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, 1999 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, 1999
Common Stock, No Par Value 4,908,666
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements:
Consolidated Statements of Income 1
Consolidated Balance Sheets 2
Consolidated Statements of Capitalization and Retained Earnings 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures of Market Risk 12
PART II. OTHER INFORMATION 13
SIGNATURE 13
PART I. - FINANCIAL INFORMATION
MIDDLESEX WATER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Twelve Months
Ended March 31, Ended March 31,
1999 1998 1999 1998
__________ __________ __________ __________
Operating Revenues $11,679,893 $ 9,769,139 $44,968,720 $40,727,238
__________ __________ __________ __________
Operating Expenses:
Operation 6,207,458 4,588,621 21,426,309 18,161,555
Maintenance 640,497 327,865 2,027,989 1,707,952
Depreciation 860,875 808,084 3,337,460 3,123,444
Other Taxes 1,529,849 1,414,457 6,217,111 5,804,928
Federal Income Taxes 495,198 682,250 2,812,236 3,166,635
__________ __________ __________ __________
Total Operating Expenses 9,733,877 7,821,277 35,821,105 31,964,514
__________ __________ __________ __________
Operating Income 1,946,016 1,947,862 9,147,615 8,762,724
Other Income:
Allowance for funds Used
During Construction 486,222 133,803 1,402,463 275,718
Other-Net 212,978 39,107 919,193 177,276
__________ __________ __________ __________
Total Other Income 699,200 172,910 2,321,656 452,994
Income Before Interest Charges 2,645,216 2,120,772 11,469,271 9,215,718
__________ __________ __________ __________
Interest Charges 1,152,007 857,521 4,718,087 3,373,586
__________ __________ __________ __________
Net Income 1,493,209 1,263,251 6,751,184 5,842,132
Preferred Stock Dividend
Requirements 79,697 79,697 318,786 265,992
__________ __________ __________ __________
Earnings Applicable to
Common Stock $ 1,413,512 $ 1,183,554 6,432,398 5,576,140
__________ __________ __________ __________
Earnings and Dividends per Share of Common Stock
Earnings per Share:
Basic $0.29 $0.28 $1.43 $1.31
Diluted $0.29 $0.28 $1.42 $1.30
Average Number of Common Shares Outstanding
Basic 4,902,005 4,290,681 4,504,617 4,254,819
Diluted 5,128,431 4,517,107 4,731,043 4,435,868
Dividends Paid per Share $0.29 1/2 $0.28 1/2 $1.16 $1.13
See Notes to Consolidated Financial Statements.
-1-
MIDDLESEX WATER COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS AND OTHER DEBITS
March 31, December 31,
1999 1998
___________ ___________
(Unaudited)
UTILITY PLANT:
Water Production $ 28,193,214 $ 28,154,961
Transmission and Distribution 118,827,828 118,234,900
General 19,387,014 19,300,406
Construction Work in Progress 31,647,407 25,794,061
___________ ___________
TOTAL 198,055,463 191,484,328
Less Accumulated Depreciation 33,099,847 32,367,936
___________ ___________
UTILITY PLANT-NET 164,955,616 159,116,392
___________ ___________
NONUTILITY ASSETS-NET 4,085,072 3,710,437
___________ ___________
CURRENT ASSETS:
Cash and Cash Equivalents 8,588,217 9,388,822
Temporary Cash Investments-Restricted 4,461,255 9,776,072
Accounts Receivable-Net 4,509,346 4,886,067
Unbilled Revenues 2,254,108 2,298,148
Materials and Supplies 967,981 906,866
Prepayments and Other Current Assets 522,920 528,348
___________ ___________
TOTAL CURRENT ASSETS 21,303,827 27,784,323
___________ ___________
DEFERRED CHARGES:
Unamortized Debt Expense 3,110,448 3,143,384
Preliminary Survey and Investigation Charges 313,268 276,202
Regulatory Assets
Income Taxes 5,863,752 5,788,752
Post Retirement Costs 1,192,540 1,214,092
Other 2,295,467 2,467,674
___________ ___________
TOTAL DEFERRED CHARGES 12,775,475 12,890,104
___________ ___________
TOTAL $203,119,990 $203,501,256
___________ ___________
See Notes to Consolidated Financial Statements.
-2-
MIDDLESEX WATER COMPANY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND OTHER CREDITS
March 31, December 31,
1999 1998
___________ ___________
(Unaudited)
CAPITALIZATION(see accompanying statements) $149,973,903 $149,756,614
___________ ____________
CURRENT LIABILITIES:
Current Portion of Long-term Debt 88,000 71,730
Notes Payable 0 1,000,000
Accounts Payable 2,660,459 3,373 595
Taxes Accrued 6,854,274 5,220,669
Interest Accrued 689,255 1,701,330
Other 1,672,998 1,832,737
___________ ___________
TOTAL CURRENT LIABILITIES 11,964,986 13,200,061
___________ ___________
DEFERRED CREDITS:
Customer Advances for Construction 10,810,436 11,275,660
Accumulated Deferred Investment Tax Credits 2,147,465 2,165,384
Accumulated Deferred Federal Income Taxes 12,006,189 12,070,474
Employee Benefit Plans 3,991,847 3,762,516
Other 804,669 791,460
___________ ___________
TOTAL DEFERRED CREDITS 29,760,606 30,065,494
___________ ___________
CONTRIBUTIONS IN AID OF CONSTRUCTION 11,420,495 10,479,087
___________ ___________
TOTAL $203,119,990 $203,501,256
___________ ___________
See Notes to Consolidated Financial Statements.
-3-
MIDDLESEX WATER COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION AND RETAINED EARNINGS
March 31, December 31,
1999 1998
___________ ___________
(Unaudited)
CAPITALIZATION:
Common Stock,No Par Value
Shares Authorized,10,000,000
Shares Outstanding-1999,4,908,666
1998,4,897,069 $ 45,793,862 $ 45,507,172
Retained Earnings 21,180,452 21,222,294
___________ ___________
TOTAL COMMON EQUITY 66,974,314 66,729,466
___________ ___________
Cumulative Preference Stock,No Par Value
Shares Authorized,100,000; Shares Outstanding,None
Cumulative Preferred Stock,No Par Value,
Shares Authorized - 149,980
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 3,406,954 3,418,243
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 23,000,000
0.00%,Series X,due August 1,2018 1,050,000 1,050,000
4.53%,Series Y,due August 1,2018 1,135,000 1,135,000
___________ ___________
SUBTOTAL LONG-TERM DEBT 78,091,954 78,103,243
Less: Current Portion of Long-term Debt (88,000) (71,730)
___________ ___________
TOTAL LONG-TERM DEBT 78,003,954 78,031,513
___________ ___________
TOTAL CAPITALIZATION $149,973,903 $149,756,614
___________ ___________
Three Months Ended Year Ended
March 31, December 31,
1999 1998
___________ ___________
(Unaudited)
RETAINED EARNINGS:
BALANCE AT BEGINNING OF PERIOD $ 21,222,294 $ 20,087,065
Net Income 1,493,209 6,521,226
___________ ___________
TOTAL 22,715,503 26,608,291
___________ ___________
Cash Dividends:
Cumulative Preferred Stock 79,697 318,751
Common Stock 1,445,197 4,987,013
Common Stock Expenses 10,157 80,233
__________ ___________
TOTAL DEDUCTIONS 1,535,051 5,385,997
___________ ___________
BALANCE AT END OF PERIOD $ 21,180,452 $ 21,222,294
___________ ___________
See Notes to Consolidated Financial Statements.
-4-
MIDDLESEX WATER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31, Twelve Months Ended March 31
1999 1998 1999 1998
___________ ___________ ___________ ___________
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,493,209 $ 1,263,251 $ 6,751,184 $ 5,842,132
Adjustments To Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 942,050 883,724 3,854,933 3,256,534
Provision for Deferred Income Taxes (139,285) 106,947 (111,256) 680,931
Allowance for Funds Used During Construction (486,222) (133,803) (1,402,463) (275,718)
Changes in Current Assets and Liabilities:
Accounts Receivable 376,721 (289,638) (424,848) (56,198)
Accounts Payable (713,136) (658,286) 127,712 1,835,348
Accrued Taxes 1,633,605 1,387,294 324,891 770,070
Accrued Interest (1,012,075) (607,804) 113,498 121,985
Unbilled Revenues 44,040 (32,894) (45,280) (2,619)
Employee Benefit Plans 229,331 238,067 1,006,544 889,401
Other-Net (193,199) (464,704) 705,171 (216,968)
___________ ___________ ___________ ___________
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,175,039 1,692,154 10,900,086 12,844,898
___________ ___________ ___________ ___________
CASH FLOWS FROM INVESTING ACTIVITIES:
Utility Plant Expenditures (Excludes Allowance
for Funds Used During Construction) (6,207,508) (4,766,355) (27,716,434) (14,213,285)
Cash from Acquisition of Subsidiary 0 0 0 158,436
Note Receivable 12,875 (15,112) (1,591,078) (9,149)
Preliminary Survey and Investigation Charges (37,066) 8,275 (107,893) (316,165)
Other-Net (274,189) (13,128) (915,666) (1,237,051)
___________ ___________ ___________ ___________
NET CASH USED IN INVESTING ACTIVITIES (6,505,888) (4,786,320) (30,331,071) (15,617,214)
___________ ___________ ___________ ___________
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of Long-term Debt (11,289) (10,321) (43,678) (42,665)
Proceeds from Issuance of Long-term Debt 0 23,000,000 2,185,000 23,000,000
Short-term Bank Borrowings (1,000,000) 2,498,913 (3,063,614) 2,498,913
Deferred Debit Issuance Expenses (1,107) 0 (503,307) 0
Temporary Cash Investments-Restricted 5,314,817 (22,876,152) 18,633,684 (23,086,827)
Proceeds from Issuance of Common Stock-Net 276,532 727,155 13,837,833 1,613,512
Payment of Common Dividends (1,445,197) (1,221,971) (5,210,239) (4,805,227)
Payment of Preferred Dividends (79,696) (79,662) (318,785) (279,291)
Customer Advances and Contributions-Net 476,184 (36,608) 1,081,826 1,130,661
___________ ___________ ___________ ___________
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,530,244 2,001,354 26,598,720 29,076
___________ ___________ ___________ ___________
NET CHANGE IN CASH AND CASH EQUIVALENTS (800,605) (1,092,812) 7,167,735 (2,743,240)
___________ ___________ ___________ ___________
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 9,388,822 2,513,294 1,420,482 4,163,722
___________ ___________ ___________ ___________
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 8,588,217 $ 1,420,482 $ 8,588,217 $ 1,420,482
___________ ___________ ___________ ___________
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash Paid During the Period for:
Interest(net of amounts capitalized) $ 1,644,621 $ 1,407,200 $ 3,047,999 $ 2,942,889
Income Taxes $ 150,500 $ 359,000 $ 2,954,475 $ 2,061,200
See Notes to Consolidated Financial Statements.
-5-
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, Utility Service Affiliates,
Inc. (USA), and Utility Service Affiliates (Perth Amboy) Inc. (USA-PA).
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 (the Company)
are reported on a consolidated basis. All intercompany accounts and
transactions have been eliminated.
The consolidated notes accompanying the 1998 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, 1999 and the results of
operations and its cash flows for the periods ended March 31, 1999 and
1998. Information included in the Balance Sheet as of December 31,
1998, 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, 1998.
Note 2 - Regulatory Matters
On May 12, 1999, the New Jersey Board of Public Utilities approved an
11.5% or $4.3 million base rate increase for Middlesex. The purpose of
the increase is to allow Middlesex the opportunity to earn a return on
and recover the capital investment in the upgrade and expansion of the
Carl J. Olsen Water Treatment Plant. This project was necessary to meet
the new and anticipated regulatory standards concerning water quality
and to increase the plant's production capacity.
Note 3 - Capitalization
Common Stock - During the three months ended March 31, 1999, 11,597
common shares ($0.3 million) were issued under the Company's Dividend
Reinvestment and Common Stock Purchase Plan.
Note 4 - Earnings Per Share
Basic earnings per share (EPS) are computed on the basis of the weighted
average number of shares outstanding. Diluted EPS assumes the
conversion of both the Convertible Preferred Stock $7.00 Series and the
Convertible Preferred Stock $8.00 Series.
-6-
Three Months Ended Twelve Months Ended
March 30, March 30,
1999 1998 1999 1998
Income Shares Income Shares Income Shares Income Shares
__________ __________ __________ __________ __________ __________ __________ __________
BASIC:
Net Income $ 1,493,209 4,902,005 $ 1,263,251 4,290,681 $ 6,751,184 4,504,617 $ 5,842,132 4,254,819
Preferred Dividend (79,697) (79,697) (318,786) (265,992)
__________ __________ __________ __________ __________ __________ __________ __________
Earnings Applicable
to Common Stock $ 1,413,512 4,902,005 $ 1,183,554 4,290,681 $ 6,432,398 4,504,617 $ 5,576,140 4,254,819
Basic EPS $0.29 $0.28 $1.43 $1.31
__________ __________ __________ _________
DILUTED:
Earnings Applicable
to Common Stock $ 1,413,512 4,902,005 $ 1,183,554 4,290,681 $ 6,432,398 4,504,617 $ 5,576,140 4,254,819
$7.00 Series Dividend 26,042 89,286 26,042 89,286 104,167 89,286 104,307 89,372
$8.00 Series Dividend 40,000 137,140 40,000 137,140 160,000 137,140 106,959 91,677
__________ __________ __________ __________ __________ __________ __________ __________
Adjusted Earnings
Applicable to
Common Stock $ 1,479,554 5,128,431 $ 1,249,596 4,517,107 $ 6,696,565 4,731,043 $ 5,787,406 4,435,868
Diluted EPS $0.29 $0.28 $1.42 $1.30
__________ __________ __________ __________
Note 5 - Business Segment Data
The Company has identified two reportable segments. One is the
regulated business of collecting, treating and distributing water on a
retail and wholesale basis to residential, commercial, industrial and
fire protection customers in parts of New Jersey and Delaware. It also
operates a regulated wastewater system in New Jersey. The Company is
subject to regulations as to its rates, services and other matters by
the States of New Jersey and Delaware with respect to utility service
within these States. The other segment is the non-regulated contract
services for the operation and maintenance of municipal water and
wastewater systems. On January 1, 1999 the Company began operating the
water and wastewater systems of the City of Perth Amboy, New Jersey
under a service contract. The accounting policies of the segments are
the same as those described in the summary of significant accounting
policies in Note 1 to the Consolidated Financial Statements.
Intersegment transactions relating to operational costs are treated as
pass through expenses. Finance charges on intersegment loan activities
are based on interest rates that are below what would normally be
charged by a third party lender.
Three Months Ended Twelve Months Ended
March 31, March 31,
Operations by Segments 1999 1998 1999 1998
__________ __________ __________ __________
Revenues:
Regulated $ 9,930 $ 9,659 $ 42,888 $ 40,316
Non-Regulated 1,761 116 2,110 435
Intersegment Elimination (11) (6) (29) (24)
__________ __________ __________ __________
Consolidated Revenues $ 11,680 $ 9,769 $ 44,969 $ 40,727
__________ __________ __________ __________
-7-
Three Months Ended Twelve Months Ended
March 31, March 31,
1999 1998 1999 1998
__________ __________ __________ __________
Operating Income:
Regulated $ 1,817 $ 1,884 $ 8,874 $ 8,545
Non-Regulated 129 64 274 220
Intersegment Elimination 0 0 0 (2)
__________ __________ __________ __________
Consolidated Operating Income $ 1,946 $ 1,948 $ 9,148 $ 8,763
__________ __________ __________ __________
Depreciation/Amortization:
Regulated $ 856 $ 808 $ 3,332 $ 3,123
Non-Regulated 5 0 5 0
Intersegment Elimination 0 0 0 0
__________ __________ __________ __________
Consolidated
Depreciation/Amortization $ 861 $ 808 $ 3,337 $ 3,123
__________ __________ __________ __________
Other Income:
Regulated $ 840 $ 297 $ 3,175 $ 1,121
Non-Regulated 0 0 0 0
Intersegment Elimination (141) (124) (853) (668)
__________ __________ __________ __________
Consolidated Other Income $ 699 $ 173 $ 2,322 $ 453
__________ __________ __________ __________
Interest Expense:
Regulated $ 1,228 $ 886 $ 4,954 $ 3,476
Non-Regulated 47 22 164 79
Intersegment Elimination (123) (50) (400) (181)
__________ __________ __________ __________
Consolidated Interest Expense $ 1,152 $ 858 $ 4,718 $ 3,374
__________ __________ __________ __________
Net Income:
Regulated $ 1,429 $ 1,294 $ 7,095 $ 6,189
Non-Regulated 82 42 110 142
Intersegment Elimination (18) (73) (454) (489)
__________ __________ __________ __________
Consolidated Net Income $ 1,493 $ 1,263 $ 6,751 $ 5,842
__________ __________ __________ __________
Capital Expenditures:
Regulated $ 6,208 $ 4,766 $ 27,716 $ 14,213
Non-Regulated 150 0 150 0
Intersegment Elimination 0 0 0 0
__________ __________ __________ __________
Total Capital Expenditures $ 6,358 $ 4,766 $ 27,866 $ 14,213
__________ __________ __________ __________
As of As of
March 31, December 31,
1999 1999
__________ __________
Assets:
Regulated $ 218,950 $ 219,014
Non-Regulated 2,815 2,377
Intersegment Elimination (18,645) (17,890)
__________ __________
Consolidated Assets $ 203,120 $ 203,501
__________ __________
-8-
MIDDLESEX WATER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations - Three Months Ended March 31, 1999
Operating revenues for the three months ended March 31, 1999 were up
$1.9 million or 19.6% from the same period in 1998. A large part of the
increase relates to $1.6 million in contract service revenues from USA-
PA, a subsidiary established to provide operating and maintenance
services to the water and wastewater systems of the City of Perth Amboy,
which was effective January 1, 1999. In addition, the full benefit of
Middlesex's 4.4% rate increase implemented in late January 1998 and the
third phase of the Pinelands Water and Wastewater rate increases
implemented in late January 1999 added $0.2 million to revenues.
Continued growth in the customer base of our Delaware operations also
contributed $0.1 million to revenues.
Offsetting higher revenues were increased operating expenses of $1.9
million or 24.5% over last year. The inclusion of USA-PA's operations
and maintenance expenses accounted for $1.5 million of the increase.
Higher pumpage and pump configurations used during the ongoing
construction at the Carl J. Olsen Water Treatment Plant (CJO Plant)
increased purchased power expenses by $0.1 million. Increases were also
experienced in administrative and general expenses of $0.1 million,
maintenance within the transmission and distribution area of $0.1
million and labor costs of $0.2 million.
Other taxes, which rose $0.1 million or 8.2%, included higher revenue
related taxes, real estate taxes and payroll taxes. Federal income
taxes were lower by $0.2 million, which reflected a lower amount of
deferred taxes, which offset an increased amount of current taxable
income.
Other income increased $0.5 million compared to the same three-month
period in 1998. An increase of $0.4 million in Allowance for Funds Used
During Construction was related to the capital expenditures incurred in
connection with the upgrade of the CJO Plant. Interest income increased
$0.1 million resulting in part from the unexpended proceeds available
for investment from the Series W Mortgage Bonds.
Total interest charges rose $0.3 million and reflect debt service on the
Series W First Mortgage Bonds issued in March 1998.
The rise in net income to $1.5 million, up 18.2% from $1.3 million, was
attributable to the net financing activity related to the CJO Plant
construction.
Results of Operations - Twelve Months Ended March 31, 1999
Operating revenues for the twelve months ended March 31, 1999 were
higher by $4.2 million or 10.4%. The following factors contributed to
this increase. The inclusion of USA-PA for three months and Public for
an entire year attributed $1.6 million and $0.4 million, respectively,
to revenues. USA-PA began operation in January 1999 and Public was
acquired in July 1997. Rate increases implemented by Middlesex and the
Pinelands Water and Wastewater Companies accounted for $1.7 million of
additional revenues. Tidewater's continued growth in its customer base
also contributed $0.5 million in revenues. Total operating expenses
increased $3.9 million or 12.0%. Primary factors contributing to the
increase are
-9-
the inclusion of USA-PA's and Public's operating and maintenance
expenses for $1.5 million and $0.2 million, respectively. Purchased
water cost rose $0.2 million due to a change in the composition of the
water sources used to supply Middlesex customers. Purchased power also
increased by $0.2 million due to the pump configurations used at the CJO
Plant. Mandated recognition of postretirement benefit costs other than
pensions and amortization of regulatory deferrals approved by the New
Jersey Board of Public Utilities added $0.4 million and $0.1 million,
respectively, to expenses. Labor costs also added $0.7 million to
increased expenses.
Depreciation expense increased $0.2 million or 6.9% as a result of newly
constructed utility plant placed in service during the twelve-month
period and utility plant acquired through the acquisition of Public.
Other Taxes increased $0.4 million or 7.1%. The increase primarily
relates to higher revenue-related taxes, employers' payroll taxes and
the inclusion of USA-PA. Federal income taxes decreased $0.3 million or
11.2% as a result of a lower amount of deferred taxes offsetting an
increased amount of current taxes.
Other income rose $1.8 million with the Allowance for Funds Used During
Construction, (AFUDC), accounting for $1.1 million. The increase in
AFUDC reflects capitalized interest on expenditures associated with the
upgrade of the CJO Plant. Unexpended proceeds available for investment
from the Series W First Mortgage Bonds, which were issued in March 1998,
increased interest income by $0.7 million.
Interest expense related to the Series W First Mortgage Bonds issued in
March 1998 contributed $1.2 million to the increase in total interest
charges of $1.3 million. The remainder of the increase is due to short-
term borrowings, incurred to provide interim financing for the Company's
capital program.
The $0.1 million increase in preferred stock dividend requirements
reflects the issuance on July 31, 1997 of the $8.00 preferred stock
series to complete the acquisition of Public. Basic and diluted
earnings per share increased $0.12. The $0.01 per share dilution for
the twelve months ended March 31, 1999 and 1998 is the result of the two
series of convertible preferred stock currently outstanding.
Capital Resources
The Company's capital program for 1999 is estimated to be $26.6 million
and includes $15.0 million for the upgrade of the CJO scheduled for
completion in June 1999, $2.0 million for the RENEW Program, which is
our program to clean and cement line approximately nine miles of unlined
mains in the Middlesex System. There is a total of approximately 170
miles of unlined mains in the 670 mile Middlesex System. The capital
program also includes $5.8 million for water system additions and
improvements for our Delaware systems and $3.8 million for scheduled
upgrades to our existing systems in New Jersey. The scheduled upgrades
consists of $1.0 million for mains, $0.7 million for service lines, $0.5
million for meters, $0.4 for hydrants and $1.2 million for various other
items.
Liquidity
Proceeds from the $23.0 million Series W First Mortgage Bonds and the
December 1998, $12.7 million common stock offering are being used to
finance the CJO Plant expenditures in 1999. Middlesex issued $2.2
million of First Mortgage Bonds in November 1998 through the New Jersey
State Revolving Fund (SRF) to cover the cost of the 1999 RENEW Program.
The Company intends to apply for SRF funding in
-10-
1999 for the years 2000 and 2001. The capital program in Delaware will
be financed through a combination of a capital contribution from
Middlesex and long-term debt financing from either a financial
institution or the Company. 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). Capital
expenditures of $6.2 million have been incurred in the three months
ended March 31, 1999. The Company may also utilize short-term
borrowings through $28.0 million of available lines of credit it has
with three commercial banks for working capital purposes. At March 31,
1999, there were no outstanding loans against the lines of credit.
Accounting Standards
In June 1998, The Financial Accounting Standards Board (FASB) issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." This Statement establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts. The Company is currently
evaluating the requirements of the accounting standard, which is
required to be adopted in the first quarter of 2000.
Year 2000 Readiness
The Company, through its year 2000 (Y2K) Committee, continues to advance
in its efforts to ensure that our ability to provide service will not be
interrupted by Y2K related problems.
Responses to our critical vendor questionnaire have reached
approximately 70%. There was a 100% response rate from the most
important vendors, namely electric utilities, chemical companies, bulk
water suppliers and telecommunications providers. Each vendor has
indicated their level of readiness. This information is being used to
finalize Middlesex contingency plans, which are scheduled to be
completed in June 1999.
The Y2K Committee continues to focus on completing its inventory of
equipment that may contain embedded chips. We are working with the
equipment manufacturers to help identify the affected equipment and the
ability to modify or replace the equipment in a timely manner. The
ability of our financial system to recognize post 1999 dates was tested
and determined to be compliant. Our customer billing and information
system is scheduled for testing during May 1999.
Forward Looking Information
Certain matters discussed in this report on Form 10-Q are "forward-
looking statements" intended to qualify for safe harbors from liability
established by the Private Securities Litigation Reform Act of 1995.
Such statements may address future plans, objective, expectations and
events concerning various matters such as capital expenditures,
earnings, litigation, growth potential, rate and other regulatory
matters, liquidity and capital resources and accounting matters. Actual
results in each case could differ materially from those currently
anticipated in such statements. The Company undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
-11-
Item 3. Quantitative and Qualitative Disclosures of Market Risk
The Company is subject to the risk of fluctuating interest rates in the
normal course of business. Our policy is to manage interest rates
through the use of fixed rate long-term debt and, to a lesser extent,
short-term debt. The Company's interest rate risk related to existing
fixed rate, long-term debt is not material due to the term of the
majority of our First Mortgage Bonds, which have maturity dates ranging
from 2009 to 2038. Over the next twelve months approximately $0.1
million of the current portion of three existing long-term debt
instruments will mature. Applying a hypothetical change in the rate of
interest charged by 10% on those borrowings, would not have a material
effect on earnings.
-12-
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. 11, Statement Regarding Computation
of Per Share Earnings
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)
/s/A. Bruce O'Connor
Date: May 10, 1999 A. Bruce O'Connor
Vice President and Controller
-13-
UT
0000066004
MIDDLESEX WATER COMPANY
3-MOS
DEC-31-1999
MAR-31-1999
PER-BOOK
164,955,616
4,085,072
21,303,827
12,775,475
0
203,119,990
45,793,862
0
21,180,452
66,974,314
0
4,995,635
78,003,954
0
0
0
88,000
0
0
0
53,058,087
203,119,990
11,679,893
495,198
9,238,679
9,733,877
1,946,016
699,200
2,645,216
1,152,007
1,493,209
79,697
1,413,512
1,445,197
4,163,988
2,175,039
0.29
0.29
EXHIBIT 11
MIDDLESEX WATER COMPANY
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Three Months Ended Twelve Months Ended
March 30, March 30,
1999 1998 1999 1998
Income Shares Income Shares Income Shares Income Shares
__________ __________ __________ __________ __________ __________ __________ __________
BASIC:
Income Before Preferred Stock
Dividend Requirement $ 1,493,209 4,902,005 $ 1,263,251 4,290,681 $ 6,751,184 4,504,617 $ 5,842,132 4,254,819
Less Preferred Stock Dividend
Requirement (79,697) (79,697) (318,786) (265,992)
__________ __________ __________ __________ __________ __________ __________ __________
Earnings Applicable to Common
Stock $ 1,413,512 4,902,005 $ 1,183,554 4,290,681 $ 6,432,398 4,504,617 $ 5,576,140 4,254,819
Basic Earnings Per Share of
Common Stock $0.29 $0.28 $1.43 $1.31
__________ __________ __________ _________
DILUTED:
Earnings Applicable to Common
Stock $ 1,413,512 4,902,005 $ 1,183,554 4,290,681 $ 6,432,398 4,504,617 $ 5,576,140 4,254,819
Convertible Preferred Stock
$7.00 Series Dividend 26,042 89,286 26,042 89,286 104,167 89,286 104,307 89,372
Convertible Preferred Stock
$8.00 Series Dividend 40,000 137,140 40,000 137,140 160,000 137,140 106,959 91,677
__________ __________ __________ __________ __________ __________ __________ __________
Adjusted Earnings Applicable to
Common Stock $ 1,479,554 5,128,431 $ 1,249,596 4,517,107 $ 6,696,565 4,731,043 $ 5,787,406 4,435,868
Diluted Earnings Per Share of
Common Stock $0.29 $0.28 $1.42 $1.30
__________ __________ __________ __________
