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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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F O R M 1 0 - Q
Quarterly Report Under Section 13 OR 15 (D)
of the Securities Exchange Act of 1934
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JUNE 30, 1997
For Quarter Ended------------------------------------------on file No. 0-18677
DOMINGUEZ SERVICES CORPORATION
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(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0391161
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(State of other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
21718 SOUTH ALAMEDA STREET, LONG BEACH, CALIFORNIA 90810
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(Address of principal executive offices) (Zip Code)
(310) 834-2625
Registrant's telephone number, including area code----------------------------
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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
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(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
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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, 1997
and 1996
(b) Consolidated Income Statement for the 4
Six Months Ending June 30, 1997
and 1996
(c) Consolidated Income Statement for the 5
Twelve Months Ending June 30, 1997
and 1996
(d) Consolidated Balance Sheet as of 6
June 30, 1997 and Consolidated
Balance Sheet as of December 31, 1996
(e) Consolidated Statements of Cash Flows 7
for the Six Months Ending
June 30, 1997 and 1996
(f) Capitalization and Stockholders' Equity 8
as of June 30, 1997
(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
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PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Company or group of companies for which report is filed: Dominguez Services
Corporation, Dominguez Water Company, Antelope Valley Water Company, Kern
River Valley Water Company (Consolidating Kernville Domestic Water Co. and
Arden Water Co.) and DSC Investments.
(a) CONSOLIDATED INCOME STATEMENT (UNAUDITED) - FISCAL QUARTER ENDING:
FOR THE FOR THE
QUARTER ENDING QUARTER ENDING
JUNE 30, 1997 JUNE 30, 1996
-------------- --------------
Operating revenue $7,000,908 $6,355,921
Costs and expenses
Operating expenses 6,001,999 5,361,540
Interest expenses 214,386 172,779
Other expenses, net 14,283 3,289
Total costs and expenses 6,230,668 5,537,608
Income from operations 770,240 818,313
Other income 110,804 75,465
Income before taxes on income 881,044 893,778
Provision for taxes on income 353,730 358,745
Net income $527,314 $535,033
Less preferred dividends --0-- --0--
Net income applicable to common shares $527,314 $535,033
Earnings per common share $0.53 $0.53
Dividends per common share $0.325 $0.310
Average common shares outstanding 1,004,370 1,004,370
See accompanying notes to financial statements.
3
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(b) CONSOLIDATED INCOME STATEMENT (UNAUDITED) - SIX MONTHS ENDING:
FOR THE SIX FOR THE SIX
MONTHS ENDING MONTHS ENDING
JUNE 30, 1997 JUNE 30, 1996
------------- -------------
Operating revenue $12,168,935 $11,581,189
Costs and expenses
Operating expenses 10,582,071 10,053,977
Interest expenses 399,523 344,803
Other expenses, net 21,470 9,249
Total costs and expenses 11,003,064 10,408,029
Income from operations 1,165,871 1,173,160
Other income 187,907 172,439
Income before taxes on income 1,353,778 1,345,599
Provision for taxes on income 543,500 540,097
Net income $810,278 $805,502
Less preferred dividends --0-- 1,219
Net income applicable to common shares $810,278 $804,283
Earnings per common share $0.81 $0.80
Dividends per common share $0.65 $0.62
Average common shares outstanding 1,004,370 1,004,370
See accompanying notes to financial statements.
4
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(c) Consolidated Income Statement (Unaudited) - Twelve Months Ending:
FOR THE TWELVE FOR THE TWELVE
MONTHS ENDING MONTHS ENDING
JUNE 30, 1997 JUNE 30, 1996
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Operating revenue $ 25,292,532 $ 25,367,586
Costs and expenses
Operating expenses 21,721,101 21,963,934
Interest expenses 713,984 684,212
Other expenses, net 33,889 11,126
Total costs and expenses 22,468,974 22,659,272
Income from operations 2,823,558 2,708,314
Other income 479,888 369,942
Income before taxes on income 3,303,446 3,078,256
Provision for taxes on income 1,317,372 1,156,688
Net income $ 1,986,074 $ 1,921,568
Less preferred dividends -0- 3,657
Net income applicable to common shares $ 1,986,074 $ 1,917,911
Earnings per common share $ 1.98 $ 1.91
Dividends per common share $ 1.27 $ 1.20
Average common shares outstanding 1,004,370 1,004,370
See accompanying notes to financial statements.
5
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(d) Consolidated Balance Sheet (Unaudited)
AS OF AS OF
JUNE 30, 1997 DECEMBER 31, 1996
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ASSETS
Plant and equipment $ 59,666,787 $ 59,652,271
Depreciation allowance (21,910,752) (21,079,569)
Construction work in progress 1,501,529 427,280
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Net utility plant 39,257,564 38,999,982
Non-utility property 573,772 530,461
Current and accrued assets 7,472,834 5,004,365
Deferred debits 2,316,608 2,339,991
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$ 49,620,778 $ 46,874,799
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LIABILITIES
Capital stock:
Class A preferred - par value $25 per share
No outstanding shares in 1997 and 1996 $ -0- $ -0-
Common - par value $1 per share
Outstanding 1,004,370 shares 1,004,370 1,004,370
Surplus:
Capital surplus 2,507,502 2,507,502
Earnings retained in business 12,272,065 12,114,573
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Total capital 15,783,937 15,626,445
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Long-term debt:
First mortgage bonds 4,000,000 5,212,000
Other notes 1,825,503 1,838,637
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Total long-term debt 5,825,503 7,050,637
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Interim debt 2,000,000 800,000
Current portion long-term debt 1,290,000 834,000
Current and accrued liabilities 6,281,159 4,303,365
Deferred taxes 3,988,569 3,903,699
Advances for construction 5,377,626 5,405,329
Contribution in aid of construction 6,002,464 6,075,881
Deferred credits 3,071,520 2,875,443
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$ 49,620,778 $ 46,874,799
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See accompanying notes to financial statements.
6
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(e) CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
FOR THE SIX FOR THE SIX
MONTHS ENDING MONTHS ENDING
JUNE 30, 1997 JUNE 30, 1996
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Cash Flow From Operating Activities:
Net Income $810,278 $805,502
Adjustments to reconcile net income to net
Cash provided by operation activities:
Depreciation and amortization 743,532 617,863
Deferred income tax and ITC 84,870 64,870
Change in assets and liabilities:
Customers receivable (896,512) (526,278)
Other receivable (867,139) 506,877
Materials and supplies --0-- 23,536
Accounts payable 577,764 (64,907)
Income taxes payable 397,896 143,779
Deferred credits 212,966 172,324
Other 565,669 (174,483)
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Net Cash Provided by Operating Activities 1,629,324 1,569,083
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Cash Flows from Investing Activities:
Capital expenditures (1,123,328) (1,926,409)
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Net Cash used for Investing Activities (1,123,328) (1,926,409)
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Cash Flows from Financing Activities:
Proceeds from contributions in aid of
construction & advances (101,120) 99,137
Repayment of long-term debt (769,134) 190,583
Dividends paid (652,841) (623,929)
Preferred stock redemption --0-- (97,525)
Proceeds from interim debt 1,200,000 --0--
Other 94,146 108,120
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Net Cash Used by Financing Activities (228,949) (323,614)
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Net Increase (Decrease) in Cash $277,047 ($680,940)
Cash at Beginning of Year 708,817 751,606
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Cash at End of Year $985,864 $70,666
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See accompanying notes to financial statements.
7
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(f) CAPITALIZATION AND STOCKHOLDERS' EQUITY (UNAUDITED)
AS OF
JUNE 30, 1997
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Debt:
Long-term debt $7,115,503
Current sinking fund requirements (1,290,000)
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Total debt maturing in more than twelve months $5,825,503
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Deferred credits
$3,071,520
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Stockholder's equity: Shares
issued or
outstanding Amount
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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 $12,114,628
Net income 810,278
Cash dividends:
Common stock @ $0.325 (652,841)
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Balance at end of interim period 12,272,065
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Total stockholder's equity $15,783,937
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See accompanying notes to financial statements.
8
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(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, 1997, earnings per share were $0.53,
compared to $0.53 in the same period in 1996. Revenues for the
quarter ended June 30, 1997 were $7,000,908 and net income was
$527,314, compared to revenues of $6,355,921 and net income of
$535,033 for the same period last year.
Earnings per share for the first half of 1997 were $0.81, which
compared with $0.80 last year. Revenues for the six months ended
June 30, 1997 were $12,168,935 and net income was $810,278,
compared to revenues of $11,581,189 and net income of $805,502 for
the same period last year.
For the twelve months ended June 30, 1997, earnings per share were
$1.98, up from $1.91 the same period in 1996. Revenues for the
twelve months ended June 30, 1997 were $25,292,532 and net income
was $1,986,074, compared to revenues of $25,367,586 and net income
of $1,921,568 for the same period last year.
The increase in gross revenues came from higher rates in the South
Bay and increased sales. However, we experienced higher water
costs and related operating expenses in the second quarter. Net
income remained essentially unchanged.
Dominguez increased rates by approximately 1.6% to recover higher
costs charged by our wholesale supplier. However, water bills of
Dominguez residential customers are still lower than those charged
by other leading Southern California water utilities, according to
industry data, which is an indication of our efficient operations
and rigorous cost discipline.
Residential sales increased by 4% for the first six months of the
year compared to the same period last year. Business sales
increased by 12% for the first six months of the year compared to
the same period last year. Industrial sales dropped 14% from the
same period last year. Overall, sales increased by 1% from last
year.
The Company expects to complete the integration of the Countrywood
Water Company acquisition in to Kern River Valley operations in the
third quarter.
9
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The Company filed an application for approval of the acquisition of
Southlake Water Company. We anticipate completing the transition in
the fourth quarter.
The Company also looks forward to developing a presence in Northern
California. In early August, Dominguez signed a letter of intent to
purchase Lucerne Water Company, which serves nearly 1,300 customers
in Sonoma County, for 35,000 shares of stock. The Company is now
entering into the due diligence process.
The Company is refinancing series H bonds and short term borrowing at
a lower interest rate.
WATER QUALITY
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As previously reported, the federal Safe Drinking Water Act (SDWA)
was re-authorized in 1996. Under the SDWA, the Company is subject
to regulation by the United States Environmental Protection Agency
(EPA) and the California Department of Health Services. The Company
is required to complete monthly water sampling in a data acquisition
program known as the Information Collection Rule (ICR).
WATER SUPPLY
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As of March 1997, the water supply outlook is favorable. California
State Water Project (SWP) reservoirs remain full. MWD also indicates
that a full compliment of Colorado River Water is available.
Dominguez expects an ample supply of imported water to be available
for 1997.
Dominguez anticipates that the West Basin Municipal Water District
Recycled Water Project will be delivering recycled water to a
limited number of South Bay customers in the 4th quarter of 1997.
Dominguez' margins will remain equal to that of replaced potable
sales.
DIVIDEND DECLARED
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The Board of Directors has declared the Company's 138th consecutive
quarterly dividend at $0.325 per share on common stock, to be paid
on September 15, 1997.
10
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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 6 MONTHS
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED INCOME STATEMENT FOR THE PERIOD
ENDING JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 985,864
<SECURITIES> 0
<RECEIVABLES> 3,765,533
<ALLOWANCES> (330,836)
<INVENTORY> 46,385
<CURRENT-ASSETS> 7,472,834
<PP&E> 61,168,316
<DEPRECIATION> 21,910,752
<TOTAL-ASSETS> 49,620,778
<CURRENT-LIABILITIES> 9,571,167
<BONDS> 5,825,503
0
0
<COMMON> 1,004,370
<OTHER-SE> 14,779,559
<TOTAL-LIABILITY-AND-EQUITY> 49,620,778
<SALES> 11,226,426
<TOTAL-REVENUES> 12,168,935
<CGS> 5,584,585
<TOTAL-COSTS> 9,618,623
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 67,442
<INTEREST-EXPENSE> 399,523
<INCOME-PRETAX> 1,353,778
<INCOME-TAX> 543,500
<INCOME-CONTINUING> 810,278
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 810,278
<EPS-PRIMARY> 0.81
<EPS-DILUTED> 0.81
</TABLE>
