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 June 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: June 30, 2000
E'town Corporation (without par value) 8,842,601
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 20
PART II - OTHER INFORMATION 27
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)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
===============================================================================
Operating Revenues $ 41,794 $ 41,611 $ 79,957 $ 77,087
-------------------------------------------------------------------------------
Operating Expenses:
Operation 17,920 17,889 35,906 32,464
Maintenance 1,660 1,563 3,561 3,172
Depreciation and amortization 4,187 3,711 8,374 7,385
Revenue taxes 4,473 4,542 8,429 8,282
Real estate, payroll and other taxes 1,106 872 2,207 1,862
Federal income taxes 2,274 2,855 3,435 5,068
-------------------------------------------------------------------------------
Total operating expenses 31,620 31,432 61,912 58,233
-------------------------------------------------------------------------------
Operating Income 10,174 10,179 18,045 18,854
-------------------------------------------------------------------------------
Other Income (Expense):
Allowance for equity funds used during
construction 111 141 225 216
Federal income taxes (158) (309) (305) (1,552)
Gain on sale of land (Note 8) 3,197
Other - net 343 751 666 1,032
-------------------------------------------------------------------------------
Total other income 296 583 586 2,893
-------------------------------------------------------------------------------
Total Operating and Other Income 10,470 10,762 18,631 21,747
-------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 4,785 4,239 9,223 8,373
Other interest expense - net 1,144 565 2,384 856
Capitalized interest (105) (112) (200) (165)
Amortization of debt discount and
expense-net 115 110 229 220
-------------------------------------------------------------------------------
Total interest charges 5,939 4,802 11,636 9,284
-------------------------------------------------------------------------------
Income Before Preferred Stock Dividends
of Subsidiary 4,531 5,960 6,995 12,463
Preferred Stock Dividends 203 203 406 406
-------------------------------------------------------------------------------
Net Income $ 4,328 $ 5,757 $ 6,589 $ 12,057
===============================================================================
Earnings Per Share of Common Stock (Note 7):
-------------------------------------------------------------------------------
Basic $ 0.49 $ 0.67 $ 0.75 $ 1.41
Diluted $ 0.49 $ 0.66 $ 0.75 $ 1.39
-------------------------------------------------------------------------------
Average Number of Shares Outstanding for
the Calculation of Earnings Per Share:
-------------------------------------------------------------------------------
Basic 8,824 8,562 8,798 8,537
Diluted 9,057 8,843 9,037 8,820
-------------------------------------------------------------------------------
Dividends Paid Per Common Share $ 0.51 $ 0.51 $ 1.02 $ 1.02
===============================================================================
See Notes to Consolidated Financial Statements.
- 1 -
<PAGE>
E'TOWN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands) June 30,
2000 December 31,
Assets (Unaudited) 1999
-------------------------------------------------------------------------------
Utility Plant-At Original Cost:
Utility plant in service $ 778,508 $ 779,485
Construction work in progress 30,093 17,441
-------------------------------------------------------------------------------
Total utility plant 808,601 796,926
Less accumulated depreciation 143,890 137,587
-------------------------------------------------------------------------------
Utility plant-net 664,711 659,339
-------------------------------------------------------------------------------
Non-utility Property and Other
Investments - Net (Note 8) 85,373 85,163
-------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 3,993 4,367
Customer and other accounts receivable
(less reserve: 2000, $1,352, 1999, $1,044) (Note 8) 33,119 30,129
Mortgage and other notes receivable 2,232 4,600
Unbilled revenues 14,953 12,972
Infrastructure loan funds receivable (Note 5) 5,657 5,657
Materials and supplies-at average cost 4,732 4,069
Prepaid federal income taxes 271 4,617
Prepaid insurance, taxes, other 2,668 3,663
-------------------------------------------------------------------------------
Total current assets 67,625 70,074
-------------------------------------------------------------------------------
Deferred Charges:
Waste residual management 1,405 1,538
Unamortized debt and preferred stock expenses 9,469 9,419
Taxes recoverable through future rates 13,466 13,466
Postretirement benefit expense 3,024 3,145
Flood expenditures 5,267 5,000
Other unamortized expenses 3,010 1,164
-------------------------------------------------------------------------------
Total deferred charges 35,641 33,732
-------------------------------------------------------------------------------
Total $ 853,350 $ 848,308
===============================================================================
See Notes to Consolidated Financial Statements.
-2-
<PAGE>
E'TOWN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands) June 30,
2000 December 31,
Capitalization and Liabilities (Unaudited) 1999
-------------------------------------------------------------------------------
Capitalization (Notes 4 and 5):
Common shareholders' equity $ 232,911 $ 229,233
Mandatory Redeemable Cumulative Preferred Stock 12,000 12,000
Redeemable preferred stock 227 227
Long-term debt - net 294,919 266,015
-------------------------------------------------------------------------------
Total capitalization 540,057 507,475
-------------------------------------------------------------------------------
Current Liabilities:
Notes payable - banks 82,000 89,500
Long-term debt - current portion (Note 5) 737 494
Accounts payable and other liabilities 25,265 31,434
Contract obligations payable (Note 5) 19,000
Customers' deposits 243 263
Municipal and state taxes accrued 18,689 17,682
Interest accrued 5,018 4,219
Preferred stock dividends accrued 59 59
-------------------------------------------------------------------------------
Total current liabilities 132,011 162,651
-------------------------------------------------------------------------------
Deferred Credits:
Customers' advances for construction 42,783 41,321
Federal income taxes 72,589 71,236
State income taxes 302 302
Unamortized investment tax credits 7,535 7,636
Accumulated postretirement benefits 3,338 3,571
-------------------------------------------------------------------------------
Total deferred credits 126,547 124,066
-------------------------------------------------------------------------------
Contributions in Aid of Construction 54,735 54,116
-------------------------------------------------------------------------------
Commitments and Contingent Liabilities
-------------------------------------------------------------------------------
Total $ 853,350 $ 848,308
===============================================================================
See Notes to Consolidated Financial Statements.
-3-
<PAGE>
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CAPITALIZATION
(In Thousands Except Share Amounts)
June 30,
2000 December 31,
(Unaudited) 1999
-------------------------------------------------------------------------------
Common Shareholders' Equity:
E'town Corporation:
Common stock without par value, authorized,
15,000,000 shares, issued 2000, 8,875,155
shares; 1999, 8,760,862 shares $ 186,286 $ 180,124
Paid-in capital 1,216 1,315
Capital stock expense (5,160) (5,160)
Retained earnings 51,537 53,922
Less cost of treasury stock; 2000 and 1999,
32,554 shares (968) (968)
-------------------------------------------------------------------------------
Total common shareholders' equity 232,911 229,233
-------------------------------------------------------------------------------
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 7,846 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) 204 204
9.65% Mortgage Note Payable (due 2001) 246 264
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% Debentough, 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) 7,040 7,040
New Jersey Department of Environmental Protection
Notes (due serially through 2018) 5,594 5,677
9.65% Mortgage Note Payable (due 2001) 156
-------------------------------------------------------------------------------
Total long-term debt 295,930 267,046
Unamortized (discount) premium-net (1,011) (1,031)
-------------------------------------------------------------------------------
Total long-term debt-net 294,919 266,015
-------------------------------------------------------------------------------
Total Capitalization $ 540,057 $ 507,475
===============================================================================
See Notes to Consolidated Financial Statements.
-4-
<PAGE>
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
(In Thousands Except Share Amounts)
Six Months Ended
June 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, 81,123 shares;
1999, 197,547 shares) 4,992 8,702
Redemption of Convertible Debentures (2000, 20,850
shares; 1999, 44,225 shares) 834 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) 336 1,077
-------------------------------------------------------------------------------
Balance at End of Period 186,286 180,124
-------------------------------------------------------------------------------
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 6,589 20,487
Dividends on common stock (2000, $1.02; 1999, $2.04) (8,974) (17,526)
-------------------------------------------------------------------------------
Balance at End of Period 51,537 53,922
-------------------------------------------------------------------------------
Treasury Stock: (968) (968)
-------------------------------------------------------------------------------
Total Common Shareholders' Equity $ 232,911 $ 229,233
===============================================================================
See Notes to Consolidated Financial Statements.
-5-
<PAGE>
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
2000 1999
-------------------------------------------------------------------------------
Cash Flows Provided by Operating Activities:
Net Income $ 6,589 $ 12,057
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 8,374 7,385
Gain on the sale of land 3,197
Increase in deferred charges (1,980) (1,279)
Deferred income taxes and investment tax
credits- net 1,252 1,458
Capitalized interest and AFUDC (425) (381)
Other operating activities-net (215) (461)
Change in current assets and current liabilities
excluding cash, short-term investments and
current portion of debt :
Customer and other accounts receivable (2,990) (2,118)
Mortgage and other notes receivable 2,368 (2,833)
Unbilled revenues (1,981) (2,719)
Accounts payable and other liabilities (6,189) (1,131)
Accrued/prepaid interest and taxes 7,147 2,958
Other (755) 254
-------------------------------------------------------------------------------
Net cash provided by operating activities 11,195 16,387
-------------------------------------------------------------------------------
Cash Flows Provided (Used) by Financing Activities:
Proceeds from issuance of common stock 5,328 4,278
Funds held in Trust by others (120) 114
Debt and preferred stock issuance and
amortization costs (50) 237
Issuance of other long-term debt 30,000
Repayment of long-term debt (19,012) (12,671)
Contributions and advances for construction 3,239 2,552
Refunds of customer advances for construction (1,068) (1,496)
Net increase (decrease) in notes payable - banks (7,500) 21,181
Dividends paid on common stock (8,974) (8,695)
-------------------------------------------------------------------------------
Net cash flows provided by financing activities 1,843 5,500
-------------------------------------------------------------------------------
Cash Flows Used for Investing Activities:
Utility plant and other capital expenditures
(excluding allowance for funds used during
construction) (12,324) (21,914)
Purchase of companies (1,800)
Capital expenditures on non-regulated property (1,088) (660)
Proceeds from sale of land 2,069
-------------------------------------------------------------------------------
Net cash flows used for investing activities (13,412) (22,305)
-------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents (374) (418)
Cash and Cash Equivalents at Beginning of Period 4,367 5,909
-------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 3,993 $ 5,491
===============================================================================
Supplemental Disclosures of Cash
Flow Information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 9,655 $ 10,133
Income taxes $ 0 $ 3,400
Preferred stock dividends $ 354 $ 354
Noncash issuance of common stock $ 834 $ 751
See Notes to Consolidated Financial Statements.
-6-
<PAGE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED INCOME
(In Thousands)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
-------------------------------------------------------------------------------
Operating Revenues $ 35,379 $ 35,509 $ 67,122 $ 66,575
-------------------------------------------------------------------------------
Operating Expenses:
Operation 12,134 12,541 24,366 24,132
Maintenance 1,463 1,447 3,205 2,903
Depreciation 3,460 3,197 6,920 6,394
Revenue taxes 4,444 4,532 8,373 8,265
Real estate, payroll and other taxes 851 746 1,740 1,629
Federal income taxes 2,841 3,079 4,496 5,268
-------------------------------------------------------------------------------
Total operating expenses 25,193 25,542 49,100 48,591
-------------------------------------------------------------------------------
Operating Income 10,186 9,967 18,022 17,984
-------------------------------------------------------------------------------
Other Income (Expense):
Allowance for equity funds used
during construction 111 141 225 216
Federal income taxes (155) (290) (281) (362)
Other - net 332 688 595 816
-------------------------------------------------------------------------------
Total other income 288 539 539 670
-------------------------------------------------------------------------------
Total Operating and Other Income 10,474 10,506 18,561 18,654
-------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 3,858 3,862 7,634 7,619
Other interest expense - net 968 315 1,881 378
Allowance for funds used during
construction (105) (112) (200) (165)
Amortization of debt discount and
expense-net 99 98 198 196
-------------------------------------------------------------------------------
Total interest charges 4,820 4,163 9,513 8,028
-------------------------------------------------------------------------------
Net Income 5,654 6,343 9,048 10,626
Preferred Stock Dividends 203 203 406 406
-------------------------------------------------------------------------------
Earnings Applicable To Common Stock $ 5,451 $ 6,140 $ 8,642 $ 10,220
===============================================================================
See Notes to Consolidated Financial Statements.
- 7 -
<PAGE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In Thousands) June 30,
2000 December 31,
Assets (Unaudited) 1999
-------------------------------------------------------------------------------
Utility Plant-At Original Cost:
Utility plant in service $ 769,448 $ 770,251
Construction work in progress 30,062 17,495
-------------------------------------------------------------------------------
Total utility plant 799,510 787,746
Less accumulated depreciation and amortization 143,083 136,975
-------------------------------------------------------------------------------
Utility plant-net 656,427 650,771
-------------------------------------------------------------------------------
Non-utility Property (Note 8) 7,456 7,337
-------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 2,383 1,342
Customer and other accounts receivable
(less reserve: 2000, $683, 1999, $674) 20,829 19,341
Unbilled revenues 12,251 10,578
Infrastructure loan funds receivable (Note 5) 5,657 5,657
Materials and supplies-at average cost 4,732 4,069
Prepaid federal income taxes 739 5,807
Prepaid insurance, taxes, other 2,416 3,229
-------------------------------------------------------------------------------
Total current assets 49,007 50,023
-------------------------------------------------------------------------------
Deferred Charges:
Waste residual management 1,405 1,538
Unamortized debt and preferred stock expenses 8,803 8,900
Taxes recoverable through future rates 13,466 13,466
Postretirement benefit expense 3,024 3,145
Flood expenditures 5,267 5,000
Other unamortized expenses 2,733 1,007
-------------------------------------------------------------------------------
Total deferred charges 34,698 33,056
-------------------------------------------------------------------------------
Total $ 747,588 $ 741,187
===============================================================================
See Notes to Consolidated Financial Statements.
- 8 -
<PAGE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In Thousands) June 30,
December 31,
Capitalization and Liabilities (Unaudited) 1999
-------------------------------------------------------------------------------
Capitalization (Note 4):
Common shareholder's equity $ 225,120 $ 220,461
Mandatory redeemable cumulative preferred stock 12,000 12,000
Long-term debt - net 244,623 244,842
-------------------------------------------------------------------------------
Total capitalization 481,743 477,303
-------------------------------------------------------------------------------
Current Liabilities:
Notes payable - banks 57,000 51,500
Long-term debt - current portion 715 481
Accounts payable and other liabilities 12,290 19,989
Customers' deposits 179 197
Municipal and state taxes accrued 18,568 17,592
Interest accrued 3,699 3,745
Preferred stock dividends accrued 59 59
-------------------------------------------------------------------------------
Total current liabilities 92,510 93,563
-------------------------------------------------------------------------------
Deferred Credits:
Customers' advances for construction 41,571 40,019
Federal income taxes 70,757 69,570
Unamortized investment tax credits 7,535 7,636
Accumulated postretirement benefits 3,156 3,399
-------------------------------------------------------------------------------
Total deferred credits 123,019 120,624
-------------------------------------------------------------------------------
Contributions in Aid of Construction 50,316 49,697
-------------------------------------------------------------------------------
Commitments and Contingent Liabilities
-------------------------------------------------------------------------------
Total $ 747,588 $ 741,187
===============================================================================
See Notes to Consolidated Financial Statements.
- 9 -
<PAGE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CAPITALIZATION
(In Thousands) June 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 146,566 141,575
Capital stock expense (485) (485)
Retained earnings 63,298 63,630
-------------------------------------------------------------------------------
Total common shareholder's equity 225,120 220,461
-------------------------------------------------------------------------------
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) 7,040 7,040
New Jersey Department of Environmental Protection
Notes (due serially through 2018) 5,594 5,677
9.65% Mortgage Note Payable (due 2001) 156
-------------------------------------------------------------------------------
Total long-term debt 245,634 245,873
Unamortized discount-net (1,011) (1,031)
-------------------------------------------------------------------------------
Total long-term debt-net 244,623 244,842
-------------------------------------------------------------------------------
Total Capitalization $ 481,743 $ 477,303
===============================================================================
See Notes to Consolidated Financial Statements.
-10-
<PAGE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
(In Thousands)
Six Months Ended
June 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 4,991 8,702
Issuance of Restricted and Unrestricted Stock
Under Compensation Programs 120
-------------------------------------------------------------------------------
Balance at End of Period 146,566 141,575
-------------------------------------------------------------------------------
Capital Stock Expense (485) (485)
-------------------------------------------------------------------------------
Retained Earnings:
Balance at Beginning of Period 63,630 60,564
Net income 9,048 21,405
Dividends on common stock (8,974) (17,526)
Dividends on preferred stock (406) (813)
-------------------------------------------------------------------------------
Balance at End of Period 63,298 63,630
-------------------------------------------------------------------------------
Total Common Shareholder's Equity $ 225,120 $ 220,461
===============================================================================
See Notes to Consolidated Financial Statements.
-11-
<PAGE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In Thousands)
(Unaudited) Six Months Ended
June 30,
2000 1999
-------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net income $ 9,048 $ 10,626
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,920 6,394
Increase in deferred charges (1,860) (1,427)
Deferred income taxes and investment tax
credits-net 1,086 1,438
Allowance for funds used during construction (425) (381)
Other operating activities-net (101) 998
Change in current assets and current liabilities
excluding cash, short-term investments and
current portion of debt :
Customer and other accounts receivable (1,488) (1,940)
Unbilled revenues (1,673) (2,575)
Accounts payable and other liabilities (7,717) (2,040)
Accrued/prepaid interest and taxes 6,811 1,916
Other (715) 254
-------------------------------------------------------------------------------
Net cash provided by operating activities 9,886 13,263
-------------------------------------------------------------------------------
Cash Flows Provided (Used) by Financing Activities:
Capital contributed by parent company 4,991 4,156
Funds held in Trust by others (120) 114
Debt and preferred stock issuance and
amortization costs 97 229
Repayment of long-term debt (5) (15)
Contributions and advances for construction 3,239 2,471
Refunds of customer advances for construction (1,068) (1,293)
Net increase in notes payable - banks 5,500 8,000
Dividends paid on common stock and preferred stock (9,328) (9,049)
-------------------------------------------------------------------------------
Net cash provided by financing activities 3,306 4,613
-------------------------------------------------------------------------------
Cash Flows Used for Investing Activities:
Utility plant expenditures (excluding allowance
for funds used during construction) (12,151) (19,168)
Purchase of company (860)
-------------------------------------------------------------------------------
Cash used for investing activities (12,151) (20,028)
-------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents 1,041 (2,152)
Cash and Cash Equivalents at Beginning of Period 1,342 3,598
-------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 2,383 $ 1,446
===============================================================================
Supplemental Disclosures of Cash
Flow Information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 8,910 $ 8,379
Income taxes $ 0 $ 3,400
Preferred stock dividends $ 354 $ 354
See Notes to Consolidated Financial Statements.
-12-
<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. The acquisition is
subject to approval by the New Jersey Board of Public Utilities (BPU).
Certain clearances must also be obtained from the New Jersey
environmental regulators. The transaction is expected to close prior to
the end of 2000.
On May 19, 2000 the Utility Workers Union of America, the 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 petition before the BPU. On June 7,
2000 the BPU granted the unions intervention status.
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.
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
will now be effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000. The Corporation does not believe this
Statement will have any 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.
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<PAGE>
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 $2.36 million and $4.99
million from the DRP proceeds to Elizabethtown for the three and six month
periods ended June 30, 2000, respectively.
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 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 June 30, 2000, the fixed charges coverage ratio was 2.10
to 1 and the debt to total capitalization ratio was .62 to 1, calculated
in accordance with the Note Agreements.
The aggregate maturities of the Corporation's long-term debt (including
the portion classified as current and contract obligations payable) as of
December 31, 1999 for each of the succeeding five years are: 2000, $19.49
million; 2001, $1.00 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, $.72
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 in proceeds from the issuance of unsecured
notes through the New Jersey Environmental Infrastructure Trust Financing
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 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 proceeds of the loans
will be used to repay 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 and was fully in service in late December
1999. The Company has requested $9.84 million from the Trust and expects
to receive payment in the third quarter of 2000.
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 the
sale of E'town's common stock or capital contributions from Thames Water
after the pending Merger, medium-term notes, 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.
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<PAGE>
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 six
month periods ended June 30, 2000 and 1999 follow:
Three Months Six Months
Ended Ended
June 30, June 30,
2000 1999 2000 1999
---------------------------------
In Thousands of Dollars Except
Per Share Amounts
Basic:
Net Income $ 4,328 $5,757 $6,589 $12,057
Average common shares 8,824 8,562 8,798 8,537
outstanding
--------------------------------
Basic earnings per share $ 0.49 $ 0.67 $ 0.75 $ 1.41
================================
Diluted:
Net income $ 4,328 $5,757 $6,589 $12,057
After tax interest expense 87 111 179 222
applicable to 6 3/4%
Convertible Subordinated
Debentures
--------------------------------
Adjusted net income $ 4,415 $5,868 $6,768 $12,279
================================
Average common shares 8,824 8,562 8,798 8,537
outstanding
Additional shares from assumed 37 28 34 28
exercise of stock options
Additional shares from assumed 196 253 205 255
conversion of 6 3/4%
Convertible Subordinated
Debentures --------------------------------
Average common shares 9,057 8,843 9,037 8,820
outstanding as
adjusted
--------------------------------
Diluted earnings per share $ 0.49 $ 0.66 $ 0.75 $ 1.39
================================
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<PAGE>
8. NON-UTILITY PROPERTY AND OTHER INVESTMENTS
The detail of amounts included in Non-Utility Property and Other
Investments at June 30, 2000 and December 31, 1999 is as follows :
2000 1999
-----------------
Thousands of Dollars
Except Per Share Amounts
Funds held in trust by others $ 7,384 $ 7,264
Other capital assets 72 73
----------------
Total Elizabethtown Water Company & Subsidiary 7,456 7,337
----------------
Concession fees on privatization contracts -
net of amortization 53,178 53,946
Capital assets from prizatization contracts -
net of amortization 7,070 6,165
Investments in real estate 9,049 9,049
Goodwill on AWM and AWWM acquisitions - net
of amortization 4,953 5,036
Investment in SEGS 1,089 1,089
Other capital assets 2,397 2,356
Other 181 185
----------------
Total E'town Corporation & Subsidiaries $85,373 $85,163
================
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 $2.54 million and
$1.90 million as of June 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 June 30, 2000 and December 31, 1999 are the receivables from
the customers of Elizabeth for wastewater services in the amount of $3.3
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
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 $13.28 million has been spent as of June 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. The accumulated amortization of
concession fees on privatization contracts and on capital assets from
privatization contracts were $.86 million and $.71 million as of June 30,
2000 and December 31, 1999, respectively. E'town has guaranteed Edison's
performance of the contract provisions.
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<PAGE>
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 June 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. The remaining $4.33
million was financed with a 7.75% mortgage, to be paid over 2 years. The
mortgage balance, including accrued interest is included in Mortgage and
Other Notes Receivable in the Corporation's Consolidated Balance Sheet as
of June 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 June 30, 2000.
Included in Non-Utility Property and Other Investments at June 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),
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 six month periods ended June 30, 2000 and
1999 is presented as follows :
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<PAGE>
Three Months Ended Six Months Ended
June 30, June 30,
In Thousands of Dollars 2000 1999 2000 1999
-----------------------------------------
Operating Revenues:
Regulated Utilities $35,585 $35,580 $67,523 $66,697
Contract Operations 5,296 4,311 10,165 9,085
Engineering/Operations/Construction 2,981 3,733 6,285 5,247
Intersegment Elimination (2,068) (2,013) (4,016) (3,942)
-----------------------------------------
Consolidated Operating Revenues $41,794 $41,611 $79,957 $77,087
=========================================
Operating Expenses:
Regulated Utilities $25,384 $25,630 $49,458 $48,758
Contract Operations 4,501 4,047 8,742 8,037
Engineering/Operations/Construction 3,154 3,634 6,885 5,072
Financing & Investment 649 134 843 480
Intersegment Elimination (2,068) (2,013) (4,016) (4,114)
-----------------------------------------
Consolidated Operating Expenses $31,620 $31,432 $61,912 $58,233
=========================================
Interest Expense:
Regulated Utilities $ 4,873 $ 4,167 $ 9,604 $ 8,033
Contract Operations 518 309 945 599
Engineering/Operations/Construction 7 4 52 5
Financing & Investment 541 322 1,035 647
-----------------------------------------
Consolidated Interest Expense $ 5,939 $ 4,802 $11,636 $ 9,284
=========================================
Depreciation and
Amortization Expense:
Regulated Utilities $ 3,550 $ 3,225 $ 7,100 $ 6,449
Contract Operations 477 401 954 802
Engineering/Operations/Construction 130 49 260 60
Financing & Investment 30 36 60 74
-----------------------------------------
Consolidated Depreciation
$ 4,187 $ 3,711 $ 8,374 $ 7,385
and Amortization Expense
=========================================
Net Income (Loss):
Regulated Utilities $ 5,407 $ 6,127 $ 8,585 $10,187
Contract Operations 277 (18) 509 503
Engineering/Operations/Construction (180) 95 (652) 170
Financing & Investment (1,176) (447) (1,853) 1,197
-----------------------------------------
Consolidated Net Income $ 4,328 $ 5,757 $ 6,589 $12,057
=========================================
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<PAGE>
Total Assets Total Debt
As of As of As of As of
June 30, December 31, June 30, December 31,
2000 1999 2000 1999
----------------------------------------------
Regulated Utilities $ 756,928 $750,690 $ 304,904 $ 299,398
Contract Operations 70,552 72,921 36,364 44,624
Engineering/Operations/Construction 7,809 7,506 3,328 2,067
Financing & Investment 62,098 51,574 74,921 59,660
Intersegment Elimination (44,037) (34,383) (41,861) (30,740)
----------------------------------------------
Consolidated Total $ 853,350 $848,308 $ 377,656 $ 375,009
==============================================
11. OTHER MATTERS
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 $9.3 million of flood-related expenditures and has
received advanced reimbursements of $4.0 million from its insurance
carrier. The remaining $5.3 million of flood-related expenditures is
reported on the Consolidated Balance Sheet as a deferred charge at June
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
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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<PAGE>
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 June 30, 2000 and the results of
operations for the three and six month periods ended June 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 or approximately $607 million. 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. The acquisition
is subject to approval by the New Jersey Board of Public Utilities
(BPU). Certain clearances must also be obtained from the New Jersey
environmental regulators. The transaction is expected to close prior to
the end of 2000.
On May 19, 2000 the Utility Workers Union of America, the 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 petition before the BPU. On June
7, 2000 the BPU granted the unions intervention status.
LIQUIDITY AND CAPITAL RESOURCES
Capital Expenditures Program
For the six months ended June 30, 2000, capital expenditures were $12.6
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
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.
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<PAGE>
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 Canal Road
Water Treatment Plant (Canal Road) and other projects. Canal Road 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.
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.
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<PAGE>
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 will be financed with a
combination of proceeds from the sale of E'town common stock or capital
contributions from Thames Water after the pending Merger, medium-term
notes, 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 February 2000 E'town issued $30 million of 7.69% Senior Notes due
2010. 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.
In November 1998 Mount Holly closed on loan agreements that will make
available up to $13.2 million in proceeds from the issuance of unsecured
notes through the New Jersey Environmental Infrastructure Trust
Financing 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 proceeds
of the loans will be used to repay short-term debt incurred to finance
a portion of the Mansfield Project. The Company has requested $9.84
million from the Trust and expects to receive payment in the third
quarter of 2000.
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
three months ended June 30, 2000 would result in a $.7 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 June 30, 2000 was $4.3 million or
$.49 per basic share compared to $5.8 million or $0.67 per basic share
for the same period in 1999. This represents a decrease of 24.8%. Net
income for the six months ended June 30, 2000 was $6.6 million or $.75
per basic share as compared with $12.1 million or $1.41 per basic share
for the same period in 1999. This represents a decrease of 45.4%.
The decrease in net income of $1.4 million for the three month period
resulted primarily from items that include, on a pretax basis, (i) $.9
million of costs associated with the pending Merger (ii) increased
interest cost of $1.1 million to finance the regulated utilities'
ongoing capital programs (iii) $.3 million of income in the second
quarter of 1999 from the settlement of litigation and (iv) a $.5 million
increase in depreciation expense due to additional capital investment in
the regulated utilities.
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<PAGE>
The decrease in net income of $5.5 million for the six month period
resulted primarily from items that include, on a pretax basis, the six
month effect of the items identified above as follows: (i) $1.1 million
of costs associated with the pending Merger (ii) increased interest cost
of $2.4 million to finance the regulated utilities' ongoing capital
programs (iii) $.3 million of income in the second quarter of 1999 from
the settlement of litigation and (iv) a 1.0 million increase in
depreciation expense due to additional capital investment in the
regulated utilities. In addition, the Corporation sold real estate in
the first quarter of 1999 and recognized, at that time, a pretax gain of
$3.2 million.
Operating Revenues increased $.2 million or .4% for the three months
ended June 30, 2000 compared to the same period in 1999. Revenues from
the Contract Operations segment increased $1.0 million from increased
water consumption and increased rates while revenues from the
Engineering/Operations and Construction segment decreased $.8 million
due to delays in the commencement of anticipated contracts to design and
build wastewater facilities (see Economic Outlook - Engineering/
Operations and Construction Segment). Revenues for the Regulated
Utilities segment remained constant as decreases in water consumption
due to a warmer, drier weather in the summer of 1999, were offset by an
increase in revenues from Mount Holly's rate increase effective January
2000 and customer growth.
Operating revenues for the six month period increased $2.9 million or
3.7% over the same period in 1999. Revenues from the Contract Operations
segment increased $1.1 million from increased water consumption and
increased rates. Revenues from the Engineering/Operations and
Construction segment increased $1.1 million due to a substantially
higher level of construction activity in the first quarter of 2000 than
in the same period in 1999. Revenues for the Regulated Utilities segment
increased $.8 million due a decrease in water consumption in the second
quarter which was more than offset by an increase in revenues from Mount
Holly's rate increase effective January 2000 and customer growth.
Operation Expenses increased less than $.1 million for the three months
ended June 30, 2000 as compared to the same period in 1999. Costs
associated with the pending Merger accounted for a $.9 million increase.
Operation expenses decreased $.5 million from the Engineering/Operations
and Construction segment. The Regulated Utilities segment accounted for
a decrease of $.4 million. The Contract Operations segment accounted for
an increase of $.1 million.
Operation expenses for the six month period increased $3.4 million or
10.6% over the same period in 1999. Costs associated with the pending
Merger accounted for $1.1 million of the increase. Operation expenses
further increased $1.8 million from the Engineering/Operations and
Construction segment, primarily reflecting additional personnel costs as
well as other operating costs, largely incurred in the first quarter of
2000, to support recently acquired businesses (see Operating Revenues
above) and future customer growth opportunities (see Economic Outlook -
Engineering/ Operations and Construction Segment). The Regulated
Utilities segment accounted for an increase of $.2 million primarily
from costs associated with harsh winter weather in 2000. The Contract
Operations segment accounted for $.3 million of the increase,
principally due to purchased water costs.
Maintenance Expenses decreased $.6 million or 28.1% for the three month
period ended June 30, 2000 as compared to the comparable period in 1999.
The Engineering/Operations and Construction segment accounted for a
decrease of $.7 million. The Regulated Utilities segment and Contract
Operations segments combined accounted for an increase of $.1 million.
Maintenance expenses for the six month period decreased $.4 million or
9.1% from the same period in 1999. The Engineering/Operations and
Construction segment accounted for a decrease of $.7 million. The
Regulated Utilities segment accounted for an increase of $.3 million
primarily from costs associated with harsh winter weather in 2000.
Maintenance costs for the Contract Operations segment remained flat for
the six month period.
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<PAGE>
Depreciation and Amortization Expense increased $.5 million or 12.8% for
the three month period in 2000 as compared with the second quarter of
1999. Of the increase, $.3 million is due to depreciation on additions
to utility plant in the Regulated Utilities segment, $.1 million is due
to depreciation on nonutility plant in the Contract Operations 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 six month period increased
$1.0 million or 13.4% over the same period in 1999. Of the increase, $.7
million is due to depreciation on additions to utility plant in the
Regulated Utilities segment, $.1 million is due to depreciation on
nonutility plant in the Contract Operations segment and $.2 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 $.1 million and increased $.1 million for the
three and six month periods, respectively due to changes discussed above
in the revenues of the Regulated Utilities segment.
Real Estate, Payroll and Other Taxes Expenses increased $.2 million or
26.8% and $.3 million or 18.5% for the three months and six months ended
June 30, 2000, respectively due to increased payroll taxes on higher
labor costs as well as for payroll taxes on distributions made in the
second quarter under incentive compensation programs.
Federal Income Taxes as a component of operating expenses decreased $.6
million or 20.4% and $1.6 million or 32.2% for the three and six month
periods ended June 30, 2000 compared to 1999 due to changes in taxable
operating income for each segment discussed herein.
Other Income (Expense) decreased $.3 million or 49.2% for the three
months ended June 30, 2000 as compared with the same period in 1999 due
to the a payment received in the second quarter of 1999 for the
settlement of litigation.
Other income (expense) decreased $2.3 million or 79.7% for the six
months ended June 30, 2000 as compared with the same period in 1999 due
to the a payment of $.3 million received in the second quarter of 1999
for the settlement of litigation as well as for 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 23.7% for the three
months ended June 30, 2000 over the same period in 1999. The increase is
comprised of (i) $.7 million in the Regulated Utilities segment for
interest expense incurred on a higher 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) $.2 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) $.2 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 $2.4 million or 25.3% for the six
months ended June 30, 2000 over the same period in 1999. The increase is
comprised of (i) $1.6 million in the Regulated Utilities segment for
interest expense incurred on a higher 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) $.4 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 payments made in June 2000 and 1999 to the city of
Elizabeth.
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<PAGE>
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
closing of 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
Earnings are expected to be lower in 2000 than in 1999 for the following
reasons:
. Regulated Utilities Segment - Water consumption is assumed to return to
normal levels for 2000 following a warm, dry summer in 1999. In
addition, Elizabethtown has agreed to delay the filing of a base rate
case, originally planned for early 2000 until at least August 2000 as a
condition of the Merger Agreement. A rate case is expected to be filed
early in 2001. As a result, recovery of increases in operating costs and
costs associated with additional utility plant investments since rates
were last increased in 1996 will be delayed.
. Engineering/Operations and Construction Segment - Revenue gains were
more modest than expected for the six months ended June 30, 2000. Also,
increased costs, primarily related to additional personnel incurred to
support growth of this segment, further contributed to a loss for the
six months ended June 30, 2000. A loss is also currently expected for
the year 2000. Management continues to review its plans and financial
projections for the remainder of the year to achieve improved financial
results as the company grows.
. Financing and Investment Segment - Properties' $2.1 million contribution
to net income during the first quarter of 1999 was due to a land sale
that will not recur in 2000. Gains are expected on land sales for
Properties remaining two parcels. The sales are not expected to close
before 2001. In addition, E'town continues to incur expenses associated
with the pending Merger. Such costs totaled $.9 million for the six
months ended June 30, 2000.
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, discussed below).
Regulated Utilities Segment
Elizabethtown, Mount Holly and AWWM
Elizabethtown expects lower net income in 2000 because (i) water
consumption for 2000 is assumed to return to normal levels following a
warm, dry summer in 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, but delayed to at least August 2000 due to the Merger
Agreement, is planned to be filed early in 2001.
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<PAGE>
Management has assumed lower earnings in 2000 than in 1999 based on a
return to normal usage patterns (based on a 5-year average). Water sales
during 1999 exceeded normal levels (based on 5-year average per customer
consumption) by an estimated $2.7 million due to a drought during July
and taking into effect state-imposed restrictions on water use during
August.
Elizabethtown, which received its last rate increase in 1996, expects
lower net income in 2000 and 2001 pending the completion of the rate case
planned for early in 2001. Elizabethtown expects its earned returns on
common equity to increase from 8.9% (for the twelve months ended June
30, 2000) to levels comparable to authorized rates of return. As part
of that rate case, Elizabethtown will request rate recognition for
approximately $109 million in 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.
Mount Holly had a negative rate of return on common equity of 2.6% in
1999, compared to an authorized rate of return of 11.25%, established in
its 1996 base rate case. Mount Holly earned significantly below its
authorized return in 1999 and 1998 because the Company was precluded
from filing for needed rate relief due to recently settled litigation
with another purveyor. 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 increase of $.5 million after elimination of the
PWAC, was effective January 1, 2000.
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 six months ended June 30, 2000
versus the comparable period in 1999, reduced revenues in the second
quarter, compared to the same period in 1999, and higher costs to
finance growth contributed to a loss for the second quarter. 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. Management is reviewing its
plans and financial projections for the remainder of the year to achieve
improved financial results as the company grows.
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<PAGE>
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.
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 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
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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<PAGE>
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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<PAGE>
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 : August 15, 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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