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, 1999
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, 1999 there were
3,018,191 shares of $1.50 par value common shares outstanding.
FLORIDA PUBLIC UTILITIES COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
June 30, December 31,
1999 1998
ASSETS
Utility Plant $121,757 $117,656
Less accumulated depreciation 44,107 42,429
Net utility plant 77,650 75,227
Current Assets
Cash and overnight investments 840 564
Accounts receivable 7,639 7,765
Inventories and prepayments 3,749 3,824
Total 12,228 12,153
Investments Held in Escrow for
Environmental Costs 3,193 3,133
Deferred Charges 1,994 1,893
Total $ 95,065 $ 92,406
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity $ 28,965 $ 27,622
Preferred stock 600 600
Long-term debt 23,500 23,500
Total 53,065 51,722
Current Liabilities
Notes payable 8,700 8,200
Accounts payable 4,822 5,388
Taxes accrued 1,232 194
Other 4,346 4,631
Customer deposits 3,872 3,867
Total 22,972 22,280
Deferred Credits 10,752 10,326
Deferred Income Taxes and
Regulatory Liability 8,276 8,078
Total $ 95,065 $ 92,406
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,
1999 1998 1999 1998
Revenues
Natural gas $ 6,647 $ 6,828 $15,629 $16,582
Electric 9,191 9,691 17,932 18,787
Propane gas 903 993 2,159 2,430
Water 648 603 1,176 1,028
Total revenues 17,389 18,115 36,896 38,827
Cost of Fuel and Taxes
Based on Revenues 10,450 11,375 21,918 24,168
Operating Margin 6,939 6,740 14,978 14,659
Operating Expenses
Operations 4,133 4,104 8,153 8,107
Depreciation 1,141 1,059 2,272 2,105
Income taxes 323 295 1,103 1,077
Total operating expenses 5,597 5,458 11,528 11,289
Operating Income 1,342 1,282 3,450 3,370
Interest Expense (721) (711) (1,454) (1,420)
Other Income 32 -- 108 24
Gain from Sale of Non-Utility
Property 134 -- 134 --
Income Taxes on Above Gain (51) -- (51) --
Net Income 736 571 2,187 1,974
Preferred Stock Dividends 7 7 14 14
Earnings For Common Stock $ 729 $ 564 $ 2,173 $ 1,960
Earnings Per Common Share $ .24 $ .19 $ .72 $ .66
Dividends Per Common Share $ .16 $ .15 $ .32 $ .30
Weighted Average Common Shares
Outstanding 3,010,324 2,989,120 3,008,333 2,987,462
FLORIDA PUBLIC UTILITIES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Six Months Ended
June 30,
1999 1998
Cash Flows from Operating Activities
Net income $ 2,187 $ 1,974
Adjustments to reconcile net income to net
cash provided (used) by operating activities
Depreciation 2,272 2,104
Deferred income taxes 197 (169)
Other (126 49
Changes in operating assets and liabilities
Accounts receivable 126 303
Inventories and prepayments 75 458
Accounts payable and accrued expenses 162 1,446
Deferred credits (53) (134)
Over recovery of fuel costs 199 195
Net cash provided by operating activities 5,039 6,226
Cash Flows from Investing Activities
Construction expenditures (4,745) (3,328)
Other 294 (21)
Net cash used by investing activities (4,451) (3,349)
Cash Flows from Financing Activities
Net change in short-term borrowings 500 (1,800)
Dividends paid (975) (909)
Other 163 140
Net cash used by financing activities (312) (2,569)
Net Increase in Cash and Cash Equivalents 276 308
Cash and Overnight Investments at Beginning
of Period 564 123
Cash and Overnight Investments at
End of Period $ 840 $ 431
<PAGE>
FLORIDA PUBLIC UTILITIES COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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, 1999 under the most restrictive provision,
approximately $7,200,000 of retained earnings were unrestricted.
3. In May 1999, the Company sold non-utility, unimproved real property for a
gain after income taxes of $83,000, equal to $0.03 per share.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition. The Company has a $15,000,000 line of credit with its
primary bank of which $8,700,000 is outstanding at June 30, 1999. The line
provides for interest at LIBOR plus fifty 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 3% 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,
1999 1998 1997
Natural Gas $ 7,571 $ 7,476 $ 7,019
Propane gas 1,493 1,478 1,286
Electric 4,789 4,721 4,556
Three Months Ended June 30,
1999 1998 1997
Natural Gas $ 3,233 $ 3,153 $ 3,153
Propane gas 648 659 526
Electric 2,438 2,350 2,244
Operating Margin. Operating margin, defined as gross operating revenues less
fuel costs and taxes based on revenues which are passed-through to customers,
provides a more meaningful basis for evaluating utility operations. 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 (net revenues retained by the Company
for operating purposes).
Six Months Ended June 30, 1999 Compared With Six Months Ended June 30, 1998
Natural and Propane Gas Service. Natural gas service operating margin increased
$95,000 in 1999 as compared with 1998. The slight increase in natural gas
operating margin was due principally to an approximate 5% increase in average
customers as compared with 1998, and was partially reduced by weather 27% warmer
than the six month period last year. Propane gas operating margin increased
$15,000 or about 1% versus 1998 and was also affected by the warmer weather.
Propane gas had a 11% decrease in average customers for 1999, most of whom were
converted to natural gas. Propane gas operating margin per customer increased
13% versus 1998, due primarily to the rate increase that became effective April
1998.
Natural gas service operating margin increased $457,000, about 7% in 1998 as
compared with 1997. 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.
Electric Service. Electric service operating margin increased $68,000 versus
1998. Average customers increased about 2% as compared with last year, however
consumption decreased about 4%, due mainly to a warmer winter in 1999 as
compared with 1998.
Total electric service operating margin increased $165,000, or almost 4% versus
1997. There was an approximate 9% increase in average consumption per customer,
due primarily to warmer weather in the second quarter, and a 2% growth in
average customers for the six month period.
Operating Expenses. In 1999, operating expenses, excluding fuel costs and taxes
passed-through to customers, increased $213,000 or about 1.4% in relation to
operating margin.
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.
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 increased 2% in 1999 versus 1998 due primarily to an increase
in amounts borrowed under the line of credit. The interest effect of greater
amounts borrowed were partially offset by a decrease in interest rates.
Cash Flows. Net cash provided by operating activities decreased $1,187,000 due
principally to changes in accounts payable and accrued expenses, a decrease of
$1,284,000.
Three Months Ended June 30, 1999 Compared with Three Months Ended
June 30, 1998
Natural and Propane Gas Service. Natural gas service operating margin increased
$80,000 or 2.5% in 1999 as compared with 1998. The slight increase in natural
gas operating margin was due principally to a 5% increase in average customers
as compared with 1998 and was partially reduced by a decrease in average
consumption per customer. Propane gas operating margin decreased slightly
versus 1998 due principally to an 11% decrease in average customers for 1999,
most of whom were converted to natural gas.
Natural gas operating margin was unchanged as compared with the second
quarter of 1997. The increase in propane gas operating margin of $133,000,
or about 25%, is due principally to a rate increase that became effective
in April.
Electric Service. Electric service operating margin increased $88,000 versus
1998. Average customers increased 2% as compared with the second quarter last
year.
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.
Operating Expenses. In 1999, operating expenses, excluding fuel costs and taxes
passed-through to customers, increased $111,000 or about 2% in relation to
operating margin.
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.
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 increased $10,000 in 1999 versus 1998. See interest expense in
the six months discussion above.
Other Matters
The Year 2000 Project. The Company has evaluated and identified its state of
readiness regarding all known Year 2000 issues and their effect on the Company's
information systems. The Company is utilizing both internal and external
resources to evaluate and remediate required modifications. The Company's
software profile consists of approximately one-half purchased software systems
and one-half internally developed systems. The purchased software consists of
various financial applications and the meter reading system. The Company plans
to complete the Year 2000 project, including testing of all systems by September
1999. Such plans are based on management's best estimates and the ability to
locate and correct all relevant computer codes on a timely basis. However,
there is no guarantee that everything will proceed as planned and actual
results could differ from these plans.
The Company is utilizing its in-house programming staff to modify internally
developed systems in preparation for the Year 2000. The modification costs,
consisting of salary and related costs, are not significant and are being
expensed as incurred. The purchased financial software systems were Year 2000
compliant when they were placed in service several years ago and do not require
any modifications. The Company's meter reading system was replaced with a Year
2000 compliant system in the second quarter of 1999 at an expenditure of
approximately $85,000.
The Company is communicating with its significant suppliers to determine their
Year 2000 status and is attempting to identify areas of concern. However, there
can be no guarantee that the systems of other companies will be converted
timely, or that a failure to convert by a supplier would not have a material
adverse effect on the Company.
The Company presently believes that with modifications to existing internal
software systems and conversion to a new meter reading software, any Year 2000
issues will be neutralized with no significant adverse effect on customers or
disruption to business operations. If such modifications are not completed,
the Year 2000 issue could have a material adverse effect on the Company. The
Company is currently in the process of adopting a contingency plan to address
possible risks to its systems.
Forward Looking Information. This report contains forward looking information
that is intended to qualify for the safe harbor provided by the Private
Securities Litigation Reform Act of 1995. Although the Company believes that
its expectations are based on reasonable assumptions, actual results could
differ materially from those currently anticipated. Factors that could cause
actual results to differ from those anticipated include, but are not limited
to, uncertainties relative to the impact of Year 2000, the effects of
regulatory actions, competition, future economic conditions and weather.
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, 1999.
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 10, 1999
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