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 March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 0-18595
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 March 31, 1995
E'town Corporation
without par value 6,658,079
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 1-2
- Consolidated Balance Sheets 3
- Statements of Consolidated Capitalization 5
- Statements of Consolidated Shareholders' Equity 6
- Statements of Consolidated Cash Flows 7-8
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
__________________________________________
- Statements of Consolidated Income 9-10
- Consolidated Balance Sheets 11
- Statements of Consolidated Capitalization 13
- Statements of Consolidated Shareholder's Equity 14
- Statements of Consolidated Cash Flows 15-16
E'TOWN CORPORATION AND SUBSIDIARIES AND
_______________________________________
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
__________________________________________
- Notes to Consolidated Financial Statements 17
Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations 23
PART II - OTHER INFORMATION
___________________________
Items 1 Legal Proceedings 31
Items 2 - 5 31
Item 6.(a) - Exhibits 32
(b) - Reports on Form 8-K 32
SIGNATURES 33
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
Three Months Ended
March 31,
1995 1994
____________ ___________
Operating Revenues $ 25,174,395 $ 24,657,389
____________ ____________
Operating Expenses:
Operation 10,423,708 10,366,988
Maintenance 1,365,679 1,574,009
Depreciation 2,127,257 1,928,865
Revenue taxes 3,123,259 3,096,397
Real estate, payroll and other taxes 725,168 741,735
Federal income taxes 1,564,264 1,436,856
____________ ____________
Total operating expenses 19,329,335 19,144,850
____________ ____________
Operating Income 5,845,060 5,512,539
____________ ____________
Other Income:
Allowance for equity funds used
during construction 618,321 153,874
Write-down of non-utility property
and other investments (Note 6) (106,826) (189,722)
Federal income taxes (211,749) (24,495)
Other - net 93,502 107,887
____________ ____________
Total other income 393,248 47,544
____________ ____________
Total Operating and Other Income 6,238,308 5,560,083
____________ ____________
Interest Charges:
Interest on long-term debt 2,895,982 2,900,676
Other interest expense - net 588,875 3,504
Capitalized interest (553,970) (215,659)
Amortization of debt discount - net 89,493 85,582
____________ ____________
Total interest charges 3,020,380 2,774,103
____________ ____________
Income Before Preferred Stock Dividends
of Subsidiary 3,217,928 2,785,980
Preferred Stock Dividends 203,250 249,267
____________ ____________
Net Income $ 3,014,678 $ 2,536,713
____________ ____________
____________ ____________
Earnings Per Share of Common Stock:
Primary $ .45 $ .45
____________ ____________
____________ ____________
Fully Diluted $ .45 $ .45
____________ ____________
____________ ____________
Average Number of Shares Outstanding for
the Calculation of Earnings Per Share:
Primary 6,635,878 5,683,286
____________ ____________
____________ ____________
Fully Diluted 6,938,157 5,994,299
____________ ____________
____________ ____________
Dividends Paid Per Common Share $ .51 $ .51
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-1-
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
Twelve Months Ended
March 31,
1995 1994
____________ ___________
Operating Revenues $102,549,511 $102,517,854
____________ ____________
Operating Expenses:
Operation 41,430,562 40,692,842
Maintenance 6,415,442 5,932,836
Depreciation 8,058,572 7,414,591
Revenue taxes 12,775,023 12,816,657
Real estate, payroll and other taxes 2,770,179 2,613,346
Federal income taxes 6,896,295 7,557,002
___________ ____________
Total operating expenses 78,346,073 77,027,274
___________ ____________
Operating Income 24,203,438 25,490,580
___________ ____________
Other Income:
Litigation settlement (932,203)
Gain on sale of land 0 1,685,521
Allowance for equity funds used
during construction 1,642,580 516,889
Write-down of non-utility property
and other investments (398,858) (373,511)
Federal income taxes (326,224) (804,981)
Other - net 618,493 472,275
____________ ____________
Total other income 603,788 1,496,193
____________ ____________
Total Operating and Other Income 24,807,226 26,986,773
____________ ____________
Interest Charges:
Interest on long-term debt 11,606,083 12,155,951
Other interest expense - net 1,055,409 61,125
Capitalized interest (1,585,977) (835,280)
Amortization of debt discount - net 357,973 281,580
____________ ____________
Total interest charges 11,433,488 11,663,376
____________ ____________
Income Before Preferred Stock Dividends
of Subsidiary 13,373,738 15,323,397
Preferred Stock Dividends 808,030 1,036,767
____________ ____________
Net Income $ 12,565,708 $ 14,286,630
____________ ____________
____________ ____________
Earnings Per Share of Common Stock:
Primary $ 1.95 $ 2.58
____________ ____________
____________ ____________
Fully Diluted $ 1.94 $ 2.54
____________ ____________
____________ ____________
Average Number of Shares Outstanding for
the Calculation of Earnings Per Share:
Primary 6,445,295 5,531,527
____________ ____________
____________ ____________
Fully Diluted 6,752,084 5,844,241
____________ ____________
____________ ____________
Dividends Paid Per Common Share $ 2.04 $ 2.02
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-2-
E'TOWN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
Assets 1995 1994
____________ ____________
Utility Plant-At Original Cost:
Utility plant in service $469,604,368 $469,172,575
Construction work in progress 67,796,144 55,739,951
____________ ____________
Total utility plant 537,400,512 524,912,526
Less accumulated depreciation and amortization 89,502,046 87,456,550
____________ ____________
Utility plant-net 447,898,466 437,455,976
____________ ____________
Non-utility Property and Other
Investments - Net (Note 6) 13,446,315 13,468,879
____________ ____________
Current Assets:
Cash and cash equivalents 5,213,974 4,254,708
Short-term investments 30,622 30,622
Customer and other accounts receivable
(less reserve: 1995, $479,603; 1994, $463,000) 13,018,512 12,346,871
Unbilled revenues 7,349,016 7,161,483
Materials and supplies-at average cost 1,696,107 1,724,969
Prepaid insurance, taxes, other 1,144,923 1,410,401
Prepaid federal income taxes 711,860
____________ ____________
Total current assets 28,453,154 27,640,914
____________ ____________
Deferred Charges:
Prepaid pension expense 847,467 871,181
Waste residual management 575,739 325,785
Unamortized debt and preferred stock expenses 9,384,691 9,490,208
Taxes recoverable through future rates 26,339,057 26,339,057
Postretirement benefit expense 2,201,705 2,077,051
Purchased water under recovery-net 293,584 314,128
Other unamortized expenses 1,544,990 997,286
____________ ____________
Total deferred charges 41,187,233 40,414,696
____________ ____________
Total $530,985,168 $518,980,465
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-3-
E'TOWN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
Capitalization and Liabilities 1995 1994
____________ ____________
Capitalization (Note 3):
Common shareholders' equity $153,967,272 $152,970,602
Cumulative preferred stock 12,000,000 12,000,000
Long-term debt - net 153,901,155 154,073,430
____________ ____________
Total capitalization 319,868,427 319,044,032
____________ ____________
Current Liabilities:
Notes payable - banks 35,000,000 23,000,000
Long-term debt - current portion 42,000 42,000
Accounts payable and other liabilities 11,472,072 18,249,580
Customers' deposits 306,098 278,895
Municipal and state taxes accrued 15,916,284 12,831,524
Federal income taxes accrued 917,224
Interest accrued 3,586,659 3,173,468
Preferred stock dividends accrued 59,000 59,000
____________ ____________
Total current liabilities 67,299,337 57,634,467
____________ ____________
Deferred Credits:
Customers' advances for construction 45,875,657 45,554,476
Federal income taxes 62,783,640 62,115,801
State income taxes 162,008 162,008
Unamortized investment tax credits 8,617,203 8,650,537
Accumulated postretirement benefits 2,368,413 2,100,628
____________ ____________
Total deferred credits 119,806,921 118,583,450
____________ ____________
Contributions in Aid of Construction 24,010,483 23,718,516
____________ ____________
Commitments and Contingent Liabilities
(Note 8)
____________ ____________
Total $530,985,168 $518,980,465
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-4-
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CAPITALIZATION
March 31, December 31,
1995 1994
___________ ___________
E'town Corporation:
Common Shareholders' Equity:
Common stock without par value, authorized,
15,000,000 shares; issued 1995, 6,680,111
shares; 1994, 6,624,663 shares $115,499,407 $114,136,195
Paid-in capital 1,315,025 1,315,025
Capital stock expense (4,286,194) (4,286,194)
Retained earnings 42,073,010 42,439,552
Less cost of treasury stock; 1995 and
1994, 22,032 shares (633,976) (633,976)
____________ ____________
Total common shareholders' equity 153,967,272 152,970,602
____________ ____________
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 11,993,000 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) 133,800 144,300
____________ ____________
Total long-term debt 155,126,800 155,309,300
Unamortized discount-net (1,225,645) (1,235,870)
____________ ____________
Total long-term debt-net 153,901,155 154,073,430
____________ ____________
Total capitalization $319,868,427 $319,044,032
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-5-
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
Three Months Year
Ended Ended
March 31, December 31,
1995 1994
____________ ____________
Common Stock:
Balance at Beginning of Period $114,136,195 $ 87,842,657
Public sale of common stock (1994,
690,000 shares) 19,147,500
Common stock issued under Dividend
Reinvestment and Stock Purchase Plan
(1995, 55,448 shares; 1994, 273,159 shares) 1,363,212 7,146,038
____________ ____________
Balance at End of Period 115,499,407 114,136,195
____________ ____________
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 (929,029)
____________ ____________
Balance at End of Period (4,286,194) (4,286,194)
____________ ____________
Retained Earnings:
Balance at Beginning of Period 42,439,552 43,207,666
Net Income 3,014,678 12,087,743
Dividends on common stock (1995,
$.51; 1994 $2.04) (3,381,220) (12,855,857)
____________ ____________
Balance at End of Period 42,073,010 42,439,552
____________ ____________
Treasury Stock: (633,976) (633,976)
____________ ____________
____________ ____________
Total Common Shareholders' Equity $153,967,272 $152,970,602
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-6-
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
Three Months Ended
March 31,
1995 1994
___________ ___________
Cash Flows from Operating Activities:
Net Income $ 3,014,678 $ 2,536,713
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,127,257 1,928,865
Write-down of non-utility property and other
investments 106,826 189,722
Increase in deferred charges (647,883) (1,200,131)
Deferred income taxes and investment tax
credits - net 634,505 604,521
Capitalized interest and AFUDC (1,172,291) (369,533)
Other operating activities-net 154,591 (16,503)
Change in current assets and current liabilities
excluding cash, short-term investments and
current portion of debt:
Customer and other accounts receivable (671,641) 105,430
Unbilled revenues (187,533) 14,265
Accounts payable and other liabilities (6,750,305) (3,226,520)
Accrued/prepaid interest and taxes 5,392,513 3,409,286
Other 28,863 (88,302)
____________ ____________
Net cash provided by operating activities 2,029,580 3,887,813
____________ ____________
Cash Flows Provided by Financing Activities:
Decrease in funds held by Trustee for
construction expenditures 382,022
Proceeds from issuance of common stock 1,363,212 1,777,319
Proceeds from issuance of preferred stock 12,000,000
Redemption of preferred stock (12,000,000)
Repayment of long-term debt (182,500) (73,500)
Contributions and advances for construction-net 613,148 993,323
Net increase in notes payable - banks 12,000,000
Dividends paid on common stock (3,381,220) (2,892,999)
____________ ____________
Net cash provided by financing activities 10,412,640 186,165
____________ ____________
Cash Flows Used for Investing Activities:
Utility plant expenditures (excluding allowance
for funds used during construction) (11,449,391) (4,136,238)
Development costs of land (33,563) (32,142)
____________ ____________
Cash used for investing activities (11,482,954) (4,168,380)
____________ ____________
Net Increase in Cash and Cash Equivalents 959,266 (94,402)
Cash and Cash Equivalents at Beginning of Period 4,254,708 7,376,472
____________ ____________
Cash and Cash Equivalents at End of Period $ 5,213,974 $ 7,282,070
____________ ____________
____________ ____________
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 2,352,388 $ 2,710,702
Income taxes $ -0- $ 1,025,000
Preferred stock dividends $ 177,000 $ 303,334
See Notes to Consolidated Financial Statements.
-7-
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
Twelve Months Ended
March 31,
1995 1994
___________ ___________
Cash Flows from Operating Activities:
Net Income $ 12,565,708 $ 14,286,630
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 8,058,572 7,414,591
Write-down of non-utility property and other
investments 398,858 373,511
Gain on sale of land (1,685,521)
Increase in deferred charges (497,850) (3,409,282)
Deferred income taxes and investment tax
credits - net 3,895,401 3,210,789
Capitalized interest and AFUDC (3,228,557) (1,352,169)
Other operating activities-net 239,499 (494,362)
Change in current assets and current liabilities
excluding cash, short-term investments and
current portion of debt:
Customer and other accounts receivable (1,092,528) (658,070)
Unbilled revenues (114,959) (656,745)
Accounts payable and other liabilities 5,083,138 793,943
Accrued/prepaid interest and taxes 901,034 2,172,491
Other 15,898 51,832
____________ ____________
Net cash provided by operating activities 26,224,214 20,047,638
____________ ____________
Cash Flows Provided by Financing Activities:
Decrease in funds held by Trustee for
construction expenditures 284 8,133,746
Proceeds from issuance of debentures 50,000,000
Proceeds from issuance of common stock 24,950,402 22,959,337
Repayment of long-term debt (483,000) (50,185,000)
Proceeds from issuance of preferred stock 12,000,000
Redemption of preferred stock (12,000,000)
Contributions and advances for construction-net 3,073,429 1,986,333
Net increase (decrease) in notes payable - banks 35,000,000 (8,000,000)
Dividends paid on common stock (13,374,256) (11,298,784)
____________ ____________
Net cash provided by financing activities 49,166,859 13,595,632
____________ ____________
Cash Flows Used for Investing Activities:
Utility plant expenditures (excluding allowance
for funds used during construction) (77,293,772) (31,702,461)
Development costs of land (165,397) (194,717)
Proceeds from sale of land 3,450,000
____________ ____________
Cash used for investing activities (77,459,169) (28,447,178)
____________ ____________
Net (Decrease) Increase in Cash and Cash Equivalents (2,068,096) 5,196,092
Cash and Cash Equivalents at Beginning of Period 7,282,070 2,085,978
____________ ____________
Cash and Cash Equivalents at End of Period $ 5,213,974 $ 7,282,070
____________ ____________
____________ ____________
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 10,058,402 $ 11,626,444
Income taxes $ 5,746,254 $ 6,206,008
Preferred stock dividends $ 679,141 $ 1,090,834
See Notes to Consolidated Financial Statements.
-8-
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED INCOME
Three Months Ended
March 31,
1995 1994
____________ ___________
Operating Revenues $ 25,174,395 $ 24,657,389
____________ ____________
Operating Expenses:
Operation 10,263,167 10,214,079
Maintenance 1,365,679 1,574,009
Depreciation 2,127,257 1,928,865
Revenue taxes 3,123,259 3,096,397
Real estate, payroll and other taxes 706,003 730,848
Federal income taxes 1,682,820 1,534,387
____________ ____________
Total operating expenses 19,268,185 19,078,585
____________ ____________
Operating Income 5,906,210 5,578,804
____________ ____________
Other Income:
Allowance for equity funds used
during construction 618,321 153,874
Federal income taxes (238,313) (79,207)
Other - net 62,572 79,087
____________ ____________
Total other income 442,580 153,754
____________ ____________
Total Operating and Other Income 6,348,790 5,732,558
____________ ____________
Interest Charges:
Interest on long-term debt 2,693,561 2,693,373
Other interest expense - net 423,742 3,504
Allowance for debt funds used
during construction (502,035) (122,807)
Amortization of debt discount - net 80,889 76,978
____________ ____________
Total interest charges 2,696,157 2,651,048
____________ ____________
Income Before Preferred Stock Dividends 3,652,633 3,081,510
Preferred Stock Dividends 203,250 249,267
____________ ____________
Earnings Applicable to Common Stock $ 3,449,383 $ 2,832,243
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-9-
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED INCOME
Twelve Months Ended
March 31,
1995 1994
____________ ___________
Operating Revenues $102,549,511 $102,517,854
____________ ____________
Operating Expenses:
Operation 40,772,068 39,960,803
Maintenance 6,415,442 5,932,836
Depreciation 8,058,572 7,414,591
Revenue taxes 12,775,023 12,816,657
Real estate, payroll and other taxes 2,692,222 2,562,404
Federal income taxes 7,324,829 7,925,465
____________ ____________
Total operating expenses 78,038,156 76,612,756
____________ ____________
Operating Income 24,511,355 25,905,098
____________ ____________
Other Income:
Litigation settlement (932,203)
Gain on sale of land 122,400
Allowance for equity funds used
during construction 1,642,580 516,889
Federal income taxes (396,705) (297,217)
Other - net 416,407 213,199
____________ ____________
Total other income 730,079 555,271
____________ ____________
Total Operating and Other Income 25,241,434 26,460,369
____________ ____________
Interest Charges:
Interest on long-term debt 10,774,196 11,316,038
Other interest expense - net 595,745 55,900
Allowance for debt funds used
during construction (1,246,329) (435,783)
Amortization of debt discount - net 323,557 247,164
____________ ____________
Total interest charges 10,447,169 11,183,319
____________ ____________
Income Before Preferred Stock Dividends 14,794,265 15,277,050
Preferred Stock Dividends 808,030 1,036,767
____________ ____________
Earnings Applicable to Common Stock $ 13,986,235 $ 14,240,283
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-10-
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
Assets 1995 1994
____________ ____________
Utility Plant - At Original Cost:
Utility plant in service $469,604,368 $469,172,575
Construction work in progress 67,796,144 55,739,951
____________ ____________
Total utility plant 537,400,512 524,912,526
Less accumulated depreciation and amortization 89,502,046 87,456,550
____________ ____________
Utility plant - net 447,898,466 437,455,976
____________ ____________
Non-utility Property 85,142 85,690
____________ ____________
Current Assets:
Cash and cash equivalents 2,896,062 1,485,115
Customer and other accounts receivable
(less reserve: 1995, $479,603; 1994, $463,000) 13,401,926 12,350,802
Unbilled revenues 7,349,016 7,161,483
Materials and supplies-at average cost 1,696,107 1,724,969
Prepaid insurance, taxes, other 1,144,923 1,410,401
Prepaid federal income taxes 1,344,630
____________ ____________
Total current assets 26,488,034 25,477,400
____________ ____________
Deferred Charges:
Prepaid pension expense 905,934 926,142
Waste residual management 575,739 325,785
Unamortized debt and preferred stock expenses 8,805,358 8,902,271
Taxes recoverable through future rates 26,339,057 26,339,057
Postretirement benefit expense 2,201,705 2,077,051
Purchased water under recovery-net 293,584 314,128
Other unamortized expenses 1,462,568 944,414
____________ ____________
Total deferred charges 40,583,945 39,828,848
____________ ____________
Total $515,055,587 $502,847,914
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-11-
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
Capitalization and Liabilities 1995 1994
____________ ____________
Capitalization (Note 3):
Common shareholder's equity $153,055,630 $151,624,255
Cumulative preferred stock 12,000,000 12,000,000
Long-term debt - net 141,908,155 141,908,430
____________ ____________
Total capitalization 306,963,785 305,532,685
____________ ____________
Current Liabilities:
Notes payable - banks 35,000,000 23,000,000
Long-term debt - current portion 42,000 42,000
Accounts payable and other liabilities 11,430,620 18,165,522
Customers' deposits 306,098 278,895
Municipal and state taxes accrued 15,916,365 12,831,524
Federal income taxes accrued 264,973
Interest accrued 3,450,872 2,828,464
Preferred stock dividends accrued 59,000 59,000
____________ ____________
Total current liabilities 66,469,928 57,205,405
____________ ____________
Deferred Credits:
Customers' advances for construction 45,875,657 45,554,476
Federal income taxes 60,777,141 60,109,244
Unamortized investment tax credits 8,617,203 8,650,537
Accumulated postretirement benefits 2,341,390 2,077,051
____________ ____________
Total deferred credits 117,611,391 116,391,308
____________ ____________
Contributions in Aid of Construction 24,010,483 23,718,516
____________ ____________
Commitments and Contingent Liabilities
(Note 8)
____________ ____________
Total $515,055,587 $502,847,914
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-12-
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CAPITALIZATION
March 31, 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 90,231,844 88,868,632
Capital stock expense (484,702) (484,702)
Retained earnings 47,567,886 47,499,723
____________ ____________
Total common shareholder's equity 153,055,630 151,624,255
____________ ____________
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) 133,800 144,300
____________ ____________
Total long-term debt 143,133,800 143,144,300
Unamortized discount - net (1,225,645) (1,235,870)
____________ ____________
Total long-term debt - net 141,908,155 141,908,430
____________ ____________
Total capitalization $306,963,785 $305,532,685
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-13-
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED SHAREHOLDER'S EQUITY
Three Months Year
Ended Ended
March 31, 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 1,363,212 25,346,038
____________ ____________
Balance at End of Period 90,231,844 88,868,632
____________ ____________
Capital Stock Expense: (484,702) (484,702)
____________ ____________
Retained Earnings:
Balance at Beginning of Period 47,499,723 46,986,485
Income Before Preferred Stock
Dividends 3,652,633 14,223,142
Dividends on Common Stock (3,381,220) (12,855,857)
Preferred Stock Dividends (203,250) (854,047)
____________ ____________
Balance at End of Period 47,567,886 47,499,723
____________ ____________
Total Common Shareholder's Equity $153,055,630 $151,624,255
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
-14-
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CASH FLOWS
Three Months Ended
March 31,
1995 1994
___________ ___________
Cash Flows from Operating Activities:
Income Before Preferred Stock Dividends $ 3,652,633 $ 3,081,510
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,127,257 1,928,865
Increase in deferred charges (630,443) (1,211,565)
Deferred income taxes and investment tax
credits - net 634,563 637,140
Allowance for debt and equity funds used
during construction (AFUDC) (1,120,356) (276,681)
Other operating activities-net 124,207 (18,420)
Change in current assets and current liabilities
excluding cash, short-term investments and
current portion of debt:
Customer and other accounts receivable (1,051,124) 741,966
Unbilled revenues (187,533) 14,265
Accounts payable and other liabilities (6,707,699) (3,107,324)
Accrued/prepaid interest and taxes 5,582,330 3,784,344
Other 28,863 (88,302)
____________ ____________
Net cash provided by operating activities 2,452,698 5,485,798
____________ ____________
Cash Flows Provided by Financing Activities:
Decrease in funds held by Trustee for
construction expenditures 382,022
Capital contributed by parent company 1,363,212
Proceeds from issuance of preferred stock 12,000,000
Redemption of preferred stock (12,000,000)
Repayment of long-term debt (10,500) (10,500)
Contributions and advances for construction-net 613,148 993,323
Net increase in notes payable - banks 12,000,000
Dividends paid on common and preferred stock (3,558,220) (3,196,333)
____________ ____________
Net cash provided (used) by financing activities 10,407,640 (1,831,488)
____________ ____________
Cash Flows Used for Investing Activities:
Utility plant expenditures (excluding allowance
for funds used during construction) (11,449,391) (4,136,238)
____________ ____________
Cash used for investing activities (11,449,391) (4,136,238)
____________ ____________
Net Increase (Decrease) in Cash and Cash Equivalents 1,410,947 (481,928)
Cash and Cash Equivalents at Beginning of Period 1,485,115 3,263,456
____________ ____________
Cash and Cash Equivalents at End of Period $ 2,896,062 $ 2,781,528
____________ ____________
____________ ____________
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 1,992,685 $ 2,381,965
Income taxes $ -0- $ 1,025,000
Preferred stock dividends $ 177,000 $ 303,334
See Notes to Consolidated Financial Statements.
-15-
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CASH FLOWS
Twelve Months Ended
March 31,
1995 1994
___________ ___________
Cash Flows from Operating Activities:
Income Before Preferred Stock Dividends $ 14,794,265 $ 15,277,050
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 8,058,572 7,414,591
Gain on sale of land (122,400)
Increase in deferred charges (464,931) (3,455,216)
Deferred income taxes and investment tax
credits - net 4,253,957 3,379,710
Allowance for debt and equity funds used
during construction (AFUDC) (2,888,909) (952,672)
Other operating activities-net 11,725 (455,927)
Change in current assets and current liabilities
excluding cash, short-term investments and
current portion of debt:
Customer and other accounts receivable (2,255,907) (544,446)
Unbilled revenues (114,959) (656,745)
Accounts payable and other liabilities 4,947,651 893,592
Accrued/prepaid interest and taxes 333,199 1,912,505
Other 15,899 (33,694)
____________ ____________
Net cash provided by operating activities 26,690,562 22,656,348
____________ ____________
Cash Flows Provided by Financing Activities:
Decrease in funds held by Trustee for
construction expenditures 284 8,133,746
Capital contributed by parent company 26,709,250 19,809,297
Proceeds from issuance of preferred stock 12,000,000
Redemption of preferred stock (12,000,000)
Proceeds from issuance of debentures 50,000,000
Repayment of long-term debt (42,000) (50,042,000)
Contributions and advances for construction-net 3,073,429 1,986,333
Net increase (decrease) in notes payable - banks 35,000,000 (7,000,000)
Dividends paid on common and preferred stock (14,023,219) (12,389,618)
____________ ____________
Net cash provided by financing activities 50,717,744 10,497,758
____________ ____________
Cash Flows Used for Investing Activities:
Utility plant expenditures (excluding allowance
for funds used during construction) (77,293,772) (31,685,971)
Selling costs of land (1,600)
Sale of land 131,000
____________ ____________
Cash used for investing activities (77,293,772) (31,556,571)
____________ ____________
Net Increase in Cash and Cash Equivalents 114,534 1,597,535
Cash and Cash Equivalents at Beginning of Period 2,781,528 1,183,993
____________ ____________
Cash and Cash Equivalents at End of Period $ 2,896,062 $ 2,781,528
____________ ____________
____________ ____________
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 9,563,558 $ 11,174,761
Income taxes $ 5,746,254 $ 6,206,008
Preferred stock dividends $ 679,141 $ 1,090,834
See Notes to Consolidated Financial Statements.
-16-
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% majority
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
E'town routinely makes an equity contribution to Elizabethtown
which represents the proceeds of common stock issued under
E'town's Dividend Reinvestment and Stock Purchase Plan (DRP).
E'town contributed $1,363,212 to Elizabethtown for the three
months ended March 31, 1995.
4. LINES OF CREDIT
Elizabethtown has executed a committed revolving credit
agreement (Agreement) with an agent bank and five additional
banks to replace its uncommitted lines of credit. 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
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 March 31, 1995, the
ratio of Elizabethtown's common and preferred equity to total
capitalization was 48%. For the twelve months ended March 31,
1995, Elizabethtown's pre-tax interest coverage ratio,
calculated in accordance with the Agreement, was 3.0 to 1. At
March 31, 1995, Elizabethtown had short-term borrowings
outstanding of $35,000,000 under the Agreement at interest rates
from 6.2% to 7.1%, at a weighted average interest rate of 6.5%.
<PAGE>
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<PAGE>
E'town has $20,000,000 of uncommitted lines of credit with
several banks in addition to the lines under the Agreement.
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
March 31, 1995 is $12,027,420 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 March 31, 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 recent appraisals, the net
realizable value of the property has remained constant. Charges
of $106,826 for the three months ended March 31, 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 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.
-18-
<PAGE>
In January 1995, Properties entered into an agreement to sell a
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. Until the conclusion of the
diligence period, either party may terminate the agreement at
any time. Properties may cancel the agreement if the closing
does not occur by July 23, 1996. Other significant dates 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
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 rate increase will recover
the financing costs associated with $62,000,000 of construction
projects that were not reflected in the rates last established
in March 1993. These projects include treatment, transmission
and storage facilities needed to ensure that Elizabethtown
continues to meet the Safe Drinking Water Act regulations on
water quality and service. The increase will offset costs for
power, labor and benefits, primarily medical. The 1995
Stipulation also provides for an increase in depreciation rates
resulting in an increase in depreciation expense of
approximately $469,000. 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.
On January 11, 1995, Elizabethtown filed with the BPU for a rate
increase of $886,166 for a change in the Purchased Water
Adjustment Clause (PWAC) rate based on an increase in the unit
cost of water purchased from the NJWSA, as originally proposed,
to be effective July 1, 1995. This procedure, established by
BPU rules, allows Elizabethtown to reflect in rates the change
in the cost of water purchased from the NJWSA without a complete
rate case. Included in this request is the amortization of the
anticipated balance, as of July 1, 1995, of the net
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<PAGE>
under-recovery from the 1994 PWAC of $440,526. In April, 1995
the NJWSA disclosed that the unit cost of water will, in fact,
decrease effective July 1, 1995. The Company has revised its
petition accordingly for a decrease in PWAC revenues of
$209,033, including recovery of an updated projected net
under-recovery balance of $169,633. A decision is expected by
the BPU prior to July 1, 1995.
In the second quarter of 1995, Mount Holly expects to petition
the BPU for an increase in rates, to take place in two phases,
of more than 100% in excess of current rates. 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 Water 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 by the end of 1995. 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 any 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 AFUDC
-20-
<PAGE>
for the Plant will be 1.5% less than the rate of return on
common 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 March 31,
1995 was 2.8 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
March 31, 1995, the Company has expended $43,781,205, excluding
AFUDC of $2,919,656 on the Plant.
Joint Venture
On March 9, 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
Several lawsuits have been filed against Elizabethtown and other
parties in connection with a fire that occurred in a storage
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<PAGE>
facility in December 1989 resulting in damage to property stored
at that facility. The lawsuits allege that the water mains
surrounding the industrial complex failed to provide an adequate
flow of water necessary to fight the fire. The suits further
allege that the Company was negligent in failing to ensure that
the sprinkler systems were operational prior to the fire,
resulting in those sprinkler systems being without water at the
time of the fire. The aggregate amount of claims made to date
against six other defendants and the Company is approximately
$3,000,000. The cause and origin of the fire have not been
definitively determined and the case has not yet progressed to
the point where the claims against Elizabethtown can be
quantified with certainty. However, counsel to Elizabethtown
has advised that, under applicable New Jersey case law,
Elizabethtown's potential exposure should not exceed $1,500,000.
The actual amount of liability, if any, depends upon the theory
of liability which may ultimately be employed and the
application of available insurance. Management is vigorously
contesting the case but cannot now predict the outcome of this
litigation.
10. TAX MATTERS
The Internal Revenue Service (Service) is concluding an audit of
the Corporation's Federal income tax returns for the tax years
1987 through 1992. The Service has raised issues related to tax
deductions taken initially in 1988 for certain land
transactions. On February 23, 1995 the Corporation reached a
tentative agreement to settle this matter with the Service. The
effect on net income for the year ended December 31, 1994 was
approximately $313,400 or $.05 per common share. An additional
charge of $260,000 or $.04 per common share has been recognized
in the first quarter of 1995 in the accompanying financial
statements.
-22-
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% majority-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 3% of the
Company's consolidated operating revenues for the twelve months ended
March 31, 1995. The following analysis sets forth significant events
affecting the financial condition of E'town and Elizabethtown at
March 31, 1995, and the results of operations for the three and twelve
months ended March 31, 1995 and 1994.
LIQUIDITY AND CAPITAL RESOURCES
Capital Expenditures Program
Capital expenditures, primarily for water utility plant, were
$11.4 million for the first three 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
$100 million, excluding an Allowance for Funds Used During
Construction (AFUDC). As of March 31, 1995, the Company has expended
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<PAGE>
$43.8 million, excluding AFUDC of $2.9 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 later in 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 March 31, 1995 was 2.8 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 and pump the water into the Mount Holly
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<PAGE>
system. The project is currently estimated to cost $16.5 million and
is expected to be 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. In the second quarter of 1995, Mount
Holly expects to petition the BPU for an increase in rates, to take
place in two phases, of more than 100% in excess of current rates.
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 new water supply, treatment and transmission
system discussed above. (See Economic Outlook-Elizabethtown and
Subsidiary).
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. Under Elizabethtown's most restrictive
debenture indenture, at March 31, 1995, Elizabethtown had the ability
to issue $57 million of long-term debentures at an assumed interest
rate of 8 1/4%. 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.
Elizabethtown has executed a committed revolving credit agreement
(Agreement) with an agent bank and five additional banks to replace
its uncommitted lines of credit. 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 March 31, 1995, the ratio of
Elizabethtown's common and preferred equity to total capitalization
was 48%. For the twelve months ended March 31, 1995 Elizabethtown's
pre-tax interest coverage ratio, calculated in accordance with the
Agreement, was 3.0 to 1. At March 31, 1995, Elizabethtown had
short-term borrowings outstanding of $35.0 million under the Agreement
at interest rates from 6.2% to 7.1%, at a weighted average interest
rate of 6.5%.
During the three months ended March 31, 1995, 55,448 shares of
common stock were issued for proceeds of $1.4 million under E'town's
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<PAGE>
Dividend Reinvestment and Stock Purchase Plan (DRP). The proceeds are
used on an ongoing basis to make capital contributions to
Elizabethtown to partially fund its capital program.
During the second quarter of 1995, E'town Corporation expects to
issue approximately 575,000 shares with a potential to issue up to
660,000 shares, of common stock through a public offering in order to
finance additional equity contributions to Elizabethtown to fund the
Company's capital program, the predominant portion of which is the
Plant.
Also in 1995, Elizabethtown intends to issue approximately
$30 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 twelve months ended March 31, 1995 was
$12.6 million or $1.95 per share on a primary basis as compared to
$14.3 million or $2.58 per share for 1994. A return to more normal
weather patterns and water consumption during the twelve months ended
March 31, 1995 from abnormally high levels the prior period combined
with a charge due to litigation of $.10 per share in September 1994
and a gain on the sale of land of $.21 per share in August 1993 all
contributed to an overall decrease in earnings ending twelve-months
ending March 31, 1995 compared to the twelve months ending
March 31, 1994. Earnings per share was further affected by a 16%
increase in the number of common shares outstanding for the twelve
month period.
Operating Revenues increased $.5 million or 2.1% for the three
months ended March 31, 1995 compared to the comparable period in 1994.
Included in this increase, is $.9 million which relates to a rate
increase for Elizabethtown, effective February 1, 1995. Sales to
retail customers decreased by $.2 million, primarily due to a return
to more normal weather patterns during the winter months of 1995
compared to 1994. Sales to other water systems and to large
industrial customers also decreased by $.2 million and $.1 million,
respectively. Due to normal growth within the service territory, fire
service revenues increased by $.1 million.
Operating Revenues increased by less than $.1 million for the
twelve months ended March 31, 1995 over the comparable period in 1994.
Included in this increase, is $.9 million which relates to the effect
of a rate increase of $5.3 million effective February 1, 1995. Also,
sales to retail customers decreased $1.5 million and sales to
industrial and fire service customers increased by $.3 million each.
Operation Expenses increased by less than $.1 million or .5% and
$.7 million or 1.8% for the three and twelve months ended
March 31, 1995, respectively, compared to the comparable periods in
1994. The increases are due primarily to increased costs for labor,
benefits, miscellaneous expenses and the unit cost of raw water
purchased from the NJWSA, which is reflected in the PWAC, (see Note 7
to the Notes to Consolidated Financial Statements) in addition to the
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<PAGE>
cost of chemicals to treat such water. Benefit costs increased due,
primarily, to an increase in the actuarially calculated pension
expense.
Maintenance Expenses decreased by $.2 million or 13.2% and
increased $.5 million or 8.1% for the three and twelve months ended
March 31, 1995, respectively, compared to the comparable periods in
1994. The decrease for the three month period is due to the effects of
unusually harsh winter weather in the first quarter of 1994. 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 $.2 million or 10.3% and
$.6 million or 8.7% for the three and twelve month periods ended
March 31, 1995, respectively, compared to the comparable periods in
1994. The increase for the three month period is 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. The increase for the twelve month period is predominantly
due to the higher level of depreciable plant placed in service during
that period.
Revenue Taxes changed by insignificant amounts for the three and
twelve month periods ended March 31, 1995 compared to the 1994 periods
due to relatively minor changes in the revenues on which these taxes
are calculated.
Real Estate, Payroll and Other Taxes decreased by less than
$.1 million or 2.2% and increased by $.2 million or 6.0% for the three
and twelve months ended March 31, 1995, respectively, compared to the
comparable periods in 1994. The increase for the twelve month period
is due to increased payroll taxes resulting from labor cost increases.
Federal Income Taxes increased by $.1 million or 8.9% and
decreased $.7 million or 8.7% for the three and twelve months ended
March 31, 1995, respectively, compared to the comparable periods in
1994 due to the changes in the components of taxable income discussed
herein.
Other Income increased $.3 million and decreased $.9 million for
the three and twelve months ended March 31, 1995, respectively,
compared to the comparable periods in 1994. Included in these net
increases and decreases is a litigation settlement of $.9 million in
September 1994 and a gain on the sale of land in August 1993 of $1.7
million. In addition, increases in the equity component of AFUDC of
$.5 million and $1.1 million for the three 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 $.2 million and decreased $.7 million for
the three and twelve month periods, respectively.
Total Interest Charges increased $.2 million or 8.9% and decreased
$.2 million or 2.0% for the three and twelve month periods ended
-27-
<PAGE>
March 31, 1995, respectively compared to the 1994 amounts. The net
increase for the three month period is due to an increased level of
short-term borrowings under the revolving credit agreement incurred to
finance Elizabethtown's capital program on an interim basis offset by
an increase in the debt component of AFUDC resulting from
Elizabethtown's higher level of construction activity, primarily due
to the Plant. The net decrease for the twelve month period is due to
increased short-term borrowings under the Agreement which were more
than offset by savings from refinancing of long-term debt in 1993 and
the higher level of AFUDC.
Preferred Stock Dividends decreased less than $.1 million and
$.2 million for the three and twelve month periods 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 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.
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
going forward in 1995 and 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.
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
-28-
<PAGE>
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.
A rate increase of approximately 30% in excess of current rates
will be requested by Elizabethtown in late 1995, to be effective in
mid-1996, a major portion of which will be needed to recover the
expected costs of the Plant. 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 for the Plant, but cannot predict the ultimate
outcome of any rate proceeding.
In the second quarter of 1995, Mount Holly expects to petition
the BPU for an increase in rates, to take place in two phases, of more
than 100% in excess of current rates. 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 new
water supply, treatment and transmission system discussed above. A
decision by the BPU on Mount Holly's petition is expected by the end
of 1995. Mount Holly's rates are now among the lowest in the State.
Even though Mount Holly's forthcoming rate increase, if granted at or
near the level proposed, will be substantial relative to current
rates, management expects that the resulting rates will be lower than
those charged by the other major investor owned water system in the
region. 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 any
rate proceeding at this time.
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.
The Internal Revenue Service (Service) is concluding an audit of
the Corporation's Federal income tax returns for the tax years 1987
through 1992. The Service has raised issues related to tax deductions
taken initially in 1988 for certain land transactions. On
February 23, 1995, the Corporation reached a tentative agreement to
settle this matter with the Service. The effect on net income for the
year ended December 31, 1994 was $.3 million, or $.05 per common
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<PAGE>
share. An additional charge of $.3 million, or $.04 per common share
for the first quarter of 1995 has been recognized in the accompanying
financial statements.
Properties
Included in Non-utility Property and Other Investments in the
Consolidated Balance Sheets of E'town at March 31, 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
March 31, 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 recent appraisals, the estimated
net realizable value of the property remains constant. Charges of
$.1 million and $.4 million for the three and twelve months ended
March 31, 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
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. Until the conclusion of the diligence period,
either party may terminate the agreement at any time. Properties may
cancel the agreement if the closing does not occur by July 23, 1996.
Other significant dates 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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<PAGE>
PART II - OTHER INFORMATION
Item 1:
Legal Proceedings
Several lawsuits have 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. The lawsuits allege that the water mains
surrounding the industrial complex failed to provide an adequate
flow of water necessary to fight the fire. The suits further
allege that the Company was negligent in failing to ensure that
the sprinkler systems were operational prior to the fire,
resulting in those sprinkler systems being without water at the
time of the fire. The aggregate amount of claims made to date
against six other defendants and the Company is approximately
$3,000,000. The cause and origin of the fire have not been
definitively determined and the case has not yet progressed to
the point where the claims against Elizabethtown can be
quantified with certainty. However, counsel to Elizabethtown has
advised that, under applicable New Jersey case law
Elizabethtown's potential exposure should not exceed $1,500,000.
The actual amount of liability, if any, depends upon the theory
of liability, which may be ultimately employed and the
application of available insurance. Management is vigorously
contesting the case but cannot now predict the outcome of this
litigation.
Items 2 - 4:
Nothing to report.
Item 5: Other Information
Tax Matters
The Internal Revenue Service (Service) is concluding an audit of
the Corporation's Federal income tax returns for the tax years
1987 through 1992. The Service has raised issues related to tax
deductions taken initially in 1988 for certain land transactions.
On February 23, 1995 the Corporation reached a tentative
agreement to settle this matter with the Service. The effect on
net income for the year ended December 31, 1994 was approximately
$313,400 or $.05 per common share. An additional charge of
approximately $260,000, or $.04 per common share, has been
recognized in the first quarter of 1995 in the accompanying
financial statements.
Management Audit
The New Jersey Board of Public Utilities (BPU) has established a
management audit program as a means of enhancing the
effectiveness of its regulatory oversight of the public utilities
in New Jersey. Elizabethtown Water Company has recently
participated in such an audit and, although not yet adopted by
the BPU, a final report was issued in March 1995. The audit
concluded that the Company has been well managed and has
demonstrated its continued ability to provide a sufficient supply
of safe, potable water at reasonable rates while maintaining
financial grade investment ratings and quality dividend payouts.
The report also made recommendations for improvements that have
the potential to assist the Company in meeting the challenges of
today, and tomorrow's utility environment. Several of these
recommendations relate to efforts already underway by the Company
with respect to business process redesign projects and the
information technology to support those processes. The Company
and the BPU will jointly develop a program to implement the
results of the audit.
-31-
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 and
Subsidiary - Computation of Ratio of Earnings to
Fixed Charges and Computation of Ratio of Earnings
to Fixed Charges and Preferred Dividends
Exhibit 27 - Financial Data Schedules
Item 6(b) - Reports on Form 8-K
Items Reported: None
-32-
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: May 15, 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>
EXHIBIT 11
Page 1 of 2
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Three Months Ended
March 31,
1995 1994
_________ _________
PRIMARY
_______
EARNINGS
Income Before Preferred Stock
Dividends of Subsidiary $ 3,217,928 $ 2,785,980
Deduct: Preferred Stock Dividends 203,250 249,267
___________ ___________
Net Income Available for
Common Stock $ 3,014,678 $ 2,536,713
___________ ___________
___________ ___________
SHARES
Weighted Average Number of
Common Shares Outstanding 6,635,574 5,676,970
Assuming Exercise of Options
Reduced by the Number of Shares
Which Could Have Been Purchased
With the Proceeds From Exercise
of Such Options 304 6,316
___________ ___________
Weighted Average Number of Common
Shares Outstanding as Adjusted 6,635,878 5,683,286
___________ ___________
___________ ___________
Primary Earnings
Per Share of Common Stock $ 0.45 $ 0.45
___________ ___________
___________ ___________
ASSUMING FULL DILUTION
______________________
EARNINGS
Income Before Preferred Stock
Dividends of Subsidiary 3,217,928 2,785,980
Deduct: Preferred Stock Dividends 203,250 249,267
Add: After Tax Interest Expense
Applicable to 6 3/4% Convertible
Subordinated Debentures 130,807 136,659
___________ ___________
Adjusted Net Income $ 3,145,485 $ 2,673,372
___________ ___________
___________ ___________
SHARES
Weighted Average Number of
Common Shares Outstanding 6,635,574 5,676,970
Assuming Exercise of Options
Reduced by the Number of Shares
Which Could Have Been Purchased
With the Proceeds From Exercise
of Such Options 304 6,316
Assuming Conversion of 6 3/4%
Convertible Subordinated
Debentures (a) 302,279 311,013
___________ ___________
Weighted Average Number of Common
Shares Outstanding as Adjusted 6,938,157 5,994,299
___________ ___________
___________ ___________
Fully Diluted Earnings
Per Share of Common Stock $ 0.45 $ 0.45
___________ ___________
___________ ___________
(a) Convertible at $40 per share.
EXHIBIT 11
Page 2 of 2
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Twelve Months Ended
March 31,
1995 1994
_________ _________
PRIMARY
_______
EARNINGS
Income Before Preferred Stock
Dividends of Subsidiary $13,373,738 $15,323,397
Deduct: Preferred Stock Dividends 808,030 1,036,767
___________ ___________
Net Income Available for
Common Stock $12,565,708 $14,286,630
___________ ___________
___________ ___________
SHARES
Weighted Average Number of
Common Shares Outstanding 6,443,932 5,523,853
Assuming Exercise of Options
Reduced by the Number of Shares
Which Could Have Been Purchased
With the Proceeds From Exercise
of Such Options 1,363 7,674
___________ ___________
Weighted Average Number of Common
Shares Outstanding as Adjusted 6,445,295 5,531,527
___________ ___________
___________ ___________
Primary Earnings
Per Share of Common Stock $ 1.95 $ 2.58
___________ ___________
___________ ___________
ASSUMING FULL DILUTION
______________________
EARNINGS
Income Before Preferred Stock
Dividends of Subsidiary 13,373,738 15,323,397
Deduct: Preferred Stock Dividends 808,030 1,036,767
Add: After Tax Interest Expense
Applicable to 6 3/4% Convertible
Subordinated Debentures 538,414 550,884
___________ ___________
Adjusted Net Income $13,104,122 $14,837,514
___________ ___________
___________ ___________
SHARES
Weighted Average Number of
Common Shares Outstanding 6,443,932 5,523,853
Assuming Exercise of Options
Reduced by the Number of Shares
Which Could Have Been Purchased
With the Proceeds From Exercise
of Such Options 1,363 7,674
Assuming Conversion of 6 3/4%
Convertible Subordinated
Debentures (a) 306,789 312,714
___________ ___________
Weighted Average Number of Common
Shares Outstanding as Adjusted 6,752,084 5,844,241
___________ ___________
___________ ___________
Fully Diluted Earnings
Per Share of Common Stock $ 1.94 $ 2.54
___________ ___________
___________ ___________
(a) Convertible at $40 per share.
<PAGE>
Exhibit 12
Page 1 of 4
Elizabethtown Water Company & Subsidiary
Computation of Ratio of Earnings to Fixed Charges
Three Months Ended
March 31,
1995 1994
________ ________
EARNINGS:
Income before preferred stock dividends $3,652,633 $3,081,510
Federal income taxes 1,921,133 1,613,594
Interest charges 2,696,157 2,651,048
___________ ___________
Earnings available to cover fixed charges $8,269,923 $7,346,152
___________ ___________
___________ ___________
FIXED CHARGES:
Interest on long-term debt 2,693,561 2,693,373
Other interest 423,742 3,504
Amortization of debt discount - net 80,889 76,978
___________ ___________
Total fixed charges $3,198,192 $2,773,855
___________ ___________
___________ ___________
Ratio of Earnings to Fixed Charges 2.59 2.65
___________ ___________
___________ ___________
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 2 of 4
Elizabethtown Water Company & Subsidiary
Computation of Ratio of Earnings to Fixed Charges
Twelve Months Ended
March 31,
1995 1994
________ ________
EARNINGS:
Income before preferred stock dividends $14,794,265 $15,277,050
Federal income taxes 7,721,534 8,222,682
Interest charges 10,447,169 11,183,319
___________ ___________
Earnings available to cover fixed charges $32,962,968 $34,683,051
___________ ___________
___________ ___________
FIXED CHARGES:
Interest on long-term debt 10,774,196 11,316,038
Other interest 595,745 55,900
Amortization of debt discount - net 323,557 247,164
___________ ___________
Total fixed charges $11,693,498 $11,619,102
___________ ___________
___________ ___________
Ratio of Earnings to Fixed Charges 2.82 2.99
___________ ___________
___________ ___________
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 3 of 4
Elizabethtown Water Company & Subsidiary
Computation of Ratio of Earnings to Fixed Charges
and Preferred Dividends
Three Months Ended
March 31,
1995 1994
________ ________
EARNINGS:
Income before preferred stock dividends $3,652,633 $3,081,510
Federal income taxes 1,921,133 1,613,594
Interest charges 2,696,157 2,651,048
___________ ___________
Earnings available to cover fixed charges $8,269,923 $7,346,152
___________ ___________
___________ ___________
FIXED CHARGES AND
PREFERRED DIVIDENDS:
Interest on long-term debt 2,693,561 2,693,373
Preferred dividend requirement (1) 310,163 379,806
Other interest 423,742 3,504
Amortization of debt discount - net 80,889 76,978
___________ ___________
Total fixed charges $3,508,355 $3,153,661
___________ ___________
___________ ___________
Ratio of Earnings to Fixed Charges
and Preferred Dividends 2.36 2.33
___________ ___________
___________ ___________
(1) Preferred Dividend Requirement:
Preferred dividends $203,250 $249,267
Effective tax rate 34.47% 34.37%
___________ ___________
Preferred dividend requirement $310,163 $379,806
___________ ___________
___________ ___________
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 4
Elizabethtown Water Company & Subsidiary
Computation of Ratio of Earnings to Fixed Charges
and Preferred Dividends
Twelve Months Ended
March 31,
1995 1994
________ ________
EARNINGS:
Income before preferred stock dividends $14,794,265 $15,277,050
Federal income taxes 7,721,534 8,222,682
Interest charges 10,447,169 11,183,319
___________ ___________
Earnings available to cover fixed charges $32,962,968 $34,683,051
___________ ___________
___________ ___________
FIXED CHARGES AND
PREFERRED DIVIDENDS:
Interest on long-term debt 10,774,196 11,316,038
Preferred dividend requirement (1) 1,229,691 1,594,781
Other interest 595,745 55,900
Amortization of debt discount - net 323,557 247,164
___________ ___________
Total fixed charges $12,923,189 $13,213,883
___________ ___________
___________ ___________
Ratio of Earnings to Fixed Charges
and Preferred Dividends 2.55 2.62
___________ ___________
___________ ___________
(1) Preferred Dividend Requirement:
Preferred dividends $808,030 $1,036,767
Effective tax rate 34.29% 34.99%
___________ ___________
Preferred dividend requirement $1,229,691 $1,594,781
___________ ___________
___________ ___________
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.
<PAGE>
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<NAME> ETOWN CORPORATION
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<TABLE> <S> <C>
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<CIK> 0000032379
<NAME> ELIZABETHTOWN WATER CO
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