FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 0-18595
E'TOWN CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey 22-2596330
(State of incorporation) (I.R.S. Employer Identification No.)
600 South Avenue
Westfield, New Jersey 07090
(Address of principal executive offices) (Zip)
Registrant's telephone number including area code: (908) 654-1234
Title of each class Name of each exchange on which registered
Common Stock, without par value New York Stock Exchange
Commission file number 0-628
ELIZABETHTOWN WATER COMPANY
(Exact name of registrant as specified in its charter)
New Jersey 22-1683171
(State of incorporation) (I.R.S. Employer Identification No.)
600 South Avenue
Westfield, New Jersey 07090
(Address of principal executive offices) (Zip)
Registrant's telephone number including area code: (908) 654-1234
Title of each class Name of each exchange on which registered
Common stock, without par value None
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
----- -----
Indicate the number of shares outstanding of each of the Registrant's classes
of Common Stock as of the latest practicable date.
Outstanding at
Class of Common Stock September 30, 1995
E'town Corporation
without par value 7,458,056
Elizabethtown Water Company
without par value * 1,974,902
* All shares are owned by E'town Corporation
E'TOWN CORPORATION
ELIZABETHTOWN WATER COMPANY
INDEX
_____
_______________________________________________________________________
PART I - FINANCIAL INFORMATION PAGE
______________________________ ____
Item 1. Financial Statements
E'TOWN CORPORATION AND SUBSIDIARIES
___________________________________
- Statements of Consolidated Income 1-3
- Consolidated Balance Sheets 4
- Statements of Consolidated Capitalization 6
- Statements of Consolidated Shareholders' Equity 7
- Statements of Consolidated Cash Flows 8-10
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
__________________________________________
- Statements of Consolidated Income 11-13
- Consolidated Balance Sheets 14
- Statements of Consolidated Capitalization 16
- Statements of Consolidated Shareholder's Equity 17
- Statements of Consolidated Cash Flows 18-20
E'TOWN CORPORATION AND SUBSIDIARIES AND
_______________________________________
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
__________________________________________
- Notes to Consolidated Financial Statements 21
Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations 26
PART II - OTHER INFORMATION
___________________________
Items 1 Legal Proceedings 34
Items 2 - 5 34
Item 6.(a) - Exhibits 34
(b) - Reports on Form 8-K 34
SIGNATURES 35
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
Three Months Ended
September 30,
1995 1994
____________ ___________
Operating Revenues $ 30,451,380 $ 27,369,703
____________ ____________
Operating Expenses:
Operation 11,484,544 10,499,101
Maintenance 1,537,768 1,635,510
Depreciation 2,253,330 1,975,572
Revenue taxes 3,842,174 3,479,035
Real estate, payroll and other taxes 714,961 641,008
Federal income taxes 2,746,002 2,225,605
____________ ____________
Total operating expenses 22,578,779 20,455,831
____________ ____________
Operating Income 7,872,601 6,913,872
____________ ____________
Other Income (Expense):
Litigation settlement 0 (932,203)
Allowance for equity funds used
during construction 690,238 316,282
Write-down of non-utility property
and other investments (Note 6) (112,328) (94,407)
Federal income taxes (244,074) 180,582
Other - net 156,934 179,203
____________ ____________
Total other income (expense) 490,770 (350,543)
____________ ____________
Total Operating and Other Income 8,363,371 6,563,329
____________ ____________
Interest Charges:
Interest on long-term debt 2,898,796 2,903,918
Other interest expense - net 639,748 10,986
Capitalized interest (618,583) (317,175)
Amortization of debt discount - net 89,493 89,493
____________ ____________
Total interest charges 3,009,454 2,687,222
____________ ____________
Income Before Preferred Stock Dividends
of Subsidiary 5,353,917 3,876,107
Preferred Stock Dividends 203,250 203,250
____________ ____________
Net Income $ 5,150,667 $ 3,672,857
____________ ____________
____________ ____________
Earnings Per Share of Common Stock:
Primary $ .69 $ .56
____________ ____________
____________ ____________
Fully Diluted $ .68 $ .56
____________ ____________
____________ ____________
Average Number of Shares Outstanding for
the Calculation of Earnings Per Share:
Primary 7,425,397 6,524,975
____________ ____________
____________ ____________
Fully Diluted 7,723,002 6,833,385
____________ ____________
____________ ____________
Dividends Paid Per Common Share $ .51 $ .51
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-1-
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
Nine Months Ended
September 30,
1995 1994
____________ ___________
Operating Revenues $ 82,727,164 $ 77,235,460
____________ ____________
Operating Expenses:
Operation 32,921,538 31,249,624
Maintenance 4,444,758 4,834,087
Depreciation 6,511,961 5,849,438
Revenue taxes 10,374,562 9,718,032
Real estate, payroll and other taxes 2,139,778 2,086,417
Federal income taxes 6,159,024 5,264,925
____________ ____________
Total operating expenses 62,551,621 59,002,523
____________ ____________
Operating Income 20,175,543 18,232,937
____________ ____________
Other Income (Expense):
Litigation settlement (932,203)
Allowance for equity funds used
during construction 2,059,203 650,563
Write-down of non-utility property
and other investments (Note 6) (330,521) (383,154)
Federal income taxes (742,712) 92,475
Other - net 430,842 392,800
____________ ____________
Total other income (expense) 1,416,812 (179,519)
____________ ____________
Total Operating and Other Income 21,592,355 18,053,418
____________ ____________
Interest Charges:
Interest on long-term debt 8,693,622 8,708,105
Other interest expense - net 1,592,062 15,060
Capitalized interest (1,912,065) (764,350)
Amortization of debt discount - net 268,479 264,568
____________ ____________
Total interest charges 8,642,098 8,223,383
____________ ____________
Income Before Preferred Stock Dividends
of Subsidiary 12,950,257 9,830,035
Preferred Stock Dividends 609,750 655,767
____________ ____________
Net Income $ 12,340,507 $ 9,174,268
____________ ____________
____________ ____________
Earnings Per Share of Common Stock:
Primary $ 1.77 $ 1.51
____________ ____________
____________ ____________
Fully Diluted $ 1.75 $ 1.50
____________ ____________
____________ ____________
Average Number of Shares Outstanding for
the Calculation of Earnings Per Share:
Primary 6,956,789 6,084,631
____________ ____________
____________ ____________
Fully Diluted 7,256,608 6,394,628
____________ ____________
____________ ____________
Dividends Paid Per Common Share $ 1.53 $ 1.53
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-2-
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
Twelve Months Ended
September 30,
1995 1994
____________ ___________
Operating Revenues $107,524,209 $101,284,584
____________ ____________
Operating Expenses:
Operation 43,045,756 41,772,323
Maintenance 6,234,443 6,204,924
Depreciation 8,522,703 7,687,633
Revenue taxes 13,404,691 12,664,108
Real estate, payroll and other taxes 2,840,107 2,691,037
Federal income taxes 7,662,986 6,738,417
____________ ____________
Total operating expenses 81,710,686 77,758,442
____________ ____________
Operating Income 25,813,523 23,526,142
____________ ____________
Other Income (Expense):
Litigation settlement (932,203)
Allowance for equity funds used
during construction 2,586,773 759,363
Write-down of non-utility property
and other investments (Note 6) (429,121) (476,378)
Federal income taxes (974,157) (5,961)
Other - net 670,920 610,432
____________ ____________
Total other income (expense) 1,854,415 (44,747)
____________ ____________
Total Operating and Other Income 27,667,938 23,481,395
____________ ____________
Interest Charges:
Interest on long-term debt 11,596,294 11,721,702
Other interest expense - net 2,047,040 23,750
Capitalized interest (2,395,381) (950,390)
Amortization of debt discount - net 357,973 334,964
____________ ____________
Total interest charges 11,605,926 11,130,026
____________ ____________
Income Before Preferred Stock Dividends
of Subsidiary 16,062,012 12,351,369
Preferred Stock Dividends 808,030 918,267
____________ ____________
Net Income $ 15,253,982 $ 11,433,102
____________ ____________
____________ ____________
Earnings Per Share of Common Stock:
Primary $ 2.22 $ 1.92
____________ ____________
____________ ____________
Fully Diluted $ 2.20 $ 1.91
____________ ____________
____________ ____________
Average Number of Shares Outstanding for
the Calculation of Earnings Per Share:
Primary 6,862,736 5,969,557
____________ ____________
____________ ____________
Fully Diluted 7,164,067 6,280,165
____________ ____________
____________ ____________
Dividends Paid Per Common Share $ 2.04 $ 2.04
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-3-
E'TOWN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
Assets 1995 1994
____________ ____________
Utility Plant-At Original Cost:
Utility plant in service $489,051,668 $469,172,575
Construction work in progress 90,213,830 55,739,951
____________ ____________
Total utility plant 579,265,498 524,912,526
Less accumulated depreciation and amortization 93,682,913 87,456,550
____________ ____________
Utility plant-net 485,582,585 437,455,976
____________ ____________
Non-utility Property and Other
Investments - Net (Note 6) 13,465,092 13,468,879
____________ ____________
Current Assets:
Cash and cash equivalents 1,750,630 4,254,708
Short-term investments 30,622 30,622
Customer and other accounts receivable
(less reserve: 1995, $456,181; 1994, $463,000) 16,240,736 12,346,871
Unbilled revenues 8,934,538 7,161,483
Materials and supplies-at average cost 1,547,180 1,724,969
Prepaid insurance, taxes, other 2,100,547 1,410,401
Prepaid federal income taxes 711,860
____________ ____________
Total current assets 30,604,253 27,640,914
____________ ____________
Deferred Charges:
Prepaid pension expense 628,147 871,181
Waste residual management 366,714 325,785
Unamortized debt and preferred stock expenses 9,173,658 9,490,208
Taxes recoverable through future rates 26,339,057 26,339,057
Postretirement benefit expense 2,587,906 2,077,051
Purchased water under recovery-net 46,530 314,128
Other unamortized expenses 2,013,360 997,286
____________ ____________
Total deferred charges 41,155,372 40,414,696
____________ ____________
Total $570,807,302 $518,980,465
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-4-
E'TOWN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
Capitalization and Liabilities 1995 1994
____________ ____________
Capitalization (Note 3):
Common shareholders' equity $176,218,759 $152,970,602
Cumulative preferred stock 12,000,000 12,000,000
Long-term debt - net 153,775,804 154,073,430
____________ ____________
Total capitalization 341,994,563 319,044,032
____________ ____________
Current Liabilities:
Notes payable - banks 55,000,000 23,000,000
Long-term debt - current portion 30,000 42,000
Accounts payable and other liabilities 11,845,761 18,249,580
Customers' deposits 299,535 278,895
Municipal and state taxes accrued 10,627,066 12,831,524
Federal income taxes accrued 1,737,154
Interest accrued 2,545,085 3,173,468
Preferred stock dividends accrued 59,000 59,000
____________ ____________
Total current liabilities 82,143,601 57,634,467
____________ ____________
Deferred Credits:
Customers' advances for construction 44,274,701 45,554,476
Federal income taxes 64,093,403 62,115,801
State income taxes 162,008 162,008
Unamortized investment tax credits 8,517,201 8,650,537
Accumulated postretirement benefits 2,883,149 2,100,628
Minority interest in joint venture 14,051
____________ ____________
Total deferred credits 119,944,513 118,583,450
____________ ____________
Contributions in Aid of Construction 26,724,625 23,718,516
____________ ____________
Commitments and Contingent Liabilities
(Note 8)
Total $570,807,302 $518,980,465
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-5-
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CAPITALIZATION
September 30, December 31,
1995 1994
___________ ___________
E'town Corporation:
Common Shareholders' Equity:
Common stock without par value, authorized,
15,000,000 shares; issued 1995, 7,483,932
shares; 1994, 6,624,663 shares $136,889,578 $114,136,195
Paid-in capital 1,315,025 1,315,025
Capital stock expense (5,111,289) (4,286,194)
Retained earnings 43,862,729 42,439,552
Less cost of treasury stock; 1995, 25,876
shares; 1994, 22,032 shares (737,284) (633,976)
____________ ____________
Total common shareholders' equity 176,218,759 152,970,602
____________ ____________
Elizabethtown Water Company:
Cumulative Preferred Stock:
$100 par value, authorized, 200,000
shares; $5.90 series, issued and
outstanding, 120,000 shares 12,000,000 12,000,000
____________ ____________
Cumulative Preferred Stock:
$25 par value, authorized, 500,000 shares;
none issued
Long-Term Debt:
E'town Corporation:
6 3/4% Convertible Subordinated Debentures,
due 2012 11,856,000 12,165,000
Elizabethtown Water Company:
7.20% Debentures, due 2019 10,000,000 10,000,000
7 1/2% Debentures, due 2020 15,000,000 15,000,000
6.60% Debentures, due 2021 10,500,000 10,500,000
6.70% Debentures, due 2021 15,000,000 15,000,000
8 3/4% Debentures, due 2021 27,500,000 27,500,000
8% Debentures, due 2022 15,000,000 15,000,000
7 1/4% Debentures, due 2028 50,000,000 50,000,000
The Mount Holly Water Company:
Notes Payable (due serially through 2000) 125,000 144,300
____________ ____________
Total long-term debt 154,981,000 155,309,300
Unamortized discount-net (1,205,196) (1,235,870)
____________ ____________
Total long-term debt-net 153,775,804 154,073,430
____________ ____________
Total capitalization $341,994,563 $319,044,032
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-6-
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
Nine Months Year
Ended Ended
September 30, December 31,
1995 1994
____________ ____________
Common Stock:
Balance at Beginning of Period $114,136,195 $ 87,842,657
Public sale of common stock (1995,
660,000 shares; 1994, 690,000 shares) 17,737,500 19,147,500
Common stock issued under Dividend
Reinvestment and Stock Purchase Plan
(1995, 183,700 shares; 1994, 273,159 shares) 4,610,364 7,146,038
Exercise of stock options (15,569 shares) 405,519
____________ ____________
Balance at End of Period 136,889,578 114,136,195
____________ ____________
Paid-in Capital: 1,315,025 1,315,025
____________ ____________
Capital Stock Expense:
Balance at Beginning of Period (4,286,194) (3,357,165)
Expenses incurred for the issuance and
sale of common stock (825,095) (929,029)
____________ ____________
Balance at End of Period (5,111,289) (4,286,194)
____________ ____________
Retained Earnings:
Balance at Beginning of Period 42,439,551 43,207,666
Net Income 12,340,507 12,087,743
Dividends on common stock (1995,
$1.53; 1994 $2.04) (10,917,329) (12,855,857)
____________ ____________
Balance at End of Period 43,862,729 42,439,552
____________ ____________
Treasury Stock: (633,976) (633,976)
Balance at Beginning of Period
Cost of shares redeemed to
exercise stock options (3,844 shares) (103,308)
____________ ____________
Balance at End of Period (737,284) (633,976)
____________ ____________
Total Common Shareholders' Equity $176,218,759 $152,970,602
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-7-
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
Three Months Ended
September 30,
1995 1994
___________ ___________
Cash Flows from Operating Activities:
Net Income $ 5,150,667 $ 3,672,857
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,253,330 1,975,572
Write-down of non-utility property and other
investments 112,328 94,407
Decrease (increase) in deferred charges 629,628 (480,686)
Deferred income taxes and investment tax
credits - net 616,033 594,009
Capitalized interest and AFUDC (1,308,821) (633,457)
Other operating activities-net 35,664 (25,816)
Change in current assets and current liabilities
excluding cash, short-term investments and
current portion of debt:
Customer and other accounts receivable (3,045,354) (540,632)
Unbilled revenues (601,008) 101,240
Accounts payable and other liabilities 1,718,181 2,506,837
Accrued/prepaid interest and taxes (3,882,435) (4,374,125)
Other 49,541 50,735
____________ ____________
Net cash provided by operating activities 1,727,754 2,940,941
____________ ____________
Cash Flows Provided by Financing Activities:
Decrease in funds held by Trustee for
construction expenditures (3)
Proceeds from issuance of common stock 1,873,230 2,186,421
Repayment of long-term debt (113,300) (114,500)
Contributions and advances for construction-net (479,150) 1,367,089
Net increase in notes payable - banks 21,000,000 4,000,000
Dividends paid on common stock (3,786,613) (3,327,962)
____________ ____________
Net cash provided by financing activities 18,494,167 4,111,045
____________ ____________
Cash Flows Used for Investing Activities:
Utility plant expenditures (excluding allowance
for funds used during construction) (20,927,950) (20,129,242)
Development costs of land (35,709) (34,624)
Net increase in short-term investments 17,012,000
____________ ____________
Cash used for investing activities (20,963,659) (3,151,866)
____________ ____________
Net (Decrease) Increase in Cash and Cash Equivalents (741,738) 3,900,120
Cash and Cash Equivalents at Beginning of Period 2,492,368 739,542
____________ ____________
Cash and Cash Equivalents at End of Period $ 1,750,630 $ 4,639,662
____________ ____________
____________ ____________
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 3,631,111 $ 3,328,399
Income taxes $ 1,750,000 $ 1,941,254
Preferred stock dividends $ 177,000 $ 177,000
See Notes to Consolidated Financial Statements.
-8-
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
Nine Months Ended
September 30,
1995 1994
___________ ___________
Cash Flows from Operating Activities:
Net Income $ 12,340,507 $ 9,174,268
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 6,511,961 5,849,438
Write-down of non-utility property and other
investments 330,521 383,154
Increase in deferred charges (229,821) (1,904,892)
Deferred income taxes and investment tax
credits - net 1,844,266 1,752,572
Capitalized interest and AFUDC (3,971,268) (1,414,913)
Other operating activities-net 320,178 (55,698)
Change in current assets and current liabilities
excluding cash, short-term investments and
current portion of debt:
Customer and other accounts receivable (3,893,865) (1,067,858)
Unbilled revenues (1,773,055) (767,113)
Accounts payable and other liabilities (6,395,179) 337,838
Accrued/prepaid interest and taxes (1,073,973) (3,347,039)
Other 177,789 (63,127)
____________ ____________
Net cash provided by operating activities 4,188,061 8,876,630
____________ ____________
Cash Flows Provided by Financing Activities:
Decrease in funds held by Trustee for
construction expenditures 381,975
Proceeds from issuance of common stock 21,824,980 24,191,568
Repayment of long-term debt (328,300) (229,500)
Contributions and advances for construction-net 1,726,334 2,812,153
Net increase in notes payable - banks 32,000,000 4,000,000
Dividends paid on common stock (10,917,329) (9,500,007)
____________ ____________
Net cash provided by financing activities 44,305,685 21,656,189
____________ ____________
Cash Flows Used for Investing Activities:
Utility plant expenditures (excluding allowance
for funds used during construction) (50,891,376) (33,155,907)
Development costs of land (106,448) (113,722)
____________ ____________
Cash used for investing activities (50,997,824) (33,269,629)
____________ ____________
Net Decrease in Cash and Cash Equivalents (2,504,078) (2,736,810)
Cash and Cash Equivalents at Beginning of Period 4,254,708 7,376,472
____________ ____________
Cash and Cash Equivalents at End of Period $ 1,750,630 $ 4,639,662
____________ ____________
____________ ____________
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 9,097,445 $ 8,223,509
Income taxes $ 2,805,000 $ 4,596,254
Preferred stock dividends $ 531,000 $ 628,475
See Notes to Consolidated Financial Statements.
-9-
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
Twelve Months Ended
September 30,
1995 1994
___________ ___________
Cash Flows from Operating Activities:
Net Income $ 15,253,982 $ 11,433,102
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 8,522,703 7,687,633
Write-down of non-utility property and other
investments 429,121 476,378
Gain on sale of land (1,685,521)
Decrease (increase) in deferred charges 624,973 (3,685,795)
Deferred income taxes and investment tax
credits - net 3,957,111 3,113,197
Capitalized interest and AFUDC (4,982,154) (1,709,753)
Other operating activities-net 444,281 (423,873)
Change in current assets and current liabilities
excluding cash, short-term investments and
current portion of debt:
Customer and other accounts receivable (3,141,464) 1,037,876
Unbilled revenues (919,103) 369,129
Accounts payable and other liabilities 1,873,906 1,632,705
Accrued/prepaid interest and taxes 1,190,873 (2,427,945)
Other 139,649 (35,105)
____________ ____________
Net cash provided by operating activities 23,393,878 15,782,028
____________ ____________
Cash Flows Provided by Financing Activities:
Decrease in funds held by Trustee for
construction expenditures 331 2,029,288
Proceeds from issuance of debentures 50,000,000
Proceeds from issuance of common stock 22,997,921 25,752,099
Repayment of long-term debt (472,800) (50,265,000)
Contributions and advances for construction-net 2,367,785 3,153,862
Net increase (decrease) in notes payable - banks 51,000,000 4,000,000
Dividends paid on common stock (14,303,357) (12,365,119)
____________ ____________
Net cash provided by financing activities 61,589,880 22,305,130
____________ ____________
Cash Flows Used for Investing Activities:
Utility plant expenditures (excluding allowance
for funds used during construction) (87,716,088) (44,235,401)
Development costs of land (156,702) (137,507)
Proceeds from sale of land 1,689,282
____________ ____________
Cash used for investing activities (87,872,790) (42,683,626)
____________ ____________
Net Decrease in Cash and Cash Equivalents (2,889,032) (4,596,468)
Cash and Cash Equivalents at Beginning of Period 4,639,662 9,236,130
____________ ____________
Cash and Cash Equivalents at End of Period $ 1,750,630 $ 4,639,662
____________ ____________
____________ ____________
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 11,290,652 $ 11,864,885
Income taxes $ 4,980,000 $ 6,990,813
Preferred stock dividends $ 708,000 $ 890,975
See Notes to Consolidated Financial Statements.
-10-
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED INCOME
Three Months Ended
September 30,
1995 1994
____________ ___________
Operating Revenues $ 30,451,380 $ 27,369,703
____________ ____________
Operating Expenses:
Operation 11,276,624 10,351,504
Maintenance 1,537,768 1,635,510
Depreciation 2,253,330 1,975,572
Revenue taxes 3,842,174 3,479,035
Real estate, payroll and other taxes 702,069 631,515
Federal income taxes 2,754,704 2,320,716
____________ ____________
Total operating expenses 22,366,669 20,393,852
____________ ____________
Operating Income 8,084,711 6,975,851
____________ ____________
Other Income (Expense):
Litigation settlement (932,203)
Allowance for equity funds used
during construction 690,238 316,282
Federal income taxes (277,735) 164,000
Other - net 103,289 133,568
____________ ____________
Total other income (expense) 515,792 (318,353)
____________ ____________
Total Operating and Other Income 8,600,503 6,657,498
____________ ____________
Interest Charges:
Interest on long-term debt 2,693,512 2,693,560
Other interest expense - net 648,538 10,987
Allowance for debt funds used
during construction (542,426) (220,867)
Amortization of debt discount - net 80,889 80,889
____________ ____________
Total interest charges 2,880,513 2,564,569
____________ ____________
Income Before Preferred Stock Dividends 5,719,990 4,092,929
Preferred Stock Dividends 203,250 203,250
____________ ____________
Earnings Applicable to Common Stock $ 5,516,740 $ 3,889,679
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-11-
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED INCOME
Nine Months Ended
September 30,
1995 1994
____________ ___________
Operating Revenues $ 82,727,164 $ 77,235,460
____________ ____________
Operating Expenses:
Operation 32,340,147 30,685,863
Maintenance 4,444,758 4,834,087
Depreciation 6,511,961 5,849,438
Revenue taxes 10,374,562 9,718,032
Real estate, payroll and other taxes 2,088,017 2,055,117
Federal income taxes 6,434,561 5,593,010
____________ ____________
Total operating expenses 62,194,006 58,735,547
____________ ____________
Operating Income 20,533,158 18,499,913
____________ ____________
Other Income:
Litigation settlement (932,203)
Allowance for equity funds used
during construction 2,059,203 650,563
Federal income taxes (829,576) (6,214)
Other - net 311,012 299,916
____________ ____________
Total other income 1,540,639 12,062
____________ ____________
Total Operating and Other Income 22,073,797 18,511,975
____________ ____________
Interest Charges:
Interest on long-term debt 8,080,633 8,080,451
Other interest expense - net 1,688,643 15,061
Allowance for debt funds used
during construction (1,687,991) (480,778)
Amortization of debt discount - net 242,667 238,756
____________ ____________
Total interest charges 8,323,952 7,853,490
____________ ____________
Income Before Preferred Stock Dividends 13,749,845 10,658,485
Preferred Stock Dividends 609,750 655,767
____________ ____________
Earnings Applicable to Common Stock $ 13,140,095 $ 10,002,718
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-12-
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED INCOME
Twelve Months Ended
September 30,
1995 1994
____________ ___________
Operating Revenues $107,524,209 $101,284,584
____________ ____________
Operating Expenses:
Operation 42,377,264 41,027,833
Maintenance 6,234,443 6,204,924
Depreciation 8,522,703 7,687,633
Revenue taxes 13,404,691 12,664,108
Real estate, payroll and other taxes 2,749,967 2,642,366
Federal income taxes 8,017,947 7,115,705
____________ ____________
Total operating expenses 81,307,015 77,342,569
____________ ____________
Operating Income 26,217,194 23,942,015
____________ ____________
Other Income:
Litigation settlement (932,203)
Allowance for equity funds used
during construction 2,586,773 759,363
Federal income taxes (1,060,961) (59,090)
Other - net 444,018 335,064
____________ ____________
Total other income 1,969,830 103,134
____________ ____________
Total Operating and Other Income 28,187,024 24,045,149
____________ ____________
Interest Charges:
Interest on long-term debt 10,774,190 10,882,318
Other interest expense - net 1,849,089 23,749
Allowance for debt funds used
during construction (2,074,314) (572,414)
Amortization of debt discount - net 323,557 300,548
____________ ____________
Total interest charges 10,872,522 10,634,201
____________ ____________
Income Before Preferred Stock Dividends 17,314,502 13,410,948
Preferred Stock Dividends 808,030 918,267
____________ ____________
Earnings Applicable to Common Stock $ 16,506,472 $ 12,492,681
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-13-
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
Assets 1995 1994
____________ ____________
Utility Plant - At Original Cost:
Utility plant in service $489,051,668 $469,172,575
Construction work in progress 90,213,830 55,739,951
____________ ____________
Total utility plant 579,265,498 524,912,526
Less accumulated depreciation and amortization 93,682,913 87,456,550
____________ ____________
Utility plant - net 485,582,585 437,455,976
____________ ____________
Non-utility Property 83,964 85,690
____________ ____________
Current Assets:
Cash and cash equivalents 1,121,580 1,485,115
Customer and other accounts receivable
(less reserve: 1995, $456,181; 1994, $463,000) 16,141,747 12,350,802
Unbilled revenues 8,934,538 7,161,483
Materials and supplies-at average cost 1,547,180 1,724,969
Prepaid insurance, taxes, other 2,100,547 1,410,401
Prepaid federal income taxes 1,344,630
____________ ____________
Total current assets 29,845,592 25,477,400
____________ ____________
Deferred Charges:
Prepaid pension expense 693,916 926,142
Waste residual management 366,714 325,785
Unamortized debt and preferred stock expenses 8,611,533 8,902,271
Taxes recoverable through future rates 26,339,057 26,339,057
Postretirement benefit expense 2,587,906 2,077,051
Purchased water under recovery-net 46,530 314,128
Other unamortized expenses 1,828,513 944,414
____________ ____________
Total deferred charges 40,474,169 39,828,848
____________ ____________
Total $555,986,310 $502,847,914
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-14-
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
Capitalization and Liabilities 1995 1994
____________ ____________
Capitalization (Note 3):
Common shareholder's equity $175,326,154 $151,624,255
Cumulative preferred stock 12,000,000 12,000,000
Long-term debt - net 141,919,804 141,908,430
____________ ____________
Total capitalization 329,245,958 305,532,685
____________ ____________
Current Liabilities:
Notes payable - banks 55,000,000 23,000,000
Long-term debt - current portion 30,000 42,000
Accounts payable and other liabilities 11,813,229 18,165,522
Customers' deposits 299,535 278,895
Municipal and state taxes accrued 10,628,828 12,831,524
Federal income taxes accrued 2,054,579
Interest accrued 2,403,481 2,828,464
Preferred stock dividends accrued 59,000 59,000
____________ ____________
Total current liabilities 82,288,652 57,205,405
____________ ____________
Deferred Credits:
Customers' advances for construction 44,274,701 45,554,476
Federal income taxes 62,086,904 60,109,244
Unamortized investment tax credits 8,517,201 8,650,537
Accumulated postretirement benefits 2,848,269 2,077,051
____________ ____________
Total deferred credits 117,727,075 116,391,308
____________ ____________
Contributions in Aid of Construction 26,724,625 23,718,516
____________ ____________
Commitments and Contingent Liabilities
(Note 8)
Total $555,986,310 $502,847,914
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-15-
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CAPITALIZATION
September 30, December 31,
1995 1994
___________ ____________
Common Shareholder's Equity:
Common stock without par value, authorized,
10,000,000 shares; issued 1995 and 1994,
1,974,902 shares $ 15,740,602 $ 15,740,602
Paid-in capital 110,347,767 88,868,632
Capital stock expense (484,702) (484,702)
Retained earnings 49,722,487 47,499,723
____________ ____________
Total common shareholder's equity 175,326,154 151,624,255
____________ ____________
Cumulative Preferred Stock:
$100 par value, authorized, 200,000
shares; $5.90 series, issued and
outstanding, 120,000 shares 12,000,000 12,000,000
____________ ___________
Cumulative Preferred Stock:
$25 par value, authorized, 500,000 shares;
none issued
Long-Term Debt:
Elizabethtown Water Company:
7.20% Debentures, due 2019 10,000,000 10,000,000
7 1/2% Debentures, due 2020 15,000,000 15,000,000
6.60% Debentures, due 2021 10,500,000 10,500,000
6.70% Debentures, due 2021 15,000,000 15,000,000
8 3/4% Debentures, due 2021 27,500,000 27,500,000
8% Debentures, due 2022 15,000,000 15,000,000
7 1/4% Debentures, due 2028 50,000,000 50,000,000
The Mount Holly Water Company:
Notes Payable (due serially through 2000) 125,000 144,300
____________ ____________
Total long-term debt 143,125,000 143,144,300
Unamortized discount - net (1,205,196) (1,235,870)
____________ ____________
Total long-term debt - net 141,919,804 141,908,430
____________ ____________
Total capitalization $329,245,958 $305,532,685
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-16-
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED SHAREHOLDER'S EQUITY
Nine Months Year
Ended Ended
September 30, December 31,
1995 1994
____________ ____________
Common Stock: $ 15,740,602 $ 15,740,602
____________ ____________
Paid-in Capital:
Balance at Beginning of Period 88,868,632 63,522,594
Capital contributed by parent company 21,479,135 25,346,038
____________ ____________
Balance at End of Period 110,347,767 88,868,632
____________ ____________
Capital Stock Expense: (484,702) (484,702)
____________ ____________
Retained Earnings:
Balance at Beginning of Period 47,499,721 46,986,485
Income Before Preferred Stock
Dividends 13,749,845 14,223,142
Dividends on Common Stock (10,917,329) (12,855,857)
Preferred Stock Dividends (609,750) (854,047)
____________ ____________
Balance at End of Period 49,722,487 47,499,723
____________ ____________
Total Common Shareholder's Equity $175,326,154 $151,624,255
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-17-
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CASH FLOWS
Three Months Ended
September 30,
1995 1994
___________ ___________
Cash Flows from Operating Activities:
Income Before Preferred Stock Dividends $ 5,719,990 $ 4,092,929
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,253,330 1,975,572
Decrease (increase) in deferred charges 610,792 (492,196)
Deferred income taxes and investment tax
credits - net 616,033 594,011
Allowance for debt and equity funds used
during construction (AFUDC) (1,232,664) (537,149)
Other operating activities-net 24,044 (21,489)
Change in current assets and current liabilities
excluding cash, short-term investments and
current portion of debt:
Customer and other accounts receivable (3,161,150) (783,967)
Unbilled revenues (601,008) 101,240
Accounts payable and other liabilities 1,732,261 2,632,000
Accrued/prepaid interest and taxes (3,748,873) (4,127,364)
Other 49,541 50,735
____________ ____________
Net cash provided by operating activities 2,262,296 3,484,322
____________ ____________
Cash Flows Provided by Financing Activities:
Decrease in funds held by Trustee for
construction expenditures (3)
Capital contributed by parent company 1,685,769 2,507,257
Repayment of long-term debt 1,700 (10,500)
Contributions and advances for construction-net (479,150) 1,367,089
Net increase in notes payable - banks 21,000,000 4,000,000
Dividends paid on common and preferred stock (3,963,613) (3,531,212)
____________ ____________
Net cash provided by financing activities 18,244,706 4,332,631
____________ ____________
Cash Flows Used for Investing Activities:
Utility plant expenditures (excluding allowance
for funds used during construction) (20,927,950) (20,129,242)
Increase in short-term investments 14,012,000
____________ ____________
Cash used for investing activities (20,927,950) (6,117,242)
____________ ____________
Net (Decrease) Increase in Cash and Cash Equivalents (420,948) 1,699,711
Cash and Cash Equivalents at Beginning of Period 1,542,528 673,803
____________ ____________
Cash and Cash Equivalents at End of Period $ 1,121,580 $ 2,373,514
____________ ____________
____________ ____________
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 3,303,056 $ 3,005,482
Income taxes $ 1,750,000 $ 1,941,254
Preferred stock dividends $ 177,000 $ 177,000
See Notes to Consolidated Financial Statements.
-18-
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CASH FLOWS
Nine Months Ended
September 30,
1995 1994
___________ ___________
Cash Flows from Operating Activities:
Income Before Preferred Stock Dividends $ 13,749,845 $ 10,658,485
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 6,511,961 5,849,438
Increase in deferred charges (134,466) (1,941,323)
Deferred income taxes and investment tax
credits - net 1,844,324 1,786,572
Allowance for debt and equity funds used
during construction (AFUDC) (3,747,194) (1,131,341)
Other operating activities-net 214,011 (59,770)
Change in current assets and current liabilities
excluding cash, short-term investments and
current portion of debt:
Customer and other accounts receivable (3,790,945) (532,029)
Unbilled revenues (1,773,055) (767,113)
Accounts payable and other liabilities (6,343,653) 347,608
Accrued/prepaid interest and taxes 81,384 (2,872,865)
Other 177,789 (63,127)
____________ ____________
Net cash provided by operating activities 6,790,001 11,274,535
____________ ____________
Cash Flows Provided by Financing Activities:
Decrease in funds held by Trustee for
construction expenditures 381,975
Capital contributed by parent company 21,479,135 23,984,576
Repayment of long-term debt (19,300) (31,500)
Contributions and advances for construction-net 1,726,334 2,812,153
Net increase (decrease) in notes payable - banks 32,000,000 4,000,000
Dividends paid on common and preferred stock (11,448,329) (10,155,774)
____________ ____________
Net cash provided by financing activities 43,737,840 20,991,430
____________ ____________
Cash Flows Used for Investing Activities:
Utility plant expenditures (excluding allowance
for funds used during construction) (50,891,376) (33,155,907)
____________ ____________
Cash used for investing activities (50,891,376) (33,155,907)
____________ ____________
Net Decrease in Cash and Cash Equivalents (363,535) (889,942)
Cash and Cash Equivalents at Beginning of Period 1,485,115 3,263,456
____________ ____________
Cash and Cash Equivalents at End of Period $ 1,121,580 $ 2,373,514
____________ ____________
____________ ____________
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 8,505,129 $ 7,807,654
Income taxes $ 2,805,000 $ 4,596,254
Preferred stock dividends $ 531,000 $ 628,475
See Notes to Consolidated Financial Statements.
-19-
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CASH FLOWS
Twelve Months Ended
September 30,
1995 1994
___________ ___________
Cash Flows from Operating Activities:
Income Before Preferred Stock Dividends $ 17,314,502 $ 13,410,948
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 8,522,703 7,687,633
Gain on sale of land (122,400)
Decrease (increase) in deferred charges 760,804 (3,733,648)
Deferred income taxes and investment tax
credits - net 4,314,286 3,283,498
Allowance for debt and equity funds used
during construction (AFUDC) (4,661,087) (1,331,777)
Other operating activities-net 142,879 (470,745)
Change in current assets and current liabilities
excluding cash, short-term investments and
current portion of debt:
Customer and other accounts receivable (3,721,733) 1,032,366
Unbilled revenues (919,103) 369,129
Accounts payable and other liabilities 1,856,765 1,638,890
Accrued/prepaid interest and taxes 1,489,462 (1,974,671)
Other 139,650 (35,105)
____________ ____________
Net cash provided by operating activities 25,239,128 19,754,118
____________ ____________
Cash Flows Provided by Financing Activities:
Decrease in funds held by Trustee for
construction expenditures 331 2,029,288
Capital contributed by parent company 22,840,597 27,142,144
Proceeds from issuance of debentures 50,000,000
Repayment of long-term debt (29,800) (50,042,000)
Contributions and advances for construction-net 2,367,785 3,153,862
Net increase in notes payable - banks 51,000,000 4,000,000
Dividends paid on common and preferred stock (14,953,887) (13,283,386)
____________ ____________
Net cash provided by financing activities 61,225,026 22,999,908
____________ ____________
Cash Flows Used for Investing Activities:
Utility plant expenditures (excluding allowance
for funds used during construction) (87,716,088) (44,218,911)
Selling costs of land (1,600)
Sale of land 124,000
____________ ____________
Cash used for investing activities (87,716,088) (44,096,511)
____________ ____________
Net Decrease in Cash and Cash Equivalents (1,251,934) (1,342,485)
Cash and Cash Equivalents at Beginning of Period 2,373,514 3,715,999
____________ ____________
Cash and Cash Equivalents at End of Period $ 1,121,580 $ 2,373,514
____________ ____________
____________ ____________
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 10,650,313 $ 11,543,153
Income taxes $ 4,980,000 $ 6,990,813
Preferred stock dividends $ 708,000 $ 890,975
See Notes to Consolidated Financial Statements.
-20-
E'TOWN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
E'town Corporation (E'town or Corporation), a New Jersey holding
company, is the parent company of Elizabethtown Water Company
(Elizabethtown or Company), E'town Properties, Inc. (Properties) and
Applied Watershed Management, L.L.C. (AWM), a 65% owned joint venture.
The Mount Holly Water Company (Mount Holly) is a wholly owned
subsidiary of Elizabethtown.
2. INTERIM FINANCIAL STATEMENTS
The financial statements reflect all adjustments which, in the opinion
of management, are necessary for a fair presentation. The notes
accompanying the 1994 Annual Report to Shareholders and the 1994 Form
10-K should be read in conjunction with this report.
Certain prior year amounts have been reclassified to conform to the
current year's presentation.
3. CAPITALIZATION
In June 1995, E'town issued 660,000 shares of common stock for net
proceeds of $16,912,405. The net proceeds were used to fund equity
contributions to Elizabethtown totalling $16,900,000. These equity
contributions have been used to repay short-term debt which had been
issued under Elizabethtown's revolving credit agreement (see below) to
partially fund the Company's capital program, the predominant portion
of which relates to the construction of the Canal Road Water Treatment
Plant (Plant) (see Note 8). E'town routinely makes equity
contributions to Elizabethtown which represent the proceeds of common
stock issued under E'town's Dividend Reinvestment and Stock Purchase
Plan (DRIP). E'town contributed $4,579,135 from the proceeds of DRIP
issuances to Elizabethtown for the nine months ended
September 30, 1995.
4. LINES OF CREDIT
In July 1994, Elizabethtown executed a committed revolving credit
agreement (Agreement) with an agent bank and five additional banks.
The Agreement allows Elizabethtown to borrow, repay and reborrow up to
$60,000,000 during the first three years, after which time
Elizabethtown may convert any outstanding balances to a
five-year fully amortizing term loan. The Agreement further
-21-
provides that, among other covenants, Elizabethtown must maintain a
ratio of common and preferred equity to total capitalization of not
less than 35% and a pre-tax interest coverage ratio of at least 1.5 to
1. As of September 30, 1995, the ratio of Elizabethtown's common and
preferred equity to total capitalization was 49%. For the twelve
months ended September 30, 1995, Elizabethtown's pre-tax interest
coverage ratio, calculated in accordance with the Agreement, was 3.2
to 1. At September 30, 1995, Elizabethtown had short-term borrowings
outstanding of $55,000,000 under the Agreement at interest rates from
5.99% to 6.23%, at a weighted average interest rate of 6.08%. E'town
has $20,000,000 of uncommitted lines of credit with several banks in
addition to the lines under the Agreement of which $17,000,000 is
available to Elizabethtown.
5. EARNINGS PER SHARE
Primary earnings per share are computed on the basis of the weighted
average number of shares outstanding, plus common stock equivalents,
which reflect the assumption that all stock options are exercised.
Fully diluted earnings per share assume both the conversion of the
6 3/4% Convertible Subordinated Debentures and the common stock
equivalents. Reference is made to Exhibit 11 for the computations of
earnings per share.
6. NON-UTILITY PROPERTY AND OTHER INVESTMENTS
Included in Non-utility Property and Other Investments at
September 30, 1995 is $12,048,749 of investments in various parcels of
land in New Jersey which are either held for sale or are in the
process of being zoned and permitted with the intent of offering these
properties for future sale. The carrying value of each parcel
includes the original cost plus any real estate taxes, interest and,
where applicable, direct costs capitalized while rezoning or
governmental approvals are, or were, being sought. Based upon
independent appraisals received at various times, prior to and during
1994, the estimated net realizable value of each property exceeds its
respective carrying value as of September 30, 1995, after the adjustments
to the Mansfield property discussed below.
Properties continues to seek permits and more favorable zoning
treatment for its Mansfield, New Jersey property and, accordingly,
continues to capitalize various carrying charges. During the second
quarter of 1993, the carrying value of the Mansfield property exceeded
its estimated net realizable value and, as a result, carrying charges
incurred after that date were, and continue to be, adjusted monthly.
This is due to the fact that the Mansfield property is not yet ready
for its intended use and, therefore, various carrying charges continue to
be capitalized while, based upon the appraisals, the net realizable
value of the property has remained constant. Charges of $112,328,
$330,521 and $429,121 for the three, nine and twelve months ended
September 30, 1995, to adjust the carrying value of the Mansfield
property, have been reflected in the Statements of Consolidated Income
and Consolidated Balance Sheets. As Properties expects to continue
capitalizing carrying charges on the Mansfield property until it is
-22-
ready for its intended use, further adjustments for these capitalized
carrying charges, reflecting management's estimate of the net
realizable value of the property, should be expected.
The Corporation will continue to monitor the relationship between the
carrying and net realizable values of its properties through updated
appraisals.
In January 1995, Properties entered into an agreement to sell a
significant parcel of land to a developer. The agreement requires the
buyer to obtain all approvals required by governmental agencies in
order to develop the property. Properties may cancel the agreement if
the closing does not occur by December 31, 1996. Other events have
been established during this period at which time either the buyer or
Properties may cancel the agreement if certain criteria, generally
relating to the development potential of the property, are not met.
7. REGULATORY MATTERS
Rates
In late November or early December 1995, Elizabethtown expects to
petition the BPU for an increase in annual rates of approximately
$31.8 million or 30%. The predominant portion of the increase is
intended to recover financing and operating costs of the Canal Road
Water Treatment Plant which is expected to be complete in late 1996.
A smaller portion of the increase is being requested to recover
increases in financing and operating costs since rates were last
established in March 1995. In light of the approval by the BPU of
the 1993 Plant Stipulation (discussed below) and Elizabethtown's
experience in obtaining base rate relief, Elizabethtown expects the
BPU to grant timely and adequate rate relief but we cannot predict the
ultimate outcome of any rate proceeding.
On January 24, 1995, the BPU approved a stipulation (1995 Stipulation)
for a rate increase for Elizabethtown of $5,300,000, or 5.34%,
effective February 1, 1995. The 1995 Stipulation provides for an
authorized rate of return on common equity of 11.5%. It also provides
for recovery of the current service cost portion of the obligation
accrued under Statement of Financial Accounting Standards 106,
"Employer's Accounting for Postretirement Benefits Other Than
Pensions," provided this amount is funded by the Company.
The 1995 Stipulation requires Elizabethtown to maintain an average
ratio of common equity to total capitalization of at least 45.1% for
the twelve months ended January 31, 1996. If a lesser ratio is
realized, the revenue requirement associated with such lesser ratio
will offset the overall revenue requirement in the next base rate
case. The Company expects to sustain an average ratio of common
equity to total capitalization in excess of 45.1% for the twelve-month
period.
-23-
On July 7, 1995 the BPU approved a Stipulation for a decrease in rates
under a Purchased Water Adjustment Clause (PWAC). The Stipulation
resulted in a decrease in rates for the PWAC, effective July 13, 1995
of $209,033. This Stipulation reflects the decrease in rates for
water purchased by Elizabethtown from the New Jersey Water Supply
Authority.
On June 26, 1995, Mount Holly petitioned the BPU for an increase in
annual rates, to take place in two phases, resulting in increases of
30.8% and 77.2%, respectively, in excess of current rates. In the
first phase rates would be increased by $851,171 and in the second
phase by $2,794,002. The first phase is necessary to recover costs
that were not reflected in rates last increased in October 1986. The
second phase would recover the costs of a new water supply, treatment
and transmission system necessary to obtain water outside a designated
portion of an aquifer currently used by Mount Holly to supply a
substantial portion of its customers and to treat and pump the water
into its Mount Holly system. This project is deemed to be the most
cost-effective alternative available to Mount Holly to comply with
recent State legislation which restricts the amount of water that can
be withdrawn from the aquifer in certain areas of Southern New Jersey.
The project is currently estimated to cost $16,500,000 and is expected
to be completed by the end of 1996. A decision by the BPU on Mount
Holly's petition is expected in the first quarter of 1996. While
management believes that the water supply, treatment and transmission
project planned for Mount Holly is a cost-effective response to State
legislation affecting the area and that the costs incurred by Mount
Holly since rates were last increased are appropriate, management
cannot predict the ultimate outcome of the rate proceeding at this
time.
In August 1993, the BPU approved a stipulation (1993 Plant
Stipulation) signed by the Department of Ratepayer Advocate, the BPU
staff and several of Elizabethtown's major wholesale customers, all of
whom typically participate in Elizabethtown's rate cases. The 1993
Plant Stipulation states that the Plant is necessary and that the
Company's estimates regarding the Plant's cost ($87,000,000 at that
time) and construction period are reasonable (See Note 8). In April
1994, Elizabethtown notified all parties to the 1993 Plant Stipulation
that the estimated cost of the Plant had increased. The 1993 Plant
Stipulation authorizes the Company to levy a rate surcharge during the
Plant's construction period if the Company's pre-tax interest coverage
ratio for any twelve-month historical period drops below 2.0 times.
The surcharge would equal 20% of the Company's gross interest expense
for the prior twelve months, adjusted for revenue taxes. The
surcharge would go into effect at the same time as the Company's next
base rate increase after the coverage ratio falls below 2.0 times.
Also, the surcharge would remain in effect for twelve months and could
be extended by the BPU for up to six additional months. The 1993
Plant Stipulation also provides that the rate of return on common
stockholder's equity used to calculate the rate for the equity
component of the Allowance for Funds Used During Construction (AFUDC)
for the Plant will be 1.5% less than the rate of return on common
-24-
stockholder's equity established in the Company's most recent
base rate case. The authorized rate of return on common
stockholder's equity is currently 11.5%. Elizabethtown's pre-tax
interest coverage ratio, calculated in accordance with the 1993
Plant Stipulation for the twelve months ended September 30, 1995
was 2.7 times. Based upon current conditions, the Company
expects its pre-tax interest coverage will remain above the 2.0
times trigger level through the completion of the Plant's
construction and that the surcharge will be not required.
8. COMMITMENTS AND CONTINGENT LIABILITIES
Capital expenditures for the three-year period ended December 31, 1997
are estimated to be $171,500,000, of which $170,400,000 is for
Elizabethtown's and Mount Holly's water utility plant ($149,500,000
for Elizabethtown and $20,900,000 for Mount Holly) and $1,100,000 is
for real estate-related expenditures and AWM.
Canal Road Water Treatment Plant
In April 1994, following a competitive bidding process, Elizabethtown
executed a fixed-price contract for the construction of the Plant.
The current estimated cost of the Plant is approximately $100,000,000,
excluding AFUDC. As of September 30, 1995, the Company has expended
$66,761,651, excluding AFUDC of $5,476,078, on the Plant.
Joint Venture
In March 1995, the Corporation entered into a three 3-year joint
venture agreement with Applied Wastewater General Partnership
(AWG) by forming a New Jersey Limited Liability Company, Applied
Watershed Management, L.L.C.(AWM), 65% of which is owned by
E'town. AWG is a unit of several privately held and affiliated
companies providing design, engineering, construction and
operating services for water and wastewater facilities in the
western portion of Elizabethtown's service area. AWM intends to
design, finance, engineer, construct, own, operate and/or sell
water and wastewater facilities, primarily in New Jersey. E'town
has agreed to provide capital contributions to AWM of up to
$500,000 to finance AWM's working capital needs. E'town may
provide additional financing for particular projects of AWM. AWG will
provide the substantial portion of the operations-related services
required to be performed by AWM. Either party may terminate the
agreement at any time.
9. LEGAL MATTERS
As previously reported several lawsuits had been filed against
Elizabethtown and other parties in connection with a fire that
occurred in a storage facility in 1989 resulting in damage to property
stored at that facility. It had also been previously reported that
Elizabethtown's exposure should not exceed $1,500,000. This matter
has been settled resulting in a liability to Elizabethtown of
approximately $114,000. A provision for this estimated liability was
previously recorded.
-25-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
E'town Corporation (E'town or Corporation), a New Jersey holding
company, is the parent company of Elizabethtown Water Company
(Elizabethtown or Company), E'town Properties, Inc. (Properties) and
Applied Watershed Management, L.L.C.(AWM), a 65%-owned joint venture.
The Mount Holly Water Company (Mount Holly) is a wholly owned
subsidiary of Elizabethtown. The assets and operating results of
Elizabethtown constitute the predominant portions of E'town's assets
and operating results. Mount Holly contributed less than 1% of the
Company's consolidated operating revenues for the twelve months ended
September 30, 1995. The following analysis sets forth significant
events affecting the financial condition of E'town and Elizabethtown
at September 30, 1995, and the results of operations for the three,
nine and twelve months ended September 30, 1995 and 1994.
LIQUIDITY AND CAPITAL RESOURCES
Capital Expenditures Program
Capital expenditures, primarily for water utility plant, were
$51.0 million for the first nine months of 1995. Capital expenditures
for the three-year period ending December 31, 1997 are estimated to be
$171.5 million, of which $170.4 million is for water utility plant
($149.5 million for Elizabethtown and $20.9 million for Mount Holly),
and $1.1 million is for real estate-related expenditures and AWM.
A major portion of the utilities' capital outlays will occur in
the first 18 months of the three-year projection period through 1997
as Elizabethtown and Mount Holly invest in new water treatment and
water supply facilities, each as described below. After these
projects are completed, the capital outlays for the utilities are
expected to decrease.
Elizabethtown
Elizabethtown's capital program includes the construction of a
new water treatment plant, the Canal Road Water Treatment Plant
(Plant), near Elizabethtown's existing plant. The Plant, which will
have an initial rated production capacity of 40 million gallons per
day and can be expanded to 200 million gallons per day, is necessary
to meet existing and anticipated customer demands and to replace
groundwater supplies withdrawn from service as a result of more
restrictive water quality regulations and groundwater contamination.
Expansion of the Plant's production capacity beyond 40 million gallons
per day is not expected to occur in the foreseeable future.
Elizabethtown's capital program also includes the construction of
additional mains and storage facilities necessary to serve existing
and future customers.
In April 1994, following a competitive bidding process,
Elizabethtown executed a fixed-price contract for the construction of
the Plant. The current estimated cost of the Plant is approximately
-26-
$100 million, excluding an Allowance for Funds Used During
Construction (AFUDC). AFUDC is a non-cash credit on the Statements of
Income, and is added to the construction cost of the project and is
included in rate base for recovery in rates during the projects'
useful life. As of September 30, 1995, the Company has expended
$66.8 million, excluding AFUDC of $5.5 million on the Plant. The
project is proceeding on schedule, the construction contract remains
on budget, and the project is expected to be completed in mid-1996.
Elizabethtown intends to file for rate relief in late November or
early December 1995, a major portion of which will relate to the Plant
(See Economic Outlook-Elizabethtown and Subsidiary.)
In August 1993, the New Jersey Board of Public Utilities (BPU)
approved a stipulation (the 1993 Plant Stipulation) signed by the
Department of Ratepayer Advocate, the BPU staff and several of
Elizabethtown's major wholesale customers, all of whom typically
participate in Elizabethtown's rate cases. The 1993 Plant Stipulation
states the Plant is necessary and the Company's estimate regarding the
Plant's cost ($87 million at that time), and construction period are
reasonable. In April 1994, Elizabethtown notified all parties to the
1993 Plant Stipulation that the estimated cost of the Plant had
increased. The 1993 Plant Stipulation authorizes Elizabethtown to
levy a rate surcharge during the Plant's construction period if the
Company's pre-tax interest coverage ratio for any twelve-month
historical period drops below 2.0 times. The surcharge would equal
20% of the Company's gross interest expense for the prior twelve
months, adjusted for revenue taxes. The surcharge would go into
effect at the same time as the Company's next base rate increase after
the coverage ratio falls below 2.0 times. Also, the surcharge would
remain in effect for twelve months and could be extended by the BPU
for up to six additional months. The 1993 Plant Stipulation also
provides that the rate of return on common stockholder's equity used
to calculate the rate for the equity component of the AFUDC for the
Plant will be 1.5% less than the rate of return on common
stockholder's equity established in Elizabethtown's most recent base
rate case. The authorized rate of return on common stockholder's
equity is currently 11.5%. Elizabethtown's pre-tax interest coverage
ratio, calculated in accordance with the 1993 Plant Stipulation, for
the twelve months ended September 30, 1995 was 2.7 times. Based upon
current conditions, the Company expects its pre-tax interest coverage
will remain above the 2.0 times trigger level through the completion
of the Plant's construction and that the surcharge will not be
required.
Mount Holly
To ensure an adequate supply of quality water from an aquifer
serving parts of southern New Jersey, State legislation is requiring
Mount Holly, as well as other suppliers obtaining water from
designated portions of this aquifer, to reduce pumpage from its wells.
Mount Holly has received preliminary approvals from the New Jersey
Department of Environmental Protection for its conceptual plan to
develop a new water supply, treatment and transmission system
necessary to obtain water outside the designated portion of the
aquifer and to treat the water and pump it into the Mount Holly
system. This is referred to as the Mansfield Project. The project is
currently estimated to cost $16.5 million and is expected to be
-27-
completed by the end of 1996. The land for the supply and treatment
facilities has been purchased and test wells have been drilled and
evaluated.
On June 26, 1995, Mount Holly petitioned the BPU for an increase
in rates, to take place in two phases resulting in increases of 30.8%
and 77.2%, respectively, in excess of current rates. In the first
phase rates would be increased by $.9 million and in the second phase
by $2.8 million. The first phase is necessary to recover costs that
were not reflected in rates last increased in October 1986. The
second phase would recover the costs of the Mansfield Project as well
as other planned capital improvements. The Mansfield project is
deemed to be the most cost-effective alternative available to Mount
Holly to comply with the legislation discussed above. While
management believes that the water supply, treatment and transmission
project planned for Mount Holly is a cost-effective response to the
State legislation affecting the area and that the costs incurred by
Mount Holly since rates were last increased are appropriate,
management cannot predict the ultimate outcome of the rate proceeding
at this time.
CAPITAL RESOURCES
For the three-year period ending December 31, 1997, Elizabethtown,
including Mount Holly, estimates 30% of its capital expenditures will
be financed with internally generated funds (after payment of common
stock dividends). Management believes that the Company will be able
to finance the balance with a combination of capital contributions
from the proceeds of E'town common stock sales, proceeds from the sale
by Elizabethtown of preferred stock, long-term debentures and from
tax-exempt New Jersey Economic Development Authority (NJEDA) bonds and
short-term borrowings by Elizabethtown under its revolving credit
agreement discussed below. The NJEDA has granted preliminary approval
for the financing of almost all of Elizabethtown's major projects over
the next three years, including the Plant. Elizabethtown expects to
pursue tax-exempt financing to the extent that final allocations are
granted by the NJEDA (see below).
In July 1994, Elizabethtown executed a committed revolving credit
agreement (Agreement) with an agent bank and five additional banks.
The Agreement allows Elizabethtown to borrow, repay and reborrow up to
$60 million during the first three years, after which time
Elizabethtown may convert any outstanding balances to a five-year
fully amortizing term loan. The Agreement further provides that,
among other covenants, Elizabethtown must maintain a ratio of common
and preferred equity to total capitalization of not less than 35% and
a pre-tax interest coverage ratio of at least 1.5 to 1. As of
September 30, 1995, the ratio of Elizabethtown's common and preferred
equity to total capitalization was 49%. For the twelve months ended
September 30, 1995 Elizabethtown's pre-tax interest coverage ratio,
calculated in accordance with the Agreement, was 3.2 to 1. At
September 30, 1995, Elizabethtown had short-term borrowings
outstanding of $55.0 million under the Agreement at interest rates
from 5.99% to 6.23%, at a weighted average interest rate of 6.08%.
E'town has $20.0 million of uncommitted lines of credit with several
banks in addition to the lines under the Agreement of which $17.0
million is available to Elizabethtown.
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In September 1995, E'town issued 660,000 shares of common stock
for net proceeds of $17.0 million. The proceeds were used to fund
equity contributions to Elizabethtown totalling $16.9 million. These
equity contributions have been used to repay short-term debt which had
been issued under Elizabethtown's revolving credit agreement to
partially fund the Company's capital program, the predominant portion
of which relates to the construction of the Canal Road Water Treatment
Plant. E'town routinely makes equity contributions to Elizabethtown
which represent the proceeds of common stock issued under E'town's
Dividend Reinvestment and Stock Purchase Plan (DRIP). E'town
contributed $4.6 million from proceeds of DRIP issuances to
Elizabethtown for the nine months ended September 30, 1995.
In late 1995, Elizabethtown intends to issue approximately
$40 million of tax-exempt debentures through the NJEDA to repay a
portion of the balances outstanding under the revolving credit
agreement incurred for qualified capital expenditures.
RESULTS OF OPERATIONS
Net Income for the three months ended September 30, 1995 was
$5.2 million or $.69 per share on a primary basis as compared to
$3.7 million or $.56 per share for the comparable 1994 period. An
increase in operating income of $1.0 million combined with an increase
in AFUDC of $.7 million, offset against a non-recurring charge due to
litigation of $.9 million in September 1994, accounted for the
predominant portion of the increase. Earnings per share was further
affected by a 14% increase the average number of common shares
outstanding for the three month period.
Net Income for the nine months ended September 30, 1995 was
$12.3 million or $1.77 per share on a primary basis as compared to
$9.2 million or $1.51 per share for the comparable 1994 period. An
increase in operating income of $1.9 million combined with an increase
in AFUDC of $2.6 million, offset against a non-recurring charge due to
litigation of $.9 million in September 1994, accounted for the
predominant portion of the increase. Earnings per share was further
affected by a 14% increase in the average number of common shares
outstanding for the nine month period.
Net Income for the twelve months ended September 30, 1995 was
$15.3 million or $2.22 per share on a primary basis as compared to
$11.4 million or $1.92 per share for the comparable 1994 period. An
increase in water consumption resulting in increased revenues of
$2.7 million and the effect of an increase in rates of $3.6 million in
February 1995, offset against a non-recurring charge due to litigation
of $.9 million in September 1994 contributed to an increase in
earnings for the twelve months ending September 30, 1995 compared to
the twelve months ending September 30, 1994. Earnings per share was
further affected by a 15% increase in the average number of common
shares outstanding for the twelve-month period.
Operating Revenues increased $3.1 million or 11.3% for the three
months ended September 30, 1995 compared to the comparable period in
1994. Included in this increase is $1.3 million which relates to a
rate increase for Elizabethtown, effective February 1, 1995. Sales to
retail customers related to water consumption due to abnormally hot,
dry summer weather increased by $1.5 million. Sales to other water
systems related to water consumption increased less than $1.0 million.
-29-
Sales to large industrial customers increased by $.1 million. Due to
normal growth within the service territory, fire service revenues
increased by $.1 million.
Operating revenues increased $5.5 million or 7.1% for the nine
months ended September 30, 1995 compared to the comparable period in
1994. Included in this increase, is $3.5 million which relates to the
rate increase for Elizabethtown effective February 1, 1995. Sales to
retail customers related to water consumption due to abnormally hot,
dry summer weather increased by $1.7 million. Sales to other water
systems related to water consumption decreased by $.3 million and sales
to large industrial customers related to water consumption increased
by $.3 million. Fire service revenues increased by $.3 million.
Operating Revenues increased $6.2 million or 6.2% for the twelve
months ended September 30, 1995 over the comparable period in 1994.
Included in this increase is $3.6 million which relates to the effect
of a $5.3 million rate increase effective February 1, 1995. Also,
sales to retail customers related to water consumption due to
abnormally hot, dry summer weather increased $2.0 million, sales to
other water systems related to water consumption decreased $.2 million
and sales to industrial and fire service customers related to water
consumption increased by $.5 million and $.3 million, respectively.
Operation Expenses increased $1.0 million or 9.4%, $1.7 million or
5.4% and $1.3 million or 3.0% for the three, nine and twelve months
ended September 30, 1995, respectively, compared to the comparable
periods in 1994. The increases are due primarily to increased costs
for labor, benefits and miscellaneous expenses. Benefit costs
increased due primarily to an increase in the actuarially calculated
pension expense.
Maintenance Expenses decreased $.1 million or 6.0% and $.4 million
or 8.1% and increased less than $.1 million or .5% for the three,
nine, and twelve months ended September 30, 1995, respectively,
compared to the comparable periods in 1994. The decreases for the
three and nine month periods are due to expenditures for the effects
of unusually harsh winter weather in the first quarter of 1994 and a
reduction in unplanned maintenance expenditures. The increase for the
twelve month period is due to an increased level of preventive
maintenance at various operating facilities throughout the Company.
Depreciation Expense increased $.3 million or 14.1%, $.7 million or
11.3% and $.8 million or 10.9% for the three, nine and twelve month
periods ended September 30, 1995, respectively, compared to the
comparable periods in 1994. The increases are due to higher
depreciation rates as a result of Elizabethtown's rate increase
effective February 1995 as well as a higher level of depreciable plant
in service.
Revenue Taxes increased $.4 million or 10.4%, $.7 million or 6.8%
and $.7 million or 5.8% for the three, nine and twelve month periods
ended September 30, 1995 compared to the 1994 periods due to increases
in the revenues on which these taxes are calculated.
Real Estate, Payroll and Other Taxes increased less than
$.1 million for both the three and nine month periods and increased
$.1 million for the twelve month period ended September 30, 1995,
respectively, compared to the comparable periods in 1994. The
-30-
increase for the twelve month period is due primarily to payroll taxes
resulting from labor cost increases. Federal Income Taxes increased
$.5 million or 23.4%, $.9 million or 17.0% and $.9 million or 13.7%
for the three, nine and twelve month periods ended September 30, 1995,
compared to the comparable periods in 1994 due to the changes in the
components of taxable income discussed herein. Included in the
changes for the nine and twelve month periods is a charge of $.2
million and a refund of $.2 million for Federal income taxes related
to the results of the recently concluded Internal Revenue Service
examination.
Other Income increased $.8 million, $1.6 million and $1.9 million
for the three, nine and twelve month periods ended September 30, 1995,
compared to the comparable periods in 1994. Included in these net
increases is a litigation settlement of $.9 million in September 1994.
In addition, increases in the equity component of AFUDC of $.4
million, $1.4 million and $1.8 million for the three, nine and twelve
month periods, respectively, resulted from increased construction
expenditures, primarily related to the Plant. Federal income taxes,
as a result of all of the above, increased $.4 million, $.8 million
and $1.0 million for the three, nine and twelve month periods,
respectively.
Total Interest Charges increased $.3 million or 12.0%, $.4 million
or 5.1% and $.5 million or 4.3% for the three, nine and twelve month
periods ended September 30, 1995, compared to the 1994 amounts. The
increases are the result of a higher level of borrowings under the
Agreement offset by increases in the debt component of AFUDC of
$.3 million, $1.2 million and $1.5 million for the three, nine and
twelve month periods ended September 30, 1995, respectively. Included
in the net changes in interest expense for the nine and twelve month
periods ended September 30, 1995 is interest of $.2 million on refunds
of Federal income taxes which the Corporation received related to 1984
and 1985.
Preferred Stock Dividends decreased less than $.1 million and
$.1 million for the twelve month period ended September 30, 1995 due
to savings from the refinancing of the $8.75 series preferred stock
with $5.90 series preferred stock in March 1994.
ECONOMIC OUTLOOK
Consolidated earnings for E'town for the next several years will
be determined primarily by Elizabethtown's ability to obtain timely
and adequate rate relief, generate adequate earnings and, to a lesser
degree, the ability of Properties, E'town and AWM to generate earnings
from their unregulated businesses.
Elizabethtown and Subsidiary
Currently, Elizabethtown and Mount Holly believe they are, in all
material respects, in compliance with all water quality standards.
Looking forward, however, governmental water quality and service
regulations are requiring Elizabethtown and Mount Holly to make
significant investments in water supply, water treatment, transmission
and storage facilities including, for Elizabethtown, the Plant, and
for Mount Holly, a new water supply, treatment and transmission system
to augment existing facilities. This capital program will require
regular external financing and rate relief through 1996.
-31-
The timing and amount of rate increases obtained by Elizabethtown
and Mount Holly, as well as various other factors, including weather,
customer usage, the magnitude and timing of capital expenditures and
the rate of growth of revenues and expenditures, will affect earnings
for the remainder of 1995 and in 1996. Elizabethtown and Mount Holly
expect that upon the completion and successful reflection in rates of
their respective new utility plant projects, discussed above, their
capital requirements for utility plant should decrease, thereby
reducing the need for rate increases and external financing.
In late November or early December 1995, Elizabethtown expects to
petition the BPU for an increase in annual rates of approximately
$31.8 million or 30%. The predominant portion of the increase is
intended to recover the financing and operating costs of the Canal
Road Water Treatment Plant which is expected to be complete in late
1996. A smaller portion of the increase is being requested to recover
increases in financing and operating costs since rates were last
established in March 1995. In light of the approval by the BPU of the
1993 Plant Stipulation and Elizabethtown's experience in obtaining
base rate relief, Elizabethtown expects the BPU to grant timely and
adequate rate relief but cannot predict the ultimate outcome of any
rate proceeding.
On January 24, 1995, the BPU approved a Stipulation (1995
Stipulation) for a rate increase for Elizabethtown of $5.3 million or
5.3%, effective February 1, 1995. The 1995 Stipulation requires
Elizabethtown to maintain an average ratio of common equity to total
capitalization of at least 45.1% for the twelve months ended
January 31, 1996. If a lesser ratio is realized, the revenue
requirement associated with such lesser ratio will offset the overall
revenue requirement in the next base rate case. The Company expects
to sustain an average ratio of common equity to total capitalization
in excess of 45.1% for the twelve-month period.
In June 1995, Mount Holly petitioned the BPU for a significant
increase in rates, to take place in two phases. A decision by the BPU
regarding this request is expected in the Spring of 1996. (See
Liquidity and Capital Resources).
E'town
The Corporation has entered into a three-year joint venture
agreement with Applied Wastewater General Partnership (AWG) by forming
a New Jersey Limited Liability Company, Applied Watershed Management,
L.L.C. (AWM), 65% of which is owned by E'town. AWG is a unit of
several privately held and affiliated companies providing design,
engineering, construction and operating services for water and
wastewater facilities in the western portion of Elizabethtown's
service area. AWM intends to design, finance, engineer, construct,
own, operate and/or sell water and wastewater facilities primarily in
New Jersey. E'town has agreed to provide capital contributions to AWM
up to $.5 million to finance AWM's working capital needs. E'town may
provide additional financing for particular projects of AWM. AWG will
provide the substantial portion of the operations-related services
required to be performed by AWM. Either party may terminate the
agreement at any time.
-32-
Properties
Included in Non-utility Property and Other Investments in the
Consolidated Balance Sheets of E'town at September 30, 1995 is
$12.0 million of investments in various parcels of undeveloped land in
New Jersey. The carrying value of each parcel includes the original
cost plus any real estate taxes, interest and, where applicable,
direct costs capitalized while rezoning or governmental approvals are
or were being sought. Based upon independent appraisals received at
various times prior to and during 1994, the estimated net realizable
value of each property exceeds its respective carrying value as of
September 30, 1995, after the adjustments to the Mansfield property
discussed below.
Properties continues to seek permits and more favorable zoning
treatment for its Mansfield, New Jersey property and, accordingly,
continues to capitalize various carrying charges. During the second
quarter of 1993, the carrying value of the Mansfield property exceeded
its estimated net realizable value and, as a result, carrying charges
incurred after that date were, and continue to be, adjusted monthly.
This is due to the fact that the Mansfield property is not yet ready
for its intended use and, therefore, various carrying charges continue
to be capitalized while based upon the appraisals, the estimated net
realizable value of the property remains constant. Charges of
$.1 million, $.3 million and $.4 million for the three, nine and
twelve months ended September 30, 1995, respectively, to adjust the
carrying value of the Mansfield property, have been reflected in the
Statements of Consolidated Income and Consolidated Balance Sheets. As
Properties expects to continue capitalizing carrying charges on the
Mansfield property until it is ready for its intended use, further
adjustments for these capitalized carrying charges, reflecting
management's estimate of net realizable value of the property should
be expected.
The Corporation will continue to monitor the relationship between
the carrying and net realizable values of its properties through
updated appraisals.
In January 1995, Properties entered into an agreement to sell a
significant parcel of land to a developer. The agreement requires the
buyer to obtain all approvals required by governmental agencies in
order to develop the property. Properties may cancel the agreement if
the closing does not occur by December 31, 1996. Other events have
been established during this period at which time either the buyer or
Properties may cancel the agreement if certain criteria, generally
relating to the development potential of the property, are not met.
-33-
PART II - OTHER INFORMATION
Item 1:
Legal Proceedings
As previously reported several lawsuits had been filed against
Elizabethtown and other parties in connection with a fire that
occurred in a storage facility in December 1989 resulting in
damage to property stored at that facility. It had also been
previously reported that Elizabethtown's exposure should not
exceed $1,500,000. This matter has been settled resulting in a
liability to Elizabethtown of approximately $114,000. A
provision for this estimated liability was previously recorded.
Items 2 - 5:
Nothing to report.
Item 6(a) - Exhibits
Exhibits to Part I:
Exhibit 11 - E'town Corporation and Subsidiaries - Statement
Regarding Computation of per Share Earnings
Exhibit 12 - Elizabethtown Water Company - Computation of
Ratio of Earnings to Fixed Charges and
Preferred Dividends and Computation of Ratio of
Earnings to Fixed Charges
Exhibit 27 - E'town Corporation and Subsidiaries and
Elizabethtown Water Company and Subsidiary -
Financial Data Schedules
Exhibits to Part II:
Exhibit 10 - Elizabethtown Water Company - Supplemental
Executive Retirement Plan
Item 6(b) - Reports on Form 8-K
None
-34-
E'TOWN CORPORATION
ELIZABETHTOWN WATER COMPANY
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.
Date: November 13, 1995 E'TOWN CORPORATION
/s/ Andrew M. Chapman
______________________________________
Andrew M. Chapman
Chief Financial Officer
(Principal Financial & Accounting Officer)
/s/ Walter M. Braswell
______________________________________
Walter M. Braswell
Secretary
ELIZABETHTOWN WATER COMPANY
/s/ Andrew M. Chapman
______________________________________
Andrew M. Chapman
Chief Financial Officer
(Principal Financial Officer)
/s/ Dennis W. Doll
______________________________________
Dennis W. Doll
Controller
(Principal Accounting Officer)
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