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Previous: ANGELO GORDON & CO LP/NY, 13F-HR, 2000-05-15 |
Next: TYLER TECHNOLOGIES INC, 10-Q, 2000-05-15 |
<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
------------------------------------------
March 31, 2000
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) - 1,563,779
<PAGE>
DOMINGUEZ SERVICES CORPORATION
<TABLE>
<CAPTION>
INDEX
PAGE NO.
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
(a) Consolidated Income Statement for the 3
Three Months Ending March 31, 2000 and 1999
(b) Consolidated Income Statement for the 4
Twelve Months Ending March 31, 2000 and 1999
(c) Consolidated Balance Sheet as of 5
March 31, 2000 and Consolidated
Balance Sheet as of December 31, 1999
(d) Consolidated Statements of Cash Flows 6
for the Three Months Ending
March 31, 2000 and 1999
(e) Capitalization and Stockholders' Equity 7
as of March 31, 2000
(f) Notes to Consolidated Financial 8
Statements
Item 2. Management's Discussion and Analysis of 8-12
Financial Condition and Results of Operation
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
Signature 13
</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 Kernville Domestic Water Company and Arden
Water Company), Redwood Valley 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, 2000 MARCH 31, 1999
-------------- --------------
<S> <C> <C>
Operating revenue $6,231,863 $5,804,331
Costs and expenses
Operating expenses 5,449,242 5,270,843
Interest expenses 246,178 234,698
Total costs and expenses 5,695,420 5,505,541
Income from operations 536,443 298,790
Other income and deductions 30,151 142,641
Income before taxes on income 566,594 441,431
Provision for taxes on income 236,775 171,675
Income before extraordinary item 329,819 269,756
Extraordinary item, net of tax - 22,895
- ------
Net income $329,819 $246,861
======== ========
Net income applicable to common shares $329,819 $246,861
Earnings per common share (basic & diluted) $0.21 $0.16
Dividends per common share $0.25 $0.24
Average common shares outstanding, basic 1,563,779 1,560,979
Average common shares outstanding, diluted 1,574,292 1,570,869
</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, 2000 MARCH 31, 1999
-------------- --------------
<S> <C> <C>
Operating revenue $28,924,294 $25,633,996
Costs and expenses
Operating expenses 25,035,577 23,086,907
Interest expenses 975,252 891,500
Total costs and expenses 26,010,829 23,978,407
Income from operations 2,913,465 1,655,589
Other income and deductions 891,823 709,283
Income before taxes on income 3,805,288 2,364,872
Provision for taxes on income 1,503,826 932,975
Income before extraordinary item 2,301,462 1,431,897
Extraordinary item, net of tax 166,792 521,416
------- -------
Net income applicable to common shares $2,134,670 $910,481
========== ========
Earnings per common share (basic and diluted) $1.37 $0.60
Earnings per common share (basic and diluted) $1.36 $0.60
Dividends per common share $0.97 $0.93
Average common shares outstanding, basic 1,549,462 1,520,129
Average common shares outstanding, diluted 1,572,091 1,567,407
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
(c) Consolidated Balance Sheet (Unaudited)
<TABLE>
<CAPTION>
AS OF AS OF
MARCH 31, 2000 DECEMBER 31, 1999
-------------- -----------------
<S> <C> <C>
ASSETS
Plant and equipment $74,411,757 $74,398,156
Depreciation allowance (26,741,697) (26,298,422)
------------ ------------
Net utility plant 47,670,060 48,099,734
Construction work in progress 2,176,191 920,971
Non-utility property 137,878 137,155
Current and accrued assets 3,952,443 6,378,563
Deferred debits 2,163,541 2,148,960
------------ ------------
$56,100,113 $57,685,383
============ ============
LIABILITIES
Capital stock:
Common - par value $1 per share
Outstanding 1,563,779 shares $1,563,779 $1,563,779
Surplus:
Capital surplus 2,916,977 2,916,977
Earnings retained in business 12,860,195 12,921,323
------------ ------------
Total capital 17,340,951 17,402,079
------------ ------------
Long-term debt:
First mortgage bonds 9,000,000 9,000,000
Other notes 3,273,329 3,294,212
------------ ------------
Total long-term debt 12,273,329 12,294,212
------------ ------------
Current portion long-term 96,000 96,000
debt
Interim debt - 400,000
Current and accrued liabilities 5,328,009 6,471,125
Deferred taxes 4,665,072 4,622,997
Advances for construction 5,415,766 5,565,307
Contribution in aid of construction 6,249,221 6,262,577
Deferred credits 4,731,765 4,571,086
------------ ------------
$56,100,113 $57,685,383
============ ============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
(d) Consolidated Statements of Cash Flow (Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE THREE
MONTHS ENDING MONTHS ENDING
MARCH 31, 2000 MARCH 31, 1999
-------------- --------------
<S> <C> <C>
Cash Flow from Operating Activities:
Net income $329,819 $246,861
Adjustments to reconcile net income to net
cash provided by operation activities:
Depreciation and amortization 394,167 423,238
Deferred income tax and ITC 42,075 42,075
Change in assets and liabilities:
Customers receivable 571,864 (296,398)
Other receivable 1,225,732 (182,383)
Materials and supplies 3,000 3,000
Accounts payable (1,133,257) (491,544)
Income taxes payable 123,317 108,975
Deferred credits 146,098 114,785
Other (28,477) 396,018
----------- ---------
Net Cash Provided by Operating Activities 1,674,338 364,627
----------- ---------
Cash Flows from Investing Activities:
Capital expenditures (1,268,821) (808,550)
----------- ---------
Net Cash used in Investing Activities (1,268,821) (808,550)
----------- ---------
Cash Flows from Financing Activities:
Proceeds from contributions in aid of
construction & advances (162,897) (49,613)
Repayment of long-term debt (20,883) (26,623)
Dividends paid (390,945) (374,634)
Proceeds from interim debt (400,000) 350,000
----------- ---------
Net Cash used in Financing Activities (974,725) (100,870)
----------- ---------
Net Decrease in Cash ($569,209) ($544,793)
Cash at Beginning of Year 942,307 708,764
----------- ---------
Cash at End of Year $373,098 $163,971
=========== =========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
(e) Capitalization and Stockholders' Equity (Unaudited)
<TABLE>
<CAPTION>
AS OF
MARCH 31, 2000
--------------
<S> <C>
Debt:
Long-term debt $12,369,329
Current sinking fund requirements (96,000)
-----------
Total debt maturing in more than twelve months $12,273,329
===========
</TABLE>
<TABLE>
<CAPTION>
SHARES
STOCKHOLDER'S EQUITY: ISSUED OR
OUTSTANDING AMOUNT
----------- ------
<S> <C> <C> <C>
Common stock $1 par value 1,563,779 $1,563,779
Capital in excess of par value 2,916,977
Retained earnings:
Balance at beginning of current fiscal year $12,921,322
Net income 329,818
Cash dividends:
Common stock @ $0.24 (390,945)
---------
Balance at end of interim period 12,860,195
-----------
Total stockholders' equity $17,340,951
===========
</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.
2. Business Segments: The following table lists the profit
and assets for each segment of the Company:
<TABLE>
<CAPTION>
NON-
THREE MONTHS ENDED REGULATED REGULATED OTHER TOTAL
------------------ --------- --------- ----- -----
<S> <C> <C> <C> <C>
MARCH 31, 2000
Operating revenue $6,231,863 -- -- $6,231,863
Extraordinary item, net of tax -- -- -- --
Other income 76,966 37,520 -- 114,486
Segment net income 323,913 5,906 -- 329,819
Segment assets 54,863,678 1,236,435 -- 56,100,113
March 31, 1999
Operating revenue $5,804,331 -- -- $5,804,331
Extraordinary item, net of tax -- -- 22,895 22,895
Other income 57,888 160,459 -- 218,347
Segment net income 198,405 71,351 (22,895) 246,861
Segment assets 53,102,612 1,227,023 -- 54,329,635
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation.
Dominguez Services Corporation (the Company) has two
wholly-owned subsidiaries: Dominguez Water Company and its
operating subsidiaries (Dominguez), which are involved in
regulated water supply and distribution, and DSC
Investments, which is involved in non-regulated,
water-related services and investments.
FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 (the
"Act") provides a "safe harbor" for forward-looking
statements to encourage registrants to provide prospective
information about their companies without fear of
litigation so long as the statements are identified as
forward-looking and are accompanied by meaningful,
cautionary statements identifying important factors that
could cause actual results to differ materially from those
projected in the statement. Words such as "estimates,"
"expects," "anticipates," "plans," "believes," "projects,"
and similar expressions identify forward-looking statements.
8
<PAGE>
Certain statements in this Form 10-Q are forward-looking
and, as such, involve risk and uncertainty. Uncertainties
arise from management estimates about weather,
environmental issues, legal contingencies and other matters
which management cannot predict or are outside of their
control, such as Y2K compliance by the Company's vendors.
Actual results may vary from those projected or implied.
This Form 10-Q should be read in conjunction with the
Company's 1999 Annual Report on Form 10-K which includes:
consolidated financial statements and footnote disclosures
prepared in accordance with generally accepted accounting
principles; management's discussion and analysis of
financial condition and results of operations; and a
detailed description of the Company's business.
MERGER AGREEMENT
As previously reported, the Company and California Water
Service Group ("CWSG") have entered into a merger
agreement. Under terms of the agreement, the Company
shareholders will receive CWSG common stock yielding an
equivalent value of approximately $33.75 per share. The
precise conversion ratio and equivalent value will depend
upon the average price of CWSG stock for a twenty-day
trading period preceding the merger's closing date. To
achieve the $33.75 exchange value, the exchange ratio can
vary between 1.25 and 1.49 shares of CWSG stock for each
Company share.
All approvals necessary to complete the merger have been
granted, except that of the California Public Utilities
Commission ("CPUC"). A draft decision recommending approval
of the merger was issued by the assigned CPUC
Administrative Law Judge ("ALJ") and adopted by the
assigned Commissioner. The Commission's new President
requested additional time to consider the merger and
subsequently circulated an alternate decision to that of
the ALJ. The alternate decision recommends against approval
of the merger, on the basis that a demonstration of
ratepayer benefit has not been provided. However, the
alternate decision, if approved, would leave the proceeding
open to provide the Company and CWSG and opportunity to
provide additional evidence that ratepayers will benefit
from the merger.
The Company expects that at the Commission's May 18, 2000
meeting, the ALJ's decision along with the alternation
decision will be considered by the full Commission. The
Company is convinced that ratepayers will benefit from the
merger and remains committed to obtaining the Commissions'
approval. While the Commission is expected to consider the
merger at its May 18, 2000 meeting, it is possible that the
decision process could extend beyond that time frame.
9
<PAGE>
RESULTS OF FIRST QUARTER OPERATIONS
For the quarter ended March 31, 2000, basic and diluted
earnings per share were $0.21, compared to $0.16 in the same
period in 1999. Revenues for the quarter ended March 31, 2000,
were $6,231,863 and net income was $329,819, compared to
revenues of $5,804,331 and net income of $246,861 for the same
period last year.
For the twelve months ended March 31, 2000, basic and diluted
earnings per share were $1.38, compared to $0.60 in the same
period in 1999. Revenues for the twelve months ended March 31,
2000 were $28,924,294 and net income was $2,134,670, compared
to revenues of $25,633,966 and net income of $910,481 for the
same period last year.
Water sales for the first three months of the year increased
by 9.8% from the same period last year. Revenues increased by
7.4%, or $428,000, from $5,804,331 to $6,231,863.
During the same time, Dominguez South Bay sales increased by
10.3% from the same period last year. Dominguez South Bay
purchased 4,341 acre feet, an increase of 1.4% from the 4,282
acre feet purchased during the same period year, and pumped
4,052 acre feet during the first three months of the year, an
increase of 7.8% from the 3,758 acre feet pumped during the
same period last year. Total variable expenses for Dominguez
South Bay were $3,159,297, up 5.5% from $2,995,666 for the
same period last year. Overall, higher sales from Dominguez
South Bay contributed $202,000 in additional operational
income compared to the same period last year.
WATER QUALITY
Dominguez 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 drinking water standards.
Dominguez is subject to other applicable environmental
regulations related to the handling, storage and disposal of
hazardous materials. Dominguez is currently in compliance with
all such regulations.
10
<PAGE>
WATER SUPPLY
As of April 1, 2000, the water supply outlook is good.
California State Water Project (SWP) reservoirs are at levels
that allow the SWP to supply 100% of the contractor requests
for 2000. MWD has not yet indicated if a full compliment of
Colorado River Water is available. Dominguez expects an ample
supply of imported water to be available for 2000.
Dominguez began selling recycled water at the end of 1999.
Over the next several years, Dominguez anticipates converting
additional industrial and irrigation users to recycled water.
Margins on recycled water sales are equal to those of replaced
potable sales.
YEAR 2000
The Company successfully transitioned from 1999 to 2000
without technology or customer service disruptions as a result
of preparation efforts by our employees. Year 2000 ("Y2K")
project teams were assembled to ensure the Company's Y2K
preparedness.
The estimated cost for Y2K preparedness was approximately
$36,000. The Company has existing contingency plans in place
for events such as extreme heat, storms, equipment failures,
and accidents. Y2K contingency plans were based on the
framework of existing emergency management system preparation
and scenario development, and addressed the most reasonably
likely worst case scenarios that could occur in the event that
various Y2K issues are not resolved in a timely manner.
Contingency planning is an ongoing process, which the Company
continues to perform.
DIVIDEND INCREASED
The Board of Directors has declared the Company's 149th
consecutive quarterly dividend at $0.25 per share on common
stock, to be paid on June 15, 2000, to shareholders of record
as of June 1, 2000.
11
<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 12, 2000 By: /s/ John S. Tootle
---------------------------------- -----------------------------------
John S. Tootle
CFO, Vice-President Finance
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 373,097
<SECURITIES> 0
<RECEIVABLES> 2,619,042
<ALLOWANCES> (336,845)
<INVENTORY> 15,244
<CURRENT-ASSETS> 3,952,443
<PP&E> 74,400,632
<DEPRECIATION> 26,741,697
<TOTAL-ASSETS> 56,100,113
<CURRENT-LIABILITIES> 5,424,009
<BONDS> 12,273,329
0
0
<COMMON> 1,563,779
<OTHER-SE> 15,777,172
<TOTAL-LIABILITY-AND-EQUITY> 56,100,113
<SALES> 5,857,660
<TOTAL-REVENUES> 6,231,863
<CGS> 3,234,042
<TOTAL-COSTS> 5,449,242
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 246,178
<INCOME-PRETAX> 566,594
<INCOME-TAX> 236,775
<INCOME-CONTINUING> 329,819
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 329,819
<EPS-BASIC> 0.21
<EPS-DILUTED> 0.21
</TABLE>
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