Exhibit 99.1
CONSUMERS WATER COMPANY
EMPLOYEES' 401(k) SAVINGS PLAN AND TRUST
Financial Statements and Supplemental Schedules
December 31, 2000 and 1999
(With Independent Auditors' Reports Thereon)
CONSUMERS WATER COMPANY
EMPLOYEES' 401 (k) SAVINGS PLAN AND TRUST
Page
Independent Auditors' Report of PricewaterhouseCoopers LLP 1
Independent Auditors' Report of KPMG LLP 2
Financial Statements:
Statements of Net Assets Available for Plan Benefits 3
Statements of Changes in Net Assets Available for Plan Benefits 4
Notes to Financial Statements 6
Schedules
1 - Schedule of Assets Held for Investment Purposes at End of Year 9
2 - Schedule of Reportable Transactions 10
CONSUMERS WATER COMPANY
EMPLOYEES' 401 (k) SAVINGS PLAN AND TRUST
Report of Independent Accountants
To the Participants and Administrator of
Consumers Water Company Employees' 401(k) Savings Plan and Trust
In our opinion, the accompanying statement of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of Consumers Water Company Employees' 401(k) Savings Plan and Trust (the "Plan")
at December 31, 2000, and the changes in net assets available for benefits for
the year then ended in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the
responsibility of the Plan's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
The financial statements of the Plan as of December 31, 1999 and for the year
then ended were audited by other independent accountants whose report dated June
23, 2000 expressed an unqualified opinion thereon.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of Assets Held
for Investment Purposes and Schedule of Reportable Transactions are presented
for the purpose of additional analysis and are not a required part of the basic
financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. These supplemental
schedules are the responsibility of the Plan's management. The supplemental
schedules have been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
/S/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
June 11, 2001
1
CONSUMERS WATER COMPANY
EMPLOYEES' 401 (k) SAVINGS PLAN AND TRUST
Independent Auditors' Report
The Pension Committee
Consumers Water Company:
We have audited the accompanying statement of net assets available for plan
benefits of Consumers Water Company Employees' 401(k) Savings Plan and Trust
(the Plan) as of December 31, 1999, and the related statement of changes in net
assets available for plan benefits for the year then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan as
of December 31, 1999, and the changes in net assets available for plan benefits
for the year then ended, in conformity with generally accepted accounting
principles.
/S/ KPMG LLP
Philadelphia, Pennsylvania
June 23, 2000
2
CONSUMERS WATER COMPANY
EMPLOYEES' 401 (k) SAVINGS PLAN AND TRUST
Statements of Net Assets Available for Plan Benefits
December 31, 2000 and 1999
2000 1999
---- ----
Investments at fair value-
Participant directed investments $17,800,017 $18,108,937
Employer common stock 11,836,127 7,224,170
----------- -----------
Total Investments $29,636,144 $25,333,107
Cash and cash equivalents 3,994 1,871
Receivables-
Employer contributions 4,416 319,908
Participants' contributions 65,100 26,924
----------- -----------
Net assets available for plan benefits $29,709,654 $25,681,810
=========== ===========
See accompanying notes to financial statements.
3
CONSUMERS WATER COMPANY
EMPLOYEES' 401 (k) SAVINGS PLAN AND TRUST
Statement of Changes in Net Assets Available for Plan Benefits
Year Ended December 31, 2000
Participant Directed Employer
Investments Common Stock Total
----------- ------------ -----
Additions:
Investment income $ 1,273,026 $ 281,276 $ 1,554,302
Realized/unrealized gain (loss) on investments (2,093,680) 3,916,465 1,822,785
-----------------------------------------------
Total investment income (820,654) 4,197,741 3,377,087
Contributions:
Employer - 308,311 308,311
Participants 1,226,151 107,747 1,333,898
-----------------------------------------------
Total contributions 1,226,151 416,058 1,642,209
Net additions 405,497 4,613,799 5,019,296
Deductions:
Benefits paid to participants 762,974 225,598 988,572
Management fee 2,813 67 2,880
-----------------------------------------------
Net increase (decrease) prior to interfund
transfers (360,290) 4,388,134 4,027,844
Interfund transfers 81,785 (81,785) -
-----------------------------------------------
Net change in plan assets (278,505) 4,306,349 4,027,844
Net assets available for plan benefits:
Balance at beginning of year 18,137,732 7,544,078 25,681,810
-----------------------------------------------
Balance at end of year $ 17,859,227 $ 11,850,427 $ 29,709,654
===============================================
See accompanying notes to financial statements.
4
CONSUMERS WATER COMPANY
EMPLOYEES' 401 (k) SAVINGS PLAN AND TRUST
Statement of Changes in Net Assets Available for Plan Benefits
Year Ended December 31, 1999
Participant Directed Employer
Investments Common Stock Total
----------- ------------ -----
Additions:
Investment income $ 1,539,718 $ 186,850 $ 1,726,568
Realized/unrealized gain (loss) on investments 1,353,580 (417,290) 936,290
-----------------------------------------------
Total investment income 2,893,298 (230,440) 2,662,858
Contributions:
Employer - 319,908 319,908
Participants 1,271,405 97,088 1,368,493
-----------------------------------------------
Total contributions 1,271,405 416,996 1,688,401
Net additions 4,164,703 186,556 4,351,259
Deductions:
Benefits paid to participants 2,825,923 844,113 3,670,036
Management fee 3,464 250 3,714
-----------------------------------------------
Net increase (decrease) prior to interfund
transfers 1,335,316 (657,807) 677,509
Interfund transfers (117,142) 117,142 -
-----------------------------------------------
Net change in plan assets 1,218,174 (540,665) 677,509
Net assets available for plan benefits:
Balance at beginning of year 16,919,558 8,084,743 25,004,301
-----------------------------------------------
Balance at end of year $ 18,137,732 $ 7,544,078 $ 25,681,810
===============================================
See accompanying notes to financial statements.
5
CONSUMERS WATER COMPANY
EMPLOYEES' 401(k) SAVINGS PLAN AND TRUST
Notes to Financial Statements
December 31, 2000 and 1999
(1) DESCRIPTION OF PLAN
The following description of the Consumers Water Company Employee's 401
(k) Savings Plan and Trust ("the Plan") is provided for general
information purposes only. Participants should refer to the Plan
document for more complete information.
General
The Plan is a defined contribution plan covering substantially all
employees of the Consumers Water Company, a wholly owned subsidiary of
Philadelphia Suburban Corporation ("the Company"). An employee becomes
eligible to participate on January 1 of the year following the date on
which his or her employment commenced. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974, as
amended (ERISA).
An employee may not participate in the Plan if the employee is a
participant of a union with which the Company has a collective
bargaining agreement directly or through an employee association,
unless the collective bargaining agreement between the Company and the
union involved specifically makes the Plan applicable to employees
covered under such collective bargaining agreements, provided that
benefits have been a subject of good faith bargaining between the
Company and its employees.
Contributions
Participants may elect to contribute from 1% to 15% of their pretax
compensation pursuant to a salary deferral election, up to a maximum of
$10,500 in 2000 and $10,000 in 1999 as determined by Internal Revenue
Code ss.402(g)(1). Participants may change the rate of their
contribution or their investment elections. They may also make
transfers or suspend their contributions at any time. Under the Plan,
participants may contribute 1% to 9% of their compensation on an
after-tax basis to their voluntary accounts. In any Plan year, a
participant's aggregate contributions to the Plan (salary deferral
amounts plus after-tax voluntary contributions) may not exceed 15% of
such participant's compensation for the applicable Plan year.
The Plan provides for the Company to contribute an amount equal to 40%
of the pretax employee contribution up to $1,040 for each participant.
The Company's contributions consisted of common stock in the Company.
Participant Accounts
Each participant's account is credited with the participant's
contribution and allocations of (a) the Company's contribution and (b)
Plan earnings. Allocations are based on participant contributions or
account balances, as defined by the Plan document.
Vesting
Each participant will always be 100% vested in all employee and Company
contributions.
Payment of Benefits
In the event a participant's employment is terminated by reason of
death, disability or termination of service, a participant's interest
will be distributed in a lump-sum payment. Withdrawals will be made in
cash or shares of Company stock, to the extent permitted by law. Under
certain circumstances, a participant may withdraw all or a portion of
the employee contributions while employed.
6
CONSUMERS WATER COMPANY
EMPLOYEES' 401(k) SAVINGS PLAN AND TRUST
Notes to Financial Statements
December 31, 2000 and 1999
(Continued)
Loans Due from Participants
Participants may borrow funds from their account balance equal to the
lesser of $50,000 or half of their vested account balance for a period
not to exceed five years. Repayment is made by payroll deduction.
During the period covered by the report, all new loans issued after
January 1, 2000 were issued at the prime rate of interest and prior to
this loans were issued at 5.5%. The prime rate of interest changed
during the year. The interest rate on loans outstanding as of December
31, 2000 ranged from 5.5% to 9.5%.
Investment Options
Participants can direct, at the time they enroll in the Plan, that
their salary deferral and voluntary contributions be invested entirely
in one of the funds offered by the Plan or divided among the funds.
Subject to compliance with applicable state and federal securities
laws, the Plan also permits participants to acquire an interest in
Company common stock. Participants may change their investment
instructions and reinvest their contributions in a different fund or
funds.
Termination of the Plan
Although the Company does not intend to terminate the Plan, it may do
so at its discretion, subject to the provisions of ERISA. All interests
of the participants would be distributed to them as determined by the
Committee (as hereinafter defined) and in accordance with applicable
provisions of the Internal Revenue Code.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The accompanying financial statements have been prepared using the
accrual basis.
Use of Estimates
The preparation of the financial statements in conformity with
accounting principles generally accepted in the United States of
America requires the Plan's management to use estimates and assumptions
that affect the accompanying financial statements and disclosures.
Actual results could differ from these estimates.
Administration
The Plan is administered by a committee ("the Committee") consisting of
three or more individuals selected by, and who may be removed at any
time by, the Board of Directors of PSC. The Committee members may be
employees of PSC and may be participants in the Plan. The Committee
members receive no compensation from the Plan for their services in
such capacity. The Committee has extensive administrative powers in
connection with the Plan, including authority to interpret the
provisions of the Plan, to adopt rules for its administration and to
make other decisions with respect to the Plan.
The custodian for the Plan's funds invests the funds as directed by the
participants. The principal duties of the trustees are to receive all
contributions paid to the Plan and to make investments and pay benefits
as directed by the Committee. The assets of the Plan are held in the
name of the Trustees.
Substantially all of the administrative expenses of the Plan are paid
by the Company.
7
CONSUMERS WATER COMPANY
EMPLOYEES' 401(k) SAVINGS PLAN AND TRUST
Notes to Financial Statements
December 31, 2000 and 1999
(Continued)
Reclassification
Certain prior year amounts have been reclassified to conform to the
current year's presentation.
Investment Valuation
The Plan's investments are stated at fair value. Mutual funds are
valued at quoted market prices which represents the net asset value of
shares held by the Plan at year-end. Common/collective trust funds are
valued at unit value, which represents the fair value of the underlying
assets as reported by the applicable custodian. Company stock is valued
at its quoted market price at year-end. Loans to participants,
short-term investments and cash are valued at cost, which approximates
fair value.
Dividend income is recorded on the ex-dividend date and interest income
is recorded when earned. Realized gains and losses on the sale of the
Company stock are based on average cost of the securities sold.
Purchases and sales are recorded on a trade date basis.
(3) INVESTMENTS
The fair market values of individual assets that represent 5% or more
of the Plan's net assets as of December 31, 2000 and 1999 are as
follows:
2000
----
Select Fund $ 8,881,205
Balanced Fund $ 2,479,656
Stable Assets $ 2,075,430
Employer Common Stock $ 11,836,127
1999
----
Select Fund $ 9,997,086
Balanced Fund $ 2,665,259
Stable Assets $ 1,911,761
Employer Common Stock $ 7,224,170
Stock Split
In August 2000, the Company's Board of Director's declared a 5-for-4
common stock split effected in the form of a stock distribution for all
common shares outstanding, to shareholders of record on November 15,
2000. The new shares were distributed on December 1, 2000.
(4) FEDERAL INCOME TAX CONSEQUENCES
The Internal Revenue Service issued its latest determination letter
dated May 3, 1995, which stated that the Plan and related trust, as
amended, qualified under applicable provisions of the Internal Revenue
Code (IRC) and, therefore are exempt from federal income taxes. The
Plan administrator and the Plan's counsel believe that the Plan is
designed and is currently being operated in compliance with applicable
requirements of the IRC. Therefore, no provision for income taxes has
been included in the Plan's financial statements.
8
SCHEDULE 1
CONSUMERS WATER COMPANY
EMPLOYEES' 401(k) SAVINGS PLAN AND TRUST
Schedule of Assets Held for Investment Purposes at End of Year
December 31, 2000
Description
Issuer of Investment Cost Current Value
- ------- --------------- ---- -------------
American Century Select Fund $ 8,881,205
American Century Balanced Fund $ 2,479,656
American Century Vista Fund $ 1,391,889
American Century Value Fund $ 731,481
American Century Equity Index $ 1,094,276
SEI Trust Stable Assets $ 2,075,430
Philadelphia Suburban Corporation Common Stock* $ 5,705,549 $11,836,127
Loans due from participants (interest rate 5.5% to 9.5%)* $ 1,146,080 $ 1,146,080
-----------
Total assets held for investment purposes $29,636,144
===========
* Represents a party-in-interest to the Plan.
9
SCHEDULE 2
CONSUMERS WATER COMPANY
EMPLOYEES' 401(k) SAVINGS PLAN AND TRUST
Schedule of Reportable Transactions
Year Ended December 31, 2000
Description of Purchase Selling
Issuer Investment Price Price Cost Net Gain
- ------- ----------- ----- ------- ---- --------
Philadelphia Suburban Corporation Common Stock* Purchases $1,298,875 $ - $1,298,875 $ -
Sales $ - $603,387 $ 426,118 $177,269
*Represents a party-in-interest to the Plan
10