CENTRAL ALASKA UTILITIES, INC. FINANCIAL STATEMENTS

Transcription

1 FINANCIAL STATEMENTS December 31, 1981 Certified Public Accountants 3709 SPENARD ROAD ANCHORAGE, ALASKA 99503

2 CERTIFIED PUBLIC ACCOUNTANTS 3709 SPENARD RD. ANCHORAGE, ALASKA Board of Directors entral Alaska Utilities, Inc. We have examined the balance sheets of Central Alaska Utilities, Inc. as of, and the related statements of income, changes in stockholders' equity and changes in financial position for the years then ended. Our examinations were made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the accompanying financial statements identified above, present fairly the financial position of Central Alaska Utilities, Inc. as of, and the results of its operations and changes in financial position for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis. February 10,

3 BALANCE SHEETS ASSETS LIABILITIES UTILITY PROPERTY - note 2 Property, plant and equipment in service and under construction Less accumulated depreciation OTHER ASSETS Non-current portion of contract and notes receivable Non-utility property, land $31,930,054 6,846,641 25,083,413 1,651, ,334 2,220,678 $27,818,368 6,202,888 21,615,480 1,453, ,334 2,023,306 STOCKHOLDERS' EQUITY Common stock, $1 par value per share; authorized 1,000,000 shares; issued 725,487 shares Paid-in capital Retained earnings,, CONTRIBUTIONS IN AID OF CONSTRUCTION Less accumulated depreciation on contributed properties $ 725,487 $ 725, , ,876 2,605,259 2,317,438 3,858,622 3,570,801 21,110,344 18,140,776 4,155z573 3, 782,823 16!954~771 14,357,953 CURRENT ASSETS Cash Receivables Customer accounts Contracts, notes and other, current portion Less allowances for doubtful receivables Net receivables Materials and supplies Prepaid expenses and other current assets TOTAL CURRENT ASSETS DEFERRED CHARGES, less portion classified as current 272, , , ,190 39, ,075 86,276 40,913 1,093,087 17, , , , ,580 39, , ' ,323 1,024,449 21,539 LONG-TERM DEBT, less portion classified as current note 3 LONG-TERM LEAS~S, less portion classified as current - note 6 CURRENT LIABILITIES Note payable to bank Accounts payable Accrued interest payable Customers' deposits Income taxes payable Accrued employee earnings, payroll taxes and other liabilities Current portion of long-term debt Current portion of long-term leases 5,520,513 4,840, , , ,000 69,554 60,951 32,636 20, , , , ,653 77, , , ,900 90,900 TOTAL CURRENT LIABILITIES 1,054, ,294 DEFERRED INCOME TAXES - note 4 456, ,342 $28,414,566 $24,684,774 $28,414,566 $24l684,774 BIGLER, HAWKINS & OBENDORF See notes to financial statements. -2-

4 STATEMENTS OF INCOME Years ended OPERATING REVENUES OPERATING EXPENSES Operations Maintenance Depreciation - note 2 Taxes, other than income taxes OPERATING INCOME $3,257,377 $2,760,663 1,043, , , , , , , ,340 1~853,480 1,648,276 1l403~897 1~112,387 OTHER INCOME (EXPENSE) Interest income Interest charged to construction Other income Interest expense INCOME BEFORE INCOME TAXES PROVISION FOR INCOME TAXES - note 4 Current Deferred (benefit) NET INCOME 125,743 97,572 62,574 8, '565 14,108 ( ) (422z33I) (244~101) (302z386) 1,159, , , , !879 (29 ~5~_) 521, ~549 $ 637~821 $ 450,452 (Earnings per share: $.88; $.64) See notes to financial statements. BIGLER, HAWKINS ~ OBENDORF" -3-

5 LTTTES, INC. STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY Common Paid-in Retained Stock Capital Earnings BALANCE AT DECEMBER 31, 1979 $700,000 $444,024 $1,968,441 Net earnings 450,452 Issue of common stock to satisfy Employee Stock Option Plan obligation 25,487 83,852 Dividends paid (101,455) BALANCE AT DECEMBER 31, , ,876 2,317,438 Net earnings 637,821 Dividends paid (350,000) BALANCE AT DECEMBER 31, 1981 $725,487 $527,876 $2z605,259 See notes to financial statements. -4-

6 STATEMENTS OF CHANGES IN FINANCIAL POSITION Years ended FINANCIAL RESOURCES WERE PROVIDED BY Operations Net earnings Items not affecting working capital Depreciation Amortization of deferred charges Deferred income taxes Stock issued to employee trust Working capital provided by operations Proceeds from sale of assets Increase in contributions in aid of construction Decrease in non-current portion of contracts and notes receivable, net Increase in long-term debt FINANCIAL RESOURCES WERE USED FOR Additions to utility plant, net of retirements Increase in non-current portion of contracts and notes receivable Payment of long-term debt, net of current classification Payment of long-term leases, net of current classification Dividends paid 1981 $ 637, ,364 4, ,879 1,096,215 3,000 3,046,901 1,219,511 1,100,000 6,465,627 4,235,380 1,416, , , ,000 6,527, $ 450, ,916 3,884 (29,353) 109, ,238 5, , ,434 1,394, ,443 57, ,221 90, ,455 1,176,918 CHANGES IN WORKING CAPITAL Increase (decrease) in current assets Cash Customer accounts receivable Contracts, notes and other receivables current portion Allowance for doubtful receivables Materials and supplies Prepaid expenses and other current assets Increase (decrease) in current li~bilities Note payable to bank Accounts payable Accrued interest payable Customers' deposits Income taxes payable Accrued employee earnings, payroll taxes and other liabilities Current portion of long-term debt Current portion of long-term leases J 1981 $ 73,396 1,267 31, (3,702) (34,410) 68, ,000 8,603 12,465 22,996 (82,121) 70,084 (40,819) 14, , $ 124,102 (5,573) (52,104) 20,436 (6,099) 53, ,225 (75,000) 33,330 (915) (1,186) 70,590 (51,176) (73,100) 13,882 (83,575) INCREASE (DECREASE) IN WORKING CAPITAL $ (61,570) $ 217,800 INCREASE (DECREASE) IN WORKING CAPITAL $ (61,570) $ 217,800-, See notes to financial statements. -5-

7 NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Central Alaska Utilities, Inc. is engaged in ~the sale of water to the general public under authority of the Alaska Public Utilities Commission. The accounting policies that affect the more significant elements of the financial statements of the Company are summarized as follows: a. Book of accounts: The Company maintains its book of accounts in accordance with the uniform system of accounts prescribed by the Alaska Public Utilities Commission. b. Utility property: Utility property is recorded at cost or estimated cost on donated property. When utility plant is retired or otherwise disposed of, the book cost of the plant p~us cost of removal and less any amounts received is charged to accumulated depreciation. The cost of maintenance and repairs is charged to income as incurred, whereas, significant renewals and betterments are capitalized and deduction is made for retirements resulting from the renewals or betterments. As a result of the Company's 1980 rate case with the Alaska Public Utilities Commission, the cost of drilling nonproductive wells is now recorded as utility property and depreciated over the estimated useful lives of same-classproducing wells. Certain interest and overhead costs are allocated and charged to utility plant constructed during the year and depreciated over the estimated useful lives of the facility to which it was charged. c. Depreciation: Depreciation is computed substantially on the straight-line method. d. Materials and supplies: Materials and supplies inventories are priced at lower of cost or market determined on the first-in, first-out method. e. Income taxes: Deferred income taxes are provided to reflect the tax effect of timing differences between financial and tax reporting due to an accounting change being amortized over a ten year period for tax purposes and investment tax credit being amortized over the life of the respective assets for financial reporting purposes, but as a reduction of income tax expense in the year in which such credits are allowable for tax purposes. BIGLER, HAWKINS!:. OBENDORF" -6-

8 NOTES TO FINANCIAL STATEMENTS (CON'T.) 2. UTILITY PROPERTY Utility plant, together with the general range of depreciable lives, consisted of the following: Depreciable Lives 1981 Cost 1980 Cost Source of supply facilities Water treatment and pumping facilities Distribution facilities Buildings Construction and office equipment Property under construction years years years 35 years 7-15 years $ 1,785,003 $ 1,864, , ,607 26,775,976 22,739,708 1,331,267 1,330, , , ~ z136 $31,930~054 $27,818,368 Depreciation expense charged to income was $314,364 and $299,916 in 1981 and 1980, respectively. 3. LONG-TERM DEBT Long-term notes and contracts payable at are summarized as follows: Small Business Administration loan financing water plant, payable in monthly installments of $16,603, including interest at 3%. Small Business Administration loan financing sewer plant sold in Payable in monthly installments of $15,180, including interest at 3%. Loan secured by a note receivable from Anchorage Municipality of approximately the same amount and payment terms. Note payable to bank, payable in monthly installments of $8,582 including interest at 11%. Note payable to bank with construction receivables and equipment assigned as collateral, payable in monthly installments of $9,259, including interest at 13.37%. Note payable to bank, guaranteed by Small Business Administration, payable in monthly installments of $4,705, including interest at 9.75%. Escrows payable through bank with land assigned as collateral, payable in monthly installments aggregating $7,162 per month including interest at a weighted average of 8.8% $1,558,597 $1,708,505 1,423,536 1,560, , , , , , , ,228-7-

9 NOTES TO FINANCIAL STATEMENTS (CON'T.) 3~ LONG-TENt! DEBT (Continued) Notes payable to bank with construction receivables and equipment assigned as collateral, payable in. monlhly installments aggregating $4,742 including interest at Seattle First National Bank Prime + 2%. Note payable to contractor with land assigned as collateral, payable at $970 per month including interest at 9.5%. Equipment contracts payable in monthly installments aggregating $2,746 including interest at 13.5% and 11%. Note payable to bank with 90% participation by Small Business Administration, payable in monthly installments of $391 including interest at 8% _and 3%. Equipment contract payable in monthly installments of $332 including interest at 18%. Note payable to bank, payable in monthly installments of $9,767 including interest at 8%. Miscellaneous assessments. Less current portion $ 286,847 $ 57,193 63,084 34,471 60,881 12,306 16,504 9,233 71,863 2l207 2,600 5,939,594 5,300, , ,900 $5, $4,840,466 Substantially all real and personal property of the utility has been pledged as collateral for the above debts. Dividends on common stock are contingent upon lender approval. 4. INCOME TAXES Permanent differences between book and tax income amounted to $37,473 and $37,286 in 1981 and 1980, respectively. Timing differences amounted to $203,430 and $61,932, respectively. Accounting for investment tax credits is the primary timing difference. 5. COMMITMENTS AND CONTINGENT LIABILITIES The Company has a bank financing arrangement for its customer contracts. The contracts are secured by mortgages against the customers' property, however, the Company remains contingently liable in the event of default. The contingent liability was $14,258 and $26,638 at, respectively. - 8-

10 NOTES TO FINANCIAL STATEMENTS (CON'T.). 6. LONG-TERM LEASES Capital leases - The utility is obligated under leases for computer equipment and related software, reservoirs and water storage facilities. The computer equipment and related software lease provides for fixed monthly payments over a five (5) year period, and a purchase option based on a percentage of the equipment's original cost. The reservoir and water storage facility leases provide for fixed monthly payments over a ten (10) year period. The leases are non-cancellable and at lease end allow the purchase of the lease property at a percentage of the facilities' original cost. All leased facilities are capitalized and amortized on the same basis as the Company's depreciation policy for like assets. Leased facilities and equipment totalling $944,547 are included in property, plant and equipment in service for both years. The following is a schedule by years of the future minimum lease payments together with the present value of the net minimum payments as of December 31, 1981 and 1980: Years ending December 31: 1981 $ $ 171, , , , , , , ,005 88, ,005 Subsequent years 233, ,398 Total m1n1mum lease payments 901,465 1,072,990 Less amount representing interest 226, ,172 Present Value of Net Minimum Lease Payments 674, ,818 Less current portion 104,900 90l900 $569,937 $ 674~918 Operating leases - The Company is obligated under an operating lease for land utilized for water storage. The land lease provides for a fifteen (15) year term with the right of first refusal should the lessor decide to sell the property during the lease period. The Company has an absolute option to purchase the land in For all periods, the purchase price is based on the property's fair market value as determined by an independent appraisal. Lease expense on the above operating lease amounted to $5,700 in both 1981 and EMPLOYEE STOCK OPTION PLAN In 1976, the Company established an Employee Stock Option Plan (ESOP) to provide retirement benefits to substantially all full time employees. Contributions under the plan amounted to approximately $60,000 in 1981 and $110,200 in " -9-

11 NOTES TO FINANCIAL STATEMENTS (CON'T.) 8. SUBSEQUENT EVENTS On January 28, 1982, the Board of Directors declared a cash dividend to stockholders of record at December 31, 1981, which.will be distributed in the following manner: $.15 per share.15 per share.15 per share.15 per share March 15, 1982 June 15, 1982 September 15, 1982 December 15,