SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File For Quarter Ended: June 30, 1997 No. 0-422 MIDDLESEX WATER COMPANY (Exact name of registrant as specified in its charter) INCORPORATED IN NEW JERSEY 22-1114430 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1500 RONSON ROAD, ISELIN, NJ 08830 (Address of principal executive offices) (Zip Code) (732) 634-1500 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that this registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 30 days. YES [X] NO [ ] Indicate the number of shares outstanding of each of the Issuer's classes of common stock, as of the latest practicable date. Class Outstanding at June 30, 1997 Common Stock, No Par Value 4,232,277
<TABLE> PART I. - FINANCIAL INFORMATION MIDDLESEX WATER COMPANY CONSOLIDATED STATEMENT OF INCOME (Unaudited) <CAPTION> Three Months Six Months Ended June 30, Ended June 30, 1997 1996 1997 1996 __________ __________ __________ __________ <S> <C> <C> <C> <C> Operating Revenues $ 9,937,149 $ 9,631,852 $19,273,168 $18,878,801 __________ __________ __________ __________ Operating Expenses: Operation and Maintenance 4,923,826 4,721,295 9,439,054 9,346,773 Depreciation 759,628 728,500 1,515,111 1,450,520 Taxes, other than Income Taxes 1,429,827 1,406,246 2,820,997 2,790,997 Federal Income Taxes 704,294 665,686 1,355,027 1,212,046 __________ __________ __________ __________ Total Operating Expenses 7,817,575 7,521,727 15,130,189 14,800,336 __________ __________ __________ __________ Utility Operating Income 2,119,574 2,110,125 4,142,979 4,078,465 Other Income-Net 16,966 17,642 93,598 27,227 __________ __________ __________ __________ Income Before Interest Charges 2,136,540 2,127,767 4,236,577 4,105,692 Interest Charges 825,720 820,433 1,643,732 1,645,095 __________ __________ __________ __________ Net Income 1,310,820 1,307,334 2,592,845 2,460,597 Preferred Stock Dividend Requirements 39,731 39,731 79,463 79,463 __________ __________ __________ __________ Earnings Applicable to Common Stock $ 1,271,089 $ 1,267,603 $ 2,513,382 $ 2,381,134 __________ __________ __________ __________ Earnings per Share of Common Stock $0.30 $0.30 $0.60 $0.57 __________ __________ __________ __________ Average Number of Common Shares Outstanding 4,224,248 4,157,585 4,217,480 4,150,383 Cash Dividends Paid per Common Share $0.28 $0.27 1/2 $0.56 $0.55 <FN> See Notes to Consolidated Financial Statements. </TABLE>
<TABLE> MIDDLESEX WATER COMPANY CONSOLIDATED BALANCE SHEETS ASSETS AND OTHER DEBITS <CAPTION> June 30, December 31, 1997 1996 ___________ ___________ (Unaudited) <S> <C> <C> UTILITY PLANT: Water Production $ 26,499,362 $ 27,378,668 Transmission and Distribution 105,930,863 103,852,969 General 17,227,157 18,156,233 Construction Work in Progress 1,201,183 319,238 ___________ ___________ TOTAL 150,858,565 149,707,108 Less Accumulated Depreciation 28,491,180 28,462,588 ___________ ___________ UTILITY PLANT-NET 122,367,385 121,244,520 ___________ ___________ NONUTILITY ASSETS-NET 1,670,505 1,774,106 ___________ ___________ CURRENT ASSETS: Cash and Cash Equivalents 4,457,830 4,262,862 Accounts Receivable(net of allowance for doubtful accounts) 4,167,560 4,022,129 Unbilled Revenues 2,459,034 2,175,478 Materials and Supplies(at average cost) 1,133,974 1,034,572 Prepayments and Other Current Assets 742,757 430,000 ___________ ___________ TOTAL CURRENT ASSETS 12,961,155 11,925,041 ___________ ___________ DEFERRED CHARGES: Regulatory Assets 7,322,664 7,184,764 Unamortized Debt Expense 2,787,887 2,848,352 Preliminary Survey and Investigation Charges 2,153,590 1,716,884 Other 1,981,242 1,965,855 ___________ ___________ TOTAL DEFERRED CHARGES 14,245,383 13,715,855 ___________ ___________ TOTAL $151,244,428 $148,659,522 ___________ ___________ <FN> See Notes to Consolidated Financial Statements. </TABLE>
<TABLE> MIDDLESEX WATER COMPANY CONSOLIDATED BALANCE SHEETS LIABILITIES AND OTHER CREDITS <CAPTION> June 30, December 31, 1997 1996 ___________ ___________ (Unaudited) <S> <C> <C> CAPITALIZATION(see accompanying statements) $105,496,225 $104,843,071 ___________ ___________ CURRENT LIABILITIES: Current Portion of Long-term Debt 40,837 39,047 Accounts Payable 2,237,665 1,686,652 Customer Deposits 390,813 377,702 Taxes Accrued 5,094,211 4,529,185 Interest Accrued 1,172,775 1,168,242 Other 1,729,348 2,125,683 ___________ ___________ TOTAL CURRENT LIABILITIES 10,665,649 9,926,511 ___________ ___________ DEFERRED CREDITS: Customer Advances for Construction 8,859,854 8,977,081 Accumulated Deferred Investment Tax Credits 2,272,898 2,308,736 Accumulated Deferred Federal Income Taxes 12,450,310 12,088,144 Other 1,898,624 1,715,458 ___________ ___________ TOTAL DEFERRED CREDITS 25,481,686 25,089,419 ___________ ___________ CONTRIBUTIONS IN AID OF CONSTRUCTION 9,600,868 8,800,521 ___________ ___________ TOTAL $151,244,428 $148,659,522 ___________ ___________ <FN> See Notes to Consolidated Financial Statements. </TABLE>
<TABLE> MIDDLESEX WATER COMPANY CONSOLIDATED STATEMENTS OF CAPITALIZATION AND RETAINED EARNINGS <CAPTION> June 30, December 31, 1997 1996 ___________ ___________ (Unaudited) <S> <C> <C> CAPITALIZATION: Common Stock,No Par Value Shares Authorized,6,000,000 Shares Outstanding-1997,4,232,277 1996,4,204,949 $ 30,509,596 $ 29,988,966 Retained Earnings 19,380,248 19,226,847 ___________ ___________ TOTAL COMMON EQUITY 49,889,844 49,215,813 ___________ ___________ Cumulative Preference Stock,No Par Value Shares Authorized,100,000; Shares Outstanding,None Cumulative Preferred Stock,No Par Value, Shares Authorized - 150,000 Convertible: Shares Outstanding,$7.00 Series - 14,901 1,564,605 1,564,605 Nonredeemable: Shares Outstanding,$7.00 Series - 1,017 101,700 101,700 Shares Outstanding,$4.75 Series - 10,000 1,000,000 1,000,000 ___________ ___________ TOTAL CUMULATIVE PREFERRED STOCK 2,666,305 2,666,305 ___________ ___________ Long-term Debt: 8.02% Amortizing Secured Note, due December 20,2021 3,480,913 3,500,000 First Mortgage Bonds: 7.25%,Series R,due July 1,2021 6,000,000 6,000,000 5.20%,Series S,due October 1,2022 12,000,000 12,000,000 5.25%,Series T,due October 1,2023 6,500,000 6,500,000 6.40%,Series U,due February 1,2009 15,000,000 15,000,000 5.25%,Series V,due February 1,2029 10,000,000 10,000,000 ___________ ___________ SUBTOTAL LONG-TERM DEBT 52,980,913 53,000,000 Less: Current Portion of Long-term Debt (40,837) (39,047) ___________ ___________ TOTAL LONG-TERM DEBT 52,940,076 52,960,953 ___________ ___________ TOTAL CAPITALIZATION $105,496,225 $104,843,071 ___________ ___________ </TABLE> <TABLE> <CAPTION> Six Months Ended Year Ended June 30, December 31, 1997 1996 ___________ ___________ (Unaudited) <S> <C> <C> RETAINED EARNINGS: BALANCE AT BEGINNING OF PERIOD $ 19,226,847 $ 18,822,817 Net Income 2,592,845 5,167,460 ___________ ___________ TOTAL 21,819,692 23,990,277 ___________ ___________ Cash Dividends: Cumulative Preferred Stock 79,463 158,926 Common Stock 2,359,981 4,604,504 ___________ ___________ TOTAL DEDUCTIONS 2,439,444 4,763,430 ___________ ___________ BALANCE AT END OF PERIOD $ 19,380,248 $ 19,226,847 ___________ ___________ <FN> See Notes to Consolidated Financial Statements. </TABLE>
<TABLE> MIDDLESEX WATER COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) <CAPTION> Six Months Ended June 30, 1997 1996 ___________ ___________ <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 2,592,845 $ 2,460,597 Adjustments To Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization 1,557,090 1,498,900 Provision for Deferred Income Taxes 362,166 299,383 Allowance for Funds Used During Construction (12,071) (15,879) Changes in Current Assets and Liabilities: Accounts Receivable (145,431) (17,848) Materials and Supplies (99,402) (80,631) Accounts Payable 551,013 238,203 Accrued Income Taxes 565,026 261,556 Accrued Interest 4,533 (42,050) Unbilled Revenues (283,556) (292,600) Other-Net (508,030) 80,565 ___________ ___________ NET CASH PROVIDED BY OPERATING ACTIVITIES 4,584,183 4,390,196 ___________ ___________ CASH FLOWS FROM INVESTING ACTIVITIES: Utility Plant Expenditures (2,623,454)<F1>(1,985,955)<F1> Preliminary Survey and Investigation Charges (436,706) (67,690) Other-Net 132,571 (366,943) ___________ ___________ NET CASH USED IN INVESTING ACTIVITIES (2,927,589) (2,420,588) ___________ ___________ CASH FLOWS FROM FINANCING ACTIVITIES: Redemption of Long-term Debt (19,087) (240,000) Deferred Debt Issuance Expenses 0 (251) Temporary Cash Investments-Restricted (206,845) (219,154) Proceeds from Issuance of Common Stock-Net 520,630 579,170 Payment of Preferred Dividends (79,463) (79,463) Payment of Common Dividends (2,359,981) (2,280,888) Customer Advances and Contributions-Net 683,120 140,824 ___________ ___________ NET CASH USED IN FINANCING ACTIVITIES (1,461,626) (2,099,762) ___________ ___________ NET CHANGE IN CASH AND CASH EQUIVALENTS 194,968 (130,154) ___________ ___________ CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,262,862 4,900,640 ___________ ___________ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,457,830 $ 4,770,486 ___________ ___________ SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: Cash Paid During the Period for: Interest(net of amounts capitalized) $ 1,575,885 $ 1,612,667 Income Taxes $ 500,700 $ 1,125,000 <FN> <F1> Excludes Allowance for funds Used During Construction. See Notes to Consolidated Financial Statements. </TABLE>
MIDDLESEX WATER COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Summary of Significant Accounting Policies Organization - Middlesex Water Company (Middlesex or the Company) is the parent company and sole shareholder of Tidewater Utilities, Inc. (Tidewater), Pinelands Water Company, Pinelands Wastewater Company, and Utility Service Affiliates, Inc. (USA). White Marsh Environmental Systems, Inc., is a wholly- owned subsidiary of Tidewater. The financial statements for Middlesex and its wholly-owned subsidiaries (Consolidated Group) are reported on a consolidated basis. All intercompany accounts and transactions have been eliminated. The consolidated notes accompanying the 1996 Form 10-K are applicable to this report and, in the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of June 30, 1997 and the results of operations and its cash flows for the periods ended June 30, 1997 and 1996. Information included in the Balance Sheet as of December 31, 1996 has been derived from the Company's audited financial statements included in its annual report on Form 10-K for the year ended December 31, 1996. Note 2 - Capitalization Common Stock - During the second quarter, 13,945 common shares ($0.2 million) were issued under the Company's Restricted Stock Plan and the Dividend Reinvestment and Common Stock Purchase Plan. Note 3 - Commitments During the second quarter, Middlesex Water Company received approval from the New Jersey Board of Public Utilities and the Delaware Public Service Commission to acquire Public Water Supply Company, Inc., (Public), a 2,500 customer water system located in Sussex County Delaware. On July 31, 1997, the acquisition of Public was completed. Under the terms of the acquisition, Middlesex issued 20,000 shares of no par $8.00 Cumulative and Convertible Preferred Stock convertible into approximately 135,000 shares of Middlesex's common stock for 100% of the common stock of Public. The acquisition price representing the value of the preferred stock issued was $2.3 million.
MIDDLESEX WATER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO JUNE 30, 1996 Net income remained relatively stable for the second quarter and rose 5% or $0.1 million for the first six months of 1997. Impacting net income for the second quarter and year-to-date were increased revenues resulting from higher contract sales in New Jersey, an increased customer base in Delaware, rate increases implemented by the Pinelands Companies, and contract services rendered by USA. Additionally, in the first half of 1997, there was an increase in Other Income which includes the net benefit from the transfer of Robinson's Branch Reservoir property and associated development rights. Offsetting effects to second quarter and year-to-date net income were increased operations and maintenance expenses, which included purchased water and Company labor offset by purchased power and transmission and distribution maintenance. Depreciation expense increased 4% for both periods due to plant additions of $3.0 million since June 30, 1996. A higher level of taxable income resulted in a 6% and 12% increase in federal taxes for the second quarter and first six months, respectively. Capital Resources: The revised consolidated capital program for 1997, estimated at $10.5 million, includes $5.4 million for routine capital expenditures and $5.1 million for special plant additions. The $5.4 million for routine plant items is comprised of $2.0 million for cleaning and lining, $1.6 million for mains, $0.6 million for service lines, $0.4 million for meters, and $0.8 million for various other items. The $5.1 million for special plant additions consists of $2.5 million for the upgrade of the Carl J. Olsen Water Treatment Plant, $1.8 million for water systems additions and improvements in Delaware and $0.8 million for miscellaneous items. Liquidity: To finance the Capital Program, the Company will utilize internally- generated cash and external financing. The Company will rely upon short-term borrowings through lines of credit established with three financial institutions through the end of the year. There is $20 million available under these commitments. Capital expenditures of $3.0 million have been incurred in the six months ended June 30, 1997. New Accounting Pronouncement: In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS 128). SFAS 128 simplifies the financial accounting and reporting standards for computing and presenting earnings per share (EPS) previously found in Accounting Principles Board Opinion No. 15, "Earnings Per Share". SFAS 128 is effective for financial statements issued for periods ending after December 15, 1997, including interim periods. Earlier application is not permitted. The Company will adopt SFAS 128 in 1997 and believes there will be no impact on the EPS as currently computed.
MIDDLESEX WATER COMPANY PART II. OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Changes in Securities None. Item 3 Defaults upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders Annual Meeting of Shareholders held May 28, 1997. Matters voted up on at the meeting: ELECTION OF DIRECTORS: Nominees for Class I term expiring in 2000: FOR WITHHOLD John C. Cutting 3,114,329 198,324 Ernest C. Gere 3,113,546 199,107 John P. Mulkerin 3,114,273 198,380 Philip H. Reardon 3,115,209 197,444 Resolution approving appointment of Deloitte & Touche LLP, Certified Public Accountants, as independent auditors for 1997: FOR AGAINST ABSTAIN 3,265,546 20,234 26,873 Resolution approving amendment to the Restated Certificate of Incorporation to increase the authorized Preferred Stock, without par value, from 69,418 shares to 150,000 shares: FOR AGAINST ABSTAIN NON-VOTE 2,116,563 430,091 109,167 656,832 Resolution approving allocation of an additional 100,000 shares of Common Stock to the 1989 Restricted Stock Plan and amendment of the 1989 Restricted Stock Plan to authorize issuance of the additional 100,000 shares of Common Stock and to make certain other modifications to the Plan. FOR AGAINST ABSTAIN NON-VOTE 2,989,249 197,777 83,175 42,452
Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K Exhibits - 27 Financial Data Schedule. Reports on Form 8-K - None SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized. MIDDLESEX WATER COMPANY (Registrant) /A. Bruce O'Connor/ Date: August 12, 1997 A. Bruce O'Connor Vice President and Controller