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, 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 October 31, 1999 there were
3,020,849 shares of $1.50 par value common shares outstanding.
FLORIDA PUBLIC UTILITIES COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
September 30, December 31,
1999 1998
ASSETS
Utility Plant $123,265 $117,656
Less accumulated depreciation 44,760 42,429
Net utility plant 78,505 75,227
Current Assets
Cash and overnight investments 848 564
Accounts receivable 7,657 7,765
Inventories and prepayments 4,161 3,824
Total 12,666 12,153
Investments Held in Escrow for
Environmental Costs 3,239 3,133
Deferred Charges 2,242 1,893
Total $ 96,652 $ 92,406
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity $ 29,114 $ 27,622
Preferred stock 600 600
Long-term debt 23,500 23,500
Total 53,214 51,722
Current Liabilities
Notes payable 8,400 8,200
Accounts payable 4,389 5,388
Taxes accrued 1,563 194
Other 4,900 4,631
Customer deposits 3,907 3,867
Total 23,159 22,280
Deferred Credits 11,913 10,326
Deferred Income Taxes and
Regulatory Liability 8,366 8,078
Total $ 96,652 $ 92,406
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,
1999 1998 1999 1998
Revenues
Natural gas $ 6,112 $ 5,512 $21,741 $22,094
Electric 10,957 11,824 28,889 30,611
Propane gas 731 719 2,890 3,149
Water 667 589 1,843 1,617
Total revenues 18,467 18,644 55,363 57,471
Cost of Fuel and Taxes
Based on Revenues 11,502 11,992 33,420 36,160
Operating Margin 6,965 6,652 21,943 21,311
Operating Expenses
Operations 4,347 4,191 12,499 12,298
Depreciation 1,112 1,079 3,385 3,183
Income taxes 259 226 1,362 1,304
Total operating expenses 5,718 5,496 17,246 16,785
Operating Income 1,247 1,156 4,697 4,526
Interest Charges and Other
Interest expense (733) (700) (2,187) (2,120)
Other income (expense) 36 (8) 145 16
Gain from sale of non-utility
property 134
Income taxes on above gain (51)
Net Income 550 448 2,738 2,422
Preferred Stock Dividends 7 7 21 21
Earnings For Common Stock $ 543 $ 441 $ 2,717 $ 2,401
Earnings Per Common Share $ .18 $ .15 $ .90 $ .80
Dividends Per Common Share $ .17 $ .16 $ .49 $ .46
Weighted Average Common Shares
Outstanding 3,018,191 2,996,913 3,011,619 2,990,612
FLORIDA PUBLIC UTILITIES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Nine Months Ended
September 30,
1999 1998
Cash Flows from Operating Activities
Net income $ 2,738 $ 2,422
Adjustments to reconcile net income to net
cash provided (used) by operating activities
Depreciation 3,385 3,183
Gain from sale of non-utility property (134)
Deferred income taxes 288 (274)
Other 14 71
Changes in operating assets and liabilities
Accounts receivable 108 161
Inventories and prepayments (337) 145
Accounts payable and accrued expenses 648 2,668
Environmental insurance proceeds 122
Over recovery of fuel costs 1,018 1,118
Other (96) (200)
Net cash provided by operating activities 7,632 9,416
Cash Flows from Investing Activities
Construction expenditures (6,740) (5,177)
Proceeds from sale of non-utility property 154
Other 250 119
Net cash used by investing activities (6,336) (5,058)
Cash Flows from Financing Activities
Short-term borrowings - net 200 (2,800)
Dividends paid (1,494) (1,394)
Other 282 234
Net cash used by financing activities (1,012) (3,960)
Net Increase in Cash and Overnight
Investments 284 398
Cash and Overnight Investments at Beginning
of Period 564 123
Cash and Overnight Investments at End of
Period $ 848 $ 521
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 September 30, 1999 under the most restrictive
provision, approximately $7,300,000 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.
4. Segment information is summarized as follows:
Non-
Nine months ended Regulated Regulated
September 30, Gas Electric Water Propane Gas Consolidated
1999
Revenues $21,741 $28,889 $1,843 $2,890 $55,363
Operating profit 2,521 2,532 632 374 6,059
1998
Revenues 22,094 30,611 1,617 3,149 57,471
Operating profit 2,579 2,595 465 191 5,830
Three Months ended
September 30,
1999
Revenues 6,112 10,957 667 731 18,467
Operating profit 246 1,012 253 (5) 1,506
1998
Revenues 5,512 11,824 589 719 18,644
Operating profit 184 1,052 192 (46) 1,382
Notes:
a. Operating profit consists of revenues less operating expenses and does not
include interest, income taxes, and other income.
b. Total assets have not changed materially from December 31, 1998.
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 $8,400,000 is outstanding at September 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) Nine Months Ended September 30,
1999 1998
Natural Gas $10,620 $10,283
Propane gas 2,036 1,987
Electric 7,525 7,497
Three Months Ended September 30,
1999 1998
Natural Gas $ 3,049 $ 2,807
Propane gas 543 509
Electric 2,736 2,776
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).
Nine Months Ended September 30, 1999 Compared With Nine Months Ended September
30, 1998
Natural and Propane Gas Service. Natural gas service operating margin increased
$337,000 in 1999 as compared with 1998. Transportation revenues accounted for
$282,000 of the $337,000 increase in operating margin as some customers are
opting to purchase their own gas and use our system to transport the gas to
their location. The remaining $55,000 increase in operating margin was due
principally to an approximate 4.5% increase in average customers as compared
with 1998. The effect of the added customers on consumption was mitigated by
winter weather 27% warmer than last year. Propane gas operating margin
increased $49,000 or about 2.5% versus 1998 and was also affected by the warmer
winter weather. Propane gas had a 11% decrease in average customers for 1999,
most of whom were converted to our natural gas system. Propane gas operating
margin per customer increased 15% versus 1998, due primarily to an increase in
rates that became effective April 1998.
Electric Service. Electric service operating margin increased $28,000 in 1999
versus 1998. Average customers increased about 2% as compared with last year,
however, consumption decreased slightly, due mainly to a warmer winter in 1999
as compared with 1998.
Operating Expenses. In 1999, operations expenses, excluding fuel costs and taxes
passed-through to customers, increased $201,000.
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 3% in 1999 versus 1998 due primarily to an increase
in amounts borrowed under the line of credit. The interest effect of greater
amounts borrowed was partially offset by a decrease in interest rates.
Cash Flows. Net cash provided by operating activities decreased $1,784,000 due
principally to changes in accounts payable and accrued expenses, a decrease of
$2,020,000.
Three Months Ended September 30, 1999 Compared with Three Months Ended
September 30, 1998
Natural and Propane Gas Service. Natural gas service operating margin increased
$242,000 or about 9% in 1999 as compared with 1998. Transportation revenues
accounted for $152,000 of the $242,000 increase in operating margin as some
customers are opting to purchase their own gas and use our system to transport
the gas to their location. The remaining $90,000 increase in operating margin
was due principally to a 4% increase in average customers as compared with 1998.
The effect of additional customers on consumption was partially reduced by a
decrease in average consumption per customer. Propane gas operating margin
increased about 7% versus 1998 due principally to an increase in average
consumption per customer of 12% and a minor increase in rates that was placed in
effect in September 1999.
Electric Service. Electric service operating margin decreased $40,000 in 1999
versus 1998 due primarily to cooler summer weather. Average customers increased
2% as compared with the second quarter last year.
Operating Expenses. In 1999, operations expenses, excluding fuel costs and taxes
passed-through to customers, increased $156,000. The natural gas divisions
accounted for most of the increase by adding marketing personnel, providing new
customer incentives and by incurring expenses related to improving our
distribution system.
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 $33,000 in 1999 versus 1998. See interest expense in
the nine 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 has
completed the year 2000 project, including testing of all systems. However,
there is no guarantee that everything will proceed as planned and actual results
could differ from these plans.
The Company utilized 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
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 known
issues have been neutralized with no anticipated significant adverse effect on
customers or disruption to business operations. If there are any undetected
issues, there could be a material adverse effect on the Company. The Company is
currently in the process of updating its 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 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
September 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: November 10, 1999
