SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File
For Quarter Ended: March 31, 2003 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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12-2 of the Securities Exchange Act of 1934). 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, 2003
----- -----------------------------
Common Stock, No Par Value 7,810,409
Explanatory Note - Restatement of condensed consolidated financial statements
The condensed consolidated financial statements as of March 31, 2003 and
December 31, 2002 and for the three and twelve month periods ended March 31,
2003 and 2002, included in this Quarterly Report on Form 10-Q/A have been
restated as discussed in Note 6 to the condensed consolidated financial
statements.
For purposes of this Form 10-Q/A, and in accordance with Rule 12b-15 under the
Securities Exchange Act of 1934, as amended, each item of the Form 10-Q for the
quarter ended March 31, 2003 as originally filed on May 12, 2003 that was
affected by the restatement has been amended to the extent affected and restated
in its entirety. NO ATTEMPT HAS BEEN MADE IN THIS FORM 10-Q/A TO MODIFY OR
UPDATE OTHER DISCLOSURES AS PRESENTED IN THE ORIGINAL FORM 10-Q EXCEPT FOR
UPDATES MADE TO PART I, ITEM 4, PART II ITEM 6(a)AND EXHIBITS 31, 31.1, 32 AND
32.1.
INDEX
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements:
Condensed Consolidated Statements of Income 1
Condensed Consolidated Balance Sheets (Restated) 2
Condensed Consolidated Statements of Capitalization and Retained Earnings 4
Condensed Consolidated Statements of Cash Flows (Restated) 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures of Market Risk 12
Item 4. Controls and Procedures 12
PART II.OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURE 14
MIDDLESEX WATER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Twelve Months
Ended March 31, Ended March 31,
2003 2002 2003 2002
----- ----- ----- ----
Operating Revenues $ 14,981,373 $ 14,229,403 $ 62,684,756 $ 60,723,650
------------ ------------ ------------ ------------
Operating Expenses:
Operations 7,811,629 7,213,568 30,516,982 29,212,127
Maintenance 975,854 657,564 3,165,499 2,753,784
Depreciation 1,280,180 1,295,718 4,947,730 5,097,272
Other Taxes 1,908,128 1,847,666 7,797,617 7,727,669
Income Taxes 629,733 702,899 3,926,129 3,999,014
------------ ------------ ------------ ------------
Total Operating Expenses 12,605,524 11,717,415 50,353,957 48,789,866
------------ ------------ ------------ ------------
Operating Income 2,375,849 2,511,988 12,330,799 11,933,784
Other Income:
Allowance for Funds Used During Construction 92,606 70,283 291,991 193,987
Other Income 19,944 43,607 225,660 475,923
Other Expense (19,170) (15,694) (80,590) (156,818)
------------ ------------ ------------ ------------
Total Other Income 93,380 98,196 437,061 513,092
Interest Charges 1,244,348 1,333,478 5,054,333 5,100,836
------------ ------------ ------------ ------------
Net Income 1,224,881 1,276,706 7,713,528 7,346,040
Preferred Stock Dividend Requirements 63,697 63,697 254,786 254,786
------------ ------------ ------------ ------------
Earnings Applicable to Common Stock $ 1,161,184 $ 1,213,009 $ 7,458,742 $ 7,091,254
============ ============ ============ ============
Earnings per share of Common Stock:
Basic $ 0.15 $ 0.16 $ 0.96 $ 0.93
Diluted $ 0.15 $ 0.16 $ 0.96 $ 0.93
Weighted Average Number of
Common Shares Outstanding :
Basic 7,783,877 7,639,843 7,745,741 7,613,209
Diluted 8,041,232 7,897,198 8,003,096 7,870,564
Cash Dividends Paid per Common Share $ 0.215 $ 0.210 $ 0.850 $ 0.833
See Notes to Condensed Consolidated Financial Statements.
-1-
MIDDLESEX WATER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
Restated
Note 6
------------------------------
March 31, December 31,
2003 2002
------------ ------------
UTILITY PLANT:
Water Production $ 73,034,406 $ 72,212,878
Transmission and Distribution 162,514,527 158,412,075
General 18,810,740 18,618,211
Construction Work in Progress 4,904,817 6,619,767
------------ ------------
TOTAL 259,264,490 255,862,931
Less Accumulated Depreciation 49,027,484 47,919,527
------------ ------------
UTILITY PLANT-NET 210,237,006 207,943,404
------------ ------------
NONUTILITY ASSETS-NET 3,736,618 3,424,492
------------ ------------
CURRENT ASSETS:
Cash and Cash Equivalents 4,923,968 2,937,894
Accounts Receivable (net of allowance
for doubtful accounts) 5,535,992 6,028,302
Unbilled Revenues 3,140,548 3,181,091
Materials and Supplies (at average cost) 1,261,034 1,190,337
Prepayments and Other Current Assets 613,440 815,392
------------ ------------
TOTAL CURRENT ASSETS 15,474,982 14,153,016
------------ ------------
DEFERRED CHARGES AND OTHER ASSETS:
Unamortized Debt Expense 3,200,904 3,239,364
Preliminary Survey and Investigation Charges 1,397,671 1,098,468
Regulatory Assets
Income Taxes 6,287,873 6,287,873
Post Retirement Costs 847,708 869,260
Restricted Cash 5,396,206 6,146,699
Other 1,425,092 1,441,656
------------ ------------
TOTAL DEFERRED CHARGES AND OTHER ASSETS 18,555,454 19,083,320
------------ ------------
TOTAL ASSETS $248,004,060 $244,604,232
============ ============
See Notes to Condensed Consolidated Financial Statements.
-2-
MIDDLESEX WATER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2003 2002
------------ ------------
TOTAL CAPITALIZATION (see accompanying statements) $168,526,024 $168,047,689
------------ ------------
CURRENT LIABILITIES:
Current Portion of Long-term Debt 637,729 639,427
Notes Payable 18,475,000 17,650,000
Accounts Payable 2,453,722 2,059,877
Taxes Accrued 7,864,708 5,898,751
Interest Accrued 1,190,803 1,614,278
Other 1,337,371 1,716,270
------------ ------------
TOTAL CURRENT LIABILITIES 31,959,333 29,578,603
------------ ------------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 5)
DEFERRED CREDITS:
Customer Advances for Construction 10,937,971 10,881,815
Accumulated Deferred Investment Tax Credits 1,834,145 1,853,799
Accumulated Deferred Federal Income Taxes 13,329,517 13,241,901
Employee Benefit Plans 5,513,564 5,279,737
Other 746,267 814,897
------------ ------------
TOTAL DEFERRED CREDITS 32,361,464 32,072,149
------------ ------------
CONTRIBUTIONS IN AID OF CONSTRUCTION 15,157,239 14,905,791
------------ ------------
TOTAL CAPITALIZATION AND LIABILITIES $248,004,060 $244,604,232
============ ============
See Notes to Condensed Consolidated Financial Statements.
-3-
MIDDLESEX WATER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CAPITALIZATION AND RETAINED EARNINGS
(Unaudited)
March 31, December 31,
2003 2002
------------- -------------
CAPITALIZATION:
Common Stock, No Par Value (Note 6):
Shares Authorized, 20,000,000
Shares Outstanding - 2003 - 7,810,409 $ 54,779,698 $ 53,866,250
2002 - 7,767,367
Restricted Stock Plan (495,429) (552,081)
------------- -------------
TOTAL COMMON STOCK 54,284,269 53,314,169
------------- -------------
Cumulative Preference Stock, No Par Value
Shares Authorized, 100,000; Shares Outstanding, None
Cumulative Preferred Stock, No Par Value:
Shares Authorized - 140,497
Convertible:
Shares Outstanding, $7.00 Series - 14,881 1,562,505 1,562,505
Shares Outstanding, $8.00 Series - 12,000 1,398,857 1,398,857
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 4,063,062 4,063,062
------------- -------------
Long-term Debt:
8.05% Amortizing Secured Note, due December 20, 2021 3,187,242 3,203,401
4.22% State Revolving Trust Note, due December 31, 2022 192,281 67,350
4.00% State Revolving Trust Bond, due September 1, 2021 850,000 850,000
0.00% State Revolving Fund Bond, due September 1, 2021 718,634 730,017
First Mortgage Bonds:
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 September 1, 2018 848,464 862,088
4.25%, Series Y, due September 1, 2018 1,010,000 1,010,000
0.00%, Series Z, due September 1, 2019 1,875,500 1,907,568
5.25%, Series AA, due September 1, 2019 2,265,000 2,265,000
0.00%, Series BB, due September 1, 2021 2,251,718 2,287,385
4.00%, Series CC, due September 1, 2021 2,440,000 2,440,000
5.10%, Series DD, due January 1, 2032 6,000,000 6,000,000
------------- -------------
SUBTOTAL LONG-TERM DEBT 88,138,839 88,122,809
------------- -------------
Less: Current Portion of Long-term Debt (637,729) (639,427)
------------- -------------
TOTAL LONG-TERM DEBT 87,501,110 87,483,382
------------- -------------
TOTAL COMMON STOCK, PREFERRED STOCK AND LONG-TERM DEBT $ 145,848,441 $ 144,860,613
============= =============
Three Months
Ended Year Ended
March 31, December 31,
2003 2002
------------- -------------
RETAINED EARNINGS:
BALANCE AT BEGINNING OF PERIOD $ 23,187,076 $ 22,190,691
Net Income 1,224,881 7,765,353
------------- -------------
TOTAL 24,411,957 29,956,044
------------- -------------
Cash Dividends:
Cumulative Preferred Stock 63,697 254,786
Common Stock 1,670,677 6,510,494
Common Stock Expenses -- 3,688
------------- -------------
TOTAL DEDUCTIONS 1,734,374 6,768,968
------------- -------------
BALANCE AT END OF PERIOD $ 22,677,583 $ 23,187,076
============= =============
See Notes to Condensed Consolidated Financial Statements.
-4-
MIDDLESEX WATER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Restated
Note 6
-------------------------------------------------------------------
Three Months Ended March 31, Twelve Months Ended March 31,
2003 2002 2003 2002
----------- ----------- ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,224,881 $ 1,276,706 $ 7,713,528 $ 7,346,040
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 1,391,893 1,392,152 4,963,008 5,369,609
Provision for Deferred Income Taxes 39,393 766 186,651 363,933
Allowance for Funds Used During Construction (92,606) (70,283) (291,991) (193,987)
Changes in Current Assets and Liabilities:
Accounts Receivable 492,310 1,240,077 (110,349) 187,717
Accounts Payable 393,845 (262,284) 319,671 245,740
Accrued Taxes 1,965,957 2,044,084 (510,253) 626,337
Accrued Interest (423,475) (963,699) 340,606 136,107
Unbilled Revenues 40,543 (175,652) (163,881) (336,657)
Employee Benefit Plans 233,827 151,873 99,016 527,023
Other-Net (250,724) (371,978) (694,480) 9,882
----------- ----------- ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,015,844 4,261,762 11,851,526 14,281,744
----------- ----------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Utility Plant Expenditures* (3,797,087) (3,803,987) (16,482,195) (15,267,847)
Restricted Cash 750,349 1,179,098 2,415,247 (5,428,402)
Note Receivable -- -- -- 105,500
Preliminary Survey and Investigation Charges (299,203) 32,899 (486,948) (110,646)
Other-Net (32,891) (5,366) 1,417 573,295
----------- ----------- ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (3,378,832) (2,597,356) (14,552,479) (20,128,100)
----------- ----------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of Long-term Debt (108,901) (6,062,301) (490,436) (6,216,618)
Proceeds from Issuance of Long-term Debt 124,931 6,000,000 192,281 12,390,000
Short-term Bank Borrowings 825,000 (1,600,000) 6,850,000 4,600,000
Deferred Debt Issuance Expenses (35,442) (600,301) 54,041 (611,741)
Restricted Cash 144 -- 219,732 (333)
Proceeds from Issuance of Common Stock-Net 970,100 769,693 3,411,267 1,706,150
Payment of Common Dividends (1,670,677) (1,602,400) (6,578,771) (6,340,902)
Payment of Preferred Dividends (63,697) (63,697) (254,786) (254,786)
Construction Advances and Contributions-Net 307,604 50,310 1,131,499 481,098
----------- ----------- ------------ ------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES 349,062 (3,108,696) 4,534,827 5,752,868
----------- ----------- ------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 1,986,074 (1,444,290) 1,833,874 (93,488)
----------- ----------- ------------ ------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,937,894 4,534,384 3,090,094 3,183,582
----------- ----------- ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,923,968 $ 3,090,094 $ 4,923,968 $ 3,090,094
=========== =========== ============ ============
* Excludes Allowance for Funds Used During Construction
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash Paid During the Period for:
Interest (net of amounts capitalized) $ 1,578,168 $ 2,217,732 $ 4,194,555 $ 4,686,925
Income Taxes $ -- $ 60,000 $ 4,177,000 $ 3,609,792
See Notes to Condensed Consolidated Financial Statements.
5
NOTES TO CONDENSED 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),
Utility Service Affiliates (Perth Amboy) Inc. (USA-PA) and Bayview Water
Company. Southern Shores Water Company, LLC 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 significant intercompany accounts and
transactions have been eliminated.
The consolidated notes within the Form 10-K are applicable to these financial
statements and, in the opinion of the Company, the accompanying unaudited
condensed consolidated financial statements contain all adjustments (consisting
of only normal recurring accruals) necessary to present fairly the financial
position as of March 31, 2003 and the results of operations and its cash flows
for the periods ended March 31, 2003 and 2002. Information included in the
Balance Sheet at December 31, 2002, has been derived from the Company's audited,
restated financial statements for the year ended December 31, 2002. Certain
reclassifications of prior period data have been made to conform with current
presentation.
Note 2 - Capitalization
Common Stock - During the three months ended March 31, 2003, there were 43,042
common shares ($0.9 million) issued under the Company's Dividend Reinvestment
and Common Stock Purchase Plan. The increase in participation in this Plan can
be attributed to the 5% discount on optional cash payments and reinvested
dividends that began on February 28, 2003. The discount is scheduled to continue
until the earlier of September 2, 2003 or when 150,000 shares are issued during
the discount period.
Long-term Debt - Tidewater received approval from the Delaware Public Service
Commission (PSC) to borrow $13.8 million to fund a portion of its multi-year
capital program and refinance some its short-term debt. Subsequent to the PSC
approval, in April 2003, Tidewater closed on a Delaware State Revolving Fund
(SRF) loan of $3.3 million. The Delaware SRF program will allow, but does not
obligate, Tidewater to draw down against a General Obligation Note for six
specific projects. Tidewater will be charged an annual fee, which is a
combination of interest charges and administrative fees, of 3.60% on the
outstanding principal amount. All unpaid principal and fees must be paid on or
before May 1, 2025. Tidewater is in the process of completing a loan transaction
of $10.5 million with CoBank, a financial institution specializing in loans to
rural utilities. Terms of the loan include a maximum loan life of twenty-five
years with monthly principal payments. The proceeds will be used to retire
short-term debt. The CoBank loan is expected to close in May 2003.
-6-
Note 3 - 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.
(In Thousands Except for per Share Amounts)
Three Months Ended Twelve Months Ended
March 31 March 31
2003 2002 2003 2002
Basic: Income Shares Income Shares Income Shares Income Shares
- -----------------------------------------------------------------------------------------------------------------
Net Income $1,225 7,784 $1,277 7,640 $7,714 7,746 $7,346 7,613
Preferred Dividend (64) (64) (255) (255)
------ ----- ------ ----- ------ ----- ------ -----
Earnings Applicable
to Common Stock $1,161 7,784 $1,213 7,640 $7,459 7,746 $7,091 7,613
Basic EPS $ 0.15 $ 0.16 $ 0.96 $ 0.93
Diluted:
- -----------------------------------------------------------------------------------------------------------------
Earnings Applicable
to Common Stock $1,161 7,784 $1,213 7,640 $7,459 7,746 $7,091 7,613
$7.00 Series Dividend 26 134 26 134 104 134 104 134
$8.00 Series Dividend 24 123 24 123 96 123 96 123
------ ----- ------ ----- ------ ----- ------ -----
Adjusted Earnings
Applicable to
Common Stock $1,211 8,041 $1,263 7,897 $7,659 8,003 $7,291 7,870
Diluted EPS $ 0.15 $ 0.16 $ 0.96 $ 0.93
Note 4 - 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
and private water and wastewater systems in New Jersey and Delaware. The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies in the consolidated notes to the
financial statements included in the Form 10-K. Inter-segment transactions
relating to operational costs are treated as pass through expenses. Finance
charges on inter-segment loan activities are based on interest rates that are
below what would normally be charged by a third party lender.
-7-
(Thousands of Dollars)
Three Months Ended Twelve Months Ended
March 31, March 31,
Operations by Segments: 2003 2002 2003 2002
- ----------------------------------------------------------------------------------------------------
Revenues:
Regulated $ 12,949 $ 12,527 $ 54,820 $ 53,412
Non - Regulated 2,044 1,711 7,909 7,347
Inter-segment Elimination (12) (9) (44) (36)
-----------------------------------------------------
Consolidated Revenues $ 14,981 $ 14,229 $ 62,685 $ 60,723
-----------------------------------------------------
Operating Income:
Regulated $ 2,273 $ 2,456 $ 11,849 $ 11,527
Non - Regulated 103 56 482 407
Inter-segment Elimination -- -- -- --
-----------------------------------------------------
Consolidated Operating Income $ 2,376 $ 2,512 $ 12,331 $ 11,934
-----------------------------------------------------
Depreciation:
Regulated $ 1,270 $ 1,287 $ 4,908 $ 5,046
Non - Regulated 10 9 40 51
Inter-segment Elimination -- -- -- --
-----------------------------------------------------
Consolidated Depreciation $ 1,280 $ 1,296 $ 4,948 $ 5,097
-----------------------------------------------------
Other Income:
Regulated $ 610 $ 422 $ 2,964 $ 1,959
Non - Regulated -- 34 (12) 46
Inter-segment Elimination (517) (358) (2,515) (1,492)
-----------------------------------------------------
Consolidated Other Income $ 93 $ 98 $ 437 $ 513
-----------------------------------------------------
Interest Expense:
Regulated $ 1,550 $ 1,581 $ 6,252 $ 6,006
Non - Regulated 15 13 56 55
Inter-segment Elimination (321) (261) (1,254) (960)
-----------------------------------------------------
Consolidated Interest Expense $ 1,244 $ 1,333 $ 5,054 $ 5,101
-----------------------------------------------------
Net Income:
Regulated $ 1,333 $ 1,298 $ 8,558 $ 7,481
Non - Regulated 88 76 416 397
Inter-segment Elimination (196) (97) (1,260) (532)
-----------------------------------------------------
Consolidated Net Income $ 1,225 $ 1,277 $ 7,714 $ 7,346
-----------------------------------------------------
Capital Expenditures:
Regulated $ 3,471 $ 3,760 $ 15,771 $ 15,161
Non - Regulated 326 44 711 107
Inter-segment Elimination -- -- -- --
-----------------------------------------------------
Total Capital Expenditures $ 3,797 $ 3,804 $ 16,482 $ 15,268
-----------------------------------------------------
As of As of
March 31, December 31,
2003 2002
--------- -----------
Assets:
Regulated $ 284,482 $ 280,655
Non - Regulated 4,163 4,093
Inter-segment Elimination (40,641) (40,144)
-----------------------------------------------------
Consolidated Assets $ 248,004 $ 244,604
-----------------------------------------------------
-8-
Note 5 - Commitments and Contingent Liabilities
Litigation - A claim is pending against the Company for damages in excess of
$10.0 million involving the break of both a Company water line and an
underground electric power cable in close proximity to it. The power cable
contained both electric lines and petroleum based insulating fluid. The Company
is insured for damages except for damages resulting from pollution discharge,
which the Company is advised is approximately $0.2 million. Causation and
liability have not been established. Management is unable to determine the
outcome of the litigation and its impact on the financial conditions or results
of operations.
A claim is pending involving a construction subcontractor, the Company's general
contractor and the Company concerning a major construction project. The dispute
relates to work required to be performed under a construction contract and
related subcontracts and includes payment issues and timing/delay issues. The
matter was instituted in 2001 and is pending in Superior Court, Middlesex
County, New Jersey. The full amount at issue is not fully known at this stage of
the litigation. At this time, management is unable to determine the impact, if
any, on the financial statements.
Note 6 - Restatement of Condensed Consolidated Financial Statements
The condensed consolidated financial statements as of March 31, 2003 and
December 31, 2002 and for the three and twelve month periods ended March 31,
2003 and 2002 have been restated to correct the classification of certain
amounts. The reclassifications were made to present the amount of Restricted
Cash as a non current asset rather than a current asset in the condensed
consolidated balance sheets at March 31, 2003 and December 31, 2002, and to
present changes in Restricted Cash related to capital expenditures as an
investing activity rather than a financing activity in the condensed
consolidated statements of cash flows for the three and twelve month periods
ended March 31, 2003 and 2002. Previously, such amounts and changes in amounts
therein were presented as Temporary Cash Investments - Restricted. Those amounts
and changes in those amounts are currently described as Restricted Cash. The
restatement had no effect on reported total assets, net income, earnings
applicable to common stock, cash flows from operations or liquidity.
A summary of the effects of the restatement is as follows:
March 31, March 31, December 31, December 31,
CONDENSED CONSOLIDATED BALANCE SHEETS 2003 2003 2002 2002
- ------------------------------------------------------------------------------------------------------------------------------------
As As
Previously As Previously As
Current Assets: Reported Restated Reported Restated
- ------------------------------------------------------------------------------------------------------------------------------------
Temporary Cash Investments - Restricted $ 5,396,206 $ -- $ 6,146,699 $ --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Current Assets $20,871,188 $15,474,982 $20,299,715 $14,153,016
- ------------------------------------------------------------------------------------------------------------------------------------
Deferred Charges and Other Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Restricted Cash $ -- $ 5,396,206 $ -- $ 6,146,699
- ------------------------------------------------------------------------------------------------------------------------------------
Total Deferred Charges and Other Assets $13,159,248 $18,555,454 $12,936,621 $19,083,320
- ------------------------------------------------------------------------------------------------------------------------------------
Three Three Three Three
CONDENSED CONSOLIDATED STATEMENTS OF Months Ended Months Ended Months Ended Months Ended
CASH FLOWS March 31, 2003 March 31, 2003 March 31, 2002 March 31, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
As As
Previously As Previously As
Cash Flows From Investing Activities: Reported Restated Reported Restated
- ------------------------------------------------------------------------------------------------------------------------------------
Restricted Cash $ -- $ 750,349 $ -- $ 1,179,098
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities: $ (4,129,181) $ (3,378,832) $ (3,776,454) $ (2,597,356)
- ------------------------------------------------------------------------------------------------------------------------------------
Three Three Three Three
Months Ended Months Ended Months Ended Months Ended
March 31, 2003 March 31, 2003 March 31, 2002 March 31, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
As As
Previously As Previously As
Cash Flows From Financing Activities: Reported Restated Reported Restated
- ------------------------------------------------------------------------------------------------------------------------------------
Temporary Cash Investments - Restricted $ 750,493 $ -- $ 1,179,098 $ --
- ------------------------------------------------------------------------------------------------------------------------------------
Restricted Cash $ -- $ 144 $ -- $ --
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Financing
Activities: $ 1,099,411 $ 349,062 $ (1,929,598) $ (3,108,696)
- ------------------------------------------------------------------------------------------------------------------------------------
-9-
Twelve Twelve Twelve Twelve
Months Ended Months Ended Months Ended Months Ended
March 31, 2003 March 31, 2003 March 31, 2002 March 31, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
As As
Previously As Previously As
Cash Flows From Investing Activities: Reported Restated Reported Restated
- ------------------------------------------------------------------------------------------------------------------------------------
Restricted Cash $ -- $ 2,415,247 $ -- $ (5,428,402)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities: $ (16,967,726) $ (14,552,479) $ (14,699,698) $ (20,128,100)
- ------------------------------------------------------------------------------------------------------------------------------------
Twelve Twelve Twelve Twelve
Months Ended Months Ended Months Ended Months Ended
March 31, 2003 March 31, 2003 March 31, 2002 March 31, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
As As
Previously As Previously As
Cash Flows From Financing Activities: Reported Restated Reported Restated
- ------------------------------------------------------------------------------------------------------------------------------------
Temporary Cash Investments - Restricted $ 2,634,979 $ -- $ (5,428,735) $ --
- ------------------------------------------------------------------------------------------------------------------------------------
Restricted Cash $ -- $ 219,732 $ -- $ (333)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided By Financing Activities: $ 6,950,074 $ 4,534,827 $ 324,466 $ 5,752,868
- ------------------------------------------------------------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The condensed consolidated financial statements as of March 31, 2003 and
December 31, 2002 and for the three and twelve month periods ended March 31,
2003 and 2002, included in this Quarterly Report on Form 10-Q/A have been
restated as discussed in Note 6 to the condensed consolidated financial
statements. For purposes of this Form 10-Q/A, and in accordance with Rule 12b-15
under the Securities Exchange Act of 1934, as amended, each item of the Form
10-Q for the quarter ended March 31, 2003 as originally filed on May 12, 2003
that was affected by the restatement has been amended to the extent affected and
restated in its entirety. NO ATTEMPT HAS BEEN MADE IN THIS FORM 10-Q/A TO MODIFY
OR UPDATE OTHER DISCLOSURES AS PRESENTED IN THE ORIGINAL FORM 10-Q, EXCEPT FOR
UPDATES MADE TO PART I, ITEM 4, PART II ITEM 6(a)AND EXHIBITS 31, 31.2, 32 AND
32.1.
Results of Operations - Three Months Ended March 31, 2003
Operating revenues for the three months ended March 31, 2003 were up $0.8
million or 5.3% from the same period in 2002. Higher base rates in Delaware
service territories provided $0.1 million of the increase along with $0.2
million increase in consumption and connection fees. Consumption increased by
$0.2 million in our New Jersey systems. Service fees from our operations and
maintenance contracts rose $0.3 million due to an increase in fees under the
City of Perth Amboy contract.
Operating expenses increased $0.9 million or 7.6%. Operations and maintenance (O
& M) expenses increased $0.9 million or 11.6% over the prior period. There were
higher sewer costs of $0.3 million for USA-PA. Costs relating to main breaks
resulting from severe winter weather conditions in the first quarter of 2003
contributed to additional O & M expenses of $0.3 million. Increases in audit
fees, legal fees and employee benefits pushed up O & M costs by $0.2 million.
All other costs of operations increased by $0.1 million.
Income taxes decreased $0.1 million or 10.4%, reflecting a lower amount of
current taxable income.
-10-
Even though there is a higher level of long-term and short-term debt outstanding
compared to last year, lower interest rates on short-term debt and the
refinancing of $6.0 million of long-term debt at a lower rate helped to reduce
the interest expense by $0.1 million of 6.7%.
Net income decreased by 4.1% to $1.2 million and basic and diluted earnings per
share decreased to $0.15 from $0.16 per share.
Results of Operations - Twelve Months Ended March 31, 2003
Operating revenues for the twelve months ended March 31, 2003 were up $2.0
million to $62.7 million amounting to a 3.2% increase. Higher consumption in
Delaware of $1.4 million contributed to additional revenue. Fueling the
consumption growth in Delaware was the 10.0% increase in the customer base since
March 2002. Rate increases accounted for $0.5 million and increased consumption
account for $0.9 million. Service fees from our operations and maintenance
contracts rose $0.5 million due to an increase in fees earned under the City of
Perth Amboy contract. Lower consumption in our New Jersey service territories
led to a $0.2 million decrease in operating revenues. The $0.3 million balance
of the increase is the result of the acquisition of the Southern Shores water
utility.
Operating expenses increased $1.6 million or 3.2%. Operations and maintenance
expenses increased $1.7 million or 5.4%. There were higher sewer costs of $0.5
million for USA-PA. Costs relating to main breaks resulting from severe winter
weather conditions in the first quarter of 2003 contributed to additional O & M
expenses of $0.3 million. Increased labor and operating costs associated with
the increased consumption in the Delaware operations amounted to $0.5 million.
Increases in audit fees and employee benefits pushed up O & M costs by $0.4
million.
Other taxes increased by $0.1 million due to higher payroll related taxes.
Income taxes decreased $0.1 million or 1.8%.
Net income increased 5.0% to $7.7 million. Basic and diluted earnings per share
increased by 3.2% to $0.96 per share.
Capital Resources
The Company's capital program for 2003 is estimated to be $30.5 million and
includes $17.9 million for water system additions and improvements for our
Delaware systems, $3.0 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 143 miles of unlined mains in the 730
mile Middlesex System. Additional expenditures on the upgrade to the CJO Plant
are estimated at $2.3 million. The capital program also includes $7.3 million
for scheduled upgrades to our existing systems in New Jersey. The scheduled
upgrades consist of $0.8 million for mains, $0.9 million for service lines, $0.3
million for meters, $0.3 million for hydrants,$1.2 million for distribution
system improvements, $0.1 million for computer systems and $3.7 million for
various other items.
Liquidity
The capital program in Delaware will be financed through a combination of a
capital contribution and short-term debt financing from Middlesex, as well as
long-term financing through the State Revolving Fund (SRF) in Delaware.
Middlesex, Tidewater and Bayview each have secured long-term financing with
their respective state agencies for certain capital projects. SRF provides low
cost financing for projects that meet certain water quality improvement
benchmarks. The proceeds from those loans will be used in 2003 through 2005. See
Note
-11-
2 to the Condensed Consolidated Financial Statements. 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 $3.8 million have been incurred in the three months ended March
31, 2003. The Company will also utilize short-term borrowings through $30.0
million of available lines of credit it has with three commercial banks for
working capital purposes. At March 31, 2003, there was $18.5 million outstanding
against the lines of credit.
Forward-Looking Information
Certain matters discussed in this report on Form 10-Q/A 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, objectives, expectations and events concerning various
matters such as capital expenditures, earnings, litigation, growth potential,
rate and other regulatory matters, liquidity, 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.
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 $0.5 million of the current portion of six 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.
Item 4. Controls and Procedures
Subsequent to the evaluation referenced in Middlesex Water Company's Quarterly
report on Form 10-Q filed May 14, 2003, the Company has re-evaluated the
effectiveness of the design and operation of its disclosure controls and
procedures. This evaluation was carried out under the supervision and with the
participation of the Company's management, including the Company's Chief
Executive Officer and the Chief Financial Officer. Based upon the re-evaluation,
the Company's Chief Executive Officer and the Chief Financial Officer concluded
that the Company's disclosure controls and procedures were effective as of the
end of the period covered by this Report. There have been no significant changes
in the Company's internal controls or in other factors which could significantly
affect internal controls subsequent to the date the Company carried out its
re-evaluation except for the following change in internal controls over
financial reporting.
Management has identified a significant deficiency in the operation of internal
controls over financial reporting relating to the classification of cash
restricted for construction projects on the Consolidated Balance Sheet and the
change in cash restricted for construction projects on the Consolidated
Statements of Cash Flows. As a result thereof, management has expanded its
periodic review process of asset classification and the appropriate presentation
of changes in such assets to enhance the reliability and effectiveness of the
financial reporting process.
-12-
Based upon the foregoing, the Company's Chief Executive Officer and Chief
Financial Officer have concluded that the Company's internal controls over
financial reporting are effective in meeting the objectives as described below
based on the aforementioned changes in internal controls.
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in Company reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in Company reports filed under the Exchange Act is
accumulated and communicated to management, including the Company's Chief
Executive Officer and Chief Financial Officer as appropriate, to allow timely
decisions regarding disclosure.
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: Exhibit 31: Section 302 Certification by Dennis G.
Sullivan Pursuant to Rules 13a-14 and
15d-14 of the Securities Exchange Act of
1934
Exhibit 31.1: Section 302 Certification by A. Bruce
O'Connor Pursuant to Rules 13a-14 and
15d-14 of the Securities Exchange Act of
1934.
Exhibit 32: Section 906 Certification by Dennis G.
Sullivan Pursuant to 18 U.S.C. ss.1350
Exhibit 32.1: Section 906 Certification by A. Bruce
O'Connor Pursuant to 18 U.S.C. ss.1350
(b) Reports on Form 8-K: Filed April 30, 2003
-13-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MIDDLESEX WATER COMPANY
By: /s/ A. Bruce O'Connor
--------------------------------
A. Bruce O'Connor
Vice President and Controller
and Chief Financial Officer
-14-
Exhibit 31
SECTION 302 CERTIFICATION PURSUANT TO RULES 13a-14
AND 15d-14 OF THE SECURITIES EXCHANGE ACT OF 1934
I, Dennis G. Sullivan, certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of Middlesex Water
Company;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have;
a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b) (Omitted pursuant to SEC Release No. 33-8238)
c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
d) Disclosed in this report any changes in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant's
auditors and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; and
b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
/s/ Dennis G. Sullivan
----------------------
Dennis G. Sullivan
Chief Executive Officer
Date: April 13, 2004
Exhibit 31.1
SECTION 302 CERTIFICATION PURSUANT TO RULES 13a-14
AND 15d-14 OF THE SECURITIES EXCHANGE ACT OF 1934
I, A. Bruce O'Connor, certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of Middlesex Water
Company;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have;
a. Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b. (Omitted pursuant to SEC Release No. 33-8238)
c. Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
d. Disclosed in this report any changes in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant's
auditors and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; and
b. Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
/s/ A. Bruce O'Connor
---------------------
A. Bruce O'Connor
Chief Financial Officer
Date: April 13, 2004
Exhibit 32
SECTION 906 CERTIFICATION PURSUANT TO 18 U.S.C.ss.1350
I, Dennis G. Sullivan, hereby certify that, to the best of my knowledge,
the periodic report being filed herewith containing financial statements fully
complies with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) and that information contained
in said periodic report fairly presents, in all material respects, the financial
condition and results of operations of Middlesex Water Company for the period
covered by said periodic report.
/s/ Dennis G. Sullivan
----------------------------
Dennis G. Sullivan
Chief Executive Officer
Date: April 13, 2004
Exhibit 32.1
SECTION 906 CERTIFICATION PURSUANT TO 18 U.S.C.ss.1350
I, A. Bruce O'Connor, hereby certify that, to the best of my knowledge, the
periodic report being filed herewith containing financial statements fully
complies with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) and that information contained
in said periodic report fairly presents, in all material respects, the financial
condition and results of operations of Middlesex Water Company for the period
covered by said periodic report.
/s/ A. Bruce O'Connor
---------------------------
A. Bruce O'Connor
Chief Financial Officer
Date: April 13, 2004