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-
<PAGE>
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-<PAGE>
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
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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.
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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
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$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
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<PAGE>
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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<PAGE>
<PAGE>
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.
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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
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<PAGE>
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.
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<PAGE>
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.
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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.
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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
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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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<PAGE>
ELIZABETHTOWN WATER COMPANY Exhibit 10
Supplemental Executive Retirement Plan
Article 1
Name
The nonqualified plan set forth herein shall be known as the
Elizabethtown Water Company
Supplemental Executive Retirement Plan.
Article 2
Purpose
The Company recognizes that the various Internal Revenue
Service limitations and restrictions imposed on the
Company's qualified plans may prevent some key employees
from realizing sufficient benefits from these plans. The
purpose of the Supplemental Executive Retirement Plan is to
acknowledge and reward certain key employees of the Company
for their service and loyalty to the Company by providing
additional post-retirement income to such key employees in
order to facilitate their attaining adequate levels of
retirement income.
The plan is intended to constitute a nonqualified deferred
retirement plan which, in accordance with ERISA 201(2),
301(a)(3) and 401(a)(1) is "unfunded and maintained by an
employer primarily for the purpose of providing deferred
compensation for a select group of management or highly
compensated employees."
Article 3
Definitions
For purposes of the Plan, the following words and phrases
shall have the following meanings unless a different meaning
is plainly required by the context. Wherever used, the
masculine pronoun shall include the feminine pronoun and the
feminine pronoun shall include the masculine and the
singular shall include the plural and the plural shall
include the singular.
3.1 "Actuarial Equivalent" shall mean a benefit of equal
value to any other benefit at Normal Retirement Date based
on the factors cited in the Employees' Retirement Plan of
Elizabethtown Water Company.
3.2 "Beneficiary" shall mean the person or persons
designated in accordance with the election filed with the
Committee. If no election has been filed with the
Committee, Beneficiary shall mean the person or persons
designated in accordance with the election filed with the
Plan Administrator of the Employees' Retirement Plan of
Elizabethtown Water Company to receive any benefits under
the Employees' Retirement Plan of Elizabethtown Water
Company in the event of a Participant's death.
3.3 "Benefit" shall mean the benefit to which a
Participant or Beneficiary is entitled in accordance with
Article 6.
3.4 "Board of Directors" shall mean the Board of Directors
of Elizabethtown Water Company.
3.5 "Change in Control" shall mean:
(a) a majority of the members of Company's Board of
Directors lose their status;
(b) any person acquires more than 20% of Company's then
outstanding shares, or acquires all or substantially all of
Company's assets. "Person" shall mean any
individual, firm, corporation, partnership, trust or other
entity, and includes a "group" as that term is used in
sections 13(d) and 14(d) of the Securities Exchange Act of
1934; or
(c) a liquidation or dissolution of the Company.
3.6 "Code" shall mean the Internal Revenue Code of 1986
and any amendments thereto.
3.7 "Committee" shall mean the person or persons appointed
by the Board of Directors to administer the Plan.
3.8 "Company" shall mean
(a) Elizabethtown Water Company which
shall adopt the Plan for its Employees with the approval of
the Board of Directors, and any other affiliated company
which adopts the Plan with the consent of the Board of
Directors, and
(b) any successor to the business entity described in
Subsection (a) as a result of a statutory merger, purchase
of assets or any other form of reorganization of the
business of the business entity described in Subsection (a).
3.9 "Compensation" shall mean Compensation as defined
in the Employees' Retirement Plan of Elizabethtown Water
Company.
3.10 "Credited Service" shall mean the amount of credited
service to which the Participant is credited under the terms
and provisions of the Employees' Retirement Plan of
Elizabethtown Water Company.
3.11 "Deferred Retirement Date" shall mean the first day of
any month coincident with or next following the date the
Participant has a Termination Date subsequent to his Normal
Retirement Date.
3.12 "Early Retirement Date" shall mean the first day of
any month coincident with or next following the date on
which a Participant attains age 62, provided he has
completed twenty-five (25) Years of Service as of such date.
3.13 "Effective Date" shall mean August 1, 1995.
3.14 "Employee" shall mean a person who is employed by the
Company and falls under the usual common law rules
applicable in determining the employer-employee
relationship.
3.15 "Final Average Compensation" shall mean the average of
the monthly Compensation earned by the Participant during
the 36 months immediately preceding the date on which a
Participant shall retire on his Normal, Early or Deferred
Retirement Date.
3.16 "Key Employee" shall mean a corporate officer holding
the position of Vice President or higher who is designated
for eligibility in the Plan by the Committee in accordance
with Section 4.2.
3.17 "Normal Retirement Age" shall mean the Participant's
65th birthday, provided he has completed twenty (20) Years
of Service.
3.18 "Normal Retirement Date" shall mean the first day of
the month coincident with or next following the date the
Participant attains his Normal Retirement Age.
3.19 "Participant" shall mean any Key Employee who is
participating in the Plan in accordance with the provisions
set forth herein.
3.20 "Period of Severance" shall mean a period of time
commencing at the Termination Date, the duration of which
shall be determined in accordance with the terms and
provisions of the Employees' Retirement Plan of
Elizabethtown Water Company.
3.21 "Plan" shall mean the Elizabethtown Water Company
Supplemental Executive Retirement Plan as it may be amended
from time to time.
3.22 "Plan Year" shall mean the period form August 1, 1995
through December 31, 1995, and each calendar year
thereafter.
3.23 "Qualified Defined Benefit Plan" shall mean the
Elizabethtown Water Company Retirement Plan as it may be
amended from time to time.
3.24 "Retirement" shall mean the termination of employment
of a Participant on his Normal, Early or Deferred Retirement
Date. 3.25 "Spouse" means the husband or wife of the
Participant.
3.26 "Termination Date" shall mean a termination of service
with the Company.
3.27 "Year of Service" shall mean a year of service
determined in accordance with the Employees' Retirement Plan
of Elizabethtown Water Company.
Article 4
Operation and Administration of the Plan
4.1 Organization of the Committee
(a) The Board of Directors shall appoint a Committee
of three members to administer the Plan, who, upon
acceptance of such appointment, shall serve at the pleasure
of the Board of Directors. Any member may resign by
delivering his written resignation to the Board of Directors
and to the Committee. Vacancies in the Committee arising
from resignation, death, or removal shall be filled by the
Board of Directors.
(b) The Committee shall act by a majority of its
members unless unanimous consent is required by the Plan or
by unanimous approval of its members if there are two or
less members in office at the time. In the event of a
Committee deadlock, the Committee shall determine the method
for resolving such deadlock. No Committee member shall act
upon any question pertaining solely to himself, and the
other member or members shall make any determination
required by the Plan in respect to such member.
(c) The Committee may, by unanimous consent,
delegate specific authority and responsibilities to one or
more of its members. The member or members so designated
shall use reasonable care and act in a fiduciary capacity.
4.2 Committee Discretion
(a) The Board has designated those Employees who are
to be Key Employees as of the Effective Date for purposes of
Article 5 by means of a list of such Employees which shall
be attached hereto and made a part hereof as Schedule "A".
(b) Thereafter, the Committee shall by written
action, designate those Employees, if any, who are to be Key
Employees for purposes of Article 5.
(c) With respect to Subsections (a) and (b), the
Committee shall designate Key Employees from those Employees
who are Company officers with a title of Vice President or
higher.
4.3 Authority and Responsibility
The Committee shall have full authority and
responsibility to formally adopt the final version of the
Plan and any amendments thereto which have been prepared in
accordance with specifications previously approved by the
Board of Directors and to interpret and construe the Plan
and determine all questions of the status and rights of the
Participants.
Its interpretation, construction or determination, as
the case may be, shall be final and conclusive on both the
Company and the Participants and their respective
successors, assigns, personal representatives and
Beneficiaries. Such authority and responsibility shall
include, but shall not be limited to, the following:
(a) appointment of qualified accountants,
consultants, administrators, counsel, appraisers, or other
persons it deems necessary or advisable, who shall serve the
Committee as advisors only and shall not exercise any
discretionary authority, responsibility or control with
respect to the management or administration of the Plan;
(b) determination of all Benefits, and resolution of
all questions arising from the administration,
interpretation and application of the Plan;
(c) adoption of forms and regulations for the
administration of the Plan; (d) remedy of all inequity
resulting from incorrect information received or
communicated, or of administrative error;
(e) settlement or compromise of any claims or debts
arising from the operation of the Plan and the commencement
of any legal actions or administrative proceeding.
4.4 Records and Reports
The Committee shall keep a record of its proceedings
and acts and shall keep books of account, records and other
data necessary for the proper administration of the Plan.
4.5 Required Information
The Company, Participants or Beneficiaries entitled to
Benefits shall furnish forms and any information or evidence
as reasonably requested by the Committee for the proper
administration of the Plan. Failure on the part of any
Participant or Beneficiary to comply with such request
within a reasonable period of time shall be sufficient
grounds for delay in the payment of Benefits until the
information or evidence requested is received.
4.6 Payment of Expenses of Plan
The expenses of the Committee in connection with the
administration of the Plan shall be the responsibility of
the Company.
4.7 Indemnification
The Company shall indemnify and hold the members of
the Committee harmless against liability incurred in the
administration of the Plan, except for the gross negligence
or willful misconduct of any member.Article 5
Eligibility for Participation
5.1 Each Key Employee on the Effective Date will be
eligible to participate in the Plan as of such date.
5.2 Each other Key Employee will be eligible to
participate in the Plan following the attainment of his
status as a Key Employee in accordance with Section 4.2.
5.3 A Key Employee must submit the signed forms and other
information to the Committee before the date they become a
Participant of the Plan, in accordance with the requirements
set forth in section 5.5 below.
5.4 The Committee shall, through the adoption of a set of
rules and regulations, provide for methods used in advising
a Key Employee of his eligibility in the Plan, and all forms
necessary for the Key Employee to elect to participate.
5.5 As a condition to participation in this Plan, the Key
Employee will provide the Committee with the following:
a. Information regarding any other retirement
benefit which the Key Employee may be eligible for;
b. A Beneficiary Election form; and
c. An election regarding the form of benefit which the Key
Employee desires from the Plan.
Article 6
Retirement Benefits
6.1 Normal or Deferred Retirement
(a) Subject to the restrictions and limitations of
Subsection (b), the benefit of a Participant who retires on
or after the attainment of age 65 and the completion of 20
Years of Service shall be a monthly lifetime income or a 15
year certain income equal to the difference between 60% of
his Final Average Compensation and the amount set forth in
subsection (i) below:
(i) the Participant's monthly retirement benefit
payable under the Employees' Retirement Plan of
Elizabethtown Water Company and any benefits payable from
employer-sponsored plans accrued during previous full-time
employment under which the Participant shall receive
retirement income, on a single life annuity basis. If the
benefits accrued on behalf of a Participant under
employer-sponsored plans of previous employers are in the
form of a lump-sum, said benefits will be converted
to a monthly amount, based on the actuarial assumptions and
formula contained in the Employees' Retirement Plan of
Elizabethtown Water Company. A benefit accrued on behalf of
a Participant under another employer-sponsored plan will be
reduced by the amount of any employee contributions and the
earnings thereon.
(b) If a Participant has accrued a benefit under a
plan sponsored by a former employer, the Participant will
cooperate with the Committee in furnishing any information
which the Committee requires to determine the amount of the
offset to the benefits to be provided under the terms of
this Plan.
6.2 Early Retirement
A Participant who wishes to retire on his Early
Retirement Date or on the first day of any month thereafter
prior to his Normal Retirement Date shall be entitled to a
monthly benefit commencing on such date determined in
accordance with Section 6.1, calculated by replacing 55% for
60% as it appears.
Article 7
Death Benefits
7.1 Death Prior to Retirement
In the event a Participant dies while in the active
service of the Company, his Beneficiary shall be entitled to
receive a Survivor's Benefit (as defined in Sections 7.2 and
7.3).
7.2 Survivor's Benefit- After Attaining Age 55
If a Participant dies while actively employed by the
Company after attaining age 55, his Beneficiary shall be
eligible to receive a monthly benefit, for fifteen years,
commencing on the first day of the month coincident with or
next following the Participant's death.
The amount of the benefit shall be equal to the
benefit which would have been payable under this Plan had
the Participant retired on the day preceding his date of
death.
7.3 Survivor's Benefit- Prior to Attaining Age 55
If a Participant dies while actively employed by the Company
prior to attaining age 55, his Beneficiary shall be eligible
to receive a benefit.
The amount of the benefit payable under the Plan shall
be equal to twice the Participant's Compensation at the time
of the Participant's death.
Article 8
Vesting
8.1 Upon Normal, Early or Deferred Retirement
A Participant who retires on his Normal, Early or
Deferred Retirement Date shall be entitled to receive his
Benefit as of his Retirement Date. Such Benefit shall be
paid in the form of distribution elected by the Participant
in accordance with Section 10.2.
8.2 Upon Other Termination of Employment
In the event that a Participant's employment is
terminated prior to his Normal, Early or Deferred Retirement
Date or death, there shall be no Benefits payable under the
Plan.
A Participant shall not be considered as having ceased
active employment with Company if he leaves Company's employ
for a Change in Control, under the following circumstances:
wherein, as a direct or indirect result of a Change in
Control, and within five (5) years thereof, Participant's
employment with Company is terminated by Company; the nature
and scope of Participant's duties or activities with Company
or its successor are reduced to a level significantly below
that which Participant had enjoyed immediately prior to the
Change in Control; Participant's base salary is reduced; or
a Change in Control which is preceded by Company terminating
Participant's employment with Company without cause
during the six-month period prior to the occurrence of the
Change in Control.
Article 9
Funding
9.1 All Benefits under the Plan are intended to be in the
form of an unfunded obligation of the Company.
9.2 Nothing contained herein shall create an obligation on
the part of the Company to set aside or earmark any monies
or other assets specifically for payments under the Plan.
At no time shall a Participant or the Participant's
Beneficiary have any right, title or interest in or to any
specific fund or assets of the Company. As to any claim for
Benefits under the Plan, the Participant or the
Participant's Beneficiary shall be a creditor of the Company
in the same manner as any other creditor having a general
claim for unpaid compensation.
Article 10
Regulations Governing Distribution of Benefits
10.1 Benefit Commencement Date
(a) Benefits payable under the Plan shall commence
no later than 60 days following the Participant's Normal or
Early Retirement Age.
(b) Notwithstanding the foregoing, in the case of a
Participant who continues his employment with the Company
beyond his Normal Retirement Age, benefits payable under the
Plan shall commence no later than 60 days after the end of
the Plan Year in which the Participant terminates his
employment.
10.2 Method of Distribution
Distribution of Benefits shall be made as a single
life annuity that ceases at the Participant's death or at
the Participant's option for a period certain of fifteen
(15) years.
In the event of election of a period certain of
fifteen year, benefits would continue to the participant's
designated beneficiary for the balance of the fifteen years
in the event of death prior to receiving one hundred and
eighty (180) monthly payments. At the end of fifteen year,
payments would cease under this option.
10.3 Election of Form of Benefit Payment
(a) A Participant shall elect the form in which his
Benefits are to be payable. Such election must be made when
the Participant makes his initial election to participate in
the Plan in accordance with Article 5.
(b) Notwithstanding the foregoing, the Participant
may elect to change the form elected in accordance with
Subsection (a), provided such new election is made at least
one full calendar year prior to the Participant's
Retirement.
(c) Any election made pursuant to this Article shall
be made on forms and in the manner prescribed by the
Committee and shall be irrevocable, except as provided in
Subsection (b).
10.4 Claim Procedure For Benefits
(a) Any request for specific information with
respect to Benefits under the Plan must be made to the
Committee in writing by a Participant or his Beneficiary if
the Participant is deceased. Oral communications will not
be recognized as a formal request or claim for Benefits.
(b) The Committee shall provide adequate notice in
writing to any Participant or Beneficiary whose claim for
Benefits under the Plan has been denied, (i) setting forth
the specific reasons for such denial; specific references to
pertinent plan provisions; a description of any material and
information which had been requested but not received by the
Committee; and, (ii) advising such Participant or
Beneficiary that any appeal of such adverse determination
must be in writing to the Committee, within such period of
time designated by the Committee but, until changed, not
more than 60 days after receipt of such notification, and
must include a full description of the pertinent issues and
basis of such claim.
(c) If the Participant or Beneficiary fails to
appeal such action to the Committee in writing within the
prescribed period of time, the Committee's adverse
determination shall be final.
(d) If an appeal is filed with the Committee, the
Participant or Beneficiary shall submit such issues he feels
are pertinent and the Committee shall reexamine all facts,
make a final determination as to whether the denial of
Benefits is justified under the circumstances, and advise
the Participant or Beneficiary in writing of its decision
and the specific reasons on which such decision was based,
within 60 days of receipt of such written request, unless
special circumstances require a reasonable extension of such
60-day period.
10.5 Substitute Payee
If a Participant or Beneficiary entitled to receive
any Benefits hereunder is in his minority, or is, in the
judgment of the Committee, legally, physically, or mentally
incapable of personally receiving and receipting any
distribution, the Committee may make distributions to a
legally appointed guardian or to such other person or
institution as, in the judgment of the Committee, is then
maintaining or has custody of the Participant of
Beneficiary.
10.6 Satisfaction of Liability
After all Benefits have been distributed in full to a
Participant or to his Beneficiary, all liability to such
Participant or to his Beneficiary shall cease.
10.7 Nonassignability
No Benefit under the Plan shall be subject in any
manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, and any such
action shall be void for all purposes of the Plan. No
Benefit shall in any manner be subject to the debts,
contracts, liabilities, engagements or torts of any person,
nor shall it be subject to attachments or other legal
process for or against any person, except to such extent as
may be required by law.Article 11
Amendment and Termination
11.1 Amendment and Termination
(a) Solely for purposes of conforming the Plan to
any amendment, modification or termination of the Employees'
Retirement Plan of Elizabethtown Water Company, the Company
shall retain the right to unilaterally amend, modify or
terminate the Plan.
(b) The Plan may not be amended, modified or
terminated for a purpose not in accordance with Subsection
(a) except by an instrument in writing signed by a duly
authorized officer of the Company and each Participant.
11.2 Participant's Rights
Notwithstanding the foregoing Subsection 11.1(a), if
the Company exercises any right described in such Section,
any benefits accrued by the Participant under the Plan
before the effective date of the applicable amendment,
modification or termination may not be reduced by such
amendment, modification or termination.
Article 12
General Provisions
12.1 Limitation of Rights
Neither the establishment of the Plan nor any
modification thereof, nor the creation of an account, nor
the payment of any Benefits shall be construed as giving any
Participant, Beneficiary, or any other person whomsoever,
any legal or equitable right against the Company or the
Committee unless such right shall be specifically provided
for in the Plan or conferred by affirmative action of the
Committee in accordance with the terms and provisions of the
Plan; or as giving any Participant the right to be retained
in the service of the Company, and all Participants and
other employees shall remain subject to discharge to the
same extent as if the Plan had never been adopted.
12.2 Construction of Agreement
The Plan shall be construed according to the laws of
the State of New Jersey, and all provisions hereof shall be
administered according to, and its validity shall be
determined under, the laws of New Jersey except where
preempted by Federal law.
12.3 Severability
Should any provision of the Plan or any regulations
adopted thereunder be deemed or held to be unlawful or
invalid for any reason, such fact shall not adversely affect
the other provisions or regulations unless such invalidity
shall render impossible or impractical the functioning of
the Plan and, in such case, the appropriate parties shall
immediately adopt a new provision or regulation to take the
place of the one held illegal or invalid.
12.4 Titles and Headings
The titles and headings of the Articles in this
instrument are for convenience of reference only and, in the
event of any conflict, the text rather than such titles or
headings shall control.
12.5 Binding Upon Successors
The liabilities under the Plan shall be binding upon
any successor or assign of the Company and any purchaser of
the Company or substantially all of the assets of the
Company.
IN WITNESS WHEREOF, we have executed this Plan the _____day of August, 1995.
SUPPLEMENTAL EXECUTIVE RETIREMENT
PLAN COMMITTEE
_____________________________________________
____________________________________________
____________________________________________
____________________________________________
SCHEDULE "A"
Gail P. Brady
Walter M. Braswell
Andrew M. Chapman
Robert W. Kean, III
Edward D. Mullen
Henry S. Patterson, III
Joseph E. Stroin, Jr.
Norbert Wagner
<PAGE>
EXHIBIT 11
Page 1 of 3
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Three Months Ended
September 30,
1995 1994
_________ _________
PRIMARY
_______
EARNINGS
Income Before Preferred Stock
Dividends of Subsidiary $ 5,353,917 $ 3,876,107
Deduct: Preferred Stock Dividends 203,250 203,250
___________ ___________
Net Income Available for
Common Stock $ 5,150,667 $ 3,672,857
___________ ___________
___________ ___________
SHARES
Weighted Average Number of
Common Shares Outstanding 7,424,527 6,523,535
Assuming Exercise of Options
Reduced by the Number of Shares
Which Could Have Been Purchased
With the Proceeds From Exercise
of Such Options 870 1,440
___________ ___________
Weighted Average Number of Common
Shares Outstanding as Adjusted 7,425,397 6,524,975
___________ ___________
___________ ___________
Primary Earnings
Per Share of Common Stock $ 0.69 $ 0.56
___________ ___________
___________ ___________
ASSUMING FULL DILUTION
______________________
EARNINGS
Income Before Preferred Stock
Dividends of Subsidiary 5,353,917 3,876,107
Deduct: Preferred Stock Dividends 203,250 203,250
Add: After Tax Interest Expense
Applicable to 6 3/4% Convertible
Subordinated Debentures 131,647 138,526
___________ ___________
Adjusted Net Income $ 5,282,314 $ 3,811,383
___________ ___________
___________ ___________
SHARES
Weighted Average Number of
Common Shares Outstanding 7,424,527 6,523,535
Assuming Exercise of Options
Reduced by the Number of Shares
Which Could Have Been Purchased
With the Proceeds From Exercise
of Such Options 870 1,440
Assuming Conversion of 6 3/4%
Convertible Subordinated
Debentures (a) 297,605 308,410
___________ ___________
Weighted Average Number of Common
Shares Outstanding as Adjusted 7,723,002 6,833,385
___________ ___________
___________ ___________
Fully Diluted Earnings
Per Share of Common Stock $ 0.68 $ 0.56
___________ ___________
___________ ___________
(a) Convertible at $40 per share.
EXHIBIT 11
Page 2 of 3
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Nine Months Ended
September 30,
1995 1994
_________ _________
PRIMARY
_______
EARNINGS
Income Before Preferred Stock
Dividends of Subsidiary $12,950,257 $ 9,830,035
Deduct: Preferred Stock Dividends 609,750 655,767
___________ ___________
Net Income Available for
Common Stock $12,340,507 $ 9,174,268
___________ ___________
___________ ___________
SHARES
Weighted Average Number of
Common Shares Outstanding 6,956,184 6,080,955
Assuming Exercise of Options
Reduced by the Number of Shares
Which Could Have Been Purchased
With the Proceeds From Exercise
of Such Options 605 3,676
___________ ___________
Weighted Average Number of Common
Shares Outstanding as Adjusted 6,956,789 6,084,631
___________ ___________
___________ ___________
Primary Earnings
Per Share of Common Stock $ 1.77 $ 1.51
___________ ___________
___________ ___________
ASSUMING FULL DILUTION
______________________
EARNINGS
Income Before Preferred Stock
Dividends of Subsidiary 12,950,257 9,830,035
Deduct: Preferred Stock Dividends 609,750 655,767
Add: After Tax Interest Expense
Applicable to 6 3/4% Convertible
Subordinated Debentures 393,555 413,176
___________ ___________
Adjusted Net Income $12,734,062 $ 9,587,444
___________ ___________
___________ ___________
SHARES
Weighted Average Number of
Common Shares Outstanding 6,956,184 6,080,955
Assuming Exercise of Options
Reduced by the Number of Shares
Which Could Have Been Purchased
With the Proceeds From Exercise
of Such Options 605 3,676
Assuming Conversion of 6 3/4%
Convertible Subordinated
Debentures (a) 299,819 309,997
___________ ___________
Weighted Average Number of Common
Shares Outstanding as Adjusted 7,256,608 6,394,628
___________ ___________
___________ ___________
Fully Diluted Earnings
Per Share of Common Stock $ 1.75 $ 1.50
___________ ___________
___________ ___________
(a) Convertible at $40 per share.
EXHIBIT 11
Page 3 of 3
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Twelve Months Ended
September 30,
1995 1994
_________ _________
PRIMARY
_______
EARNINGS
Income Before Preferred Stock
Dividends of Subsidiary $16,062,012 $12,351,369
Deduct: Preferred Stock Dividends 808,030 918,267
___________ ___________
Net Income Available for
Common Stock $15,253,982 $11,433,102
___________ ___________
___________ ___________
SHARES
Weighted Average Number of
Common Shares Outstanding 6,862,187 5,964,783
Assuming Exercise of Options
Reduced by the Number of Shares
Which Could Have Been Purchased
With the Proceeds From Exercise
of Such Options 549 4,774
___________ ___________
Weighted Average Number of Common
Shares Outstanding as Adjusted 6,862,736 5,969,557
___________ ___________
___________ ___________
Primary Earnings
Per Share of Common Stock $ 2.22 $ 1.92
___________ ___________
___________ ___________
ASSUMING FULL DILUTION
______________________
EARNINGS
Income Before Preferred Stock
Dividends of Subsidiary 16,062,012 12,351,369
Deduct: Preferred Stock Dividends 808,030 918,267
Add: After Tax Interest Expense
Applicable to 6 3/4% Convertible
Subordinated Debentures 528,835 551,380
___________ ___________
Adjusted Net Income $15,782,817 $11,984,482
___________ ___________
___________ ___________
SHARES
Weighted Average Number of
Common Shares Outstanding 6,862,187 5,964,783
Assuming Exercise of Options
Reduced by the Number of Shares
Which Could Have Been Purchased
With the Proceeds From Exercise
of Such Options 549 4,774
Assuming Conversion of 6 3/4%
Convertible Subordinated
Debentures (a) 301,331 310,608
___________ ___________
Weighted Average Number of Common
Shares Outstanding as Adjusted 7,164,067 6,280,165
___________ ___________
___________ ___________
Fully Diluted Earnings
Per Share of Common Stock $ 2.20 $ 1.91
___________ ___________
___________ ___________
(a) Convertible at $40 per share.
Exhibit 12
Page 1 of 6
Elizabethtown Water Company & Subsidiary
Computation of Ratio of Earnings to Fixed Charges
and Preferred Dividends
Three Months Ended
September 30,
1995 1994
________ ________
EARNINGS:
Income before preferred stock dividends $5,719,990 $4,092,929
Federal income taxes 3,032,439 2,156,716
Interest charges 2,880,513 2,564,569
___________ ___________
Earnings available to cover fixed charges $11,632,942 $8,814,214
___________ ___________
___________ ___________
FIXED CHARGES AND
PREFERRED DIVIDENDS:
Interest on long-term debt 2,693,512 2,693,560
Preferred dividend requirement (1) 311,018 310,353
Other interest 648,538 10,987
Amortization of debt discount - net 80,889 80,889
___________ ___________
Total fixed charges $3,733,957 $3,095,789
___________ ___________
___________ ___________
Ratio of Earnings to Fixed Charges
and Preferred Dividends 3.12 2.85
___________ ___________
___________ ___________
(1) Preferred Dividend Requirement:
Preferred dividends $203,250 $203,250
Effective tax rate 34.65% 34.51%
___________ ___________
Preferred dividend requirement $311,018 $310,353
___________ ___________
___________ ___________
Earnings to Fixed Charges and Preferred Dividends represents the sum of
Income Before Preferred Stock Dividends, Federal income taxes and Interest
Charges (which is reduced by Allowance for Debt Funds Used During Construction),
divided by Fixed Charges. Fixed Charges and Preferred Dividends consist of
interest on long and short-term debt (which is not reduced by Allowance for Debt
Funds Used During Construction), dividends on Preferred Stock on a pre-tax basis
and Amortization of debt discount.
Exhibit 12
Page 2 of 6
Elizabethtown Water Company & Subsidiary
Computation of Ratio of Earnings to Fixed Charges
and Preferred Dividends
Nine Months Ended
September 30,
1995 1994
________ ________
EARNINGS:
Income before preferred stock dividends $13,749,845 $10,658,485
Federal income taxes 7,264,137 5,599,224
Interest charges 8,323,952 7,853,490
___________ ___________
Earnings available to cover fixed charges $29,337,934 $24,111,199
___________ ___________
___________ ___________
FIXED CHARGES AND
PREFERRED DIVIDENDS:
Interest on long-term debt 8,080,633 8,080,451
Preferred dividend requirement (1) 931,912 1,000,255
Other interest 1,688,643 15,061
Amortization of debt discount - net 242,667 238,756
___________ ___________
Total fixed charges $10,943,855 $9,334,523
___________ ___________
___________ ___________
Ratio of Earnings to Fixed Charges
and Preferred Dividends 2.68 2.58
___________ ___________
___________ ___________
(1) Preferred Dividend Requirement:
Preferred dividends $609,750 $655,767
Effective tax rate 34.57% 34.44%
___________ ___________
Preferred dividend requirement $931,912 $1,000,255
___________ ___________
___________ ___________
Earnings to Fixed Charges and Preferred Dividends represents the sum of
Income Before Preferred Stock Dividends, Federal income taxes and Interest
Charges (which is reduced by Allowance for Debt Funds Used During Construction),
divided by Fixed Charges. Fixed Charges and Preferred Dividends consist of
interest on long and short-term debt (which is not reduced by Allowance for Debt
Funds Used During Construction), dividends on Preferred Stock on a pre-tax basis
and Amortization of debt discount.
Exhibit 12
Page 3 of 6
Elizabethtown Water Company & Subsidiary
Computation of Ratio of Earnings to Fixed Charges
and Preferred Dividends
Twelve Months Ended
September 30,
1995 1994
________ ________
EARNINGS:
Income before preferred stock dividends $17,314,502 $13,410,948
Federal income taxes 9,078,908 7,174,795
Interest charges 10,872,522 10,634,201
___________ ___________
Earnings available to cover fixed charges $37,265,932 $31,219,944
___________ ___________
___________ ___________
FIXED CHARGES AND
PREFERRED DIVIDENDS:
Interest on long-term debt 10,774,190 10,882,318
Preferred dividend requirement (1) 1,231,753 1,409,466
Other interest 1,849,089 23,749
Amortization of debt discount - net 323,557 300,548
___________ ___________
Total fixed charges $14,178,589 $12,616,081
___________ ___________
___________ ___________
Ratio of Earnings to Fixed Charges
and Preferred Dividends 2.63 2.47
___________ ___________
___________ ___________
(1) Preferred Dividend Requirement:
Preferred dividends $808,030 $918,267
Effective tax rate 34.40% 34.85%
___________ ___________
Preferred dividend requirement $1,231,753 $1,409,466
___________ ___________
___________ ___________
Earnings to Fixed Charges and Preferred Dividends represents the sum of
Income Before Preferred Stock Dividends, Federal income taxes and Interest
Charges (which is reduced by Allowance for Debt Funds Used During Construction),
divided by Fixed Charges. Fixed Charges and Preferred Dividends consist of
interest on long and short-term debt (which is not reduced by Allowance for Debt
Funds Used During Construction), dividends on Preferred Stock on a pre-tax basis
and Amortization of debt discount.
Exhibit 12
Page 4 of 6
Elizabethtown Water Company & Subsidiary
Computation of Ratio of Earnings to Fixed Charges
Three Months Ended
September 30,
1995 1994
________ ________
EARNINGS:
Income before preferred stock dividends $5,719,990 $4,092,929
Federal income taxes 3,032,439 2,156,716
Interest charges 2,880,513 2,564,569
___________ ___________
Earnings available to cover fixed charges $11,632,942 $8,814,214
___________ ___________
___________ ___________
FIXED CHARGES:
Interest on long-term debt 2,693,512 2,693,560
Other interest 648,538 10,986
Amortization of debt discount - net 80,889 80,889
___________ ___________
Total fixed charges $3,422,939 $2,785,436
___________ ___________
___________ ___________
Ratio of Earnings to Fixed Charges 3.40 3.16
___________ ___________
___________ ___________
Earnings to Fixed Charges represents the sum of Income Before Preferred Stock
Dividends, Federal income taxes and Interest Charges (which is reduced by
Allowance for Debt Funds Used During Construction), divided by Fixed Charges.
Fixed Charges consist of interest on long and short-term debt (which is not
reduced by Allowance for Debt Funds Used During Construction), and Amortization
of debt discount.
Exhibit 12
Page 5 of 6
Elizabethtown Water Company & Subsidiary
Computation of Ratio of Earnings to Fixed Charges
Nine Months Ended
September 30,
1995 1994
________ ________
EARNINGS:
Income before preferred stock dividends $13,749,845 $10,658,485
Federal income taxes 7,264,137 5,599,224
Interest charges 8,323,952 7,853,490
___________ ___________
Earnings available to cover fixed charges $29,337,934 $24,111,199
___________ ___________
___________ ___________
FIXED CHARGES AND
Interest on long-term debt 8,080,633 8,080,451
Other interest 1,688,643 15,061
Amortization of debt discount - net 242,667 238,756
___________ ___________
Total fixed charges $10,011,943 $8,334,268
___________ ___________
___________ ___________
Ratio of Earnings to Fixed Charges 2.93 2.89
___________ ___________
___________ ___________
Earnings to Fixed Charges represents the sum of Income Before Preferred Stock
Dividends, Federal income taxes and Interest Charges (which is reduced by
Allowance for Debt Funds Used During Construction), divided by Fixed Charges.
Fixed Charges consist of interest on long and short-term debt (which is not
reduced by Allowance for Debt Funds Used During Construction), and Amortization
of debt discount.
Exhibit 12
Page 6 of 6
Elizabethtown Water Company & Subsidiary
Computation of Ratio of Earnings to Fixed Charges
Twelve Months Ended
September 30,
1995 1994
________ ________
EARNINGS:
Income before preferred stock dividends $17,314,502 $13,410,948
Federal income taxes 9,078,908 7,174,795
Interest charges 10,872,522 10,634,201
___________ ___________
Earnings available to cover fixed charges $37,265,932 $31,219,944
___________ ___________
___________ ___________
FIXED CHARGES:
Interest on long-term debt 10,774,190 10,882,318
Other interest 1,849,089 23,749
Amortization of debt discount - net 323,557 300,548
___________ ___________
Total fixed charges $12,946,836 $11,206,615
___________ ___________
___________ ___________
Ratio of Earnings to Fixed Charges 2.88 2.79
___________ ___________
___________ ___________
Earnings to Fixed Charges represents the sum of Income Before Preferred Stock
Dividends, Federal income taxes and Interest Charges (which is reduced by
Allowance for Debt Funds Used During Construction), divided by Fixed Charges.
Fixed Charges consist of interest on long and short-term debt (which is not
reduced by Allowance for Debt Funds Used During Construction), and Amortization
of debt discount.
<PAGE>
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<TABLE> <S> <C>
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<CIK> 0000032379
<NAME> ELIZABETHTOWN WATER CO
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<PERIOD-TYPE> 9-MOS
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