-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N66rtUG46yAKEigwtf3PCniygk7J6VXuGmZRNYT3uRXX7ry3qiie95RhiTLipLJb KE00/t1q7T7yLvIeEDHCYw== 0000950130-97-002314.txt : 19970514 0000950130-97-002314.hdr.sgml : 19970514 ACCESSION NUMBER: 0000950130-97-002314 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970513 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08586 FILM NUMBER: 97601918 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-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION ------------------------------------- WASHINGTON, D. C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997 --------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________________ to___________________ Commission file number 1-858-6 ------------- United Water Resources Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) New Jersey 22-2441477 ------------------------------- ------------------- (State or other Jurisdiction (I.R.S. Employer of Incorporation) Identification No.) 200 Old Hook Road, Harrington Park, New Jersey 07640 - -------------------------------------------------------------------------------- (Address of principal executive office) (zip code) 201-784-9434 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) 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 --------- --------- Common shares of stock outstanding as of April 30, 1997 35,373,060 ----------- PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ------------------------------- UNITED WATER RESOURCES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (THOUSANDS OF DOLLARS)
MARCH 31, DECEMBER 31, 1997 1996 ------------ ------------ (UNAUDITED) ASSETS - ------ UTILITY PLANT, including $40,011 and $27,947 under construction $1,366,667 $1,349,194 LESS accumulated depreciation 275,450 267,639 ---------- ---------- 1,091,217 1,081,555 ---------- ---------- UTILITY PLANT ACQUISITION ADJUSTMENTS, NET 64,294 64,710 ---------- ---------- REAL ESTATE AND OTHER INVESTMENTS, less accumulated depreciation of $10,340 and $9,909 80,369 83,340 EQUITY INVESTMENTS 85,364 82,433 ---------- ---------- 165,733 165,773 CURRENT ASSETS: Cash and cash equivalents 2,693 8,961 Restricted cash 25,698 27,203 Accounts receivable and unbilled revenues, net 60,023 65,911 Prepaid and other current assets 14,102 11,681 ---------- ---------- 102,516 113,756 ---------- ---------- DEFERRED CHARGES AND OTHER ASSETS: Regulatory assets 75,377 74,062 Prepaid employee benefits 16,362 16,139 Unamortized debt expense 30,578 30,720 Other deferred charges and assets 27,761 34,265 ---------- ---------- 150,078 155,186 ---------- ---------- $1,573,838 $1,580,980 ========== ========== CAPITALIZATION AND LIABILITIES - ------------------------------ CAPITALIZATION: Common stock and retained earnings $ 386,968 $ 391,490 Preferred stock without mandatory redemption 9,000 9,000 Preferred stock with mandatory redemption 53,971 53,978 Preference stock, convertible, with mandatory redemption 39,299 39,283 Long-term debt 558,180 558,093 ---------- ---------- 1,047,418 1,051,844 ---------- ---------- CURRENT LIABILITIES: Notes payable 70,925 93,225 Preferred stock and long-term debt due within one year 29,474 29,546 Accounts payable and other current liabilities 36,874 37,594 Accrued taxes 25,417 17,690 Dividends payable 8,728 198 Accrued interest 8,650 8,213 ---------- ---------- 180,068 186,466 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES: Deferred income taxes and investment tax credits 176,053 174,530 Customer advances for construction 25,629 25,259 Contributions in aid of construction 127,031 126,395 Other deferred credits and liabilities 17,639 16,486 ---------- ---------- 346,352 342,670 ---------- ---------- $1,573,838 $1,580,980 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. UNITED WATER RESOURCES INC. AND SUBSIDIARIES STATEMENT OF CONSOLIDATED INCOME (THOUSANDS OF DOLLARS) (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, ------------------------------------- 1997 1996 ---- ---- OPERATING REVENUES $80,006 $69,759 ------- ------- OPERATING EXPENSES: Operation and maintenance 44,062 35,957 Depreciation and amortization 8,628 7,542 General taxes 12,672 12,168 ------- ------- TOTAL OPERATING EXPENSES 65,362 55,667 ------- ------- OPERATING INCOME 14,644 14,092 ------- ------- INTEREST AND OTHER EXPENSES: Interest expense, net of amount capitalized 11,029 10,966 Allowance for funds used during construction (697) (405) Preferred stock dividends of subsidiaries 567 573 Gain on New Mexico settlement -- (10,372) Other income, net (3,377) (661) ------- ------- TOTAL INTEREST AND OTHER EXPENSES 7,522 101 ------- ------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 7,122 13,991 PROVISION FOR INCOME TAXES 1,885 7,612 ------- ------- INCOME FROM CONTINUING OPERATIONS 5,237 6,379 Preferred and preference stock dividends 1,135 1,200 ------- ------- NET INCOME APPLICABLE TO COMMON STOCK FROM CONTINUING OPERATIONS 4,102 5,179 Loss from discontinued operations -- (298) ------- ------- NET INCOME APPLICABLE TO COMMON STOCK $ 4,102 $ 4,881 ======= ======= Average common shares outstanding (thousands) 34,741 33,000 NET INCOME PER COMMON SHARE Continuing operations $ 0.12 $ 0.16 Discontinued operations -- (.01) ------- ------- Total $ 0.12 $ 0.15 ======= ======= DIVIDENDS PER COMMON SHARE $ 0.23 $ 0.23 ======= =======
The accompanying notes are an integral part of these consolidated financial statements UNITED WATER RESOURCES INC. AND SUBSIDIARIES STATEMENT OF CONSOLIDATED CASH FLOWS (THOUSANDS OF DOLLARS) (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, ------------------------------------ 1997 1996 ---- ---- OPERATING ACTIVITIES: NET INCOME $ 5,237 $ 6,081 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Depreciation and amortization 8,931 7,960 Gain on New Mexico settlement -- (10,372) Equity (earnings) loss of affiliates (2,681) 270 Proceeds from sales of properties 6,864 84 Gain on sale of properties (3,215) (66) Improvements to property under development (324) (249) Deferred income taxes and investment tax credits, net 1,523 11,890 Allowance for funds used during construction (AFUDC) (697) (405) Changes in assets and liabilities, net of effect of New Mexico settlement: Accounts receivable and unbilled revenues 5,888 2,424 Prepaid and other current assets (2,902) (1,072) Prepaid employee benefits (223) (675) Regulatory assets (1,315) (5,352) Accounts payable and other current liabilities (720) (6,169) Accrued taxes 7,727 2,372 Accrued interest 437 3,294 Other, net 2,081 (246) -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 26,611 9,769 -------- -------- INVESTING ACTIVITIES: Additions to utility plant (excludes AFUDC) (10,922) (7,713) Additions to real estate and other properties (919) (991) Investments in service contracts -- (2,500) Change in restricted cash 1,505 7,599 -------- -------- NET CASH USED IN INVESTING ACTIVITIES (10,336) (3,605) -------- -------- FINANCING ACTIVITIES: Change in notes payable (22,300) (1,000) Additional long-term debt 368 -- Reduction in preferred stock and long-term debt (360) (321) Issuance of common stock 7,845 4,543 Dividends on common stock (7,967) (7,580) Dividends on preferred and preference stock (1,135) (1,200) Net contributions and advances for construction 1,006 (480) -------- -------- NET CASH USED IN FINANCING ACTIVITIES (22,543) (6,038) -------- -------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (6,268) 126 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 8,961 4,529 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,693 $ 4,655 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. UNITED WATER RESOURCES INC. AND SUBSIDIARIES STATEMENT OF CONSOLIDATED CASH FLOWS (THOUSANDS OF DOLLARS) (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, ------------------------------------ 1997 1996 -------- ------- Supplemental disclosures of cash flow information: Interest (net of amount capitalized) $10,289 $7,360 Income taxes (refunded)/paid (827) 808
Supplemental disclosures of non-cash transactions: In connection with the New Mexico settlement in the first quarter of 1996, liabilities of $20.2 million were transferred to the city of Rio Rancho. UNITED WATER RESOURCES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1997 NOTE 1 - GENERAL - ---------------- In the opinion of United Water Resources (United Water, or the Company), the accompanying unaudited consolidated financial statements contain all adjustments, which consist of normal recurring adjustments, necessary for the fair presentation of the results for the interim periods. Additional footnote disclosure concerning accounting policies and other matters are disclosed in the Company's audited consolidated financial statements included in its 1996 Annual Report on Form 10-K, which should be read in conjunction with these financial statements. Certain prior year amounts have been reclassified to conform with current year presentation. Due to the seasonal nature of the Company's operations, financial results for interim periods are not necessarily indicative of the results for a twelve month period. NOTE 2 - INVESTMENT IN NORTHUMBRIAN PARTNERSHIP - ----------------------------------------------- On June 28, 1996, United Water and Lyonnaise Europe plc formed the Northumbrian Partnership (the Partnership), an equal partnership which has acquired a 20% interest in Northumbrian Water Group Plc, the fifth largest investor-owned water company (by population served) in the United Kingdom. United Water's share of the Partnership's earnings is included in Other Income in the Statement of Consolidated Income. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION - ------- ----------------------------------------------------------- AND RESULTS OF OPERATIONS ------------------------- GENERAL - ------- United Water's principal utility subsidiaries include United Water New Jersey, United Water New York and United Waterworks. United Water New Jersey and United Water New York (a subsidiary of United Water New Jersey) provide public water supply services to more than one million people in northern New Jersey and southern New York. United Waterworks provides public water supply services to approximately one million people in 13 states. Its major utility operations are located in Arkansas, Delaware, Florida, Idaho, New Jersey, New York and Pennsylvania. In addition, its utility in Florida also provides wastewater collection and treatment services, generally to its water customers. The water utility business is cyclical in nature, as both revenues and earnings are higher in the summer months when customer consumption is higher than in the cooler months. United Properties Group (United Properties), United Water's real estate subsidiary, 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. It owns a portfolio of real estate located in New Jersey, New York, Pennsylvania, Idaho, Delaware and Florida. United Properties also provides consulting and advisory services in support of the real estate assets of the other United Water companies. NEW MEXICO SETTLEMENT - --------------------- On March 29, 1996, the Company settled the condemnation proceeding with the city of Rio Rancho, New Mexico (the City). The agreement was approved on the same day by the Thirteenth Judicial District Court in New Mexico. Under the terms of the agreement, the Company agreed to accept $67 million for the water and wastewater systems of its United Water New Mexico operations (including capital expenditures incurred in 1995). Results of this transaction are included in the Company's first quarter 1996 earnings. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- 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. These capital expenditures are necessary to meet growth requirements and to comply with environmental laws and regulations. Excluding the effects of inflation, the capital expenditures of United Water's utility subsidiaries are projected to aggregate $297 million over the next five years, including $63 million and $61 million in 1997 and 1998, respectively. This total includes $204 million for United Waterworks and $88 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 capital expenditures over the 1997-2001 period. To the best of management's knowledge, the Company is in compliance with all major environmental laws and regulations. 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 participate in 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 March 31, 1997, $25.7 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. In June 1996, United Water entered into a $30 million long-term note agreement with Credit Lyonnais to partially fund its investment in the Northumbrian Partnership. The loan bears interest at a LIBOR-based floating rate and is payable in annual installments through June 2006. The Company purchased an offsetting interest rate cap to limit its exposure under this financing to a maximum interest rate of 8.6%. The remainder of the investment was funded through borrowings on United Water's various short-term bank lines of credit. In November 1996, United Water New Jersey issued three series of Variable Rate Demand Water Facilities Revenue Refunding Bonds (the Bonds) aggregating $130 million ($50 million due 2025 and $80 million due 2026), through the New Jersey Economic Development Authority (the EDA). Proceeds from the Bonds were used to refund an equal aggregate principal amount of 6%-7% bonds issued by the EDA in 1987 to finance or refinance a portion of the costs of acquiring and constructing certain water transmission, transportation, storage and distribution facilities located in Bergen, Passaic and Hudson counties in New Jersey. In December 1996, the Company purchased a five-year interest rate cap to limit its exposure under this financing to a maximum interest rate of 7%. LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) - ------------------------------- United Properties currently expects to spend $24.9 million over the next five years for capital expenditures on its existing real estate portfolio. Expenditures are projected to be $11.8 million and $2.4 million in 1997 and 1998, respectively. Funding for these expenditures is anticipated to come from sales of properties, operations of existing commercial properties and golf courses, and proceeds of new financings. At March 31, 1997, United Water had cash and cash equivalents of $2.7 million (excluding restricted cash) and unused short-term bank lines of credit of $145.5 million. Management expects that unused credit lines currently available, cash flows from 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. The Company continues to follow Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation," for its regulated utilities. SFAS No. 71 provides for the recognition of regulatory assets and liabilities as allowed by state regulators that are considered probable of recovery. During 1996, the Company's regulated utilities received ten rate settlement awards with an aggregate annual rate revenue increase of $11.1 million. An estimated $4.2 million of this amount was reflected in 1996's revenues while the remaining $6.9 million of carryover impact of the rate awards received in 1996 is expected to increase revenues in 1997. At the end of March 1997, there were eight rate cases pending in which the Company has requested an aggregate annual rate increase of $15.1 million. The most significant rate cases pending were filed by United Water Florida and United Water Delaware. In July 1996, United Water Florida filed for rate relief in the amount of $3.3 million, or 45.9%, in water revenues and $5.1 million, or 32.6%, in wastewater revenues. The increases were requested primarily to fund capital investments. As part of the proposal, the Company requested that it be permitted to place into effect on an interim basis $1.1 million, or 16.8%, of the proposed water increase and $1.1 million, or 7.9%, of the proposed wastewater increase. On November 15, 1996, the Florida Public Service Commission granted United Water Florida interim rate increases subject to refund of $725,000, or 10.6%, for water and $238,000, or 1.7%, for wastewater. A final decision on the Company's rate request is not anticipated until the end of the second quarter of 1997. In August 1996, United Water Delaware filed for rate relief in the amount of $3.7 million, or a 24.6% increase in revenues. A petition to place $2.2 million, or 15%, in effect subject to refund was filed in September 1996 and was approved by the Delaware Public Service Commission on October 15, 1996 for rates to become effective on October 26, 1996. A final decision on the Company's rate request is not anticipated until the end of the second quarter of 1997. Generally, the rate awards the Company's operating utilities actually receive are less than the amounts requested, primarily due to circumstances that change while the rate case is being processed. The Company expects to file additional rate cases in 1997 but does not expect that those rate awards, if received in 1997, will have a significant impact on revenues in 1997. RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1997 - --------------------------------------------------------- OVERVIEW United Water's net income applicable to common stock for the first quarter of 1997 decreased to $4.1 million from $4.9 million in the comparable period in 1996. Net income per common share for the first quarter of 1997 was 12 cents as compared to 15 cents for the same period last year. Utility investments, which include the Northumbrian Partnership, contributed 14 cents per share in 1997 compared with 10 cents per share for the first quarter of 1996. Results for 1997 included a significant land sale that contributed five cents per share. In 1996, United Water recorded a one-time contribution of 13 cents per share resulting from a condemnation settlement in New Mexico. Results for 1997 and 1996 included six cents and seven cents, respectively, for corporate charges relating to interest and preferred and preference dividends. OPERATING REVENUES The $10.2 million increase in revenues from the same period in 1996 was attributable to the following factors: (thousands of dollars) Increase (Decrease) ---------------------------------------------------- Utilities: Rate awards $ 2,412 3.5% Consumption (1,591) (2.3%) Growth 1,695 2.4% Real estate 6,923 9.9% Other operations 808 1.2% ---------------------------------------------------- $ 10,247 14.7% ---------------------------------------------------- The 3.5% increase in revenues from rate awards in the first quarter of 1997 includes the impact of 1996 rate awards for ten of the Company's operating utilities. The increase in revenues due to growth is primarily attributable to the acquisitions of two utilities in New Jersey in the second quarter of 1996. A decrease in consumption due to unfavorable weather conditions in several service areas partially offset these revenue increases. The 9.9% increase in real estate revenues was due to the sale of four parcels of land in the first quarter of 1997 as compared to only one property sale in the same period in 1996. Other operations increased 1.2% mainly due to revenues from the public- private partnership with Jersey City which commenced in May 1996, partially offset by a lower number of meter installations. OPERATING EXPENSES The increase in operating expenses from the same period in 1996 is due to the following: (thousands of dollars) Increase ----------------------------------------------- Operation and maintenance $8,105 22.5% Depreciation and amortization 1,086 14.4% General taxes 504 4.1% ----------------------------------------------- The $8.1 million increase in operation and maintenance expenses was due primarily to an increase in the costs associated with land sales in 1997, operating expenses incurred as a result of the commencement of the public- private partnership with Jersey City, higher purchased water and health care costs at the Company's utility subsidiaries and additional operating expenses incurred relating to the acquisitions of two utilities in New Jersey in May 1996. These were partially offset by lower meter installation costs. RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1997 (CONTINUED) - --------------------------------------------------------- The $1.1 million increase in depreciation and amortization was primarily attributable to utility plant additions by United Waterworks' utility subsidiaries, as well as amortization attributable to the service contract in Jersey City. General taxes increased $504,000 primarily due to higher real estate and franchise taxes in utility operations. OTHER INCOME The increase in other income of $2.7 million was mainly due to $3.2 million of earnings from the Northumbrian Partnership. INCOME TAXES The effective income tax rates on income before preferred and preference stock dividends were 24.5% and 52.8% in the first quarter of 1997 and 1996, respectively. The decrease in the effective rate is primarily attributable to the impact of the New Mexico settlement in the first quarter of 1996 and the tax treatment of the earnings from the Northumbrian Partnership. The Company considers the undistributed earnings to be permanently reinvested and has not provided deferred taxes on these earnings. NEW ACCOUNTING STANDARD In February 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings per Share". This statement, which is effective for financial statements issued for periods ending after December 15, 1997, including interim periods, establishes simplified standards for computing and presenting earnings per share (EPS). It requires dual presentation of basic and diluted EPS on the face of the income statement for entities with complex capital structures and disclosure of the calculation of each EPS amount. The Company does not anticipate that adoption of this standard will have a significant impact on reported EPS. 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; therefore, high inflation could have a detrimental effect on the Company until sufficient 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. PROSPECTIVE INFORMATION In addition to the historical information contained herein, this report contains a number of "forward-looking statements," within the meaning of the Securities Exchange Act of 1934. Such statements address future events and conditions concerning the adequacy of water supply and utility plant, capital expenditures, earnings on assets, resolution and impact of litigation, liquidity and capital resources and accounting matters. Actual results in each case could differ materially from those projected in such statements, by reason of factors including, without limitation, general economic conditions, competition, actions by regulators and other governmental authorities, and technological developments affecting the Company's operations, markets, services and prices, and other factors discussed in the Company's filings with the Securities and Exchange Commission, including this report. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS - ------- ----------------- Three suits were filed by Safas Corporation, New Regime Company and Aircraft Engineering Products against United Water, Dundee Water Power & Land Co. (Dundee) and United Water New Jersey in September and November 1994 and May 1995 in the Superior Court of New Jersey, Passaic County. The suits allege that the plaintiffs suffered property damage 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 Water owns 50% of the outstanding common stock. North Jersey District Water Supply Commission, the other 50% shareholder, has also been named as a defendant. Initially, the plaintiffs in the Safas and New Regime suits voluntarily dismissed United Water and United Water New Jersey without prejudice from their actions. In August 1995, Safas and New Regime reinstituted their suits against United Water and United Water New Jersey. Plaintiffs, in the aggregate, seek damages of several million dollars. Pursuant to a Case Management Order issued in April 1997, the parties have been directed to complete discovery by August 1997. The trial is scheduled to commence in September 1997. Both United Water's and the North Jersey District Water Supply Commission's respective policies of insurance name Dundee as an additional insured. 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 Delaware (formerly Wilmington Suburban Water Corporation), a subsidiary of United Waterworks, was the subject of a Criminal Violation Notice issued by 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. Violation notice forms were also 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. An application for approval of a remediation plan was submitted to the New Castle County Department of Planning on May 26, 1995 and the County accepted this proposal on September 1, 1995. United Water Delaware and New Castle County entered into a Release and Settlement Agreement (the Agreement) dated April 9, 1996. Pursuant to the Agreement, New Castle County has withdrawn the Criminal Violation Notice against United Water Delaware. The withdrawal of the Criminal Violation Notice is conditioned on United Water Delaware undertaking in good faith to implement the remediation plan. 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. 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. (LAH), United Waterworks and GWC Corporation (former parent of United Waterworks) in connection with the 1982 purchase of 50% of the outstanding common stock of United Waterworks by LAH. On June 16, 1995, United Waterworks, LAH and IU entered into a settlement agreement pursuant to which United Waterworks agreed to pay IU $800,000 on the date of execution of such agreement. In addition, United Waterworks agreed to pay IU an additional amount of up to approximately $1.15 million plus interest thereon (such interest commencing as of September 15, 1993) at United Waterworks' average short-term borrowing rate. Such payments become due in the event and at the time that certain tax benefits previously claimed by United Waterworks with respect to its 1992 tax year reach "finality" LEGAL PROCEEDINGS (CONTINUED) - ----------------- through the running of the statute of limitations on the 1992 tax year or when it is determined that such tax benefits are allowable by the Internal Revenue Service. On June 16, 1995, United Waterworks paid $800,000 to IU. Pursuant to the settlement agreement, on June 30, 1995, the parties filed with the court a stipulation of dismissal of the lawsuit with prejudice. On September 15, 1996, the statute of limitations expired on the 1992 tax year. As a result, on November 19, 1996, United Waterworks paid IU $977,000 of the $1.15 million. The remaining balance was paid on April 16, 1997. A class action lawsuit was filed in the Supreme Court of the State of New York, New York County, on May 28, 1996 by Steven Tagliaferri and John Ambroselli, individually and on behalf of a class of employees (Plaintiffs) against United Metering Inc., a subsidiary of United Water, for breach of contract. Plaintiffs claim that United Metering failed to comply with prevailing wage rate regulations in connection with work performed pursuant to certain public works contracts awarded by the New York City Department of Environmental Protection. The damages sought are in excess of $600,000. United Metering has filed a response denying Plaintiffs' claims and motion for summary judgement seeking dismissal of the lawsuit. Oral argument on such motion was held on March 14, 1997 and on April 1, 1997, a decision was issued granting United Metering's motion and dismissing the lawsuit. Plaintiffs have until the end of May to appeal. 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. On July 20, 1994, the Townhouse at Lake Isle Home Owners Association, Inc. filed suit against United Water New Rochelle (formerly New Rochelle Water Company) in the Supreme Court of the State of New York, Westchester County. The suit seeks to recover for alleged property damage arising out of repeated leaks in service lines installed in or about 1982 by the developer of a townhouse complex in Eastchester, New York. The bulk of the relief sought by plaintiff involves monetary damages for the cost of replacing the service lines, which belong to United Water. The plaintiff did not seek injunctive relief. A default judgement on the issue of liability was entered against United Water New Rochelle on December 2, 1994. United Water has diligently prosecuted motions to reopen and appeal from the default judgement, on the principal ground that the default resulted from a failure by United Water's insurance carrier and claims processing service provider to timely file an answer to the plaintiff's complaint. To date, motions to vacate the default judgement have not been successful. Following an inquest on the issue of damages, the Court issued a decision, dated December 20, 1996, awarding the plaintiff $1,330,000. The Company has filed a motion to set aside the Court's December 20, 1996 decision on the ground that the relief granted exceeded the plaintiff's original demand. The Company plans to appeal the judgement and will consolidate therewith its appeals from prior decisions on its motions to vacate the default judgement. The Company believes that it has meritorious arguments on appeal and on the original matter, should it be reopened. Further, the Company expects to seek reimbursement from third parties of any ultimate liability resulting in this matter. Management believes 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. S I G N A T U R E Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. UNITED WATER RESOURCES INC. ------------------------------ (Registrant) Date: May 13, 1997 By JOHN J. TURNER ------------ --------------------------- (Signature) John J. Turner Treasurer DULY AUTHORIZED AND CHIEF ACCOUNTING OFFICER EX-27 2 FINANCIAL DATA SCHEDULE
UT This schedule contains summary information extracted from the Consolidated Balance Sheet, Statement of Consolidated Income and Statement of Consolidated Cash Flows and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 PER-BOOK 1,091,217 165,733 102,516 150,078 64,294 1,573,838 342,718 0 44,250 386,968 93,270 9,000 558,180 0 70,925 0 29,214 260 0 0 426,021 1,573,838 80,006 1,885 65,362 67,247 12,759 3,507 16,266 11,029 5,237 1,135 4,102 7,967 0 26,611 0.12 0.12
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