Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
-----------------------
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 1-8060
--------------
AQUARION COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 06-0852232
------------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
835 Main Street, Bridgeport, Connecticut 06601
---------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 335-2333
----------------
(Former name, former address and former fiscal year, if changed since
last report)
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
--- ---
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of November 4, 1994:
Common Stock
No Par Value (Stated Value: $1) 6,590,483
------------------------------- ---------------
Class Number of Shares <PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
AQUARION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
1994 1993 1994 1993
---- ---- ---- ----
(In thousands, except share data)
<S> <C> <C> <C> <C>
Operating revenues $29,649 $28,914 $85,118 $79,790
------- ------- ------- -------
Costs and expenses:
Operating 11,101 10,274 31,511 29,637
General and 4,764 4,791 13,486 13,207
administrative
Depreciation 2,982 2,720 8,944 7,712
Interest expense 2,126 2,291 6,299 7,058
Taxes other than income 3,190 3,066 9,466 8,987
taxes
------- ------- ------- -------
Total costs and expenses 24,163 23,142 69,706 66,601
------- ------- ------- -------
5,486 5,772 15,412 13,189
Allowance for funds used
during construction 140 122 330 507
------- ------- ------- -------
Income before income taxes 5,626 5,894 15,742 13,696
Income taxes 2,207 2,122 6,177 5,068
------- ------- ------- -------
Net income $ 3,419 $ 3,772 $ 9,565 $ 8,628
======= ======= ======= =======
Per share $ 0.52 $ 0.58 $ 1.47 $ 1.40
======= ======= ======= =======
Weighted average common
shaers outstanding 6,546,851 6,484,816 6,514,409 6,156,431
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-2-<PAGE>
<PAGE>
AQUARION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
UNAUDITED
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
--------------- -----------------
RETAINED EARNINGS 1994 1993 1994 1993
---- ---- ---- ----
(In thousands, except share data)
<S> <C> <C> <C> <C>
Beginning of period $15,889 $14,133 $15,015 $14,327
Net income 3,419 3,772 9,565 8,628
------- ------- ------- -------
19,308 17,905 24,580 22,955
Deduct: Cash dividends
declared on common
stock, $.405 per
share per quarter
in 1994 and 1993 2,661 2,631 7,933 7,681
------- ------- ------- -------
$16,647 $15,274 $16,647 $15,274
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-3- <PAGE>
<PAGE>
AQUARION COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED
<TABLE>
<CAPTION>
ASSETS September 30, December 31,
1994 1993
-------------- ------------
<S> <C> <C>
(In thousands)
Property, plant and equipment $380,231 $367,564
Less: acumulated depreciation 126,119 117,191
-------- --------
Net property, plant and
equipment 254,112 250,373
-------- --------
Current assets:
Cash and cash equivalents 337 90
-------- --------
Accounts receivable:
Customers 17,286 14,422
Miscellaneous 2,102 2,439
-------- --------
19,388 16,861
Less: allowance for doubtful
accounts 3,787 2,935
-------- --------
15,601 13,926
Accrued revenues 9,963 8,995
Inventories (NOTE 2) 2,196 2,885
Prepaid expenses 8,938 6,698
-------- --------
Total current assets 37,035 32,594
-------- --------
Goodwill 10,388 10,709
Recoverable income taxes 46,377 46,377
Other assets 24,980 22,819
-------- --------
$372,892 $362,872
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-4- <PAGE>
<PAGE>
AQUARION COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED
<TABLE>
<CAPTION>
LIABILITIES AND September 30, December 31,
SHAREHOLDERS' EQUITY 1994 1993
------------- ------------
(In thousands, except share data)
<S> <C> <C>
Shareholders' equity:
Preferred stock, no par value,
authorized 2,500,000 shares not
to exceed aggregate value of
$25,000,000, issuable in
series-none issued $ - $ -
Common stock, stated value: $1
Authorized-16,000,000 shares
Issued-6,655,168 shares in 1994
and 6,564,533 shares in 1993 6,655 6,565
Capital in excess of stated value 93,420 91,441
Retained earnings 16,647 15,015
-------- --------
116,722 113,021
Less: cost of treasury stock,
85,038 shares in 1994 and
92,291 shares in 1993 2,339 2,540
-------- --------
Total shareholders' equity 114,383 110,481
Redeemable preferred stock of
subsidiaries 375 375
-------- --------
Long-term debt and other
obligations 115,538 115,591
-------- --------
Current liabilities:
Short-term borrowings, unsecured 6,200 5,500
Current maturities of long-term debt 70 62
Accounts payable and accrued
liabilities 12,206 10,790
Dividends payable 2,661 2,621
Accrued interest 2,369 2,240
Taxes other than income taxes 1,583 1,354
Income taxes 1,036 976
-------- --------
Total current liabilities 26,125 23,543
-------- --------
Advances for construction 23,076 22,593
Contributions in aid of
construction 21,551 20,883
Recoverable income taxes 6,123 6,123
Deferred taxes 65,721 63,283
-------- --------
$372,892 $362,872
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-5-<PAGE>
<PAGE>
AQUARION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Nine months ended September 30,
1994 1993
------- -------
<S> <C> <C>
(In thousands)
Cash flows from operating activities:
Net income $9,565 $8,628
Adjustments reconciling net income to net
cash provided by operating activities:
Depreciation and amortization 9,623 8,380
Allowance for funds used during
construction (330) (507)
Provision for losses on accounts
receivable 919 903
Deferred and prepaid income taxes, net 1,928 1,005
Proceeds from sale of surplus land,
net of gains 1,204 338
Change in assets and liabilities (NOTE 3) (6,220) (6,172)
-------- -------
Net cash provided by operating activities 16,689 12,575
Cash flows from investing activities:
Capital additions, excluding an
allowance for funds used
during construction (12,363) (13,621)
Advances and contributions in aid of
construction, net of refunds 1,151 385
Other investing activities (52) (36)
------- -------
Net cash used in investing (11,264) (13,272)
------- -------
Cash flows from financing activities:
Net proceeds from short-term
borrowings 700 (9,500)
Proceeds from the issuance of common
stock, net 2,069 12,390
Proceeds from the issuance of long-
term debt - 10,000
Principal payments on long-term debt (53) (3,454)
Common dividends paid (7,894) (7,460)
------- -------
Net cash (used in) provided by
financing activities (5,178) 1,976
------- -------
Net increase in cash and cash equivalents 247 1,279
Cash and cash equivalents, beginning of
period 90 319
------ ------
Cash and cash equivalents, end of period $337 $1,598
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-6- <PAGE>
<PAGE>
AQUARION COMPANY
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
UNAUDITED
---------
Aquarion Company (Aquarion) is a holding company whose
subsidiaries are engaged both in the regulated utility
business of public water supply and in various nonutility
businesses. Aquarion's utility subsidiary, Bridgeport
Hydraulic Company (BHC) and BHC's subsidiary, Stamford Water
Company (SWC), (collectively, the Utilities) collect, treat
and distribute water for residential, commercial and
industrial customers, to other utilities for resale and for
private and municipal fire protection. The Utilities provide
water to customers in 22 communities with a population of
approximately 492,000 people in Fairfield, New Haven, and
Litchfield Counties in Connecticut, including communities
served by other utilities to which BHC makes water available
on a wholesale basis for back-up supply or peak demand
purposes through BHC's Southwest Regional Pipeline. BHC is
the largest investor-owned water company in Connecticut and,
with its SWC subsidiary, is among the ten largest investor-
owned water companies in the nation. The Utilities are
regulated by several Connecticut agencies, including the
Connecticut Department of Public Utility Control (DPUC).
Aquarion and its subsidiaries (collectively, the Company) are
also engaged in various nonutility activities. The Company
conducts an environmental testing laboratory business through
its Industrial and Environmental Analysts, Inc. group of
laboratories which analyze contaminants in hazardous waste,
soil, air and water (IEA). Additionally, the Company is
engaged in various utility management service businesses
through Hydrocorp, Inc. (Hydrocorp) and Aquarion Management
Services, Inc. (AMS), owns a forest products and electricity
cogeneration business through Timco, Inc. (Timco) and owns a
real estate subsidiary, Main Street South Corporation (MSSC).
NOTE 1 - BASIS OF PRESENTATION
------------------------------
The accompanying consolidated financial statements of the
Company have been prepared in accordance with generally
accepted accounting principles for interim financial
information, with the instructions to Form 10-Q and Rule 10-01
of Regulation S-X and as applied in the case of rate-regulated
public utilities, comply with the Uniform System of Accounts
and rate making practices prescribed by the DPUC.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have
been included. The results of operations are not necessarily
indicative of the results of operations for the calendar year.
Water consumption is less in the first quarter of the year
than during the warmer months. The laboratory testing
business is seasonal as well with traditionally lower first
quarter revenues. Other factors affecting the comparability
of various accounting periods include the timing of rate
increases granted the Utilities and the timing and magnitude
of property sales. For further information, refer to the
consolidated financial statements and accompanying footnotes
included in the Company's annual report on Form 10-K for the
year ended December 31, 1993.
-7- <PAGE>
<PAGE>
NOTE 2 - INVENTORIES
--------------------
Inventories were comprised of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- ------------
(Unaudited)
<S> <C> <C>
Lumber and logs $ 829 $1,314
Materials and supplies 1,367 1,571
------ ------
$2,196 $2,885
====== ======
</TABLE>
NOTE 3 - SUPPLEMENTAL DISCLOSURE FOR CONSOLIDATED STATEMENTS
---------------------------------------------------------------
OF CASH FLOWS
-------------
Changes in assets and liabilities for the nine month period
ended September 30, are set forth below (in thousands):
<TABLE>
<CAPTION>
1994 1993
------- -------
(Unaudited)
<S> <C> <C>
(Increase) in accounts receivable $(3,503) $(1,440)
Decrease in inventory 689 285
(Increase) in prepayments (2,240) (1,604)
Increase (decrease) in accounts payable
and accrued liabilities 1,417 (1,394)
Increase (decrease) in interest and
taxes payable 419 (682)
Net changes in other noncurrent balance
sheet items (3,002) (1,337)
------- -------
$(6,220) $(6,172)
Supplemental cash flow information:
Cash paid for:
Interest $6,557 $7,160
Income taxes $4,622 $3,122
</TABLE>
NOTE 4 - SALE OF SURPLUS LAND
-----------------------------
During the first nine months of 1994, the Company sold
approximately 41 acres of surplus land for a total of
$1,970,000. Sales include eight building lots at Waverly
Woods in Shelton, Connecticut, four lots at Deer Run Estates
in Weston, Connecticut, and one lot at Lords Highway East in
Weston, Connecticut. Total gains approximated $766,000 or
$.12 per share. Approximately two-thirds of the net proceeds
of the Deer Run and Waverly Woods land sales are allocated to
shareholders and the remaining one-third allocated to
ratepayers through amortization into BHC's rate base over five
years. Net proceeds from Lords Highway East are allocated
approximately 50 percent to shareholders and 50 percent to
ratepayers through amortization into BHC's rate base over
8-1/2 years.
NOTE 5 - EMPLOYERS' ACCOUNTING FOR POSTEMPLOYMENT BENEFITS
----------------------------------------------------------
On January 1, 1994, the Company was required to adopt
Financial Accounting Standards Board (FASB) Statement No. 112,
"Employers' Accounting for Postemployment Benefits" (SFAS
112). This statement requires that employers accrue the cost
of providing future benefits to former or inactive employees
after employment but before retirement. Such benefits are to
be recognized over the employees' years of service or at the
date giving rise to such benefits. Adoption of SFAS 112 has
no material impact on the financial position or results of
operations of the Company.
-8- <PAGE>
<PAGE>
NOTE 6 - SUBSEQUENT EVENTS
--------------------------
On November 8, 1994, Timco announced that it has agreed to
terminate its long-term rate order with Public Service Company
of New Hampshire (PSNH) under which Timco sold PSNH
electricity produced at its cogeneration plant. The agreement
calls for PSNH to pay Timco $8,195,105 in exchange for the
assignment of the rate order to PSNH and a release of PSNH's
obligations to buy power from Timco. The net after tax gain
on this transaction, after providing for unrecoverable costs
and expenses the Company anticipates, is $1,902,000, which
approximates the present value of the income stream Timco
would have received over the remaining life of the contract.
As a result, Timco will not have these revenues in the future.
Revenues from electricity cogeneration were $3,500,000 in 1993
and $2,600,000 through September 30, 1994.
Aquarion will also record a charge of $1,772,000 related to
the Company's investment in the Clocktower Housing Associates
Limited Partnership (the "partnership"), a rehabilitation
housing unit in New Hampshire. Aquarion has been informed
that the partnership may require additional capital from each
of the five limited partners beyond the amounts originally
agreed upon. At present, it is not known whether the limited
partners will make the necessary capital contributions to
sustain the operation of the partnership. Based upon the risk
of continued funding and the projects poor performance, the
Company no longer believes that the value of their investment
in the partnership is recoverable.
The net effect of these two transactions will have an
approximate $.02 per share impact on Aquarion's earnings in
the forth quarter of 1994.
Item 2. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations
-----------------------------------
Management's Discussion and Analysis of the Results of
Operations and Financial Condition contained in Aquarion's
Annual Report on Form 10-K for the year ended December 31,
1993 (1993 Form 10-K) should be read in conjunction with the
comments below.
Capital Resources and Liquidity
-------------------------------
Capital Expenditures
--------------------
The Company invested $12,363,000 in property, plant and
equipment in the first nine months of 1994, compared with
$13,621,000 for the same 1993 period. The Utilities accounted
for approximately $11,105,000 of plant additions during the
current nine-month period, including $2,263,000 expended on
filtration facilities mandated under the Safe Drinking Water
Act (SDWA), with the balance being invested primarily in the
Company's environmental testing laboratories and forest
products operations. Management estimates that capital
expenditures will total $19,600,000 in 1994, of which
approximately $17,000,000 will be for water utility
construction programs. Nonutility capital expenditures will
approximate $2,600,000 in 1994, primarily for laboratory
equipment at IEA.
-9- <PAGE>
<PAGE>
Financing Activities
--------------------
Due to the magnitude of the Company's construction programs
and the capital-intensive nature of the public water supply
business, financing has been provided from both internal and
external sources.
Historically, the Company's ability to finance its capital
expenditures has depended substantially on rate relief.
Effective August 1, 1993, the DPUC awarded BHC a 21 percent
water service rate increase designed to provide a $10,400,000
annual increase in revenues and an 11.6 percent return on
common equity.
The percentage of capital expenditures financed by net cash
from operating activities was 100 percent and 92 percent
for the nine months ended September 30, 1994 and 1993,
respectively. (See "Consolidated Financial Statements-
Consolidated Statements of Cash Flows.") The remainder has
been provided from external financing sources.
Funds from external sources historically have been borrowed
on a short-term basis and periodically refinanced through
long-term debt or equity issues. On May 13, 1994, the Company
renewed unsecured revolving credit agreements with five banks.
These agreements, which are renewed annually, provide
$50,000,000 ($10,000,000 with each bank) of short-term credit
availability on a committed basis. At September 30, 1994,
$6,200,000 of short-term borrowings under the agreements was
outstanding.
On June 29, 1993, the Company completed a common stock
offering of 460,000 shares at $25.875 per share. The proceeds
of the issue, after all expenses, amounted to $11,200,500. In
addition, BHC issued a 5.6 percent, $10,000,000 unsecured note
under a tax-exempt financing with the Connecticut Development
Authority. Proceeds from both transactions were used to
reduce short-term borrowings which had been incurred in
connection with the construction of BHC's Easton Lake
Reservoir Water Treatment Plant.
The Company obtained additional funds of $2,069,000 through
its Dividend Reinvestment and Common Stock Purchase Plan (the
Plan) and $1,151,000 from advances and contributions in aid of
construction from developers and customers in the first nine
months of 1994. During April, 1994, the Company filed a Form
S-3 registration statement with the Securities and Exchange
Commission to enhance the plan and include an additional
750,000 shares.
Future Financing Requirements
-----------------------------
The Company's ability to finance future utility construction
programs depends substantially on rate relief. Rate relief
has an impact on cash flow from operating activities and
consequently affects the Company's ability to obtain external
financing, since sufficient operating cash flows are necessary
to maintain certain debt coverage ratios to allow for the
issuance of additional debt securities. Additionally, rate
relief will have an impact on the Company's ability to
generate sufficient cash flows to provide a reasonable return
in the form of dividends to Aquarion's stockholders. In light
of the Company's substantial need for additional funds, the
Company will need additional debt and equity capital to
finance future utility construction. The type, amount and
timing of new financings will be based on the Company's
general financial policies regarding capitalization, as well
as on market conditions and other economic factors.
-10- <PAGE>
<PAGE>
Results of Operations for the nine months
-----------------------------------------
ended September 30, 1994 and 1993
---------------------------------
Net income for the nine months ended September 30, 1994 was
$9,565,000 compared with $8,628,000 for the same 1993 period.
Operating results during the first nine months of 1994
reflect the impact of higher water rates for BHC due to a 21
percent rate increase, effective August 1, 1993 and the
increase in sales of surplus off-watershed land. Reflecting a
common stock offering of 460,000 shares in June 1993, per
share amounts were based on weighted average shares
outstanding of 6,514,409 for the nine months ended
September 30, 1994 versus 6,156,431 for the same 1993 period.
Operating revenues for the first nine months of 1994
increased $5,328,000 from the comparable 1993 period.
Revenues from the Utilities increased $2,355,000. This
increase was principally due to a 21 percent water service
rate increase which became effective August 1, 1993, partially
offset by the effects of a wet summer in 1994. Revenues from
property sales increased by $1,325,000 due to the Company's
continued commitment to sell surplus land. Forest products
experienced an increase in revenues of $852,000 due to
increased volume and sales prices for lumber. Revenues from
the laboratories increased $771,000. This variance is
principally due to higher sampling receipts in 1994, partially
offset by the sale of the Air Services Division in the fourth
quarter of 1993, the harsh winter weather which hampered
sampling efforts during the first quarter of 1994 and
continued competitive pricing in the industry. The Utility
management services business accounts for the remainder of the
variance.
Operating expenses for the first nine months of 1994
increased $1,874,000 from the comparable 1993 period.
Operating expenses at the Utilities increased approximately
$758,000. This increase was principally due to higher costs
associated with the operation of BHC's Easton Lake Reservoir
Water Treatment Plant, which was placed in service in June
1993 and higher costs for snow removal. Forest products
experienced an increase of $725,000 which was largely the
result of higher production costs associated with an increased
sales volume. Operating expenses from property sales
increased by $650,000 due to the increased activity in the
Land Sales program. The Laboratories experienced a decrease
in operating expenses of $175,000 primarily due to costs
associated with the Air Services Division, which was sold in
the fourth quarter of 1993, partially offset by higher costs
associated with the increased sampling efforts in 1994.
Utility management service businesses account for the
remainder of the variance.
General and administrative expenses for the first nine
months of 1994 increased $279,000 from the comparable 1993
period. Expenses from the Utilities increased $299,000
primarily due to higher costs associated with BHC's adoption
of FASB Statement No. 106, "Employers' Accounting for Post-
Retirement Benefits Other Than Pensions" partially offset by
lower costs associated with workers compensation insurance,
outside services and miscellaneous expenses. General and
administrative expenses for Laboratories, Forest products,
Real Estate and Corporate account for the remainder of the
variance.
Depreciation expense for the first nine months of 1994 was
$1,232,000 higher than the 1993 comparable period. This
increase is primarily attributable to the addition of BHC's
Easton Lake Reservoir Water Treatment Plant, which was placed
in service in June 1993, a higher composite annual
depreciation rate for BHC effective August 1, 1993 and routine
plant additions by both the Utilities and the Laboratories.
-11- <PAGE>
<PAGE>
Interest expense for the first nine months of 1994 was
$759,000 lower than the 1993 comparable period. Lower
outstanding average total debt coupled with lower long-term
borrowing rates due to the debt refinancing in 1993
principally account for this variance.
Taxes other than income taxes for the first nine months of
1994 increased $479,000 over the comparable 1993 period.
Property taxes increased by $228,000 which was attributable to
a higher property base in 1994. Gross earnings taxes
increased by $145,000 due to increased revenues from Utility
operations. The remainder of this variance is due to an
increase in payroll taxes of $106,000.
Income taxes for the first nine months of 1994 were
$1,109,000 higher than the comparable 1993 period primarily
due to higher taxable income and a higher effective tax rate
in 1994.
Results of Operations for the three months
------------------------------------------
ended September 30, 1994 and 1993
---------------------------------
Net income for the three-months ended September 30, 1994 was
$3,419,000 compared with $3,772,000 for the same 1993 period.
Operating results during the third quarter of 1994 reflect
the impact of a wetter than normal summer partially offset by
higher water rates for BHC due to a 21 percent rate increase,
effective August 1, 1993 and improved results at the
Laboratories.
Operating revenues during the third quarter of 1994
increased $735,000 from the comparable 1993 period. Revenues
from the Laboratories increased $1,089,000 which was primarily
the result of higher sampling receipts, partially offset by
the sale of the Air Services Division in the fourth quarter of
1993. Forest products experienced an increase in revenues of
$645,000 due to increased volume and sales prices for lumber.
Property sales revenues increased by $115,000 due to the
Company's continued commitment to sell surplus land. Revenues
from the Utilities decreased $1,146,000 primarily due to the
wetter than normal summer months, partially offset by the rate
increase that went into effect on August 1, 1993. The Utility
management service businesses account for the remainder of
this variance.
Operating expenses during the third quarter of 1994
increased by $827,000 from the comparable 1993 period. Forest
products operating expenses increased by $641,000 due
primarily to higher production and raw material costs
associated with the increased sales volume and annual
maintenance on the saw mill performed in July. Operating
expenses at the Laboratories increased by $195,000 which was
primarily attributable to higher costs associated with the
additional sampling receipts. Increased efforts in the
Company's land sale program resulted in additional operating
expenses of $74,000. Utility Operations and Utility
management service businesses account for the remainder of the
variance.
General and administrative expenses during the third quarter
of 1994 decreased $27,000 from the comparable 1993 period.
There are no significant variances to report in this area.
Depreciation expense for the third quarter 1994 was $262,000
higher than the 1993 comparable period. This increase is
largely the result of additional utility plant put into
service in the third quarter.
Interest expense for the third quarter of 1994 was $165,000
lower than the 1993 comparable period. This favorable
variance is the result of lower outstanding average total debt
and a lower long-term borrowing rate due to the debt
refinancings in 1993.
-12- <PAGE>
<PAGE>
Taxes other than income taxes for the third quarter of 1994
increased by $124,000 over the comparable 1993 period.
Property taxes increased by $133,000 which was attributable to
a higher property base and mill rates. Gross earnings taxes
decreased by $31,000 due to decreased revenues from Utility
operations. Higher payroll taxes of $22,000 account for the
remainder of this variance.
Income taxes for the third quarter of 1994 increased $85,000
from the comparable 1993 period due primarily to a higher
effective tax rate in 1994, partially offset by lower taxable
income.
PART II. OTHER INFORMATION
--------------------------
ITEM 1. - LEGAL PROCEEDINGS
---------------------------
All legal proceedings have previously been reported on the
Annual Report on Form 10-K in Part I, Item 3 for the year
ended December 31, 1993.
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-------------------------------------------------------------
All "Submission of Matters to a Vote of Security Holders"
have been previously reported on Form 10-Q in Part II, Item 4
for the quarter ended March 31, 1994.
ITEM 5. - OTHER INFORMATION
---------------------------
On October 20, 1994, Bridgeport Hydraulic Company, (BHC)
filed with the Department of Public Utility, (DPUC) an
application to implement a water rate surcharge in order to
recover 90% of the carrying costs of capital used in the
construction of a federally mandated filtration plant at its
Hemlocks Reservoir in Fairfield, Connecticut, which is
estimated to cost approximately $50,000,000. If approved, the
0.82 percent surcharge would increase BHC's revenues by
$497,000 on an annual basis beginning in December 1994. BHC
will file applications with the DPUC quarterly to increase
this surcharge as construction continues into 1997, at which
time the filtration facilities are expected to be operational
and subject to general ratemaking regulations.
The Company's proposed acquisition of the New Canaan Water
Company and the Ridgefield Water Supply Company and a related
property exchange (see Item 1 of the Company's Report on
Form 10-K for the year ended December 31, 1993, "Business-
Recent Developments - Pending Utility Acquisition") are
subject to certain conditions and regulatory approvals,
including a water diversion permit (the "Diversion Permit")
regarding the use of the New Canaan Reservoir. On June 24,
1994, the Connecticut Department of Environmental Protection
(the "DEP") issued the Diversion Permit, but a community
resident has filed a declaratory ruling petition with the DEP,
asserting that the Diversion Permit should not have been
issued without a public hearing. The extent of the delay this
petition or any ruling issued thereon may have on the closing
of the intended transactions is uncertain. The DPUC, which
approved the proposed transactions in June 1993, has recently
reopened its approval proceeding to consider BHC's request for
an extension of the closing date for the acquisition and
property exchange transactions until February 28, 1995 and to
review related matters. It is anticipated that subject to the
DPUC's approval and resolution of the declaratory ruling
petition, the parties to the acquisition and property exchange
agreements will execute further extensions of these agreements
in order to permit closing at any time until February 28,
1995.
-13- <PAGE>
<PAGE>
On November 8, 1994, Timco announced that it has agreed to
terminate its long-term rate order with Public Service Company
of New Hampshire (PSNH) under which Timco sold PSNH
electricity produced at its cogeneration plant. The agreement
calls for PSNH to pay Timco $8,195,105 in exchange for the
assignment of the rate order to PSNH and a release of PSNH's
obligations to buy power from Timco. The net after tax gain
on this transaction, after providing for unrecoverable costs
and expenses the Company anticipates, is $1,902,000, which
approximates the present value of the income stream Timco
would have received over the remaining life of the contract.
As a result, Timco will not have these revenues in the future.
Revenues from electricity cogeneration were $3,500,000 in 1993
and $2,600,000 through September 30, 1994.
Aquarion will also record a charge of $1,772,000 related to
the Company's investment in the Clocktower Housing Associates
Limited Partnership (the "partnership"), a rehabilitation
housing unit in New Hampshire. Aquarion has been informed
that the partnership may require additional capital from each
of the five limited partners beyond the amounts originally
agreed upon. At present, it is not known whether the limited
partners will make the necessary capital contributions to
sustain the operation of the partnership. Based upon the risk
of continued funding and the projects poor performance, the
Company no longer believes that the value of their investment
in the partnership is recoverable.
The net effect of these two transactions will have an
approximate $.02 per share impact on Aquarion's earnings in
the fourth quarter of 1994.
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------
(a) The Company has nothing to report for this item.
(b) The Company did not file a report on Form 8-K for
the nine months ended September 30, 1994.
-14- <PAGE>
<PAGE>
SIGNATURE
---------
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.
AQUARION COMPANY
Date: November 9, 1994 By s/s/JANET M. HANSEN
------------------- ----------------------------------
Janet M. Hansen
Senior Vice President,
Chief Financial Officer and
Treasurer
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1994, AQUARION COMPANY FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 337
<SECURITIES> 0
<RECEIVABLES> 17286
<ALLOWANCES> 3787
<INVENTORY> 2196
<CURRENT-ASSETS> 37035
<PP&E> 380231
<DEPRECIATION> 126119
<TOTAL-ASSETS> 372892
<CURRENT-LIABILITIES> 26125
<BONDS> 115538
<COMMON> 6655
375
0
<OTHER-SE> 107728
<TOTAL-LIABILITY-AND-EQUITY> 372892
<SALES> 85118
<TOTAL-REVENUES> 85118
<CGS> 63077
<TOTAL-COSTS> 63077
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 919
<INTEREST-EXPENSE> 6299
<INCOME-PRETAX> 15742
<INCOME-TAX> 6177
<INCOME-CONTINUING> 9565
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9565
<EPS-PRIMARY> 1.47
<EPS-DILUTED> 1.47
</TABLE>
