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, 2000
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 1-11023
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 Code)
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 Code)
Registrant's telephone number, including area code: (908) 654-1234
Title of each class Name of each exchange on which registered
Senior Unsecured Debentures None
Mandatory Redeemable Preferred Stock 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, 2000
E'town Corporation (without par value) 8,890,371
Elizabethtown Water Company (without par value)* 1,974,902
* All shares are owned by E'town Corporation
===============================================================================
<PAGE>
E'TOWN CORPORATION AND SUBSIDIARIES
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
INDEX
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PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
E'TOWN CORPORATION AND SUBSIDIARIES
- Statements of Consolidated Income 1
- Consolidated Balance Sheets 2-3
- Statements of Consolidated Capitalization 4
- Statements of Consolidated Shareholders' Equity 5
- Statements of Consolidated Cash Flows 6
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
- Statements of Consolidated Income 7
- Consolidated Balance Sheets 8-9
- Statements of Consolidated Capitalization 10
- Statements of Consolidated Shareholder's Equity 11
- Statements of Consolidated Cash Flows 12
E'TOWN CORPORATION AND SUBSIDIARIES AND
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
- Notes to Consolidated Financial Statements 13
Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations 21
PART II - OTHER INFORMATION 28
Items 1 - 5
Item 6 (a) - Exhibits 28
(b) - Reports on Form 8-K 28
SIGNATURES 29
<PAGE>
E'TOWN CORPORATION AND SUBSIDIARIES
(In Thousands Except Per Share Amounts) Three Months Ended Nine Months Ended
(Unaudited) September 30, September 30,
2000 1999 2000 1999
================================================================================
Operating Revenues $ 42,428 $ 45,593 $ 122,385 $ 122,680
--------------------------------------------------------------------------------
Operating Expenses:
Operation 16,867 17,236 52,773 49,703
Maintenance 1,505 1,644 5,066 4,813
Depreciation and amortization 4,207 3,848 12,581 11,233
Revenue taxes 4,532 4,956 12,961 13,238
Real estate, payroll and other taxes 1,012 891 3,219 2,753
Federal income taxes 2,926 4,209 6,361 9,277
--------------------------------------------------------------------------------
Total operating expenses 31,049 32,784 92,961 91,017
--------------------------------------------------------------------------------
Operating Income 11,379 12,809 29,424 31,663
--------------------------------------------------------------------------------
Other Income (Expense):
Allowance for equity funds used during
construction 189 61 414 277
Federal income taxes (116) (139) (421) (1,691)
Gain on sale of land (Note 8) 3,197
Other - net 143 228 809 1,093
--------------------------------------------------------------------------------
Total other income 216 150 802 2,876
--------------------------------------------------------------------------------
Total Operating and Other Income 11,595 12,959 30,226 34,539
--------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 4,746 3,884 13,969 12,090
Other interest expense - net 1,184 901 3,568 1,757
Capitalized interest (137) (93) (337) (258)
Amortization of debt discount
and expense-net 117 111 346 331
--------------------------------------------------------------------------------
Total interest charges 5,910 4,803 17,546 13,920
--------------------------------------------------------------------------------
Income Before Preferred Stock Dividends
of Subsidiary 5,685 8,156 12,680 20,619
Preferred Stock Dividends 203 203 609 609
--------------------------------------------------------------------------------
Net Income $ 5,482 $ 7,953 $ 12,071 $ 20,010
================================================================================
Earnings Per Share of Common Stock (Note 7):
--------------------------------------------------------------------------------
Basic $ 0.62 $ 0.92 $ 1.37 $ 2.34
Diluted $ 0.61 $ 0.91 $ 1.36 $ 2.30
--------------------------------------------------------------------------------
Average Number of Shares Outstanding for
the Calculation of Earnings Per Share:
--------------------------------------------------------------------------------
Basic 8,872 8,612 8,823 8,562
Diluted 9,095 8,887 9,076 8,843
--------------------------------------------------------------------------------
Dividends Paid Per Common Share $ 0.51 $ 0.51 $ 1.53 $ 1.53
================================================================================
See Notes to Consolidated Financial Statements.
-1-
<PAGE>
E'TOWN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands) September 30,
2000 December 31,
Assets (Unaudited) 1999
--------------------------------------------------------------------------------
Utility Plant-At Original Cost:
Utility plant in service $ 779,769 $ 779,485
Construction work in progress 40,634 17,441
--------------------------------------------------------------------------------
Total utility plant 820,403 796,926
Less accumulated depreciation 147,349 137,587
--------------------------------------------------------------------------------
Utility plant-net 673,054 659,339
--------------------------------------------------------------------------------
Non-utility Property and Other
Investments - Net (Note 8) 81,762 85,163
--------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 7,843 4,367
Customer and other accounts receivable
(less reserve: 2000, $1,385, 1999, $1,044)
(Note 8) 28,437 30,129
Mortgage and other notes receivable 2,217 4,600
Unbilled revenues 13,998 12,972
Infrastructure loan funds receivable (Note 5) 1,286 5,657
Materials and supplies-at average cost 4,464 4,069
Prepaid federal income taxes 453 4,617
Prepaid insurance, taxes, other 1,708 3,663
--------------------------------------------------------------------------------
Total current assets 60,406 70,074
--------------------------------------------------------------------------------
Deferred Charges:
Waste residual management 1,419 1,538
Unamortized debt and preferred stock expenses 9,362 9,419
Taxes recoverable through future rates 13,466 13,466
Postretirement benefit expense 2,963 3,145
Flood expenditures 5,659 5,000
Other unamortized expenses 3,986 1,164
--------------------------------------------------------------------------------
Total deferred charges 36,855 33,732
--------------------------------------------------------------------------------
Total $ 852,077 $ 848,308
================================================================================
See Notes to Consolidated Financial Statements.
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<PAGE>
E'TOWN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands) September 30,
2000 December 31,
Capitalization and Liabilities (Unaudited) 1999
--------------------------------------------------------------------------------
Capitalization (Notes 4 and 5):
Common shareholders' equity $ 236,631 $ 229,233
Mandatory Redeemable Cumulative Preferred Stock 12,000 12,000
Redeemable preferred stock 227 227
Long-term debt - net 293,991 266,015
--------------------------------------------------------------------------------
Total capitalization 542,849 507,475
--------------------------------------------------------------------------------
Current Liabilities:
Notes payable - banks 81,500 89,500
Long-term debt - current portion (Note 5) 583 494
Accounts payable and other liabilities 23,605 31,434
Contract obligations payable (Note 5) 19,000
Customers' deposits 234 263
Municipal and state taxes accrued 13,411 17,682
Interest accrued 5,583 4,219
Preferred stock dividends accrued 59 59
--------------------------------------------------------------------------------
Total current liabilities 124,975 162,651
--------------------------------------------------------------------------------
Deferred Credits:
Customers' advances for construction 43,744 41,321
Federal income taxes 73,964 71,236
State income taxes 302 302
Unamortized investment tax credits 7,484 7,636
Accumulated postretirement benefits 2,323 3,571
--------------------------------------------------------------------------------
Total deferred credits 127,817 124,066
--------------------------------------------------------------------------------
Contributions in Aid of Construction 56,436 54,116
--------------------------------------------------------------------------------
Commitments and Contingent Liabilities
--------------------------------------------------------------------------------
Total $ 852,077 $ 848,308
================================================================================
See Notes to Consolidated Financial Statements.
-3-
<PAGE>
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CAPITALIZATION
(In Thousands Except Share Amounts) September 30,
2000 December 31,
(Unaudited) 1999
--------------------------------------------------------------------------------
Common Shareholders' Equity:
E'town Corporation:
Common stock without par value, authorized,
15,000,000 shares, issued 2000, 8,922,925
shares; 1999, 8,760,862 shares $ 189,049 180,124
Paid-in capital 1,216 1,315
Capital stock expense (5,160) (5,160)
Retained earnings 52,494 53,922
Less cost of treasury stock; 2000 and
1999, 32,554 shares (968) (968)
--------------------------------------------------------------------------------
Total common shareholders' equity 236,631 229,233
--------------------------------------------------------------------------------
Preferred Shareholders' Equity
Elizabethtown Water Company:
Mandatory Redeemable Cumulative Preferred Stock:
$100 par value, authorized, 200,000
shares; $5.90 series, issued and
outstanding, 120,000 shares 12,000 12,000
Cumulative Preferred Stock:
$25 par value, authorized, 500,000
shares; none issued
Applied Wastewater Management, Inc.:
Redeemable Preferred Stock:
No par value, noncumulative, issued and
outstanding, 227 shares 227 227
--------------------------------------------------------------------------------
Total preferred shareholders' equity 12,227 12,227
--------------------------------------------------------------------------------
Long-term Debt (Notes 5 and 8):
E'town Corporation:
6 3/4% Convertible Subordinated
Debentures, due 2012 7,390 8,705
6.79% Senior Notes, due 2007 12,000 12,000
7.69% Senior Notes, due 2010 30,000
Applied Wastewater/Applied Water Management:
6% Note Payable (due serially through 2027) 199 204
9.65% Mortgage Note Payable (due 2001) 264
Elizabethtown Water Company:
7.20% Debentures, due 2019 10,000 10,000
7 1/2% Debentures, due 2020 15,000 15,000
6.60% Debentures, due 2021 10,500 10,500
6.70% Debentures, due 2021 15,000 15,000
8 3/4% Debentures, due 2021 27,500 27,500
8% Debentures, due 2022 15,000 15,000
5.60% Debentures, due 2025 40,000 40,000
7 1/4% Debentures, due 2028 50,000 50,000
Variable Rate Debentures, due 2027 50,000 50,000
The Mount Holly Water Company:
New Jersey Environmental Infrastructure
Trust Notes (due serially through 2018) 5,373 5,677
New Jersey Department of Environmental
Protection Notes (due serially through 2018) 7,030 7,040
9.65% Mortgage Note Payable (due 2001) 156
--------------------------------------------------------------------------------
Total long-term debt 294,992 267,046
Unamortized (discount) premium-net (1,001) (1,031)
--------------------------------------------------------------------------------
Total long-term debt-net 293,991 266,015
--------------------------------------------------------------------------------
Total Capitalization $ 542,849 $ 507,475
================================================================================
See Notes to Consolidated Financial Statements.
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<PAGE>
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
(In Thousands Except Share Amounts)
Nine Months Ended
September 30, Year Ended
2000 December 31,
(Unaudited) 1999
--------------------------------------------------------------------------------
Common Stock:
Balance at Beginning of Period $ 180,124 $ 169,324
Common stock issued under Dividend Reinvestment
and Stock Purchase Plan (2000, 117,507 shares;
1999, 197,547 shares) 7,299 8,702
Redemption of Convertible Debentures
(2000, 32,250 shares; 1999, 44,225 shares) 1,290 1,769
Issuance of restricted stock under compensation
programs (1999, 2,822 shares) 119
Restricted stock (redeemed) in connection with
acquisitions (1999, (25,756) shares) (867)
Exercise of stock options (2000, 12,500 shares;
1999, 37,500 shares) 3367 1,077
--------------------------------------------------------------------------------
Balance at End of Period 189,049 180,124
--------------------------------------------------------------------------------
Paid-in Capital: 1,216 1,315
--------------------------------------------------------------------------------
Capital Stock Expense: (5,160) (5,160)
--------------------------------------------------------------------------------
Retained Earnings:
Balance at Beginning of Period 53,922 50,961
Net Income 12,071 20,487
Dividends on common stock (2000, $1.53;
1999, $2.04) (13,499) (17,526)
--------------------------------------------------------------------------------
Balance at End of Period 52,494 53,922
--------------------------------------------------------------------------------
Treasury Stock: (968) (968)
--------------------------------------------------------------------------------
Total Common Shareholders' Equity $ 236,631 $ 229,233
================================================================================
See Notes to Consolidated Financial Statements.
-5-
<PAGE>
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
Nine Months Ended
(Unaudited) September 30,
2000 1999
--------------------------------------------------------------------------------
Cash Flows Provided by Operating Activities:
Net Income $ 12,071 $ 20,010
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 12,581 11,233
Gain on the sale of land (3,197)
Increase in deferred charges (3,362) (2,094)
Deferred income taxes and investment
tax credits-net 2,576 2,280
Capitalized interest and AFUDC (751) (535)
Other operating activities-net (1,158) 4,255
Change in current assets and current liabilities
excluding cash, short-term investments and
current portion of debt :
Customer and other accounts receivable 6,063 (5,490)
Mortgage and other notes receivable 2,383 (3,746)
Unbilled revenues (1,026) (1,885)
Accounts payable and other liabilities (7,858) 1,917
Accrued/prepaid interest and taxes 3,212 (1,483)
Other (395) 555
--------------------------------------------------------------------------------
Net cash provided by operating activities 24,336 21,820
--------------------------------------------------------------------------------
Cash Flows Provided (Used) by Financing Activities:
Proceeds from issuance of common stock 7,635 6,593
Funds held in Trust by others 4,520 42
Debt and preferred stock issuance and
amortization costs 57 318
Issuance of other long-term debt 30,000
Repayment of long-term debt (19,650) (13,156)
Contributions and advances for construction 6,566 3,998
Refunds of customer advances for construction 1,823) (2,566)
Net increase (decrease) in notes payable - banks (8,000) 37,057
Dividends paid on common stock (13,499) (13,087)
--------------------------------------------------------------------------------
Net cash flows provided by financing activities 5,806 19,199
--------------------------------------------------------------------------------
Cash Flows Used for Investing Activities:
Utility plant and other capital expenditures
(excluding allowance for funds used during
construction) (24,013) (35,181)
Purchase of companies (1,800)
Capital expenditures on non-regulated property (2,653) (1,787)
Proceeds from sale of land 2,069
--------------------------------------------------------------------------------
Net cash flows used for investing activities (26,666) (36,699)
--------------------------------------------------------------------------------
Net Increase in Cash
and Cash Equivalents 3,476 4,320
Cash and Cash Equivalents at
Beginning of Period 4,367 5,909
--------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 7,843 $ 10,229
================================================================================
Supplemental Disclosures of Cash
Flow Information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 15,201 $ 12,859
Income taxes $ 1,800 $ 7,100
Preferred stock dividends $ 531 $ 531
Noncash issuance of common stock $ 1,290 $ 1,233
See Notes to Consolidated Financial Statements.
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<PAGE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED INCOME
(In Thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
--------------------------------------------------------------------------------
Operating Revenues $ 35,929 $ 39,204 $ 103,051 $ 105,779
--------------------------------------------------------------------------------
Operating Expenses:
Operation 11,919 12,932 36,285 37,064
Maintenance 1,388 1,536 4,593 4,439
Depreciation 3,460 3,197 10,380 9,591
Revenue taxes 4,503 4,944 12,876 13,209
Real estate, payroll and other taxes 827 755 2,567 2,384
Federal income taxes 3,230 4,068 7,726 9,336
--------------------------------------------------------------------------------
Total operating expenses 25,327 27,432 74,427 76,023
--------------------------------------------------------------------------------
Operating Income 10,602 11,772 28,624 29,756
--------------------------------------------------------------------------------
Other Income (Expense):
Allowance for equity funds used
during construction 189 61 414 277
Federal income taxes (108) (133) (389) (495)
Other - net 118 201 713 850
--------------------------------------------------------------------------------
Total other income 199 129 738 632
--------------------------------------------------------------------------------
Total Operating and Other Income 10,801 11,901 29,362 30,388
--------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 3,819 3,507 11,453 10,959
Other interest expense - net 729 490 2,610 868
Allowance for funds used
during construction (137) (75) (337) (240)
Amortization of debt discount
and expense-net 101 99 299 295
--------------------------------------------------------------------------------
Total interest charges 4,512 4,021 14,025 11,882
--------------------------------------------------------------------------------
Net Income 6,289 7,880 15,337 18,506
Preferred Stock Dividends 203 203 609 609
--------------------------------------------------------------------------------
Earnings Applicable To Common Stock $ 6,086 $ 7,677 $ 14,728 $ 17,897
================================================================================
See Notes to Consolidated Financial Statements.
-7-
<PAGE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In Thousands) September 30,
2000 December 31,
Assets (Unaudited) 1999
--------------------------------------------------------------------------------
Utility Plant-At Original Cost:
Utility plant in service $ 770,664 $ 770,251
Construction work in progress 40,603 17,495
--------------------------------------------------------------------------------
Total utility plant 811,267 787,746
Less accumulated depreciation and amortization 146,444 136,975
--------------------------------------------------------------------------------
Utility plant-net 664,823 650,771
--------------------------------------------------------------------------------
Non-utility Property (Note 8) 2,815 7,337
--------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 3,644 1,342
Customer and other accounts receivable
(less reserve: 2000, $704, 1999, $674) 19,459 19,341
Unbilled revenues 11,362 10,578
Infrastructure loan funds receivable (Note 5) 1,286 5,657
Materials and supplies-at average cost 4,464 4,069
Prepaid federal income taxes 1,492 5,807
Prepaid insurance, taxes, other 1,570 3,229
--------------------------------------------------------------------------------
Total current assets 43,277 50,023
--------------------------------------------------------------------------------
Deferred Charges:
Waste residual management 1,419 1,538
Unamortized debt and preferred stock expenses 8,690 8,900
Taxes recoverable through future rates 13,466 13,466
Postretirement benefit expense 2,963 3,145
Flood expenditures 5,659 5,000
Other unamortized expenses 3,640 1,007
--------------------------------------------------------------------------------
Total deferred charges 35,837 33,056
--------------------------------------------------------------------------------
Total $ 746,752 $ 741,187
================================================================================
See Notes to Consolidated Financial Statements.
-8-
<PAGE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In Thousands) September 30,
2000 December 31,
Capitalization and Liabilities (Unaudited) 1999
--------------------------------------------------------------------------------
Capitalization (Note 4):
Common shareholder's equity $ 228,989 $ 220,461
Mandatory redeemable cumulative preferred stock 12,000 12,000
Long-term debt - net 244,402 244,842
--------------------------------------------------------------------------------
Total capitalization 485,391 477,303
--------------------------------------------------------------------------------
Current Liabilities:
Notes payable - banks 53,000 51,500
Long-term debt - current portion 575 481
Accounts payable and other liabilities 13,349 19,989
Customers' deposits 169 197
Municipal and state taxes accrued 13,308 17,592
Interest accrued 4,691 3,745
Preferred stock dividends accrued 59 59
--------------------------------------------------------------------------------
Total current liabilities 85,151 93,563
--------------------------------------------------------------------------------
Deferred Credits:
Customers' advances for construction 42,532 40,019
Federal income taxes 72,034 69,570
Unamortized investment tax credits 7,484 7,636
Accumulated postretirement benefits 2,143 3,399
--------------------------------------------------------------------------------
Total deferred credits 124,193 120,624
--------------------------------------------------------------------------------
Contributions in Aid of Construction 52,017 49,697
--------------------------------------------------------------------------------
Commitments and Contingent Liabilities
--------------------------------------------------------------------------------
Total $ 746,752 $ 741,187
================================================================================
See Notes to Consolidated Financial Statements.
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<PAGE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CAPITALIZATION
(In Thousands) September 30,
2000 December 31,
(Unaudited) 1999
--------------------------------------------------------------------------------
Common Shareholder's Equity (Note 4):
Common stock without par value, authorized,
15,000,000 shares, issued 2000 and 1999,
1,974,902 shares $ 15,741 $ 15,741
Paid-in capital 148,874 141,575
Capital stock expense (485) (485)
Retained earnings 64,859 63,630
--------------------------------------------------------------------------------
Total common shareholder's equity 228,989 220,461
--------------------------------------------------------------------------------
Preferred Shareholders' Equity:
Mandatory Redeemable Cumulative Preferred Stock
$100 par value, authorized, 200,000 shares;
$5.90 series, issued and outstanding,
120,000 shares 12,000 12,000
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 10,000
7 1/2% Debentures, due 2020 15,000 15,000
6.60% Debentures, due 2021 10,500 10,500
6.70% Debentures, due 2021 15,000 15,000
8 3/4% Debentures, due 2021 27,500 27,500
8% Debentures, due 2022 15,000 15,000
5.60% Debentures, due 2025 40,000 40,000
7 1/4% Debentures, due 2028 50,000 50,000
Variable Rate Debentures, due 2027 50,000 50,000
The Mount Holly Water Company:
New Jersey Environmental Infrastructure Trust
Notes (due serially through 2018) 5,373 5,677
New Jersey Department of Environmental
Protection Notes (due serially through 2018) 7,030 7,040
9.65% Mortgage Note Payable (due 2001) 156
--------------------------------------------------------------------------------
Total long-term debt 245,403 245,873
Unamortized discount-net (1,001) (1,031)
--------------------------------------------------------------------------------
Total long-term debt-net 244,402 244,842
--------------------------------------------------------------------------------
Total Capitalization $ 485,391 $ 477,303
================================================================================
See Notes to Consolidated Financial Statements.
-10-
<PAGE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
(In Thousands)
Nine Months Ended
September 30, Year Ended
2000 December 31,
(Unaudited) 1999
--------------------------------------------------------------------------------
Common Stock: $ 15,741 $ 15,741
--------------------------------------------------------------------------------
Paid-in Capital:
Balance at Beginning of Period 141,575 132,753
Capital Contributed by Parent Company from:
Common Stock Issued Under Dividend
Reinvestment and Stock Purchase Plan 7,299 8,702
Issuance of Restricted and Unrestricted
Stock Under Compensation Programs 120
--------------------------------------------------------------------------------
Balance at End of Period 148,874 141,575
--------------------------------------------------------------------------------
Capital Stock Expense (485) (485)
--------------------------------------------------------------------------------
Retained Earnings:
Balance at Beginning of Period 63,630 60,564
Net income 15,337 21,405
Dividends on common stock (13,499) (17,526)
Dividends on preferred stock (609) (813)
--------------------------------------------------------------------------------
Balance at End of Period 64,859 63,630
--------------------------------------------------------------------------------
Total Common Shareholder's Equity $ 228,989 $ 220,461
================================================================================
See Notes to Consolidated Financial Statements.
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<PAGE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In Thousands)
(Unaudited) Nine Months Ended
September 30,
2000 1999
--------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net income $ 15,337 $ 18,506
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 10,380 9,591
Increase in deferred charges (3,173) (2,657)
Deferred income taxes and investment tax
credits-net 2,312 2,178
Allowance for funds used during construction (751) (517)
Other operating activities-net (1,042) 64
Change in current assets and current liabilities
excluding cash, short-term investments and
current portion of debt :
Customer and other accounts receivable 4,253 (4,901)
Unbilled revenues (784) (1,668)
Accounts payable and other liabilities (6,668) (683)
Accrued/prepaid interest and taxes 2,636 (3,148)
Other (473) 106
--------------------------------------------------------------------------------
Net cash provided by operating activities 22,027 16,871
--------------------------------------------------------------------------------
Cash Flows Provided (Used) by Financing Activities:
Capital contributed by parent company 7,299 6,456
Funds held in Trust by others 4,520 42
Debt and preferred stock issuance and
amortization costs 210 345
Repayment of long-term debt (376) (23)
Contributions and advances for construction 6,566 3,998
Refunds of customer advances for construction (1,733) (2,384)
Net increase in notes payable - banks 1,500 24,000
Dividends paid on common stock and preferred stock (14,030) (13,618)
--------------------------------------------------------------------------------
Net cash provided by financing activities 3,956 18,816
--------------------------------------------------------------------------------
Cash Flows Used for Investing Activities:
Utility plant expenditures (excluding allowance
for funds used during construction) (23,681) (33,125)
Purchase of company (860)
--------------------------------------------------------------------------------
Cash used for investing activities (23,681) (33,985)
--------------------------------------------------------------------------------
Net Increase in Cash and
Cash Equivalents 2,302 1,702
Cash and Cash Equivalents at
Beginning of Period 1,342 3,598
--------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 3,644 $ 5,300
================================================================================
Supplemental Disclosures of Cash
Flow Information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 12,084 $ 10,453
Income taxes $ 1,800 $ 7,100
Preferred stock dividends $ 531 $ 531
See Notes to Consolidated Financial Statements.
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<PAGE>
E'TOWN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
E'town Corporation (E'town), a New Jersey holding company, is the parent
company of Elizabethtown Water Company (Elizabethtown or Company), Edison
Water Company (Edison), E'town Properties, Inc. (Properties), Liberty
Water Company (Liberty), Applied Water Management, Inc. (AWM) and Applied
Wastewater Management, Inc. (AWWM). The Mount Holly Water Company (Mount
Holly) is a wholly-owned subsidiary of Elizabethtown. The Corporation and
its subsidiaries as a consolidated entity are referred to herein as the
Corporation. The assets and operating results of Elizabethtown constitute
the predominant portions of E'town's assets and operating results. The
regulated utilities, Elizabethtown, Mount Holly and AWWM, comprise the
Regulated Utilities segment, Liberty and Edison comprise the Contract
Operations segment, AWM is the Engineering/Operations and Construction
segment and E'town and Properties comprise the Financing and Investment
segment.
2. PENDING MERGER
On November 21, 1999, E'town entered into an agreement (Merger Agreement)
with Thames Water Plc (Thames Water) under which Thames Water has agreed,
subject to certain conditions, to acquire E'town for $68 per share in
cash. Thames Water will also assume the debt of the Corporation. The
acquisition will take the form of a merger (Merger) of E'town with a newly
formed subsidiary of Thames Water and E'town will be the surviving company.
A special meeting of shareholders was held on May 18, 2000 at which time
the E'town shareholders approved the transaction.
On December 20 1999, the Company applied to the New Jersey Board of
Public Utilities (BPU) to approve the merger with Thames Water. On May
19, 2000 the Utility Workers Union of America, AFL-CIO and the Utility
Workers Union of America Local 423 (collectively referred to as the
"unions"), which represent certain employees of Elizabethtown and Mount
Holly, intervened in the merger proceeding before the BPU. On June 7, 2000
the BPU granted the unions intervention status.
On October 10, 2000 the BPU approved the acquisition of E'town by Thames
Water pursuant to the terms of a Stipulation among the parties to the
BPU's proceeding. In the Stipulation, the parties agreed to certain terms
and conditions, including that neither Elizabethtown, Mount Holly nor AWWM
will file for a rate increase before April 1, 2001 and that each of their
rate increases cannot be effective until at least March 1, 2002. The
parties also agreed that the rate requests cannot exceed 18 percent.
Certain required clearances have been obtained from the New Jersey
environmental regulators and E'town expects the remaining clearances to be
obtained shortly. The transaction is expected to close prior to the end
of 2000.
3. INTERIM FINANCIAL STATEMENTS
The financial statements reflect all adjustments which, in the opinion of
management, are necessary for a fair presentation. The Notes to
Consolidated Financial Statements accompanying the 1999 Annual Report to
Shareholders and the 1999 Form 10-K should be read in conjunction with
this report.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period.
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New Accounting Pronouncements
In 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activity". In June 1999, the FASB
issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activity - Deferral of the Effective Date of SFAS No. 133" to defer the
effective date of SFAS No. 133 for one year. Consequently, SFAS No. 133
is now effective for all fiscal quarters of all fiscal years beginning
after June 15, 2000. In June 2000, the FASB issued SFAS No. 138
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities - an amendment of FASB Statement No. 133." The Corporation is
evaluating SFAS Nos. 133 and 138 but does not believe they will have a
significant impact on the Corporation's financial condition and results
of operations. In December 1999, the Securities and Exchange Commission
released Staff Accounting Bulletin No. 101 (SAB 101) which provides
guidance on the timing of revenue recognition in financial statements. SAB
101 provides specific criteria to assist in this determination. The
adoption of SAB 101 is not expected to have an impact on the present
revenue recognition practices of the Corporation and therefore, there is
no expected impact on the Corporation's financial statements.
4. CAPITALIZATION
E'town routinely makes equity contributions to Elizabethtown from the
proceeds of common stock issued under E'town's Dividend Reinvestment and
Stock Purchase Plan (DRP). E'town contributed $2.31 million and $7.30
million from the DRP proceeds to Elizabethtown for the three and nine
month periods ended September 30, 2000, respectively. Optional Cash
Payments under the DRP are not accepted after November 9, 2000.
5. LONG-TERM DEBT
In February 2000, E'town issued $30 million of 7.69% Senior Notes due 2010
in a private placement. The proceeds were used to repay short-term debt
incurred to finance the acquisition of the contract to operate the water
system of the city of Elizabeth and capital expenditures for the
non-regulated subsidiaries.
E'town also has outstanding $12 million of 6.79% Senior Notes due December
15, 2007. The Note Agreements for E'town's 6.79% and 7.69% Senior Notes
require the maintenance of a consolidated fixed charges coverage ratio of
at least 1.5 to 1 and a debt to total capitalization ratio not to exceed
.65 to 1. As of September 30, 2000, the fixed charges coverage ratio was
1.78 to 1 and the debt to total capitalization ratio was .62 to 1,
calculated in accordance with the Note Agreements.
In conjunction with the Merger, on October 27 2000, E'town issued a
notice of redemption of the 6.79% and 7.69% Senior Notes, such redemption
to occur on the day of the closing with Thames Water at par plus a make-
whole premium of approximately $3.86 million. Additionally, in conjunction
with the Merger, E'town on October 25 issued a notice to redeem the 6 3/4%
Convertible Subordinated Debentures at par on November 27.
The aggregate maturities of the Corporation's long-term debt (including
the portion classified as current and contract obligations payable, but
excluding the above-mentioned optional redemptions) as of December 31,
1999 for each of the succeeding five years are: 2000, $19.49 million;
2001, $.58 million; 2002, $.59 million; 2003, $.60 million and 2004, $.61
million. Included in the Corporation's amounts are Elizabethtown's
aggregate long-term debt maturities for each of the five years succeeding
December 31, 1999 : 2000, $.48 million; 2001, $.57 million; 2002, $.58
million; 2003, $.59 million and 2004, $.60 million.
In November 1998 Mount Holly closed on loan agreements that will make
available up to $13.19 million through the New Jersey Environmental
Infrastructure Trust Financing Program (Program). This Program provides
financing through two loans. The first loan, in the amount of $7.30
million, is through the New Jersey Environmental Infrastructure Trust
(Trust), which issued tax-exempt bonds with average interest rates of
4.7%. The second loan, in the amount of $5.89 million, is from the State
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of New Jersey, acting through the New Jersey Department of Environmental
Protection. The State is participating in the Safe Drinking Water State
Revolving Fund authorized by the Safe Drinking Water Act amendments of
1996 whereby the federal government is funding the state loan at no
interest cost. The effective interest rate for the combined notes is
approximately 2.59%. The Company received $9.11 million from the Trust for
reimbursement of qualified expenditures in the third quarter of 2000 and
used these funds to repay the major portion of short-term debt incurred to
finance the Mansfield Project, a construction project that was
undertaken to comply with New Jersey legislative restrictions to obtain
an alternative water supply to reduce pumpage from an aquifer. Mount
Holly expects to requisition the balance of the funds in the fourth
quarter of 2000 which will be used to repay a portion of the short-term
debt that had been incurred to finance the Mansfield Project.
6. LINES OF CREDIT
E'town has $115 million of uncommitted lines of credit with several banks,
of which up to $55 million is available for use by its unregulated
subsidiaries and $90 million is available to Elizabethtown. Of the lines
available to Elizabethtown, $10 million represents a committed line of
credit. These lines, together with internal funds and proceeds from
capital contributions from Thames Water after the pending Merger,
long-term debt, proceeds of tax-exempt New Jersey Economic Development
Authority (NJEDA) bonds and short-term borrowings are expected to be
sufficient to finance the Corporation's capital needs.
7. EARNINGS PER SHARE
Basic earnings per share are computed on the basis of the weighted average
number of shares outstanding. Diluted earnings per share assumes both the
conversion of the 6 3/4% Convertible Subordinated Debentures and common
stock equivalents, assuming all stock options are exercised. The
calculations of basic and diluted earnings per share for the three and
nine month periods ended September 30, 2000 and 1999 follow:
Three Months Nine Months
Ended Ended
September 30, September 30,
2000 1999 2000 1999
-------------------------------------
In Thousands of
Dollars Except Per
Share Amounts
Basic:
Net Income $5,482 $7,953 $12,071 $20,010
Average common 8,872 8,612 8,823 8,562
shares outstanding
--------------------------------------
Basic earnings per $ 0.62 $ 0.92 $ 1.37 $ 2.34
share
======================================
Diluted:
Net income $5,482 $7,953 $12,071 $20,010
After tax interest
expense applicable
to 6 3/4% Convertible
Subordinated Debentures 84 106 263 328
--------------------------------------
Adjusted net income $5,566 $8,059 $12,334 $20,338
======================================
Average common 8,872 8,612 8,823 8,562
shares outstanding
Additional shares
from assumed
exercise of
stock options 38 41 53 31
Additional shares
from assumed
conversion of 6 3/4%
Convertible Subordinated
Debentures 185 234 200 250
Average common
shares outstanding
as adjusted 9,095 8,887 9,076 8,843
--------------------------------------
Diluted earnings $ 0.61 $ 0.91 $ 1.36 $ 2.30
per share
======================================
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8. NON-UTILITY PROPERTY AND OTHER INVESTMENTS
The detail of amounts included in Non-Utility Property and Other
Investments at September 30, 2000 and December 31, 1999 is as follows :
2000 1999
-----------------
Thousands of Dollars Except Per
Share Amounts
Funds held in trust by others $2,744 $7,264
Other capital assets 71 73
-----------------
Total Elizabethtown Water 2,815 7,337
Company & Subsidiary
-----------------
Concession fees on privatization 52,774 53,946
contracts - net
Capital assets from privatization 8,550 6,165
contracts - net
Investments in real estate 9,048 9,049
Goodwill on AWM and AWWM 4,911 5,036
acquisitions - net of
amortization
Investment in SEGS 1,089 1,089
Other capital assets 2,395 2,356
Other 180 185
-----------------
Total E'town Corporation & $81,762 $85,163
Subsidiaries =================
E'town, through Liberty, has a 40-year privatization agreement, entered
into in July 1998 with the city of Elizabeth (Elizabeth), New Jersey to
operate its water system which serves approximately 17,600 customers.
Under the contract, Liberty made concession payments to Elizabeth of $19.7
million in 1998, $12 million in 1999 and $19 million in June 2000. These
concession fee payments are being amortized on a straight-line basis over
the life of the contract and are included in the table above. Under the
terms of the contract, Liberty will deposit $57.8 million from customer
collections over the 40-year contract into a fund administered by
Elizabeth (Fund Deposits), of which $52.3 million is due after 2012.
Elizabeth will use the Fund Deposits to pay for capital improvements or
for other water system purposes. As these funds will be controlled by
Elizabeth, they will be accounted for as a pass-through from customers to
Elizabeth and will not be included in revenues or expenses of Liberty.
Liberty is responsible for $7.45 million of construction expenditures,
primarily for meter replacements, over the life of the contract as well as
for all operating expenses. Of the construction commitments, approximately
$2.45 million is expected to be expended in the next three years. The
accumulated amortization of concession fees on privatization contracts and
on capital assets from privatization contracts were $2.85 million and
$1.90 million as of September 30, 2000 and December 31, 1999,
respectively. Over the life of the contract, Liberty will bill the
customers of the water system in accordance with rate increases set forth
in the contract and receive all revenues except for the Fund Deposits.
E'town has guaranteed Liberty's performance of the contract provisions.
Liberty also performs the commercial billing operations for the wastewater
system of Elizabeth and remits all cash collected to Elizabeth. Liberty
does not operate the wastewater system. Included in the Consolidated
Balance Sheets of the Corporation as Customer and Other Accounts
Receivable at September 30, 2000 and December 31, 1999 are the receivables
from the customers of Elizabeth for wastewater services in the amount of
$2.9 million and $4.6 million, respectively. An equal amount of liability
to Elizabeth is included in Accounts Payable and Other Liabilities to
reflect Liberty's obligation to remit these funds to Elizabeth as
collected.
E'town, through Edison, has a 20-year privatization agreement, entered
into in June 1997, with the township of Edison, New Jersey to operate its
water system which serves approximately 11,500 customers. Under the
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terms of the contract, Edison bills and receives all water revenues
generated as a result of operating the water system of the township of
Edison and pays all the operating expenses. Edison expects to make
expenditures of approximately $25 million during the 20-year life of the
contract of which $14.13 million has been spent as of September 30, 2000.
Construction expenditures, as they are incurred, are being amortized on a
straight-line basis over the remaining life of the contract. Expenditures
include capital improvements to the water system as well as contract
payments to the township of Edison. Of the total, approximately $2.94
million is expected to be expended in the next three years of the
contract. An initial payment of $5.7 million was made upon the closing and
has been included in the table above. Concession fee payments included in
the table above are also being amortized on a straight-line basis over the
remaining life of te contract. The accumulated amortization of concession
fees on privatization contracts and on capital assets from privatization
contracts were $.95 million and $.71 million as of September 30, 2000 and
December 31, 1999, respectively. E'town has guaranteed Edison's
performance of the contract provisions.
If the Elizabeth or Edison contracts were terminated by either the
township of Edison or the city of Elizabeth, the unamortized balance of
the concession fees and amounts paid for additional capital improvements
would be refunded to Liberty and Edison in accordance with the contracts
Included in Non-Utility Property and Other Investments at September 30,
2000 and December 31, 1999 are $9.05 million of investments in various
parcels of undeveloped land in New Jersey. In February 1999, Properties
sold a parcel of land which had been under contract since 1995 in Green
Brook, New Jersey for $5.83 million, at a gain of $2.00 million net of
taxes. Cash proceeds of $1.99 million were received in 1999 and the
remaining amount due was financed with a 7.75% mortgage, to be paid over
2 years. The remaining $1.92 million mortgage balance, including accrued
interest is included in Mortgage and Other Notes Receivable in the
Corporation's Consolidated Balance Sheet as of September 30, 2000.
Properties sold a small parcel in Clinton, New Jersey in 1999 for $.6
million at a gain of less than $.1 million net of taxes. The sale proceeds
are being invested into water and wastewater projects. Properties has
entered into contracts for sale for all of its remaining parcels. The
eventual sale of these parcels is contingent upon the purchaser obtaining
various approvals for development. This process could take up to several
years. Based upon the expected sales prices for these properties under the
contracts, the estimated net realizable value of each property exceeds its
respective carrying value as of September 30, 2000.
Included in Non-Utility Property and Other Investments at September 30,
2000 and December 31, 1999 is an investment of $1.09 million ($.35 million
net of related deferred taxes) in a limited partnership that owns Solar
Electric Generating System V (SEGS), located in California. E'town owns a
3.19% interest in SEGS. The investment is being accounted for on the
equity method. E'town continues to monitor the relationship between the
carrying and net realizable values of its investment in SEGS, based upon
information provided by SEGS management as well as through cash flow
analyses.
During 1999 AWM made certain investments in non-regulated wastewater
assets for $1.7 million. Of this amount $1.2 million was recorded as other
capital assets and $.5 million was recorded as goodwill. The goodwill is
being amortized over 10 years.
9. REGULATORY MATTERS
MOUNT HOLLY
In December 1999, Mount Holly completed a construction project, called the
Mansfield Project, to comply with New Jersey legislative restrictions to
obtain alternative water supplies, thereby reducing its water pumpage from
an aquifer, which had been subject to over-pumping by Mount Holly and
various local purveyors in a portion of southern New Jersey.
Effective January 1, 2000, Mount Holly received an increase in annual
rates of $1.88 million. This increase included costs for the Mansfield
Project. After elimination of a purchased water adjustment clause (PWAC),
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the net rate increase was $.51 million. This increase also reflects
additional construction and financing costs, as well as higher operating
costs since base rates were last established in January 1996.
In June 1999, Mount Holly purchased Homestead Water Utility, Inc. and AWWM
purchased Homestead Treatment Utility, Inc. for a combined cash price of
$1.8 million. The entities provide water and wastewater services to
approximately 800 customers of the Homestead community in southern New
Jersey. The transactions were accounted for as purchases.
10. SEGMENT REPORTING
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," requires that companies disclose segment data based upon how
management makes decisions, allocates resources and measures performance.
Segment data for the three and nine month periods ended September 30, 2000
and 1999 is presented as follows :
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Three Months Ended Nine Months Ended
September 30, September 30,
In Thousands of Dollars 2000 1999 2000 1999
-----------------------------------------
Operating Revenues:
Regulated Utilities $36,137 $$39,290 $103,660 $105,987
Contract Operations 5,122 5,642 15,287 14,727
Engineering/Operations/
Construction 3,279 2,757 9,564 8,004
Intersegment Elimination (2,110) (2,096) (6,126) (6,038)
-----------------------------------------
Consolidated Operating $42,428 $45,593 $122,385 $122,680
Revenues
=========================================
Operating Expenses:
Regulated Utilities $25,519 $$27,560 $74,977 $$76,318
Contract Operations 4,234 4,566 12,976 12,603
Engineering/Operations/
Construction 3,214 2,618 10,099 7,690
Financing & Investment 192 136 1,035 444
Intersegment Elimination (2,110) (2,096) (6,126) (6,038)
-----------------------------------------
Consolidated Operating $31,049 $32,784 $92,961 $91,017
Expenses
=========================================
Interest Expense:
Regulated Utilities $4,557 $4,034 $14,161 $11,900
Contract Operations 681 396 1,626 995
Engineering/Operations/
Construction 59 1 111 6
Financing & Investment 613 372 1,648 1,019
-----------------------------------------
Consolidated Interest $5,910 $4,803 $17,546 $13,920
Expense
=========================================
Depreciation and
Amortization Expense:
Regulated Utilities $3,550 $3,225 $10,650 $9,674
Contract Operations 492 557 1,446 1,359
Engineering/Operations/
Construction 135 31 395 91
Financing & Investment 30 35 90 109
-----------------------------------------
Consolidated Depreciation $4,207 $3,848 $12,581 $11,233
and Amortization Expense
=========================================
Net Income (Loss):
Regulated Utilities $6,052 $7,612 $14,637 $17,799
Contract Operations 223 680 732 1,183
Engineering/Operations/
Construction 6 138 (646) 308
Financing & Investment (799) (477) (2,652) 720
-----------------------------------------
Consolidated Net Income $5,482 $7,953 $12,071 $20,010
=========================================
Total Assets Total Debt
------------------- -----------------
As of As of As of As of
September December September December
30, 31, 30, 31,
2000 1999 2000 1999
---------------------------------------
Regulated Utilities 755,638 $750,690 300,278 $299,398
Contract Operations 73,912 72,921 36,123 44,624
Engineering/Operations/
Construction 8,320 7,506 3,448 2,067
Financing & Investment 61,919 51,574 78,015 59,660
Intersegment Elimination (47,712) (34,383) (41,790) (30,740)
-----------------------------------------
Consolidated Total $852,077 $848,308 $376,074 $375,009
Assets
=========================================
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11. OTHER MATTERS
Elizabethtown has secured the right to acquire the water system of the
Borough of Manville, New Jersey for $4.9 million and the voters of
Manville approved the acquisition in the general election on November 7,
2000. Elizabethtown will file a petition with the BPU for approval of the
franchise. A closing is expected to occur upon receipt of such approval.
In September 1999, Elizabethtown withdrew its primary water treatment
plant, the Raritan-Millstone Water Treatment Plant (Plant), from service
as a result of flooding from Tropical Storm Floyd (Floyd). For several
days, Elizabethtown had difficulty maintaining adequate water pressure in
portions of its distribution system because overall system production
levels were substantially less than normal. Customers in portions of a few
municipalities were without water service for approximately 3 days.
Costs incurred to repair and replace equipment damaged by the flood and to
respond to inquiries by customers, regulatory bodies and the media have
been deferred and are expected to be recoverable through insurance. The
Company has incurred $9.7 million of flood-related expenditures and has
received advanced reimbursements of $4.0 million from its insurance
carrier. The remaining $5.7 million of flood-related expenditures is
reported on the Consolidated Balance Sheet as a deferred charge at
September 30, 2000 (see Note 12 for legal matters related to Floyd).
12. LEGAL MATTERS
On September 23, 1999, two parties filed separate class action law suits
for compensatory damages and related fees on behalf of themselves and
similarly situated residential and commercial customers against
Elizabethtown Water Company, Edison Water Company and Liberty Water
Company. The law suit alleges breach of contract, breach of tariff,
negligence and products liability regarding the quantity and quality of
water services provided by the Corporation during the period in September
1999 when Elizabethtown's plant was flooded from Hurricane Floyd and was
withdrawn from service for approximately three days. Upon notifying its
insurance carrier of the law suit, the insurance carrier has taken a
position that there is no coverage for breach of contract and has reserved
its rights under the policy regarding breach of tariff. The insurance
carrier has neither limited nor denied coverage for negligence and
products liability. Elizabethtown filed a Motion for Summary
Judgment to dismiss the law suit as a class action proceeding prior
to answering the plaintiff's allegations. In March, 2000, the New
Jersey Superior Court denied the Motion for Summary Judgment and referred
the case to the New Jersey Board of Public Utilities (NJBPU) for purposes
of investigating the matter and reporting its findings to the New Jersey
Superior Court. The New Jersey Superior Court, in view of the NJBPU's
findings will then determine what, if any, damages were suffered by the
plaintiffs and what, if any, liability rests with Elizabethtown.
The Corporation maintains that the plaintiffs' allegations are without
merit, believes that the plaintiffs' chances of prevailing are not
probable, and that those allegations specifically not covered by insurance
pose immaterial liability.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
E'town Corporation (E'town), a New Jersey holding company, is the parent
company of Elizabethtown Water Company (Elizabethtown or Company),
Edison Water Company (Edison), E'town Properties, Inc. (Properties),
Liberty Water Company (Liberty), Applied Water Management, Inc. (AWM)
and Applied Wastewater Management, Inc. (AWWM). 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, Liberty, AWM and Edison contributed 3.2%, 5.4%, 7.4% and 1.6%,
respectively, of the Corporation's consolidated operating revenues for
1999. Reference to the Corporation and its subsidiaries as a
consolidated entity is referred to herein as E'town. The regulated
utilities, Elizabethtown, Mount Holly and AWWM, comprise the Regulated
Utilities segment, Liberty and Edison comprise the Contract Operations
segment, AWM is the Engineering/Operations and Construction segment and
E'town and Properties comprise the Financing and Investment segment (See
Note 10 to E'town's Notes to Consolidated Financial Statements). The
following analysis sets forth significant events affecting the financial
condition of the various segments at September 30, 2000 and the results
of operations for the three and nine month periods ended September 30,
2000 and 1999.
PENDING MERGER
On November 21, 1999, E'town entered into an agreement (Merger
Agreement) with Thames Water Plc (Thames Water) under which Thames Water
has agreed, subject to certain conditions, to acquire E'town for $68 per
share in cash. Thames Water will also assume the debt of the
Corporation. The acquisition will take the form of a merger (Merger) of
E'town with a newly formed subsidiary of Thames Water and E'town will be
the surviving company. A special meeting of shareholders was held on
May 18, 2000 at which time the E'town shareholders approved the
transaction.
On December 20 1999, the Company applied to the New Jersey Board of
Public Utilities (BPU) to approve the merger with Thames Water. On May
19, 2000 the Utility Workers Union of America, AFL-CIO and the Utility
Workers Union of America Local 423 (collectively referred to as the
"unions"), which represent certain employees of Elizabethtown and Mount
Holly, intervened in the merger proceeding before the BPU. On June 7,
2000 the BPU granted the unions intervention status.
On October 10, 2000 the BPU approved the acquisition of E'town by Thames
Water pursuant to the terms of a Stipulation among the parties to the
BPU's proceeding. In the Stipulation, the parties agreed to certain
terms and conditions, including that neither Elizabethtown, Mount Holly
nor AWWM will file for a rate increase before April 1, 2001 and that
each of their rate increases cannot be effective until at least March 1,
2002. The parties also agreed that the rate requests cannot exceed 18
percent.
Certain required clearances have been obtained from the New Jersey
environmental regulators and E'town expects the remaining clearances to
be obtained shortly. The transaction is expected to close prior to the
end of 2000.
LIQUIDITY AND CAPITAL RESOURCES
Capital Expenditures Program
For the nine months ended September 30, 2000, capital expenditures were
$16.6 million, principally comprised of other additions and improvements
to water utility plant and wastewater facilities. In addition, Liberty
disbursed $19.0 million to the City of Elizabeth in June 2000 for a
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scheduled concession payment. For the three years ending December 31,
2002, capital and investment requirements for the Corporation are
estimated to be $171.4 million, consisting of (i) expenditures for the
Regulated Utilities Segment ($135.1 million for Elizabethtown, $4.7
million for Mount Holly and $5.2 million for AWWM), (ii) investments in
the Contract Operations segment for a scheduled concession payment by
Liberty in June 2000 of $19.0 million and capital improvements for
Liberty and Edison of $5.4 million, and (iii) investments in the
Engineering/Operations and Construction segment of $2.0 million. These
estimates do not include any amounts for possible additional
acquisitions or privatization activities in the three-year period.
REGULATED UTILITIES SEGMENT
Elizabethtown
Elizabethtown's three-year capital program includes $62.0 million for
routine projects (services, hydrants, system rehabilitation and main
extensions not funded by developers) and $73.1 million for transmission
system upgrades, a new operations center, expansion of the capacity at
Canal Road Water Treatment Plant (Canal Road) and other projects. Canal
Road's treatment capacity will be expanded to provide for enhanced
system reliability and to accommodate customer growth. Canal Road was
designed as a 40 million gallon per day (MGD) plant, expandable to 200
MGD.
Mount Holly
During the next three years, Mount Holly expects to spend $4.7 million,
of which $3.3 million is for routine projects (services, hydrants and
main extensions not funded by developers).
In December 1999, Mount Holly completed a construction project, called
the Mansfield Project, to comply with New Jersey legislative
restrictions to obtain alternative water supplies, thereby reducing its
water pumpage from an aquifer, which had been subject to over-pumping by
Mount Holly and various local purveyors in a portion of southern New
Jersey.
Effective January 1, 2000, Mount Holly received an increase in annual
rates of $1.88 million. This increase included costs for the Mansfield
Project. After elimination of a purchased water adjustment clause
(PWAC), the net rate increase was $.51 million. This increase also
reflects additional construction and financing costs, as well as higher
operating costs since base rates were last established in January 1996.
AWWM
AWWM expects to incur capital expenditures of $5.2 million in the next
three years for purchases of wastewater plants from developers.
CONTRACT OPERATIONS SEGMENT
LIBERTY
Under the contract to operate the water system of the city of Elizabeth,
New Jersey, Liberty made payments to Elizabeth of $19.7 million in 1998,
$12.0 million in June 1999 and $19 million in June 2000. Under the
terms of the contract, Liberty will deposit $57.8 million from revenues
earned during the 40-year contract, of which $52.3 million is due after
2012, into a fund administered by Elizabeth (Fund Deposits). Elizabeth
will use the Fund Deposits to pay for capital improvements or for other
water system purposes. Liberty is responsible for $7.45 million of
construction expenditures, primarily for meter replacements, during the
life of the contract. Of the total construction expenditures,
approximately $2.5 million is expected to be expended in the next three
years.
EDISON
Under the contract to operate the water system of the township of
Edison, New Jersey, Edison Water Company expects to spend $2.9 million
during the next three years to upgrade the system.
ENGINEERING/OPERATIONS/CONSTRUCTION SEGMENT
AWM
AWM expects to incur capital expenditures of $2.0 million during the
next three years, primarily for vehicles and equipment used in the
construction and waste hauling operations.
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Capital Resources
During 1999 the Corporation financed 37.0% of its capital expenditures,
including capital expenditures for the Regulated Utilities segment and
investments in the Contract Operations and Engineering/Operations and
Construction segments, from internally generated funds (after payment of
common stock dividends). The balance was financed with a combination of
short-term borrowings under lines of credit, proceeds from capital
contributions from E'town (funded by issuances of Common Stock under
E'town's Dividend Reinvestment and Stock Purchase Plan) and proceeds
from the sale of real estate.
For the three-year period ending December 31, 2002, the Corporation
estimates that 52% of its currently projected capital expenditures and
concession fee obligations for all segments are expected to be financed
with internally generated funds (after payment of common stock
dividends, at current levels). The balance is expected to be financed
with a combination of proceeds from capital contributions from Thames
Water, long-term debt, proceeds of tax-exempt New Jersey Economic
Development Authority (NJEDA) bonds and short-term borrowings.
Elizabethtown expects to pursue additional tax-exempt financing to the
extent that final allocations are granted by the NJEDA.
In November 1998 Mount Holly closed on loan agreements that will make
available up to $13.2 million through the New Jersey Environmental
Infrastructure Trust Financing Program (Program). This program provides
financing through two loans. The first loan, in the amount of $7.3
million, is through the New Jersey Environmental Infrastructure Trust
(Trust), which issued tax-exempt bonds with average interest rates of
4.7%. The second loan, in the amount of $5.9 million, is from the State
of New Jersey, acting through the New Jersey Department of Environmental
Protection. The State is participating in the Safe Drinking Water State
Revolving Fund authorized by the Safe Drinking Water Act amendments of
1996 whereby the federal government is funding the state loan at no
interest cost. The effective interest rate for the combined notes is
approximately 2.6%. The Company received $9.11 million from the Trust
for reimbursement of qualified expenditures in the third quarter of 2000
and used these funds to repay the major portion of short-term debt
incurred to finance the Mansfield Project, a construction project that
was undertaken to comply with New Jersey legislative restrictions to
obtain an alternative water supply to reduce pumpage from an aquifer.
Mount Holly expects to requisition the balance of the funds in the
fourth quarter which will be used to repay the remaining short-term
debt that had financed the Mansfield Project.
E'town' s senior debt is currently rated A3 and A and Elizabethtown's
senior debt is currently rated A2 and A+ by Moody's Investors Service
and Standard & Poor's Ratings Group, respectively.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
INTEREST RATE RISK
The Corporation is subject to the risk of fluctuating interest rates in
the normal course of business. The Corporation manages interest rates
through the use of fixed and, to a lesser extent, variable rate debt. A
hypothetical single percentage point change in interest rates for the
nine months ended September 30, 2000 would result in a $1.0 million
change in interest costs related to short-term and variable rate debt
and to earnings before tax.
RESULTS OF OPERATIONS
Net Income for the three months ended September 30, 2000 was $5.5
million or $.62 per basic share compared to $8.0 million or $0.92 per
basic share for the same period in 1999. This represents a decrease of
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31.1%. Net income for the nine months ended September 30, 2000 was $12.1
million or $1.37 per basic share as compared with $20.0 million or $2.34
per basic share for the same period in 1999. This represents a decrease
of 39.7%.
The decrease in net income of $2.5 million for the three month period
resulted primarily from a reduction of $1.7 million in water consumption
resulting from very different weather patterns between the respective
quarters in 2000 and 1999 and increased interest costs of $.9 million on
higher levels of debt incurred to finance the regulated utilities'
ongoing capital programs and a scheduled concession fee payment for
Liberty's privatization contract with the city of Elizabeth. These
decreases were partially offset by a $.7 million reduction in the
actuarially-determined pension expense.
The decrease in net income of $7.9 million for the nine month period
resulted primarily from : (i) $1.9 million in reduced water consumption
related to the unusual weather patterns noted above (ii) increased
interest costs of $2.5 million to finance the regulated utilities'
ongoing capital programs and the aforementioned concession fee payment
(iii) $.9 million of costs associated with the pending Merger (iv) a $.9
million increase in depreciation expense due to additional capital
investment in the regulated utilities (v) a loss at AWM of $1.0 million
and (vi) a sale of real estate in the first quarter of 1999 at an
after-tax gain of $2.1 million. These decreases were partially offset
by a reduction of $.9 million in pension expense.
Operating Revenues decreased $3.2 million or 6.9% for the three months
ended September 30, 2000 compared to the same period in 1999. Revenues
for the Regulated Utilities segment and the Contract Operations segment
declined by $3.2 million and $ .5 million, respectively due to the
weather patterns noted above. These declines were partly offset by an
increase of $.5 million in the Engineering/Operations and Construction
segment for increased construction activity.
Operating revenues for the nine month period decreased $.3 million or
.2% over the same period in 1999. Revenues from the Regulated Utilities
segment decreased $2.3 million, of which $3.2 million reflects the
aforementioned unusual weather patterns in 1999. The decrease in the
Regulated Utilities segment was somewhat mitigated by increases of $.5
million and $.4 million from Mount Holly and AWWM, respectively, due to
Mount Holly's rate increase effective January 2000 and customer growth,
principally from Mount Holly's acquisition in June, 1999 of Homestead
Water Utility, Inc. and AWWM's simultaneous acquisition of Homestead
Treatment Utility, Inc. Revenues from the Engineering/Operations and
Construction segment increased $1.5 million due to a substantially
higher level of construction activity. Revenues from the Contract
Operations segment increased $.5 million from increased water
consumption and increased rates.
Operation Expenses decreased $.4 million or 2.1% for the three months
ended September 30, 2000 as compared to the same period in 1999.
Operations expenses of the Regulated Utilities segment decreased $1.1
million, primarily reflecting reductions in pension expense. Operation
expenses increased $.5 million from the Engineering/Operations and
Construction segment, primarily reflecting additional personnel costs as
well as other operating costs to support the higher levels of
construction activity in 2000 and future customer growth opportunities.
Costs associated with the pending Merger in the Financing and Investment
segment accounted for a $.2 million increase. Operation expenses of the
Contract Operations segment remained flat.
Operation expenses for the nine month period increased $3.1 million or
6.2% over the same period in 1999. While the Regulated Utilities segment
decreased $.9 million, primarily due to reductions in pension expense,
operation expenses increased $2.4 million from the
Engineering/Operations and Construction segment, primarily reflecting
the aforementioned costs. Expenses of the Financing and Investment
segment associated with the pending Merger accounted for $1.3 million of
the increase. The Contract Operations segment accounted for $.3 million
of the increase, principally due to purchased water costs.
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Maintenance Expenses decreased $.1 million or 8.4% and increased $.3
million or 5.3% for the three month and nine month periods ended
September 30, 2000, respectively. The Regulated Utilities segment
accounted for the variances. The increase for the nine month period is
primarily from costs associated with harsh winter weather in 2000.
Depreciation and Amortization Expense increased $.4 million or 9.3% for
the three month period in 2000 as compared with the third quarter of
1999. Of the increase, $.3 million is due to depreciation on additions
to utility plant in the Regulated Utilities segment and $.1 million is
due to amortization of goodwill from acquisition of a septic services
business in 1999 in the Engineering/Operations and Construction segment.
Depreciation and amortization expense for the nine month period
increased $1.3 million or 12.0% over the same period in 1999. Of the
increase, $1.0 million is due to depreciation on additions to utility
plant in the Regulated Utilities segment and $.3 million is due to
amortization of goodwill from acquisition of a septic services business
in 1999 in the Engineering/Operations and Construction segment.
Revenue Taxes decreased $.4 million or 8.6% and $.3 million or 2.1% for
the three and nine month periods, respectively due to changes discussed
above in the revenues of the Regulated Utilities segment.
Real Estate, Payroll and Other Taxes Expenses increased $.1 million or
13.6% and $.5 million or 16.9% for the three months and nine months
ended September 30, 2000, respectively due to increased payroll taxes on
higher labor costs as well as on the fair value of distributions of
restricted stock awarded in 1997 under the incentive compensation
programs.
Federal Income Taxes as a component of operating expenses decreased $1.3
million or 30.5% and $2.9 million or 31.4% for the three and nine month
periods ended September 30, 2000 compared to 1999 due to changes in
taxable operating income for each segment discussed herein.
Other Income (Expense) remained relatively consistent for the three
months ended September 30, 2000 as compared with the same period in
1999.
Other income (expense) decreased $2.1 million or 72.1% for the nine
months ended September 30, 2000 as compared with the same period in 1999
principally due to the recognition in the first quarter of 1999 of a
gain of $3.2 million ($2.1 million after taxes) on the sale of a parcel
of land in the Financing and Investment segment.
Total Interest Charges increased $1.1 million or 23.1% for the three
months ended September 30, 2000 over the same period in 1999. The
increase is comprised of (i) $.5 million in the Regulated Utilities
segment for interest expense incurred on an increased level of
short-term bank notes used to fund Elizabethtown's and Mount Holly's
capital expenditures and a higher interest rate on Elizabethtown's
long-term variable rate debt (ii) $.3 million in the Financing and
Investment segment for interest costs to finance equity contributions by
E'town to Liberty for concession payments made by Liberty to the City of
Elizabeth in June 2000 and (iii) $.3 million in the Contract Operations
segment to finance Liberty's concession payment made in June 2000 to the
city of Elizabeth.
Total interest charges increased $3.6 million or 26.0% for the nine
months ended September 30, 2000 over the same period in 1999. The
increase is comprised of (i) $2.3 million in the Regulated Utilities
segment for interest expense incurred on an increased level of
short-term bank notes used to fund Elizabethtown's, Mount Holly's and
AWWM's capital expenditures and a higher interest rate on
Elizabethtown's long-term variable rate debt (ii) $.6 million in the
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Financing and Investment segment for interest costs to finance equity
contributions by E'town to Liberty for concession payments made by
Liberty to the City of Elizabeth in June 2000 (iii) $.6 million in the
Contract Operations segment to finance Liberty's concession payments
made in June 2000 and 1999 to the city of Elizabeth and (iv) $.1 million
in the Engineering/Operations and Construction segment to fund
non-utility capital expenditures.
ECONOMIC OUTLOOK
Forward Looking Information
Information in this report includes certain forward looking statements
within the meaning of the Federal securities laws regarding future
earnings, capital expenditures and anticipated actions of regulators,
among other things. Any forward looking statements are based upon
information currently available and are subject to future events, risks
and uncertainties that could cause actual results to differ materially
from those expressed in the statements. Such events, risks and
uncertainties include, without limitation, actions of regulators, the
effects of weather, changes in historical patterns of water consumption
and demand, including changes through increased use of water-conserving
devices, conditions in capital and real estate markets, increases in
operating expenses due to factors beyond the Corporation's control, the
pending Merger with Thames Water, changes in environmental regulation
and associated costs of compliance and additional investments or
acquisitions which may be made by the Corporation.
E'town Corporation and Subsidiaries
Elizabethtown has secured the right to acquire the water system of the
Borough of Manville, New Jersey for $4.9 million and the voters of
Manville approved the acquisition in the general election on November 7,
2000. Elizabethtown will file a petition with the BPU for approval of the
franchise. A closing is expected to occur upon receipt of such approval.
During the next several years, management will further seek to increase
earnings by (i) maximizing earned returns on the Regulated Utilities
segment through expansion efforts to increase sales, cost control
measures and obtaining timely and adequate rate relief and (ii)
investing in water and wastewater assets (including municipal
privatization contracts, as well as designing, constructing, operating
and purchasing wastewater assets through AWM and AWWM).
Regulated Utilities Segment
Elizabethtown, Mount Holly and AWWM
Elizabethtown expects lower net income in 2000 because of (i) decreased
water consumption due to the very different weather patterns between
2000 and 1999 and (ii) higher costs associated with operations and
capital investments incurred since rates were last established in 1996
which are not presently recovered in rates. Both factors will be
partially offset by continued growth in Elizabethtown's customer base.
Furthermore, a rate case originally planned to be filed early in 2000
and delayed due to a condition of the the Merger Agreement, is now
planned to be filed on approximately April 1, 2001.
Elizabethtown expects its earned returns on common equity to increase
from 8.0% (for the twelve months ended September 30, 2000) to levels
comparable to authorized rates of return following the next rate
increase. As part of that rate case, Elizabethtown will request rate
recognition for additional investments in utility plant since rates were
last adjusted in 1996, as well as for increases in expenses since that
time. In addition, Elizabethtown will request rate recognition for
capital expenditures and increases in operating expenses incurred
through the completion of the rate case.
Management expects Mount Holly to contribute to the Corporation's
earnings per share in 2000 as a result of a Stipulation Agreement
approved by the BPU whereby a rate increase of $1.9 million, or a net
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increase of $.5 million after elimination of the PWAC, was effective
January 1, 2000. Mount Holly plans to file a rate case on approximately
April 1, 2001.
AWWM expects to become profitable after it expands its customer base in
the next several years.
Contract Operations Segment
Liberty
Liberty is expected to realize a return on its capital in an amount
similar to that currently earned by the Corporation's regulated
operations.
Edison
Edison is expected to realize a return on its capital in an amount
similar to that currently earned by the Corporation's regulated
operations. Contributions to earnings will be small through 2002 and
then will increase as rate increases specified in the contract take
effect.
E'town continues to pursue opportunities to operate municipal water and
wastewater systems under long-term contracts, primarily in New Jersey.
E'town will focus on opportunities where it may have an advantage due to
location or experience in operation.
Engineering/Operations and Construction Segment
AWM
AWM, acquired by E'town in June 1998, provides engineering, construction
and operations services for stand-alone water and wastewater treatment
facilities for industrial, commercial and residential customers, as well
as developers of such properties.
Despite increases in revenues for the nine months ended September 30,
2000 versus the comparable period in 1999, higher costs to finance
growth resulted in a loss for 2000. Such costs are due to additional
personnel to support higher business volumes as well as startup, and
subsequent expansion, of an office in New England. In addition, two
construction projects anticipated for the first quarter were delayed due
to permitting issues. These projects have now commenced. Customer demand
remains strong with several projects in the proposal and/or contract
negotiation stage.
Financing and Investment Segment
E'town and Properties
In 1997, E'town decided to sell its unregulated real estate assets
(Properties) and reinvest the proceeds in water and wastewater projects.
Several properties were sold during 1997 and 1998 and one property was
sold in January, 1999 for an after-tax gain of $2.1 million.
At this time, the two remaining properties are under contract to be sold
for amounts in excess of current carrying costs. The sale of these
parcels is contingent upon various municipal approvals and closings are
expected to occur in stages from 2001 through 2004. After-tax sale
proceeds are expected to be used to fund investments in water and
wastewater projects.
New Accounting Pronouncements
See Note 3 of the Corporation's Notes to Consolidated Financial
Statements for a discussion of new accounting standards.
Year 2000
The Corporation has not experienced any operational difficulties with
respect to the year 2000 nor has it incurred any additional costs with
respect to this issue.
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PART II - OTHER INFORMATION
Item 1 Legal Proceedings
On September 23, 1999, two parties filed separate class action law suits
for compensatory damages and related fees on behalf of themselves and
similarly situated residential and commercial customers against
Elizabethtown Water Company, Edison Water Company and Liberty Water
Company.
The law suits allege breach of contract, breach of tariff, negligence
and products liability regarding the quantity and quality of water
services provided by the Corporation during the period in September 1999
when Elizabethtown's plant was flooded from Hurricane Floyd and was
withdrawn from service for approximately three days.
Upon notifying its insurance carrier of the law suit, the insurance
carrier has taken a position that there is no coverage for breach of
contract and has reserved its rights under the policy regarding breach
of tariff. The insurance carrier has neither limited nor denied
coverage for negligence and products liability.
Elizabethtown filed a Motion for Summary Judgment to dismiss the law
suit as a class action proceeding prior to answering the plaintiff's
allegations. In March, 2000, the New Jersey Superior Court denied the
Motion for Summary Judgment and referred the case to the New Jersey
Board of Public Utilities (NJBPU) for purposes of investigating the
matter and reporting its findings to the New Jersey Superior Court. The
New Jersey Superior Court, in view of the NJBPU's findings will then
determine what, if any, damages were suffered by the plaintiffs and what
liability, if any, rests with Elizabethtown.
The Corporation maintains that the plaintiffs' allegations are without
merit, believes that the plaintiffs' chances of prevailing are not
probable, and that those allegations specifically not covered by
insurance pose immaterial liability.
Items 2 - 5:
Nothing to Report.
Item 6(a) - Exhibits
Exhibits to Part I:
Exhibit 12 - E'town Corporation and Subsidiaries - Computation
of Ratio of Earnings to Fixed Charges
Exhibit 12(a) - Elizabethtown Water Company - Computation of
Ratio of Earnings to Fixed Charges
Exhibit 12(b) - Elizabethtown Water Company - Computation of
Ratio of Earnings to Fixed Charges and Preferred
Dividends
Exhibit 27 - E'town Corporation and Subsidiaries and
Elizabethtown Water Company and Subsidiary -
Financial Data Schedules
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, 2000
E'TOWN CORPORATION
ELIZABETHTOWN WATER COMPANY
/s/ Gail P. Brady
____________________________________
Gail P. Brady
Treasurer
/s/ Dennis W. Doll
_____________________________________
Dennis W. Doll
Controller
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