UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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 Identification No.)
incorporation or organization)
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
(Former name, former address and former fiscal year, if changed since last
report)
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
APPLICABLE ONLY TO ISSUERS 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 Sections 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 ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. At October 31, 1997 there
were 1,488,586 shares of $1.50 par value common shares outstanding.
FLORIDA PUBLIC UTILITIES COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
September 30, December 31,
1997 1996
ASSETS
Utility Plant $111,001 $106,684
Less accumulated depreciation and
amortization 38,842 36,808
Net utility plant 72,159 69,876
Current Assets
Cash and overnight investments 512 841
Accounts receivable - net 7,375 8,062
Inventories and prepayments 3,909 4,079
Total 11,796 12,982
Investments Held in Escrow for
Environmental Costs 2,890 2,881
Deferred Charges 1,095 2,430
Deferred Income Taxes and
Regulatory Asset 2,953 2,825
Total $ 90,893 $ 90,994
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity $ 25,894 $ 24,511
Preferred stock 600 600
Long-term debt 23,500 23,500
Total 49,994 48,611
Current Liabilities
Notes payable 5,400 7,900
Accounts payable 5,619 7,564
Taxes accrued 1,650 308
Other 5,543 4,677
Customer deposits 3,768 3,634
Total 21,980 24,083
Deferred Credits 8,145 6,975
Deferred Income Taxes and
Regulatory Liability 10,774 11,325
Total $ 90,893 $ 90,994
FLORIDA PUBLIC UTILITIES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
Revenues
Natural gas $ 6,151 $ 6,016 $24,431 $23,914
Electric 11,328 11,474 29,779 31,478
Water 526 530 1,451 1,427
Propane gas 727 736 3,092 3,374
Total revenues 18,732 18,756 58,753 60,193
Cost of Fuel and Taxes
Based on Revenues 12,410 12,579 38,737 39,834
Operating Margin 6,322 6,177 20,016 20,359
Operating Expenses
Operations 3,565 3,583 10,486 10,413
Depreciation 1,010 973 3,007 2,896
Taxes other than income taxes 468 433 1,373 1,273
Income taxes 179 119 1,016 1,302
Total operating expenses 5,222 5,108 15,882 15,884
Operating Income 1,100 1,069 4,134 4,475
Interest Charges and Other
Interest expense (717) (705) (2,199) (2,131)
Other income (expense) 12 (23) 32 (21)
Gain from sale of non-utility 837 837
property
Income taxes on above gain (315) (315)
Net Income 917 341 2,489 2,323
Preferred Stock Dividends 7 7 21 21
Earnings For Common Stock $ 910 $ 334 $ 2,468 $ 2,302
Earnings Per Common Share $ .61 $ .23 $ 1.67 $ 1.57
Dividends Per Common Share $ .30 $ .30 $ .90 $ .90
Weighted Average Common Shares
Outstanding 1,486,355 1,471,295 1,482,141 1,467,416
FLORIDA PUBLIC UTILITIES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Nine Months Ended
September 30,
1997 1996
Cash Flows from Operating Activities
Net income $ 2,489 $ 2,323
Adjustments to reconcile net income to net
cash provided (used) by operating activities
Depreciation 3,007 2,896
Gain from sale of non-utility property (837)
Deferred income taxes (678) 276
Other 196 201
Changes in operating assets and liabilities
Accounts receivable 563 199
Inventories and prepayments 170 (295)
Accounts payable and accrued expenses 392 2,196
Environmental insurance proceeds 259 103
Over/(under) recovery of fuel costs 2,060 (305)
Other (12) (69)
Net cash provided by operating activities 7,609 7,525
Cash Flows from Investing Activities
Construction expenditures (5,416) (5,550)
Proceeds from sale of non-utility property 886
Other 194 141
Net cash used by investing activities (4,336) (5,409)
Cash Flows from Financing Activities
Repayments of short-term borrowings - net (2,500) (300)
Dividends paid (1,351) (1,324)
Other 249 201
Net cash used by financing activities (3,602) (1,423)
Net Increase (Decrease) in Cash and Overnight
Investments (329) 693
Cash and Overnight Investments at Beginning
of Period 841 270
Cash and Overnight Investments at End of
Period $ 512 $ 963
FLORIDA PUBLIC UTILITIES COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
1. In the opinion of the Company, the accompanying condensed consolidated
financial statements contain all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the financial information
contained therein. The results of operations are not necessarily
indicative of the results expected for the full year.
2. The First Mortgage Bond Indentures provide for restrictions on the payment
of cash dividends. At September 30, 1997, under the most restrictive
provision, approximately $4,600,000 of retained earnings were unrestricted.
3. In September 1997, the Company sold non-utility, unimproved real property
for a gain after income taxes of $522,000, equal to $0.35 per share.
FLORIDA PUBLIC UTILITIES COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1997
Financial Condition. The Company has a $15,000,000 line of credit with its
primary bank of which $5,400,000 was outstanding at September 30, 1997. 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.
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.
Summary of Operating Margins
(in thousands)
Nine Months Ended September 30,
1997 1996 1995
Natural and Propane Gas
Operating margin $11,389 $11,846 $10,831
Less propane gas 1,728 1,979 1,905
Remainder $ 9,661 $ 9,867 $ 8,926
Electric
Operating margin $ 7,161 $ 7,164 $ 6,894
Less industrial 428 407 462
Remainder $ 6,733 $ 6,758 $ 6,432
Three Months Ended September 30,
1997 1996 1995
Natural and Propane Gas
Operating margin $ 3,152 $ 3,097 $ 3,027
Less propane gas 442 462 464
Remainder $ 2,710 $ 2,635 $ 2,563
Electric
Operating margin $ 2,544 $ 2,548 $ 2,529
Less industrial 148 142 154
Remainder $ 2,396 $ 2,406 $ 2,375
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 and fluctuations in such costs distort the relationship of gross
operating revenues and operating margin (revenues retained by the Company for
operating purposes).
Nine Months Ended September 30, 1997 Compared With Nine Months Ended
September 30, 1996
Natural and Propane Gas Service. Total natural and propane gas service
operating margin decreased $457,000 or about 4% in 1997 as compared with 1996.
Excluding propane gas operating margin from total gas operating margin,
remaining operating margin decreased $206,000 or about 2% in 1997 as compared
with 1996. Propane gas operating margin decreased $251,000, or about 13%.
The decrease in natural and propane gas operating margin is due principally to
an approximate 60% decrease in heating degree days early in 1997.
Total natural and propane gas service operating margin increased $1,015,000 or
about 9% in 1996 as compared with 1995. Excluding propane gas operating margin
from total gas operating margin, remaining operating margin increased $941,000,
or about 10% as compared to 1995. The increase in natural gas operating margin
is due primarily to an approximate 45% increase in heating degree days from the
comparable period in 1995 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 $74,000, or about 4%. Similarly, the increase in propane gas
operating margin is due principally to the colder weather in 1996.
Electric Service. Total electric service operating margin decreased $3,000 in
1997 as compared with 1996. Affecting the comparison of operating margin are two
industrial customers. Excluding these customers, operating margin decreased
$25,000. The effect on consumption of the warmer weather early in 1997 more
than offset customer growth of 2.4%.
In 1996, total electric service operating margin increased $270,000, or about
4%, as compared with 1995. Affecting the comparison of operating margins are
two industrial customers and excluding these customers, operating margin
increased $326,000, or about 5%. The remaining increase in operating margin is
due principally to a 2% growth both in customers and in average consumption per
customer.
Operating Expenses. In 1997, operations expenses (administrative and general
expenses and other operating expenses), excluding cost of fuel and taxes
passed-through to customers, increased $73,000. Such expenses increased due to
inflationary pressures and were mitigated by an increase in the amortization of
net periodic pension cost (actually a credit as the pension plan is over-
funded). Depreciation increased, due to expansion and remodeling of our corp-
orate headquarters and growth of our utility plant and taxes other than income
taxes increased due to an increase in property taxes.
In 1996, total operating expenses, excluding cost of fuel and taxes passed-
through to customers, increased $506,000, or 2.5% in relation to operating
margin. Operating expenses have increased generally in all classifications of
expense due primarily to inflationary pressures.
Income taxes were provided for at approximately the same rate in both nine-month
periods. The principal differences between the effective income tax rate and
the statutory federal income tax rate is the effect of state income taxes and
amortization of investment tax credits.
Interest expense increased in 1997 versus 1996 due primarily to greater weighted
average amounts outstanding at slightly greater rates in 1997 as compared with
1996.
Cash Flows. Net cash provided by operating activities increased only slightly
when compared with last year. There were, however, significant changes in
certain items. The most significant of the changes occurred in over/under
recovery of fuel costs, a change of $2,365,000, due to increased natural gas
prices in 1996 that were recovered from customers in 1997. Also, a change of
$1,804,000 in accounts payable and accrued expenses, due principally to a
decrease in accounts payable, resulting from a decrease in the cost of natural
gas from year-end 1996 to September 1997. The change in deferred taxes results
from the change in over/under recovery of fuel costs.
Three Months Ended September 30, 1997 Compared with Three Months Ended
September 30, 1996
Natural and Propane Gas Service. Total natural and propane gas service
operating margin increased $55,000 or about 2% in 1997 as compared with 1996.
Excluding propane gas operating margin from total gas operating margin, remain-
ing operating margin decreased $75,000 or about 3% in 1997 as compared with
1996. The increase in natural gas operating margin is due principally to
an approximate 2% increase in customers and a like increase in average
consumption per customer. Propane gas operating margin decreased $20,000, or
about 4%, due primarily to a 1% decrease in customers (some of which were
converted to natural gas) and an 6% decrease in average consumption per
customer.
Total natural and propane gas service operating margin increased $70,000 or
about 2% in 1996 as compared with 1995. Excluding propane gas operating margin
from total gas operating margin, remaining operating margin increased $72,000,
or about 3% as compared to 1995. The increase in natural gas operating margin
is due primarily to customer growth. Propane gas operating margin was
virtually unchanged.
Electric Service. Total electric service operating margin decreased $4,000 in
1997 as compared with 1996. Excluding the two industrial customers operating
margin decreased $10,000.
Total electric service operating margin increased $19,000 in 1996 as compared
with 1995. Affecting the comparison of operating margins are two industrial
customers. Excluding these customers, operating margin increased $31,000, or
about 1%.
Operating Expenses. In 1997, operations expenses, excluding cost of fuel and
taxes passed-through to customers, decreased $18,000. Refer to the above
comments for the 1997 nine-month period for comments regarding such expenses,
depreciation and taxes other than incomes taxes.
In 1996, total operating expenses, excluding cost of fuel and taxes passed-
through to customers, increased $225,000, less than 4% in relation to operating
margin. Operating expenses have generally increased in all classifications of
expense due primarily to inflationary pressures.
Income taxes were provided for at approximately the same rate in both three
month periods. The provisions were adjusted by a credit in 1996 and a debit in
1995, according to accounting principles established by Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes", for the net
amortization of deferred taxes that were never provided for and the turn-around
of deferred taxes at current rates that were originally provided for at higher
rates.
Interest expense increased in 1997 versus 1996 due primarily to greater weighted
average amounts outstanding at slightly greater rates in 1997 as compared with
1996.
PART II.
OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K.
(a) None.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed for the quarter ending
September 30, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FLORIDA PUBLIC UTILITIES COMPANY
(Registrant)
By /s/ Jack R. Brown
Jack R. Brown
Treasurer
(DULY AUTHORIZED OFFICER
AND
CHIEF FINANCIAL OFFICER)
Date: November 7, 1997
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