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S.KCURITIHS AND EXC"ANGB COMMISSION Washington, D. c. 20549
PORM 1~K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For Fiscal Year Ended December 31, 1985 Commission file number 0-13190
DOMINGUEZ WATER CORPORATION {Exact name of registrant as specified in its charter)
California {State or other jtn"isdiction of
incorporation or organization)
95-0687360 {I.R.S. Employer
identification No.)
Registrant's telephone number, including area code __ -..:..(2;;;..;1;;;..;3~)_7..;...7_5_-_2_30_1 _____ _
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
None
Securities registered pursuant to Section 12(g) of the Act:
Common Shares, $1 Par Value {Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
State the aggregate market value of the voting stock held by non-affiliates of the registrant:
Common Shares average bid price of 17-3/8 on March 3, 1986. Voting Preferred for which there is no established market was excluded.
Aggregate market value $11,350,600
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date:
December 31, 1985, 653,084 shares
Documents incorporated by reference:
(1) Annual report to shareholders for the year ended December 31, 1985, as to Part ll, Items 5, 6, 7 & 8.
(2) ·Proxy statement dated April 1, 1986 as to Item 10 (part), Item 11, Item 12, and Item 13.
(There are fourteen pages in this 10-K)
PART I
Item 1. Business.
General
Dominguez Water Corporation (Dominguez), an operating public utility, together with its utility subsidiaries of Antelope Valley Water Company and Kernville Domestic Water Company (Dominguez Consolidated), produce and supply water for residential, commercial, industrial and agricultural consumption in nine separate service areas located primarily within Los Angeles County, California, and a small portion in northern Kern County. Dominguez, a California corporation, was organized in 1937. Ninety percent of the customers are contained in the Dominguez operations serving a suburban area south of downtown Los Angeles. Dominguez also owns a non-regulated subsidiary, Hydro-Metric Service Corporation, which tests and repairs large water meters and is engaged in meter sales.
There were no significant changes in the kinds of service rendered during 1985.
Operations
Ninety percent of the area served by Dominguez Consolidated consists of land devoted to residential and industrial use and to a lesser extent serves some rural areas. As of December 31, 1985, Dominguez Consolidated served 32,788 customers, including residential customers in a territory having an estimated population of approximately 100,000.
Water Supply
The source of water is from wells and purchases from wholesalers.
Dominguez and one utility subsidiary district obtain a portion of their water supply from wholesalers who acquire supplies from the State Water Project. One wholesaler, the Metropolitan Water District, also takes water from the Colorado River. Long-term adequacy from wholesalers depends on the outcome of several events: (1) legislative and/or voter approval of weter impoundment and canal proj-ects in Northern California to replace the loss of approximately two-thirds of the righb; to Colorado River water; (2) Federal agreement to share responsibility for water quality standards in the Sacramento-San Joaquin Delta; and (3) possible increased demand on the Metropolitan Water District by the City of Los Angeles resulting from litigation of its eastern Sierra water rights. Any change in imported water supply will affect most water purveyors in Southern California. Management believes imported supplies to be adequate for Southern California, assuming normal weather.
All the service areas have wells. The amount that can be pumped by Dominguez is fixed by court adjudication. This adjudication established groundwater basins which are managed by a court appointed Watermaster. Groundwater management, among other things, fixes the amounts of water that can be withdrawn and arranges for replenishment of the basins by using impounded stormwater as well as imported water. At no time since its organization in 1937 has it been necessary for Dominguez to ration water, but wise use of water is strongly promoted.
Page 1
Item 1. Business, Continued.
The water from underground sources requires only minimal treatment. The water purchased has already been filtered and disinfected and requires no further treatment. Samples of both the well and purchased water are tested regularly.
Close cooperation is maintained with public health agencies who also test the water supplies for purity. Recently concerns have been expressed about maintaining the quality of drinking water, both underground and surface waters. Congress passed the Safe Drinking Water Act in 1974. In response to this, there have been considerably more studies to investigate chemicals of external origin that may be entering our water supplies and their source. The Environmental Protection Agency (EPA) was empowered by this law . to investigate the problems with drinking water and issue regulations about how water and wastewater industries should deal with the problems. As a result, Dominguez Consolidated has been analyzing the water more frequently than required by regulations. The tests are difficult and expensive to conduct due to the extremely sensitive equipment needed to detect the maximum contaminate levels expressed in parts per billion set by the EPA. Dominguez also participates in an area-wide water quality monitoring program coordinated by the West and Central Basin Water Associations which represent the two groundwater basins utilized by Dominguez.
Regulation
Dominguez Consolidated is subject to the jurisdiction of the Public Utilities Commission of the State of California. Each of the service areas is required to have and possesses a permit from either the State Board of Health or the County Health Department.
Non-Utility Subsidiary
Hydro-Metric Service Corporation is a non regulated service company specializing in field testing and repa·:.ring of large water meters for, high-volume usage as well 88:< the sale of water meters.
Employee Relations
As of December 31, 1985 there were a total of 57 employees in both the utility and non-utility operations. None of the employees is represented by a labor organization, and there has never been a work stoppage or interruption due to a labor dispute. In general, wages, hours, and conditions of employment are equivalent or superior to those found in the industry. Dominguez Consolidated considers its relations with its employees to be good. All employees receive paid annual vacations and sick leave. Dominguez Consolidated provides and pays the cost of group life, disability insurance, and pensions for its employees. In 1985 it became necessary to charge the employees a nominal amount for the group medical due to the drastic increase in the cost of health care insurance.
Page 2
Item 2. Properties.
Dominguez Consolidated's general administrative and executive offices are located on 5-1/2 acres of company-owned property at 21718 South Alameda Street, Long Beach, California. The offices and shops were completed in April 1972 and are considered by management to be ample for the company for the foreseeable future.
Dominguez Consolidated has 38 water wells, some of which are located on its own land and some on leased sites. Water storage consists of a 5 million gallon steel tank which was completed in 1983, four 3-1/2 million gallon steel tanks, one 750,000 gallon elevated steel storage t8Jlk plus many other small storage tanks. The 5 million gallon tank-,- the four 3-1/2 million gallon tanks and the elevated tank are all on property owned by Dominguez. Well sites under lease expire between 1986 and 2000 and require aggregate annual payments of $14,700.
Dominguez has prior rights to lay distribution mains and for other uses on much of the public and private lands in its service area. Dominguez' claim of prior rights is derived from the original Spanish land grant covering the Dominguez service area. For this reason, Dominguez, unlike most other public utilities, generally receives compensation from the appropriate public authority when the relocation of its facilities is necessitated by the construction of roads or other projects. It is common for other public utilities to bear the entire cost of such relocation.
Substantially all of the property of Dominguez is subject to the lien of the Trust Indenture dated as of August 1, 1954, as supplemented and amended, to Trust Services of America, Inc., as Trustee, securing the five outstanding series of Dominguez' First Mortgage Bonds. ·
Item 3. Legal Proceedings.
None.
Item 4. Submission of matters to a . vote of Security Holders.
None.
Page 3
Item 5.
(a)
PART D
Market For The Registrant's Common Equity and Related Stockholder Matters.
Market Price for Common Shares
Reference is made to Page 18 of the Annual Report to the Shareholders.
(b) Approximate Number of Holders of Common Shares
As of December 31, 1985, there were 307 holders of record of Common Shares.
(c) Frequency and Amount of Any Dividends Declared
Reference is made to Pages 18 of the Annual Report to the Shareholders.
(d) Dividend Restriction
Item 6.
Reference is made to Note 3 of Notes to Consolidated Financial Statements of the Annual Report to the Shareholders.
Selected Financial Data.
Reference is made to Page 1 of the Annual Report to the Shareholders.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation.
Reference Ls made to Page 10 of the Annual Report to Shareholders. -
Page 4
Item 8. Financial Statements and Supplementary Data.
Financial statements incorporated by reference from the Annual Report to Shareholders:
Consolidated Balance Sheets - December 31, 1985 and 1984;
Consolidated Statements of Income for the years ended December 31, 1985, 1984 and 1983.
Consolidated Statements of Retained Earnings for the years ended December 31, 1985, 1984 and 1983.
Consolidated Statements of Changes in Financial Position for the years ended December 31, 1985, 1984 and 1983;
Notes to Consolidated Financial Statements;
Report of Independent Certified Public Accountants.
Item 9. Disagreements on Aceotmting and Financial Disclosure.
None
Page 5
PART m
Item 10. Directors and Executive Officers of the Registrant.
The following table sets forth the names and ages of all executive officers, indicating all positions and offices presently held by each.
Name !!!: Position and Office
Dwight C. Baum 74 Director
C. Marvin Brewer 74 Director
Joseph R. Brown, Jr. 60 Director
James W. Farinet 61 Director
Allen D. Harper 75 Director
William T. Huston 59 Director
Joseph Robert Vaughan 71 Director
Charles W. Porter 55 President and Chief Executive Officer and Director
Michael D. Moynahan 42 Vice President
Robert P. Jones 35 Vice President-Finance and Chief Financial Officer
Rubye E. Rittgers 57 Secretary
There is no "family relationship" between any of the executive officers.
Information responding to Item 10 was included in a proxy statement filed by Dominguez with the Commission on April 1, 1986, pursuant to Regulation l4A and is incorporated by reference herein pursuant to General Instruction G(3).
Item 11. Executive Compensation
Information responding to Item 11 was included in a proxy statement (page 5) filed by Dominguez with the Commission on April 1, 1986, pursuant to Regulation 14A and is incorporated by reference herein pursuant to General Instruction G(3).
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information responding to Item 12 was included in a proxy statement (page 1) filed by Dominguez with the Commission on April 1, 1986, pursuant to Regulation 14A and is incorporated by reference herein pursuant to General Instruction G(3).
Item 13. Certain Relationships and Related Transactions.
Information responding to Item 13 was included in a proxy statement (page 6) filed by Dominguez with the Commission on April 1, 1986, pursuant to Regulation 14A . and is incorporated by reference herein pursuant to General Instruction G(3). Other information is included in Note 10 of the Notes to Consolidated Financial Statements of the Annual Report to Shareholders.
Page 6
Item 14.
(a)
PART IV
Exhibits, Financial Statement Schedules and Reports on Porm 8-K.
Exhibits: The following exhibits are incorporated as part of this report by reference to Form 10K for the year ended December 31, 1980.
3. By-Laws of Dominguez Water Corporation
22. Subsidiaries of the registrant.
Amended and Restated Articles of Incorporation of Dominguez Water Corporation (amended August 30, 1985 ). (Attached)
(b) Schedules V, VI, and Vill, not included in the Annual Report to the Shareholders, and related report of independent public accountants are included after Item 14 in Part IV.
(c) Schedules Omitted:
All other schedules have been omitted as they are not applicable, not material, or the required information is given in the Financial Statements or Notes.
)
Schedules I, ll, m, IV, Vll, IX, XI, Xll and Xlli are omitted as they are not applicable. ·
(d) Reference is made to the Financial Statements incorporated herein in Item 8.
(e) No events have been reported on Form 8-K during the past year covered by this report.
Page 7
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors Dominguez Water Corporation Long Beach, California
Our report on the consolidated financial statements has been incorporated by reference in this Form 10-K from page 18 of the 1985 annual report to shareholders of Dominguez Water Corporation and subsidiaries. In connection with our examinations of such finBJlcial statements, we have also examined the related financial statement schedules listed in the index on page 7 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly the information required to be included therein.
Los Angeles, California March 5, 1986
COOPERS & LYBRAND
Page 8
CoLA
Claasifieation
Utility plant: Plant and eqJipment:
Source of supply Pumpi~ Water treatment Transmission and distribution General plant
Subtotal
Land and land rights Water rights Organization franchise
Total utility plant
N onutilfty plant
Construction work in progress
Total
Notes:
DOMINGUEZ WATER CORPOB.ATIOR And Subsidiaries
SCIIBDULB V - PROPBRTY, PLANT AlfD BQUIPMBNT, Continued Year Bnded Deeember 31, 1985
Col. 8
Balanee at Beginning of
Period
1 475 844 1 574 465
399 472 29 741 100 1 423 125
34 614 006
41 992 119 983
11 065
34 787 046
67 226
557 638
35 411 910
CoLC
Additions at Cost (Note 1)
9 370 129 040
23 655 2 015 688
52 837
2 230 590
2 230 590
13 489
2 244 079
CoLD
Retirements (Note 2)
6 554
94 811 22 097
123 462
123 462
23 943
147 405
CoLB
Other Ctmlgel -Add (Deduet) -
Deseribe
( 250 450 ) (3)
( 250 450 )
CoLP
Balanee at End of Period
1 478 660 1 703 505
423 127 31 661 977 1 453 865
36 721 134
41 992 119 983
11 065
36 894 174
56 772
307 188
37 258 134
(1) As Is the custom with utilities, a portion of the general expense of the Company has been charged to property, plant, and equipment accounts as representing overhead applicable to the construction or acqlisitlon of assets.
(2) The retirements above are stated at cost of the assets at the time they were first devoted to public service.
In addition, in 1961, the Company, upon the recommendation of thP Public Utilities Commission of the State of California, adopted the policy of eharging interest on fmds employed (based on net effective rates of borrrowed monies) and depreciation on equipment used during construction to construction in progress. The amounts of such additions are considered insignificant.
AJso included are additions at cost for which reimbursements have been received and <!l'edited to Contributions in Aid of Construction (see Note 7 to financial statements).
Page 9
I
(3) Net in<!l'ease (decrease) in cost of construction.
CoL A
Claarifieation
Utlllty plant: Plant and equipment:
Source of supply Pumph~ Water treatment Transmission and distribution General plant
Subtotal
Land and land rf ghts Water rights Organization franchise
Total utility plant
Nonutility plant
Construction work in progress
Total
Notes:
DOMDfGUEZ WATBR CORPORATION And Subsidiaries
SCREDULB V- PROPERTY, PLANT AlfD BQUIPMEMT, Continued Year Bnded Deeember 31, 1984
CoLD
Balance at Beginning of
Per~od
$ 1 344 067 1 644 1;95
146 687 28 382 761 1 472 493
32 990 703
42 392 119 983 ~
33 164 143
76 398
. 558 721
$33 799 262
CoLC
Additions at Cost (Note 1)
$ 147 445 81 945
263 984 1 535 371
82 420
2 111 165
2 111 165
1 278
$ 2 112 443
Col. D
Retirements (Note 2)
$ 15 668 152 175
11 199 177 032 131 788
487 862
400
488 262
10 450
---$ 498 712
CoLB CoLP
Other Clmlges - Balanee at Add (Deduct) - Bnd of
Desen"be Period
$ 1 475 844 1 574 465
399 472 29 741 100 1 423 125
34 614 006
41 992 119 983
__.!..! 065
34 787 046
67 226
$ ( 1 083 ) (3) 557 638
$( 1 083 ) $35 411 910
(1) As Is the custom with utilities, a portion of the general expense of the Company has been charged to property, plant, and equipment accounts as representing overhead applicable to the construction or acquisition of assets.
(2) The retirements above are stated at cost of the assets at the time they were first devoted to public service.
In addition, in 1961, the Company, upon the recommendation of the Public Utilities Commission of the State of California, adopted the policy of charging interest on funds employed (based on net effective rates of borrrowed monies) and depreciation on equipment used during construction to construction in progress. The amounts of such additions are considered insignificant.
Also included are additions at cost for which reimbursements have been received and credited to Contributions in Aid of Construction (see Note 7 to financial statements).
(3) Net increase (decrease) in cost of construction.
Page 10
CoLA.
CJaaifieaton
U tilfty plant: Plant and Equipment:
Sourt!e of supply Pumpi• Water treatment Transmission and distribution General plant
Subtotal
Land and land rights Water rights Organization frant!hlse
Total utility plant
N onutntty plant
Construt!ton work in progress
Total
Notes:
DOMIMGUBZ WATBR CORPORA'ftOlf And Subsidiaries
SCHEDULE V - PROPEltTY, PLANT AMD EQUIPMENT Year Ended Deeember 31, 1983
Col._!! CoLC CoLD
Balanee at Additions Beginning of at Coat Retirements
Period (Note 1) !Note 2)
$ 1 307 313 $ 45 200 $ 8 446 1 647 081 42 415 44 801
149 109 31 388 33 810 27 065 768 1 454 689 137 696
1 350 195 161 692 39 394
31 519 486 1 735 384 264 147
51 370 119 983
__ 11 065
31 701 884 1 735 384 264 147
1.12 729 1 470 46 779
168 891
$31 983 504 $1 736 854 $ 310 926
CoLE
Other Changes -Add (Deduet) -
Deseribe
$( 8 978 ) (4)
( 8 978 )
8 978
389 830 (3)
$ 389 830
CoL p
Belanee at End of Period
$1 344 067 1 644 695
146 687 28 382 761
1 472 493
32 990 703
42 392 119 983
11 065
33 164 143
76 398
ill..!!! $33 799 262
(1) As is the C!Ustom with utilities, a portion of the general expense of the Company hM been t!harged to property, plant, and equipment aecounts as representing overhead applicable to the oonstrut!tion or &t!CJJlsition of fixed assets.
(2) The retirements above are stated at cost of the assets at the time they were first devoted to publiC! service.
In addition, In 1961, the Company, upon the ret!ommendation or the PubliC! Utilities Commission of the State of California, adopted the policy of t!harglng interest on funds employed (based on net effee!tive rates of borrowed monies) and depree!iation on equipment used during C!On&trut!ton to oonstrut!tion in progress. The amounts of sut!h additions are t!onsidered insignifit!ant.
Page 11
(3) Net int!rease in oost of C!Onstrut!tion.
(4) Represents transfer of land to non utility property.
COLA
De!eriptlon
Year ended December 31, 1985: Utility plant:
Source of supply Pumpi~ Water treatment Transmission and distribution General plant
Subtotal Nonutlllty
Total
Year ended December 31, 1984: Utility plant:
Source of supply Pump I~ Water treatment Transmission and distribution General plant
Subtotal Nonutllity
Total
Year ended December 31, 1983: Utility plant;
Source of supply Pumpi~ Water treatment Transmission and distribution General plant
Subtotal Nonutllity
Total
Notes:
DOMINGUEZ 11'ATHR CORPORA'MON And Subsidiaries
SCHEDULE VI- ACCUMULATED DEPRECIA'MOM, DEPLETION, AND AMORTIZA'MON OF PROPHRTY, PLANT, AND EQUIPMENT
Col. B CoLC CoLD Additions
Balanee at Charged to Beginning of Cost and
Period bpeillel Retirements
$ 438 578 $ 37 616 $ 6 554 873 114 71 557
73 364 6 546 8 588 881 530 593 94 811
518 516 97 040 22 097
10 492 453 743 352 123 462 41 728 7213 23 943
$to 534 t81 $ 750 565 $ 147 405
$ 417 060 $ 33 469 $ 15 379 941 642 78 593 147 121
77 437 7 126 11 199 8 124 699 491 903 173 555
546 959 99 945 131 788
10 107 797 711 036 479 042 46 841 5 337 10 450
ho 154 638 ! 716 373 $ 489 492
$ 386 882 $ 35 188 $ 8 446 904 773 81 670 44 801 1(;7 573 3 674 33 810
7 704 181 460 766 137 696 ~tov J77 85 300 39 394
9 583 486 666 598 264 147 67 700 7 956 28 815
$9 651 -m $ 674 554 $ 292 962
(1) Charged to Contributions in Aid of Constructon (see Note 8 to financial statements).
(2) Cost of removal of assets retired, less salvage (see Note 1 to financial statements).
Page 12
Col. E CoLP
Other Changes - Balanee at Add (Deduet) - End of
Deseribe Period
( 37 018 ) (2) $ 432 622 944 671
79 910 154 096 (1) 9 178 759
6 512 (2) 599 971
123 590 11 235 933 24 998
$ 123 590 !11 260 931
$ 3 428 (1) $ 438 578 873 114
73 364 145 834 (1) 8 588 881
3 400 (2) 518 516
152 662 10 492 453 41 728
$ 152 662 $10 534 181
$ 3 436 (1) $ 417 060 941 642
77 437 97 448 (1) 8 124 699 20 976 (2) 546 959
121 860 10 107 797 46 841
$ 121 860 $10 154 638
DOMINGUEZ WATER CORPOilA'ftOR And SUbaidlaries
SCHEDULE VOl- VALUATION AND QUALIPYIMG ACCOUMTS
CoLA
Description
Allowance for doubtful accounts:
Year ended December 31, 1985
Year ended December 31, 1984
Year ended December 31, 1983
Notes:
(1) Accounts receivable written off.
(2) Receipts on accounts previously written off.
CoL B
Balance At Beginning Of
Period
$ 89 929 ~
$ 62 176
$ 56 031
Page 13
CoLC
ADDmON
Charged to Charged To Costs Other And Accounts-
Expenses Describe
$ 49 600 $ 733 (2)
$ 74 500 $ 753 (2)
$ 39 600 $ 2 123 (2)
CoLD Col. E
Balance At Deductions - End Of
Describe Period
$ 43 479 (1) $ 96 783
$ 47 500 (1) $ 89 929
$ 35 578 (1) $ 62 176
SIGNATURF.S
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.
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 and on the dates indicated.
DffiECTO~~: ,/~ fJ_ /.-/·- ' fLI / )} .-- /) ' . ,·· , , . c J~ -_ c I r ' 1
Date C. -"M. Brewer j -
Date
Date
3 //Jb Date
Date
Page 14