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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001 Commission File
number 1-6659
PHILADELPHIA SUBURBAN CORPORATION
---------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1702594
- -------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
762 W. Lancaster Avenue, Bryn Mawr, Pennsylvania 19010-3489
- ------------------------------------------------ -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code: (610)-527-8000
--------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
Common stock, par value $.50 per share New York Stock Exchange, Inc.
Philadelphia Stock Exchange Inc.
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 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 amendments to
this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 1, 2002.
$1,345,282,568
For purposes of determining this amount only, registrant has defined
affiliates as including (a) the executive officers named in Part I of
this 10-K report, (b) all directors of registrant, and (c) each
shareholder that has informed registrant by March 1, 2002, that it has
sole or shared voting power of 5% or more of the outstanding common
stock of registrant.
The number of shares outstanding of each of the registrant's classes of common
stock as of March 1, 2002.
68,486,101
Documents incorporated by reference
(1) Portions of registrant's 2001 Annual Report to Shareholders have
been incorporated by reference into Parts I and II of this Form 10-K
Report.
(2) Portions of the Proxy Statement, relative to the May 16, 2002
annual meeting of shareholders of registrant, to be filed within 120
days after the end of the fiscal year covered by this Form 10-K Report,
have been incorporated by reference into Part III of this Form 10-K
Report.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Annual Report on Form 10-K ("10-K"), or incorporated
by reference in this 10-K, are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934 made based upon, among other things, our
current assumptions, expectations and beliefs concerning future developments and
their potential effect on us. These forward-looking statements involve risks,
uncertainties and other factors, many of which are outside our control, that may
cause our actual results, performance or achievements to be materially different
from any future results, performance or achievements expressed or implied by
these forward-looking statements. In some cases you can identify forward-looking
statements where statements are preceded by, followed by or include the words
"believes," "expects," "anticipates," "plans," "future," "potential" or the
negative of such terms or similar expressions. Forward-looking statements in
this 10-K, or incorporated by reference in this 10-K, include, but are not
limited to, statements regarding:
o projected capital expenditures and related funding requirements;
o developments and trends in the water and wastewater utility
industries;
o opportunities for future acquisitions;
o the development of new services and technologies by us or our
competitors;
o the availability of qualified personnel;
o general economic conditions; and
o merger-related costs and synergies.
Because forward-looking statements involve risks and uncertainties,
there are important factors that could cause actual results to differ materially
from those expressed or implied by these forward-looking statements, including
but not limited to:
o changes in general economic, business and financial market
conditions;
o changes in government regulations, including environmental and
public utility regulations;
o abnormal weather conditions;
o changes in capital requirements;
o our ability to integrate businesses, technologies or services
which we may acquire;
o our ability to manage the expansion of our business;
o the extent to which we are able to develop and market new and
improved services;
o the effect of the loss of major customers;
o our ability to retain the services of key personnel and to hire
qualified personnel as we expand;
o unanticipated capital requirements; and
o cost overruns relating to improvements or the expansion of our
operations.
Given these uncertainties, you should not place undue reliance on these
forward-looking statements. You should read this 10-K and the documents that we
incorporate by reference in this 10-K completely and with the understanding that
our actual future results may be materially different from what we expect. These
forward-looking statements represent our estimates and assumptions only as of
the date of this 10-K. Except for our ongoing obligations to disclose material
information under the federal securities laws, we are not obligated to update
these forward-looking statements, even though our situation may change in the
future. We qualify all of our forward-looking statements by these cautionary
statements.
2
PART I
Item 1. Business
The Company
Philadelphia Suburban Corporation (referred to as "we" or "us") is the
holding company for regulated utilities providing water or wastewater services
to approximately 2 million people in Pennsylvania, Ohio, Illinois, New Jersey,
Maine, and North Carolina. Our two primary subsidiaries are Pennsylvania
Suburban Water Company, a regulated public utility that provides water or
wastewater services to about 1.3 million residents in the suburban areas north
and west of the City of Philadelphia and in ten other counties in Pennsylvania,
and Consumers Water Company, a holding company for several regulated public
utility companies that provide water or wastewater service to about 700,000
residents in various communities in four states. Other subsidiaries provide
water or wastewater services in parts of Pennsylvania, North Carolina and Ohio.
In January 2002, Philadelphia Suburban Water Company and various of our other
Pennsylvania operating subsidiaries were merged together into Pennsylvania
Suburban Water Company. The purpose of the merger was to achieve certain legal,
financing and administrative efficiencies and benefits. For operational
purposes, those entities will continue to do business under their former names.
For discussion purposes, all references to Pennsylvania Suburban Water Company
relates to Pennsylvania Suburban Water Company or its predecessor companies.
We are among the largest investor-owned water utilities in the United
States based on the number of customers. In addition, we provide water and
wastewater service to approximately 35,000 people through operating and
maintenance contracts with municipal authorities and other parties close to our
operating companies' service territories. Some of our subsidiaries provide
wastewater collection, treatment and disposal services (primarily residential)
to approximately 40,000 people in Pennsylvania, Illinois, New Jersey and North
Carolina.
Consumers Water Company owns 100% of the voting stock of three water
companies operating in Ohio, Illinois and Maine, and at least 99% of the voting
stock of one water company operating in New Jersey. Consumers Water Company's
subsidiaries operate 24 divisions in these four states, providing water service
to approximately 700,000 people.
The following table indicates by geographic area our number of
customers served and utility revenues (water and wastewater revenues) for the
year ended December 31, 2001:
Number
Utility of
Revenues Customers
(000's) Served
-----------------------
Suburban Philadelphia $ 185,451 347,728
Pennsylvania* 25,192 47,121
Ohio 34,662 83,299
Illinois 28,571 64,030
New Jersey 15,584 37,937
Maine 8,675 16,882
North Carolina 2,053 5,513
----------------------
$ 300,188 602,510
======================
* Other than suburban Philadelphia.
3
Item 1, Continued
The following table indicates by customer class our number of customers
served and utility revenues for the year ended December 31, 2001:
Number
Utility of
Revenues Customers
Customer class (000's) Served
- -------------- -----------------------
Residential $ 188,303 526,776
Commercial 53,103 29,745
Industrial 16,140 1,454
Other 35,682 9,947
Wastewater and operating contracts 6,960 34,588
-----------------------
$ 300,188 602,510
=======================
Our customer base is primarily residential, representing approximately
63% of our total sales. Substantially all of our water customers are metered,
which allows us to measure our customers' water consumption. Water consumption
per customer is affected by local weather conditions during the year, especially
during the late spring and early summer. In general, during these seasons, an
extended period of dry weather increases consumption, while above average
rainfall decreases water consumption. Also, an increase in the average
temperature generally causes an increase in water consumption. See "Water
Supplies and Facilities" for a discussion of water use restrictions that may
impact water consumption during abnormally dry weather. Our exposure to regional
weather conditions is lessened by our geographic diversity, as our customers are
located in six states. During 2001, we experienced relatively dry weather and
warmer temperatures than normal in portions of our service territory,
particularly suburban Philadelphia, New Jersey and Maine. The 2001 weather
conditions resulted in increased water consumption in these portions of our
service territory, in contrast to the cool and wet weather conditions in these
same areas during the summer of 2000, which resulted in a decline in water
consumption during this period in 2000.
The growth in revenues over the past three years is a result of
increases in the customer base and in water rates. Excluding customers added
through acquisitions and other growth ventures, during the three-year period of
1999 through 2001, our customer base grew at an annual compound rate of 1.2%.
Including acquisitions and other growth ventures, our customer base increased at
an annual compound rate of 4.1% during this period. The customer growth rate in
2001 was 4.0%. Our business combination with Consumers Water Company in 1999 has
enabled us to grow through acquisitions in the areas where Consumers operates,
and to enter a new state, North Carolina, in 2000.
Acquisitions and Water Sale Agreements
With more than 50,000 community water systems in the U.S. (85% of which
serve less than 3,300 customers), the water industry is the most fragmented of
the major utility industries (telephone, natural gas, electric and water). The
nation's water systems range in size from large municipally-owned systems, like
the New York City water system that serves about 9 million people, to small
systems, where a few customers share a common well. In the states where we
operate, we believe there are over 8,800 public water systems of widely varying
size.
4
Item 1, Continued
Although not as fragmented as the water industry, the wastewater
industry in the U.S. also presents opportunities for consolidation. According to
the U.S Environmental Protection Agency's most recent survey of publicly-owned
wastewater treatment facilities in 1996, there are approximately 16,000 such
facilities in the nation serving approximately 72% of the U.S. population. The
vast majority of wastewater facilities are government-owned rather than
privately-owned. That survey also indicates that there are about 3,500 such
facilities in operation or planned in the six states where we operate.
We believe that there are many potential water and wastewater system
acquisition candidates throughout the United States because of the fragmented
nature of these industries. We believe the factors driving consolidation of
these systems are:
o the benefits of economies of scale, including the development of
technological expertise that would not be feasible in a smaller
organization;
o increasingly stringent environmental regulations; and
o the need for capital investment.
We believe that acquisitions will continue to be an important source of
growth for us. We intend to continue to pursue acquisitions of municipally-owned
and investor-owned water systems of all sizes that provide services in the
vicinity of our existing service territories or in new service areas, and we
intend to pursue wastewater system acquisitions, typically when the wastewater
system acquisition complements a water system opportunity. We engage in
continuing activities with respect to potential acquisitions, including
performing analyses and investigations of acquisition candidates, making
preliminary acquisition proposals and negotiating the terms of potential
acquisitions.
During the past five years, exclusive of the Consumers Water Company
merger we have completed 73 acquisitions or other growth ventures adding
approximately 66,200 customers to our customer base. The largest of these
transactions was the acquisition of the water utility assets of Bensalem
Township in December 1999, which has added 14,945 customers. We are actively
exploring other opportunities to expand our utility operations through
acquisitions or otherwise.
Water Supplies and Water Facilities
Our water utility operations obtain their water supplies from surface
water sources such as reservoirs, lakes, ponds, rivers and streams, in addition
to obtaining water from wells and purchasing water from other water suppliers.
Less than 10% of our water sales are purchased from other suppliers. We believe
that we have all of the necessary permits to obtain the water we distribute. Our
supplies are sufficient for anticipated daily demand and normal peak demand
under normal weather conditions. Our supplies by service area are as follows:
o Suburban Philadelphia - The principal supply of water is surface water from
the Schuylkill River, Delaware River, eight rural streams which are
tributaries of the Schuylkill and Delaware Rivers, and the Upper Merion
Reservoir, a former quarry now impounding groundwater. Wells and
interconnections with adjacent municipal authorities supplement these
surface supplies.
o Pennsylvania (other than suburban Philadelphia) - The Roaring Creek Division
draws its water from a man-made lake within a 12,000 acre watershed and two
wells also located in the watershed. The Susquehanna Division obtains its
water supply from wells. The Shenango Division draws its water from the
Shenango River. The Waymart Division's water supply is principally from
wells.
5
Item 1, Continued
o Ohio - Water supply is obtained for customers in Lake County from Lake Erie.
Customers in Mahoning County obtain their water from man-made lakes and the
Ashtabula division is supplied by purchased water. Water supply is obtained
for customers in Stark and Summit Counties from wells.
o Illinois - Water supply is obtained for customers in Kankakee County from
the Kankakee River and satellite wells, while customers in Vermilion County
are supplied from Lake Vermilion. In Will, Lee, Boone, Lake and Knox
counties, our customers are served from deep and shallow well systems.
o New Jersey - Water supply in our three non-contiguous divisions is obtained
from wells and is supplemented with purchased water.
o Maine - Eleven non-contiguous water systems obtain their water supply as
follows: five systems use groundwater, five systems use surface water and
one system purchases water from a neighboring municipal district.
o North Carolina - Water supply in 105 non-contiguous divisions is obtained
from wells and 2 divisions purchase water from neighboring municipalities.
We believe that the capacities of our sources of supply, and our water
treatment, pumping and distribution facilities are generally sufficient to meet
the present requirements of our customers. On a continuing basis, we make system
improvements and additions to capacity in response to changing regulatory
standards, changing patterns of consumption and increases in the number of
customers. The various state public utility commissions have generally
recognized the operating and capital costs associated with these improvements in
setting water rates.
On occasion, drought warnings and water use restrictions are issued by
governmental authorities for portions of our service territories in response to
extended periods of dry weather conditions. The timing and duration of the
warnings and restrictions can have an impact on our water revenues and net
income. In general, water consumption in the summer months are affected by
drought warnings and restrictions to a higher degree because nonessential and
recreational use of water is highest and at times other than the summer months,
warnings and restrictions generally have less of an effect on water consumption.
In November 2001, a drought warning was declared in nine counties in
Pennsylvania, including one of the five counties we serve in southeastern
Pennsylvania. A drought warning calls for a 10 to 15 percent voluntary reduction
of water use, particularly non-essential uses of water. In February 2002, a
drought emergency was declared in 24 counties, including seven of the counties
we serve in Pennsylvania. A drought emergency imposes a ban on nonessential
water use.
On occasion, there have been other water use restrictions in
Pennsylvania and New Jersey during the past three years, however, the
restrictions did not have a significant impact on operating revenues and we had
sufficient quantities of raw water and maintained adequate storage levels of
treated water.
6
Item 1, Continued
Economic Regulation
Our water and wastewater utility operations are subject to regulation
by their respective state regulatory commissions, which have broad
administrative power and authority to regulate rates and charges, determine
franchise areas and conditions of service and authorize the issuance of
securities. The regulatory commissions also establish uniform systems of
accounts and approve the terms of contracts with affiliates and customers,
business combinations with other utility systems, loans and the purchases or
sales of property. The profitability of our utility operations is influenced to
a great extent by the timeliness and adequacy of rate allowances in the various
states in which we operate. Accordingly, we maintain a rate case management
capability to provide that the tariffs of our utility operations reflect, to the
extent practicable, the timely recovery of increases in costs of operations,
capital, taxes, energy, materials and compliance with environmental regulations.
Rates for some divisions of our Ohio water utility can be fixed by negotiated
agreements with the municipalities that are served by those divisions in lieu of
regulatory approval from the Public Utilities Commission of Ohio. Currently, two
of the six regulated divisions in Ohio are operating under such rate ordinances.
The Pennsylvania Public Utility Commission ("PAPUC") permits
Pennsylvania water utilities to add a surcharge to their water bills. The
revenues earned from the surcharge offsets the additional depreciation and
capital costs associated with certain capital expenditures related to replacing
and rehabilitating distribution systems. In general, the capital expenditures
are associated with projects that are non-revenue producing, non-expense
reducing replacements and rehabilitation distribution system improvements. The
surcharge is known as a Distribution System Improvement Charge ("DSIC"). Prior
to the DSIC, water utilities absorbed all of the depreciation and capital costs
of these projects between base rate increases without the benefit of additional
revenues. The gap between the time that a capital project is completed and the
recovery of its costs in base rates is known as regulatory lag. The DSIC is
intended to eliminate or reduce regulatory lag that often acted as a
disincentive to water utilities in rehabilitating their distribution systems.
The DSIC is adjusted quarterly based on additional qualified capital
expenditures made in the previous quarter. The DSIC may never exceed 5% of the
base rates in effect. The DSIC is reset to zero when new base rates that reflect
the costs of those additions become effective. The PAPUC also limits use of the
DSIC to periods when a company's return on equity is less than a benchmark it
establishes each quarter.
In 2001, the Illinois Commerce Commission issued regulations
implementing an infrastructure surcharge mechanism known as a Qualifying
Infrastructure Plant Surcharge ("QIPS") for use by Illinois water and wastewater
utilities. QIPS is similar to DSIC, however, it is established annually and
prospectively based on anticipated qualifying capital expenditures, and it
includes a broader range of qualifying capital expenditures, including certain
wastewater capital expenditures. Consumers Illinois Water Company has received
approval to add a QIPS to its bills in three of its operating divisions
beginning January 1, 2002 at various rates ranging from 1.06% to 2.49%. We are
currently working to establish DSIC mechanisms in the other states in which we
operate.
In general, we believe that Philadelphia Suburban Corporation and its
subsidiaries have valid authority, free from unduly burdensome restrictions, to
enable us to carry on our business as presently conducted in the territories we
now serve. The rights to provide water or wastewater service to a particular
franchised service territory are generally non-exclusive, although the
applicable regulatory commissions usually allow only one utility to provide
service to a given area. In some instances, another water utility provides
service to a separate area within the same political subdivision served by one
of
7
Item 1, Continued
our subsidiaries. In the states where our subsidiaries operate, it is possible
that portions of our subsidiaries' operations could be acquired by municipal
governments by one or more of the following methods:
o eminent domain;
o the right of purchase given or reserved by a municipality or political
subdivision when the original franchise was granted; and
o the right of purchase given or reserved under the law of the state in which
the subsidiary was incorporated or from which it received its permit.
The price to be paid upon such an acquisition by the municipal
government is usually determined in accordance with applicable law governing the
taking of lands and other property under eminent domain. In other instances, the
price may be negotiated, fixed by appraisers selected by the parties or computed
in accordance with a formula prescribed in the law of the state or in the
particular franchise or charter. Generally, our strategy is to acquire
additional water and wastewater systems, maintain our existing systems, and
actively oppose efforts by municipal governments to acquire any of our
operations, particularly for less than the fair market value of our operations
or where the municipal government seeks to acquire more than it is entitled to
under the applicable law or agreement.
There are two matters in Ohio that involve the attempted acquisition or
condemnation of certain assets of our Ohio water utility.
In Ashtabula County, Consumers Ohio Water Company provides water
service to several municipalities and to areas of the county that are located
outside of these municipalities. Ashtabula County has proposed, under a 1959
agreement with Consumers Ohio Water Company, to purchase certain assets of
Consumers Ohio Water Company that are located outside of these municipalities.
This proposal resulted in litigation over the question of whether Ashtabula
County's right to purchase includes all of the assets located outside of these
municipalities or only those assets that are not essential for providing service
to these municipalities. The court denied the County's request to acquire all
assets outside of these municipalities; yet, the assets which may be purchased
have not been defined. A court hearing has been scheduled in mid-2002 to define
the assets that may be purchased. It is not certain that the County will proceed
with an acquisition if all the assets cannot be purchased. If the County does
proceed to acquire all or some of these assets, we believe that Consumers Ohio
Water Company will be entitled to fair market value for these assets, which we
believe will be in excess of the book value for these assets.
The City of Geneva in Ashtabula County, Ohio, has passed an ordinance
seeking authorization to condemn the assets of Consumers Ohio Water Company that
are located in Geneva. The issue was submitted to a referendum in November 2000,
whereby voters by a margin of 16 votes affirmed the ordinance. The City has
engaged a consulting firm to assist it in valuing the assets that may be
condemned. If the City condemns these assets, we believe that Consumers Ohio
Water Company will be entitled to fair market value for these assets, which we
believe will be in excess of the book value for these assets. The total number
of customers included in the Ashtabula and Geneva systems discussed above
represent approximately 1% of our total customer base.
Environmental Regulation
The provision of water and wastewater services is governed primarily by
the federal Safe Drinking Water Act, the Clean Water Act and related state laws,
and state and federal regulations issued under these laws by the Environmental
Protection Agency and state environmental regulatory agencies. These laws and
regulations establish criteria and standards for drinking water and for
discharges into the
8
Item 1, Continued
waters of the United States. The states may have the right to establish criteria
and standards that are stricter than those established by the Environmental
Protection Agency. In addition, we are subject to federal and state laws and
other regulations relating to residual waste disposal, dam safety and other
operations of our subsidiaries.
In addition to the capital expenditures and costs currently
anticipated, changes in environmental regulations, enforcement policies and
practices or related matters may result in additional capital expenditures and
costs. Capital expenditures and costs required as a result of water quality
standards and environmental requirements have been recognized by state public
utility commissions as appropriate for inclusion in establishing rates.
Safe Drinking Water Act - The Safe Drinking Water Act establishes criteria and
procedures for the Environmental Protection Agency to develop national quality
standards for drinking water. Regulations issued pursuant to the Safe Drinking
Water Act set standards on the amount of certain microbial and chemical
contaminants and radionuclides allowable in drinking water. The 1996 Amendments
to the Safe Drinking Water Act require the Environmental Protection Agency to
analyze both the benefits and the costs of compliance when considering new or
stricter water quality standards. Current requirements under the Safe Drinking
Water Act are not expected to have a material impact on our operations or
financial condition. We may, in the future, be required to change our method of
treating drinking water at certain sources of supply if additional regulations
become effective. The 1996 amendments to the Safe Drinking Water Act also
prescribe testing for certain additional substances and propose establishing
future rules that may change standards for water treatment. The cost of
maintaining compliance with new rulemakings is expected to be fully recoverable
in water rates and is not expected to have a material impact on our results from
operations or financial condition.
The Safe Drinking Water Act of 1974 established a standard for nitrate,
a regulated inorganic chemical used extensively in crop fertilization. In 1999
and 2000, elevated levels of nitrate were observed in the Vermilion River, a
water supply source for Consumers Illinois Water Company. As a result of the
nitrate levels, in December 2000 Consumers Illinois Water Company completed
construction of a nitrate-removal facility for its Vermilion River source. The
facility has operated effectively since then to keep nitrate levels at the
Danville Water Treatment Plant in compliance with the drinking water standard.
The project cost of approximately $5.7 million is being recovered in water
rates.
The EPA may issue a final rule for radon in the future, although the
EPA has postponed the issuance of these rules many times in the past. If a rule
is issued, limits for radon would probably become effective 4 or 5 years later.
We anticipate this rule may establish a radon level that would require treatment
at a small number of our wells. The capital costs to comply with the anticipated
limit are expected to total less than $1 million. If the states in which we
operate elect not to implement general radon reduction programs (Multi-Media
Mitigation), then a lower limit for radon may apply and a larger number of wells
would be affected. It is expected that states will adopt Multi-Media Mitigation
programs. Whether or not states adopt these programs, we expect that future
costs associated with radon treatment will be fully recoverable in water rates.
The Safe Drinking Water Act provides for the regulation of
radionuclides other than radon, such as radium and uranium. In December 2000,
the EPA issued a final rule regulating certain radionuclides other than radon.
The rule will become effective in December 2003 and no significant impact on our
operations or financial condition is anticipated from the new rulemaking. As a
result of revised testing procedures under the new regulation, additional
treatment or alternate sources of water supply may be required for a small
number of groundwater sources in one of our divisions. We believe the costs for
additional treatment or alternate sources of water supply will be fully
recoverable in water rates.
9
Item 1, Continued
In order to eliminate or inactivate microbial organisms, the Surface
Water Treatment Rule and the Interim Enhanced Surface Water Treatment Rule were
issued by the EPA to improve disinfection or filtration. The EPA developed the
Disinfectants-Disinfection By-products Rule to reduce consumers' exposure to
disinfectants and by-products of the disinfection process. In December 1998, the
EPA issued new rules on disinfection and on surface water treatment. Our large
surface water systems are in compliance with these rulemakings, including the
additional provisions that became effective in January 2002. In July 2000,
construction was completed on a $35 million water treatment plant at one of our
Pennsylvania operating companies. This new plant replaced an aged,
lower-capacity facility and allows us to maintain compliance with the Surface
Water Treatment Rule, continue to maintain compliance with anticipated future
regulations. The cost of the plant is being fully recovered in rates. The plant
is currently operating under an agreement with a state regulatory agency while
data is being collected to demonstrate the effective performance of the plant's
innovative technologies. This plant has met and continues to meet all drinking
water standards. Groundwater and smaller surface water systems have until
December 2003 to comply with the rules on disinfection and on surface water
treatment. We are currently developing a new groundwater source for a small
surface water system in Maine, and in the future may be required to install
filtration for a surface water supply in Maine. A number of small groundwater
systems in New Jersey and Pennsylvania may be reclassified as being influenced
by surface water. This may require additional treatment or the development of
replacement sources of supply over time, and that could cost approximately $5
million. It is expected that these capital expenditures would be fully
recoverable in water rates and would represent a small portion of our typical
annual capital expenditures.
We conduct extensive water quality monitoring beyond what is required
by the regulations, including monitoring for contaminants for which health
advisories or other limits have been published or proposed, but for which
drinking water standards are not in effect. In the course of this monitoring,
contaminants may be identified that may prompt us to take a water supply source
out of service or add treatment at the water supply source. Where a source of
contamination can be identified, we pursue recovery of response costs from
responsible parties. In April 2000, the gasoline additive Methyl tert-Butyl
Ether ("MtBE") was discovered in a Consumers New Jersey production well at
levels exceeding the New Jersey drinking water standard. The well was
immediately taken out of service and alternate water supplies were obtained
through existing wells. The New Jersey Department of Environmental Protection
identified the source of the MtBE as a nearby gasoline station. The company
responsible for the contamination has reimbursed us for expenses incurred
to-date and we expect to continue to be reimbursed for the future costs
associated with developing a long-term replacement supply.
In January 2001, the EPA issued a final rule for arsenic that lowers
the limit to a more stringent level effective by 2006, with a provision for
further time extensions for small systems. Currently, two small well systems
slightly exceed the new arsenic levels and will require additional treatment.
The cost of maintaining compliance with new rulemakings is expected to be fully
recoverable in water rates and is not expected to have a material impact on our
results from operations or financial condition.
Additional rules dealing with water treatment and disinfection are
anticipated during 2002, and are not expected to have a material impact on our
results of operations or financial condition.
10
Item 1, Continued
Clean Water Act - The Clean Water Act regulates discharges from drinking water
and wastewater treatment facilities into lakes, rivers, streams, and
groundwater. We currently maintain all required permits and approvals for the
discharge from our water and wastewater facilities. Additional capital
expenditures and operating costs in connection with the management and disposal
of discharges from our water and wastewater facilities may be required in the
future, particularly if changes are made in the requirements of the applicable
Federal or state laws. We believe that these capital expenditures would be fully
recoverable in our rates.
Residual and Solid Waste Disposal - The handling and disposal of residuals and
solids from water and wastewater treatment facilities are governed by state and
federal laws and regulations. Water treatment residuals and solids are a
combination of the chemicals used in the treatment process and the silt and
other materials removed from the raw water. Most of our water treatment
residuals and solids are disposed of in company-owned, dedicated landfills, or
by land application by a licensed contractor. A small portion of our water
treatment residuals and solids are disposed of in state-approved landfills owned
by others or in a liquid form into municipal sewer systems. Wastewater residuals
and solids result from the treatment of wastewater, and these "sludges" are
disposed of in approved landfills, transferred to larger wastewater treatment
facilities or applied to farmland. We currently maintain all required permits
for our water and wastewater treatment facilities and our dedicated landfills.
Additional capital expenditures and operating costs in connection with the
management and disposal of residuals and solids from our water and wastewater
facilities may be required in the future, particularly if changes are made in
the requirements of the applicable Federal or state laws. We believe that these
capital expenditures would be fully recoverable in our rates.
Dam Safety - Our subsidiaries own seventeen major dams that are subject to the
requirements of the Federal and state regulations related to dam safety. All
major dams undergo an annual engineering inspection. We believe that all
seventeen dams are structurally sound and well-maintained.
In Pennsylvania, the Department of Environmental Protection has
recently adopted the use of a new formula for determining the magnitude of the
Probable Maximum Flood. We are studying our dams to determine what improvements
may be needed to our dams as a result of this new calculation. As a result of
the initial results of the studies, we have identified three dams that could
require capital improvements of approximately $7 million in aggregate. We
believe that these capital expenditures that could be required by the new
formulas would be fully recoverable in our rates. In Ohio, the Department of
Environmental Resources has adopted the use of the new formula. We are studying
our dams in Ohio to determine the required improvements. Based on the
preliminary results, we believe that capital expenditures of approximately $2.2
million in aggregate will be required on three dams over the next four years.
Employee Relations
As of December 31, 2001, we employed a total of 951 full-time persons.
Our subsidiaries are parties to agreements with labor unions covering 456
employees. We consider our employee relations to be good.
11
Item 2. Properties.
Our properties consist of transmission and distribution mains and
conduits, water treatment plants, pumping facilities, wells, tanks, meters,
supply lines, dams, reservoirs, buildings, vehicles, land, easements, rights and
other facilities and equipment used for the operation of our systems, including
the collection, treatment, storage and distribution of water. Substantially all
of our properties are owned by our subsidiaries and are subject to liens of
mortgage or indentures. These liens secure bonds, notes and other evidences of
long-term indebtedness of our subsidiaries. For certain properties that we
acquired through the exercise of the power of eminent domain and certain other
properties we purchased, we hold title for water supply purposes only. We own,
operate and maintain approximately 7,690 miles of transmission and distribution
mains, 19 water treatment plants and 14 wastewater treatment plants. Some
properties are leased under long-term leases. The following table indicates our
net utility plant as of December 31, 2001 by service area:
Net Property,
Plant and
Equipment
(000's)
----------------
Suburban Philadelphia $ 842,410
Pennsylvania* 129,174
Ohio 150,909
Illinois 124,442
New Jersey 79,571
Maine 34,628
North Carolina 10,452
Inter-company eliminations and other (3,471)
----------
$1,368,115
==========
*Other than suburban Philadelphia.
We believe that our properties are maintained in good condition and in
accordance with current standards of good waterworks industry practice. We
believe that the facilities used in the operation of our business are in good
condition in terms of suitability, adequacy and utilization.
Our corporate offices are leased from Pennsylvania Suburban Water
Company and located in Bryn Mawr, Pennsylvania.
Item 3. Legal Proceedings
There are various legal proceedings in which we are involved. Although
the results of legal proceedings cannot be predicted with certainty, there are
no pending legal proceedings to which we or any of our subsidiaries is a party
or to which any of our properties is the subject that are expected to have a
material effect on our financial position, results of operations or cash flows.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
fourth quarter of 2001.
Executive Officers of the Registrant
Information with respect to our executive officers is contained in Item
10 hereof and is hereby incorporated by reference herein.
12
PART II
Item 5. Market for the Registrant's Common Stock and Related Security
Holder Matters
Our common stock is traded on the New York Stock Exchange and the
Philadelphia Stock Exchange. As of March 1, 2002, there were approximately
21,056 holders of record of our common stock.
The following selected quarterly financial data is in thousands of
dollars, except for per share amounts:
First Second Third Fourth Year
--------------------------------------------------------------
2001
- --------------------------------------------------------------------------------------------------------------------
Operating revenues $70,193 $77,240 $84,726 $75,121 $307,280
Operations and maintenance expense 26,186 26,462 28,994 30,243 111,885
Net income available to common
stock 13,085 15,432 19,279 12,209 60,005
Basic net income per common share 0.19 0.23 0.28 0.18 0.88
Diluted net income per common share 0.19 0.22 0.28 0.18 0.87
Dividend paid per common share 0.124 0.124 0.124 0.13248 0.504
Dividend declared per common share 0.124 0.124 0.25648 - 0.504
Price range of common stock
- high 19.39 20.40 23.28 24.64 24.64
- low 15.65 16.60 18.66 20.80 15.65
2000
- --------------------------------------------------------------------------------------------------------------------
Operating revenues $64,208 $68,494 $72,123 $69,189 $274,014
Operations and maintenance expense 24,928 24,350 25,037 27,426 101,741
Net income available to common
stock 10,246 13,565 16,539 12,434 52,784
Basic net income per common share 0.16 0.21 0.26 0.19 0.82
Diluted net income per common share 0.16 0.21 0.25 0.18 0.81
Dividends paid per common share 0.115 0.115 0.115 0.124 0.4696
Dividends declared per common share 0.115 0.115 0.239 - 0.4696
Price range of common stock
- high 14.08 15.96 15.56 19.95 19.95
- low 10.56 11.60 12.80 13.56 10.56
All per share data as presented has been adjusted for the 2001 5-for-4
common stock split effected in the form of a stock distribution (described
below). High and low prices of our common stock are as reported on the New York
Stock Exchange Composite Tape. The cash dividends paid in December 2001 of
$0.13248 per share and December 2000 of $0.124 per share were declared in August
2001 and August 2000, respectively.
Net income available to common stock and net income per common share
for 2000 includes the partial recovery of the merger costs related to the
Consumers Water Company merger as follows: $972,000 ($1,059,000 pre-tax) or
$0.02 per share in the second quarter and $1,264,000 ($2,982,000 pre-tax) or
$0.02 per share in the third quarter.
13
Item 5, Continued
We have paid common dividends consecutively for 57 years. Effective
December 1, 2001, our Board of Directors authorized an increase of 6.9% in the
dividend rate over the amount Philadelphia Suburban Corporation has historically
paid. As a result of this authorization, beginning with the dividend payment in
December, the annual dividend rate increased to $0.53 per share. We presently
intend to pay quarterly cash dividends in the future, on March 1, June 1,
September 1 and December 1, subject to our earnings and financial condition,
regulatory requirements and such other factors as our Board of Directors may
deem relevant. During the past five years, after restatement for the Consumers
Water Company pooling, our common dividends paid have averaged 65.3% of income
from continuing operations.
In August 2001, our Board of Directors declared a 5-for-4 common stock
split effected in the form of a 25% stock distribution for all common shares
outstanding, to shareholders of record on November 16, 2001. The new shares were
distributed on December 1, 2001. PSC's par value of $0.50 per share remained
unchanged and $6,829,000 was transferred from Capital in Excess of Par Value to
Common Stock to record the split. All share and per share data for all periods
presented have been restated to give effect to the stock split.
Item 6. Selected Financial Data
The information appearing in the section captioned "Summary of Selected
Financial Data" from the portions of our 2001 Annual Report to Shareholders
filed as Exhibit 13.9 to this Form 10-K Report is incorporated by reference
herein.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information appearing in the section captioned "Management's
Discussion and Analysis" from the portions of our 2001 Annual Report to
Shareholders filed as Exhibit 13.9 to this Form 10-K Report is incorporated by
reference herein.
14
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are subject to market risks in the normal course of business,
including changes in interest rates and equity prices. The exposure to changes
in interest rates is a result of financings through the issuance of fixed-rate,
long-term debt. Such exposure is typically related to financings between utility
rate increases, since generally our rate increases include a revenue level to
allow recovery of our current cost of capital. Interest rate risk is managed
through the use of a combination of long-term debt, which is at fixed interest
rates and short-term debt, which is at floating interest rates. As of December
31, 2001, the debt maturities by period, in thousands of dollars, and the
weighted average interest rate for fixed-rate, long-term debt are as follows:
Fair
2002 2003 2004 2005 2006 Thereafter Total Value
- --------------------------------------------------------------------------------------------------------------------
Long-term
debt (fixed rate) $14,935 $34,945 $39,972 $40,961 $17,130 $383,512 $531,455 $562,740
- --------------------------------------------------------------------------------------------------------------------
Average interest rate 6.54% 6.75% 6.36% 7.22% 7.20% 7.02% 6.96%
- --------------------------------------------------------------------------------------------------------------------
From time to time, we make investments in marketable equity securities.
As a result, we are exposed to the risk of changes in equity prices for the
"available-for-sale" marketable equity securities. As of December 31, 2001, our
carrying value of marketable equity securities was $6,425,000, which reflects
the market value of such securities. The market risks that we are exposed to are
consistent with the risks that we were exposed to in the prior year.
Item 8. Financial Statements and Supplementary Data
Information appearing under the captions "Consolidated Statements of
Income and Comprehensive Income", "Consolidated Balance Sheets", "Consolidated
Cash Flow Statements" "Consolidated Statements of Capitalization" and "Notes to
Consolidated Financial Statements" from the portions of our 2001 Annual Report
to Shareholders filed as Exhibit 13.9 to this Form 10-K Report is incorporated
by reference herein. Also, the information appearing in the section captioned
"Reports on Financial Statements" from the portions of our 2001 Annual Report to
Shareholders filed as Exhibit 13.9 to this Form 10-K Report is incorporated by
reference herein.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
15
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors of the Registrant
The information appearing in the section captioned "Information
Regarding Nominees and Directors" of the Proxy Statement relating to our May 16,
2002, annual meeting of shareholders, to be filed within 120 days after the end
of the fiscal year covered by this Form 10-K Report, is incorporated herein by
reference.
Executive Officers of the Registrant
The following table and the notes thereto set forth information with
respect to the executive officers of the Registrant, including their names,
ages, positions with the Registrant and business experience during the last five
years:
Position with the Registrant
Name Age and date of election (1)
- ---- --- --------------------------
Nicholas DeBenedictis 56 President and Chairman (May 1993 to present); President and Chief
Executive Officer (July 1992 to May 1993); Chairman and Chief
Executive Officer, Pennsylvania Suburban Water Company (July 1992 to
present); President, Philadelphia Suburban Water Company (February
1995 to January 1999) (2)
Morrison Coulter 65 President, Pennsylvania Suburban Water Company - Philadelphia Suburban
Division (December 2001 to present); President, Philadelphia Suburban
Water Company (January 1999 to December 2001); Senior Vice President -
Production, Philadelphia Suburban Water Company (February 1996 to
January 1999); Vice President - Production, Philadelphia Suburban
Water Company (April 1989 to February 1996) (3)
Richard R. Riegler 55 Senior Vice President - Engineering and Environmental Affairs (January
1999 to present); Senior Vice President - Operations, Philadelphia
Suburban Water Company (April 1989 to January 1999) (4)
Roy H. Stahl 49 Executive Vice President and General Counsel (May 2000 to present);
Secretary (June 2001 to present); Senior Vice President and General
Counsel (April 1991 to May 2000) (5)
David P. Smeltzer 43 Senior Vice President - Finance and Chief Financial Officer (December
1999 to present); Vice President - Finance and Chief Financial Officer
(May 1999 to December 1999); Vice President - Rates and Regulatory
Relations, Philadelphia Suburban Water Company (March 1991 to May
1999) (6)
(1) In addition to the capacities indicated, the individuals named in the above
table hold other offices or directorships with subsidiaries of the Registrant.
Officers serve at the discretion of the Board of Directors.
(2) Mr. DeBenedictis was Secretary of the Pennsylvania Department of
Environmental Resources from 1983 to 1986. From December 1986 to April 1989, he
was President of the Greater Philadelphia Chamber of Commerce. Mr. DeBenedictis
was Senior Vice President for Corporate and Public Affairs of Philadelphia
Electric Company from April 1989 to June 1992.
(3) Mr. Coulter was Superintendent of Pumping Facilities from 1971 to 1982. From
1982 to 1987 he served as Manager - Electrical/Mechanical Department and from
1987 to 1989 he was Assistant Vice President - Production.
(4) Mr. Riegler was Chief Engineer of Philadelphia Suburban Water Company from
1982 to 1984. He then served as Vice President and Chief Engineer from 1984 to
1986 and Vice President of Operations from 1986 to 1989.
(5) From January 1984 to August 1985, Mr. Stahl was Corporate Counsel, from
August 1985 to May 1988 he was Vice President - Administration and Corporate
Counsel of the Registrant, and from May 1988 to April 1991 he was Vice President
and General Counsel of the Registrant.
(6) Mr. Smeltzer was Vice President - Controller of Philadelphia Suburban Water
Company from March, 1986 to March 1991.
16
Item 11. Executive Compensation
The information appearing in the sections captioned "Executive
Compensation" of the Proxy Statement relating to our May 16, 2002, annual
meeting of shareholders, to be filed within 120 days after the end of the fiscal
year covered by this Form 10-K Report, is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information appearing in the sections captioned "Ownership of
Common Stock" of the Proxy Statement relating to our May 16, 2002, annual
meeting of shareholders, to be filed within 120 days after the end of the fiscal
year covered by this Form 10-K Report, is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information appearing in the sections captioned "Certain
Relationships and Related Transactions" of the Proxy Statement relating to our
May 16, 2002, annual meeting of shareholders, to be filed within 120 days after
the end of the fiscal year covered by this Form 10-K Report, is incorporated
herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Financial Statements. The following is a list of our consolidated financial
statements and its subsidiaries and supplementary data incorporated by reference
in Item 8 hereof:
Report of Management
Independent Accountants' Report of PricewaterhouseCoopers LLP - 2001
Consolidated Balance Sheets - December 31, 2001 and 2000
Consolidated Statements of Income and Comprehensive Income - 2001, 2000
and 1999
Consolidated Cash Flow Statements - 2001, 2000, and 1999
Consolidated Statements of Capitalization - December 31, 2001 and 2000
Notes to Consolidated Financial Statements
Financial Statement Schedules. The financial statement schedules, or
supplemental schedules, filed as part of this annual report on Form 10-K are
omitted because they are not applicable or not required, or because the required
information is included in the consolidated financial statements or notes
thereto.
17
Item 14, Continued
Pursuant to Rule 14a-3 Note 1, filed herein is the independent
auditors' report of KPMG LLP for the year ended December 31, 1999.
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
Philadelphia Suburban Corporation:
We have audited the accompanying consolidated statements of income and
comprehensive income and cash flow of Philadelphia Suburban Corporation and
subsidiaries for the year ended December 31, 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and the cash flows
of Philadelphia Suburban Corporation and subsidiaries for the year ended
December 31, 1999, in conformity with generally accepted accounting principles.
/s/ KPMG LLP
Philadelphia, Pennsylvania
January 31, 2000
Reports on Form 8-K.
Philadelphia Suburban Corporation filed no reports on Form 8-K during the
quarter ended December 31, 2001.
Exhibits, Including Those Incorporated by Reference. The following is a list of
exhibits filed as part of this annual report on Form 10-K. Where so indicated by
footnote, exhibits which were previously filed are incorporated by reference.
For exhibits incorporated by reference, the location of the exhibit in the
previous filing is indicated in parentheses. The page numbers listed refer to
page numbers where such exhibits are located using the sequential numbering
system specified by Rules 0-3 and 403.
18
EXHIBIT INDEX
Exhibit No. Page No.
- ---------- --------
3.1 Amended and Restated Articles of Incorporation, as -
amended (1) (Exhibit 3.1)
3.2 By-Laws, as amended (14) (Exhibit 3.2) -
3.3 Amendment to Amended and Restated Articles of -
Incorporation, as amended, to increase the number
of authorized shares to 41,770,819 and to
provide that 40,000,000 of such shares be
shares of Common Stock (14) (Exhibit 3.3)
3.4 Amendment to Amended and Restated Articles of -
Incorporation, as amended, designating the
Series B Preferred Stock (14) (Exhibit 3.4)
3.5 Amendment to Section 3.03 and addition of Section 3.17 -
to Bylaws (16) (Exhibits 1 and 2)
3.6 Amendment to Amended and Restated Articles of -
Incorporation, designating the terms of the Series A
Junior Participating Preferred Shares (18) (Exhibit 3.6)
3.7 Amendment to Amended and Restated Articles of Incorporation, -
to increase the number of authorized shares to 101,770,819
and to provide that 100,000,000 of such shares be shares of
Common Stock (20) (Annex E)
3.8 Amendment to Section 3.03 of the Bylaws (23) (Exhibit 3.8) -
3.9 Amendment to Section 5.05(a) to the Amended and restated Articles -
of Incorporation (24) (Annex A)
3.10 Amendments to Sections 2.01(a), 2.02 and 3.08(b) of the Bylaws (25) (Exhibit 3.10) -
3.11 Restated Articles of Incorporation (as of May 17, 2001) 28
4.1 Indenture of Mortgage dated as of January 1, 1941 -
between Philadelphia Suburban Water Company and The
Pennsylvania Company for Insurance on Lives and Granting
Annuities(now First Pennsylvania Bank, N.A.), as Trustee, with
supplements thereto through the Twentieth Supplemental Indenture
dated as of August 1, 1983 (2) (Exhibits 4.1 through 4.16)
4.2 Agreement to furnish copies of other long-term debt -
instruments (1) (Exhibit 4.7)
4.3 Twenty-first Supplemental Indenture dated as of August 1, -
1985 (3) (Exhibit 4.2)
4.4 Twenty-second Supplemental Indenture dated as of April 1, -
1986 (4) (Exhibit 4.3)
4.5 Twenty-third Supplemental Indenture dated as of April 1, -
1987 (5) (Exhibit 4.4)
4.6 Twenty-fourth Supplemental Indenture dated as of June 1, -
1988 (6) (Exhibit 4.5)
4.7 Twenty-fifth Supplemental Indenture dated as of -
January 1, 1990 (7) (Exhibit 4.6)
19
Exhibit No. Page No.
- ----------- --------
4.8 Twenty-sixth Supplemental Indenture dated as of November -
1, 1991 (8) (Exhibit 4.12)
4.9 Twenty-seventh Supplemental Indenture dated as of June 1, -
1992 (1) (Exhibit 4.14)
4.10 Twenty-eighth Supplemental Indenture dated as of April 1, -
1993 (9) (Exhibit 4.15)
4.11 Twenty-ninth Supplemental Indenture dated as of March 30, -
1995 (11) (Exhibit 4.17)
4.12 Thirtieth Supplemental Indenture dated as of August 15, -
1995 (12) (Exhibit 4.18)
4.13 Thirty-first Supplemental Indenture dated as of July 1, -
1997 (15) (Exhibit 4.22)
4.14 Rights Agreement, dated as of March 1, 1998 between Philadelphia -
Suburban Corporation and ChaseMellon Shareholder Services,
L.L.C., as Rights Agent (17) (Exhibit 1)
4.15 Rights Agreement, dated as of March 1, 1998 between Philadelphia -
Suburban Corporation and BankBoston, N.A., as Rights Agent (21)
(Exhibit 4.25)
4.16 Thirty-second Supplement Indenture, dated as of October 1, 1999 (22) -
(Exhibit 4.26)
4.17 Thirty-third Supplemental Indenture, dated as of November 15, 1999. -
(23) (Exhibit 4.27)
4.18 Revolving Credit Agreement between Philadelphia Suburban Water -
Company and PNC Bank National Association, First Union National
Bank, N.A., Mellon Bank, N.A. dated as of December 22, 1999.
(23) (Exhibit 4.27)
4.19 First Amendment to Revolving Credit Agreement dated as of November 28, -
2000, between Philadelphia Suburban Water Company and PNC Bank,
National Association, First Union National Bank, N.A., Mellon Bank,
N.A. dated as of December 22, 1999. (25) (Exhibit 4.19)
4.20 Second Amendment to Revolving Credit Agreement dated as of December 18, 37
2001, between Philadelphia Suburban Water Company (and its successor
Pennsylvania Suburban Water Company) and PNC Bank, National
Association, Citizens Bank of Pennsylvania, First Union National
Bank, N.A., Fleet National Bank dated as of December 22, 1999.
4.21 Thirty-fourth Supplemental Indenture, dated as of October 15, 2001. 43
4.22 Thirty-fifth Supplemental Indenture, dated as of January 1, 2002. 79
10.1 1982 Stock Option Plan, as amended and restated effective -
May 21, 1992* (1) (Exhibit 10.1)
10.2 1988 Stock Option Plan, as amended and restated effective -
May 21, 1992* (1) (Exhibit 10.2)
10.3 Excess Benefit Plan for Salaried Employees, effective -
December 1, 1989* (7) (Exhibit 10.4)
10.4 Supplemental Executive Retirement Plan, effective -
December 1, 1989* (7) (Exhibit 10.5)
20
Exhibit No. Page No.
- ----------- --------
10.5 Supplemental Executive Retirement Plan, effective March -
15, 1992* (1) (Exhibit 10.6)
10.6 Employment letter agreement with Mr. Nicholas -
DeBenedictis* (1) (Exhibit 10.8)
10.7 1994 Equity Compensation Plan, as amended by Amendment -
1994-1* (13) (Exhibit 10.10)
10.8 Placement Agency Agreement between Philadelphia -
Suburban Water Company and PaineWebber Incorporated
dated as of March 30, 1995 (11) (Exhibit 10.12)
10.9 Bond Purchase Agreement among the Delaware County -
Industrial Development Authority, Philadelphia
Suburban Water Company and Legg Mason Wood Walker,
Incorporated dated August 24, 1995 (12) (Exhibit 10.13)
10.10 Construction and Financing Agreement between the -
Delaware County Industrial Development Authority and
Philadelphia Suburban Water Company dated as of August
15, 1995 (12) (Exhibit 10.14)
10.11 Amendment 1994-2 to 1994 Equity Compensation -
Plan, as amended* (14) (Exhibit 10.16)
10.12 Agreement among Philadelphia Suburban Corporation, -
Philadelphia Suburban Water Company and Nicholas
DeBenedictis, dated as of January 1, 1997* (14) (Exhibit 10.18)
10.13 Agreement among Philadelphia Suburban Corporation, -
Philadelphia Suburban Water Company and Roy H.
Stahl, dated as of January 1, 1997* (14) (Exhibit 10.19)
10.14 Agreement among Philadelphia Suburban Corporation, -
Philadelphia Suburban Water Company and Richard R.
Riegler, dated as of January 1, 1997* (14) (Exhibit 10.21)
10.15 Agreement among Philadelphia Suburban Corporation, -
Philadelphia Suburban Water Company and Morrison
Coulter, dated as of January 1, 1997* (14) (Exhibit 10.22)
10.16 Philadelphia Suburban Corporation Amended and -
Restated Executive Deferral Plan* (14) (Exhibit 10.23)
10.17 Philadelphia Suburban Corporation Deferred -
Compensation Plan Master Trust Agreement
with PNC Bank, National Association, dated
as of December 31, 1996* (14) (Exhibit 10.24)
10.18 First Amendment to Supplemental Executive Retirement -
Plan* (14) (Exhibit 10.25)
10.19 Placement Agency Agreement between Philadelphia -
Suburban Water Company and A.G. Edwards and Sons,
Inc., Janney Montgomery Scott Inc., HSBC Securities,
Inc., and PaineWebber Incorporated (15) (Exhibit 10.26)
10.20 Philadelphia Suburban Corporation Director Deferral Plan* (21) -
(Exhibit 10.28)
10.21 Amendment No. 1 dated as of February 1, 1999 to Agreement -
among Philadelphia Suburban Corporation, Philadelphia
Suburban Water Company and Nicholas DeBenedictis,
dated as of January 1, 1997* (21) (Exhibit 10.29)
21
Exhibit No. Page No.
- ----------- --------
10.22 Amendment No. 1 dated as of February 1, 1999 to Agreement -
among Philadelphia Suburban Corporation, Philadelphia
Suburban Water Company and Roy H. Stahl, dated as of
January 1, 1997* (21) (Exhibit 10.30)
10.23 Amendment No. 1 dated as of February 1, 1999 to Agreement -
among Philadelphia Suburban Corporation, Philadelphia
Suburban Water Company and Richard R. Riegler, dated
as of January 1, 1997* (21) (Exhibit 10.32)
10.24 Amendment No. 1 dated as of February 1, 1999 to Agreement -
among Philadelphia Suburban Corporation, Philadelphia
Suburban Water Company and Morrison Coulter, dated
as of January 1, 1997* (21) (Exhibit 10.33)
10.25 1999 Annual Cash Incentive Compensation Plan* (21) -
(Exhibit 10.34)
10.26 The Philadelphia Suburban Corporation 1994 Equity -
Compensation Plan (as Amended and Restated
Effective March 3, 1998)* (19) (Exhibit A)
10.27 Amendment 1998-1 to The Philadelphia Suburban -
Corporation 1994 Equity Compensation Plan*
(20) (Annex F)
10.28 Bond Purchase Agreement among the Delaware County -
Industrial Development Authority, Philadelphia
Suburban Water Company and Commerce Capital
Markets dated September 29, 1999 (22) (Exhibit 10.37)
10.29 Construction and Financing Agreement between the Delaware -
County Industrial Development Authority and Philadelphia
Suburban Water Company dated as of October 1, 1999
(22) (Exhibit 10.38)
10.30 2000 Annual Cash Incentive Compensation Plan * (23) (Exhibit 10.39) -
10.31 Agreement among Philadelphia Suburban Corporation, -
Philadelphia Suburban Water Company and
David P. Smeltzer dated December 1,1999. (23) (Exhibit 10.40)
10.32 Placement Agency Agreement between Philadelphia Suburban -
Water Company and Merrill Lynch & Co., PaineWebber
Incorporated, A.G. Edwards & Sons, Inc., First Union
Securities, Inc., PNC Capital Markets, Inc. and Janney
Montgomery Scott, Inc., dated as of November 15, 1999
(23) (Exhibit 10.41)
10.33 Amendment 2000-1 to 1994 Equity Compensation Plan* (24) (Exhibit 10.33) -
10.34 2001 Annual Cash Incentive Compensation Plan* (26) (Exhibit 10.34) -
10.35 Bond Purchase Agreement among the Delaware County 117
Industrial Development Authority, Philadelphia
Suburban Water Company and The GMS Group, L.L.C,
dated October 23, 2001
10.36 Construction and Financing Agreement between the Delaware 140
County Industrial Development Authority and Philadelphia
Suburban Water Company dated as of October 15, 2001
22
Exhibit No. Page No.
- ----------- --------
10.37 Agreement among Philadelphia Suburban Corporation, 164
Philadelphia Suburban Water Company and Nicholas DeBenedictis,
dated August 7, 2001*
10.38 Agreement among Philadelphia Suburban Corporation, 176
Philadelphia Suburban Water Company and Roy H. Stahl,
dated August 7, 2001*
10.39 Agreement among Philadelphia Suburban Corporation, 186
Philadelphia Suburban Water Company and Richard R. Riegler,
dated August 7, 2001*
10.40 Agreement among Philadelphia Suburban Corporation, 199
Philadelphia Suburban Water Company and David P. Smeltzer,
dated August 7, 2001*
13.1 Selected portions of Annual Report to Shareholders -
for the year ended December 31, 1993 incorporated
by reference in Annual Report on Form 10-K for
the year ended December 31, 1993 (9) (Exhibit 13.1)
13.2 Selected portions of Annual Report to Shareholders -
for the year ended December 31, 1994 incorporated
by reference in Annual Report on Form 10-K for the
year ended December 31, 1994 (10) (Exhibit 13.2)
13.3 Selected portions of Annual Report to Shareholders -
for the year ended December 31, 1995 incorporated
by reference in Annual Report on Form 10-K for the
year ended December 31, 1995 (13) (Exhibit 13.3)
13.4 Selected portions of Annual Report to Shareholders -
for the year ended December 31, 1996 incorporated
by reference in Annual Report on Form 10-K for the
year ended December 31, 1996 (14) (Exhibit 13.4)
13.5 Selected portions of Annual Report to Shareholders -
for the year ended December 31, 1997 incorporated
by reference in Annual Report on Form 10-K for the
year ended December 31, 1997 (18) (Exhibit 13.5)
13.6 Selected portions of Annual Report to Shareholders -
for the year ended December 31, 1998 incorporated
by reference in Annual Report on Form 10-K for the
year ended December 31, 1998 (21) (Exhibit 13.6)
13.7 Selected portions of Annual Report to Shareholders -
for the year ended December 31, 1999 incorporated
by reference in Annual Report on Form 10-K for the
year ended December 31, 1999 (23) (Exhibit 13.7)
23
Exhibit No. Page No.
- ----------- --------
13.8 Selected portions of Annual Report to Shareholders -
for the year ended December 31, 2000 incorporated
by reference in Annual Report on Form 10-K for the
year ended December 31, 2000 (25) (Exhibit 13.8)
13.9 Selected portions of Annual Report to Shareholders for the year 209
ended December 31, 2001 incorporated by reference in Annual
Report on Form 10-K for the year ended December 31, 2001
21. Subsidiaries of Philadelphia Suburban Corporation 253
23.1 Consent of Independent Accountants - PricewaterhouseCoopers LLP 254
23.2 Consent of Independent Accountants - KPMG LLP 255
24. Power of Attorney (set forth as a part of this report) 26
24
- Notes -
Documents Incorporated by Reference
(1) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1992.
(2) Indenture of Mortgage dated as of January 1, 1941 with supplements thereto through the
Twentieth Supplemental Indenture dated as of August 1, 1983 were filed as an Exhibit to Annual
Report on Form 10-K for the year ended December 31, 1983.
(3) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1985.
(4) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1986.
(5) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1987.
(6) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1988.
(7) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1989.
(8) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1991.
(9) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1993.
(10) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1994.
(11) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter ended March 31, 1995.
(12) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter ended September 30, 1995.
(13) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1995.
(14) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1996.
(15) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
(16) Filed as an Exhibit to Form 8-K filed August 7, 1997.
(17) Filed as Exhibit 1 to the Registration Statement on Form 8-A filed on March 17, 1998.
(18) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1997.
(19) Filed as Exhibit A to definitive Proxy Statement dated April 7, 1998.
(20) Filed as an Annex to Registration Statement on Form S-4 filed on September 11, 1998.
(21) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1998.
(22) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.
(23) Filed as Exhibit to Annual Report on Form 10-K for the year ended December 31, 1999.
(24) Filed as Annex A to definitive Proxy Statement dated April 10, 2000.
(25) Filed as Exhibit to Annual Report on Form 10-K for the year ended December 31, 2000.
(26) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.
* Indicates management contract or compensatory plan or arrangement.
25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PHILADELPHIA SUBURBAN CORPORATION
By /s/ Nicholas DeBenedictis
----------------------------------
Nicholas DeBenedictis
President and Chairman
Date: March 20, 2002
Pursuant to the requirements of the Securities and 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.
Each person in so signing also makes, constitutes and appoints Nicholas
DeBenedictis, President and Chairman of Philadelphia Suburban Corporation, David
P. Smeltzer, Senior Vice President - Finance and Chief Financial Officer of
Philadelphia Suburban Corporation, and each of them, his or her true and lawful
attorneys-in-fact, in his or her name, place and stead to execute and cause to
be filed with the Securities and Exchange Commission any and all amendments to
this report.
26
/s/ Nicholas DeBenedictis /s/ David P. Smeltzer
- ---------------------------------- ----------------------------------------
Nicholas DeBenedictis David P. Smeltzer
President and Chairman Senior Vice President - Finance and
(principal executive officer) Chief Financial Officer
and Director
/s/ Mary C. Carroll /s/ G. Fred DiBona, Jr.
- ---------------------------------- ----------------------------------------
Mary C. Carroll G. Fred DiBona, Jr.
Director Director
/s/ Richard H. Glanton /s/ Alan Hirsig
- ---------------------------------- ----------------------------------------
Richard H. Glanton Alan Hirsig
Director Director
/s/ John E. Menario /s/ John F. McCaughan
- ---------------------------------- ----------------------------------------
John E. Menario John F. McCaughan
Director Director
/s/ Richard L. Smoot
- ---------------------------------- ----------------------------------------
Andrew D. Seidel Richard L. Smoot
Director Director
27