================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
The Company's expenditures on property, plant and equipment during 1996 totaled
$6.2 million and consisted of the following: $3.3 million for routine capital
additions, which include transmission and distribution mains, hydrants, service
lines, meters and general equipment; $0.9 million for the cleaning and lining of
mains; $0.4 million for a main relocation in Port Reading, New Jersey; and $1.6
million for water system development in Delaware. These expenditures were
financed by utilization of the December 31, 1995, cash balance,
internally-generated funds from operations, the sale of common stock through the
Dividend Reinvestment Plan and proceeds from a long-term secured note.
The Company has projected capital expenditures of $17.1 million, $21.8 million
and $14.3 million, for 1997, 1998 and 1999, respectively. For 1997, $5.6 million
is for routine capital expenditures; $6.4 million for the upgrade of the Carl J.
Olsen Water Treatment Plant (CJO Plant); $1.9 million for treatment of well
supplies; $2.3 million for water systems additions and improvements in Delaware;
$0.2 million for the South River Basin regional supply; and $0.7 million for
miscellaneous items. For 1998 and 1999 combined, $12.0 million is for routine
capital expenditures; $20.5 million for the CJO Plant upgrade; $1.3 million for
water system development in Delaware; $1.3 million for treatment of well
supplies; $0.5 million for the South River Basin regional supply; and $0.5
million for miscellaneous items.
Sources of Capital - To finance the Capital Program, the Company will utilize
internally-generated cash and external financing. The Company will initially
rely upon short-term borrowings through lines of credit established with three
financial institutions. There is $20 million available under these commitments.
It is expected that there will be several debt and equity financings over the
three-year period. The amount, type and timing of the financings will be based
upon the construction schedule, regulatory rate relief and financial market
conditions.
RESULTS OF OPERATIONS
1996 COMPARED TO 1995
Consolidated operating revenues in 1996 were $0.2 million higher than in 1995.
Consumption was lower in all major classes of customers. These decreases were
offset by additional fixed service charges as a result of an increased customer
base in Delaware of 12.5% and the inclusion of revenues from the Pinelands
Companies and Utility Service Affiliates for a full year in 1996.
Operations and maintenance expenses were $0.9 million or 4.8% higher in 1996
over 1995 due principally to increases in purchased water of $0.3 million; water
treatment of $0.3 million; pumping expenses of $0.2 million; and customer
accounts and administrative and general expenses of $0.3 million; offset by a
decrease in transmission and distribution expenses of $0.2 million.
Depreciation increased $0.1 million or 4.1% due to a higher depreciation base.
Federal income taxes decreased $0.5 million due to lower taxable income.
Interest expenses increased $0.2 million or 5.3% as a result of the long-term
borrowings by Tidewater.
As a result, net income decreased $0.5 million or 9.4%.
RESULTS OF OPERATIONS
1995 COMPARED TO 1994
Operating revenues increased $1.7 million or 4.8% over the previous year. Of
that amount, $0.5 million is due to the inclusion of the Pinelands Companies for
almost nine months during 1995. The remainder is the result of increased
consumption, which is due to Tidewater increasing their customer base by 13% and
the extended dry weather pattern during the summer.
Operations and maintenance expenses increased by $1.0 million or 5.9% over 1994.
Of this increase, $0.4 million relates to the inclusion of the Pinelands
Companies. Additionally, there were increases in water treatment of $0.3
million; pumping expenses of $0.2 million; transmission and distribution
expenses of $0.2 million and administrative and general expenses of $0.1
million; which were offset by a decrease in purchased water of $0.2 million.
Depreciation increased $0.2 million or 6.2% due to a higher depreciation base
and the inclusion of the newly acquired subsidiaries. Taxes, other than income
taxes, increased $0.1 million or 2.5% due largely to higher revenue-related
taxes. Federal income taxes increased $0.2 million due to higher taxable income.
Net income increased 3.8% reflecting overall higher revenues, continued
monitoring of operating expenses, and a noted increase in Tidewater's customer
base.
REGULATORY MATTERS
On November 27, 1996, Middlesex filed a petition with the New Jersey Board of
Public Utilities (BPU) for a base rate increase of $5.8 million or 16.8%.
Included in the petition are the following: Deferred charges of $0.7 million
which the Company is seeking to recover in rates by amortizing these costs over
periods of two to ten years; projected construction work in progress
expenditures of $7.0 million associated with the upgrade of the Carl J. Olsen
Water Treatment Plant, which is necessary to comply with new and anticipated
environmental laws and regulations and to expand the plant's production
capacity; and $1.2 million for the recovery of postretirement benefit costs
other than pension which are mandated by the Company's compliance with Statement
of Financial Accounting Standards (SFAS No. 106), "Employers' Accounting for
Postretirement Benefits Other Than Pensions." A decision in this matter is
expected some time in 1997. The last increase in base rates granted by the BPU
was $2.8 million or 9.33% in April 1993.
On December 19, 1996, the BPU approved the Company's request to transfer its
Robinson's Branch Reservoir to the Township of Clark and to transfer a
conservation easement on the property to the New Jersey Conservation Foundation.
Although the reservoir has not been used as a water supply since approximately
1970, the Company intends to retain its water diversion rights for possible
future
================================================================================
10
================================================================================
use. Under the terms of the transaction, the municipality is to assume the
obligation to make certain improvements to the reservoir's dam required under
the New Jersey Dam Safety Act.
On October 9, 1996, Middlesex received approval from the BPU for a Purchased
Water Adjustment Clause (PWAC) rate increase pertaining to $0.2 million of
increased purchase water costs. A PWAC, which was first implemented by Middlesex
in 1994, is subject to an annual reconciliation of actual costs incurred with
amounts recovered under a PWAC rate.
On January 23, 1997, the BPU approved a stipulation agreed to by the parties to
the Pinelands Water and Wastewater Companies' rate cases which were filed in
February 1996. The stipulations allow for a combined rate increase which will
result in $0.4 million additional revenues. The new rates will be phased in over
a three-year period to minimize the impact on customers. Previously, in April
1995, the BPU approved the $2.3 million asset purchase by the Pinelands
Companies of a 2,200 customer water utility and a 2,200 customer wastewater
utility located in Burlington County, New Jersey. The transaction was financed
by a combination of cash on hand and promissory notes, which have since been
extinguished.
ACCOUNTING STANDARDS
The Financial Accounting Standards Board (FASB) issued SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," which requires that long-lived assets be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Effective January 1, 1996, the Company adopted SFAS No.
121 with no effect on its results of operations or cash flows.
The FASB also issued SFAS No. 123, "Accounting for Stock-Based Compensation."
SFAS No. 123 establishes financial accounting and disclosure requirements using
a fair value-based method of accounting for stock-based employee compensation
plans. The Statement provides an entity the option to either adopt the new
method or to continue to measure compensation cost as prescribed by Accounting
Principles Board Opinion No. 25 (APB 25), "Accounting for Stock Issued to
Employees," and provide proforma disclosures of the effect of adopting SFAS 123.
The Company has elected to continue its current accounting treatment for stock
compensation under APB 25.
OUTLOOK
Revenues and earnings for 1997 are projected to increase based on anticipated
customer growth in the Delaware service territory, recently approved rate relief
for the Pinelands Companies, and increased contract service revenues. Fair and
timely rate relief from the Middlesex base rate increase request should also
provide the opportunity to improve revenues.
Currently, there are no plans by Tidewater to file for a rate increase in
Delaware. The last rate increase granted to Tidewater was in October 1991.
Average annual customer growth of 20% since that time has made it possible for
Tidewater to sustain earnings under the existing rate structure.
Middlesex will continue to be active in the evolving water industry. Growth
opportunities in both the regulated and non-regulated sectors that are
financially sound, complement the existing operations and increase shareholder
value will be pursued by Middlesex.
Certain matters discussed in this annual report are "forward-looking statements"
intended to qualify for safe harbors from liability established by the Private
Securities Litigation Reform Act of 1995. Such statements address future plans,
objectives, expectations and events concerning various matters such as capital
expenditures, earnings, litigation, growth potential, rate and other regulatory
matters, liquidity and capital resources, and accounting matters. Actual results
in each case could differ materially from those currently anticipated in such
statements. The Company undertakes no obligation to publicly update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise.
REPORT OF MANAGEMENT
The consolidated financial statements and other financial information included
in this annual report have been prepared by and are the responsibility of
Management. The statements have been prepared in conformity with generally
accepted accounting principles considered appropriate under the circumstances
and include amounts based on necessary judgment and estimates deemed
appropriate.
The Company maintains a system of internal accounting controls designed to
provide reasonable assurance that assets are protected from improper use and
loss and to provide reliable financial information.
The consolidated financial statements of the Company have been audited by its
independent auditors, Deloitte & Touche LLP, and their report is included
herein.
The Board of Directors, through its Audit Committee consisting solely of
outside Directors, is responsible for overseeing and reviewing the Company's
financial reporting and accounting practices. The Audit Committee meets
periodically with the independent auditors to review the scope of their work and
discuss any changes and developments that may impact the Company.
/s/ J. Richard Tompkins /s/ A. Bruce O'Connor
Chairman of the Board Vice President and
and President Controller
February 14, 1997
================================================================================
11
================================================================================
MIDDLESEX WATER COMPANY
CONSOLIDATED BALANCE SHEETS
Assets
DECEMBER 31,
1996 1995
===================================================================================================
UTILITY PLANT Water Production $ 27,378,668 $ 27,598,613
(NOTE 5): Transmission and Distribution 103,852,969 97,359,802
General 18,156,233 18,169,056
Construction Work in Progress 319,238 1,207,538
-------------------------------------------------------------------------------
TOTAL 149,707,108 144,335,009
Less Accumulated Depreciation 28,462,588 26,402,377
-------------------------------------------------------------------------------
UTILITY PLANT - NET 121,244,520 117,932,632
-------------------------------------------------------------------------------
NONUTILITY ASSETS - NET 1,774,106 1,737,596
===================================================================================================
CURRENT ASSETS: Cash and Cash Equivalents 4,262,862 4,900,640
Accounts Receivable 4,022,129 4,224,653
Unbilled Revenues 2,175,478 2,170,143
Materials and Supplies (at average cost) 1,034,572 1,030,801
Prepayments and Other Current Assets 430,000 660,314
-------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 11,925,041 12,986,551
===================================================================================================
DEFERRED Unamortized Debt Expense 2,848,352 2,969,281
CHARGES: Preliminary Survey and Investigation Charges 1,716,884 833,869
Regulatory Assets:
Income Taxes (Note 3) 6,181,048 6,052,524
Postretirement Costs (Note 4) 1,003,716 758,127
Other (Note 2) 1,965,855 1,551,627
-------------------------------------------------------------------------------
TOTAL DEFERRED CHARGES 13,715,855 12,165,428
-------------------------------------------------------------------------------
TOTAL $148,659,522 $144,822,207
-------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
===================================================================================================
12
===================================================================================================
Capitalization and Liabilities
DECEMBER 31,
1996 1995
===================================================================================================
CAPITALIZATION Common Stock $ 29,988,966 $ 28,820,844
(SEE ACCOMPANYING Retained Earnings 19,226,847 18,822,817
STATEMENTS -------------------------------------------------------------------------------
AND NOTE 9): TOTAL COMMON EQUITY 49,215,813 47,643,661
-------------------------------------------------------------------------------
Cumulative Preferred Stock 2,666,305 2,666,305
Long-term Debt 52,960,953 52,960,000
-------------------------------------------------------------------------------
TOTAL CAPITALIZATION 104,843,071 103,269,966
===================================================================================================
CURRENT Current Portion of Long-term Debt 39,047 240,000
LIABILITIES: Accounts Payable 1,686,652 1,521,515
Customer Deposits 377,702 348,631
Taxes Accrued 4,529,185 4,321,919
Interest Accrued 1,168,242 1,216,851
Other 2,125,683 1,161,630
-------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 9,926,511 8,810,546
===================================================================================================
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 5)
===================================================================================================
DEFERRED Customer Advances for Construction 8,977,081 9,207,565
CREDITS: Accumulated Deferred Investment Tax Credits (Note 3) 2,308,736 2,380,416
Accumulated Deferred Federal Income Taxes (Note 3) 12,088,144 11,147,627
Other 1,715,458 1,985,654
-------------------------------------------------------------------------------
TOTAL DEFERRED CREDITS 25,089,419 24,721,262
-------------------------------------------------------------------------------
CONTRIBUTIONS IN AID OF CONSTRUCTION 8,800,521 8,020,433
-------------------------------------------------------------------------------
TOTAL $148,659,522 $144,822,207
-------------------------------------------------------------------------------
===================================================================================================
See Notes to Consolidated Financial Statements.
13
===================================================================================================
Middlesex Water Company
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31,
1996 1995 1994
===================================================================================================
OPERATING REVENUES (Note 2) $38,024,669 $37,846,899 $36,122,475
- ---------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Operations:
Water Purchased (Note 5) 2,965,616 2,656,423 2,769,265
Other 14,284,315 13,573,581 12,592,008
Maintenance 1,527,842 1,686,051 1,549,970
Depreciation 2,929,106 2,813,927 2,649,657
Taxes, other than Income Taxes 5,569,047 5,479,299 5,343,563
Federal Income Taxes (Note 3) 2,526,297 2,975,227 2,766,361
- ---------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 29,802,223 29,184,508 27,670,824
- ---------------------------------------------------------------------------------------------------
OPERATING INCOME 8,222,446 8,662,391 8,451,651
===================================================================================================
OTHER INCOME:
Allowance for Funds Used During Construction - Equity 39,891 21,654 --
Other - Net 185,277 134,461 87,418
- ---------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME 225,168 156,115 87,418
- ---------------------------------------------------------------------------------------------------
INCOME BEFORE INTEREST CHARGES 8,447,614 8,818,506 8,539,069
===================================================================================================
INTEREST CHARGES:
Interest on Long-term Debt 3,166,786 2,981,258 2,882,731
Allowance for Funds Used During Construction - Debt (23,723) (5,606) --
Amortization of Debt Expense 120,930 121,138 118,657
Other Interest Expense 16,161 17,972 42,309
- ---------------------------------------------------------------------------------------------------
TOTAL INTEREST CHARGES 3,280,154 3,114,762 3,043,697
- ---------------------------------------------------------------------------------------------------
NET INCOME 5,167,460 5,703,744 5,495,372
- ---------------------------------------------------------------------------------------------------
PREFERRED STOCK DIVIDEND REQUIREMENTS 158,926 158,932 188,357
- ---------------------------------------------------------------------------------------------------
EARNINGS APPLICABLE TO COMMON STOCK $ 5,008,534 $5,544,812 $5,307,015
- ---------------------------------------------------------------------------------------------------
EARNINGS AND DIVIDENDS PER SHARE OF COMMON STOCK:
Earnings $ 1.20 $ 1.36 $ 1.33
Dividends Paid $ 1.10 1/2 $ 1.08 1/2$ 1.05 3/4
Average Number of Shares Outstanding 4,169,334 4,078,890 4,003,393
- ---------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
===================================================================================================
14
===================================================================================================
Middlesex Water Company
CONSOLIDATED STATEMENTS OF CAPITAL STOCK
AND LONG-TERM DEBT
DECEMBER 31,
1996 1995
====================================================================================================
Common Stock, No Par Value (Notes 4 and 9):
Shares Authorized - 6,000,000
Shares Outstanding -1996 - 4,204,949 $30,281,565
1995 - 4,136,972 $29,110,095
Restricted Stock Plan (292,599) (289,251)
- ----------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK $29,988,966 $28,820,844
- ----------------------------------------------------------------------------------------------------
Cumulative Preference Stock, No Par Value:
Shares Authorized - 100,000
Shares Outstanding - None
Cumulative Preferred Stock, No Par Value (Note 9):
Shares Authorized - 69,418
Convertible:
Shares Outstanding, $7.00 Series - 14,901 $ 1,564,605 $ 1,564,605
Nonredeemable:
Shares Outstanding, $7.00 Series - 1,017 101,700 101,700
Shares Outstanding, $4.75 Series - 10,000 1,000,000 1,000,000
- ----------------------------------------------------------------------------------------------------
TOTAL CUMULATIVE PREFERRED STOCK $ 2,666,305 $ 2,666,305
- ----------------------------------------------------------------------------------------------------
Long-term Debt (Note 9):
8.05%, Amortizing Secured Note, due December 20, 2021 $ 3,500,000 $ 2,500,000
7.00%, Promissory Notes, due April 21, 2000 -- 1,200,000
First Mortgage Bonds:
7.25%, Series R, due July 1, 2021 6,000,000 6,000,000
5.20%, Series S, due October 1, 2022 12,000,000 12,000,000
5.25%, Series T, due October 1, 2023 6,500,000 6,500,000
6.40%, Series U, due February 1, 2009 15,000,000 15,000,000
5.25%, Series V, due February 1, 2029 10,000,000 10,000,000
- ----------------------------------------------------------------------------------------------------
SUBTOTAL LONG-TERM DEBT $53,000,000 $53,200,000
- ----------------------------------------------------------------------------------------------------
Less: Current Portion of Long-term Debt (39,047) (240,000)
- ----------------------------------------------------------------------------------------------------
TOTAL LONG-TERM DEBT $52,960,953 $52,960,000
- ----------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
====================================================================================================
15
===================================================================================================
MIDDLESEX WATER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
1996 1995 1994
===================================================================================================
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 5,167,460 $ 5,703,744 $ 5,495,372
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 3,011,337 2,925,928 2,961,727
Provision for Deferred Income Taxes 811,993 278,384 639,381
Allowance for Funds Used During Construction (63,614) (27,260) --
Changes in Current Assets and Liabilities:
Accounts Receivable 202,524 12,147 (694,293)
Materials and Supplies (3,771) (36,907) (24,109)
Accounts Payable 165,137 (95,430) 144,923
Accrued Income Taxes 207,266 (122,453) 77,450
Accrued Interest (48,609) 82,628 191,728
Unbilled Revenues (5,335) (26,348) 102,820
Other - Net 812,337 227,334 (53,483)
- ---------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 10,256,725 8,921,767 8,841,516
- ---------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Utility Plant Expenditures* (6,172,482) (8,990,408) (5,979,113)
Notes Receivable -- (1,250,000) --
Preliminary Survey & Investigation Charges (883,015) (180,541) 11,819
Marketable Securities -- 931,750 (933,298)
Other - Net (657,958) (93,919) (345,778)
- ---------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (7,713,455) (9,583,118) (7,246,370)
- ---------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of Long-term Debt (1,200,000) -- (12,500,000)
Proceeds from Issuance of Long-term Debt 1,000,000 3,700,000 25,000,000
Temporary Cash Investments - Restricted 64,907 212,362 2,633,653
Proceeds from Issuance of Common Stock - Net 1,168,122 1,669,171 928,459
Deferred Debt Issuance Expenses (251) (53,719) (1,167,605)
Payment of Preferred Dividends (158,926) (158,497) (180,006)
Payment of Common Dividends (4,604,504) (4,421,852) (4,231,410)
Construction Advances and Contributions - Net 549,604 884,140 878,204
Redemption of Preferred Stock -- (123,800) (1,248,500)
Short-term Bank (Repayments) -- -- (9,000,000)
- ---------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (3,181,048) 1,707,805 1,112,795
- ---------------------------------------------------------------------------------------------------
NET CHANGES IN CASH AND CASH EQUIVALENTS (637,778) 1,046,454 2,707,941
- ---------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,900,640 3,854,186 1,146,245
- ---------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4,262,862 $ 4,900,640 $ 3,854,186
- ---------------------------------------------------------------------------------------------------
*Excludes Allowance for Funds Used During Construction.
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash Paid During the Year for:
Interest (net of amounts capitalized) $ 3,116,338 $ 2,877,483 $ 2,722,327
Income Taxes $ 2,117,998 $ 3,078,000 $ 2,453,936
- ---------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
===================================================================================================
16
- --------------------------------------------------------------------------------
MIDDLESEX WATER COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
YEARS ENDED DECEMBER 31,
1996 1995 1994
- --------------------------------------------------------------------------------------------------------
BALANCE AT BEGINNING OF YEAR $18,822,817 $17,699,422 $16,615,466
NET INCOME 5,167,460 5,703,744 5,495,372
- --------------------------------------------------------------------------------------------------------
TOTAL 23,990,277 23,403,166 22,110,838
- --------------------------------------------------------------------------------------------------------
CASH DIVIDENDS:
Cumulative Preferred Stock 158,926 158,497 180,006
- --------------------------------------------------------------------------------------------------------
Common Stock 4,604,504 4,421,852 4,231,410
- --------------------------------------------------------------------------------------------------------
TOTAL DEDUCTIONS 4,763,430 4,580,349 4,411,416
- --------------------------------------------------------------------------------------------------------
BALANCE AT END OF YEAR $19,226,847 $18,822,817 $17,699,422
- --------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
========================================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization - Middlesex Water Company (Middlesex or the Company) is the
parent company and sole shareholder of Tidewater Utilities, Inc. (Tidewater),
Pinelands Water Company, Pinelands Wastewater Company, and Utility Service
Affiliates, Inc. (USA). White Marsh Environmental Systems, Inc., is a
wholly-owned subsidiary of Tidewater. The financial statements for Middlesex and
its wholly-owned subsidiaries (Consolidated Group) are reported on a
consolidated basis. All intercompany accounts and transactions have been
eliminated.
(b) System of Accounts - Middlesex, Pinelands Water and Pinelands Wastewater
maintain their accounts in accordance with the Uniform System of Accounts
prescribed by the Board of Public Utilities of the State of New Jersey (BPU).
Tidewater maintains its accounts in accordance with the Public Service
Commission of Delaware (PSC).
(c) Utility Plant - Utility Plant is stated at original cost as defined for
regulatory purposes. Property accounts are charged with the cost of betterments
and major replacements of property. Cost includes direct material, labor and
indirect charges for pension benefits and payroll taxes. Middlesex and Tidewater
capitalize an Allowance for Funds Used During Construction on individual
projects with costs exceeding specific thresholds for each company. Depreciation
is computed by each regulated member of the Consolidated Group utilizing a rate
approved by the applicable regulatory authority. The Accumulated Provision for
Depreciation is charged with the cost of property retired, together with removal
costs, less salvage. The cost of labor, materials, supervision and other
expenses incurred in making repairs and minor replacements and in maintaining
the properties is charged to the appropriate expense accounts. On January 1,
1996, the Company adopted SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to Be Disposed Of." At December 31,
1996, there was no event or change in circumstance that would indicate that the
carrying amount of any long-lived asset was not recoverable. Under the current
regulatory environment, the Company does not expect SFAS No. 121 to have a
significant impact on their results of operations or cash flows.
(d) Accounts Receivable - Provision for allowance for doubtful accounts at
December 31, 1996, 1995 and 1994, and the corresponding expense and deduction
for those years, is each less than $0.1 million.
(e) Revenues - In general, revenues are recorded as service is rendered and
include estimates for amounts unbilled at the end of the period for water used
subsequent to the last billing cycle. Service charges are billed in advance by
two subsidiaries and are recognized in revenue as the service is provided.
(f) Deferred Charges - Unamortized Debt Expense is amortized over the lives of
the related issues. As authorized by the BPU, main cleaning and lining costs are
being amortized over a 14-year period.
(g) Income Taxes - Middlesex files a consolidated Federal income tax return for
the Consolidated Group and income taxes are allocated based on the separate
return method. Investment tax credits have been deferred and are being amortized
over the estimated useful life of the related property.
17
================================================================================
================================================================================
(h) Statements of Cash Flows - For purposes of reporting cash flows, the Company
considers all highly liquid investments with original maturity dates of three
months or less to be cash equivalents. Cash and cash equivalents represent bank
balances, money market funds, and U.S. Treasury Bills maturing in less than 90
days.
(i) Use of Estimates - Conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts in the financial statements. Actual results could differ from those
estimates.
(j) Certain prior year amounts have been reclassified to conform to the current
year reporting.
NOTE 2 - RATES AND REVENUES
On November 27, 1996, Middlesex filed a petition with the BPU for a base rate
increase of $5.8 million or 16.8%. Included in the petition are the following:
Deferred charges of $0.7 million which the Company is seeking to recover in
rates by amortizing these costs over periods of two to ten years; projected
construction work in progress expenditures of $7.0 million associated with the
upgrade of the Carl J. Olsen Water Treatment Plant, which is necessary to comply
with new and anticipated environmental laws and regulations and to expand the
plant's production capacity; and $1.2 million for the recovery of postretirement
costs other than pension expenses which are mandated by the Company's compliance
with SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." A decision in this matter is expected some time in 1997. The last
increase in base rates granted by the BPU was $2.8 million or 9.33% in April
1993.
On December 19, 1996, the BPU approved the Company's request to transfer
its Robinsons Branch Reservoir to the Township of Clark and to transfer a
conservation easement on the property to the New Jersey Conservation Foundation.
Although the reservoir has not been used as a water supply since approximately
1970, the Company intends to retain its water diversion rights for possible
future use. Under the terms of the transaction, the municipality is to assume
the obligation to make certain improvements to the reservoir's dam required
under the New Jersey Dam Safety Act.
On October 9, 1996, Middlesex received approval from the BPU for a Purchased
Water Adjustment Clause (PWAC) rate increase pertaining to $0.2 million of
increased purchase water costs. A PWAC is a regulatory vehicle that allows New
Jersey water utilities to pass along to customers changes in the cost of
purchasing water, without the need for filing a full base rate case. A PWAC,
which was first implemented by Middlesex in 1994, is subject to an annual
reconciliation of actual costs incurred to amounts recovered under a PWAC rate.
On January 23, 1997, the BPU approved a stipulation agreed to by the parties to
the Pinelands Water and Wastewater Companies' rate cases which were filed on
February 21, 1996. The stipulations allow for a combined rate increase which
will result in $0.4 million additional revenues. The new rates will be phased in
over a three-year period to minimize the impact on customers. Previously, in
April 1995, the BPU approved the $2.3 million asset purchase by the Pinelands
Companies of a 2,200 customer water utility and a 2,200 customer wastewater
utility located in Burlington County, New Jersey. The transaction was financed
by a combination of cash on hand and promissory notes, which have since been
extinguished.
Included in Deferred Charges-Other is $0.1 million of deferred costs at December
31, 1996, which Middlesex is recovering through rates over a period of 14 years.
The BPU has excluded these costs from rate base and, therefore, Middlesex is not
earning a return on the unamortized costs during the recovery period.
NOTE 3 - INCOME TAXES
Federal income tax expense differs from the amount computed by applying the
statutory rate on book income subject to tax for the following reasons:
YEARS ENDED DECEMBER 31,
(THOUSANDS OF DOLLARS)
1996 1995 1994
- --------------------------------------------------------------------------------
Income Tax at Statutory Rate
of 34% $ 2,616 $ 2,951 $ 2,809
Tax Effect of:
Allowance for Funds Used
During Construction (22) (9) --
Other (68) 33 (43)
- --------------------------------------------------------------------------------
Total Federal Income Tax
Expense $ 2,526 $ 2,975 $ 2,766
- --------------------------------------------------------------------------------
Federal income tax expense is comprised
of the following:
Current $ 1,835 $ 2,726 $ 2,219
Deferred:
Customer Advances 35 (265) (123)
Accelerated Depreciation 760 637 617
Revenue Taxes -- (6) (403)
Bond Redemptions (16) (16) 477
Investment Tax Credit (72) (72) (72)
Other (16) (29) 51
- --------------------------------------------------------------------------------
Total Federal Income Tax Expense $ 2,526 $ 2,975 $ 2,766
- --------------------------------------------------------------------------------
The statutory review period for income tax returns for the years prior to 1993
has been closed.
Under SFAS No. 109, "Accounting for Income Taxes," the Company is required to
set up deferred income taxes for all temporary differences regardless of the
regulatory ratemaking treatment. However, if it is probable that these
additional taxes will be passed on to ratepayers, an offsetting regulatory asset
or liability is to be recorded. Management believes that it is probable that the
consolidated deferred income tax liability of approximately $6.2 million will be
recovered in future rates. Therefore, a regulatory asset has been set up to
offset the increased liability.
================================================================================
18
================================================================================
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial purposes
and the amounts used for income tax purposes. The components of the net deferred
tax liability are as follows:
YEARS ENDED DECEMBER 31,
(THOUSANDS OF DOLLARS)
1996 1995
- --------------------------------------------------------------------------------
Utility Plant Related $16,278 $15,180
Customer Advances (3,920) (3,856)
Other (270) (176)
- --------------------------------------------------------------------------------
Total Deferred Tax Liability $12,088 $11,148
- --------------------------------------------------------------------------------
NOTE 4 - EMPLOYEE BENEFIT PLANS
Pension
The Company has a noncontributory defined benefit pension plan which covers
substantially all employees with more than 1,000 hours of service. The Company
makes annual contributions to the plan consistent with the funding requirements
of Federal laws and regulations.In 1996, employees of Tidewater became eligible
to participate in the Plan.
Pension expense for 1996, 1995 and 1994 was $292,000, $372,000 and $218,000,
respectively.
Plan assets consist primarily of corporate equities, cash equivalents, and stock
and bond funds. The following table sets forth the plan's funded status and
amounts recognized in the Company's balance sheets.
YEARS ENDED DECEMBER 31,
(THOUSANDS OF DOLLARS)
1996 1995
- --------------------------------------------------------------------------------
Actuarial present value of plan benefits:
Vested benefits $(8,791) $(8,172)
Nonvested benefits (42) (31)
Impact of estimated future
compensation charges (2,921) (2,964)
- --------------------------------------------------------------------------------
Projected plan benefits (11,754) (11,167)
Plan assets at fair value 12,831 11,705
- --------------------------------------------------------------------------------
Plan assets in excess of
projected plan benefits 1,077 538
Unrecognized net obligation 72 86
Unrecognized prior service cost 120 --
Unrecognized net gain (1,346) (701)
- --------------------------------------------------------------------------------
Accrued pension cost
recognized in the
balance sheet $ (77) $ (77)
- --------------------------------------------------------------------------------
Net pension cost includes the following components:
Service cost benefits earned
during the period $ 408 $ 344
Interest cost on projected
benefit obligation 787 763
Return on plan assets (924) (749)
Net amortization and deferral 21 14
- --------------------------------------------------------------------------------
Net pension cost $ 292 $ 372
- --------------------------------------------------------------------------------
The assumptions used in determining the actuarial present value of the projected
obligation at December 31, 1996 and 1995 was a discount rate of 7.25% and a
compensation increase of 4.75%. The expected long-term rate of return on plan
assets used in determining net periodic cost was 8.0%.
The Company maintains an unfunded supplemental pension plan for its executives.
At December 31, 1996 and December 31, 1995, expenses for the supplemental plan
were $293,000 and $250,000, and the projected benefit obligations were $1.4
million and $1.3 million, respectively.
Postretirement Benefits Other Than Pensions (PBOP)
Middlesex provides certain health care and life insurance benefits for
substantially all of its retired employees, which are accounted for in
accordance with SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions." SFAS No. 106 requires an accrual method of accounting for
PBOP. Previously, the cost of these benefits were expensed when incurred. During
1996, the Company determined that certain assumptions used to calculate the
transition obligation when SFAS No. 106 was adopted needed to be revised. As a
result, the transition obligation has been reduced, with no impact on earnings.
In accordance with SFAS No. 71, "Accounting for the Effects of Certain Types of
Regulation," the Company has recognized a deferred regulatory asset relating to
the difference between the accrued PBOP costs determined under SFAS No. 106 and
the pay-as-you-go amounts previously expensed. The regulatory asset at December
31, 1996 and 1995 was $1.2 million and $0.9 million, respectively.
On January 8, 1997, the BPU approved an order that provides options for the
recovery of PBOP costs. The Company is seeking recovery of PBOP costs through
rates as part of its base rate case (see Note 2).
In 1996, 1995 and 1994, the Company recognized PBOP expenses of $192,000,
$185,000 and $176,000, respectively. The plan's funded status is as follows:
YEARS ENDED DECEMBER 31,
(THOUSANDS OF DOLLARS)
1996 1995
- --------------------------------------------------------------------------------
Retirees $1,149 $1,623
Fully eligible plan participants 354 776
Other active plan participants 1,543 758
- --------------------------------------------------------------------------------
Accumulated postretirement
benefit obligation 3,046 3,157
Plan assets at fair value -- --
Unrecognized net loss (47) (99)
Unrecognized prior service cost 169 --
Unrecognized transition
obligation (2,164) (2,300)
- --------------------------------------------------------------------------------
Accrued postretirement benefit
obligation $1,004 $ 758
================================================================================
19
================================================================================
Net postretirement benefit cost consisted of the following components:
YEARS ENDED DECEMBER 31,
(THOUSANDS OF DOLLARS)
1996 1995
- --------------------------------------------------------------------------------
Service cost--benefits earned
during the year $ 101 $ 83
Interest cost on accumulated
postretirement benefit obligation 211 212
Amortization of net (gain)/loss 2 (11)
Amortization of prior service cost (11) --
Amortization of transition obligation 135 135
Regulatory deferral (246) (234)
- --------------------------------------------------------------------------------
Net postretirement benefit cost $ 192 $185
- --------------------------------------------------------------------------------
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation for 1996 was 5%, which will remain constant
for all future years. A one-percentage point increase in the assumed health care
cost trend rate would increase the accumulated postretirement benefit obligation
by 14% and the 1996 net postretirement benefit cost by approximately 10%. The
assumed discount rate used in determining the accumulated postretirement benefit
obligation for 1996 and 1995 was 7.25%.
Stock Based Compensation
The Company maintains a restricted stock plan, under which 30,300 shares of the
Company's common stock are held in escrow by the Company for key employees. Such
stock is subject to an agreement requiring forfeiture by the employee in the
event of termination of employment within five years of the grant other than as
a result of retirement, death or disability.
The maximum number of shares authorized for grant under this plan is 60,000
shares. Compensation expense is determined by the market value of the stock on
the date of the award and is being amortized over a five-year period. The
compensation expenses for 1996, 1995 and 1994 were not considered material.
The Financial Accounting Standards Board (FASB) issued SFAS No. 123, "Accounting
for Stock-Based Compensation." SFAS No. 123 provides an entity the option to
either adopt the new method or to continue to measure compensation cost as
prescribed by Accounting Principles Board Opinion No. 25 (APB 25), "Accounting
for Stock Issued to Employees," and provide proforma disclosures of the effect
of adopting SFAS No. 123. The Company has elected to continue its current
accounting treatment for stock compensation under APB 25. Had compensation costs
for the Company's restricted stock plan been determined based on methodology
prescribed in SFAS No. 123, there would have been no effect on its results of
operations or cash flows.
NOTE 5 - COMMITMENTS AND CONTINGENT LIABILITIES
Service Agreement - On May 19, 1995, Middlesex and USA jointly entered into a
five-year contract with the City of South Amboy to operate and maintain the
City's 2,600 customer water system. The Contract, which is subject to renewal
for three future five-year periods, is expected to produce approximately $1.5
million in revenues for the first five years with only a minimal impact on
earnings. In 1996, $0.3 million in revenues was recognized under the contract.
Water Supply - Middlesex has an agreement with the Elizabethtown Water Company
for the purchase of treated water. This agreement, which expires December 31,
2005, provides for the minimum purchase of 3 million gallons daily (mgd) of
treated water with provisions for additional purchases. The 1996, 1995 and 1994
costs under this agreement were $1.3 million, $0.9 million and $1.0 million,
respectively.
Middlesex also has an agreement with the New Jersey Water Supply Authority
(NJWSA), which expires November 1, 2013, and provides for the minimum purchase
of 20 mgd of untreated water from the Delaware and Raritan Canal and the Raritan
River. In addition, the Company has a supplemental one-year agreement for an
additional 5 mgd through April 30, 1997. This agreement is renewable on an
annual basis. The total costs for 1996, 1995 and 1994, were $1.7 million, $1.7
million and $1.8 million, respectively.
Construction - The Consolidated Group plans to spend approximately $17.1 million
in 1997 on its construction program. Substantially all of the utility plant of
the Group is subject to the lien of its mortgage which also includes certain
restrictions as to cash dividend payments and other distributions on common
stock.
Litigation - A local entity and its owner have filed a negligence claim against
the Company, for which the Company is insured, with a claim for punitive damages
which may not be insured. Their action alleges financial losses arising out of
improper water pressure and service. An amendment to the claim alleges damages
resulting from some poor quality water. Other parties who dealt with the
claimants have joined the matter. Without taking a position on the negligence
claim, the Company does not believe that the claim for punitive damages will
prevail. While the outcome of this case is not presently determinable,
management believes that the final resolution will not have a significant effect
on the Company's financial position or results of operations or cash flows.
NOTE 6 - LINES OF CREDIT AND NOTES PAYABLE
(THOUSANDS OF DOLLARS)
1996 1995 1994
- --------------------------------------------------------------------------------
Established Lines of Credit at
year-end $20,000 $20,000 $15,500
Amounts Outstanding at
December 31 -- -- --
Maximum Amount Outstanding -- -- 11,000
Average Outstanding Balance -- -- 1,769
Weighted Average Interest Rate -- -- 3.4%
- --------------------------------------------------------------------------------
Short-term borrowings are generally below the prime rate.
================================================================================
20
================================================================================
As part of the service agreement with the City of South Amboy, on June 1, 1995,
USA made an investment in the form of a loan of $1.25 million, which is included
in nonutility assets on the Consolidated Balance Sheet. Principal repayment and
the interest rate are based upon renewal provisions of the contract.
NOTE 7 - RELATED PARTY TRANSACTIONS
During 1996, 1995 and 1994, the Company had transactions with a construction
company in which a Director has a financial interest. Major construction
transactions were awarded on the basis of competitive bids approved by the Board
of Directors (with the interested Director abstaining) and amounted to $0.9
million, $0.9 million and $0.6 million for the years 1996, 1995 and 1994,
respectively. These amounts included $0.1 million due the construction company
at December 31, 1996, 1995 and 1994.
NOTE 8 - QUARTERLY OPERATING RESULTS - UNAUDITED
Quarterly operating results for 1996 and 1995 are as follows:
1ST 2ND 3RD 4TH
1996 QUARTER QUARTER QUARTER QUARTER YEAR
- --------------------------------------------------------------------------------
(THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
Operating Revenues $9,247 $9,632 $ 9,934 $9,212 $38,025
Operating Income 1,968 2,110 2,288 1,856 8,222
Net Income 1,153 1,307 1,494 1,213 5,167
Earnings per Common
Share $ 0.27 $ 0.30 $ 0.35 $ 0.28 $ 1.20
1995
- --------------------------------------------------------------------------------
Operating Revenues $8,740 $9,608 $10,447 $9,052 $37,847
Operating Income 1,970 2,285 2,788 1,619 8,662
Net Income 1,213 1,507 1,922 1,062 5,704
Earnings per
Common Share $ 0.29 $ 0.36 $ 0.46 $ 0.25 $ 1.36
- --------------------------------------------------------------------------------
The information above, in the opinion of the Company, includes all adjustments
consisting only of normal recurring accruals necessary for a fair presentation
of such amounts. The business of the Company is subject to seasonal fluctuation
with the peak period usually occurring during the summer months.
NOTE 9 - CAPITALIZATION
All the transactions discussed below related to the issuance or redemption of
securities were approved by the BPU, except where noted.
Common Stock
There are 900,000 shares of common stock authorized under the Dividend
Reinvestment and Common Stock Purchase Plan (DRP). The cumulative number of
shares issued under the DRP at December 31, 1996 is 688,793.
During 1996, 1995 and 1994, 67,977 shares ($1.2 million), 106,138 shares ($1.7
million) and 51,447 shares ($0.9 million) of common stock were issued under DRP
and the restricted stock plan, respectively.
In the event dividends on the preferred stock are in arrears, no dividends may
be declared or paid on the common stock of the Company. At December 31, 1996, no
restrictions were placed on common dividends.
Preferred Stock
If four or more quarterly dividends are in arrears, the preferred shareholders,
as a class, are entitled to elect two members to the Board of Directors in
addition to Directors elected by holders of the common stock. At December 31,
1996, no dividends were in arrears.
The conversion feature of the no par $7.00 Cumulative and Convertible Preferred
Stock, which is effective in 1997, allows the security holders to exchange one
convertible preferred share for six shares of the Company's common stock. In
addition, the Company may redeem up to 10% of the outstanding convertible stock
in any calendar year at a price equal to the fair market value of six shares of
the Company's common stock for each share of convertible stock redeemed.
Both the $4.75 Series and the $7.00 Series are redeemable at the option of the
Company, and in November 1994, an offer to purchase the $7.00 Series at the
stated redemption price of $100 per share was extended to all holders of this
stock. At December 31, 1995, the Company had purchased and retired 1,483 shares
of the $7.00 Series. Since there was no premium associated with the redemption,
approval from the BPU was not required.
Long-term Debt
On September 13, 1995, Tidewater received approval from the Delaware PSC to
borrow up to $3.5 million through an amortizing secured term bank loan. The
terms of the loan agreement provide for a maximum term of twenty five years from
the conclusion of the drawdown period with the interest rate fixed on the date
of any advance by the bank. In October 1995, Tidewater received an initial $2.5
million at a rate of 8.02%. In the fourth quarter of 1996, the remaining $1.0
million was borrowed resulting in an overall interest rate of 8.05% on the total
amount borrowed. Monthly principal payments began in January 1997 with the final
payment due in December 2021. The proceeds of the loan were used to fund capital
expenditures.
As part of the asset purchase by the Pinelands Companies, promissory notes of
$1.2 million were issued. On November 21, 1996, the Company purchased, at a
nominal discount, and retired the promissory notes. The purchase was funded with
internally generated cash.
================================================================================
21
================================================================================
Fair Value of Financial Instruments
The following methods and assumptions were used by the Company in estimating its
fair value disclosure for financial instruments for which it is practicable to
estimate that value. The carrying amounts reflected in the consolidated balance
sheets for cash and cash equivalents, marketable securities, and trade
receivables and payables approximate their respective fair values due to the
short-term maturities of these instruments. The fair value of the Company's
long-term debt relating to first mortgage bonds is based on quoted market prices
for similar issues. At December 31, 1996 and 1995, the carrying and fair market
value of the Company's Bonds were as follows:
(THOUSANDS OF DOLLARS)
1996 1995
- --------------------------------------------------------------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
- --------------------------------------------------------------------------------
First Mortgage Bonds $49,500 $46,900 $49,500 $48,400
- --------------------------------------------------------------------------------
For other long-term debt for which there were no quoted market price, it was not
practicable to estimate their fair value. The carrying amounts of these
instruments at December 31, 1996 and 1995 were $3.5 million. Customer advances
for construction have a carrying value of $9.0 million and $9.2 million at
December 31, 1996 and 1995, respectively. Their relative fair values cannot be
accurately estimated since future refund payments depend on several variables,
including new customer connections, customer consumption levels and future rate
increases.
================================================================================
Independent Auditors' Report
MIDDLESEX WATER COMPANY
We have audited the accompanying consolidated balance sheets and
consolidated statements of capital stock and long-term debt of Middlesex Water
Company and its subsidiaries as of December 31, 1996 and 1995 and the related
consolidated statements of income, retained earnings and of cash flows for each
of the three years in the period ended December 31, 1996. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Middlesex Water Company and its
subsidiaries at December 31, 1996 and 1995 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1996 in conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
February 14, 1997
================================================================================
22
==========================================================================================================================
CONSOLIDATED SELECTED FINANCIAL DATA
(Thousands of Dollars Except per Share Data)
1996 1995 1994 1993 1992 1991 1986
==========================================================================================================================
OPERATING REVENUES $ 38,025 $ 37,847 $ 36,122 $ 35,479 $ 30,861 $ 29,853 $ 22,010
- --------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Operations and Maintenance 18,778 17,916 16,911 16,753 14,715 13,454 9,849
Depreciation 2,929 2,814 2,650 2,376 1,961 1,834 1,043
Taxes, other than Income Taxes 5,569 5,479 5,343 5,222 4,620 5,132 3,429
Income Taxes 2,526 2,975 2,766 3,072 2,351 2,377 2,519
- --------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 29,802 29,184 27,670 27,423 23,647 22,797 16,840
- --------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 8,223 8,663 8,452 8,056 7,214 7,056 5,170
OTHER INCOME 225 156 87 438 515 205 198
- --------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE
INTEREST CHARGES 8,448 8,819 8,539 8,494 7,729 7,261 5,368
- --------------------------------------------------------------------------------------------------------------------------
INTEREST CHARGES 3,280 3,115 3,044 3,014 3,267 3,156 2,174
- --------------------------------------------------------------------------------------------------------------------------
NET INCOME 5,168 5,704 5,495 5,480 4,462 4,105 3,194
PREFERRED STOCK DIVIDEND
REQUIREMENTS 159 159 188 256 186 161 185
- --------------------------------------------------------------------------------------------------------------------------
EARNINGS APPLICABLE TO COMMON
STOCK $ 5,009 $ 5,545 $ 5,307 $ 5,224 $ 4,276 $ 3,944 $ 3,009
- --------------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE OF
COMMON STOCK $ 1.20 $ 1.36 $ 1.33 $ 1.33 $ 1.20 $ 1.14 $ 1.01
Average Number of Shares
Outstanding for the Year 4,169,334 4,078,890 4,003,393 3,924,363 3,568,499 3,477,406 2,974,602
Dividends Declared and Paid $ 1.10 1/2 $ 1.08 1/2 $ 1.05 3/4 $ 1.01 1/4 $ 0.97 $ 0.94 1/2 $ 0.80
Total Assets $ 148,660 $ 144,822 $ 132,413 $ 125,676 $ 113,843 $ 100,014 $ 73,937
Redeemable Preferred Stock $ -- $ -- $ -- $ 1,158 $ 1,224 $ 1,290 $ 1,620
Long-term Debt $ 52,961 $ 52,960 $ 49,500 $ 37,000 $ 42,550 $ 45,350 $ 29,350
- --------------------------------------------------------------------------------------------------------------------------
STATISTICAL SUMMARY
1996 1995 1994 1993 1992 1991 1986
==========================================================================================================================
REVENUES (Thousands of Dollars):
- --------------------------------------------------------------------------------------------------------------------------
Residential $ 15,091 $ 15,202 $ 14,306 $ 14,042 $ 11,733 $ 11,624 $ 9,959
Commercial 4,347 4,393 4,282 4,170 3,616 3,549 2,700
Industrial 6,621 6,669 6,598 6,481 6,044 5,768 5,030
Fire Protection 4,637 4,543 4,352 4,312 3,905 3,772 3,017
Contract Sales 6,778 6,658 6,322 6,232 5,477 5,098 1,223
Other 551 382 262 242 86 42 81
- --------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES $ 38,025 $ 37,847 $ 36,122 $ 35,479 $ 30,861 $ 29,853 $ 22,010
CAPITALIZATION RATIOS:
Long-term Debt 51% 51% 51% 50% 49% 56% 51%
Preferred Stock 3 3 3 4 5 3 5
Common Stock Equity 46 46 46 46 46 41 44
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RATIOS 100% 100% 100% 100% 100% 100% 100%
Book Value of Common Stock $ 11.70 $ 11.52 $ 11.13 $ 10.77 $ 10.29 $ 9.44 $ 8.45
Meters in Service 63,775 61,332 58,371 57,318 56,340 52,356 50,798
Population Served (Retail) 255,000 245,000 233,000 229,000 225,000 209,000 203,000
Miles of Main 1,067 1,035 972 947 920 654 634
Fire Hydrants 4,750 4,690 4,558 4,503 4,445 4,024 3,877
Pumpage (million gallons) 16,791 17,380 16,794 16,789 15,174 14,572 11,367
==========================================================================================================================
23