Item 1. Business
The Company is a specially chartered Connecticut public service corporation in the business of collecting and distributing water for domestic, commercial and industrial uses and fire protection in Ansonia and Derby, Connecticut, and in small parts of the contiguous Town of Seymour. Under its charter, the Company enjoys a monopoly franchise in the distribution of water in the area which it serves. In conjunction with its right to sell water, the Company has the power of eminent domain and the right to erect and maintain certain facilities on and in public highways and grounds, all subject to such consents and approvals of public bodies and others as may be required bylaw.
The current sources of the Company's water are wells located in Derby and Seymour and interconnections with the South Central Connecticut Regional Water Authority's (the "Regional Water Authority") system (a) at the border of Orange and Derby (the "Grassy Hill Interconnection") and (b) near the border of Seymour and Ansonia (the "Woodbridge Interconnection"). The Company maintains its interconnected Beaver Lake Reservoir System, a 2.2 million gallon per day (MGD) surface supply in case of emergency needs.
The Company's entire system has a safe daily yield (including only those supplies that comply with the SDWA on a consistent basis) of approximately 8.0 MGD, while the average daily demand and the maximum daily demand on the system during 1997 were approximately 3.2 MGD and 4.3 MGD, respectively. The distribution system with the exception of the well supplies, is mainly through gravity, but there are seven distinct areas at higher elevations where pumping, pressure tanks and standpipes are utilized. These higher areas serve approximately 25% of the Company's customers.
During 1997 approximately 1.16 billion gallons of water from all sources were delivered to the Company's customers. The Company has approximately 8,848 customers of whom approximately 98.7% are residential and commercial. No single customer accounted for as much as 10% of total billings in 1997. The business of the Company is to some extent seasonal, since greater quantities of water are delivered to customers in the hot summer months.
The Company had, as of February 28, 1998, 20 full-time employees. The Company's employees are not affiliated with any union organization.
The Company is subject to the jurisdiction of the Connecticut Department of Public Utility Control ("DPUC") as to accounting, financing, ratemaking, disposal of property, the issuance of long term securities and other matters affecting its operations. The Connecticut Department of Public Health (the "Health Department" or "DPH") has regulatory powers over the Company under state law with respect to water quality, sources of supply, and the use of watershed land. The Connecticut Department of Environmental Protection ("DEP") is authorized to regulate the Company's operations with regard to water pollution abatement, diversion of water from streams and rivers, safety of dams and the location, construction and alteration of certain water facilities. The Company's activities are also subject to regulation with regard to environmental and other operational matters by federal, state and local authorities, including, without limitation, zoning authorities.
The Company is subject to regulation of its water quality under the Federal Safe Drinking Water Act ("SDWA"). The United States Environmental Protection Agency has granted to the Health Department the primary enforcement responsibility in Connecticut under the SDWA. The Health Department has established regulations containing maximum limits on contaminants which have or may have an adverse effect on health.
Executive Officers of the Registrant
Name, Age and Position Business Experience Past 5 Years
Betsy Henley-Cohn, 45 Chairwoman of the Board Chairwoman of the Board of Directors of the Company since May of 1992; Chairman of the Board of Directors and Treasurer, Joseph Cohn & Sons, Inc. (construction sub- contractors); Director, United Illuminating Company; Director, Aristotle Corp.; Director, Citizens Bank of Connecticut; Society for Savings Bancorp, Director 1985-1993.
Aldore J. Rivers, 64 President President of the Company since 1985.
Item 2.
Item 2. Properties
The Company's properties consist chiefly of land, wells, reservoirs, and pipelines. The Company has 5 production wells with an aggregate effective capacity of approximately 3.0 MGD. The Company's existing interconnections with the Regional Water Authority can provide 5.0 MGD. The Company's entire system has a safe daily yield (including only those supplies that comply with the SDWA on a consistent basis) of approximately 8.0 MGD, while the average daily demand and the maximum daily demand on the system during 1997 were approximately 3.19 MGD and 4.26 MGD, respectively. The distribution system, with the exception of the well supplies, is mainly through gravity, but there are seven distinct areas at higher elevations where pumping, pressure tanks and standpipes are utilized. These higher areas serve approximately 25% of the Company's customers.
The Company has three emergency stand-by reservoirs (Peat Swamp, Quillinan and Middle) with a storage capacity of 484 million gallons and a safe daily yield of approximately 2.2 MGD. Because the water produced by those reservoirs does not consistently meet with the quality standards of the SDWA, none of those reservoirs is actively being used by the Company to supply water to the system. In addition, the Company owns the Great Hill reservoir system which was abandoned as a usable reservoir in 1994, with the approval of the Health Department. Because this reservoir does not meet the requirements of the SDWA and because of the minimal storage capacity, the Company has determined that it is not large enough to build a filtration plant to bring the water into compliance economically. During 1996 and in January of 1998, the Company sold to the City of Ansonia and the City of Derby the Sentinel Hill Reservoir system and its watershed located in Ansonia and Derby.
The Company's dams are subject to inspection by and the approvalof the DEP. All of the Company's dams are in compliance with improvements previously ordered by the U.S. Army Corps of Engineers.
The Company has an office building at 230 Beaver Street, in Ansonia. That building was built in 1964, is of brick construction, and contains 4,200 square feet of office and storage space. In addition, the Company owns two buildings devoted to equipment storage. The Company also maintains some office space in a wood frame, residential building owned by the Company at 228 Beaver Street, Ansonia.
The Company's approximately 3,400 acres of land were acquired over the years principally in watershed areas to protect the quality and purity of the Company's water at a time when land use was not regulated and standards for water quality in streams were non-existent.
Under Connecticut law a water Company cannot abandon a source of supply or dispose of any land holdings associated with a source of supply until it has a "water supply plan" approved by the Health Department. The Health Department approved the Company's first Water Supply Plan in 1988 and updated Water Supply Plan in 1993. Pursuant to abandonment permits issued by the Health Department in 1988, the Company abandoned its Upper and Lower Sentinel Hill Reservoirs, Steep Hill (Bungay) Reservoir, and Fountain LakeReservoir, and the land associated with them then became available for sale. In 1994, the abandonment of Great Hill Reservoir was approved by the Health Department.
Since 1988, the Company has sold approximately 150 acres of land in Bethany for a gain after taxes of $765,367, 102 acres in Ansonia, Derby and Seymour for a net gain of $974,567, 151 acres in Seymour for a net gain of $796,527 59 acres in Ansonia for a net gain of $529,739, 10 acres in Seymour for a net gain of $142,329 and 4 acres in Seymour for a net gain of $92,811.
The Company believes that approximately 1,250 acres of its land holdings will not be needed in the future for water supply purposes and can be sold. The Company has proposed, and the DPUC has accepted with respect to prior transactions, an accounting and ratemaking mechanism by which the gain on the sale of the Company's land holdings is shared between ratepayers and stockholders as contemplated by Connecticut law. (See Note 1 to the Company's Financial Statements).
Item 3.
Item 3. Legal Proceedings
None.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5.
Item 5. Market for the Registrant's Common Stock and RelatedSecurity Holding Matters
As of December 31, 1997, there were approximately 486 record holders of the Company's common stock. Approximately 37% of the Company's stock is held in "nominee" or "street" name. The Company's common stock is traded on the NASDAQ Small Cap Market. The market is not active, and actual trades are infrequent. The following table sets forth the divident record for the Company's common stock and the range of bid prices for the last two calendar years. The stock prices are based upon NASDAQ records provided to the Company. The prices given are retail prices. The Company's Mortgage Bond Indenture under which its First Mortgage Bonds are issued contains provisions that limit the dividends the Company may pay, under certain circumstances.
Item 6.
Item 6. Selected Financial Data
Presented below is a summary of selected financial data for the years 1993 through 1997:
(000's omitted except for per share data)
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Net Income
The Company's net income for 1997 was $667,879 compared with net income of $764,737 in 1996 and $518,068 in 1995. Earnings per share, basic for 1997, 1996 and 1995 were $.88, $1.02 and $.69, respectively.
The decrease in net income of $96,858 in 1997 is principally a result of a decline in land sale income of $191,252. This decline, however, is largely offset by increased other income of $70,625 and decreased income taxes from operations of $58,745. The increase in net income in 1996 from 1995 of $246,672 is a result of increases in land sale income including amortization of prior year gains of $146,776 and increased income from operations of $99,896.
Revenues
Water sales to the Company's customers, primarily in the cities of Ansonia and Derby, Connecticut, of $4,367,357 were $12,414 lower than the sales achieved in 1996 of $4,379,771. A 5% rate reduction that became effective July 1, 1997, as a result of the repeal of the Connecticut Gross Receipts tax, is principally offset by increased revenues due to a 2% increase in consumption from the Company's residential class of customers. Although overall consumption in 1997 has only increased .6% from the level achieved in 1996, the residential consumption increase, for the most part, can be attributed to dry and warmer weather patterns experienced in 1997 vs. 1996. In 1996, water service revenues were $141,696, or 3.3%, ahead of 1995 revenues. A 6.9% water service rate increase that became effective on January 1, 1996, was minimized by lower consumption levels achieved in 1996, as a result of that year's wet and cool summer.
Operating Expenses
Operating expenses of $2,483,875 in 1997 have increased $89,145, or 3.7%, over total operating expenses of $2,394,730 for 1996. Increased costs associated with special services relating to professional fees principally account for this variance. Operating expenses in 1996 were $109,136 lower than in 1995, as a result of lower purchased water costs due to wet weather conditions in 1996, and decreased auditing fees.
Maintenance Expenses
Maintenance expenses of $185,131 for 1997 are $39,931 or 17.7% lower than maintenance expenses of $225,062 for 1995. Lower expenses relating to main maintenance and service repairs principally relating to milder weather conditions in 1997 vs. 1996 contribute to this favorable variance. Maintenance expense in 1996 was $70,133 higher than 1996 as harsh weather conditions in 1996 caused main and service repairs to escalate.
Depreciation Expense
Depreciation expense for 1997 of $439,116 exceeds depreciation expense for 1996 of $395,059 by $44,057. Depreciation expense relating to an increasing amount of general plant additions made in 1996 and 1997 vs. prior years accounts for this variance. Depreciation expense in 1996 was $12,207 higher than in 1995, due to routine plant additions.
Taxes other than Income Taxes
Taxes other than income taxes in 1997 of $403,560 are $106,239 lower than the expense of $509,799 for 1996. The repeal of the Connecticut Gross Receipts tax that became effective July 1, 1997 accounts for this reduction. Taxes other than income taxes in 1996 also decreased from the previous year's expense by $29,497 as a result of decreased property taxes due to the disposition of property and to a reduction in the mill rate in the Town of Ansonia, Connecticut.
Income Taxes
Taxes on the Company's income from operations were $69,714 in 1997, $128,459 in 1996 and $67,742 in 1995. The decrease in 1997 from 1996 is principally the result of tax deductions for property donations in conjunction with the sale of Company excess land in Seymour, CT to the Town of Seymour and property in Derby, CT to Yale University, as well as an increase in flow through tax deductions principally relating to rate case expense. The tax increase in 1996 from 1995 reflects an increase in operating income for that year.
The Company also incurs income tax liability for gains from land transactions, both in the year in which they occur and in the later years in which income, previously deferred in accordance with the DPUC's orders concerning the sharing of the gains between the Company's shareholders and ratepayers, is recognized by the Company. Taxes related to gains on land transactions were $258,476, $382,107 and $286,694 in 1997, 1996 and 1995, respectively. The Company's total income tax liability including both the tax on operating income and on land sale gains was $328,190 in 1997, $510,566 in 1996 and $354,436 in 1995.
Land Dispositions
When the Company disposes of land, any gain recognized, net of tax, is shared between ratepayers and stockholders based upon a formula approved by the DPUC. The impact of land dispositions is recognized in two places on the statement of income.
The statement of income reflects income from the disposition of land (net of taxes) of $195,457 in 1997, $386,709 in 1996 and $279,101 in 1995, which represent the stockholders' immediate share of income from land dispositions occurring in each year.
Land disposition income is also recognized in the financial statements as a component of operating income on the line entitled "Amortization of Deferred Income on Dispositions of Land." These amounts represent the recognition of income deferred on land dispositions which occurred in prior years. The amortization of deferred income on land dispositions, net of tax, was $175,744, $161,065 and $121,897 for the years 1997, 1996 and 1995, respectively.
Recognition of deferred income will continue over time periods ranging from three to fifteen years, depending upon the amortization period ordered by the DPUC for each particular disposition. See Note 7 of the Financial Statements.
Other Income
Other income in 1997 of $150,708 is $70,652 greater than the level achieved in 1996 of $80,083. Increased jobbing income and fees associated with the Company's managed system and increased AFUDC account for this favorable increase. Other income in 1996 was $71,335 below the 1995 level due to reduced interest income in conjunction with a note provided from a developer for a land sale which note was repaid in early 1995.
Inflation
Inflation, as measured by the Consumer Price Index, increased 1.7 percent, 3.3 percent and 2.5 percent in 1997, 1996 and 1995, respectively. The regulatory authorities allow the recovery of depreciation through revenues solely on the basis of the historical cost of plant. The replacement cost of utility plant would be significantly higher than the historical cost. While the regulatory authorities give no recognition in the ratemaking process to the current cost of replacing utility plant, the Company believes that, based on past practices, the Utilities will continue to be allowed to earn a return on the increased cost of their net investment when prudent replacement of facilities actually occurs.
FINANCIAL RESOURCES
During 1997, 1996 and 1995, the Company's water operations generated funds available for investment in utility plant and for use in financing activities, including payment of dividends on common stock, of $489,361, $456,951 and $498,949, respectively (see Statement of Cash Flows).
Net cash provided by operating activities increased $32,410 from 1996 to 1997. Increases in operating income and decreases in accounts receivable and accrued revenues are almost offset by decreases in accounts payable and decreased income from land dispositions.
During the three-year period 1995, 1996 and 1997, the Company has generated sufficient funds to meet its day-to-day operational needs, including regular expenses, payment of dividends, and investment in normal plant replacements, such as new services, meters and hydrants. It expects to be able to continue to do so for the foreseeable future. In order to meet day-to-day cash needs that may arise unexpectedly, the Company maintains an unsecured working capital line of credit of up to $600,000 with a local bank. There were no borrowings outstanding under the working capital line of credit as of December 31, 1997.
Completion of the Company's Long Term Capital Improvement Program is dependent upon the Company's ability to raise capital from external sources, including, for the purpose of this analysis, proceeds from the sale of the Company's holdings of excess land. During 1997, 1996 and 1995, the Company's additions to utility plant, net of customer advances, cost $1,281,242, $1,461,152 and $600,278, respectively (see Statement of Cash Flows). These additions were financed primarily from external sources, including proceeds from land sales and increases in debt.
The Company has outstanding $4,606,000 principal amount of Mortgage Bonds, due September 1, 2011, issued under its Mortgage Indenture. The Mortgage Indenture limits the issuing of additional First Mortgage Bonds and the payment of dividends. It does not, however, restrict the issuance of either long term or short term debt which is either unsecured or secured with liens subject to the lien of the Mortgage Indenture. The Company also has a secured, term loan with a principal amount outstanding on December 31, 1997 of $1,225,000 at an interest rate of 8.18%. Principal and interest payments are made monthly and must be paid in full in 2004.
The Company also maintains an additional, secured, line of credit in the principal amount of $1,500,000 maturing on May 1, 1998. The secured line of credit is used to provide funds to continue the Company's construction program; at the Company's option it may be converted to a term loan on May 1, 1998, with the term loan maturing in 2004. (See Note 3 to the Financial Statements). In April 1996, when the revolving loan financing arrangement was approved by the DPUC, the DPUC prohibited the Company from drawing down funds under the revolving line of credit, if at the time of or as a result of the draw down, the amount of the Company's long-term debt (including amounts outstanding under the revolving line of credit) would exceed 67% of the Company's total capitalization. The effect of the limitation, as of December 31, 1997, is to limit the Company to advances outstanding under the line of credit in the aggregate amount of approximately $145,000 for use on budgeted projects until such time as the Company obtains additional equity capital. There was a balance of $1,355,00 outstanding under the revolving line of credit at December 31, 1997 at an interest rate of 8.375%.
The Company's 1998 Capital Budget of $1,300,000 is two-tiered. The first tier consists of typical capital improvements made each year for services, hydrants and meters budgeted for $250,000 in 1998 and is expected to be financed primarily with internally generated funds.
The second tier of the 1998 Capital Budget consists of replacements and betterments which are part of the Company's Long Term Capital Improvement Program and includes $1,050,000 of budgeted plant additions. Plant additions from this part of the 1998 budget may require external financing in addition to the Company's line of credit. Second tier plant additions can be, and portions of it are expected to be, deferred to future years if funds are not available for their construction in 1998.
As of December 31, 1997, the Company has approximately 1,250 acres of excess land available for sale, consisting of land currently classified as Class III, non-watershed land under the statutory classification system for water company lands. The Company believes that by selling these excess lands it can generate sufficient equity capital to support its 10 year capital budget, currently estimated at $10,715,000. Such land dispositions are subject to approval by the DPUC. Proceeds from the sale of land are recorded as revenue at the time of closing and portions of the gains are deferred and amortized over various time periods as stipulated by the DPUC.
On June 27, 1997, the Company sold to the Connecticut Department of Transportation ("DOT"), 3.6 acres of land in Seymour, Connecticut for $175,000. The total gain from sale amounted to $92,811 of which $15,570 was deferred and will be amortized over a 5-year period, as approved by the DPUC on June 4, 1997.
On November 7, 1997, the Company sold to Nemer Associates 10.02 acres of land in Seymour, Connecticut for $300,000. The total gain from the sale amounted to $142,329 of which $23,876 was deferred and will be amortized over a 4-year period, as approved by the DPUC on December 4, 1996.
On March 18, 1997, the Company entered into a Purchase and Sale Agreement with M/1 Homes, LLC ("M/1 Homes"), pursuant to which the Company agreed to sell and M/1 Homes agreed to purchase approximately 245 acres of the Company's unimproved real property in Seymour, Connecticut for $3,950,000. The agreement calls for at least 50% of the property to be dedicated for open space. The purchase and sale was approved by the DPUC on September 17, 1997, stipulating a four-year amortization period for the net gain, based on that 50% open space dedication. The agreement may be terminated by either party if M/1 Homes has not received all the required development approvals by December 31, 1998. There is a provision in the agreement to extend its term through December 31, 2000 to accommodate appeals of required governmental approvals, in which case the purchase price for the property will increase by $20,000 for each month, or portion thereof, after December 31, 1999 until the closing shall occur. The Company cannot predict whether M/1Homes will be able to obtain all of the required approvals.
On January 21, 1998, the Company sold to the City of Derby, Connecticut 145 acres of land in Derby, Connecticut for $1,800,000. The net gain on this sale including the deferred portion approximated $913,000. The DPUC approved this sale on October 22, 1997 stipulating a 3-year amortization period as 75% of this parcel will be dedicated for open space.
On February 18, 1998, the Company executed a purchase and sale agreement with The Trust for Public Land, Inc. ("TPL") for the purchase by TPL of 465 acres of unimproved real property in the Town of Oxford, Connecticut for $3,220,000. TPL is a non-profit California public benefit corporation with offices in New Haven, Connecticut. TPL is not required to purchase the property unless voters of the Town of Oxford approve the Town to acquire such property from TPL. The agreement is also subject to approval by the DPUC. The closing is scheduled to be completed within 45 days after the completion of the above events, but in no event, shall any closing occur after December 31, 1998. The Company has no reason to believe that the DPUC will not approve the agreement. The Company cannot predict whether or not the voters of the Town of Oxford will vote to acquire the property or if TPL will proceed in the event that the voters fail to approve the acquisition.
On March 3, 1998, the Company executed a purchase and saleagreement with the Town of Seymour (the "Town") for the purchase by the Town of 229acres of unimproved real property in the Town for $1,800,000. The salesagreement must be approved by the DPUC and the Company has no reason to believethat the DPUC will not approve the agreement.
The Company maintains a common stock Dividend Reinvestment Plan (the "Plan") pursuant to which shareholders will be entitled to purchase up to 70,000 new shares of the Company's Common Stock by applying to the purchase price of the new shares cash dividends which otherwise would be issued by the Company with respect to its existing common stock. The Plan provides that the purchase price for the new shares will be their fair market value at the time of the purchase. Dividends reinvested during 1996 totaled $51,386 and in 1997, $45,581.
Item 8.
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements Page
Report of Independent Accountants 12
Balance Sheet as of December 31, 1997 and December 31, 1996 13 three years ended December 31, 1997
Statement of Cash Flows for 15 the three years ended December 31, 1997
Notes to Financial Statements 16-28
Financial Statement Schedules are omitted because they are not applicable or the required information is shown in the financial statements or the notes thereto.
To the Shareholders Birmingham Utilities, Inc. Ansonia, Connecticut
We have audited the accompanying balance sheets of Birmingham Utilities, Inc. as of December 31, 1997 and 1996, and the related statements of income and retained earnings and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Birmingham Utilities, Inc. as of December 31, 1997 and 1996 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles.
February 12, 1998 Bridgeport, Connecticut
/s/ Dworken, Hillman, LaMorte & Sterczala [CAPTION]
BALANCE SHEETS
See notes to financial statements [CAPTION] STATEMENTS OF INCOME AND RETAINED EARNINGS
Years Ended December 31, 1997 1996 1995
See notes to financial statements
[CAPTION] STATEMENTS OF CASH FLOWS
Years Ended December 31,
See notes to financial statements
BIRMINGHAM UTILITIES, INC.
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1997, 1996, 1995
1. Accounting policies:
Description of business
Birmingham Utilities, Inc.'s (the "Company") predominant business activity is to provide water service to various cities and towns in Connecticut. The Company's accounting policies conform to generally accepted accounting principles, and the Uniform System of Accounts and ratemaking practices prescribed by the Connecticut Department of Public Utility Control ("DPUC").
Estimates and assumptions
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting period. Actual results could vary from those estimates.
Utility plant
The costs of additions to utility plant and the costs of renewal sand betterments are capitalized. The cost of repairs and maintenance is charged to income. Upon retirement of depreciable utility plant in service, accumulated depreciation is charged with the book cost of the property retired and the cost of removal, and is credited with the salvage value and any other amounts recovered.
Depreciation
For financial statement purposes, the Company provides for depreciation using the straigh-line method. The rates used are intended to distribute the cost of depreciable properties over their estimated service lives. For income tax purposes, the Company provides for depreciation utilizing the straight-line and accelerated methods.
Cash and cash equivalents
Cash and cash equivalents consist of cash in banks and overnight investment accounts in banks.
From time to time, the Company has on deposit at financial institutions cash balances which exceed federal deposit insurance limitations. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.
Allowance for funds used during construction
An allowance for funds used during construction ("AFUDC") is made by applying the last allowed rate of return on rate base granted by the DPUC to construction projects exceeding $10,000 and requiring more than one month to complete. AFUDC represents the net cost, for the period of construction, of borrowed funds used for construction purposes and a reasonable rate on other funds used. AFUDC represents a noncash credit to income. Utility plant under construction is not recognized as part of the Company's rate base for ratemaking purposes until facilities are placed into service. Accordingly, the Company capitalizes AFUDC as a portion of the construction cost of utility plant until it is completed. Capitalized AFUDC is recovered through water service rates over the service lives of the facilities.
Revenue recognition
The Company follows the proactive of recognizing revenue when bills are rendered to customers. In addition, the Company accrues revenue for the estimated amount of water sold but not billed as of the balance sheet date.
Advances for construction / contributions in aid of construction
The Company receives cash advances from developers and customers to finance construction of new water main extensions. These advances are partially refunded over a 10 year contract period to developers, as revenues are earned on the new water mains. Any unrefunded balances are reclassified to "Contributions in aid of Construction" and are no longer refundable.
Fair value of financial instruments
The carrying amount of cash and cash equivalents, trade accounts receivable, and trade accounts payable approximates their fair values due to their short term nature. The carrying amount of note payable and long term debt approximate fair value based on market conditions for debt of similar terms and maturities.
Income taxes
Except for accelerated depreciation since 1981 (federal only) and the tax effect of contributions in aid of construction for the period January 1, 1987 through June 12, 1996, for which deferred income taxes have been provided, the Company's policy is to reflect as income tax expense the amount of tax currently payable. This method, known as the flow through method of accounting, is consistent with the ratemaking policies of the DPUC, and is based on the expectation that tax expense payments in future years will be allowed for ratemaking purposes.
The Company's deferred tax provision was determined under the liability method. Deferred tax assets and liabilities were recognized based on differences between the book and tax bases of assets and liabilities using presently enacted tax rates. The provision for income taxes is the sum of the amount of income tax paid or payable as determined by applying the provisions of enacted tax laws to the taxable income for that year and the net change during the year in the Company's deferred tax assets and liabilities.
In addition, the Company is required to record an additional deferred liability for temporary differences not previously recognized. This additional deferred tax liability totaled $266,635 at December 31, 1997 and $235,438 at December 31, 1996. Management believes that these deferred taxes will be recovered through the ratemaking process. Accordingly, the Company has recorded an offsetting regulatory asset and regulatory liability.
Employee benefits
The Company has a noncontributory defined benefit plan which covers substantially all employees. The benefits are primarily based on years of service and the employee's compensation. Pension expense includes the amortization of a net transition obligation over a twenty three year period. The Company's funding policy is to make annual contributions in an amount that approximates what was allowed for ratemaking purposes consistent with ERISA funding requirements. Contributions are intended to provide not only for benefits attributed to service to date, but also for those expected to be earned in the future.
The Company has a 401(k) Plan. Employees are allowed to contribute a percentage of salary, based on certain parameters. From January 1, 1995 through March 31, 1996 the Company matched 25% of employee contributions up to 6% of total compensation. Effective April 1, 1996, the Company matches 50% of employee contributions up to 6% of total compensation.
In addition, the Company provides certain health care and life insurance benefits for retired employees and their spouses. Generally, the plan provides for Medicare wrap around coverage plus life insurance based on a percentage of each participant's final salary. Substantially all of the Company's employees may become eligible for these benefits if they reach retirement age while working for the Company. The Company's obligation for postretirement benefits expected to be provided to or for an employee must be fully accrued by the date that the employee attains full eligibility for benefits. The Company has elected to recognize the unfunded accumulated postretirement benefit obligation over 20 years. The Company's funding policy is to contribute amounts annually to a benefit trust and pay directly all current retiree premiums.
Compensated absences
Company policy and practice does not provide for any accumulated but unused vacation, sick time or any other compensated absences to be carried over beyond the year end.
Deferred charges
Deferred charges consist primarily of costs incurred to prepare the Company's surplus land for future disposition. Deferred charges are allocated to dispositions of land based on specific identification, if applicable, and on the percentage of acres disposed to total surplus acres.
Land dispositions
The Company is actively seeking to dispose of surplus land not required for utility operations. The net gain of each disposition, after deducting costs, expenses and taxes is allocated between the shareholders and ratepayers by a method approved by the DPUC based on legislation passed by the Connecticut General Assembly. The portion of income applicable to shareholders is recognized in the year of disposition. Income attributable to ratepayers is deferred and amortized in a manner that reflects reduced water revenue resulting from the sharing formula as determined by the DPUC.
Unamortized debt expense
Cost related to the issuance of debt are capitalized and amortized over the term of the related indebtedness. The Company has received permission from the DPUC to amortize the costs associated with debt previously outstanding over the term of the new indebtedness.
2. Utility Plant
3. Note Payable
Notes Payable consist of a ten year $1,500,000 term loan, a $1,500,000 revolving line of credit to fund additional capital improvements, and an unsecured line of credit of $600,000 to be used for working capital purposes. The revolving line of credit and unsecured line of credit become due and payable on May 1, 1998 and with the unsecured portion required to be reduced to a zero balance for 30 consecutive days prior to the maturity date. The outstanding balance of the revolving note may be converted to a term loan at maturity with the same maturity and payment terms as the original term loan. Both the term loan and the revolving line of credit are secured by a lien (subordinate to the lien of the Mortgage Bond Indenture See Note 5) on all of the Company's utility property other than its excess land available for sale.
The term loan portion of the facility has both fixed and variable interest rate options. The applicable interest rate at December 31, 1997 and through July 2000 is 8.18%. Interest is payable monthly. The revolving line of credit also has various interest rate options, including a variable rate at 0.125% above the prime rate and LIBOR rate options, fixed for various short term periods including 30, or 90 days at 1.75% over the applicable LIBOR rate. Interest is payable monthly. Borrowings of $1,355,000 were outstanding on the revolving line of credit at December 31, 1997. On January 22, 1998, these borrowings were paid in full as a result of a Land Sale that took place between the City of Derby and the Company. (See Note 18).
The unsecured line of credit also provides for various interest rate options, including a variable rate at 0.125% above the prime rate, a variable rate at 1.75% above the bank's cost of funds (as provided by the bank), and the LIBOR options also available under the revolving line of credit. Borrowings of $125,000 were outstanding on the unsecured line of credit at December 31, 1997.
All three facilities provide that a default under any of them or under the Mortgage Bond Indenture is considered a default under the others. They also provide that the net proceeds from the sale of any of the Company's excess land must be used to reduce the balance of the revolving line of credit first and then the term loan and require maintenance of certain financial ratios and shareholders' equity of at least $3,000,000. In addition, the DPUC has restricted the Company from borrowing funds under the revolving line of credit if at any time or as a result of the borrowing, the Companyns long term debt (including amounts outstanding under the revolving line of credit) would exceed 67% of the Companyns total capitalization. The DPUC has also required that the Company's ratio of long term debt to total capital not exceed 62% by May 1, 1998.
Minimum annual principal payments due on the term loan follows:
Year ending December 31:
4. Long Term Debt
Pursuant to its Mortgage Bond Indenture, the Company has outstanding, a series of first mortgage bonds in the amount of $4,606,000 due on September 1, 2011. The terms of the indenture provide, among other things, annual sinking fund requirements commencing September 1, 1997, and limitations on (a) payment of cash dividends; and (b) incurrence of additional bonded indebtedness. Under the dividend limitation, approximately $906,700 was available to pay dividends at December 31, 1997 after the quarterly dividend payment made on that date. Interest is payable semi annually on the first day of March and September. The indenture is secured by a lien on all of the Companyns utility property other than excess land available for sale.
The Company began to pay current maturities of long term debt of $94,000 on September 1, 1997, and is required to pay $94,000 each September 1 thereafter, until the bonds are paid in full.
[CAPTION]
Note 5 Accounts Payable and Accrued Liabilities
Note 6 Deferred Income on Dispositions of Land
Deferred income on the prior dispositions of land is amortized to operating income under a method that coordinates the sharing of the net gains from land sales between the Company's shareholders and ratepayers, in accordance with a rate making formula approved by the DPUC. Amortization of deferred income and related taxes to be included in future years operating income for land sales completed as of the balance sheet date follow:
The amortization of deferred income on prior land sales does not include the effect of anticipated future land sales under the Company's ongoing land sales program.
7. Taxes, Other Than Income Taxes
The Connecticut Gross Receipts tax was repealed as of July 1, 1997 and as a result, water service rates were also reduced to reflect that reduction.
8. Income Taxes
The provisions for taxes on income for the years ended December 31, 1997, 1996 and 1995 consist of:
State deferred income taxes relate solely to timing differences in the recognition of income related to land dispositions.
A reconciliation of the income tax expense at the federal statutory tax rate of 34 percent to the effective rate follows:
9. Related Party Transactions
The Company has paid legal and consulting fees to firms whose partners are directors and shareholders of the Company. During the years ended December 31, 1997, 1996 and 1995, fees paid amounted to $123,439, $32,378 and $34,748, respectively.
10. Allowance for Doubtful Accounts
11. Postemployment Benefits
Pension Plan
The plan's funded status and related pension accrual follows:
The weighted average discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligations was 7.0% in 1997 and in 1996. The expected long term rate of return on assets was 8.0% in 1997 and in 1996.
Net periodic pension costs include the following components:
Employer matching contributions to the 401(k) plan were $17,645, $14,372 and $7,731 in 1997, 1996 and 1995, respectively.
Other post retirement benefit
The net periodic postretirement benefit cost includes the following components:
The funded status and the related accrual for postretirement benefits other than pensions were as follows:
The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 7.5% in 1997 and 1996. The expected long term rate of return on assets was 7.5% in 1997 and 1996.
For measurement purposes, a 10.0% annual increase in the per capita cost of covered health care benefits was assumed for 1998. This rate was assumed to decrease gradually to 6% for 2004 and remain at that level thereafter. A 1% increase in health care cost trend rate assumptions would produce an increase in the accumulated postretirement benefit obligation at December 31, 1997 of $71,579 and in increase in the aggregate service and interest cost of the net periodic postretirement benefit cost of $9,718.
The Company has established tax effective funding vehicles for such retirement benefits in the form of a qualified Voluntary Employee Beneficiary Association (VEBA) trust. The Company funded the VEBA trust with tax deductible contributions totaling $45,011, $49,387 and $57,767 in 1997, 1996 and 1995, respectively.
The Company president's employment contract requires accounting for benefit payable in accordance with SFAS 106. The accumulated present value of future benefits attributable to the Companyns president is being recognized over his remaining years of service to retirement. The liability recorded at December 31, 1997 and 1996 was $136,650 and $112,818, respectively. At December 31, 1997, an amount of $86,250 has been included in other assets relating to a regulatory asset for cost which were included in the Company's rate case.
12. Earnings per share Supplemental Information
The following table summarizes the number of common shares used in the calculation of earnings per share:
13. Commitments and Contingent Liabilities
Leases
The Company leases equipment under several noncancelable operating leases expiring through 2001. Total minimum rentals under noncancelable operating leases are as follow:
Year ending December 31:
Lease expense was $11,907 in 1997, $27,903 in 1996 and $35,274 in 1995.
Management agreement
The Company maintains an agreement with the City of Derby (the "City"), pursuant to which agreement, the Company manages the water system owned by the City. The Company is responsible for costs of maintenance and improvements. Amounts collected from customers, net of expenses, are retained by the Company.
Capital budget
Management has budgeted $1,300,000 for capital expenditures in 1998, $250,000 of which is expected to be necessary to meet its service obligations for the coming year. The balance of the capital budget depends on the Company's ability to raise additional capital.
Purchase commitment
The Company has an agreement with South Central Connecticut Regional Water Authority to purchase water. This agreement provides for a minimum purchase of 600 million gallons of water annually. Charges to expense were $691,166, $680,125 and $743,904 for the years 1997, 1996 and 1995, respectively. The purchase price is based on South Central Connecticut Regional Water Authorityns wholesale rate. At December 31, 1997, this rate was $1,150 per million gallons. This agreement expires December 31, 2015 and provides for two ten year extensions at the Company's option.
14. Year 2000 Compliance
The Company is evaluating its computer system for compliance with issues related to the year 2000. Management anticipates that the Company's systems will be fully compliant by the end of 1998. Costs associated with compliance are not expected to have a material impact on the Companyns financial position or results of operations.
15. Rate Matters
On July 18, 1997, the Company filed a rate application with the DPUC for a 14.2 percent water service rate increase designed to provide a $601,382 increase in annual water service revenues and a return on equity of 12.95%. The Company subsequently revised its request to $439,426 or an increase in annual revenues of 10.4 percent. On January 21, 1998, the DPUC granted the Company a 4.1 percent water service rate increase designed to provide a $177,260 annual increase in revenues and a 12.16% return on common equity.
On December 27, 1995, the DPUC granted the Company an increase in annual revenue of $289,333, or 6.9%, effective January 1, 1996.
16. Equity
Stock option plans
The Company has two stock option plans and a non employee director stock option plan and a key employee incentive stock option plan. 40,000 and 35,000 shares, respectively, were authorized under the two plans which provide for options to purchase common stock of the Company at the fair market value at the date of the grant. The options vest over various periods and must be exercised within 10 years from date of grant. The following table summarizes the transactions of the Company's stock option plans for the three years ended December 31, 1997:
On January 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation" (SFAS 123). As permitted by SFAS 123, the Company has chosen to continue to apply Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and, accordingly, no compensation cost has been recognized for stock options in the financial statements. The pro forma effect of these options on net income and earnings per share, utilizing the Black Scholes option pricing model, consistent with the method stipulated by SFAS 123, was not material to the Companyns results of operations in those years.
Dividend reinvestment plan
The Company has a dividend reinvestment plan which provides for the issuance and sale of up to 70,000 shares of the Company's authorized but unissued common stock to its shareholders who elect to reinvest cash dividends on the Company's existing shares. Shares under the plan will be purchased at their fair market value price on the date of the dividends to be invested in the new shares. The following table summarizes the activity in common shares related to the dividend reinvested plan:
17. Supplemental Disclosure of Cash Flow Information and Noncash Financing Activities
Cash paid for interest for the years ended 1997, 1996 and 1995 was $625,729, $574,993 and $608,764, respectively.
Cash paid for income taxes for the years ended 1997, 1996 and 1995 was $283,150, $539,200, and $188,575, respectively.
The Company receives contributions of plant from developers. These contributions are reported in utility plant and in customers' advances for construction. The contributions are deducted from construction expenditures to determine cash expenditures by the Company.
18. Subsequent Event
On January 21, 1998, the Company sold to the City of Derby, Connecticut, 145 acres of land for $1,800,000. The net gain of this sale, including the deferred portion, approximated $913,000.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
(a) The following list identifies all current directors of the Company. No director or executive officer has (i) any family relationship with any other such person or (ii) been involved in any legal proceeding which would require disclosure under Item 401 of Regulation S K. There are no arrangements between any director or officer and any other person pursuant to which he or she was or is to be selected as a director or officer or as a nominee therefor.
Business Experience during the Last Director Name Age Five Years and Other Directorships Since
Stephen P. Ahern 68 V.P., Unicco Security Services; 1994 Principal, Ahern Builders
Edward G. Brickett 68 Retired; Director of Finance, Town 1979 of Southington, CT until June 1995
James E. Cohen 51 Lawyer in Practice in Derby; 1982 Director, Great Country Bank (1987 1993)
Betsy Henley Cohn 45 Chairwoman of the Board of Directors 1981 of the 1981 Company; Chairman and Treasurer, Joseph Cohn & Sons, Inc. (construction sub contractors); Director, United Illuminating Corp.; Director, Aristotle Corp.; Director, Citizens Bank of Connecticut; Director, Society for Savings Bancorp, Inc. (1985 1993)
Alvaro da Silva 52 President, B.I.D., Inc. (land May, development and home building company); 1997 Managing Partner Connecticut Commercial Investors, LLC., (a commercial real estate and investment partnership); Chairman, Shelton Inland Wetlands Commission; Board of Governors Unquowa School
Aldore J. Rivers 64 President of the Company 1986
B. Lance Sauerteig 52 Lawyer in Practice in Westport; 1996 Principal in BLS Strategic Capital, Inc. (financial and inv. advisory company); President, First Spring Corp., (1986 1994) (financial & investment advisory company); Director, OFFITBANK (a New York based private investment management bank)
Kenneth E. Schaible 56 Bank Consultant and Real Estate 1994 Developer; Senior Vice President, Webster Bank (1995 1996); President, Shelton Savings Bank and Shelton Bancorp.,Inc. (1967 1995)
David Silverstone 51 Group Vice President, The Southern 1994 Connecticut Gas Company; Lawyer in Practice in Hartford until March 31, 1998.
The Board of Directors' Audit Committee consisted of Messrs. Brickett, da Silva and Schaible during 1997. It performs the function of recommending the engagement and reviewing the performance of the Companyns independent public accountants. The Audit Committee met once in 1997. The Board of Directors' Personnel and Pension Committee consisted of Ms. Henley Cohn (ex officio) and Messrs. Ahern, Brickett, Sauerteig and Silverstone and performs the function of reviewing Executive Office compensation and proposing the same to the full Board of Directors for action. It also proposes to the full Board overall payroll pool levels and pension plan arrangements for all employees. The Personnel and Pension Committee met five times in 1997. In 1997, seven meetings of the full Board of Directors were held, and all Directors attended at least 75% of the meetings of the full Board and committees on which they served.
(b) Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Companyns equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and the Company.
Based solely on review of copies of such forms furnished to the Company, or written representations that no reconciliation forms were required, the Company believes that during fiscal year ending December 31, 1997, all section 16(a) filing requirements applicable to its officers, directors and greater than ten percent shareholders were complied with.
Item 11.
Item 11. Compensation of Directors and Executive Officers
Directors: The Company's Directors, except for Ms. Henley Cohn and Mr. Rivers, received an annual fee of $3,000 plus $500 for each full Board meeting and $300 for each Committee meeting actually attended in 1997. Ms. Henley Cohn received an annual salary of $52,000 for services in pursuit of land sales during 1997 and as Chairwoman of the Board of Directors.
Executive Officers: The following table sets forth the annual cash compensation for Mr. Rivers, the Company's Chief Executive Officer and only Executive Officer whose total annual salary exceeded $100,000, for each of 1995, 1996 and 1997. The Company has no long term incentive plans.
* Includes the economic benefit of premiums on a split dollar life insurance policy pursuant to which Mr. Rivers is the Insured and the Company is the owner and paid the premiums in 1995, 1996 and 1997.
Employment Agreement and Split Dollar Insurance Plan
The Company entered into an Employment Agreement with Mr. Rivers in 1990 (the "Employment Agreement"), pursuant to which the Company agreed to employ Mr. Rivers as President of the Company. The Employment Agreement was amended in 1992 and 1993.
The Employment agreement, as amended, provides for a so called "Split Dollar Life Insurance" plan for the benefit of both the Company and Mr. Rivers. The plan provides for the Company to maintain insurance on Mr. Rivers' life in an amount not less than $150,000, and to pay to Mr. Rivers' designee $150,000 if he should die on or before the age of 65. The balance of the life insurance proceeds, if any, may be retained by the Company. If Mr. Rivers dies after reaching the age of 65, all death benefits of the policy are retained by the Company. The Company has agreed to make one hundred eighty (180) monthly supplemental pension payments of (a) $1,170 each to Mr. Rivers commencing when he reaches the age of 65 and continuing until the earlier of his death or the end of the 180 month period and (b) if he should die after reaching the age of 65 but before the end of the 180 month period and his spouse survives him, $585 each to her until the earlier of her death or the expiration of the balance of the 180 month period. The Company expects to use the proceeds of the life insurance to reimburse itself for the supplemental pension payments that may be made to Mr. Rivers and his spouse after his 65th birthday.
Item 12.
Item 12. Security Ownership of Management and Certain Beneficial Owners
(a) The following table sets forth certain information with respect to the only persons, to the knowledge of the Company, who own as much as 5% of the Company's stock as of February 28, 1998.
Name and Address Amount and Nature of Percent of Beneficial Owner Beneficial Ownership Of Class
Group consisting of Cohn Realty & Investment, 185,960 Shares (1) 24.25%
Betsy Henley Cohn, John J. Crawford, as custodian for Juri Henley Cohn, and as custodian for Jesse Henley Cohn, Joel Cohn Revocable Trusts 1A 2A and 2B, Betsy Cohn Spray Trust, Harry Berkowitz Revocable Trust, Betsy Cohn Income Trust, 80 Hamilton, Street, New Haven, CT 06511, and Ruth Weisman, 26 Kohary Drive, New Haven, CT 06515.
James E. Cohen, 315 Main Street 39,098 (2) 5.10% Derby, Connecticut 06418
John J. Crawford, 70 Indian Road, Guilford, CT 06437 66,262 Shares (2) 8.74%
(1) Of the 185,960 shares owned by this Group, Betsy Henley Cohn owns options to purchase 10,000 shares of the Company's Common Stock under the Company's 1994 Stock Incentive Plan, which options are exercisable within 60 days of April 13, 1998, the record date for the Company's 1998 Annual Shareholders Meeting (the "Record Date"); Cohn Realty & Investment (a Connecticut general partnership consisting of three investment trusts whose managing agent is Betsy Henley Cohn, whose beneficiaries are certain members of the Cohn Family and whose Trustees are Rhoda Cohn and Stanley Bergman) has beneficial ownership of 36,000 shares; John J. Crawford, as custodian for Juri Henley Cohn, has beneficial ownership of 21,900 shares; John J. Crawford, as custodian for Jesse Henley Cohn, has beneficial ownership of 22,206 shares; Joel Cohn Revocable Trust 1A has beneficial ownership of 26,380 shares; Joel Cohn Revocable Trust 2A has beneficial ownership of 1,500 shares; Joel Cohn Revocable Trust 2B has beneficial ownership of 1,000 shares; Betsy Cohn Spray Trust has beneficial ownership of 32,188 shares; Betsy Cohn Income Trust has beneficial ownership of 10,960 shares; Harry Berkowitz Revocable Trust has beneficial ownership of 16,098 shares; and Ruth Weisman has beneficial ownership of 10,228 shares. Betsy Henley Cohn has either a controlling or a beneficial interest in Cohn Realty & Investment, Betsy Cohn Spray Trust and Betsy Cohn Income Trust. Except for the options owned by Betsy Henley Cohn described above, no member of the Group owns or has the right to acquire, directly or indirectly, any other shares. Unless otherwise indicated, the named beneficial owner of the shares has sole voting and dispositive power with respect thereto. The information set forth in this footnote is derived from filings with the Securities and Exchange Commission made by the Group and from other information available to the Company.
(2) Includes 32,598 shares held by Mr. Cohen as Trustee for the David B. Cohen Family Trust, options to purchase 5,000 shares under the Company's Stock Option Plan for Non Employee Directors exercisable within 60 days of the Record Date, and 1,500 shares held in a brokerage custodial account for Mr. Cohen's benefit.
(3) Includes 5,830 shares held jointly by Mr. Crawford and his wife, 22,206 shares held by Mr. Crawford as custodian for the benefit of Jesse Henley Cohn, and 21,900 shares held by Mr. Crawford as custodian for the benefit of Juri Henley Cohn. Mr. Crawford has sole voting power over the shares held for the benefit of Jesse Henley Cohn and Juri Henley Cohn, but has no family relationship with Jesse Henley Cohn or Juri Henley Cohn. The 22,091 shares held in trust for the benefit of Jesse Henley Cohn and the 21,785 shares held in trust for the benefit of Juri Henley Cohn are also included in the shares set forth in footnote (1), above, as being held by John J. Crawford as custodian for Jesse Henley Cohn and Juri Henley Cohn.
(b) The following table sets forth certain information concerning ownership of the Company's Shares by management:
(1) Includes options to purchase shares of Common Stock exercisable within 60 days of the Record Date, as follows: Mr. Ahern, 4,375; Mr. Brickett, 5,000; Mr. Cohen, 5,000; Ms. Henley Cohn, 10,000; Mr. Rivers, 10,000; Mr. Sauerteig, 825; Mr. Schaible, 4,375; and Mr. Silverstone, 4,375.
(2) For the purpose of calculating the percentage of Common Stock beneficially owned (a) by the individual persons listed in the table, the number of options held by such person is included in both the number of shares beneficially owned by the person and in the total number of shares outstanding in the class with respect to the individual person's percentage calculation, and (b) by the directors and officers as a group, the total number of shares beneficially owned by the group and the total number of shares outstanding includes the 43,950 shares issuable upon the exercise of options exercisable by all persons in the group within 60 days of the Record Date.
(3) Includes 1,700 shares owned by Ahern Family Limited Partnership.
(4) Includes 32,598 shares held by Mr. Cohen, as Trustee for the David B. Cohen Family Trust, and 1,500 shares held in a brokerage custodial account for Mr. Cohen's benefit.
(5) Ms. Henley Cohn is a member of the shareholder group described in the preceding table. The 185,690 shares set forth in this table is the aggregate number of shares held by all of the members of the group. See note (1) to the preceding table for information concerning shares beneficially held by Ms. Henley Cohn.
Item 13.
Item 13. Certain Relationships and Related Transactions
Mr. Cohen is a partner in the law firm of Cohen and Thomas, which has represented the Company on occasions in past years; the Company may continue to employ that firm on occasion in the future.
Mr. Silverstone was, until March 31, 1998, a partner in the law firm of Silverstone & Koontz, which represented the Company on rate matters in 1997.
Mr. Sauerteig is a principal in the law firm of Levett, Rockwood and Sanders, which provided legal services to the Company in past years and may do so in the future.
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8 K
(a) (1) and (2). See Index to Item 8. Financial Statements and Supplementary Data are herein incorporated by reference.
(3) Certificate of Incorporation and By Laws of Birmingham Utilities, Inc. Incorporated herein by reference is Exhibit 3 of Birmingham Utilities, Inc.ns Annual report on Form 10K for the period ended December 31, 1994.
(4) Instruments Defining Rights of Security Holders
(i) Amended and Restated Mortgage Indenture by and between The Ansonia Derby Water Company and The Connecticut National Bank as Trustee, dated as of August 9, 1991. Attached hereto as pp. 39 to 149 .
(ii) Commercial Term and Revolving Loan Agreement by and between Birmingham Utilities, Inc. and Fleet Bank, N.A., dated April 29, 1994. Incorporated herein by reference is Exhibit 10(1) of the Quarterly Report on Form 10 Q/A of Birmingham Utilities, Inc. for the period ended June 30, 1994.
(iii) Birmingham Utilities, Inc. Dividend Reinvestment Plan, adopted by its Board of Directors on September 13, 1994. Incorporated herein by reference is Exhibit 4 (iii) of Birmingham Utilities, Inc.ns Annual Report on Form 10 K for the period ended December 31, 1994.
(10) Material Contracts
(10.1) Agreement to Purchase Water by and between The Ansonia Derby Water Company and South Central Connecticut Regional Water Authority dated January 18, 1984 for the sale of water by the Authority to the Company and subsequent amendment dated December 29, 1988. Incorporated herein by reference is Exhibit (10.1) of the Annual Report on Form 10 K of Birmingham Utilities, Inc. for the period ended December 31, 1993.
(10.2) Agreement to Purchase Water by and between The Ansonia Derby Water Company and South Central Connecticut Regional Water Authority dated November 30, 1984 for the sale by the Authority to the company of water and for the construction of the pipeline and pumping and storage facilities in connection therewith by the Authority at the expense primarily of the Company and Bridgeport Hydraulic Company. Incorporated herein by reference is Exhibit (10.2) of the Annual Report on Form 10 K of Birmingham Utilities, Inc. for the period ended December 31, 1996.
(10.3) Employment Agreement between The Ansonia Derby Water Company and Aldore J. Rivers dated August 5, 1990, as amended by amendments dated July 28, 1992 and April 20, 1993. Incorporated herein by reference is Exhibit (10.6) of the Annual Report on Form 10 K of Birmingham Utilities, Inc. for the period ended December 31, 1993.
(10.4) Birmingham Utilities, Inc. 1994 Stock Incentive Plan adopted by its Board of directors on September 13, 1994. Incorporated herein by reference is Exhibit (10.9) of Birmingham Utilities, Inc.'s Annual Report on Form 10 K for the period ended December 31, 1994.
(10.5) Birmingham Utilities, Inc. Stock Option plan for Non Employee Directors adopted by its Board of directors on September 13, 1994. Incorporated herein by reference is Exhibit (10.10) of Birmingham Utilities, Inc.'s Annual Report on Form 10 K for the period ended December 31, 1994.
(10.6) Purchase and Sale Agreement by and between Birmingham Utilities, Inc. and M/1 Homes, LLC dated March 18, 1997 for the sale by the Company to M/1 Homes of approximately 245 acres of unimproved land in Seymour, Connecticut. Incorporated herein by reference is Exhibit (10.6) of the Annual Report on Form 10 K of Birmingham Utilities, Inc. for the period ended December 31, 1996.
(10.7) Purchase and Sale Agreement by and between Birmingham Utilities, Inc. and the Trust for Public Land (Inc.) ("TPL") dated as of January 27, 1998 for the sale by the Company to TPL of approximately 516 acres of unimproved land located in Oxford and Seymour, Connecticut. Attached hereto as pp. 150 to 166.
(10.8) Purchase and Sale Agreement by and between Birmingham Utilities, Inc. and the town of Seymour (the "Town") dated as of March 3, 1998 for the sale by the Company to the Town of approximately 229 acres of unimproved land located in Seymour, Connecticut. Attached hereto as pp. 167 to 183.
(23) Consent of Dworken, Hillman, LaMorte & Sterczala, P.C. Attached hereto as pp. 184.
(b) Reports on Form 8 K. No reports on Form 8 K were filed by the Registrant during the last quarter of 1997.
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.
(Registrant) BIRMINGHAM UTILITIES, INC.
BY: /s/ Betsy Henley Cohn Betsy Henley Cohn Chairwoman of the Board
BY: /s/ John S. Tomac John S. Tomac Vice President and Treasurer
Date: March 30, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ Stephen P. Ahern /s/ Aldore J. Rivers Stephen P. Ahern, Director Aldore J. Rivers, President Date: March 30, 1998 Date: March 30, 1998
Edward G. Brickett, Director B. Lance Sauerteig, Director Date: March , 1998 Date: March , 1998
/s/ James E. Cohen /s/ Kenneth E. Schaible James E. Cohen, Director Kenneth E. Schaible, Director Date: March 30, 1998 Date: March 30, 1998
/s/ Betsy Henley Cohn /s/ David Silverstone Betsy Henley Cohn, Chairwoman David Silverstone, Director Board of Directors Date: March 31, 1998 Date: March 30, 1998
Alvaro da Silva, Director Date: March , 1998
BIRMINGHAM UTILITIES, INC.
INDEX TO EXHIBITS
Item No. Page No.
4(i) Amended and Restated Mortgage Indenture by and 39-149 between the Ansonia Derby Water Company and The Connecticut National Bank as Trustee, dated as of August 9, 1991
10.7 Purchase and Sale Agreement by and between 150-166 Birmingham Utilities, Inc. and the Trust for Public Land (Inc.) ("TPL") dated as of January 27, 1998 for the sale by the Company to TPL of approximately 516 acres of unimproved land located in Oxford and Seymour, Connecticut.
10.8 Purchase and Sale Agreement by and between 167-183 Birmingham Utilities, Inc. and the Town of Seymour (the "Town") dated as of March 3, 1998 for the sale by the Company to the Town of approximately 229 acres of unimproved land located in Seymour, Connecticut.
23 Consent of Dworken, Hillman, LaMorte & Sterczala, P.C. 184