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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, 2004 Commission File
Number 1-6659
AQUA AMERICA, INC. (formerly 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 (610) 527-8000
area code: --------------
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. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12(b)-2).
Yes X No .
---- ----
The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant as of June 30, 2004. $1,851,041,022
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 June 30, 2004, 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 February 18, 2005. 95,475,161
Documents incorporated by reference
(1) Portions of registrant's 2004 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 19, 2005
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 into 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 that are 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 into this
10-K, include, but are not limited to, statements regarding:
o projected capital expenditures and related funding requirements;
o developments, trends and consolidation in the water and wastewater
utility industries;
o dividend payment projections;
o opportunities for future acquisitions, the success of pending
acquisitions and the impact of future acquisitions;
o the capacity of our water supplies, water facilities and wastewater
facilities;
o the impact of geographic diversity on our exposure to unusual
weather;
o our capability to pursue timely rate increase requests;
o our authority to carry on our business without unduly burdensome
restrictions;
o our ability to obtain fair market value for condemned assets;
o the impact of fines and penalties;
o the development of new services and technologies by us or our
competitors;
o the availability of qualified personnel;
o the condition of our assets;
o the impact of legal proceedings;
o general economic conditions;
o acquisition-related costs and synergies; and
o the forward-looking statements contained under the heading
"Forward-Looking Statements" in the section entitled "Management's
Discussion and Analysis" from the portion of our 2004 Annual Report
to Shareholders incorporated by reference herein and made a part
hereof.
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 and policies, including
environmental and public utility regulations and policies;
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o changes in environmental conditions, including those that result in
water use restrictions;
o abnormal weather conditions;
o changes in capital requirements;
o changes in our credit rating;
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;
o increasing difficulties in obtaining insurance and increased cost of
insurance;
o cost overruns relating to improvements or the expansion of our
operations; and
o civil disturbance or terroristic threats or acts.
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 into 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.
3
PART I
Item 1. Business
Name Change
On January 16, 2004, Philadelphia Suburban Corporation changed its
corporate name to Aqua America, Inc. In addition, we changed our ticker symbol
from PSC to WTR on the New York Stock Exchange and Philadelphia Stock Exchange
effective as of the opening of trading on January 20, 2004.
The Company
Aqua America, Inc. (referred to as "Aqua America", "we" or "us") is the
holding company for regulated utilities providing water or wastewater services
to what we estimate to be more than 2.5 million people in Pennsylvania, Ohio,
North Carolina, Illinois, Texas, New Jersey, Florida, Indiana, Virginia, Maine,
Missouri, New York and South Carolina. Our largest operating subsidiary, Aqua
Pennsylvania, Inc. - formerly Pennsylvania Suburban Water Company - accounts for
approximately 55% of our operating revenues and provides water or wastewater
services to approximately 1.3 million residents in the suburban areas north and
west of the City of Philadelphia and in 21 other counties in Pennsylvania. Our
other subsidiaries provide similar services in 12 other states. In addition, we
provide water and wastewater service through operating and maintenance contracts
with municipal authorities and other parties close to our operating companies'
service territories. We are the largest U.S.-based publicly-traded water utility
based on number of people served.
The following table reports our operating revenues by principal state
for the year ended December 31, 2004:
Operating
Revenues
(000's)
----------
Pennsylvania $ 254,034
Ohio 37,679
Illinois 32,134
Texas 30,334
New Jersey 20,908
North Carolina 17,846
Indiana 15,344
Florida 12,672
Maine 9,403
Virginia 7,882
Other states 3,803
---------
$ 442,039
=========
4
The following table indicates by customer class our operating revenues
for the year ended December 31, 2004:
Operating
Revenues
Customer class (000's) Percent
-------------- ---------- -------
Residential water $264,910 60%
Commercial water 65,605 15%
Fire protection 20,771 5%
Industrial water 17,377 4%
Other water 23,822 5%
-------- -----
Water 392,485 89%
Wastewater 35,931 8%
Water and wastewater
operating contracts and other 13,623 3%
-------- -----
$442,039 100%
======== =====
Our customer base is diversified among residential, commercial,
industrial, other water, wastewater customers and operating contracts and other
customers. Residential customers make up the largest component of our customer
base, with these customers representing 60% of our total water revenues.
Substantially all of our water customers are metered, which allows us to measure
and bill for 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 our northern U.S. service territories. 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. On
occasion, abnormally dry weather in our service areas can result in governmental
authorities declaring drought warnings and water use restrictions in the
affected areas, which could reduce water consumption. See "Water Supplies, Water
Facilities and Wastewater Facilities" for a discussion of water use restrictions
that may impact water consumption during abnormally dry weather. The geographic
diversity of our customer base reduces our exposure to extreme or unusual
weather conditions in any one area of our service territory.
The growth in revenues over the past three years is a result of
increases in the customer base and in water rates. The majority of the increase
in customer base is due to customers added through acquisitions. During the
three-year period of 2000 through 2002, our customer base increased at an annual
compound rate of 3.3%. The customer growth rate in 2003 was 23.8%, and reflects
the additional customers obtained in the AquaSource acquisition on July 31,
2003. In 2004, the customer growth rate was 11.5% and reflects the additional
customers added through the Heater and Florida Water Services acquisitions.
Overall, for the five-year period of 2000 through 2004, our customer base
increased at annual compound rate of 8.8%.
Available Information
We file annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission ("SEC"). You may
read and copy any document we file at the SEC's public reference room at 450
Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room. You may
also obtain our SEC filings from the SEC's Web site at www.sec.gov.
5
Our Internet Web site address is http://www.aquaamerica.com. We make
available free of charge through our internet website's Investor Relations page
all of our filings with the SEC, including our annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and other
information. These reports and information are available as soon as reasonably
practicable after such material is electronically filed or furnished to the SEC.
Our Board of Directors has various committees including an audit
committee, an executive compensation and employee benefits committee and a
corporate governance committee. Each of the three committees named above has a
formal charter. We also have Corporate Governance Guidelines and a Code of
Ethical Business Conduct. Copies of these charters, guidelines and codes, and
any waivers or amendments to such codes which are applicable to our executive
officers, senior financial officers or directors, can be obtained free of charge
from our Web site, www.aquaamerica.com.
In addition, you may request a copy of the foregoing filings, charters,
guidelines and codes, and any waivers or amendments to such codes which are
applicable to our executive officers, senior financial officers or directors, at
no cost by writing or telephoning us at the following address or telephone
number:
Investor Relations Department
Aqua America, Inc.
762 W. Lancaster Avenue
Bryn Mawr, PA 19010-3489
Telephone: 610-527-8000
Acquisitions and Water Sale Agreements
With more than 50,000 community water systems in the U.S. (84% of which
serve less than 3,300 customers), the water industry is the most fragmented of
the major utility industries (telephone, natural gas, electric, water and
wastewater). The nation's water systems range in size from large
municipally-owned systems, such as the New York City water system that serves
approximately 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 22,000
public water systems of widely varying size, with the majority of the population
being served by government-owned water systems.
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 ("EPA") most recent survey of
publicly-owned wastewater treatment facilities in 2000, there are approximately
16,000 such facilities in the nation serving approximately 72% of the U.S.
population. The remaining population represents individual homeowners with their
own treatment facilities; for example, community on-lot disposal systems and
septic tank systems. The vast majority of wastewater facilities are
government-owned rather than privately-owned. The EPA survey also indicated that
there are approximately 6,600 wastewater facilities in operation or planned in
the 13 states where we operate.
Because of the fragmented nature of the water and wastewater utility
industries, we believe that there are many potential water and wastewater system
acquisition candidates throughout the United States. We believe the factors
driving consolidation of these systems are:
o the benefits of economies of scale;
o increasingly stringent environmental regulations;
o the need for capital investment; and
o the need for technological and managerial expertise.
We are actively exploring opportunities to expand our utility
operations through acquisitions or other growth ventures. As of December 31,
2004, we had completed 111 acquisitions or other growth ventures during the past
five years.
6
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 and wastewater systems of all sizes that provide
services in areas adjacent to our existing service territories or in new service
areas. We engage in continuing activities with respect to potential
acquisitions, including calling on perspective sellers, performing analyses and
investigations of acquisition candidates, making preliminary acquisition
proposals and negotiating the terms of potential acquisitions.
Water Supplies, Water Facilities and Wastewater 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. It is our
policy to obtain and maintain the permits necessary to obtain the water we
distribute.
Our supplies by principal service area are as follows:
o Suburban Philadelphia - The principal supply of water is surface water from
eight rural streams, two rivers (Schuylkill River and Delaware River), 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 and Whitehaven Divisions'
water supply is obtained from wells.
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. In Trumbull
County, customers are served through an interconnection from our
Pennsylvania division.
o North Carolina - Water supply in 669 divisions is obtained principally from
wells, with several divisions purchasing water from neighboring
municipalities.
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 wells.
o Texas - Water supply in 295 non-contiguous water systems is obtained
principally from wells, supplemented in some cases by purchased water from
adjacent surface water systems.
o Florida - Water supply in the majority of the 70 water systems is obtained
principally from wells, supplemented in some cases by purchased water from
adjacent surface water systems.
o New Jersey - Water supply in our three non-contiguous divisions is obtained
principally from wells and is supplemented with purchased water in two
divisions.
o Indiana - Water supply in three water systems is obtained principally from
wells.
o Virginia - Water supply in 124 non-contiguous divisions is obtained from
wells, one division's supply is from surface water, and four divisions
supplement their supply with purchased water from a nearby water system.
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.
Generally 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 under normal
conditions. We plan system improvements and additions to capacity in response to
changing regulatory standards, changing patterns of consumption and increased
demand from a growing 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.
7
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 is affected by
drought warnings and restrictions to a higher degree because nonessential and
recreational use of water is at its highest during the summer months. At other
times of the year, warnings and restrictions generally have less of an effect on
water consumption.
We have not had a drought warning or drought emergency since 2002. A
drought warning calls for a 10 to 15 percent voluntary reduction of water use,
particularly non-essential uses of water. A drought emergency imposes a ban on
nonessential water use.
We believe that our wastewater treatment facilities are generally
adequate to meet the present requirements of our customers. In addition, we own
several sewer collection systems where the wastewater is treated at a
municipally-owned facility. Capital funds are budgeted to address inflow and
infiltration in the collection systems, and wet weather flows at our lift
stations and treatment plants, and other conditions and requirements can affect
compliance. Changes in regulatory requirements may be reflected in revised
permit limits and conditions when NPDES permits are renewed, typically on a
five-year cycle. Capital improvements are planned and budgeted to meet
anticipated changes in regulations and needs for increased capacity related to
projected growth. The various state public utility commissions have generally
recognized the operating and capital costs associated with these improvements in
setting wastewater rates for current customers and capacity charges for new
customers.
Economic Regulation
Most of 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 other financings,
and the franchise areas that we serve. Some of our operations are subject to
rate regulation by county or city governments. 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. In the states in which we operate, we
are subject to regulation by the following state regulatory commissions:
State Regulatory Commission
----- ---------------------
Pennsylvania Pennsylvania Public Utility Commission
Ohio The Public Utilities Commission of Ohio
North Carolina North Carolina Utilities Commission
Illinois Illinois Commerce Commission
Texas Texas Commission on Environmental Quality
New Jersey New Jersey Board of Public Utilities
Florida Florida Public Service Commission
Indiana Indiana Utility Regulatory Commission
Virginia Virginia State Corporation Commission
Maine Maine Public Utilities Commission
Missouri Missouri Public Service Commission
New York New York Public Service Commission
South Carolina South Carolina Public Service Commission
8
Four states in which we operate permit water utilities, and in some
states wastewater utilities, to add a surcharge to their water or wastewater
bills to offset the additional depreciation and capital costs associated with
certain capital expenditures related to replacing and rehabilitating
infrastructure systems. Prior to these mechanisms being approved, water and
wastewater 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 rates is known as regulatory lag. The infrastructure rehabilitation
surcharge mechanism is intended to substantially reduce regulatory lag which
often acted as a disincentive to water and wastewater utilities to rehabilitate
their infrastructure. In addition, our subsidiaries in certain states use a
surcharge or credit on their bill to reflect changes in certain costs, such as
changes in state tax rates, until such time as the costs are incorporated into
base rates.
Currently, Pennsylvania, Illinois, Ohio and Indiana allow for the use
of infrastructure rehabilitation surcharges. These mechanisms typically adjust
periodically based on additional qualified capital expenditures completed or
anticipated in a future period. The infrastructure rehabilitation surcharge is
capped at a percentage of base rates, generally 5% of base rates, and is reset
to zero when new base rates that reflect the costs of those additions become
effective or when a utility's earnings exceed a regulatory benchmark.
Infrastructure rehabilitation surcharges provided revenues of $7,817,000 in
2004, $8,147,000 in 2003 and $5,518,000 in 2002.
In general, we believe that Aqua America, Inc. and its subsidiaries
have valid authority, free from unduly burdensome restrictions, to enable us to
carry on our business as presently conducted in the franchised or contracted
areas 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 regulated 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 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.
In December 2004, as a result of the settlement of a condemnation
action, our Ohio operating subsidiary sold its water utility assets within the
municipal boundaries of the City of Geneva in Ashtabula County, Ohio for net
proceeds of approximately $4,716,000, which was in excess of the book value for
these assets. The sale resulted in the recognition in the fourth quarter of 2004
of a gain on the sale of these assets, net of expenses, of $2,342,000. We
continue to operate this water system for the City of Geneva under an operating
contract that began upon the closing of the sale for a period through December
2006. The operating contract provides for an annual base operating fee of
$135,000 and allows for additional fees to be earned commensurate with the
services provided. These water utility assets represent less than 1% of Aqua
America's total assets, and the total number of customers included in the water
system sold represents less than 1% of our total customer base.
9
In December 2002, as a result of the settlement of a condemnation
action, our Ohio operating subsidiary sold its water utility assets in the
unincorporated areas of Ashtabula County and the area within the Village of
Geneva on the Lake to Ashtabula County, Ohio for approximately $12,118,000,
which was in excess of the book value for these assets. The sale resulted in the
recognition in the fourth quarter of 2002 of a gain on the sale of these assets,
net of expenses, of $5,676,000. We continue to operate this water system for
Ashtabula County under a multi-year operating contract. The water utility assets
sold represent less than 1% of our total assets, and the total number of
customers included in the water system sold represents less than 1% of our total
customer base. The increase in earnings associated with reinvesting the sale's
proceeds and the operating income generated by the operating contract has offset
the loss of this water system's historic contribution to income.
The City of Fort Wayne, Indiana has authorized the acquisition, by
eminent domain or otherwise, of a portion of the utility assets of one of the
operating subsidiaries that we acquired in connection with the AquaSource
acquisition in 2003. We have challenged whether the City is following the
correct legal procedures in connection with the City's attempted condemnation
and we have challenged the City's valuation of this portion of our system. The
portion of the system under consideration represents approximately 1% of our
total customer base. While we continue to discuss this matter with officials
from the City of Fort Wayne, we continue to protect our interests in this
proceeding.
We believe that our operating subsidiaries will be entitled to fair
market value for any assets that are condemned, and we believe the fair market
value will be in excess of the book value for such assets. Despite the sales and
possible condemnation referred to above, our strategy continues to be 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.
Environmental, Health and Safety Regulation
Provision of water and wastewater services is subject to regulation
under the federal Safe Drinking Water Act, the Clean Water Act and related state
laws, and under federal and state regulations issued under these laws. These
laws and regulations establish criteria and standards for drinking water and for
wastewater discharges. In addition, we are subject to federal and state laws and
other regulations relating to solid waste disposal, dam safety and other
operations. Capital expenditures and operating costs required as a result of
water quality standards and environmental requirements have been traditionally
recognized by state public utility commissions as appropriate for inclusion in
establishing rates.
Environmental compliance issues remain at various water and wastewater
facilities associated with acquired systems, including facilities acquired in
connection with the AquaSource acquisition that was completed in July 2003, the
Heater and Florida Water Service acquisitions completed in June 2004 and the
acquisitions of small utilities in Northeastern Pennsylvania. We believe that
the capital expenditures required to address these compliance issues have been
budgeted in our capital program and represent less than 10% of our total
capital expenditures over the next five years. We are parties to agreements with
regulatory agencies in Texas, Florida, Indiana, Virginia and North Carolina
under which we have committed to make certain improvements for environmental
compliance. These agreements are intended to provide the regulators with
assurance that problems covered by these agreements will be addressed, and the
agreements generally provide protection to us from fines, penalties and other
actions while corrective measures are being implemented. We are actively working
directly with state environmental officials to implement or amend these
agreements as necessary. Regulatory agencies have imposed some fines and
penalties with respect to existing compliance issues at the acquired operations,
but none have been material. To the extent they have arisen from incidents that
occurred prior to our purchase of the acquired operations, we have made
indemnity claims for such amounts against the sellers under the applicable
purchase agreements.
10
Safe Drinking Water Act - The Safe Drinking Water Act establishes criteria and
procedures for the U.S. Environmental Protection Agency to develop national
quality standards for drinking water. Regulations issued pursuant to the Safe
Drinking Water Act and its amendments set standards on the amount of certain
microbial and chemical contaminants and radionuclides allowable in drinking
water. Current requirements under the Safe Drinking Water Act are not expected
to have a material impact on our operations or financial condition as we have
made and are making investments to meet existing water quality standards. 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.
EPA's issuance of a rule regulating radon in tap water has been
postponed repeatedly since 1991. Limits for radon in tap water, if promulgated,
would probably become effective 4 or 5 years after promulgation and would likely
contain two standards to recognize cost-effective alternative approaches to
dealing with radon in indoor air. We anticipate that the higher level
established by such a rule might require treatment at a small percentage of our
wells, primarily in North Carolina, Pennsylvania and Virginia. If the states in
which we operate elect not to implement general radon reduction (Multi-Media
Mitigation) programs, then a more stringent limit for radon could apply and a
larger number of wells would be affected. We anticipate that states will adopt
Multi-Media Mitigation programs, and the capital costs to comply with this
future regulation could approximate $4,000,000 over a five year period, and is
less than 3% of our typical annual capital expenditures. The costs could be
higher if a promulgated regulation does not allow for Multi-Media Mitigation, or
states choose not to adopt such programs. It is not possible at this time to
reasonably project what the potential impact on the capital budget, if any,
might be from these rules, but the impact is not expected to have a material
impact on our results of operations or financial condition.
The Safe Drinking Water Act provides for the regulation of
radionuclides other than radon, such as radium and uranium. The new
Radionuclides Rule that became effective in December 2003 left unchanged the
existing standards for gross alpha and radium, but changed the monitoring
protocol. The rule also added a maximum contaminant level for uranium. The rule
will require additional testing over the next two years and will require
treatment at some of our smaller groundwater facilities by January 2006. The
capital cost of compliance is expected to be less than $3,300,000. The impact of
the new rulemaking is not expected to have a material impact on our results from
operations or financial condition.
In order to remove or inactivate microbial organisms, rules were issued
by the EPA to improve disinfection and filtration of potable water and reduce
consumers' exposure to disinfectants and by-products of the disinfection
process. In the future, we may be required to install filtration or other
treatment, for one currently unfiltered surface water supply. The cost of this
treatment, should it be required, is not expected to exceed $5,000,000. Certain
small groundwater systems could be reclassified as being influenced by surface
water. This may require additional treatment or the development of replacement
sources of supply over time, the cost for which is not expected to exceed a
total of $3,000,000.
The EPA is expected to promulgate a Long Term 2 Enhanced Surface Water
Treatment Rule and a Stage 2 Disinfection/Disinfection By-product Rule in 2005.
These rules are expected to result in additional one-time special monitoring
costs of approximately $200,000 over a two-year period in 2006 and 2007. The
results of the monitoring might require modification of treatment, including
capital improvements, in year 2008 and beyond. It is not possible at this time
to reasonably project the potential impact on the capital budget, if any, from
these rules, but the impact is not expected to have a material impact on our
results of operations or financial condition.
11
The new rule lowering the limit on arsenic which was promulgated in
2001 and becomes effective in 2006, with a provision for further time extensions
for small systems. The new rule will require installation of treatment or
development of alternative supplies at a very limited number of our groundwater
sources. The largest of these, in Pennsylvania, was equipped with a treatment
mechanism in 2004 and the treatment mechanism is performing as designed. The
cost of additional capital improvements elsewhere in our systems to fully
achieve compliance with this regulation is not expected to exceed $500,000.
In April 2000, the gasoline additive Methyl tert-Butyl Ether ("MtBE")
was discovered in a production well in one of our operating subsidiaries at
levels exceeding the state drinking water standard. The well was immediately
taken out of service and alternate water supplies were obtained. Pursuant to a
legal settlement reached with the company believed to be responsible for the
contamination, we received $2,000,0000 in September 2004. The settlement amount
was sufficient to cover our costs to develop a permanent replacement well and to
cover our purchased water costs incurred on an interim basis. The replacement
well was completed and placed in service in October 2004. Traces of MtBE may be
found throughout the environment as the result of extensive use of MtBE as a
gasoline additive.
Clean Water Act - The Clean Water Act regulates discharges from drinking water
and wastewater treatment facilities into lakes, rivers, streams, and
groundwater. We operate 213 facilities with such discharges in nine states. It
is our policy to obtain and maintain all required permits and approvals for the
discharges from these water and wastewater facilities, and to comply with all
conditions of those permits and other regulatory requirements. A program is in
place to monitor facilities for compliance with permitting, monitoring and
reporting for wastewater discharges. From time to time, discharge violations may
occur which may result in fines. We are also parties to compliance agreements
with regulatory agencies in several states where we operate while improvements
are being made to address wastewater discharge compliance issues. These fines
and penalties, if any, are not expected to have a material impact on our results
of operations or financial condition. The required costs to comply with the
agreements previously cited are included in the capital budget are not expected
to be significant, and are expected to be recoverable in rates.
Solid Waste Disposal - The handling and disposal of residuals and solid waste
generated from water and wastewater treatment facilities is governed by federal
and state laws and regulations. A program is in place to monitor our facilities
for compliance with regulatory requirements, and we do not currently anticipate
any major expenditures in connection with the handling and disposal of waste
material from our water and wastewater operations.
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 a
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 the aggregate. We
believe that the capital expenditures that could be required by the new formula
would be recoverable in our rates. Similarly, in Ohio, the Department of Natural
Resources has adopted the use of a new formula. We have studied our dams in Ohio
and it has been determined that some of the dams will require improvements.
Based on the preliminary results, we believe that capital expenditures of
approximately $4.2 million in the aggregate will be required on three dams in
Ohio over the next two years.
12
Safety Standards - Our facilities and operations may be subject to inspections
by representatives of the Occupational Safety and Health Administration from
time to time. We maintain safety policies and procedures to maintain compliance
with the Occupational Safety and Health Administration's rules and regulations,
but violations may occur from time to time, which may result in fines and
penalties, which are not expected to be material. We endeavor to correct such
violations promptly after they are brought to our attention.
Employee Relations
As of December 31, 2004, we employed a total of 1,442 full-time
employees. Our subsidiaries are parties to 10 agreements with labor unions
covering 434 employees that expire at various times between March 2006 and May
2009. Based on the number of employees covered by each agreement, a substantial
portion of the agreements expire in 2006.
Risk Factors
OUR BUSINESS REQUIRES SIGNIFICANT CAPITAL EXPENDITURES AND THE RATES WE CHARGE
OUR CUSTOMERS ARE SUBJECT TO REGULATION. IF WE ARE UNABLE TO OBTAIN GOVERNMENT
APPROVAL OF OUR REQUESTS FOR RATE INCREASES, OR IF APPROVED RATE INCREASES ARE
UNTIMELY OR INADEQUATE TO COVER OUR INVESTMENTS, OUR PROFITABILITY MAY SUFFER.
The water utility business is capital intensive. On an annual basis, we
spend significant sums for additions to or replacement of property, plant and
equipment. Our ability to maintain and meet our financial objectives is
dependent upon the rates we charge our customers. These rates are subject to
approval by the public utility commissions or similar regulatory bodies in the
states in which we operate. We file rate increase requests, from time to time,
to recover our investments in utility plant and expenses. Once a rate increase
petition is filed with a public utility commission, the ensuing administrative
and hearing process may be lengthy and costly. The timing of our rate increase
requests are therefore partially dependent upon the estimated cost of the
administrative process in relation to the investments and expenses that we hope
to recover through the rate increase to the extent approved. We can provide no
assurances that any future rate increase request will be approved by the
appropriate state public utility commission; and, if approved, we cannot
guarantee that these rate increases will be granted in a timely or sufficient
manner to cover the investments and expenses for which we initially sought the
rate increase.
OUR OPERATING COSTS COULD BE SIGNIFICANTLY INCREASED IN ORDER TO COMPLY WITH NEW
OR STRICTER REGULATORY STANDARDS IMPOSED BY FEDERAL AND STATE ENVIRONMENTAL
AGENCIES.
Our water and wastewater services are governed by various federal and
state environmental protection and health and safety laws and regulations,
including the federal Safe Drinking Water Act, the Clean Water Act and similar
state laws, and federal and state regulations issued under these laws by the
United States Environmental Protection Agency and state environmental regulatory
agencies. These laws and regulations establish, among other things, criteria and
standards for drinking water and for discharges into the waters of the United
States and states. Pursuant to these laws, we are required to obtain various
environmental permits from environmental regulatory agencies for our operations.
We cannot assure you that we have been or will be at all times in total
compliance with these laws, regulations and permits. If we violate or fail to
comply with these laws, regulations or permits, we could be fined or otherwise
sanctioned by regulators. Environmental laws and regulations are complex and
change frequently. These laws, and the enforcement thereof, have tended to
become more stringent over time. While we have budgeted for future capital and
operating expenditures to maintain compliance with these laws and our permits,
it is possible that new or stricter standards could be imposed that will raise
our operating costs. Although these costs may
13
be recovered in the form of higher rates, there can be no assurance that the
various state public utility commissions or similar regulatory bodies that
govern our business would approve rate increases to enable us to recover such
costs. In summary, we cannot assure you that our costs of complying with, or
discharging liability under, current and future environmental and health and
safety laws will not adversely affect our business, results of operations or
financial condition.
OUR BUSINESS IS SUBJECT TO SEASONAL FLUCTUATIONS, WHICH COULD AFFECT DEMAND FOR
OUR WATER SERVICE AND OUR REVENUES.
Demand for our water during the warmer months is generally greater than
during cooler months due primarily to additional requirements for water in
connection with irrigation systems, swimming pools, cooling systems and other
outside water use. Throughout the year, and particularly during typically warmer
months, demand will vary with temperature and rainfall levels. In the event that
temperatures during the typically warmer months are cooler than normal, or if
there is more rainfall than normal, the demand for our water may decrease and
adversely affect our revenues.
DROUGHT CONDITIONS MAY IMPACT OUR ABILITY TO SERVE OUR CURRENT AND FUTURE
CUSTOMERS, AND MAY IMPACT OUR CUSTOMERS' USE OF OUR WATER, WHICH MAY ADVERSELY
AFFECT OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
We depend on an adequate water supply to meet the present and future
demands of our customers. Drought conditions could interfere with our sources of
water supply and could adversely affect our ability to supply water in
sufficient quantities to our existing and future customers. An interruption in
our water supply could have a material adverse effect on our financial condition
and results of operations. Moreover, governmental restrictions on water usage
during drought conditions may result in a decreased demand for our water, even
if our water reserves are sufficient to serve our customers during these drought
conditions, which may adversely affect our revenues and earnings.
AN IMPORTANT ELEMENT OF OUR GROWTH STRATEGY IS THE ACQUISITION OF WATER AND
WASTEWATER SYSTEMS. ANY FUTURE ACQUISITIONS WE DECIDE TO UNDERTAKE MAY INVOLVE
RISKS.
An important element of our growth strategy is the acquisition and
integration of water and wastewater systems in order to broaden our current, and
move into new, service areas. We will not be able to acquire other businesses if
we cannot identify suitable acquisition opportunities or reach mutually
agreeable terms with acquisition candidates. It is our intent, when practical,
to integrate any businesses we acquire with our existing operations. The
negotiation of potential acquisitions as well as the integration of acquired
businesses could require us to incur significant costs and cause diversion of
our management's time and resources. Future acquisitions by us could result in:
o dilutive issuances of our equity securities;
o incurrence of debt and contingent liabilities;
o failure to have effective internal control over financial reporting;
o fluctuations in quarterly results; and
o other acquisition-related expenses.
Some or all of these items could have a material adverse effect on our
business and our ability to finance our business and comply with regulatory
requirements. The businesses we acquire in the future may not achieve sales and
profitability that would justify our investment and any difficulties we
encounter in the integration process, including in the integration of controls
necessary for internal control and financial reporting, could interfere with our
operations, reduce our operating margins and adversely affect our internal
controls. In addition, as consolidation becomes more prevalent in the water and
wastewater industries, the prices for suitable acquisition candidates may
increase to unacceptable levels and limit our ability to grow through
acquisitions.
14
CONTAMINATION TO OUR WATER SUPPLY MAY RESULT IN DISRUPTION IN OUR SERVICES AND
LITIGATION WHICH COULD ADVERSELY AFFECT OUR BUSINESS, OPERATING RESULTS AND
FINANCIAL CONDITION.
Our water supplies are subject to contamination, including
contamination from the development of naturally-occurring compounds, chemicals
in groundwater systems, pollution resulting from man-made sources, such as MtBE,
and possible terrorist attacks. In the event that our water supply is
contaminated, we may have to interrupt the use of that water supply until we are
able to substitute the flow of water from an uncontaminated water source. In
addition, we may incur significant costs in order to treat the contaminated
source through expansion of our current treatment facilities, or development of
new treatment methods. If we are unable to substitute water supply from an
uncontaminated water source, or to adequately treat the contaminated water
source in a cost-effective manner, there may be an adverse effect on our
revenues, operating results and financial condition. The costs we incur to
decontaminate a water source or an underground water system could be significant
and could adversely affect our business, operating results and financial
condition and may not be recoverable in rates. We could also be held liable for
consequences arising out of human exposure to hazardous substances in our water
supplies or other environmental damage. For example, private plaintiffs have the
right to bring personal injury or other toxic tort claims arising from the
presence of hazardous substances in our drinking water supplies. Our insurance
policies may not be sufficient to cover the costs of these claims.
In addition to the potential pollution of our water supply as described
above, in the wake of the September 11, 2001 terrorist attacks and the ensuing
threats to the nation's health and security, we have taken steps to increase
security measures at our facilities and heighten employee awareness of threats
to our water supply. We have also tightened our security measures regarding the
delivery and handling of certain chemicals used in our business. We have and
will continue to bear increased costs for security precautions to protect our
facilities, operations and supplies. These costs may be significant. We are
currently not aware of any specific threats to our facilities, operations or
supplies; however, it is possible that we would not be in a position to control
the outcome of terrorist events should they occur.
WE DEPEND SIGNIFICANTLY ON THE SERVICES OF THE MEMBERS OF OUR MANAGEMENT TEAM,
AND THE DEPARTURE OF ANY OF THOSE PERSONS COULD CAUSE OUR OPERATING RESULTS TO
SUFFER.
Our success depends significantly on the continued individual and
collective contributions of our management team. The loss of the services of any
member of our management team or the inability to hire and retain experienced
management personnel could harm our operating results.
15
Item 2. Properties.
Our properties consist of transmission and distribution mains and
conduits, water and wastewater 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 and the collection and treatment of wastewater. 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 several thousand miles of transmission and distribution mains, 21 water
treatment plants, many well treatment stations, and 213 wastewater treatment
plants. Some properties are leased under long-term leases. The following table
indicates our net utility plant, in thousands of dollars, as of December 31,
2004 in the principal states where we operate:
Net Property
Plant and
Equipment
------------
Pennsylvania $1,225,914
Illinois 168,940
Ohio 166,439
Texas 148,836
North Carolina 121,326
New Jersey 104,273
Indiana 82,443
Florida 49,772
Maine 39,300
Virginia 29,107
Missouri 4,187
Inter-company eliminations
and other states (70,725)
----------
$2,069,812
==========
We believe that our properties are generally 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 Aqua Pennsylvania, Inc. 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 material or 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 2004.
16
PART II
Item 5. Market for the Registrant's Common Stock, Related Stockholder
Matters and Purchases of Equity Securities
Our common stock is traded on the New York Stock Exchange and the
Philadelphia Stock Exchange under the ticker symbol WTR. As of February 18,
2005, there were approximately 24,306 holders of record of our common stock.
The following table shows the high and low intraday sales prices for
our common stock as reported on the New York Stock Exchange composite
transactions reporting system and the cash dividends paid per share for the
periods indicated (all per share data as presented has been adjusted for the
2003 5-for-4 common stock split effected in the form of a stock distribution):
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
---------------------------------------------------------
2004
- -----------------------------------------------------------------------------------------------
Dividend paid per common share $ 0.12 $ 0.12 $ 0.12 $ 0.13 $ 0.49
Dividend declared per common share 0.12 0.12 0.25 - 0.49
Price range of common stock
- high 22.85 21.96 22.22 24.64 24.64
- low 20.00 18.98 18.90 20.77 18.90
2004
- -----------------------------------------------------------------------------------------------
Dividend paid per common share $0.112 $ 0.112 $0.112 $0.120 $0.456
Dividend declared per common share 0.112 0.112 0.232 - 0.456
Price range of common stock
- high 17.83 19.85 20.07 22.40 22.40
- low 15.77 17.22 18.28 18.71 15.77
We have paid common dividends consecutively for 60 years. Effective
December 1, 2004, our Board of Directors authorized an increase of 8.3% in the
dividend rate over the amount Aqua America, Inc. paid in the previous quarter.
As a result of this authorization, beginning with the dividend payment in
December 2004, the annualized dividend rate increased to $0.52 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, our common dividends paid have
averaged 56.6% of net income.
In August 2003, 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 14, 2003. The new shares were
distributed on December 1, 2003. Aqua America's par value of $0.50 per share
remained unchanged and $9,244,000 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.
17
The following table summarizes the Company's purchases of its common
stock for the quarter ending December 31, 2004:
Issuer Purchases of Equity Securities
-------------------------------------
Total Maximum
Number of Number of
Shares Shares
Purchased that May
as Part of Yet be
Total Publicly Purchased
Number Average Announced Under the
of Shares Price Paid Plans or Plan or
Period Purchased (1) per Share Programs Programs (2)
- ------ ------------- ----------- ----------- ------------
October 1-31, 2004 6,307 $21.78 - 411,209
November 1-30, 2004 7,608 $23.30 - 411,209
December 1-31, 2004 10,058 $23.65 - 411,209
------- ------- ----- --------
Total 23,973 $23.04 - 411,209
======= ======= ===== ========
Item 6. Selected Financial Data
The information appearing in the section captioned "Summary of Selected
Financial Data" from the portions of our 2004 Annual Report to Shareholders
filed as Exhibit 13.1 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 2004 Annual Report to
Shareholders filed as Exhibit 13.1 to this Form 10-K Report is incorporated by
reference herein.
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, 2004, 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
2005 2006 2007 2008 2009 Thereafter Total Value
- --------------------------------------------------------------------------------------------------
Long-term
debt (fixed rate) $50,195 $24,623 $31,068 $23,756 $6,816 $698,198 $834,656 $863,247
- --------------------------------------------------------------------------------------------------
Weighted average
interest rate 7.19% 5.69% 5.10% 6.66% 4.89% 5.93% 6.00%
- --------------------------------------------------------------------------------------------------
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, 2004, we
owned no marketable equity securities as we sold the balance of our securities
during 2004. The market risks that we are exposed to are less than the risks
that we were exposed to in the prior year.
18
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",
"Consolidated Statements of Common Stockholders' Equity" and "Notes to
Consolidated Financial Statements" from the portions of our 2004 Annual Report
to Shareholders filed as Exhibit 13.1 to this Form 10-K Report is incorporated
by reference herein. Also, the information appearing in the sections captioned
"Management's Report on Internal Control Over Financial Reporting" and "Report
of Independent Registered Public Accounting Firm" from the portions of our 2004
Annual Report to Shareholders filed as Exhibit 13.1 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.
Item 9A. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures - Our management, with the
participation of our Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of our disclosure controls and procedures as of the
end of the period covered by this report. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures as of the end of the period covered by this report are
functioning effectively to provide reasonable assurance that the information
required to be disclosed by us in reports filed under the Securities Exchange
Act of 1934 is (i) recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms and (ii) accumulated and
communicated to our management, including the Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding
disclosure. A controls system cannot provide absolute assurance, however, that
the objectives of the controls system are met, and no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within a company have been detected.
(b) Management's Report on Internal Control Over Financial Reporting - Our
management's report on internal control over financial reporting is set forth in
Item 8 of this annual report on Form 10-K and is incorporated by reference
herein.
(c) Changes in Internal Control over Financial Reporting - No change in our
internal control over financial reporting occurred during our most recent fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
Item 9B. Other Information
On December 9, 2004, the Board of Directors approved the following
recommendations of the Executive Compensation and Employee Benefits Committee
regarding compensation for Aqua America's Non-employee Directors:
Effective January 1, 2005, Non-Employee Director members of the Board
of Directors will receive an annual retainer fee of $12,500, payable
quarterly, plus an annual grant of restricted stock with a value of
$25,000 to be issued on the first of the month following the Annual
19
Meeting of Shareholders. The restricted stock vests six months after
the date of grant. Non-Employee Directors also receive a fee of $1,500
for attendance at each meeting of the Board of Directors and a meeting
fee for attendance at each committee meeting of $1,250 for the Audit
Committee and $1,000 for other committees. In addition, each committee
Chairman who is a Non-Employee Director receives an annual retainer fee
of $5,000 for the Chairmen of the Audit Committee and Corporate
Governance Committee and $2,500 for the Chairmen of other committees.
All directors are reimbursed for reasonable expenses incurred in connection with
attendance at Board or Committee meetings. Directors who are full-time employees
of Aqua America do not receive a retainer or fees for service on the Board of
Directors or committees of the Board. Directors are eligible to defer part or
all of their fees under Aqua America's Director Deferral Plan. Amounts deferred
accrue interest at the prime interest rate plus 1.0%. Amounts deferred are not
funded.
PART III
Item 10. Directors and Executive Officers of the Registrant
We make available free of charge within the Investor Relations /
Corporate Governance section of our Internet Web site, at www.aquaamerica.com,
and in print to any shareholder who requests, our Corporate Governance
Guidelines, the Charters of each Committee of our Board of Directors, and our
Code of Ethical Business Conduct. Requests for copies may be directed to
Investor Relations Department, Aqua America, Inc., 762 W. Lancaster Avenue, Bryn
Mawr, PA 19010-3489. Amendments to the Code, and any grant of waiver from a
provision of the Code requiring disclosure under applicable SEC rules will be
disclosed on the Company's Web site. The information contained on our Internet
website is not incorporated by reference into this Form 10-K and should not be
considered part of this or any other report that we file with or furnish to the
SEC.
Directors of the Registrant, Audit Committee Financial Expert and Filings under
Section 16(c)
The information appearing in the sections captioned "Information
Regarding Nominees and Directors", "Corporate Governance" and "Section 16(a)
Beneficial Ownership Reporting Compliance" of the Proxy Statement relating to
our May 19, 2005, 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.
20
Executive Officers of the Registrant
The following table and the notes thereto set forth information with
respect to our executive officers, including their names, ages, positions with
Aqua America, Inc. and business experience during the last five years:
Position with
Name Age Aqua America, Inc. (1)
- ---- --- -----------------------
Nicholas DeBenedictis 59 President and Chairman (May 1993 to present); President and Chief Executive
Officer (July 1992 to May 1993); Chairman and Chief Executive Officer, Aqua
Pennsylvania, Inc. (July 1992 to present); President, Philadelphia Suburban
Water Company (February 1995 to January 1999) (2)
Roy H. Stahl 52 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) (3)
David P. Smeltzer 46 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) (4)
Richard R. Riegler 58 Senior Vice President - Engineering and Environmental Affairs (January 1999
to present); Senior Vice President - Operations, Philadelphia Suburban Water
Company (April 1989 to January 1999) (5)
Richard D. Hugus 55 President, Southern Operations (August 2003 to present); Vice President - Corporate
Development, Pennsylvania Suburban Water Company (March 1991 to August 2003) (6)
Karl M. Kyriss 54 President - Aqua Pennsylvania (March 2003 to present) (7)
Robert G. Liptak, Jr. 57 President, Northern Operations (March 1999 to present); President, Consumers
Pennsylvania Water Company (1980 to March 1999) (8)
Robert A. Rubin 42 Controller and Chief Accounting Officer (March 2004 to present); Controller
(March 1999 to March 2004) (9)
(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) 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 Aqua America, Inc., and from May 1988 to April
1991 he was Vice President and General Counsel of Aqua America, Inc..
(4) Mr. Smeltzer was Vice President - Controller of Philadelphia Suburban
Water Company from March, 1986 to March 1991.
(5) 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.
21
(6) Mr. Hugus was Vice President and Treasurer of Philadelphia Suburban
Water Company from December 1988 to March 1991.
(7) Mr. Kyriss was Vice President - Northeast Region of American Water
Works Services Company from 1997 to 2003.
(8) Mr. Liptak was President of Consumers Pennsylvania Water Company
from 1980 to March 1999.
(9) Mr. Rubin was Accounting Manager with Aqua America, Inc.
from June 1989 to June 1994. He then served from June 1994 to
March 1999 as Assistant Controller of Philadelphia Suburban Water
Company.
Item 11. Executive Compensation
The information appearing in the sections captioned "Executive
Compensation" of the Proxy Statement relating to our May 19, 2005, 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 and
related Stockholder matters
Ownership of Common Stock - The information appearing in the section captioned
"Ownership of Common Stock" of the Proxy Statement relating to our May 19, 2005,
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.
Securities Authorized for Issuance under Equity Compensation Plans - The
following table provides information for our equity compensation plan as of
December 31, 2004:
- -------------------------------------------------------------------------------------------------------------
Number of securities
Number of securities remaining available for
to be issued upon Weighted-average future issuance under
exercise of exercise price of equity compensation plans
outstanding options, outstanding options, (excluding securities)
Plan Category warrants and rights (a) warrants and rights (b) reflected in column (a)
- -------------------------------------------------------------------------------------------------------------
Equity compensation
plans approved
by security holders 3,050,237 $14.96 3,678,584
- --------------------------------------------------------------------------------------------------------------
Equity compensation
plans not approved
by security holders 0 0 0
- --------------------------------------------------------------------------------------------------------------
Total 3,050,237 $14.96 3,678,584
- --------------------------------------------------------------------------------------------------------------
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 19, 2005, 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.
22
Item 14. Principal Accountant Fees and Services
The information appearing in the section captioned "Independent
Registered Public Accounting Firm - Services and Fees" of the Proxy Statement
relating to our May 19, 2005, 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 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Financial Statements. The following is a list of our consolidated financial
statements and supplementary data incorporated by reference in Item 8 hereof:
Management's Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets - December 31, 2004 and 2003
Consolidated Statements of Income and Comprehensive Income - 2004,
2003 and 2002
Consolidated Cash Flow Statements - 2004, 2003 and 2002
Consolidated Statements of Capitalization - December 31, 2004 and 2003
Consolidated Statements of Common Stockholders' Equity - December 31,
2004, 2003 and 2002
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.
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.
23
EXHIBIT INDEX
Exhibit No.
- -----------
3.1 Restated Articles of Incorporation (as of December 9, 2004) (20) (Exhibit 3.1)
3.2 By-Laws, as amended (9) (Exhibit 3.2)
3.3 Amendment to Section 3.03 and addition of Section 3.17 to Bylaws (11) (Exhibits 1 and 2)
3.4 Amendment to Section 3.03 of the Bylaws (13) (Exhibit 3.8)
3.5 Amendments to Sections 2.01(a), 2.02 and 3.08(b) of the Bylaws (14) (Exhibit 3.10)
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-fourth Supplemental Indenture dated as of June 1, 1988 (3) (Exhibit 4.5)
4.4 Twenty-fifth Supplemental Indenture dated as of January 1, 1990 (4) (Exhibit 4.6)
4.5 Twenty-sixth Supplemental Indenture dated as of November 1, 1991 (5) (Exhibit 4.12)
4.6 Twenty-eighth Supplemental Indenture dated as of April 1, 1993 (6) (Exhibit 4.15)
4.7 Twenty-ninth Supplemental Indenture dated as of March 30, 1995 (7) (Exhibit 4.17)
4.8 Thirtieth Supplemental Indenture dated as of August 15, 1995 (8) (Exhibit 4.18)
4.9 Thirty-first Supplemental Indenture dated as of July 1, 1997 (10) (Exhibit 4.22)
4.10 First Amended and Restated Rights Agreement, dated as of February 20, 2004 between Aqua
America, Inc. and Equiserve Trust Company, N.A., as Rights Agent. (22) (Exhibit 4.10)
4.11 Thirty-second Supplement Indenture, dated as of October 1, 1999 (12) (Exhibit 4.26)
4.12 Thirty-third Supplemental Indenture, dated as of November 15, 1999.(13) (Exhibit 4.27)
4.13 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 (13) (Exhibit 4.27)
4.14 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 (14) (Exhibit 4.19)
4.15 Second Amendment to Revolving Credit Agreement dated as of December 18, 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 (15) (4.20)
24
EXHIBIT INDEX
Exhibit No.
- -----------
4.16 Thirty-fourth Supplemental Indenture, dated as of October 15, 2001. (15) (4.21)
4.17 Thirty-fifth Supplemental Indenture, dated as of January 1, 2002. (15) (4.22)
4.18 Thirty-sixth Supplemental Indenture, dated as of June 1, 2002. (17) (4.23)
4.19 Thirty-seventh Supplemental Indenture, dated as of December 15, 2002. (18) (4.23)
4.20 Credit Agreement dated as of October 25, 2002, between Philadelphia Suburban Corporation
and PNC Bank, National Association. (18) (4.24)
4.21 Third Amendment to Revolving Credit Agreement dated as of December 16, 2002, between
Philadelphia Suburban Water Company (and its successor Pennsylvania Suburban Water
Company) and PNC Bank, National Association, Citizens Bank of Pennsylvania, Fleet
National Bank dated as of December 22, 1999. (18) (4.25)
4.22 Fourth Amendment to Revolving Credit Agreement dated as of December 24, 2002, between
Philadelphia Suburban Water Company (and its successor Pennsylvania Suburban Water
Company) and PNC Bank, National Association, Citizens Bank of Pennsylvania, Fleet
National Bank, National City Bank dated as of December 22, 1999. (18) (4.26)
4.23 Note Purchase Agreement among the note purchasers and Philadelphia Suburban Corporation,
dated July 31, 2003 (19) (4.27)
4.24 Credit Agreement dated as of July 31, 2003, between Philadelphia Suburban Corporation
and PNC Bank, National Association (19) (4.28)
4.25 Fifth Amendment to Revolving Credit Agreement dated as of December 14, 2003, between
Philadelphia Suburban Water Company (and its successor Pennsylvania Suburban Water
Company) and PNC Bank, National Association, Citizens Bank of Pennsylvania, Fleet
National Bank, National City Bank dated as of December 22, 1999. (22) (Exhibit 4.25)
4.26 Credit Agreement dated as of May 28, 2004, between Aqua America, Inc. and PNC Bank,
National Association (21) (4.26)
4.27 Sixth Amendment to Revolving Credit Agreement dated as of December 12, 2004 between Aqua
Pennsylvania, Inc. (formerly known as Pennsylvania Suburban Water Company, successor by
merger to Philadelphia Suburban Water Company) and PNC Bank, National Association,
Citizens Bank of Pennsylvania, Fleet National Bank, National City Bank dated as of
December 22, 1999.
4.28 Thirty-eighth Supplemental Indenture, dated as of November 15, 2004.
10.1 Excess Benefit Plan for Salaried Employees, effective December 1, 1989* (4)
(Exhibit 10.4)
10.2 Supplemental Executive Retirement Plan, effective December 1, 1989* (4) (Exhibit 10.5)
10.3 Supplemental Executive Retirement Plan, effective March 15, 1992* (1) (Exhibit 10.6)
10.4 Employment letter agreement with Mr. Nicholas DeBenedictis* (1) (Exhibit 10.8)
10.5 1994 Equity Compensation Plan, as amended by Amendment effective August 5, 2003* (22) (Exhibit 10.5)
10.6 Placement Agency Agreement between Philadelphia Suburban Water Company and PaineWebber
Incorporated dated as of March 30, 1995 (7) (Exhibit 10.12)
25
EXHIBIT INDEX
Exhibit No.
- -----------
10.7 Bond Purchase Agreement among the Delaware County Industrial Development Authority,
Philadelphia Suburban Water Company and Legg Mason Wood Walker, Incorporated dated
August 24, 1995 (8) (Exhibit 10.13)
10.8 Construction and Financing Agreement between the Delaware County Industrial Development
Authority and Philadelphia Suburban Water Company dated as of August 15, 1995 (8)
(Exhibit 10.14)
10.9 Philadelphia Suburban Corporation Amended and Restated Executive Deferral Plan* (22)
(Exhibit 10.9)
10.10 Philadelphia Suburban Corporation Deferred Compensation Plan Master Trust Agreement with
PNC Bank, National Association, dated as of December 31, 1996* (9) (Exhibit 10.24)
10.11 First Amendment to Supplemental Executive Retirement Plan* (9) (Exhibit 10.25)
10.12 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 (10) (Exhibit 10.26)
10.13 The Director Deferral Plan* (22) (Exhibit 10.13)
10.14 Bond Purchase Agreement among the Delaware County Industrial Development Authority,
Philadelphia Suburban Water Company and Commerce Capital Markets dated September 29,
1999 (12) (Exhibit 10.37)
10.15 Construction and Financing Agreement between the Delaware County Industrial Development
Authority and Philadelphia Suburban Water Company dated as of October 1, 1999 (12)
(Exhibit 10.38)
10.16 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 (13) (Exhibit 10.41)
10.17 Bond Purchase Agreement among the Delaware County Industrial Development Authority,
Philadelphia Suburban Water Company and The GMS Group, L.L.C., dated October 23, 2001
(15) (10.35)
10.18 Construction and Financing Agreement between the Delaware County Industrial Development
Authority and Philadelphia Suburban Water Company dated as of October 15, 2001 (15)
(10.36)
10.19 Agreement among Philadelphia Suburban Corporation, Philadelphia Suburban Water Company
and Nicholas DeBenedictis, dated August 7, 2001* (15) (10.37)
10.20 Agreement among Philadelphia Suburban Corporation, Philadelphia Suburban Water Company
and Roy H. Stahl, dated August 7, 2001* (15) (10.38)
10.21 Agreement among Philadelphia Suburban Corporation, Philadelphia Suburban Water Company
and Richard R. Riegler, dated August 7, 2001* (15) (10.39)
26
EXHIBIT INDEX
Exhibit No.
- -----------
10.22 Agreement among Philadelphia Suburban Corporation, Philadelphia Suburban Water Company
and David P. Smeltzer, dated August 7, 2001* (15) (10.40)
10.23 Agreement among Philadelphia Suburban Corporation, Philadelphia Suburban Water Company
and Richard D. Hugus, dated August 7, 2001* (22) (Exhibit 10.23)
10.24 2003 Annual Cash Incentive Compensation Plan* (18) (Exhibit 10.46)
10.25 Bond Purchase Agreement among the Bucks County Industrial Development Authority,
Pennsylvania Suburban Water Company and Janney Montgomery Scott LLC, dated May 21, 2002
(17) (Exhibit 10.42)
10.26 Construction and Financing Agreement between the Bucks County Industrial Development
Authority and Pennsylvania Suburban Water Company dated as of June 1, 2002 (17) (Exhibit 10.43)
10.27 Bond Purchase Agreement among the Delaware County Industrial Development Authority,
Pennsylvania Suburban Water Company, and The GMS Group, L.L.C., dated December 19, 2002
(18) (Exhibit 10.44)
10.28 Construction and Financing Agreement between the Delaware County Industrial Development
Authority and Pennsylvania Suburban Water Company dated as of December 15, 2002 (18)
(Exhibit 10.45)
10.29 2005 Annual Cash Incentive Compensation Plan*
10.30 2004 Annual Cash Incentive Compensation Plan* (22) (Exhibit 10.30)
10.31 Bond Purchase Agreement among the Northumberland County Industrial Development
Authority, Aqua Pennsylvania, Inc., and Sovereign Securities Corporation, LLC, dated
November 16, 2004.
10.32 Aqua America, Inc. 2004 Equity Compensation Plan* (23)
10.33 2005 Executive Deferral Plan*
10.34 2005 Director Deferral Plan*
10.35 Directors' Compensation*
13.1 Selected portions of Annual Report to Shareholders for the year ended December 31, 2004
incorporated by reference in Annual Report on Form 10-K for the year ended December 31,
2004
21. Subsidiaries of Aqua America, Inc.
23.1 Consent of Independent Registered Public Accounting Firm - PricewaterhouseCoopers LLP
24. Power of Attorney (set forth as a part of this report)
31.1 Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) under the
Securities and Exchange Act of 1934
31.2 Certification of Chief Financial Officer, pursuant to Rule 13a-14(a) under the
Securities and Exchange Act of 1934
32.1 Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350
32.2 Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350
27
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, 1988.
(4) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1989.
(5) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1991.
(6) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1993.
(7) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter ended March 31, 1995.
(8) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter ended September 30, 1995.
(9) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1996.
(10) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
(11) Filed as an Exhibit to Form 8-K filed August 7, 1997.
(12) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.
(13) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1999.
(14) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 2000.
(15) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 2001.
(16) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter ended March 31, 2002.
(17) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.
(18) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 2002.
(19) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter ended September 30, 2003
(20) Filed as an Exhibit to Form 8-K filed December 9, 2004.
(21) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter ended June 30, 2004.
(22) Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 2003.
(23) Filed as Appendix C to definitive Proxy Statement dated April 2, 2004.
*Indicates management contract or compensatory plan or arrangement.
28
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.
AQUA AMERICA, INC.
By NICHOLAS DEBENEDICTIS
-------------------------------
Nicholas DeBenedictis
President and Chairman
Date: March 14, 2005
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.
29
NICHOLAS DEBENEDICTIS DAVID P. SMELTZER
- ----------------------------- ----------------------------------
Nicholas DeBenedictis David P. Smeltzer
President and Chairman Senior Vice President - Finance and
(principal executive officer) Chief Financial Officer
and Director
ROBERT A. RUBIN MARY C. CARROLL
- ----------------------------- ----------------------------------
Robert A. Rubin Mary C. Carroll
Principal Accounting Officer Director
RICHARD H. GLANTON WILLIAM P. HANKOWSKY
- ----------------------------- ----------------------------------
Richard H. Glanton William P. Hankowsky
Director Director
JOHN F. MCCAUGHAN JOHN E. MENARIO
- ----------------------------- ----------------------------------
John F. McCaughan John E. Menario
Director Director
RICHARD L. SMOOT
- -----------------------------
Richard L. Smoot
Director
30