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 March 31, 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 April 30, 1999
there were 3,010,791 shares of $1.50 par value common shares outstanding.
FLORIDA PUBLIC UTILITIES COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
March 31, December 31,
1999 1998
ASSETS
Utility Plant $119,793 $117,656
Less accumulated depreciation 43,260 42,429
Net utility plant 76,533 75,227
Current Assets
Cash and overnight investments 648 564
Accounts receivable 8,064 7,765
Inventories and prepayments 3,691 3,824
Total 12,403 12,153
Investments Held in Escrow for
Environmental Costs 3,140 3,133
Deferred Charges 1,936 1,893
Total $ 94,012 $ 92,406
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity $ 28,682 $ 27,622
Preferred stock 600 600
Long-term debt 23,500 23,500
Total 52,782 51,722
Current Liabilities
Notes payable 7,600 8,200
Accounts payable 4,724 5,388
Taxes accrued 1,207 194
Other 4,959 4,631
Customer deposits 3,883 3,867
Total 22,373 22,280
Deferred Credits 10,648 10,326
Deferred Income Taxes and
Regulatory Liability 8,209 8,078
Total $ 94,012 $ 92,406
FLORIDA PUBLIC UTILITIES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands, except per share data)
Three Months Ended
March 31,
1999 1998
Revenues
Electric $ 8,742 $ 9,096
Natural gas 8,982 9,754
Propane gas 1,256 1,438
Water 527 424
Total revenues 19,507 20,712
Cost of fuel and taxes
based on revenues 11,468 12,793
Operating Margin 8,039 7,919
Operating Expenses
Operations 3,439 3,461
Depreciation 1,131 1,046
Taxes other than income taxes 581 542
Income taxes 780 782
Total operating expenses 5,931 5,831
Operating Income 2,108 2,088
Interest Expense (733) (709)
Other - Net 76 24
Net Income 1,451 1,403
Preferred Stock Dividends 7 7
Earnings for Common Stock $ 1,444 $ 1,396
Earnings Per Common Share $ .48 $ .47
Dividends Per Common Share $ .16 $ .15
Average Shares Outstanding 3,006,341 2,985,804
FLORIDA PUBLIC UTILITIES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Three Months Ended
March 31,
1999 1998
Cash Flows from Operating Activities
Net income $1,451 $1,403
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation 1,131 1,046
Other 133 (144)
Changes in operating assets and liabilities
Receivables (300) 220
Inventories and prepayments 133 232
Accounts payable and accruals 693 1,011
Over recovery of fuel costs 119 195
Other 6 59
Net cash provided by operating activities 3,366 4,022
Cash Flows from Investing Activities
Construction expenditures (2,461) (1,418)
Other 169 (22)
Net cash used by investing activities (2,292) (1,440)
Cash Flows from Financing Activities
Net change in short-term borrowings (600) (1,700)
Dividends paid (487) (454)
Other 97 91
Net cash used by financing activities (990) (2,063)
Net Increase in Cash 84 519
Cash at Beginning of Period 564 123
Cash at End of Period $ 648 $ 642
FLORIDA PUBLIC UTILITIES COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
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 March 31, 1999, under the most
restrictive provision, approximately $7,000,000 of retained earnings
were unrestricted.
FLORIDA PUBLIC UTILITIES COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MARCH 31, 1999
Financial Condition. The Company has a $15,000,000 line of credit with its
primary bank of which $7,600,000 is outstanding. 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 operations: 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.
Operating Margin 1999 1998 1997
Natural Gas $ 4,339 $ 4,323 $ 3,866
Propane Gas $ 844 $ 820 $ 760
Electric $ 2,351 $ 2,371 $ 2,312
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 taxed 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).
Three Months Ended March 31, 1999 Compared
with Three Months Ended March 31, 1998
Natural and Propane Gas Service. Natural gas service operating margin
increased $16,000 in 1999 as compared with 1998. The slight increase in
natural gas operating margin was principally due to a 4% increase in average
customers as compared with 1998, and was affected by weather 30% warmer than
the same period last year and 50% warmer than normal. Propane gas operating
margin increased $24,000 or about 3% versus 1998 and was also affected by the
warmer weather. Propane gas had a 10% decrease in average customers for
1999, most of whom were converted to natural gas. The increase in propane
operating margin is primarily due to the propane rate increase that became
effective in April 1998.
Electric Service. Electric service operating margin decreased $20,000 versus
1998. Average customers increased 1.7% as compared with the first quarter
last year, however consumption remained neutral due to the warmer weather.
Operating Expenses. In 1999, operating expenses, excluding fuel costs and
taxes passed-through to customers, increased $102,000 or about 1.3% in
relation to operating margin.
Three Months Ended March 31, 1998 Compared
with Three Months Ended March 31, 1997
Natural and Propane Gas Service. Natural gas service operating margin
increased $457,000, about 12% in 1998 as compared with 1997. The increase in
natural gas operating margin was due to a 1.3% increase in average customers
for the quarter ended March 31, 1998 and an increase in per customer
consumption of about 12%, resulting from an increase in heating degree days
of approximately 60%. Propane gas operating margin increased $60,000 or about
8% as compared with 1997. Propane gas had an 0.8% decrease in average
customers for the quarter ended March 31, 1998, some of whom were converted
to natural gas. The net increase in average consumption per customer is
primarily due to the increase in heating degree days.
Electric Service. Electric service operating margin increased $59,000, or
2.6% versus the first quarter of 1997. There was an 0.8% decrease in average
consumption per customer which was more than compensated for by a 2.3% growth
in average customers for the quarter.
Operating Expenses. In 1998, operating expenses, excluding fuel costs and
taxes passed-through to customers, increased $78,000, or about 1% in relation
to operating margin. Generally, operating expenses have increased marginally
due to inflationary pressures with depreciation accounting for approximately
two-thirds of the overall increase. Most of the increase in depreciation is
attributable to growth in utility plant.
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 July 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 will be
replaced with a Year 2000 compliant system in the second quarter of 1999 at
an estimated expenditure of $80,000.
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 4. Submission of matters to a vote of security holders.
(a) The annual meeting of stockholders was held on April 20, 1999.
(b) Not applicable.
(c) None
(d) None.
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
March 31, 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)
April 28, 1999
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