<PAGE>
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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For Quarter Ended JUNE 30, 1998 on file No 0-18677
DOMINGUEZ SERVICES CORPORATION
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(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0391161
- ---------------------------- -----------------
(State or other jurisdiction of (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)
Registrant's telephone number, including area code (310) 834-2625
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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) - 1,506,512
<PAGE>
DOMINGUEZ SERVICES CORPORATION
INDEX
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PART I - FINANCIAL INFORMATION PAGE NO.
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Item 1. Financial Statements
(a) Consolidated Income Statement for the 3
Three Months Ending June 30, 1998
and 1997
(b) Consolidated Income Statement for the 4
Six Months Ending June 30, 1998
and 1997
(c) Consolidated Income Statement for the 5
Twelve Months Ending June 30, 1998
and 1997
(d) Consolidated Balance Sheet as of 6
June 30, 1998 and Consolidated
Balance Sheet as of December 31, 1997
(e) Consolidated Statements of Cash Flows 7
for the Six Months Ending
June 30, 1998 and 1997
(f) Capitalization and Stockholders' Equity 8
as of June 30, 1998
(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 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:
<TABLE>
<CAPTION>
For the For the
Quarter Ending Quarter Ending
June 30, 1998 June 30, 1997
------------- -------------
<S> <C> <C>
Operating revenue $ 6,166,222 $ 7,000,908
Costs and expenses
Operating expenses 5,432,779 6,001,999
Interest expenses 224,504 214,386
Total costs and expenses 5,657,283 6,216,385
Income from operations 508,939 784,523
Other income 143,521 96,521
Income before taxes on income 652,460 881,044
Provision for taxes on income 263,279 353,730
Net income $ 389,181 $ 527,314
Less preferred dividends --0-- --0--
Net income applicable to common shares $ 389,181 $ 527,314
Earnings per common share (basic & diluted) $ 0.26 $ 0.35
Dividends per common share $ 0.2300 $ 0.2175
Average common shares outstanding 1,506,512 1,506,512
</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, 1998 June 30, 1997
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<S> <C> <C>
Operating revenue $ 11,603,692 $ 12,168,935
Costs and expenses
Operating expenses 10,311,376 10,582,071
Interest expenses 437,893 399,523
Total costs and expenses 10,749,269 10,981,594
Income from operations 854,423 1,187,341
Other income 229,177 166,437
Income before taxes on income 1,083,600 1,353,778
Provision for taxes on income 434,000 543,500
Net income $ 649,600 $ 810,278
Less preferred dividends --0-- --0--
Net income applicable to common shares $ 649,600 $ 810,278
Earnings per common share (basic & diluted) $ 0.43 $ 0.54
Dividends per common share $ 0.460 $ 0.435
Average common shares outstanding 1,506,512 1,506,512
</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, 1998 June 30, 1997
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<S> <C> <C>
Operating revenue $ 26,252,935 $ 25,292,532
Costs and expenses
Operating expenses 22,933,406 21,721,101
Interest expenses 796,466 713,984
Total costs and expenses 23,729,872 22,435,085
Income from operations 2,523,063 2,857,477
Other income 612,911 445,999
Income before taxes on income 3,135,974 3,303,446
Provision for taxes on income 1,275,468 1,317,372
Net income $ 1,860,506 $ 1,986,074
Less preferred dividends --0-- --0--
Net income applicable to common shares $ 1,860,506 $ 1,986,074
Earnings per common share (basic and diluted) $ 1.23 $ 1.32
Dividends per common share $ 0.895 $ 0.850
Average common shares outstanding 1,506,512 1,506,512
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
(d) Consolidated Balance Sheet (Unaudited)
<TABLE>
<CAPTION>
As of As of
June 30, 1998 December 31, 1997
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<S> <C> <C>
ASSETS
Plant and equipment $ 62,357,240 $ 62,256,131
------------ ------------
Depreciation allowance (23,089,429) (22,256,863)
Net utility plant 39,267,811 39,999,268
Construction work in progress 3,487,010 1,255,260
Non-utility property 573,639 583,308
Current and accrued assets 6,202,862 7,569,388
Deferred debits 2,317,302 2,253,331
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$ 51,848,624 $ 51,660,555
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LIABILITIES
Capital stock:
Common - par value $1 per share
Outstanding 1,506,512 shares 1,506,512 1,506,512
Surplus:
Capital surplus 2,005,352 2,005,352
Earnings retained in business 12,786,731 12,830,127
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Total capital 16,298,595 16,341,991
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Long-term debt:
First mortgage bonds 9,000,000 9,000,000
Other notes 2,158,225 2,194,407
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Total long-term debt 11,158,225 11,194,407
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Current potion long-term debt 64,000 64,000
Current and accrued liabilities 5,314,514 5,439,195
Deferred taxes 4,173,634 4,089,364
Advances for construction 5,567,453 5,515,687
Contribution in aid of construction 6,213,679 6,117,603
Deferred credits 3,058,524 2,898,308
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$ 51,848,624 $ 51,660,555
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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, 1998 June 30, 1997
------------- -------------
<S> <C> <C>
Cash Flow from Operating Activities:
Net income $ 649,600 $ 810,278
Adjustments to reconcile net income to net
cash provided by operation activities:
Depreciation and amortization 761,463 743,532
Deferred income tax and ITC 84,270 84,870
Change in assets and liabilities:
Customers receivable (134,135) (896,512)
Other receivable 58,903 (867,139)
Materials and supplies 3,000 --0--
Accounts payable (228,260) 577,764
Income taxes payable (23,972) 397,896
Deferred credits 96,245 212,966
Other (96,402) 565,669
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Net Cash Provided by Operating Activities 1,170,712 1,629,324
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Cash Flows from Investing Activities:
Capital expenditures (2,332,859) (1,123,328)
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Net Cash used for Investing Activities (2,332,859) (1,123,328)
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Cash Flows from Financing Activities:
Proceeds from contributions in aid of
construction & advances 147,842 (101,120)
Repayment of long-term debt (36,182) (769,134)
Dividends paid (692,996) (652,841)
Proceeds from interim debt --0-- 1,200,000
Other --0-- 94,146
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Net Cash ued by Financing Activities (581,336) (228,949)
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Net Increase (Decrease) in Cash $(1,743,483) $ 277,047
Cash at Beginning of Year 2,137,339 708,817
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Cash at End of Year $ 393,856 $ 985,864
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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, 1998
-------------
<S> <C> <C> <C>
Debt:
Long-term debt $ 11,222,225
Current sinking fund requirements (64,000)
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Total debt maturing in more than twelve months $ 11,158,225
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------------
Deferred credits $ 3,058,524
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Stockholder's equity: Shares
issued or
outstanding Amount
----------- ------
Common stock $1 par value 1,506,512 $ 1,506,512
Capital in excess of par value 2,005,352
Retained earnings:
Balance at beginning of current $ 12,830,127
fiscal year
Net income 649,600
Cash dividends:
Common stock @ $0.46 (692,996)
Balance at end of interim period ----------- 12,786,731
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Total stockholder's equity $ 16,298,595
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------------
</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, 1998, earnings per share were $0.26,
compared to $0.35 in the same period in 1997. Revenues for the
quarter ended June 30, 1998, were $6,166,222 and net income was
$389,181, compared to revenues of $7,000,908 and net income of
$527,314 for the same period last year.
Earnings per share for the first half of 1998 were $0.43, which
compared with $0.54 last year. Revenues for the six months ended
June 30, 1998, were $11,603,692 and net income was $649,602,
compared to revenues of $12,168,935 and net income of $810,278 for
the same period last year.
For the twelve months ended June 30, 1998, earnings per share were
$1.23, compared to $1.32 in the same period in 1997. Revenues for
the twelve months ended June 30, 1998 were $26,252,935 and net
income was $1,860,506, compared to revenues of $25,292,532 and net
income of $1,986,074 for the same period last year.
The second quarter operating results were constrained by the
lingering effects of El Nino, which brought rain well into the
month of May and curtailed consumer usage. While the Company's
water sales to industrial customers remained strong, these
lower-margin sales did not completely offset reduced residential
usage.
WATER QUALITY
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The Company is subject to water quality regulations promulgated by
the United States Environmental Protection Agency (EPA) and the
California Department of Health Services (DHS). Both groundwater
and purchased water are subject to extensive analysis. With
occasional minor exceptions, the Company meets all current primary
water standards.
The Company is subject to other applicable environmental
regulations related to the handling, storage and disposal of
hazardous materials. The Company is currently in compliance with
all such regulations.
In March 1998, the California Public Utilities Commission (CPUC)
ordered all regulated utilities to furnish information related to
the CPUC's investigation into the
9
<PAGE>
existing standards and policies of the CPUC regarding drinking
water quality. The Company will comply with the CPUC's order by
September 11, 1998.
WATER SUPPLY
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As of June 1998, the water supply outlook is excellent. California
State Water Project (SWP) reservoirs are at levels that allow the
SWP to supply 100% of the contractor requests for 1998. 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 1998.
Dominguez has signed up its first recycled water customer, which
will receive water purchased from the West Basin Municipal Water
District Recycled Water Project in El Sequndo, Over the next two
years, Dominguez anticipates converting several industrial and
irrigation users to recycled water. Margins on recycled water
sales will be equal to those of replaced potable sales.
STRATEGIC GROWTH PLAN
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The Company has reached settlement agreements with the staff of
CPUC for the purchase of the Lucerne and Armstrong Water Companies.
Dominguez anticipates closing these transactions in the fourth
quarter.
DIVIDEND INCREASED
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The Board of Directors has declared the Company's 142nd consecutive
quarterly dividend at $0.23 per share on common stock to be paid on
September 15, 1998.
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: August 13, 1998 By: /s/ John S. Tootle
------------------------ ------------------------------------
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 DECEMBER 31, 1997.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 393,856
<SECURITIES> 0
<RECEIVABLES> 3,451,724
<ALLOWANCES> (247,614)
<INVENTORY> 36,244
<CURRENT-ASSETS> 6,202,862
<PP&E> 62,357,240
<DEPRECIATION> 23,089,429
<TOTAL-ASSETS> 51,848,624
<CURRENT-LIABILITIES> 5,378,514
<BONDS> 11,158,225
0
0
<COMMON> 1,506,512
<OTHER-SE> 14,792,083
<TOTAL-LIABILITY-AND-EQUITY> 51,848,624
<SALES> 10,725,427
<TOTAL-REVENUES> 11,603,692
<CGS> 5,912,067
<TOTAL-COSTS> 10,311,376
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 59,135
<INTEREST-EXPENSE> 437,893
<INCOME-PRETAX> 1,083,602
<INCOME-TAX> 434,000
<INCOME-CONTINUING> 649,602
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 649,602
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
</TABLE>
