SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-493
CONSUMERS WATER COMPANY
(Exact name of registrant as specified in its Charter)
Maine 01-0049450
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification number)
Three Canal Plaza, Portland, ME 04101
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (207) 773-6438
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
such filing requirements for the past 90 days. YES X NO
The number of common shares of Consumers Water Company outstanding as of
November 6, 1998 was 9,019,705.
Part I Item I
Consumers Water Company and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
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September 30, December 31,
1998 1997
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(Unaudited)
<S> <C> <C>
Assets
Property, Plant and Equipment, at cost:
Plant in service $473,032 $499,087
Less - Accumulated depreciation 96,462 92,787
-------------------------
376,570 406,300
-------------------------
Construction work in progress 20,347 11,843
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Net property, plant and equipment 396,917 418,143
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Assets of Discontinued Operations, Net 1,318 2,679
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Investments, at cost 1,545 1,520
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Current Assets:
Cash and cash equivalents 5,806 2,694
Accounts receivable, net of reserves of $1,019 in 1998 and $924 in 1997 9,267 8,695
Unbilled revenue 5,394 5,077
Inventories 1,891 2,068
Prepayments and other 2,609 6,585
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Total current assets 24,967 25,119
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Other Assets:
Funds restricted for construction activity 858 1,079
Deferred charges and other assets 16,509 17,159
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17,367 18,238
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$442,114 $465,699
=========================================================================================================
Shareholders' Investment and Liabilities
Capitalization:
Common Stock, $1 par value
Authorized: 15,000,000 shares
Issued: 9,010,305 shares in 1998 and
8,967,894 in 1997 $ 9,010 $ 8,968
Amounts in excess of par value 80,289 79,555
Reinvested Earnings 25,888 20,134
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115,187 108,657
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Preferred shareholders' investment 1,044 1,044
Minority interest 2,387 2,370
Long-term debt 152,839 171,771
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Total capitalization 271,457 283,842
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Contributions in Aid of Construction 73,479 77,297
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Current Liabilities:
Notes payable 14,620 18,830
Sinking fund requirements and current maturities 524 836
Accounts payable 3,331 5,177
Accrued taxes 5,808 9,945
Accrued interest 2,624 3,919
Dividends payable 2,803 2,754
Accrued expenses 10,964 10,310
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Total current liabilities 40,674 51,771
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Commitments and Contingencies
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Deferred Credits:
Customers' advances for construction 22,250 22,049
Deferred income taxes 30,253 26,246
Unamortized investment tax credits 4,001 4,494
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56,504 52,789
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$442,114 $465,699
=========================================================================================================
Book Value Per Share of Common Stock $ 12.78 $ 12.12
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Consumers Water Company and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
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For the nine months ended September 30, 1998 1997
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<S> <C> <C>
Operating Revenue $ 74,452 $ 74,375
Costs and Expenses:
Operations and maintenance 30,913 32,076
Depreciation 9,147 8,525
Taxes other than income 9,096 9,461
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Operating Expenses 49,156 50,062
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Operating Income 25,296 24,313
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Other Income and (Expense):
Interest expense (10,200) (11,409)
Construction interest capitalized 327 254
Preferred dividends and minority interest of subsidiaries (116) (121)
Gains on sales of properties 6,680 587
Other 1,011 809
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(2,298) (9,880)
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Earnings From Continuing Operations Before Income
Taxes 22,998 14,433
Income Taxes 8,906 5,170
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Total Income from Continuing Operations 14,092 9,263
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Loss From Discontinued Operations:
Before Discontinuance, Net of Taxes 0 (387)
Provision for Loss on Disposal of Discontinued Operations, Net of Taxes 0 (1,500)
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Total from Discontinued Operations 0 (1,887)
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Net Income $ 14,092 $ 7,376
=========================================================================================================
Weighted Average Shares Outstanding 9,001 8,830
Basic Earnings per Common Share:
Continuing Operations $1.56 $1.04
=========================================================================================================
Discontinued Operations -
Before Discontinuance $0.00 ($0.04)
Loss from Disposal of Discontinued Operations $0.00 ($0.17)
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Total Discontinued Operations $0.00 ($0.21)
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Total Basic Earnings per Common Share $1.56 $0.83
=========================================================================================================
Diluted Earnings per Common Share:
Continuing Operations $1.56 $1.04
=========================================================================================================
Discontinued Operations -
Before Discontinuance $0.00 ($0.04)
Loss from Disposal of Discontinued Operations $0.00 ($0.17)
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Total Discontinued Operations $0.00 ($0.21)
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Total Diluted Earnings per Common Share $1.56 $0.83
=========================================================================================================
Dividends Declared Per Common Share $0.92 $0.905
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</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Consumers Water Company and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
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For the three months ended September 30, 1998 1997
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<S> <C> <C>
Operating Revenue $26,890 $27,226
Costs and Expenses:
Operations and maintenance 10,350 10,889
Depreciation 3,111 2,846
Taxes other than income 2,920 3,164
- --------------------------------------------------------------------------------------------------------
Operating Expenses 16,381 16,899
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Operating Income 10,509 10,327
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Other Income and (Expense):
Interest expense (3,213) (3,845)
Construction interest capitalized 177 63
Preferred dividends and minority interest of subsidiaries (51) (51)
Gains on sales of properties 0 571
Other 332 296
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(2,755) (2,966)
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Earnings From Continuing Operations Before Income Taxes 7,754 7,361
Income Taxes 2,963 2,618
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Net Income $ 4,791 $ 4,743
========================================================================================================
Weighted Average Shares Outstanding 9,010 8,888
Earnings per Common Share:
Basic Earnings per Common Share $0.53 $0.53
========================================================================================================
Diluted Earnings per Common Share $0.53 $0.53
========================================================================================================
Dividends Declared Per Common Share $0.31 $0.305
- --------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Consumers Water Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
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For the nine months ended September 30, 1998 1997
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<S> <C> <C>
Operating activities:
Net income $ 14,092 $ 7,376
---------------------
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 10,278 10,031
Deferred income taxes and investment tax credits 3,514 740
Gains on sales of properties (6,680) (587)
Changes in assets and liabilities:
Increase in accounts receivable and unbilled revenue (1,570) (682)
(Increase) Decrease in inventories 57 (140)
Decrease in prepaid expenses 3,946 4,556
Decrease in accounts payable and accrued expenses (5,603) (3,866)
Change in other assets, net of change in other liabilities of continuing operations (1,291) (274)
Change in assets, net of change in liabilities of discontinued operations 1,361 (152)
Loss on disposal of discontinued operations 0 1,500
---------------------
Total adjustments 4,012 11,126
---------------------
Net cash provided by operating activities 18,104 18,502
---------------------
Investing activities:
Capital expenditures (19,300) (16,170)
Decrease in funds restricted for construction activity 221 1,256
Decrease in construction accounts payable (842) (2,245)
Proceeds from sales of properties 33,728 73
---------------------
Net cash used in investing activities 13,807 (17,086)
---------------------
Financing activities:
Net borrowings (repayment) of short-term debt (4,210) 651
Proceeds from issuance of long-term debt 1,875 1,059
Repayment of long-term debt (21,119) (788)
Proceeds from issuance of stock 776 3,145
Advances and contributions in aid of construction 2,435 4,108
Repayments of advances (267) (877)
Taxes paid by developers on advances and contributions in aid of construction 0 (4)
Cash dividends paid (8,289) (7,951)
---------------------
Net cash provided by financing activities (28,799) (657)
---------------------
Net increase in cash and cash equivalents 3,112 759
Cash and cash equivalents at beginning of year 2,694 1,775
---------------------
Cash and cash equivalents at end of period $ 5,806 $ 2,534
=====================
Supplemental disclosures of cash flow information from continuing operations:
Cash paid during the period for:
Interest (net of amounts capitalized) $10,931 $ 10,677
Income taxes $ 2,679 $ 2,170
Non-cash investing and financing activities for the period:
Property advanced or contributed $ 1,481 $ 968
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
CONSUMERS WATER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
September 30, 1998
PART I ITEM 1
-------------
A. PREPARATION OF FINANCIAL STATEMENTS
The condensed financial statements included herein have been prepared by the
registrant, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the registrant believes
that the disclosures which are made are adequate to make the information
presented not misleading, particularly when read in conjunction with the
financial statements and notes thereto included in the registrants' latest
annual report on Form 10-K. In management's opinion, the attached interim
financial statements reflect all adjustments which are necessary for a fair
statement of the results for the periods presented. All adjustments made
were of a normal and recurring nature except for the discontinued operations
described below.
B. EARNINGS PER SHARE
Earnings per common share are based on the weighted average number of shares
and common share equivalents actually outstanding during the period. The
effect of employee stock options which are included as common share
equivalents is not material.
C. MERGER AGREEMENT
On June 27, 1998, the Company entered into a definitive merger agreement
which was updated on August 5, 1998 by the restated and amended agreement
and plan to merge with Philadelphia Suburban Corporation (PSC) for
approximately $270 million in common stock. The merger is subject to
customary closing conditions, including approval of the shareholders of both
companies and the various state regulatory agencies. The special meetings
of the shareholders of both companies to vote on the merger proposal are
scheduled for November 16, 1998. The Company continues to actively pursue
the regulatory approvals necessary to close the transaction as early as
possible. Because of the state regulatory approval processes, it appears
unlikely that all five states will grant approval by the end of the year.
Under the terms of the stock merger agreement, Consumers' common
shareholders will receive 1.459 shares of PSC's common stock for each
Consumers common share subject to adjustment in certain circumstances
(a collar) and Consumers' preferred shareholders will receive 5.756 shares
of PSC's common stock for each Consumers' preferred share subject to a collar.
Consumers would become a wholly-owned subsidiary of PSC. The merger will be
accounted for as a pooling-of-interests under Accounting Principles Board
Opinion No. 16.
D. DISCONTINUED OPERATIONS
On April 29, 1997, the Company announced its intention to dispose of its
technical services company, Consumers Applied Technologies, Inc (CAT). The
Company has been unsuccessful in selling CAT as an on-going business and is
proceeding with its liquidation. Estimated loss on the disposal of $1.5
million, net of tax benefits of $773,000 was recorded in the first quarter
of 1997. In the fourth quarter an additional reserve of $850,000 net of tax
benefits of $438,000 was recorded to reflect additional expenses associated
with the completion of contracts. CAT's operations were substantially
shutdown during 1997. CAT continues to be responsible for certain long-term
contracts, however. The operating results of CAT prior to the date of
discontinuance are shown under Discontinued Operations on the accompanying
Consolidated Statements of Income and all financial statements of prior
periods have been restated. Total sales for the discontinued operations for
the first nine months of 1998 and 1997 were $338,000 and $4,039,000,
respectively. Net assets of the discontinued operations approximate
realizable value. A summary of the net assets of discontinued operations
follows:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
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<S> <C> <C>
Cash $ 76,000 $ 332,000
Receivables, net 1,033,000 1,815,000
Income taxes receivable 730,000 2,443,000
Other current assets 1,000 16,000
----------------------------
Total assets $1,840,000 $4,606,000
----------------------------
Accounts payable $ 23,000 $ 17,000
Accrued expenses 406,000 1,816,000
Other 93,000 94,000
----------------------------
Total liabilities $ 522,000 $1,927,000
----------------------------
Net assets of discontinued operations $1,318,000 $2,679,000
============================
</TABLE>
E. SALE OF CONSUMERS NEW HAMPSHIRE WATER COMPANY
On April 9, 1998, Consumers New Hampshire Water Company sold its utility
assets to the Town of Hudson under the New Hampshire condemnation statute
for $33.7 million net of certain closing costs. The sale generated a gain
of $3.9 million, net of taxes, or $0.43 per share which was recorded in the
second quarter of 1998. Consumers New Hampshire had $6.5 million in sales,
$744,000 in net income, and 8,229 customers in 1997.
PART I ITEM 2
-------------
Management's Discussion and Analysis of Financial Conditions and Results of
Operations.
This Report contains certain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995, which are based on
management's current views and assumptions regarding future events and
financial performance. The Report also contains statements as to the
assumptions of management in making those statements and the risk factors
that could cause actual results to differ from those contained in the forward
looking statements.
The following discussion and analysis sets forth certain factors relative to
the Company's financial condition at September 30, 1998 and the results of
its operations for the nine months and the three months then ended as
compared to the same period of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
CONSTRUCTION PROGRAM
Capital construction expenditures totaled $ 17.1 million, net of
contributions and advances, in the first nine months of 1998, substantially
all of which relates to the Company's utility subsidiaries. Projects
included $ 6.3 million spent on the major plant replacement described below,
and many smaller projects around the Company.
The Company expects capital expenditures for 1998 through 2000 to be $72
million, net of contributions and advances. The capital construction budget
is down from its peak of $103 million for the 1995-1997 planning period as a
result of the completion of many of the improvements required by the Safe
Drinking Water Act (SDWA), the Clean Water Act (CWA), and other regulations.
With the reduced capital spending due to regulatory requirements, the
Company has increased its focus on replacing aging infrastructure.
The Company is engaged in a project that will replace a major plant at
Consumers Pennsylvania Water Company - Shenango Valley Division (Shenango).
The cost of this project is estimated at $32 million when it is completed in
2000. This will replace one of the Company's oldest water treatment plants.
Current and future water quality regulations along with future demand
projections require that the existing plant be retired and replaced with a
new facility. The design is complete and construction has commenced. The
Company expects to finance this project with tax exempt debt and equity.
Several of the Company's water utility subsidiaries have filed or plan to
file rate cases in their respective jurisdictions for recovery of and return
on capital used to fund their capital expenditure programs. Costs which
have been prudently incurred in the judgement of the appropriate public
utility commission have been, and are expected to continue to be, recognized
in rate setting. The Company has had large rate increases in prior years
which lead to increased scrutiny of rate filings. With the declining
capital construction budgets the Company is seeing an improvement in its
ability to obtain timely rate relief.
FINANCING AND CAPITALIZATION
Water utilities now require higher equity ratios than in the past to
maintain favorable debt ratings due to the recognition by Standard & Poor's
rating system of the additional risk of the SDWA requirements and the
uncertainty of future regulatory treatment of the cost of these
requirements. Due to this need for higher equity ratios and the size of the
Company's capital spending program, the Company had expected to return to
the equity market. However, the sale of Consumers New Hampshire generated
over $19 million in cash which was used to pay down long-term debt. This is
expected to delay the Company's need to return to the equity market for a
few years. The Company's subsidiaries anticipate continuing to fund their
immediate cash flow needs with short-term lines of credit until a
subsidiary's short-term debt level is high enough to warrant placement of
long-term debt, generally, in the $4-6 million range. The Company's
subsidiaries had unused lines of credit available at September 30, 1998 of
$74.7 million. In addition, the Company has three revolving credit
agreements with a total availability of $35.0 million. Two of these
agreements are committed until mid-1999 and one for $15 million is committed
until mid-2000. Borrowings under these agreements were used primarily to
provide equity infusions to the subsidiaries. In addition to short-term
debt, the Company's water utility subsidiaries plan to continue to use tax-
exempt, long-term debt financing in appropriate situations.
Retained earnings increased by $5,754,000 in the first nine months of 1998.
This reflects the gain from the sale of Consumers New Hampshire of $3.9
million, the seasonality of the Company's business and the continuation of
its dividend policy.
ACQUISITIONS AND DISPOSITIONS
Over the past five years, the Company has acquired six water systems.
Management anticipates continuing the acquisition policy of recent years.
The Company has sold six divisions with customers totaling approximately
23,000 under the threat of eminent domain since 1991. The gain on these
sales totaled over $10.9 million. This includes the April 9, 1998 sale of
Consumers New Hampshire Water Company's utility assets to the Town of Hudson
under the New Hampshire condemnation statute for $33.7 million net of
certain closing costs. The sale generated a gain of $3.9 million, net of
taxes, or $0.43 per share, and was recorded in the second quarter of 1998.
Consumers New Hampshire had $6.5 million in sales, $744,000 in net income
and 8,229 customers in 1997. It is expected that interest savings
associated with paying off the revolving credit agreements will help offset
the loss of New Hampshire's normal contribution to income. The Company
continues to work with the local communities in its service areas in an
effort to prevent future eminent domain proceedings.
OTHER
On June 27, 1998, the Company entered into a definitive merger agreement
which was updated on August 5, 1998 by the restated and amended agreement
and plan to merge with Philadelphia Suburban Corporation (PSC) for
approximately $270 million in common stock. The merger is subject to
customary closing conditions, including approval of the shareholders of both
companies and the various state regulatory agencies. The special meetings
of the shareholders of both companies to vote on the merger proposal are
scheduled for November 16, 1998. The Company continues to actively pursue
the regulatory approvals necessary to close the transaction as early as
possible. Because of the state regulatory approval processes, it appears
unlikely that all five states will grant approval by the end of the year.
Under the terms of the stock merger agreement, Consumers' common
shareholders will receive 1.459 shares of PSC's common stock for each
Consumers common share subject to adjustment in certain circumstances
(a collar) and Consumers' preferred shareholders will receive 5.756 shares
of PSC's common stock for each Consumers' preferred share subject to a collar.
Consumers would become a wholly-owned subsidiary of PSC. The merger will be
accounted for as a pooling-of-interests under Accounting Principles Board
Opinion No. 16.
In 1985, the Company's subsidiary, Consumers Maine Water Company, started
construction of a transmission main to Fish and Hobbs ponds, which are
located in Hope, Maine, to increase the available water supply of its Camden
and Rockland Division. Due to local opposition related to the uncertainty
about the environmental impact of withdrawing water from these ponds, the
project was delayed. In 1989, final legislation was passed that imposed a
moratorium on the withdrawal of water from these ponds. The Maine Public
Utilities Commission (MPUC) ordered Consumers Maine to defer the costs of
the project, the legal costs of defending its water rights and carrying
costs until its first rate case after June 1, 1997. Consumers Maine
currently has approximately $600,000 on its balance sheet related to this
project. Currently it is anticipated that a rate case filing seeking
recovery of these costs will not occur until 2000.
Following an audit of the Company, the Maine State Tax Assessor assessed
additional state corporate income taxes against the Company for the period
1988 to 1993 due to the application of the unitary tax method. The amount
of the additional taxes, penalties and interest assessed was $586,207.11 as
of February 15, 1998. As a result of the denial of the Company's request
for reconsideration of the additional assessment, the Company filed a
petition for Review and DeNovo Determination of the assessment with the
Cumberland County Superior Court of the State of Maine on March 5, 1998. In
its petition, the Company seeks a final determination that a portion of the
assessment is barred by the statute of limitations and that the entire
assessment is improper on several grounds, including that it represents an
inappropriate application of the state's unitary tax method for the years
subject to the audit. As part of its normal business practice, the Company
maintains a reserve for possible additional tax assessments from taxing
authorities. The Company expects this reserve to be adequate to cover this
assessment. Therefore the Company does not expect that the amount of taxes,
interest and penalties finally determined to be due will have a material
impact on its financial position, results of operations or cash flows.
The Company is actively reviewing the computer programs used in its business
to determine the risk that those systems might fail due to the so-called
"millennium bug" which causes computer systems to fail or malfunction as a
result of their inability to distinguish dates after December 31, 1999 using
a two digit entry field. The objective of this review is to ensure that the
Company's critical systems and processes that impact the Company's ability
to deliver water to its customers will not experience significant
interruptions that would interfere with such water service or result in a
material adverse impact to the Company's operations, liquidity or financial
condition. The Company's computer systems can be divided into three
categories: the Financial Information System, the Customer Information
System, and other systems which include non-informational systems. The
Company is currently in the process of replacing the Financial Information
System due primarily to the age of the system. This system is scheduled to
be completed by mid 1999. The new system is expected to cost approximately
$2.5 million in total. Most of the costs of the new system pertain to
hardware or software and therefore will be capitalized. Training, data
conversion, and other costs will be expensed. It is expected that efficiency
gains from the new system will offset many of these costs. As of September
30, 1998 replacement of the Financial Information System is proceeding on
schedule and actual costs incurred to date are on budget. The Company has
completed and tested updates to the Customer Information System. This work
was completed with in-house resources and therefore added no significant
incremental costs. The Company continues to evaluate its other systems such
as process control services, HVAC, telephone systems and vendor compliance
based on priorization of the risks they pose to the overall objectives.
Therefore different systems and processes are in different phases of
evaluation. As of September 30, 1998 the inventory and assessment phases
have been completed on schedule. Based on the assessment completed to date,
all such systems, while important to the normal operation of the utilities,
are not critical in that the operations can be managed with manual overrides
and other workarounds. The testing and contingency planning phases, scheduled
for completion by mid-1999, are ongoing. The remediation phase is scheduled
to be completed by mid-1999. This work is being completed primarily by
in-house resources with assistance from an outside consultant. The costs have
not been determined, at this time, but are expected to be estimated by the end
of 1998. The Company does not expect the cost of updating these systems to be
material and does expect to fund these costs with internally generated funds.
These expectations will be updated as contingency planning is completed. The
Company's relationship with third parties are an important component of this
review, especially those with which it has a material relationship. Such third
parties include vendors, data transfer systems, and other software vendors and
customers. Third party vendors or critical software systems have been
contacted regarding the compliance status of their software and either the
vendors have represented that their software packages are compliant or the
software is being remedied as part of the Company's plan. The key vendors for
the water utilities are the power companies which supply the treatment plants
and the distribtuion systems. The Company's electric suppliers have indicated
they intend to be compliant prior to the end of 1999. The Company has sources
of alternate power at some locations, and is investigating the feasibility
and costs of providing such alternate power at additional locations by
mid-1999. A material non-compliance could result in the interruption of, or
curtailment of, normal business activities and operations. The Company
believes that any such material non-compliance would be the result of third
party non-compliance and not from non-compliance by the Company due to the
availability of manual overrides and other methods of working around
computer system failures. The Company also believes that, with the
completion of this review, the possibility of significant interruptions of
normal operations should be reduced. However, in the event of a severe
service interruption, the potential for a materially adverse consequence
does exist that may not be fully eliminated. Contingency plans may be
developed for certain other critical systems, if such systems would have a
significant effect on the Company's ability to delivery water to its
customers. At this time, the Company does not have a contingency plan in
place but is in the process of completing contingency plans for all
locations and expects to have them in place by mid-1999. The Company
believes that its plan minimizes the risk of failure in its computer systems
due to the millennium bug. The Company will continue to actively monitor
these systems in the Year 2000.
As of September 30, 1998, Consumers Services Company, operating as a
division of the Company, began providing certain financial support
services to the Company's water utilities. The remaining financial support
services are scheduled to be provided by the division by mid-1999. Other
support services such as engineering and human resources may be added in the
future.
RESULTS OF OPERATIONS
First Nine Months 1998, Compared to First Nine Months 1997
REVENUE
Revenues increased $77,000 or .1% for the nine months ended September 30,
1998 compared to the same period in 1997 due primarily to rate increases of
$2,753,000 and increased consumption in the amount of $762,000 due to dry
conditions as compared to the prior year. These increases were offset, in
part, by the lost revenues of $3,438,000 due to the sale of the utility
assets of Consumers New Hampshire Water Company on April 9, 1998. Four rate
cases have been settled in 1998 for additional annual revenues of
$3,171,000. Currently, one additional rate case has been filed with an
annual revenue request totaling $352,000.
OPERATING EXPENSE
Operating expenses decreased $906,000 or 1.8% for the nine months ended
September 30, 1998 compared to the same period in 1997. The impact on
expenses from the sale of Consumers New Hampshire was a $2,150,000 decrease,
offset by expense increases in the rest of the Company. Depreciation in the
rest of the Company increased $893,000. Increased depreciation on the old
Shenango Plant accounted for $509,000 of the increase. Shenango is in the
process of building a new treatment plant. In their last rate case they
were allowed these accelerated depreciation rates in order to recover the
cost of the old plant. The remainder of the increase is due to higher plant
balances throughout the Company. Other operating expenses increased by just
$351,000, or .8%, due to the Company's cost control efforts. The Company
began an aggressive cost control program in the second quarter of 1997 which
continues to date.
INTEREST EXPENSE
Interest expense net of interest capitalized decreased $1,283,000 or 11.5%
for the nine months ended September 30, 1998 compared to the same period in
1997 due to debt which was paid down with the proceeds from the sale of
Consumers New Hampshire.
Third Quarter 1998, Compared to Third Quarter 1997
REVENUE
Revenues decreased $336,000 for the three months ended September 30, 1998
compared to the same period in 1997 due primarily to lost revenues due to
the sale of Consumers New Hampshire on April 9, 1998 of $1,760,000 partially
offset by the impact of rate increases of $1,290,000 and increased
consumption.
OPERATING EXPENSE
Operating expenses decreased $518,000 or 3.1% for the three months ended
September 30, 1998 compared to the same period in 1997. The impact on
expenses from the sale of Consumers New Hampshire was a $1,024,000 decrease.
This was partly offset by expense increases in the rest of the Company.
Depreciation in the rest of the Company increased $406,000. Increased
depreciation on the old Shenango Plant accounted for $168,000 of the
increase. Shenango is in the process of building a new treatment plant. In
its last rate case Shenango was allowed to institute accelerated
depreciation rates in order to recover the cost of the old plant. The
remainder of the increase is due to higher plant balances throughout the
Company. Other operating expenses increased by $100,000 due to continued
efforts by the Company on aggressive cost control programs.
INTEREST EXPENSE
Interest expense net of interest capitalized decreased $746,000 or 19.7% for
the three months ended September 30, 1998 compared to the same period in
1997 due to debt which was paid down with the proceeds from the sale of
Consumers New Hampshire.
PART II
-------
Item 4. Submission of Matters to Vote of Security Holders
(a) None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Agreement for Purchase and Sale of assets dated October 24, 1997
by and between Consumers New Hampshire Water Company and the Town of Hudson
is incorporated by reference to Exhibit 2.1 to Consumers Water Company's
Quarterly Report on Form 10-Q for the Quarter ended September 30, 1997.
2.2 Amended and Restated Agreement and Plan of Merger as of August
5, 1998 by and among Philadelphia Suburban Corporation, Consumers
Acquisition Company and Consumers Water Company is incorporated by reference
to Exhibit 2.2 to Consumers Water Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998.
10.10 Consulting Agreement between Consumers Water Company and Peter
L. Haynes is submitted herewith as Exhibit 10.10.
10.11 Consulting Agreement between Consumers Water Company and John
Isacke is submitted herewith as Exhibit 10.11.
10.12 Consulting Agreement between Consumers Water Company and Paul D.
Schumann is submitted herewith as Exhibit 10.12.
10.13 Consulting Agreement between Consumers Water Company and Paul F.
Noran is submitted herewith as Exhibit 10.13.
10.14 Consulting Agreement between Consumers Water Company and Brian
Mullany is submitted herewith as Exhibit 10.14.
27. Financial Data Schedule is submitted herewith as Exhibit 27.
(b) Reports on Form 8-K
No reports have been filed on Form 8-K for the quarter ended September
30, 1998.
SIGNATURES
Pursuant to the requirements 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.
CONSUMERS WATER COMPANY
(Registrant)
11/13/98 /s/ Peter L. Haynes
- --------------- ------------------------------------
Date Peter L. Haynes
Chief Executive Officer
11/13/98 /s/ John F. Isacke
- --------------- ------------------------------------
Date John F. Isacke
Chief Financial Officer
Exhibit Index
2.1 Agreement for Purchase and Sale of assets dated October 24, 1997
by and between Consumers New Hampshire Water Company and the Town of Hudson
is incorporated by reference to Exhibit 2.1 to Consumers Water Company's
Quarterly Report on Form 10-Q for the Quarter ended September 30, 1997.
2.2 Amended and Restated Agreement and Plan of Merger as of August
5, 1998 by and among Philadelphia Suburban Corporation, Consumers
Acquisition Company and Consumers Water Company is incorporated by reference
to Exhibit 2.2 to Consumers Water Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998.
10.10 Consulting Agreement between Consumers Water Company and Peter
L. Haynes is submitted herewith as Exhibit 10.10.
10.11 Consulting Agreement between Consumers Water Company and John
Isacke is submitted herewith as Exhibit 10.11.
10.12 Consulting Agreement between Consumers Water Company and Paul D.
Schumann is submitted herewith as Exhibit 10.12.
10.13 Consulting Agreement between Consumers Water Company and Paul F.
Noran is submitted herewith as Exhibit 10.13.
10.14 Consulting Agreement between Consumers Water Company and Brian
Mullany is submitted herewith as Exhibit 10.14.
27. Financial Data Schedule is submitted herewith as Exhibit 27.
Exhibit 10.10
CONSULTING AGREEMENT
Consulting Agreement (the "Agreement") executed as of this 11th day of
August, 1998, by and between Consumers Water Company, a Maine corporation
with a place of business at Three Canal Plaza, Portland, Maine 04112 (the
"Corporation") and Peter L. Haynes, an individual (the "Consultant").
W I T N E S S E T H :
WHEREAS, Consultant is employed as a senior officer of the Corporation;
and
WHEREAS, Consultant has over the years of employment acquired
knowledge and skills that will be useful to the Corporation in connection
with the transition process involved in the merger of the Corporation into a
subsidiary of Philadelphia Suburban Corporation (the "Merger"); and
WHEREAS, Consultant will cease to be employed by the Corporation
following the Merger, but desires to aid and assist the Corporation as a
consultant by providing certain advisory and consulting services to the
Corporation following the Merger, and the Corporation desires so to engage
the Consultant;
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises herein set forth, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as follows:
1. Engagement of Consultant. The Corporation does hereby appoint and
engage the Consultant as a consultant and advisor with respect to the
matters specified in Section 2 hereof for the compensation and term
hereinafter set forth, and the Consultant hereby accepts such appointment
and engagement by the Corporation.
2. Activities of Consultant. (a) During the term of this Agreement
specified in Section 4 hereof (the "Term") and subject further to the terms
and provisions hereof , the Consultant will make himself available to the
Corporation as a consultant to assist in the administration of the affairs
of the Corporation within the area of activities of the Consultant during
the Consultant's period of employment by the Corporation, and to provide
such other services for the Corporation as may be reasonably requested by
the Corporation from time to time and agreed to by the Consultant. The
parties contemplate that Consultant's services hereunder will ordinarily be
performed by telephone or electronic communication, and will not require
Consultant's physical presence at the Corporation's place of business; if
the Corporation requests that Consultant be physically present, the time and
duration of such work shall be mutually agreed to by the parties.
Consultant shall not be asked for consulting services hereunder in excess of
twenty (20) hours per month.
3. Compensation of Consultant. For the foregoing Agreement to
consult with the corporation, the Corporation agrees to pay the Consultant
the sum of $135,000, upon execution of this Agreement.
4. Term. The Term shall commence as of the date hereof and shall
terminate on the first day of the month commencing next after the first
anniversary of the Effective Time of the Merger or upon December 31, 1999,
if the Effective Time of the Merger has not then occurred, whichever occurs
first.
5. Expenses. During the term of this Agreement, the Corporation
shall pay or promptly reimburse the Consultant, in advance if requested by
Consultant, for all business expenses paid or incurred by the Consultant in
connection with the performance of his activities, responsibilities, and
services under this Agreement.
6. This Agreement shall inure to the benefit of and be binding on the
respective parties and their respective heirs, successors and assigns.
7. Neither this Agreement nor any term or provision hereof may be
changed, waived, discharged or terminated orally or in any manner other than
by a written instrument signed by all of the parties.
8. This Agreement shall remain in effect until the expiration of the
Term specified in Paragraph 4 above unless sooner terminated by agreement of
both parties.
9. This Agreement has been delivered and is intended to be performed
in the State of Maine and shall be construed and enforced in accordance with
the laws of Maine. In the event that any provision of this Agreement shall
be held to be invalid, the other provisions hereof shall remain in full
force and effect. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. In proving this Agreement, it shall
not be necessary to produce or account for more that one such counterpart.
10. Independent Contractor. The Consultant shall, during the Term of
this Agreement after the Effective Time of the Merger, be an independent
contractor, rather than a co-venturer, agent, employee, or representative of
the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its duly authorized officers and its corporate seal to be
affixed hereto, and the Consultant has executed this Agreement under seal,
all effective as of the day and year first above written.
WITNESS: CONSUMERS WATER COMPANY
/s/ Mary G. Barthelman By: /s/ John F. Isacke
- ------------------------------ -------------------------------
Its: Senior Vice President
--------------------------
/s/ Mary G. Barthelman /s/ Peter L. Haynes
- ------------------------------ -------------------------------
Consultant
Exhibit 10.11
CONSULTING AGREEMENT
Consulting Agreement (the "Agreement") executed as of this 2nd day of
September, 1998, by and between Consumers Water Company, a Maine corporation
with a place of business at Three Canal Plaza, Portland, Maine 04112 (the
"Corporation") and John F. Isacke, an individual (the "Consultant").
W I T N E S S E T H :
WHEREAS, Consultant is employed as a senior officer of the Corporation;
and
WHEREAS, Consultant has over the years of employment acquired
knowledge and skills that will be useful to the Corporation in connection
with the transition process involved in the merger of the Corporation into a
subsidiary of Philadelphia Suburban Corporation (the "Merger"); and
WHEREAS, Consultant will cease to be employed by the Corporation
following the Merger, but desires to aid and assist the Corporation as a
consultant by providing certain advisory and consulting services to the
Corporation following the Merger, and the Corporation desires so to engage
the Consultant;
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises herein set forth, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as follows:
1. Engagement of Consultant. The Corporation does hereby appoint and
engage the Consultant as a consultant and advisor with respect to the
matters specified in Section 2 hereof for the compensation and term
hereinafter set forth, and the Consultant hereby accepts such appointment
and engagement by the Corporation.
2. Activities of Consultant. (a) During the term of this Agreement
specified in Section 4 hereof (the "Term") and subject further to the terms
and provisions hereof, the Consultant will make himself available to the
Corporation as a consultant to assist in the administration of the affairs
of the Corporation within the area of activities of the Consultant during
the Consultant's period of employment by the Corporation, and to provide
such other services for the Corporation as may be reasonably requested by
the Corporation from time to time and agreed to by the Consultant. The
parties contemplate that Consultant's services hereunder will ordinarily be
performed by telephone or electronic communication, and will not require
Consultant's physical presence at the Corporation's place of business; if
the Corporation requests that Consultant be physically present, the time and
duration of such work shall be mutually agreed to by the parties.
Consultant shall not be asked for consulting services hereunder in excess of
twenty (20) hours per month.
3. Compensation of Consultant. For the foregoing Agreement to
consult with the corporation, the Corporation agrees to pay the Consultant
the sum of $49,000, upon execution of this Agreement.
4. Term. The Term shall commence as of the date hereof and shall
terminate on the first day of the month commencing next after the first
anniversary of the Effective Time of the Merger or upon December 31, 1999,
if the Effective Time of the Merger has not then occurred, whichever occurs
first.
5. Expenses. During the term of this Agreement, the Corporation
shall pay or promptly reimburse the Consultant, in advance if requested by
Consultant, for all business expenses paid or incurred by the Consultant in
connection with the performance of his activities, responsibilities, and
services under this Agreement.
6. This Agreement shall inure to the benefit of and be binding on the
respective parties and their respective heirs, successors and assigns.
7. Neither this Agreement nor any term or provision hereof may be
changed, waived, discharged or terminated orally or in any manner other than
by a written instrument signed by all of the parties.
8. This Agreement shall remain in effect until the expiration of the
Term specified in Paragraph 4 above unless sooner terminated by agreement of
both parties.
9. This Agreement has been delivered and is intended to be performed
in the State of Maine and shall be construed and enforced in accordance with
the laws of Maine. In the event that any provision of this Agreement shall
be held to be invalid, the other provisions hereof shall remain in full
force and effect. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. In proving this Agreement, it shall
not be necessary to produce or account for more that one such counterpart.
10. Independent Contractor. The Consultant shall, during the Term of
this Agreement after the Effective Time of the Merger, be an independent
contractor, rather than a co-venturer, agent, employee, or representative of
the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its duly authorized officers and its corporate seal to be
affixed hereto, and the Consultant has executed this Agreement under seal,
all effective as of the day and year first above written.
WITNESS: CONSUMERS WATER COMPANY
/s/ Brian Mullany By: /s/ P. L. Haynes
- ------------------------------ -------------------------------
Its: President
---------------------------
/s/ Mary G. Barthelman /s/ John F. Isacke
- ------------------------------ -------------------------------
Consultant
Exhibit 10.12
CONSULTING AGREEMENT
Consulting Agreement (the "Agreement") executed as of this 19th of
August, 1998, by and between Consumers Water Company, a Maine corporation
with a place of business at Three Canal Plaza, Portland, Maine 04112 (the
"Corporation") and Paul D. Schumann, an individual (the "Consultant").
W I T N E S S E T H :
WHEREAS, Consultant is employed as a senior officer of the Corporation;
and
WHEREAS, Consultant has over the years of employment acquired
knowledge and skills that will be useful to the Corporation in connection
with the transition process involved in the merger of the Corporation into a
subsidiary of Philadelphia Suburban Corporation (the "Merger"); and
WHEREAS, Consultant will cease to be employed by the Corporation
following the Merger, but desires to aid and assist the Corporation as a
consultant by providing certain advisory and consulting services to the
Corporation following the Merger, and the Corporation desires so to engage
the Consultant;
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises herein set forth, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as follows:
1. Engagement of Consultant. The Corporation does hereby appoint and
engage the Consultant as a consultant and advisor with respect to the
matters specified in Section 2 hereof for the compensation and term
hereinafter set forth, and the Consultant hereby accepts such appointment
and engagement by the Corporation.
2. Activities of Consultant. (a) During the term of this Agreement
specified in Section 4 hereof (the "Term") and subject further to the terms
and provisions hereof , the Consultant will make himself available to the
Corporation as a consultant to assist in the administration of the affairs
of the Corporation within the area of activities of the Consultant during
the Consultant's period of employment by the Corporation, and to provide
such other services for the Corporation as may be reasonably requested by
the Corporation from time to time and agreed to by the Consultant. The
parties contemplate that Consultant's services hereunder will ordinarily be
performed by telephone or electronic communication, and will not require
Consultant's physical presence at the Corporation's place of business; if
the Corporation requests that Consultant be physically present, the time and
duration of such work shall be mutually agreed to by the parties.
Consultant shall not be asked for consulting services hereunder in excess of
twenty (20) hours per month.
3. Compensation of Consultant. For the foregoing Agreement to
consult with the corporation, the Corporation agrees to pay the Consultant
the sum of $49,000, upon execution of this Agreement.
4. Term. The Term shall commence as of the date hereof and shall
terminate on the first day of the month commencing next after the first
anniversary of the Effective Time of the Merger or upon December 31, 1999,
if the Effective Time of the Merger has not then occurred, whichever occurs
first.
5. Expenses. During the term of this Agreement, the Corporation
shall pay or promptly reimburse the Consultant, in advance if requested by
Consultant, for all business expenses paid or incurred by the Consultant in
connection with the performance of his activities, responsibilities, and
services under this Agreement.
6. This Agreement shall inure to the benefit of and be binding on the
respective parties and their respective heirs, successors and assigns.
7. Neither this Agreement nor any term or provision hereof may be
changed, waived, discharged or terminated orally or in any manner other than
by a written instrument signed by all of the parties.
8. This Agreement shall remain in effect until the expiration of the
Term specified in Paragraph 4 above unless sooner terminated by agreement of
both parties.
9. This Agreement has been delivered and is intended to be performed
in the State of Maine and shall be construed and enforced in accordance with
the laws of Maine. In the event that any provision of this Agreement shall
be held to be invalid, the other provisions hereof shall remain in full
force and effect. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. In proving this Agreement, it shall
not be necessary to produce or account for more that one such counterpart.
10. Independent Contractor. The Consultant shall, during the Term of
this Agreement after the Effective Time of the Merger, be an independent
contractor, rather than a co-venturer, agent, employee, or representative of
the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its duly authorized officers and its corporate seal to be
affixed hereto, and the Consultant has executed this Agreement under seal,
all effective as of the day and year first above written.
WITNESS: CONSUMERS WATER COMPANY
/s/ Barbara C. Delage By: /s/ P. L. Haynes
- ------------------------------ -------------------------------
Its: President
-------------------------------
/s/ Barbara C. Delage /s/ Paul D. Schumann
- ------------------------------ -------------------------------
Consultant
Exhibit 10.13
CONSULTING AGREEMENT
Consulting Agreement (the "Agreement") executed as of this 11 day of
August, 1998, by and between Consumers Water Company, a Maine corporation
with a place of business at Three Canal Plaza, Portland, Maine 04112 (the
"Corporation") and Paul F. Noran, an individual (the "Consultant").
W I T N E S S E T H :
WHEREAS, Consultant is employed as a senior officer of the Corporation;
and
WHEREAS, Consultant has over the years of employment acquired
knowledge and skills that will be useful to the Corporation in connection
with the transition process involved in the merger of the Corporation into a
subsidiary of Philadelphia Suburban Corporation (the "Merger"); and
WHEREAS, Consultant will cease to be employed by the Corporation
following the Merger, but desires to aid and assist the Corporation as a
consultant by providing certain advisory and consulting services to the
Corporation following the Merger, and the Corporation desires so to engage
the Consultant;
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises herein set forth, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as follows:
1. Engagement of Consultant. The Corporation does hereby appoint and
engage the Consultant as a consultant and advisor with respect to the
matters specified in Section 2 hereof for the compensation and term
hereinafter set forth, and the Consultant hereby accepts such appointment
and engagement by the Corporation.
2. Activities of Consultant. (a) During the term of this Agreement
specified in Section 4 hereof (the "Term") and subject further to the terms
and provisions hereof , the Consultant will make himself available to the
Corporation as a consultant to assist in the administration of the affairs
of the Corporation within the area of activities of the Consultant during
the Consultant's period of employment by the Corporation, and to provide
such other services for the Corporation as may be reasonably requested by
the Corporation from time to time and agreed to by the Consultant. The
parties contemplate that Consultant's services hereunder will ordinarily be
performed by telephone or electronic communication, and will not require
Consultant's physical presence at the Corporation's place of business; if
the Corporation requests that Consultant be physically present, the time and
duration of such work shall be mutually agreed to by the parties.
Consultant shall not be asked for consulting services hereunder in excess of
twenty (20) hours per month.
3. Compensation of Consultant. For the foregoing Agreement to
consult with the corporation, the Corporation agrees to pay the Consultant
the sum of $32,000, upon execution of this Agreement.
4. Term. The Term shall commence as of the date hereof and shall
terminate on the first day of the month commencing next after the first
anniversary of the Effective Time of the Merger or upon December 31, 1999,
if the Effective Time of the Merger has not then occurred, whichever occurs
first.
5. Expenses. During the term of this Agreement, the Corporation
shall pay or promptly reimburse the Consultant, in advance if requested by
Consultant, for all business expenses paid or incurred by the Consultant in
connection with the performance of his activities, responsibilities, and
services under this Agreement.
6. This Agreement shall inure to the benefit of and be binding on the
respective parties and their respective heirs, successors and assigns.
7. Neither this Agreement nor any term or provision hereof may be
changed, waived, discharged or terminated orally or in any manner other than
by a written instrument signed by all of the parties.
8. This Agreement shall remain in effect until the expiration of the
Term specified in Paragraph 4 above unless sooner terminated by agreement of
both parties.
9. This Agreement has been delivered and is intended to be performed
in the State of Maine and shall be construed and enforced in accordance with
the laws of Maine. In the event that any provision of this Agreement shall
be held to be invalid, the other provisions hereof shall remain in full
force and effect. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. In proving this Agreement, it shall
not be necessary to produce or account for more that one such counterpart.
10. Independent Contractor. The Consultant shall, during the Term of
this Agreement after the Effective Time of the Merger, be an independent
contractor, rather than a co-venturer, agent, employee, or representative of
the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its duly authorized officers and its corporate seal to be
affixed hereto, and the Consultant has executed this Agreement under seal,
all effective as of the day and year first above written.
WITNESS: CONSUMERS WATER COMPANY
/s/ Mary G. Barthelman By: /s/ P. L. Haynes
- ------------------------------ -------------------------------
Its: President
---------------------------
/s/ Barbara C. Delage /s/ Paul F. Noran
- ------------------------------ -------------------------------
Consultant
Exhibit 10.14
CONSULTING AGREEMENT
Consulting Agreement (the "Agreement") executed as of this 18th day of
August, 1998, by and between Consumers Water Company, a Maine corporation
with a place of business at Three Canal Plaza, Portland, Maine 04112 (the
"Corporation") and Brian R. Mullany, an individual (the "Consultant").
W I T N E S S E T H :
WHEREAS, Consultant is employed as a senior officer of the Corporation;
and
WHEREAS, Consultant has over the years of employment acquired
knowledge and skills that will be useful to the Corporation in connection
with the transition process involved in the merger of the Corporation into a
subsidiary of Philadelphia Suburban Corporation (the "Merger"); and
WHEREAS, Consultant will cease to be employed by the Corporation
following the Merger, but desires to aid and assist the Corporation as a
consultant by providing certain advisory and consulting services to the
Corporation following the Merger, and the Corporation desires so to engage
the Consultant;
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises herein set forth, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as follows:
1. Engagement of Consultant. The Corporation does hereby appoint and
engage the Consultant as a consultant and advisor with respect to the
matters specified in Section 2 hereof for the compensation and term
hereinafter set forth, and the Consultant hereby accepts such appointment
and engagement by the Corporation.
2. Activities of Consultant. (a) During the term of this Agreement
specified in Section 4 hereof (the "Term") and subject further to the terms
and provisions hereof , the Consultant will make himself available to the
Corporation as a consultant to assist in the administration of the affairs
of the Corporation within the area of activities of the Consultant during
the Consultant's period of employment by the Corporation, and to provide
such other services for the Corporation as may be reasonably requested by
the Corporation from time to time and agreed to by the Consultant. The
parties contemplate that Consultant's services hereunder will ordinarily be
performed by telephone or electronic communication, and will not require
Consultant's physical presence at the Corporation's place of business; if
the Corporation requests that Consultant be physically present, the time and
duration of such work shall be mutually agreed to by the parties.
Consultant shall not be asked for consulting services hereunder in excess of
twenty (20) hours per month.
3. Compensation of Consultant. For the foregoing Agreement to
consult with the corporation, the Corporation agrees to pay the Consultant
the sum of $32,000, upon execution of this Agreement.
4. Term. The Term shall commence as of the date hereof and shall
terminate on the first day of the month commencing next after the first
anniversary of the Effective Time of the Merger or upon December 31, 1999,
if the Effective Time of the Merger has not then occurred, whichever occurs
first.
5. Expenses. During the term of this Agreement, the Corporation
shall pay or promptly reimburse the Consultant, in advance if requested by
Consultant, for all business expenses paid or incurred by the Consultant in
connection with the performance of his activities, responsibilities, and
services under this Agreement.
6. This Agreement shall inure to the benefit of and be binding on the
respective parties and their respective heirs, successors and assigns.
7. Neither this Agreement nor any term or provision hereof may be
changed, waived, discharged or terminated orally or in any manner other than
by a written instrument signed by all of the parties.
8. This Agreement shall remain in effect until the expiration of the
Term specified in Paragraph 4 above unless sooner terminated by agreement of
both parties.
9. This Agreement has been delivered and is intended to be performed
in the State of Maine and shall be construed and enforced in accordance with
the laws of Maine. In the event that any provision of this Agreement shall
be held to be invalid, the other provisions hereof shall remain in full
force and effect. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. In proving this Agreement, it shall
not be necessary to produce or account for more that one such counterpart.
10. Independent Contractor. The Consultant shall, during the Term of
this Agreement after the Effective Time of the Merger, be an independent
contractor, rather than a co-venturer, agent, employee, or representative of
the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its duly authorized officers and its corporate seal to be
affixed hereto, and the Consultant has executed this Agreement under seal,
all effective as of the day and year first above written.
WITNESS: CONSUMERS WATER COMPANY
/s/ Mary G. Barthelman By: /s/ P.L. Haynes
- ------------------------------ -------------------------------
Its: President
---------------------------
/s/ Barbara C. Delage /s/ Brian Mullany
- ------------------------------ -------------------------------
Consultant
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