UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-1055
FLORIDA PUBLIC UTILITIES COMPANY
(Exact name of registrant as specified in its charter)
Florida 59-0539080
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
401 South Dixie Highway, West Palm Beach, FL 33401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (407) 832-2461
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, par value $1.50 per share American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
(Title of Class)
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
(continued)
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K(Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment of this Form 10-K.[X]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant, computed by reference to the closing price on March 15, 1996,
was $28,740,400.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. At March 15,
1996, there were 1,464,479 common shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy statement for the Annual Meeting of Common Stockholders,
April 16, 1996. (Part III)
PART I
Item 1. Business
General
The Company was incorporated on April 29, 1925 under the 1925 Florida
Corporation Law and is continuing its corporate existence pursuant to such
law and its Certificate of Reincorporation, as amended. The Company is a
public utility regulated by the Florida Public Service Commission (except
for propane gas service)and provides natural and propane gas service,
electric service and water service to consumers in Florida. The Company
is comprised of the following four divisions and number of customers as of
December 31, 1995: (1) West Palm Beach, located in southeast Florida,
serves natural gas to 27,003 customers and propane gas to 5,555 customers;
(2) Mid-Florida, consisting of the Sanford and DeLand districts, serves
7,612 natural gas customers and 4,396 propane customers; (3) Marianna,
located in the Florida panhandle, provides electricity to 11,544
customers; (4) Fernandina Beach, located in extreme northeast Florida,
serves 11,234 electric customers and 5,629 water customers. The economies
of West Palm Beach, Sanford, and DeLand rely somewhat on the migration of
winter residents and tourists during the winter season. Agriculture
and citrus processing, together with light industry, provide year-round
stability. Marianna's economy is predominantly agricultural including
peanuts, soy beans, corn, pork and beef. The area has many small
industries. Fernandina's economy is centered around two large paper mills;
ITT Rayonier, Inc. and Container Corporation of America. The beach area,
Amelia Island, is noted for its fine beaches and resort amenities.
The population by counties, as estimated by the University of Florida's
Bureau of Economic and Business Research, in which the service areas are
located, as of April 1, 1995, is as follows:
West Palm Beach (Palm Beach County) 963,000
Sanford (Seminole County) 324,000
DeLand (Volusia County) 403,000
Marianna (Jackson, Calhoun & Liberty Counties) 65,000
Fernandina Beach (Nassau County) 49,000
In Fernandina Beach, two large paper mills accounted for 14.1% of total
1995 electric division operating revenues and 7.8% of the Company's total
operating revenues. However, such mills accounted for 6.6% of total 1995
electric division operating margin and 2.3% of the Company's total
operating margin.
Sources of Gas and Electricity
Natural Gas
The Company receives its total supply of natural gas at ten City Gate
Stations connected to Florida Gas Transmission Company's (FGT) pipeline
system. FGT is the only natural gas pipeline serving peninsular Florida
and is under the jurisdiction of the Federal Energy Regulatory Commission
(FERC). The Company utilizes FGT solely as a transporter of natural gas.
All gas supplies for the Company's traditional sales markets are
independently procured by the Company through gas marketers, aggregators
and producers. The Company's transportation customers are responsible for
obtaining their own gas supplies and arranging for pipeline transportation.
During 1995 the Company has been actively involved in FGT's Operating
Committee and Spin-Down filing. Each pipeline shipper, including FGT, has
the right to representation on FGT's Operating Committee. This committee
has been successful in cooperatively formulating solutions to improve the
physical operations of the pipeline. The Company's participation in this
committee is a litigation costs reduction measure. It also encourages more
timely resolution of shipper and pipeline concerns.
FGT's Spin-Down filing would permit the pipeline to sell-off their southern
most production facilities in West Texas. If FERC approves the Spin-Down,
FGT's customers would have to negotiate contracts for transportation on a
"new" upstream pipeline for certain gas supplies purchased in south Texas.
This will affect all gas entering the pipeline in Starr and Hidalgo
Counties, northward to central Nueces County in Texas.
FGT completed construction of their Phase III expansion during 1995. FGT
estimated this expansion program has cost approximately $900 million. With
Phase III in service, FGT now has a total deliverability of 1.4 billion
cubic feet per day of natural gas within the state of Florida.
Participation in the Phase III expansion insured the Company sufficient
pipeline capacity to serve our growing market well into the next century.
Over the last five years the Company has gained valuable experience
contracting for gas supplies directly with marketers and producers while
contracting for transportation services from FGT. This experience
appropriately postures the Company to be most effective in operating under
Order 636. The Company has lowered its fuel cost substantially by
purchasing its gas supplies from sources other than FGT. All fuel cost
savings are passed through to the Company's customers by a required
purchase gas adjustment.
The Company has actively reduced its demand charges for pipeline capacity
by temporarily "subletting" unused contracted capacity to other shippers on
FGT's system. For the period October 1991 through December 1995, the
Company has had one of the lowest average purchase gas costs of all the
local distribution companies regulated by the Florida Public Service
Commission(FPSC).
The Company has become very active in Off-System Sales after receiving
appropriate tariff approval from the FPSC. Off-System Sales allow the
Company to broaden its market to include any customer within the state of
Florida who currently uses natural gas. Off-System Sales have been
negotiated between the Company and national marketers, electric generators,
other gas distributors and agricultural firms. The tariff permits
Off-System profits to be shared by the Company and its customers. The
Company will continue to explore every future potential opportunity to
keep its total cost of gas as low as possible.
Installation of System Control and Data Acquisition terminals at our
interruptible sales and transportation customers' sites has been completed.
These terminals effectively allow the Company to closely monitor the
customers' gas usage and avoid high pipeline penalties.
Electric Power
The Company purchases most of its power requirements at wholesale rates
from two nearby generating utilities. Less than 2% of the Company's
requirements are purchased on an "as available" basis from a self
generating paper mill.
In the Fernandina Beach division, electric power is purchased from the
Jacksonville Electric Authority (JEA), a municipally owned electric utility
that serves the greater Jacksonville, Florida area. In 1995, total
purchases from JEA were 335,339 MWH with an average cost of 4.91 cents per
KWH.
An economic study of future power supply options for the Fernandina Beach
division was completed in late 1995. The study evaluated proposals from
four power supply sources. The Company concluded that continuing with the
JEA until 2002 would be the most cost effective option. JEA's proposal
will reduce future purchased power costs.
Electric supply requirements for the Marianna division are purchased from
Gulf Power Company at five delivery points. Wholesale tariffs of Gulf
Power, an operating subsidiary of The Southern Company, are regulated by
FERC. Purchases from Gulf Power in 1995 amounted to 286,696 MWH at an
average cost of 4.32 cents per KWH. The Company plans to evaluate power
supply options for the Marianna division in 1996.
The following table sets forth the revenues, operating profit and
identifiable assets of each of the Company's business segments.
(See "Segment Information" in the Notes to Financial Statements.)
1995 1994 1993
(in thousands)
Revenues
Natural gas $25,231 $20,768 $22,414
Electric 38,370 36,070 38,307
Water 1,596 1,516 1,504
Propane gas 4,135 4,046 4,359
Operating profit
Natural gas 2,902 1,786 1,916
Electric 3,078 2,946 2,750
Water 328 378 352
Propane gas 212 180 329
Identifiable assets
Natural gas 32,115 29,093 28,500
Electric 32,155 31,189 30,512
Water 4,508 4,721 4,696
Propane gas 5,866 5,746 5,759
Regulation
The Florida Public Service Commission, pursuant to State Statutes, has
authority encompassing natural gas, electric and water rates, conditions
of service, the issuance of securities and certain other matters affecting
the operations of the Company.
Franchises
The Company holds franchises in each of the incorporated municipalities
where natural gas, electric and water operations take place. These
franchises generally have terms from 15 to 30 years and terminate at
various dates.
Employees
On December 31, 1995 the Company had 298 employees, of whom approximately
110 were covered under union contracts with two labor unions, the
International Brotherhood of Electri cal Workers and the International
Chemical Workers Union. The Company does not engage in research activities.
110 were covered under union contracts with two labor unions, the
International Brotherhood of Electrical Workers and the International
Chemical Workers Union. The Company does not engage in research activities.
Competition
Generally, in municipalities and other areas where the Company provides
natural gas, electric and water services, no other utility directly
renders such service.
Item 2. Properties
The Company's properties consist primarily of distribution systems and
related facilities. At December 31, 1995 the Company owned 22 miles of
electric transmission lines and 986 miles of electric distribution lines.
The gas properties distribute gas through 995 miles of 3" equivalent gas
main. The water property consists of deep wells, pumping equipment, water
treatment facilities and a distribution system. The propane gas systems
operated by the Company's subsidiary have bulk storage facilities and tank
installations on the customers' premises.
Certain properties of the Company and the shares of Flo-Gas Corporation, a
wholly-owned subsidiary, are subject to a lien collateralizing the funded
indebtedness of the Company under its Mortgage Indenture.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
The Company's common shares are traded on the American Stock Exchange under
the symbol FPU.
1995 1994
Low High Low High
STOCK PRICES
Quarter ended
March 31 $16.00 - $20.00 $17.25 - $18.88
June 30 16.63 - 18.75 16.88 - 18.13
September 30 17.13 - 19.13 17.00 - 18.13
December 31 17.63 - 19.38 15.75 - 17.25
DIVIDENDS PAID
January 1 $.29 $.28
April 1 .29 .29
July 1 .29 .29
October 1 .29 .29
At March 15, 1996, there were 1,298 holders of record of the
Registrant's Common Stock.
See "Capitalization, Long-Term Debt" in the Notes to Financial
Statement for information concerning restriction on the payment
of cash dividends.
Item 6. Selected Financial Data (in thousands, except per share data)
Years Ended December 31,
1995 1994 1993 1992 1991
Revenues $69,332 $62,400 $66,384 $67,049 $62,887
Operating margin 25,401 23,163 22,611 22,126 21,253
Net income 2,438 1,717 1,751 1,843 1,597
Earnings per common share 1.66 1.18 1.22 1.47 1.43
Dividends per common share 1.16 1.16 1.12 1.08 1.00
Total assets 85,240 82,281 78,035 71,195 68,955
Utility plant - net 66,278 63,713 61,567 59,746 57,335
Current debt 5,600 4,673 4,028 737 12,051
Long-term debt 23,500 23,500 24,173 25,818 18,555
Common shareholders'
equity 23,302 22,334 21,961 21,483 15,151
Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition
RESULTS OF OPERATIONS
Overview The Company is organized into three regulated business segments,
natural gas, electric and water and one non-regulated segment, propane gas.
The gas and electric segments aggregate approximately 94% of total
operating margin.
Contributing to variations in operating margins are the effects of
seasonal weather conditions, the timing of rate increases and the migration
of winter residents and tourists to central and southern Florida during the
winter season.
From the Florida Public Service Commission (FPSC) perspective, the Company
operates four distinct "entities", i.e., Marianna electric, Fernandina
Beach electric, Fernandina Beach water and natural gas, consisting of Palm
Beach County, Sanford and DeLand. The Company received a rate increase for
its natural gas operations, which became effective May 1995. The Marianna
electric division received a rate increase which became effective February
1994. The Fernandina Beach electric division received a rate increase
which became effective February 1989. The Company receives an increase
each year for its water operation through a price index mechanism provided
by the FPSC. The Company does not anticipate a need to file for a rate
increase in any of its regulated operations in the foreseeable future. See
"Rate Matters" in the Notes to Financial Statements (Notes).
Summary of Operating Margins
(in thousands)
1995 1994 1993
Natural and Propane Gas
Operating margin $14,865 $13,142 $13,160
Less propane 2,488 2,457 2,534
Remainder $12,377 $10,685 $10,626
Electric
Operating margin $9,013 $8,573 $8,015
Less industrial interruptible 594 596 582
Remainder $ 8,419 $ 7,977 $ 7,433
Operating Margin Operating margin, defined as gross operating revenues
less cost of fuel and taxes passed-through to customers which are based on
revenues, provides a more meaningful basis for evaluating utility
operations since fuel costs and taxes passed-through to customers have no
effect on results of operations.
Natural and Propane Gas Service Total natural and propane gas service
operating margin increased $1,723,000, or 13% in 1995 as compared with
1994. Excluding propane gas operating margin from total gas operating
margin, remaining operating margin increased $1,692,000 or 16% in 1995 as
compared with 1994. The increase in natural gas operating margin is
principally due to an approximate $800,000 of the approved interim increase
in base rates effective until May 5, 1995 and the final increase in base
rates effective May 6 and a 10% increase in consumption, due mainly to
significantly colder weather in 1995 when compared to last year. Propane
gas operating margin increased $31,000, about 1%. The effect of the
December cold weather on propane gas operating margins will not be realized
until January 1996 as consumption is not known until the meters are read
and the tanks are filled.
Total natural and propane gas service operating margin was virtually
unchanged in 1994 as compared with 1993. Excluding propane gas operating
margin from total gas operating margin, remaining operating margin
increased $59,000 or about one-half percent over 1993. Propane gas
operating margin decreased $77,000, or 3%, due to an approximate one-half
percent decrease in customers and an approximate 7% decrease in average
consumption per customer. The decrease in consumption was partially offset
by an approximate 5% increase in the price of propane gas sold.
In 1995, operating expenses, excluding cost of fuel and taxes passed-
through to customers, increased $575,000,about 4% in relation to
operating margin. Operating expenses have increased due to inflationary
pressures, in all classifications of expense with payroll and related
costs, property insurance premiums, pension expense and maintenance
costs accounting for most of the increase.
In 1994, operating expenses increased $261,000, about 2% in relation to
operating margin. Operating expenses have generally increased
due to inflationary pressures in all classifications of expense with
payroll and related costs and depreciation accounting for most of the
increase. Such increase is partially offset by a decrease in FPSC related
administrative expenses.
Electric Service Total electric service operating margin increased
$440,000, about 5% in 1995, as compared with 1994. Affecting the
comparison of operating margins are two industrial interruptible customers.
Excluding these customers, operating margin increased $442,000, less than 6%.
Other than industrial customers, the increase in operating margin is
principally due to a 2% growth in customers and a 6% increase in average
consumption per customer. Such increase in average consumption is more
than the historical increase, most likely resulting from the colder weather
in December.
In 1994, operating margin increased $558,000 or about 7% as compared with
1993. Excluding two industrial interruptible customers, operating margin
increased $544,000, or approximately 7%. Other than the industrial
customers, the increase in operating margin is affected by a 2% increase
in customers, a 2% decrease in average consumption per customer and an
approximate 8% increase in the price of MWH sold. Such increase is due to
the permanent rate increase in the Marianna division that went into effect
February 1994.
In 1995, operating expenses, excluding cost of fuel and taxes passed-
through to customers, increased $308,000, about 3% in relation to operating
margin. Operating expenses have increased due to inflationary pressures
in all classifications of expense with payroll and related costs, expensing
of overheads no longer appropriate to capitalize, property insurance
premiums, pension expense, maintenance costs and fees for an electrical
power study for the Fernandina Beach Division accounting for most of the
increase.
In 1994, operating expenses increased $362,000, about 4% in relation to
operating margin. Operating expenses have generally increased due to
inflationary pressures in all classifications of expense. The major reasons
for the increase in expenses are the FPSC disallowance of capitalizing over-
heads beginning in 1994, the establishment of a storm damage reserve in the
Marianna division beginning in 1994 and increased maintenance and
depreciation costs.
Interest Charges Interest charges consist of interest on bonds, short-term
borrowings and customer deposits. The primary factor causing interest
amounts to fluctuate are increases in amounts borrowed under the line of
credit and related interest rate changes. See "Notes Payable" and "Capi-
talization, Financing Transactions" in the Notes for additional informa-
tion.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows Net cash provided by operating activities decreased $2,031,000
during 1995, primarily due to a decrease in insurance settlement proceeds
of $1,985,000 and the cold weather in December 1995. Contributing to
increases in accounts receivable, accounts payable, and under recovery of
fuel costs were increased consumption due to the cold weather and greater
natural gas prices.
Cash used in investing activities usually fluctuates within a narrow range
as construction expenditures are typically $5.5 to $6.0 million per year.
However, in 1995 the Company moved the amount held in escrow for
environmental costs from overnight investments to various high quality
instruments extending to 2002.
Cash used by financing activities decreased from 1994 principally because
short-term borrowings increased $1,600,000 and $673,000 of long-term debt
was repaid.
Capital Resources The Company has historically replaced short-term
borrowings when the outstanding amount was large enough to make a sale of
bonds economically feasible and when long-term interest rates appear at-
tractive.
The Company has a $15,000,000 line of credit with its primary bank of which
$5,600,000 is outstanding at December 31, 1995. The line provides for
interest at LIBOR plus one-half percent. The Company is approved by the
Florida Public Service Commission to borrow up to $15,000,000 on a line of
credit basis, $14,000,000 of which is available for general corporate
purposes with the remaining $1,000,000 reserved as a contingency for major
storm repairs in the Marianna electric division.
The Company usually has no material commitments for construction
expenditures; however, the Company started construction of the addition to
the general office building in February 1996. The total cost will be
approximately $1.5 million. Historically, capital expenditures have
averaged $5.7 million over the past five years. Capital expenditures for
1996 have been budgeted for $9,255,000; however, while the actual amount
expended for construction is influenced by many factors, the Company
anticipates that expenditures for 1996, excluding the general office
addition, will not be significantly different from those amounts
historically incurred. For additional information see "Notes Payable" and
"Capitalization" in the Notes.
The Company anticipates that its future construction expenditures and
commitments are likely to require additional debt and/or equity financing.
Issuance of Additional Bonds The Company's 1942 Indenture of Mortgage and
Deed of Trust, which is a mortgage on all real and personal property,
permits the issuance of additional bonds based upon a calculation of
unencumbered net real and personal property. At December 31, 1995, such
calculation would permit the issuance of approximately $30,000,000 of
additional bonds.
OTHER
Environmental Matters The Company has several contamination sites in
various stages of assessment investigation, see "Contingencies" in the
Notes. Due to the rate relief granted the Company for environmental costs
and insurance settlement proceeds for environmental costs received by the
Company which are being held in escrow, the Company believes that any
future contamination assessment and remedial costs arising from any of
these sites will not be material to the Company's operating results or
liquidity.
Postretirement Benefits As discussed more fully in the Notes, the Company
adopted Statement of Financial Accounting Standards (SFAS) No. 106,
"Employers Accounting for Postretirement Benefits other than Pensions" in
the first quarter of 1993. The Company estimates the cost for 1996 at
$192,000, of which the Company estimates it will recover substantially all
of such amount from its customers through rates. The Company is not
funding these benefit costs and it has historically accounted for such
costs on the pay-as-you go (cash) method. The actual cash outlay for such
benefits in 1995 was $27,000.
Quarterly Earnings The Company's quarterly financial information as
summarized in the Notes under the caption "Quarterly Financial Data
(Unaudited)" reflects the influence of, among other things, seasonal
weather conditions, the timing of rate increases and the migration of
winter residents and tourists to central and southern Florida during the
winter season.
INDEPENDENT AUDITORS' REPORT
To the Directors and Shareholders
of Florida Public Utilities Company:
We have audited the accompanying consolidated balance sheets and statements
of capitalization of Florida Public Utilities Company and its wholly-owned
subsidiary, Flo-Gas Corporation, as of December 31, 1995 and 1994, and the
related consolidated statements of income, common shareholders' equity and
cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Florida Public Utilities
Company and its wholly-owned subsidiary, Flo-Gas Corporation, at December
31, 1995 and 1994, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Certified Public Accountants
West Palm Beach, Florida
February 16, 1996
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
Years Ended December 31
1995 1994 1993
Revenues $69,332 $62,400 $66,584
Cost of fuel and taxes based on revenues 43,931 39,237 43,973
Operating Margin 25,401 23,163 22,611
Operating Expenses
Operations 11,196 10,480 10,113
Maintenance 2,409 2,193 2,104
Depreciation and amortization 3,694 3,672 3,533
Taxes other than income taxes 1,582 1,528 1,514
Income taxes 1,356 943 867
Total operating expenses 20,237 18,816 18,131
Operating Income 5,164 4,347 4,480
Interest Charges and Other
Long-term debt 2,248 2,268 2,348
Short-term borrowings 273 146 61
Customer deposits and other interest 246 255 279
Other-net (41) (39) 41
Total interest charges and other 2,726 2,630 2,729
Net Income 2,438 1,717 1,751
Preferred Stock Dividends 29 29 29
Earnings for Common Stock $ 2,409 $ 1,688 $ 1,722
Earnings Per Common Share $ 1.66 $ 1.18 $ 1.22
Dividends Per Common Share 1.16 1.16 1.12
Average Shares Outstanding 1,454,986 1,435,280 1,416,476
See Notes to Financial Statements.
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31,
ASSETS 1995 1994
Utility Plant
Electric $42,975 $40,826
Natural gas 42,576 39,846
Water 6,083 6,110
Propane gas 6,997 6,831
Common 2,027 1,787
Total 100,658 95,400
Less accumulated depreciation 34,380 31,687
Net utility plant 66,278 63,713
Current Assets
Cash and overnight investments 270 848
Investments held in escrow for
environmental costs 1,992
Accounts receivable 7,382 6,102
Less allowance for uncollectible accounts (86) (85)
Inventories (at average or unit cost) 2,351 2,131
Prepayments and deferrals 804 832
Total current assets 10,721 11,820
Other Assets
Investments held in escrow for
environmental costs 2,737
Deferred income taxes 2,453 2,154
Regulatory asset 1,841 3,546
Defered charges 1,210 1,048
Total other assets 8,241 6,748
Total $85,240 $82,281
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity $23,302 $22,334
Preferred stock 600 600
Long-term debt 23,500 23,500
Total capitalization 47,402 46,434
Current Liabilities
Notes payable 5,600 4,000
Accounts payable 5,660 3,918
Dividends declared 431 425
Taxes accrued 309 114
Interest accrued 549 538
Tax collections payable 653 522
Insurance accrued 1,442 1,081
Other 652 537
Customer deposits 3,550 3,502
Current maturities of long-term debt 673
Total current liabilities 18,846 15,310
Deferred Credits
Customer advances for construction 809 1,128
Unamortized investment tax credits 1,582 1,703
Environmental insurance proceeds 4,386 3,185
Over recovery of fuel costs 1,267
Total deferred credits 6,777 7,283
Regulatory Liability 9,317 10,242
Deferred Income Taxes 2,898 3,012
Commitments and Contingencies
Total $85,240 $82,281
See Notes to Financial Statements.
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(dollars in thousands)
December 31,
1995 1994
Common Shareholders' Equity
Common stock, $1.50 par value, authorized
2,000,000 shares; issued 1,577,782 shares
in 1995; 1,567,119 shares in 1994 $ 2,367 $ 2,351
Paid-in capital 10,797 10,597
Retained earnings 12,191 11,469
Treasury stock - at cost (117,686 shares 1995;
121,860 shares 1994) (2,053) (2,083)
Total common shareholders' equity 23,302 22,334
Preferred Stock
4 3/4% Series A, $100 par value, redemption
price $106.00, authorized and outstanding
6,000 shares 600 600
Long-Term Debt
First mortgage bonds
Series
9.57% due 2018 10,000 10,000
10.03% due 2018 5,500 5,500
9.08% due 2022 8,000 8,000
Total long-term debt 23,500 23,500
Total Capitalization $47,402 $46,434
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
(in thousands)
Common Stock
Aggregate Paid-in Retained Treasury Stock
Shares Par Value Capital Earnings Shares Cost
Balance,
December 31, 1992 1,540,251 $2,311 $10,021 $11,309 132,421 $(2,158)
Net income 1,751
Dividends (1,615)
Stock plans 11,938 18 288 (5,099) 36
Balance,
December 31, 1993 1,552,189 2,329 10,309 11,445 127,322 (2,122)
Net income 1,717
Dividends (1,693)
Stock plans 14,930 22 288 (5,462) 39
Balance,
December 31, 1994 1,567,119 2,351 10,597 11,469 121,860 (2,083)
Net income 2,438
Dividends (1,716)
Stock plans 10,663 16 200 (4,174) 30
Balance,
December 31, 1995 1,577,782 $2,367 $10,797 $12,191 117,686 $(2,053)
See Notes to Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
1995 1994 1993
Cash Flows from Operating Activities
Net income $ 2,438 $ 1,717 $ 1,751
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 3,694 3,672 3,533
Doubtful accounts 116 91 139
Deferred income taxes 367 (611) 378
Investment tax credits (121) (109) (107)
Other 222 83 37
Changes in operating assets and
liabilities:
Accounts receivable (1,396) 579 (615)
Inventories and prepayments (192) (97) 59
Accounts payable and accrued expenses 2,606 (329) (289)
Environmental insurance proceeds 1,201 3,185
Over/(under) recovery of fuel costs (1,400) 1,092 6
Other (110) 183 (51)
Net cash provided by operating
activities 7,425 9,456 4,841
Cash Flows from Investing Activities
Construction expenditures (6,401) (5,938) (5,379)
Customer advances for construction (319) (172) (158)
Purchase of long-term investments (2,737)
Net cash used by investing
activities (9,457) (6,110) (5,537)
Cash Flows from Financing Activities
Short-term borrowings 7,950 4,750 4,000
Repayments of short-term borrowings (6,350) (4,750)
Repayments of long-term debt (673) (28) (2,354)
Proceeds from common stock plans 246 349 341
Dividends paid (1,711) (1,673) (1,596)
Net cash provided (used) by
financing activities (538) (1,352) 391
Net Increase (Decrease) in Cash and
Overnight Investments (2,570) 1,994 (305)
Cash and Overnight Investments
at Beginning of Year 2,840 846 1,151
Cash and Overnight Investments
at End of Year $ 270 $ 2,840 $ 846
Supplemental Cash Flow Information
Cash was paid during the years as follows:
Interest $ 2,511 $ 2,403 $ 2,646
Income Taxes 1,006 1,779 698
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
Summary of Significant Accounting and Reporting Policies
Business and Regulation Florida Public Utilities Company (the Company) is an
operating public utility engaged principally in the purchase, transmission,
distribution and sale of electricity and in the purchase, transmission,
distribution, sale and transportation of natural gas. The Company is subject
to the jurisdiction of the Florida Public Service Commission (FPSC) with
respect to its electric, natural gas and water operations. The suppliers of
electrical power to the Marianna division and of natural gas to the natural
gas divisions are subject to the jurisdiction of the Federal Energy Regulatory
Commission (FERC). The Fernandina Beach division is supplied most of its
electrical power by a municipality which is exempt from FERC and FPSC
regulation. The Company also distributes propane gas through a non-regulated
subsidiary. The Company's accounting policies and practices conform to
generally accepted accounting principles as applied to regulated public
utilities and are in accordance with the accounting requirements and rate
making practices of the FPSC.
The Company prepares its financial statements in accordance with the
provisions of Statement of Financial Accounting Standards No. 71 - "Accounting
for the Effects of Certain Types of Regulation" (SFAS 71). In general, SFAS
71 recognizes that accounting for rate regulated enterprises should reflect
the relationship of costs and revenues introduced by rate regulation. As a
result, a regulated utility may defer recognition of a cost (a regulatory
asset) or recognize an obligation (a regulatory liability) if it is probable
that, through the rate making process, there will be a corresponding increase
or decrease in revenues.
Accordingly, the Company has deferred certain costs, some of which are
material and some of which are not, which are being amortized over various
periods. Such costs relate to deferred income taxes, employees'
postretirement benefits other than pensions, unamortized debt, and unamortized
rate case expense. The Company believes that the FPSC will continue to allow
the Company to recover its regulatory assets.
Revenues The Company records utility revenues as service is provided and
bills its customers monthly on a cycle billing basis. Accordingly, at the end
of each month, the Company accrues for estimated unbilled revenues.
The rates of the Company include base revenues, fuel adjustment charges and
the pass through of certain governmental imposed taxes based on revenues. The
base revenues are determined by the FPSC and remain constant until a request
for an increase in such rates is filed and approved by the FPSC. From the
FPSC perspective, the Company operates four distinct "entities", i.e.,
Marianna electric, Fernandina Beach electric, Fernandina Beach water, and
natural gas, consisting of Palm Beach County, Sanford and DeLand. Thus, for
the Company to recover through rate relief the effects of inflation for all
such "entities", a request for an increase in base revenues would require the
filing of four separate rate cases. At the present time, the Company does not
have the resources to file more than one rate case per year. However, the
FPSC allows for an annual automatic rate increase for water operations through
the use of a price index. Fuel adjustment charges are estimated for customer
billing purposes and any under/over-recovery difference between the incurred
cost of fuel and estimated amounts billed to customers is deferred for future
recovery or refund and either charged or credited to customers. Interest
accrues on such under/over-recoveries and is included in the subsequent
adjustment.
Consolidation The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiary, Flo-Gas Corporation. All
significant intercompany balances and transactions have been eliminated.
Certain reclassifications have been made to the prior years' financial
statements and other financial information contained herein to conform with
the 1995 presentation.
Utility Plant and Depreciation Utility plant is stated at original cost. The
costs of additions to utility plant include contracted services, direct labor,
materials and allowances for borrowed and equity funds used during
construction. The costs of units of property retired are removed from utility
plant, and such costs plus removal costs, less salvage, are charged to
accumulated depreciation. Maintenance and repairs of property and replacement
and renewal of items determined to be less than units of property are charged
to operating expenses. Substantially all of the utility plant and the shares
of Flo-Gas Corporation collateralize the Company's First Mortgage Bonds.
Depreciation is computed using the composite straight-line method at rates
prescribed by the FPSC for financial accounting purposes. Such rates are
based on estimated service lives of the various classes of property.
Depreciation provisions on average depreciable property approximates 4.0% per
year.
Income Taxes As of January 1, 1993, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes",
which requires a change from the deferred method to the liability method of
accounting for income taxes. Under the liability method, the tax effect of
temporary differences between the financial statement and tax basis of assets
and liabilities are reported as deferred taxes measured at currently enacted
rates. In accordance with SFAS No. 109, an increase in the net accumulated
deferred income tax liability and a corresponding regulatory asset were
recognized on the accompanying consolidated balance sheets to give effect to
temporary differences for which deferred taxes were not previously required to
be provided under APB No. 11. Adoption of this standard had no effect on
results of operations.
The Company provides for deferred income taxes on substantially all temporary
differences that give rise to the deferred tax assets and liabilities.
Investment tax credits have been deferred and are amortized based upon the
average useful life of the related property.
Deferred Charges Deferred charges consist principally of unamortized debt
issuance expense and early extinguishment premium. Such expenses are being
amortized over the lives of the issues to which they pertain.
Use of Estimates Inherent in the accounting process is the use estimates when
preparing financial statements in accordance with generally accepted
accounting principals. Accordingly, the Company has used estimates in the
preparation of its financial statements and the only such estimate that might
result in a material change is the accrual for uninsured liability claims.
The Company is self-insured for the first $250,000 of each liability claim and
therefore accrues for estimated losses occurring from both asserted and
unasserted claims. The estimate for unasserted claims arising from unreported
incidents is based on an analysis of historical claims data. The Company's
portion of liability claims incurred for the ten year period ended in 1995
averaged approximately $95,000 per year and the accrual for such claims was
approximately $425,000 at December 31, 1995. The Company believes that its
accrual for potential liability claims is adequate in all material respects.
Notes Payable
The Company has a line of credit agreement with its primary bank providing for
a $15,000,000 loan with interest at LIBOR plus one-half percent. $14,000,000
of such loan is available for general corporate purposes, with the remaining
$1,000,000 reserved as a contingency for major storm repairs in the Marianna
electric division. At December 31, 1995 there was a balance outstanding of
$5,600,000. The weighted-average interest rates for 1995 and 1994 were 6.6%
and 6.6%, respectively.
Capitalization
Common Shares Reserved The Company has reserved 35,068 common shares for
issuance under the Dividend Reinvestment Plan and 16,992 common shares for
issuance under the Employee Stock Purchase Plan.
Dividend Restriction The Indenture of Mortgage and Deed of Trust and
supplements thereto provide for restriction of the payment of cash dividends.
At December 31, 1995 approximately $3,600,000 of retained earnings were free
of such restriction.
Maturities of Long-Term Debt Sinking fund payments are scheduled to begin in
2008.
Rate Matters
On September 23, 1994, the Company filed a request with the FPSC for an
increase in annual natural gas revenues of $2,079,000 and requested that the
interim rates be put into effect pending final action on the permanent
increase. In December 1994, the FPSC granted an interim rate increase of
$387,000. The final order granting a permanent increase of $1,282,000 was
effective May 6, 1995. The principal reasons for the increase in base rates
were attributed to increased operating and plant replacement costs, a
deteriorated return on the Company's investment and an aggressive marketing
plan to attract new customers.
On September 1, 1993, the Company filed a request with the FPSC for an
increase of $858,000 in annual electric revenues in the Marianna Division and
requested that the interim rates be put into effect pending final action on
the permanent increase. In November 1993, the FPSC granted an interim rate
increase of $137,000 that was effective November 18, 1993. On January 18,
1994, the FPSC authorized a permanent increase of $515,000 that became
effective February 17, 1994. The principal reason for the final increase
being lower than the Company's request was that the FPSC authorized the use of
a lower return on common equity capital and approved smaller increases in
storm reserve and tree trimming expenses than the Company had requested.
Following FPSC rules for water utilities, the Company in mid-1994 filed for
and was granted a price index revenue increase in the Fernandina Beach water
division. This increase, approximating $14,000 on an annual basis, was placed
into effect on July 7, 1995. A similar price index filing is planned for
1996.
Segment Information
The Company operates distribution systems providing natural and propane gas
service in three locations in central and southern Florida, electric service
in two locations in northern Florida and water service in one location in
northern Florida. There are no material intersegment sales or transfers.
Operating profit consists of revenues less operating expenses and does not
include other income, interest income, interest expense and income taxes.
Identifiable assets are those assets used in the Company's operations in each
business segment. Corporate assets are principally cash and overnight
investments, deferred tax assets and common plant.
Business segment information for 1995, 1994 and 1993 is summarized as follows
(in thousands):
NON-
REGULATED REGULATED
1995 Gas Electric Water Common Propane Consolidated
Revenues $25,231 $38,370 $1,596 $ $4,135 $69,332
Operating profit 2,902 3,078 328 212 6,520
Identifiable assets 32,115 32,155 4,508 10,596 5,866 85,240
Depreciation 1,578 1,453 204 125 334 3,694
Construction expenditures 3,245 2,533 (17) 312 328 6,401
1994
Revenues 20,768 36,070 1,516 4,046 62,400
Operating profit 1,786 2,946 378 180 5,290
Identifiable assets 29,093 31,189 4,721 11,532 5,746 82,281
Depreciation 1,566 1,449 190 141 326 3,672
Construction expenditures 2,617 2,400 195 351 375 5,938
1993
Revenues 22,414 38,307 1,504 4,359 66,584
Operating profit 1,916 2,750 352 329 5,347
Identifiable assets 28,500 30,512 4,696 8,568 5,759 78,035
Depreciation 1,504 1,390 184 136 319 3,533
Construction expenditures 2,250 2,519 89 147 374 5,379
Income Taxes
The provision (credit) for income taxes consists of the following (in
thousands):
1995 1994 1993
Currently payable
Federal $ 871 $1,471 $ 523
State 239 192 73
1,110 1,663 596
Deferred
Federal 387 (574) 307
State (20) (37) 71
367 (611) 378
Investment tax credit (121) (109) (107)
Total $1,356 $ 943 $ 867
The difference between the effective income tax rate and the statutory federal
income tax rate applied to pretax income is accounted for as follows (in
thousands):
1995 1994 1993
Federal income tax at
statutory rate $1,298 $ 912 $ 881
Effect of state income
taxes 219 155 144
Investment tax credit (121) (109) (107)
Other (40) (15) (51)
Provision for income taxes $1,356 $ 943 $ 867
The tax effects of temporary differences producing accumulated deferred income
tax assets and liabilities in accordance with SFAS No. 109 as reflected in the
accompanying consolidated balance sheets are as follows (in thousands):
Deferred tax assets 1995 1994
Environmental $ 1,689 $ 1,227
Alternative minimum tax
credit 428 656
Other 336 271
Total deferred tax assets $ 2,453 $ 2,154
Deferred tax liabilities
Utility plant related $ 8,837 $ 9,766
Other 480 476
Total deferred tax
liabilities $ 9,317 $10,242
Employee Benefit Plans
Pension Plan The Company has a noncontributory defined benefit pension plan
covering substantially all its employees. The benefits are based on the
employee's credited service and average compensation, generally during the
last five years before retirement. The Company's policy is to fund pension
costs in accordance with contribution guidelines established by The Employee
Retirement Income Security Act of 1974. Plan assets consist of stocks, bonds
and short-term investments.
The components of net pension income are as follows (in thousands):
1995 1994 1993
Service cost $ 513 $ 473 $ 445
Interest cost 875 791 728
Actual return on assets (4,499) 230 (2,791)
Net amortization and deferral 3,061 (1,644) 1,519
Net periodic pension income $ (50) $ (150) $ (99)
The Plan's funded status of the plan at December 31, 1995 and 1994, is as
follows (in thousands):
1995 1994
Actuarial present value of benefit
obligations:
Vested benefit obligation $ (10,289) $ (9,098)
Accumulated benefit obligation $ (10,878) $ (9,602)
Projected benefit obligation $(13,530) $(12,206)
Plan assets at fair value 21,790 18,060
Plan assets in excess of projected
benefit obligation 8,260 5,854
Unrecognized net gain (8,030) (4,836)
Unrecognized prior service cost 1,354 699
Unrecognized net asset at January 1,
1986 being recognized over 15 years (916) (1,100)
Prepaid pension cost $ 668 $ 617
Actuarial assumptions:
Discount rate 7% 7%
Rate of increase in future
compensation levels 5.5% 5.5%
Expected long-term rate of
return on assets 8% 8%
Health Plan The Company is principally self-insured for its employee and
retiree medical insurance plan. The Company's health care liability under the
plan is limited to $60,000 per individual per year, with a maximum total
liability currently approximating $925,000.
A reserve for future benefit payments for active employees is maintained at a
level sufficient to provide for estimated outstanding claims under the plan
net of amounts contributed by employees. Net health care benefits paid by the
Company for active employees were approximately $493,000, $622,000 and
$548,000 for 1995, 1994 and 1993, respectively.
Other Postretirement Benefits As of January 1, 1993, the Company adopted SFAS
No. 106, "Employers Accounting for Postretirement Benefits other than
Pensions". The Statement requires accrual of postretirement benefits during
the years an employee provides service. The Company provides postretirement
health care benefits for certain retired employees and their eligible
dependents and reduced postretirement life insurance benefits for retired
employees. The accumulated health care postretirement benefit obligation
(transition obligation) under SFAS No. 106 is being amortized over 20 years
beginning 1993. The Company estimates that it recovered approximately 93%
from its customers through rates in 1995 and expects to recover about 93% in
1996. The Company is not accruing for reduced postretirement life insurance
benefits as the actual outlay to the Company is offset by employee
contributions.
The components of postretirement benefit costs are as follows (in thousands):
1995 1994
Service Cost $ 69 $ 65
Interest cost 76 80
Amortization of transition obligation 43 43
Return on plan assets 0 0
Net amortization and deferral 0 6
Periodic postretirement benefit cost $188 $194
The Plan's funded status at December 31, 1995 and 1994, is as follows (in
thousands):
1995 1994
Accumulated postretirement benefit
obligation (APBO):
Retirees $(231) $ (448)
Fully eligible active plan participants (108) (48)
Other active plan participants (884) (761)
Total APBO (1,223) (1,257)
Plan assets 0 0
APBO less than plan assets (1,223) (1,257)
Unamortized transition obligation 730 772
Unrecognized (gain) loss 83 236
Accrued post benefit obligation $ (410) $ (249)
The measurement of the APBO assumes a 7% discount rate and a health care cost
trend rate of 10.4% in 1995 decreasing to 5.5% by the year 2007 and beyond. A
one-percentage point increase in the assumed health care cost trend rate would
increase the APBO by approximately 14% and the periodic cost by about 13%.
Employee Stock Purchase Plan The Company's Employee Stock Purchase Plan
offers common stock at a discount to qualified employees. During 1995, 1994
and 1993, 3,774, 5,062, and 5,099 shares, respectively, were issued under the
Plan for aggregate consideration of $55,000, $81,000 and $93,000,
respectively.
Financial Instruments
In 1995, the Company adopted SFAS No. 107 - "Disclosures about Fair Value of
Financial Instruments." The carrying amounts reported in the balance sheet for
cash and overnight investments, investments held in escrow for environmental
costs, notes payable, taxes accrued and other accrued liabilities approximate
fair value. The Company does not enjoy a debt rating and therefore the Company
has no reasonable way of estimating the current rate at which similar first
mortgage bonds would be made to borrowers with similar debt ratings and
maturities. However, the current bonds outstanding were issued in 1988 and
1992 and since that time interest rates have declined, and thus it is reason-
able to assume that the fair value of existing first mortgage bonds would be
more if the same bonds were issued today.
Contingencies
The Company is subject to federal and state legislation with respect to soil,
groundwater and employee health and safety matters and to environmental
regulations issued by the Florida Department of Environmental Protection
(FDEP), the United States Environmental Protection Agency and other federal
and state agencies. Except as discussed below, the Company does not expect to
incur material future expenditures for compliance with existing environmental
laws and regulations.
West Palm Beach Site The Company is currently conducting a contamination
assessment investigation of a parcel of property owned by it in West Palm
Beach, Florida. After a preliminary contamination assessment investigation
indicated soil and groundwater impacts, the Company entered into a consent
order with the FDEP. The consent order requires the Company to delineate the
extent of soil and groundwater impacts associated with the prior operation of
a gasification plant on the property and requires the Company to remediate any
soil and groundwater impacts, if necessary. In June 1992, the FDEP approved
the Company's proposed contamination assessment plan and the Company commenced
the contamination assessment investigation. The Company completed the
additional contamination assessment activities in December 1995, and submitted
a report to FDEP summarizing the results of such activities. At present, the
Company does not anticipate that additional assessment work will be required to
be performed. Since the FDEP has not yet completed its review of the report,
it is not possible to determine the complete extent or cost of remedial action,
if any, which may be required. However, preliminary estimates from the
Company's environmental consultant suggest that total contamination assessment
and remediation costs for this site may reach approximately $3,250,000. Until
the FDEP determines the contamination assessment investigation is completed,
it is not possible at this time to determine when and how much of such costs
the Company will have to pay. A portion of the on-site impacts on the site
have been determined to be eligible for reimbursement from a state fund and the
FDEP has determined that a portion of the work conducted off-site is eligible
for reimbursement under state law. Due to the rate relief granted to the
Company for environmental costs and insurance settlement proceeds for environ-
mental costs received by the Company which are being held in escrow, as well
as the potential for reimbursement from the state for a portion of the
assessment and remediation, the Company believes that it will not incur
material future expenditures to achieve compliance for this site with existing
environmental laws and regulations.
Sanford Site The Company owns a parcel of property located in Sanford,
Florida. Prior to the Company's acquisition of this property, it had been the
site of a gasification plant. The FDEP issued a Warning Notice to the Company
which required the Company to conduct a contamination assessment investigation
of the property. A preliminary investigation revealed that soil was impacted
throughout the center of the property.
In 1992, the Company brought suit in federal court in Orlando against former
owners and operators of the gasification plant to seek recovery of the
Company's compliance costs at this property. The Company later entered into a
cost sharing agreement with four former owners/operators of the gasification
plant. Under that agreement, the parties agreed to share equally in the cost
of the contamination assessment investigation of the property. The Company
dismissed the cost recovery action in 1995.
The initial contamination assessment investigation was completed and a
Contamination Assessment Report (CAR) was delivered to FDEP on February 4,
1994. In April 1995, FDEP provided the parties with its response to the CAR
requiring additional soil and groundwater sampling. At present, the parties
have been unable to reach agreement with FDEP on the scope of the additional
assessment activities in the vicinity of the site. On March 14, 1995,
representatives of FDEP and EPA conducted a site walkover of the former
gasification plant site. The walkover was to further evaluate the scope
of future action at the site for possible inclusion on the National Priorities
List (NPL). By letter, dated May 9, 1995, EPA, Region IV, extended an offer
to the Company to conduct an Expanded Site Investigation (ESI) and a Remedial
Investigation/Feasibility Study (RI/FS). The Company declined to fund or
perform the ESI because the primary scope of the ESI was focused on off-site
areas where historical practices may have resulted in contamination many
years before FPUC acquired title to the real property on which the gasification
plant was located. In July 1995, EPA advised the Company that EPA will proceed
with the ESI. Pending completion of the ESI and RI/FS by EPA, we are unable to
determine, to an acceptable degree of certainty, the extent or cost of
remediation by EPA or FDEP at this site and it is not possible to determine
the complete extent or cost of remedial action, if any, which may be required.
However, preliminary estimates from the Company's environmental consultant
suggest that total contamination assessment and remedial costs for the site
may reach approximately $2,750,000. Pending completion of the ESI and RI/FS by
EPA, it is not possible to determine when and how much of such costs the
Company will have to pay. Due to the rate relief granted to the Company for
environmental costs and insurance settlement proceeds for environmental costs
received by the Company which are being held in escrow, as well as the
potential for recovery of a portion of the assessment and remediation costs
from several owners/operators of the gasification plant, the Company believes
that it will not incur material future expenditures to achieve compliance for
this site with existing environmental laws and regulations.
Pensacola Site The FDEP notified the Company and other alleged responsible
parties to conduct additional soils and groundwater sampling to determine the
extent of soil and groundwater impacts at a property previously the site of a
gasification plant in Pensacola, Florida. The Company was a former own-
er/operator of the gasification plant for several years. The Company and
other alleged responsible parties have agreed to share equally the costs of
such an investigation.
A contamination assessment report (CAR) describing the results of the
contamination assessment investigations were delivered to FDEP in January
1994. With the exception of security fencing, the CAR recommended no further
action at this site. After its review of the CAR in November 1994, the FDEP
notified the Company and other alleged responsible parties that additional soil
and groundwater sampling was necessary at this site. The additional work was
conducted in 1995 and a CAR Addendum was submitted to FDEP in November 1995.
Prior to completion of negotiations with FDEP over the substance of the CAR
Addendum, we are unable to determine the extent or costs of remedial action,
if any, which may be required by FDEP. Until the negotiations with FDEP are
completed, it is not possible to determine when and how much of such costs the
Company will have to pay. Due to the rate relief granted to the Company for
environmental costs and insurance settlement proceeds for environmental costs
received by the Company which are being held in escrow, as well as the
potential for recovery of a portion of the assessment and remediation costs
from several current and former owners/operators of the site, the Company
believes that it will not incur material future expenditures to achieve
compliance for this site with existing environmental laws and regulations.
Georgia Transformer Site In October 1994, the Environmental Protection Agency
(EPA) issued a Notice of Potential Liability to the Company in which the EPA
identified the Company as a potentially responsible party (PRP) in connection
with a site in Georgia where the Company was alleged to have sent transformers
for repair. In the notice, the EPA demanded that PRPs for the site reimburse
the EPA for response costs that it had incurred through August 1994 in
connection with soil remediation efforts.
The Company, along with the PRPs, entered into a settlement agreement in 1995
with the EPA and the Company paid its share of the response costs in the
amount of approximately $8,300. Since the EPA and the State of Georgia are
currently evaluating whether additional contamination assessment and remedial
action may be required at this site, it is not possible to determine the nature
and extent of soil or groundwater impacts on the site, nor is it possible to
determine the extent or cost of additional remedial action which may be
required. Based on the Company's volumetric share of materials sent to the
site, the Company believes that it will not incur significant future
expenditures to satisfy its obligations at this site.
Insurance Claims and Rate Relief The Company notified its insurance carriers
of environmental impacts detected at each of the former manufactured gas plant
(MGP) sites discussed above.
As a result of negotiations with the Company's major insurance carriers that
concluded in 1995, such carriers paid settlement proceeds totaling
approximately $4,200,000 for certain environmental costs to be paid to the
Company over the period of time ending in December 1995. In addition, the
Florida Public Service Commission has allowed the Company to recover through
rate relief environmental expenses of approximately $2,400,000 over a ten-year
period at the rate of approximately $240,000 per year.
Due to the rate relief granted the Company for environmental costs and
insurance settlement proceeds for environmental costs received by the Company
which are being held in escrow, the Company believes that any future
contamination assessment and remedial costs arising from any of these sites
will not be material to the Company's operating results or liquidity.
Quarterly Financial Data (Unaudited)
The quarterly financial data presented below reflects the influence of, among
other things, seasonal weather conditions, the timing of rate increases and
the migration of winter residents and tourists to central and southern Florida
during the winter season. (in thousands, except per share amounts).
FIRST SECOND THIRD FOURTH
1995 QUARTER QUARTER QUARTER QUARTER
Revenues $17,841 $17,055 $17,023 $17,413
Operating margin 7,044 5,876 5,980 6,501
Operating profit 2,453 1,204 1,216 1,647
Net income 1,113 352 354 619
Earnings per share .76 .24 .24 .42
1994
Revenues $17,900 $15,085 $15,571 $13,844
Operating margin 6,472 5,496 5,396 5,799
Operating profit 2,074 1,047 789 1,380
Net income 937 258 103 419
Earnings per share1 .65 .18 .07 .29
1The sum of the quarterly earnings per share amounts does not equal the
annual earnings per share amount reflected in the consolidated statement
of income due to the effect of changes in average common shares outstanding
during the fiscal year.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information concerning directors and nominees of the Registrant is
included under the caption "Nominees and Continuing Directors" in the
Registrant's Proxy Statement for the 1996 Annual Meeting of Shareholders
and is incorporated by reference herein.
The following table sets forth certain information about the executive
officers of the Registrant as of March 15, 1996.
Name Age Position Date
R. L. Terry 76 Chairman of the Executive
Committee 1985 - Present
F. C. Cressman 62 President 1985 - Present
Chief Executive Officer 1991 - Present
John T. English 52 Senior Vice President 1993 - Present
Charles L. Stein 46 Vice President 1993 - Present
Darryl L. Troy 54 Vice President 1993 - Present
Jack Brown 61 Treasurer 1988 - Present
Corporate Secretary 1995 - Present
Mr. English was Vice President preceding his appointment as Senior Vice
President.
Mr. Stein was Manager of Gas Operations preceding his appointment as Vice
President.
Mr. Troy was Assistant Secretary and Assistant Treasurer preceding his
appointment as Vice President.
There are no family relationships between the executive officers.
All executive officers are elected for a one year term.
Item 11. Executive Compensation
Information concerning executive compensation is included under the
caption
"Executive Compensation" in the Registrant's Proxy Statement and is
incorporated by reference herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information concerning the security ownership of certain of the
Registrant's beneficial owners and management is icluded under the
captions "Security Ownership of Certain Beneficial Owners" and "Nominees
and Continuing Directors" in the Registrant's Proxy Statement and is
incorporated by reference herein.
Item 13. Certain Relationships and Related Transactions
Information concerning certain relationships and related transactions is
included under the caption "Transactions with Management" in the
Registrant's Proxy Statement and is incorporated by reference herein.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
The following consolidated financial statements of Florida
Public Utilities Company are included in the Registrant's 1995
Annual Report to Shareholders.
Independent Auditors' Report
Consolidated Statements of Income
Consolidated Balance Sheets
Consolidated Statements of Capitalization
Consolidated Statements of Common Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Financial Statements
2. Financial Statement Schedules
All schedules are omitted because of the absence of the
conditions under which they are required or because the
required information is included in the financial statements
and related notes thereto.
3. Exhibits
See Exhibit Index following signatures.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended
December 31, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
FLORIDA PUBLIC UTILITIES COMPANY
(Registrant)
By /s/ Jack Brown
Jack Brown
Principal Financial and Accounting Officer
Date March 22, 1995
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the date
indicated.
/s/ Robert L. Terry Date: March 22, 1996
Robert L. Terry
Chairman of the Executive Committee and Director
/s/ Franklin C. Cressman Date: March 22, 1996
Franklin C. Cressman
President and Chief Executive Officer and Director
/s/ E. James Carr, Jr. Date: March 22, 1996
E. James Carr, Jr.
Director
/s/ Daniel Downey Date: March 22, 1996
Daniel Downey
Director
/s/ John T. English Date: March 22, 1996
John T. English
Senior Vice President and Director
/s/ Richard C. Hitchins Date: March 22, 1996
Richard C. Hitchins
Director
/s/ Gordon O. Jerauld Date: March 22, 1996
Gordon O. Jerauld
Director
FLORIDA PUBLIC UTILITIES COMPANY
EXHIBIT INDEX
(a) Exhibits
Regulation S-K
Item Number 21. Subsidiary of the registrant
23. Independent auditors' consent
27. Financial data schedule
EXHIBIT 21
Subsidiary of the registrant
Name Jurisdiction of Incorporation
Flo-Gas Corporation Florida
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Post-Effective Amendment No.
16 to Registration Statement No. 2-24986 of Florida Public Utilities Company
on Form S-8 of our report dated February 16, 1996, appearing in this Annual
Report on Form 10-K of Florida Public Utilities Company for the year ended
December 31, 1995.
DELOITTE & TOUCHE LLP
Certified Public Accountants
West Palm Beach, Florida
March 20, 1996
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