U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
[ ] 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 0-18552
Pennichuck Corporation
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(Exact name of small business issuer as specified in its charter)
New Hampshire 02-0177370
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Four Water Street, Nashua, New Hampshire 03061
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(Address of principal executive offices) (Zip Code)
(603) 882-5191
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(Issuer's telephone number)
Not applicable
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(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practical date:
Common Stock, $1 Par Value--742,075 shares as of November 1, 1996
<PAGE> 1
INDEX
PENNICHUCK CORPORATION AND SUBSIDIARIES
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PAGE NUMBER
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets--September 30, 1996 and
December 31, 1995 3
Condensed Consolidated Statements of Income--Three months ended
September 30, 1996 and 1995; Nine months ended September 30, 1996
and 1995 4
Condensed Consolidated Statements of Cash Flows--Nine months ended
September 30, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements--
September 30, 1996 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7-13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings Not Applicable
Item 2. Changes in Securities Not Applicable
Item 3. Defaults upon Senior Securities Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders Not Applicable
Item 5. Other Information Not Applicable
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 13
</TABLE>
<PAGE> 2
PART I. Item 1. FINANCIAL INFORMATION
PENNICHUCK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30 December 31
1996 1995
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ASSETS (Unaudited)
(In thousands)
<S> <C> <C>
Property, Plant and Equipment
Land $ 379 $ 318
Buildings 15,807 15,173
Equipment 41,043 39,214
Construction work in progress 176 522
57,405 55,227
Less accumulated depreciation 14,584 13,781
42,821 41,446
Current Assets
Cash 50 203
Accounts receivable, net 1,840 1,743
Inventory 230 220
Other current assets 85 404
2,205 2,570
Other Assets
Land development costs 2,302 2,844
Deferred charges, net 1,038 916
Investment in real estate partnerships 415 117
TOTAL ASSETS $ 48,781 $ 47,893
STOCKHOLDERS' EQUITY AND LIABILITIES
Common stock-par value $1 per share $ 745 $ 722
Paid in capital 5,068 4,678
Retained earnings 7,112 6,898
Treasury stock, at cost (53) (51)
12,872 12,247
Long-Term Debt, less current portion 20,796 20,881
Current Liabilities
Current portion of long-term debt 818 147
Accounts payable 212 586
Accrued interest payable 214 195
Other accrued expenses 668 903
1,912 1,831
Other Liabilities
Contributions in aid of construction 8,600 8,376
Other liabilities and deferred credits 4,601 4,558
TOTAL STOCKHOLDERS' EQUITY & LIABILITIES $ 48,781 $ 47,893
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE> 3
PENNICHUCK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30 September 30
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1996 1995 1996 1995
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(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues
Water utility operations $ 3,057 $ 3,184 $ 8,077 $ 8,213
Real estate operations and other 50 604 664 643
3,107 3,788 8,741 8,856
Operating expenses
Water utility operations 2,051 1,992 5,658 5,403
Real estate operations and other 42 482 622 600
2,093 2,474 6,280 6,003
Operating income 1,014 1,314 2,461 2,853
Other income (expense) 4 (61) 8 (57)
Interest expense 409 430 1,223 1,284
Income before income taxes 609 823 1,246 1,512
Provision for income taxes 232 311 469 575
Net income $ 377 $ 512 $ 777 $ 937
Net income per common share $ .51 $ .72 $ 1.06 $ 1.31
Dividends paid per common share $ .26 $ .22 $ .77 $ .66
Weighted average number of shares outstanding 740,514 715,474 734,132 715,760
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE> 4
PENNICHUCK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
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1996 1995
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(In thousands)
<S> <C> <C>
CASH PROVIDED (USED) BY:
Operating Activities $ 1,870 $ 2,187
Investing Activities:
Purchase of property, plant and equipment (2,308) (1,400)
Receipt of contributions in aid of construction 311 178
(Increase) decrease in partnership investments (298) 4
(Increase) decrease in other assets (164) (130)
(2,459) (1,348)
Financing Activities:
Payments on long-term debt (7,414) (213)
Proceeds from issuance of long-term debt 8,000 4,645
Increase (decrease) in notes payable to bank -- (4,645)
Payment of common dividends (563) (472)
Proceeds from dividend reinvestment plan & other 413 43
436 (642)
INCREASE (DECREASE) IN CASH (153) 197
CASH AT BEGINNING OF PERIOD 203 198
CASH AT END OF PERIOD $ 50 $ 395
</TABLE>
Supplemental Cash Flow Information. Interest paid was $1,195,000 and
$1,245,000 for the nine months ended September 30, 1996 and 1995, respectively.
Income taxes paid were $265,000 and $288,000 for the nine months ended September
30, 1996 and 1995, respectively.
See notes to condensed consolidated financial statements.
<PAGE> 5
PENNICHUCK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 1996
NOTE A -- BACKGROUND
The financial statements include the accounts of Pennichuck Corporation
(the "Company") and its wholly-owned subsidiaries, Pennichuck Water Works, Inc.
("Pennichuck"), The Southwood Corporation ("Southwood") and Pennichuck Water
Service Corporation ("PWSC"). All significant intercompany accounts have been
eliminated in consolidation.
NOTE B -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and Item
310 of Regulation S-B. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine month period ended September 30,
1996 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1996. The Balance Sheet amounts shown under the
December 31, 1995 column have been derived from the audited financial statements
of the Company as contained in its Annual Report to Shareholders. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report for the year ended December 31,
1995.
<PAGE> 6
PART I. Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition
The financial position of Pennichuck Corporation (the "Company") and its
three wholly-owned operating subsidiaries, Pennichuck Water Works, Inc.
("Pennichuck"), The Southwood Corporation ("Southwood") and Pennichuck Water
Service Corporation ("PWSC") is shown in the accompanying Condensed Consolidated
Balance Sheets.
The Company's cash needs for operations, capital projects, debt service and
dividends throughout the year are funded primarily by operating cash flow as
supplemented by borrowings under a revolving credit agreement (the "agreement")
with Fleet Bank-NH ("Fleet"). The agreement allows the Company to borrow up to
$4.5 million at interest rates tied to Fleet's cost of funds or LIBOR, whichever
is lower. At September 30, 1996, the Company had $2,500,000 in notes outstanding
under this credit facility, at interest rates ranging from 7.16% to 7.41%. These
notes mature in December 1996 and may be automatically renewed at maturities
ranging from one to seventeen months. In addition, the Company had $395,000
outstanding under the revolving line of credit portion of the agreement, at
Fleet's current base rate of 8.25%. Under the terms of the agreement, the
maturity date of all amounts borrowed, or to be borrowed in the next 20 months,
has been extended to May 31, 1998. As a result, outstanding bank borrowings at
September 30, 1996 totaling $2,895,000 have been classified as "Long Term Debt"
in the Condensed Consolidated Balance Sheets.
Total indebtedness under the credit facility with Fleet decreased from
$4,295,000 at December 31, 1995 to $2,895,000 at September 30, 1996. This
decrease was principally due to (i) an $8,000,000 refinancing in March 1996 of
which $2,670,000 was applied against bank borrowings as discussed in the
Company's 1995 Annual Report to Shareholders, (ii) the receipt of $495,000 from
a land sale during January 1996 and (iii) the receipt of $411,000 from the sale
of Company common stock under its dividend reinvestment and common stock
purchase plan in February, May and August 1996. In March 1996, however, the
Company utilized its credit facility with Fleet to prepay $653,000 of principal
previously outstanding on a mortgage note in order to take advantage of the
recent decline in long-term interest rates.
For the remainder of 1996, the Company's cash flow projections indicate
that outstanding borrowings under the agreement at various times of the year
should not exceed $3.5 million and that the Company should have adequate credit
availability to fund any unanticipated expenditures during the next twelve
months. The Company's revised 1996 consolidated capital budget consists of
$2,804,000 for water utility projects and $298,000 for real estate capital
expenditures, the total of which exceeds the $2.5 million and $2.4 million
expended for capital projects during 1995 and 1994, respectively. Through the
nine months ended September 30, 1996, Pennichuck has invested $2,128,000 in
capital projects, net of $310,000 of contributions in aid of construction. These
projects consist primarily of a new booster station in the northwest section of
Nashua, relocation of mains to accommodate highway improvements in Nashua and
routine system upgrades.
<PAGE> 7
Other changes in the Company's financial position during the first nine
months of 1996 were (i) a decrease of $542,000 in "Land Development Costs" which
reflects the removal of the infrastructure costs allocated to the sale of a 19
acre parcel of land in January 1996 and (ii) an increase of $298,000 in
"Investment in real estate partnerships" in two real estate joint ventures in
which Southwood and the Company are participating and discussed in further
detail under "Results of Operations -- Nine Months Ended September 30, 1996
Compared to Nine Months Ended September 30, 1995, Real Estate Operations and
Other." Also, at September 30, 1996, the "Current portion of long-term debt"
includes $718,000 for a balloon payment on one of Pennichuck's outstanding notes
due August 1, 1997. The decrease in "Other accrued expenses" relates principally
to the repayment of $97,000 in customer deposits and advances and a payment in
the amount of $75,000 to the City of Nashua as settlement for certain
obligations relating to the zoning of Southwood Business Park.
In October 1995, the Company amended its dividend reinvestment plan to
allow Pennichuck's residential customers and employees in New Hampshire to make
initial investments in the Company's common stock and thereafter to participate
in the plan, as well as to allow for limited optional cash payments by existing
shareholders. On February 15 , May 15 and August 15, 1996, the Company issued
and sold approximately 23,000 new shares of common stock through initial
investments, optional cash payments and dividend reinvestments. The effect of
those new shares has been to add approximately $411,000 to the Company's
consolidated common equity base. The proceeds from the plan investments were
used to reduce outstanding bank borrowings during the quarter.
At September 30, 1996, consolidated retained earnings increased to
$7,112,000, or by $214,000 from the beginning of the year, reflecting net income
of $777,000 less payment of common dividends of $563,000 for the nine months
then ended. The Company's ability to pay common dividends is dependent on the
level of its future earnings and the capital needs of its operating business
units.
Results of Operations -- Nine Months Ended September 30, 1996 Compared to Nine
Months Ended September 30, 1995
For the nine month period ended September 30, 1996, consolidated net income
was $777,000, or $1.06 per common share compared to $937,000, or $1.31 per
common share for the same period in 1995. Consolidated revenues thus far in 1996
were $8,741,000, or $115,000 less than last year. That revenue decrease occurred
in the water utility operations of the Company principally as a result of a
decline in billed consumption during the 1996 period. The Company's consolidated
revenues are generally seasonal due to the overall significance of the water
sales of Pennichuck as a percent of consolidated revenues. Water revenues are
typically at their lowest point during the first and fourth quarters of the
calendar year while water revenues in the second and third quarters tend to be
greater as a result of increased water consumption during the late spring and
summer months.
<PAGE> 8
Water Utility Operations
Utility operating revenues for the first nine months of 1996 totaled
$8,077,000 or a $136,000 decrease from the same period in 1995, reflecting a
3.8% decline in billed consumption in Pennichuck's core system. That decline is
principally due to the cooler and damper spring and summer experienced in 1996
as well as a decline in industrial consumption from 1995 to 1996. Year to date
rainfall in 1996 was 36 inches, or nearly 48% more than in 1995. However, water
sales in Pennichuck's satellite systems increased approximately $18,000 as a
result of a 7.7% increase in the number of customers outside Pennichuck's core
system.
Pennichuck has not filed for any rate relief since its last step adjustment
on December 1, 1994. Presently, Pennichuck is contemplating filing for rate
relief in early 1997 given its growth in rate base and increased operating
costs, principally property taxes and sludge removal, over the past two years.
Pennichuck's investment in rate base has increased from $27.9 million at the end
of 1994 to $29.3 million at the end of September 1996 while property taxes
payable to the City of Nashua and Town of Merrimack have increased on an annual
basis by nearly $250,000, or 25%, over the same period.
The operating expenses of Pennichuck totaled $5,658,000 for the nine months
ended September 30, 1996, an increase of $255,000 from the same period last
year. Of that increase, $74,000 relates to property tax increases resulting from
reassessments of Pennichuck's property in Nashua and Merrimack, New Hampshire.
Those increases became effective April 1, 1995. Pennichuck's treatment and
production costs were $1,313,000 for the nine months ended September 30, 1996,
representing a $38,000 increase over 1995 caused primarily by increases in
chemical, sludge removal and labor costs. In February 1996, the City of Nashua
increased the sludge disposal fee rate chargeable to Pennichuck from $1.31 per
hundred cubic feet to $3.91 per hundred cubic feet resulting in a $35,000
increase in sludge fees for the first nine months of the year. Increases in
production costs, however, were offset by $52,000 in reduced electric costs as a
result of a 3.2% decrease in 1996 pumpage. Distribution and maintenance expenses
thus far in 1996 increased by $69,000 over last year reflecting additional gate
valve maintenance and main repair costs experienced during the third quarter of
1996. Given the significant capital investment in rate base during 1995 and
1996, Pennichuck also experienced a $47,000 increase in depreciation over last
year.
<PAGE> 9
Water Service Operations
In an effort to expand its non-regulated, water-related business
activities, the Company created a wholly-owned subsidiary, Pennichuck Water
Service Corporation ("PWSC"), which entered into a joint venture with Weston &
Sampson Services, Inc. ("WSS"), a regional water engineering firm, for the
purpose of providing water-related operations and maintenance contract services
to municipalities. Federal mandates under the Safe Drinking Water Act have made
compliance difficult for municipalities, especially those with limited bonding
ability. Contract operations and public-private partnerships provide viable
alternatives for such municipalities. In May 1995, the joint venture of PWSC and
WSS entered into a three year contract with the Town of Cohasset, Massachusetts
to operate its water treatment plant and distribution system. While this single
contract alone did not have a material impact on the Company's consolidated
earnings during 1995 or during the first nine months of 1996, it is expected
that the operations and maintenance contract alternative provides an opportunity
for growth in the Company's non-regulated operations.
Real Estate and Other Operations
For the nine months ended September 30, 1996 and 1995, revenues from real
estate and other activities totaled $664,000 and $643,000, respectively. The
current year's real estate revenues include $495,000, net of commission, from
the sale of a 19 acre parcel located in Southwood Business Park. That sale,
which occurred in January 1996, reduces Southwood's property tax burden by
$18,000 annually. In August 1995, Southwood sold a 9.9 acre parcel in its
Corporate Park for $647,000, resulting in a pretax gain of $147,000.
Other revenues from real estate-related activities during 1996 include
approximately $66,000 of option fee income earned during the nine months ended
September 30, 1996. Under a development option agreement entered into in
September 1995 with a regional developer, Southwood receives an annual option
fee equal to the carrying costs associated with Southwood Corporate Park,
principally property taxes and maintenance costs, in exchange for an option for
the exclusive development rights for that Park. As lots are readied for
development, the option agreement provides for a per acre payment of a minimum
of $60,000 to Southwood. Presently, there are 47 acres in the Corporate Park
subject to this agreement.
The operating expenses associated with the Company's real estate and other
non-utility activities increased to $622,000 in 1996 from $600,000 in 1995.
Those amounts include infrastructure costs of $520,00 and $415,000,
respectively, which were allocated to the aforementioned land sales. Property
taxes on Southwood's real estate holdings for the first nine months of 1996 were
$35,000 compared to $139,000 in same period of 1995. That decrease in expense
resulted from the receipt of approximately $50,000 from the City of Nashua for
an abatement filed last year by Southwood. That abatement proceeding resulted in
a reduction of the assessed values of property located in Southwood Corporate
Park which previously had been assessed at $4.5 million. Under the terms of the
abatement, the property within Southwood Corporate Park was re-assessed at $2.5
million for the tax year April 1, 1995 to March 31, 1996. Based on these new
assessments, Southwood expects that its property taxes on the Corporate Park
will be approximately $80,000 for the current year compared to $133,000 last
year.
<PAGE> 10
In May 1996, NYNEX Corporation ("NYNEX"), a partner in 555 Aeyers Mills
Associates, sold its one-half interest in that partnership to the Company for
approximately $204,000 pursuant to the terms of the partnership agreement.
NYNEX's decision to sell its interest was part of a corporate-wide plan to
divest itself from real estate development activities. That partnership was
originally formed to develop, construct and lease a 90,000 square foot
commercial office building on a 6.75 acre site owned by the partnership in
Southwood Corporate Park. That parcel is now included under the development
option agreement discussed earlier.
Also in May 1996, Southwood entered into a joint venture, Bowers Pond LLP,
with a local builder to develop a 21 lot residential subdivision in the City of
Nashua. Under the terms of that agreement, Southwood, as a 50% partner, has sold
the partnership approximately 15 acres of land in exchange for a $420,000,
non-interest bearing note. As homes are constructed and sold to third parties,
Southwood will receive principal payments on the note in the amount of $20,000
per lot and 50% of the profit on each home. To date, the partnership has entered
into ten purchase and sale agreements and those sales are expected to occur in
the fourth quarter of 1996. Under generally accepted accounting principles, the
note receivable from the partnership has been offset by the deferred gain on the
sale of land to the partnership and any gains will be recorded as the homes are
sold to third parties.
Results of Operations -- Three Months Ended September 30, 1996 Compared to
Three Months Ended September 30, 1995
For the third quarter ended September 30, 1996, consolidated net income was
$377,000, or $.51 per share, compared to $512,000, or $.72 per common share for
the same quarter in 1995.
<PAGE> 11
Water Utility Operations
Operating revenues of Pennichuck for the third quarter of 1996 were
$3,057,000, or $127,000 less than in 1995 and are comprised primarily of water
sales and fire protection charges. For the three months ended September 30,
1996, billed water consumption was 7.1% less than last year as a result of the
increased amount of rainfall experienced in July and September 1996 compared to
the same months in 1995. Total unbilled revenues, included under "Accounts
receivable, net" in the Condensed Consolidated Balance Sheet at September 30,
1996 were $1,110,000 which will be billed and collected during the fourth
quarter of 1996. Billed accounts receivable at September 30, 1996 were $729,000,
of which 93% were less than 30 days outstanding.
Total operating expenses relating to the water utility operations include
operations and maintenance costs, depreciation and amortization, property and
payroll taxes. The total of these expenses in the third quarter of 1996 was
$2,051,000, an increase of $59,000, or 3%, from the same period in 1995. Of this
amount, operations and maintenance ("O&M") expenses for the third quarter of
1996 were $1,440,000, representing a 4% increase from the same quarter in 1995.
O&M expenses include costs for water treatment and purification, pumping and
distribution, system maintenance, customer accounting and administration. The
increase in O&M costs and other utility operating expenses relates principally
to (i) $58,000 in additional gate valve and main repairs in Pennichuck's core
distribution system and (ii) $39,000 in additional administrative costs for
salaries, professional fees and public relations. The effect of these costs
increases, however, was mitigated by a $39,000 decrease in treatment and
production costs, principally due to the decrease in pumpage and consumption
during the third quarter of 1996 compared to 1995. As a result of the decline in
operating revenues and slight increase in operating expenses, Pennichuck's
operating margin decreased from 37% in 1995 to 33% in 1996. This ratio
represents the remaining amount of revenues available to cover interest on
outstanding indebtedness, income taxes and payments of dividends to
shareholders.
Real Estate and Other Operations
During the third quarter of 1996, there were no major real estate sales as
compared to the quarter ended September 30, 1995 during which Southwood sold a
9.9 acre parcel in its Corporate Park for $647,000. "Revenues -- Real estate
operations and other" for the quarter ended September 30, 1996 includes
approximately $20,000 of income earned under the option agreement with a
regional developer and other income from non-regulated activities.
Real estate and other operating costs decreased $400,000 between the two
quarters, principally due to the removal of allocated infrastructure costs
totaling $410,000 which relate to the sale of the 9.9 acre parcel of land in
August 1995. Other operating costs include property taxes of $21,000 and certain
property management expenses relating to Southwood Corporate and Business Parks
and allocated management fees from the Company which did not change materially
from 1995 to 1996.
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) There following exhibit is filed herewith:
Exhibit Number Exhibit Description
-------------- -------------------
Exhibit 10.10 Amendment Agreement dated July 31, 1996 to Amended
and Restated Revolving Credit Agreement dated
March 24, 1994 between Pennichuck Corporation and
Fleet Bank-NH
(b) There were no reports on Form 8-K filed during the third quarter
of 1996.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Pennichuck Corporation
(Registrant)
Date: November 11, 1996 /s/ Maurice L. Arel
------------------------------------
Maurice L. Arel, President and
Principal Executive Officer
Date: November 11, 1996 /s/ Charles J. Staab
------------------------------------
Charles J. Staab, Vice President,
Treasurer and Principal Financial
Officer
<PAGE> 13
Exhibit 10.10
AMENDMENT AGREEMENT
This Amendment Agreement ("Agreement") entered into as of the 31st day of
July 1996, by and among PENNICHUCK CORPORATION, a New Hampshire corporation with
an address of 4 Water Street, Nashua, New Hampshire 03060 (the "Borrower"),
PENNICHUCK WATER WORKS, INC., a New Hampshire corporation with an address of 4
Water Street, Nashua, New Hampshire 03060 (the "Guarantor"), and FLEET BANK NH,
a bank incorporated under the laws of the State of New Hampshire with a
principal place of business at 1155 Elm Street, Manchester, New Hampshire 03101.
WITNESSETH:
WHEREAS, the Bank and the Borrower entered into a Loan Agreement dated
October 2, 1991 establishing a Revolving Line of Credit Loan (the "Loan") in
favor of the Borrower, as amended by agreements dated on or about June 4, 1993,
March 23, 1994 and May 4, 1995 (the "Loan Agreement");
WHEREAS, the Guarantor executed a Limited Guaranty Agreement dated as of
March 23, 1994 in which it guaranteed the payment of the Loan as governed by and
limited in said Limited Guaranty Agreement (the "Limited Guaranty Agreement");
WHEREAS, the parties have executed certain documents and instruments in
connection with the Loan (collectively the "Loan Documents"); and
WHEREAS, the Borrower and the Bank have agreed to amend the Loan Agreement
and Loan Documents to, among other things, decrease the amount available under
the Line of Credit (as such term is defined in the Loan Agreement) and to amend
the period of loan commitment under the Line of Credit.
NOW, THEREFORE, in consideration of the foregoing and mutual covenants and
agreements therein contained, the receipt and adequacy of which is hereby
acknowledged, the parties covenant, stipulate and agree as follows:
1. Representations and Warranties of the Borrower and the Guarantor. Each
of the Borrower and the Guarantor represents and warrants to the Bank as
follows:
(a) The representations, warranties and covenants of the Borrower and
the Guarantor made in the Loan Documents remain true and accurate and are
hereby reaffirmed as of the date hereof.
(b) Each of the Borrower and the Guarantor has performed, in all
material respects, all obligations to be performed by it to date under the
Loan Documents and no event of default exists thereunder.
(c) Each of the Borrower and the Guarantor is a corporation duly
organized, qualified and existing in good standing under the laws of the
State of New Hampshire and is duly qualified to do business in all
jurisdictions in which the character of the property owned by or the nature
of its activities causes such qualification to be necessary.
(d) The execution, delivery and performance of this Agreement and the
documents relating hereto (the "Amendment Documents") are within the power
of the Borrower and the Guarantor and are not in contravention of law, of
either of the Borrower's or the Guarantor's Articles of Incorporation,
By-laws or the terms of any other documents, agreements or undertaking to
which either the Borrower or the Guarantor is a party or by which either
the Borrower or the Guarantor is bound. No approval of any person,
corporation, governmental body or other entity not provided herewith is a
prerequisite to the execution, delivery and performance by the Borrower or
the Guarantor of the Amendment Documents or any of the documents submitted
to the Bank in connection with the Amendment Documents, or upon execution
by the Bank to ensure the validity or enforceability thereof.
(e) When executed on behalf of the Borrower and the Guarantor, the
Amendment Documents will constitute the legally binding obligations of the
Borrower and the Guarantor, enforceable in accordance with their terms.
2. Amendment of Loan Agreement. The Loan Agreement is hereby amended by
deleting the amount "Five Million Five Hundred Thousand Dollars ($5,500,000.00)"
in the fifth and sixth lines of Article II(A) and replacing the amount with
"Four Million Five Hundred Thousand Dollars ($4,500,000.00)".
3. Amendment of Amended and Restated Revolving Credit Promissory Note. The
Amended and Restated Revolving Promissory Note in the face amount of $5,500,000
dated March 23, 1994 from the Borrower to the Bank (the "Note") is hereby
amended as follows:
(a) The amount "$5,500,000.00" appearing in the upper left hand corner
of page 1 thereof is hereby deleted and replaced with "$4,500,000.00".
(b) The phrase "Five Million Five Hundred Thousand Dollars
($5,500,000.00)" appearing in the ninth line of the first paragraph thereof
is hereby deleted and replaced with "Four Million Five Hundred Thousand
Dollars ($4,500,000.00)".
(c) The date "May 31, 1997" in the third paragraph is hereby deleted
and such date is replaced with "May 31, 1998".
(d) The phrase "fifteenth (15th)" appearing in the third line of the
second full paragraph on page 4 thereof is hereby replaced with "tenth
(10th)".
4. Guarantor Consent. By execution hereof, the Guarantor consents to this
Agreement and the transactions contemplated hereby and acknowledges and agrees
that its guaranty under the Limited Guaranty Agreement applies to all amounts
advanced or to be advanced under the Loan Agreement, the Note and all Loan
Documents, as amended, in accordance with the terms of the Limited Guaranty
Agreement.
5. Conditions Precedent. The obligations of the Bank hereunder are subject
to delivery by the Borrower and the Guarantor to the Bank of this Agreement and
all other documents set forth on the Closing Agenda attached hereto as Exhibit
A.
6. Loan Documents. The Borrower and the Guarantor shall deliver this
Agreement to the Bank and this Agreement shall be included in the term "the Loan
Documents" in the Loan Agreement. The collateral granted to the Bank therein,
including without limitation, the Limited Guaranty Agreement, shall continue to
secure the Loan as set forth in the Loan Documents, as amended hereby.
7. Future References. All references to the Loan Documents shall
hereinafter refer to such documents as amended.
8. Continuing Effect. The provisions of the Loan Document, as modified
herein, shall remain in full force and effect in accordance with their terms and
are hereby ratified and confirmed.
9. General. (a) The Borrower and the Guarantor shall execute and deliver
such additional documents and do such other acts as the Bank may reasonably
require to implement the intent of this Agreement fully.
(b) The Borrower shall pay all costs and expenses, including, but not
limited to, attorneys' fees incurred by the Bank in connection with this
Agreement. The Bank, at its option, but without any obligation to do so,
may advance funds to pay any such costs and expenses that are the
obligation of the Borrower and all such funds advanced shall bear interest
at the highest rate provided in the Loan Documents.
(c) This Agreement may be executed in several counterparts by the
Borrower, the Bank and any obligor or guarantor of the Loan Agreement, each
of which.shall be deemed an original but all of which together shall
constitute one and the same Agreement.
IN WITNESS WHEREOF, the Bank, the Borrower and the Guarantor have executed
this agreement by their duly authorized officers (if appropriate) as of the date
set forth above.
FLEET BANK - NH
/s/ Paula Belanger By: /s/ Karen A. Cross
- ----------------------------- -----------------------------------
Witness Karen A. Ross, Its Duly
Authorized Vice President
PENNICHUCK CORPORATION
/s/ Sharen Weston By: /s/ Charles J. Staab
- ----------------------------- -----------------------------------
Witness Charles J. Staab, Its Duly
Authorized Vice President
PENNICHUCK WATER WORKS, INC.
/s/ Sharen Weston By: /s/ Charles J. Staab
- ----------------------------- ----------------------------------
Witness Charles J. Staab, its Duly
Authorized Vice President
STATE OF NEW HAMPSHIRE
COUNTY OF HILLSBOROUGH
The foregoing instrument was acknowledged before me this 31st day of July, 1996
by Karen A. Cross, duly authorized Vice President of FLEET BANK - NH, a bank
incorporated under the laws of the State of New Hampshire, on behalf of same.
/s/ Linda D. Hale
- -----------------------------
Notary Public
My Commission Expires:
Notary Seal
LINDA D. HALE, Notary Public
My commission Expires April 28, 1997
STATE OF NEW HAMPSHIRE
COUNTY OF HILLSBOROUGH
The foregoing instrument was acknowledged before me this 31st day of July, 1996
by Charles J. Staab, duly authorized Vice President of PENNICHUCK CORPORATION, a
New Hampshire corporation, on behalf of same.
/s/ Justin Curtis
- -----------------------------
Justice of the Peace/Notary
Public
My commission Expires: 2/14/99
Notary Seal
STATE OF NEW HAMPSHIRE
COUNTY OF HILLSBOROUGH
The foregoing instrument was acknowledged before me this 31st day of JULY, 1996,
by Charles J. Staab, duly authorized Vice President of PENNICHUCK WATER WORKS,
INC., a New Hampshire corporation, on behalf of same.
/s/ Justin Curtis
- -----------------------------
Justice of the Peace/Notary
Public
My Commission Expires: 2/14/99
Notary Seal
<TABLE> <S> <C>
<ARTICLE> UT
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 42,821,000
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 2,205,000
<TOTAL-DEFERRED-CHARGES> 1,308,000
<OTHER-ASSETS> 2,717,000
<TOTAL-ASSETS> 48,781,000
<COMMON> 745,000
<CAPITAL-SURPLUS-PAID-IN> 5,068,000
<RETAINED-EARNINGS> 7,112,000
<TOTAL-COMMON-STOCKHOLDERS-EQ> 12,872,000
0
0
<LONG-TERM-DEBT-NET> 20,796,000
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
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0
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<TOT-CAPITALIZATION-AND-LIAB> 48,781,000
<GROSS-OPERATING-REVENUE> 8,741,000
<INCOME-TAX-EXPENSE> 469,000
<OTHER-OPERATING-EXPENSES> 0
<TOTAL-OPERATING-EXPENSES> 6,280,000
<OPERATING-INCOME-LOSS> 2,461,000
<OTHER-INCOME-NET> 8,000
<INCOME-BEFORE-INTEREST-EXPEN> 2,469,000
<TOTAL-INTEREST-EXPENSE> 1,223,000
<NET-INCOME> 777,000
0
<EARNINGS-AVAILABLE-FOR-COMM> 777,000
<COMMON-STOCK-DIVIDENDS> 563,000
<TOTAL-INTEREST-ON-BONDS> 1,223,000
<CASH-FLOW-OPERATIONS> 1,870,000
<EPS-PRIMARY> 1.06
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