FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 2000 Commission File Number 0-6028
BIRMINGHAM UTILITIES, INC.
(Exact name of registrant as specified in its charter)
CONNECTICUT 06-0878647
230 Beaver Street, Ansonia, CT 06401
(Address of principal executive office) (Zip Code)
________________________________________________________________
(Former name, former address and former fiscal year, if changes since
last report)
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.
No _________ Yes ____X_____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at May 1, 2000
Common stock, no par value 1,596,833
Page Two
PART I. FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
BIRMINGHAM UTILITIES, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
(Unaudited)
Three Months Ended March 31,
2000 1999
Operating Revenue $1,063,515 $1,076,641
Operating Expenses:
Operating Expenses 627,328 571,495
Maintenance Expenses 71,498 55,149
Depreciation 131,250 134,001
Taxes Other Than Income Taxes 84,324 73,585
Taxes on Income 14,202 47,735
Total Operating Expense 928,602 881,965
Utility Operating Income 134,913 194,676
Amortization of Prior Years'
Deferred Income on Land Dispositions
(Net of income taxes of $27,123
in 2000 and $48,183 in 1999) 46,137 85,740
Other income, net 22,288 34,291
Income before interest expense 203,338 314,707
Interest and Amortization of
Debt Discount 117,885 112,802
Income from dispositions of land - 0 - - 0 -
Net income 85,453 $201,905
Retained earnings, beginning $5,511,802 $5,219,875
Dividends 198,953 155,472
Retained earnings, ending $5,398,302 $5,266,308
Earnings per share - basic $.05 $.13
Earnings per share - diluted $.05 $.12
Dividends per share $.125 $.10
The accompanying notes are an integral part of these financial
statements.
Page Three
BIRMINGHAM UTILITIES, INC.
BALANCE SHEETS
(Unaudited)
March 31, Dec. 31,
2000 1999
ASSETS:
Utility Plant $22,362,513 $22,265,530
Accumulated depreciation (6,684,012) (6,543,747)
Net Utility Plant 15,678,501 15,721,783
Current Assets:
Cash and cash equivalent 51,225 44,471
Accounts receivable, net of
allowance for doubtful accounts 397,598 415,330
Accrued utility revenue 409,249 429,127
Materials & supplies 105,631 87,042
Prepayments 77,777 55,154
Total current assets 1,041,480 1,031,124
Deferred Charges 625,204 595,263
Unamortized debt expense 150,172 154,234
Income taxes recoverable 360,812 360,812
Other assets 415,210 18,055
1,551,398 1,528,364
$18,271,379 $18,281,271
STOCKHOLDERS' EQUITY AND LIABILITIES
Stockholders' Equity:
Common Stock, no par value, authorized
2,000,000 shares; issued and outstanding
3/31/00- 1,556,435 shares;
12/31/99- 1,583,025 $ 2,695,308 $ 2,634,762
Retained earnings 5,398,302 5,511,802
8,093,610 8,146,564
Long-term debt 4,324,000 4,324,000
Current Liabilities:
Current portion of note payable and
long term debt 94,000 94,000
Note Payable 655,000 360,000
Accounts payable and accrued liabilities 478,185 691,142
Total current liabilities 1,227,185 1,145,142
Customers' advances for construction 1,193,044 1,182,216
Contributions in aid of construction 1,188,935 1,188,934
Regulatory liability-income taxes refundable 164,772 164,772
Deferred income taxes 1,654,426 1,630,976
Deferred income on disposition of land 425,407 498,667
4,626,584 4,665,565
$18,271,379 $18,281,271
The accompanying notes are an integral part of these financial
statements.
Page Four
BIRMINGHAM UTILITIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31,
Cash Flows From Operating Activities 2000 1999
Net Income $85,453 $201,905
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 145,126 147,884
Amoritization of deferred income,
net of tax (46,137) (85,740)
Increases and decreases in assets
and liabilities:
Accounts receivable and
accrued utility revenue 37,610 36,432
Materials and supplies (18,589) (54,818)
Prepayments (22,623) (55,282)
Accounts payable and accrued expenses (212,946) (1,822,022)
Deferred income taxes (3,675) (3,675)
Total Adjustments (121,234) (1,837,221)
Net cash flows provided by (used in)
operating activities (35,781) (1,635,316)
Cash flows from investing activities:
Net construction expenditures (81,023) (230,659)
Other assets and deferred charges, net (12,760) (32,875)
Net Cash flows from (used in)
investing activities (68,263) (263,534)
Cash flows from financing activities:
Increase in current note payable 295,000 ------
Dividends paid - net (184,202) (133,132)
Net Cash flows used in
financing activities: 110,798 (133,132)
Net increase in cash and cash equivalents 6,754 (2,031,982)
Cash and cash equivalents, beginning 44,471 2,696,706
Cash, ending $ 51,225 $ 664,724
Supplemental disclosure of
cash flow information:
Cash paid for
Interest $220,295 $217,478
Income Taxes $94,000 $1,746,000
Supplemental disclosure of
non-cash flow information:
The Company receives contributions of
plant from builders and developers.
These contributions of plant are
reported in utility plant and in
customers' advances for construction.
The contributions are deducted from
construction expenditures by the Company.
Gross Plant, additions $96,983 $275,068
Customers' advances for construction 15,960 44,409
Capital expenditures, net. $81,023 $230,659
The accompanying notes are an integral part of these financial
statements.
Page Five
BIRMINGHAM UTILITIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Birmingham Utilities, Inc. is a specially chartered public
service corporation in the business of collecting and distributing water
for domestic, commercial and industrial uses and fire protection. The
Company provides water to Ansonia and Derby, Connecticut and in small
parts of the contiguous Town of Seymour with a population of
approximately 31,000 people.
The Company is subject to the jurisdiction of the Connecticut
Department of Public Utility Control ("DPUC") as to accounting,
financing, ratemaking, disposal of property, the issuance of long-term
securities and other matters affecting its operations. The Connecticut
Department of Public Health (The "Health Department" or "DPH") has
regulatory powers over the Company under state law with respect to water
quality, sources of supply, and the use of watershed land. The
Connecticut Department of Environmental Protection "DEP") is authorized
to regulate the Company's operations with regard to water pollution
abatement, diversion of water from streams and rivers, safety of dams and
the location, construction and alteration of certain water facilities.
The Company's activities are also subject to regulation with regard to
environmental and other operational matters by federal, state and local
authorities, including, without limitation, zoning authorities.
The Company is subject to regulation of its water quality under
the Federal Safe Drinking Water Act ("SDWA"). The United States
Environmental Protection Agency has granted to the Health Department the
primary enforcement responsibility in Connecticut under the SDWA. The
Health Department has established regulations containing maximum limits
on contaminants, which have or may have an adverse effect on health.
NOTE 1 - QUARTERLY FINANCIAL DATA
The accompanying financial statements of Birmingham Utilities,
Inc. (the "Company") have been prepared in accordance with generally
accepted accounting principles, without audit, except for the Balance
Sheet for the period ending December 31, 1998, which has been audited.
The interim financial information conforms to the instructions to Form
10-Q and Rule 10-01 of Regulation S-X and, as applied in the case of
rate-regulated public utilities, complies with the Uniform System of
Accounts and ratemaking practices prescribed by the authorities.
Certain information and footnote disclosures required by generally
accepted accounting principles have been omitted, pursuant to such rules
and regulations; although the Company believes that the disclosures are
adequate to make the information presented not misleading. For further
information, refer to the financial statements and accompanying footnotes
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999.
The Company's business of selling water is to a certain extent
seasonal because water consumption normally increases during the warmer
summer months. Other factors affecting the comparability of various
accounting periods include the timing of rate increases and the timing
and magnitude of property sales. Accordingly, annualization of the
results of operations for the three months ended March 31, 2000 and
March 31, 1999 would not necessarily accurately forecast the annual
results of each year.
Page Six
NOTE 2 - CALCULATION OF WEIGHTED AVERAGE SHARES OUTSTANDING-DILUTED
The following table summarizes the number of common shares used
in the calculation of earnings per share.
Three Months Ended
3/31/00 3/31/99
Weighted average shares outstanding
for earnings per share, basic 1,586,067 1,557,406
Incremental shares from assumed
conversion of stock options 64,555 62,066
Weighted average shares outstanding
for earnings per share, diluted 1,650,622 1,619,472
NOTE 3 - LAND SALES
On March 21, 2000, the Company executed a Purchase and Sale Agreement
with Toll Brothers, Inc. ("Toll Bros.") for the sale by the Company and
purchase by Toll Bros. of 322 acres of unimproved property in the
Town of Seymour, Connecticut. The property consists of two contiguous
parcels of 245 acres and 77 acres. The purchase price of the parcels is
$3,294,000 and $1,026,000, respectively. The agreement is subject to
approval by the Connecticut Department of Public Utility Control
("DPUC") and application for approval will be filed in mid-May, 2000.
The closings are scheduled to be completed within 30 days after
the completion of DPUC approval, but in no event shall the closing with
respect to the 245-acre parcel occur before January 1, 2001 or after
March 1, 2001 and with respect to the 77-acre parcel, before January 1,
2001 or after June 1, 2001. The Company sees no reason why the DPUC
would not approve this application.
On September 13, 1999, the Company executed two purchase and sale
agreements with The Trust for Public Land, Inc., ("TPL") for the sale by
the Company and purchase by TPL of 570 and 42.5 acres of unimproved
property in the City of Ansonia and the Towns of Seymour and Woodbridge,
CT, subject to TPL arranging for the availability of public financing for
the purchases. The purchase price of the parcels is $6,050,000 and
$200,000, respectively. The Company is unable to predict at this time
whether or not such financing will be available, although it is the
Company's understanding that TPL expects to convey the property
immediately to the State of Connecticut and the City of Ansonia for open
space purposes and that they expect such financing to be in place by
mid-year. The DPUC approved these transactions on March 1, 2000.
Page Seven
NOTE 4 - STOCK SPLIT
On January 11, 1999, the Company filed with the DPUC an Application for
Approval to Issue approximately 780,000 additional shares of common stock
in conjunction with a 2-for-1 stock split. The stock split, which had
been approved by the Board of Directors in December, 1998 was approved by
the DPUC on February 26, 1999. The stock split became effective on March
31, 1999 with respect to shares held of record on March 18, 1999. All per
share financial information contained in this Quarterly Report on Form
10-Q has been adjusted to reflect the impact of the common stock split.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Management's Discussion and Analysis of the Results of Operations
and Financial Condition contained in the Company's Annual Report on Form
10K for the year ended December 31, 1999, should be read in conjunction
with the comments below.
CAPITAL RESOURCES AND LIQUIDITY
Completion of the Company's Long Term Capital Improvement Program
is dependent upon the Company's ability to raise capital from external
sources, including, for the purpose of this analysis, proceeds from the
sale of the Company's holdings of excess land. For the three months
ended March 31, 2000 and 1999, the Company's additions to utility plant,
net of customer advances, cost $81,023 and $230,659, respectively. (see
Statement of Cash Flows). These additions were financed primarily from
external sources, namely proceeds from land sales.
The Company has outstanding $4,418,000 principal amount of
Mortgage Bonds, due September 1, 2011, issued under its Mortgage
Indenture. The Mortgage Indenture limits the issuing of additional First
Mortgage Bonds and the payment of dividends. It does not, however,
restrict the issuance of either long term or short-term debt, which is
either unsecured or secured with liens subordinate to the lien of the
Mortgage Indenture.
In 1998, the Company converted a $600,000 working capital line of
credit and a $1,500,000 secured line of credit to a two-year $2,100,000
revolving line of credit. In June 2000, the Company will have the option
to convert any outstanding balance to a six-year term note with principal
payments based on a 20-year amortization schedule, with a balloon payment
at the end of the six-year term. The revolving line of credit is secured
by a lien (subordinate to the lien of the Mortgage Bond Indenture) on all
of the Company's utility property other than its excess land available
for sale. Borrowings of $655,000 were outstanding on the revolving line
of credit on March 31, 2000. The Company may choose among several
interest rate options on the revolving line of credit variable option of
30- or 90-day LIBOR plus 100 basis points, or prime. The term loan
interest rate options consist of a fixed rate at the bank's cost of funds
plus 100 basis points, or a variable rate of the prime rate or 90 day
LIBOR plus 100 basis points, which is reset every 90 days.
Page Eight
The Company's 2000 Capital Budget of $1,888,000 is two-tiered.
The first tier consists of typical capital improvements made each year
for services, hydrants and meters, is budgeted for $701,000 in 2000, and
is expected to be financed primarily with internally generated funds.
The second tier of the 2000 Capital Budget consists of
replacements and betterments, which are part of the Company's Long Term
Capital Improvement Program, and includes $1,187,000 of budgeted plant
additions. Plant additions from this part of the 2000 budget will
require use of the Company's line of credit. Second tier plant additions
can be, and portions of it are expected to be, deferred to future years
if funds are not available for their construction in 2000.
As of March 31, 2000, the Company has approximately 964 acres of
excess land available for sale, of which all but 30 acres is currently
under contract, consisting of land currently classified as Class III,
non-watershed land under the statutory classification system for water
company lands. The Company believes that by selling these excess lands
it can generate sufficient equity capital to support its 5-year capital
budget, currently estimated at $7,100,000. Such land dispositions are
subject to approval by the DPUC. Proceeds from the sale of land are
recorded as revenue at the time of closing and portions of the gains are
deferred and amortized over various times as stipulated by the DPUC.
Results of Operations for the three Months Ended March 31, 2000 and 1999.
Net income for the three months ended March 31, 2000 was $85,453
compared with $201,905 for the same 1999 period. Increased operating
expenses and a reduction in the amortization of prior year land sales
principally account for this decline. Reduced revenues also contribute
to this decline.
Operating Revenues
Operating revenues for the first three months of 2000 of
$1,063,515 are $13,126 lower than operating revenues of $1,076,641 for
the first three months of 1999. Decreased water consumption in 2000
principally from the residential and commercial customers accounts for
this slight decrease.
Operating and Maintenance Expenses
Operating and Maintenance Expenses for the first three months of
2000 are $55,833 above the comparable 1999 period. Higher purchased
water costs and payroll charges in the 2000 first quarter principally
account for this variance. Purchased power costs in 2000 also exceed the
comparable 1999 period.
Depreciation Expense
Depreciation expense for the first three months of 2000 is $2,751
lower than the comparable 1999 period due to an overaccrual in 1999.
Depreciation expense relating to general plant additions somewhat offset
the overaccrual in 1999.
Page Nine
Taxes Other Than Income Taxes
Taxes Other Than Income Taxes for the three-month period ended
March 31, 2000 is $10,739 higher than the comparable 1999 period.
Increased payroll taxes in 2000 as a result of higher wages and an
increase in municipal property taxes account for this increase.
Other Income
Other Income for the first three months of 2000 is $12,003 below
the comparable 1999 period. Investment interest income recorded in the
first quarter of 1999 did not occur in the first quarter of 2000.
Land Dispositions
When the Company disposes of land, any gain recognized, net of
tax, is shared between ratepayers and stockholders based upon a formula
approved by the DPUC. The impact of land dispositions is recognized in
two places on the statement of income.
The statement of income will reflect income from the disposition
of Land (net of taxes) if land sales do occur. Since there were no land
sales in the first quarters of 2000 and 1999, the statement of income
reflects zero in both years. If land sales occur, the stockholders'
immediate share of income will be booked in the year of the sale based on
a formula approved by the DPUC.
Land disposition income is also recognized in the financial
statements as a component of operating income on the line entitled
"Amortization of Deferred Income on Dispositions of Land". These
amounts represent the recognition of income deferred on land dispositions
which occurred in prior years. The amortization of deferred income on
land dispositions net of tax, was $46,137 and $85,740 for the three
months ended March 31, 2000 and 1999, respectively.
Recognition of deferred income will continue over time periods
ranging from three to fifteen years, depending upon the amortization
period ordered by the DPUC for each particular disposition.
Page Ten
PART II. OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Financial Data Schedule
(b) Report on Form 8-K, dated March 9, 2000 was filed with
respect to the Registrant's net earnings for the twelve
months ended December 31, 1999, and with respect to the
approval by the Department of Public Utility Control
("DPUC") of the Registrant's Application to sell 570 acres
in the City of Ansonia and Town of Seymour for $6,050,000
to the Trust for Public Land ("TPL"), and with respect to a
second approval by the DPUC of the Registrant's Application
to sell 42.5 acres, to the City of Ansonia as the ultimate
Buyer.
(c) Report on Form 8-K, dated March 31, 2000 was filed with
respect to the Registrant's agreement with Toll Bros., Inc.
("Toll Bros.") for the sale of approximately 322 acres in
the Town of Seymour, Connecticut for $4,320,000.
Page Eleven
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BIRMINGHAM UTILITIES, INC.
Registrant
Date: May 12, 2000
/s/ John S. Tomac___________
John S. Tomac, President