SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File
For Quarter Ended: September 30, 1997 No. 0-422
MIDDLESEX WATER COMPANY
(Exact name of registrant as specified in its charter)
INCORPORATED IN NEW JERSEY 22-1114430
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 RONSON ROAD, ISELIN, NJ 08830
(Address of principal executive offices) (Zip Code)
(732) 634-1500
(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 and Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that this registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 30 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.
Class Outstanding at September 30, 1997
Common Stock, No Par Value 4,254,602
PART I. - FINANCIAL INFORMATION
MIDDLESEX WATER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
__________ __________ __________ __________
Operating Revenues $10,968,031 $ 9,934,128 $30,241,199 $28,812,929
__________ __________ __________ __________
Operating Expenses:
Operation and Maintenance 4,943,505 4,722,937 14,382,559 14,069,710
Depreciation 750,761 737,088 2,265,872 2,187,608
Taxes, other than Income Taxes 1,556,779 1,438,272 4,377,776 4,229,269
Federal Income Taxes 1,035,095 747,978 2,390,122 1,960,024
__________ __________ __________ __________
Total Operating Expenses 8,286,140 7,646,275 23,416,329 22,446,611
__________ __________ __________ __________
Utility Operating Income 2,681,891 2,287,853 6,824,870 6,366,318
Other Income-Net 30,233 21,517 123,831 48,744
__________ __________ __________ __________
Income Before Interest Charges 2,712,124 2,309,370 6,948,701 6,415,062
Interest Charges 818,181 815,756 2,461,913 2,460,851
__________ __________ __________ __________
Net Income 1,893,943 1,493,614 4,486,788 3,954,211
Preferred Stock Dividend
Requirements 66,398 39,732 145,861 119,195
__________ __________ __________ __________
Earnings Applicable to
Common Stock $ 1,827,545 $ 1,453,882 $ 4,340,927 $ 3,835,016
__________ __________ __________ __________
Earnings per Share of
Common Stock $0.43 $0.35 $1.03 $0.92
__________ __________ __________ __________
Average Number of Common
Shares Outstanding 4,243,478 4,179,249 4,226,241 4,160,075
Cash Dividends Paid per
Common Share $0.28 $0.27 1/2 $0.84 $0.82 1/2
See Notes to Consolidated Financial Statements.
MIDDLESEX WATER COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS AND OTHER DEBITS
September 30, December 31,
1997 1996
___________ ___________
(Unaudited)
UTILITY PLANT:
Water Production $ 27,628,248 $ 27,378,668
Transmission and Distribution 110,048,676 103,852,969
General 19,333,138 18,156,233
Construction Work in Progress 3,437,782 319,238
___________ ___________
TOTAL 160,447,844 149,707,108
Less Accumulated Depreciation 29,594,916 28,462,588
___________ ___________
UTILITY PLANT-NET 130,852,928 121,244,520
___________ ___________
NONUTILITY ASSETS-NET 1,671,014 1,774,106
___________ ___________
CURRENT ASSETS:
Cash and Cash Equivalents 3,232,065 4,262,862
Accounts Receivable(net of allowance
for doubtful accounts) 4,408,821 4,022,129
Unbilled Revenues 2,499,465 2,175,478
Materials and Supplies(at average cost) 1,068,416 1,034,572
Prepayments and Other Current Assets 500,928 430,000
___________ ___________
TOTAL CURRENT ASSETS 11,709,695 11,925,041
___________ ___________
DEFERRED CHARGES:
Regulatory Assets 7,578,776 7,184,764
Unamortized Debt Expense 2,757,655 2,848,352
Preliminary Survey and Investigation Charges 193,405 1,716,884
Other 1,942,227 1,965,855
___________ ___________
TOTAL DEFERRED CHARGES 12,472,063 13,715,855
___________ ___________
TOTAL $156,705,700 $148,659,522
___________ ___________
See Notes to Consolidated Financial Statements.
MIDDLESEX WATER COMPANY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND OTHER CREDITS
September 30, December 31,
1997 1996
___________ ___________
(Unaudited)
CAPITALIZATION(see accompanying statements) $108,766,455 $104,843,071
___________ ____________
CURRENT LIABILITIES:
Current Portion of Long-term Debt 41,763 39,047
Accounts Payable 2,039,800 1,686,652
Notes Payable 567,434 0
Customer Deposits 393,754 377,702
Taxes Accrued 5,245,734 4,529,185
Interest Accrued 460,270 1,168,242
Other 1,887,586 2,125,683
___________ ___________
TOTAL CURRENT LIABILITIES 10,636,341 9,926,511
___________ ___________
DEFERRED CREDITS:
Customer Advances for Construction 10,655,585 8,977,081
Accumulated Deferred Investment Tax Credits 2,254,979 2,308,736
Accumulated Deferred Federal Income Taxes 12,119,584 12,088,144
Other 1,982,190 1,715,458
___________ ___________
TOTAL DEFERRED CREDITS 27,012,338 25,089,419
___________ ___________
CONTRIBUTIONS IN AID OF CONSTRUCTION 10,290,566 8,800,521
___________ ___________
TOTAL $156,705,700 $148,659,522
___________ ___________
See Notes to Consolidated Financial Statements.
MIDDLESEX WATER COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION AND RETAINED EARNINGS
September 30, December 31,
1997 1996
___________ ___________
(Unaudited)
CAPITALIZATION:
Common Stock,No Par Value
Shares Authorized,6,000,000
Shares Outstanding-1997,4,254,602
1996,4,204,949 $ 30,833,163 $ 29,988,966
Retained Earnings 20,006,275 19,226,847
___________ ___________
TOTAL COMMON EQUITY 50,839,438 49,215,813
___________ ___________
Cumulative Preference Stock,No Par Value
Shares Authorized,100,000; Shares Outstanding,None
Cumulative Preferred Stock,No Par Value,
Shares Authorized - 150,000
Convertible:
Shares Outstanding,$7.00 Series - 14,901 1,564,605 1,564,605
Shares Outstanding,$8.00 Series - 20,000 2,331,430 0
Nonredeemable:
Shares Outstanding,$7.00 Series - 1,017 101,700 101,700
Shares Outstanding,$4.75 Series - 10,000 1,000,000 1,000,000
___________ ___________
TOTAL CUMULATIVE PREFERRED STOCK 4,997,735 2,666,305
___________ ___________
Long-term Debt:
8.02% Amortizing Secured Note,
due December 20,2021 3,471,045 3,500,000
First Mortgage Bonds:
7.25%,Series R,due July 1,2021 6,000,000 6,000,000
5.20%,Series S,due October 1,2022 12,000,000 12,000,000
5.25%,Series T,due October 1,2023 6,500,000 6,500,000
6.40%,Series U,due February 1,2009 15,000,000 15,000,000
5.25%,Series V,due February 1,2029 10,000,000 10,000,000
___________ ___________
SUBTOTAL LONG-TERM DEBT 52,971,045 53,000,000
Less: Current Portion of Long-term Debt (41,763) (39,047)
___________ ___________
TOTAL LONG-TERM DEBT 52,929,282 52,960,953
___________ ___________
TOTAL CAPITALIZATION $108,766,455 $104,843,071
___________ ___________
Nine Months Ended Year Ended
September 30, December 31,
1997 1996
___________ ___________
(Unaudited)
RETAINED EARNINGS:
BALANCE AT BEGINNING OF PERIOD $ 19,226,847 $ 18,822,817
Net Income 4,486,788 5,167,460
___________ ___________
TOTAL 23,713,635 23,990,277
___________ ___________
Cash Dividends:
Cumulative Preferred Stock 159,628 158,926
Common Stock 3,547,732 4,604,504
___________ ___________
TOTAL DEDUCTIONS 3,707,360 4,763,430
___________ ___________
BALANCE AT END OF PERIOD $ 20,006,275 $ 19,226,847
___________ ___________
See Notes to Consolidated Financial Statements.
MIDDLESEX WATER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
1997 1996
___________ ___________
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 4,486,788 $ 3,954,211
Adjustments To Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 2,321,104 2,252,913
Provision for Deferred Income Taxes 570,310 638,736
Allowance for Funds Used During Construction (63,637) (37,458)
Changes in Current Assets and Liabilities:
Accounts Receivable (308,882) (51,330)
Materials and Supplies (33,844) (57,513)
Accounts Payable 313,273 60,874
Accrued Income Taxes 716,549 377,819
Accrued Interest (712,121) (746,158)
Unbilled Revenues (294,187) (226,200)
Other-Net (273,798) 159,759
___________ ___________
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,721,555 6,325,653
___________ ___________
CASH FLOWS FROM INVESTING ACTIVITIES:
Utility Plant Expenditures (7,257,652)(4,108,309)
Cash from Acquisition of Subsidiary 158,436 0
Preliminary Survey and Investigation Charges 1,523,479 (358,415)
Other-Net (87,781) (435,883)
___________ ___________
NET CASH USED IN INVESTING ACTIVITIES (5,663,518) (4,902,607)
___________ ___________
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of Long-term Debt (28,955) (240,000)
Deferred Debt Issuance Expenses 0 (251)
Temporary Cash Investments-Restricted 10,125 (1,654)
Proceeds from Issuance of Common Stock-Net 844,197 872,919
Payment of Preferred Dividends (159,628) (119,195)
Payment of Common Dividends (3,547,732) (3,430,226)
Customer Advances and Contributions-Net 793,159 453,689
___________ ___________
NET CASH USED IN FINANCING ACTIVITIES (2,088,834) (2,464,718)
___________ ___________
NET CHANGE IN CASH AND CASH EQUIVALENTS (1,030,797) (1,041,672)
___________ ___________
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 4,262,862 4,900,640
___________ ___________
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 3,232,065 $ 3,858,968
___________ ___________
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash Paid During the Period for:
Interest(net of amounts capitalized) $ 3,038,530 $ 2,867,452
Income Taxes $ 1,102,200 $ 1,616,998
Excludes Allowance for funds Used During Construction.
See Notes to Consolidated Financial Statements.
MIDDLESEX WATER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
Organization - Middlesex Water Company (Middlesex or the Company) is the
parent company and sole shareholder of Tidewater Utilities, Inc.
(Tidewater), Pinelands Water Company, Pinelands Wastewater Company, and
Utility Service Affiliates, Inc. (USA). Public Water Supply Company,
Inc. and White Marsh Environmental Systems, Inc. are wholly-owned
subsidiaries of Tidewater. The financial statements for Middlesex and
its wholly-owned subsidiaries (Consolidated Group) are reported on a
consolidated basis. All intercompany accounts and transactions have
been eliminated.
The consolidated notes accompanying the 1996 Form 10-K are applicable to
this report and, in the opinion of the Company, the accompanying
unaudited consolidated financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the financial position as of September 30, 1997 and the results
of operations and its cash flows for the periods ended September 30,
1997 and 1996. Information included in the Balance Sheet as of December
31, 1996 has been derived from the Company's audited financial
statements included in its annual report on Form 10-K for the year ended
December 31, 1996.
Note 2 - Regulatory Matters
In the fourth quarter of 1996, Middlesex filed a petition with the New
Jersey Board of Public Utilities (BPU) for a base rate increase. At
present, the Company has requested an increase of $4.6 million or 13.3%
and includes projected work in progress expenditures for the upgrade and
expansion of the Carl J. Olsen Water Treatment Plant (CJO Plant),
recovery of postretirement costs other than pension expenses which are
mandated by the Company's compliance with SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" and various
deferred charges which would be recovered in rates through amortization
over two to ten year periods. A decision in this matter is expected by
the end of 1997. The last increase in base rates granted by the BPU was
$2.8 million or 9.33% in April 1993.
On September 26, 1997, Middlesex filed a petition with the BPU seeking
approval to issue first mortgage bonds to finance part of the CJO Plant
project. Construction costs are anticipated to be $30 million and the
Company expects to issue $23 million of forty year tax exempt bonds
through the New Jersey Economic Development Authority. This financing
is expected to be completed by the second quarter of 1998. With the CJO
Plant project scheduled for substantial completion in the second quarter
of 1999, Middlesex will use internally generated funds from operations
and proceeds from the Dividend Reinvestment and Common Stock Purchase
Plan to fund the balance of the costs. Some level of common equity
offering may be required in late 1998.
Note 3 - Common Stock
During the third quarter, 22,325 common shares ($0.3 million) were
issued under the Company's Restricted Stock Plan and the Dividend
Reinvestment and Common Stock Purchase Plan.
Note 4 - Commitments
During the second quarter, Middlesex Water Company received approval
from the BPU and the Delaware Public Service Commission to acquire
Public Water Supply Company, Inc., (Public), a 2,500 customer water
system located in Sussex County Delaware. On July 31, 1997, Middlesex
completed the acquisition of Public at a price of $2.3 million and is
being accounted for under the purchase method of accounting. Under the
terms of the agreement, Middlesex issued 20,000 shares of no par $8.00
Cumulative and Convertible Preferred Stock convertible into
approximately 137,140 shares of Middlesex's common stock for 100% of the
common stock of Public. The preferred shares are convertible at the
election of the security holder within seven years from the date of
issuance at the common equivalent rate of 6.857 shares of common stock
for each share of preferred. The same conversion feature applies to
Middlesex after seven years from the date of issuance. The acquisition
of Public will not have a material impact on Middlesex's net income.
Note 5 - Contingent Liabilities
A fire at a warehouse within the Company's service territory has
resulted in multiple party claims for unspecified amounts. This has led
the warehouse operator to assert a claim against the Company for alleged
insufficient water pressure and supply. The Company believes it has
substantial defenses to the claim.
MIDDLESEX WATER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO
SEPTEMBER 30,1996
Revenues increased $1.0 million or 10.4% for the third quarter and $1.4
million or 5.0% for the first nine months of 1997. These increases are
the result of higher consumption due to favorable weather in New Jersey
and Delaware service territories. Additional revenues were realized due
to rate increases for the Pinelands Companies, contract services
operations of USA and increased fixed service charges due to continued
customer growth in Delaware.
Total operating expenses for the third quarter and nine months ended
September 1997 rose 8.4% and 4.3%, respectively. These increases are
the result of higher operations and maintenance expenses which included
purchased water, company labor, employee benefits, transmission and
distribution maintenance, and were partially offset by decreases in
purchased power and chemicals. Also impacting operating expenses were
Taxes other than Income Taxes which increased due to higher revenue
based taxes while Federal Income Taxes rose 38.4% and 21.9% for the
quarter and first nine months, respectively, based on higher taxable
income.
Capital Resources: The revised consolidated capital program for 1997,
estimated at $11.7 million, includes $5.5 million for routine capital
expenditures and $6.2 million for special plant additions. The $5.5
million for routine plant items is comprised of $2.0 million for
cleaning and lining, $1.7 million for mains, $0.6 million for service
lines, $0.4 million for meters, and $0.8 million for various other
items. The $6.2 million for special plant additions consists of $4.4
million for the upgrade of the Carl J. Olsen Water Treatment Plant, $1.3
million for water systems additions and improvements in Delaware and
$0.5 million for miscellaneous items.
Liquidity: To finance the Capital Program, the Company will utilize
internally-generated cash and external financing. The Company will rely
upon short-term borrowings through lines of credit established with
three financial institutions through the end of the year. There is $20
million available under these commitments. See Note 3 to Consolidated
Financial Statements for discussion of long-term financing. Capital
expenditures of $7.3 million have been incurred in the nine months ended
September 30, 1997.
New Accounting Pronouncement: In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No.
128, "Earnings Per Share" (SFAS 128). SFAS 128 simplifies the financial
accounting and reporting standards for computing and presenting earnings
per share (EPS) previously found in Accounting Principles Board Opinion
No. 15, "Earnings Per Share". SFAS 128 is effective for financial
statements issued for periods ending after December 15, 1997, including
interim periods. Earlier application is not permitted. The Company
will adopt SFAS 128 in 1997 and believes there will be no impact on the
EPS as currently computed.
MIDDLESEX WATER COMPANY
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
A fire at a warehouse within the Company's service
territory has resulted in multiple party claims for
unspecified amounts. This has led the warehouse operator
to assert a claim against the Company for alleged
insufficient water pressure and supply. The Company
believes it has substantial defenses to the claim.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
On November 10, 1997, the Company filed a Form S-3 Post
Effective Amendment relating to Registration No. 33-11717
on Form S-3 on December 12, 1991. The Company is offering
to sell shares of its Common Stock at a 5% discount to
participants in the Company's Dividend Reinvestment and
Common Stock Plan between the period of January 2, 1998
and June 1, 1998. The offer will be limited to the first
100,000 shares sold during the discount period.
Item 6. Exhibits and Reports on Form 8-K
Exhibits - 27 Financial Data Schedule.
Reports on Form 8-K - None
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereto duly authorized.
MIDDLESEX WATER COMPANY
(Registrant)
/A. Bruce O'Connor/
Date: November 13, 1997 A. Bruce O'Connor
Vice President and Controller
UT
0000066004
MIDDLESEX WATER COMPANY
9-MOS
DEC-31-1997
SEP-30-1997
PER-BOOK
130,852,928
1,671,014
11,709,695
12,472,063
0
156,705,700
30,833,163
0
20,006,275
50,839,438
0
4,997,735
52,929,282
0
0
0
41,763
0
0
0
47,897,482
156,705,700
30,241,199
2,390,122
21,026,207
23,416,329
6,824,870
123,831
6,948,701
2,461,913
4,486,788
145,861
4,340,927
3,547,732
2,885,250
6,721,555
1.03
1.03
