-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Xy1Tp+Vi6pXcGYrupWmA79BBZ+L4gZH7AVx/a+5qqeMc37A0y1AuQN7dRK6xGPas on5iTkkUfQqDiuXAnIDfmA== 0000950130-95-000584.txt : 199507120000950130-95-000584.hdr.sgml : 19950711 ACCESSION NUMBER: 0000950130-95-000584 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950328 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED WATER RESOURCES INC CENTRAL INDEX KEY: 0000715969 STANDARD INDUSTRIAL CLASSIFICATION: WATER SUPPLY [4941] IRS NUMBER: 222441477 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08586 FILM NUMBER: 95524039 BUSINESS ADDRESS: STREET 1: 200 OLD HOOK RD CITY: HARRINGTON PARK STATE: NJ ZIP: 07640 BUSINESS PHONE: 2017849434 MAIL ADDRESS: STREET 1: 200 OLD HOOK ROAD CITY: HARRINGTON PARK STATE: NJ ZIP: 07640 10-K 1 FORM 10-K 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, 1994 ----------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period ____________________ to _______________________ Commission File No. 1-8586 ------ UNITED WATER RESOURCES INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) NEW JERSEY 22-2441477 - ------------------------ ------------------- (State of incorporation) (I.R.S. Employer Identification No.) 200 OLD HOOK ROAD, HARRINGTON PARK, N.J. 07640 - --------------------------------------------- ----- (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: 201-784-9434 ------------ Securities registered pursuant to Section 12 (b) of the Act: Name of Each Exchange Title of Each Class on Which Registered ------------------- --------------------- Common Stock (No par value) New York Stock Exchange Outstanding at February 28, 1995 - 31,391,352 ---------- Securities registered pursuant to Section 12 (g) of the Act: None ----- 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 III of this Form 10-K or any amendment to this Form 10-K. [ ] At February 28, 1995, the registrant's Common Stock, no par value, held by non-affiliates had an aggregate market value of $ 303,250,612. See Item 13. ------------ The following document is incorporated by reference in this Form 10-K: United Water Resources Inc. Proxy Statement to be filed in connection with the Registrant's Annual Meeting tentatively to be held on May 8, 1995 as to Part III, items 10, 11, 12, and 13. United Water Resources Inc. PART I ------ ITEM 1. BUSINESS - ------- -------- (a) GENERAL DEVELOPMENT OF BUSINESS ------------------------------- United Water Resources Inc. (United Water, or the Company) is a New Jersey corporation that was incorporated on February 25, 1983 and has its principal office at 200 Old Hook Road, Harrington Park, New Jersey 07640. On April 22, 1994, United Water completed a merger (the Merger) with GWC Corporation (GWC), in which United Water was the surviving corporation. GWC's principal assets included 100% of the stock of General Waterworks Corporation, which owns regulated water and wastewater utilities operating in 14 states, and a 25% indirect investment in JMM Operational Services, Inc. (JMM). JMM provides operations and management services to government and industry for water and wastewater treatment facilities. The Merger was accounted for under the purchase method of accounting. For a discussion of the Merger, see Item 1 (c), below. In March 1995, the Company changed the names of many of its operating subsidiaries. By adopting "United Water" in the names of its utility subsidiaries, the Company will achieve a unified corporate identity and greater national recognition. The new names of some of the larger operating subsidiaries are United Water New Jersey (formerly Hackensack Water Company), United Waterworks (formerly General Waterworks Corporation) and United Water New York (formerly Spring Valley Water Company). In 1994, Rivervale Realty Company changed its name to United Properties Group. The new names are used hereafter. United Water's principal utility subsidiaries, United Water New Jersey, United Water New York and United Waterworks, provide water and wastewater services to approximately two million people in fourteen states, with more than half of the Company's utility operations located in northeastern New Jersey and southeastern New York. United Water New Jersey was incorporated by an act of the New 1 United Water Resources Inc. Jersey Legislature in 1869. United Water New York was incorporated under the laws of New York in 1893 and is wholly-owned by United Water New Jersey. United Waterworks was incorporated under the laws of Delaware in 1942. Other significant wholly-owned subsidiaries of United Water include: United Properties Group (United Properties), which is engaged in real estate activities, including commercial rentals, land development, golf course operations and consulting services; Laboratory Resources, a network of environmental testing laboratories in New Jersey, Connecticut and Pennsylvania; and United Water Mid-Atlantic (formerly Mid-Atlantic Utilities Corporation), which owns and operates water and wastewater systems. (b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS --------------------------------------------- See Note 15 to the Consolidated Financial Statements in Item 8 below for segment information. (b) NARRATIVE DESCRIPTION OF BUSINESS --------------------------------- As a holding company, United Water does not conduct any business operations, except through its subsidiaries. MERGER WITH GWC CORPORATION - --------------------------- On April 22, 1994, United Water completed a Merger with GWC, in which United Water was the surviving corporation. GWC's principal assets included 100% of the stock of General Waterworks Corporation (now known as United Waterworks). The Merger was accounted for under the purchase method and resulted in the recording of a utility plant acquisition adjustment of $67 million. In exchange for the common stock of GWC that was issued and outstanding immediately preceding the Merger, United Water (i) issued 9,295,860 shares of United Water common stock, (ii) issued 3,341,078 shares of United Water 5% cumulative convertible preference stock, with a liquidation price of $13.794 per share, and (iii) 2 United Water Resources Inc. paid former shareholders of GWC $8.9 million in cash. In addition, each share of GWC 7 5/8% cumulative preferred stock outstanding at the time of the Merger was converted into one fully paid non-assessable share of United Water 7 5/8% cumulative preferred stock, with equal stated dividends and substantially similar rights, privileges, qualifications and restrictions. Prior to the Merger, Lyonnaise American Holding, Inc. (LAH), a Delaware corporation and a wholly-owned subsidiary of Lyonnaise des Eaux, a French societe anonyme, owned approximately 81.9% of GWC's common stock. The remaining 18.1% of GWC's common stock was publicly traded. On the date of the Merger, LAH converted 70% of its shares of GWC common stock into United Water common stock and the remainder of its shares of GWC common stock into United Water 5% cumulative convertible preference stock. Immediately after the Merger, LAH owned approximately 25.4% of the issued and outstanding United Water common stock and approximately 97.7% of the issued and outstanding United Water 5% cumulative convertible preference stock. A twelve-year Governance Agreement, commencing April 22, 1994, between LAH and United Water contains a number of restrictions, including restrictions on when LAH can convert its preference shares into United Water common stock and on LAH's ability to buy or sell United Water common stock or preference stock. REGULATED UTILITY OPERATIONS - ---------------------------- The Company's principal business is providing water and wastewater services to the public at large in areas where its regulated utility subsidiaries possess franchises to provide such services. Its utility subsidiaries are subject to rate regulation, generally by the regulatory authorities in the states in which they operate. 3 United Water Resources Inc. United Water New Jersey supplies water service to approximately 175,600 customers in 60 municipalities in the northeastern part of New Jersey, serving most of Bergen County and the northern part of Hudson County. The total population served is about 750,000 persons. United Water New Jersey is subject to rate regulation by the New Jersey Board of Public Utilities (BPU). United Water New Jersey's principal source of water supply is the Hackensack River, with a watershed of 113 square miles, and is supplemented by water diversions from additional streams and rivers, by ground water supplies drawn from wells and by the purchase of water from contiguous water systems. United Water New Jersey also obtains stream flow benefits from United Water New York, which owns and operates an impounding reservoir, Lake DeForest, on the Hackensack River in Rockland County, New York, and has available additional water supply from the Wanaque South Project. The Wanaque South Project, which was completed in 1987, is a joint undertaking of United Water New Jersey and the North Jersey District Water Supply Commission. United Water New Jersey has a 50% interest in the utility plant of the Wanaque South Project and is responsible for its proportionate share of operating expenses. United Water New York supplies water service to approximately 61,200 customers in Rockland County, New York, and is subject to rate regulation by the New York Public Service Commission (PSC). The total population served is about 250,000 persons. United Water New York's principal source of supply is derived from wells and surface supplies, including the Lake DeForest reservoir. United Waterworks is a holding company that provides water and wastewater services to a total of approximately 346,000 customers in 14 states through its regulated water and wastewater utility subsidiaries. The utility subsidiaries of United Waterworks serve a total population of about 1,000,000 persons. Its water utilities obtain water primarily from wells and surface supplies (lakes, ponds, reservoirs and streams), and in a few cases purchase water wholesale from adjoining water systems, generally owned 4 United Water Resources Inc. by municipalities. None of United Waterworks' major water utility subsidiaries are dependent upon water purchased from others, except that United Water New Rochelle (formerly The New Rochelle Water Company), a wholly-owned subsidiary, purchases all of its water from an aqueduct system that is owned by and serves the City of New York. United Waterworks believes that its water utilities have adequate supplies of water for their present requirements, but anticipates making future capital expenditures to expand their sources of water supply, primarily through development of additional wells and expansion of other facilities, to provide for projected increases in future demand because of customer growth. United Water Mid-Atlantic owns and operates several small water and wastewater utility systems that provide water supply, wastewater collection and wastewater transmission services to approximately 3,700 customers in Vernon Township and Mt. Arlington, New Jersey. United Water Mid-Atlantic's subsidiaries are subject to regulation by the BPU. The Company's water business is seasonal, as sales tend to be higher during warm, dry periods. The Company's water utilities operate in some jurisdictions in which water conservation regulations have from time to time been imposed during periods of drought. To date, such regulations have not had a material impact on the Company's results of operations. The Company's water utilities have not experienced any long-term disruption of service because of contamination of their water supplies; however, the Company cannot predict what effect such events, should they occur, would have on its business. 5 United Water Resources Inc. The following table sets forth information concerning United Water's water and wastewater utility operations, particularly the nine larger utilities which in 1994 accounted for 87.2% of United Water's utility customers, 92.5% of United Water's utility revenues and 91.6% of United Water's net investment in utility plant.
# of Customers at 1994 Location Dec. 31, 1994 Revenues ----------------- -------- (in thousands) Major Utility Operations: United Water New Jersey 175,620 $117,584 United Water New York 61,194 38,054 United Waterworks: United Water Idaho /(1)/ 53,254 16,343 United Water Florida /(1)/ 46,459 15,014 United Water Pennsylvania /(1)/ 44,152 13,442 United Water New Rochelle /(1)/ 30,079 12,999 United Water Delaware /(1)/ 30,861 10,115 United Water Toms River /(1)/ 41,745 9,658 United Water New Mexico /(1)/ 27,890 9,359 ----------------- -------- Subtotal 511,254 242,568 Other utility operations 75,127 19,565 ----------------- -------- Total utility operations 586,381 $262,133 ----------------- --------
- ---------- /(1)/ Acquired April 1994 in the Merger with GWC. Revenues include period from April 1 to December 31, 1994. The Company's water utility subsidiaries chemically and physically treat, filter or otherwise improve the quality of the water. Treated water is distributed to customers through the utility subsidiaries' distribution mains, assisted by pumping facilities where necessary. The Company's utility operations provide water that meets or surpasses the minimum standards of the Federal Safe Drinking Water Act (SDWA) of 1974, as amended in 1986. Customers. In 1994, the Company's utility revenues were derived as --------- follows: 62% from residential customers, 17% from commercial customers, 17% from industrial customers and 4% from fire 6 United Water Resources Inc. protection customers. Of the Company's 551,721 water utility customers at December 31, 1994, 496,400 (90%) were residential customers, 51,981 (9%) were commercial customers and 3,340 (1%) were industrial customers. The Company also had 34,660 wastewater customers at December 31, 1994, many of whom were also water customers of the Company. No single utility customer accounted for more than 10% of the Company's utility revenues in 1994. Capital Expenditures. As a result of the utility operations of United -------------------- Waterworks acquired in the Merger with GWC in April 1994, the Company's additions to utility plant increased substantially in 1994, from $15,986,000 in 1993 to $57,592,000 in 1994. For a discussion of the Company's capital expenditures, see Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7, below. Competition and Franchises. Substantially all of the Company's -------------------------- utility subsidiaries serve an area or areas in which the subsidiaries own and operate the sole public water or wastewater system. Accordingly, the Company's utility businesses are, in most cases, free from direct competition. The Company believes that its utility subsidiaries possess, with relatively minor exceptions and qualifications, such governmental franchises, water rights, licenses and permits as are necessary for the continuation of the water and wastewater operations as now conducted. Many such franchises, rights, licenses and permits are perpetual and others are expected to be renewable as they expire. The Company's utility subsidiaries derive their rights to install and maintain distribution mains under streets and other public places from statutes, municipal ordinances and permits from state and local authorities. In most cases, these rights are non-exclusive. Governmental Acquisition. In most of the states in which the Company ------------------------ has water or wastewater operations, there exists the right of governmental acquisition. The price to be paid under condemnation is usually determined in accordance with the eminent domain statutes of the state governing 7 United Water Resources Inc. the taking of land or other property by condemnation, which statutes generally provide for the payment of a price which reflects the fair value of the condemned property. A condemnation action was commenced in 1994 against United Waterworks' water and wastewater utility in New Mexico. See Item 3, Legal Proceedings, below. Rate Matters. The Company's utility subsidiaries are subject to ------------ regulation by state regulatory commissions (or, in one case, by a local authority) having jurisdiction over their respective service areas with regard to rates, services, safety, accounting, issuance of securities, changes in ownership, control or organization and other matters. The rates charged by the Company's utility subsidiaries are fixed by the regulatory authority having jurisdiction over each utility. The profitability of the Company's utility subsidiaries is to a large extent dependent upon the timeliness and adequacy of the rate relief allowed by regulatory authorities. Accordingly, the Company maintains a centralized rate management staff which monitors expense increases, capital expenditures and other factors affecting the financial performance of its utility subsidiaries and prepares, files and litigates rate cases. In certain jurisdictions, procedures have been established by the utility regulatory authorities to permit a more rapid, and less costly, recovery of certain expense increases. The Company believes that all of its regulated utilities are in compliance with those regulations. For a discussion of rate increases granted the Company's utility subsidiaries in 1994 and 1993, see Note 10 to the Consolidated Financial Statements in Item 8, below. 8 United Water Resources Inc. NON-REGULATED OPERATIONS - ------------------------ The Company is engaged in several activities which are not subject to regulation of rates, service and similar matters by state public utility commissions. The Company's principal non-regulated operations include United Properties, a subsidiary engaged in real estate activities, Laboratory Resources, a subsidiary that owns and operates a network of environmental testing laboratories, and a 50% investment in a joint venture partnership (the Partnership) with LAH which, in turn, holds 50% of the common stock of JMM, an environmental technology and engineering firm. United Properties United Properties is a non-regulated business ----------------- engaged in real estate investment and development activities, including commercial office and retail properties, residential and commercial land development, golf course operations and consulting services. United Properties owns a portfolio of real estate located in New Jersey, New York and Pennsylvania. United Properties also provides consulting and advisory services in support of the real estate assets of the other United Water companies. JMM Operational Services, Inc. As a result of the Merger and the ------------------------------ formation of the Partnership with LAH, the Company acquired an indirect 25% interest in JMM. The Partnership owns 50% of JMM's outstanding common stock and the remaining 50% is owned by Montgomery Watson Americas, Inc., a privately held environmental technology and engineering firm. JMM, headquartered in Denver, Colorado, provides contract operations and maintenance services, principally to municipalities, for water and wastewater facilities in North America. JMM also offers its customers specialized operations and maintenance consulting services that include facilities start up, staff training, plant evaluation, operational problem solving, preparation of operating manuals and maintenance management. The Company's investment in the Partnership is accounted for under the equity method of accounting. The Partnership is also actively seeking other opportunities to provide water and wastewater services to 9 United Water Resources Inc. municipalities and other government bodies, in the United States and elsewhere in the northwestern hemisphere, through privatization of public facilities, public-private partnerships and other types of service agreements. Laboratory Resources Laboratory Resources performs a wide range of -------------------- environmental analyses for consulting engineers, industry, public water suppliers, wastewater treatment facilities and governmental agencies. In 1994, Laboratory Resources received U.S. Army and Navy environmental cleanup certifications allowing them to enter into a new and growing market. Negotiations for other federal contracts are in progress. Hoboken Service Contract The Company entered into a public-private ------------------------ partnership with the city of Hoboken, NJ in July 1994. The Company will manage and maintain the city's distribution system and the city will retain ownership. EMPLOYEE RELATIONS - ------------------ The Company and its subsidiaries have approximately 1,400 employees. Subsidiaries of the Company are parties to agreements with labor unions covering approximately 535 employees at 9 locations. The Company does not expect any material interference with operations at any location as a result of the expiration of any of these labor agreements. During the past five years, the Company has experienced no work stoppages. The Company considers its employee relations to be good. ENVIRONMENTAL REGULATION - ------------------------ The Company and its subsidiaries are subject to environmental regulation by state and federal agencies. The state agencies typically consist of one responsible for public health and another responsible for environmental protection. The United States Environmental Protection Agency (EPA) administers numerous federal statutes which encompass both public health and environmental protection concerns. 10 United Water Resources Inc. At the Federal level, the SDWA provides minimum standards for potable water quality and monitoring. State statutes and regulations, which are also applicable, impose standards which, in some cases, are more stringent than the Federal standards. The Company believes that all its water utilities are currently in compliance in all material respects with, and have all permits required by, the SDWA and other applicable Federal and state health and environmental statutes and regulations. During 1986, the EPA issued revisions and a timetable for future revisions to its regulations which resulted in additional and more stringent standards under the SDWA. The Company does not expect any significant adverse financial impact from these new regulations on the Company's results of operations or financial condition. Although the Company projects that additional expenditures for utility plant will be required as a result of the 1986 amendments to the SDWA, as discussed above, it anticipates that regulatory authorities will allow a recovery of and return on any investment needed. The Federal Water Pollution Control Act, also known as the Clean Water Act, and state laws in a number of jurisdictions regulate certain effluent discharges into waterways. These laws are administered by the EPA at the federal level and by state agencies. These laws require the Company's utility subsidiaries to obtain permits for effluent discharges associated with water and wastewater treatment operations and these permits typically impose limitations with respect to quality and quantity of effluent discharges. The Company believes that its utility subsidiaries are currently in compliance in all material respects with, and have all permits required by, these pollution control statutes. (d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT ---------------------------------------------------------------------- SALES ----- (Not applicable) 11 United Water Resources Inc. ITEM 2. PROPERTIES - ------- ---------- REGULATED UTILITY OPERATIONS - ---------------------------- United Water's utility subsidiaries own, operate and maintain a total of 383 wells, 58 water treatment plants, with treatment capacities of up to 200 million gallons per day (MGD), 15 wastewater treatment plants, with treatment capacities of up to 3 MGD, and 211 ground and elevated storage tanks. The Company's utility subsidiaries also own numerous impounding basins, lift stations and purification stations, generally located on land owned by the respective subsidiaries. In addition, the Company's utility subsidiaries own a total of approximately 7,472 miles of water transmission and distribution mains and 440 miles of wastewater collection mains. The water mains and wastewater collection facilities are located in easements and rights-of-way on or under public highways, streets, waterways and other public places pursuant to statutes, municipal ordinances and permits from state and local authorities, or on or under property owned by the respective subsidiaries or occupied under property rights from the owners, which rights are deemed adequate for the purpose for which they are used. In addition, the Company's subsidiaries own pipelines, meters, services, fire hydrants, transportation vehicles, construction equipment, office furniture and equipment and computer equipment. United Water's subsidiaries own or lease office space at their respective locations. In connection with the Wanaque South Project, United Water New Jersey owns a 17-mile aqueduct from the Wanaque Reservoir to the Oradell Reservoir, along with a booster pumping station. United Water New Jersey also owns 50% of the other elements of the Wanaque South Project, including an 11-mile aqueduct and related pump stations, a roller compacted concrete dam and reservoir, and has contracted rights to yields derived from the Passaic and Ramapo rivers. 12 United Water Resources Inc. NON-REGULATED OPERATIONS - ------------------------ United Properties owns approximately 1,500 acres of land available for sale or under development principally in New Jersey, New York and Pennsylvania and 487,250 square feet of office and retail properties. Laboratory Resources owns and operates three (3) commercial testing laboratories in Teterboro, New Jersey; Brooklyn, Connecticut; and Bethlehem, Pennsylvania. ITEM 3. LEGAL PROCEEDINGS - ------- ----------------- In 1990, the Paterson Municipal Utilities Authority (PMUA) filed suit in the Superior Court of New Jersey - Passaic County, against United Water New Jersey and the North Jersey District Water Supply Commission. The suit was based on PMUA's alleged ownership of various water rights in the Passaic River, which rights the PMUA claimed were, or may have been, affected by diversions related to the Wanaque South Project, a project owned equally by United Water New Jersey and the North Jersey District Water Supply Commission. United Water New Jersey's Motion for Summary Judgement, dismissing the Complaint, was granted by the trial court in July 1992. In October 1992 the PMUA filed a Notice of Appeal with the Appellate Division, and the Appellate Division affirmed the dismissal in May 1994. The PMUA next appealed to the New Jersey Supreme Court, which denied certification of this appeal in September 1994. Finally, the PMUA filed a Petition for Certiorari to the United States Supreme Court in December 1994, and in February 1995 the United States Supreme Court denied their petition. Two suits were filed by Safas Corporation and New Regime Company against United Water, Dundee Water Power & Land Co. (Dundee) and United Water New Jersey in September and November 1994 in the Superior Court of New Jersey - Passaic County. The suits allege that the plaintiffs suffered property damages as a result of an alleged breach in a berm surrounding the Dundee Canal, allowing water to escape. The Dundee Canal is the property of Dundee, a corporation of which United 13 United Water Resources Inc. Water owns 50% of the outstanding common stock. While an assessment of the property damages being alleged has not yet been completed, it is believed that such claims will be in excess of $500,000. One of the plaintiffs has voluntarily dismissed the Company and United Water New Jersey from its action, having been provided satisfactory evidence by the Company regarding its status as a shareholder in Dundee, and the Company intends to pursue a similar dismissal with counsel for the other plaintiff. The Company is of the opinion that it, United Water New Jersey and Dundee have adequate insurance to cover claims of this nature. United Water is undertaking a continuing investigation of the claims in conjunction with the North Jersey District Water Supply Commission, the other 50% co-owner of Dundee. United Waterworks owns a utility subsidiary which provides water and wastewater services to customers in Rio Rancho, New Mexico. The city of Rio Rancho (the City) notified United Waterworks that it intends to acquire the Company's utility operations in Rio Rancho, and on October 28, 1994 commenced condemnation proceedings in the Thirteenth Judicial District, Sandoval County. On December 15, 1994, the City filed an Application for Immediate Possession of the Company's utility system in Rio Rancho. Hearings were held on the Application, and on March 2, 1995 the Company was notified by the Court that it would grant the City its Application for Immediate Possession and that a hearing would be held on March 22, 1995 so that the order could be entered. Upon entry of the order, the City will have 90 days to tender to the court $53 million as a deposit for the condemnation. The City cannot take immediate possession until the deposit is made. New Mexico's condemnation laws require that the City pay the Company fair market value for any assets that are taken by the City in a condemnation proceeding. Consequently, the Company expects that the final, total payment by the City for the assets taken by a condemnation, or sale in lieu of condemnation, should result in the Company at least recovering the book value of its Rio Rancho utility. In 1994, the Company's Rio Rancho utility had revenues of $11.6 million. 14 United Water Resources Inc. United Water Delaware (formerly Wilmington Suburban Water Corporation), a subsidiary of United Waterworks, is the subject of a Criminal Violation Notice issued by the New Castle County, Delaware Department of Public Works (the Notice). The Notice, dated April 15, 1992, describes the violation as being an illegal placement of fill in a floodplain in contravention of the New Castle County Zoning and Drainage Codes. United Water Delaware alleges that the illegal fill was placed on land it owns by one or more third parties without the knowledge or approval of United Water Delaware. The management of United Water Delaware has responded to the Notice by engaging hydrogeological engineers to investigate the feasibility of a mitigation and remediation plan which would be consistent with the appropriate County Ordinances. Violation notice forms also were issued to other similarly situated property owners, and United Water Delaware has taken part in many discussions concerning the level of participation by all such parties in a remediation. United Water Delaware has met with the New Castle County authorities and presented a plan to partially remediate the fill. It is expected that the County will accept this proposal. On October, 28, 1994, IU International Corporation (IU) filed suit in the Superior Court of the State of Delaware against United Waterworks alleging breach of contract and seeking reimbursement from United Waterworks of more than $3 million, as well as interest thereon. IU's claim is based on certain tax indemnifications that were part of a stock purchase agreement entered into by IU, Lyonnaise American Holding, Inc., United Waterworks and GWC in connection with the 1982 purchase of 50% of the outstanding common stock of United Waterworks by LAH. United Waterworks is engaged in settlement negotiations with IU, but no final settlement agreement has been executed by the parties. Management believes that the resolution of this matter will not have a material adverse effect upon the financial position or results of operations of the Company. United Water is not a party to any other litigation other than the routine litigation incidental to the business of United Water. None of such litigation, either individually or in the aggregate, is material to the business of United Water. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ----------------------------------------------------------- During the fourth quarter of 1994, there were no matters submitted to a vote of security holders. 15 United Water Resources Inc. PART II ------- ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER - ------- ------------------------------------------------------------------ MATTERS ------- United Water Resources' common stock is traded on the New York Stock Exchange under the symbol UWR. The high and low sales prices for United Water's common stock for 1994, 1993 and 1992 and the dividends paid on the common stock each quarter were as follows:
(dollars) STOCK PRICE DIVIDEND -------------------- -------- QUARTER HIGH LOW ------- ------- -------- 1994 Fourth $14.000 $12.250 $.23 Third 14.250 13.000 .23 Second 14.625 12.875 .23 First 14.750 12.875 .23 ------- ------- -------- 1993 Fourth 15.750 14.000 .23 Third 15.750 14.750 .23 Second 15.875 14.750 .23 First 15.875 14.375 .23 ------- ------- -------- 1992 Fourth 15.500 13.375 .23 Third 15.875 13.500 .23 Second 15.000 13.000 .23 First 16.625 13.250 .23 ------- ------- --------
The high and low stock prices from January 1 to February 28, 1995, were $14.125 and $12.50. There were 19,857 holders of record of United Water's common stock as of February 28, 1995. Dividend Policy The Company has paid continuous cash dividends on its --------------- common stock since 1886. Under the Company's current common stock dividend policy, quarterly dividends are paid by the Company, generally on March 1, June 1, September 1 and December 1. Each future declaration of dividends, however, shall be made at the sole discretion of the Board of Directors, and only out of cumulative earnings available therefor. 1 United Water Resources Inc.
ITEM 6. SELECTED FINANCIAL DATA - ------- ------------------------- Year ended December 31, ---------------------------------------------------------- 1994 1993 1992 1991 1990 (thousands except per share data) ---------------------------------------------------------- Income Statement Data - --------------------- Operating revenues $ 292,996 $200,418 $164,869 $161,750 $164,594 Operating income 83,435 55,360 46,516 45,664 46,278 Net income 27,887 19,978 15,784 16,442 18,292 Net income per share 1.01 1.03 .87 .96 1.10 Dividends paid per share .92 .92 .92 .91 .88 ========== ======== ======== ======== ======== Balance Sheet Data (at end of period) - ------------------------------------- Total assets $1,457,427 $740,526 $691,659 $667,933 $636,781 Long-term debt 505,204 276,753 294,169 301,730 251,062 Preferred stock without mandatory redemption 9,000 9,000 9,000 9,000 9,000 Preferred and preference stock with mandatory redemption 98,173 23,840 24,100 9,360 10,910
2 United Water Resources Inc. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - ------- ---------------------------------------------------------------------- RESULTS OF OPERATIONS ----------------------- MERGER On April 22, 1994, United Water Resources (United Water, or the Company) completed a merger (the Merger) with GWC Corporation (GWC) in which United Water was the surviving corporation. GWC's principal assets included 100% of the stock of General Waterworks Corporation, which owns regulated water and wastewater utilities operating in 14 states, and a 25% indirect investment in JMM Operational Services, Inc. (JMM). JMM provides operations and management services to government and industry for water and wastewater treatment facilities. In March 1995, the Company changed the names of many of its operating subsidiaries. By adopting "United Water" in the names of its utility subsidiaries, the Company will achieve a unified corporate identity and greater national recognition. The new names of some of the larger operating subsidiaries are United Water New Jersey (formerly Hackensack Water Company), United Waterworks (formerly General Waterworks Corporation) and United Water New York (formerly Spring Valley Water Company). In 1994, Rivervale Realty Company changed its name to United Properties Group. The new names are used hereafter. The operating water and wastewater utilities of United Waterworks are individually much smaller in size than the combined utility operations of United Water's primary pre-merger utility subsidiaries, United Water New Jersey and United Water New York. In the aggregate, however, United Waterworks' operating utilities are approximately equal in size to United Water New Jersey and United Water New York combined. Following the Merger, the Company became the nation's second largest investor-owned water services company serving approximately two million people in 14 states. The greater geographic diversity of United Water's utility operations should serve to reduce the Company's risks related to weather and rate regulation. 3 United Water Resources Inc. As a result of the Merger, there were a number of substantial increases in the Company's consolidated financial statements. Significant changes in the balance sheet included a $502 million increase in net utility plant, to more than $1 billion, while total assets increased by $662 million, to $1.4 billion. Total equity, including common, preferred and preference stock, increased by $197 million, to $436 million, while long-term debt increased $212 million, to $489 million. Significant changes in the operating results are discussed in Results of Operations. The Merger was accounted for as a purchase. In exchange for the common stock of GWC that was issued and outstanding immediately preceding the Merger, United Water (i) issued 9,295,860 shares of United Water common stock, (ii) issued 3,341,078 shares of United Water 5% cumulative convertible preference stock, with a liquidation price of $13.794 per share, and (iii) paid former shareholders of GWC $8.9 million in cash. In addition, at the time of the Merger, each issued and outstanding share of GWC 7 5/8% cumulative preferred stock was converted into one fully paid non-assessable share of United Water 7 5/8% cumulative preferred stock with equal stated dividends and substantially similar rights, privileges, qualifications and restrictions. Prior to the Merger, Lyonnaise American Holding, Inc. (LAH), a Delaware corporation and a wholly-owned subsidiary of Lyonnaise des Eaux, a French societe anonyme, owned approximately 81.9% of GWC's common stock; the remaining 18.1% of GWC's common stock was publicly traded. On the date of the Merger, LAH converted 70% of its shares of GWC common stock into United Water common stock and the remainder of its shares of GWC common stock into United Water 5% cumulative convertible preference stock. Immediately after the Merger, LAH owned approximately 25.4% of the issued and outstanding United Water common stock and approximately 97.7% of the issued and outstanding United Water 5% cumulative convertible preference stock. A twelve-year Governance Agreement between LAH and United Water contains a number of restrictions, including restrictions on when LAH can convert its preference shares into United Water common stock and on LAH's ability to buy or sell United Water common stock or preference stock. 4 United Water Resources Inc. United Water's 1994 results include the operations of United Waterworks for the nine months from April to December 1994. It should be noted that the results of operations for those nine months include the warmer, high demand summer months, and therefore represent a significant portion of the total 1994 earnings of United Waterworks' operating utilities. LIQUIDITY AND CAPITAL RESOURCES As shown in the consolidated statement of cash flows, the Company's major uses of cash in 1994 included: $66.9 million of net capital expenditures; $5.1 million paid in connection with the Merger; $29.3 million of common, preferred and preference dividends paid to shareholders; and $5.5 million invested in a service contract with the city of Hoboken, New Jersey. The major sources of funds to meet these cash needs included: $43.6 million of cash provided by operations; a $37.1 million increase in short-term notes payable; and $23.2 million of proceeds from the issuance of additional shares of common stock. Net capital expenditures are generally incurred by United Water's utility subsidiaries in connection with the normal upgrading and expansion of existing water and wastewater facilities and to comply with existing environmental regulations. United Water considers its utility plant to be adequate and in good condition. However, the Company is projecting higher levels of capital expenditures during the next five years due to the addition of new, or expansion of existing, water treatment and source of supply facilities by United Waterworks' utility subsidiaries. These capital expenditures are necessary to meet growth requirements and to comply with environmental laws and regulations. Excluding the effects of inflation, the net capital expenditures of United Water's utility subsidiaries are projected to aggregate $301 million over the next five years, including $56 million and $63 million, respectively, in 1995 and 1996. This total includes $226 million for United Waterworks and $75 million for United Water New Jersey and United Water New York. The expenditures related to compliance with environmental laws and regulations are estimated to be approximately 25% of the projected net capital expenditures over the 1995- 1999 period. To the best of management's knowledge, the Company is in compliance with all major environmental laws and regulations. 5 United Water Resources Inc. United Water anticipates that its future capital expenditures will be funded by internally generated funds, external debt financings and the issuance of additional common and preferred stock, including shares issued to existing shareholders, bondholders, customers and employees under the Company's dividend reinvestment and stock purchase plans. In addition, United Waterworks and United Water New York are parties to a number of tax-exempt financings for the purpose of funding capital expenditures. Funds are drawn down on these financings as qualified capital expenditures are made. As of December 31, 1994, $30.2 million of proceeds from these financings have not yet been disbursed to the Company and are included in the consolidated balance sheet as restricted cash. The amount and timing of the use of these proceeds and of future financings will depend on actual capital expenditures, the timeliness and adequacy of rate relief, the availability and cost of capital, and the ability to meet interest and fixed charge coverage requirements. There were a number of changes in the Company's long-term debt in 1994. In January 1994, United Water New Jersey redeemed $10 million of First Mortgage Bonds, 9 3/4% Series, due in 2006. United Water New Jersey also refinanced $40 million of tax-exempt bonds in April 1994 using the proceeds from the issuance of $20 million of 5.8% bonds and $20 million of 5.9% bonds, both due in 2024. In June 1994, United Water New York refinanced $27 million of 1988 New York State Environmental Facilities Corporation 7.7% - 8% notes, due in 2018, by issuing $12 million of 6.15% notes and $15 million of 6.3% notes, both due in 2024. In January 1995, United Water New York issued $12 million of 8.98% senior notes, the proceeds of which were used to reduce short-term borrowings. These short-term borrowings were incurred, in part, when United Water New York redeemed $5 million of Series E, 4.7% First Mortgage Bonds at maturity on August 1, 1994. In October 1994, the Idaho Water Resource Board issued $20 million of 6.4% tax-exempt bonds on behalf of United Waterworks, due in 2024, to finance certain capital expenditures of United Water Idaho (formerly Boise Water Corporation), a subsidiary of United Waterworks. The proceeds from these 6 United Water Resources Inc. tax-exempt bonds will be drawn down as qualified capital expenditures are made, generally within three years of the issuance of the bonds. In December 1994, United Waterworks entered into a private placement medium-term note program that will enable United Waterworks to issue up to $75 million of debt with terms ranging from 9 months to 30 years. The interest rates will be set as notes are issued under the program. In February 1995, United Waterworks issued the first $10 million of notes under this program, at a rate of 8.84%, with the full amount maturing in 2025, and redeemed outstanding notes payable. In December 1994, United Water Mid-Atlantic (formerly Mid-Atlantic Utilities Corporation), a subsidiary of United Water, issued $5.5 million of long-term debt maturing in 2004 to finance the cost of a service contract with the city of Hoboken. The interest rate floats, based on the London Interbank Offered Rate or a treasury rate index, and was 7.125% at December 31, 1994. At December 31, 1994, United Water had cash and cash equivalents of $9.8 million (excluding restricted cash) and unused short-term bank lines of credit of $112.8 million. Management expects that unused credit lines currently available, cash flows provided by operations and cash generated from the dividend reinvestment and stock purchase plans will be sufficient to meet anticipated future operational needs. RATE MATTERS The profitability of United Water's regulated utilities is, to a large extent, dependent upon adequate and timely rate relief. The Company anticipates that the regulatory authorities that have jurisdiction over its utility operations will allow the Company's regulated utilities to earn a reasonable return on their utility investments. In October 1993, a rate increase of approximately 3.1%, or $3.5 million, became effective for United Water New Jersey, the Company's largest utility subsidiary. This increase resulted from the settlement of a dispute involving a transfer of land from United Water New Jersey to United Properties 7 United Water Resources Inc. Group (United Properties). The increase had no effect on United Water's cash flows in 1994 because offsetting credits related to the settlement are being applied to customer bills until late 1995. Twelve rate increases were awarded to the Company's regulated utilities during 1994, representing an aggregate annual revenue increase of $8.1 million. An estimated $3.2 million of this amount was reflected in 1994's revenues while the remaining $4.9 million of carryover impact of the rate awards received in 1994 is expected to increase revenues in 1995. At the end of January 1995, there were nine rate cases pending in which the Company has requested an aggregate annual rate increase of $11.7 million. Only a portion of the rate increase, if received in 1995, will affect revenues in 1995. Generally, the rate awards the Company's operating utilities actually receive are less than the amounts requested. The Company expects to file additional rate cases in 1995, but does not expect that those rate awards, if received in 1995, will have a significant impact on revenues in 1995. 8 United Water Resources Inc. REAL ESTATE ACTIVITIES United Properties owns a portfolio of real estate located in New Jersey, New York and Pennsylvania, consisting of commercial properties, golf courses and land available for development. United Properties is pursuing joint ventures, sales, or direct development opportunities for the various properties in its portfolio, as well as the acquisition of additional commercial and golf properties. United Properties expects to spend $43.4 million over the next five years for capital expenditures on its existing real estate portfolio, including $3.6 million and $17.4 million, respectively, in 1995 and 1996. Funding for United Properties' activities is anticipated to come from operations, including the sales of properties and the operation of existing commercial properties and golf courses, and from the proceeds of new financings. The timing of these expenditures will depend upon market conditions and the attainment of necessary approvals. RESULTS OF OPERATIONS OVERVIEW United Water's net income applicable to common stock for 1994 was $27.9 million, an increase of 39.6% as compared to the $20 million earned in 1993. This increase in net income was primarily attributable to the operations acquired in the Merger. Net income per common share for 1994 was $1.01 as compared to $1.03 for 1993. The Merger contributed positively to the Company's earnings per share in 1994 even though 9.3 million shares of United Water common stock were issued to effect the Merger. Despite the favorable impact of the Merger, earnings per share were lower than in 1993, primarily due to a one-time gain from a real estate transfer in the third quarter of 1993 from United Properties to United Water New Jersey and record water sales during the hot, dry summer of 1993. Due to regulatory treatment, the effects of the intercompany real estate transaction were not eliminated in consolidation. 9 United Water Resources Inc. REVENUES Operating revenues increased $92.6 million, or 46.2%, in 1994 and $35.5 million, or 21.6%, in 1993 from the prior years, as follows:
1994 VS. 1993 1993 vs. 1992 (thousands of dollars) INCREASE (DECREASE) Increase (Decrease) --------------------- ------------------- Utilities: Merger $105,936 52.8% $ ---- ---- Rate awards 5,210 2.6% 1,952 1.2% Consumption (3,509) (1.7%) 9,245 5.6% Real estate (22,109) (11.0%) 23,204 14.1% Other operations 7,050 3.5% 1,148 .7% -------- ----- ------- ---- $ 92,578 46.2% $35,549 21.6% -------- ----- ------- ----
The Merger increased revenues $105.9 million, or 52.8%, in 1994 and was the major reason for the 46.2% increase in revenues in 1994 as compared to 1993. This includes the effect of any in-year rate increases granted to the operating utilities of United Waterworks in 1994. The 2.6% increase in revenues from rate awards includes the impact of current year and prior year rate awards for United Water New Jersey and United Water New York, and resulted from rate increases of 5.7% and 3.8% in May 1993 and July 1994, respectively, for United Water New York and from a 3.1% rate increase in October 1993 for United Water New Jersey. Lower consumption resulted in a decrease in revenues of $3.5 million in 1994 as weather conditions returned to a more normal pattern after a very hot, dry summer season in 1993. Real estate revenues decreased primarily due to the $26 million land transfer from United Properties to United Water New Jersey in 1993. Revenues from meter installation contracts for the city of New York and a service contract with the city of Hoboken contributed to the increase in other operations in 1994. Revenues in 1993 increased 21.6% over 1992. The increase was primarily attributable to a $23.2 million, or 14.1%, increase in real estate revenues resulting from the aforementioned land transfer. The 1.2% increase in utility revenues from rate awards was the result of a 5.7% United Water New York rate increase in May 1993, a 3.1% United Water New Jersey rate increase in October 1993 and the recognition of approximately $1 million of deferred revenue credits relating to United Water New York's 10 United Water Resources Inc. rate case. The 5.6% increase in consumption in 1993 was attributable to increases in United Water New Jersey's water sales due to an unusually hot and dry summer. COSTS AND EXPENSES The changes in operating expenses in 1994 as compared to 1993, including the effect of the Merger, were as follows:
Total Effect of Net of Merger (thousands of dollars) Increase Merger Increase (Decrease) -------------- --------- -------------------- Operation and maintenance $40,793 40.6% $48,834 ($8,041) (8.0%) Depreciation and amortization 10,921 76.5% 10,671 250 1.8% General taxes 12,789 42.1% 10,980 1,809 6.0% ------- ---- ------- ------- ----
The decrease in operation and maintenance expenses, excluding the impact of the Merger, represents the net effect of the decrease in costs related to the real estate transfer in 1993, offset in part by higher costs in 1994 related to the Company's utility operations, meter installations under contracts with the city of New York, other property sales and the service contract with the city of Hoboken. The operation and maintenance expenses of the Company's utility operations increased $1.9 million, or 2.9%, in 1994. The increase in general taxes of $1.8 million, or 6%, in 1994 was primarily attributable to higher real estate taxes as well as the recognition in 1993 of $755,000 of credits in franchise and real estate taxes relating to United Water New York's rate case. The changes in operating expenses in 1993 as compared to 1992 were as follows: 11 United Water Resources Inc.
(thousands of dollars) Increase ------------------ Operation and maintenance $25,216 33.5% Depreciation and amortization 326 2.3% General taxes 1,163 4.0% ------- ----
Operation and maintenance expenses increased $25.2 million, or 33.5%, from 1992. This increase was primarily due to real estate activity, including the $15.5 million cost of the real estate transferred from United Properties to United Water New Jersey and a $4.1 million valuation reserve recorded on other real estate properties during 1993. The remaining increase of $5.6 million, or 7.4%, was primarily caused by higher utility operating expenses, in part, due to increased water sales related to the hot, dry summer in 1993, and the recognition of $850,000 of deferred expenses related to United Water New York's 1993 rate case. General taxes were $1.2 million, or 4%, higher in 1993 over 1992, due principally to increases of 2.1% in revenue based taxes and 8.4% in property related taxes, less the recognition in 1993 of $755,000 of credits in franchise and real estate taxes relating to United Water New York's rate case. INTEREST AND OTHER Consolidated interest expense increased 62.6% in 1994 as compared to 1993, primarily due to the Merger, and decreased 1% in 1993 as compared to 1992, due to lower interest rates on short-term borrowings and a reduction in long- term debt. Other income was $4.5 million higher in 1994 as compared to 1993, primarily due to the award of escrow monies to United Properties following a foreclosure settlement and a gain on the sale of a wastewater transmission facility in Pine Bluff, Arkansas. INCOME TAXES The effective income tax rates on income before preferred and preference stock dividends were 38% in 1994, 36% in 1993 and 31.1% in 1992. The increases in the effective rates in 1994 and 1993, as compared to the preceding years, resulted from higher state income taxes and additional provisions for federal income taxes. The higher state income taxes in 1994 were primarily a result of the operations 12 United Water Resources Inc. acquired in the Merger and in 1993 were attributable to land sales. An analysis of income taxes is included in Note 11 to the financial statements. EFFECTS OF INFLATION Operating income from utility operations is normally not materially affected by inflation because cost increases generally lead to proportionate increases in revenues allowed through the regulatory process. However, there is a lag in the recovery of higher expenses through the regulatory process, and therefore, high inflation could have a detrimental effect on the Company until rate increases are received. Conversely, lower inflation and lower interest rates tend to result in reductions in the rates of return allowed by the utility commissions, as has happened over the last several years. 13 United Water Resources Inc. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ------- -----------------------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGE - ------------------------------------------ ---- Financial Statements: Report of Independent Accountants 15 Consolidated Balance Sheet at December 31, 1994 and 1993 16 Statement of Consolidated Income for each of the years ended December 31, 1994, 1993 and 1992 17 Statement of Consolidated Common Equity for each of the years ended December 31, 1994, 1993 and 1992 17 Statement of Consolidated Cash Flows for each of the years ended December 31, 1994, 1993 and 1992 18 Statement of Consolidated Capitalization at December 31, 1994 and 1993 19 Notes to Consolidated Financial Statements 20 - 47 Financial Statement Schedules: For the three years ended December 31, 1994 VIII - Consolidated Valuation and Qualifying Accounts 2
All other schedules are omitted because they are not applicable, or the required information is shown in the consolidated financial statements or notes thereto. Financial statements of any 50%-owned investments have been omitted because the registrant's proportionate share of net income and total assets of each is less than 20% of the respective consolidated amounts, and the investment in and the amount advanced to each is less than 20% of consolidated total assets. 14 REPORT OF INDEPENDENT ACCOUNTANTS To The Board of Directors of United Water Resources In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of United Water Resources and its subsidiaries at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. These financial statements are the responsibility of United Water Resources' 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 generally accepted auditing standards 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 the opinion expressed above. PRICE WATERHOUSE LLP New York, New York February 23, 1995 15 CONSOLIDATED BALANCE SHEET United Water Resources and Subsidiaries
December 31, (thousands of dollars) 1994 1993 ---------- --------- ASSETS UTILITY PLANT, including $24,505 and $5,815 under construction $1,272,446 $606,102 Less accumulated depreciation 235,962 103,557 ---------- -------- 1,036,484 502,545 UTILITY PLANT ACQUISITION ADJUSTMENTS, Less amortization of $1,326 and $(51) 73,444 (434) REAL ESTATE AND OTHER INVESTMENTS, Less accumulated depreciation of $12,430 and $10,889 107,315 96,312 CURRENT ASSETS: Cash and cash equivalents 9,840 8,933 Restricted cash 30,227 8,502 Accounts receivable and unbilled revenues, less allowance of $1,373 and $1,273 59,292 30,544 Prepaid and other current assets 13,425 10,635 ---------- -------- 112,784 58,614 DEFERRED CHARGES AND OTHER ASSETS: Recoverable income taxes 48,295 26,384 Prepaid and deferred employee benefits 24,290 10,569 Unamortized debt expense 25,253 15,276 Other deferred charges and assets 29,562 31,260 ---------- -------- 127,400 83,489 ---------- -------- $1,457,427 $740,526 ========== ======== CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common stock and retained earnings $ 350,495 $202,110 Preferred stock without mandatory redemption 9,000 9,000 Preferred stock with mandatory redemption 54,696 23,840 Preference stock, convertible, with mandatory redemption 43,477 -- Long-term debt 505,204 276,753 ---------- -------- 962,872 511,703 CURRENT LIABILITIES: Notes payable 76,450 15,500 Preferred stock and long-term debt due within one year 10,246 16,843 Accounts payable and other accruals 36,541 12,066 Accrued taxes 28,744 20,454 Accrued customer benefits 3,707 6,771 Accrued interest and other current liabilities 9,876 6,590 ---------- -------- 165,564 78,224 DEFERRED CREDITS AND OTHER LIABILITIES: Deferred income taxes and investment tax credits 163,020 104,864 Customer advances for construction 30,459 9,319 Contributions in aid of construction 115,642 7,586 Other deferred credits and liabilities 19,870 28,830 ---------- -------- 328,991 150,599 ---------- -------- $1,457,427 $740,526 ========== ========
The accompanying notes are an integral part of these consolidated financial statements. 16 STATEMENT OF CONSOLIDATED INCOME United Water Resources and Subsidiaries
Years ended December 31, (thousands of dollars except per share data) 1994 1993 1992 --------- --------- -------- OPERATING REVENUES $292,996 $200,418 $164,869 OPERATING EXPENSES: Operation and maintenance 141,229 100,436 75,220 Depreciation and amortization 25,197 14,276 13,950 General taxes 43,135 30,346 29,183 -------- -------- -------- TOTAL OPERATING EXPENSES 209,561 145,058 118,353 -------- -------- -------- OPERATING INCOME 83,435 55,360 46,516 INTEREST AND OTHER EXPENSES: Interest expense, net of amount capitalized 35,801 22,023 22,186 Allowance for funds used during construction (1,247) (617) (573) Preferred stock dividends of subsidiaries 2,318 2,338 2,088 Other income, net (5,449) (942) (1,023) -------- -------- -------- TOTAL INTEREST AND OTHER EXPENSES 31,423 22,802 22,678 -------- -------- -------- INCOME BEFORE INCOME TAXES 52,012 32,558 23,838 PROVISION FOR INCOME TAXES 20,671 12,580 8,054 -------- -------- -------- NET INCOME 31,341 19,978 15,784 PREFERRED AND PREFERENCE DIVIDENDS 3,454 -- -- -------- -------- -------- NET INCOME APPLICABLE TO COMMON STOCK $ 27,887 $ 19,978 $ 15,784 ======== ======== ======== AVERAGE COMMON SHARES OUTSTANDING 27,524 19,428 18,178 NET INCOME PER COMMON SHARE $1.01 $1.03 $0.87 -------- -------- --------
STATEMENT OF CONSOLIDATED COMMON EQUITY United Water Resources and Subsidiaries
Common Stock ------------------------------ Number Retained (thousands) of shares Amount earnings --------- -------- --------- BALANCE AT DECEMBER 31, 1991 17,523 $100,662 $ 62,856 Dividend reinvestment and stock purchase plans 1,275 17,286 -- Net income -- -- 15,784 Cash dividends paid on common stock, $.92 per share -- -- (16,760) Preferred stock issuance expenses -- -- (299) ------ -------- -------- BALANCE AT DECEMBER 31, 1992 18,798 117,948 61,581 Dividend reinvestment and stock purchase plans 1,418 20,508 -- Net income -- -- 19,978 Cash dividends paid on common stock, $.92 per share -- -- (17,905) ------ -------- -------- BALANCE AT DECEMBER 31, 1993 20,216 138,456 63,654 Dividend reinvestment and stock purchase plans 1,769 23,158 -- Common stock issued in connection with Merger 9,296 123,170 -- Net income -- -- 27,887 Cash dividends paid on common stock, $.92 per share -- -- (25,830) ------ -------- -------- BALANCE AT DECEMBER 31, 1994 31,281 $284,784 $ 65,711 ------ -------- --------
The accompanying notes are an integral part of these consolidated financial statements. 17 STATEMENT OF CONSOLIDATED CASH FLOWS United Water Resources and Subsidiaries
Years ended December 31, (thousands of dollars) 1994 1993 1992 --------- --------- --------- OPERATING ACTIVITIES: NET INCOME $ 31,341 $ 19,978 $ 15,784 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Depreciation and amortization 26,347 15,476 14,765 Deferred income taxes and investment tax credits, net 5,865 36,651 6,065 Gain from release of security deposit on real estate settlement (2,811) -- -- Gain on land transfer -- (10,519) -- Valuation reserve -- 4,111 -- Allowance for funds used during construction (1,247) (617) (573) Changes in assets and liabilities, net of effect of Merger: Accounts receivable and unbilled revenues (9,412) (1,027) 928 Prepayments 4,146 (1,757) (1,197) Prepaid and deferred employee benefits (6,617) (5,301) (4,959) Recoverable income taxes (1,589) (26,384) -- Accounts payable and other accruals 6,479 2,466 (730) Accrued taxes 3,356 1,262 (2,512) Accrued interest (2,734) (505) (17) Accrued customer benefits (3,064) (420) 129 Other, net (6,442) (5,625) (1,704) -------- -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 43,618 27,789 25,979 -------- -------- -------- INVESTING ACTIVITIES: Additions to utility plant (excludes allowance for funds used during construction) (57,592) (15,986) (14,066) Additions to real estate and other properties (9,317) (6,948) (7,516) Acquisition of GWC, net of cash received (5,059) -- -- Investment in Hoboken service contract (5,500) -- -- Change in restricted cash 510 (8,502) -- -------- -------- -------- NET CASH USED IN INVESTING ACTIVITIES (76,958) (31,436) (21,582) -------- -------- -------- FINANCING ACTIVITIES: Change in notes payable 37,050 (3,500) (1,250) Additional long-term debt 88,648 19,700 1,114 Reduction in preferred stock and long-term debt (90,123) (22,547) (8,885) Issuance of common stock 23,158 20,508 17,286 Issuance of preferred stock -- -- 15,000 Dividends on common stock (25,830) (17,905) (16,760) Dividends on preferred and preference stock (3,454) -- -- Net contributions and advances for construction 4,798 (1,670) 372 -------- -------- -------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 34,247 (5,414) 6,877 -------- -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 907 (9,061) 11,274 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 8,933 17,994 6,720 -------- -------- -------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 9,840 $ 8,933 $ 17,994 ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 18 STATEMENT OF CONSOLIDATED CAPITALIZATION United Water Resources and Subsidiaries
December 31, (thousands of dollars) 1994 1993 --------- -------- COMMON STOCK AND RETAINED EARNINGS: Common stock, no par value--authorized 50,000,000 shares $301,381 $155,085 Less treasury shares, at cost (16,597) (16,629) Retained earnings 65,711 63,654 -------- -------- TOTAL COMMON STOCK AND RETAINED EARNINGS 350,495 202,110 -------- -------- CUMULATIVE PREFERRED STOCK WITHOUT MANDATORY REDEMPTION: United Water New Jersey, authorized 2,000,000 shares, stated value--$100 per share, issuable in series: 4 1/2% Series, authorized and outstanding 30,000 shares 3,000 3,000 4.55% Series, authorized and outstanding 60,000 shares 6,000 6,000 -------- -------- TOTAL PREFERRED STOCK WITHOUT MANDATORY REDEMPTION 9,000 9,000 -------- -------- CUMULATIVE PREFERRED AND PREFERENCE STOCK WITH MANDATORY REDEMPTION, NET OF AMOUNT DUE IN ONE YEAR: United Water New Jersey: 5% Series, authorized and outstanding 8,400 shares 780 840 7 5/8% Series, authorized and outstanding 150,000 shares 15,000 15,000 United Water New York: Authorized 100,000 shares, stated value--$100 per share issuable in series: $8.75 Series, authorized and outstanding 30,000 shares 2,800 3,000 $9.84 Series, authorized and outstanding 50,000 shares 5,000 5,000 United Water Idaho: 5%, authorized and outstanding 8,245 shares 819 -- United Water Resources: 7 5/8% Series B, authorized and outstanding 300,000 shares 30,297 -- 5% Series A, convertible preference, authorized and outstanding 3,341,078 shares 43,477 -- -------- -------- TOTAL PREFERRED AND PREFERENCE STOCK WITH MANDATORY REDEMPTION 98,173 23,840 -------- -------- LONG-TERM DEBT, NET OF AMOUNT DUE WITHIN ONE YEAR: United Water New Jersey: First mortgage bonds, 5 5/8%-8 3/4%, due 1997-2024 (weighted average 6.76%) 75,000 75,000 Unsecured promissory notes, 6%-7%, due 1997-2019 (weighted average 6.93%) 100,000 100,000 United Water New York: First mortgage bonds, 5 5/8%-9 3/8%, due 1997-2001 (weighted average 6.79%) 5,800 6,100 Unsecured promissory notes, 5.65%-9.25%, due 1998-2024 (weighted average 6.23%) 41,972 41,750 United Water Resources: Promissory notes, 9.38%, due 2019 25,000 25,000 Floating rate LIBOR-based term loan, due 1994 -- 3,167 United Waterworks: Unsecured debt, 6.4%-10.2%, due 1996-2024 (weighted average 8.24%) 220,476 -- Laboratory Resources: Floating prime rate term loan, due 1997 -- 260 United Properties Group: Mortgage notes, 9.75% to 10%, due 2001-2006 (weighted average 9.99%) 17,431 17,776 Floating rate LIBOR-based term loan due 2000 7,601 7,700 New Jersey Wastewater Treatment Loans, 0%-4.8%, due 2013 (weighted average 2.31%) 2,248 -- United Water Services: Promissory note, 8%, due 1997 5,000 -- United Water Mid-Atlantic: Promissory note at floating interest rate, due 2004 4,676 -- -------- -------- TOTAL LONG-TERM DEBT 505,204 276,753 -------- -------- TOTAL CAPITALIZATION $962,872 $511,703 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 19 United Water Resources Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of United Water Resources (United Water, or the Company) and its more than 50% owned subsidiaries. The Company accounts for investments in which it has significant influence under the equity method of accounting. Certain prior year amounts have been reclassified to conform with current year presentation. DESCRIPTION OF BUSINESS: In March 1995, the Company changed the names of many of its operating subsidiaries, including pre-merger United Water operations, as well as those acquired in the April 1994 merger (the Merger) with GWC Corporation (GWC) as discussed in Note 2. By adopting "United Water" in the names of its utility subsidiaries, the Company will achieve a unified corporate identity and greater national recognition. The new names of some of the larger operating subsidiaries are United Water New Jersey (formerly Hackensack Water Company), United Waterworks (formerly General Waterworks Corporation) and United Water New York (formerly Spring Valley Water Company). In 1994, Rivervale Realty Company changed its name to United Properties Group. The new names are used hereafter. United Water's principal utility subsidiaries include United Water New Jersey, United Water New York and United Waterworks. These subsidiaries provide water and wastewater services to two million people in 14 states. Other significant wholly-owned subsidiaries of United Water include: United Properties Group (United Properties), which is engaged in real estate activities including commercial rentals, land development, golf course operations and consulting services; Laboratory Resources, a network of 20 United Water Resources Inc. environmental testing laboratories; and United Water Mid-Atlantic (formerly Mid- Atlantic Utilities Corporation), which owns and operates water and wastewater systems. United Water's utility subsidiaries are subject to regulation by the public utility commissions of the states in which they operate. Their accounting must comply with the applicable uniform system of accounts prescribed by these regulatory commissions and must also conform to generally accepted accounting principles as applied to rate regulated public utilities. This accounting allows, among other things, the recognition of intercompany profit in situations where it is probable such profit will be recovered in the ratemaking process and the recording of assets and liabilities not generally recorded by non-regulated enterprises. UTILITY PLANT: Utility plant is recorded at original cost, which includes direct and indirect labor and material costs associated with construction activities, related operating overheads and an allowance for funds used during construction (AFUDC). AFUDC is a non-cash credit to income and includes both the cost of borrowed funds and a return on equity funds attributable to plant under construction. The original cost of utility property retired or otherwise disposed of in the normal course of business is charged to accumulated depreciation, and salvage (net of removal cost) is credited thereto; no gain or loss is recognized. The costs of property repairs, replacements and renewals of minor property items are included in maintenance expense when incurred. ADVANCES AND CONTRIBUTIONS IN AID OF CONSTRUCTION: When required by the public utility commissions of the states in which the Company's utility subsidiaries operate, outside parties, generally customers and 21 United Water Resources Inc. developers, make payments to the Company to fund certain utility capital expenditures to provide water or wastewater service to new customers. Non- refundable amounts received by the Company are recorded as contributions in aid of construction, except where the Company is required to record such amounts directly as a reduction to utility plant. Refundable amounts received are recorded as advances, and are refundable, for limited periods of time, generally as new customers begin to receive service. The remaining balance of any advances received, after the Company has made all required refunds of such advances, is transferred to contributions in aid of construction. The balances of advances and contributions are used to reduce utility plant in determining rate base, and plant funded by advances and contributions is generally not depreciated. However, the public utility commissions in several of the states in which the Company operates permit the depreciation of plant funded by contributions in aid of construction, but also require that contributions be amortized, so that there is no net effect on income from the depreciation of the contributed plant. For income tax purposes, advances and contributions received after 1986 are included as taxable income, and the related plant is depreciated for tax purposes. UTILITY PLANT ACQUISITION ADJUSTMENTS: Utility plant acquisition adjustments represent the difference between the purchase price and the book value of net assets acquired, and are amortized, generally, on a straight-line basis over a 40-year period. Utility plant acquisition adjustments include a premium paid to acquire the operating utilities of GWC in the Merger. JOINTLY OWNED FACILITIES: Utility plant includes United Water New Jersey's 50% interest in the Wanaque South Water Supply Project, the net book value of which was $45 million and $46 million at 22 United Water Resources Inc. December 31, 1994 and 1993, respectively. United Water New Jersey's share of the project's operating expenses is included in operation and maintenance expenses. REGULATORY ASSETS AND LIABILITIES: Included in deferred charges and other assets and in deferred credits and other liabilities are regulatory items which are expected to be recognized when included in future rates and recovered from or refunded to customers as directed by the state public utility commissions. These regulatory assets and liabilities include items that the public utility commissions have ordered the Company's regulated utilities to defer and prudently incurred costs where the Company expects that recovery is probable because of the past practices of the public utility commissions. Two of the more significant categories of regulatory assets and liabilities involve income taxes (see Income taxes below) and postretirement employee benefits, including pensions and health care. As of December 31, 1994, prepaid employee benefits include $11.5 million of prepaid pension costs and $12.8 million of prepaid and deferred postretirement health care benefits. Most of the postretirement costs relate to employees and retirees of the Company's utility subsidiaries. Postretirement health care costs in excess of those currently included in rates have been deferred in those jurisdictions where their recovery is deemed probable. REAL ESTATE: Real estate properties are carried at the lower of cost, which includes original purchase price and direct development costs, or net realizable value. Real estate taxes and interest costs are capitalized during the development period. The amount of interest capitalized was $2.7 million in 1994, $2.6 million in 1993 and $3 million in 1992. Real estate operating revenues include rental income from commercial 23 United Water Resources Inc. properties, proceeds from the disposition of real estate properties, revenues from golf course operations and fees from consulting services. Proceeds and costs related to pending real estate transactions which do not qualify as completed sales for accounting purposes are recorded under the deposit method. At December 31, 1993, proceeds of approximately $17 million were recorded as deferred credits. At December 31, 1994, there were no pending real estate transactions recorded under the deposit method. UNAMORTIZED DEBT EXPENSE: Debt premium, debt discount and deferred debt expenses are amortized to income or expense over the lives of the applicable issues. REVENUES: United Water New Jersey and United Waterworks recognize as revenues billings to customers, plus estimated revenues for consumption for the period from the date of the last billing to the balance sheet date. United Water New York recognizes revenues as bills are rendered to customers and does not accrue for unbilled revenues. United Water New York and United Water New Rochelle (formerly the New Rochelle Water Company) have been directed by the New York Public Service Commission (New York PSC) to institute a Revenue Reconciliation Clause, which requires the reconciliation of billed revenues with pro forma revenues that were used to set rates. Any variances outside a 1% range are accrued or deferred for subsequent recovery from or refund to customers. At December 31, 1994, United Water New York and United Water New Rochelle had $1.4 million of net unamortized revenue deferrals which are available to offset other incremental deferred costs or to be refunded to customers over a three-year period. These deferrals were related to revenues in excess of amounts used to set rates, reductions in federal income taxes and reductions in pension expense. 24 United Water Resources Inc. DEPRECIATION: Depreciation of utility plant and real estate properties is recognized using the straight-line method over the estimated service lives of the properties. Utility plant depreciation rates are prescribed by the public utility commissions. The provisions for depreciation in 1994, 1993 and 1992 were equivalent to 2.1%, 2.2% and 2.2%, respectively, of average depreciable utility plant in service. For federal income tax purposes, depreciation is computed using accelerated methods and, in general, shorter depreciable lives as permitted under the Internal Revenue Code. INCOME TAXES: The Company and its eligible subsidiaries file a consolidated federal income tax return. Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." SFAS No. 109 requires that deferred income taxes be recorded to reflect an estimate of future tax liability based on temporary differences between the financial and tax bases of assets and liabilities. This adjustment includes deferred taxes for utility temporary differences not previously recognized and the effect on the liability of changes in tax laws and rates. The adoption of SFAS No. 109 in 1993 resulted in the recording of a deferred tax liability and an offsetting regulatory asset. This regulatory asset represents the probable increase in revenues that will be received through future ratemaking proceedings for the recovery of those deferred taxes. The adoption of SFAS No. 109 did not have a material effect on net income. For 1992, the provision for income taxes represents the estimated amounts currently payable for the period plus the changes in net deferred taxes relating to differences between income for accounting and tax purposes for certain items as discussed in Note 11. Deferred tax expense is provided for timing differences between financial and income tax reporting, except where not allowed in the rate process. 25 United Water Resources Inc. Investment tax credits arising from property additions are deferred and amortized over the estimated service lives of the related properties. STATEMENT OF CASH FLOWS: United Water considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company made cash payments for interest (net of amounts capitalized) and federal and state income taxes as follows:
(thousands of dollars) 1994 1993 1992 ------- ------- ------- Interest, net of amounts capitalized $31,917 $21,328 $21,388 Income taxes 11,205 2,915 5,023 ------- ------- -------
The following is a supplemental schedule of non-cash transactions related to the Merger:
(thousands of dollars) Fair value of assets purchased $667,435 Less: Liabilities assumed 464,749 Common stock issued 123,170 Fair value of preferred stock assumed 31,135 Fair value of preference stock issued 43,322 -------- Cash paid for GWC, net of cash received $ 5,059 --------
26 United Water Resources Inc. NOTE 2 - MERGER On April 22, 1994, United Water completed the Merger with GWC, in which United Water was the surviving corporation. GWC's principal assets included 100% of the stock of General Waterworks Corporation (presently known as United Waterworks), which owns regulated water and wastewater utilities operating in 14 states, and a 25% indirect investment in JMM Operational Services, Inc. (JMM). JMM provides operations and management services to government and industry for water and wastewater treatment facilities. The Merger was accounted for under the purchase method and resulted in the recording of a utility plant acquisition adjustment of $67 million. In exchange for the common stock of GWC that was issued and outstanding immediately preceding the Merger, United Water (i) issued 9,295,860 shares of United Water common stock, (ii) issued 3,341,078 shares of United Water 5% cumulative convertible preference stock, with a liquidation price of $13.794 per share, and (iii) paid former shareholders of GWC $8.9 million in cash. In addition, each share of GWC 7 5/8% cumulative preferred stock outstanding at the time of the Merger was converted into one fully paid non-assessable share of United Water 7 5/8% cumulative preferred stock, with equal stated dividends and substantially similar rights, privileges, qualifications and restrictions. Prior to the Merger, Lyonnaise American Holding, Inc. (LAH), a Delaware corporation and a wholly-owned subsidiary of Lyonnaise des Eaux, a French societe anonyme, owned approximately 81.9% of GWC's common stock. The remaining 18.1% of GWC's common stock was publicly traded. On the date of the Merger, LAH converted 70% of its shares of GWC common stock into United Water common stock and the remainder of its shares of GWC common stock into United Water 5% cumulative convertible preference stock. Immediately after the Merger, LAH owned approximately 25.4% of the issued and outstanding United Water common stock and approximately 97.7% of the issued and outstanding United 27 United Water Resources Inc. Water 5% cumulative convertible preference stock. A twelve year Governance Agreement between LAH and United Water contains a number of restrictions, including restrictions on when LAH can convert its preference shares into United Water common stock and on LAH's ability to buy or sell United Water common stock or preference stock. The financial results of the former subsidiaries of GWC are included in United Water's financial results beginning April 1, 1994. The following unaudited pro forma condensed income statement information gives effect to the Merger as if it had occurred at the beginning of 1994 and 1993. Pro forma results are not necessarily indicative of what actually would have occurred had the acquisition been in effect for the periods presented. In addition, the pro forma results are not intended to be a projection of future results.
(thousands of dollars except per share data) 1994 1993 -------- ---------- (Unaudited) Operating revenues $322,192 $325,762 Operating income 89,442 93,051 Net income applicable to common stock 27,724 31,360 Net income per common share $ .91 $ 1.09 -------- ----------
28 United Water Resources Inc. NOTE 3 - NOTES PAYABLE United Water and its subsidiaries have a number of credit lines with banks. Borrowings under these credit lines generally bear interest at rates between the London Interbank Offered Rate (LIBOR) and the prime lending rate. United Water maintains balances and pays commitment fees under arrangements with certain of these banks to compensate them for services and to support these lines of credit. There are no legal restrictions placed on the withdrawal or other use of these bank balances. The total credit lines, the amounts outstanding and the range of interest rates at December 31 were as follows:
(thousands of dollars) 1994 1993 ------------ ------------ Total credit lines $189,200 $73,000 Outstanding 76,450 15,500 Interest rates 6.2% TO 6.9% 3.5% to 4.4% ------------ ------------
29 United Water Resources Inc. NOTE 4 - LONG-TERM DEBT The long-term debt repayments over each of the next five years are as follows: 1995-$9.9 million; 1996-$13.6 million; 1997-$29.7 million; 1998-$23.7 million and 1999-$25.3 million. Substantially all of the utility plant of United Water New Jersey and United Water New York is subject to first mortgage liens, and both companies, as well as United Waterworks and other subsidiaries of United Water, are subject to certain restrictive covenants related to debt issued by those subsidiaries. In July 1993, United Water New Jersey redeemed $10 million of its $20 million, 9 3/4% Series, First Mortgage Bonds, due in 2006, and redeemed the remaining $10 million in January 1994. In April 1994, United Water New Jersey refinanced $40 million of tax-exempt bonds, using the proceeds from the issuance of $20 million of 5.8% bonds and $20 million of 5.9% bonds, both due in 2024. In June 1994, United Water New York refinanced $27 million of 1988 New York State Environmental Facilities Corporation (New York EFC) 7.7% - 8% notes, due in 2018, by issuing $12 million of 6.15% notes and $15 million of 6.3% notes, both due in 2024. In October 1994, the Idaho Water Resources Board issued $20 million of 6.4% tax- exempt bonds on behalf of United Waterworks, due in 2024, to finance certain capital expenditures of United Water Idaho (formerly Boise Water Corporation), a subsidiary of United Waterworks. In December 1994, United Waterworks entered into a private placement medium-term note program that will enable United Waterworks to issue up to $75 million of debt with terms ranging from 9 months to 30 years. The interest rates will be set as notes are issued under this program. 30 United Water Resources Inc. In December 1994, United Water Mid-Atlantic issued $5.5 million of long-term debt, maturing in 2004. The interest rate floats, based on LIBOR or a treasury rate index, and was 7.125% at December 31, 1994. In November 1993, United Properties repaid $1.5 million of an existing $9.5 million mortgage on an office building and refinanced the remaining $8 million with a floating rate term loan, due in 2000. The interest rate (7% at December 31, 1994) is established every 30 days and is based on LIBOR plus a premium. In December 1993, the New York EFC issued $12 million of 5.65%, tax-exempt Water Facilities Revenue Bonds, due in 2023. The bonds, which have optional redemption provisions, were issued on behalf of United Water New York to finance construction programs through 1995 and are insured as to the payment of interest and principal by the AMBAC Indemnity Corporation. NOTE 5 - CAPITAL EXPENDITURES The future net capital expenditures of the Company's utility subsidiaries are projected to aggregate $301 million over the next five years, including $56 million and $63 million, respectively, in 1995 and 1996. United Properties currently projects spending $43.4 million over the next five years for capital expenditures on its existing real estate portfolio, including $3.6 million and $17.4 million, respectively, in 1995 and 1996. 31 United Water Resources Inc. NOTE 6 - PREFERRED AND PREFERENCE STOCK The utility subsidiaries of the Company have issued and outstanding cumulative preferred stock, generally with mandatory redemption provisions requiring annual sinking fund payments. These sinking fund requirements total $260,000 in each of the years 1995 through 1997 and $2,073,000 in each of 1998 and 1999. The redemption of cumulative preferred stock was $260,000 in each of 1994 and 1993 and $880,000 in 1992. In addition, except as described in the next paragraph, optional sinking fund provisions can be exercised and redemptions made at specific prices for all preferred stock issues. Redemptions require payment of accrued and unpaid dividends to the date fixed for redemption. As discussed in Note 2, the Merger resulted in the issuance by United Water of 3,341,078 shares ($46 million par value) of 5% Series A cumulative convertible preference stock, valued at $43.3 million at the time of the Merger and $30 million of 7 5/8% Series B cumulative preferred stock, valued at $31.1 million at the time of the Merger. LAH owns 97.7% of the Series A preference stock outstanding. The Series B preferred stock has a $1.5 million mandatory annual redemption commencing in 1998. Shares of the Series B preferred stock may not be redeemed by the Company prior to September 1, 1997. Each share of the Series A preference stock outstanding may be converted into .83333 shares of United Water common stock at any time commencing April 22, 1996. However, under the Governance Agreement between United Water and LAH, LAH may convert 10% of the Series A preference stock it owns during the year commencing April 22, 1996, and an additional 10% cumulatively per year thereafter until April 22, 2003, at which time these conversion restrictions end. United Water may not redeem any of the outstanding, unconverted Series A preference stock prior to maturity on April 22, 2004. 32 United Water Resources Inc. NOTE 7 - INCENTIVE STOCK PLANS Under the Company's management incentive plan, the following options have been granted to key employees:
Number of Exercise price options per option ---------- ---------------- Outstanding at December 31, 1991 350,245 $11.375 to 17.00 Granted 196,710 16.375 Exercised (72,867) 11.375 to 12.27 Canceled or expired (34,576) 11.375 to 17.00 ---------- ---------------- Outstanding at December 31, 1992 439,512 $11.375 to 17.00 Granted 114,960 14.50 to 15.50 Exercised (18,654) 11.375 to 12.27 Canceled or expired (1,255) 17.00 ---------- ---------------- Outstanding at December 31, 1993 534,563 $11.375 to 17.00 Granted 183,910 13.75 to 14.50 Exercised (2,900) 11.375 Canceled or expired (10,781) 11.375 to 17.00 ---------- ---------------- OUTSTANDING AT DECEMBER 31, 1994 704,792 $11.375 TO 17.00 ---------- ----------------
All options are currently exercisable and represent the only stock options outstanding at December 31, 1994. A total of 1,140,625 common shares are reserved for issuance under the management incentive plan. In May 1993, the shareholders approved the creation of dividend units to be issued in conjunction with stock options granted under the management incentive plan. One dividend unit may be attached to each unexercised option to purchase a share of United Water common stock, and entitles the option holder to accrue, as a credit against the option exercise price, the aggregate dividends actually paid on a share of United Water common stock while the dividend unit is in effect. The dividend units are designed to create an incentive for option holders to exercise their options and ties that incentive to the dividend payments 33 on the common stock. United Water recorded compensation expense of $274,000 in 1994 and $47,000 in 1993 with respect to the management incentive plan. In May 1988, the shareholders approved a restricted stock plan for certain key employees. United Water issued 3,750 shares in 1994, 7,500 shares in 1993 and 16,353 shares in 1992 in connection with the restricted stock plan. Such shares are earned by the recipients over a 5-year period. United Water recorded compensation expense of $93,000 in 1994, $301,000 in 1993 and $241,000 in 1992 with respect to this restricted stock plan. NOTE 8 - SHAREHOLDER RIGHTS PLAN In July 1989, the board of directors of United Water approved a Shareholder Rights Plan designed to protect shareholders against unfair and unequal treatment in the event of a proposed takeover. It also guards against partial tender offers and other hostile tactics to gain control of United Water without paying all shareholders a fair price. Under the plan, each share of United Water's common stock also represents one Series A Participating Preferred Stock Purchase Right (Right) until the Rights become exercisable. The Rights attach to all of United Water's common stock outstanding as of August 1, 1989, or subsequently issued, and expire on August 1, 1999. The Rights would be exercisable only if a person or group acquired 20% or more of United Water's common stock or announced a tender offer that would lead to ownership by a person or group of 20% or more of the common stock. 34 United Water Resources Inc. In certain cases where an acquirer purchased more than 20% of United Water's common stock, the Rights would allow shareholders (other than the acquirer) to purchase shares of United Water's common stock at 50% of market price, diminishing the value of the acquirer's shares and diluting the acquirer's equity position in United Water. If United Water were acquired in a merger or other business combination transaction, under certain circumstances the Rights could be used to purchase shares in the acquirer at 50% of the market price. Subject to certain conditions, if a person or group acquired 20% or more of United Water's common stock, United Water's board of directors may exchange each Right held by shareholders (other than the acquirer) for one share of common stock or 1/100 of a share of Series A Participating Preferred Stock. If an acquirer successfully purchased 80% of United Water's common stock after tendering for all of the stock, the Rights would not operate. If holders of a majority of the shares of United Water's common stock approved a proposed acquisition under specified circumstances, the Rights would be redeemed at one cent each. They could also be redeemed by United Water's board of directors for one cent each at any time prior to the acquisition of 20% of the common stock by an acquirer. On September 15, 1993, United Water's Shareholder Rights Plan was amended in connection with United Water's execution of a merger agreement with GWC Corporation. The amendment generally excepts the majority stockholder of GWC Corporation and its affiliates and associates from triggering the Rights through the execution of the merger agreement, the performance of the transactions contemplated therein or otherwise. 35 United Water Resources Inc. NOTE 9 - EMPLOYEE BENEFITS POSTRETIREMENT BENEFIT PLANS OTHER THAN PENSIONS: In January 1993, the Company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." This standard requires that employers recognize these benefits on an accrual basis rather than on a cash basis. The Company sponsors a defined benefit postretirement plan that covers hospitalization, major medical benefits and life insurance benefits for salaried and non-salaried employees. The Company is funding a portion of its postretirement health care benefits through contributions to Voluntary Employees' Beneficiary Association (VEBA) Trusts. Effective January 1, 1995, the Company made a number of changes to its medical plan for active employees and retirees. These amendments include the requirement that active employees and retirees pay a greater share of the cost of their medical coverage. The following sets forth the plan's funded status and reconciles that funded status to the amounts recognized in the Company's balance sheet as of December 31:
(thousands of dollars) 1994 1993 --------- -------- Accumulated postretirement benefit obligation (APBO): Retirees $(11,983) $(14,242) Fully eligible actives (11,461) (8,482) Other actives (16,593) (12,307) -------- -------- Total (40,037) (35,031) Plan assets at fair value 7,123 4,724 -------- -------- Funded status (32,914) (30,307) Unrecognized transition obligation 23,503 28,823 Unrecognized (gain) loss (600) 2,585 -------- -------- (Accrued) prepaid postretirement benefit cost $(10,011) $ 1,101 -------- --------
36 United Water Resources Inc. Net periodic postretirement benefit cost for 1994 and 1993 included the following components:
(thousands of dollars) 1994 1993 -------- ------- Service cost $1,362 $ 761 Interest cost 3,226 2,455 Actual return on plan assets 103 (106) Amortization of transition obligation 1,512 1,517 Net amortization and deferral (476) (65) ------ ------ Net periodic postretirement benefit cost $5,727 $4,562 -------- -------
The assumed discount rate and expected return on assets used in determining the APBO were as follows:
1994 1993 ---- ---- Assumed discount rate 9.0% 7.75% Expected return on assets 8.25% 8.25% ---- ----
The associated health care cost trend rate used in measuring the postretirement benefit obligation at December 31, 1994 was 13.3%, gradually declining to 5.5% in 2002 and thereafter. Increasing the assumed health care cost trend rate by one percentage point in each year would increase the APBO as of December 31, 1994 by $4.9 million, to a total of $44.9 million, and the aggregate service and interest cost components of net periodic postretirement benefit cost for 1994 by $778,000, to a total of $6.5 million. Postretirement health care costs in excess of those currently included in rates have been deferred in those jurisdictions where their recovery is deemed probable. At December 31, 1994 and 1993, United Water New Jersey and United Water New York had deferred balances of $6.5 million and $3.4 million, respectively, for recovery in future rates. Prior to the Merger, GWC had not adopted SFAS No. 106 because it did not consider the impact of adopting SFAS No. 106 to be material. However, at the date of the Merger, GWC's postretirement benefit obligation was recalculated using revised assumptions and the Company recorded both the unfunded liability and an estimate of the amount of that liability expected to be recoverable in the regulatory process. Because of the rate recovery mechanism, the adoption of SFAS No. 106 has not had a material effect on the Company's consolidated net income. 37 United Water Resources Inc. DEFINED BENEFIT PENSION PLANS: Most of United Water's employees are covered by trusteed, non-contributory, defined benefit pension plans. Benefits under these plans are based upon years of service and the employee's compensation during the last five years of employment. United Water's policy is to fund amounts accrued for pension expense to the extent deductible for federal income tax purposes. It is expected that no funding will be made for 1994. The components of net periodic pension cost were as follows:
(thousands of dollars) 1994 1993 1992 -------- -------- -------- Current year service cost $ 3,456 $ 1,941 $ 2,166 Interest cost 7,829 4,564 4,318 Actual return on plan assets 818 (5,043) (1,865) Net amortization and deferral (12,552) (3,535) (6,775) -------- ------- ------- Net periodic pension income $ (449) $(2,073) $(2,156) -------- -------- --------
38 The status of the funded plans at December 31 was as follows:
(thousands of dollars) 1994 1993 -------- -------- Accumulated benefit obligation: Vested $ 80,643 $ 44,422 Non-vested 5,674 3,493 -------- -------- Total $ 86,317 $ 47,915 -------- -------- Fair value of plan assets (primarily stocks and bonds, including $7.2 million and $8.1 million, respectively, in common stock of United Water) $134,522 $ 86,568 Projected benefit obligation (PBO) 103,617 61,008 -------- -------- Plan assets in excess of PBO 30,905 25,560 Unrecognized prior service cost 775 639 Unrecognized net gain (14,146) (13,593) Remaining unrecognized net transition asset from applying the standard in 1987 (amortized over 18 years) (6,076) (6,704) -------- -------- Prepaid pension cost recognized in the consolidated balance sheet $ 11,458 $ 5,902 -------- --------
The major actuarial assumptions used in the foregoing calculations were as follows:
1994 1993 1992 ----- ----- ------- Assumed discount rate 9% 7.5% 7.75% Assumed range of compensation increase 4.5-5% 4.5-5% 4.5-7.5% Expected long-term rate of return on plan assets 8.75% 8.75% 8.75% ----- ----- -------
39 United Water Resources Inc. SUPPLEMENTAL BENEFIT PLANS: Certain categories of employees are covered by non- funded supplemental plans. The projected benefit obligations of these plans at December 31, 1994 totaled $5.4 million. The unfunded accumulated benefit obligation of $4.7 million has been recorded in other deferred credits and liabilities and an intangible pension asset of $776,000 is included in deferred charges and other assets at December 31, 1994. United Water made contributions of $921,000, $552,000 and $562,000 in 1994, 1993 and 1992, respectively, to defined contribution savings plans. 40 United Water Resources Inc. Note 10 - RATE MATTERS In October 1993, United Water New Jersey was granted a rate increase of approximately $3.5 million, or 3.1%. This increase, which resulted from the settlement of a dispute involving a transfer of land from United Water New Jersey to United Properties, had no cash flow effect on United Water in 1994 because offsetting credits related to the settlement are being applied to customer bills until late in 1995. In May 1993, United Water New York was granted a rate increase of approximately $1.9 million, or 5.7%. The New York PSC also allowed United Water New York to recover approximately $850,000 of previously deferred expenses and required it to refund certain revenue credits of approximately $1 million. This action, which resulted in a one-time increase in revenues and various expenses during 1993, did not have a material effect on net income. Twelve rate increases were awarded to the Company's regulated utilities during 1994, representing an aggregate annual revenue increase of $8.1 million. An estimated $3.2 million of this amount was reflected in 1994's revenues while the remaining $4.9 million of carryover impact of the rate awards received in 1994 is expected to increase revenues in 1995. 41 United Water Resources Inc. NOTE 11 - INCOME TAXES CURRENT AND DEFERRED INCOME TAX ASSETS AND LIABILITIES: The components of the total recoverable income taxes at December 31 are as follows:
(thousands of dollars) 1994 1993 -------- -------- Differences previously flowed- through, including AFUDC and effect of statutory rate changes $ 58,757 $32,331 Deferred investment tax credit (10,462) (5,947) -------- ------- Recoverable income taxes $ 48,295 $26,384 -------- -------
Deferred tax liabilities (assets) and deferred investment tax credits were comprised of the following at December 31:
(thousands of dollars) 1994 1993 -------- --------- Basis differences of property, plant and equipment $110,254 $ 65,811 Real estate transactions and capitalized costs 19,083 17,533 Other liabilities 27,760 18,559 -------- -------- Gross deferred tax liabilities 157,097 101,903 -------- -------- Alternative minimum tax credit carryforwards (7,968) (6,779) Other assets (10,104) (7,148) -------- -------- Gross deferred tax assets (18,072) (13,927) -------- -------- Deferred investment tax credits 23,995 16,888 -------- -------- Total deferred tax liability and investment tax credits $163,020 $104,864 -------- --------
42 United Water Resources Inc. INCOME TAX PROVISION: A reconciliation of income tax expense at the statutory federal income tax rate to the actual income tax expense for 1994, 1993 and 1992 is as follows:
(thousands of dollars) 1994 1993 1992 -------- -------- ------- Statutory tax rate 35% 35% 34% Federal taxes at statutory rates on pretax income before preferred stock dividends of subsidiaries $19,015 $12,214 $8,815 Utility plant acquisition adjustment 644 -- -- State income taxes, net of federal benefit 521 487 144 Deferred investment tax credits (477) (298) (428) Other 968 177 (477) ------- ------- ------ Provision for income taxes $20,671 $12,580 $8,054 ------- ------- ------ Income tax expense for 1994, 1993 and 1992 consisted of the following: (thousands of dollars) 1994 1993 1992 ------- ------- ------ Current: Federal $ 9,897 $ 1,562 $2,000 State 890 751 (11) ------- ------- ------ Total current $10,787 $ 2,313 $1,989 ------- ------- ------ Deferred (prepaid): Accelerated depreciation $ 7,779 $ 5,144 $4,627 Contributions and advances for construction (4,148) 509 (375) Prepaid employee benefits 1,775 1,772 1,682 Real estate transactions and capitalized costs 1,466 3,613 1,023 Alternative minimum tax (1,261) (2,184) (781) Investment tax credits (477) (298) (428) State income taxes, net of federal benefit 37 (258) 144 Other 4,713 1,969 173 ------- ------- ------ Total deferred $ 9,884 $10,267 $6,065 ------- ------- ------ Total provision for income taxes $20,671 $12,580 $8,054 ------- ------- ------
The Company's federal income tax returns for 1989, 1990 and 1991 are currently under examination by the Internal Revenue Service. Management believes that the outcome of this examination will not have a material effect upon the consolidated financial position of United Water. 43 United Water Resources Inc. NOTE 12 - FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amount at December 31, 1994 of those current assets and liabilities which are considered financial instruments approximates their fair value at that date because of the short maturity of those instruments. Such current assets and liabilities include cash and cash equivalents, accounts receivable and unbilled revenues, notes payable, accounts payable and accrued interest and other current liabilities. Real estate and other investments consist primarily of real estate and investments in affiliates accounted for using the equity method of accounting, substantially all of which are not financial instruments. The Company understands that there are no quoted market prices for the Company's preferred stock, preference stock or long-term debt. The fair values of the Company's long-term debt and preferred and preference stock have been determined by discounting their future cash flows using approximate current market interest rates for securities of a similar nature and duration. The estimated fair values of United Water's financial instruments at December 31 are as follows:
Carrying Fair (thousands of dollars) amount value -------- -------- 1994 Long-term debt $505,204 $514,200 Preferred and preference stock with mandatory redemption 98,173 92,700 -------- -------- 1993 Long-term debt $276,753 $304,000 Preferred stock with mandatory redemption 23,840 27,100 -------- --------
The Company's customer advances for construction have a carrying value of $30,459 and $9,319 at December 31, 1994 and 1993, respectively. Their relative fair values cannot be accurately estimated since future refund payments depend on several variables, including new customer connections, customer consumption levels and future rate increases. 44 United Water Resources Inc. NOTE 13 - LEASES United Properties owns several office buildings, with an aggregate net book value of $45.2 million (net of accumulated depreciation of $6.4 million), which are leased to tenants under various operating leases. The following is a schedule, by year, of the minimum future rental income on non-cancelable operating leases outstanding at December 31, 1994:
(thousands of dollars) 1995 $ 5,288 1996 6,018 1997 5,945 1998 5,481 1999 4,421 Thereafter 4,020 ------- Total minimum future rentals $31,173 -------
United Water's total consolidated rental expense was approximately $1,661,000 in 1994, $332,000 in 1993 and $320,000 in 1992. The minimum future lease payments under all non-cancelable operating leases at December 31, 1994 are as follows:
(thousands of dollars) 1995 $1,809 1996 1,590 1997 1,414 1998 859 1999 668 Thereafter 355 ------ Total minimum future lease payments $6,695 ------
45 United Water Resources Inc. NOTE 14 - POSSIBLE CONDEMNATION United Waterworks owns a utility subsidiary which provides water and wastewater services to customers in Rio Rancho, New Mexico. The city of Rio Rancho (the City) notified United Waterworks that it intends to acquire the Company's utility operations, and on October 28, 1994 commenced condemnation proceedings. On December 15, 1994, the City filed an amended petition for condemnation seeking immediate possession of the Company's utility system. The Company has responded to the court that the City's petition should be denied. New Mexico's condemnation laws require that the City pay the Company fair market value for any assets that are taken by the City in a condemnation proceeding. Consequently, the Company expects that any condemnation, or sale in lieu of condemnation, should result in the Company at least recovering the book value of its Rio Rancho utility. In 1994, the Company's Rio Rancho utility had revenues of $11.6 million. 46 United Water Resources Inc.
NOTE 15 - SEGMENT INFORMATION Parent, Other Real Operations and (thousands of dollars) Utilities Estate Eliminations Consolidated ---------- -------- -------------- ------------ 1994 Operating revenues $ 262,133 $ 11,854 $19,009 $ 292,996 Income before income taxes 51,035 3,552 (2,575) 52,012 Depreciation and amortization 22,522 1,210 1,465 25,197 Capital expenditures 57,959 6,828 2,122 66,909 Identifiable assets 1,328,020 97,555 31,852 1,457,427 ---------- -------- ------------ ------------ 1993 Operating revenues $ 154,497 $ 33,963 $11,958 $ 200,418 Income before income taxes 29,073 6,024 (2,539) 32,558 Depreciation and amortization 11,854 1,272 1,150 14,276 Capital expenditures 15,993 5,240 1,701 22,934 Identifiable assets 614,766 106,342 19,418 740,526 ---------- -------- ------------ ------------ 1992 Operating revenues $ 143,300 $ 10,759 $10,810 $ 164,869 Income before income taxes 25,193 1,803 (3,158) 23,838 Depreciation and amortization 11,396 1,292 1,262 13,950 Capital expenditures 14,075 5,523 1,984 21,582 Identifiable assets 559,992 123,244 8,423 691,659 ---------- -------- ------------ ------------
47 United Water Resources Inc. QUARTERLY FINANCIAL INFORMATION (Unaudited)
QUARTER ---------------------------------- (thousands except per share data) FIRST SECOND THIRD FOURTH ------- ------- ------- ------- 1994 Operating revenues $39,015 $82,397 $93,487 $78,097 Operating income 7,069 23,665 33,534 19,168 Net income applicable to common stock 2,367 7,739 14,094 3,687 Net income per common share $ .12 $ .28 $ .46 $ .12 ------- ------- ------- ------- 1993 Operating revenues $35,895 $43,341 $78,225 $42,957 Operating income 6,930 12,567 24,791 11,072 Net income applicable to common stock 706 3,924 11,206 4,142 Net income per common share $ .04 $ .20 $ .57 $ .21 ------- ------- ------- ------- 1992 Operating revenues $36,636 $42,472 $44,703 $41,058 Operating income 7,704 12,166 15,295 11,351 Net income applicable to common stock 1,525 4,119 6,156 3,984 Net income per common share $ .09 $ .23 $ .34 $ .21 ------- ------- ------- -------
48 United Water Resources Inc. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND - ------- ----------------------------------------------------------------------- FINANCIAL DISCLOSURE --------------------- There were no changes in or disagreements with accountants on accounting and financial disclosure in 1994. 49 United Water Resources Inc. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - -------- -------------------------------------------------------- ITEM 11. EXECUTIVE COMPENSATION - -------- ----------------------- ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - -------- -------------------------------------------------------------------- ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------- -------------------------------------------------- The information called for by Items 10 (including information relating to delinquent filers under Section 16 of the Securities Exchange Act of 1934), 11, 12 and 13 is omitted because the registrant will file with the Securities and Exchange Commission, not later than 120 days after the close of the year covered by this Form 10-K, a definitive proxy statement pursuant to Regulation 14A involving the election of directors. In determining which persons may be affiliates of the registrant for the purpose of disclosing on the cover page of this Form 10-K the market value of voting shares held by non-affiliates, the registrant has excluded shares held by the members of its Board of Directors, executive officers and beneficial owners of more than 10% of the common stock outstanding to the extent that they have not disclaimed beneficial ownership. No determination has been made that any director or person connected with a director is an affiliate or that any other person is not an affiliate. The registrant specifically disclaims any intent to characterize any person as being or not being an affiliate. 1 S I G N A T U R E S Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized. UNITED WATER RESOURCES INC. --------------------------- (Registrant) March 16, 1995 By DONALD L. CORRELL --------------------- ----------------------------------- Donald L. Correll Chairman , President and Chief Executive 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. SIGNATURE TITLE DATE --------- ----- ---- Chairman, President DONALD L. CORRELL and Chief Executive Officer March 16, 1995 - --------------------------- (Donald L. Correll) Secretary DOUGLAS W. HAWES and Director March 16, 1995 - --------------------------- (Douglas W. Hawes) JOHN J. TURNER Treasurer March 16, 1995 - --------------------------- (John J. Turner) DIRECTORS --------- EDWARD E. BARR 3/16/95 ROBERT A. GERBER 3/16/95 - --------------------------- ------- ------------------------ ------- (Edward E. Barr) Date (Robert A. Gerber) Date FRANK J. BORELLI 3/16/95 JON F. HANSON 3/16/95 - --------------------------- ------- ------------------------ ------- (Frank J. Borelli Date (Jon F. Hanson) Date PHILIPPE BRONGNIART 3/16/95 GEORGE M. HASKEW, JR. 3/16/95 - --------------------------- ------- ------------------------ ------- (Philippe Brongniart) Date (George M. Haskew, Jr.) Date LAWRENCE R. CODEY 3/16/95 DOUGLAS W. HAWES 3/16/95 - --------------------------- ------- ------------------------ ------- (Lawrence R. Codey) Date (Douglas W. Hawes) Date DONALD L. CORRELL 3/16/95 DENNIS M. NEWNHAM 3/16/95 - --------------------------- ------- ------------------------ ------- (Donald L. Correll) Date (Dennis M. Newnham) Date PETER DEL COL 3/16/95 JACQUES F. PETRY 3/16/95 - --------------------------- ------- ------------------------ ------- (Peter Del Col) Date (Jacques F. Petry) Date ALLAN R. DRAGONE 3/16/95 MARCIA L. WORTHING 3/16/95 - --------------------------- ------- ------------------------ ------- (Allan R. Dragone) Date (Marcia L. Worthing) Date ROBERT L. DUNCAN, JR. 3/16/95 - --------------------------- ------- (Robert L. Duncan, Jr.) Date 2 United Water Resources Inc. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM - -------- ------------------------------------------------------------------ 8-K --- The following documents are filed as part of this report: (a) Financial Statements and Supplementary Data: See Item 8 (b) Reports on Form 8-K filed in the fourth quarter of 1994: None (c) Exhibits: 3(i)(a) Restated Certificate of Incorporation (Articles of Incorporation) of United Water Resources Inc., dated July 14, 1987 (Filed as Exhibit 4(b) to Registration Statement No. 33-20067.) 3(i)(b) Certificate of Correction to Restated Certificate of Incorporation of United Water Resources Inc., dated August 13, 1987 (Filed as Exhibit 4(c) to Registration Statement No. 33-20067). 3(ii) Amended By-laws of United Water Resources dated as of March 10, 1994 (Filed as Exhibit 4(l) to Form 10-K for year ended December 31, 1993). 4(a) Specimen of United Water Resources Common Stock (Filed as Exhibit 4(d) to Registration Statement No. 2-90540). 4(b) Governance Agreement between United Water Resources and Lyonnaise American Holding, Inc., dated April 22, 1994 (Filed in Appendix A to Registration Statement No. 33-51703). 4(c) Additional instruments defining rights of holders of the Company's long-term debt are not being filed because the securities authorized under each such agreement do not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. The Company agrees to furnish to the Commission a copy of each such agreement upon request. 10(a) Employment Agreement between and among United Water Resources Inc. its Subsidiaries and Affiliates and Donald L. Correll 10(b) Employment Agreement by and between General Waterworks Corporation and Ronald S. Dungan 10(c) Executive Employment Agreement by and between United Water Resources and Richard B. McGlynn 21 Subsidiaries of registrant 23 Consent of Independent Accountants 27 Financial Data Schedule 1 U N I T E D W A T E R R E S O U R C E S I N C. SCHEDULE VIII - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS (THOUSANDS OF DOLLARS)
DECEMBER 31, ------------------------------ 1994 1993 1992 ---- ---- ---- ALLOWANCE FOR DOUBTFUL ACCOUNTS: Balance at beginning of period $1,273 $1,272 $1,014 Charges to costs and expenses 1,970 1,278 1,435 Accounts written off (2,071) (1,460) (1,366) Recoveries of accounts written off 201 183 189 ------ ------ ------ BALANCE AT END OF PERIOD $1,373 $1,273 $1,272 ====== ====== ====== REAL ESTATE VALUATION RESERVE: Balance at beginning of period $4,111 $ --- $ --- Charges to costs and expenses --- 4,111 --- Sales of properties (845) --- --- ====== ====== ====== BALANCE AT END OF PERIOD $ 3,266 $4,111 $ --- ======= ====== ======
2 EX-10.A 2 EMPL AGREMNT AMONG UNITED WATER & DONALD L. CORRELL Exhibit 10 (a) EMPLOYMENT AGREEMENT BETWEEN AND AMONG UNITED WATER RESOURCES INC. ITS SUBSIDIARIES AND AFFILIATES AND DONALD L. CORRELL 1 THIS AGREEMENT, made effective as of January 1, 1988 between and among UNITED WATER RESOURCES INC. (the "Company"), a New Jersey corporation, its subsidiaries and affiliates (the Company and its subsidiaries and affiliates, hereinafter collectively called the "Companies") and DONALD L. CORRELL (the "Employee"), WITNESSETH THAT: WHEREAS, the Employee is a principal officer of one or more of the Companies and an integral part of management who participates in the decision making process relative to short and long term planning and policy; and WHEREAS, the Board of Directors of the Company (the "Board"), at its meeting on February 4, 1988, determined that it would be in the best interests of the Company and its shareholders to assure continuity in the management of the administration and operations of the Companies by entering into an employment agreement to retain the services of the Employee containing such terms and conditions as are hereinafter set forth; and WHEREAS, the respective boards of directors of each of the Company's subsidiaries and affiliates have determined that it would also be in the best interests of such subsidiaries and affiliates to enter into such agreement with the Employee; and WHEREAS, the Companies wish to assure themselves of the continued services of the Employee for the period hereinafter provided, and the Employee is willing to continue in the employ of one or more of the Companies for said period, upon the other terms and conditions provided in this Agreement; NOW, THEREFORE, it is hereby agreed between and among the parties hereto as follows: 1. Employment. The Companies agree to continue the Employee in the ---------- employ of one or more of the Companies, and the Employee agrees to remain in the employ of one or more of the Companies, for the "Period of Employment" (as hereinafter defined) and upon the other terms and conditions herein provided. 2. Position and Responsibilities. During the Period of Employment, the ----------------------------- Employee agrees to serve the Companies in such executive capacity or capacities involving rank, duties and responsibilities at least equal in importance and scope to those of the Employee's position or positions with the Companies at the date first written above, as the Board, the Chairman of the Board and Chief Executive Officer or any other board or executive officer of the Companies to whom the Employee reports may from time to time determine. During the Period of Employment, the Employee also agrees to serve, if elected, as a director of one or more of the Companies. 3. Term and Duties. (A) The period of the Employee's employment under --------------- this Agreement shall be from January 1, 1988 through December 31, 1989, subject to extension or termination as hereinafter 2 provided (the "Period of Employment"). On January 1, 1989, and on the first day of each calendar year thereafter (the "Subsequent Year"), the Period of Employment shall be automatically extended by one additional year (i.e. to include a period of twenty-four (24) months commencing on the first day of each Subsequent Year) unless, prior to January 1, 1989 or the first day of any Subsequent Year the Company shall deliver to the Employee or the Employee shall deliver to the Company written notice that the Period of Employment will not be further extended, in which case the Period of Employment will end twenty-four (24) months after the last day of the month in which such notice was delivered, and shall not be further extended except by agreement of the Companies and the Employee. Notwithstanding the above, in no event shall the Period of Employment extend beyond the Employee's sixty-fifth (65) birthday, except by agreement of the Companies and the Employee. (B) During the Period of Employment and except for illness or incapacity and reasonable vacation period, the Employee's business time, attention, skill and efforts shall be devoted exclusively to the business and affairs of the Companies by which the Employee is employed; provided, however, that nothing in this Agreement shall preclude the Employee from devoting time during the reasonable period required for (i) serving as an officer, director or member of a committee of any company or organization involving no conflict of interest with the Company or any of its subsidiaries or affiliates, provided the Employee is requested by the Company to so serve, and (ii) delivery lectures and fulfilling speaking engagements, and (iii) engaging in charitable and community activities, provided that the Employee's devotion of such time does not materially affect or interfere with the Employee's performance of duties and satisfaction of obligations hereunder to the Companies. 4. Compensation. (A) For all services rendered by the Employee in any ------------ capacity or capacities during the Period of Employment, including services as an executive, officer, director, or member of any committee of the Company and any subsidiary or affiliate thereof, the Companies shall pay the Employee as total compensation (i) a fixed salary at the rate of not less than One Hundred Seventeen Thousand Eight Hundred Dollars ($117,800.00) per year, subject to such periodic increases as the respective boards of directors of the Companies by which the Employee is employed shall deem appropriate in accordance with applicable procedures and practices regarding salaries of senior management of the Companies, and (ii) such incentive compensation and bonuses, if any, as may be awarded to the Employee from time to time by such boards in accordance with applicable procedures and practices regarding incentive compensation and bonus awards to 3 key employees of the Companies. Such fixed salary shall be payable in accordance with the applicable payroll practices of the respective Companies by which the Employee is employed, but in no event less frequently than monthly. Such incentive compensation and bonuses, if any, shall be payable in the manner specified by said boards at the time of any such award. Except as otherwise provided in this Agreement, periodic increases in salary, once granted, shall not be subject to reduction or revocation. (B) In addition, during the Period of Employment the Employee shall have any rights or benefits that may now or hereafter be provided the Employee, or for which the Employee may be or become eligible under any of the Companies': (i) group medical, hospitalization, health, vision, dental care, life, disability or other insurance plans; (ii) termination pay programs, stock purchase, incentive pay, thrift or savings, employee stock ownership, retirement income or pension plans; or (iii) other employee benefit plans or programs now existing or that may hereafter be adopted by the Company or any of its subsidiaries or affiliates. Specifically, the Employee shall continue to participate in each of the plans and programs listed below in which the Employee participated as of the date first written above; provided, however, that such continued participation, if any, shall be in accordance with the applicable terms and conditions of such plans and programs: (a) The Hackensack Water Company and Subsidiaries Employees' Retirement Plan - Executive, Supervisory and Other Employees Not Represented by a Bargaining Agent (the "Retirement Plan"); (b) The Hackensack Water Company Supplemental Retirement Benefits Plan for certain key executives (the "SRP"); (c) The Employees' Thrift Plan of Hackensack Water Company and Spring Valley Water Company Incorporated (the "Thrift Plan"); (d) The United Water Resources, Inc. Employee Stock Ownership Plan (the "ESOP"); (e) The United Water Resources, Inc., Rivervale Realty, Inc. and Laboratory Resources, Inc. Management Incentive Plans (the "MIP"); (f) The group life insurance plan maintained by Hackensack Water Company; (g) The long term disability benefit plan maintained by Hackensack Water Company; (h) The group medical, dental and health plans maintained by Hackensack Water Company; and 4 (i) Any equivalent or similar plan or program which is a successor to any of the above, in which senior management employees of the Companies are generally eligible to participate; provided, however, that nothing in this Agreement shall preclude the Company or any of its subsidiaries or affiliates from amending or terminating any such plan or program, on the condition that such amendment or termination is applicable generally to all of the senior management employees of the Company and its subsidiaries and affiliates. 5. Business Expenses. The Companies shall pay or reimburse the Employee ----------------- for all reasonable travel and other expenses incurred in connection with the performance of the Employee's duties under this Agreement in accordance with such procedures as the Companies may from time to time establish. The Companies agree further to furnish the Employee with a private office and a secretary and such other assistance and accommodations as shall be suitable to the character of the Employee's position or positions with the Companies and adequate for the performance of the Employee's duties under this Agreement. 6. Additional Benefits. The payments and benefits provided in Paragraphs ------------------- 4, 5, 8, 9 and 12 hereof are in addition to any other payments or benefits to which the Employee may be, or become, entitled under any other present or future compensation or benefit plan or program of the companies for which key employees are or shall become eligible including, without limitation, any sick-leave plan, travel or accident insurance, auto allowance or auto lease plan, executive contingent compensation plan, capital accumulation program, restricted stock plan or stock option plan. The Employee shall be entitled to receive during the Period of Employment all benefits, perquisites and emoluments to which key employees are entitled under all such plans or programs to the extent permitted under the general terms and conditions of such plans or programs and in accordance with the provisions hereof. 7. Termination of Employment. Notwithstanding any other provision of ------------------------- this Agreement, the Employee's employment under this Agreement may be terminated at any time: (A) by the Company or any of its subsidiaries or affiliates, in the event of: (i) the Employee's serious, willful misconduct in respect of the Employee's duties under this Agreement including, without limitation, conviction for a felony or perpetration of a common law fraud which has resulted, or is likely to result, in material economic damage to the Company or any of its subsidiaries or affiliates; or (ii) the Employees repeated failure to follow rules or procedures of the Companies by which he is employed, or to meet bona ---- fide objectives and qualifications which have been duly ---- promulgated as part of the customary personnel 5 practices of such Companies and which are set forth in Exhibit A and incorporated herein by reference; by written notice to the Employee, specifying the event relied upon for such termination and given within 180 days after such event; (B) by the Company or any of its subsidiaries or affiliates if the Employee accepts employment or a consulting position with another person or company; or (C) by the Employee in the event of any: (i) liquidation, dissolution, consolidation or merger of the Company, or transfer of all or substantially all of its assets, other than a transaction in which a successor corporation with a net worth at least equal to that of the Companies assumes this Agreement and all obligations and undertakings hereunder of the Companies; or (ii) reduction in the Employee's fixed salary under Paragraph 4(A)(i) hereof; or reduction in the Employee's potential incentive compensation or bonuses under Paragraph 4(A)(ii) hereof calculated on the assumption that any objectives for full payment of such incentive compensation or bonuses are attained but not exceeded; except a proportionate reduction in such fixed salary, incentive compensation or bonuses as part of any wage and salary reduction program affecting the employees of the Companies generally; or (iii) material change by the Company or any of its subsidiaries or affiliates of the Employee's functions, duties or responsibilities, which change would reduce the rank, level, dignity, responsibility, importance or scope of the Employee's position with the Company or any of its subsidiaries or affiliates from the position or positions and attributes thereof held by the Employee at the date first written above; or (iv) assignment or reassignment by the Company or any of its subsidiaries or affiliates of the Employee to another place of employment more than 50 miles from the Employee's principal place of employment at the date first written above; or (v) other material breach of this Agreement by the Company or any of its subsidiaries or affiliates; 6 by written notice to the Company, specifying the event relied upon for such termination and given within 180 days after such event. 8. Payments Upon Termination of Employment. In the event the Employee's --------------------------------------- employment under this Agreement is terminated by reason of the Employee's death or total and permanent disability, or by the Company or any of its subsidiaries or affiliates for any reason specified in Paragraph 7(A) or 7(B) above, this Agreement shall terminate and be deemed cancelled and except as provided in Paragraph 12 of this Agreement, the Companies shall be under no obligation hereunder either to continue the Employee's employment or to provide the Employee with any payment or benefit of any kind whatsoever, except for such payments or benefits to which the Employee may otherwise be entitled notwithstanding the provisions of this Agreement. In the event of any termination of employment (prior to the expiration of the Period of Employment) by the Employee pursuant to Paragraph 7(C) above, or in the event the employee's employment under this Agreement is terminated (prior to the expiration of the Period of Employment) by the Company or any of its subsidiaries or affiliates for any reason other than the Employee's death, total and permanent disability or one of those reasons specified in Paragraph 7(A) or 7(B) above, the Companies shall, subject to Paragraphs 8(H) and 8(I) below, pay the Employee (or, in the event of the Employee's death after such termination but prior to the time payment hereunder is made, the Employee's estate), as liquidated damages or severance pay, or both, the amounts described in Subparagraphs (A) through (F) below: (A) The Employee shall be paid the excess of: (i) the amount of fixed salary otherwise payable during the Period of Employment that remains after the Employee's termination of employment hereunder, as determined pursuant to Paragraph 4(A)(i) above (excluding, however, any "periodic increases" provided in such Paragraph that would otherwise have become effective after the Employee's termination of employment hereunder), increased, however, by five percent (5%) for each calendar year commencing during the Period of Employment and after the date of the Employee's termination of employment hereunder; plus any incentive compensation and bonuses that would otherwise have been payable during such remaining Period of Employment pursuant to Paragraph 4(A)(ii) above, computed on the assumption that any objectives for full payment of same are obtained but not exceeded, over 7 (ii) the amounts, if any, paid to the Employee pursuant to any severance, separation or termination pay program or arrangement of the Company or any of its subsidiaries or affiliates. Payment of such amount shall commence with the month in which the Employee's termination of employment hereunder shall occur. Payments under this Paragraph 8(A) attributable to "fixed salary" amounts shall continue to be made in equal installments at the times provided for payment of fixed salary in Paragraph 4(A), above. Payments under this Paragraph 8(A) attributable to incentive compensation and bonuses shall be made at the respective time or times provided for payment of incentive compensation and bonuses in Paragraph 4(A) above, provided, however, that all such incentive compensation and bonus payments under this Paragraph 8(A) shall be made no later than the last day of the Period of Employment. (B) The Employee shall be paid the excess of: (i) the actuarially determined present value of the vested benefit the Employee would have accrued under the Retirement Plan had the Employee continued in full-time employment under this Agreement throughout the Period of Employment remaining after the Employee's termination of employment hereunder at an annual rate of compensation equal to that specified in Paragraph 8(A) above, over (ii) the actuarially determined present value of the vested benefit accrued by the Employee under such Retirement Plan to the date of the Employee's actual termination of employment hereunder. Notwithstanding any provision of the Retirement Plan, the benefit provided under this Paragraph 8(B) shall be determined with reference to the benefit formula of the Retirement Plan as in effect on the date first written above and shall be computed (for purposes of determining a present value hereunder) as a life annuity payable for the Employee's lifetime only, and deemed to commence at the earliest date the Employee could elect to receive vested retirement benefits under the Retirement Plan after his termination of employment hereunder. The actuarially determined present value of benefits payable under this Paragraph 8(B) shall be determined by using a discount factor equal to one percentage point below the interest rate last publicly announced, as of the date on which the Employee's termination of employment hereunder shall have occurred, by the First Jersey National Bank, Jersey City, New Jersey, as applicable to its most creditworthy customers' demand borrowings. Payment of the amount computed under this Paragraph 8(B) shall commence with the month in which the Employee's termination of employment hereunder shall occur, and shall continue to be made throughout 8 the remaining Period of Employment in equal installments at the times provided for payment of fixed salary in Paragraph 4(A) hereof. (C) The employee shall be paid the amount, if any, of the "Projected Thrift Plan Contribution" computed as follows: The Projected Thrift Plan Contribution is the cumulative amount of the "Matching Employer Contributions" (as defined in the Thrift Plan at the date first written above) that would have been contributed to the Thrift Plan on the Employee's behalf had the Employee: (i) continued in employment under this Agreement throughout the Period of Employment remaining after the Employee's termination of employment hereunder, and (ii) actually been credited under the Thrift Plan with Matching Employer Contributions throughout such remaining Period of Employment at the rate of 50% of the combined average monthly "Basic Contributions" and "Salary Deferral Contributions" (as such terms are defined in the Thrift Plan at the date first written above) contributed by the Employee to the Thrift Plan during the twelve (12) month period ending with the last day of the month prior to the month in which occurs the Employee's actual termination of employment under this Agreement. Payment of such amount shall commence with the month in which occurs the Employee's termination of employment hereunder, and shall continue to be made throughout the remaining Period of Employment in equal installments at the times provided for the payment of fixed salary in Paragraph 4(A) hereof. (D) The Employee shall be paid the excess of: (i) the actuarially determined present value of the vested retirement benefit the Employee would have accrued under the SRP had the Employee actually continued in full-time employment and participated in the SRP throughout the Period of Employment remaining after the Employee's termination of employment hereunder, at the annual rate of compensation specified in Paragraph 8(A) above, over (ii) the actuarially determined present value of the vested retirement benefit actually accrued by the Employee under the SRP, or that would have so accrued had the Employee actually participated in the SRP, to the date of the Employee's actual termination of employment hereunder. 9 The amount provided under this Paragraph 8(D) shall be determined with reference to the benefit formula of the SRP as in effect on the date first written above and shall be computed (for purposes of determining a present value hereunder) as a life annuity payable for the Employee's lifetime only, and deemed to commence at the earliest date the Employee could elect to receive vested retirement benefits under the SRP (or could have so elected had the Employee actually participated in the SRP) after his termination of employment hereunder. For purposes of this Paragraph 8(D), at the time of the Employee's actual termination of employment hereunder the Employee shall be deemed to be the older of age 55 or the Employee's actual age at such time. The actuarially determined present value of the benefits payable under this Paragraph 8(D) shall be determined by using a discount factor equal to one percentage point below the interest rate last publicly announced, as of the date on which the Employee's termination of employment hereunder shall have occurred, by the First Jersey National Bank, Jersey City, New Jersey, as applicable to its most creditworthy customers' demand borrowings. Payment of the amount computed under this Paragraph 8(D) shall commence with the month in which the Employee's termination of employment hereunder shall occur, and shall continue to be made throughout the remaining Period of Employment in equal installments at the times provided for the payment of fixed salary in Paragraph 4(A) hereof. (E) The Employee shall be paid the amount of "Projected Performance Cash Awards" computed as follows: Projected Performance Cash Awards shall be the cumulative amount of Performance Cash Awards that would have been awarded the employee under the MIP had the Employee: (i) continued in employment under this Agreement throughout the Period of Employment remaining after the Employee's termination of employment hereunder at an annual rate of compensation equal to that specified in Paragraph 8(A) above, and (ii) actually been awarded Performance Cash Awards under the MIP throughout such remaining Period of Employment in amounts computed at the percentage rate of Performance Cash Awards last in effect for the Employee as of the date of the Employee's termination of employment hereunder. Payment of such amount shall commence with the month in which the Employee's termination of employment hereunder shall occur, and shall continue to be made throughout the remaining Period of Employment in equal installments at the times provided for the payment of fixed salary in Paragraph 4(A) hereof. (F) The Employee shall be paid an amount, if any, determined as follows: 10 Upon the Employee's termination of employment hereunder the Employee may elect to surrender all or any portion of the Employee's outstanding Stock Options under the MIP, provided (i) such Stock Options were outstanding on the date of the Employee's termination hereunder, and (ii) at least six months have elapsed since the date of grant of the Stock Options to be surrendered, and (iii) at least six months have elapsed since the date first written above. The Employee may make such election by delivering to the Company not later than the 30th day after the date of the Employee's termination of employment hereunder a notice (the "Notice") specifying the Stock Options being surrendered and the Employee's decision to surrender them in accordance with this Paragraph 8(F). The Notice once delivered shall be irrevocable. If the Employee so elects to surrender Stock Options hereunder, the Company shall pay the Employee not later than 45 days after delivery of the Notice an amount in immediately available funds equal to the excess, if any, of (a) the "Highest Traded Price" (as defined below) of the shares subject to the surrendered Stock Options, minus (ii) the option price for such shares. Upon full payment to the Employee of the amount specified above, the Stock Options so surrendered by the Employee shall be cancelled and all obligations of the Companies under the MIP or otherwise in connection therewith shall be discharged. For purposes of this Paragraph 8(F) "Highest Traded Price" means the highest closing price per share of Company stock based upon composite transactions reported from all national securities exchanges on the date of the Employee's termination hereunder, or, if the Company's stock is not so traded on that date, the first day preceding that date on which the Company's stock is so traded. (G) In addition, in the event of any termination of employment by the Employee pursuant to Paragraph 7(C) above, or in the event the Employee's employment under this Agreement is terminated by the Company or any of its subsidiaries or affiliates for any reason other than the Employee's death, total and permanent disability or one of those reasons specified in Paragraph 7(A) or 7(B) above, the Companies shall, subject to the provisions of Paragraph 8(I) below, ensure that the Employee shall continue, throughout the Period of Employment remaining after the Employee's termination of employment hereunder, to be entitled to all benefits listed in subparts (f), (g) and (h) of Paragraph 4(B) of this Agreement, as if the Employee were still employed under this Agreement during such period. Such benefits will based upon the Employee's fixed salary for the remaining Period of Employment as computed under Paragraph 8(A) above. If and to the extent such benefits shall not be payable or provided under the group plans and programs so listed above, the Companies shall pay or provide for payment of such benefits on an individual basis. The benefits described in subpart (h) of Paragraph 4(B) hereof, as provided the Employee under this Paragraph 8(G), shall be secondary to any comparable benefits provided the Employee by another person or company. 11 (H) Notwithstanding any other provision of this Agreement, in the event: (i) the Employee's termination of employment shall occur prior to the expiration of the Period of Employment and during the twenty-four (24) month period commencing on the occurrence, if any, of a Change in Control (as defined in Paragraph 9 of this Agreement), and (ii) such termination was effected by the Employee pursuant to Paragraph 7(C) above, or by the Company or any of its subsidiaries or affiliates for any reason other than the Employee's death, total and permanent disability or one of those reasons specified in Paragraph 7(A) or 7(B) above, the Employee shall be paid, no later than fifteen (15) business days after such termination, a lump sum cash amount equal to the actuarially determined present value of the sum of all amounts otherwise payable to the Employee pursuant to Paragraphs 8(A) through (E) above, determined by using a discount factor equal to one percentage point below the interest rate last publicly announced, as of the date on which such termination of employment shall have occurred, by the First Jersey National Bank, Jersey City, New Jersey, as applicable to its most creditworthy customers' demand borrowings. (I) Payments and benefits provided the Employee under this Paragraph 8 shall be reduced to the extent the Employee receives, or would receive but for any deferral of same, payments or benefits corresponding to those provided in this Paragraph 8, or other payments or benefits, for services rendered to another person or company during the period upon which the payments and benefits provided under this Paragraph 8 are based. The Employee agrees to make an appropriate refund, without interest, to the Companies in the amounts expended by the Companies to provide payments and benefits under this Paragraph 8 to the extent the Employee receives, or would receive but for any deferral, payments or benefits corresponding to those provided under this Paragraph 8 from another person or company. This Paragraph 8(I) shall be interpreted to prevent the Employee's receipt of duplicative payments or benefits under this Paragraph 8 and from other sources. 9. Payments upon the Occurrence of a Change in Control. As used in this --------------------------------------------------- Agreement, "Change in Control" means the happening of any of the following: (a) the acquisition by any party or group of the beneficial ownership of 20% or more of the voting shares of the Company, or (b) the occurrence of a transaction requiring shareholder approval for the acquisition of the Company through purchase or exchange of stock or assets, or by merger, or otherwise, or (c) the election during a period of 12 months or less, of one third (1/3) or more of the members of the Board, without the approval of a majority of the Board as constituted at the beginning of such period. 12 In the event a Change in Control occurs (i) prior to the Employee's actual termination of employment hereunder, or (ii) after the Employee's actual termination of employment hereunder and prior to the expiration of the Period of Employment (provided, however, that a termination of employment under this subpart (ii) was effected by the Employee pursuant to Paragraph 7(C) above, or by the Company or any of its subsidiaries or affiliates for any reason other than the Employee's death, total and permanent disability or one of those reasons specified in Paragraph 7(A) or 7(B) above) the Companies shall pay the Employee (or, in the event of the Employee's death after the Change in Control but prior to the time payment hereunder is made, the Employee's estate) within fifteen (15) business days after the occurrence of such Change in Control (or, in the case of payments required under Paragraph 9(C) hereof, at such later time as may be specified in such Paragraph), a single lump sum amount in immediately available funds equaling the sum of the amounts described in Subparagraphs (A) through (D), below: (A) The actuarially determined present value of the vested retirement benefit accrued by the Employee under the SRP, or that would have so accrued had the Employee actually participated in the SRP, determined as if the Employee's employment hereunder had terminated on the date of the Change in Control. The amount provided under this Subparagraph shall be determined with reference to the benefit formula of the SRP as in effect on the date first written above, and shall be computed (for purposes of determining a present value hereunder) as a life annuity payable for the Employee's lifetime only, and deemed to commence at the earliest date after the Change in Control the Employee could elect to receive vested retirement benefits under the SRP (or could have so elected had the Employee actually participated in the SRP) had his employment hereunder terminated on the date of the Change in Control. For purposes of this Paragraph 9(A), at the time of a Change in Control, the Employee shall be deemed to be the older of age 55 or the Employee's actual age at such time. The actuarially determined present value of the benefit payable under this Paragraph 9(A) shall be determined by using a discount factor equal to one percentage point below the interest rate last publicly announced, as of the date on which the change in Control shall have occurred, by the First Jersey National Bank, Jersey City, New Jersey, as applicable to its most creditworthy customers' demand borrowings. (B) the amount of all "Performance Cash Awards" (as defined in the MIP) awarded the Employee under MIP but not yet paid by the Company at the time the Change in Control occurs. (C) An amount attributable to surrendered "Stock Options", if any, under the MIP, determined as follows: Upon the occurrence of a Change in Control hereunder the Employee may elect to surrender all or any portion of the Employee's outstanding Stock Options under the MIP, provided (i) such Stock Options were outstanding on the date of the Change in Control, and (ii) at least six months have elapsed since the date of grant of the Stock Options to be surrendered, and (iii) at least six months have elapsed since 13 the date first written above. The Employee may make such election by delivering to the Company not later than the 30th day after the date of the Change in Control a notice (the "Notice") specifying the Stock Options being surrendered and the Employee's decision to surrender them in accordance with this Paragraph 9(C). The Employee may elect to surrender such Stock Options regardless of whether the Employee has been continuously employed by one or more of the Companies on and after the date of the Change in Control. The Notice once delivered shall be irrevocable. If the Employee so elects to surrender Stock Options hereunder, the Companies shall pay the employee not later than 45 days after delivery of the Notice an amount in immediately available funds equal to the excess, if any, of (i) the "Current Market Value" (as defined below) of the share subject to the surrendered Stock Options, minus (ii) the option price for such shares. Upon full payment to the Employee of the amount specified above, the Stock Options so surrendered by the Employee shall be cancelled and all obligations of the Companies under the MIP or otherwise in connection therewith shall be discharged. For purposes of this Paragraph 9(C), "Current Market Value" means the highest "Closing Price" (as defined below) during the period commencing thirty (30) days prior to the Change in Control and ending thirty (30) days after the Change in Control (the "Reference Period"); provided, however, that if a Change in Control occurs as a result of a tender offer or exchange offer, or a merger, purchase of assets or stock or other transaction approved by shareholders of the Company, "Current Market Value" means the higher of (i) the highest Closing Price during the Reference Period, or (ii) the highest price paid per share of Company stock pursuant to such tender offer, exchange offer or transaction. The "Closing Price" on any day during the Reference Period means the closing price per share of Company stock based upon composite transactions reported from all national securities exchanges on that day. (D) The amount, if any, of the Employee's outstanding deferrals (through the date of the Change in Control) of salary, Performance Cash Awards under the MIP or other amounts under any plan or program of one or more of the Companies that permits or permitted such deferrals and in which only highly compensated employees of the Company or its subsidiaries or affiliates are or were eligible to participate (the "Elective Deferrals"). The Elective Deferrals shall include earnings, if any, on amounts so deferred to the extent provided, if at all, under the applicable provisions of any such plan or program. The Elective Deferrals shall not include any amounts described herein that are actually paid on the Employee's behalf prior to the Change in Control. Notwithstanding the provisions of any such plan or program, any amount of Elective Deferrals that may actually become payable on the Employee's behalf under such plan or program shall be reduced by any amount paid for the same period of employment under this Subparagraph. 10. Offsets. To the extent the Employee shall receive amounts payable ------- under Paragraph 8 of this Agreement, equivalent amounts also payable under Paragraph 9 of this Agreement and attributable to the same 14 period or periods of the Employee's employment with the Companies shall be correspondingly reduced, and vice versa. In addition, any amounts otherwise payable under Paragraphs 8 and 9 of this Agreement will be reduced to the extent equivalent amounts attributable to the same period or periods of the Employee's employment with the Companies are actually provided under any of the plans or programs described in Paragraphs 4 and 6 above or otherwise maintained or sponsored by the Companies. 11. Source of Payments. All payments provided under Paragraphs 4, 5, 8, 9 ------------------ and 12 herein shall be paid from the general funds of the Companies unless otherwise properly payable under any contract, trust or other arrangement maintained by one or more of the Companies for purposes of such payment. The Companies shall not be required to segregate any funds, create any trust or make any special deposits to fund any obligations under this Agreement provided, however, that the Companies, at their sole and absolute discretion, may take any steps they deem appropriate to meet their obligations hereunder. 12. Litigation Expenses. In the event of any litigation or other ------------------- proceeding between one or more of the Companies and the Employee with respect to the subject matter of this Agreement and the enforcement of rights hereunder, the companies shall reimburse the Employee for all reasonable costs and expenses relating to such litigation or other proceeding, including reasonable attorneys' fees and expenses, provided that such litigation or proceeding results in any (i) settlement requiring one or more of the Companies to make a payment to the Employee, or (ii) judgment, order, finding, award, determination or other resolution in favor of the Employee, regardless of whether such result is subsequently reversed on appeal or in a collateral proceeding. In no event shall the Employee be required to reimburse any of the Companies for any of the costs and expenses relating to such litigation or other proceeding. The obligation of the Companies under this Paragraph 12 shall survive the termination or cancellation for any reason of this Agreement (whether such termination is by the Companies, by the Employee, upon the expiration of this Agreement or otherwise). 13. Tax Withholding. The Companies may deduct and withhold from any --------------- amounts which they are otherwise obligated to pay hereunder any amount which they may determine they are required to deduct or withhold pursuant to any applicable statute, law, regulation or order of any jurisdiction whatsoever. 14. Entire Understanding. This Agreement contains the entire -------------------- understanding between the Companies and the Employee with respect to the subject matter hereof and supersedes any prior employment agreement between or among one or more of the Companies and the Employee, except that this Agreement 15 shall not affect or operate to reduce any benefit or compensation inuring to the Employee of a kind elsewhere provided and not expressly discussed in this Agreement. 15. Severability. If, for any reason, any one or more of the provisions ------------ or part of a provision contained in this Agreement shall be judicially held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement not held so invalid, illegal or unenforceable, and each other provision or part of a provision shall to the full extent consistent with law continue in full force and effect. 16. Notices. All notices, requests, demands and other communications ------- required or permitted hereunder shall be given in writing and shall be deemed to have been duly given if personally delivered against receipt or mailed, postage prepaid, certified mail, return receipt requested, as follows: (a) to the Companies: Hackensack Water Company 200 Old Hook Road Harrington Park, New Jersey 07640 Attention: Secretary (b) to the Employee: Hackensack Water Company 200 Old Hook Road Harrington Park, New Jersey 07640 with an additional copy to (home address): 375 Spring Street Ridgewood, New Jersey 07450 or to such other address as any party hereto shall have previously specified in writing to the other. 17. No Attachment. Except as required by law, no right to receive any ------------- payment or benefit under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or to execution, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect. 18. Binding Agreement. This Agreement shall be binding upon, and shall ----------------- inure to the benefit of, the Employee and the Companies and their respective permitted successors and assigns. 16 19. Modification and Waiver. This Agreement may not be modified or ----------------------- amended except by an instrument in writing signed by the parties hereto. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement except by written instrument signed by the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver will operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. 20. Headings of No Effect. The paragraph headings contained in this --------------------- Agreement are included solely for convenience of reference and shall not in any way affect the meaning or interpretation of any of the provisions of this Agreement. 21. Governing Law. This Agreement and its validity, interpretation, ------------- performance, and enforcement shall be governed by the laws of the State of New Jersey. IN WITNESS WHEREOF, the Companies have caused this Agreement to be executed and their seals affixed hereunto by the officers, or members of their respective boards of directors, thereunto duly authorized, and the Employee has signed this Agreement, all as of the date first above written. ATTEST: UNITED WATER RESOURCES INC. PATRICIA DAVIDSON By: GEORGE M. HASKEW - --------------------------- ------------------------------------- Assistant Secretary HACKENSACK WATER COMPANY PATRICIA DAVIDSON By: GEORGE M. HASKEW - --------------------------- -------------------------------------- Assistant Secretary SPRING VALLEY WATER COMPANY INCORPORATED PATRICIA DAVIDSON By: GEORGE M. HASKEW - --------------------------- -------------------------------------- Assistant Secretary RIVERVALE REALTY CO., INC. PATRICIA DAVIDSON By: GEORGE M. HASKEW - --------------------------- -------------------------------------- Assistant Secretary 17 CORWICK REALTY CORPORATION PATRICIA DAVIDSON By: GEORGE M. HASKEW - --------------------------- -------------------------------------- Assistant Secretary RIDGEWAY RIVER COMPANY, INC. PATRICIA DAVIDSON By: ONOFRIO F. LAURINO - --------------------------- -------------------------------------- Secretary MID-ATLANTIC UTILITIES CORPORATION NORMAN NIELSEN By: GEORGE M. HASKEW - --------------------------- -------------------------------------- Senior Vice President Hackensack Water Co. UWR DEVELOPMENT CORPORATION NORMAN NIELSEN By: ROBERT A. GERBER - --------------------------- ---------------------------------------- Senior Vice President Hackensack Water Co. DONALD L. CORRELL ---------------------------------- Donald L. Correll 18 Exhibit A --------- Employment Objectives and Qualifications under the Employment Agreement between and among United Water Resources Inc., its Subsidiaries and Affiliates and ______________________________ The following employment objectives and qualifications will be considered pursuant to Paragraph 7(A)(ii) of this Agreement. I. Management Objectives. The Employee has made reasonable efforts to --------------------- meet the reasonable written employment objectives promulgated by the Companies from time to time. II. Expansion of Responsibilities. The Employee has willingly assumed ----------------------------- additional or more complex duties assigned by the Companies, provided it is reasonable to expect assumption of such duties given the extent and complexity of matters being performed prior to such assignment. III. Entrepreneurial Abilities. The Employee has formulated and presented ------------------------- for consideration by the Companies potentially profitable new business ideas. IV. Delegation of Duties. The Employee has successfully delegated -------------------- supervisory and administrative functions to subordinates. V. Regulatory Relationships. The Employee has maintained good ------------------------ relationships with federal, state and municipal governments and regulatory bodies. VI. Customer Service. The Employee has formulated ideas designed to ---------------- improve service to customers. 19 EX-10.B 3 EMPL AGREMNT BETWN GENERAL WATERWORKS & RONALD S. DUNGAN Exhibit 10(b) EMPLOYMENT AGREEMENT BY AND BETWEEN GENERAL WATERWORKS CORPORATION AND RONALD S. DUNGAN 1 AGREEMENT, dated as of October 28, 1993, by and between GENERAL WATERWORKS CORPORATION (the "Employer"), and RONALD S. DUNGAN (the "Employee"). IN CONSIDERATION OF the mutual covenants herein contained, and other good and valuable consideration, the parties hereto agree as follows: 1. Employment. ---------- (a) Employer hereby agrees to employ Employee, and Employee agrees to serve as an employee of Employer during the Period of Employment, as an Executive Officer of the Employer. (b) If at any time during the Period of Employment, the Employer fails, without Employee's consent, to cause Employee to be elected or re- elected as an Executive Officer of the Employer, or removes Employee from such offices, or if at any time during the Period of Employment, Employee shall fail to be vested by the Board of Directors of the Employer with the power and authority of an Executive Officer of Employer at a level equivalent to Employee's current position, Employee shall have the right by written notice to Employer to terminate his services hereunder, effective as of the last day of the month after the month of receipt by Employer of the written notice, in which event the Period of Employment, as hereinafter defined, shall so terminate on the last day of such month; termination under these circumstances shall be deemed pursuant to paragraph (a) of Section 6 hereof as a termination by Employee with "Good Reason" (as defined therein) with all the consequences which flow from such termination. 2. Period of Employment. -------------------- The "Period of Employment" shall be the period commencing January 1, 1994 or such later date as the merger between Employer and United Water Resources Inc., pursuant to the Agreement and Plan of Merger dated as of September 15, 1993, is consummated, and ending on December 31, 1996. 3. Duties During the Period of Employment. -------------------------------------- Employee shall devote Employee's full business time, attention and best efforts to the affairs of Employer and the parent company and subsidiaries of Employer during the Period of Employment as an Executive Officer of Employer at a level equivalent to Employee's current position, provided, -------- 2 however, that Employee may engage in other activities, such as activities ------- involving professional, charitable, educational, religious and similar types of organizations, speaking engagements, membership on the Board of Directors of other organizations (as Employer may from time to time agree to), and similar type activities to the extent that such other activities do not inhibit or prohibit the performance of Employee's duties under this Agreement, or conflict in any material way with the business of Employer and the parent company and subsidiaries of Employer. 4. Current Cash Compensation. ------------------------- (a) Base Annual Salary. ------------------ Employer will pay to Employee during the Period of Employment a base annual salary of $200,000, payable in accordance with Employee's normal payroll policies for senior executives, subject to applicable withholding of taxes and other applicable payroll deductions. It is agreed between the parties that Employer shall review the base annual salary annually and in light of such review may, in the discretion of the Board of Directors of Employer (but shall not be obligated to), increase such base annual salary taking into account any change in Employee's then responsibilities, increases in the cost of living, increases in compensation of other executives of Employer and the parent company and subsidiaries of Employer, performance by Employee, and other pertinent factors. (b) Discretionary Bonus. ------------------- During the Period of Employment, Employer, in its sole discretion, may award to Employee an annual bonus based on Employee's performance and other factors; provided, however, that while not being legally -------- ------- required to pay any bonus, Employer agrees to take into account, in determining the amount of the annual bonus, the factors described in paragraph (a) of this Section. 5. Other Employee Benefits. ----------------------- (a) Vacation and Sick Leave. ----------------------- Employee shall be entitled to reasonable paid annual vacation periods and to reasonable sick leave as determined by the Board of Directors of Employer but no less than Employer's policy at the date of this Agreement. (b) Regular Reimbursed Business Expenses. ------------------------------------ 3 Employer shall reimburse Employee for all travel and other expenses and disbursements reasonably incurred by Employee in the performance of Employee's duties during the Period of Employment, in accordance with Employer's established policies. (c) Employer's Benefit Plans or Arrangements. ---------------------------------------- Employee, subject to the provisions of this Agreement, shall be entitled to participate in all employee benefit plans of Employer in which other executives of Employer participate, as presently in effect or as they may be modified or added to by Employer from time to time, including, without limitation, plans providing retirement benefits, medical insurance, disability insurance, and accidental death or dismemberment insurance and shall be entitled to full credit thereunder for all service with Employer and any successor. Employee shall be provided with the use of a company car with all lease, operating costs, insurance, etc. paid by Employer. Benefits shall be at least comparable to those provided by the current plans of Employer. (d) Employer's Executive Compensation Plans. --------------------------------------- Employee, subject to the provisions of this Agreement, shall be entitled to participate in all executive compensation plans of Employer, as presently in effect or as they may be modified or added to by Employer from time to time, including, without limitation, management incentive plans, deferred compensation plans, supplemental retirement plans and stock and stock option plans. Employee shall be entitled to benefit opportunities and incentives at least comparable to those to which Employee is entitled at the date of this Agreement. 6. Termination. ----------- (a) Termination by Employer Other than for Cause or by Employee with ---------------------------------------------------------------- Good Reason. ----------- If Employer should terminate the Period of Employment other than for Cause, as defined herein, or if Employee should terminate the Period of Employment with Good Reason, in addition to all other benefits, if any, payable as provided for hereunder, Employer shall forthwith pay to Employee an amount equal to the sum of (a) the result of multiplying (i) the sum of the base annual salary payable to Employee pursuant to paragraph (a) of Section 4 as of the date of termination of the Period of Employment and the average annual compensation earned under Employer's management incentive plan during the three years prior to termination by (ii) the number of years (and fractions thereof) then remaining in the Period of Employment and (b) the discretionary bonus earned by Employee pursuant to paragraph (b) of Section 4. 4 "Cause" shall mean the continued and willful failure by Employee to perform substantially his duties with Employer (other than any such failure resulting from incapacity due to physical or mental illness) after a demand for substantial performance is delivered to Employee by Employer; conviction of a felony; excessive absenteeism not related to illness, sick leave or vacations, but only after notice from Employer followed by a repetition of such excessive absenteeism; misconduct or dishonesty that is harmful to the interest of Employer; or material breach by Employee of this Agreement. Employee's termination with "Good Reason" shall mean Employee's termination of his employment pursuant to paragraph (b) of Section 1 above; a reduction by Employer in Employee's base annual salary as in effect immediately prior to such reduction; or a material breach by Employer of its obligations under this Agreement. (b) Termination by Employee or by Employer for Cause. ------------------------------------------------ (i) Employee shall have the right, upon 30 days' notice given to Employer in accordance with Section 10 hereof, or as otherwise agreed to by Employer, to terminate the Period of Employment. (ii) If Employee should terminate the Period of Employment pursuant to Section 6(b)(i) above or Employer should terminate the Period of Employment for Cause, as herein defined, Employee will only be entitled to be paid the base annual salary otherwise payable to Employee under paragraph (a) of Section 4 through the end of the month in which the Period of Employment is terminated. (c) Consulting Agreement Following Termination of Employment. -------------------------------------------------------- If Employer should terminate the Period of Employment other than for Cause, as defined herein, or if Employee should terminate the Period of Employment with Good Reason, or if Employee shall not continue to be employed by Employer or a successor until age 65 at a level equivalent to Employee's current position except as a result of termination by Employer for Cause or by Employee without Good Reason, then Employee shall be entitled to be paid a consulting fee of $100,000 per year, payable in equal monthly installments subject to withholding of applicable taxes and other 5 payroll deductions until December 31 of the year in which Employee reaches the age of 65; provided however, -------- ------- (i) in the event that Employee is employed by any person, partnership or corporation engaged in any business in competition with the business of Employer and the parent company and subsidiaries of Employer, the consulting arrangement shall terminate and (ii) in the event Employee is employed by any other person, partnership or corporation, the consulting fee shall be reduced to $50,000 per year. 7. Source of Payments. ------------------ All payments provided herein shall be paid from the general funds of Employer unless otherwise properly payable under any contract, trust or other arrangement maintained by Employer for purposes of such payment. Employer shall not be required to segregate any funds, create any trust or make any special deposits to fund any obligations under this Agreement, provided, however, that Employer, at its sole -------- ------- and absolute discretion, may take any steps it deems appropriate to meet its obligations hereunder. 8. Non-Disclosure. -------------- Employee shall not, at any time during or following the Period of Employment, disclose, use, transfer or sell, except in the course of employment with Employer, any confidential information or proprietary data of Employer and the parent company and subsidiaries of Employer so long as such information or proprietary data remains confidential and has not been disclosed or is not otherwise in the public domain, except as required by law or pursuant to legal process. 9. Noncompetition Agreement. ------------------------ Without the consent in writing of the Board of Directors of Employer, during the Period of Employment and for a period of two years after termination of Employee's employment for any reason whatsoever, Employee will not permit his name to be used by, or engage in, or carry on, directly or indirectly, either for himself or as a member of a partnership or as more than a five percent (5%) stockholder, investor, officer or director of a corporation or as an employee, agent, associate or consultant of any person, partnership or corporation, any 6 business in competition with the business carried on in the United States by Employer and the parent company and subsidiaries of Employer. 10. Governing Law. ------------- This Agreement is governed by and is to be construed and enforced in accordance with the laws of the State of Delaware, without reference to rules relating to conflicts of law. If under such law, any portion of this Agreement is at any time deemed to be in conflict with any applicable statute, rule, regulation or ordinance, such portion shall be deemed to be modified or altered to conform thereto or, if that is not possible, to be omitted from this Agreement; the invalidity of any such portion shall not affect the force, effect and validity of the remaining portion hereof. 11. No Attachment. ------------- Except as required by law, no right to receive any payment or benefit under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or to execution, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect. 12. Notices. ------- All notices under this Agreement shall be in writing and shall be deemed effective when delivered in person, or forty-eight (48) hours after deposit thereof in the U.S. mails, postage prepaid, for delivery as registered or certified mail--addressed, in the case of Employee, to him at his residential address, and in the case of Employer, to its corporate headquarters, attention of the Secretary, or to such other address as Employee or Employer may designate in writing at any time or from time to time to the other party. In lieu of personal notice by deposit in the U.S. mail, a party may give notice by telegram, telex or telecopier. 7 13. Miscellaneous. ------------- This Agreement constitutes the entire understanding between Employer and Employee relating to employment of Employee by Employer and supersedes and cancels all prior written and oral agreements and understandings with respect to the subject matter of this Agreement. This Agreement may be amended but only by a subsequent written agreement of the parties. This Agreement shall be binding upon and shall inure to the benefits of Employee, Employee's heirs, executors, administrators and beneficiaries, and Employer and its successors, whether by merger, combination sale of assets or otherwise. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the year and day first above written. General Waterworks Corporation By: F. PIZZITOLA ------------------------------ RONALD S. DUNGAN ----------------------------- Ronald S. Dungan 8 EX-10.C 4 EXEC EMPL AGREMNT BETWN UNITED WATER & RICHARD B. MCGLYNN Exhibit 10(c) EXECUTIVE EMPLOYMENT AGREEMENT BY AND BETWEEN UNITED WATER RESOURCES AND RICHARD B. MC GLYNN 1 AGREEMENT, dated as of January 1, 1995, by and between United Water Resources, Inc. (the "Employer"), and Richard B. McGlynn (the "Employee"). IN CONSIDERATION OF the mutual covenants herein contained, and other good and valuable consideration, the parties hereto agree as follows: SECTION 1: EMPLOYMENT, TERM DUTIES AND RESPONSIBILITIES - -------------------------------------------------------- 1.1 Employment. ---------- Employer hereby agrees to employ Employee, and Employee agrees to serve as employee of Employer during the Period of Employment, as General Counsel of the Employer. It is understood and agreed that the position of General Counsel is an Executive Officer level position and shall be considered as such for all purposes. 1.2 Period of Employment. --------------------- If at any time during the Period of Employment, the Employer fails, without Employee's consent, to cause Employee to be elected or re-elected as General Counsel of the Employer, or removes Employee from such offices, or if at any time during the Period of Employment, Employee shall fail to be vested by the Board of Directors of the Employer with the power and authority of an Executive Officer of Employer at a level equivalent to Employee's current position, Employee shall have the right by written notice to Employer to terminate his services hereunder, effective as of the last day of the month after the month of receipt by Employer of the written notice, in which event the Period of Employment, as hereinafter defined, shall so terminate on the last day of such month; termination under these circumstances shall be deemed pursuant to Section 3.1 hereof as a termination by Employee with "Good Reason" (as defined therein) with all the consequences which flow from such termination. 1.3 Non-Disclosure. -------------- Employee shall not, at any time during or following the Period of Employment, disclose, use, transfer or sell, except in the course of employment with Employer, any confidential information or proprietary data of Employer and the parent company and subsidiaries of Employer so long as such information or proprietary data remains confidential and has not been disclosed or is not otherwise in the public domain, except as required by law or pursuant to legal process. 2 1.4 Term of Employment. ------------------ The "Period of Employment" shall be the 5 year period commencing January 1, 1995 and ending on December 31, 1999. 1.5 Duties and Responsibilities. --------------------------- Employee shall devote Employee's full business time, attention and best efforts to the affairs of Employer and the parent company and subsidiaries of Employer during the Period of Employment as an Executive Officer of Employer at a level equivalent to Employee's current position, provided, -------- however, that Employee may engage in other activities, such as activities ------- involving professional, charitable, educational, religious and similar types of organizations, speaking engagements, membership on the Board of Directors of other organizations (as Employer may from time to time agree to), and similar type activities to the extent that such other activities do not inhibit or prohibit the performance of Employee's duties under this Agreement, or conflict in any material way with the business of Employer and the parent company and subsidiaries of Employer. Employer acknowledges that Employee is currently serving as a Director of Atlantic Energy, Inc. and agrees to Employee's continuing to serve in that capacity during the term of this Agreement. SECTION 2: COMPENSATION AND BENEFITS - ------------------------------------ 2.1 Base Salary. ----------- Employer will pay to Employee during the Period of Employment a base annual salary of $180,000, payable in accordance with Employer's normal payroll policies for senior executives, subject to applicable withholding of taxes and other applicable payroll deductions. It is agreed between the parties that Employer shall review the base annual salary annually and in light of such review may, in the discretion of the Board of Directors of Employer (but shall not be obligated to), increase such base annual salary taking into account any change in Employee's then responsibilities, increases in the cost of living, increases in compensation of other executives of Employer and the parent company and subsidiaries of Employer, performance by Employee, and other pertinent factors. 2.2 Employee Benefits. ----------------- (a) Vacation and Sick Leave. ----------------------- Employee shall be entitled to 20 days paid vacation per year and to reasonable sick leave as determined by the Board of Directors of Employer but no less than Employer's policy at the date of this Agreement. 3 (b) Regular Reimbursed Business Expenses. ------------------------------------ Employer shall reimburse Employee for all travel and other expenses and disbursements reasonably incurred by Employee in the performance of Employee's duties during the Period of Employment, in accordance with Employer's established policies. (c) Employer's Benefit Plans or Arrangements. ---------------------------------------- Employee, subject to the provisions of this Agreement, shall be entitled to participate in all employee benefit plans of Employer in which other executives of Employer participate, as presently in effect or as they may be modified or added to by Employer from time to time, including, without limitation, plans providing retirement benefits, medical insurance, disability insurance, and accidental death or dismemberment insurance and shall be entitled to full credit thereunder for all service with Employer and any successor. Employee shall be provided with the use of a company car with all lease, operating costs, insurance, etc. paid by Employer. Benefits shall be at least comparable to those provided by the current plans of Employer. 2.3 Executive Compensation Plans. ---------------------------- Employee, subject to the provisions of this Agreement, shall be entitled to participate in all executive compensation plans of Employer, as presently in effect or as they may be modified or added to by Employer from time to time, including without limitation, management incentive plans, deferred compensation plans, supplemental "top hat" retirement plans and stock and stock option plans. Employee shall be entitled to benefit opportunities and incentives at least comparable to those to which Employee is entitled at the date of this Agreement. SECTION 3: TERMINATION - ---------------------- 3.1 Termination by Employer Other Than for Cause or by Employee with Good --------------------------------------------------------------------- Reason. ------ If Employer should terminate the Period of Employment other than for Cause, as defined herein, or if Employee should terminate the Period of Employment with Good Reason, in addition to all other benefits, if any, payable as provided for hereunder, Employer shall forthwith pay to Employee an amount equal to the sum of (a) the result of multiplying (i) the base annual salary payable to Employee pursuant to Section 2.1 as of the date of termination of the Period of Employment (ii) the number of years (and fractions thereof) then remaining in the Period of Employment. "Cause" shall mean the continued and willful failure by Employee to perform substantially his duties with Employer (other than any such failure resulting from incapacity due to physical or mental illness) 4 after a demand for substantial performance is delivered to Employee by Employer; conviction of a felony; excessive absenteeism not related to illness, sick leave or vacations, but only after notice from Employer followed by a repetition of such excessive absenteeism; misconduct or dishonesty that is harmful to the interest of Employer; or material breach by Employee of this Agreement. Employee's termination with "Good Reason" shall mean Employee's termination of his employment pursuant to Section 1.2 above; a reduction by Employer in Employee's base annual salary as in effect immediately prior to such reduction; or a material breach by Employer of its obligations under this Agreement. 3.2 Termination by Employee or by Employer for Cause. ------------------------------------------------ (a) Employee shall have the right, upon 30 days' notice given to Employer in accordance with Section 9 hereof, or as otherwise agreed to by Employer, to terminate the Period of Employment. (b) If Employee should terminate the Period of Employment pursuant to Section 3.2(a) above or Employer should terminate the Period of Employment for Cause, as herein defined, Employee will be entitled to be paid the base annual salary otherwise payable to Employee under Section 2.1 through the end of the month in which the Period of Employment is terminated. Employee shall be entitled to all other earned and accrued benefits to which Employee would otherwise be entitled through the termination date. SECTION 4: SOURCE OF PAYMENTS - ----------------------------- All payments provided herein shall be paid from the general funds of Employer unless otherwise properly payable under any contract, trust or other arrangement maintained by Employer for purposes of such payment. Employer shall not be required to segregate any funds, create any trust or make any special deposits to fund any obligations under this Agreement, provided, however, that Employer, -------- ------- at its sole and absolute discretion, may take any steps it deems appropriate to meet its obligation hereunder. SECTION 5: NON-COMPETITION AGREEMENT - ------------------------------------ Without the consent in writing of the Board of Directors of Employer, during the Period of Employment and for a period of two years after termination of Employee's employment for any reason whatsoever, Employee will not permit his name to be used by, or engage in, or carry on, directly or indirectly, either for himself or as a member of a partnership or as more than a five percent (5%) stockholder, investor, officer or director of 5 a corporation or as an employee, agent, associate or consultant of any person, partnership or corporation, any business in competition with the business carried on in the United States by Employer and the parent company and subsidiaries of Employer. SECTION 6: GOVERNING LAW - ------------------------ This Agreement is governed by and is to be construed and enforced in accordance with the laws of the State of New Jersey, without reference to rules relating to conflicts of law. If under such law, any portion of this Agreement is at any time deemed to be in conflict with any applicable statute, rule, regulation or ordinance, such portion shall be deemed to be modified or altered to conform thereto or, if that is not possible, to be omitted from this Agreement; the invalidity of any such portion shall not affect the force, effect and validity of the remaining portion hereof. SECTION 7: NO ATTACHMENT - ------------------------ Except as required by law, no right to receive any payment or benefit under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or to execution, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect. SECTION 8: ARBITRATION - ---------------------- Any claim, controversy or dispute arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration by an independent impartial arbitrator in accordance with the rules of the American Arbitration Association then obtaining. The decision of the arbitrator shall be final and binding and judgment upon the award rendered may be entered in any court having jurisdiction thereof. In any such claim, controversy or dispute involving a request for relief by way of injunction to prevent the disclosure or further disclosure of confidential information belonging to Employer, the arbitrator shall be appointed by the American Arbitration Association without submission of any such list of prospective arbitrators to the parties, and the proceedings shall be carried out as expeditiously as possible by the parties without undue delay. SECTION 9: NOTICES - ------------------ All notices under this Agreement shall be in writing and shall be deemed effective when delivered in person, or forty-eight (48) hours after deposit thereof in the U.S. mails, postage prepaid, for delivery as registered or 6 certified mail -- addressed, in the case of Employee, to him at his residential address, and in the case of Employer, to its corporate headquarters, attention of the Secretary, or to such other address as Employee or Employer may designate in writing at any time or from time to time to the other party. If to the Employee: Name Address If to the Employer: Chairman Address In lieu of personal notice by deposit in the U.S. mail, a party may give notice by telegram, telex or telecopier. SECTION 10: MISCELLANEOUS - ------------------------- This Agreement constitutes the entire understanding between Employer and Employee relating to employment of Employee by Employer and supersedes and cancels all prior written and oral agreements and understandings with respect to the subject matter of this Agreement. This Agreement may be amended but only by a subsequent written agreement of the parties. This Agreement shall be binding upon and shall inure to the benefit of Employee, Employee's heirs, executors, administrators and beneficiaries, and Employer and its successors, whether by merger, combination sale of assets or otherwise. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the year and day first above written. United Water Resources By: DONALD L. CORRELL ---------------------------- Chairman RICHARD B. MC GLYNN ---------------------------- Richard B. McGlynn 7 EX-21 5 SUBSIDIARIES OF REGISTRANT Exhibit 21 UNITED WATER RESOURCES INC. LIST OF SUBSIDIARIES OF THE REGISTRANT Names of Companies and their Subsidiaries States of Incorporation - ----------------------------------------- ----------------------- United Water New Jersey Inc. New Jersey United Water New York Inc. New York United Waterworks Inc. Delaware United Water Idaho Inc. Idaho United Water Florida Inc. Florida United Water Pennsylvania Inc. Pennsylvania United Water New Rochelle Inc. New York United Water Delaware Inc. Delaware United Water Toms River Inc. New Jersey United Water New Mexico Inc. New Mexico 14 other subsidiaries in the water services business 7 states United Water Mid-Atlantic Inc. New Jersey Owns 8 subsidiaries in the water services business New Jersey United Properties Group Incorporated New York Owns 6 subsidiaries in the real estate business 3 states Laboratory Resources, Inc. New Jersey Dundee Water Power & Land Company (50% owned) New Jersey Eight (8) other subsidiaries in businesses related to the water industry or providing services to affiliates 4 states 1 EX-23 6 CONSENT OF INDEPENDENT ACCOUNTANTS Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS ------------------------------------- We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 33-66420), the Prospectus constituting part of the Registration Statement on Form S-3 (No. 33- 10274) and the Registration Statement on Form S-8 (No. 33-64674) of United Water Resources of our report dated February 23, 1995, appearing on page 31 of this Annual Report on Form 10-K. PRICE WATERHOUSE LLP New York, New York March 27, 1995 1 EX-27 7 ARTICLE UT FINANCIAL DATA SCHEDULE
UT This schedule contains summary financial information extracted from the Consolidated Balance Sheet, Statement of Consolidated Income, Statement of Consolidated Common Equity and Statement of Consolidated Cash Flows and is qualified in its entirety by reference to such financial statements. 12-MOS DEC-31-1994 JAN-01-1994 DEC-31-1994 PER-BOOK 1,036,484 107,315 112,784 127,400 73,444 1,457,427 284,784 0 65,711 350,495 98,173 9,000 505,204 0 76,450 0 9,986 260 0 0 407,859 1,457,427 292,996 20,671 209,561 230,232 62,764 4,378 67,142 35,801 31,341 3,454 27,887 25,380 11,933 43,618 1.01 1.01
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