ITEM 1. Business
ORGANIZATION
E'town Corporation (E'town or Corporation) was incorporated under the laws of the State of New Jersey in 1985 to serve as a holding company for Elizabethtown Water Company (Elizabethtown or Company) and its wholly owned subsidiary, The Mount Holly Water Company (Mount Holly). Elizabethtown and Mount Holly are regulated water utilities which, as a consolidated entity, are referred to herein as Elizabethtown Water Company (Elizabethtown Water Company). E'town Properties, Inc. (Properties) was incorporated in 1987 as a wholly owned and non-regulated subsidiary of E'town to acquire, develop and sell real estate holdings.
Elizabethtown and Mount Holly are engaged in the distribution of water for domestic, commercial, industrial and fire protection purposes and for resale by other water companies and public bodies.
Elizabethtown is a New Jersey corporation, one of whose predecessors was first incorporated in 1854. The present corporation was formed in 1961 as a result of a consolidation of Elizabethtown Water Company Consolidated and Plainfield-Union Water Company. Princeton and Somerville Water Companies were merged into Elizabethtown in 1973, and, as of January 1, 1977, Bound Brook Water Company was also merged into Elizabethtown. Elizabethtown owns all of the common stock of Mount Holly which contributed approximately 3% of the Company's consolidated operating revenues for 1995.
SERVICE AREA AND CUSTOMERS
At December 31, 1995 Elizabethtown and Mount Holly furnished water service on a retail basis to general customers and to industrial customers served through 195,375 meters in 54 municipalities in the counties of Union, Middlesex, Somerset, Mercer, Hunterdon, Ocean, Morris and Burlington in the central part of New Jersey. Elizabethtown also provides, on a wholesale basis, a portion of the water requirements of eight additional municipalities with their own retail water systems and of three other investor-owned water companies. Water for fire protection service is provided to 53 municipalities and also to commercial and industrial establishments.
The Company's operating revenues by major classifications for the twelve months ending December 31, 1995 are as follows:
General customers 62.2% Sales to other systems 17.3% Larger industrial customers 7.3% Fire protection service/miscellaneous 13.2%
The systems are substantially all metered except for fire service.
Additional operating statistics appear on page 13.
WATER SUPPLY
The water supply systems of Elizabethtown and Mount Holly are physically separate. During 1995, Elizabethtown's pumpage averaged 132.5 million gallons per day (MGD) and Mount Holly's pumpage averaged 3.6 MGD. Elizabethtown and Mount Holly believe they have sufficient water supply sources to meet the current needs of their customers. Mount Holly plans to construct additional facilities, as discussed below, to augment its water supplies.
In 1995, surface water sources supplied approximately 88% of Elizabethtown's supply with wells supplying the remaining 12%. All of Mount Holly's water is produced from wells.
Substantially all of Elizabethtown's surface water is purchased under a long-term contract with the New Jersey Water Supply Authority (NJWSA) which requires Elizabethtown to purchase (i) 32 MGD from the state-owned Delaware and Raritan Canal which transports water from the Delaware River Basin plus (ii) 70 MGD from the Raritan River Basin which includes the state-owned Spruce Run-Round Valley Reservoir System. The safe yield of the Raritan River Basin and the Delaware and Raritan Canal is 225 MGD of which 151 MGD is presently allocated to Elizabethtown and others. The NJWSA has available and, as needed to meet system demand, Elizabethtown purchases, water over and above the Company's minimum purchase obligation.
The Company continues to analyze the potential effect of federal and state regulations on the long-term capacity of Elizabethtown's wells. Since 1985, wells with an aggregate capacity of 11 MGD have been withdrawn from service due to more stringent federal and state regulations and increased groundwater contamination at certain well sites. Under state and federal regulations now in effect, Elizabethtown owns and operates wells with an aggregate safe daily yield of approximately 18 MGD. If regulations governing radionuclides in drinking water proposed by the United States Environmental Protection Agency (USEPA) are adopted, Elizabethtown's well capacity will decrease to about 13 MGD.
All of Mount Holly's system delivery of 3.6 MGD in 1995 was supplied from wells. To ensure an adequate supply of quality water
from an aquifer serving parts of southern New Jersey, state legislation will require Mount Holly, as well as other suppliers obtaining water from designated portions of this aquifer, to reduce pumpage from its wells. Mount Holly has a plan to develop a new water supply, treatment and transmission system necessary to obtain water outside the designated portion of the aquifer and to treat the water and pump it into the Mount Holly system. This is referred to as the Mansfield Project. The project is currently estimated to cost $16.5 million excluding an Allowance for Funds Used During Construction (AFUDC). Construction is expected to begin after issuance of the final water allocation diversion permit and is expected to be completed in 1997. The land for the supply and treatment facilities has been purchased and wells have been drilled and can produce the required supply. Mount Holly has filed for rate relief relating to the Mansfield Project.
On October 5, 1995, the New Jersey Department of Environmental Protection (NJDEP) granted Mount Holly a water allocation diversion permit for four wells that are to be the water supply for the Mansfield Project. On October 20, 1995, New Jersey-American Water Company requested, and was subsequently granted, an adjudicatory hearing on the permit. The Company and Mount Holly believe that the permit in question will be upheld but cannot predict the outcome of the objection. In the event that the objection is successful and the permit is rescinded Mount Holly would utilize the alternative plan of purchasing water from New Jersey-American Water Company.
WATER TREATMENT FACILITIES AND WATER QUALITY REGULATIONS
Elizabethtown owns and operates a treatment plant at the confluence of the Raritan and Millstone Rivers adjacent to the Delaware and Raritan Canal to treat surface waters purchased from the NJWSA. The plant can withdraw water from any of these sources, which is an advantage in the event that one source becomes contaminated. The plant was placed in service in 1931 and has continually been upgraded since that time. Elizabethtown also operates smaller treatment facilities to treat groundwater produced by certain wells. Mount Holly operates similar groundwater treatment facilities.
Both the USEPA and the NJDEP regulate the operation of Elizabethtown's and Mount Holly's water treatment and distribution systems and the quality of the water Elizabethtown and Mount Holly deliver to their customers. Currently, Elizabethtown and Mount Holly believe they are in compliance, in all material respects, with all present federal and state water quality standards, including all regulations promulgated to date by the USEPA pursuant to the Federal Safe Drinking Water Act, as amended (SDWA), and by the NJDEP pursuant to similar state legislation. Elizabethtown has included certain capital projects in its three-year capital expenditure plans which it anticipates will be necessary to comply with regulations that have been proposed by the USEPA and NJDEP. Recovery of the financing
and operating costs of such improvements, plus those costs for any additional projects which cannot be foreseen at this time, will be requested in rates.
Elizabethtown has responded to recent water quality regulations promulgated by NJDEP and the USEPA by replacing groundwater supplies with increased withdrawals of surface water. Accordingly, the proportion of supply produced from surface water has increased from 85% in 1986 to 88% in 1995. The Company expects this trend to continue because it is preferable from the standpoint of operational efficiency and cost to modify treatment processes and facilities at one or two large plants than to attempt to constantly upgrade treatment facilities at multiple well sites.
New Surface Water Treatment Plant
Elizabethtown's capital program includes the construction of a new water treatment plant, the Canal Road Water Treatment Plant (Plant) to increase Elizabethtown's sustainable production capacity and provide the ability to continue to meet water quality regulations. In April 1994, the Company executed a lump-sum contract for the construction of the Plant, which will have an initial capacity of 40 MGD. Construction of the Plant is currently in progress. The current estimated cost of the Plant is approximately $100 million, excluding AFUDC. The Company has expended $83.0 million, excluding AFUDC of $7.2 million, on the Plant as of December 31, 1995. The project is proceeding on schedule, the construction contract remains on budget and the project is expected to be completed during the third quarter of 1996.
In August 1993, the New Jersey Board of Public Utilities (BPU) approved a stipulation (1993 Plant Stipulation) signed by all parties to the Company's petition filed in connection with the Plant which states that the parties affirm the Plant is necessary and that the Company's estimate regarding the Plant's cost, at that time of $87 million, and construction period are reasonable. In April 1994, Elizabethtown notified all parties to the 1993 Plant Stipulation that the estimated cost of the Plant had increased. The 1993 Plant Stipulation also provides for a potential rate setting mechanism for the Plant during the construction period that has never been required to be triggered.
Water Quality Regulations
As required by the SDWA, the USEPA has established maximum contaminant levels (MCLs) for various substances found in drinking water. As authorized by similar state legislation, the NJDEP has set MCLs for certain substances which are more restrictive than the MCLs set by the USEPA. In certain cases, the USEPA and NJDEP have also mandated that certain treatment procedures be followed in addition to satisfying MCLs established for specific contaminants. The NJDEP is also the USEPA's agent for enforcing the SDWA in New Jersey and, in that capacity, monitors the activities of Elizabethtown and Mount Holly and reviews the results of water quality tests performed by Elizabethtown and Mount Holly for adherence to applicable regulations.
Regulations generally applicable to water utilities, including Elizabethtown and Mount Holly, include the Lead and Copper Rule (LCR), the MCLs established for various volatile organic compounds (VOCs), the MCLs proposed for radionuclides and the Surface Water Treatment Rule (SWTR).
Lead and Copper Rule
The LCR requires Elizabethtown and Mount Holly to test the quantity of lead and copper in drinking water at the customer's tap and, if certain contaminant levels (action levels) are exceeded, to notify customers and initiate a public information campaign advising customers how to minimize exposure to lead and copper. The LCR also requires Elizabethtown to add corrosion inhibitors to water to minimize leaching of lead from piping, faucets and soldered joints into water consumed at the tap. Results from two separate tests completed during 1992 within Elizabethtown and Mount Holly's systems do not indicate lead and copper concentrations above the action levels. Accordingly, public notification and a public information campaign have not been required. Capital projects including corrosion inhibitor facilities for Elizabethtown will be completed later in 1996. Elizabethtown has requested that the costs of compliance be recovered in rates in the Company's pending rate proceeding.
Volatile Organic Compounds
VOCs include various substances (primarily synthetic organic solvents) which have percolated into groundwater aquifers from surface sources. Elizabethtown has found VOCs in excess of the applicable MCLs in certain of its wells and has either suspended the use of such wells or constructed aeration towers which remove such contaminants from the water by venting them into the atmosphere. Because underground water flows are difficult to map, it is difficult to predict when and where contamination will occur in the future. To the extent that contamination in excess of applicable MCLs occurs at wells lacking aeration towers, Elizabethtown will consider building such facilities if feasible and cost effective, or closing such wells, thereby increasing its reliance on surface water. To date, Mount Holly has not been affected by VOC contamination.
Radionuclides
Radionuclides are naturally occurring radioactive substances (primarily radon) found in groundwater. Like VOCs, radon can be removed from groundwater using aeration towers. If the MCLs proposed for all radionuclides are finally adopted, Elizabethtown believes that it will abandon wells with aggregate production capacity of approximately 5 MGD, thereby further increasing Elizabethtown's reliance on surface water.
Surface Water Treatment Rule
The operation of Elizabethtown's existing Raritan-Millstone treatment plant is subject to the SWTR. Elizabethtown has assessed
the plant's sustainable production capacity, assuming operation consistent with the requirements of the SWTR, and determined that improvements to the existing plant are necessary.
Specifically, Elizabethtown has installed additional pumps to increase capacity and reliability at peak times and has constructed a new building to house offices and lab facilities. Also, Elizabethtown is replacing existing chlorine gas disinfection facilities with liquid sodium hypochlorite to improve community and employee safety and will install corrosion inhibitor facilities in conformance with the LCR.
TRANSMISSION AND DISTRIBUTION
As of December 31, 1995, Elizabethtown Water Company's transmission and distribution system included 2,869 miles of transmission and distribution mains. Mains range in size up to 60 inches, substantially all of which are either ductile iron, cast iron or prestressed concrete pipe. Elizabethtown conducts an ongoing program costing approximately $1.0 million per year to clean and line its older cast iron mains. Such costs are capitalized and have been included in rate base in stipulations settling recent rate cases.
As of December 31, 1995, Elizabethtown also had in service pumping equipment having capacities of 283 MGD for low lift pumping capacity, 577 MGD for system supply pumping capacity and 194 MGD for transfer booster pumping capacity. Distribution storage facilities as of December 31, 1995 consisted of standpipes, elevated and ground storage tanks and reservoirs with an aggregate capacity of 82 MG. Such pumping, transmission and storage facilities are necessary to maintain adequate water pressures throughout the service territory. Failure to maintain pressures could adversely affect domestic service and impede local fire departments' efforts to fight fires, particularly during peak summer loads.
On an ongoing basis, Elizabethtown assesses the capacity of its system to maintain adequate pressures and initiates plans to construct pumping, transmission and storage facilities as needed.
ENERGY SUPPLY
Elizabethtown pumps most of its water with electric power purchased from two major electric utilities. The Company is replacing certain electric pumps with natural gas fired pumps to reduce energy costs. Elizabethtown also has diesel powered pumping and generating facilities at its major treatment plants and at certain transfer stations to provide basic service during possible electrical shortages. Elizabethtown has not, to date, experienced any shortage of electric energy or diesel fuel to operate its pumps and has cooperated with its electric suppliers
during their peak periods by operating non-electrical pumping facilities upon request.
ENVIRONMENTAL MATTERS
Elizabethtown and Mount Holly are also subject to regulation by the NJDEP with respect to water supply plans and specifications for the construction, improvement, alteration and operation of public water supply systems and with respect to the quality of any residuals from treatment plants.
As a normal by-product of treating surface water, Elizabethtown's existing surface water treatment plant generates silt removed from untreated river water plus residue from chemicals used in the treatment process. Historically, Elizabethtown had disposed of this material in landfills. As a result of revised regulations governing landfills, Elizabethtown has been reusing this material on site and is presently removing some material off-site for beneficial reuse. Due to limited on-site storage capacity, Elizabethtown is investigating alternatives to dry the by-product for beneficial reuse.
During the late 1980's, Elizabethtown withdrew a well field from service because of increased groundwater contamination and more stringent water quality regulations. Elizabethtown commissioned an engineering firm to determine whether it is feasible and cost effective to install treatment facilities so that those wells not presently complying with current regulations can be returned to service. The study was also intended to evaluate whether the resumption of pumping would have any effect on the local water table. The study concluded that it is possible to treat the water at this location and resume pumping at a quality and yield that is satisfactory to Elizabethtown. Elizabethtown is evaluating the cost-effectiveness of this approach in connection with a possible governmental grant to the municipality involved for such purpose. Preliminary cost estimates of treatment facilities necessary to return certain wells in this area to service are included in the Company's capital program.
Under New Jersey law, environmental matters are addressed by the NJDEP before diversion allowances or other water supply projects are authorized. To date, Elizabethtown has been able to construct all plant facilities and obtain all diversion authorizations necessary to maintain customer service. Mount Holly has also been able to construct all facilities and obtain all diversion authorizations with the exception of the pending objection to the diversion permit for the Mansfield Project as discussed above.
FRANCHISES
The property and franchises of Elizabethtown and Mount Holly are subject to rights of eminent domain of the State of New Jersey. These rights have been delegated by statutes now in effect to municipalities or groups of municipalities and have been or may be delegated to various public agencies. No such rights of eminent domain have been exercised since 1931.
EMPLOYEE RELATIONS
As of December 31, 1995, the Corporation had a total of 398 full-time employees, of which 210 were covered by union contracts. The contracts between the Company and the Utility Workers Union of America (A.F.L.-C.I.O.) were renegotiated on February 1, 1996 and will expire on January 31, 1999.
The Company considers relations with both union and non-union employees to be satisfactory.
RATE MATTERS
Elizabethtown and Mount Holly are subject to regulation by the New Jersey Board of Public Utilities (BPU) with respect to the issuance and sale of securities, rates and service, classification of accounts, mergers, and other matters. Elizabethtown and Mount Holly periodically seek rate relief to cover the cost of increased operating expenses, increases in financing expenses due to additional investments in utility plant, and other costs of doing business.
Elizabethtown
On November 20, 1995, Elizabethtown filed with the BPU for an increase in rates of $31.6 million, or 29.6%. The largest portion of the request, $22.9 million, is needed to cover the cost to finance and operate the Plant. The remainder of the rate increase, $8.7 million, is needed to cover the cost to finance additional construction projects and to cover increases in operating expenses since rates were last established in February 1995. A decision by the BPU is expected in the summer of 1996. In light of the approval by the BPU of the 1993 Plant Stipulation and Elizabethtown's experience in obtaining base rate relief, Elizabethtown expects the BPU to grant timely and adequate rate relief, but cannot predict the ultimate outcome of any rate proceeding.
As mentioned previously, the 1993 Plant Stipulation, approved in August 1993, states that the Plant is necessary and that the Company's estimates regarding the Plant's cost, at that time of $87 million, and construction period are reasonable. In addition, the 1993 Plant Stipulation authorizes the Company to levy a rate surcharge if the Company's pre-tax interest coverage ratio for any 12-month historical period drops below 2.0 times. The pre-tax interest coverage ratio has remained above the 2.0 times trigger level and therefore, the surcharge has not been required. The 1993 Plant Stipulation also provides that the rate of return on common shareholder's equity used to calculate the rate for the equity component of the AFUDC for the Plant will be 1.5% less than the rate of return on common shareholder's equity established in the Company's most recent base
rate case. The authorized rate of return on common shareholder's equity is currently 11.5%.
In January 1995, the BPU approved a stipulation (1995 Stipulation) for Elizabethtown for a rate increase of $5.3 million or 5.34%, effective February 1, 1995. The 1995 Stipulation provides for an authorized rate of return on common equity of 11.5%. It also provides for recovery of the 1994 current service cost portion of the obligation accrued under Statement of Financial Accounting Standards No. 106, "Employer's Accounting for Postretirement Benefits Other Than Pensions," provided this amount is funded by the Company. Elizabethtown funded $.3 million in 1995 which represents the 1994 current service cost allowed in the 1995 Stipulation. The rate increase covered the cost to finance $62.0 million of construction projects since rates were last established in March 1993. These projects include treatment, transmission and storage facilities needed to ensure that Elizabethtown continues to meet federal and state regulations water quality and service. The increase also offset increased costs for power, labor and benefits, primarily medical. The 1995 Stipulations also provides for an increase in annual depreciation expense of approximately $.5 million. The 1995 Stipulation also required Elizabethtown to maintain a monthly average percentage of common equity to total capitalization of at least 45.1% for the 12 months ended January 31, 1996. The Company has met this requirement.
Mount Holly
On June 26, 1995, Mount Holly petitioned the BPU for an increase in rates, to take place in two phases. In the first phase rates would be increased by $.9 million and in the second phase by $2.8 million. The first phase is necessary to cover costs that were not reflected in rates last increased in October 1986. The second phase would cover the cost of the Mansfield Project as discussed above.
On January 24, 1996, the BPU approved a stipulation (Mount Holly Stipulation) for an increase in rates of $.6 million effective as of that date. The Mount Holly Stipulation has, effectively, concluded the first phase of the rate proceeding. Mount Holly is continuing with the adjudicatory process with respect to the second phase of the petition. While management believes that the water supply, treatment and transmission project planned for Mount Holly is the most cost-effective response to the state legislation affecting the area, management cannot predict the ultimate outcome of the rate proceeding at this time.
For information regarding additional rate matters see Note 8 to the Notes to Consolidated Financial Statements contained in Appendix I.
REAL ESTATE MATTERS
Properties and E'town currently own several parcels of land aggregating approximately 740 acres located in central New Jersey
having an original acquisition cost of approximately $8 million. A portion of this acreage was purchased from a third party and the balance was land formerly owned by Elizabethtown and no longer needed for utility purposes. These holdings are owned in fee.
The Corporation has no plans to acquire additional real estate. Over the next several years, the Corporation expects to work with local and state officials to obtain various approvals to enhance the value and development potential of its real estate holdings while minimizing expenditures.
Properties has entered into an agreement to sell a parcel of land to a developer. The agreement requires the buyer to obtain all approvals required by governmental agencies in order to develop the property. Properties may cancel the agreement if the closing does not occur by December 31, 1996. Other events have been established during this period, at which time either the buyer or Properties may cancel the agreement if certain criteria, generally relating to the development potential of the property, are not met.
Executive Officers of the Corporation and Elizabethtown
Name Age Positions Held
Robert W. Kean, Jr. 73 Chairman and Chief Executive Officer of the Corporation since 1985 and Elizabethtown since 1973.
Henry S. Patterson, II 73 President of the Corporation since March 1985 and Properties since July 1987.
Thomas J. Cawley 65 Vice Chairman of Elizabethtown since January 1996 and President of Elizabethtown and its subsidiary, Mount Holly since August 1992. Executive Vice President of Elizabethtown since January 1987 and Vice President of Mount Holly since 1973. Previously, Vice President, Operations since 1975.
Andrew M. Chapman 40 Chief Financial Officer of the Corporation since August 1989 and Treasurer of the Corporation since November 1990. President of Elizabethtown since January 1996 and Executive Vice President of Elizabethtown from May 1994 to December 1995. He served as Senior Vice President of Elizabethtown from April 1993 to May 1994, Chief Financial Officer of Elizabethtown from November 1990 to December 1995 and Treasurer of Elizabethtown from August 1989 to May 1994. Prior to 1989, he was Director of the Office of Financial Management of the State of New Jersey, Department of Treasury and earlier, a Vice President at Shearson Lehman Brothers.
Anne Evans Estabrook 51 Vice President of the Corporation since September 1987. Owner of the Elberon Development Co., (a real estate holding company) since 1984 and President of David O. Evans, Inc. (a construction company) since 1983.
Walter M. Braswell 46 Secretary of the Corporation, Properties and Elizabethtown since December 1990 and Vice President and General Counsel of Elizabethtown since August 1988. Previously, Assistant Secretary and General Attorney of Elizabethtown since May 1983.
Norbert Wagner 60 Senior Vice President-Operations of Elizabethtown since May 1992. Vice President-Operations since March 1987, Chief Engineer since October 1978.
Edward F. Cash 60 Vice President - Customer Services of Elizabethtown since 1977. Assistant Vice President Customer Services since 1973.
ITEM 2.
ITEM 2. Properties
All principal plants and other materially important units of property of Elizabethtown and Mount Holly are owned in fee. The Company considers that the properties of Elizabethtown and Mount Holly are in good operating condition.
ITEM 3.
ITEM 3. Legal Proceedings
As previously reported, several lawsuits had been filed against Elizabethtown and other parties in connection with a fire that occurred in a storage facility in 1989 resulting in damage to property stored at that facility. This matter was settled in 1995 resulting in a payment by Elizabethtown of approximately $.1 million. A provision for this estimated liability was previously recorded.
In the opinion of management, other litigation in which the Corporation or its subsidiaries is involved is in the ordinary course of business and will not have a material adverse effect on the consolidated financial condition of the Corporation.
ITEM 4.
ITEM 4. Submission of Matters to a Vote of Security Holders
None
PART II
ITEM 5.
ITEM 5. Market for the Corporation's Common Stock and Related Stockholder Matters
This information is included in Exhibit 13, filed herewith, and is incorporated herein by reference. All of the common stock of Elizabethtown Water Company is owned by E'town.
ITEM 6.
ITEM 6. Selected Financial Data
________________________________ E'town Corporation
__________________
This information is included in Exhibit 13, filed herewith, and is incorporated herein by reference.
ITEM 7.
ITEM 7. Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations
E'town Corporation
This information is included in Exhibit 13, filed herewith, and is incorporated herein by reference.
Elizabethtown Water Company and Subsidiary
The water utility operations of Elizabethtown Water Company (Elizabethtown or Company) and its subsidiary The Mount Holly Water Company (Mount Holly), presently constitute the major portion of E'town Corporation's (E'town or Corporation) assets and earnings. Mount Holly contributed 3% of Elizabethtown Water Company's consolidated operating revenues for 1995. E'town, a New Jersey holding company, is the parent company of Elizabethtown Water Company and E'town Properties, Inc. The following analysis sets forth significant events affecting the financial condition at December 31, 1995 and 1994, and the results of operations for the years ended December 31, 1995, 1994 and 1993 for Elizabethtown Water Company.
LIQUIDITY AND CAPITAL RESOURCES Capital Expenditures Program
Capital expenditures were $73.8 million during 1995. Capital expenditures for the three-year period ending December 31, 1998, are estimated to be $148.9 million, of which $128.4 million is for Elizabethtown and $20.5 million for Mount Holly. A major portion of the capital outlays will occur in the first nine months of the three-year period as Elizabethtown completes its new water treatment plant. After this project is completed in late 1996, the capital outlays for Elizabethtown are expected to return to levels experienced in the early 1990s. Mount Holly expects to incur significant capital expenditures in 1997 as it constructs new water supply, treatment and transmission facilities as discussed below.
Elizabethtown
Elizabethtown's capital program includes the construction of a new water treatment plant, the Canal Road Water Treatment Plant (Plant), near Elizabethtown's existing plant. The Plant, which will have an initial rated production capacity of 40 million gallons per day (mgd) and has been designed to permit expansion to 200 mgd, is necessary to meet existing and anticipated customer demands and to replace groundwater supplies withdrawn from service as a result of more restrictive water quality regulations and groundwater contamination. Expansion of the Plant's production capacity beyond 40 mgd is not expected to occur in the foreseeable future. Elizabethtown's construction program also includes additional mains
and storage facilities necessary to serve existing and future customers.
In April 1994, Elizabethtown executed a lump-sum contract for the construction of the Plant. The estimated cost of the Plant is approximately $100 million, excluding an Allowance for Funds Used During Construction (AFUDC). The Company has expended $83.0 million, excluding AFUDC of $7.2 million on the Plant, as of December 31, 1995. The project is proceeding on schedule, the construction contract remains on budget and the project is expected to be completed during the third quarter of 1996.
In August 1993, the New Jersey Board of Public Utilities (BPU) approved a stipulation (1993 Plant Stipulation) signed by the Department of Ratepayer Advocate, the BPU staff and several of Elizabethtown's major wholesale customers, all of whom typically participate in Elizabethtown's rate cases. The 1993 Plant Stipulation states the Plant is necessary and the Company's estimate regarding the Plant's cost, at that time $87 million and construction period are reasonable. In April 1994, Elizabethtow-n notified all parties to the 1993 Plant Stipulation that the estimated cost of the Plant had increased.
The 1993 Plant Stipulation authorizes Elizabethtown to levy a rate surcharge during the Plant's construction period if the Company's pre-tax interest coverage ratio for any 12-month historical period drops below 2.0 times. The pre-tax interest coverage has remained above the 2.0 times trigger level and therefore, the surcharge has not been required. The 1993 Plant Stipulation also provides that the rate of return on common shareholder's equity used to calculate the rate for the equity component of the AFUDC for the Plant will be 1.5% less than the rate of return on common shareholder's equity established in Elizabethtown's most recent base rate case. The authorized rate of return on Elizabethtown's common shareholder's equity is currently 11.5%. Elizabethtown has filed for a rate increase to reflect the financing and operating costs of the Plant which is expected to take effect when the Plant is completed later this year (see Economic Outlook).
Mount Holly
To ensure an adequate supply of quality water from an aquifer serving parts of southern New Jersey, state legislation requires Mount Holly, as well as other suppliers obtaining water from designated portions of this aquifer, to reduce pumpage from its wells. Mount Holly has received approval from the New Jersey Department of Environmental Protection (NJDEP) for its plan to develop a new water supply, treatment and transmission system necessary to obtain water outside the designated portion of the aquifer and to treat the water and pump it into the Mount Holly system. This is referred to as the Mansfield Project. The project is currently estimated to cost $16.5 million, excluding AFUDC, and is expected to be completed in 1997. The land for the supply and treatment facilities has been purchased and wells have been drilled and can produce the required supply. Mount Holly has filed for rate relief relating to the Mansfield Project (see Economic Outlook).
On October 5, 1995, the NJDEP granted Mount Holly a water allocation diversion permit for four wells that are to be the water supply for the Mansfield Project. On October 20, 1995, New Jersey-American Water Company requested, and was subsequently granted, an adjudicatory hearing on the permit. The Company and Mount Holly believe that the permit in question will be upheld but cannot predict the outcome of the objection. In the event that the objection is successful and the permit is rescinded, Mount Holly would utilize the alternative plan of purchasing water from New Jersey-American Water Company.
CAPITAL RESOURCES
During 1995, Elizabethtown, including Mount Holly, financed 8.4% of its capital expenditures from internally generated funds (after payment of common stock dividends). The balance was financed with a combination of proceeds from capital contributions from E'town (funded by sale of its Common Stock), tax exempt bonds issued through the New Jersey Economic Development Authority (NJEDA) and short-term borrowings under a revolving credit agreement discussed below.
For the three-year period ending December 31, 1998, Elizabethtown, including Mount Holly, estimates 34% of its capital expenditures will be financed with internally generated funds (after payment of common stock dividends). The balance will be financed with a combination of capital contributions from the proceeds from the sale of E'town common stock, long-term debentures, proceeds of tax-exempt NJEDA bonds, short-term borrowings under the revolving credit agreement and other short-term financing. -The NJEDA has granted preliminary approval for the financing of almost all of Elizabethtown's and Mount Holly's major projects over the next three years, including the Plant. Elizabethtown expects to pursue tax-exempt financing to the extent that final allocations are granted by the NJEDA. The Company's senior debt is rated A3 and A by Moody's and Standard & Poor's, respectively.
In June 1995, E'town issued 660,000 shares of common stock for net proceeds of $16.9 million which were used to fund an equity contribution to Elizabethtown. The equity contribution has been used to repay short-term debt that had been issued under Elizabethtown's revolving credit agreement to partially fund the Company's capital program, the predominant portion of which relates to the construction of the Plant. During 1995, 248,846 shares of common stock were issued for proceeds of $6.4 million under E'town's Dividend Reinvestment and Stock Purchase Plan (DRP). The proceeds are used on an ongoing basis to make capital contributions to Elizabethtown to partially fund its capital program.
In December 1995, Elizabethtown issued $40.0 million of 5.60% tax-exempt Debentures through the NJEDA. The proceeds of the issue
were used to repay amounts outstanding under Elizabethtown's revolving credit agreement.
During 1995, Elizabethtown obtained a portion of funds required for its capital program through borrowings under its revolving credit agreement (Agreement) with an agent bank and five additional banks. The Agreement provides up to $60.0 million in revolving short-term financing, which together with internal funds, other short-term financing, proceeds of future issuances of debt and preferred stock and capital contributions from E'town, is expected to be sufficient to finance Elizabethtown's and Mount Holly's capital needs through 1998. The Agreement allows Elizabethtown to borrow, repay and reborrow up to $60.0 million during the first three years, after which time Elizabethtown may convert any outstanding balances to a five-year fully amortizing term loan. The Agreement further provides that, among other covenants, Elizabethtown must maintain a percentage of common and preferred equity to total capitalization of not less than 35% and a pre-tax interest coverage ratio of at least 1.5 to 1. As of December 31, 1995, the percentage o-f Elizabethtown's common and preferred equi-ty to total capitalization, calculated in accordance with the Agreement, was 47%. For the 12 months ended December 31, 1995, Elizabethtown's pre-tax interest coverage ratio, calculated in accordance with the Agreement, was 3.12 to 1. At December 31, 1995, Elizabethtown had borrowings outstanding of $27.0 million under the Agreement at interest rates from 5.75% to 6.00%, at a weighted average rate of 5.94%.
1994 and 1993
In May 1994, E'town issued 690,000 shares of common stock for net proceeds of $18.2 million. The net proceeds were used to fund an equity contribution to Elizabethtown of $16.0 million. This contribution had been used to partially fund Elizabethtown's construction program, the predominant portion of which related to the Plant. During 1994, 273,159 shares of common stock were issued for proceeds of $7.1 million under E'town's DRP. The proceeds were used to make capital contributions to Elizabethtown to partially fund its capital program.
In March 1994, Elizabethtown issued 120,000 shares of $100 par value, $5.90 Cumulative Preferred Stock for proceeds of $12.0 million at an effective rate of 7.37%. The proceeds were used to redeem $12.0 million of the Company's $8.75 Cumulative Preferred Stock. The redemption premium of $1.0 million was paid from general Company funds.
In May 1993, E'town issued 575,000 shares of common stock for net proceeds of $16.6 million. The net proceeds were used to fund equity contributions to Elizabethtown of $11.0 million in May 1993 and $2.8 million in September 1993. Elizabethtown used a portion of such contributions to repay $7.0 million of short-term bank debt incurred for construction expenditures and invested the balance on a short-term basis to fund working capital requirements.
During 1993, 200,878 shares of common stock were issued for proceeds of $6.0 million under E'town's DRP. Such proceeds were used to fund equity contributions to Elizabethtown, primarily for Elizabethtown's capital expenditures.
In November 1993, Elizabethtown issued $50.0 million of 7 1/4% Debentures due November 1, 2028. The proceeds of the issue were used to redeem $30.0 million of the Company's 8 5/8% Debentures due 2007 and $20.0 million of the Company's 10 1/8% Debentures due 2018. The aggregate redemption premiums of $2.7 million were paid from general Company funds.
RESULTS OF OPERATIONS
Earnings Applicable to Common Stock for 1995 were $16.5 million as compared to $13.4 million for 1994. The combined effect of a $5.3 million rate increase in February 1995 (discussed below), increases in AFUDC in 1995 and a non-recurring charge in 1994 all contributed to the increase between 1994 and 1995.
Earnings Applicable to Common Stock for 1994 were $13.4 million as compared to $13.8 million for 1993. A return to more normal summer weather and water consumption patterns, the combined effect of a non-recurring charge in 1994, and increases in operating and depreciation expenses since March 1993, when rates were last increased, all contributed to the decrease between 1993 and 1994.
Operating Revenues increased $6.4 million or 6.2% in 1995. Of this increase, $4.6 million relates to the rate increase, discussed below, effective February 1995. Increased consumption by retail customers and an increase in the number of customers increased revenues by $1.4 million. Revenues from industrial customers resulting from consumption increased $.2 million while revenues from other water systems resulting from consumption decreased $.2 million. Revenues from fire service customers increased $.4 million.
Operating Revenues increased $2.0 million or 2.0% in 1994. Of this increase, $1.2 million relates to a rate increase discussed below, effective March 1993. Sales to retail customers related to consumption decreased by $.9 million, primarily due to a return to more normal weather patterns during the spring and summer months of 1994, compared to 1993. However, despite the return to more normal weather patterns, sales to other water systems and to large industrial customers related to consumption increased by $.6 million and $.7 million, respecti-vely. Due to normal growth within the service territory, fire service revenues increased by $.4 million.
Operation Expenses increased $2.4 million or 5.9% in 1995. The increase is due, primarily, to increased costs for labor, benefits and the cost of purchased water calculated in accordance with a Purchased Water Adjustment Clause (PWAC) (see Note 8 to the Notes to Consolidated Financial Statements.) Benefit costs increased due to increases in the actuarially calculated pension expense and the cost of postemployment benefits, a portion of which is being expensed in
1995 as it is recognized in rates pursuant to the 1995 Stipulation effective February 1995 (see Economic Outlook).
Operation Expenses increased $2.2 million or 5.7% in 1994. The increase is due, primarily, to increased costs for labor, benefits, miscellaneous expenses and the unit cost of raw water purchased from the New Jersey Water Supply Authority (NJWSA), which is reflected in the PWAC, in addition to the cost of chemicals to treat such water. Benefit costs increased due, primarily, to an increase in the actuarially calculated pension expense.
Maintenance Expenses decreased $.8 million or 12.4% in 1995. The decrease is due, primarily, to the absence in 1995 of the unusually harsh winter weather that occurred in 1994. Also, the results of preventive maintenance programs have contributed to an overall decrease in maintenance expenses.
Maintenance Expenses increased $.9 million or 15.9% in 1994 due, primarily, to the effects of unusually harsh winter weather in the first quarter of 1994, in addition to an increased level of preventive maintenance at various operating facilities throughout the Company.
Depreciation Expense increased $.9 million or 12.1% in 1995 and $.6 million or 7.9% in 1994 due, primarily, to additional depreciable plant being placed in service during those periods. Also, an increase in authorized depreciation rates as a result of the 1995 Stipulation, effective February 1995, accounted for $.4 million of the increase.
Revenue Taxes increased $.8 million or 6.6% in 1995 and $.2 million or 2.0% in 1994, due to additional taxes on the higher revenues discussed above.
Real Estate, Payroll and Other Taxes increased $.1 million or 2.0% and $.2 million or 8.1% in 1995 and 1994, respectively, due to increased payroll taxes resulting from labor cost increases.
Federal Income Taxes increased $.8 million or 11.5% in 1995 and decreased $.5 million or 6.3% in 1994 due to changes in the components of taxable income discussed herein. In addition, in 1995 Elizabethtown received tax refunds related to the years 1984 and 1985 of $.1 million.
Other Income increased $1.7 million in 1995 due, primarily, to an increase in the equity component of AFUDC of $1.8 million and a non-recurring litigation settlement of $.9 million in 1994 as discussed below. These increases were offset by the federal income taxes associated with the various components.
Other Income decreased less than $.1 million in 1994. Included in this net decrease is a litigation settlement of $.9 million (see Note 11 to the Notes to Consolidated Financial Statements.) In addition, increases in the equity component of AFUDC of $.7 million resulted from increased construction expenditures, primarily related to the Plant. Other increases of $.3 million resulted from
miscellaneous items. Federal income taxes, as a result of all of the above, decreased less than $.1 million.
Total Interest Charges increased $.7 million or 6.8% in 1995 due, primarily, to an increase in interest expense of $2.1 million on increased borrowings under Elizabethtown's revolving credit agreement to finance the Company's ongoing capital program, the largest component of which is the Plant. This amount was offset by an increase in the debt component of AFUDC of $1.6 million, also primarily related to the construction of the Plant. In addition, in 1995 Elizabethtown received interest on tax refunds related to 1984 and 1985 of $.1 million.
Total Interest Charges decreased $1.0 million or 9.1% in 1994 due, primarily, to savings from refinancing of long-term debt in 1993. Also, an increase in the debt component of AFUDC of $.5 million resulted in a reduction of interest expense.
Preferred Stock Dividends decreased less than $.1 million due to savings from the refinancing of the $8.75 series preferred stock with $5.90 series preferred stock in March 1994.
ECONOMIC OUTLOOK
Earnings for Elizabethtown and Mount Holly for the next several years will be determined primarily by Elizabethtown's and Mount Holly's ability to obtain adequate and timely rate relief in connection with their additions to utility plant.
Elizabethtown and Subsidiary
Over the last several years, governmental water quality and service regulations have required Elizabethtown and Mount Holly to make significant investments in water supply, water treatment, transmission and storage facilities, including the Plant and the Mansfield Project, to augment existing facilities. This capital program is requiring regular external financing and rate relief. Currently, Elizabethtown and Mount Holly believe they are in compliance with all water quality standards in all material respects.
In November 1995, Elizabethtown filed for a $31.6 million or 29.6% rate increase primarily to cover the financing and operating costs of the Plant. While Mount Holly received a $.6 million or 19.9% rate increase effective January 1996, deliberations regarding the portion of the rate case related to the Mansfield Project, in which Mount Holly is requesting an additional 84.2% rate increase, are ongoing and awaiting the award of the final water diversion permit. Accordingly, the timing and amount of rate increases obtained by Elizabethtown and Mount Holly, in response to the pending rate requests, will be a major factor affecting earnings in 1996 and beyond. Once the new facilities, referred to above, are constructed and reflected in rates, Elizabethtown expects its internally generated cash flow to increase and capital outlays to return to levels experienced in the early 1990's. As a result, the need for external
financing and rate relief should become less frequent. Therefore, more so than in recent years, management's ongoing efforts to grow unit sales and control operating cost will benefit the customer by reducing the frequency of rate increases and will benefit shareholders by positively affecting earnings.
On November 20, 1995, Elizabethtown filed a petition with the BPU for an increase in rates of $31.6 million, or 29.6%. The largest portion of the request, $22.9 million, is needed to cover the costs to finance and operate the Plant. The remainder of the rate increase, $8.7 million, is needed to cover the cost to finance additional construction projects and to cover increases in operating expenses since rates were last established in February 1995. A decision by the BPU is expected in the summer of 1996. In light of the approval by the BPU of the 1993 Plant Stipulation and Elizabethtown's experience in obtaining base rate relief, Elizabethtown expects the BPU to grant timely and adequate rate relief, but cannot predict the ultimate outcome of any rate proceeding.
In January 1995, the BPU approved a stipulation (1995 Stipulation) for Elizabethtown for a rate increase of $5.3 million or 5.34%, effective February 1, 1995. The 1995 Stipulation provides for an authorized rate of return on common equity of 11.5%. It also provides for recovery of the 1994 current service cost portion of the obligation accrued under Statement of Financial Accounting Standards No. 106, "Employer's Accounting for Postretirement Benefits Other Than Pensions," provided this amount is funded by the Company. Elizabethtown funded $.3 million in 1995, which represents the 1994 current service cost allowed in the 1995 Stipulation. The rate increase is covering the cost to finance $62.0 million of construction projects since rates were last established in March 1993. These projects include treatment, transmission and storage facilities needed to ensure that Elizabethtown continues to meet federal and state regulations on water quality and service. The increase is also offsetting increased costs for power, labor and benefits, primarily medical. The 1995 Stipulation also provides for an increase in depreciation rates resulting in an increase in annual depreciation expense of approximately $.5 million. The 1995 Stipulation also required Elizabethtown to maintain a monthly average percentage of common equity to total capitalization of at least 45.1% for the 12 months ended January 31, 1996. The Company has met this requirement.
On June 26, 1995, Mount Holly petitioned the BPU for an increase in rates, to take place in two phases. In the first phase rates would be increased by $.9 million and in the second phase by $2.8 million. The first phase is necessary to cover costs that were not reflected in rates last increased in October 1986. The second phase would cover the cost of the Mansfield Project as discussed above. The project is currently estimated to cost $16.5 million. Construction is expected to begin upon final issuance of the water allocation diversion permit from the NJDEP, and the project is expected to be completed in 1997.
On January 24, 1996, the BPU approved a stipulation (Mount Holly Stipulation) for an increase in rates of $.6 million effective as of that date. The Mount Holly Stipulation has, effectively, concluded the first phase of the rate proceeding. Mount Holly is continuing with the adjudicatory process with respect to the second phase of the petition. While management believes that the water supply, treatment and transmission project planned for Mount Holly is the most cost-effective response to the state legislation affecting the area, management cannot predict the ultimate outcome of the rate proceeding at this time.
New Accounting Pronouncement
See Note 2 of the Notes to Consolidated Financial Statements for a discussion of a new accounting standard that will become effective in 1996.
Item 8.
Item 8. Financial Statements and Supplementary Data
The information for E'town is included in Exhibit 13, filed herewith, and is incorporated herein by reference.
The information for Elizabethtown Water Company is contained on pages 2 through 19 of Appendix I included herein.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
Information with respect to directors of E'town and Elizabethtown is included in E'town's Proxy Statement for the 1996 Annual Meeting of Stockholders, and is incorporated herein by reference.
Information regarding the executive officers of both E'town and Elizabethtown follows Item 1 in Part I of this Form 10-K.
Item 11.
Item 11. Executive Compensation
This information for E'town and Elizabethtown is included in E'town's Proxy Statement for the 1996 Annual Meeting of Stockholders, and is incorporated herein by reference.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
This information is included in E'town's Proxy Statement for the 1996 Annual Meeting of Stockholders, and is incorporated herein by reference.
Item 13.
Item 13. Certain Relationships and Related Transactions
This information for E'town and Elizabethtown is included in E'town's Proxy Statement for the 1996 Annual Meeting of Stockholders, and is incorporated herein by reference.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements:
Elizabethtown Water Company
Statements of Consolidated Income for the years ended December 31, 1995, 1994 and 1993.
Consolidated Balance Sheets as of December 31, 1995 and 1994.
Statements of Consolidated Capitalization as of December 31, 1995 and 1994.
Statement of Consolidated Shareholder's Equity for the years ended December 31, 1995, 1994 and 1993.
Statements of Consolidated Cash Flows for the years ended December 31, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements.
E'town Corporation
A portion of the 1995 Annual Report to Shareholders which includes Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations, Consolidated Financial Statements, Notes to Consolidated Financial Statements, Independent Auditors' Report and Other Financial and Statistical Data is filed herewith as Exhibit 13 and is herein incorporated by reference.
Elizabethtown Water Company
Elizabethtown Water Company's consolidated financial statements and notes thereto are included herein on pages 2 through 19 of Appendix I.
E'town and Elizabethtown Water Company
The Independent Auditors' Reports for E'town and Elizabethtown Water Company appear on page 28 herein and page 1 of Appendix I, respectively.
2. Financial Statement Schedules:
All financial schedules required to be filed contain the same data and amounts for both E'town and Elizabethtown Water Company, except for Supplemental Schedule of Property, Plant and Equipment, which includes property, plant and equipment for each company.
Schedule II - Valuation and Qualifying Accounts for the Years Ended December 31, 1995, 1994 and 1993.
Supplemental Schedule of Property, Plant and Equipment at December 31, 1995 and 1994.
Other schedules are omitted because of the absence of the conditions under which they are required or because the required information is included in the financial statements or the notes accompanying each company's financial statements.
3. Exhibits
(a) Exhibits for E'town and Elizabethtown Water Company are listed in the Exhibit Index.
(b) Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
March 29, 1996 E'TOWN CORPORATION
By: /s/ Robert W. Kean, Jr.
_________________________ Chairman, Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 29, 1996.
Chairman, Chief Executive Officer and Director /s/ Robert W. Kean, Jr.
_________________________
President and Director /s/ Henry S. Patterson, II
_________________________
Vice President and Director /s/ Anne Evans Estabrook
_________________________
Chief Financial Officer, Treasurer and Director /s/ Andrew M. Chapman
_________________________ (Principal Financial & Accounting Officer)
Director /s/ Brendan T. Byrne
_________________________
Director /s/ Thomas J. Cawley
_________________________
Director /s/ John Kean
_________________________
Director /s/ Robert W. Kean III
_________________________
Director /s/ Arthur P. Morgan
_________________________
Director /s/ Barry T. Parker
_________________________
Director /s/ Hugo M. Pfaltz, Jr.
_________________________
Director /s/ Chester A. Ring III
_________________________
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
March 29, 1996 ELIZABETHTOWN WATER COMPAY
By: /s/ Robert W. Kean, Jr.
__________________________ Chairman, Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 29, 1996.
Chairman, Chief Executive Officer and Director /s/ Robert W. Kean, Jr.
__________________________
Vice Chairman and Director /s/ Thomas J. Cawley
__________________________
President and Director /s/ Andrew M. Chapman
__________________________
Vice President - Finance & Treasurer /s/ Gail P. Brady
__________________________ (Principal Financial Officer)
Controller /s/ Dennis W. Doll
__________________________ (Principal Accounting Officer)
Director /s/ Brendan T. Byrne
__________________________
Director /s/ Anne Evans Estabrook
__________________________
Director /s/ John Kean
__________________________
Director /s/ Robert W. Kean III
__________________________
Director /s/ Arthur P. Morgan
__________________________
Director /s/ Barry T. Parker
__________________________
Director /s/ Henry S. Patterson, II
__________________________
Director /s/ Hugo M. Pfaltz, Jr.
__________________________
Director /s/ Chester A. Ring III
__________________________
INDEPENDENT AUDITORS' REPORT
E'TOWN CORPORATION:
We have audited the consolidated financial statements of E'town Corporation and its subsidiaries as of December 31, 1995 and 1994, and for each of the three years in the period ended December 31, 1995, and have issued our report thereon dated February 15, 1996; such consolidated financial statements and report are included in your 1995 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the financial statement schedules of E'town Corporation and its subsidiaries, listed in Item 14. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
February 15, 1996 Parsippany, New Jersey
E'TOWN CORPORATION SCHEDULE II ELIZABETHTOWN WATER COMPANY VALUATION AND QUALIFYING ACCOUNTS
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
________ ________ ________ ________ ________
ADDITIONS BALANCE AT CHARGED TO BALANCE AT BEGINNING COSTS AND END DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
_____________ _________ ___________ __________ ___________
Reserve for Uncollectible Accounts:
Year Ended December 31, 1995 $463,000 $600,648 (A) $531,648 $532,000
Year Ended December 31, 1994 $434,000 $552,459 (A) $523,459 $463,000
Year Ended December 31, 1993 $377,000 $571,116 (A) $514,116 $434,000
_________________________________
(A) Write-off of uncollectible accounts, net of recoveries.
____________________________________________________________________________
SUPPLEMENTAL SCHEDULE E'TOWN CORPORATION ELIZABETHTOWN WATER COMPANY PROPERTY, PLANT AND EQUIPMENT AT DECEMBER 31, 1995 AND 1994
1995 1994
_________ _________ ELIZABETHTOWN WATER COMPANY:
____________________________ UTILITY PLANT IN SERVICE: Intangible Plant $ 250,766 $ 250,766 Source of Supply Plant 10,073,447 9,739,125 Pumping Plant 44,838,866 43,658,801 Water Treatment Plant 53,070,107 46,008,913 Transmission & Distribution Plant 378,216,166 354,703,279 General Plant 15,373,329 14,068,349 Leasehold Improvements 117,186 110,954 Acquisition Adjustments 632,388 632,388
____________ ____________ Utility Plant in Service 502,572,255 469,172,575 Construction Work in Progress 100,212,636 55,739,951
____________ ____________ Total Utility Plant 602,784,891 524,912,526
NON-UTILITY PROPERTY - net 83,178 85,690
____________ ____________ TOTAL $602,868,069 $524,998,216
____________ ____________
____________ ____________ E'TOWN CORPORATION:
___________________ UTILITY PLANT (as above) $602,784,891 $524,912,526
NON-UTILITY PROPERTY - net 12,151,496 12,061,574
____________ ____________ TOTAL $614,936,387 $536,974,100
____________ ____________
____________ ____________
EXHIBIT INDEX
Certain of the following exhibits, designated with an asterisk(*), are filed herewith. The exhibits not so designated have heretofore been filed with the Commission and are incorporated herein by reference to the documents indicated in brackets following the description of such exhibits.
E'town Corporation
Exhibit No. Description
3(a) - Certificate of Incorporation of E'town Corp. [Registration Statement No. 33-42509, Exhibit 4(a)]
3(b) - By-Laws of E'town Corp. [Form 10-K for the year 1994, Exhibit 3(b)]
3(c) - Certificate of Incorporation of E'town Properties, Inc. [Registration Statement No. 33-32143, Exhibit 4(j)]
3(d) - By-Laws of E'town Properties, Inc. [Registration Statement No. 33-32143, Exhibit 4(n)]
4(a) - Rights Agreement dated as of February 4, 1991 between E'town and the Rights Agent [Registration Statement No. 33-38566, Exhibit 4(n)]
4(b) - Indenture dated as of January 1, 1987 from E'town Corporation to Boatmen's Trust, Trustee, relating to the 6 3/4% Convertible Subordinated Debentures due 2012 [Registration Statement No. 33-32143, Exhibit 4(a)]
10(a) - Incentive Stock Option Plan [Registration Statement No. 2-99602, Exhibit 28(a)]
10(b) - Savings and Investment Plan - 401(k) [Form 10-K for the year 1994, Exhibit 10(b)]
10(c) - Management Incentive Plan [Registration Statement No. 33-38566, Exhibit 10(i)]
10(d) - E'town's 1987 Stock Option Plan [Registration Statement No. 33-42509, Exhibit 28]
Exhibit No. Description
10(e) - E'town's 1990 Performance Stock Program [Registration Statement No. 33-46532, Exhibit 10(k)]
10(f) - E'town's Dividend Reinvestment and Stock Purchase Plan [Registration No. 33-56013, Exhibit 4(e)]
10(g) - Change of Control Agreement [Form 10-Q for the quarter ended March 31, 1995, Exhibit 10]
*11 - Statement Regarding Computation of Per Share Earnings
*13 - Portion of the 1995 Annual Report to Shareholders which includes Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations, Consolidated Financial Statements, Notes to Consolidated Financial Statements, Independent Auditors' Report and Other Financial and Statistical Data and is herein incorporated by reference.
*23 - Consent of Deloitte & Touche LLP, Independent Auditors
*27 - E'town Corporation - Financial Data Schedule
EXHIBIT INDEX
Certain of the following exhibits, designated with an asterisk(*), are filed herewith. The exhibits not so designated have heretofore been filed with the Commission and are incorporated herein by reference to the documents indicated in brackets following the description of such exhibits.
Elizabethtown Water Company
Exhibit No. Description
3(a) - Form of Restated Certificate of Incorporation of Elizabethtown Water Company [Form 10-K for the year ended December 31, 1994, Exhibit 3(a)]
3(b) - By-Laws of Elizabethtown Water Company
4(a) - Indenture dated as of November 1, 1994 from Elizabethtown Water Company to The Bank of New York, Trustee, relating to the 7 1/4% Debentures due 2028. [Form 10-K for year ended December 31, 1994, Exhibit 4(a)]
4(b) - Indenture dated as of September 1, 1992 from Elizabethtown Water Company to The Bank of New York, Trustee, relating to the 8% Debentures due 2022 [Form 10-K for year ended December 31, 1993, Exhibit 4(a)]
4(c) - Indenture dated as of October 1, 1991 from Elizabethtown Water Company to The Bank of New York, Trustee, relating to the 8 3/4% Debentures due 2021 [Registration Statement No. 33-46532, Exhibit 4(f)]
4(d) - Indenture dated as of August 1, 1991 from Elizabethtown Water Company to The Bank of New York, Trustee, relating to the 6.60% Debentures due 2021 [Registration Statement No. 33-46532, Exhibit 4(g)]
4(e) - Indenture dated as of August 1, 1991 from Elizabethtown Water Company to The Bank of New York, Trustee, relating to the 6.70% Debentures due 2021 [Registration Statement No. 33-46532, Exhibit 4(h)]
4(f) - Indenture dated as of October 1, 1990 from Elizabethtown Water Company to Citibank, N.A., Trustee, relating to the 7 1/2% Debentures due 2020 [Registration Statement No. 33-38566, Exhibit 4(e)]
Exhibit No. Description
4(g) - Indenture dated as of December 1, 1989 from Elizabethtown Water Company to Citibank, N.A., Trustee, relating to the 7.20% Debentures due 2019 [Registration Statement No. 33-38566, Exhibit 4(f)]
*4(h) - Indenture dated as of December 1, 1995 from Elizabethtown Water Company to The Bank of New York, Trustee, relating to the 5.60% Debentures due 2025
10(a) - Contract for service to Middlesex Water Company. [Registration Statement No. 33-38566, Exhibit 10(a)]
10(b) - Contract for service to Edison Township. [Registration Statement No. 2-58262, Exhibit 13(c)]
10(c) - Contract for service to New Jersey-American Water Company. [Form 10-K for the year ended December 31, 1993, Exhibit 10(c)]
10(d) - Contract for service to City of Elizabeth. [Form 10-K for the year ended December 31, 1992, Exhibit 10(d)]
10(e) - Contract for service to Franklin Township. [Registration Statement No. 33-46532, Exhibit 10(e)]
10(f) - Contract with the New Jersey Water Supply Authority for the purchase of water from the Raritan Basin. [Registration Statement No. 33-32143, Exhibit 10(e)]
10(g) - Supplemental Executive Retirement Plan of Elizabethtown Water Company [Form 10-K for the year ended December 31, 1992, Exhibit 10(g)]
10(h) - Medical Reimbursement Plan of Elizabethtown Water Company [Form 10-K for the year ended December 31, 1992, Exhibit 10(h)]
10(i) - Supplemental Executive Retirement Plan of Elizabethtown Water Company [Form 10-Q for the year ended September 30, 1995, Exhibit 10] Exhibit No. Description
*12(a) - Computation of Ratio of Earnings to Fixed Charges
*12(b) - Computation of Ratio of Earnings to Fixed Charges and Preferred Dividends
* 27 - Elizabethtown Water Company - Financial Data Schedule.
APPENDIX I
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 AND INDEPENDENT AUDITORS' REPORT
APPENDIX I
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
__________________________________________
______________________________________________________________________
INDEPENDENT AUDITORS' REPORT
STATEMENTS OF CONSOLIDATED INCOME FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1995 AND 1994
STATEMENTS OF CONSOLIDATED CAPITALIZATION AS OF DECEMBER 31, 1995 AND 1994
STATEMENTS OF CONSOLIDATED SHAREHOLDER'S EQUITY FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
______________________________________________________________________
APPENDIX I
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDER AND BOARD OF DIRECTORS OF ELIZABETHTOWN WATER COMPANY:
We have audited the accompanying consolidated balance sheets and statements of consolidated capitalization of Elizabethtown Water Company and its subsidiary as of December 31, 1995 and 1994, and the related consolidated statements of income, shareholder's equity, and cash flows for each of the three years in the period ended December 31, 1995. Our audits also included the financial statement schedules listed in the Index at Item 14. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Elizabethtown Water Company and its subsidiary at December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
February 15, 1996 Parsippany, New Jersey
Elizabethtown Water Company and Subsidiary APPENDIX I
Statements of Consolidated Income
Year Ended December 31,
________________________________________ 1995 1994 1993
_____________ _____________ ____________
Operating Revenues $108,398,105 $102,032,505 $99,996,120
____________ ____________ ____________
Operating Expenses: Operation 43,132,400 40,722,980 38,529,149 Maintenance 5,805,511 6,623,772 5,716,157 Depreciation 8,808,169 7,860,180 7,285,309 Revenue taxes 13,591,212 12,748,161 12,501,804 Real estate, payroll and other taxes 2,771,716 2,717,067 2,513,891 Federal income taxes (Note 3) 8,002,292 7,176,396 7,658,770
____________ ____________ ___________ Total operating expenses 82,111,300 77,848,556 74,205,080
____________ ____________ ___________
Operating Income 26,286,805 24,183,949 25,791,040
____________ ____________ ___________
Other Income: Litigation settlement (Note 11) (932,203) Gain on sale of land 122,400 Allowance for equity funds used during construction (Note 2) 2,976,290 1,178,133 445,339 Federal income taxes (Note 3) (1,159,218) (237,599) (258,024) Other-net 335,763 432,922 169,474
____________ ____________ ___________ Total other income 2,152,835 441,253 479,189
____________ ____________ ___________
Total Operating and Other Income 28,439,640 24,625,202 26,270,229
____________ ____________ ___________
Interest Charges: Interest on long-term debt 10,892,129 10,774,008 11,527,301 Other interest expense-net 2,343,903 175,507 77,921 Capitalized interest (Note 2) (2,445,093) (867,101) (391,895) Amortization of debt discount-net 323,557 319,646 224,383
____________ ____________ ___________ Total interest charges 11,114,496 10,402,060 11,437,710
____________ ____________ ___________
Income Before Preferred Stock Dividends 17,325,144 14,223,142 14,832,519 Preferred Stock Dividends 813,000 854,047 1,050,000
____________ ____________ ___________
Earnings Applicable to Common Stock $ 16,512,144 $ 13,369,095 $13,782,519
____________ ____________ ___________
____________ ____________ ___________
See Notes to Consolidated Financial Statements.
Elizabethtown Water Company and Subsidiary APPENDIX I
Consolidated Balance Sheets
December 31,
___________________________ Assets 1995 1994
____________ ____________
Utility Plant-at Original Cost: Utility plant in service $502,572,255 $469,172,575 Construction work in progress 100,212,636 55,739,951
____________ ____________ Total utility plant 602,784,891 524,912,526 Less accumulated depreciation and amortization 94,926,413 87,456,550
____________ ____________ Utility plant-net 507,858,478 437,455,976
____________ ____________
Non-utility Property 83,178 85,690
____________ ____________
Current Assets: Cash and cash equivalents 3,796,757 1,485,115 Customer and other accounts receivable (less reserve: 1995, $532,000; 1994, $463,000) 16,943,725 12,350,802 Unbilled revenues 7,443,656 7,161,483 Materials and supplies-at average cost 1,912,015 1,724,969 Prepaid insurance, taxes, other 1,874,338 1,410,401 Prepaid federal income taxes 1,344,630
____________ ____________ Total current assets 31,970,491 25,477,400
____________ ____________
Deferred Charges (Note 7): Prepaid pension expense (Note 10) 580,534 926,142 Waste residual management 970,182 546,490 Unamortized debt and preferred stock expenses 9,384,609 8,902,271 Taxes recoverable through future rates (Note 3) 26,427,627 26,339,057 Postretirement benefit expense (Note 10) 2,900,569 2,077,051 Purchased water under recovery - net 37,316 314,128 Other unamortized expenses 594,875 723,709
____________ ____________ Total deferred charges 40,895,712 39,828,848
____________ ____________ Total $580,807,859 $502,847,914
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
Elizabethtown Water Company and Subsidiary APPENDIX I
Consolidated Balance Sheets
December 31,
____________________________ Capitalization and Liabilities 1995 1994
____________ ____________
Capitalization (Notes 4 and 5): Common shareholder's equity $176,684,773 $151,624,255 Cumulative preferred stock 12,000,000 12,000,000 Long-term debt-net 181,922,528 141,908,430
____________ ____________ Total capitalization 370,607,301 305,532,685
____________ ____________
Current Liabilities: Notes payable-banks (Note 5) 27,000,000 23,000,000 Long-term debt-current portion (Note 4) 30,000 42,000 Accounts payable and other liabilities 16,723,904 18,165,522 Customers' deposits 305,349 278,895 Municipal and state taxes accrued 13,661,620 12,831,524 Federal income taxes accrued 533,286 Interest accrued 2,937,637 2,828,464 Preferred stock dividends accrued 59,000 59,000
____________ ____________ Total current liabilities 61,250,796 57,205,405
____________ ____________
Deferred Credits: Customer advances for construction 45,460,749 45,554,476 Federal income taxes (Note 3) 64,886,448 60,109,244 Unamortized investment tax credits 8,448,811 8,650,537 Accumulated postretirement benefits (Note 10) 2,900,569 2,077,051
____________ ____________ Total deferred credits 121,696,577 116,391,308
____________ ____________
Contributions in Aid of Construction 27,253,185 23,718,516
____________ ____________
Commitments and Contingent Liabilities (Note 9)
____________ ____________ Total $580,807,859 $502,847,914
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
Elizabethtown Water Company and Subsidiary APPENDIX I
Statements of Consolidated Capitalization
December 31,
____________________________ 1995 1994
____________ ____________
Common Shareholder's Equity (Notes 4 and 5): Common stock without par value, authorized, 10,000,000 shares; issued 1995 and 1994, 1,974,902 shares $ 15,740,602 $ 15,740,602 Paid-in capital 112,157,348 88,868,632 Capital stock expense (484,702) (484,702) Retained earnings 49,271,525 47,499,723
____________ ____________ Total common shareholder's equity 176,684,773 151,624,255
____________ ____________
Cumulative Preferred Stock (Note 4): $100 par value, authorized, 200,000 shares; $5.90 series, issued and outstanding, 120,000 shares 12,000,000 12,000,000
____________ ___________
Cumulative Preferred Stock: $25 par value, authorized, 500,000 shares; none issued
Elizabethtown Water Company: 7.20% Debentures, due 2019 10,000,000 10,000,000 7 1/2% Debentures, due 2020 15,000,000 15,000,000 6.60% Debentures, due 2021 10,500,000 10,500,000 6.70% Debentures, due 2021 15,000,000 15,000,000 8 3/4% Debentures, due 2021 27,500,000 27,500,000 8% Debentures, due 2022 15,000,000 15,000,000 5.60% Debentures, due 2025 40,000,000 7 1/4% Debentures, due 2028 50,000,000 50,000,000
The Mount Holly Water Company: Notes Payable (due serially through 2000) 117,500 144,300
____________ ____________ Total long-term debt 183,117,500 143,144,300 Unamortized discount-net (1,194,972) (1,235,870)
____________ ____________ Total long-term debt-net 181,922,528 141,908,430
____________ ____________ Total capitalization $370,607,301 $305,532,685
____________ ____________
____________ ____________
See Notes to Consolidated Financial Statements.
Elizabethtown Water Company and Subsidiary APPENDIX I
Statements of Consolidated Shareholder's Equity
Year Ended December 31,
_______________________________________ 1995 1994 1993
____________ ___________ ___________
Common Stock: $ 15,740,602 $ 15,740,602 $ 15,740,602
____________ ____________ ____________
Paid-in Capital: Balance at Beginning of Year 88,868,632 63,522,594 43,713,297 Capital contributed by parent company 23,288,716 25,346,038 19,809,297
____________ ____________ ____________ Balance at End of Year 112,157,348 88,868,632 63,522,594
____________ ____________ ____________
Capital Stock Expense: (484,702) (484,702) (484,702)
____________ ____________ ____________
Retained Earnings: Balance at Beginning of Year 47,499,723 46,986,485 44,054,327 Income Before Preferred Stock Dividends 17,325,144 14,223,142 14,832,519 Dividends on Common Stock (14,740,342) (12,855,857) (10,850,361) Preferred Stock Dividends (813,000) (854,047) (1,050,000)
____________ ____________ ____________ Balance at End of Year 49,271,525 47,499,723 46,986,485
____________ ____________ ____________
Total Common Shareholder's Equity $176,684,773 $151,624,255 $125,764,979
____________ ____________ ____________
____________ ____________ ____________
See Notes to Consolidated Financial Statements.
Elizabethtown Water Company and Subsidiary APPENDIX I
Statements of Consolidated Cash Flows Year Ended December 31,
_____________________________________ 1995 1994 1993
___________ ___________ ___________ Cash Provided by Operating Activities: Income Before Preferred Stock Dividends $ 17,325,144 $ 14,223,142 $ 14,832,519 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 8,808,169 7,860,180 7,285,309 Gain on sale of land (122,400) Decrease (increase) in deferred charges 327,562 (169,459) 260,600 Deferred income taxes and investment tax credits-net 4,486,908 4,256,534 3,332,558 Allowance for debt and equity funds used during construction (AFUDC) (5,421,383) (2,045,234) (837,234) Other operating activities-net (61,590) (130,902) (449,792) Change in current assets and liabilities excluding cash, short-term investments and current portion of debt: Customer and other accounts receivable (4,592,923) (462,817) (840,485) Unbilled revenues (282,173) 86,839 (688,601) Accounts payable and other liabilities (1,415,164) 8,517,848 669,078 Accrued/prepaid interest and taxes 2,353,248 (1,464,787) 232,741 Other (187,046) (101,266) (6,870)
____________ ____________ ____________ Net cash provided by operating activities 21,340,752 30,570,078 23,667,423
____________ ____________ ____________ Cash Provided by Financing Activities: Decrease in funds held by Trustee for construction expenditures 382,306 8,519,877 Proceeds from issuance of debentures 40,000,000 50,000,000 Proceeds from issuance of preferred stock 12,000,000 Redemption of preferred stock (12,000,000) Debt and preferred stock issuance costs (482,338) (876,594) (3,139,571) Capital contributed by parent company 23,288,716 25,346,038 19,809,297 Repayment of long-term debt (38,800) (42,000) (50,042,000) Contributions and advances for construction-net 3,440,942 3,453,604 1,909,905 Net increase (decrease) in notes payable-banks 4,000,000 23,000,000 (5,500,000) Dividends paid on common and preferred stock (15,448,342) (13,631,154) (11,900,361)
____________ ____________ ____________ Net cash provided by financing activities 54,760,178 37,632,200 9,657,147
____________ ____________ ____________ Cash Used for Investing Activities: Utility plant expenditures (excluding AFUDC) (73,789,288) (69,980,619) (32,501,865) Proceeds from sale of land 131,000
____________ ____________ ____________ Net cash used for investing activities (73,789,288) (69,980,619) (32,370,865)
____________ ____________ ____________ Net Increase (Decrease) in Cash and Cash Equivalents 2,311,642 (1,778,341) 953,705 Cash and Cash Equivalents at Beginning of Year 1,485,115 3,263,456 2,309,751
____________ ____________ ____________ Cash and Cash Equivalents at End of Year$ 3,796,757 $ 1,485,115 $ 3,263,456
____________ ____________ ____________
____________ ____________ ____________ Supplemental Disclosures of Cash Flow Information: Cash paid during the year for: Interest (net of amount capitalized) $ 7,833,355 $ 9,952,838 $ 11,837,347 Income taxes 4,158,093 6,771,254 5,881,008 Preferred stock dividends $ 708,000 $ 805,475 $ 1,050,000
See Notes to Consolidated Financial Statements.
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION Elizabethtown Water Company (Elizabethtown or Company) and its wholly owned subsidiary, The Mount Holly Water Company (Mount Holly), is a wholly owned subsidiary of E'town Corporation (E'town or Corporation). E'town, a New Jersey holding company, is the parent company of Elizabethtown Water Company and E'town Properties, Inc.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The consolidated financial statements include Elizabethtown and its subsidiary, Mount Holly. Significant intercompany accounts and transactions have been eliminated. Elizabethtown and Mount Holly are regulated water utilities and follow the Uniform System of Accounts, as adopted by the New Jersey Board of Public Utilities (BPU).
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Utility Plant and Depreciation Income is charged with the cost of labor, materials and other expenses incurred in making repairs and minor replacements and in maintaining the properties. Utility plant accounts are charged with the cost of improvements and major replacements of property. When depreciable property is retired or otherwise disposed of, the cost thereof, plus the cost of removal net of salvage, is charged to accumulated depreciation. Depreciation generally is computed on a straight-line basis at functional rates for various classes of assets. The provision for depreciation, as a percentage of average depreciable property, was 1.83% for 1995, 1.75% for 1994 and 1.74% for 1993. The 1995 rate case (see Note 8) allowed an increase in depreciation rates effective February 1, 1995.
Allowance for Funds Used During Construction Elizabethtown and Mount Holly capitalize, as an appropriate cost of utility plant, an Allowance for Funds Used During Construction (AFUDC), which represents the cost of financing major projects during construction. AFUDC, a non-cash credit on the Statements of Consolidated Income, is added to the construction cost of the project and included in rate base and then recovered in rates during the project's useful life. AFUDC is comprised of a debt component (credited to Interest Charges), and an equity component (credited to Other Income) in the Statements of Consolidated Income. AFUDC totaled $5,421,383, $2,045,234 and $837,234 for 1995, 1994 and 1993, respectively (see Note 8).
Revenues Revenues are recorded based on the amounts of water delivered to customers through the end of each accounting period. This includes an accrual for unbilled revenues for water delivered from the time meters were last read to the end of the respective accounting periods.
Federal Income Taxes Elizabethtown Water Company files a consolidated federal tax return with E'town. Deferred income taxes are provided for timing differences in the recognition of revenues and expenses for tax and financial statement purposes to the extent permitted by the BPU. Elizabethtown and Mount Holly account for prior years' investment tax credits by the deferral method, which amortizes the credits over the lives of the respective assets.
Customer Advances for Construction and Contributions in Aid of Construction Customer Advances for Construction and Contributions in Aid of Construction represent capital provided by developers for main extensions to new real estate developments. Some portion of Customer Advances for Construction is refunded based upon the revenues that the new developments generate. Contributions in Aid of Construction are Customer Advances for Construction that, under the terms of individual main extension agreements, are no longer subject to refund.
Cash Equivalents Elizabethtown Water Company considers all highly liquid debt instruments purchased with maturities of three months or less to be cash equivalents.
New Accounting Pronouncement In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of," which is effective in 1996. The statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The resultant impairment, if any, would be measured based on the fair value of the asset. The Company believes that the adoption of SFAS 121 will not have any effect on the Company's results of operations or financial position.
Reclassification Certain prior year amounts have been reclassified to conform to the current year's presentation.
3. FEDERAL INCOME TAXES The computation of federal income taxes and the reconciliation of the tax provision computed at the federal statutory rate (35%) with the amount reported in the Statements of Consolidated Income follow: 1995 1994 1993 ------------------------- (Thousands of Dollars)
Tax expense at statutory rate $9,270 $7,573 $7,962 Items for which deferred taxes are not provided: Capitalized interest (2) (2) Difference between book and tax depreciation 133 92 81 Investment tax credits (204) (209) (208) Other (37) (40) 84 ----------------------- Provision for federal income taxes $9,162 $7,414 $7,917 ======================= The provision for federal income taxes is composed of the following: Current $6,409 $5,087 $5,926 Tax collected on main extensions (1,734) (1,931) (1,341) Deferred: Tax depreciation 3,492 3,366 3,222 Capitalized interest 800 384 72 Main cleaning and lining 405 396 323 Other (8) 314 (91) Investment tax credits-net (202) (202) (194) ----------------------- Total provision $9,162 $7,414 $7,917 =======================
Effective January 1, 1993, the Company adopted SFAS 109, "Accounting for Income Taxes." SFAS 109 established accounting rules that changed the manner in which income tax expense is determined for accounting purposes. SFAS 109 utilizes a liability method under which deferred taxes are provided at the enacted statutory rate for all temporary differences between financial statement earnings amounts and the tax basis of existing assets or liabilities.
In connection with the adoption of SFAS 109, Elizabethtown and Mount Holly recorded additional deferred taxes for water utility temporary differences not previously recognized. The increased deferred tax liability was offset by a corresponding asset representing the future revenue expected to be recovered through rates based on established regulatory practice permitting such recovery.
In accordance with SFAS 109, deferred tax balances have been reflected at E'town's current consolidated federal income tax rate, which is 35%.
The tax effect of significant temporary differences representing deferred income tax assets and liabilities as of December 31, 1995 and 1994 is as follows:
1995 1994 --------------------- (Thousands of Dollars)
Water utility plant-net $(56,956) $(53,517) Taxes recoverable through future rates (9,250) (9,219) Investment tax credit 2,957 3,028 Prepaid pension expense (203) (324) Capitalized interest (1,308) (508) Other assets 654 557 Other liabilities (780) (126) ------------------- Net deferred income tax liabilities $(64,886) $(60,109) ===================
In 1995 Elizabethtown received tax refunds and interest related to the years 1984 and 1985 that contributed to an increase in net income of $206,948.
4. CAPITALIZATION In June 1995, E'town issued 660,000 shares of common stock for net proceeds of $16,863,860. The gross proceeds of $17,737,500 were used to fund equity contributions to Elizabethtown totalling $16,900,000. These equity contributions have been used to repay short-term debt that had been issued under Elizabethtown's revolving credit agreement (see below) to partially fund the Company's capital program, the predominant portion of which relates to the construction of the Canal Road Water Treatment Plant (Plant) (see Note 9).
In May 1994, E'town issued 690,000 shares of common stock for net proceeds of $18,218,471. The net proceeds were used to fund an equity contribution to Elizabethtown of $16,000,000. This contribution had been used to partially fund Elizabethtown's construction program, the predominant portion of which related to the Plant.
E'town routinely makes equity contributions to Elizabethtown which represent the proceeds of common stock issued under E'town's Dividend Reinvestment and Stock Purchase Plan (DRP). E'town contributed $6,388,716 and $7,146,038 in 1995 and 1994, respectively, to Elizabethtown from the proceeds of DRP issuances.
Cumulative Preferred Stock In March 1994, Elizabethtown issued 120,000 shares of $100 par value, $5.90 Cumulative Preferred Stock for proceeds of $12,000,000 at an effective rate of 7.37%. The proceeds were used to redeem $12,000,000 of the Company's $8.75 Cumulative Preferred Stock. The redemption premium of $1,050,000 was paid from general Company funds and is being amortized over 10 years for ratemaking purposes.
The $5.90 Cumulative Preferred Stock is not redeemable at the option of Elizabethtown. Elizabethtown is required to redeem all 120,000 shares of the Preferred Stock on March 1, 2004 at $100 per share.
Long-term Debt Elizabethtown's long-term debt indentures restrict the amount of retained earnings available to Elizabethtown to pay cash dividends (which is the primary source of funds available to the Corporation for payment of dividends on its common stock), or acquire Elizabethtown's
common stock, all of which is held by E'town. At December 31, 1995, $7,753,084 of Elizabethtown's retained earnings were restricted under the most restrictive indenture provision. Therefore, $35,241,659 of E'town's consolidated retained earnings were unrestricted.
In December 1995, Elizabethtown issued $40,000,000 of 5.60% tax-exempt debentures through the New Jersey Economic Development Authority (NJEDA). The proceeds of the issue were used to repay amounts outstanding under a revolving credit agreement (see Note 5).
5. LINES OF CREDIT In 1994, Elizabethtown executed a committed revolving credit agreement (Agreement) with an agent bank and five additional banks that replaced the Company's uncommitted lines of credit. The Agreement provides up to $60,000,000 in revolving short-term financing, which together with internal funds, other short-term financing, proceeds of future issuances of debt and preferred stock by Elizabethtown and capital contributions from E'town, is expected to be sufficient to finance Elizabethtown's and Mount Holly's capital needs, which are estimated to be $148,905,000 through 1998. At December 31, 1995, Elizabethtown had outstanding borrowings of $27,000,000 under the Agreement at interest rates from 5.75% to 6.00%, at a weighted average rate of 5.94%.
The Agreement allows Elizabethtown to borrow, repay and reborrow up to $60,000,000 during the first three years, after which time Elizabethtown may convert any outstanding balances to a five-year, fully amortizing term loan. The Agreement further provides that, among other covenants, Elizabethtown must maintain a percentage of common and preferred equity to total capitalization of not less than 35% and a pre-tax interest coverage ratio of at least 1.5 to 1. As of December 31, 1995, the percentage of Elizabethtown's common and preferred equity to total capitalization, as calculated in accordance with the Agreement, was 47%. For the 12 months ended December 31, 1995, Elizabethtown's pre-tax interest coverage ratio, calculated in accordance with the Agreement, was 3.12 to 1.
Elizabethtown has $17,000,000 of uncommitted lines of credit with several banks in addition to the lines under the Agreement.
Information relating to bank borrowings for 1995, 1994 and 1993 is as follows: 1995 1994 1993 ------------------------------- (Thousands of Dollars)
Maximum amount outstanding.......... $60,000 $23,000 $7,000 Average monthly amount outstanding.. $39,636 $ 2,958 $2,062 Average interest rate at year end... 5.9% 6.1% (A) Compensating balances at year end... $ 0 $ 0 $ 195 Weighted average interest rate based on average daily balances.......... 6.2% 5.7% 3.8%
(A) No outstanding bank borrowings at year end.
6. FINANCIAL INSTRUMENTS The carrying amounts and the estimated fair values, as of December 31, 1995 and 1994, of financial instruments issued or held by the Company, are as follows: 1995 1994 ------------------------ (Thousands of Dollars) Cumulative preferred stock (1): Carrying amount $ 12,000 $ 12,000 Estimated fair value 11,940 10,860 Long-term debt (1): Carrying amount $181,923 $141,908 Estimated fair value 189,664 129,355
(1) Estimated fair values are based upon quoted market prices for these or similar securities.
7. REGULATORY ASSETS AND LIABILITIES Certain costs incurred by Elizabethtown and Mount Holly which have been deferred have been recognized as regulatory assets and are being amortized over various periods as set forth below:
1995 1994 ----------------------- (Thousands of Dollars)
Waste residual management $ 970 $ 546 Unamortized debt and preferred stock expense 9,385 8,902 Taxes recoverable through future rates (Note 3) 26,428 26,339 Postretirement benefit expense (Note 10) 2,901 2,077 Purchased water under recovery-net (Note 8) 37 314 ------------------- Total $39,721 $38,178 ===================
Waste Residual Management The costs of disposing of the waste generated by Elizabethtown's and Mount Holly's water treatment plants are being amortized over three-year periods for ratemaking and financial statement purposes. No return is being earned on these deferred balances.
Unamortized Debt and Preferred Stock Expenses Costs incurred in connection with the issuance or redemption of long-term debt have been deferred and are being amortized over the lives of respective issues for ratemaking and financial statement purposes. Costs incurred in connection with the issuance and redemption of preferred stock have been deferred and are being amortized over a 10-year period for ratemaking and financial statement purposes.
There were no regulatory liabilities at December 31, 1995 or 1994.
8. REGULATORY MATTERS Rates Elizabethtown On November 20, 1995, Elizabethtown filed a petition with the BPU for an increase in rates of $31,634,500 or 29.6%. The largest portion of the request, $22,925,227, is to cover the cost to finance and operate the Plant (see Note 9). The remainder of the rate request, $8,709,273
is needed to cover the cost to finance additional construction projects and to cover increases in operating expenses since rates were last established in February 1995. A decision by the BPU is expected in the summer of 1996. In light of the approval by the BPU of the 1993 Plant Stipulation (discussed below) and Elizabethtown's experience in obtaining base rate relief, Elizabethtown expects the BPU to grant timely and adequate rate relief, but cannot predict the ultimate outcome of any rate proceeding.
In February 1996, Elizabethtown filed a petition with the BPU for a decrease in rates of $390,318 under a Purchased Water Adjustment Clause (PWAC). This procedure, established by BPU rules, allows Elizabethtown to reflect in rates a change in the cost of water purchased from the New Jersey Water Supply Authority (NJWSA) without a complete rate case. The purpose of this request is to reflect in rates the expected decrease in the rate for water purchased by Elizabethtown from the NJWSA effective July 1, 1996.
In August 1993, the BPU approved a stipulation (1993 Plant Stipulation) signed by the Department of Ratepayer Advocate, the BPU staff and several of Elizabethtown's major wholesale customers, all of whom typically participate in Elizabethtown's rate cases. The 1993 Plant Stipulation states that the Plant is necessary and that the Company's estimates regarding the Plant's cost ($87,000,000 at that time) and construction period are reasonable (see Note 9). In April 1994, Elizabethtown notified all parties to the 1993 Plant Stipulation that the estimated cost of the Plant had increased. The 1993 Plant Stipulation authorizes the Company to levy a rate surcharge during the Plant's construction period if the Company's pre-tax interest coverage ratio for any 12-month historical period drops below 2.0 times. The 1993 Plant Stipulation also provides that the rate of return on common shareholder's equity used to calculate the rate for the equity component of the AFUDC for the Plant will be 1.5% less than the rate of return on common shareholder's equity established in the Company's most recent base rate case. The authorized rate of return on common shareholder's equity is currently 11.5%.
In January 1995, the BPU approved a stipulation (1995 Stipulation) for Elizabethtown for a rate increase of $5,300,000, or 5.34%, effective February 1, 1995. The 1995 Stipulation provides for an authorized rate of return on common equity of 11.5%. It also provides for recovery of the current service cost portion of the obligation accrued under SFAS 106, "Employer's Accounting for Postretirement Benefits Other Than Pensions," provided this amount is funded by the Company (see Note 10). The rate increase is covering the cost to finance $62,000,000 of construction projects that were not reflected in the rates established in March 1993. These projects include treatment, transmission and storage facilities needed to ensure that Elizabethtown continues to meet federal and state regulations on water quality and service. The increase is also offsetting increased costs for power, labor and benefits, primarily medical. The 1995 Stipulation also provides for an increase in depreciation rates resulting in an increase in depreciation expense of approximately $469,000. The 1995 Stipulation also required Elizabethtown to maintain a percentage of common equity to total capitalization of at least 45.1% for the 12 months ended January 31, 1996. The Company has met this requirement.
On July 7, 1995, the BPU approved a Stipulation for a decrease in rates under a PWAC. The Stipulation resulted in a decrease in rates
for the PWAC, effective July 13, 1995 of $348,527. This Stipulation reflects the decrease in rates for water purchased from the NJWSA.
In June 1994, the BPU approved a Stipulation for an increase in rates under a PWAC. The Stipulation resulted in an increase in rates, effective July 1, 1994, of $334,611, reflecting the increase in rates for water purchased from the NJWSA.
Mount Holly On June 26, 1995, Mount Holly petitioned the BPU for an increase in rates, to take place in two phases. In the first phase rates would be increased by $851,171 and in the second phase by $2,794,002. The first phase is necessary to cover costs that were not reflected in rates last increased in October 1986. The second phase would cover the cost of a new water supply, treatment and transmission system necessary to obtain water outside a designated portion of an aquifer currently used by Mount Holly and to treat and pump the water into the Mount Holly distribution system. Management believes this project is the most cost-effective alternative available to Mount Holly to comply with recent state legislation which restricts the amount of water that can be withdrawn from an aquifer in certain areas of southern New Jersey. The project is currently estimated to cost $16,500,000. The land for the supply and treatment facilities has been purchased and wells have been drilled and can produce the required supply. On October 5, 1995, the New Jersey Department of Environmental Protection granted Mount Holly a water allocation diversion permit for four wells that are to be the water supply for the Mansfield Project. On October 20, 1995, New Jersey-American Water Company requested, and was subsequently granted, an adjudicatory hearing on the permit. The Company and Mount Holly believe that the permit in question will be upheld, but cannot predict the outcome of the objection. In the event that the objection is successful and the permit is rescinded, Mount Holly would utilize the alternative plan of purchasing water from New Jersey-American Water Company.
On January 24, 1996, the BPU approved a stipulation (Mount Holly Stipulation) for an increase in rates of $550,000, effective as of that date. The Mount Holly Stipulation has, effectively, concluded the first phase of the rate proceeding. Mount Holly is continuing with the process with respect to the second phase of the petition. While management believes that the water supply, treatment and transmission system planned for Mount Holly is the most cost-effective response to the state legislation affecting the area, we cannot predict the ultimate outcome of the rate proceeding at this time.
Main Extension Refunds Previous disclosures have detailed events surrounding several lawsuits filed by developers with respect to the BPU's suggested refund formula for particular main extension agreements. The BPU's formula suggests refunds of 2 1/2 times annual revenues for each metered connection for water service. The plaintiffs had received refunds in accordance with this suggested formula. The initial petitions by the developers and the related litigation have been ongoing since 1984 with numerous BPU decisions, Appellate Division decisions and a New Jersey Supreme Court decision.
In June 1995, the New Jersey Supreme Court once again reviewed these matters and declined to hear the final appeal of the developers.
Effectively, the BPU's suggested refund formula has been reaffirmed and therefore no refunds in excess of the 2 1/2 times revenues formula are required by the Company. Based upon the New Jersey Supreme Court's decision, the plaintiffs have withdrawn their suits.
9. COMMITMENTS Elizabethtown is obligated, under a contract that expires in 2013, to purchase from the NJWSA a minimum of 37 billion gallons of water annually. The Company purchases additional water from the NJWSA on an as-needed basis. Effective July 1, 1996, the annual cost under the contract will be $7,861,486. The total cost of water purchased from the NJWSA, including additional water purchased on an as-needed basis, was $9,344,792, $8,987,472 and $8,819,212 for 1995, 1994 and 1993, respectively.
The following is a schedule by years of future minimum rental payments required under noncancelable operating leases with terms in excess of one year at: December 31, ---------------------- (Thousands of Dollars)
1996 $ 909 1997 859 1998 12 1999 -0- 2000 -0- ------ Total $1,780 ======
Rent expense totaled $820,481, $829,562 and $789,636 for 1995, 1994 and 1993, respectively.
Capital expenditures through 1998 are estimated to be $148,905,000 for Elizabethtown's and Mount Holly's utility plant.
Canal Road Water Treatment Plant In April 1994, following a competitive bidding process, Elizabethtown executed a lump-sum contract for the construction of the Canal Road Water Treatment Plant. The project is currently estimated to cost $100,000,000, excluding AFUDC. The project is being completed on schedule and the construction contract is on budget. The Company has expended $82,952,434, excluding AFUDC of $7,167,396, on the Plant as of December 31, 1995. Construction is expected to be completed in the third quarter of 1996.
10. PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS Elizabethtown has a trusteed, noncontributory Retirement Plan (Plan), which covers most employees. Under the Company's funding policy, the Company makes contributions that meet the minimum funding requirements of the Employee Retirement Income Security Act of 1974.
The components of the net pension costs (credits) are as follows:
1995 1994 1993 ------------------------- (Thousands of Dollars) Service cost--benefits earned during the year .. $ 915 $1,052 $ 899 Interest cost on projected benefit obligation .. 2,156 1,946 1,973 Return on Plan assets .......................... (7,587) 939 (1,409) Net amortization and deferral .................. 4,862 (3,860) (1,658) ------------------------- Net pension costs (credits) .................... $ 346 $ 77 $ (195) =========================
Plan assets are invested in publicly traded debt and equity securities. The reconciliations of the funded status of the Plan to the amounts recognized in the Consolidated Balance Sheets are presented below:
1995 1994 ---------------------- (Thousands of Dollars)
Market value of Plan assets $36,957 $30,810 Actuarial present value of Plan benefits: ---------------- Vested benefits 25,986 20,776 Non-vested benefits 101 157 ---------------- Accumulated benefit obligation 26,087 20,933 Projected increases in compensation levels 7,877 5,642 ---------------- Projected benefit obligation 33,964 26,575 Excess of Plan assets over projected benefit ---------------- obligation 2,993 4,235 Unrecognized net gain (620) (1,337) Unrecognized prior service cost 363 451 Unrecognized transition asset (2,156) (2,423) ---------------- Prepaid pension expense $ 580 $ 926 ================
The assumed rates used in determining the actuarial present value of the projected benefit obligations were as follows: 1995 1994 1993 ------------------------ Discount rate 7.00% 8.00% 7.00% Compensation increase 5.50% 5.50% 5.50% Rate of return on Plan assets 9.00% 8.50% 8.50%
The Company provides certain health care and life insurance benefits for substantially all of its retired employees. As a result of a contract negotiated in February 1996 with the Company's bargaining unit, all union and non-union employees retiring after January 1, 1997 will pay 25% of future increases in the premiums the Company pays for postretirement medical benefits.
Effective January 1, 1993, the Company adopted SFAS 106. Under SFAS 106, the costs of postretirement benefits are accrued for each year the employee renders service, based on the expected cost of providing such benefits to the employee and the employee's beneficiaries and covered dependents, rather than expensing these benefits on a pay-as-you-go basis for retired employees.
Based upon an independent actuarial study, the transition obligation, calculated under SFAS 106, was $7,214,736 as of January 1, 1993. The transition obligation is being amortized over 20 years. The following table details the postretirement benefit obligation at December 31:
1995 1994 ---------------------- (Thousands of Dollars)
Retirees $2,404 $2,457 Fully eligible plan participants 6,263 5,080 ----------------- Accumulated postretirement benefit obligation 8,667 7,537 Plan assets at fair value (320) 0 Unrecognized net gain 685 1,033 Unrecognized transition obligation (6,131) (6,493) ----------------- Accrued postretirement benefit obligation $2,901 $2,077 =================
The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation as of December 31, 1995, and for 1995, was 12%. This rate decreases linearly each successive year until it reaches 5% in 2005, after which the rate remains constant. The assumed rates used in determining the actuarial present value of the projected benefit obligations were as follows: 1995 1994 1993 ------------------------- Discount rate 7.00% 8.00% 7.00%
A single percentage point increase in the assumed health care cost trend rate for each year would increase the accumulated postretirement benefit obligation as of December 31, 1995, and net postretirement service and interest cost by approximately $1,260,000 and $250,000, respectively.
Based upon the independent actuarial study referred to above, the annual postretirement cost calculated under SFAS 106 is as follows:
1995 1994 1993 ---------------------------- (Thousands of Dollars) Service cost - benefits earned during the year $ 474 $ 369 $ 249 Interest cost on accumulated postretirement benefit obligation 579 592 602 Amortization of transition obligation 360 361 361 --------------------------------- Total 1,413 1,322 1,212 Deferred amount for regulated companies pending recovery (824) (1,072) (1,005) --------------------------------- Net postretirement benefit expense $ 589 $ 250 $ 207 =================================
The rate increases allowed by the 1995 Stipulation and the Mount Holly Stipulation include as an allowable expense the pay-as-you-go portion of postretirement benefits as well as the current service cost, and require that the current service cost be funded. Elizabethtown funded $318,222 in 1995. These stipulations allow Elizabethtown and Mount Holly to defer the amount accrued in excess of these amounts for consideration in future rate cases. Generally accepted accounting principles permit this regulatory treatment, provided deferrals are not accumulated for a period of more than five years. As of December 31, 1995, the amount that has been deferred is $2,900,569.
Recovery of Elizabethtown's deferred postretirement costs has been requested in Elizabethtown's recent rate case. Management believes that Elizabethtown
and Mount Holly will recover the deferred postretirement costs in future rates.
11. LEGAL MATTERS
As reported in 1994, a developer asserted in a suit filed in 1991 against Elizabethtown that the Company failed to install facilities necessary to provide water service to a new development in a timely manner.
In November 1994, the Company settled this matter by paying the developer $1,750,000. As part of the settlement, the developer agreed that part of this payment represented a refund of funds deposited under a main extension loan agreement for the construction of the facilities. In addition, the Company applied a portion of the settlement against an insurance reserve. The effect on 1994 earnings was $932,203 or $605,932 net of federal income taxes. The Company is seeking recovery from its insurance carriers.
As previously reported, several lawsuits had been filed against Elizabethtown and other parties in connection with a fire that occurred in a storage facility in 1989 resulting in damage to property stored at that facility. This matter has been settled in 1995 resulting in a payment by Elizabethtown of $114,250. A provision for this estimated liability was previously recorded.
12. RELATED PARTY TRANSACTIONS
The Company enters into various transactions with E'town and E'town Properties, Inc. Elizabethtown provides administrative and accounting services to these affiliates with are billed on a monthly basis. Elizabethtown is billed for financial services by E'town.
The total of all intercompany billings was $469,548, $426,944 and $278,191 for 1995, 1994 and 1993, respectively. In addition, various expenditures are made to vendors which are common to the entities. Each entity absorbs its proportionate share of these costs.
13 QUARTERLY FINANCIAL DATA (Unaudited)
A summary of financial data for each quarter of 1995 and 1994 follows:
Income Before Earnings Operating Operating Preferred Applicable Quarter Revenues Income Stock Dividends to Common Stock ------------------------------------------------------------------------ (Thousands of Dollars Except Per Share Amounts)
1st $25,174 $ 5,906 $ 3,653 $3,449 2nd 27,101 6,542 4,377 4,174 3rd 30,451 8,085 5,720 5,517 4th 25,672 5,754 3,575 3,372 ----------------------------------------------------- Total $108,398 $26,287 $17,325 $16,512 ===================================================== 1st $ 24,657 $ 5,579 $ 3,082 $2,832 2nd 25,208 5,945 3,484 3,281 3rd 27,370 6,976 4,093 3,890 4th 24,798 5,684 3,564 3,366 ----------------------------------------------------- Total $102,033 $24,184 $14,223 $13,369 =====================================================
Water utility revenues are subject to a seasonal fluctuation due to normal increased consumption during the third quarter of each year.