<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
F O R M 1 0 - Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
________________
JUNE 30, 1995
For Quarter Ended . . . . . . . . . . . . . . . . . Commission file No. 0-18677
DOMINGUEZ SERVICES CORPORATION
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0391161
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(State of other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
21718 SOUTH ALAMEDA STREET, LONG BEACH, CALIFORNIA 90810
(Address of principal executive offices) . . . . . . . . . . . . .(Zip Code)
Registrant's telephone number, including area code. . . . . . . (310) 834-2625
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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, and (2) has been subject to such filing
requirements for the past 90 days.
YES X . 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 close of the period covered by this report. Common
stock (one class) - 1,004,370
<PAGE>
DOMINGUEZ SERVICES CORPORATION
INDEX
PAGE NO.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
(a) Consolidated Income Statement for the 3
Three Months Ended June 30, 1995
and 1994
(b) Consolidated Income Statement for the 4
Six Months Ended June 30, 1995 and 1994
(c) Consolidated Income Statement for the 5
Twelve Months Ended June 30, 1995
and 1994
(d) Consolidated Balance Sheet as of 6
June 30, 1995 and Consolidated
Balance Sheet as of December 31, 1994
(e) Consolidated Statements of Cash Flows 7
for the Six Months Ended
June 30, 1995 and 1994
(f) Capitalization and Stockholders' Equity 8
as of June 30, 1995
(g) Notes to Consolidated Financial 9
Statements
Item 2. Management's Discussion and Analysis of 10-11
Financial Condition and Results of Operation
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on form 8-K 12
Signatures
2
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Company or group of companies for which report is filed: Dominguez Services
Corporation, Dominguez Water Corporation, Antelope Valley Water Company,
Kernville Domestic Water Company, Arden Water Company, Hydro-Metric Service
Corporation.
(a) Consolidated Income Statement (Unaudited) - Fiscal Quarter ending:
<TABLE>
<CAPTION>
For the For the
Quarter Ended Quarter Ended
June 30, 1995 June 30, 1994
------------- -------------
<S> <C> <C>
Operating Revenue . . . . . . . . . . . . . . . . . . . . . . $6,868,243 $5,867,300
Costs and Expenses
Operating Expenses. . . . . . . . . . . . . . . . . . . 5,704,554 4,616,834
Interest Expenses . . . . . . . . . . . . . . . . . . . 166,901 179,920
Other expenses, net . . . . . . . . . . . . . . . . . . 2,813 22,674
Total Costs and Expenses. . . . . . . . . . . . . . . . 5,874,268 4,819,428
Income from operations. . . . . . . . . . . . . . . . . . . . 993,976 1,047,872
Other income. . . . . . . . . . . . . . . . . . . . . . . . . $ 14,906 42,673
Income before taxes on income. . . . . . . . . . . . . . 1,008,882 1,090,545
Provision for taxes on income . . . . . . . . . . . . . . . . 404,945 437,749
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . $603,937 $ 652,796
Less preferred dividends. . . . . . . . . . . . . . . . 1,219 1,219
Net income applicable to common shares . . . . . . . . . $ 602,718 $ 651,577
Earnings per common share . . . . . . . . . . . . . . . . . . $0.60 $0.65
Dividends per common share. . . . . . . . . . . . . . . . . . $0.29 $0.275
Average common shares outstanding . . . . . . . . . . . . . . 1,004,370 1,004,370
</TABLE>
See accompanying notes to Financial Statements
3
<PAGE>
(b) Consolidated Income Statement (Unaudited) - Six Months Ended:
<TABLE>
<CAPTION>
For the Six For the Six
Months Ended Months Ended
June 30, 1995 June 30, 1994
------------- -------------
<S> <C> <C>
Operating Revenues. . . . . . . . . . . . . . . . . . . . . . $11,962,535 $10,706,843
Costs and Expenses
Operating Expenses. . . . . . . . . . . . . . . . . . . 10,248,948 8,915,948
Interest Expenses . . . . . . . . . . . . . . . . . . . 343,724 362,232
Other expenses, net . . . . . . . . . . . . . . . . . . 5,310 27,088
Total Costs and Expenses. . . . . . . . . . . . . . . . 10,597,982 9,305,268
Income from operations. . . . . . . . . . . . . . . . . . . . 1,364,553 1,401,575
Other income. . . . . . . . . . . . . . . . . . . . . . . . . 32,728 61,219
Income before taxes on income . . . . . . . . . . . . . . . . 1,397,281 1,462,794
Provision for taxes on income . . . . . . . . . . . . . . . . 560,841 587,149
Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . $ 836,440 $ 875,645
Less preferred dividends. . . . . . . . . . . . . . . . 2,438 2,438
Net income applicable to common shares. . . . . . . . . . . . $ 834,002 $ 873,207
Earnings per common share . . . . . . . . . . . . . . . . . . $0.83 $0.87
Dividends per common share. . . . . . . . . . . . . . . . . . $0.58 $0.55
Average common shares outstanding . . . . . . . . . . . . . . 1,004,370 1,004,370
</TABLE>
See accompanying notes to Financial Statements
4
<PAGE>
(c) Consolidated Income Statement (Unaudited) - Twelve Months Ended:
<TABLE>
<CAPTION>
12 Months 12 Months
Ended Ended
June 30, 1995 June 30, 1994
------------- -------------
<S> <C> <C>
Operating Revenue . . . . . . . . . . . . . . . . . . . . . . $25,942,424 $22,431,208
Costs and Expenses
Operating Expenses. . . . . . . . . . . . . . . . . . . 22,103,422 18,838,247
Interest Expenses . . . . . . . . . . . . . . . . . . . 695,203 716,769
Other expenses, net . . . . . . . . . . . . . . . . . . 7,651 28,861
Total Costs and Expenses. . . . . . . . . . . . . . . . 22,806,276 19,583,877
Income from operations. . . . . . . . . . . . . . . . . . . . 3,136,148 2,847,331
Other Income. . . . . . . . . . . . . . . . . . . . . . . . . 70,163 378,125
Income before taxes on income . . . . . . . . . . . . . . . . 3,206,311 3,225,456
Provision for taxes on income . . . . . . . . . . . . . . . . 1,312,989 1,226,580
Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,893,322 $ 1,998,876
Less preferred dividends. . . . . . . . . . . . . . . . 4,876 4,876
Net income applicable to common shares. . . . . . . . . . . . $ 1,888,446 $ 1,994,000
Earnings per common share . . . . . . . . . . . . . . . . . . $1.88 $1.99
Dividends per common share. . . . . . . . . . . . . . . . . . $1.13 $1.08
Average common share outstanding. . . . . . . . . . . . . . . 1,004,370 1,004,370
</TABLE>
See accompanying notes to Financial Statements
5
<PAGE>
(d) Consolidated Balance Sheet (Unaudited)
<TABLE>
<CAPTION>
As of As of
June 30, 1995 Dec. 31, 1994
------------- -------------
<S> <C> <C>
ASSETS
Plant and equipment . . . . . . . . . . . . . . . . . . $54,750,691 $54,787,402
Less allowance for depreciation . . . . . . . . . . . . 20,418,417 19,586,430
----------- -----------
Net plant and investments . . . . . . . . . . . . . . . 34,332,274 35,200,972
Construction work in progress . . . . . . . . . . . . . 1,983,050 748,375
----------- -----------
Net utility plant . . . . . . . . . . . . . . . . . . . 36,315,324 35,949,347
Non utility property. . . . . . . . . . . . . . . . . . 184,472 560,185
Current and accrued assets. . . . . . . . . . . . . . . 6,122,940 5,507,209
Deferred debits . . . . . . . . . . . . . . . . . . . . 2,783,075 2,635,590
----------- -----------
$45,405,811 $44,652,331
----------- -----------
----------- -----------
LIABILITIES
Capital stock
Class A Preferred - par value $25 per share
Outstanding 3,901 shares . . . . . . . . . . . . . . $ 97,525 $ 97,525
Common - par value $1 per share
Outstanding 1,004,370 shares . . . . . . . . . . . . 1,004,370 1,004,370
Surplus:
Capital Surplus. . . . . . . . . . . . . . . . . . . . . 2,512,371 2,490,591
Earnings retained in business. . . . . . . . . . . . . . . 10,848,815 10,597,342
----------- -----------
Total Capital. . . . . . . . . . . . . . . . . . . . . . 14,463,081 14,189,828
----------- -----------
Long-term debt:
First mortgage bonds . . . . . . . . . . . . . . . . . . 6,065,000 6,083,000
Other notes. . . . . . . . . . . . . . . . . . . . . . . 1,415,714 1,242,781
----------- -----------
Total Long-term debt . . . . . . . . . . . . . . . . . . 7,480,714 7,325,781
----------- -----------
Current portion long-term debt . . . . . . . . . . . . . . 319,000 319,000
Current and accrued liabilities. . . . . . . . . . . . . . 5,307,060 4,776,055
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . 3,646,771 3,563,065
Advances for construction. . . . . . . . . . . . . . . . . 5,153,816 5,334,557
Contributions and in aid of construction . . . . . . . . 6,160,621 6,263,605
Deferred credits . . . . . . . . . . . . . . . . . . . . . 2,874,748 2,880,440
----------- -----------
$45,405,811 $44,652,331
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to Financial Statements
6
<PAGE>
(e) Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
For the Six For the Six
Months Ended Months Ended
June 30, 1995 June 30, 1994
------------- -------------
<S> <C> <C>
Cash Flows from operating activities:
Net Income . . . . . . . . . . . . . . . . . . . . . . $ 836,440 $ 875,645
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and Amortization. . . . . . . . . . . . . 760,467 639,223
Deferred Income Tax and ITC. . . . . . . . . . . . . . 83,706 83,706
Change in Assets and Liabilities:
Customers Receivables. . . . . . . . . . . . . . . . . (573,962) (665,600)
Other Receivables. . . . . . . . . . . . . . . . . . . 574,471 379,262
Materials and Supplies . . . . . . . . . . . . . . . . 8,586 6,847
Accounts Payable . . . . . . . . . . . . . . . . . . . (51,667) 650,241
Income Taxes Payable . . . . . . . . . . . . . . . . . (105,886) (167,819)
Deferred Credits . . . . . . . . . . . . . . . . . . . (431,351) 130,750
All Other. . . . . . . . . . . . . . . . . . . . . . . 966,981 (121,835)
----------- -----------
Net Cash Provided by Operating Activities . . . . . . . . . 2,047,785 1,810,420
----------- -----------
Cash flows from Investing Activities:
Capital Expenditures . . . . . . . . . . . . . . . . . (1,176,184) (1,456,714)
----------- -----------
Net Cash Used for Investing Activities. . . . . . . . . . . (1,176,184) (1,456,714)
----------- -----------
Cash Flow from Financing Activities:
Proceeds from Contributions in Aid of Construction . . (204,805) (106,166)
Repayment of Long-Term Debt. . . . . . . . . . . . . . 154,933 (31,486)
Dividends Paid . . . . . . . . . . . . . . . . . . . . (584,967) (554,844)
----------- -----------
Net Cash Used by Financing Activities . . . . . . . . . . . 634,839 (692,496)
----------- -----------
Net Increase (Decrease) in Cash . . . . . . . . . . . . . . 236,762 (338,790)
Cash at Beginning of Year . . . . . . . . . . . . . . . . . 1,085,283 1,910,767
----------- -----------
Cash at End of Period . . . . . . . . . . . . . . . . . . . . $ 1,322,045 $ 1,571,977
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to Financial Statements
7
<PAGE>
(f) Capitalization and Stockholders' Equity (Unaudited)
<TABLE>
<CAPTION>
As of
June 30, 1995
-------------
<S> <C>
Debt:
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . $7,799,714
Current sinking fund requirements . . . . . . . . . . . . . . 319,000
----------
Long-term debt maturing in more than twelve months . . . . . . . $7,480,714
----------
----------
Deferred credits. . . . . . . . . . . . . . . . . . . . . . . . . . $2,874,748
----------
----------
</TABLE>
<TABLE>
<CAPTION>
Shares Issued
Or Outstanding
--------------
<S> <C> <C>
Stockholders' Equity:
Non-convertible cumulative preferred stock
Class A, 5%, $25 par value . . . . . . . . . . 3,901 $ 97,525
Common stock. . . . . . . . . . . . . . . . . . . 1,004,370 $ 1,004,370
Capital in excess of par value. . . . . . . . . . $ 2,512,371
-----------
Retained earnings:
Balance at beginning of current Fiscal Year . . $10,597,342
Net Income . . . . . . . . . . . . . . . . . 836,440
Cash dividends Common stock @ $0.58. . . . . 582,529
Preferred stock Class A @ $0.6250. . . . . 2,438
-------
Balance at end of interim period. . . . . . . . $10,848,815
-----------
-----------
Total Stockholders' Equity . . . . . . . . . . . . $14,463,081
-----------
-----------
</TABLE>
See accompanying notes to Financial Statements
8
<PAGE>
(g) Notes to Consolidated Financial Statements (Unaudited)
1. In the opinion of management, information furnished herein reflects
adjustments necessary for a fair presentation of the financial
position and results of operations for the interim periods.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
Earnings per share for the quarter ended June 30, 1995 were $0.60
compared to $0.65 in the second quarter of 1994. Revenues for the
quarter ended June 30, 1995 were $6,868,243 and net income was
$603,937, compared to revenues of $5,867,300 and net income of
$652,796 for the same period last year.
Despite increased revenues for the second quarter, earnings were
lower due to a tighter margin and higher operating expenses. Margin
narrowed due to lower revenues associated with leased water rights
and costs recorded for the Company's participation in water supply
management programs. Operating expenses included additional costs
to renovate wells in the South Bay and higher costs in the Kern
River Valley. However, we do expect year-end earnings to exceed
industry averages.
Earnings for the first half of 1995 were $0.83, which compares with
$0.87 last year. Gross revenues were $11,962,535 and net income was
$836,440, compared to 1994's gross revenues of $10,706,843 and net
income of $875,645. Earnings per share for the twelve months ended
the same date were $1.88, compared to $1.99 for the same period
last year. Revenues totaled $25,942,424 and net income was
$1,893,322, compared to $22,431,208 and $1,998,876 respectively for
the same period last year.
On June 27, 1995, the Board of Directors announced the Company's
129th consecutive quarterly dividend at $.29 per share on common
stock to be paid on September 15, 1995.
The most significant event during this quarterly period is the
increase in water costs to us adopted by our imported suppliers,
Metropolitan Water District and the West Basin Municipal Water
District. The Water Replenishment District also increased its
charges for basin management. The total cost increases are
$1,500,000. This would be a 6.2 percent increase effective July 1
to our South Bay customers. The application to the Commission is
now under consideration. Because of the Company's high earnings,
not all of the amount will be recoverable in rates at this time.
However, we can expect to recover the difference in the balancing
account in the future. This pass-through of higher water costs in
rates does not increase the profits of the Company.
At the Annual Shareholders' Meeting held May 5, the Companys
president, C.W. Porter, announced that he would be retiring at the
end of 1995. The Board has hired an executive recruiter to search
for outside candidates, in addition to considering our internal
candidates. Selection can then be made from a broad spectrum of
aspirants. This search should be culminated when the next quarterly
report is due in October.
10
<PAGE>
The status of regulation of utility companies through the
California Public Utilities Commission (CPUC) is in a state of
flux. The legislature is holding hearings concerning the
organization of the Commission. The Public Utilities Commissioners
are trying to forestall legislative action by submitting a plan
that envisions performance based rate making for utilities as well
as other steps to reorganize the Commission itself to streamline
its task of regulating. One proposal, that we would welcome, is a
division within the Commission dedicated to regulating water
utilities instead of multi-divisions which now regulate the water
industry.
Whatever the outcome, we expect public utility type regulation will
be carried-on into the future. The difference might be adoption of
performance-based rate making similar in form now being negotiated
by the power companies. Under these rules, the utility and the
Commission would agree to a set of certain operating utility
efficiency ratios. The companies would agree to pursue greater
efficiencies which would then allow the company to post better
earnings, part of which the shareholders would keep and part of
which would be passed on to rate payers. Rate cases would be less
frequent. In the meantime, owners, customers, and management will
be watching closely the developments in the California legislature.
We are pleased to welcome a new member to our Board of Directors.
Ms. Debra Reed is Executive Vice President of Southern California
Gas Company and lends considerable expertise to our Board. She is
manager of the largest division of the gas company, which includes
the rate making, distribution, and billing. This most recent
assignment follows her position as Vice President of Human
Resources. All of this experience will be valuable for the company
inasmuch as there are many changes in these arenas.
11
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On June 28, 1994, a complaint was filed in the Superior Court of
the State of California for the County of Los Angeles against the
Company, its wholly owned subsidiary, Dominguez Water Corporation
(the "Water Company"), and other defendants by the widow of a
deceased employee. The complaint seeks $10 million in actual
damages as well as punitive damages from the defendants in
connection with the death of plaintiff's husband who was shot dead
on January 7, 1994 by Ahmed Kadil who was employed by the Water
Company at the time of the shooting. The shooting did not occur on
the Company's premises. Plaintiff alleges, however, that Mr. Kadil
was acting as an agent of the Company and the Water Company and
that, among other things, they were both negligent in hiring,
training and retaining him as an employee.
Plaintiff has not yet served her complaint on the Company or the
Water Company. The Company intends to deny any responsibility or
liability for the death of plaintiff's husband. It further believes
that there is a reasonable likelihood that the plaintiff will be
precluded by the California Workers' Compensation law for
recovering any monetary damages directly from the Company or the
Water Company as a successful claim against them would only entitle
plaintiff to recover statutorily mandated damages directly from the
California Workers' Compensation fund.
Item 6. OTHER
An 8-K report was not required for either
1. Material unusual charges or credits to income during the
most recently completed fiscal quarter, or
2. A change in independent accountants during the period.
The information furnished reflects all adjustments which, in the opinion
of management, are necessary to the fair statement of the results of the
interim periods.
DOMINGUEZ SERVICES CORPORATION
Date: 8/14/95 By: John S. Tootle
---------------------------- ----------------------------
John S. Tootle
Vice-President Finance
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED INCOME STATEMENT FOR THE PERIOD
ENDING JUNE 30, 1995.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,322,045
<SECURITIES> 0
<RECEIVABLES> 3,179,713
<ALLOWANCES> (224,997)
<INVENTORY> 92,478
<CURRENT-ASSETS> 6,122,940
<PP&E> 56,733,741
<DEPRECIATION> 20,418,417
<TOTAL-ASSETS> 45,405,811
<CURRENT-LIABILITIES> 5,626,060
<BONDS> 6,065,000
<COMMON> 1,004,370
0
97,525
<OTHER-SE> 13,361,186
<TOTAL-LIABILITY-AND-EQUITY> 45,405,811
<SALES> 10,999,734
<TOTAL-REVENUES> 11,962,585
<CGS> 5,679,463
<TOTAL-COSTS> 9,385,653
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 74,431
<INTEREST-EXPENSE> 343,724
<INCOME-PRETAX> 1,397,281
<INCOME-TAX> 560,841
<INCOME-CONTINUING> 836,440
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 836,440
<EPS-PRIMARY> 0.83
<EPS-DILUTED> 0.83
</TABLE>
