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, 1996
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 (561) 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
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 10, 1997,
was $31,054,000.
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 10,
1997, there were 1,478,771 common shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy statement for the Annual Meeting of Common Stockholders,
April 15, 1997. (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, 1996: (1) West Palm Beach, located in southeast Florida,
serves natural gas to 27,396 customers and propane gas to 5,547 customers;
(2) Mid-Florida, consisting of the Sanford and DeLand districts, serves
7,785 natural gas customers and 4,349 propane customers; (3) Marianna,
located in the Florida panhandle, provides electricity to 11,734
customers; (4) Fernandina Beach, located in extreme northeast Florida,
serves 11,585 electric customers and 5,803 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, 1996, is as follows:
West Palm Beach (Palm Beach County) 982,000
Sanford (Seminole County) 329,000
DeLand (Volusia County) 407,000
Marianna (Jackson, Calhoun & Liberty Counties) 69,000
Fernandina Beach (Nassau County) 51,000
In Fernandina Beach, two large paper mills accounted for 13.5% of total
1996 electric division operating revenues and 7.0% of the Company's total
operating revenues. However, such mills accounted for 5.8% of total 1996
electric division operating margin and 2.0% of the Company's total
operating margin.
Sources of Gas and Electricity
Natural Gas
The Company receives its natural gas at ten City Gate Stations connected to
Florida Gas Transmission Company's (FGT) pipeline system. A contract was
signed with FGT to construct an additional gate station for our DeLand
district's distribution system. The new "DeLand South" station will
eliminate a developing gas delivery restriction, provide for future system
expansion and improve the reliability of our DeLand system. DeLand is our
only system which has relied upon a single gate station for its gas supply.
Completion of the new station will provide the necessary redundance to
ensure uninterrupted service to our customers and will allow station
maintenance to be performed in a timely, economical manner.
FGT is the sole pipeline serving peninsular Florida and is under the
jurisdiction of the Federal Energy Regulatory Commission (FERC). The
Company contracts with FGT to receive, transport and deliver natural gas
which the Company has procured from independent gas marketers and producers
to satisfy its traditional sales markets. The Company also receives gas
from FGT for delivery to transportation customers who have contracted for
their own gas supply and pipeline transportation.
The Company is actively participating in FGT's rate proceeding before the
FERC (Docket No. RP96-366). This rate proceeding resulted from FGT's Phase
III construction settlement filing as reported in our 1995 Annual Report.
Anticipated changes in the character of services provided by FGT, as well
as an increase in pipeline rates effective March 1, 1997, should not
adversely affect the current competitive advantage natural gas holds over
alternative energy sources. The Company is also actively participating in
FGT's Gas Industry Standards Board (GISB) proceeding before the FERC
(Docket No. RP96-21). The FERC required the GISB filing in an effort to
establish a nationwide uniform information network for natural gas
producers, pipelines, marketers, distribution companies and other end-users.
The GISB's goal is to establish industry-wide time frames for
transactions involving purchasing, transporting, delivering, invoicing,
etc. of natural gas on a national basis. The GISB is requiring the
information network to be fully available to participants 24 hours a day,
365 days a year. The Company is prepared, at minimal costs, to assume the
GISB imposed requirements when they become effective for FGT's customers on
March 1, 1997.
For six years, the Company has been contracting for its gas supplies from
marketers and producers and for transportation of those supplies by FGT.
The experience gained during these six years positions the Company to
operate effectively within an unbundled industry environment. Purchasing
gas supplies directly from marketers and producers has substantially
reduced the Company's gas supply costs. Pipeline capacity demand charges
have also been reduced by "subletting" temporary excess pipeline capacity
to other shippers on FGT's system. Savings realized by these activities
are passed through to our customers in the form of lower fuel charges. In
addition, the Company continues to pursue off-system sales under conditions
set forth in our Florida Public Service Commission approved tariff.
Off-system sales allow the Company to sell excess gas to any current user of
natural gas within the State of Florida. The tariff directs that profits
derived from off-system sales be shared with the Company's system
customers. Off-system sales have been transacted with national marketers,
electric generators, agricultural firms and other gas distributors. In
conjunction with our on-going efforts to control and reduce our cost of
gas, the Company expanded its System Control and Data Acquisition System
(SCADA). SCADA terminals were installed at interruptible and
transportation customer sites to closely monitor and maximize gas sales to
such customers without incurring expensive pipeline penalties.
Electricity
The Company purchases most of its electrical power requirements at
wholesale rates from two nearby generating utilities. Less than 1% of the
Company's requirements are purchased on an "as available" basis from a
self-generating paper mill.
Increased competition in the wholesale power market has enabled the Company
to negotiate new power supply agreements that will significantly reduce
future power costs. Cost savings from these lower power costs will be
passed on to our customers placing the Company's residential and commercial
electric rates among the lowest of all electric utilities in Florida.
A power supply study for the Fernandina Beach Division was completed in
1995, which evaluated proposals from four utility companies. The Company
concluded that continuing with the Jacksonville Electric Authority (JEA)
through 2002 would be the most cost effective option. The JEA executed a
new agreement with the Company in 1995 which provided for new rates and
terms effective January 1, 1996.
The Company recently executed a new power supply agreement with Gulf Power
Company to provide electric power to the Marianna Division. The new
eleven-year agreement provides improved rates and terms when compared to
the previous contract and became effective January 1, 1997.
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.)
1996 1995 1994
(in thousands)
Revenues
Natural gas $31,854 $26,144 $21,679
Electric 40,701 40,074 37,441
Water 1,854 1,674 1,589
Propane gas 4,401 4,135 4,046
Operating profit
Natural gas 3,250 2,902 1,786
Electric 3,141 3,078 2,946
Water 495 328 378
Propane gas 138 212 180
Identifiable assets
Natural gas 33,977 32,115 29,093
Electric 33,038 32,155 31,189
Water 4,584 4,508 4,721
Propane gas 6,100 5,866 5,746
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, 1996 the Company had 302 employees, of whom approximately
102 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.
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, 1996 the Company owned 22 miles of
electric transmission lines and 997 miles of electric distribution lines.
The gas properties distribute gas through 1,136 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.
1996 1995
Low High Low High
STOCK PRICES
Quarter ended
March 31 $18.50 - $20.50 $16.00 - $20.00
June 30 18.75 - 20.38 16.63 - 18.75
September 30 19.63 - 20.75 17.13 - 19.13
December 31 19.75 - 21.00 17.63 - 19.38
DIVIDENDS PAID
January 1 $.29 $.29
April 1 .30 .29
July 1 .30 .29
October 1 .30 .29
At March 10, 1997, there were 1,008 holders of record of the
Registrant's Common Stock.
See "Capitalization, Dividend Restriction" in the Notes to Financial
Statements 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,
1996 1995 1994 1993 1992
Revenues $78,810 $72,027 $64,755 $68,626 $68,944
Operating margin 26,771 25,401 23,163 22,611 22,126
Net income 2,751 2,438 1,717 1,751 1,843
Earnings per common share 1.85 1.66 1.18 1.22 1.47
Dividends per common share 1.20 1.16 1.16 1.12 1.08
Total assets 90,994 85,240 82,281 78,035 71,195
Utility plant - net 69,876 66,278 63,713 61,567 59,746
Current debt 7,900 5,600 4,673 4,028 737
Long-term debt 23,500 23,500 23,500 24,173 25,818
Common shareholders'
equity 24,511 23,302 22,334 21,961 21,483
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 business 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 last received rate increases
as follows: natural gas operations, May 1995; Marianna electric division,
February 1994; and Fernandina Beach electric division, 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 at the present time. See "Rate Matters" in the Notes to
Financial Statements (Notes).
Summary of Operating Margins
(in thousands)
1996 1995 1994
Natural and Propane Gas
Operating margin $15,841 $14,865 $13,142
Less propane gas 2,573 2,488 2,457
Remainder $13,268 $12,377 $10,685
Electric
Operating margin $ 9,243 $ 9,013 $ 8,573
Less industrial 537 594 596
Remainder $ 8,706 $ 8,419 $ 7,977
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 $976,000 or about 7% in 1996 as compared with
1995. Excluding propane gas operating margin from total gas operating
margin, remaining operating margin increased $891,000 or about 7% compared
with 1995. An increase of $124,000 of such increase, or 1%, is due to an
industrial customer increasing its consumption by about 240% in 1996. The
remaining increase in natural gas operating margin is due primarily to a
1% growth in customers, a 3% growth in average consumption and the effect
of an approved final increase in base rates of $1,282,000 annually, which
commenced May 1995 (approved lesser interim rates were in effect for the
year until May 5th of 1995). Propane gas operating margin increased
$85,000, or about 3%. The increase in propane gas operating margin is due
principally to slightly higher prices in 1996.
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 1994. Propane gas operating margin
increased $31,000, about 1%. The effect of the December cold weather on
propane gas operating margins was not realized until January 1996 as
consumption is not determinable until the meters are read and the tanks are
filled.
In 1996, operating expenses, excluding cost of fuel and taxes passed-
through to customers, increased $702,000, about 4% in relation to operating
margin. Operating expenses have generally increased in all classifications
of expense due to inflationary pressures, with increased costs relating to
the Company's new billing system, increased payroll and related costs and
expenses related to the Company's natural gas mains and lines offset by an
increase in net periodic pension income.
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.
Electric Service. Total electric service operating margin increased
$230,000, or about 3% as compared with 1995. Affecting the comparison of
operating margins are two industrial customers. Excluding these customers,
operating margin increased $287,000, or about 3%. Excluding industrial
customers, the increase in operating margin is due principally to a 2%
growth in customers and a 1% growth in average consumption.
Total electric service operating margin increased $440,000, about 5% in
1995, as compared with 1994. Excluding the two industrial customers,
operating margin increased $442,000, about 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 1996, operating expenses increased $167,000, about 2% in relation to
operating margin. Operating expenses have generally increased in all
classifications of expense due to inflationary pressures.
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.
Interest Charges. Interest charges consist of interest on bonds, short-term
borrowings and customer deposits. The primary factor causing interest
amounts to fluctuate are changes in amounts borrowed under the line of
credit and related interest rate changes. See "Notes Payable" and "Capi-
talization" in the Notes for additional information.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows. Net cash provided by operating activities decreased $8,000 in
1996 as compared with 1995. While the net change is not particularly
significant, there were changes in individual line items that were more so.
Accounts receivable increased, due primarily to increased gas and electric
fuel costs and customer growth. Inventories and prepayments increased due
principally to a change of the insurance renewal date to September 1 from
March 18 and estimated income tax payments in excess of accrued
liabilities. Accounts payable and accruals increased due primarily to
increased gas and electric fuel costs, an increase in accrued insurance,
including a reserve for the self-insured portion of casualty claims,
accrued workers' compensation and other postretirement benefits and
substantially increased off-system sales in December 1996. Environmental
insurance proceeds decreased as the majority of settlement amounts were
received in previous years.
Cash used in investing activities usually fluctuates within a narrow range
as construction expenditures are typically about $6.0 million per year.
Included in construction expenditures in 1996 is $1,343,000 relating to the
general office addition. Purchase of long-term investments decreased as
environmental insurance settlement proceeds decreased.
Cash used by financing activities increased from 1995 principally because
short-term borrowings increased $700,000 and there were no repayments of
long-term debt.
The Company has a $15,000,000 line of credit with its primary bank of which
$7,900,000 is outstanding at December 31, 1996. The line provides for
interest at LIBOR plus one-half percent and expires in 1997. The Company
expects to renew its line of credit at essentially existing terms and
conditions. 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 $1.6 million including the remodeling of the original
building, which is expected to be completed by April 1997. Historically,
capital expenditures have averaged $5.9 million over the past five years,
excluding the general office building addition. Capital expenditures for
1997 have been budgeted for $7,660,000; however, while the actual amount
expended for construction is influenced by many factors, the Company
anticipates that expenditures for 1997 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, 1996, such
calculation would permit the issuance of approximately $33,000,000 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.
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, 1996 and 1995, 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,
1996. 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, 1996 and 1995, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Certified Public Accountants
West Palm Beach, Florida
February 21, 1997
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
Years Ended December 31,
1996 1995 1994
Revenues $78,810 $72,027 $64,755
Cost of fuel and taxes based on revenues 52,039 46,626 41,592
Operating Margin 26,771 25,401 23,163
Operating Expenses
Operations 11,601 11,196 10,480
Maintenance 2,526 2,409 2,193
Depreciation and amortization 3,876 3,694 3,672
Taxes other than income taxes 1,744 1,582 1,528
Income taxes 1,396 1,356 943
Total operating expenses 21,143 20,237 18,816
Operating Income 5,628 5,164 4,347
Interest Charges and Other
Long-term debt 2,235 2,248 2,268
Short-term borrowings 348 273 146
Customer deposits and other interest 275 246 255
Other-net 19 (41) (39)
Total interest charges and other 2,877 2,726 2,630
Net Income 2,751 2,438 1,717
Preferred Stock Dividends 29 29 29
Earnings for Common Stock $ 2,722 $ 2,409 $ 1,688
Earnings Per Common Share $ 1.85 $ 1.66 $ 1.18
Dividends Per Common Share 1.20 1.16 1.16
Average Shares Outstanding 1,468,974 1,454,986 1,435,280
See Notes to Financial Statements.
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31,
ASSETS 1996 1995
Utility Plant
Electric $ 44,758 $ 42,975
Natural gas 45,367 42,576
Water 6,315 6,083
Propane gas 7,156 6,997
Common 3,088 2,027
Total 106,684 100,658
Less accumulated depreciation 36,808 34,380
Net utility plant 69,876 66,278
Current Assets
Cash and overnight investments 841 270
Accounts receivable 8,153 7,382
Allowance for uncollectible accounts (91) (86)
Inventories (at average or unit cost) 2,494 2,351
Prepayments and deferrals 1,585 804
Total current assets 12,982 10,721
Other Assets
Investments held in escrow for
environmental costs 2,881 2,737
Deferred income taxes 2,361 2,453
Regulatory assets-tax 464 1,841
Deferred charges 1,101 1,078
Under recovery of fuel costs 1,329 132
Total other assets 8,136 8,241
Total $ 90,994 $ 85,240
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity $ 24,511 $ 23,302
Preferred stock 600 600
Long-term debt 23,500 23,500
Total capitalization 48,611 47,402
Current Liabilities
Notes payable 7,900 5,600
Accounts payable 7,564 5,660
Dividends declared 449 431
Taxes accrued 308 309
Interest accrued 575 549
Tax collections payable 532 653
Insurance accrued 2,325 1,442
Other 796 652
Customer deposits 3,634 3,550
Total current liabilities 24,083 18,846
Other Liabilities
Customer advances for construction 982 809
Deferred income taxes 8,583 9,317
Unamortized investment tax credits 1,462 1,582
Environmental insurance proceeds and
related earnings 4,531 4,386
Regulatory liabilities-tax 2,742 2,898
Commitments and contingencies
Total other liabilities 18,300 18,992
Total $ 90,994 $ 85,240
See Notes to Financial Statements.
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(dollars in thousands)
December 31,
1996 1995
Common Shareholders' Equity
Common stock, $1.50 par value, authorized
2,000,000 shares; issued 1,585,478 shares
in 1996; 1,577,782 shares in 1995 $ 2,379 $ 2,367
Paid-in capital 10,992 10,797
Retained earnings 13,151 12,191
Treasury stock - at cost (111,831 shares
in 1996; 117,686 shares 1995) (2,011) (2,053)
Total common shareholders' equity 24,511 23,302
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 $48,611 $47,402
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
(dollars in thousands)
Common Stock
Shares Aggregate Paid-in Retained Treasury Stock
Issued Par Value Capital Earnings Shares Cost
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)
Net income 2,751
Dividends (1,791)
Stock plans 7,696 12 195 (5,855) 42
Balance,
December 31, 1996 1,585,478 $2,379 $10,992 $13,151 111,831 $(2,011)
See Notes to Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
1996 1995 1994
Cash Flows from Operating Activities
Net income $ 2,751 $ 2,438 $ 1,717
Adjustments to reconcile net income to
net cash from operating activities
Depreciation 3,876 3,694 3,672
Deferred income taxes 578 367 (611)
Investment tax credits (121) (121) (109)
Other 406 338 174
Effects of changes in
Receivables (936) (1,396) 579
Inventories and prepayments (924) (192) (97)
Accounts payable and accruals 2,918 2,606 (329)
Environmental insurance proceeds
and related earnings 145 1,201 3,185
Over/(under) recovery of fuel costs (1,197) (1,400) 1,092
Other (79) (110) 183
Net cash provided by operating
activities 7,417 7,425 9,456
Cash Flows from Investing Activities
Construction expenditures (7,653) (6,401) (5,938)
Customer advances for construction 175 (319) (172)
Purchase of long-term investments (145) (2,737)
Net cash used by investing
activities (7,623) (9,457) (6,110)
Cash Flows from Financing Activities
Net short-term borrowings 2,300 1,600
Proceeds from common stock plans 250 246 349
Dividends paid (1,773) (1,711) (1,673)
Repayments of long-term debt (673) (28)
Net cash provided (used) by
financing activities 777 (538) (1,352)
Net Increase (Decrease) in Cash and
Overnight Investments 571 2,570) 1,994
Cash and Overnight Investments
at Beginning of Year 270 2,840 846
Cash and Overnight Investments
at End of Year $ 841 $ 270 $ 2,840
Supplemental Cash Flow Information
Cash was paid during the years as follows:
Interest $ 2,585 $ 2,511 $ 2,403
Income Taxes 1,534 1,006 1,779
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
Summary of Significant Accounting and Reporting Polices
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 recognized certain regulatory assets and
liabilities. Such regulatory assets relate to deferred income taxes,
unamortized debt reacquisition costs and unamortized rate case expense. Such
regulatory liabilities relate to deferred income taxes and property damage
self-insurance reserves. The Company believes that the FPSC will continue to
allow the Company to recover its regulatory assets and liabilities through its
rates.
The Company has agreed with the FPSC staff to limit its earned return on
equity for its regulated electric and natural gas operations. The disposition
of any excess earnings is left to the discretion of the FPSC, with
alternatives including a refund to customers, additional contributions to
storm damage reserves, or the reduction of any depreciation reserve
deficiency. Excess earnings for 1995 at one of the Company's electric
divisions was ordered by the FPSC to be added to that division's storm damage
reserve. The Company believes it has adequately reserved for 1996 excess
earnings.
Various states, other than Florida, have enacted or are considering enacting
legislation or other initiatives that would provide utility customers with the
ability to choose their supplier, thus establishing competition between the
suppliers of utility services. No such proposals are currently being
considered in Florida.
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 1996 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 approximate 4.0% per
year.
Income Taxes. Deferred income taxes are provided on all significant temporary
differences between the financial statement and tax basis of assets and
liabilities at currently enacted tax rates. Investment tax credits have been
deferred and are amortized based upon the average useful life of the related
property in accordance with the rate treatment.
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 of estimates
when preparing financial statements in accordance with generally accepted
accounting principles. 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 1996
averaged approximately $90,000 per year and the accrual for such claims was
approximately $800,000 at December 31, 1996. The Company believes that its
accrual for potential liability claims is adequate.
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, 1996 there was a balance outstanding of
$7,900,000. The weighted-average interest rates at December 31, 1996 and 1995
were 6.2% and 6.4%, respectively.
Capitalization
Common Shares Reserved. The Company has reserved 27,372 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, 1996 approximately $3,500,000 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-1996 filed for
and was granted a price index revenue increase in the Fernandina Beach water
division. This increase, approximating $19,000 on an annual basis, was placed
into effect on June 4, 1996. A similar price index filing is planned for
1997.
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. Common assets are principally cash and overnight
investments, deferred tax assets and common plant.
Business segment information for 1996, 1995 and 1994 is summarized as follows
(in thousands):
Non-
Regulated Regulated
1996 Gas Electric Water Common Propane Gas Consolidated
Revenues $31,854 $40,701 $1,854 $ $4,401 $78,810
Operating profit 3,250 3,141 495 138 7,024
Identifiable assets 33,977 33,038 4,584 13,295 6,100 90,994
Depreciation 1,654 1,540 201 137 344 3,876
Construction
expenditures 3,369 2,360 257 1,324 343 7,653
1995
Revenues 26,144 40,074 1,674 4,135 72,027
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 21,679 37,441 1,589 4,046 64,755
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
Income Taxes
The provision (credit) for income taxes consists of the following (in
thousands):
1996 1995 1994
Current payable
Federal $ 751 $ 871 $1,471
State 188 239 192
939 1,110 1,663
Deferred
Federal 532 387 (574)
State 46 (20) (37)
578 367 (611)
Investment tax credit (121) (121) (109)
Total $ 1,396 $1,356 $ 943
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):
1996 1995 1994
Federal income tax at
statutory rate $1,406 $1,298 $ 912
Effect of state income
taxes 154 145 102
Investment tax credit (121) (121) (109)
Other (43) 34 38
Provision for income taxes $1,396 $1,356 $ 943
The tax effects of temporary differences producing accumulated deferred income
tax assets and liabilities in the accompanying consolidated balance sheets are
as follows (in thousands):
1996 1995
Deferred tax assets
Environmental $1,806 $1,689
Alternative minimum tax credit 210 428
Other 345 336
Total deferred tax assets $2,361 $2,453
Deferred tax liabilities
Utility plant related $7,625 $8,837
Under recovery of fuel costs 667 176
Other 291 304
Total deferred tax
liabilities $8,583 $9,317
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):
1996 1995 1994
Service cost $ 539 $ 513 $ 473
Interest cost 935 875 791
Actual return on assets (3,278) (4,499) 230
Net amortization and deferral 1,636 3,061 (1,644)
Net periodic pension income $ (168) $ (50) $ (150)
The Plan's funded status at December 31, 1996 and 1995, is as follows (in
thousands):
1996 1995
Actuarial present value of benefit
obligations:
Vested benefit obligation $(10,938) $(10,289)
Accumulated benefit obligation $(11,599) $(10,878)
Projected benefit obligation $(14,403) $(13,530)
Plan assets at fair value 24,178 21,790
Plan assets in excess of projected
benefit obligation 9,775 8,260
Unrecognized net gain (9,720) (8,030)
Unrecognized prior service cost 1,513 1,354
Unrecognized net asset at January 1,
1986 being recognized over 15 years (733) (916)
Prepaid pension cost $ 835 $ 668
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 $1,175,000.
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 $408,000, $493,000 and
$622,000 for 1996, 1995 and 1994, 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 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):
1996 1995
Service Cost $ 66 $ 69
Interest cost 78 76
Amortization of transition obligation 43 43
Periodic postretirement benefit cost $ 187 $ 188
The Plan's funded status at December 31, 1996 and 1995, is as follows (in
thousands):
1996 1995
Accumulated postretirement benefit
obligation (APBO):
Retirees $ (253) $ (231)
Fully eligible active plan participants (135) (108)
Other active plan participants (860) (884)
Total APBO (1,248) (1,223)
Plan assets 0 0
APBO less than plan assets (1,248) (1,223)
Unamortized transition obligation 686 730
Unrecognized (gain) loss 1 83
Accrued post benefit obligation $ (561) $ (410)
The measurement of the APBO assumes a 7% discount rate and a health care cost
trend rate of 9.5% in 1996 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 13% 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 1996, 1995
and 1994, 5,455, 3,774 and 5,062 shares, respectively, were issued under the
Plan for aggregate consideration of $90,000, $55,000 and $81,000,
respectively.
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 reasonable to assume
that the fair value of existing first mortgage bonds would be more than their
carrying value.
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 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.
Following discussions with FDEP, the Company agreed to conduct further limited
assessment activities in 1997. Prior to the completion of this work, it is
not possible to determine to an acceptable degree of certainty 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 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 environmental 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 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. Upon
implementation of the cost sharing agreement, 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 or EPA on the scope of the
additional assessment activities in the vicinity of the site. 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) in connection with EPA's effort to evaluate whether the site
should be proposed for addition to the national priorities list. 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 would 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 former
owners/operators of the gasification plant, the Company believes that it will
not incur material future expenditures to achieve compliance with existing
environmental laws and regulations for this site.
Pensacola Site. The Company was a former owner/operator of a gasification
plant at this site for several years. 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 and other alleged responsible parties have agreed to share equally the
costs of such an investigation.
A contamination assessment report addendum (CARA) describing the results of
completed contamination assessment investigations was delivered to FDEP in
November 1995. By letter dated March 29, 1996, FDEP notified all parties of
FDEP's approval of a monitoring only plan (MOP) as a permanent remedy for the
site. The Company has agreed to share the costs of the MOP with the other
alleged responsible parties. 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 with existing environmental laws and regulations for this site.
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, has entered into 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 agreed to pay settlement proceeds totaling
approximately $4,200,000 for certain environmental costs. 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
1996 QUARTER QUARTER QUARTER QUARTER
Revenues $23,519 $17,918 $18,756 $18,617
Operating margin 7,995 6,187 6,177 6,412
Operating profit 3,221 1,368 1,188 1,247
Net income 1,564 418 341 428
Earnings per share1 1.06 .28 .23 .29
1995
Revenues $18,565 $17,681 $17,729 $18,052
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
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 1997 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 10, 1997.
Name Age Position Date
R. L. Terry 77 Chairman of the Executive
Committee 1985 - Present
F. C. Cressman 63 President 1985 - Present
Chief Executive Officer 1991 - Present
John T. English 53 Senior Vice President 1993 - Present
Charles L. Stein 47 Vice President 1993 - Present
Darryl L. Troy 55 Vice President 1993 - Present
Jack R. Brown 62 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 included 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 1996
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, 1996.
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 R. Brown
Jack R. Brown
(Principal Financial and Accounting Officer)
Date March 21, 1997
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 21, 1997
Robert L. Terry
Chairman of the Executive Committee and Director
/s/ Franklin C. Cressman Date: March 21, 1997
Franklin C. Cressman
President and Chief Executive Officer and Director
/s/ E. James Carr, Jr. Date: March 21, 1997
E. James Carr, Jr.
Director
/s/ Daniel Downey Date: March 21, 1997
Daniel Downey
Director
/s/ John T. English Date: March 21, 1997
John T. English
Senior Vice President and Director
/s/ Richard C. Hitchins Date: March 21, 1997
Richard C. Hitchins
Director
/s/ Gordon O. Jerauld Date: March 21, 1997
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 21, 1997, appearing in this Annual
Report on Form 10-K of Florida Public Utilities Company for the year ended
December 31, 1996.
DELOITTE & TOUCHE LLP
Certified Public Accountants
West Palm Beach, Florida
March 18, 1997
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