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 June 30, 1998
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 July 31, 1998 there were
2,996,913 shares of $1.50 par value common shares outstanding.
FLORIDA PUBLIC UTILITIES COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
June 30, December 31,
1998 1997
ASSETS
Utility Plant $115,133 $112,356
Less accumulated depreciation 41,276 39,632
Net utility plant 73,857 72,724
Current Assets
Cash and overnight investments 431 123
Accounts receivable 7,304 7,621
Inventories and prepayments 3,620 4,063
Total 11,355 11,807
Investments Held in Escrow for
Environmental Costs 3,086 3,024
Deferred Charges 1,267 1,067
Total $ 89,565 $ 88,622
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity $ 27,362 $ 26,189
Preferred stock 600 600
Long-term debt 23,500 23,500
Total 51,462 50,289
Current Liabilities
Notes payable 5,800 7,600
Accounts payable 5,659 5,596
Taxes accrued 1,301 146
Other 5,380 5,149
Customer deposits 3,812 3,782
Total 21,952 22,273
Deferred Credits 8,168 7,909
Deferred Income Taxes and
Regulatory Liability 7,983 8,151
Total $ 89,565 $ 88,622
FLORIDA PUBLIC UTILITIES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Revenues
Natural gas $ 6,828 $ 7,578 $16,582 $18,280
Electric 9,691 8,891 18,787 18,451
Propane gas 993 923 2,430 2,365
Water 603 486 1,028 925
Total revenues 18,115 17,878 38,827 40,021
Cost of Fuel and Taxes
Based on Revenues 11,375 11,492 24,168 26,278
Operating Margin 6,740 6,386 14,659 13,743
Operating Expenses 4,104 3,897 8,107 7,875
Depreciation 1,059 1,003 2,105 1,997
Income taxes 295 256 1,077 837
Total operating expenses 5,458 5,156 11,289 10,709
Operating Income 1,282 1,230 3,370 3,034
Interest Expense (711) (723) (1,420) (1,482)
Other Income -- 19 24 20
Net Income 571 526 1,974 1,572
Preferred Stock Divide 7 7 14 14
Earnings For Common Stock $ 564 $ 519 $ 1,960 $ 1,558
Earnings Per Common Share $ .19 $ .17 $ .66 $ .53
Dividends Per Common Share $ .15 $ .15 $ .30 $ .30
Weighted Average Common Shares
Outstanding 2,989,120 2,962,594 2,987,462 2,960,068
FLORIDA PUBLIC UTILITIES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Six Months Ended
June 30,
1998 1997
Cash Flows from Operating Activities
Net income $ 1,974 $ 1,572
Adjustments to reconcile net income to net
cash provided (used) by operating activities
Depreciation 2,104 1,997
Deferred income taxes (169) (432)
Other 49 132
Changes in operating assets and liabilities
Accounts receivable 303 1,335
Inventories and prepayments 458 724
Accounts payable and accrued expenses 1,446 (1,139)
Deferred credits (134) (28)
Over recovery of fuel costs 195 1,420
Net cash provided by operating activities 6,226 5,581
Cash Flows from Investing Activities
Construction expenditures (3,328) (3,591)
Other (21) 117
Net cash used by investing activities (3,349) (3,474)
Cash Flows from Financing Activities
Net change in short-term borrowing (1,800) (1,800)
Dividends paid (909) (900)
Other 140 150
Net cash used by financing activities (2,569) (2,550)
Net Increase in Cash and Cash Equivalents 308 (443)
Cash and Overnight Investments at Beginning
of Period 123 841
Cash and Overnight Investments at
End of Period $ 431 $ 398
FLORIDA PUBLIC UTILITIES COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
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 June 30, 1998 under the most restrictive provision,
approximately $5,900,000 of retained earnings were unrestricted.
FLORIDA PUBLIC UTILITIES COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
JUNE 30, 1998
Financial Condition. The Company has a $15,000,000 line of credit with its
primary bank of which $5,800,000 is outstanding at June 30, 1998. The line
provides for interest at LIBOR plus 50 basis points. 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 a non-regulated operation, propane gas.
The water operations are not significant, approximating 2.5% of revenues.
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 Florida during the winter season.
Summary of Operating Margins
(in thousands)
Six Months Ended June 30,
1998 1997 1996
Natural and Propane Gas
Operating margin $ 8,954 $ 8,305 $ 8,815
Less propane gas 1,478 1,286 1,518
Remainder $ 7,476 $ 7,019 $ 7,297
Electric
Operating margin $ 4,721 $ 4,556 $ 4,591
Less industrial 282 281 264
Remainder $ 4,439 $ 4,275 $ 4,327
Three Months Ended June 30,
1998 1997 1996
Natural and Propane Gas
Operating margin $ 3,812 $ 3,679 $ 3,502
Less propane gas 659 526 578
Remainder $ 3,153 $ 3,153 $ 2,924
Electric
Operating margin $ 2,350 $ 2,244 $ 2,258
Less industrial 139 148 139
Remainder $ 2,211 $ 2,096 $ 2,119
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.
Six Months Ended June 30, 1998 Compared With Six Months Ended June 30, 1997
Natural and Propane Gas Service. Total natural and propane gas service
operating margin increased $649,000, about 8% in 1998 as compared with 1997.
Excluding propane gas operating margin from total gas operating margin,
remaining operating margin increased $457,000, about 7%. The increase in
natural gas operating margin was due to a 1.5% increase in average customers
for the first half ended June 30, 1998 and an increase in per customer
consumption of about 5%, resulting primarily from an increase in heating degree
days of approximately 60% from the comparable period in 1997. Propane gas
operating margin increased $192,000 or about 15% as compared with 1997.
Propane gas had an 1% decrease in average customers for the six month period
ended June 30, 1998, some of whom were converted to natural gas. The net
increase in propane operating margin is primarily due to the increase in
heating degree days in 1998 and a propane rate increase that became effective
in April.
Total natural and propane gas service operating margin decreased $510,000 or
about 6% in 1997 as compared with 1996. Excluding propane gas operating margin
from total gas operating margin, remaining operating margin decreased $278,000
or about 4% in 1997 as compared with 1996. The decrease in natural gas
operating margin is due principally to a 60% decrease in heating degree days
early in 1997. Propane gas operating margin decreased $232,000, or about 15%.
Similarly, the decrease in propane gas operating margin is due principally to
the warmer weather early in 1997.
Electric Service. Total electric service operating margin increased $165,000, or
almost 4% versus 1997. There was an approximate 9% increase in average
consumption per customer, primarily due to warmer weather in the second quarter,
and a 2% growth in average customers for the six month period.
Total electric service operating margin decreased $35,000 in 1997 as compared
with 1996. Affecting the comparison of operating margin are two industrial
customers. Excluding these customers, operating margin decreased $52,000. The
effect on consumption of the warmer weather early in 1997 was greater than the
2.5% increase in customer growth.
Operating Expenses. In 1998, operating expenses, excluding cost of fuel and
taxes passed-through to customers, increased $340,000, or a little more than 2%
in relation to operating margin. Generally, operating expenses have increased
marginally in all categories of expense due to inflationary pressures with
depreciation accounting for approximately one-third of the overall increase.
Most of the increase in depreciation is attributable to growth in utility plant.
In 1997, operating expenses, excluding cost of fuel and taxes passed-through to
customers, increased $229,000, or almost 2% in relation to operating margin.
Operating expenses increased marginally in all classifications of expense due
primarily to inflationary effects.
Income taxes were provided for at approximately the same rate in both six-month
periods and are reduced by amortization of deferred investment tax credits.
Interest expense decreased in 1998 versus 1997 due primarily to an approximate
17% reduction in the weighted average amounts outstanding under the line of
credit as compared with 1997.
Cash Flows. Net cash provided by operating activities increased $645,000 due to
changes in certain components of cash provided by operating activities. The
most significant of the changes occurred in accounts payable and accrued
expenses, a change of $2,585,000. The effect of restoring outstanding checks to
cash as of June 30, 1998, increased payables by approximately $1,100,000 and the
decrease in gas and electric fuel costs from December 1996 to June 1997 reduced
payables by approximately $1,100,000; thus accounting for about $2,200,000 of
the $2,585,000 change. Accounts receivable provided less cash flow in the 1998
period as there were less fuel costs to recover than in the comparable period of
1997.
Three Months Ended June 30, 1998 Compared with Three Months Ended
June 30, 1997
Natural and Propane Gas Service. Total natural and propane gas service
operating margin increased $133,000, about 4% in 1998 as compared with 1997.
Natural gas operating margin was unchanged as compared with the second quarter
of 1997. The increase in propane gas operating margin of 25% is due
principally to a rate increase that became effective in April.
Total natural and propane gas service operating margin increased $177,000 or
about 5% in 1997 as compared with 1996. Excluding propane gas operating margin
from total gas operating margin, remaining operating margin decreased $229,000
or about 8% 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 5% increase in average consumption per customer. Propane gas operating
margin decreased $52,000, or about 9%, due primarily to a 2% decrease in
customers (some of which were converted to natural gas) and an 8% decrease in
average consumption per customer.
Electric Service. Total electric service operating margin increased $106,000
or about 5% versus the second quarter of 1997. There was a 16% increase in
average consumption per customer due primarily to warmer weather in 1998.
Resulting from such increase in consumption was an increase of more than 3%
in average operating margin per customer, excluding industrial customers.
Total electric service operating margin decreased $14,000 in 1997 as compared
with 1996. Affecting the comparison of operating margin are two industrial
customers. Excluding these customers, operating margin decreased $23,000 or 1%.
Operating Expenses. In 1998, operating expenses, excluding cost of fuel and
taxes passed-through to customers, increased $263,000, or about 4% in relation
to operating margin. Generally, operating expenses have increased marginally
in all classifications of expense, due primarily to inflationary pressures.
In 1997, operating expenses, excluding cost of fuel and taxes passed-through
to customers, increased $81,000, or about 1% in relation to operating margin.
Operating expenses increased due primarily to inflationary pressures.
Income taxes were provided for at approximately the same rate in both three-
month periods and are reduced by amortization of deferred investment tax
credits.
Interest expense decreased in 1998 versus 1997 due primarily to an approximate
8% reduction in the weighted average amounts outstanding under the line of
credit as compared with 1997.
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
June 30, 1998.
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: August 13, 1998
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