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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, 1996 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 Lancaster Avenue, Bryn Mawr, Pennsylvania 19010
- --------------------------------------------- ------------
(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 3, 1997. $328,672,705
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 3, 1997, 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 3, 1997. 19,242,350
Documents incorporated by reference
(1) Portions of registrant's 1996 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 15, 1997
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.
PART I
Item 1. Business
Philadelphia Suburban Corporation ("PSC" or the "Registrant"), a
Pennsylvania corporation, was incorporated in 1968. The information appearing in
"Management's Discussion and Analysis" from the portions of PSC's 1996 Annual
Report to Shareholders filed as Exhibit 13.4 to this Form 10-K Report is
incorporated by reference herein.
The business of PSC is conducted almost entirely through its subsidiary
Philadelphia Suburban Water Company ("PSW"), a regulated public utility. PSW
supplies water to 284,141 residential, commercial, industrial and public
customers. PSW's service territory is approximately 463 square miles, comprising
a large portion of the suburban area west and north of the City of Philadelphia.
This territory is primarily residential in nature and is completely metered for
water service, except for fire hydrant service. Based on the 1990 census, PSW
estimates that the total number of persons currently served is approximately
900,000. Excluding the customers that were added at the time of acquisitions in
the last three years, customer accounts have grown at an average rate of
approximately .9% per annum for the last three years.
Operating revenues during the twelve months ended December 31, 1996 were
derived approximately as follows:
65.7% from residential customers
22.0% from commercial customers
4.0% from industrial customers
1.1% from public customers
6.8% from fire protection services
0.4% from sales to other water utilities and
miscellaneous customers
-------
100.0%
=======
In October 1996, PSW purchased the franchise rights and the water
utility assets of Hatboro Borough Authority. The Hatboro system covers a one and
one-half square mile service area in Montgomery County and is contiguous to
PSW's service territory. In November 1996, PSW acquired the water systems of the
Utility Group Services Corporation ("UGS") in a purchase transaction. The UGS
system consisted of three water utilities, with a 49 square mile service
territory, and one wastewater utility with a one square mile territory, all in
Chester County and in close proximity to PSW's existing territory. On December
31, 1996, PSW purchased the franchise rights and the water utility assets of
Bristol Borough Water and Sewer Authority serving the entire Borough and parts
of Bensalem and Bristol Townships in Bucks County. The Bristol system covers a
12 square mile service area in close proximity to PSW's existing territory. In
addition, PSW purchased the franchise rights and the water utility assets of
three smaller water systems during 1996 with a combined service territory of one
and one-half square miles. PSW continues to hold acquisition discussions with
several water systems that are near or adjacent to it's service territory.
The total purchase price for the eight water systems and wastewater
system acquired in 1996 was $47,889,000, including the issuance of $3,220,000 of
PSC's preferred stock and the assumption of $2,547,000 in liabilities. The
annual revenues from these systems approximates $6,000,000, and revenues
included in the consolidated financial statements during the period owned by PSW
were $466,000.
PSW has completed 18 water system acquisitions and one wastewater
system acquisition in the last five years. In May 1995, PSW purchased the
franchise rights and the water utility assets of Media Borough ("Media"). In
addition, PSW purchased the franchise rights and the water utility assets of
four smaller water systems in 1995. In December 1994, PSW acquired the franchise
rights and the water utility assets of two privately owned water companies. In
December 1993, PSW acquired the water utility assets and franchise rights of the
Borough of Malvern. In December 1992, PSW acquired the water utility assets of
the West Whiteland Township and the Uwchlan Township Municipal Authority water
systems. Combined, the ten systems acquired before 1996 added 70 square miles of
service territory adjacent to or in close proximity to PSW's existing service
territory and had revenues of approximately $7,750,000 in 1996.
2
Item 1, Continued
Selected operating statistics. Set forth below is a table showing certain
selected operating statistics for PSW for the past three years.
Revenues from water sales (000's omitted) 1996 1995 1994
-----------------------------------------
Residential $ 79,056 $ 78,082 $ 69,545
Commercial 26,504 24,473 23,453
Industrial 4,823 4,533 4,742
Public 1,373 1,252 1,257
Fire protection 8,140 7,421 7,054
Other 438 617 848
Tax Surcharge (credit) (1) (505) (97)
------------------------------------------
Total $ 120,333 $ 115,873 $ 106,802
==========================================
Water sales (million gallons)
Residential 17,228 17,610 16,577
Commercial 8,236 7,983 7,804
Industrial 1,768 1,919 2,085
Public 354 335 324
Fire protection - metered 84 51 55
Other 25 124 261
------------------------------------------
Total 27,695 28,022 27,106
==========================================
System delivery by source (million gallons)
Surface (including Upper Merion
reservoir) 27,287 26,904 25,386
Wells 5,136 4,830 5,037
Purchased 2,046 2,077 2,356
------------------------------------------
Total 34,469 33,811 32,779
==========================================
Number of metered customers (end of year)
Residential 265,765 248,500 234,624
Commercial 13,449 12,019 11,071
Industrial 753 554 539
Public 785 775 688
Fire protection 3,378 3,006 2,596
Other 11 11 15
------------------------------------------
Total 284,141 264,865 249,533
==========================================
Average consumption per
customer in gallons 103,206 109,084 109,001
==========================================
3
Item 1, Continued
Water supplies and usage. PSW derives its principal supply of water from
the Schuylkill River, Delaware River, seven rural streams which are tributaries
of the Schuylkill and Delaware Rivers, and the Upper Merion Reservoir, a former
quarry now impounding groundwater. All of these are either within or adjacent to
PSW's service territory. PSW acquired the right to remove water from these
sources, and in connection with such rights, PSW has secured the necessary
regulatory approvals. PSW has five impounding reservoirs and has six treatment
and pumping facilities to provide storage and purification of these surface
water supplies.
The Pennsylvania Department of Environmental Protection ("DEP") has
regulatory power with respect to sources of supply and the construction,
operation and safety practices for certain dams and other water containment
structures under the Pennsylvania Dam Safety and Encroachments Act of 1979.
PSW's dams are in compliance with these requirements in all material respects.
PSW's surface supplies are supplemented by 60 wells. PSW also has
interconnections with: the Chester Water Authority, which permits PSW to
withdraw up to 6.4 million gallons per day ("mgd"); the Bucks County Water and
Sewer Authority, which provides for a supply of up to 7.0 mgd; and the West
Chester Area Municipal Authority, which provides up to a maximum of 1.0 mgd.
Agreements regarding the first two interconnections require PSW to purchase
certain minimum amounts of water. PSW believes it possesses all the necessary
permits to obtain its supply of water from the sources indicated above.
The minimum safe yield of all sources of supply described above, based on
low stream flows of record with respect to surface supplies, is as follows:
Surface supplies 104.8 mgd
Upper Merion 7.2
Reservoir
Wells 22.3
Purchased supplies 8.2
--------
Total 142.5 mgd
========
During periods of normal precipitation, the safe yield is more than the
minimum shown above. Under normal operating conditions, PSW can deliver a
maximum of 162 mgd to its distribution system for short periods of time. The
average daily sendout for 1996, 1995 and 1994 was 94.2, 92.6 and 89.8 mgd,
respectively.
The maximum demand ever placed upon PSW's facilities for one month
occurred during August 1995, when sendout averaged 109.3 mgd. The peak day of
record occurred during July 1995 when water use reached 121.8 mgd.
Actual water usage (as measured by the water meters installed at each
service location) is less than the amount of water delivered into the system due
to leaks, PSW's operational use of water, fire hydrant usage and other similar
uses. Water consumption per customer is affected by local weather conditions
during the year. In general, during the late spring and summer, an increase in
rainfall reduces water consumption, while extended periods of dry weather
increases consumption. Also, an increase in the average temperature generally
causes an increase in water consumption.
Energy supplies. PSW does all of its pumping using electric power
purchased from PECO Energy Company. Energy supplies have been sufficient to meet
customer demand.
Water shortages. The Delaware River Basin, which is the drainage area of
the Delaware River from New York State to Delaware, periodically experiences
water shortages, particularly during the summer months. To the extent that the
reservoirs in the upper part of the Basin are affected by a lack of
precipitation, the Delaware River Basin Commission (the "DRBC") may impose
either voluntary or mandatory water use restrictions on portions or all of the
Basin. The Commonwealth of Pennsylvania (the "Commonwealth") also has the
authority to impose similar restrictions on a county-by-county basis.
PSW's raw water supplies have been adequate to meet customer demand for
the past five years principally because of its five impounding reservoirs.
However, PSW's customers may be required to comply with the Commonwealth and
DRBC water use restrictions, even if PSW's supplies are adequate.
4
Item 1, Continued
In September 1995, the Governor of the Commonwealth declared a drought
emergency in the counties served by PSW. The drought emergency imposed a
mandatory ban on all nonessential water usage by PSW's customers. Because the
order was issued toward the end of the summer months, when nonessential and
recreational use of water has traditionally declined, the restriction did not
have a significant impact on PSW revenues. The drought emergency was lifted by
the end of 1995. Throughout the drought emergency, PSW maintained adequate
storage levels of treated water and had sufficient quantities of raw water. No
other drought restrictions were imposed by the Commonwealth or DRBC in 1996 or
in the five years preceding 1995.
Regulation by the Pennsylvania Public Utility Commission. PSW is subject
to regulation by the Pennsylvania Public Utility Commission ("PUC") which has
jurisdiction with respect to rates, service, accounting procedures, issuance of
securities, acquisitions and other matters.
Under applicable Pennsylvania statutes, PSW has rights granted under its
Articles of Incorporation and by certificates of public convenience from the PUC
authorizing it to conduct its present operations in the manner in which such
operations are now conducted and in the territory in which it now renders
service, to exercise the right of eminent domain and to maintain its mains in
the streets and highways of such territory. Such rights are generally
nonexclusive, although it has been the practice of the PUC to allow only one
water company to actually provide service to a given area. Consequently, PSW is
subject to competition only with respect to potential customers who also may
have access to the service of another water supplier, or where other water
service opportunities exist (including non-utility companies with riparian
rights or access to an adequate supply from a neighboring facility).
In 1993, the PUC initiated a rulemaking procedure intended to facilitate
the development of practical standards by which water mains should be extended
to "bona fide service applicants", typically existing homes or businesses in
need of a reliable public water supply. In December 1995, the PUC issued a final
rulemaking, reflecting the position that the primary costs of such extensions
should be justified by anticipated revenues. Generally, construction costs
beyond those justified by anticipated revenues must be borne by the applicant.
Under the proposal, PSW is required to invest approximately $4,000 per customer
in a main extension prior to requiring any customer contribution. The PUC
selected this threshold because revenues from an average customer offset the
interest, depreciation and incremental operating expense associated with the
investment.
In August 1996, the PUC approved the Company's request for a
"Distribution System Improvement Charge" or "DSIC". The DSIC will enable PSW to
add a surcharge to customer bills beginning January 1, 1997 reflecting the
capital costs and depreciation related to certain distribution system
improvement projects completed and placed into service during the period
September 1 through November 30, 1996. PSW is permitted to request adjustments
to the DSIC quarterly to reflect subsequent capital expenditures and the
surcharge is reset to zero when new base rates that reflect the costs of those
additions become effective. The maximum DSIC that can be in effect at any time
is 5%. The initial charge effective January 1, 1997 is .5% (one half of one
percent).
Water Quality & Environmental Issues. PSW is subject to regulation of
water quality by the U.S. Environmental Protection Agency ("EPA") under the
Federal Safe Drinking Water Act (the "SDWA") and by the Pennsylvania Department
of Environmental Protection ("DEP") under the Pennsylvania Safe Drinking Water
Act. The SDWA provides for the establishment of minimum water quality standards,
as well as governmental authority to specify the type of treatment process to be
used for public drinking water. PSW is presently in compliance with all
standards and treatment requirements promulgated to date.
The EPA has an ongoing directive to issue additional regulations under
the SDWA. The directive was clarified in 1986 when Congress amended the SDWA to
require, among other revisions, disinfection of all drinking water, additional
maximum contaminant level ("MCL") specifications, and filtration of all surface
water supplies. PSW has already installed the necessary equipment to provide for
the disinfection of the drinking water throughout the system and is monitoring
for the additional specified contaminants. PSW's surface water supplies are
filtered.
5
Item 1, Continued
On August 6, 1996, the President signed into law the reauthorization of
the SDWA. The new Act places a greater emphasis on the cost/benefit of
regulating additional substances, by requiring definitive research on the impact
of such regulations. The reauthorized SDWA focuses regulations on contaminants
known to be of public health concern based on occurrence, health risks and cost
benefit considerations. The new Act eliminated the previous requirement of the
1986 SDWA Amendments that had required the EPA to promulgate MCLs for many
chemicals not previously regulated and mandated further MCLs every three years.
The new Act also specifies that the EPA shall study radon, arsenic and sulfates
and propose respective rulemakings in 1999, 2000 and 2001 if these chemicals are
deemed to be a threat to public health. The reauthorized SDWA is not expected to
have a material impact on PSW's operations or financial condition. PSW may, in
the future, have to change its method of treating drinking water at certain of
its sources of supply if additional regulations become effective.
In 1991, EPA promulgated final regulations for lead and copper (the "Lead
and Copper Rule"). Under the Lead and Copper Rule, large water utilities are
required to conduct corrosion control studies and to sample certain high-risk
customer homes to determine the extent of treatment techniques that may be
required. PSW conducted the two required rounds of sampling in 1992 and did not
exceed the EPA action levels for either lead or copper. Additional sampling will
be required in the future. PSW has developed a corrosion control program for its
surface sources of supply and does not foresee the need to make any major
additional treatment changes or capital expenditures as a result of the Lead and
Copper Rule.
On January 1, 1993, new federal regulations ("Phase II") became effective
for certain volatile organics, herbicides, pesticides and inorganic parameters.
All required Phase II monitoring was completed in 1995. In the few cases where
Phase II contaminants were detected, concentrations were below MCLs. Future
monitoring will be required, but no major treatment modifications are
anticipated as a result of these regulations.
In May 1996, the EPA issued the first rule of a three rule package
addressing Disinfection By-Products ("DBP") and monitoring of disease-causing
micro-organisms. DBP's are chemicals formed during the drinking water
purification process. The first rule is an Information Collection Rule ("ICR")
designed to collect data to be used in developing further rules. The start of
the ICR has been postponed until mid-1997 and will also include studies of
advanced treatment techniques. The ICR phase is expected to be completed by
December 1998. Studies on the data collected may result in new treatment
standards and processes.
PSW is also subject to other environmental statutes administered by the
EPA and DEP. These include the Federal Clean Water Act ("FCWA") and the Resource
Conservation and Recovery Act ("RCRA"). Under the FCWA, the Company must obtain
National Pollutant Discharge Elimination System ("NPDES") permits for discharges
from its treatment stations. PSW currently maintains five NPDES permits relating
to its water treatment plants, which are subject to renewal every five years.
During the past five years, PSW has installed the required waste water treatment
facilities and presently meets all NPDES requirements. Although management
recognizes that permit renewal may become more difficult if more stringent
guidelines are imposed, no significant obstacles to permit renewal are presently
foreseen.
Under RCRA, PSW is subject to specific regulations regarding the solid
waste generated from the water treatment process. The DEP promulgated a "Final
Rulemaking" for solid waste (Residual Waste Management) in July 1992. PSW has
retained engineering consultants to assist with the extensive monitoring, record
keeping and reporting required under these regulations. A preliminary
application for permitting has been filed, and formal permitting of these
facilities should be issued in 1997 in accordance with regulatory requirements.
In 1996, PSW acquired the Little Washington Wastewater Company ("LWW"), a
317 customer wastewater system located within the service territory of PSW. LWW
is subject to regulation by the EPA and DEP, and is also subject to
environmental statutes, including FCWA and RCRA. LWW currently maintains a NPDES
permit for its wastewater treatment station in accordance with FCWA. LWW is
presently in compliance with all standards and treatment requirements
promulgated to date.
6
Item 1, Continued
Where PSW is required to make certain capital investments in order to
maintain its compliance with any of the various regulations discussed above, it
is management's belief that all such expenditures would be fully recoverable in
PSW's rates. However, under current law, the capital investments of these types,
would have to be financed prior to their inclusion in PSW's rate structure, and
the resulting rate increases would not necessarily be timely.
Employee Relations
As of December 31, 1996, the Registrant employed a total of 540 persons.
Hourly employees of PSW are represented by the International Brotherhood of
Firemen and Oilers, Local No. 473. The contract with the union expires on
December 1, 1997. Management considers its employee relations to be
satisfactory.
Item 2. Properties.
The Registrant believes that the facilities used in the operation of its
business is generally in excellent condition in terms of suitability, adequacy
and utilization.
The property of PSW consists of a waterworks system devoted to the
collection, storage, treatment and distribution of water in its service
territory. Management considers that its properties are maintained in good
operating condition and in accordance with current standards of good waterworks
practice. The following table summarizes the principal physical properties owned
by PSW:
No. of Square Feet
Location Buildings Description Floor Area
- ------------------------------------------------------------------------------
Pennsylvania 6 Office & warehouse 174,185
Pennsylvania 17 Pumping stations and
treatment buildings 180,000
Pennsylvania 23 Well stations App. 600 ea.
Pennsylvania 37 Well stations App. 150 ea.
Pennsylvania 49 Booster stations App. 1,100 ea.
In addition, PSW also owns 66 storage facilities for treated water
throughout its service territory with a combined capacity of 160.25 million
gallons and five surface water impounding reservoirs. The water utility also
owns approximately 3,437 miles of transmission and distribution mains, has
284,141 active metered services and 13,322 fire hydrants.
PSW's properties referred to herein, with certain minor exceptions
which do not materially interfere with their use, are owned and are subject to
the lien of an Indenture of Mortgage dated as of January 1, 1941, as
supplemented. In the case of properties acquired through the exercise of the
power of eminent domain and certain properties acquired through purchase, it has
title only for water supply purposes.
The Registrant's corporate offices are leased from PSW and located in
Bryn Mawr, Pennsylvania.
Item 3. Legal Proceedings
There are various legal proceedings in which the Company is involved.
Although the results of legal proceedings cannot be predicted with certainty,
there are no pending legal proceedings to which the Registrant or any of its
subsidiaries is a party or to which any of their properties is the subject that
present a reasonable likelihood of a material adverse impact on the Registrant.
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 1996.
Information with respect to the executive officers of the Company is
contained in Item 10 hereof and is hereby incorporated by reference herein.
7
PART II
Item 5. Market for the Registrant's Common Stock and Related Security
Holder Matters
The Company's common stock is traded on the New York Stock Exchange
and the Philadelphia Stock Exchange. As of March 3, 1997, there were
approximately 13,799 holders of record of the Company's common stock.
The following selected quarterly financial data of the Company is in
thousands of dollars, except for per share amounts:
Total
First Second Third Fourth Year
-------------------------------------------------------------------
1996
- -------------------------------------------------------------------------------------------------------
Earned revenues $ 29,290 $ 30,683 $ 30,831 $ 31,699 $ 122,503
Operating expenses 13,070 12,614 11,757 14,174 51,615
Income, continuing operations 3,968 5,281 5,847 4,661 19,757
Income per share, continuing
operations 0.21 0.28 0.31 0.24 1.04
Income, discontinued operations - - 365 600 965
Income per share, discontinued
operations - - 0.02 0.03 0.05
Net income available to common
stock 3,968 5,281 6,212 5,261 20,722
Net income per common share 0.21 0.28 0.33 0.27 1.09
Dividend paid per common share 0.193 0.193 0.2025 0.2025 0.791
Price range of common stock
- high 15.42 16.75 17.25 19.88 19.88
- low 13.67 15.00 15.50 16.50 13.67
1995
- -------------------------------------------------------------------------------------------------------
Earned revenues $ 25,712 $ 28,827 $ 32,355 $ 30,150 $ 117,044
Operating expenses 11,766 12,357 13,793 13,786 51,702
Income, continuing operations 3,315 4,659 5,732 4,324 18,030
Income per share, continuing
operations 0.19 0.26 0.32 0.23 1.00
Income, discontinued operations - - - 370 370
Income per share, discontinued
operations - - - 0.02 0.02
Net income available to common
stock 3,315 4,659 5,732 4,694 18,400
Net income per common share 0.19 0.26 0.32 0.25 1.02
Dividend paid per common share 0.186 0.186 0.193 0.193 0.758
Price range of common stock
- high 12.17 12.50 12.42 14.33 14.33
- low 11.59 11.75 11.75 12.00 11.59
All per share data as presented has been adjusted for the 1996 common
stock split effected in the form of a stock distribution. High and low prices of
the Company's common stock are as traded on the New York Stock Exchange.
8
Item 5, Continued
Following is a recent history of income from continuing operations and
common dividends of the Company:
- -----------------------------------------------------------------------------
Income per
share from
Cash dividend continuing Payout
per common share operations ratio
- -----------------------------------------------------------------------------
1992 $ 0.69 $ 0.82 84%
1993 0.71 0.85 84%
1994 0.73 0.90 81%
1995 0.76 1.00 76%
1996 0.79 1.04 76%
- -----------------------------------------------------------------------------
Dividends have averaged approximately 80% of income from continuing
operations during this period. In August 1996, the annual dividend increased by
4.7% to $.81 beginning with the September 1996 dividend.
Recent Sales of Unregistered Securities
On November 22, 1996, the Company sold 32,200 shares of its Series B
Preferred Stock for an aggregate amount of approximately $3,220,000. Such shares
were issued to the owners of a business acquired by the Company for an aggregate
price of $45,342,000, the balance of which was paid by the Company in cash. Such
shares were sold by the Company to accredited investors without registration
under the Securities Act of 1933, as amended, pursuant to Rule 506 promulgated
under such Rule.
Item 6. Selected Financial Data
The information appearing in the section captioned "Summary of Selected
Financial Data" from the portions of the Company's 1996 Annual Report to
Shareholders filed as Exhibit 13.4 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 the Company's 1996 Annual Report
to Shareholders filed as Exhibit 13.4 to this Form 10-K Report is incorporated
by reference herein.
Item 8. Financial Statements and Supplementary Data
Information appearing under the captions "Consolidated Statements of
Income", "Consolidated Balance Sheets", "Consolidated Cash Flow Statements"
"Consolidated Statements of Capitalization" and "Notes to Consolidated Financial
Statements" from the portions of the Company's 1996 Annual Report to
Shareholders filed as Exhibit 13.4 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 the Company's 1996 Annual
Report to Shareholders filed as Exhibit 13.4 to this Form 10-K Report is
incorporated by reference herein.
Item 9. Disagreements on Accounting and Financial Disclosure
None.
9
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 the May 15,
1997, annual meeting of shareholders of the Company, to be filed within 120 days
after the end of the fiscal year covered by this Form 10-K Report, is
incorporated by reference herein.
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 51 President and Chairman (May 1993 to present); President and Chief
Executive Officer (July 1992 to May 1993); Chairman
and Chief Executive Officer, Philadelphia Suburban Water
Company (July 1992 to Present); President, Philadelphia
Suburban Water Company (February 1995 to present) (2)
Richard R. Riegler 50 Senior Vice President - Operations, Philadelphia
Suburban Water Company (April 1989 to present) (3)
Roy H. Stahl 44 Senior Vice President and General Counsel (April 1991 to
present) (4)
Michael P. Graham 48 Senior Vice President - Finance and Treasurer (March
1993 to present) (5)
Morrison Coulter 60 Senior Vice President - Production, Philadelphia Suburban Water Company
(February 1996 to present); Vice President - Production, Philadelphia Suburban Water
Company (April 1989 to February 1996) (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. 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.
(4) 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.
10
Item 10, Continued
(5) Mr. Graham was Controller of the Company from 1984 to September 1990, and
from September 1990 to May 1991 he was Chief Financial Officer and Treasurer.
From May 1991 to March 1993, Mr. Graham was Vice President - Finance and
Treasurer.
(6) 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.
Item 11. Management Remuneration
The information appearing in the sections captioned "Compensation of
Directors and Executive Officers" of the Proxy Statement relating to the May 15,
1997, annual meeting of shareholders of the Company, to be filed within 120 days
after the end of the fiscal year covered by this Form 10-K Report, is
incorporated by reference herein.
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 the May 15, 1997, annual
meeting of shareholders of the Company, to be filed within 120 days after the
end of the fiscal year covered by this Form 10-K Report, is incorporated by
reference herein.
Item 13. Certain Relationships and Related Transactions
The information appearing in the sections captioned "Other Remuneration
and Certain Transactions" of the Proxy Statement relating to the May 15, 1997,
annual meeting of shareholders of the Company, to be filed within 120 days after
the end of the fiscal year covered by this Form 10-K Report, is incorporated by
reference herein.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Financial Statements. The following is a list of the consolidated financial
statements of the Company and its subsidiaries and supplementary data
incorporated by reference in Item 8 hereof:
Management's Report
Independent Auditors' Report
Consolidated Balance Sheets - December 31, 1996 and 1995
Consolidated Statements of Income - 1996, 1995 and 1994
Consolidated Statements of Cash Flow - 1996, 1995, and 1994
Consolidated Statements of Capitalization - December 31, 1996 and 1995
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.
Reports on Form 8-K. The Company filed no report on Form 8-K during the quarter
ended December 31, 1996.
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 parenthesis. The page numbers listed refer to
page number where such exhibits are located using the sequential numbering
system specified by Rules 0-3 and 403.
11
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 (1) (Exhibit 3.2) -
3.3 Amendment to Amended and Restated Articles of 19
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
3.4 Amendment to Amended and Restated Articles of 20
Incorporation, as amended, designating the
Series B Preferred Stock
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 Revolving Credit Agreement between Philadelphia Suburban -
Water Company and Mellon Bank (East) National Association
dated as of February 16, 1990 (3) (Exhibit 4.3)
4.3 First Amendment to Revolving Credit Agreement between -
Philadelphia Suburban Water Company and Mellon Bank
N.A. dated as of September 1, 1992 (1) (Exhibit 4.3)
4.4 Preferred Stock Agreement between Philadelphia Suburban -
Water Company and Provident Life and Accident Insurance
Company dated as of January 1, 1991 (3) (Exhibit 4.4)
4.5 Indenture dated as of July 1, 1988 between Philadelphia -
Suburban Corporation and the Philadelphia National
Bank, as Trustee. (4) (Exhibit 4)
4.6 Form of Rights Agreement, dated as of February 19, 1988, -
between Philadelphia Suburban Corporation and
Mellon Bank (East) National Association, as amended
by Amendment No. 1. (5) (Exhibit 1)
4.7 Agreement to furnish copies of other long-term debt -
instruments (1) (Exhibit 4.7)
4.8 Twenty-first Supplemental Indenture dated as of August 1, -
1985 (6) (Exhibit 4.2)
4.9 Twenty-second Supplemental Indenture dated as of April 1, -
1986 (7) (Exhibit 4.3)
4.10 Twenty-third Supplemental Indenture dated as of April 1, -
1987 (8) (Exhibit 4.4)
4.11 Twenty-fourth Supplemental Indenture dated as of June 1, -
1988 (9) (Exhibit 4.5)
4.12 Twenty-fifth Supplemental Indenture dated as of -
January 1, 1990 (10)(Exhibit 4.6)
12
EXHIBIT INDEX, Continued
Exhibit No. Page No.
- ----------- --------
4.13 Twenty-sixth Supplemental Indenture dated as of November -
1, 1991 (11) (Exhibit 4.12)
4.14 Twenty-seventh Supplemental Indenture dated as of June 1, -
1992 (1) (Exhibit 4.14)
4.15 Twenty-eighth Supplemental Indenture dated as of April 1, -
1993 (12) (Exhibit 4.15)
4.16 Revolving Credit Agreement between Philadelphia -
Suburban Water Company and Mellon Bank, N.A., PNC Bank
National Association, First Union National Bank, N.A.
and CoreStates Bank, N.A. dated as of March 17, 1994
(12) (Exhibit 4.16)
4.17 Twenty-Ninth Supplemental Indenture dated as of March 30, -
1995 (14) (Exhibit 4.17)
4.18 Thirtieth Supplemental Indenture dated as of August 15, -
1995 (15) (Exhibit 4.18)
4.19 First Amendment to Revolving Credit Agreement dated as of May 27
22, 1995, between Philadelphia Suburban Water Company and
Mellon Bank, N.A., PNC Bank National Association, First Fidelity
National Bank, N.A. Meridian Bank, N.A. dated as of March 17,
1994
4.20 Second Amendment to Revolving Credit Agreement dated as of July 43
21, 1995, between Philadelphia Suburban Water Company and
Mellon Bank, N.A., PNC Bank National Association, First Fidelity
National Bank, N.A. Bank, N.A. dated as of March 17, 1994
4.21 Third Amendment to Revolving Credit Agreement dated as of December 55
20, 1996, between Philadelphia Suburban Water Company and
Mellon Bank, N.A., PNC Bank National Association, First Union
National Bank, N.A. CoreStates Bank, N.A. dated as of March 17,
1994
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 Executive Incentive Award Plan, as amended March 21, -
1989 and February 6, 1990* (10) (Exhibit 10.3)
10.4 Excess Benefit Plan for Salaried Employees, effective -
December 1, 1989* (10) (Exhibit 10.4)
10.5 Supplemental Executive Retirement Plan, effective -
December 1, 1989* (10) (Exhibit 10.5)
10.6 Supplemental Executive Retirement Plan, effective March -
15, 1992* (1) (Exhibit 10.6)
10.7 1993 Incentive Compensation Plan* (1) (Exhibit 10.7) -
10.8 Employment letter agreement with Mr. Nicholas -
DeBenedictis* (1) (Exhibit 10.8)
10.9 1994 Incentive Compensation Program* (12) (Exhibit 10.9) -
13
EXHIBIT INDEX, Continued
Exhibit No. Page No.
- ----------- --------
10.10 1994 Equity Compensation Plan, as amended by Amendment -
1994-1* (16) (Exhibit 10.10)
10.11 1995 Incentive Compensation Plan* (13) (Exhibit 10.11) -
10.12 Placement Agency Agreement between Philadelphia -
Suburban Water Company and PaineWebber Incorporated
dated as of March 30, 1995 (14) (Exhibit 10.12)
10.13 Bond Purchase Agreement among the Delaware County -
Industrial Development Authority, Philadelphia
Suburban Water Company and Legg Mason Wood Walker,
Incorporated dated August 24, 1995 (15) (Exhibit 10.13)
10.14 Construction and Financing Agreement between the -
Delaware County Industrial Development Authority and
Philadelphia Suburban Water Company dated as of August
15, 1995 (15) (Exhibit 10.14)
10.15 1996 Annual Cash Incentive Compensation Plan* (16) -
(Exhibit 13.4)
10.16 Amendment 1994-2 to 1994 Equity Compensation 71
Plan, as amended*
10.17 1997 Annual Cash Incentive Compensation Plan* 72
10.18 Agreement among Philadelphia Suburban Corporation, 78
Philadelphia Suburban Water Company and Nicholas
DeBenedictis, dated as of January 1, 1997*
10.19 Agreement among Philadelphia Suburban Corporation, 97
Philadelphia Suburban Water Company and Roy H.
Stahl, dated as of January 1, 1997*
10.20 Agreement among Philadelphia Suburban Corporation, 113
Philadelphia Suburban Water Company and Michael P.
Graham, dated as of January 1, 1997*
10.21 Agreement among Philadelphia Suburban Corporation, 129
Philadelphia Suburban Water Company and Richard R.
Riegler, dated as of January 1, 1997*
10.22 Agreement among Philadelphia Suburban Corporation, 145
Philadelphia Suburban Water Company and Morrison
Coulter, dated as of January 1, 1997*
10.23 Philadelphia Suburban Corporation Amended and 161
Restated Executive Deferral Plan*
10.24 Philadelphia Suburban Corporation Deferred 170
Compensation Plan Master Trust Agreement
with PNC Bank, National Association, dated
as of December 31, 1996*
10.25 First Amendment to Supplemental Executive Retirement 184
Plan*
14
EXHIBIT INDEX, Continued
Exhibit No. Page No.
- ----------- --------
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 (12) (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 (13) (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 (16) (Exhibit 13.3)
13.4 Selected portions of Annual Report to Shareholders 187
for the year ended December 31, 1996 incorporated
by reference in Annual Report on Form 10-K for the
year ended December 31, 1996
21. Subsidiaries of Philadelphia Suburban Corporation 222
23. Consent of Independent Auditors 223
24. Power of Attorney (set forth as a part of this report) 17
27. Financial Data Schedule 224
15
- 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, 1990.
(4) Filed as Exhibit 4 to the Registration Statement on Form S-3 filed with
the Securities and Exchange Commission on June 14, 1988.
(5) Filed as Exhibit 1 to the Registration Statement on Form 8-A filed with
the Securities and Exchange Commission on March 1, 1988, with respect to
the New York Stock Exchange, and on November 9, 1988, with respect to
the Philadelphia Stock Exchange.
(6) Filed as an Exhibit to Annual Report on Form 10-K for the year ended
December 31, 1985.
(7) Filed as an Exhibit to Annual Report on Form 10-K for the year ended
December 31, 1986.
(8) Filed as an Exhibit to Annual Report on Form 10-K for the year ended
December 31, 1987.
(9) Filed as an Exhibit to Annual Report on Form 10-K for the year ended
December 31, 1988.
(10) Filed as an Exhibit to Annual Report on Form 10-K for the year ended
December 31, 1989.
(11) Filed as an Exhibit to Annual Report on Form 10-K for the year ended
December 31, 1991.
(12) Filed as an Exhibit to Annual Report on Form 10-K for the year ended
December 31, 1993.
(13) Filed as an Exhibit to Annual Report on Form 10-K for the year ended
December 31, 1994.
(14) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995.
(15) Filed as an Exhibit to Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995.
(16) Filed as an Exhibit to Annual Report on Form 10-K for the year ended
December 31, 1995.
* Indicates management contract or compensatory plan or arrangement.
16
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 Nicholas DeBenedictis
---------------------------------
Nicholas DeBenedictis
President and Chairman
Date: March 24, 1997
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,
Michael P. Graham, Senior Vice President - Finance and Treasurer 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.
17
John H. Austin, Jr. John W. Boyer, Jr.
- ---------------------------------------- ----------------------------------
John H. Austin, Jr. John W. Boyer, Jr.
Director Director
Mary C. Carroll Nicholas DeBenedictis
- ---------------------------------------- ----------------------------------
Mary C. Carroll Nicholas DeBenedictis
Director President and Chairman
(principal executive officer)
and Director
G. Fred DiBona, Jr. Richard H. Glanton
- ---------------------------------------- ----------------------------------
G. Fred DiBona, Jr. Richard H. Glanton
Director Director
Michael P. Graham Joseph C. Ladd
- ---------------------------------------- ----------------------------------
Michael P. Graham Joseph C. Ladd
Senior Vice President-Finance and Director
Treasurer (principal financial and
accounting officer)
John F. McCaughan Harvey J. Wilson
- ---------------------------------------- ----------------------------------
John F. McCaughan Harvey J. Wilson
Director Director
18