ITEM 2. PROPERTIES
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The properties of the Utilities consist of land, easements, rights
(including water rights), buildings, reservoirs, standpipes, dams, wells,
supply lines, treatment plants, pumping plants, transmission and distribution
mains and conduits, mains and other facilities and equipment used for the
collection, purification, storage and distribution of water. The Utilities
own their principal properties in fee. The Utilities believe that their
properties are in good operating condition. Water mains are located, for the
most part, in public streets and, in a few instances, are located on land
owned by the Utilities in fee and land occupied under easements, most of which
are perpetual and valid and sufficient for the purpose for which they are
held. Although it is impractical to investigate the validity of the title to
some of the easements held by the Utilities for distribution mains or to clear
title in the cases where such distribution easements titles have been found
defective, any such irregularities or defects in title which may exist do not
materially impair the use of such properties in the businesses of the
Utilities.
BHC owns a 20,000-square-foot headquarters building and a 44,370-square-
foot Operations Center in Bridgeport, a 28,000-square-foot office building in
Monroe, Connecticut and leases an additional 22,000-square-feet of office,
laboratory and garage space in Bridgeport for utility operations.
At December 31, 1997, BHC owned in the aggregate 17 active reservoirs,
59 producing wells and approximately 1,984 miles of water mains, of which
approximately 83 miles have been laid in the past five years. The rights to
locate and maintain water transmission and distribution mains are secured by
charter, easement and permit and are generally perpetual. Water is delivered
to the distribution system from three major reservoir systems, comprised of
several smaller reservoirs and producing wells. BHC owns six filtration
plants for treatment of its reservoir system. These plants have capacities
ranging from .75 to 50 MGD, respectively.
SCWC owns four acres of land in Long Island, New York in four separate
locations that are occupied by an office and pump station, two well sites and
a tank site. SCWC also owns 54 miles of water mains.
Aquarion owns nonutility land totaling approximately 99 acres in Easton
and Litchfield, Connecticut. BHC owns approximately 20,000 acres of real
property, most of which consists of reservoirs and surrounding watershed,
located in Fairfield, New Haven, and Litchfield counties in Connecticut and in
Pound Ridge and Lewisboro New York. All but 1,360 specified acres of such
property are subject to the first lien arising under the BHC Indenture
securing its First Mortgage Bonds.
The DPH regulates Connecticut Company lands according to a three-tiered
classification system. Class I lands cannot be sold, leased or transferred.
The DPH may authorize transfer or change in use of Class II lands only upon a
finding that there will be no adverse impact upon the public water supply and
that any use restrictions required as a condition of transfer are enforceable
against subsequent owners and occupants of the lands. Class III lands, which
are off-watershed, are not currently subject to regulation by the DPH. BHC
has identified approximately 2,700 acres of land it believes are surplus to
its water supply needs, and therefore would qualify as Class III land. All of
this Class III land, which includes approximately 570 acres that have never
been in rate base, is available for sale, although all of it may not be
marketable.
Real property may not be sold or transferred by a water utility without
the prior approval of the DPUC and compliance with other restrictions imposed
by Connecticut law. State laws and regulations govern, among other things, to
whom certain water company lands may be transferred, with preference given to
other water companies, the municipality in which the property is located and
the State of Connecticut, in that order. Additionally, the disposition of the
proceeds of any permissible sale is subject to state law.
The Equitable Sharing Statute, required the DPUC to use an accounting
treatment to "equitably allocate" the economic benefits of the net proceeds
from the sales of Class III land that was previously in the utility's rate
base between the Company's ratepayers and its shareholders. The Equitable
Sharing Statute provides that the economic benefits from the sale of former
rate base, Class III land shall be allocated "substantially in favor" of
shareholders when 25 percent or more of the land sold is to be used for open
space or recreational purposes. Ratepayers do not share in gains from the
sale of land that has never been in rate base.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
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The registrant has nothing to report for this item.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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The registrant has nothing to report for this item.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
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Page 31 of the Company's Annual Report to Shareholders for the year
ended December 31, 1997 is incorporated by reference herein pursuant to Rule
12b-23 of the Securities and Exchange Act of 1934 (the Act) and to Instruction
G(2) to Form 10-K.
Aquarion has declared and paid quarterly dividends on its common stock
without interruption since its organization in 1969 and, prior thereto, BHC
paid dividends annually on its common stock without interruption since 1890.
Dividends, when declared, are normally paid on the 30th day of
January, April, July and October.
The earnings of Aquarion are derived from its investments in its
subsidiaries, particularly BHC. Aquarion's future ability to pay dividends to
holders of its Common Stock is dependent upon the continued payment by BHC of
dividends to Aquarion. BHC's ability to pay dividends will depend upon timely
and adequate rate relief, compliance with restrictions under certain of the
BHC debt instruments and other factors.
Dividends on Aquarion common stock can be paid only from its net profits
and surplus. Aquarion's ability to pay dividends is further restricted by the
terms of Aquarion's 5.95 percent unsecured Senior Note due January 1999
(Aquarion Note). As of December 31, 1997, the applicable restrictions would
have permitted payment of additional dividends on Aquarion's common stock of
up to $40,133,000.
While Aquarion's Board of Directors intends to continue the practice of
declaring cash dividends on a quarterly basis, no assurance can be given as to
future dividends or dividend rates since they will be determined in light of a
number of factors, including earnings, cash flow, and Aquarion and BHC's
financial requirements. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations--Capital Resources and
Liquidity".
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
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See the inside front cover ("Selected Financial Data") and Pages 30 - 31
("Supplemental Financial Data") of the Company's Annual Report to Shareholders
for the year ended December 31, 1997, which is incorporated by reference
herein pursuant to Rule 12b-23 of the Act and Instruction G(2) to Form 10-K.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND ---------------------------------------------------------------
RESULTS OF OPERATIONS
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See the inside front cover ("Selected Financial Data") and Pages 9 - 14
of the Company's Annual Report to Shareholders for the year ended December 31,
1997, which is incorporated by reference herein pursuant to Rule 12b-23 of the
Act and Instruction G(2) to Form 10-K.
ITEM 7.A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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Not applicable.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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The consolidated financial statements, together with the report thereon
of Price Waterhouse LLP, dated January 28, 1998, appearing on Pages 15 - 29,
the inside front cover ("Selected Financial Data") and Pages 30 - 31
("Supplemental Financial Data") of the accompanying 1997 Annual Report to
Shareholders of Aquarion Company are incorporated by reference herein pursuant
to Rule 12b-23 of the Act and Instruction G(2) to Form 10-K.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND --------------------------------------------------------------- FINANCIAL DISCLOSURE
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The registrant has nothing to report for this item.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
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The information as to directors required by Item 10 is set forth at
Pages 1 - 7 of the Company's Definitive Proxy Statement, dated March 25, 1998
relating to the proposed Annual Meeting of Shareholders to be held on April
29, 1998, filed with the Commission pursuant to Regulation 14a under the Act,
and is incorporated by reference herein pursuant to Rule 12b-23 of the Act and
Instruction G(3) to Form 10-K.
Executive Officers
The executive officers of the registrant are listed below. These
officers were elected to the offices indicated on April 22, 1997, except as
otherwise noted, for a term expiring with the 1998 annual meeting of
directors. Except as indicated, all have been with registrant and its
predecessors in an executive capacity for more than five years. There are no
family relationships among members of the executive officers. There were no
arrangements or undertakings between any of the officers listed below and any
other person pursuant to which he or she was selected as an officer.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
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Pages 8 - 14 of the Company's Definitive Proxy Statement, dated March
25, 1998, relating to the proposed Annual Meeting of Shareholders to be held
on April 29, 1998, filed with the Commission pursuant to Regulation 14a under
the Act are incorporated by reference herein pursuant to Rule 12b-23 of the
Act and Instruction G(3) to Form 10-K.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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Pages 4 - 5 of the Company's Definitive Proxy Statement, dated March 25,
1998, relating to the proposed Annual Meeting of Shareholders to be held on
April 29, 1998, filed with the Commission pursuant to Regulation 14a under the
Act, are incorporated by reference herein pursuant to Rule 12b-23 of the Act
and Instruction G(3) to Form 10-K.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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The registrant has nothing to report for this item.
PART IV.
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
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a) The following documents are filed as part of this report: