UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 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
incorporation or organization) Identification No.)
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
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, par value $1.50 per share American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
(Title of Class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K(Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment of this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant, computed by reference to the closing price on March 10, 2000,
was $39,702,564.
APPLICABLE ONLY TO REGISTRANTS 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 section 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 REGISTRANTS
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. At
March 10, 2000, there were 2,810,801 common shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy statement for Annual Meeting of Stockholders, April 18, 2000.
(Part III)
PART I
Item 1. Business
General
The Company was incorporated on April 29, 1925 under the 1925 Florida
Corporation Law and is continuing its corporate existence pursuant to such
law and its Certificate of Reincorporation, as amended. The Company is
regulated by the Florida Public Service Commission (except for propane gas
service)and provides natural and propane gas service, electric service and
water service to consumers in Florida. The Company is comprised of the
following four divisions and number of customers as of December 31, 1999:
(1) West Palm Beach, located in southeast Florida, serves natural gas to
28,784 customers and propane gas to 5,405 customers; (2) Mid-Florida,
consisting of the Sanford and DeLand districts, serves 9,622 natural gas
customers and 2,856 propane customers; (3) Marianna, located in the Florida
panhandle, provides electricity to 11,934 customers; and (4) Fernandina
Beach,located in extreme northeast Florida, serves 12,956 electric customers
and 6,665 water customers. The economies of West Palm Beach, Sanford, and
DeLand rely somewhat on the migration of seasonal residents and tourists
during the winter season. Agriculture and citrus processing, together with
light industry, provide year-round stability. Marianna's economy is
predominantly agricultural including peanuts, soy beans, corn, pork and beef.
The area has many small industries. Fernandina's economy is centered around
two large paper mills; ITT Rayonier, Inc. and Container Corporation of
America. The beach area, Amelia Island, is noted for its fine beaches and
resort amenities.
The population by counties, as estimated by the University of Florida's
Bureau of Economic and Business Research, in which the service areas are
located, as of April 1, 1999, is as follows:
West Palm Beach (Palm Beach County) 1,042,000
Sanford (Seminole County) 354,000
DeLand (Volusia County) 427,000
Marianna (Jackson, Calhoun & Liberty Counties) 72,000
Fernandina Beach (Nassau County) 57,000
In Fernandina Beach, two large paper mills accounted for 16.7% of total 1999
electric division operating revenues and 8.5% of the Company's total
operating revenues. However, such mills accounted for 5.8% of total 1999
electric division operating margin and 2.0% of the Company's total operating
margin.
Sources of Gas and Electricity
Natural Gas
The Company receives its total supply of natural gas at eleven City Gate
Stations connected to Florida Gas Transmission Company's (FGT) pipeline
system. The Company has the adequate redundancy of gate stations in each
distribution system to assure high levels of continuous service to our
customers.
FGT is the sole natural gas pipeline serving peninsular Florida and is under
the jurisdiction of the Federal Energy Regulatory Commission (FERC). The
Company uses FGT solely as a carrier of natural gas. All gas supplies for the
Company's traditional sales markets are independently procured by the Company
using gas marketers and producers. The Company's transportation customers
are responsible for obtaining their own gas supplies and arranging for
pipeline transportation.
The Company has continued to be in full compliance with the Gas Industry
Standards Board's (GISB) standards. The GISB was formed to develop a uniform
nationwide network of natural gas producers, marketers, gathering systems,
pipelines, distribution companies and customers. The GISB's standards places
all participants on the same time schedules for procurement, capacity
transactions, invoicing, etc. It caused the network to be fully available
twenty-four hours per day, 365 days per year.
Over the last nine years, the Company has gained vast experience directly
contracting for gas supplies with marketers and producers while contracting
for transportation services from FGT. This experience appropriately postures
the Company to be most effective in operating within an unbundled industry
environment. The Company lowered its fuel cost substantially by directly
purchasing gas supplies from sources other than FGT. All fuel costs and
associated savings are passed along to our traditional sales customers.
Additionally, the Company has actively reduced demand charges it pays for the
pipeline capacity by "subletting" unused capacity, for short terms, to other
shippers on FGT's system. The Company continues to be one of Florida's
lowest cost suppliers of natural gas.
The Company continued its activity in Off-System Sales since receiving
approval for the appropriate tariff from the Florida Public Service
Commission (FPSC). Off-System Sales allow the Company to broaden its market
to include any customer within the state of Florida who currently uses
natural gas. Since inception, Off-Systems Sales have been transacted between
the Company and national marketers, electric generators, other gas
distributors and agricultural firms, to name a few. The tariff permits for
profit sharing between the Company and its customers. The Company will
employ every future potential opportunity to keep its total cost of gas as
low as possible.
During 1999, the Company completed the process of upgrading its Systems
Control and Data Acquisitions (SCADA) system software. The upgrade will
assist in the management of transportation customers. This system
effectively allows the Company to closely monitor such customers to maximize
sales and avoid high pipeline penalties.
The Company has been an active participant in the FPSC unbundling docket.
This docket focuses on the potential for unbundling natural gas services of
distribution companies regulated by the FPSC, including the Company. During
1999, the FPSC conducted agenda hearings and workshops to determine if the
FPSC would require local distribution companies to offer transportation
services to all commercial customers. This year, the FPSC is expected to
issue an order that will allow any commercial natural gas customer to choose
their supplier. Some of our commercial natural gas customers may elect to
choose a different supplier, however, the Company's operating results would
not be affected as the Company realizes the same operating margin regardless
of whether the customer purchases the gas from the Company or uses our system
to transport the gas.
Electricity
The Company purchases most of its electrical power supply requirements at
wholesale rates from two nearby generating utilities. Less than 1% of the
Company's power supply is purchased on an "as available" basis from a
self-generating paper mill.
Deregulation of the wholesale power market has enabled the Company to
negotiate long term power supply agreements which reduced our cost of
purchased power. Cost savings from these lower power supply costs are passed
on to our customers. The Company's residential and commercial electric rates
are lower than most of Florida's other electric utilities.
During 1996, the Company executed a power supply agreement with Gulf Power
Company to supply electric power for the Marianna Division. It is an
eleven-year agreement which became effective January 1, 1997.
The Jacksonville Electric Authority executed a new power supply agreement
with the Company which commenced on January 1, 1996. The contract has a
seven-year primary term and provides for substantial cost reductions.
The following table sets forth the revenues, operating profit and
identifiable assets of each of the Company's business segments. (See
"Segment Information" in the Notes to Financial Statements.)
1999 1998 1997
(in thousands)
Revenues
Natural gas $30,287 $29,734 $33,475
Electric 37,544 40,254 38,683
Water 2,401 2,161 1,911
Propane gas 3,866 4,043 4,065
Operating profit(loss)
Natural gas 3,493 3,444 3,288
Electric 3,173 3,213 3,065
Water 739 599 468
Propane gas 393 207 (17)
Identifiable assets
Natural gas 38,355 36,870 35,227
Electric 35,384 34,605 34,021
Water 7,199 5,941 5,270
Propane gas 4,999 5,134 5,877
Regulation
The Florida Public Service Commission, pursuant to State Statutes, has
authority encompassing natural gas, electric and water rates, conditions of
service, the issuance of securities and certain other matters affecting the
operations of the Company.
Franchises
The Company holds franchises in each of the incorporated municipalities
where natural gas, electric and water operations take place. These
franchises generally have terms from 15 to 30 years and terminate at various
dates.
Employees
On December 31, 1999 the Company had 301 employees, of whom 84 were covered
under union contracts with two labor unions, the International Brotherhood of
Electrical Workers and the International Chemical Workers Union. The Company
does not engage in research activities.
Competition
Generally, in municipalities and other areas where the Company provides
natural gas, electric and water services, no other utility directly renders
such service.
Item 2. Properties
The Company's properties consist primarily of distribution systems and
related facilities. At December 31, 1999 the Company owned 22 miles of
electric transmission lines and 1,036 miles of electric distribution lines.
The gas properties distribute gas through 1,188 miles of gas main. The water
property consists of deep wells, pumping equipment, water treatment
facilities and a distribution system. The propane gas systems operated by
the Company's subsidiary have bulk storage facilities and tank installations
on the customers' premises.
Certain properties of the Company and the shares of Flo-Gas Corporation, a
wholly-owned subsidiary, are subject to a lien collateralizing the funded
indebtedness of the Company under its Mortgage Indenture.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The Company's common shares are traded on the American Stock Exchange under
the symbol FPU.
1999 1998
Low High Low High
STOCK PRICES
Quarter ended
March 31 $14.63 - $17.38 $11.56 - $13.63
June 30 14.63 - 18.88 12.81 - 16.38
September 30 17.88 - 19.63 14.25 - 16.50
December 31 16.75 - 20.00 13.13 - 17.50
DIVIDENDS PAID
January 1 $.16 $.15
April 1 .16 .15
July 1 .17 .16
October 1 .17 .16
At March 10, 2000, there were 1,024 holders of record of the Registrant's
Common Stock.
See "Capitalization, Dividend Restriction" in the Notes to Consolidated
Financial Statements for information concerning restriction on the payment of
cash dividends.
Item 6. Selected Financial Data (in thousands, except per share data)
Years Ended December 31,
1999 1998 1997 1996 1995
Revenues $74,098 $76,192 $ 78,134 $78,810 $72,027
Operating margin 29,342 28,491 26,679 26,937 25,514
Net income 3,529(1) 3,068 3,191(1) 2,751 2,438
Earnings per common share 1.17(1) 1.02 1.07(1) .93 .83
Dividends per common share .66 .62 .60 .60 .58
Total assets 96,807 92,406 89,050 88,169 85,240
Utility plant - net 78,272 75,227 72,724 69,876 66,278
Current debt 13,000 8,200 7,600 7,900 5,600
Long-term debt 23,500 23,500 23,500 23,500 23,500
Common shareholders'
equity 25,866 27,622 26,189 24,511 23,302
(1) Includes a gain after income taxes from the sale of non-utility real
property of $83,000, $0.03 per share (1999) and $522,000, $0.18 per share
(1997).
Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition
RESULTS OF OPERATIONS
Overview The Company is organized into three regulated business segments,
natural gas, electric and water and one non-regulated business segment,
propane gas. The gas and electric segments aggregate approximately 92% 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 Florida during the winter
season.
From the Florida Public Service Commission's (FPSC) perspective, the Company
operates four distinct "entities", i.e., Marianna electric, Fernandina Beach
electric, Fernandina Beach water and natural gas, consisting of Palm Beach
County, Sanford and DeLand. The Company last received rate increases as
follows: natural gas operations, May 1995; Marianna electric division,
February 1994; and Fernandina Beach electric division, February 1989. The
Company receives an increase each year for its water operation through a price
index mechanism provided by the FPSC. The Company filed for a rate increase
in its Fernandina Beach Water Division in 1999.
Summary of Operating Margins
(in thousands)
1999 1998 1997
Natural Gas $14,484 $13,879 $13,342
Propane gas 2,673 2,602 2,300
Electric 9,890 9,946 9,214
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).
Natural and Propane Gas Service Natural gas service operating margin
increased $605,000 or 4.4% in 1999 as compared with 1998. Transportation
revenues accounted for $460,000 of the $605,000 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 $145,000 increase in
operating margin was due principally to an approximate 4.2% increase in
average customers for 1999, as compared with 1998, 650 of whom were converted
from our Mid-Florida propane gas division. The effect of the added customers
on consumption was mitigated by winter weather warmer than last year. Propane
gas operating margin increased $71,000 or about 2.7% versus 1998 and was also
affected by the warmer winter weather. Propane gas had a 10% decrease in
average customers for 1999, most of whom were converted to our Mid-Florida
natural gas system. Propane gas operating margin per customer increased 14%
versus 1998, due primarily to an increase in rates that became effective
April 1998.
Total natural gas service operating margin increased $537,000 or 4.0% in 1998
as compared with 1997. The increase in natural gas operating margin was due
principally to a 2.6% increase in average customers as compared with 1997.
Propane gas operating margin increased $302,000 or about 13% versus 1997.
Propane gas had a 4.4% decrease in average customers for 1998, most of whom
were converted to natural gas. The net increase in propane operating margin
is due primarily to the propane rate increase that became effective in April
1998.
In 1999, operating expenses increased $442,000 or about 3.5%, excluding cost
of fuel and taxes passed-through to customers. Other than general increases
in all classifications of expense, most of the increase is attributable to
additional marketing staff, increases in customer service costs, including
postage increase, and additional expenses for natural gas mains and regulator
costs.
In 1998, operating expenses, excluding cost of fuel and taxes passed-through
to customers, increased $458,000. Operating expenses have increased in all
classifications of expense due to inflationary pressures, with depreciation,
maintenance, increased payroll and related costs and expenses and a decrease
in the credit amortization of net periodic pension cost accounting for most
of the increase.
Electric Service Electric service operating margin decreased $56,000 in
1999 versus 1998. Average customers increased about 2% as compared with
last year, however, consumption decreased slightly, due mainly to a milder
winter in 1999 as compared with 1998.
Total electric service operating margin increased $732,000 in 1998 or 8%
versus 1997. There was a 6% increase in average consumption per customer due
primarily to milder weather in 1998 as compared with 1997, and an increase in
customers of almost 2%. Resulting from such increase in consumption and
customers was an increase of more than 6% in average operating margin per
customer, excluding industrial customers.
In 1999, operating expenses, excluding cost of fuel and taxes passed-through
to customers, remained essentially flat. There was a 7% increase in
depreciation in 1999 due primarily to adjustments resulting from a
depreciation study in our Fernandina Beach division in 1999 and our Marianna
division in 1998. Such increase was offset by across the board decreases in
the other classifications of expense.
In 1998, operating expenses, excluding cost of fuel and taxes passed-through
to customers, increased 9.5%. Operating expenses have increased in all
classifications of expense due to inflationary pressures with larger than
normal increases in administrative and general expenses, maintenance and taxes
other than income taxes. These increases were primarily caused by a decrease
in the credit amortization of the net periodic pension cost, additional tree
trimming and facilities maintenance and an increase in ad valorem taxes in
the Fernandina Beach Division.
Interest Charges Interest charges consist of interest on bonds, short-term
borrowings and customer deposits. The primary factor causing interest amounts
to fluctuate are changes in amounts borrowed under the line of credit and
related interest rate changes. See "Notes Payable" and "Capitalization" in
the Notes for additional information.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows Net cash provided by operating activities decreased $912,000 when
compared with 1998. There were two significant changes in operating assets
and liabilities in 1999 when compared with 1998. Deferral of costs
relating to the Area Expansion Program increased $752,000 in 1999,
primarily due to expansion of the natural gas system in our Mid-Florida
division. Also, deferred income taxes increased by $714,000, principally
relating to such expansion.
Cash used in investing activities usually fluctuates within a narrow range as
construction expenditures have averaged about $7.2 million over the last five
years. Included in construction expenditures are more than $750,000 and
$500,000, in 1999 and 1998, respectively, towards modernizing and expanding
our water plant in Fernandina Beach.
Cash used by financing activities fluctuated because of changes in short-term
borrowings and the purchase of 218,464 common shares for the treasury.
The Company has a $15,000,000 line of credit with its primary bank, of which
$13,000,000 is outstanding at December 31, 1999. The line provides for
interest at LIBOR plus 50 basis points and expires in 2000. The Company is
approved by the FPSC 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. The line matures on April 30, 2000 and is
expected to be renewed for approximately $20,000,000 at the same terms and
conditions.
The Company usually has no material commitments for construction expenditures.
Capital expenditures for 2000 have been budgeted for $9,780,000; however,
while the actual amount expended for construction is influenced by many
factors, the Company anticipates that expenditures for 2000 will not be
significantly different from amounts historically incurred. For additional
information see "Notes Payable" and "Capitalization" in the Notes.
The Company anticipates that its future construction expenditures and
commitments are likely to require additional debt and/or equity financing.
Issuance of Additional Bonds The Company's 1942 Indenture of Mortgage and Deed
of Trust, which is a mortgage on all real and personal property, permits the
issuance of additional bonds based upon a calculation of unencumbered net real
and personal property. At December 31, 1999, such calculation would permit
the issuance of approximately $43,000,000 of additional bonds.
OTHER
The Year 2000 Project The Company successfully completed its preparation
for Year 2000 and as a result there were no disruptions of service or any
other adverse reactions as 1999 became 2000. The total cost of the Y2K
project was not significant.
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, the effects of regulatory actions, competition, future economic conditions
and weather.
Environmental Matters The Company has several contamination sites in various
stages of assessment investigation, see "Contingencies" in the Notes. The
Company believes that all future contamination assessment and remedial costs,
legal fees and other related costs will not be in excess of the rate relief
granted the Company and insurance settlement proceeds received.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The long-term debt due in 2018 can be retired beginning in 2013 with a premium
that is not interest rate sensitive that decreases until maturity and the
long-term debt due in 2022 cannot be retired early. Investments held in
escrow for environmental costs are invested in fixed income debt securities at
an average yield of 6.4% whose carrying amounts approximate fair value. The
investments mature from 2000 to 2004 and are held to maturity. Therefore,
such long-term debt and investments are not subject to changes in interest
rates.
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
Years Ended December 31
Revenues 1999 1998 1997
Electric $37,544 $40,254 $38,683
Natural gas 30,287 29,734 33,475
Propane gas 3,866 4,043 4,065
Water 2,401 2,161 1,911
Total revenues 74,098 76,192 78,134
Cost of fuel and taxes based on revenues 44,756 47,701 51,455
Operating Margin 29,342 28,491 26,679
Operating Expenses
Operations 12,013 11,755 11,283
Maintenance 2,763 2,807 2,512
Depreciation and amortization 4,557 4,269 4,029
Taxes other than income taxes 2,211 2,196 2,051
Income taxes 1,628 1,568 1,286
Total operating expenses 23,172 22,595 21,161
Operating Income 6,170 5,896 5,518
Interest Charges and Other
Long-term debt 2,235 2,235 2,235
Short-term borrowings 473 355 407
Customer deposits and other interest 260 250 253
Other-net (244) (12) (46)
Gain from sale of non-utility property (134) (837)
Income taxes on above gain 51 315
Total interest charges and other 2,641 2,828 2,327
Net Income 3,529 3,068 3,191
Preferred Stock Dividends 29 29 29
Earnings for Common Stock $ 3,500 $ 3,039 $ 3,162
Earnings Per Common Share $ 1.17 $ 1.02 $ 1.07
Dividends Per Common Share .66 .62 .60
Average Shares Outstanding 2,995,721 2,992,938 2,967,504
See Notes to Consolidated Financial Statements.
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31,
ASSETS 1999 1998
Utility Plant
Electric $ 51,075 $ 48,955
Natural gas 53,330 50,644
Propane gas 6,441 6,658
Water 9,493 8,033
Common 3,559 3,366
Total 123,898 117,656
Less accumulated depreciation 45,626 42,429
Net utility plant 78,272 75,227
Current Assets
Cash 165 564
Accounts receivable 8,154 7,879
Allowance for uncollectible accounts (128) (114)
Inventories (at average or unit cost) 2,430 2,172
Prepayments and deferrals 621 472
Total current assets 11,242 10,973
Other Assets
Investments held in escrow for
environmental costs 2,877 3,133
Deferred charges 4,416 3,073
Total other assets 7,293 6,206
Total $ 96,807 $ 92,406
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity $ 25,866 $ 27,622
Preferred stock 600 600
Long-term debt 23,500 23,500
Total capitalization 49,966 51,722
Current Liabilities
Notes payable 13,000 8,200
Accounts payable 5,481 5,388
Insurance accrued 2,050 2,113
Interest accrued 537 597
Other accruals and payables 2,268 2,115
Over recovery of fuel costs 1,569 1,124
Customer deposits 3,994 3,867
Total current liabilities 28,899 23,404
Other Liabilities
Deferred income taxes 6,900 6,110
Unamortized investment tax credits 1,092 1,222
Environmental liability 4,594 5,004
Regulatory tax liabilities 1,818 1,968
Customer advances for construction 1,672 1,374
Storm damage and environmental reserve 1,866 1,602
Commitments and contingencies
Total other liabilities 17,942 17,280
Total $ 96,807 $ 92,406
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(dollars in thousands)
December 31,
1999 1998
Common Shareholders' Equity
Common stock, $1.50 par value, authorized
3,500,000 shares; issued 3,212,201 shares
in 1999; 3,200,860 shares in 1998 $ 4,819 $ 4,801
Paid-in capital 9,344 9,065
Retained earnings 17,204 15,686
Treasury stock - at cost (409,816 shares in 1999;
200,945 shares in 1998) (5,501) (1,930)
Total common shareholders' equity 25,866 27,622
Preferred Stock
4 3/4% Series A, $100 par value, redemption
price $106, authorized and outstanding
6,000 shares 600 600
Long-Term Debt
First mortgage bonds
Series
9.57% due 2018 10,000 10,000
10.03% due 2018 5,500 5,500
9.08% due 2022 8,000 8,000
Total long-term debt 23,500 23,500
Total Capitalization $49,966 $51,722
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
(dollars in thousands)
Common Stock
Shares Aggregate Paid-in Retained Treasury Stock
Issued Par Value Capital Earnings Shares Cost
Balance,
December 31, 1996 1,585,478 $2,379 $10,992 $13,151 111,831 $(2,011)
Net income 3,191
Dividends (1,810)
Stock plans 8,874 13 241 (6,065) 43
Balance
December 31, 1997 1,594,352 2,392 11,233 14,532 105,766 (1,968)
Net income 3,068
Dividends (1,914)
Stock plans 9,006 13 228 (7,630) 38
Two-for-one stock split 1,597,502 2,396 (2,396) 102,809
Balance
December 31, 1998 3,200,860 4,801 9,065 15,686 200,945 (1,930)
Net income 3,529
Dividends (2,011)
Stock plans 11,341 18 279 (9,593) 34
Purchase of
treasury shares 218,464 (3,605)
Balance
December 31, 1999 3,212,201 $4,819 $9,344 $17,204 409,816 $(5,501)
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
1999 1998 1997
Cash Flows from Operating Activities
Net income $ 3,529 $ 3,068 $ 3,191
Adjustments to reconcile net income to
net cash from operating activities
Depreciation 4,557 4,269 4,029
Deferred income taxes 641 (73) (349)
Investment tax credits (130) (120) (121)
Other 133 216 385
Gain on sale of non-utility property (134) (837)
Effects of changes in
Receivables (261) (158) 269
Inventories and prepayments (407) 253 16
Accounts payable and accruals 519 547 (1,341)
Over/(under) recovery of fuel costs 446 731 1,722
Area expansion program deferred costs (945) (193)
Environmental liability (424) 172 301
Other 19 (257) (241)
Net cash provided by operating
activities 7,543 8,455 7,024
Cash Flows from Investing Activities
Construction expenditures (8,177) (6,952) (7,034)
Customer advances for construction 298 48 287
Other 271 (109) (73)
Proceeds from sale of non-utility property 154 886
Net cash used by investing
activities (7,454) (7,013) (5,934)
Cash Flows from Financing Activities
Net short-term borrowings(repayments) 4,800 600 (300)
Proceeds from common stock plans 331 279 297
Dividends paid (2,014) (1,880) (1,805)
Purchase of treasury shares (3,605)
Net cash used by
financing activities (488) (1,001) (1,808)
Net Increase (Decrease) in Cash (399) 441 (718)
Cash at Beginning of Year 564 123 841
Cash at End of Year $ 165 $ 564 $ 123
Supplemental Cash Flow Information
Cash was paid during the years as follows:
Interest $ 2,792 $ 2,513 $ 2,719
Income Taxes 1,188 1,729 1,845
See Notes to Consolidated Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary of Significant Accounting and Reporting Policies
Business and Regulation Florida Public Utilities Company (the Company) is an
operating public utility engaged principally in the purchase, transmission,
distribution and sale of electricity and in the purchase, transmission,
distribution, sale and transportation of natural gas. The Company is subject
to the jurisdiction of the Florida Public Service Commission (FPSC) with respect
to its electric, natural gas and water operations. The suppliers of electrical
power to the Marianna division and of natural gas to the natural gas divisions
are subject to the jurisdiction of the Federal Energy Regulatory Commission
(FERC). The Fernandina Beach division is supplied most of its electrical power
by a municipality which is exempt from FERC and FPSC regulation. The Company
also distributes propane gas through a non-regulated subsidiary. The Company's
accounting policies and practices conform to generally accepted accounting
principles as applied to regulated public utilities and are in accordance with
the accounting requirements and rate making practices of the FPSC.
The Company prepares its financial statements in accordance with the provisions
of Statement of Financial Accounting Standards No. 71 - "Accounting for the
Effects of Certain Types of Regulation" (SFAS 71). In general, SFAS 71
recognizes that accounting for rate regulated enterprises should reflect the
relationship of costs and revenues introduced by rate regulation. As a result,
a regulated utility may defer recognition of a cost (a regulatory asset) or
recognize an obligation (a regulatory liability) if it is probable that, through
the rate making process, there will be a corresponding increase or decrease
in revenues.
Accordingly, the Company has recognized certain regulatory assets (included in
deferred charges) related to area expansion program costs and unamortized debt
reacquisition costs and regulatory liabilities (included in current and other
liabilities) related to deferred income taxes, over recovery of fuel costs, and
storm and environmental self-insurance reserves. The Company believes that the
FPSC will continue to allow the Company to recover such items through its rates.
The Company has agreed with the FPSC staff to limit its earned return on equity
for its regulated electric and natural gas operations. The disposition of any
excess earnings is left to the discretion of the FPSC, with alternatives
including a refund to customers, additional contributions to storm damage
reserves, or the reduction of any depreciation reserve deficiency. Excess
earnings for 1997 and 1998 at one of the Company's electric divisions were
ordered by the FPSC to be added to that division's storm damage reserve.
The Company believes it has adequately reserved for 1999 excess earnings.
Following FPSC rules for water utilities, the Company filed for and was granted
a price index revenue increase in the Fernandina Beach water division. This
increase, approximating $11,000 on an annual basis, was placed into effect in
June 1999. The Company filed for a rate increase in its water rates with the
FPSC in 1999. The process was recently completed and final rates are expected
to increase revenues $380,000 annually beginning in March 2000.
Various states, other than Florida, have enacted or are considering enacting
legislation or other initiatives that would provide utility customers with the
ability to choose their supplier. This year, the FPSC is expected to issue an
order that will allow any commercial natural gas customer to choose their
supplier. Some of our commercial natural gas customers may elect to choose a
different supplier, however, the Company's operating results would not be
affected as the Company realizes the same operating margin regardless of whether
the customer purchases the gas from us or uses our system to transport the gas.
Revenues The Company records utility revenues as service is provided and bills
its customers monthly on a cycle billing basis. Accordingly, at the end of each
month, the Company accrues for estimated unbilled revenues.
The rates of the Company include base revenues, fuel adjustment charges and the
pass-through of certain governmental imposed taxes based on revenues. The base
revenues are determined by the FPSC and remain constant until a request for an
increase in such rates is filed and approved by the FPSC. From the FPSC
perspective, the Company operates four distinct "entities", i.e., Marianna
electric, Fernandina Beach electric, Fernandina Beach water, and natural gas,
consisting of Palm Beach County, Sanford and DeLand. Thus, for the Company to
recover through rate relief the effects of inflation for all such "entities", a
request for an increase in base revenues would require the filing of four
separate rate cases. The FPSC allows for an annual automatic rate increase
for water operations through the use of a price index. Fuel adjustment charges
are estimated for customer billing purposes and any under/over-recovery
difference between the incurred cost of fuel and estimated amounts billed to
customers is deferred for future recovery or refund and either charged or
credited to customers. Interest accrues on such under/over-recoveries and is
included in the subsequent adjustment.
Consolidation The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, Flo-Gas Corporation. All significant
intercompany balances and transactions have been eliminated.
Certain reclassifications have been made to the prior years' financial
statements and other financial information contained herein to conform with the
1999 presentation.
Utility Plant and Depreciation Utility plant is stated at original cost. The
costs of additions to utility plant include contracted services, direct labor
and materials. The costs of units of property retired are removed from utility
plant, and such costs plus removal costs, less salvage, are charged to
accumulated depreciation. Maintenance and repairs of property and replacement
and renewal of items determined to be less than units of property are charged to
operating expenses. Substantially all of the utility plant and the shares of
Flo-Gas Corporation collateralize the Company's First Mortgage Bonds.
Depreciation is computed using the composite straight-line method at rates
prescribed by the FPSC for financial accounting purposes. Such rates are based
on estimated service lives of the various classes of property. Depreciation
provisions on average depreciable property approximate 3.6% per year.
Income Taxes Deferred income taxes are provided on all significant temporary
differences between the financial statement and tax basis of assets and
liabilities at currently enacted tax rates. Investment tax credits have been
deferred and are amortized based upon the average useful life of the related
property in accordance with the rate treatment.
Use of Estimates Inherent in the accounting process is the use of estimates
when preparing financial statements in accordance with generally accepted
accounting principles. Actual results could differ from these estimates.
The Company has used estimates in the preparation of its financial statements
including the accrual for uninsured liability claims. The Company is self-
insured for the first $250,000 of each liability claim and therefore accrues for
estimated losses occurring from both asserted and unasserted claims. The
estimate for unasserted claims arising from unreported incidents is based on an
analysis of historical claims data. The Company's portion of liability claims
incurred for the ten year period ended in 1999 averaged approximately $45,000
per year and the accrual for such claims was approximately $800,000 at December
31, 1999. The Company believes that its accrual for potential liability claims
is adequate.
Notes Payable
The Company has a line of credit agreement with its primary bank providing for a
$15,000,000 loan with interest at LIBOR plus fifty basis points. $14,000,000 of
such loan 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. The interest rates at December 31, 1999 and 1998 were
approximately 6.3% and 5.6%, respectively.
Capitalization
Common Stock Split In July 1998, the Company effected a two-for-one stock split
in the form of a stock dividend and, accordingly, transferred from paid-in
capital to common stock, an amount equal to the aggregate par value of the
additional shares. All per share data included herein have been retroactively
restated to reflect the stock split.
Common Shares Reserved The Company has reserved 13,499 common shares for
issuance under the Dividend Reinvestment Plan and 33,984 common shares for
issuance under the Employee Stock Purchase Plan.
Dividend Restriction The Indenture of Mortgage and Deed of Trust and
supplements thereto provide for restriction of the payment of cash dividends.
At December 31, 1999 approximately $3,900,000 of retained earnings were free of
such restriction.
Maturities of Long-Term Debt Sinking fund payments are scheduled to begin in
2008.
Segment Information
The Company operates distribution systems providing natural and propane gas
service in three locations in central and southern Florida, electric service in
two locations in northern Florida and water service in one location in northern
Florida. There are no material intersegment sales or transfers.
Operating profit consists of revenues less operating expenses and does not
include other income, interest income, interest expense and income taxes.
Identifiable assets are those assets used in the Company's operations in each
business segment. Common assets are principally cash and overnight investments,
deferred tax assets and common plant.
Business segment information for 1999, 1998, and 1997 is summarized as follows
(in thousands):
Non-
Regulated Regulated
1999 Gas Electric Water Common Propane Gas Consolidated
Revenues $30,287 $37,544 $2,401 $ $3,866 $74,098
Operating profit 3,493 3,173 739 393 7,798
Identifiable assets 38,355 35,384 7,199 10,870 4,999 96,807
Depreciation 1,998 1,863 260 133 303 4,557
Construction
expenditures 3,337 2,774 1,462 220 384 8,177
Income tax expense 729 621 191 209 87 1,837
1998
Revenues 29,734 40,254 2,161 4,043 76,192
Operating profit 3,444 3,213 599 207 7,463
Identifiable assets 36,870 34,605 5,941 9,856 5,134 92,406
Depreciation 1,838 1,733 223 135 340 4,269
Construction
expenditures 3,136 2,585 767 158 306 6,952
Income tax expense 688 715 157 17 8 1,585
1997
Revenues 33,475 38,683 1,911 4,065 78,134
Operating profit 3,288 3,065 468 (17) 6,804
Identifiable assets 35,227 34,021 5,270 8,655 5,877 89,050
Depreciation 1,733 1,629 208 116 343 4,029
Construction
expenditures 2,925 2,641 866 323 279 7,034
Income tax expense 695 580 98 351 (87) 1,637
Income Taxes
The provision (credit) for income taxes consists of the following (in
thousands):
1999 1998 1997
Current payable
Federal $ 954 $1,484 $1,547
State 163 277 208
1,117 1,761 1,755
Deferred
Federal 526 (54) (378)
State 115 (19) 29
641 (73) (349)
Investment tax credit (130) (120) (120)
Total - operating 1,628 1,568 1,286
Included in interest charges
and other-net 209* 17 351*
Total $1,837 $1,585 $1,637
*Includes income tax of $51,000 and $315,000 on gain from the sale of
non-utility property, 1999 and 1997, respectively.
The difference between the effective income tax rate and the statutory
federal income tax rate applied to pretax income is accounted for as follows
(in thousands):
1999 1998 1997
Federal income tax at
statutory rate $1,824 $1,582 $1,642
State income taxes,
net of federal benefit 183 170 156
Investment tax credit (130) (120) (120)
Other (40) (47) (41)
Total provision for income taxes $1,837 $1,585 $1,637
The tax effects of temporary differences producing accumulated deferred
income taxes in the accompanying consolidated balance sheets are as follows
(in thousands):
1999 1998
Deferred tax assets
Environmental $2,111 $2,083
Other 343 468
Total deferred tax assets 2,454 2,551
Deferred tax liabilities
Utility plant related 8,525 8,395
Under recovery of fuel costs 129
Area expansion program 428 73
Other 272 193
Total deferred tax liabilities 9,354 8,661
Net deferred income taxes $6,900 $6,110
Employee Benefit Plans
Florida Public Utilities Company sponsors a qualified pension plan and post-
retirement medical and life benefit plans for its employees. The life plan
obligations are insignificant and are not reflected in the following
disclosures. In 1998, the Company changed the benefit formula to provide
for improved pension benefits. The following tables provide a reconciliation
of the changes in the plans' benefit obligations and fair value of assets for
the years ending December 31, 1999 and 1998, and a statement of the funded
status at December 31, 1999 and 1998 (in thousands):
Pension Benefits Medical Benefits
1999 1998 1999 1998
Reconciliation of Benefit Obligation
Prior year obligation at December $ 19,279 $ 14,803 $ 1,475 $ 1,318
Service cost 771 764 72 73
Interest cost 1,369 1,245 109 96
Participant contributions 0 0 11 14
Plan amendments 259 3,440 0 0
Actuarial (gain) loss 423 (137) 121 87
Benefit payments (974) (836) (80) (113)
Current year obligation at December 31 $ 21,127 $ 19,279 $ 1,708 $ 1,475
Reconciliation of Fair Value of Plan Assets
Prior year fair value of plan assets at
December 31 $ 32,531 $ 29,080 $ 0 $ 0
Actual return on plan assets 4,828 4,287 0 0
Employer contributions 0 0 69 99
Participant contributions 0 0 11 14
Benefit payments (974) (836) (80) (113)
Current year fair value of plan
assets at December 31 $ 36,385 $ 32,531 $ 0 $ 0
Funded Status
Funded status at December 31 $ 15,258 $ 13,252 $(1,708) $(1,475)
Unrecognized transition
(asset) obligation (183) (367) 558 600
Unrecognized prior service cost 4,238 4,401 0 0
Unrecognized (gain) loss (17,750) (15,990) 170 50
Net amount recognized $ 1,563 $ 1,296 $ (980) $ (825)
The following table provides the components of net periodic benefit cost for
the Plans for 1999, 1998 and 1997 (in thousands):
Pension Benefits Medical Benefits
1999 1998 1997 1999 1998 1997
Service cost $ 771 $ 764 $ 549 $ 72 $ 73 $ 65
Interest cost 1,369 1,245 963 109 96 83
Expected return on plan assets (2,171) (1,943) (1,546) 0 0 0
Amortization of transition
(asset) obligation (183) (183) (183) 43 43 43
Amortization of prior service cost 422 401 151 0 0 0
Amortization of net gain (474) (424) (255) 0 0 0
Net periodic benefit cost $ (266) $ (140) $ (321) $ 224 $ 212 $ 191
The prior service costs are amortized on a straight-line basis over the average
remaining service period of active participants. Gains and losses in excess of
10% of the greater of the benefit obligation and the market-related value of
assets are amortized over the average remaining service period of active
participants.
The pension plan is non-contributory; the postretirement medical plan is
contributory with participants' contributions subject to adjustment annually.
The accounting for the health care plan anticipates future cost-sharing changes
to the written plan such that retiree contributions will increase at the same
rate as the total plan cost.
The assumptions used in the measurement of the Company's benefit obligation are
shown in the following table:
Pension Benefits Medical Benefits
Weighted-average assumptions
as of December 31 1999 1998 1997 1999 1998
Discount rate-benefit obligation 7.0% 7.0% 7.0% 7.0% 7.0%
Expected return on plan assets 8.5% 8.5% 8.0% N/A N/A
Rate of compensation increase 5.5% 5.5% 5.5% N/A N/A
For measurement purposes, the annual rate of increase in the per capita cost of
covered health care benefits during 1999 was 8.0% for retirees under 65 and 7.1%
for retirees over 65. These rates were assumed to decrease gradually each year
to a rate of 5.5% for 2007 and remain at that level thereafter.
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A 1% change in assumed health care cost
trend rates would have the following effects:
1% Increase 1% Decrease
Effect on total of service and interest
cost components of net periodic post-
retirement health care benefit cost $ 27,475 $ (23,847)
Effect on the health care component of
the accumulated postretirement benefit
obligation $ 222,537 $(198,858)
Health Plan The Company is principally self-insured for its employee and
retiree medical insurance plan. The Company's health care liability under the
plan is limited to $60,000 per individual per year, with a maximum total
liability of $865,000.
A reserve for future benefit payments for active employees is maintained at a
level sufficient to provide for estimated outstanding claims under the plan net
of amounts contributed by employees. Net health care benefits paid by the
Company for active employees were approximately $516,000, $455,000 and $457,000
for 1999, 1998 and 1997, respectively.
Employee Stock Purchase Plan The Company's Employee Stock Purchase Plan offers
common stock at a discount to qualified employees. During 1999, 1998 and 1997,
8,193, 7,230 and 5,665 shares, respectively, were issued under the Plan for
aggregate consideration of $116,000, $100,000 and $103,000, respectively.
Dividend Reinvestment Plan During 1999, 1998 and 1997, 11,341, 9,006 and
8,874 shares, respectively, were issued under the Company's Dividend
Reinvestment Plan for aggregate consideration of $193,000, $169,000 and
$185,000, respectively.
Financial Instruments
The carrying amounts reported in the balance sheet for investments held in
escrow for environmental costs, notes payable, taxes accrued and other accrued
liabilities approximate fair value. The Company does not enjoy a debt rating
and therefore the Company has no reasonable way of estimating the current rate
at which similar first mortgage bonds would be made to borrowers with similar
debt ratings and maturities. However, the current bonds outstanding were issued
in 1988 and 1992 and since that time interest rates have declined, and thus it
is reasonable to assume that the fair value of existing first mortgage bonds
would be more than their carrying value.
Contingencies
The Company is subject to federal and state legislation with respect to soil,
groundwater and employee health and safety matters and to environmental
regulations issued by the Florida Department of Environmental Protection (FDEP),
the United States Environmental Protection Agency (EPA)and other federal and
state agencies. Except as discussed below, the Company does not expect to incur
material future expenditures for compliance with existing environmental laws and
regulations.
West Palm Beach Site The Company is currently conducting a contamination
assessment investigation of a parcel of property owned by it in West Palm
Beach, Florida. After a preliminary contamination assessment investigation
indicated soil and groundwater impacts, the Company entered into a consent order
with the FDEP. The consent order requires the Company to delineate the extent
of soil and groundwater impacts associated with the prior operation of a
gasification plant on the property and requires the Company to remediate any
soil and groundwater impacts, if necessary. In June 1992 the Company commenced
the contamination assessment investigation. The original contamination
assessment report ("CAR") was submitted to FDEP in December 1995. A CAR
addendum is scheduled to be submitted to FDEP in early 2000, in response to FDEP
comments to the CAR. Prior to the completion of this work, and review of same
by FDEP,it is not possible to determine to an acceptable degree of certainty the
complete extent or cost of remedial action, if any, which may be required.
However, a preliminary estimate from the Company's environmental consultant
suggested that additional contamination assessment and remediation costs for
this site may reach approximately $1,400,000. Until the FDEP concludes that
the contamination assessment investigation is complete, it is not possible to
determine whether remediation is necessary and, if so, when and how much of such
costs the Company will have to pay. A portion of the on-site impacts had been
determined to be eligible for reimbursement from a state fund and the FDEP has
determined that a portion of the work conducted off-site is eligible for
reimbursement under state law.
Sanford Site The Company owns a parcel of property located in Sanford, Florida.
Prior to the Company's acquisition of this property, it had been the site of a
gasification plant. The FDEP issued a Warning Notice to the Company which
required the Company to conduct a contamination assessment investigation of the
property. A preliminary investigation revealed that soil was impacted
throughout the center of the property.
Thereafter, in cooperation with four former owners and operators of the
gasification plant, the Company participated in the funding of an initial
contamination assessment investigation, the results of which are set forth in a
Contamination Assessment Report delivered to FDEP on February 4, 1994. On
July 11, 1997, the EPA notified the Company of its potential liability under
applicable federal laws for assessment and remediation of the site. Similar
notices were sent by the EPA to the four former owners and operators of the
site. On or about March 25, 1998, the Company and the four former owners and
operators (collectively, the Group) and the EPA executed an Administrative Order
on Consent (AOC) that obligates the Group to implement a Remedial
Investigation/Feasibility Study (RI/FS) task. The Group also entered into a
Participation Agreement and an Escrow Agreement on or about April 13, 1998.
These agreements govern the manner and means by which all parties will satisfy
their respective obligations under the AOC. On or about April 13, 1998, the
Group also entered into services agreements (collectively, the RI/FS Agreement)
with two environmental consulting entities, to undertake the RI/FS and
associated risk assessment activities called for under the terms of the AOC.
The total combined budget for the consultants' services is presently
approximately $637,850. The Company has agreed to pay approximately 13.7% of
the cost for the RI/FS. Field work for the RI/FS was initiated in 1998. A
final RI report was submitted to the EPA in July 1999. Also submitted to EPA
in July 1999, were a draft FS report and a draft Baseline Risk Assessment (BRA).
In response to EPA comments to the BRA, a second draft BRA was submitted in
October 1999 and a third draft BRA was submitted in January 2000. FDEP also
issued comments to the draft FS report, responses to which were due to FDEP by
the end of January 2000. Prior to the completion of the RI/FS field activities
and approval by the EPA of the complete RI/FS Report and BRA, the Company is
unable to determine the appropriate remedy for the site or, what the Company's
share of the cost of that remedy would be. However, a preliminary estimate
from the Group's environmental consultant suggested that remedial costs for
removal of the visible extent of impacted soils at the site and adjacent thereto
may cost up to $5,800,000. Recent allocation negotiations between members of
the Group have resulted in a tentative allocation to the Company of
approximately 10.5% of the soil removal costs.
It is not known at this time whether groundwater remediation will be required at
the property. The Group's environmental consultant has proposed to complete a
FS for groundwater for approximately $35,000. The Company's share of this cost
is 13.7%.
Insurance Claims and Rate Relief The Company notified its insurance carriers of
environmental impacts detected at the former manufactured gas plant (MGP) sites
discussed above. As a result of negotiations with the Company's major insurance
carriers that concluded in 1997, such carriers agreed to pay settlement proceeds
totaling approximately $4,300,000 for certain environmental costs. Most
recently, in September 1999, certain British based insurers agreed to settle
claims in the approximate total amount of $7,600. Since 1991, the FPSC has also
allowed the Company to recover through rate relief environmental expenses of
$2,116,000 at the rate of approximately $240,000 per year; such recovery will
end in February 2001.
The Company believes that all future contamination assessment and remedial
costs, legal fees and other related costs will not be in excess of the rate
relief granted the Company and insurance settlement proceeds received.
Commitments
To ensure a reliable supply of power and natural gas at competitive prices, the
Company has entered into long-term purchase and transportation contracts with
various suppliers and producers which expire at various dates through 2015.
Purchase prices under these contracts are determined by formulas either based on
market prices or at fixed prices. At December 31, 1999, the Company has firm
purchase and transportation commitments adequate to supply its expected future
sales requirements. The Company is committed to pay demand or similar fixed
charges of approximately $5,700,000 during 2000 related to these agreements.
Substantially all costs incurred under these agreements are recoverable from
customers through fuel adjustment clause mechanisms.
Recent Accounting Pronouncements
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards (FAS) 133, "Accounting for Derivative Instruments
and Hedging Activities". FAS 133 requires derivatives, as defined in the
statement, to be measured at their fair value. The FASB deferred the effective
date of FAS 133 until the first quarter of 2001 at which time certain issues
will be clarified and the scope narrowed. Subject to that final determination,
the Company does not believe that it will be subject to the revised FAS in a
material fashion, if at all.
Quarterly Financial Data (Unaudited)
The quarterly financial data presented below reflects the influence of, among
other things, 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 (in thousands, except per share amounts):
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
1999
Revenues $19,507 $17,389 $18,467 $18,735
Operating margin 8,039 6,939 6,965 7,399
Operating profit 2,888 1,665 1,506 1,739
Net income 1,451 736 1 550 792
Earnings per share .48 .24 1 .18 .27
1998
Revenues $20,712 $18,115 $18,644 $18,721
Operating margin 7,919 6,740 6,652 7,180
Operating profit 2,870 1,577 1,382 1,634
Net income 1,403 571 448 646
Earnings per share .47 .19 .15 .21
1 Includes a gain after income taxes from the sale of non-utility real
property of $83,000, $0.03 per share.
INDEPENDENT AUDITORS' REPORT
To the Directors and Shareholders of Florida Public Utilities Company:
We have audited the accompanying consolidated balance sheets and statements of
capitalization of Florida Public Utilities Company and its wholly owned
subsidiary, Flo-Gas Corporation, as of December 31, 1999 and 1998, and the
related consolidated statements of income, common shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Florida Public Utilities Company
and its wholly owned subsidiary, Flo-Gas Corporation, at December 31, 1999 and
1998, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE
Certified Public Accountants
West Palm Beach, Florida
February 18, 2000
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information concerning directors and nominees of the Registrant is included
under the caption "Nominees and Continuing Directors" in the Registrant's
Proxy Statement for the 2000 Annual Meeting of Shareholders and is
incorporated by reference herein.
The following table sets forth certain information about the executive
officers of the Registrant as of March 10, 2000.
Name Age Position Date
John T. English 56 Chief Executive Officer 1998 - Present
President 1997 - Present
Chief Operating Officer 1997 - Present
Charles L. Stein 50 Senior Vice President 1997 - Present
Darryl L. Troy 58 Vice President 1993 - Present
Jack R. Brown 65 Corporate Secretary 1995 - Present
Treasurer 1988 - Present
Mr. English was Senior Vice President from 1993 preceding his appointment
as President and Chief Operating Officer.
Mr. Stein was Vice President from 1993 preceding his appointment as
Senior Vice President.
There are no family relationships between the executive officers.
All executive officers are elected for a one year term.
Item 11. Executive Compensation
Information concerning executive compensation is included under the
caption "Executive Compensation" in the Registrant's Proxy Statement and
is incorporated by reference herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information concerning the security ownership of certain of the
Registrant's beneficial owners and management is included under the
captions "Security Ownership of Certain Beneficial Owners" and "Nominees
and Continuing Directors" in the Registrant's Proxy Statement and is
incorporated by reference herein.
Item 13. Certain Relationships and Related Transactions
Information concerning certain relationships and related transactions is
included under the caption "Transactions with Management" in the
Registrant's Proxy Statement and is incorporated by reference herein.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
The following consolidated financial statements of Florida Public
Utilities Company are included herein and in the Registrant's 1999
Annual Report to Shareholders.
Consolidated Statements of Income
Consolidated Balance Sheets
Consolidated Statements of Capitalization
Consolidated Statements of Common Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditors' Report
2. Financial Statement Schedules
All schedules are omitted because of the absence of the conditions
under which they are required or because the required information
is included in the financial statements and related notes thereto.
3. Exhibits
See exhibit index following signatures.
(b) Reports on Form 8-K.
Form 8-K, Item 5. Other Events was reported on and filed on November
16, 1999.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By /s/ Jack R. Brown Date: March 21, 2000
Jack R. Brown, Treasurer
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
/s/ John T. English Date: March 21, 2000
John T. English
President, Chief Executive Officer, Chief Operating Officer and
Director
/s/ Franklin C. Cressman Date: March 21, 2000
Franklin C. Cressman
Director
/s/ E. James Carr, Jr. Date: March 21, 2000
E. James Carr, Jr.
Director
/s/ Daniel Downey Date: March 21, 2000
Daniel Downey
Director
/s/ Richard C. Hitchins Date: March 21, 2000
Richard C. Hitchins
Director
/s/ Gordon O. Jerauld Date: March 21, 2000
Gordon O. Jerauld
Director
/s/ Paul L. Maddock, Jr. Date: March 21, 2000
Paul L. Maddock, Jr.
Director
/s/ Rudy E. Schupp Date: March 21, 2000
Rudy E. Schupp
Director
FLORIDA PUBLIC UTILITIES COMPANY
EXHIBIT INDEX
(a) Exhibits
Regulation S-K
Item Number 21. Subsidiary of the registrant
23. Independent auditors' consent
27. Financial data schedule
EXHIBIT 21
Subsidiary of the registrant
Name Jurisdiction of Incorporation
Flo-Gas Corporation Florida
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
No. 2-79935 on Form S-3 and Post-Effective Amendment No. 16 to Registration
Statement No. 2-24986 on Form S-8 of Florida Public Utilities Company, of our
report dated February 18, 2000, appearing in this Annual Report on Form 10-K of
Florida Public Utilities Company for the year ended December 31, 1999.
DELOITTE & TOUCHE LLP
Certified Public Accountants
West Palm Beach, Florida
March 21, 2000
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