Operating income attributable to the Company's three operating segments:
Regulated Energy Products and Services, principally the purchase, distribution
and sale of natural gas by PG Energy and Honesdale ("Energy Products and
Services - Regulated"); Nonregulated Energy Products and Services, principally
the sale of natural gas, propane, electricity and other energy-related products
and services by Energy Services and Power Corp ("Energy Products and Services -
Nonregulated"); and Pipeline Construction and Services, principally the
construction, maintenance and rehabilitation of utility facilities by Keystone
("Pipeline Construction and Services"), for the quarters ended March 31, 1999
and 1998, was as follows:
Quarter Ended March 31,
----------------------------------
Increase
1999 1998 (Decrease)
Energy Products and Services -
Regulated ....................... $ 12,575 $ 8,651 $ 3,924
Nonregulated .................... 333 131 202
Pipeline Construction and Services (110) (122) 12
Intercompany eliminations and
corporate expenses .............. (38) (73) 35
-------- -------- --------
Total ........................... $ 12,760 $ 8,587 $ 4,173
======== ======== ========
The increase in operating income from Regulated Energy Products and
Services is primarily related to the aforementioned increase in sales to PG
Energy's residential and commercial heating customers. The increase in operating
income from Nonregulated Energy Products and Services is primarily the result of
the increased sales by Energy Services.
Interest Charges. Interest charges increased $194,000 (7.1%) from $2.7
million for the first quarter of 1998 to $2.9 million for the first quarter of
1999. This increase was largely attributable to a higher average level of
long-term debt outstanding in 1999.
Subsidiary's Preferred Stock Dividends. Dividends on preferred stock
decreased $269,000 (83.8%) from $321,000 the quarter ended March 31, 1998, to
$52,000 for the quarter ended March 31, 1999, as a result of the repurchase by
PG Energy of all its remaining 9% cumulative preferred stock as of December 1,
1998.
Net Income. The increase of $4.4 million in net income, from $5.5 million
for the first quarter of 1998 to $9.9 million for the first quarter of 1999, and
the $.37 per share increase in both the basic and diluted earnings per share of
common stock, from $.57 per share (basic) and $.56 per share (diluted) for the
first quarter of 1998 to $.94 per share (basic) and $.93 per share (diluted) for
the first quarter of 1999, were principally the result of the increase in
operating income, as discussed above.
RATE MATTERS
Rate Increase. By Order adopted October 16, 1998, the PPUC approved an
overall 4.1% increase in PG Energy's base rates, designed to produce $7.4
million of additional annual revenue, effective October 17, 1998.
Gas Cost Adjustments. The provisions of the Pennsylvania Public Utility
Code require that the tariffs of local gas distribution companies ("LDCs") be
adjusted on an annual basis, and, in the case of larger LDCs such as PG Energy,
on an interim basis when circumstances dictate, to reflect changes in their
purchased gas costs. The procedure includes a process for the reconciliation of
actual gas costs incurred and actual revenues received and also provides for the
refund of any overcollections, plus interest thereon, or the recoupment of any
undercollections of gas costs.
In accordance with these procedures, PG Energy has been permitted to make
the following changes since January 1, 1998, to the gas costs contained in its
gas tariff rates:
Change in Calculated
Effective Rate per MCF Increase (Decrease)
---------------------
Date From To in Annual Revenue
- ------------------ ---------- ---------- ---------------------
March 1, 1999 $4.53 $4.39 $(3,200,000)
December 1, 1998 4.25 4.53 7,100,000
September 1, 1998 4.18 4.25 1,900,000
June 1, 1998 3.95 4.18 5,800,000
March 1, 1998 4.05 3.95 (2,100,000)
The changes in gas rates on account of purchased gas costs have no effect
on earnings since the change in revenue is offset by a corresponding change in
the cost of gas.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
The primary capital needs of the Company continue to be the funding of PG
Energy's construction program and the seasonal funding of PG Energy's gas
purchases and increases in its customer accounts receivable. PG Energy'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 nonregulated activities continue to
expand, further capital will be required for those activities. It is currently
anticipated that such expenditures will be funded by a combination of capital
provided by the Company, bank borrowings and other debt financing.
The cash flow from PG Energy'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 PG Energy to use bank borrowings to
fund such expenditures, pending the periodic issuance of stock and long-term
debt. Bank borrowings are also used by PG Energy for the seasonal funding of its
gas purchases and increases in customer accounts receivable.
In order to temporarily finance construction expenditures and to meet its
seasonal borrowing requirements, PG Energy has made arrangements for a total of
$64.0 million of unsecured revolving bank credit, which is deemed adequate for
its needs. Specifically, PG Energy currently has seven bank lines of credit with
an aggregate borrowing capacity of $64.0 million which provide for borrowings at
interest rates generally less than prime and which mature at various times
during 1999 and 2000 and which PG Energy intends to renew or replace as they
expire. As of April 30, 1999, PG Energy had $5.8 million of borrowings
outstanding under these bank lines of credit.
In order to finance the conversion of its cogeneration facility, the
construction of a methane recovery facility and initial phases of the
development of an industrial site adjacent to its cogeneration facility, Power
Corp has borrowed $7.0 million pursuant to two bank lines of credit as of April
30, 1999. These bank lines of credit provide for borrowings at interest rates
less than prime and mature during 1999 and 2000. Power Corp intends to renew or
replace these lines of credit as they expire.
The Company believes that its Regulated Subsidiaries and Power Corp will
be able to raise in a timely manner such funds as are required for their future
construction expenditures, refinancings and other working capital requirements.
Likewise, the Company believes that its other nonregulated subsidiaries will be
able to raise such funds as are required for their needs.
Long-Term Debt and Capital Stock Financings
Both the Company and its subsidiaries, most notably PG Energy,
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 PG Energy during the
three-month period ended March 31, 1999.
The Company also obtains external funds from the sale of common stock
through its Dividend Reinvestment and Stock Purchase Plan, its Customer Stock
Purchase Plan, its 1992 Stock Option Plan and its Employees' Savings Plan.
During 1999 (through April 30, 1999) the Company realized $9.4 million from the
issuance of common stock under these plans.
Capital Expenditures and Related Financings
Capital expenditures totaled $4.9 million during the first three months
of 1999, including $3.2 million of expenditures for the construction of utility
plant and $1.3 million for the development of an industrial site adjacent to
Power Corp's cogeneration facility.
The Company estimates that its capital expenditures will total $17.6
million for the remainder of the year, consisting of $15.2 million relative to
utility plant and $2.5 million with respect to the Company's nonregulated
activities. These capital expenditures will be financed with internally
generated funds and bank borrowings, pending the periodic issuance of stock and
long-term debt.
Current Maturities of Long-Term Debt
As of March 31, 1999, $49.8 million of long-term debt was required to be
repaid within twelve months. The $49.8 million of long-term debt includes $20.0
million outstanding under the Company's Term Loan Agreement which is due on May
31, 1999, $19.8 million outstanding under PG Energy's bank lines of credit which
is due at various times during 1999 and 2000 and $10.0 million of PG Energy's
9.23% series first mortgage bonds which mature September 1, 1999.
The Company intends to repay the $20.0 million outstanding under its Term
Loan Agreement with proceeds from a $20.0 million short-term bank loan which
will mature in May, 2000. PG Energy intends to finance its current maturities of
long-term debt with internally generated funds and bank borrowings pending the
periodic issuance of long-term debt and capital stock.
Year 2000 Readiness Disclosure
The Company has performed an inventory and assessment of its computer
systems and applications, as well as devices with embedded technology, to
identify year 2000 issues and to develop a plan for addressing those issues.
This plan, which was initiated in 1996, was completed in March, 1999, for all
applications and devices that could have a material effect on the Company's
operations, and all such applications and devices are now year 2000 compliant.
The plan is scheduled to be completed by June 30, 1999, with respect to all
other issues. The plan involves the replacement of certain systems with
purchased software, the renovation of other systems, and the purchase of certain
hardware and other devices. The Company is utilizing both internal resources and
contract personnel to implement the plan, which is currently on schedule.
It is estimated that the total cost of the Company's plan to address year
2000 issues will be approximately $2.0-2.5 million. This amount, which had been
largely expended as of March 31, 1999, includes costs for the purchase of
hardware and software, external contractors and internal resources. The internal
resources, which are estimated to account for approximately $1.0 million of the
total cost, involved the redeployment of existing personnel and did not
represent an incremental cost. In view of the estimated cost and because the
plan is now largely complete, management does not believe the expenditures
necessary to carry out the plan to address year 2000 issues will be material
relative to the Company's financial position or results of operations.
As key elements of its plan to address year 2000 issues, the Company
replaced its financial and human resource systems with purchased software. The
installation of these new systems, along with modifications made to the
Company's customer information system and upgrading of its operating system
software which were completed in March, 1999, resolved the primary year 2000
issues.
The Company's plan to address year 2000 issues includes an assessment of
its critical suppliers and vendors, and also its largest customers, to determine
their status relative to year 2000 compliance. The Company has surveyed
approximately 200 such suppliers, vendors and customers and to date has not
identified any situations that would appear to pose a significant risk to the
Company. The Company intends to continue monitoring the progress being made by
its suppliers, vendors and largest customers relative to year 2000 compliance
and will promptly make any changes in its contingency planning as the occasion
warrants.
The Company is subject to potential disruptions in its operations as a
result of year 2000 related failures of its critical suppliers and vendors.
Although there is presently no basis for suggesting such situation would occur,
management believes the worst case scenario in such regard might involve the
temporary disruption in the gas service of certain of its customers. To provide
for this and other possible contingencies related to year 2000 issues, the
Company is continuing to evaluate its existing emergency and disaster recovery
plans. These plans will be modified, as deemed appropriate, based, among other
considerations, on the Company's assessment of the year 2000 compliance of its
critical suppliers and vendors. These plans, as so modified, will attempt to
mitigate, to the extent reasonably possible, the effect of any year 2000 related
failures by a third party. However, the Company is dependent on its suppliers of
natural gas, interstate gas pipelines and utility and telecommunication
companies, over which it has no control, to serve its customers. Any disruption
in service by one of these key suppliers could, depending upon its nature and
extent, have a material adverse effect on the Company's operations.
Natural Gas Industry Restructuring
The Company and PG Energy believe that in 1999 Pennsylvania may enact
legislation which provides all customers of the larger natural gas utilities in
the state that are regulated by the PPUC with the right to choose their natural
gas supplier. As currently envisioned, such legislation would require that PG
Energy provide all of its customers with unbundled transportation service within
the next year to 18 months. While the rates for the transportation of natural
gas through PG Energy's distribution system and the storage services offered by
PG Energy would continue to be price regulated by the PPUC, the commodity cost
of gas purchased from suppliers other than PG Energy would not be so regulated.
Customers could, however, continue to receive a bundled sales service from PG
Energy which would be subject to price regulation by the PPUC. Essentially, the
legislation would extend the transportation service which is now available to a
limited number of PG Energy's customers to all its customers, and customers
could choose to have their natural gas provided by a supplier other than PG
Energy, based on nonregulated market prices and other considerations.
If Pennsylvania enacts legislation which permits all customers of the
larger regulated LDCs to choose their supplier of natural gas, PG Energy will be
faced with significant competition from marketers for the sale of natural gas to
its customers. However, under current regulations of the PPUC, PG Energy does
not realize a profit or incur any loss with respect to the commodity cost of
natural gas. Moreover, PG Energy would not expect the pending legislation to
result in the bypass of its distribution system by any significant number of
customers because of the nature of its customer base and the cost of any such
bypass. Additionally, based on various provisions of the legislation currently
being considered, PG Energy does not believe that the legislation will result in
any significant amount of transition costs (such as the negotiated buyout of
contracts with interstate pipelines, the recovery of deferred purchased gas
costs or the recovery of regulated assets). Further, PG Energy believes that the
transition costs it would incur in offering choice to all its customers
(including those involving information systems and customer education) would
generally be recoverable through rates or other customer charges. Accordingly,
although it cannot be certain, because the terms of such legislation have not
been finalized and the ultimate effect on PG Energy cannot be determined, PG
Energy does not believe that the enactment of legislation providing for
customers of the larger regulated LDCs to purchase their natural gas from third
parties would have any material adverse impact on its earnings or financial
condition despite the increased competition to which PG Energy would be subject
regarding the sale of natural gas to its customers.
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, such statements 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. The Company
cautions that assumptions, projections, expectations, intentions or beliefs
about future events, while expressed in good faith and believed by the Company
to have a reasonable basis, may and often do vary from actual results and the
differences between assumptions, projections, expectations, intentions or
beliefs and actual results can be material. Accordingly, there can be no
assurance that actual results will not differ materially from those expressed or
implied by the forward-looking statements. The following are some of the factors
that could cause actual achievements and events to differ materially from those
expressed or implied in such forward-looking statements: the nature of
Pennsylvania legislation restructuring the natural gas industry; the impact of
year 2000 disruption; industrial, commercial and residential growth in the
service territories of the Company and its subsidiaries; the weather and other
natural phenomena; the timing and extent of changes in commodity prices and
interest rates; changes in environmental and other laws and regulations to which
the Company and its subsidiaries are subject or other external factors over
which the Company has no control; growth in opportunities for the Company's
nonregulated activities; and general economic conditions and uncertainties
relating to such growth during the periods covered by the forward-looking
statements. Also, it is not possible for the Company to predict any new factors
which may emerge and affect the Company and its subsidiaries, nor can it assess
the effect of each such factor on the Company's business or the extent to which
any such factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements. The Company
undertakes no obligation to publicly release any revision to these
forward-looking statements to reflect events or circumstances after the date of
this filing.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10-1 Form of Stock Option Agreement -- 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.
<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: May 6, 1999 By: /s/ Donna M. Abdalla
Donna M. Abdalla
Secretary
Date: May 6, 1999 By: /s/ John F. Kell, Jr.
John F. Kell, Jr.
Vice President, Financial Services
(Principal Financial Officer and
Principal Accounting Officer)
STOCK OPTION AGREEMENT
UNDER THE PENNSYLVANIA ENTERPRISES, INC.
STOCK INCENTIVE PLAN
Option No.: _______________
THIS AGREEMENT dated as of _______________ (the "Date of Grant") is
made by and between PENNSYLVANIA ENTERPRISES, INC. (the "Company") and
_______________ (the "Optionee").
WHEREAS, the Company, has adopted the Pennsylvania Enterprises, Inc. Stock
Incentive Plan (the "Plan"); and
WHEREAS, the Company's Board of Directors (the "Board"), has determined
that it would be in the best interests of the Company to enter into this
Agreement.
NOW, THEREFORE, the Company hereby grants an Option (the "Option")
under the Plan to the Optionee on the following terms and conditions:
1. AMOUNT OF STOCK SUBJECT TO OPTION:
The Company hereby grants to the Optionee, subject to the terms and
conditions set forth in this Agreement, the Option to purchase ____________
shares of authorized and unissued common stock of the Company (without nominal
or par value, with a stated value of $5.00 per share) or shares reacquired by
the Company and held in treasury (the "Stock"), which Stock is to be issued by
the Company upon the exercise of the Option as hereinafter set forth.
2. PURCHASE PRICE:
The purchase price per share of Stock subject to the Option shall be
_______________, the fair market value of a share of Stock on the Date of Grant,
as determined by the Board.
3. TYPE OF OPTION:
The Option is intended to be a Non-Qualified Stock Option that is not
an Incentive Stock Option within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.
<PAGE>
Option No.: _______________
4. PERIOD OF OPTION:
The Option is granted as of the Date of Grant. The Option shall expire
at the earliest to occur of (a) three months after termination of the Optionee's
employment or service on the Board for any reason except death, disability, or
retirement; (b) one year after termination of the Optionee's employment with the
Company or service on the Board by reason of death or disability; (c) five years
after termination of the Optionee's Employment by reason of retirement, on or
after age 55, under the Employees' Retirement Plan of Pennsylvania Enterprises,
Inc., or (d) _______________ (ten years after the Date of Grant). In no event
shall the term of the Option be greater than ten years.
5. EXERCISE OF OPTION:
(a) The Option may be exercised with respect to full shares (and no
fractional shares shall be issued) as follows:
(i) no part of the Option may be exercised during the first
year following the Date of Grant;
(ii) thereafter, the Option may be exercised in part or in
full until it expires in accordance with Section 4.
(b) In order to exercise the Option or any part thereof, the Optionee
shall give notice in writing to the Company at its headquarters address (on a
form acceptable to the Company) of the Optionee's intention to purchase all or
part of the shares subject to the Option, and in said notice the Optionee shall
set forth the number of shares as to which he/she desires to exercise his/her
Option. The notice must be accompanied by payment in full of the exercise price
for such shares. Such payment may be made in cash, through the delivery to the
Company of full shares of Stock which have been owned by the Optionee for at
least six months having a value equal to the total exercise price of the portion
of the Option so exercised or through a combination of cash and shares of Stock,
or in any such other manner as may be permitted by the Board. Any shares of
Stock so delivered shall be valued at the average of the high and low trading
prices for the trading date immediately prior to the date on which the Option is
exercised. The Option will be deemed exercised on the date a proper notice of
exercise (accompanied as described above) is hand delivered, or, if mailed,
postmarked.
(c) The Optionee shall, no later than the date of exercise of the
Option, make payment to the Company in cash or its equivalent of any federal,
state, local or other taxes of any kind required by law to be withheld with
respect to the Option. The obligations of the Company under the Plan and this
Option shall be conditional on such payment, and the Company shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the Optionee.
<PAGE>
Option No.: _______________
6. NON-TRANSFERABILITY OF OPTION:
The Option is not transferable otherwise than by will or by the laws of
descent and distribution. To the extent the Option is exercisable at the time of
the Optionee's death, it may be exercised by the executor or administrator of
the Optionee's estate or by the person designated by will or entitled by the
laws of descent and distribution, upon such death, to any remaining rights
arising out of the Option.
7. CHANGE OF CONTROL:
Notwithstanding the provisions of Section 4, the Option shall become
fully exercisable upon the occurrence of a Change of Control (as defined in the
Plan).
8. CHANGE IN CAPITAL:
If prior to the expiration of the Option, there shall be any changes in
the Stock structure of the Company by reason of the declaration of stock
dividends, recapitalization resulting in stock split-ups or combinations or
exchanges of shares by reason of merger, consolidation, or by any other means,
then the number of shares subject to the Option and the exercise price per share
of Stock shall be equitably and appropriately adjusted as the Board in its sole
discretion shall deem just and reasonable in light of all the circumstances
pertaining thereto.
9. RIGHT TO TERMINATE SERVICE AS DIRECTOR:
The Option shall not confer upon the Optionee any right to continued
service as a Director of the Company.
10. REGISTRATION AND OTHER REQUIREMENTS:
The Option is subject to the requirement that, if at any time the Board
shall determine that (a) the listing, registration or qualification of the Stock
subject or related to the Option upon any securities exchange or under any state
or federal law, (b) the consent or approval of any governmental regulatory body
or (c) an agreement by the Optionee with respect to the disposition of Stock is
necessary or desirable (in connection with any requirement or interpretation of
any federal or state securities law, rule or regulation) as a condition of, or
in connection with, the issuance, purchase or delivery of Stock under the
Option, the Option shall not be exercised, in whole or in part, unless such
listing, registration, qualification, consent, approval or agreement shall have
been effected or obtained free of any conditions not acceptable to the Board.
11. SUBJECT TO THE PLAN:
The Option evidenced by the Agreement and the exercise thereof are
subject to the terms and conditions of the Plan, which are incorporated herein
by reference and made a part hereof. In addition, the Option is subject to any
rules and regulations promulgated by the Board.
<PAGE>
Option No.: _______________
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto:
PENNSYLVANIA ENTERPRISES, INC.
By: ______________________________
Name: Thomas F. Karam
Title: President and CEO
Accepted and agreed to as of the Date of Grant:
- -----------------------------------------------
Optionee
<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> 3-mos
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 281,353,000
<OTHER-PROPERTY-AND-INVEST> 28,942,000
<TOTAL-CURRENT-ASSETS> 70,175,000
<TOTAL-DEFERRED-CHARGES> 40,862,000
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 421,332,000
<COMMON> 53,695,000
<CAPITAL-SURPLUS-PAID-IN> 40,949,000
<RETAINED-EARNINGS> 51,478,000
<TOTAL-COMMON-STOCKHOLDERS-EQ> 146,122,000
240,000
4,745,000
<LONG-TERM-DEBT-NET> 100,000,000
<SHORT-TERM-NOTES> 7,050,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 49,836,000
44,000
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 113,295,000
<TOT-CAPITALIZATION-AND-LIAB> 421,332,000
<GROSS-OPERATING-REVENUE> 104,312,000
<INCOME-TAX-EXPENSE> 6,910,000
<OTHER-OPERATING-EXPENSES> 84,642,000
<TOTAL-OPERATING-EXPENSES> 91,552,000
<OPERATING-INCOME-LOSS> 12,760,000
<OTHER-INCOME-NET> 114,000
<INCOME-BEFORE-INTEREST-EXPEN> 12,874,000
<TOTAL-INTEREST-EXPENSE> 2,918,000
<NET-INCOME> 9,956,000
52,000
<EARNINGS-AVAILABLE-FOR-COMM> 9,904,000
<COMMON-STOCK-DIVIDENDS> 3,200,000
<TOTAL-INTEREST-ON-BONDS> 4,837,000
<CASH-FLOW-OPERATIONS> 31,773,000
<EPS-PRIMARY> .94
<EPS-DILUTED> .93
</TABLE>
<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>
<RESTATED>
<CIK> 0000077231
<NAME> PENNSYLVANIA ENTERPRISES, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 264,636,000
<OTHER-PROPERTY-AND-INVEST> 17,404,000
<TOTAL-CURRENT-ASSETS> 61,283,000
<TOTAL-DEFERRED-CHARGES> 38,633,000
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 381,956,000
<COMMON> 48,900,000
<CAPITAL-SURPLUS-PAID-IN> 24,572,000
<RETAINED-EARNINGS> 52,909,000
<TOTAL-COMMON-STOCKHOLDERS-EQ> 126,381,000
640,000
15,864,000
<LONG-TERM-DEBT-NET> 125,000,000
<SHORT-TERM-NOTES> 1,245,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 17,337,000
80,000
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 95,409,000
<TOT-CAPITALIZATION-AND-LIAB> 381,956,000
<GROSS-OPERATING-REVENUE> 76,889,000
<INCOME-TAX-EXPENSE> 4,156,000
<OTHER-OPERATING-EXPENSES> 64,146,000
<TOTAL-OPERATING-EXPENSES> 68,302,000
<OPERATING-INCOME-LOSS> 8,587,000
<OTHER-INCOME-NET> (3,000)
<INCOME-BEFORE-INTEREST-EXPEN> 8,584,000
<TOTAL-INTEREST-EXPENSE> 2,724,000
<NET-INCOME> 5,860,000
321,000
<EARNINGS-AVAILABLE-FOR-COMM> 5,539,000
<COMMON-STOCK-DIVIDENDS> 2,925,000
<TOTAL-INTEREST-ON-BONDS> 4,837,000
<CASH-FLOW-OPERATIONS> 20,848,000
<EPS-PRIMARY> .57
<EPS-DILUTED> .56
</TABLE>
