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: March 31, 1998 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 March 31, 1998
Common Stock, No Par Value 4,304,549
PART I. - FINANCIAL INFORMATION
MIDDLESEX WATER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months
Ended March 31,
1998 1997
__________ __________
Operating Revenues $ 9,769,139 $ 9,336,019
__________ __________
Operating Expenses:
Operation and Maintenance 4,916,486 4,560,358
Depreciation 808,084 755,483
Taxes, other than Income Taxes 1,414,457 1,391,170
Federal Income Taxes 682,250 650,733
__________ __________
Total Operating Expenses 7,821,277 7,357,744
__________ __________
Utility Operating Income 1,947,862 1,978,275
Other Income-Net 129,791 121,762
__________ __________
Income Before Interest Charges 2,077,653 2,100,037
Interest Charges 814,402 818,012
__________ __________
Net Income 1,263,251 1,282,025
Preferred Stock Dividend
Requirements 79,697 39,732
__________ __________
Earnings Applicable to
Common Stock $ 1,183,554 $ 1,242,293
__________ __________
Basic and Diluted Earnings
per Share $0.28 $0.30
__________ __________
Average Number of Common
Shares Outstanding 4,290,681 4,210,636
Cash Dividends Paid per
Common Share $0.28 1/2 $0.28
See Notes to Consolidated Financial Statements.
MIDDLESEX WATER COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS AND OTHER DEBITS
March 31, December 31,
1998 1997
___________ ___________
(Unaudited)
UTILITY PLANT:
Water Production $ 27,690,257 $ 27,689,254
Transmission and Distribution 113,716,550 113,104,789
General 18,906,253 18,845,301
Construction Work in Progress 9,472,848 5,683,217
___________ ___________
TOTAL 169,785,908 165,322,561
Less Accumulated Depreciation 30,621,877 30,251,825
___________ ___________
UTILITY PLANT-NET 139,164,031 135,070,736
___________ ___________
NONUTILITY ASSETS-NET 2,052,178 2,038,568
___________ ___________
CURRENT ASSETS:
Cash and Cash Equivalents 1,420,482 2,513,294
Temporary Cash Investments-Restricted 23,094,939 218,787
Accounts Receivable(net of allowance
for doubtful accounts) 4,084,498 3,794,860
Unbilled Revenues 2,208,828 2,175,934
Materials and Supplies(at average cost) 1,041,575 960,577
Prepayments and Other Current Assets 316,388 387,487
___________ ___________
TOTAL CURRENT ASSETS 32,166,710 10,050,939
___________ ___________
DEFERRED CHARGES:
Regulatory Assets 7,334,460 7,359,969
Unamortized Debt Expense 2,742,524 2,773,233
Preliminary Survey and Investigation Charges 205,375 213,650
Other 2,597,207 2,253,678
___________ ___________
TOTAL DEFERRED CHARGES 12,879,566 12,600,530
___________ ___________
TOTAL $186,262,485 $159,760,773
___________ ___________
See Notes to Consolidated Financial Statements.
MIDDLESEX WATER COMPANY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND OTHER CREDITS
March 31, December 31,
1998 1997
___________ ___________
(Unaudited)
CAPITALIZATION(see accompanying statements) $132,817,236 $109,139,429
___________ ____________
CURRENT LIABILITIES:
Current Portion of Long-term Debt 43,353 42,708
Notes Payable 3,063,614 564,701
Accounts Payable 3,017,716 3,602 420
Customer Deposits 394,603 393,376
Taxes Accrued 6,529,383 5,142,089
Interest Accrued 575,757 1,183,561
Other 2,040,873 2,039,828
___________ ___________
TOTAL CURRENT LIABILITIES 15,665,299 12,968,683
___________ ___________
DEFERRED CREDITS:
Customer Advances for Construction 10,781,225 10,830,646
Accumulated Deferred Investment Tax Credits 2,219,141 2,237,060
Accumulated Deferred Federal Income Taxes 12,284,940 12,177,993
Other 2,126,764 2,051,895
___________ ___________
TOTAL DEFERRED CREDITS 27,412,070 27,297,594
___________ ___________
CONTRIBUTIONS IN AID OF CONSTRUCTION 10,367,880 10,355,067
___________ ___________
TOTAL $186,262,485 $159,760,773
___________ ___________
See Notes to Consolidated Financial Statements.
MIDDLESEX WATER COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION AND RETAINED EARNINGS
March 31, December 31,
1998 1997
___________ ___________
(Unaudited)
CAPITALIZATION:
Common Stock,No Par Value
Shares Authorized,6,000,000
Shares Outstanding-1998,4,304,549
1997,4,269,217 $ 31,865,639 $ 31,138,484
Retained Earnings 20,048,683 20,087,065
___________ ___________
TOTAL COMMON EQUITY 51,914,322 51,225,549
___________ ___________
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 - 14,881 1,562,505 1,562,505
Shares Outstanding,$8.00 Series - 20,000 2,331,430 2,331,430
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 4,995,635 4,995,635
___________ ___________
Long-term Debt:
8.02% Amortizing Secured Note,
due December 20,2021 3,450,632 3,460,953
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
5.35%,Series W,due February 1,2038 23,000,000 0
___________ ___________
SUBTOTAL LONG-TERM DEBT 75,950,632 52,960,953
Less: Current Portion of Long-term Debt (43,353) (42,708)
___________ ___________
TOTAL LONG-TERM DEBT 75,907,279 52,918,245
___________ ___________
TOTAL CAPITALIZATION $132,817,236 $109,139,429
___________ ___________
Three Months Ended Year Ended
March 31, December 31,
1998 1997
___________ ___________
(Unaudited)
RETAINED EARNINGS:
BALANCE AT BEGINNING OF PERIOD $ 20,087,065 $ 19,226,847
Net Income 1,263,251 5,860,906
___________ ___________
TOTAL 21,350,316 25,087,753
___________ ___________
Cash Dividends:
Cumulative Preferred Stock 79,662 239,361
Common Stock 1,221,971 4,761,327
___________ ___________
TOTAL DEDUCTIONS 1,301,633 5,000,688
___________ ___________
BALANCE AT END OF PERIOD $ 20,048,683 $ 20,087,065
___________ ___________
See Notes to Consolidated Financial Statements.
MIDDLESEX WATER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
1998 1997
___________ ___________
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,263,251 $ 1,282,025
Adjustments To Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 883,724 772,408
Provision for Deferred Income Taxes 106,947 204,537
Allowance for Funds Used During Construction (133,803) (5,997)
Changes in Current Assets and Liabilities:
Accounts Receivable (289,638) 71,639
Materials and Supplies (80,998) (16,771)
Accounts Payable (584,704) (767,381)
Accrued Income Taxes 1,387,294 1,230,128
Accrued Interest (607,804) (718,619)
Unbilled Revenues (32,894) (931)
Other-Net (305,286) (316,164)
___________ ___________
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,606,089 1,734,874
___________ ___________
CASH FLOWS FROM INVESTING ACTIVITIES:
Utility Plant Expenditures (4,766,355)
(786,755)
Note Receivable (15,112) 0
Preliminary Survey and Investigation Charges 8,275 (133,576)
Other-Net 72,937 183,872
___________ ___________
NET CASH USED IN INVESTING ACTIVITIES (4,700,255) (736,459)
___________ ___________
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of Long-term Debt (10,321) (9,436)
Proceeds from Issuance of Long-term Debt 23,000,000 0
Short-term Bank Borrowings 2,498,913 0
Temporary Cash Investments-Restricted (22,876,152) 3,171
Proceeds from Issuance of Common Stock-Net 727,155 261,061
Payment of Preferred Dividends (79,662) (39,732)
Payment of Common Dividends (1,221,971) (1,178,071)
Customer Advances and Contributions-Net (36,608) (134,548)
___________ ___________
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 2,001,354 (1,097,555)
___________ ___________
NET CHANGE IN CASH AND CASH EQUIVALENTS (1,092,812) (99,140)
___________ ___________
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 2,513,294 4,262,862
___________ ___________
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 1,420,482 $ 4,163,722
___________ ___________
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash Paid During the Period for:
Interest(net of amounts capitalized) $ 1,407,200 $ 1,510,178
Income Taxes $ 359,000 $ 0
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) 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. (Public) 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 1997 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 March 31, 1998 and the results of
operations and its cash flows for the periods ended March 31, 1998 and
1997. Information included in the Balance Sheet as of December 31, 1997
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, 1997.
Note 2 - Regulatory Matters
In the first quarter, Middlesex filed an application with the New Jersey
Board of Public Utilities to issue and sell up to 800,000 additional
shares of Common Stock under the Company's Dividend Reinvestment and
Common Stock Purchase Plan. A decision on this matter is expected by the
end of June 1998.
Note 3 - Capitalization
Common Stock - During the three months ended March 31, 1998, 35,332
common shares ($0.7 million) were issued under the Company's Dividend
Reinvestment and Common Stock Purchase Plan. A 5% discount on purchases
and reinvestments through the Plan is available until June 1, 1998. The
discount is limited to the first 100,000 shares sold during the discount
period.
Long-term Debt - On March 31, 1998, Middlesex issued $23.0 million of
First Mortgage Bonds designated as Series W with a maturity date of
February 1, 2038 and a coupon rate of 5.35%. The effective interest cost
to maturity is 5.48%. The bond offering was competitively bid in
cooperation with the New Jersey Economic Development Authority. Interest
paid to the bondholders is exempt from federal and New Jersey income
taxes. However, the interest is subject to the Alternative Minimum Tax.
The proceeds of the bonds will be used to finance a significant portion
of the upgrade of the Carl J. Olsen Water Treatment Plant (CJO Plant).
MIDDLESEX WATER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO
MARCH 31, 1997
Operating Revenues in the first quarter were up $0.4 million or 4.6% from
the same period in 1997. The increase reflects a partial effect of
Middlesex's rate increase implemented in January 1998, continued customer
growth in Tidewater, the second phase of the Pinelands rate increase and
the inclusion of Public, acquired in July 1997.
Higher revenues were offset by increased operating expenses of $0.5
million or 6.3%. The increases were mainly due to increased water
treatment costs, mandated recognition of accrued postretirement benefit
costs other than pensions, and the inclusion of Public's expenses.
Additionally, power costs in the prior year quarter reflected a one-time
credit. Depreciation expense increased 7% reflecting plant additions of
$5.3 million since March 31, 1997 and utility plant acquired as part of
the acquisition of Public.
Net Income declined by 1.5%. Earnings applicable to Common Stock
decreased by 4.7% due to dividends on the $8 convertible series stock
issued in July 1997 for the acquisition of Public.
Capital Resources: The Company's capital program for 1998 is estimated to
be $28.3 million and includes $18.0 million for the upgrade of the Carl
J. Olsen Water Treatment Plant which is scheduled for completion in June
1999, $2.0 million for the rehabilitation of unlined cast iron pipe
(RENEW Program), $4.6 million for water system additions and improvements
in Delaware and $3.7 million for scheduled upgrades to existing systems.
The $3.7 million for scheduled upgrades consists of $0.9 million for
mains, $0.7 million for service lines, $0.8 million for meters and
hydrants and $1.3 million for various other items.
Liquidity: Proceeds from the $23.0 million Series W First Mortgage Bonds
will be used to finance a large part of the CJO Plant project. Other
capital expenditures will be financed through internally generated funds
and sale of common stock through the Dividend Reinvestment and Common
Stock Purchase Plan (DRP). Additionally, the Company will utilize short-
term borrowings through $24.0 million of available lines of credit. A
subsequent offering of common equity will be considered based on the
level of funds generated internally and from the DRP. Capital
expenditures of $4.8 million have been incurred in the three months ended
March 31, 1998.
Accounting Pronouncements: The Financial Accounting Standards Board
(FASB) issued three new accounting pronouncements, which the Company is
required to adopt in 1998.
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income" establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. At March 31, 1998, the Company does not have any
items of comprehensive income that would affect the current reporting of
the Company's financial position, results of operations or cash flows.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", requires that public enterprises report certain information
about operating segments in complete sets of financial statements.
Disclosure is not required for interim financial statements in the
initial year of its application. The Company is evaluating the
requirements of SFAS No. 131. Because the statement relates solely to
disclosure provisions, it will not have any effect on the Company's
financial position, results of operations or cash flows.
SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits", revises and standardizes disclosure requirements
for pension and other postretirement benefit plans but does not change
the measurement or recognition of those plans.
MIDDLESEX WATER COMPANY
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
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
None
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibits: No.27, Financial Data Schedule.
(b)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: May 12, 1998 A. Bruce O'Connor
Vice President and Controller
UT
0000066004
MIDDLESEX WATER COMPANY
3-MOS
DEC-31-1998
MAR-31-1998
PER-BOOK
139,164,031
2,052,178
32,166,710
12,879,566
0
186,262,485
31,865,639
0
20,048,683
51,914,322
0
4,995,635
75,907,279
3,063,614
0
0
43,353
0
0
0
50,338,282
186,262,485
9,769,139
682,250
7,139,027
7,821,277
1,947,862
129,791
2,077,653
814,402
1,263,251
79,697
1,183,554
1,221,971
4,115,750
1,606,089
0.28
0.28
