SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13, or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998 Commission file No.0-6028
BIRMINGHAM UTILITIES, INC.
(Exact Name of registrant as specified in its charter)
CONNECTICUT 06-0878647
(State or other jurisdiction of I.R.S. Employer Identification No.
incorporation or organization)
230 Beaver Street, Ansonia, CT 06401-0426
(Address of principal executive offices Zip Code
Registrant's telephone number including area code (203) 735-1888
Securities registered pursuant to Section 12(b) of the Act
Title of each class Name of each exchange
None None
Securities registered pursuant to Section 12(g) of the Act
Common Stock (no 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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) 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 III of this Form 10-K or any amendment to this Form
10-K. [ X ]
Aggregate market value of the voting stock held by non-affiliates* of
the registrant based on the average bid and asked prices of such stock
as of March 26, 1998: $7,710,304.
Indicate the number of shares outstanding or each of the registrant's
class of common stock, as of the latest practicable date.
Class Outstanding at March 26, 1999
Common Stock, no par value 1,554,716
PAGE 2
* For purposes of setting forth on the cover sheet of this Annual
Report on Form 10-K the aggregate market value of the voting stock held
by non-affiliates of the registrant, the registrant has deemed that all
shares beneficially held by officers, directors, and nominees are shares
held by affiliates.
PART I
Item 1. Business
The Company is a specially chartered Connecticut public service
corporation in the business of collecting and distributing water for
domestic, commercial and industrial uses and fire protection in Ansonia
and Derby, Connecticut, and in small parts of the contiguous Town of
Seymour. Under its charter, the Company enjoys a monopoly franchise in
the distribution of water in the area which it serves. In conjunction
with its right to sell water, the Company has the power of eminent
domain and the right to erect and maintain certain facilities on and in
public highways and grounds, all subject to such consents and approvals
of public bodies and others as may be required by law.
The current sources of the Company's water are wells located in Derby
and Seymour and interconnections with the South Central Connecticut
Regional Water Authority's (the "Regional Water Authority") system (a)
at the border of Orange and Derby (the "Grassy Hill Interconnection")
and (b) near the border of Seymour and Ansonia (the "Woodbridge
Interconnection"). The Company maintains its interconnected Beaver
Lake Reservoir System, a 2.2 million gallon per day (MGD) surface
supply in case of emergency needs.
The Company's entire system has a safe daily yield (including only
those supplies that comply with the SDWA on a consistent basis) of
approximately 8.0 MGD, while the average daily demand and the maximum
daily demand on the system during 1998 were approximately 3.2 MGD and
4.7 MGD, respectively. The distribution system with the exception of
the well supplies, is mainly through gravity, but there are seven
distinct areas at higher elevations where pumping, pressure tanks and
standpipes are utilized. These higher areas serve approximately 25%
of the Company's customers.
During 1997 approximately 1.18 billion gallons of water from all
sources were delivered to the Company's customers. The Company has
approximately 8,902 customers of whom approximately 94% are residential
and commercial. No single customer accounted for as much as 10% of
total billings in 1997. The business of the Company is to some extent
seasonal, since greater quantities of water are delivered to customers
in the hot summer months.
The Company had, as of February 28, 1999, 19 full-time employees. The
Company's employees are not affiliated with any union organization.
PAGE 3
The Company is subject to the jurisdiction of the Connecticut Department
of Public Utility Control ("DPUC") as to accounting, financing,
ratemaking, disposal of property, the issuance of long term securities
and other matters affecting its operations. The Connecticut Department
of Public Health (the "Health Department" or "DPH") has regulatory
powers over the Company under state law with respect to water quality,
sources of supply, and the use of watershed land. The Connecticut
Department of Environmental Protection ("DEP") is authorized to regulate
the Company's operations with regard to water pollution abatement,
diversion of water from streams and rivers, safety of dams and the
location, construction and alteration of certain water facilities. The
Company's activities are also subject to regulation with regard to
environmental and other operational matters by federal, state and local
authorities, including, without limitation, zoning authorities.
The Company is subject to regulation of its water quality under the
Federal Safe Drinking Water Act ("SDWA"). The United States
Environmental Protection Agency has granted to the Health Department the
primary enforcement responsibility in Connecticut under the SDWA. The
Health Department has established regulations containing maximum limits
on contaminants which have or may have an adverse effect on health.
Executive Officers of the Registrant
Name, Age and Position Business Experience Past 5 Years
Betsy Henley-Cohn, 46
Chairwoman of the Board Chairwoman of the Board of Directors of
the Company since May of 1992; Chairman
of the Board of Directors and Treasurer,
Joseph Cohn & Sons, Inc. (construction
sub-contractors); Director, United
Illuminating Company; Director, Aristotle
Corp.; Director, Citizens Bank of
Connecticut; Society for Savings Bancorp,
Director 1985-1993.
John S. Tomac, 45
President President of the Company since October 1,
1998. Vice President and Treasurer of the
Company December 1, 1997-September 30,
1998.
Assistant Controller, BHC Company
since 1991.
PAGE 4
Item 2. Properties
The Company's properties consist chiefly of land, wells, reservoirs,
and pipelines. The Company has 5 production wells with an aggregate
effective capacity of approximately 3.0 MGD. The Company's existing
interconnections with the Regional Water Authority can provide 5.0 MGD.
The Company's entire system has a safe daily yield (including only those
supplies that comply with the SDWA on a consistent basis) of
approximately 8.0 MGD, while the average daily demand and the maximum
daily demand on the system during 1997 were approximately 3.2 MGD and
4.7 MGD, respectively. The distribution system, with the exception of
the well supplies, is mainly through gravity, but there are seven
distinct areas at higher elevations where pumping, pressure tanks and
standpipes are utilized. These higher areas serve approximately 25% of
the Company's customers.
The Company has three emergency stand-by reservoirs (Peat Swamp,
Quillinan and Middle) with a storage capacity of 484 million gallons and
a safe daily yield of approximately 2.2 MGD. Because the water produced
by those reservoirs does not consistently meet the quality standards of
the SDWA, none of those reservoirs is actively being used by the Company
to supply water to the system. During 1996 and in January of 1998, the
Company sold to the City of Ansonia and the City of Derby the Sentinel
Hill Reservoir system and its watershed located in Ansonia and Derby.
In November of 1998, the Company sold to the Town of Seymour the Great
Hill reservoir system and its watershed located in the Towns of Seymour
and Oxford.
The Company's dams are subject to inspection by and the approval of the
DEP. All of the Company's dams are in compliance with improvements
previously ordered by the U.S. Army Corps of Engineers.
The Company has an office building at 230 Beaver Street, in Ansonia.
That building was built in 1964, is of brick construction, and contains
4,200 square feet of office and storage space. In addition, the Company
owns two buildings devoted to equipment storage. The Company also
maintains some office space in a wood frame, residential building owned
by the Company at 228 Beaver Street, Ansonia.
The Company's approximately 3,400 acres of land were acquired over the
years principally in watershed areas to protect the quality and purity
of the Company's water at a time when land use was not regulated and
standards for water quality in streams were non-existent.
PAGE 5
Under Connecticut law a water Company cannot abandon a source of supply
or dispose of any land holdings associated with a source of supply until
it has a "water supply plan" approved by the Health Department. The
Health Department approved the Company's first Water Supply Plan in 1988
and updated Water Supply Plan in 1993. Pursuant to abandonment permits
issued by the Health Department in 1988, the Company abandoned its Upper
and Lower Sentinel Hill Reservoirs, Steep Hill (Bungay) Reservoir, and
Fountain Lake Reservoir, and the land associated with them then became
available for sale. In 1994, the abandonment of Great Hill Reservoir
was approved by the Health Department.
Since 1988, the Company has sold approximately 1,364 acres of land in
Bethany, Ansonia, Derby, Seymour and Oxford, realizing net gains of
$6,994,974.
The Company believes that approximately 1,050 acres of its land holdings
will not be needed in the future for water supply purposes and can be
sold. The Company has proposed, and the DPUC has accepted with respect
to prior transactions, an accounting and ratemaking mechanism by which
the gain on the sale of the Company's land holdings is shared between
ratepayers and stockholders as contemplated by Connecticut law. (See
Note 1 to the Company's Financial Statements).
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Market for the Registrant's Common Stock and Related Security
Holding Matters
Page 1 of the Company's Annual Report to shareholders for the year ended
December 31, 1998, (Financial Highlights), is incorporated herein by
reference, pursuant to Rule 12b-23 of the Securities and Exchange Act
of 1934 (the "Act") and to Instruction G(2) to Form 10-K.
Item 6. Selected Financial Data
Page 1 of the Company's Annual Report to shareholders for the year ended
December 31, 1998 (Financial Highlights) is incorporated herein by
reference, pursuant to Rule 12b-23 of the Act and to Instruction G(2) to
Form 10-K.
Item 7.Management's Discussion and Analysis of Financial
Condition and Results of Operations
PAGE 6
Net Income
Pages 8 through 11 of the Company's Annual Report to Shareholders for
the year ended December 31, 1998 are incorporated herein by reference,
pursuant to Rule 12b-23 of the Act and to Instruction G(2) to Form 10-K.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements, together with the report therein,
of Dworken, Hillman, LaMorte and Sterczala, P.C., dated February 3,
1999, appearing on pages 12 through 24 of the accompanying 1998 Annual
Report to Shareholders of Birmingham Utilities, Inc. are incorporated
herein by reference, 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
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) The following list identifies all current directors of the Company.
No director or executive officer has (i) any family relationship with
any other such person or (ii) been involved in any legal proceeding
which would require disclosure under Item 401 of Regulation S-K. There
are no arrangements between any director or officer and any other person
pursuant to which he or she was or is to be selected as a director or
officer or as a nominee therefor.
Business Experience during the Last Director
Name Age Five Years and Other Directorships Since
Stephen P. Ahern 69 V.P., Unicco Security Services; 1994
Principal, Ahern Builders
Edward G. Brickett 69 Retired; Director of Finance,Town 1979
of Southington, CT until June 1995
James E. Cohen 52 Lawyer in Practice in Derby; 1982
Director, Great Country Bank (1987-1993)
PAGE 7
Betsy Henley-Cohn 46 Chairwoman of the Board of 1981
Directors of the 1981 Company;
Chairman and Treasurer, Joseph
Cohn & Sons, Inc.(construction,
sub-contractors); Director,
United Illuminating Corp.;
Director, Aristotle Corp.;
Director, Citizens Bank of
Connecticut; Director, Society
for Savings Bancorp,Inc.
(1985-1993)
Alvaro da Silva 53 President, B.I.D., Inc. 1997
(land development and home
building company); Managing
Partner Connecticut Commercial
Investors, LLC., (a commercial
real estate and investment
partnership); Chairman, Shelton
Inland Wetlands Commission;
Board of Governors Unquowa School
Aldore J. Rivers 65 Retired; Former President of the 1986
Company
B. Lance Sauerteig 53 Lawyer in Practice in Westport; 1996
Principal in BLS Strategic
Capital, Inc. (financial and inv.
advisory company); President,
First Spring Corp., (1986-1994)
(financial & investment advisory
company); Director, OFFITBANK
(a New York based private investment
management bank)
Kenneth E. Schaible 57 Bank Consultant and Real Estate 1994
Developer;Senior Vice President,
Webster Bank (1995-1996);
President, Shelton Savings Bank
and Shelton Bancorp.,Inc.
(1967-1995)
David Silverstone 52 Group Vice President, The Southern 1994
Connecticut Gas Company; Lawyer in
Practice in Hartford until
March 31, 1998.
PAGE 8
The Board of Directors' Audit Committee consisted of Messrs. Brickett,
da Silva and Schaible during 1998. It performs the function of
recommending the engagement and reviewing the performance of the
Company's independent public accountants. The Audit Committee met
three times in 1998. The Board of Directors' Personnel and Pension
Committee consisted of Ms. Henley-Cohn (ex-officio) and Messrs. Ahern,
Brickett, Sauerteig and Silverstone and performs the function of
reviewing Executive Office compensation and proposing the same to the
full Board of Directors for action. It also proposes to the full Board
overall payroll pool levels and pension plan arrangements for all
employees. The Personnel and Pension Committee met six times in 1998.
In 1998, five meetings of the full Board of Directors were held, and all
Directors attended at least 75% of the meetings of the full Board and
committees on which they served.
(b) Section 16(a) Beneficial Ownership Reporting Compliance. Section
16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission and the Company.
Based solely on review of copies of such forms furnished to the Company,
or written representations that no reconciliation forms were required,
the Company believes that during fiscal year ending December 31, 1998,
all section 16(a) filing requirements applicable to its officers,
directors and greater than ten percent shareholders were complied with.
Item 11. Compensation of Directors and Executive Officers
Page 5 of the Company's Definitive Proxy Statement, dated April 6, 1999
relating to the proposed Annual Meeting of Shareholders to be held on
May 12, 1999, filed or to be filed with the Commission pursuant to
Regulation 14A under the Act, is incorporated herein by reference,
pursuant to Rule12b-23 of the Act and Instruction G(3) to Form 10-K.
Item 12. Security Ownership of Management and Certain Beneficial Owners
Pages 3 through 5 of the Company's Definitive Proxy Statement, dated
April 6, 1999, relating to the proposed Annual Meeting of Shareholders
to be held on May 12, 1999, filed or to be filed with the Commission
pursuant to Regulation 14A under the Act, are incorporated herein by
reference, pursuant to Rule 12b-23 of the Act and Instruction G(3) to
Form 10-K.
Item 13. Certain Relationships and Related Transactions
Mr. Cohen is a partner in the law firm of Cohen and Thomas, which has
represented the Company on occasions in past years; the Company may
continue to employ that firm on occasion in the future.
PAGE 9
Mr. Silverstone was, until March 31, 1998, a partner in the law firm of
Silverstone & Koontz, which represented the Company on rate matters in
1997.
Mr. Sauerteig is a principal in the law firm of Levett, Rockwood and
Sanders, which provided legal services to the Company in past years and
may do so in the future.
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*
Statements of Income and Retained
earnings for the three years ended
December 31, 1998 14
Balance Sheets at December 31, 1998 13
Statements of Cash Flows for the three
years ended December 31, 1998 15
Notes to the Consolidated Financial
Statements 16-24
Report of Independent Accountants 12
Financial Highlights 1
Selected Financial Data 1
Management's Discussion and Analysis 8-11
* Incorporated by reference from the indicated pages
of the 1998 Annual Report and included as
Exhibit (13), attached hereto as pp. 35 to 71.
(3) Certificate of Incorporation and By-Laws of Birmingham Utilities,
Inc. Incorporated herein by reference is Exhibit 3 of Birmingham
Utilities, Inc.'s Annual report on Form 10K for the period ended
December 31, 1994.
(4) Instruments Defining Rights of Security Holders
(i) Amended and Restated Mortgage Indenture by and between The Ansonia
Derby Water Company and The Connecticut National Bank as Trustee, dated
as of August 9, 1991. Incorporated herein by reference is Exhibit 4(i)
of the Annual Report on Form 10-K of Birmingham Utilities, Inc. for the
period ended December 31, 1997.
PAGE 10
(ii) Commercial Term and Revolving Loan Agreement by and between
Birmingham Utilities, Inc. and Fleet Bank, N.A., dated April 29, 1994,
as amended by a Third Extension and Reaffirmation Agreement dated
September 17, 1998. (Incorporated herein by reference is Exhibit 10(1)
of the Quarterly Report on Form 10-Q/A of Birmingham Utilities, Inc.
for the period ended June 30, 1994.) The Third Extension and
Reaffirmation Agreement is attached as pp. 14 to 21.
(iii) Birmingham Utilities, Inc. Dividend Reinvestment Plan, adopted
by its Board of Directors on September 13, 1994. Incorporated herein
by reference is Exhibit 4 (iii) of Birmingham Utilities, Inc.'s Annual
Report on Form 10-K for the period ended December 31, 1994.
(10) Material Contracts
(10.1) Agreement to Purchase Water by and between The Ansonia Derby
Water Company and South Central Connecticut Regional Water Authority
dated January 18, 1984 for the sale of water by the Authority to the
Company and subsequent amendment dated December 29, 1988. Incorporated
herein by reference is Exhibit (10.1) of the Annual Report on Form 10-K
of Birmingham Utilities, Inc. for the period ended December 31, 1993.
(10.2) Agreement to Purchase Water by and between The Ansonia Derby
Water Company and South Central Connecticut Regional Water Authority
dated November 30, 1984 for the sale by the Authority to the company of
water and for the construction of the pipeline and pumping and storage
facilities in connection therewith by the Authority at the expense
primarily of the Company and Bridgeport Hydraulic Company. Incorporated
herein by reference is Exhibit (10.2) of the Annual Report on Form 10-K
of Birmingham Utilities, Inc. for the period ended December 31, 1996.
(10.3) Employment Agreement between Birmingham Utilities, Inc. and
John S. Tomac dated October 1, 1998. Attached hereto as pp. 22 to 27.
(10.4) Birmingham Utilities, Inc. 1994 Stock Incentive Plan adopted by
its Board of Directors on September 13, 1994. Incorporated herein by
reference is Exhibit (10.9) of Birmingham Utilities, Inc.'s Annual
Report on Form 10-K for the period ended December 31, 1994.
(10.5) Birmingham Utilities, Inc. Stock Option plan for Non-Employee
Directors adopted by its Board of directors on September 13, 1994.
Incorporated herein by reference is Exhibit (10.10) of Birmingham
Utilities, Inc.'s Annual Report on Form 10-K for the period ended
December 31, 1994.
(10.6) Purchase and Sale Agreement by and between Birmingham Utilities,
Inc. and M/1 Homes, LLC dated March 18, 1997 for the sale by the Company
to M/1 Homes of approximately 245 acres of unimproved land in Seymour,
Connecticut. Incorporated herein by reference is Exhibit (10.6) of the
Annual Report on Form 10-K of Birmingham Utilities, Inc. for the period
ended December 31, 1996.
PAGE 11
(10.7) Amendment to Purchase and Sale Agreement by and between
Birmingham Utilities, Inc. and M/1 Homes, LLC, dated as of December 31,
1998 for the sale by the Company to M/1 Homes, LLC, of approximately
245 acres of unimproved land in Seymour, CT, dated as of December 31,
1998. Attached hereto as pp.28 to 34.
(10.8) Birmingham Utilities, Inc. 1998 Stock Incentive Plan adopted by
its Board of Directors on September, 1998. Incorporated herein by
reference is Exhibit A to its Definitive Proxy Statement, dated April
6, 1999, filed or to be filed with the Commission pursuant to
Regulation 14A under the Act.
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the
Registrant during the last quarter of 1998.
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.
(Registrant) BIRMINGHAM UTILITIES, INC.
BY:/s/ Betsy Henley-Cohn
Betsy Henley-Cohn
Chairwoman of the Board
BY:/s/ John S. Tomac
John S. Tomac
President
Date: March 30, 1999
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.
PAGE 12
/s/ Stephen P. Ahern /s/ Aldore J. Rivers
Stephen P. Ahern, Director Aldore J. Rivers, Director
Date: March 25, 1999 Date: March 24, 1999
/s/ Edward G. Brickett /s/ B. Lance Sauerteig
Edward G. Brickett, Director B. Lance Sauerteig, Director
Date: March 26, 1999 Date: March 26, 1999
/s/ James E. Cohen /s/ Kenneth E. Schaible
James E. Cohen, Director Kenneth E. Schaible, Director
Date: March 24, 1999 Date: March 26, 1999
/s/ Betsy Henley-Cohn /s/ David Silverstone
Betsy Henley-Cohn, Chairwoman David Silverstone, Director
Board of Directors Date: March 30, 1999
Date: March 30, 1999
/s/ Alvaro da Silva
Alvaro da Silva, Director
Date: March 29, 1999
PAGE 13
BIRMINGHAM UTILITIES, INC.
INDEX TO EXHIBITS
Item No. Page No.
4(ii) Third Extension and Reaffirmation
Agreement by and between Fleet Bank
and Birmingham Utilities, Inc. dated
September 12, 1998 14
10.3 Employment Agreement between Birmingham
Utilities, Inc. and John S. Tomac dated
as of October 1, 1998 22
10.7 Amendment to Purchase and Sale
Agreement by and between Birmingham
Utilities, Inc. and M/1 Homes, LLC,
dated as of December 31, 1998 28
13 Birmingham Utilities, Inc. 1998 Annual
Report to Shareholders 35
23 Consent of Dworken, Hillman, LaMorte
& Sterczala, P.C. 72