SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM ___________ TO ___________
Commission file number 1-905
A. Full title of the plan and the address of the plan if different from that
of the issuer named below:
PP&L EMPLOYEE STOCK OWNERSHIP PLAN
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
PP&L RESOURCES, INC.
TWO NORTH NINTH STREET
ALLENTOWN, PENNSYLVANIA 18101-1179
Report of Independent Accountants
To the Employee Benefit Plan Board of
PP&L, Inc.
In our opinion, the accompanying statements of net assets available for benefits
and the related statements of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the PP&L Employee Stock Ownership Plan (the "Plan") at December 31, 1998 and
1997, and the changes in net assets available for benefits for the years then
ended in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Plan's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes at December 31, 1998 and of reportable transactions for
the year ended December 31, 1998 are presented for the purpose of additional
analysis and are not a required part of the basic financial statements but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These supplemental schedules are the responsibility of the
Plan's management. The supplemental schedules have been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
PricewaterhouseCoopers
Philadelphia, Pennsylvania
June 15, 1999
PP&L EMPLOYEE STOCK OWNERSHIP PLAN
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STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AT DECEMBER 31, 1998 AND 1997
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ASSETS 1998 1997
------ ---- ----
INVESTMENT - Common stock of PP&L Resources,
Inc. at fair value.............................................. $161,667,948 $142,609,547
DIVIDENDS RECEIVABLE.............................................. 1,399,865 2,370,396
---------------------- ----------------------
163,067,813 144,979,943
LIABILITIES
-----------
DIVIDENDS PAYABLE TO PARTICIPANTS................................. 1,399,865 2,370,396
---------------------- ----------------------
NET ASSETS AVAILABLE FOR BENEFITS
(100% VESTED)................................................... $161,667,948 $142,609,547
====================== ======================
See accompanying notes to financial statements.
PP&L EMPLOYEE STOCK OWNERSHIP PLAN
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STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- ----------------------------------------------
1998 1997
---- ----
INCREASES:
Employer contributions.......................................... $ 6,160,662 $ 6,796,970
Dividend income................................................. 7,715,979 9,604,431
Net appreciation of investment.................................. 22,045,110 5,265,820
---------------------- ----------------------
Total increases............................................. 35,921,751 21,667,221
---------------------- ----------------------
DECREASES:
Dividend distributions to participants.......................... 7,715,979 9,604,431
Distributions of stock and cash to active
and terminated participants................................... 9,147,371 4,964,390
---------------------- ----------------------
Total decreases............................................. 16,863,350 14,568,821
---------------------- ----------------------
NET INCREASE...................................................... 19,058,401 7,098,400
NET ASSETS AVAILABLE FOR BENEFITS AT
BEGINNING OF YEAR............................................... 142,609,547 135,511,147
---------------------- ----------------------
NET ASSETS AVAILABLE FOR BENEFITS AT
END OF YEAR..................................................... $161,667,948 $142,609,547
====================== ======================
See accompanying notes to financial statements.
PP&L EMPLOYEE STOCK OWNERSHIP PLAN
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NOTES TO FINANCIAL STATEMENTS
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1. PLAN DESCRIPTION
The PP&L Employee Stock Ownership Plan, formerly known as the Pennsylvania
Power & Light Company Employee Stock Ownership Plan, (Plan) was adopted
effective January 1, 1975 and most recently amended effective January 1,
1999. Amounts contributed to the Plan are used to purchase shares of common
stock of PP&L Resources, Inc. (Resources), the parent holding company of
PP&L, Inc. (PP&L), for employees of PP&L and, effective September 1, 1998,
PP&L EnergyPlus Co. (EnergyPlus), a subsidiary of PP&L. The following
description of the Plan provides only general information. Participants
should refer to the Plan agreement for a more complete description of the
plan provisions.
The Plan requires that dividends on shares credited to participants'
accounts be paid in cash. Under existing income tax laws, PP&L or Resources
is permitted to deduct the amount of those dividends for income tax
purposes and to contribute the resulting tax savings (dividend-based
contribution) to the Plan. The dividend-based contribution is used to buy
shares of Resources' common stock and is expressly conditioned upon the
deductibility of the contribution for federal income tax purposes.
Substantially all full-time employees of PP&L and EnergyPlus (participating
companies) who have completed one year of service are eligible to
participate in the Plan. All amounts contributed to the Plan are invested
in shares of common stock of Resources. The shares of common stock
purchased with the dividend-based contribution are allocated to
participants' accounts, 75% on the basis of shares held in a participant's
account and 25% on the basis of the participant's compensation.
The shares of common stock allocated to a participant's account may not
exceed the maximum permitted by law. All shares of common stock credited to
a participant's account are 100% vested and nonforfeitable, but cannot be
pledged as security by the employee. Stock certificates representing shares
in the Plan are held by the Trustee.
Participants may elect to withdraw from their accounts common stock which
has been allocated with respect to a Plan year ending at least 84 months
prior to the end of the Plan year in which the election is made.
Participants so electing may receive cash or stock certificates for the
number of whole shares, cash for any fractional shares available for
withdrawal or may make a rollover to a qualified plan.
Participants who have attained age 55 and have completed ten years of
participation in the Plan may elect to withdraw a limited number of shares
added to their accounts after December 31, 1986. For the first five years
after meeting the requirement participants may withdraw up
to an aggregate of 25% of such shares. In the sixth year qualified
participants may withdraw up to an aggregate of 50% of such shares.
Upon termination of service with a participating company, participants are
entitled to receive cash or stock certificates for the number of whole
shares, cash for any fractional shares allocated to them or may make a
rollover to a qualified plan. Participants who terminate service with a
participating company and whose account balance exceeds, or exceeded at the
time of any prior distribution, $5,000 may defer distribution of the shares
of stock in the account until the earlier of age 65 or death. Prior to
January 1, 1998 participants could defer distribution of the shares of
stock in the account if the account balance exceeded $3,500. Participants
who terminate service with a participating company on or after age 55 may
defer distribution of the shares of stock in the account up to April 1 of
the year following the year in which the participant attains the age of 70-
1/2.
A 10% federal excise tax is applicable to withdrawals from the Plan made,
generally, before a participant reaches age 59-1/2.
Resources has reserved the right to amend or terminate the Plan at any time
by or pursuant to action of its Board of Directors. Upon termination of the
Plan a procedure for distribution of all shares to participants would be
established.
The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974.
2. SIGNIFICANT ACCOUNTING POLICIES
A. The accompanying financial statements have been prepared under the
accrual basis of accounting.
B. 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. Actual results could differ
from those estimates.
C. The Plan's common stock investment is stated at fair value. Fair value
is the quoted market price of Resources' common stock at the end of
the year. Realized gains and losses from the sale or distribution of
stock by the Trustee are based on the average cost of common stock
held at the time of sale.
D. Dividend income and dividend distributions to participants are
recorded on dividend record dates.
E. Distributions of stock and cash to terminated participants not
electing to defer distributions are recorded in the Plan year during
which service is terminated. Otherwise, such distributions are
recorded as stock certificates are issued and cash is paid.
F. Distributions of stock and cash to active participants electing to
withdraw eligible shares are recorded in the Plan year in which
elections are received.
G. All contributions to the Plan are made by PP&L or Resources. PP&L and
Resources' funding policy is to make annual contributions to the
trust, such that, all employee benefits will be fully provided. PP&L's
and/or Resources' contributions have exceeded the current estimated
liability.
H. As of December 31, 1998 and 1997, net assets available for benefits
did not include any benefits due to participants who have withdrawn
from participation in the Plan.
3. ADMINISTRATION
The Plan is administered by an Employee Benefit Plan Board (Board),
composed of certain PP&L officers, appointed by the Board of Directors of
PP&L. The Board of Directors of PP&L has appointed Mellon Bank as Trustee
of the Plan.
Expenses incurred in the administration of the Plan are paid by PP&L and
the facilities of PP&L are used by the Plan at no charge.
4. TAX STATUS
In 1995, the Internal Revenue Service (IRS) issued a determination letter
that the Plan, as amended through December 20, 1994, continues to be
qualified under Section 401(a) of the Internal Revenue Code as a stock
bonus plan and constitutes an employee stock ownership plan under Section
409 of the Internal Revenue Code. The Plan has been amended since receiving
the determination letter; however, the Plan administrator believes that the
Plan is designed and is currently operated in compliance with the
applicable requirements of the Internal Revenue Code.
Under present Federal income tax laws and regulations, a qualified plan is
not taxed on contributions received from Resources or participants, on
dividend income, on realized gains from the sale of stock or on any
unrealized appreciation of investments. A participant in a qualified plan
is not subject to Federal income tax on amounts contributed by Resources
until that participant receives a distribution from the plan.
PP&L EMPLOYEE STOCK OWNERSHIP PLAN
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ITEM 27(a) - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
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Identity of Issue,
Borrower, Lessor, Current
or Similar Party Description of Investment Value Cost
- ---------------------- -------------------------------------- ------------------- ----------------
PP&L Resources, Inc. Common Stock - $0.01 par value $161,667,948 $104,760,433
PP&L EMPLOYEE STOCK OWNERSHIP PLAN
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ITEM 27(d) - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
SERIES OF TRANSACTIONS, INVOLVING SECURITIES OF THE SAME ISSUE, IN EXCESS OF 5%
OF THE CURRENT VALUE OF NET ASSETS AVAILABLE FOR BENEFITS AT THE BEGINNING OF
THE PLAN YEAR
- --------------------------------------------------------------------------------
CURRENT
VALUE OF
IDENTITY OF TOTAL TOTAL ASSET ON NET
PARTY PURCHASE SELLING COST OF TRANSACTION GAIN
INVOLVED DESCRIPTION OF ASSET PRICE PRICE ASSET DATE (LOSS)
- ------------------------ ------------------------ ------------ --------- ---------- ----------- -----------
The Employee Benefit PP&L Resources, Inc.
Plan Board of PP&L, Inc. Common Stock:
as Administrator for Purchase of 222,356
the PP&L Employee shares $6,160,662 $6,160,662
Stock Ownership Plan
Sale of 251,095 shares $6,159,957 $3,813,631 $6,159,957 $2,346,326
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Employee Benefit Plan Board has duly caused this annual report to be signed on
its behalf by the undersigned hereunto duly authorized.
PP&L Employee Stock Ownership Plan
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By: /s/ John M. Chappelear
-----------------------
John M. Chappelear
Chairman, Employee Benefit Plan Board
PP&l, Inc.
Dated: June 30, 1999