SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993 .
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( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________.
Commission file number 1-8060.
AQUARION COMPANY
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(Exact name of registrant as specified in its charter)
DELAWARE 06-0852232
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
835 Main Street, Bridgeport, Connecticut 06601
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 335-2333
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, New York Stock Exchange
no par value
Series A Junior New York Stock Exchange
Participating Preferred
Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act:
None
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(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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part IV of this Form 10-K or any
amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant: $166,130,567 (Computed by reference to the closing price of
the Registrant's Common Stock on March 8, 1994, as reported on the New York
Stock Exchange-Composite Tape.)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding at March 8, 1994
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Common Stock, no par value 6,491,841
The following documents have been incorporated by reference:
1. Annual Report to Shareholders for the year ended December 31,
1993--PART I, Item 1; PART II, Item 5, Item 6, Item 7 and Item 8;
PART IV.
2. Definitive Proxy Statement, dated March 21, 1994, for the Annual
Meeting of Shareholders to be held on April 26, 1994--PART III.
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PART I
ITEM 1. BUSINESS
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General
Aquarion Company ("Aquarion") is a holding company whose subsidiaries
are engaged both in the regulated utility business of public water supply
and in various nonutility businesses.
Aquarion's utility subsidiary, Bridgeport Hydraulic Company ("BHC"),
and its subsidiary, Stamford Water Company ("SWC", together with BHC, the
"Utilities") collect, treat and distribute water to residential, commercial
and industrial customers, to other utilities for resale and for private and
municipal fire protection. The Utilities provide water to customers in 22
communities with a population of approximately 492,000 people in Fairfield,
New Haven and Litchfield Counties in Connecticut, including communities
served by other utilities to which water is available on a wholesale basis
for back-up supply or peak demand purposes through the Regional Pipeline.
BHC is the largest investor-owned water company in Connecticut and, with
its SWC subsidiary, is among the 10 largest investor-owned water companies
in the nation. The Utilities are regulated by several Connecticut
agencies, including the Connecticut Department of Public Utility Control
(the "DPUC").
Aquarion is also engaged in various nonutility activities. The
Company conducts an environmental testing laboratory business through its
Industrial and Environmental Analysts group of subsidiaries (collectively,
"IEA"). IEA performs testing to determine the nature and quantity of
contamination in sampled materials, including hazardous wastes, soil, air
and water. IEA provides a range of environmental analytical testing
capabilities, including routine and customized analysis of organic and
inorganic contaminants. IEA's testing services are conducted at six
regional environmental testing laboratories in Connecticut, Florida,
Illinois, Massachusetts, New Jersey and North Carolina. IEA's laboratories
are subject to governmental regulation at both state and federal levels.
IEA's clients include engineering consulting firms, industrial and
commercial corporations and federal, state and local governmental entities.
The laboratories located in North Carolina, New Jersey and Connecticut
participate in the U.S. Environmental Protection Agency's Contract
Laboratory Program.
Aquarion owns Timco, Inc. ("Timco"), a small forest products and
electricity cogeneration company based in New Hampshire. At Timco's
sawmill complex, lumber is cut and packaged for sale to wholesalers and
retailers. The cogeneration plant produces electricity which is sold to a
public utility and low cost steam for drying the lumber and heating some of
the sawmill buildings. Aquarion Company is also engaged in several small
utility management service businesses through its Hydrocorp, Inc.
("Hydrocorp") and Aquarion Management Services, Inc. ("AMS") subsidiaries
and owns Main Street South Corporation ("MSSC"), a small real estate
subsidiary formed in 1969 to assist the Utilities in marketing surplus
land.
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The Company was incorporated in Delaware as The Hydraulic Company in
1969 to become the parent company to BHC, a Connecticut corporation founded
in 1857. The corporate name was changed to Aquarion Company in April 1991.
The Company's executive offices are located at 835 Main Street, Bridgeport,
Connecticut 06601-2353 and its telephone number is (203) 335-2333.
Recent Developments
Rates. In filing its rate application with the Connecticut Department
of Public Utility Control (DPUC) in February 1993, BHC had requested a
35 percent water service rate increase designed to provide a $17,500,000
increase in annual water service revenues and a return on common equity of
12.75 percent. Prior to the final decision, BHC lowere
request by a total of $1,400,000 by restructuring long-term debt to reduce
annual interest costs and by reducing property taxes and other
miscellaneous expenses. The request included the replacement of a
construction work in progress water service rate surcharge (CWIP rate
surcharge) previously granted to BHC pursuant to DPUC regulations to
recover 90 percent of the carrying costs of capital used in its Easton Lake
Filtration Construction Project mandated by the federal Safe Drinking Water
Act of 1974 (the "SDWA"). During 1993 and 1992, BHC derived revenues of
$1,937,000 and $1,532,000, respectively, from the CWIP rate surcharge.
Effective August 1, 1993, the DPUC awarded BHC a 20.7 percent water service
rate increase designed to provide a $10,400,000 annual increase in revenues
and a 11.6 percent return on common equity. The DPUC approved a 22.5
percent water services rate increase for SWC effective August 28, 1991,
designed to increase annual revenues by $2,276,000 and provide a 12.85
percent return on its common equity. Effective January 1, 1991, BHC was
awarded a 15 percent rate increase designed to increase annual revenues by
$6,983,000 and provide a 13.25 percent return on its common equity. There
is no certainty that any given rate increase will produce the intended
level of revenues or the allowed return on equity. See "Public Water
Supply--Rates and Regulation."
Pending Utility Acquisition. Aquarion has proposed to acquire The New
Canaan Water Company and Ridgefield Water Supply Company for Aquarion
common stock with a market value of $3,500,000 on or about the closing
date. The acquisition and a related property exchange have been approved
by the DPUC but remain contingent upon certain other regulatory approvals
satisfactory to the parties. Proceedings to obtain the regulatory
approvals are pending. The parties have agreed to extend their acquisition
agreement and the related property exchange agreement until March 31, 1994.
There is no certainty that the parties will agree to further extensions if
the transaction has not closed by that time. See "Industry Segment
Information."
Sale of Facilities. On March 15, 1993 IEA sold its Vermont laboratory
which performed qualification and certification of and consulting for high
purity gas delivery systems and ultrapure water systems, as well as some
microbiological testing. In addition, in October 1993 IEA sold the assets
of its air testing division to TRC, Inc. of Hartford, Connecticut. See
"Environmental Laboratories."
Other. Native Americans who allege that they constitute the Golden
Hill Paugussett Tribe of Indians (the "Paugussett Indians") have taken an
appeal to the U.S. Court of
4
Appeals for the Second Circuit for the
dismissal by the U.S. District Court in Connecticut of their suit seeking
to restore claimed rights to certain lands in various towns in Fairfield
and New Haven Counties. Newspaper reports during 1993 indicated that they
have announced plans to claim further lands, including all land in the
municipalities of Monroe, Shelton and Trumbull. BHC, which has not been
named as a defendant to date, owns land in these communities, including
land it considers surplus. It is not possible at this time to determine
whether any further suit will be filed or, if so, whether BHC will be named
a defendant, nor is it possible to determine what effect, if any, the
filing of any such suit might have on the marketability of real property in
these communities or, should the Paugussett Indians prevail, whether there
would be any effect on the operations of BHC.
Utility Construction Program
The Utilities are engaged in a continuing construction program
mandated by legislative and regulatory requirements, as well as for
infrastructure replacements. The Utilities expended $16,300,000,
$21,727,000 and $13,969,000 in 1993, 1992 and 1991, respectively, for plant
additions and modifications of existing plant facilities, excluding an
allowance for funds used during construction ("AFUDC"). The expenditures
were made primarily for installations of water mains, service connections
and meters and such special projects as the Easton Lake
and the Litchfield Division supply and distribution system improvements.
Utility capital expenditures for 1993 aggregated $16,300,000 and
budgeted expenditures for 1994, most of which management believes should
not be postponed, are approximately $34,200,000. Approximately half of
these expenditures will be devoted to compliance with the SDWA, which
requires filtration or alternative water treatment measures for BHC's
major, unfiltered surface water supplies. The total capital cost of water
filtration or alternative treatment measures for such supplies through
December 31, 1993 was approximately $28,400,000, of which $26,800,000
related to construction of the Easton Lake filtration facility. Management
estimates that the total of such costs from 1994 through 1996 will
approximate $50,000,000, without adjustment for inflation, including
$15,300,000 expected to be incurred in 1994. Approximately $48,000,000 of
the projected 1994 through 1996 water treatment costs will be incurred in
construction of the filtration facility for the Hemlocks reservoir. The
remaining $2,000,000 of estimated filtration expenditures over the next
four years is budgeted for SDWA-related facilities for BHC's Lakeville and
Norfolk Reservoirs. Part of the cost associated with the Hemlocks facility
is expected to be offset by CWIP rate surcharges which, at the DPUC's
discretion, permit the recovery of 90 percent of the carrying cost of
capital used in construction of SDWA-mandated water treatment facilities.
Management cannot predict whether future federal, state or local regulation
may require additional capital expenditures.
The Company's ability to finance its future construction programs
depends in part on future rate relief and the level of CWIP rate
surcharges. In light of the Company's substantial need for additional
funds, the Company will need additional debt and equity capital to finance
future utility construction. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Capital
Resources and Liquidity" and "Business--Public Water Supply--Rates and
Regulation."
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Industry Segment Information
The Company's operations are grouped into four industry segments:
public water supply; environmental laboratories and utility management
services; forest products; and real estate. The consolidated operating
revenues of the Company for the year ended December 31, 1993 were derived
from the following sources: 66 percent from public water supply, 22 percent
from environmental laboratories and utility management services, 12 percent
from forest products, and less than 1 percent from real estate, including
both MSSC and surplus utility land sales. For additional information
concerning each segment for each of the years ended December 31, 1993, 1992
and 1991, see "Note 11" of "Notes to Consolidated Financial Statements" and
"Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Public Water Supply
Service Area. The Utilities are engaged in the collection, treatment
and distribution of water for public and private use to residential,
commercial, and industrial users, and for municipal and private fire
protection services in 22 communities in parts of Fairfield, Litchfield and
New Haven counties in Connecticut. The Utilities also sell, as requested,
water for redistribution to customers of the First and Second Taxing
Districts' Water Departments of the City of Norwalk, Connecticut,
Connecticut-American Water Company, and NCWC through the Southwest Regional
Pipeline in Fairfield County.
The communities served by the Utilities as of December 31, 1993, have
a population of approximately 492,000, and the total number of customer
accounts as of that date was approximately 123,900. The Utilities' service
areas, primarily residential in nature, have experienced an average growth
in accounts of approximately 1 percent per year over the last ten years.
Industrial use has declined significantly in that time period, and the
residential characteristics of the area have changed, indicating an
increase in the percentage of apartment dwellings and condominium units.
Management does not anticipate any significant growth in residential
consumption in the foreseeable future, and expects continued decline in
industrial use.
The operating revenues of the Utilities for the twelve months ended
December 31, 1993 were derived from the following sources: 59 percent from
residential customers, 17 percent from commercial customers, 5 percent from
industrial customers, 14 percent from fire protection customers, and
5 percent from other sources.
Seasonality. The business of the Utilities is subject to seasonal
fluctuations and weather variations. The demand for water during the
warmer months is generally greater than during the cooler months, primarily
due to additional water requirements of industrial and residential cooling
systems, and various private and public outdoor uses such as lawn and golf
course sprinkling. From year to year and season to season, demand will
vary with rainfall and temperature levels.
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Water Supply. Water is available from both surface and subsurface
sources. During 1993, approximately 97 percent of the water supplied by
the Utilities was provided by impounding reservoirs, 2 percent by producing
wells and 1 percent by purchased water. As of December 31, 1993, the
Utilities' reservoirs, well fields and interconnections with other water
utilities had an aggregate safe daily yield of 112.3 million gallons. Safe
yield is an estimate of the supply capability during an extended drought.
The average daily demand for water from the Utilities in 1993 was 69.3
million gallons per day ("MGD"). The reservoirs of the Utilities have an
aggregate storage capacity of 29.4 billion gallons.
All of the Utilities' reservoirs and active wells are located on
property owned by the Utilities. Management believes it has an adequate
water supply to satisfy the current and projected needs of its customers
within its territorial service area through at least the year 2040. During
historical drought periods in the northeastern United States, the Utilities
have been able to accommodate the needs of their own customers and to offer
relief to supplement the supplies to neighboring communities by water sales
to utilities with which it has pipeline interconnections. Supply and
distribution needs of the Utilities undergo constant review, and the
Utilities continue to explore and develop additional ground water supplies
and study alternative surface water sources to meet anticipated future
water requirements.
The Connecticut Water Diversion Policy Act, enacted in 1982, prohibits
any future diversions of surface or ground water without a permit from the
DEP. Although this law "grandfathers" existing surface and ground water
supplies which existed when it was enacted, any subsequent water diversion
which might be effected by the Utilities is subject to a lengthy permit
application process and approval by the DEP. Diversion permits granted
pursuant to this law are subject to renewal when their terms, which
typically run from five to ten years, expire.
Rates and Regulation. The Utilities are incorporated under and
operate as public water utilities by virtue of authority granted by Special
Acts adopted by the Connecticut legislature (the "Acts"). These Acts have
granted a non-exclusive franchise, unlimited in duration, to provide public
water supply to private and public customers in designated municipalities
and adjacent areas. The Acts also authorize the Utilities to lay their
mains and conduits in any public street, highway, or public ground; to use
the water of certain rivers, streams, or other waters in Fairfield,
Litchfield and New Haven counties and from certain locations along and in
the Housatonic River and its tributaries, subject to such consents and
approvals as may be required by law; and to exercise the po
domain in connection with lands, springs, streams or ponds and any rights
or interests therein which are expedient to or necessary for furnishing
public water supply. In the event of the exercise of such condemnation
powers, the Utilities must pay appropriate compensation to those
injuriously affected by such taking.
The Utilities are subject to regulation by the DPUC, which has
jurisdiction with respect to rates, service, accounting procedures,
issuance of securities, dispositions of utility property and other related
matters.
Rates charged by each of BHC and SWC are subject to approval by the
DPUC. The Utilities continually review the need for increases of water
rates, and historically have sought
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rate relief in a timely manner in light
of increases in operating costs, additional investment in utility plant and
related financing costs, as well as other factors. For information
concerning rate increases granted in 1993 and 1991, see "Item 1. Business.
Recent Developments, Rates.", above.
The following table sets forth information as to rate requests by BHC
and SWC and increases granted by the DPUC in the last three rate cases.
% Total % Return On Allowed
Date of Amount Increase Effective Increase Increase Utility Return on
Application Requested Requested Date Granted Granted Common Equity Rate Base
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BHC:
2/5/93 $16,100,000* 32% 8/1/93 $10,400,000 21% 11.6% 9.62%
6/29/90 9,819,000 22 1/1/91 6,983,000 15 13.25 10.95
11/21/88 7,600,000 18 6/1/89 3,383,000 8 12.90 10.90
SWC:
2/8/91 $3,646,000 36.5% 8/28/91 $2,276,000 22.5% 12.85% 10.69%
8/1/86 3,849,000 56 12/30/86 3,706,000 54 14.80 11.39
3/22/85 4,959,000 43 7/29/85 450,000 7 14.80 11.39
* Original request of $17,500,000, or 35 percent, was
subsequently lowered prior to the final decision by
$1,400,000 by restructuring long-term debt to reduce annual
interest costs and by reducing property taxes and other
miscellaneous expenses.
The DPUC may allow a surcharge to be applied to rates in
order to provide a current cash return to water utilities on the
major portions of CWIP applicable to facilities, including
filtration plants, required for compliance with the SDWA. See
"Environmental Regulations." The surcharge is adjusted
quarterly, subject to DPUC approval, to reflect increased CWIP
expenditures for SDWA facilities. In connection with BHC's
construction of filtration facilities at its Easton Lake
Reservoir, the DPUC granted BHC an initial .94 percent CWIP rate
surcharge in September 1990, which amount was incrementally
increased on a quarterly basis to 7.35 percent at the time new
rates became effective and the Easton facility became operational
and subject to general ratemaking regulations. There is no CWIP
surcharge in effect at present, although BHC intends to apply for
a CWIP surcharge with respect to its planned filtration
facilities when appropriate.
Aquarion is neither an operating utility company nor a
"public service company" within the meaning of the Connecticut
General Statutes and is not presently subject to general
regulation by the DPUC. DPUC approval is necessary, however,
before Aquarion may acquire or exercise control over any
Connecticut public service company. DPUC approval is also
required before any other entity can acquire or exercise, or
attempt to exercise, control of Aquarion.
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Connecticut regulations govern the sale of water company
land and treatment of land sale proceeds. See "Item 2.
Properties."
Environmental Regulations. The Utilities are subject to
regulation by the DPHAS with respect to water quality matters,
use of water from surface and subsurface sources, the location,
construction and operation of water supply facilities and the
sale of certain utility property. Plans for new water supply
systems or enlargement of existing water supply systems also must
be submitted to the DPHAS for approval. The DEP is authorized to
regulate the operations of the Utilities with respect to water
pollution abatement, diversion of water from surface and
subsurface sources, and the location, construction and alteration
of dams and other water obstructions.
The Federal Clean Water Act of 1972, as amended (the "Clean
Water Act"), regulates for discharges of effluents into navigable
waters. A joint Federal and state permit system has been
established to ensure that applicable effluent limitations and
water quality standards are met in connection with the
construction and operation of facilities which affect or
discharge into state or interstate waters.
The Utilities are subject to regulation of water quality
under the SDWA, which provides for the establishment of uniform
minimum national quality standards by the Environmental
Protection Agency (the "EPA"), as well as governmental authority
to specify the type of treatment process to be used for public
drinking water. EPA regulations issued pursuant to the SDWA set
limits for, among other things, certain organic and inorganic
chemical contaminants, odor, turbidity, microbiological
contaminants and radioactivity. The SDWA provides that the
states have the primary enforcement responsibility for public
drinking water systems, as long as the states' regulations are no
less stringent than those adopted pursuant to SDWA. For certain
of these water quality standards the DPHAS has adopted
regulations which in some instances impose standards more
stringent than those imposed under the Federal regulations.
EPA regulations pursuant to SDWA include the Surface Water
Treatment Rule ("SWTR"), the Total Coliform Rule ("TCR") and the
Lead and Copper Rule ("LCR"). The water treatment requirements
of SWTR mandate the construction of filtration plants at BHC's
Hemlocks, Lakeville and Norfolk Reservoirs. BHC has entered into
consent agreements with DPHAS establishing timetables for
construction of filtration facilities at the Hemlock, Lakeville
and Norfolk reservoirs and penalties if the facilities are not
completed within such timetables. The Hemlocks plant must be
completed by June 29, 1998 or a $250,000 penalty will be imposed.
Lesser penalties apply to the smaller facilities for Lakeville
and Norfolk, if not completed by June 29, 1997 and June 29, 1996,
respectively. The Company anticipates that it will be able to
meet the construction timetables. The TCR affects the Utilities
by the imposition of requirements for additional biological
sampling and monitoring. The stringent requirements of the TCR
may also result in increased public notification relating to
water quality. The LCR establishes corrosion control techniques
and requires monitoring to determine compliance with prescribed
lead and copper levels in drinking water. If such levels are
exceeded, a multi-year program involving additional monitoring,
public notification, state-supervised corrosion control and
treatment and replacement of lead service lines could result.
After the first two required testing periods, the Utilities were
found to be
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in compliance with the LCR. Further SDWA-related
regulations are anticipated for such water quality parameters as
organics, inorganics and disinfection by-products. It is
impossible to determine at this time the ultimate impact these
regulations will have on the Utilities.
The Company currently estimates that future capital costs of
SWTR-mandated filtration facilities will approximate $50,000,000
for the period 1994 through 1996, without adjustment for
inflation, in addition to the $28,400,000 which has been expended
through December 31, 1993, mostly for construction of the Easton
Reservoir plant. That plant is located in Easton, Connecticut
and was completed in June 1993 at an aggregate cost of
$26,800,000.
Water quality tests are made continuously at all of the
Utilities' water supply sources, and the Utilities believe they
are in substantial compliance with regulations promulgated by the
organic chemical, inorganic chemical, physical, and
bacteriological standards for drinking water. BHC has been
voluntarily monitoring for giardia and cryptosporidium, water
quality concerns addressed by the SWTR. Positive samples (low
levels) have been found in the three unfiltered surface water
supplies. When the filtration plants become operational, they
will remedy such concerns, which are now being addressed by
interim treatment techniques approved by the DPHAS.
Connecticut has established seven public water supply
management areas to coordinate the comprehensive planning of
public water systems and provide for the centralized regulation
by the DPHAS of water resources for water supply and other public
purposes. Each area has a water utility coordinating committee
("WUCC") comprised of representatives of the various public water
systems and regional planning agencies in the area. BHC
operations fall under four of the State's seven WUCCs, and SWC
operations fall under two WUCCs. Each WUCC is required to
establish exclusive service areas for each public water system in
the area. The DPHAS is authorized to resolve any disagreements
among members of the respective committees. It is not possible
at this time to predict the full impact on the Utilities of the
WUCC system and the associated regulations and proceedings.
Aquifer protection legislation in Connecticut requires each
water utility to conduct extensive groundwater data collection
and groundwater mapping of critical wellfield areas. The DEP is
also proposing land use regulations within these critical areas.
The proposed legislation mandates that each municipality
designate an aquifer protection agency to regulate land use in
these areas. Finally, the DEP, in consultation with the DPHAS and
DPUC, is preparing guidelines for acquisition of lands for
proposed public water supply wellfields. Regulations are still
being prepared for this program and the effect of this
legislation and related regulations cannot be determined at this
time. If BHC were required to purchase additional land around
its wellfields, the cost could be substantial.
Developments with respect to the identification and
measurement of various elements in water supplies and concern
about the effect of such elements on public health, together with
possible contamination of water sources, may in the future
require the Utilities to modify all or portions of their various
water supplies, to develop replacement supplies or to implement
new treatment techniques. Any such developments would
significantly increase
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the Utilities' operating costs and capital
requirements. The Company expects that all such expenditures and
costs should ultimately be recoverable through rates for water
service, but there can be no assurance that this will be the
case.
Certain dams owned by the Utilities are subject to
inspection under the National Dam Inspection Act as well as the
Connecticut Dam Registration Act, and dams owned by SWC in New
York are subject to inspection by the New York State Department
of Environmental Conservation. The Utilities own 29 dams, 16 of
which are subject to federal inspection. Although certain
modifications and further studies have been required, no material
problems with respect to these dams have been reported to the
Company.
The Utilities are required to obtain permits from the DEP
for the location, construction or alteration of any dam or
reservoir, and to secure the approval of the DEP for the
diversion and use of water from any surface or ground source for
public use. The Utilities have taken all compliance actions
required to date.
SWC may be subject to health, safety and environmental
regulation by various state and local authorities in New York
State with respect to its properties located in New York. SWC
does not provide water to any customers in New York. The leasing
or sale of land around reservoirs, wellfields and some streams
may be restricted by various Connecticut statutes and
regulations. See "Item 2. Properties."
Environmental Laboratories
Laboratories. The Company conducts an environmental testing
laboratory business through IEA, which operates six laboratories
in Connecticut, Florida, Illinois, Massachusetts, New Jersey and
North Carolina through six corporate subsidiaries. IEA believes
that it is among the twenty largest environmental testing
laboratory businesses in the country. IEA is headquartered at
its Cary, North Carolina facility.
Environmental laboratories provide data to customers
concerning the nature and quantity of contaminants or hazardous
substances present in samples. IEA offers a range of
environmental analytical services, including routine and
customized testing of hazardous wastes, soil, air and water.
Additionally, IEA offers mixed waste/radiological testing at its
North Carolina laboratory. IEA also provides asbestos testing
and sample collection services.
Quality Control. The ability to deliver accurate and
precise test results consistently is essential to a successful
laboratory, and testing samples must meet rigorous
chain-of-custody requirements and testing protocols to enable the
test results to be used as evidence in legal or regulatory
proceedings. IEA performs internal quality assurance reviews to
monitor consistent performance. IEA is certified in over 20
state-operated certification programs and, through its
laboratories in North Carolina, New Jersey and Connecticut, is an
active participant in the EPA's Contract Laboratory Program
("CLP"). In order to qualify for the CLP, the laboratories must
satisfy stringent quality control standards, and are subject to
quarterly performance evaluations.
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Technology. IEA has invested in sophisticated analytical
testing equipment needed to process a large volume of tests with
accurate results. IEA laboratories are equipped with Gas
Chromatography/Mass Spectrometry instruments, which identify
specified organic and inorganic chemical compounds within a
sample by means of electron beam "fingerprinting." IEA owns
chromatograph instruments, which are used extensively to perform
organics testing. IEA laboratories contain inductively coupled
plasma instruments and atomic absorption units for organic analysis.
analysis. IEA laboratories perform wet-chemistry tests for
general chemistry parameters and also offer a range of microscopy
services including asbestos analysis.
Laboratory Employees. Experienced personnel qualified in
the use of the instruments and related computer systems used by
IEA are critical to its operations. IEA has a staff of
approximately 300, which includes 183 scientists and technicians.
IEA's laboratory services are marketed by a field and in-house
sales staff who are supported by IEA's Client Service Department
as well as by IEA's scientific and technical staff. The testing
laboratory industry, as well as the environmental services
industry as a whole, suffers from a shortage of qualified staff
at all skill levels. As a result, the market for trained
technical staff is very competitive, and IEA occasionally
experiences personnel shortages.
Customers. During 1993, IEA serviced approximately 1,500
customers. No single customer represented 10 percent or more of
IEA's revenues during that period. IEA's broad client base
includes consulting and engineering firms, public and private
water companies, large and small industrial and high-tech
companies, Federal government agencies, including the EPA, and
various state and local government bodies, including state
environmental departments, municipalities and waste treatment
facilities.
Competition. The environmental testing business is highly
competitive. Its participants compete primarily on the basis of
price and service. Many customers view environmental testing as
a commodity, and price for them is the most important factor in
purchasing decisions. Following a period of rapid growth, the
environmental testing business is now characterized by
significant overcapacity. As a result of these factors,
operating margins tend to be low.
Estimates of the number of commercial laboratory companies
range between 1,000 and 1,500, although IEA believes that the
thirty largest companies account for approximately 50 percent of
industry revenues. Most laboratory companies are
single-laboratory operations serving a local market. As the
environmental services market has matured over the past 20 years,
the trend has been toward consolidation and larger laboratory
companies that operate several laboratories. This trend has been
driven, in part, by the increasing sophistication and expense of
laboratory equipment. In addition, larger laboratory companies
can offer a wider variety of services and equipment. Some
customers, particularly larger companies with operations in
multiple locations, prefer to deal with larger laboratory
companies. In addition, some environmental service businesses
operate in-house laboratories that exclusively service their own
environmental testing needs. IEA's competitors include larger
companies that possess greater financial resources than the
Company. The three IEA laboratories that participate in the CLP
compete with approximately 50 other laboratory companies that bid
for such EPA work.
12
Regulatory Background. Federal and state environmental laws
and regulations have been the primary force driving the
environmental testing laboratory market. The proliferation of
environmental regulations over the past two decades has required
increasingly sophisticated analysis and remediation of a growing
range of environmental hazards. The environmental services
industry has grown rapidly in response to regulatory demands for
tests that reveal the nature and quantity of any contamination
caused during the handling, use and transportation of hazardous
substances, the treatment, storage and disposal of wastes, and
the remediation of contaminated sites. As advances in technology
have continued to make greater testing sophistication possible,
regulations have often been revised to require those more
sophisticated tests.
Environmental Regulation. IEA receives and uses various
small quantities of hazardous chemicals in its operations, and is
a licensed hazardous waste handler. IEA operates under federal
and, as applicable to the states in which various IEA
laboratories operate, various state environmental laws and
regulations that subject parties handling hazardous wastes to
potential liabilities for non-compliance, in addition to possible
civil and criminal penalties.
Contract Terms. IEA's client contracts generally contain
provisions which may impose financial penalties for inaccurate or
late test results. Contracts with governmental and private
sector clients regularly contain liquidated damage or penalty
provisions which reduce the amount paid if a test is delivered
late.
Seasonality. IEA's business is affected by seasonality.
IEA's busiest period is during the late spring, summer and early
fall, when sampling and construction activity is at its peak.
Sampling, and therefore the related testing, falls off for large
parts of IEA's service area during the winter months because of
frozen ground and water and accumulations of snow in some parts
of the country.
Utility Management Services
The Company, through Hydrocorp and its AMS subsidiary,
provides clients with an integrated range of utility management
services, including contract management and operations,
information services, water and wastewater billing and
collections and various engineering, operations and management
consulting services. AMS clients are private and municipal water
and wastewater utilities, including municipal systems engaged in
privatization initiatives.
Hydrocorp also has minority interests in small businesses
which provide security consulting services and automated mapping
and facilities management services to utilities, industry,
municipalities and government agencies.
The utility management services businesses are highly
competitive, on the basis of service and price.
13
Forest Products
The Company is engaged in the forest products industry
through Timco, which has operations in New Hampshire consisting
of a sawmill complex and a wood-waste electricity cogeneration
plant. The sawmill complex processes and markets kiln-dried,
finished Eastern White Pine and other lumber. The product is
used in the remodeling and do-it-yourself markets and, to a
lesser extent, in the construction of new homes.
in the Northeast and Mid-Atlantic regions through lumber
wholesalers, distributors and, in some instances, directly to
retailers. Wholesalers and distributors, in turn, sell the
product to the construction trade and to retail outlets. Timco
obtains the timber used in its products from independent loggers
and from purchased timber rights. A four megawatt electricity
cogeneration plant is located at the sawmill complex.
By-products of the cogeneration plant include low cost steam for
drying lumber and heating some of the sawmill buildings.
Electricity produced at Timco's cogeneration plant is sold
to Public Service Company of New Hampshire ("PSNH") under a
long-term rate order of the New Hampshire Public Utilities
Commission ("PUC") applicable to Small Power Producers (the "Rate
Order"). In January 1988, PSNH sought protection under Chapter
11 of the U.S. Bankruptcy Code. PSNH emerged from bankruptcy in
June 1991, managed by Northeast Utilities ("NU") and was acquired
by NU in June, 1992 after NU's reorganization plan received the
requisite approvals. The plan provided that after the merger, NU
would seek to restructure the Rate Order. Negotiations to
restructure the Rate Order have produced a tentative agreement
between PSNH and several small power producers, including Timco,
which has been submitted to the PUC for approval. Terms of the
agreement call for PSNH to pay Timco up to $8.6 million depending
on the timing of regulatory approval and the date of payment, in
exchange for the assignment of the Rate Order to PSNH and a
release of PSNH's obligations to buy power from Timco. There is
no assurance that it will be approved, nor is there any way to
predict what action the PUC might take if it does not approve the
agreement. Any substantial reduction in Timco's electricity
revenues ($3,515,000 in 1993) which may result from a
restructuring of the Rate Order would have an adverse impact on
the Company's forest products operations.
Traditionally, the demand for Timco's lumber is lower in the
winter months and inventories are built up in anticipation of the
busier spring and summer season. The lumber products industry is
very competitive, primarily on the basis of price. Timco faces
competition on the basis of price from domestic and foreign
forest product companies, many of which have greater resources
than the Company.
Real Estate
The Company treats real estate as a separate business
segment in order to distinguish the earnings impact from sales of
surplus utility land from the results of Utility operations. For
a discussion of the surplus non-watershed land which the
Utilities intend to market as appropriate, see "Item 2.
Properties."
14
Employees
As of December 31, 1993, the Company employed approximately
695 persons on a full time basis, including 289 in the Public
Water Supply business, 306 in the Environmental Laboratories and
Utility Management Services business and 100 in the Forest
Products business. None of the Company's employees are covered
by collective bargaining arrangements, and the Company believes
its relations with its employees are satisfactory.
Executive Officers
For information concerning the Company's executive officers,
see "Item 10. Directors and Executive Officers of the
Registrant".
ITEM 2. PROPERTIES
-------------------
The Company
BHC owns a 20,000 square foot headquarters building and a
44,370 square foot Operations Center in Bridgeport, and leases an
additional 22,000 square feet of office, laboratory and garage
space in Bridgeport for utility operations. SWC owns its
13,618 square foot headquarters and operations facility in
Stamford, Connecticut. Aquarion owns nonutility land totaling
approximately 99 acres in Easton and Litchfield, Connecticut.
Property
At December 31, 1993, BHC owned in the aggregate 11 active
reservoirs and approximately 1,640 miles of water mains, of which
approximately 77 miles have been laid in the past five years. In
addition, SWC owned 5 active reservoirs at year end. The rights
to locate and maintain water transmission and distribution mains
are secured by charter, easement and permit and are generally
perpetual. Water is delivered to the distribution system from
four major and several smaller reservoirs and forty-two producing
wells. Eight additional reservoirs are used for storage purposes
and are interconnected with the distribution reservoirs.
BHC owns two dual media filtration plants for treatment of
its Trap Falls and Easton Lake reservoir systems, which plants
have capacities of 25 and 20 MGD, respectively. SWC owns a 24
MGD rapid-sand and activated-carbon filtration plant for
treatment of its entire reservoir system.
BHC owns approximately 19,000 acres of real property located
in Fairfield, New Haven, and Litchfield Counties, Connecticut,
most of which consists of reservoirs and surrounding watershed.
All but 1,360 specified acres of such property are subject to the
first lien arising under the BHC Indenture securing its First
Mortgage Bonds. SWC owns approximately 2,400 acres of real
property located in Stamford and New Canaan, Connecticut, and in
Pound Ridge and Lewisboro, New York, which consist almost
15
exclusively of reservoirs and surrounding watershed, pumps,
standpipes and building facilities.
The DPHAS regulates public water company lands according to
a three-tiered classification system. Class I lands cannot be
sold, leased or transferred. The DPHAS may authorize a transfer
or change in use of Class II lands only upon a finding that there
will be no adverse impact upon the public water supply and that
any use restrictions required as a condition of transfer are
enforceable against subsequent owners and occupants of the lands.
Class III lands, which are non-watershed, are not presently
subject to regulation by the DPHAS. BHC has identified
approximately 2,300 acres of land it believes are surplus to its
water supply needs, and therefore would qualify as Class III
land. All of this Class III land, which includes approximately
570 acres which have never been in rate base, is available for
sale, although all of it may not be marketable. Up to 530
additional acres could become available if the DPHAS approves the
abandonment of a former reservoir system in New Haven County and
reclassifies existing watershed property as Class III land, as
requested by the Company.
Real property may not be sold or transferred by a water
utility without the prior approval of the DPUC an
with other restrictions imposed by Connecticut law. State laws
and regulations govern, among other things, to whom certain water
company lands may be transferred, with preference given to other
water companies, the municipality in which the property is
located and the State of Connecticut, in that order.
Additionally, the disposition of the proceeds of any permissible
sale is subject to state law.
Until changed by statute in 1988, it had been the practice
of the DPUC to apply gains from the sale of surplus water company
land that had ever been in the rate base as an offset against
operating expenses, thereby substituting profits from the sale of
such land for revenues which would otherwise be provided through
rates. Legislation enacted in 1988, the Equitable Sharing
Statute, required the DPUC to "equitably allocate" the economic
benefits of the net proceeds from the sales of Class III land
which was previously in the utility's rate base between the
Company's ratepayers and its shareholders. Ratepayers do not
share in gains from the sale of land which has never been in rate
base.
The Equitable Sharing Statute was clarified by a 1990
amendment which provides that the economic benefits from the sale
of former-rate-base, Class III land which promotes a perpetual
public interest in open space or recreational use shall be
allocated "substantially in favor" of shareholders when
25 percent or more of the land sold is to be used for open space
or recreational purposes.
Two decisions involving 1990 land sales, resulted in
allocations of the respective gain on the sales of 75 percent and
43 percent, respectively, to BHC's shareholder.
In November 1993 the DPUC gave BHC approval to sell 25.78
acres of surplus, off-watershed land in Shelton, Connecticut.
BHC plans to subdivide the land into eleven building lots. BHC
also received approval from the DPUC in December 1993 to sell
34.55 acres of surplus, off-watershed land in Weston,
Connecticut. BHC plans to subdivide the land into ten building
lots. Each case involves former rate base land, and 25 percent of
16
the land to be sold will be conveyed to the host municipality
to be preserved as open space. Under the terms of both
decisions, approximately two-thirds of the net proceeds from the
land sales will be allocated to shareholders and the remaining
one-third allocated to ratepayers through amortization into BHC's
rate base over a five year period. All such net proceeds must be
used for reinvestment in utility plant.
The Company leases all of its laboratory facilities, except
for the Massachusetts laboratory, which it owns. Aquarion owns
50 percent of Key Partners III, a partnership which owns IEA's
North Carolina laboratory and headquarters facility. The
smallest of IEA's laboratories occupies approximately
6,750 square feet. The largest, located in Cary, North Carolina,
occupies approximately 30,000 square feet. The Company believes
that the laboratory facilities owned or leased are adequate for
its present and anticipated future needs and that the amounts
paid for all the leases into which it has entered are reasonable.
ITEM 3. LEGAL PROCEEDINGS
--------------------------
The registrant has nothing to report for this item.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
------------------------------------------------------------
The registrant has nothing to report for this item.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
---------------------------------------------------------------
STOCKHOLDER MATTERS
-------------------
Page 45 of the Company's Annual Report to Shareholders for
the year ended December 31, 1993 is incorporated by reference
herein pursuant to Rule 12b-23 of the Securities and Exchange Act
of 1934 (the "Act") and to Instruction G(2) to Form 10-K.
Aquarion has declared and paid quarterly dividends on its
common stock without interruption since its organization in 1969,
and prior thereto, BHC paid dividends annually on its common
stock without interruption since 1890. Dividends, when declared,
are normally paid on the 30th day of January, April, July and
October.
17
The earnings of Aquarion are derived from its investments in
its subsidiaries, particularly BHC. Aquarion's future ability to
pay dividends to holders of its Common Stock is dependent upon
the continued payment by BHC of dividends to Aquarion. BHC's
ability to pay dividends will depend upon timely and adequate
rate relief, compliance with restrictions under certain of the
BHC debt instruments and other factors. In addition, no
dividends on BHC's common stock can be paid during any period in
which BHC's preferred stock dividends are in arrears.
Dividends on Aquarion common stock can be paid only out of
net profits and surplus of the Company. Aquarion's ability to
pay dividends is further restricted by the terms of Aquarion's
8 1/2 percent unsecured Senior Notes due January 1994 , which
were replaced by a 5.95% unsecured Senior Note due January 1999
and 7.8 percent unsecured Senior Notes due June 1997 (the
"Aquarion Notes"). As of December 31, 1993, the applicable
restrictions would have permitted payment of additional dividends
on Aquarion's common stock of up to $31,000,000.
While Aquarion's Board of Directors intends to continue the
practice of declaring cash dividends on a quarterly basis, no
assurance can be given as to future dividends or dividend rates
since they will be determined in light of a number of factors,
including earnings, cash flow, and Aquarion and BHC's financial
requirements. See "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations--Capital
Resources and Liquidity."
ITEM 6. SELECTED FINANCIAL DATA
-------------------------------------
See Page 1 ("Selected Financial Data") and Pages 44 - 45
("Supplemental Financial Data") of the Company's Annual Report to
Shareholders for the year ended December 31, 1993, which is
incorporated by reference herein pursuant to Rule 12b-23 of the
Act and Instruction G(2) to Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
----------------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
See Page 1 ("Selected Financial Data") and Pages 17 - 23 of
the Company's Annual Report to Shareholders for the year ended
December 31, 1993, which is incorporated by reference herein
pursuant to Rule 12b-23 of the Act and Instruction G(2) to Form
10-K.
18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
---------------------------------------------------------
The consolidated financial statements, together with the
report thereon of Price Waterhouse, dated January 31, 1994,
appearing on Pages 24 - 22 and Page 1 ("Selected Financial Data")
and Pages 44 - 45 ("Supplemental Financial Data") of the
accompanying 1993 Annual Report to Shareholders of Aquarion
Company are incorporated by reference herein pursuant to Rule
12b-23 of the Act and Instruction G(2) to Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
--------------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
The registrant has nothing to report for this item.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
----------------------------------------------------------------
The information as to directors required by Item 10 is set
forth at Pages 2 - 8 of the Company's Definitive Proxy Statement,
dated March 21, 1994 relating to the proposed Annual Meeting of
Shareholders to be held on April 26, 1994, filed with the
Commission pursuant to Regulation 14a under the Act, and is
incorporated by referenced herein pursuant to Rule 12b-23 of the
Act and Instruction G(3) to Form 10-K.
Executive Officers
The executive officers of the registrant are listed below.
These officers were elected to the offices indicated on April 27,
1993, except as otherwise noted, for a term expiring with the
1994 annual meeting of directors. Except as indicated, all have
been with registrant and its predecessors in an executive
capacity for more than five years. There are no family
relationships among members of the executive officers. There
were no arrangements or undertakings between any of the officers
listed below and any other person pursuant to which he or she was
selected as an officer.
19
Served
as
Office, Business Experience Officer
Executive Officer Age During Past Five Years Since
----------------- --- ------------------------ -----
Jack E. McGregor 59 President (since 1988) 1985
Chief Executive Officer
(since January 1990) Chief
Operating Officer (1988 to
January 1990) and Executive
Vice President (1985 to
1988) of the Company.
Director of People's Bank
and Physicians Health
Services, Inc. Director and
Member of Executive
Committee, National
Association of Water
Companies. Trustee of
Fairfield University and
Yale-New Haven Hospital.
Richard K. Schmidt, Ph.D 49 Senior Vice President 1992
(since April 1993) of the
Company; President and
Chief Executive Officer of
IEA (since March 1992);
formerly President and
Chief Operating Officer
(1984-1992) of Mechanical
Technology, Inc.
James S. McInerney 56 Senior Vice President 1989
(since April 1992) of the
Company; President (since
April 1991) and Chief
Operating Officer (since
January 1990) of BHC, and
Chairman and Chief
Executive Officer (since
January 1990) of Stamford
Water Company. Executive
Vice President (1990 to
April 1991) and Vice
President (1989) of BHC and
President, Stamford Water
Company (1977 to January
1990). Mr. McInerney is a
Director, President or Vice
President of certain of the
Company's other
subsidiaries.
20
Served
as
Office, Business Experience Officer
Executive Officer Age During Past Five Years Since
----------------- --- ------------------------ -----
Janet M. Hansen 51 Senior Vice President 1983
(since April 1993), Chief
Financial Officer (since
April 1992) and Treasurer
(since 1988) of the Company
and Vice President (since
1989), Chief Financial
Officer (since April 1991)
and Treasurer (since 1985)
of BHC; Mrs. Hansen is Vice
President and Treasurer
(since April 1991) of IEA
and Chairman of the Board
and Chief Executive Officer
(since April 1992) of
Timco. Mrs. Hansen is also
Vice President, Chief
Financial Officer and
Treasurer of certain of the
Company's other subsid-
iaries. Director of
Gateway Bank.
Larry L. Bingaman 43 Vice President, Corporate 1990
Relations and Secretary
(since April 1993); Vice
President, Marketing and
Communications (since 1990)
of the Company; Formerly
Director of Communications
for United Technologies'
Sikorsky Aircraft Division
(1989 to June 1990).
ITEM 11. EXECUTIVE COMPENSATION
------------------------------------
Pages 8 - 13 of the Company's Definitive Proxy Statement,
dated March 21, 1994, relating to the proposed Annual Meeting of
Shareholders to be held on April 26, 1994, filed with the
Commission pursuant to Regulation 14a under the Act are
incorporated by reference herein pursuant to Rule 12b-23 of the
Act and Instruction G(3) to Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
-----------------------------------------------------------------
MANAGEMENT
----------
Pages 5 - 6 of the Company's Definitive Proxy Statement,
dated March 21, 1994, relating to the proposed Annual Meeting of
Shareholders to be held on April 26, 1994, filed with the
Commission pursuant to Regulation 14a under the Act, are
incorporated by reference herein pursuant to Rule 12b-23 of the
Act and Instruction G(3) to Form 10-K.
21
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
------------------------------------------------------------
The registrant has nothing to report for this item.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
-----------------------------------------------------------------
FORM 8-K
--------
a) The following documents are filed as part of this
report:
Page in
Annual Report*
-------------
(1) Consolidated Statements of
Income for the three years
ended December 31, 1993 24
Consolidated Balance Sheets at
December 31, 1993 and 1992 25-26
Consolidated Statements of Cash
Flows for the three years
ended December 31, 1993 27
Consolidated Statements of
Shareholders' Equity for the
three years ended
December 31, 1993 28
Notes to Consolidated Financial
Statements 29-41
Report of Independent
Accountants 42
Selected Financial Data 1
Supplemental Financial
Information 44-45
* Incorporated by reference from the indicated
pages of the 1993 Annual Report to Shareholders.
____________________
(2) Financial Statement Schedules:
Report of Independent Accountants on Financial
Statement Schedules, see Page F-2 hereto.
Index to Additional Financial Information, see
Page F-1 hereto.
The Financial Statement Schedules above should be read in
conjunction with the Consolidated Financial Statements in
the 1993 Annual Report to Shareholders. All other
schedules are omitted because they are not applicable or
the required information is shown in the consolidated
financial statements or notes thereto.
22
(b) Reports on Form 8-K.
The Company did not file a report on Form 8-K for the
fourth quarter of the year ended December 31, 1993.
(c) Exhibits:
Each document referred to below is incorporated by
reference to the files of the Commission, unless the
reference is preceded by an asterisk (*). Each
management contract, compensatory plan or arrangement
required to be filed as an exhibit hereto is preceded
by a double asterisk (**).
3(a) Restated Certificate of Incorporation of
Aquarion, as amended.(1)
3(b) By-laws of Aquarion, as amended. (6)
4(a) Rights Agreement between Aquarion and The
Chase Manhattan Bank, N.A. setting forth
description of Preferred Stock Purchase
Rights distributed to holders of Aquarion
Common Stock.(6)
10(a) First Mortgage Indenture of BHC dated
June 1, 1924.(2)
10(b) Seventeenth Supplemental Mortgage of BHC
dated as September 1, 1960.(2)
10(c) Nineteenth Supplemental Mortgage of BHC
dated as of August 1, 1965.(1)
10(d) Twentieth Supplemental Mortgage of BHC
dated as of November 1, 1968.(1)
10(e) Loan Agreement of BHC dated as of
October 15, 1984.(1)
10(f) Loan and Trust Agreement as of November 1,
1984.(1)
10(g) Note Agreement of Aquarion dated
December 28, 1990.(3)
10(h) Note Agreement of BHC dated January 24,
1991.(3)
10(i) Note Agreement of Aquarion dated as of
May 19, 1992.
**10(j) Aquarion Long-Term Incentive Plan.(1)
10(k) Joint Venture Agreement betwee
Brennan, Jr., William A. Brennan and Main
Street South Corporation dated February 23,
1979.(4)
**10(l) Employment Agreement between Aquarion and
James S. McInerney, dated June 1, 1990.
**10(m) Employment Agreement between Aquarion and
Janet M. Hansen dated November 1, 1992.
23
**10(n) Agreement between Aquarion and
William S. Warner dated October 15,
1989.(5)
**10(o) Employment Agreement between Aquarion and
Jack E. McGregor dated January 1, 1990.(5)
**10(p) Form of Stock Option Award Agreement for
options granted pursuant to Long-Term
Incentive Plan.(5)
10(q) Purchase Agreement dated July 28, 1989 by
and among Frederick T. Doane,
Heike A. Doane and Aquarion.(3)
10(r) Purchase Agreement dated July 10, 1990 by
and among Robert L. MacDonald and
Aquarion.(3)
10(s) Stock Purchase Agreement dated November 5,
1990 between Paul B. Priest,
A C Laboratories, Inc. and Aquarion.(3)
10(t) Stock Purchase Agreement dated as of
December 7, 1990 between Aquarion and the
sellers listed on Schedule 2. 1 thereof.(3)
**10(u) Employment Agreement between Aquarion and
Larry L. Bingaman dated June 11, 1990.(3)
10(v) Amendment dated September 12, 1991 to the
Stock Purchase Agreement dated as of
December 7, 1990.(1)
10(w) Purchase and Sale Agreement dated
September 12, 1991, by and among YWC
Technologies, Inc., Bird Corporation, YWC,
Inc., Interim Dewatering Services, Inc.,
Ad+Soil, Inc. and Aquarion.(1)
10(x) Agreement for Construction Management
Services dated April 18, 1991 between BHC
and Gilbane Building Company.(1)
**10(y) Employment Agreement between Industrial and
Environmental Analysts, Inc. and
Dr. Richard K. Schmidt dated April 1, 1992.
**10(z) Employment Agreement between Industrial and
Environmental Analysts, Inc. and David C.
Houle dated September 1, 1992.
10(aa) Loan Agreement of BHC dated as of June 1,
1990.(6)
10(bb) First Mortgage Bonds, Series C and
Preferred Stock, 1968 Series, Purchase
Agreement of SWC dated July 1968.
10(cc) Revolving Credit Agreement dated May 14,
1993.(7)
10(dd) Loan Agreement of BHC dated as of June 1,
1993. (7)
24
10(ee) Forward Purchase Agreement of BHC (1994A
Series) dated June 9, 1993.(7)
10(ff) Loan Agreement of SWC dated September 1,
1993.
*10(gg) Loan Agreement of BHC dated December 1,
1993.
*10(hh) Note Agreement of Aquarion dated January 4,
1994.
*13(a) Annual Report to Shareholders for the year
ended December 31, 1993.
*22(a) Subsidiaries of Aquarion
*24(a) Consent of Independent Accountants for
Aquarion Company is contained in Report of
Independent Accountants on page F-2 hereof.
*25(a) Power of Attorney.
____________________
(1) Filed as part of Aquarion's Form 8 Amendment to its
Form 10-Q for the quarter ended September 30, 1991, filed
February 19, 1992.
(2) Filed as an Exhibit to BHC's Registration Statement on
Form S-1, File Number 2-23434, dated April 26, 1965.
(3) Filed as part of the Annual Report of the Company on Form
10-K for the year ended December 31, 1990.
(4) Filed as part of the Amendment No. 1 to the Company's
Registration Statement as Form S-7, File No. 2-74305, dated
November 5, 1981.
(5) Filed as part of the Company's Annual Report on Form 10-K
for the year ended December 31, 1989.
(6) Filed as part of the Company's Annual Report on Form 10-K
for the year ended December 31, 1991.
(7) Filed as part of the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1993.
25
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.
Aquarion Company
________________
(Registrant)
Date
----
By /s/Janet M. Hansen March 23, 1994
------------------------------------------------
Janet M. Hansen
Senior Vice President, Treasurer and
Chief Financial Officer
(Principal Financial and Accounting Officer)
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.
By * March 23, 1994
------------------------------------------------
William S. Warner
Chairman of the Board of Directors
and Director
By * March 23, 1994
------------------------------------------------
Jack E. McGregor
President, Chief Executive Officer
and Director
By March 23, 1994
------------------------------------------------
George W. Edwards, Jr.
Director
26
By
------------------------------------------------
Geoffrey Etherington
Director
By * March 23, 1994
------------------------------------------------
Norwick R.G. Goodspeed
Director
By * March 23, 1994
------------------------------------------------
Janet D. Greenwood
Director
By * March 23, 1994
------------------------------------------------
Donald M. Halsted, Jr.
Director
By
------------------------------------------------
Eugene D. Jones
Director
By * March 23, 1994
------------------------------------------------
Larry L. Pflieger
Director
By * March 23, 1994
------------------------------------------------
G. Jackson Ratcliffe
Director
By * March 23, 1994
------------------------------------------------
John A. Urquhart
Director
*By /s/Janet M. Hansen
------------------------------------------------
Janet M. Hansen
Attorney-in-fact
27
F-1
INDEX TO ADDITIONAL FINANCIAL INFORMATION
-----------------------------------------
The consolidated financial statements, together with the
report of Price Waterhouse thereon, dated January 31, 1994,
appearing on Pages 24 - 45 of the accompanying 1993 Annual Report
to Shareholders are incorporated by reference in this Form 10-K
Annual Report. With the exception of the aforementioned
information and the information incorporated in Items 1, 5, 6, 7
and 8, the 1993 Annual Report to Shareholders is not to be deemed
filed as part of this report. The following financial
information should be read in conjunction with the consolidated
financial statements in such 1993 Annual Report to Shareholders.
Financial Statement Schedules not included in this Form 10-K
Annual Report have been omitted because they are not applicable
or the required information is shown in the consolidated
financial statements or notes thereto.
ADDITIONAL FINANCIAL INFORMATION
--------------------------------
Page
----
Property, plant and equipment (Schedule V)
for the years 1993, 1992 and 1991 F-3
Accumulated depreciation, depletion and
amortization of property, plant and
equipment (Schedule VI) for the years
1993, 1992 and 1991 F-4
Supplementary income statement information
(Schedule X) for the years 1993, 1992 and 1991 F-5
28
F-2
REPORT OF INDEPENDENT ACCOUNTANTS ON
------------------------------------
FINANCIAL STATEMENT SCHEDULES
-----------------------------
To the Board of Directors of Aquarion Company
Our audits of the consolidated financial statements referred to
in our report dated January 31, 1994 appearing on Page 42 of the
1993 Annual Report to Shareholders of Aquarion Company, (which
report and consolidated financial statements are incorporated by
reference in this Annual Report on Form 10-K) also included an
audit of the Financial Statement Schedules listed in item 14(a)
of this Form 10-K. In our opinion, these Financial Statement
Schedules present fairly, in all material respects, the
information set forth therein when read in conjunction with the
related consolidated financial statements.
/s/Price Waterhouse
---------------------
Price Waterhouse
Stamford, Connecticut
January 31, 1994
29
F-3
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
Balance at Other Balance
Beginning Additions changes at end
of period at cost Retirements add(deduct) of period
---------- ------- ----------- ----------- ---------
Description
(In thousands)
--------------
1993:
----
Organization . . . . . . . . $ 185 $ - $ - $ - $ 185
Source of supply . . . . . . 25,261 1,501 - - 26,762
Pumping . . . . . . . . . . . 11,696 1,699 - - 13,395
Water treatment . . . . . . . 30,905 22,046 (2) - - 52,951
Transmission & distribution 199,539 7,505 (1) 179 - 206,865
General plant . . . . . . . . 28,795 2,061 770 - 30,086
Construction work in progress 23,193 (17,927)(2) - - 5,266
Utility plant held for future
use . . . . . . . . . . . . . 471 - - - 471
Nonutility . . . . . . . . . 31,714 1,809 1,940(4) 31,583
-------- ------- ------ - --------
Total . . . . . . . . . . $351,759 $18,694 $2,889 $ 0 $367,564
======= ====== ===== == =======
1992:
Organization . . . . . . . . $ 185 $ - $ - $ - $ 185
Source of supply . . . . . . 24,628 558 2 77 25,261
Pumping . . . . . . . . . . . 11,598 98 - - 11,696
Water treatment . . . . . . . 30,817 88 - - 30,905
Transmission & distribution 195,173 4,632(1) 230 (36)(3) 199,539
General plant . . . . . . . . 25,981 3,444 627 (3) 28,795
Construction work in progress 9,637 13,556(2) - - 23,193
Utility plant held for future
use . . . . . . . . . . . . . 471 - - - 471
Nonutility . . . . . . . . . 28,647 3,010 62 119 31,714
-------- ------- ------ ---- --------
Total . . . . . . . . . . $327,137 $25,386 $ 921 $157 $351,759
======= ====== === === =======
1991:
Organization . . . . . . . . $ 185 $ - $ - $ - $ 185
Source of supply . . . . . . 24,508 120 - - 24,628
Pumping . . . . . . . . . . . 11,305 303 30 20 11,598
Water treatment . . . . . . . 30,574 243 - - 30,817
Transmission and distribution 189,854 5,759(1) 440 - 195,173
General plant . . . . . . . . 23,583 3,022 611 (13) 25,981
Construction work in progress 4,778 4,859(2) - - 9,637
Utility plant held for future
use . . . . . . . . . . . . . 487 - 16 - 471
Nonutility . . . . . . . . . 25,295 3,546 207 13 28,647
-------- -------- ------ ---- --------
Total $310,569 $17,852 $1,304 $ 20 $327,137
======= ====== ===== == =======
- -----------
(1) The change in transmission and distribution is due to normal plant expansion.
(2) Primarily related to filtration facilities.
(3) Contribution in aid of construction from Stamford Water Company in conjunction with
the Southwest regional pipeline.
(4) Includes the gross plant from laboratory sales.
30
F-4
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
Balance at Balance
Beginning Other at end
of Additions changes of period
period at cost Retirements add(deduct) at cost
------- ------- ----------- ----------- ---------
Description
(In thousands)
- --------------
1993:
- ----
Source of supply . . . . . . $ 8,568 $ 352 $ 3 $ - $ 8,917
Pumping . . . . . . . . . . . 5,236 393 - - 5,629
Water treatment . . . . . . . 8,242 1,182 - - 9,424
Transmission and distribution 60,118 3,829 241 - 63,706
General . . . . . . . . . . 10,790 2,284 632 - 12,442
Nonutility . . . . . . . . . 15,656 2,587 1,170 - 17,073
-------- ------- ------ --- ------
Total . . . . . . . . . . $108,610 $10,627 $2,046 $ 0 $117,191
======= ====== ===== == =======
1992:
- ----
Source of supply . . . . . . $ 8,222 $ 346 $ - $ - $ 8,568
Pumping . . . . . . . . . . . 4,844 392 - - 5,236
Water treatment . . . . . . . 7,379 863 - - 8,242
Transmission and distribution 56,610 3,716 281 73(1) 60,118
General . . . . . . . . . . 9,715 1,655 627 47 10,790
Nonutility . . . . . . . . . 12,956 2,548 50 202(2) 15,656
-------- ------- ------ ----- --------
Total . . . . . . . . . . $ 99,726 $ 9,520 $ 958 $322 $108,610
====== ===== === === =======
1991:
- ----
Source of supply . . . . . . $ 7,882 $ 340 $ - $ - $ 8,222
Pumping . . . . . . . . . . . 4,522 384 62 - 4,844
Water treatment . . . . . . . 6,506 873 - - 7,379
Transmission and distribution 53,470 3,631 500 9 56,610
General . . . . . . . . . . . 8,827 1,421 573 40 9,715
Nonutility . . . . . . . . . 10,876 2,243(2) 185 22 12,956
-------- ------ ------ ---- --------
$ 92,083 $ 8,892 $1,320 $ 71 $ 99,726
Total ====== ===== ===== == ======
- ---------------
(1) Billings to State of Connecticut for relocation of facilities.
(2) Accumulated depreciation from acquisitions.
(3) Includes accumulated depreciation from laboratory sales.
31
F-5
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
1993 1992 1991
---- ---- ----
(In thousands)
Maintenance and repairs . . . . . . . . . $3,295 $3,279 $3,705
Depreciation . . . . . . . . . . . . . . 10,623 9,520 8,892
Amortization . . . . . . . . . . . . . . 965 1,030 1,413
Taxes other than payroll and income taxes:
Property . . . . . . . . . . . . . . . . 6,585 6,601 6,198
Gross earnings and franchise taxes . . . 3,658 3,309 3,319
_________
Other "Supplementary Income Statement Information" that otherwise would be
required has been omitted since the amounts were less than 1% of total
consolidated revenues during each of the above years.
32
EXHIBIT 22(a)
-------------
Subsidiaries of the Registrant
------------------------------
Bridgeport Hydraulic Company, incorporated in the State of Connecticut
Stamford Water Company, incorporated in the State of Connecticut
Main Street South Corporation, incorporated in the State of Connecticut
Timco, Inc., incorporated in the State of Connecticut
Hydrocorp, Inc., incorporated in the State of Delaware
Industrial and Environmental Analysts, Inc., incorporated in the State of
Vermont
Industrial and Environmental Analysts, Inc. - Massachusetts, incorporated
in the State of Massachusetts
Industrial and Environmental Analysts, Inc. - New Jersey, incorporated in
the State of Delaware
Industrial and Environmental Analysts, Inc. - Illinois, incorporated in the
State of Delaware
Industrial and Environmental Analysts, Inc. - Florida,incorporated in the
State of Florida
SRK Holding, Inc., incorporated in the State of Connecticut
THC Acquisition Corp., incorporated in the State of Delaware
YWC, Inc., incorporated in the State of Connecticut
Aquarion Management Services, Inc., incorporated in the State of Delaware
33
EXHIBIT 24(a)
-------------
Consent of Independent Accountants
----------------------------------
The Consent of Independent Accountants for Aquarion Company is contained
in the Report of Independent Accountants on page F-2 of this Form 10-K.
34