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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED SEPTEMBER 30, 2000 COMMISSION FILE NUMBER 0-6028
BIRMINGHAM UTILITIES, INC.
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(Exact name of registrant as specified in its charter)
CONNECTICUT 06-0878647
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230 BEAVER STREET, ANSONIA, CT 06401
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(Address of principal executive office) (Zip Code)
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(Former name, former address and former fiscal year, if
changes 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.
NO YES X
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at Nov.1, 2000
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COMMON STOCK, NO PAR VALUE 1,602,894
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<PAGE>
PART I. FINANCIAL INFORMATION
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ITEM 1 FINANCIAL STATEMENTS
BIRMINGHAM UTILITIES, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
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UNAUDITED
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<TABLE><CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Operating Revenue $1,154,036 $1,294,363 $3,408,939 $3,535,441
---------- ---------- ---------- ----------
Operating Expenses:
Operating Expenses 598,689 638,733 1,840,097 1,823,542
Maintenance Expense 46,208 36,733 161,216 134,899
Depreciation 131,250 134,001 393,750 402,003
Taxes Other Than Income Taxes 94,139 82,001 258,887 242,837
Taxes on Income 49,066 121,730 118,229 224,457
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Total Operating Expense 919,352 1,012,888 2,772,279 2,827,738
---------- ---------- ---------- ----------
Utility Operating Income 234,684 281,475 636,660 707,703
Amortization of Prior Years'
Deferred Income on Land Dispositions
(Net of income taxes) 46,137 85,740 138,411 257,220
Other Income, net 25,005 1,221 56,831 42,270
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Income before interest expense 305,826 368,436 831,902 1,007,193
Interest and Amortization of Debt Discount 140,207 112,045 382,658 337,648
Income from dispositions of land (net of
income taxes) -- 7,057 -- 9,152
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Net income $ 165,619 $ 263,448 $ 449,244 $ 678,697
Retained earnings, beginning $5,396,354 $5,323,600 $5,511,802 $5,219,875
Dividends 200,089 158,195 599,162 469,719
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Retained earnings, ending $5,361,884 $5,428,853 $5,361,884 $5,428,853
========== ========== ========== ==========
Earnings per share - basic $ .10 $ .17 $ .28 $ .43
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Earnings per share - diluted $ .10 $ .16 $ .27 $ .41
========== ========== ========== ==========
Dividends per share $ .125 $ .10 $ .375 $ .30
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BIRMINGHAM UTILITIES, INC.
BALANCE SHEETS
<TABLE><CAPTION>
(Unaudited)
September 30, Dec. 31,
2000 1999
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ASSETS:
<S> <C> <C>
Utility Plant $ 23,857,623 $ 22,265,530
Accumulated depreciation (6,917,877) (6,543,747)
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Net Utility Plant 16,939,746 15,721,783
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Current Assets:
Cash and cash equivalent 279,233 44,471
Accounts receivable, net of
allowance for doubtful accounts 471,070 415,330
Accrued utility revenue 480,487 429,127
Materials & supplies 105,603 87,042
Prepayments 58,292 55,154
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Total current assets 1,394,685 1,031,124
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Deferred Charges 739,021 595,263
Unamortized debt expense 142,049 154,234
Income taxes recoverable 360,812 360,812
Other assets 402,882 418,055
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1,644,764 1,528,364
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$ 19,979,195 18,281,271
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STOCKHOLDERS' EQUITY AND LIABILITIES
Stockholders' Equity:
Common Stock, no par value, authorized
2,000,000 shares; issued and outstanding 9/30/00
1,602,894 shares; 12/31/99- 1,583,025 $ 2,729,998 $ 2,634,762
Retained earnings 5,361,875 5,511,802
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8,091,873 8,146,564
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Long-term debt 4,230,000 4,324,000
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Current Liabilities:
Note Payable 2,256,715 360,000
Current portion of note payable and long term debt 94,000 94,000
Accounts payable and accrued liabilities 765,804 691,142
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Total current liabilities 3,116,519 1,145,142
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Customers' advances for construction 1,199,887 1,182,216
Contributions in aid of construction 1,195,935 1,188,934
Regulatory liability-income taxes refundable 164,772 164,772
Deferred income taxes 1,701,322 1,630,976
Deferred income on disposition of land 278,887 498,667
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4,540,803 4,665,565
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$ 19,979,195 $ 18,281,271
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</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BIRMINGHAM UTILITIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE><CAPTION>
Nine Months Ended September 30,
Cash Flows From Operating Activities 2000 1999
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<S> <C> <C>
Net Income $ 449,244 $ 678,697
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Adjustments to reconcile net income to
net cash provided by operating activities: -- (9,152)
Income from land dispositions 435,386 443,640
Depreciation and amortization (138,411) (257,220)
Amortization of deferred income, net of tax
Increases and decreases in assets and liabilities:
Accounts receivable and accrued utility revenue (107,100) (68,809)
Materials and supplies (18,561) (76,798)
Prepayments (3,138) (2,325)
Accounts payable and accrued expenses 74,662 (1,764,264)
Deferred income taxes (11,025) (11,025)
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Total Adjustments 231,813 (1,745,953)
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Net cash flows provided by (used in) operating activities 681,057 (1,067,256)
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Cash flows from investing activities:
Proceeds from land dispositions -- 18,000
Net construction expenditures (1,603,136) (913,341)
Other assets and deferred charges, net (91,861) (61,770)
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Net Cash flows from used in
investing activities (1,694,997) (957,111)
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Cash flows from financing activities:
Increase in note payable 1,896,715
(Decrease) in long-term debt (94,000) (94,000)
Dividends paid - net (554,013) (414,535)
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Net Cash flows provided by (used in)
financing activities: 1,248,702 (508,535)
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Net (decrease) increase in cash & cash equivalents 234,762 (2,532,902)
Cash & cash equivalents, beginning 44,471 2,696,706
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Cash, ending $ 279,233 $ 163,804
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Supplemental disclosure of cash flow information:
Cash paid for
Interest $ 477,702 $ 434,957
Income Taxes 200,695 1,822,000
Supplemental disclosure of non-cash flow information:
The Company receives contributions of plant from builders
and developers. These contributions of plant are reported
in utility plant and in customers' advances for
construction. The contributions are deducted from
construction expenditures by the Company
Gross Plant, additions $ 1,630,306 $ 983,532
Customers' advances for construction (27,170) (70,191)
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Capital expenditures, net $ 1,603,136 $ 913,341
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</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BIRMINGHAM UTILITIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Birmingham Utilities, Inc. is a specially chartered public service
corporation in the business of collecting and distributing water for domestic,
commercial and industrial uses and fire protection. The Company provides water
to Ansonia and Derby, Connecticut and in small parts of the contiguous Town of
Seymour with a population of approximately 31,000 people.
The Company is subject to the jurisdiction of the Connecticut
Department of Public Utility Control ("DPUC") as to accounting, financing,
ratemaking, disposal of property, the issuance of long-term securities and other
matters affecting its operations. The Connecticut Department of Public Health
(The "Health Department" or "DPH") has regulatory powers over the Company under
state law with respect to water quality, sources of supply, and the use of
watershed land. The Connecticut Department of Environmental Protection "DEP") is
authorized to regulate the Company's operations with regard to water pollution
abatement, diversion of water from streams and rivers, safety of dams and the
location, construction and alteration of certain water facilities. The Company's
activities are also subject to regulation with regard to environmental and other
operational matters by federal, state and local authorities, including, without
limitation, zoning authorities.
The Company is subject to regulation of its water quality under the
Federal Safe Drinking Water Act ("SDWA"). The United States Environmental
Protection Agency has granted to the Health Department the primary enforcement
responsibility in Connecticut under the SDWA. The Health Department has
established regulations containing maximum limits on contaminants, which have or
may have an adverse effect on health.
NOTE 1 - QUARTERLY FINANCIAL DATA
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The accompanying financial statements of Birmingham Utilities, Inc.
(the "Company") have been prepared in accordance with generally accepted
accounting principles, without audit, except for the Balance Sheet for the
period ending December 31, 1999, which has been audited. The interim financial
information conforms to the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X and, as applied in the case of rate-regulated public utilities,
complies with the Uniform System of Accounts and ratemaking practices prescribed
by the authorities. Certain information and footnote disclosures required by
generally accepted accounting principles have been omitted, pursuant to such
rules and regulations; although the Company believes that the disclosures are
adequate to make the information presented not misleading. For further
information, refer to the financial statements and accompanying footnotes
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1999.
The Company's business of selling water is to a certain extent seasonal
because water consumption normally increases during the warmer summer months.
Other factors affecting the comparability of various accounting periods include
the timing of rate
<PAGE>
increases and the timing and magnitude of property sales. Accordingly,
annualization of the results of operations for the three months ended September
30, 2000 and September 30, 1999 would not necessarily accurately forecast the
annual results of each year.
NOTE 2 - CALCULATION OF WEIGHTED AVERAGE SHARES
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OUTSTANDING-DILUTED
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The following table summarizes the number of common shares used in the
calculation of earnings per share.
<TABLE><CAPTION>
Three Months Ended Nine Months Ended
9/30/00 9/30/99 9/30/00 9/30/99
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<S> <C> <C> <C> <C>
Weighted average shares outstanding
for earnings per share, basic 1,600,073 1,577,245 1,594,341 1,562,740
Incremental shares from assumed
conversion of stock options 43,833 78,001 51,781 73,801
--------- --------- --------- ---------
Weighted average shares outstanding
for earnings per share, diluted 1,643,906 1,655,246 1,646,122 1,636,541
========= ========= ========= =========
</TABLE>
NOTE 3 - LAND SALES
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On March 21, 2000, the Company executed a Purchase and Sale Agreement with Toll
Brothers, Inc. ("Toll Bros.") for the sale by the Company and purchase by Toll
Bros. of 322 acres of unimproved property in the Town of Seymour, Connecticut.
The property consists of two contiguous parcels of 245 acres and 77 acres. The
purchase price of the parcels is $3,294,000 and $1,026,000, respectively. An
application for approval was filed with the DPUC on July 14, 2000 and draft
approval for the sale was given on October 30, 2000 for a sale price of no less
than $4,270,000 for both parcels. Final approval is expected on November 8,
2000. The closing is scheduled within 30 days after the completion of DPUC
approval, but in no event shall the closing occur before January 1, 2001 or
after September 1, 2001.
On September 13, 1999, the Company executed two purchase and sale agreements
with The Trust for Public Land, Inc., ("TPL") for the sale by the Company and
purchase by TPL of 570 and 42.5 acres of unimproved property in the City of
Ansonia and the Towns of Seymour and Woodbridge, CT, subject to TPL arranging
for the availability of public financing for the purchases. The purchase price
of the parcels is $6,050,000 and $200,000, respectively. On October 5, 2000, the
City of Ansonia purchased the 42.5-acre parcel for $200,000. The Company is
unable to predict at this time whether or not financing will be available for
the 570 acre parcel, although it is the Company's understanding that TPL expects
to convey the property immediately to the State of Connecticut and the City of
Ansonia for open space purposes and that they expect such financing to be in
place by the end of the
<PAGE>
year or shortly thereafter. The DPUC approved these transactions on March 1,
2000.
NOTE 4 - STOCK SPLIT
On January 11, 1999, the Company filed with the DPUC an Application for Approval
to Issue approximately 780,000 additional shares of common stock in conjunction
with a 2-for-1 stock split. The stock split, which had been approved by the
Board of Directors in December, 1998 was approved by the DPUC on February 26,
1999. The stock split became effective on March 31, 1999 with respect to shares
held of record on March 18, 1999. All per share financial information contained
in this Quarterly Report on Form 10-Q has been adjusted to reflect the impact of
the common stock split.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
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OPERATIONS AND FINANCIAL CONDITION
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Management's Discussion and Analysis of the Results of Operations and
Financial Condition contained in the Company's Annual Report on Form 10K for the
year ended December 31, 1999, should be read in conjunction with the comments
below.
CAPITAL RESOURCES AND LIQUIDITY
Completion of the Company's Long Term Capital Improvement Program is
dependent upon the Company's ability to raise capital from external sources,
including, for the purpose of this analysis, proceeds from the sale of the
Company's holdings of excess land. For the nine months ended September 30, 2000
and 1999, the Company's additions to utility plant, net of customer advances,
cost $1,603,136 and $913,341, respectively. (see Statement of Cash Flows). These
additions were financed primarily from external sources, namely, land sales and
short-term borrowing.
The Company has outstanding $4,324,000 principal amount of Mortgage
Bonds, due September 1, 2011, issued under its Mortgage Indenture. The Mortgage
Indenture limits the issuing of additional First Mortgage Bonds and the payment
of dividends. It does not, however, restrict the issuance of either long term or
short-term debt, which is either unsecured or secured with liens subordinate to
the lien of the Mortgage Indenture.
The Company also maintains a $5,000,000 two-year, unsecured revolving
line of credit. During the revolving period, the Company can choose between
variable rate options of 30,60, 90 or 180-day LIBOR plus 100 basis points or the
Prime plus 0%. The Company is required to pay interest only during the revolving
period. The loan is payable in full at maturity.
The DPUC approved this transaction on July 26, 2000. This $5,000,000
two-year, unsecured revolving line replaces the Company's $2,100,000 secured
line of credit, which expired on July 31, 2000. Borrowings of $2,256,715 were
outstanding on the revolving line of credit on September 30, 2000.
<PAGE>
The Company's 2000 Capital Budget of $1,888,000 is two-tiered. The
first tier consists of typical capital improvements made each year for services,
hydrants and meters, is budgeted for $701,000 in 2000, and is expected to be
financed primarily with internally generated funds.
The second tier of the 2000 Capital Budget consists of replacements and
betterments, which are part of the Company's Long Term Capital Improvement
Program, and includes $1,187,000 of budgeted plant additions. Plant additions
from this part of the 2000 budget will require use of the Company's line of
credit. Second tier plant additions can be, and portions of it are expected to
be, deferred to future years if funds are not available for their construction
in 2000.
As of September 30, 2000, the Company has approximately 922 acres of
excess land available for sale, of which substantially all is currently under
contract for sale (See Note 3), consisting of land currently classified as Class
III, non-watershed land under the statutory classification system for water
company lands. The Company believes that by selling these excess lands, it can
generate sufficient equity capital to support its 5-year capital budget,
currently estimated at $7,100,000. Such land dispositions are subject to
approval by the DPUC. Proceeds from the sale of land are recorded as revenue at
the time of closing and portions of the gains are deferred and amortized over
various times as stipulated by the DPUC.
RESULTS OF OPERATIONS
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Net Income
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Net income for the nine months ended September 30, 2000 was $449,244
compared with $678,697 for the same 1999 period. Increased operating expenses
and interest expense, as well as a reduction in the amortization of prior year
land sales, principally account for this decline. Net Income for the three
months ended September 30, 2000 of $165,619 is below earnings of $263,448,
achieved for the comparable quarter in 1999. A reduction in revenues in the
third quarter of 2000 from the comparable 1999 period and increased interest
expense account for this decline.
Operating Revenues
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Operating revenues for the first nine months of 2000 of $3,408,939 are
$126,502 below the comparable 1999 period. Decreased consumption in 2000 as
compared to 1999 due to an extended dry period in 1999 accounts for the decline.
Operating revenues for the three-month period ending September 30, 2000 are
$140,327 lower than the comparable 1999 quarter. Decreased consumption among the
residential and commercial classes accounts for this decrease, as the 2000 third
quarter was cool and wet compared to a very hot and dry third quarter in 1999.
<PAGE>
Operating and Maintenance Expenses
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Operating and Maintenance Expenses for the first nine months of 2000 of
$2,002,413 are $42,972 higher than operating and maintenance expenses of
$1,958,441 recorded in the first nine months of 1999. Higher water treatment
facilities expenses, increased transmission and distribution maintenance,
increased meter expenses and higher general plant charges account for this
increase. Reduced administrative salary expenses somewhat offset these
increases. Operating and Maintenance expenses for the three-month period ending
September 30, 2000 are $30,569 below the level achieved in the third quarter of
1999. Reduced purchased water costs, director fees, as well as reduced
administrative salaries, account for the decline.
Depreciation Expense
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Depreciation expense for the first nine months of 2000 and for the
three-month period ending September 30, 2000 are $8,253 and $2,751,
respectively, lower than the comparable 1999 periods due to an overaccrual in
1999, which was adjusted in the last quarter of 1999. Depreciation expense
relating to general plant additions in 2000, somewhat offset the overaccrual.
Taxes Other Than Income Taxes
-----------------------------
Taxes Other Than Income Taxes for the nine-month period ending
September 30, 2000 are $16,050 higher than the comparable 1999 period. Increased
payroll taxes and property taxes account for this increase. Taxes other than
income taxes for the three-month period ending September 30, 2000 are $12,138
higher than the comparable 1999 period. Increased property taxes account for
this variance.
Other Income
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Other Income for the first nine months of 2000 is $14,561 higher than
the comparable period in 1999. Increased miscellaneous non-operating income
accounts for this increase. Other income for the three-month period ending
September 30, 2000 is $23,784 higher than the comparable 1999 quarter. Increased
jobbing and miscellaneous, non-operating income account for this variance.
Land Dispositions
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When the Company disposes of land, any gain recognized, net of tax, is
shared between ratepayers and stockholders based upon a formula approved by the
DPUC. The impact of land dispositions is recognized in two places on the
statement of income.
The statement of income will reflect income from the disposition of
Land (net of taxes) if land sales do occur. Since there were no land sales in
2000, the statement of income reflects zero for both year to date and in the
third quarter. The minor land sales booked in 1999, realizing a net gain of
$9,152, related to encroachment disputes. When
<PAGE>
land sales occur, the stockholders' immediate share of income will be booked in
the year of the sale based on a formula approved by the DPUC, when the sales
price exceeds $50,000.
Land disposition income is also recognized in the financial statements
as a component of operating income on the line entitled "Amortization of
Deferred Income on Dispositions of Land". These amounts represent the
recognition of income deferred on land dispositions, which occurred in prior
years. The amortization of deferred income on land dispositions net of tax, was
$138,411 and $257,330 for the nine months ended September 30, 2000 and 1999, and
$46,137 and $85,740, respectively, for the three-month periods ending September
30, 2000 and 1999.
Recognition of deferred income will continue over time periods ranging
from three to fifteen years, depending upon the amortization period ordered by
the DPUC for each particular disposition.
<PAGE>
PART II. OTHER INFORMATION
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ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits - Financial Data Schedule
(b) Reports on form 8-K. None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the company
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BIRMINGHAM UTILITIES, INC.
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Registrant
Date: November 1, 2000
/s/ John S. Tomac
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John S. Tomac, President
