Exhibit 99.1
CONSUMERS WATER COMPANY
EMPLOYEES' 401(k) SAVINGS PLAN AND TRUST
Financial Statements and Supplemental Schedules
December 31, 2001 and 2000
(With Independent Accountants' Reports Thereon)
CONSUMERS WATER COMPANY
EMPLOYEES' 401 (k) SAVINGS PLAN AND TRUST
Page
Independent Accountants' Report of PricewaterhouseCoopers LLP 1
Financial Statements:
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4
Supplemental Schedules
1 - Schedule of Assets (Held 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 statements of net assets available for benefits
and the related statements 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, 2001 and 2000, and the changes in net assets available for
benefits for the years 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.
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 at End of Year) and 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
May 23, 2002
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CONSUMERS WATER COMPANY
EMPLOYEES' 401(k) SAVINGS PLAN AND TRUST
Statements of Net Assets Available for Benefits
December 31, 2001 and 2000
2001 2000
---- ----
Investments at fair value $30,231,000 $29,636,144
Cash and cash equivalents 6,138 3,994
Receivables:
Employer contributions 487 4,416
Participants' contributions 8,793 65,100
----------- -----------
Net assets available for benefits $30,246,418 $29,709,654
=========== ===========
See accompanying notes to financial statements.
2
CONSUMERS WATER COMPANY
EMPLOYEES' 401(k) SAVINGS PLAN AND TRUST
Statements of Changes in Net Assets Available for Benefits
December 31, 2001 and 2000
2001 2000
---- ----
Additions:
Investment income $ 635,324 $ 1,554,302
Net appreciation (depreciation)
in fair valve of investments (390,353) 1,822,785
----------- -----------
Total investment income 244,971 3,377,087
Contributions:
Employer 304,858 308,311
Participants 1,350,521 1,333,898
----------- -----------
Total contributions 1,655,379 1,642,209
Net additions 1,900,350 5,019,296
Deductions:
Benefits paid to participants 1,361,356 988,572
Administrative expenses 2,230 2,880
----------- -----------
Net increase 536,764 4,027,844
Net assets available for benefits:
Beginning of year 29,709,654 25,681,810
----------- -----------
End of year $30,246,418 $29,709,654
=========== ===========
See accompanying notes to financial statements.
3
CONSUMERS WATER COMPANY
EMPLOYEES' 401(k) SAVINGS PLAN AND TRUST
Notes to Financial Statements
December 31, 2001 and 2000
(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 (the "Company") and employees
of certain divisions of Pennsylvania Suburban Water Company, wholly
owned subsidiaries of Philadelphia Suburban Corporation ("PSC"). 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 2001 and 2000 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 PSC.
Participant Accounts
Each participant's account is credited with the participant's
contribution and allocations of (a) the Company's contribution, (b)
Plan earnings and (c) allocation of administrative expenses.
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 PSC stock, to the extent permitted by law. Under
certain circumstances, a participant may withdraw all or a portion of
the employee contributions while employed.
4
CONSUMERS WATER COMPANY
EMPLOYEES' 401(k) SAVINGS PLAN AND TRUST
Notes to Financial Statements
December 31, 2001 and 2000
(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 interest rate on loans outstanding
as of December 31, 2001 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. The
Plan currently offers nine (9) mutual funds and one (1)
common/collective trust fund. Subject to compliance with applicable
state and federal securities laws, the Plan also permits participants
to acquire an interest in PSC 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.
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CONSUMERS WATER COMPANY
EMPLOYEES' 401(k) SAVINGS PLAN AND TRUST
Notes to Financial Statements
December 31, 2001 and 2000
(Continued)
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. PSC 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
PSC 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, 2001 and 2000 are as
follows:
2001
Select Fund, 191,606 shares $ 7,089,438
Balanced Fund, 166,185 shares $ 2,452,885
Stable Assets, 2,622,951 shares $ 2,622,951
PSC Common Stock, 627,146 shares* $14,142,142
* Nonparticipant-directed balance $10,287,197 and 456,051 shares
2000
Select Fund, 196,096 shares $ 8,881,205
Balanced Fund, 157,639 shares $ 2,479,656
Stable Assets, 2,075,430 shares $ 2,075,430
PSC Common Stock, 603,884 shares** $11,836,127
** Nonparticipant-directed balance $8,881,973 and 453,085 shares
Stock Split
In August 2001, PSC'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 16, 2001. The
new shares were distributed on December 1, 2001. PSC shares for 2000
have been restated for the effect of the 2001 5-for 4 common stock
split.
6
CONSUMERS WATER COMPANY
EMPLOYEES' 401(k) SAVINGS PLAN AND TRUST
Notes to Financial Statements
December 31, 2001 and 2000
(Continued)
The Plan's investments (including gains and losses on investments
brought and sold, as well as held during the year) appreciated
(depreciated) in value as follows:
2001 2000
---- ----
Common Stock $ 1,816,743 $ 3,916,465
Mutual Funds (2,207,096) (2,093,680)
----------- -----------
Total $ (390,353) $ 1,822,785
=========== ===========
(4) Nonparticipant-Directed Investments
Information about the net assets and the significant components of the
changes in net assets relating to the nonparticipant-directed
investments is as follows:
2001 2000
---- ----
Net Assets:
Common Stock $10,287,197 $ 8,881,973
----------- -----------
Total $10,287,197 $ 8,881,973
=========== ===========
2001 2000
---- ----
Changes in Net Assets:
Contributions 308,787 623,803
Interest & Dividends 228,996 208,965
Net Appreciation 1,336,943 2,905,936
Benefits paid to participants (469,503) (214,845)
---------- ----------
Total $1,405,223 $3,523,859
========== ==========
(5) Related-Party Transactions
Certain Plan investments are shares of mutual funds managed by J.P.
Morgan/American Century Retirement Plan Services. J.P. Morgan/American
Century Retirement Plan Services is the trustee as defined by the Plan
and, therefore, these transactions qualify as party-in interest
transactions.
7
CONSUMERS WATER COMPANY
EMPLOYEES' 401(k) SAVINGS PLAN AND TRUST
Notes to Financial Statements
December 31, 2001 and 2000
(Continued)
(6) TAX STATUS
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 at End of Year)
December 31, 2001
Description
Identity of Issuer of Investment Cost Current Value
- ------------------ ------------- ---- -------------
American Century International Growth* Registered Investment Company $ 30,600
American Century Select Fund* Registered Investment Company $ 7,089,438
American Century Balanced Fund* Registered Investment Company $ 2,452,885
American Century Vista Fund* Registered Investment Company $ 811,778
American Century Valve Fund* Registered Investment Company $ 1,086,718
American Century Strategic Allocation Moderate* Registered Investment Company $ 8,145
JP Morgan U.S. Small Company* Registered Investment Company $ 54,721
American Century Diversified Bond* Registered Investment Company $ 70,055
American Century Equity Index* Registered Investment Company $ 877,055
SEI Trust Stable Assets Common/Collective Fund $ 2,622,951
Philadelphia Suburban Corporation* Common Stock $6,538,377 $14,142,142
Loans* Loans due from participants
(interest rate 5.5% to 9.5%) $ 984,512 $ 984,512
-----------
Total assets (Held at End of Year) $30,231,000
===========
* Represents a party-in-interest to the Plan.
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SCHEDULE 2
CONSUMERS WATER COMPANY
EMPLOYEES' 401(k) SAVINGS PLAN AND TRUST
Schedule of Reportable Transactions
Year Ended December 31, 2001
Description of Purchase Selling
Identity of Issuer Investment Price Price Cost Net Gain
- ------------------ -------------- -------- ------- ----- --------
Philadelphia Suburban Corporation Common Stock* Purchases $1,182,890 $ - $1,182,890 $ -
Sales $ - $411,268 $ 213,803 $197,465
*Represents a party-in-interest to the Plan
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