<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
-------------------------------------
WASHINGTON, D. C. 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 MARCH 31, 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 1-858-6
-------------
United Water Resources Inc.
- - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-2441477
- - ---------------------------------- -----------------------------------
(State or other Jurisdiction I.R.S. Employer
of Incorporation) Identification No.)
200 Old Hook Road, Harrington Park, New Jersey 07640
- - -------------------------------------------------------------------------------
(Address of principal executive office) (zip code)
201-784-9434
- - -----------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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
--------- ----------
Common shares of stock outstanding as of April 30, 1994 30,126,536
----------------
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- - -------------------------------
UNITED WATER RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1994 1993
--------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
- - ------
UTILITY PLANT, including $5,018 and $5,815 under construction $610,028 $605,668
LESS - Accumulated depreciation 106,493 103,557
-------- --------
503,535 502,111
-------- --------
REAL ESTATE AND OTHER INVESTMENTS, less accumulated
depreciation of $11,451 and $10,889 100,544 96,312
-------- --------
CURRENT ASSETS:
Cash and temporary cash investments 5,304 8,933
Construction funds 7,008 8,502
Accounts receivable and unbilled revenues 30,094 30,544
Materials and supplies 2,713 2,422
Prepayments 8,018 8,213
-------- --------
53,137 58,614
-------- --------
DEFERRED CHARGES AND OTHER ASSETS:
Recoverable income taxes 26,219 26,384
Prepaid and deferred employee benefits 12,074 10,569
Unamortized debt expense 15,094 15,276
Other deferred charges and assets 17,953 31,260
-------- --------
71,340 83,489
-------- --------
$728,556 $740,526
CAPITALIZATION AND LIABILITIES
- - ------------------------------
CAPITALIZATION:
Common stock and retained earnings $205,996 $202,110
Preferred stock without mandatory redemption 9,000 9,000
Preferred stock with mandatory redemption 23,840 23,840
Long-term debt 276,560 276,753
-------- --------
515,396 511,703
-------- --------
CURRENT LIABILITIES:
Notes payable 27,320 15,500
Preferred stock and long-term debt due within one year 6,735 16,843
Accounts payable and other accruals 9,723 12,066
Accrued taxes 20,536 20,454
Accrued interest 5,057 6,590
Accrued customer benefits 6,120 6,771
-------- --------
75,491 78,224
-------- --------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes and investment tax credits 107,790 104,864
Customer advances for construction 9,320 9,319
Contributions in aid of construction 7,890 7,586
Other deferred credits and liabilities 12,669 28,830
-------- --------
137,669 150,599
-------- --------
$728,556 $740,526
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
UNITED WATER RESOURCES INC. AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED INCOME
(THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
--------------------------------------
1994 1993
------- -------
<S> <C> <C>
OPERATING REVENUES $39,015 $35,895
------- -------
OPERATING EXPENSES:
Operation and maintenance 20,963 18,289
Depreciation 3,611 3,516
General taxes 7,372 7,160
------- -------
TOTAL OPERATING EXPENSES 31,946 28,965
------- -------
OPERATING INCOME 7,069 6,930
------- -------
INTEREST AND OTHER EXPENSES:
Interest expense, net of amount capitalized 5,672 5,394
Allowance for funds used during construction (127) (134)
Preferred stock dividends of subsidiaries 583 592
Other income (3,054) (203)
------- -------
TOTAL INTEREST AND OTHER EXPENSES 3,074 5,649
------- -------
INCOME BEFORE INCOME TAXES 3,995 1,281
PROVISION FOR INCOME TAXES 1,628 575
NET INCOME $ 2,367 $ 706
======= =======
AVERAGE COMMON SHARES OUTSTANDING (THOUSANDS) 20,442 18,936
NET INCOME PER COMMON SHARE $ .12 $ .04
======= =======
DIVIDENDS PER COMMON SHARE $ .23 $ .23
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
UNITED WATER RESOURCES INC. AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
(THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
--------------------------------------
1994 1993
------------------ ------------------
<S> <C> <C>
OPERATING ACTIVITIES:
NET INCOME $ 2,367 $ 706
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization 4,190 3,721
Deferred income taxes and investment tax credits, net 2,926 23,182
Gain from release of security deposit to Rivervale (2,811) --
Allowance for funds used during construction (AFUDC) (127) (134)
Changes in assets and liabilities:
Accounts receivable and unbilled revenue 450 2,578
Prepayments 195 (436)
Prepaid and deferred employee benefits (1,505) (1,501)
Recoverable income taxes 165 (20,170)
Accounts payable and other accruals (2,343) 621
Accrued taxes 82 419
Accrued interest (1,533) (1,692)
Accrued customer benefits (651) 27
Other, net (1,008) (1,791)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 397 5,530
-------- --------
INVESTING ACTIVITIES:
Additions to utility plant (excludes AFUDC) (4,907) (3,498)
Additions to real estate and other properties (3,956) (936)
Draw down of construction funds 1,494 --
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (7,369) (4,434)
-------- --------
FINANCING ACTIVITIES:
Change in notes payable 11,820 (1,980)
Reduction in preferred stock and long-term debt (10,301) (1,216)
Issuance of common stock 6,232 4,188
Dividends on common stock (4,713) (4,363)
Net contributions and advances for construction 305 (422)
-------- --------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 3,343 (3,793)
-------- --------
Net decrease in cash and temporary cash investments (3,629) (2,697)
Cash and temporary cash investments at beginning of period 8,933 17,994
-------- --------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $ 5,304 $ 15,297
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 3,582 $ 6,781
Income taxes 860 668
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
UNITED WATER RESOURCES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1994
NOTE 1 - GENERAL
- - ----------------
In the opinion of United Water Resources (UWR), the accompanying unaudited
consolidated financial statements contain all adjustments, which consist of
normal recurring adjustments, necessary for the fair presentation of the results
for the interim periods. The Notes to Consolidated Financial Statements
incorporated by reference in UWR's 1993 Annual Report on Form 10-K should be
read with the accompanying financial statements.
NOTE 2 - SUPPLEMENTAL FINANCIAL INFORMATION
- - -------------------------------------------
On April 22, 1994, UWR and GWC Corporation (GWC) merged (the Merger), with UWR
as the surviving corporation. The acquisition is being accounted for as a
purchase, and the financial results of the former subsidiaries of GWC will
generally be included in the Company's financial results beginning April 1,
1994. The following unaudited pro forma financial information reflects the
combined historical balance sheet information and statements of income of UWR
and GWC after giving effect to the Merger. The unaudited pro forma combined
condensed balance sheet information at March 31, 1994 and December 31, 1993 give
effect to the Merger as if it had occurred on these dates. The unaudited pro
forma condensed income statement information for the periods ended March 31,
1994 and 1993 give effect to the Merger as if it had occurred at the beginning
of the periods presented. These pro forma results are not necessarily
indicative of what actually would have occurred had the acquisition been in
effect for the periods presented. In addition, the pro forma results are not
intended to be a projection of future results or of future financial position.
<TABLE>
<CAPTION>
BALANCE SHEET INFORMATION:
MARCH 31, DECEMBER 31,
1994 1993
----------- ------------
(unaudited)
<S> <C> <C>
Net Utility Plant $1,001,318 $ 995,234
Total assets 1,369,570 1,374,803
Common stock and retained earnings 329,167 327,041
Total Capitalization $ 905,607 $ 895,020
<CAPTION>
INCOME STATEMENT INFORMATION FOR THE THREE MONTHS ENDED:
MARCH 31, MARCH 31,
1994 1993
---------- ----------
(unaudited)
<S> <C> <C>
Operating Revenues $ 68,211 $ 62,715
Operating Income 13,111 12,586
Net Income applicable to common stock 2,252 (94)
Net Income per common share $ .08 ---
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- - ----------------------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
MERGER
- - ------
On April 22, 1994, United Water Resources, Inc. (UWR) and GWC Corporation
(GWC) merged (the Merger), with UWR as the surviving corporation. The Merger
was effected pursuant to an Amended and Restated Agreement and Plan of Merger,
dated September 15, 1993, between UWR and GWC. At special meetings held on
March 10, 1994, the stockholders of UWR and GWC approved the Merger. GWC's
principal assets include 100% of the stock of General Waterworks Corporation
(General Waterworks), which owns regulated utilities operating in 14 states, and
a 25% indirect investment in JMM Operational Services, Inc. (JMM), a company
that provides operations and management services to government and industry for
water and wastewater treatment facilities. On the date of the Merger of GWC
with and into UWR, all the issued and outstanding shares of GWC Common Stock
were converted into (i) the right to receive 1.2 shares of UWR Common Stock for
70% of the GWC Common Stock outstanding and (ii) either 1.2 shares of UWR 5%
Preference Stock or cash for the remaining 30% of the GWC Common Stock. The
newly issued UWR Common Stock was valued at $13.25 per share, the market price
of the UWR Common Stock at the time of the Merger. The UWR 5% Preference Stock
has a liquidation value of $13.794 per share, which is equal to the average
closing price of the UWR Common Stock over a predetermined 20-day period ending
prior to the date of the Merger. The amount of cash per share of GWC Common
Stock paid to GWC Shareholders in the Merger was equal to 1.2 times that same
20-day average closing price of the UWR Common Stock. In addition, at the time
of the Merger, each issued and outstanding share of GWC 7 5/8% Preferred Stock
was converted into the right to receive one fully paid non-assessable share of
UWR 7 5/8% Preferred Stock with equal stated dividends and substantially similar
rights, privileges, qualifications and restrictions.
Prior to the Merger, Lyonnaise American Holding, Inc. ("LAH"), a Delaware
corporation and a wholly-owned subsidiary of Lyonnaise Des Eaux-Dumez, a French
societe anonyme, owned approximately 81.9% of GWC's Common Stock, and the
remaining 18.1% of the GWC Common Stock was publicly traded. On the date of the
Merger, LAH converted 70% of its shares of GWC Common Stock into UWR Common
Stock and the remainder of its shares of GWC Common Stock into UWR 5% Preference
Stock. Immediately after the Merger, LAH owned approximately 25.4% of the
issued and outstanding UWR Common Stock and approximately 97.7% of the issued
and outstanding UWR 5% Preference Stock.
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
Capital expenditures by UWR's utility subsidiaries, including the utility
subsidiaries of General Waterworks acquired in the merger with GWC, are
generally incurred in connection with the normal upgrading and expansion of
existing water and wastewater facilities and to comply with existing
environmental regulations. UWR considers its utility plants to be adequate and
in good condition, but is projecting significantly higher levels of capital
expenditures during the next five years due to the addition of new, or expansion
of existing, water treatment and source of supply facilities by the utility
subsidiaries of General Waterworks to meet growth requirements or to comply with
environmental laws. The net capital expenditures of UWR's utility subsidiaries
are projected at $48.4 million in 1994 (excluding the net capital expenditures
of General Waterworks prior to the date of the merger) and $59.8 million in
1995. For the five year period from 1994 to 1998, the net capital expenditures
of UWR's utility subsidiaries are estimated to aggregate $285 million. This
total includes $205 million of net capital expenditures estimated to be spent by
regulated utility operations of General Waterworks and $80 million of net
capital expenditures by Hackensack Water Company (Hackensack) and Spring Valley
Water Company (Spring Valley). Net capital expenditures represent gross capital
expenditures for construction programs less advances and contributions in aid of
construction received from customers, primarily real estate developers, to fund
capital expenditures to serve new customers.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
- - -------------------------------
The primary sources of the funds necessary to pay for this construction
program are internally generated funds from operations and proceeds from
financings, including future draw downs on existing tax-exempt financings not
yet fully drawn.
In January 1994, Hackensack redeemed $10,000,000 of First Mortgage Bonds, 9-
3/4% Series, due 2006. On March 22, 1994, Hackensack agreed to refinance $40
million of tax-exempt refunding bonds, using the proceeds from the issuance in
April of $20 million of 5.80% bonds and $20 million of 5.9% bonds, both due in
2024. At March 31, 1994, UWR had cash and temporary cash investments of $5.3
million and unused short-term bank lines of credit of $59.3 million. Subsequent
to the merger, the combined companies had unused short-term bank lines of credit
of $100.7 million, which lines are generally available to fund UWR's capital
needs. In addition, General Waterworks is a party to a number of tax-exempt
financings for the purpose of funding expected capital expenditures in several
of its larger utility subsidiaries; these financings will provide an additional
$19.8 million of funding to General Waterworks from April 1994 through 1995.
The use of these funds and any future financings will depend upon actual
construction expenditures and prevailing market conditions.
Rivervale Realty Company, Inc. (Rivervale) currently projects spending $28
million over the next five years for capital expenditures on its existing real
estate portfolio. Expenditures in 1995 and 1996 are projected to be $2.5
million and $6.5 million, respectively. Funding for these expenditures is
projected to be available from internally generated cash.
GENERAL
- - -------
Hackensack, UWR's principal utility subsidiary, and Spring Valley, a
subsidiary of Hackensack, provide public water supply service to more than a
million people in northern New Jersey and southern New York. General Waterworks
provides public water supply services to approximately one million people in 14
states, including primarily Arkansas, Delaware, Florida, Idaho, New Jersey, New
Mexico, New York and Pennsylvania. In addition, two of its utilities, in
Florida and New Mexico, also provide wastewater collection and treatment
services, generally to their water customers. The water utility business is
cyclical in nature, with the summer months accounting for the major portion of
the subsidiaries' revenue and earnings.
Rivervale, UWR's real estate subsidiary, is a non-regulated business engaged
in real estate acquisitions and development, leasing and sales, golf course
operations and consulting activities. It holds properties in Bergen and Essex
Counties, New Jersey; and Orange, Westchester and Rockland County, New York.
Because the timing of property sales, and therefore the earnings, of UWR's real
estate operations tend to be less predictable and regular than those of the
regulated utility operations, the real estate operations generally result in a
greater variability in UWR's earnings pattern.
<PAGE>
RATE MATTERS
- - ------------
HACKENSACK WATER COMPANY
On October 12, 1993, a rate increase of approximately 3.1%, or $3.5 million,
became effective. This increase, which resulted from the settlement of
a dispute involving a transfer of land from Hackensack to Rivervale, will not
have a cash flow effect on UWR for approximately two years, because offsetting
credits related to the settlement will be applied to customer bills during that
period.
SPRING VALLEY WATER COMPANY
In July 1992, Spring Valley applied to the Public Service Commission (PSC) for
permission to increase its annual revenues by $5 million, or 14.4%, to offset
the effects of continued investment in plant facilities and increases in
operating expenses. On May 12, 1993, the PSC rendered its decision, allowing
Spring Valley an overall rate of return of 8.75% and a return on equity of
10.5%. The decision provided for an increase in annual revenues of
approximately $1.9 million, or 5.7%, which became effective on May 30, 1993.
The PSC also allowed Spring Valley to recover approximately $850,000 of
previously deferred expenses and required it to refund certain revenue credits
of approximately $1 million immediately. This action, which resulted in a one-
time increase in revenues and various expenses in the second quarter of 1993,
did not have a material effect on net income. The PSC's decision also permitted
Spring Valley to submit a second stage filing after February 1, 1994 to recover
increases in property taxes, salaries and wages, and medical benefits that were
not provided for in their previous determination. In February 1994, Spring
Valley made its second stage filing which seeks to increase revenues by
approximately $1.6 million, or 4.4%. In addition to these items, the second
stage filing also seeks rate recognition of its postretirement benefits other
than pensions on an accrual basis. Spring Valley anticipates a PSC decision on
its request in June 1994.
The PSC's May 1993 decision also directed Spring Valley to institute a Revenue
Reconciliation Clause (RRC), which requires Spring Valley to reconcile billed
revenues with the pro forma revenues that were used to set rates. Any variances
outside a 1% range are accrued or deferred for subsequent recovery from or
refund to customers. As a result of the hot weather experienced during the
summer of 1993, the RRC resulted in the deferral of $1.4 million, which will be
used in part to recover certain deferred costs. The remaining balance will be
refunded to Spring Valley customers along with previous RRC credit balances over
a three-year period beginning in July 1994.
In 1985, the New York PSC authorized the sale and transfer of 23 acres of land
from Spring Valley to Rivervale. Subsequently, the PSC initiated an
administrative proceeding arising from an Order inquiring into the price for the
transfer of the land, and in September 1990 ordered Spring Valley to record a
deferred credit that reduced rate base by $1.9 million to reflect the
appreciated value of the property as of the date of sale of the land. In
January 1991 Spring Valley filed an appeal with the New York State Supreme Court
Appellate Division regarding the PSC decision, and in February 1992 the
Appellate Division affirmed the action of the PSC. The effect of that decision
on United Water was recognized by an after-tax charge against income of $809,000
in 1991. Spring Valley filed with the New York Court of Appeals a Motion for
Leave to Appeal, which was denied on September 17, 1992. Spring Valley
submitted a proposal to the PSC to make a one-time customer refund through
billing credits of a portion of the deferred credit, and this was approved by
the Commission on April 6, 1994. The net effect of this decision on UWR was to
recognize a one-time refund to customers of $281,000 in April 1994.
GENERAL WATERWORKS
At March 31, 1994, the utility subsidiaries of General Waterworks had eight
rate cases pending, in which UWR expects to receive an aggregate annual revenue
increase of approximately $6.3 million, only a small portion of which will
affect 1994. The carry-over revenue effect of rate awards received in 1993 to
1994, subsequent to the merger, is expected to be approximately $2.4 million.
Although UWR anticipates that the utility subsidiaries of General Waterworks
will file additional rate cases in 1994, it does not expect that those rate
awards, if received in 1994, would have a significant impact on revenues in
1994.
<PAGE>
RESULTS OF OPERATIONS
- - ---------------------
OVERVIEW
United Water's consolidated net income for the first quarter of 1994 was $2.4
million, an increase of 235% from $.7 million in the comparable period in 1993.
Net income per common share for the first quarter of 1994 was 12 cents versus 4
cents for the same period last year, despite an 8.0% rise in the average number
of common shares outstanding. This increase in consolidated net income is
primarily attributable to the recognition of the award of escrow monies to
Rivervale following a foreclosure settlement. The terms of the settlement
required the owner to give up any claims against Rivervale relating to the
Emerson golf course received in the settlement by Rivervale.
REVENUES
The $3.1 million, or 8.7%, increase in revenues from the same period in 1993
is attributable to the following factors:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
OPERATING REVENUES 1994 VS. 1993
----------------------------
(thousands of dollars)
------------------------
<S> <C> <C>
Utilities:
Rate impact $1,216 3.4%
Consumption 436 1.2%
Other (20) (0.1%)
Real Estate 402 1.1%
Other operations 1,086 3.0%
------ ----
$3,120 8.7%
</TABLE>
The rate impact of 3.4% in utility revenues in 1994 resulted from a 5.7%
Spring Valley rate increase in May 1993, and a 3.1% Hackensack rate increase in
October 1993. Higher volumes of water sold by both utilities resulted in the
increase in revenues due to consumption. Real estate revenues increased 1.1% due
to a land sale in the first quarter of 1994. A meter installation contract for
the City of New York contributed to the 3.0% increase in other operation
revenues over the same quarter in 1993.
COSTS AND EXPENSES
The change in operating expenses from the same period in 1993 is due to the
following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
OPERATING EXPENSES 1994 VS. 1993
----------------------------
(thousands of dollars)
---------------------------
<S> <C> <C>
Operation and Maintenance $2,674 14.6%
Depreciation 95 2.7%
General Taxes 212 3.0%
--------------------------- ------ ----
</TABLE>
Operation and maintenance increased $2.7 million, or 14.6%, compared to the
same period in 1993. This increase was primarily due to expenses related to
meter installations for the New York City contract and the sale of real estate.
An increased number of main breaks caused by severe winter weather and higher
chemical costs for water treatment also contributed to the increase in operation
and maintenance expenses in 1994.
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
- - ---------------------
Depreciation increased by 2.7% as a result of additional facilities placed
in service and because of an increase in Spring Valley's composite rate from 2%
to 2.2% in the second quarter of 1993 as permitted in a rate order received in
May of 1993.
General taxes increased $212,000, or 3%, mainly due to higher revenue and an
increase in property related taxes.
INTEREST AND OTHER
Consolidated interest expense increased $278,000, or 5%, due to an increase
in short-term borrowings.
Other income increased in the first quarter of 1994 by $2.9 million, or
140.4%, primarily due to the recognition of the award of escrow monies to
Rivervale following a foreclosure settlement.
INCOME TAXES
The effective income tax rate on income before preferred dividends was 35.6%
in the first quarter of 1994, as compared to 30.7% in the same quarter last
year. In 1994, the provision for income taxes increased $1 million, or 183.1%,
over the same period last year, mainly due to the state income tax effect of the
forementioned foreclosure settlement, higher water sales, and an increase in the
statutory federal income tax rate.
EFFECTS OF INFLATION
Operating income from utility operations is normally not materially
affected by inflation because cost increases generally lead to proportionate
increases in revenues allowed through the regulatory process. However, there is
a lag in the recovery of higher expenses through the regulatory process,
therefore, high inflation could have a detrimental effect on the company until
rate increases are received. Conversely, lower inflation and lower interest
rates tend to result in reductions in the rates of return allowed by the utility
commissions, as has happened over the last several years.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- - ----------------------------
The Paterson Municipal Utilities Authority filed suit against Hackensack
and the North Jersey District Water Supply Commission. Summons and Complaint
were served on August 8, 1990. The suit was based on alleged ownership of
various water rights in the Passaic River owned by the Authority and which the
Authority claimed were, or may have been, affected by diversions from the
Wanaque South Project, in which Hackensack is an equal partner with the North
Jersey District Water Supply Commission. Hackensack's Motion for Summary
Judgement, dismissing the Complaint, was granted by the trial court on July 23,
1992. On October 5, 1992, the Paterson Municipal Utilities Authority filed a
Notice of Appeal; the matter was argued before the Appellate Division in April
1994, and the Appellate Division in May 1994 affirmed the dismissal.
In 1985, the New York PSC authorized the sale and transfer of 23 acres of
land from Spring Valley to Rivervale. Subsequently, the PSC initiated an
administrative proceeding arising from an Order inquiring into the price for the
transfer of the land, and in September 1990 ordered Spring Valley to record a
deferred credit that reduced rate base by $1.9 million to reflect the
appreciated value of the property as of the date of sale of the land. In
January 1991 Spring Valley filed an appeal with the New York State Supreme Court
Appellate Division regarding the PSC decision, and in February 1992 the
Appellate Division affirmed the action of the PSC. The effect of that decision
on United Water was recognized by an after-tax charge against income of $809,000
in 1991. Spring Valley filed with the New York Court of Appeals a Motion for
Leave to Appeal, which was denied on September 17, 1992. Spring Valley
submitted a proposal to the PSC to make a one-time customer refund through
billing credits of a portion of the deferred credit, and this was approved by
the Commission on April 6, 1994. The net effect of this decision on UWR was to
recognize a one-time refund to customers of $281,000 in April 1994.
On August 6, 1991, Rivervale entered into a modification agreement relating
to the outstanding proceeds being held in escrow from the sale of the Emerson
Country Club. The modification provided for additional collateral to secure the
purchase, the loan of the escrow monies in the amount of $13.1 million to the
buyer, and a release of the remaining portion of the escrow funds in the amount
of $4.4 million to Rivervale. The release to the buyer was secured by a note
and mortgage on the Country Club and certain other properties owned by the
buyer, together with a guaranty from the buyer's parent company, as additional
security for the substitution of collateral. The buyer failed to make its
scheduled March 1992 and all subsequent payments, and as a result, the note was
placed in a non-accrual status. Rivervale began an action in foreclosure, which
the buyer challenged. By Superior Court Order dated February 10, 1993,
Rivervale was awarded possession of the course and operated the facility during
the 1993 season. On March 18, 1994, Rivervale and the buyer entered into a
stipulation of settlement whereby Rivervale acquired additional property from
the buyer for $2 million. The stipulation also requires the buyer to give up
all claims to the golf course parcel, forfeit his escrow deposit, and withdraw
all actions against Rivervale and UWR. The closing of the settlement occurred
on March 30, 1994.
In addition to the matters mentioned herein, UWR is involved in litigation
dealing with numerous aspects of its business operations. Based upon advice
from counsel, management believes Hackensack, Spring Valley and Rivervale have
meritorious defenses in all of the claims which remain pending and intend to
contest them vigorously. The likelihood that the ultimate resolution will have
a material effect upon the financial position or results of operations of United
Water or its subsidiaries is considered to be remote.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- - --------------------------------------------------------------
(a) At a Special Meeting of the shareholders of the Company on March 10,
1994, the shareholders approved the Merger of the Company and GWC
Corporation. The Merger was completed on April 22, 1994.
(c) On March 10, 1994, special meetings of the stockholders of United
Water Resources Inc. and GWC Corporation were held to consider and
vote upon a proposal to approve an Amended and Restated Plan of Merger
dated as of September 15, 1993 between United Water Resources Inc. and
GWC Corporation pursuant to which GWC Corporation would merge with and
into United Water Resources Inc. The number of votes cast and in
favor of the proposed Merger were as follows:
(1) United Water Resources Vote:
Entitled to Vote: 20,494,184 Voting: 13,050,518
For: 12,498,712
(2) GWC Corporation Vote:
Entitled to Vote: 11,066,600 Voting: 10,770,183
For: 10,701,513
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- - ------- --------------------------------
(b) A current report on Form 8-K regarding the merger of GWC Corporation
with and into United Water Resources Inc. was filed by UWR on May 4,
1994.
<PAGE>
S I G N A T U R E
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.
UNITED WATER RESOURCES INC.
------------------------------
(Registrant)
Date: May 13, 1994 By /s/ John J. Turner
------------ ----------------------
(Signature)
John J. Turner
Vice President and
Controller
DULY AUTHORIZED AND CHIEF
ACCOUNTING OFFICER
