<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 10 - Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
MARCH 31, 1998
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) - 1,506,512
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DOMINGUEZ SERVICES CORPORATION
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE NO.
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<S> <C>
Item 1. Financial Statements
(a) Consolidated Income Statement for the 3
Three Months Ending March 31, 1998
and 1997
(b) Consolidated Income Statement for the 4
Twelve Months Ending March 31, 1998
and 1997
(c) Consolidated Balance Sheet as of 5
March 31, 1998 and Consolidated
Balance Sheet as of December 31, 1997
(d) Consolidated Statements of Cash Flows 6
for the Three Months Ended
March 31, 1998 and 1997
(e) Capitalization and Shareholders' Equity 7
as of March 31, 1998
(f) Notes to Consolidated Financial 8
Statements
Item 2. Management's Discussion and Analysis of 8-9
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 10
Signature 10
</TABLE>
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 Kern River Valley Water Company and
Arden Water Company) and DSC Investments.
(a) Consolidated Income Statement (Unaudited) - Fiscal Quarter ending:
<TABLE>
<CAPTION>
For the For the
Quarter Ending Quarter Ending
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Operating revenue $5,437,470 $5,168,027
Costs and expenses
Operating expenses 4,878,597 4,580,072
Interest expenses 213,389 185,137
Total costs and expenses 5,091,986 4,765,209
Income from operations 345,484 402,818
Other income 85,658 69,916
Income before taxes on income 431,142 472,734
Provision for taxes on income 170,721 189,770
Net income $260,421 $282,964
Less preferred dividends --0-- --0--
Net income applicable to common shares $260,421 $282,964
Earnings per common share (basic & diluted) $0.17 $0.19
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) - Twelve Months Ending:
<TABLE>
<CAPTION>
For the Twelve For the Twelve
Months Ending Months Ending
March 31, 1998 March 31, 1997
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<S> <C> <C>
Operating revenue $27,087,621 $24,647,545
Costs and expenses
Operating expenses 23,502,626 21,080,642
Interest expenses 786,348 672,377
Total costs and expenses 24,288,974 21,753,019
Income from operations 2,798,647 2,894,526
Other income 565,911 421,654
Income before taxes on income 3,364,558 3,316,180
Provision for taxes on income 1,365,919 1,322,387
Net income $1,998,639 $1,993,793
Less preferred dividends --0-- --0--
Net income applicable to common shares $1,998,639 $1,993,793
Earnings per common share (basic & diluted) $1.32 $1.32
Dividends per common share $0.8825 $0.8400
Average common shares outstanding 1,506,512 1,506,512
</TABLE>
See accompanying notes to financial statements.
<PAGE>
(d) Consolidated Balance Sheet (Unaudited)
<TABLE>
<CAPTION>
As of As of
March 31, 1998 December 31, 1997
-------------- -----------------
<S> <C> <C>
ASSETS
Plant and equipment $ 62,256,131 $ 62,256,131
Depreciation allowance (22,681,186) (22,256,863)
------------ ------------
Net utility plant 39,574,945 39,999,268
Construction work in progress 2,637,773 1,255,260
Non-utility property 583,308 583,308
Current and accrued assets 5,975,458 7,569,388
Deferred debits 2,322,624 2,253,331
------------ ------------
$ 51,094,108 $ 51,660,555
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
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 12,744,051 12,830,127
------------ ------------
Total capital 16,255,915 16,341,991
------------ ------------
Long-term debt:
First mortgage bonds 9,000,000 9,000,000
Other notes 2,187,497 2,194,407
------------ ------------
Total long-term debt 11,187,497 11,194,407
------------ ------------
Current portion long-term debt 64,000 64,000
Current and accrued liabilities 4,746,919 5,439,195
Deferred taxes 4,131,559 4,089,364
Advances for construction 5,566,695 5,515,687
Contribution in aid of construction 6,142,678 6,117,603
Deferred credits 2,998,845 2,898,308
------------ ------------
$ 51,094,108 $ 51,660,555
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
(e) Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
For the For the
Quarter Ending Quarter Ending
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Cash Flow from Operating Activities:
Net income $260,421 $282,964
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 383,451 380,948
Deferred income tax and ITC 42,195 42,435
Changes in assets and liabilities:
Customers receivable 408,739 (113,884)
Other receivable 80,819 (463,106)
Accounts payable (835,432) (42,139)
Income taxes payable 227,176 119,493
Deferred credits 31,244 107,186
Other 23,898 177,689
---------- ----------
Net Cash Provided by Operating Activities 622,510 491,586
---------- ----------
Cash Flows from Investing Activities:
Capital expenditures (1,382,513) (472,969)
---------- ----------
Net Cash Used in Investing Activities (1,382,513) (472,969)
---------- ----------
Cash Flows from Financing Activities:
Proceeds from contributions in aid of
construction & advances 76,083 3,897
Repayment of long-term debt (6,910) (3,163)
Dividends paid (346,497) (326,421)
Proceeds from interim debt --0-- 700,000
---------- ----------
Net Cash (Used in) Provided by Financing Activities
(277,324) 374,313
---------- ----------
Net Increase in Cash $(1,037,327) $ 392,930
Cash at Beginning of Year 2,137,339 708,817
---------- ----------
Cash at End of Year $1,100,012 $1,101,747
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
(f) Capitalization and Shareholders' Equity (Unaudited)
<TABLE>
<CAPTION>
As of
March 31, 1998
--------------
<S> <C> <C> <C>
Debt:
Long-term debt $11,251,497
Current sinking fund requirements (64,000)
-----------
Total debt maturing in more than twelve months $11,187,497
-----------
-----------
Deferred credits $ 2,998,845
-----------
-----------
Shareholders' 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 fiscal year $12,830,127
Net income 260,421
Cash dividends:
Common stock @ $0.23 (346,497)
----------
Balance at end of interim period 12,744,051
-----------
Total shareholders' equity $16,255,915
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
7
<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 Operations.
For the quarter ended March 31, 1998, earnings per share were $0.17,
compared to $0.19 in the first quarter in 1997. Revenues for the
quarter ended March 31, 1998 were $5,437,470 and net income was
$260,421, compared to revenue of $5,168,027 and net income of
$282,964 for the same period last year.
For the twelve months ended March 31,1998, earnings per share were
$1.32, compared to $1.32 for the same period in 1997. Revenues for
the twelve months ended March 31, 1998 were $27,087,621 and net income
was $1,998,639, compared to revenue of $24,647,545 and net income of
$1,993,793 for the same period last year.
First quarter revenue growth was spurred by higher water sales to
industrial customers. That water is sold at lower prices which, in
turn, impacted margins and contributed to the slight dip in earnings
we experienced year to year. Profit was constrained by higher water
costs resulting from a one-time increase in the amount of imported
water purchased for the South Bay service area. Also, we are
experiencing higher tax and interest expenses associated with
investment in acquired properties and capital expenditures.
Water Quality
-------------
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.
8
<PAGE>
Water Supply
------------
As of March 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 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 1998. Dominguez' margins will remain
equal to those of replaced potable sales.
Strategic Growth Plan
---------------------
Dominguez announced during the first quarter, that the City Council of
Torrance, California, agreed to purchase pumped groundwater supply
from Dominguez, who already provides services to portions of the
city. Dominguez values this association greatly and is pleased to be
able to meet the water needs of the community.
In April, the Kern River Valley Water Company subsidiary relocated its
headquarters to a facility which is more centrally located and
convenient to all service areas. As always, the opening of this new
location caps a period of well-planned expansion by Dominguez in Kern
County and evidences our strong commitment to the area.
Dividend Increased
------------------
The Board of Directors has declared the Company's 141st consecutive
quarterly dividend at $0.23 per share on common stock to be paid on
June 15, 1998.
9
<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: May 15, 1998 By: /s/ John S. Tootle
------------------- -----------------------------
John S. Tootle
CFO, Vice-President Finance
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLDIATED BALANCE SHEETS AND CONSOLIDATED INCOME STATEMENT FOR THE PERIOD
ENDING DECEMBER 31, 1997.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,100,012
<SECURITIES> 0
<RECEIVABLES> 2,906,504
<ALLOWANCES> (245,270)
<INVENTORY> 39,244
<CURRENT-ASSETS> 5,975,458
<PP&E> 62,256,131
<DEPRECIATION> 22,681,186
<TOTAL-ASSETS> 1,094,108
<CURRENT-LIABILITIES> 4,810,919
<BONDS> 11,187,497
0
0
<COMMON> 1,506,512
<OTHER-SE> 14,749,403
<TOTAL-LIABILITY-AND-EQUITY> 51,094,108
<SALES> 5,116,995
<TOTAL-REVENUES> 5,437,470
<CGS> 2,701,737
<TOTAL-COSTS> 4,878,597
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 41,692
<INTEREST-EXPENSE> 213,389
<INCOME-PRETAX> 431,142
<INCOME-TAX> 170,721
<INCOME-CONTINUING> 260,421
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 260,421
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
