<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, 1996
FOR QUARTER ENDED ON 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)
(310) 834-2625
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE..............................
- --------------------------------------------------------------------------------
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
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PAGE NO.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
(a) CONSOLIDATED INCOME STATEMENT FOR THE 3
THREE MONTHS ENDING JUNE 30, 1996
AND 1995
(b) CONSOLIDATED INCOME STATEMENT FOR THE 4
SIX MONTHS ENDING JUNE 30, 1996
AND 1995
(c) CONSOLIDATED INCOME STATEMENT FOR THE 5
TWELVE MONTHS ENDING JUNE 30, 1996
AND 1995
(d) CONSOLIDATED BALANCE SHEET AS OF 6
JUNE 30, 1996 AND CONSOLIDATED
BALANCE SHEET AS OF DECEMBER 31, 1995
(e) CONSOLIDATED STATEMENTS OF CASH FLOWS 7
FOR THE SIX MONTHS ENDING
JUNE 30, 1996 AND 1995
(f) CAPITALIZATION AND STOCKHOLDERS' EQUITY 8
AS OF JUNE 30, 1996
(g) NOTES TO CONSOLIDATED FINANCIAL 9
STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 9-10
FINANCIAL CONDITION AND RESULTS OF OPERATION
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11
SIGNATURE 11
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 CO., KERNVILLE
DOMESTIC WATER CO., ARDEN WATER CO., HYDRO-METRIC SERVICE CORPORATION.
(a) CONSOLIDATED INCOME STATEMENT (UNAUDITED) - FISCAL QUARTER ENDING:
<TABLE>
<CAPTION>
FOR THE FOR THE
QUARTER ENDING QUARTER ENDING
JUNE 30, 1996 JUNE 30, 1995
-------------- --------------
<S> <C> <C>
OPERATING REVENUE $6,355,921 $6,605,633
COSTS AND EXPENSES
OPERATING EXPENSES 5,361,540 5,552,154
INTEREST EXPENSES 172,779 166,901
OTHER EXPENSES, NET 3,289 2,813
TOTAL COSTS AND EXPENSES 5,537,608 5,721,868
INCOME FROM OPERATIONS 818,313 883,765
OTHER INCOME 75,465 125,116
INCOME BEFORE TAXES ON INCOME 893,778 1,008,881
PROVISION FOR TAXES ON INCOME 358,745 404,945
NET INCOME $535,033 $603,936
LESS PREFERRED DIVIDENDS --0-- 1,219
NET INCOME APPLICABLE TO COMMON SHARES $535,033 $602,717
EARNINGS PER COMMON SHARE $0.53 $0.60
DIVIDENDS PER COMMON SHARE $0.31 $0.29
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 ENDING:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE SIX
MONTHS ENDING MONTHS ENDING
JUNE 30, 1996 JUNE 30, 1995
------------- -------------
<S> <C> <C>
OPERATING REVENUE $11,581,189 $11,699,925
COSTS AND EXPENSES
OPERATING EXPENSES 10,053,977 10,096,548
INTEREST EXPENSES 344,803 343,724
OTHER EXPENSES, NET 9,249 5,310
TOTAL COSTS AND EXPENSES 10,408,029 10,445,582
INCOME FROM OPERATIONS 1,173,160 1,254,343
OTHER INCOME 172,439 142,938
INCOME BEFORE TAXES ON INCOME 1,345,599 1,397,281
PROVISION FOR TAXES ON INCOME 540,097 560,841
NET INCOME $805,502 $836,440
LESS PREFERRED DIVIDENDS 1,219 2,438
NET INCOME APPLICABLE TO COMMON SHARES $804,283 $834,002
EARNINGS PER COMMON SHARE $0.80 $0.83
DIVIDENDS PER COMMON SHARE $0.62 $0.58
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 ENDING:
<TABLE>
<CAPTION>
FOR THE TWELVE FOR THE TWELVE
MONTHS ENDING MONTHS ENDING
JUNE 30, 1996 JUNE 30, 1995
-------------- --------------
<S> <C> <C>
OPERATING REVENUE $25,367,586 $25,026,809
COSTS AND EXPENSES
OPERATING EXPENSES 21,963,934 21,659,962
INTEREST EXPENSES 684,212 695,203
OTHER EXPENSES, NET 11,126 7,651
TOTAL COSTS AND EXPENSES 22,659,272 22,362,816
INCOME FROM OPERATIONS 2,708,314 2,663,993
OTHER INCOME 369,942 542,318
INCOME BEFORE TAXES ON INCOME 3,078,256 3,206,311
PROVISION FOR TAXES ON INCOME 1,156,688 1,312,989
NET INCOME $1,921,568 $1,893,322
LESS PREFERRED DIVIDENDS 3,657 4,876
NET INCOME APPLICABLE TO COMMON SHARES $1,917,911 $1,888,446
EARNINGS PER COMMON SHARE $1.91 $1.88
DIVIDENDS PER COMMON SHARE $1.20 $1.13
AVERAGE COMMON SHARES 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, 1996 DECEMBER 31, 1995
------------- -----------------
ASSETS
<S> <C> <C>
PLANT AND EQUIPMENT $57,200,005 $57,094,383
DEPRECIATION ALLOWANCE (21,031,075) (20,312,058)
CONSTRUCTION WORK IN PROGRESS 2,107,388 291,478
--------- -------
NET UTILITY PLANT 38,276,318 37,073,803
NON-UTILITY PROPERTY 135,133 149,138
CURRENT AND ACCRUED ASSETS 5,439,564 5,272,443
DEFERRED DEBITS 2,484,259 2,799,374
--------- ---------
$46,335,274 $45,294,758
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----------- -----------
LIABILITIES
CAPITAL STOCK:
CLASS A PREFERRED - PAR VALUE $25 PER SHARE
NO OUTSTANDING SHARES IN 1996 $--0-- $97,525
COMMON - PAR VALUE $1 PER SHARE
OUTSTANDING 1,004,370 SHARES 1,004,370 1,004,370
SURPLUS:
CAPITAL SURPLUS 2,507,502 2,512,379
EARNINGS RETAINED IN BUSINESS 11,561,486 11,379,913
---------- ----------
TOTAL CAPITAL 15,073,358 14,994,187
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LONG-TERM DEBT:
FIRST MORTGAGE BONDS 6,005,000 6,023,000
OTHER NOTES 1,458,918 1,250,335
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TOTAL LONG-TERM DEBT 7,463,918 7,273,335
--------- ---------
CURRENT PORTION LONG-TERM DEBT 81,000 81,000
CURRENT AND ACCRUED LIABILITIES 5,244,650 4,819,070
DEFERRED TAXES 3,761,435 3,696,565
ADVANCES FOR CONSTRUCTION 5,485,300 5,440,080
CONTRIBUTION IN AID OF CONSTRUCTION 6,109,271 6,055,354
DEFERRED CREDITS 3,116,342 2,935,167
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$46,335,274 $45,294,758
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----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
(e) CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX FOR THE SIX
MONTHS ENDING MONTHS ENDING
JUNE 30, 1996 JUNE 30, 1995
------------- -------------
CASH FLOW FROM OPERATING ACTIVITIES:
<S> <C> <C>
NET INCOME $805,502 $836,440
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATION ACTIVITIES:
DEPRECIATION AND AMORTIZATION 617,863 726,377
DEFERRED INCOME TAX AND ITC 64,870 83,706
CHANGE IN ASSETS AND LIABILITIES:
CUSTOMERS RECEIVABLE (526,278) (573,962)
OTHER RECEIVABLE 506,877 554,471
MATERIALS AND SUPPLIES 23,536 8,586
ACCOUNTS PAYABLE (64,907) (51,667)
INCOME TAXES PAYABLE 143,779 (105,886)
DEFERRED CREDITS 172,324 (160,576)
ALL OTHERS (174,483) 354,168
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NET CASH PROVIDED BY OPERATING ACTIVITIES 1,569,083 1,671,657
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
CAPITAL EXPENDITURES (1,926,409) (1,166,183)
PURCHASE SUBSIDIARIES --0-- (10,001)
----- ------
NET CASH USED FOR INVESTING ACTIVITIES
(1,926,409) (1,176,184)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
PROCEEDS FROM CONTRIBUTIONS IN AID OF
CONSTRUCTION & ADVANCES 99,137 (283,725)
REPAYMENT OF LONG TERM DEBT 190,583 154,933
DIVIDENDS PAID (623,929) (584,967)
STOCK REDEMPTION (97,525) --0--
OTHER 108,120 113,010
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NET CASH USED BY FINANCING ACTIVITIES (323,614) (600,749)
------- -------
NET (DECREASE) INCREASE IN CASH ($680,940) ($105,276)
CASH AT BEGINNING OF YEAR 751,606 1,427,321
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CASH AT END OF YEAR $70,666 $1,322,045
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</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
(f) CAPITALIZATION AND STOCKHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
AS OF
JUNE 30, 1996
-------------
<S> <C> <C> <C>
DEBT:
LONG-TERM DEBT $7,544,918
CURRENT SINKING FUND REQUIREMENTS (81,000)
------
TOTAL DEBT MATURING IN MORE THAN TWELVE MONTHS $7,463,918
----------
----------
DEFERRED CREDITS $3,116,342
----------
----------
STOCKHOLDER'S EQUITY: SHARES
ISSUED OR
OUTSTANDING AMOUNT
----------- ------
COMMON STOCK $1 PAR VALUE 1,004,370 $1,004,370
CAPITAL IN EXCESS OF PAR VALUE 2,507,502
RETAINED EARNINGS:
BALANCE AT BEGINNING OF CURRENT FISCAL YEAR $11,379,913
NET INCOME 805,502
CASH DIVIDENDS:
COMMON STOCK @ $0.31 $622,710
PREFERRED STOCK CLASS A @ $0.3125 1,219 (623,929)
----- -------
BALANCE AT END OF INTERIM PERIOD 11,561,486
----------
TOTAL STOCKHOLDER'S EQUITY $15,073,358
-----------
-----------
</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.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
For the quarter ended June 30, 1996, earnings per share were $0.53,
compared to $0.60 the same period in 1995. Revenues for the quarter
ended June 30, 1996, were $6,355,921 and net income was $535,033,
compared to revenues of $6,605,633 and net income of $603,936 for the
same period last year.
Earnings per share for the first half of 1996 were $0.80, which
compared with $0.83 last year. Gross revenues were $11,581,189 and
net income was $805,502, compared to 1995's gross revenues of
$11,699,925 and net income of $836,440.
For the twelve months ended June 30, 1996, earnings per share were
$1.91, up from $1.88 the same period in 1995. Revenues for the twelve
months ended June 30, 1996, were $25,367,586 and net income was
$1,921,568, compared to revenues of $25,026,809 and net income of
$1,893,322, for the same period last year.
The slight decrease in this quarter's results are attributable to a
4.1% decrease in sales from the same quarter last year, caused by
reduced water purchases by one industry group. However, seasonal
variations in sales are to be expected in the water industry, and the
Company does not anticipate the quarter's results to affect its year-
end performance.
The Company remains on track with its strategic plan, which focuses on
increasing the efficiency and growing the business. Employee teams
are delivering measurable improvements to some of the Company's key
business processes, thus strengthening the core business and readying
the Company for growth. Also enhancing the Company's growth
potential, the Company has secured service agreements with two mutual
water companies in the Kern River Valley.
As part of the Company's strategic repositioning, Dominguez sold the
remaining assets of its non-utility subsidiary, Hydro-Metric
Corporation as of April 26, 1996. This transaction had no material
effect on the Company's financial statements.
As of March 15, 1996, the Company redeemed all its outstanding Class A
Preferred Shares.
9
<PAGE>
WATER QUALITY
As a water purveyor to more than 100,000 people, the Company has been
ordered by the EPA to participate in a data acquisition program
beginning in September. The purpose of this nationwide study is to
provide technical information which will guide the EPA in establishing
additional disinfection by-products regulations. Known as the
Information Collection Rule (ICR), the program is expected to last for
two years.
WATER SUPPLY
The water supply outlook is encouraging. Although this year's runoff
was slightly less than in the prior year, reservoirs are near capacity
and snow pack in Northern California is still well above normal. MWD
expects full deliveries from the Colorado River, and State Water
Project water will be available. The Company is assured of having
adequate supplies to meet South Bay customers' demands for the next
two years.
The Company continues to increase local well capacity in order to
mitigate the effects of water shortages and future imported water rate
increases. All South Bay wells are operational, producing
approximately 50% of the system's supply. For the last twelve months,
these wells produced more water than any other time in the last twenty
years.
In the Kern River Valley and Antelope Valley, ground water levels
indicate that these systems should have an adequate water supply for
1996.
DIVIDEND INCREASE
The Board of Directors has declared the Company's 134th consecutive
quarterly dividend at $.31 per share on common stock to be paid on
September 15, 1996.
OTHER
The Company wish the best to Vice President and Corporate Secretary
Chris Rose, who has decided to pursue other career opportunities. The
Company thank him for the many contributions he has made to
Dominguez's success. His management skills and valuable insight will
be missed. He will continue to share his expertise with the Company
in a consulting capacity.
10
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS - No legal proceedings have been filed
against the registrant that have not
been previously reported.
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: By:
------------------------- --------------------------------
John S. Tootle
CFO, Vice-President Finance
11
<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, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 70,666
<SECURITIES> 0
<RECEIVABLES> 3,254,719
<ALLOWANCES> (256,883)
<INVENTORY> 70,635
<CURRENT-ASSETS> 5,439,564
<PP&E> 59,307,393
<DEPRECIATION> 21,031,075
<TOTAL-ASSETS> 46,335,274
<CURRENT-LIABILITIES> 5,325,650
<BONDS> 6,005,000
1,004,370
0
<COMMON> 0
<OTHER-SE> 14,068,988
<TOTAL-LIABILITY-AND-EQUITY> 46,335,274
<SALES> 10,970,172
<TOTAL-REVENUES> 11,581,189
<CGS> 3,748,330
<TOTAL-COSTS> 9,172,059
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 49,648
<INTEREST-EXPENSE> 344,803
<INCOME-PRETAX> 1,345,599
<INCOME-TAX> 540,097
<INCOME-CONTINUING> 805,502
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 805,502
<EPS-PRIMARY> 0.80
<EPS-DILUTED> 0.80
</TABLE>
