FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-493
CONSUMERS WATER COMPANY
(Exact name of registrant as specified in its Charter)
Maine 01-0049450
(State or other jurisdiction of(I.R.S. Employer Identi-
incorporation or organization) identification number)
Three Canal Plaza, Portland, ME 04101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (207) 773-6438
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 Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
The number of common shares of Consumers Water Company
outstanding as of April 28, 1995, was 8,337,880.
CONSUMERS WATER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
PART I ITEM I
March 31, December 31,
1995 1994
----------------------
(Unaudited)
ASSETS
Property, Plant and
Equipment, at cost:
Water utility plant,
in service $398,965 $395,900
Less: Accumulated
depreciation 71,130 69,148
-----------------------
327,835 326,752
-----------------------
Other subsidiaries 2,061 1,947
Less: Accumulated
depreciation 1,186 1,119
-----------------------
875 828
-----------------------
Construction work in
progress 25,392 21,674
Net property, plant and -----------------------
equipment 354,102 349,254
-----------------------
Investments, at cost 1,986 1,984
-----------------------
Current Assets:
Cash and cash equivalents 1,835 2,906
Accounts receivable, net of
reserves of $751 in
1995 and $682 in 1994 9,944 10,465
Unbilled revenue 8,499 8,966
Inventories 2,244 2,258
Prepayments and other 5,261 6,116
----------------------
Total current assets 27,783 30,711
----------------------
Other Assets:
Funds restricted for
construction activity 1,403 2,503
Deferred charges and other
assets 16,828 16,928
----------------------
18,231 19,431
----------------------
$ 402,102 $ 401,380
======== ========
See attached notes.
CONSUMERS WATER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands Except Per Share Amounts)
PART I ITEM I
March 31, December 31,
1995 1994
-------------------------
(Unaudited)
SHAREHOLDERS' INVESTMENT
AND LIABILITIES
Capitalization:
Common Stock, $1 par value
Authorized: 15,000,000
shares Issued: 8,331,686
shares in 1995 and
8,259,685 in 1994 $ 8,332 $ 8,260
Amounts in excess of par
value 69,211 68,084
Reinvested earnings 26,156 24,584
-----------------------
Common shareholders'
investment $103,699 $100,928
-----------------------
Preferred shareholders'
investment 1,069 1,069
Minority interest 2,248 2,218
Long-term debt 129,500 130,038
-----------------------
Total capitalization 236,516 234,253
-----------------------
Contributions in Aid of
Construction 62,370 61,576
-----------------------
Current Liabilities:
Notes payable 31,935 27,306
Sinking fund requirements
and current maturities 909 2,510
Accounts payable 3,688 5,916
Accrued taxes 5,814 6,496
Accrued interest 3,243 3,435
Accrued expenses and other 9,550 12,352
----------------------
Total current liabilities 55,139 58,015
----------------------
Commitments and Contingencies
Deferred Credits:
Customers' advances for
construction 21,848 21,917
Deferred income taxes 21,283 20,613
Unamortized investment tax
credits 4,946 5,006
----------------------
$ 48,077 $ 47,536
----------------------
$402,102 $401,380
======================
Book Value Per Share of
Common Stock $ 12.45 $ 12.22
=====================
See attached notes.
CONSUMERS WATER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Amounts)
(Unaudited)
PART I ITEM I
Three Months Ended
March 31, March 31,
1995 1994
--------------------------
Revenue and Sales:
Water utility operations $19,665 $18,245
Other operations 2,865 2,571
--------------------
Operating revenue 22,530 20,816
--------------------
Costs and Expenses:
Water utility operations 14,639 14,124
Other operations 3,207 2,703
--------------------
Operating expenses 17,846 16,827
--------------------
Operating Income 4,684 3,989
--------------------
Other Income and (Expense):
Interest expense (3,423) (2,937)
Construction interest
capitalized 342 419
Preferred dividends and minority
interest of subsidiaries ( 33) ( 25)
Other net 242 144
-------------------
(2,872) (2,399)
-------------------
Earnings before Income Taxes and Gains from
Sales of Properties 1,812 1,590
Income Taxes 580 459
-------------------
Earnings:
Before Gains from Sales of
Properties 1,232 1,131
Gains from Sales of Properties 363 -
-------------------
Net Income $1,595 $1,131
===================
Weighted Average Shares
Outstanding #8,296 #8,084
Earnings per Common Share:
Before Gains from Sales $ 0.15 $ 0.14
===================
Total $ 0.19 $ 0.14
===================
Dividends Declared per Common
Share $ - $ 0.29
===================
See attached notes.
CONSUMERS WATER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(In Thousands)
(Unaudited)
PART I ITEM I
Three Months Ended
March 31, March 31,
1995 1994
----------------------
Operating Activities:
Net income $ 1,595 $ 1,131
Adjustments to reconcile net ---------------------
income to net cash provided
by operating activities:
Depreciation and amortization 2,626 2,156
Deferred income taxes and
investment tax credits 376 508
Gains on sales of properties (363) -
Change in assets and liabilities:
Decrease in accounts receivable
and unbilled revenue 988 200
(Increase) decrease in
inventories 14 (194)
Decrease in prepaid expenses 855 1,895
Decrease in accounts payable and
accrued expenses (1,952) (3,744)
Change in other assets, net of
change in other liabilities (1,340) ( 746)
Change in other assets, net of
change in other liabilities
of discontinued operations - ( 37)
--------------------
Net cash provided by operating
activities 2,799 1,169
--------------------
Investing activities:
Capital expenditures ( 6,883) ( 5,850)
Decrease in funds restricted
for construction activity 1,100 1,341
Decrease in construction
accounts payable (1,511) (1,826)
Net proceeds from sales of
properties 1,522 -
--------------------
Net cash used in investing
activities ( 5,772) ( 6,335)
--------------------
Financing activities:
Net borrowing of short-term
debt 4,629 4,407
Proceeds from issuance of
long-term debt 32 -
Repayments of long-term debt (2,171) ( 706)
Proceeds from issuance of stock 1,202 1,240
Advances and contributions in
aid of construction, net of
repayments 673 254
Deferred taxes paid by developers
on advances and contributions
in aid of construction (4) (15)
Cash dividends paid (2,459) (2,355)
----------------------
Net cash provided by
financing activities 1,902 2,825
----------------------
Net decrease in cash and cash
equivalents (1,071) (2,341)
Cash and cash equivalents at
beginning of year 2,906 4,993
----------------------
Cash and cash equivalents at
end of period $ 1,835 $ 2,652
======================
Supplemental disclosures of cash flow
information from continuing operations:
Cash paid during the period for:
Interest (net of amounts
capitalized) $ 3,216 $ 2,968
Income taxes $ 38 $ 637
Non-cash investing and financing
activities for the year:
Property advanced or
contributed $ 52 $ -
See attached notes.
CONSUMERS WATER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
March 31, 1995
PART I ITEM 1
A. PREPARATION OF FINANCIAL STATEMENTS
The condensed financial statements included herein
have been prepared by the registrant, without audit, pursuant
to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance
with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations,
although the registrant believes that the disclosures which are
made are adequate to make the information presented not
misleading, particularly when read in conjunction with the
financial statements and notes thereto included in the
registrants' latest annual report on Form 10-K. In management's
opinion, the attached interim financial statements reflect all
adjustments which are necessary for a fair statement of the
results for the periods presented. All adjustments made were
of a normal and recurring nature.
B. EARNINGS PER SHARE
Earnings per common share are based on the weighted
average number of shares and common share equivalents actually
outstanding during the period. The effect of employee stock
options which are included as common share equivalents is to
increase the number of shares outstanding by 64 in 1995 and
1,665 in 1994.
C. DISPOSITIONS
In October, 1994, the Damariscotta Division of
Consumers Maine Water Company was taken by the local
communities by eminent domain for approximately $600,000 or 75%
of rate base. Consumers Maine Water challenged the purchase
price and in February, 1995, settled for a price of $1.5
million. The sale generated a gain of approximately $363,000
net of taxes. The Damariscotta Division had approximately 600
customers.
D. COMMITMENTS AND CONTINGENCIES
In March, 1993, an outside contractor spilled a
small amount of mercury while working at the Company's
subsidiary, Consumers Ohio Water's water treatment plant.
Several areas in and around the plant were contaminated by the
spill, although no mercury has contaminated Consumers Ohio
Water's water supply. The cleanup has been completed at a
total cost of approximately $900,000. Consumers Ohio Water
has received $100,000 from its insurer and is currently
seeking recovery of all the cleanup costs from the contractor.
While there can be no assurances to the ultimate outcome of
Consumers Ohio Water's efforts to obtain such recovery,
Management believes that it is probable that Consumers Ohio
Water will recover cleanup costs from the contractor and/or
the contractor's insurer and, therefore, has deferred the
costs incurred in connection with the spill.
CONSUMERS WATER COMPANY AND SUBSIDIARIES
March 31, 1995
PART I ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
The following discussion and analysis sets forth certain
factors relative to the Company's financial condition at
March 31, 1995 and the results of its operations for the
three months then ended as compared to the same period of
the prior year.
LIQUIDITY AND CAPITAL RESOURCES
CONSTRUCTION PROGRAM
Capital construction expenditures in the first quarter of
1995 totaled $6.2 million, net of contributions and advances,
substantially all of which relates to the Company's utility
subsidiaries. Projects include $1.0 million spent on a new
water treatment plant in Pennsylvania estimated to cost $16
million when completed in mid 1995 and many smaller projects
throughout the Company.
The Company expects capital expenditures for 1995 through
1997 to be approximately $103 million, net of contributions
and advances. Almost 29% of these expenditures are required
by the Safe Drinking Water Act (SDWA), the Clean Water Act
(CWA) and other regulations. The new $16 million treatment
plant and transmission main, which is under construction in
Pennsylvania, is required by State regulations under the SDWA.
The Company's water utility subsidiaries plan to file cases in
their respective jurisdictions for recovery of and return on
capital used to fund their capital expenditure programs.
Costs which have been prudently incurred in the judgement of
the appropriate public utility commission have been, and are
expected to continue to be, recognized in rate setting. To
support these capital expenditures over the next three years,
some subsidiaries will be required to file for large
percentage rate increases principally due to the significant
capital expenditures resulting from compliance with the SDWA
and the CWA. Given these large rate increases, Management
expects the current increased scrutiny of the rate requests
by the local public utility commissions to continue.
FINANCING AND CAPITALIZATION
The table below shows the cash generated and used by the
Company during the three months of 1995.
Cash was generated from:
Dollars in millions
Operations $ 4.3
Net increase in short-term debt 4.6
Common stock issued 1.2
Proceeds from sale of properties 1.5
Decrease in funds restricted for
construction 1.1
---------
Total Cash Generated $ 12.7
=========
Cash was used:
Capital expenditures, net of
Contributions and Advances $ (6.2)
Repay long-term debt (2.2)
Pay dividends (2.5)
Net change in working capital (1.4)
Other (1.5)
---------
Total Cash Used $ (13.8)
---------
Decrease in Cash $ (1.1)
=========
CONSUMERS WATER COMPANY AND SUBSIDIARIES
March 31, 1995
PART I ITEM 2
(continued..)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
Water utilities will require higher equity ratios to maintain
current debt ratings due to the recognition by Standard &
Poor's rating system of additional risk of the SDWA
requirements and the uncertainty of future regulatory treatment
of the cost of these requirements. This coupled with the size
of the 1995 through 1997 capital expenditure program makes it
likely that the Company will return to the equity market again
in the next three years. Any cash flow not provided through
a stock issuance will, as usual, be financed with short-term
lines of credit until the subsidiaries' short-term debt level
is high enough to warrant placement of long-term debt,
generally, in the $4-$6 million range. As of March 31, 1995,
the Company had unused lines of credit available of over $56
million. In addition to the short-term debt, the Company
plans to continue to use tax-exempt, long-term debt financing
in appropriate situations. The $16 million project in
Pennsylvania mentioned above is being financed in large part
with $14 million of 6.375% tax-exempt bonds issued on behalf
of Roaring Creek Water Company in October of 1993.
ACQUISITIONS AND DISPOSITIONS
Over the past five years, the Company has acquired seven water
systems. Although the Company currently has no material
acquisitions pending, management anticipates continuing the
acquisition policy of recent years.
In October, 1994, the Damariscotta Divison of Consumers Maine
Water Company was taken by the local communities by eminent
domain for approximately $600,000 or 75% of rate base.
Consumers Maine Water challenged the purchase price and in
February, 1995, settled for a price of $1.5 million. The sale
generated a gain of aproximately $363,000, net of taxes. The
Damariscotta Division had approximately 600 customers.
The Company has sold four divisions with customers totaling
approximately 15,000 under threat of eminent domain in the
last four years. The gain on these sales totaled almost $7
million. The Company is working with the local communities
in its service areas in an effort to prevent future eminent
domain proceedings.
OTHER
In March, 1993, an outside contractor spilled a small amount
of mercury while working at the Company's subsidiary,
Consumers Ohio Water's water treatment plant. Several areas
in and around the plant were contaminated by the spill,
although no mercury has contaminated Consumers Ohio Water's
water supply. The cleanup has been completed at a total cost
of approximately $900,000. Consumers Ohio Water has received
$100,000 from its insurer and is currently seeking recovery
of all the cleanup costs from the contractor. While there
can be no assurances to the ultimate outcome of Consumers
Ohio Water's efforts to obtain such recovery, Management
believes that it is probable that Consumers Ohio Water will
recover cleanup costs from the contractor and/or the
contractor's insurer and, therefore, has deferred the costs
incurred in connection with the spill.
RESULTS OF OPERATIONS
First Quarter 1995, Compared to First Quarter, 1994
UTILITY REVENUE
Utilities revenues increased $1,420,000 or 7.8% compared to
the first three months of 1994 primarily due to $1,292,000 in
rate increases. During 1995, the Company has had three rate
settlements for almost $2.1 million in annualized rate
increases. Currently, there are two rate cases pending in
which over almost $5.0 million in additional annual revenue is
sought. The Company's water utility subsidiaries plan to file
for eight additional cases in 1995, timed to seek recovery of
and return on funds used to finance its large capital
expenditure programs.
CONSUMERS WATER COMPANY AND SUBSIDIARIES
March 31, 1995
PART I ITEM 2
(continued..)
RESULTS OF OPERATIONS
First Quarter, 1995 Compared to First Quarter 1994 (cont.)
UTILITY OPERATING EXPENSES
Water utility operating expenses increased approximately
$515,000, or 3.6%. Increased depreciation and property
taxes due to increased plant balances are being partially
offset by lower labor expense. Labor expense is down due
to the mild winter in 1995 compared to 1994. Employees had
less overtime and have spent more time working on capital
projects in 1995. The Company's practice is to capitalize
labor associated with capital projects.
OTHER OPERATIONS - REVENUE AND EXPENSE
Other operating revenue increased by $294,000, or 11.4%
while other operating expenses are up $504,000, or 18.6%,
compared to the first quarter of 1994, primarily due to
reduced margins in meter installation work as Consumers
Applied Technologies, Inc. complete their contracts with
the City of New York. Consumers Applied Technologies,
Inc., formerly C/P Utility Services, was unsuccessful in
their bid for additional New York City meter installation
projects. As a result, revenues of other operations may
be down for the year ending December 31, 1995, as compared
to 1994. Management plans to shift Consumers Applied
Technologies' focus to higher margin technical and
engineering work to help compensate for the lost revenue.
OTHER
Interest expense is up $486,000 due to increased debt
balances and interest rates.
CONSUMERS WATER COMPANY AND SUBSIDIARIES
March 31, 1995
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule is submitted herewith as Exhibit 27.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter ended
March 31, 1995.
SIGNATURES
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 thereunto duly
authorized.
CONSUMERS WATER COMPANY
(Registrant)
05/08/95 /s/ Peter L. Haynes
- --------------------- -----------------------
Date Peter L. Haynes
Chief Executive Officer
05/08/95 /s/ John F. Isacke
- --------------------- ----------------------
Date John F. Isacke
Chief Financial Officer
CONSUMERS WATER COMPANY AND SUBSIDIARIES
March 31, 1995
PART II
Exhibit Index
27. Financial Data Schedule is submitted herewith as Exhibit 27.