Document Summary:
Document: EDGAR10Q
Author:
Addressee:
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Creation Date: 02/21/1994
Modification Date: 05/15/1995
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Comments:
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, 1995
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 0-15420
IWC RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
Indiana 35-1668886
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1220 Waterway Boulevard, Indianapolis, Indiana 46202
(Address of principal executive office) (Zip Code)
(317) 639-1501
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 twelve 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 the latest practicable date:
Common Stock, no par value per share 6,938,057
Class Outstanding at 4-1-95
IWC RESOURCES CORPORATION AND SUBSIDIARIES
Index
Part I. Financial Information:
Consolidated Balance Sheets as of March 31, 1995 and
1994, and December 31, 1994 (Unaudited)
Consolidated Statement of Shareholders' Equity - Three
Months ended March 31, 1995 (Unaudited)
Consolidated Statements of Earnings - Three Months ended
March 31, 1995 and 1994 (Unaudited)
Consolidated Statements of Cash Flows -
Three Months ended March 31, 1995 and 1994 (Unaudited)
Notes to Consolidated Financial Statements (Unaudited)
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Part II. Other Information:
<TABLE>
PART I. FINANCIAL INFORMATION
IWC RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1995 and 1994 and December 31, 1994
(Unaudited)
<CAPTION>
March 31, December 31,
1995 1994 1994
(in thousands)
ASSETS
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 1,518 1,925 2,889
Accounts receivable, less allowance for
doubtful accounts of $190 10,579 9,712 10,124
Materials and supplies, at average cost 2,099 1,812 2,257
Other current assets 1,447 881 1,099
Total current assets 15,643 14,330 16,369
Utility plant:
Utility plant in service 347,090 325,961 343,488
Less accumulated depreciation 77,370 71,928 75,801
Net plant in service 269,720 254,033 267,687
Construction work in progress 8,889 8,940 7,407
Utility plant, net 278,609 262,973 275,094
Construction funds held by Trustee - 2,023 -
Other property 14,817 7,370 13,053
Goodwill, net of accumulated amortization 16,836 17,347 16,964
Deferred charges and other assets 14,729 12,380 13,902
$340,634 316,423 335,382
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 22,454 9,937 17,674
Current portion of long-term debt - - 1,150
Accounts payable and accrued expenses 17,079 15,541 16,295
Dividends payable 51 51 -
Federal income taxes 1,538 742 256
Customer deposits 1,140 1,058 1,126
Total current liabilities 42,262 27,329 36,501
Long-term obligations:
Long-term debt, less current portion 98,225 99,375 98,225
Customer advances for construction 48,487 45,569 48,750
Other liabilities 6,904 5,592 6,079
Total long-term obligations 153,616 150,536 153,054
Deferred income taxes 31,347 28,887 31,003
Contributions in aid of construction 30,527 28,586 30,181
Preferred stock of subsidiary and
redeemable preferred stock 5,705 5,705 5,705
Shareholders' equity
Common stock, authorized 10,000 common
shares; 6,932, 6,836, and 6,886 issued
and outstanding, respectively 61,736 59,600 60,540
Retained earnings 16,241 15,929 18,398
77,977 75,529 78,938
Less unearned compensation 800 149 -
Total shareholders' equity 77,177 75,380 78,938
Commitments and contingencies
$340,634 316,423 335,382
======= ======= =======
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<TABLE>
IWC RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three months ended March 31, 1995
(Unaudited)
<CAPTION>
Total
Common Stock Retained Unearned Shareholders'
Shares Amount Earnings Compensation Equity
(In thousands, except share data)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 6,886,271 $ 60,540 $ 18,398 $ - $ 78,938
Net earnings - - 282 - 282
Dividends - $.35 per share:
Common Stock - - (2,421) - (2,421)
Redeemable preferred stock - - (18) - (18)
Common stock issued:
Dividend Reinvestment Plan 16,618 318 - - 318
Restricted stock plan 29,461 878 - (878) -
Compensation expense - - - 78 78
Balance at March 31, 1995 6,932,350 $ 61,736 $ 16,241 $ (800) $ 77,177
========= ======= ======= === =======
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
IWC RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
For the three months ended March 31, 1995 and 1994
(Unaudited)
Three Months
Ended March 31,
1995 1994
(in thousands, except per share data)
Operating revenues:
Water utilities $17,066 16,085
Utility-related services 6,448 5,274
23,514 21,359
Operating expenses:
Operation and administration:
Water utilities 8,601 8,641
Utility-related services 7,305 5,459
Depreciation 2,126 1,839
Taxes other than income taxes 2,272 1,907
Total operating expenses 20,304 17,846
Operating earnings 3,210 3,513
Other income (expense):
Interest expense, net (2,173) (1,816)
Interest income 2 44
Dividends on preferred
stock of subsidiary (51) (51)
Other, net 588 (395)
(1,634) (2,218)
Earnings before income taxes 1,576 1,295
Income taxes 1,294 872
Net earnings $ 282 423
====== ======
Net earnings per common and common
equivalent share $ .04 .06
====== ======
Average number of common
and common equivalent shares outstanding 6,974 6,879
====== ======
The accompanying notes are an integral part of the
consolidated financial statements.
<TABLE>
IWC RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1995 and 1994
(Unaudited)
<CAPTION>
Three Months
Ended March 31,
1995 1994
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 282 423
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 2,539 2,206
Deferred income taxes 344 63
Gain on sales of other property (632) -
Provision for bad debts 95 105
Dividends on preferred stock of subsidiary 51 51
Other, net 288 (244)
Changes in operating assets and liabilities:
Accounts receivable (550) (302)
Materials and supplies 158 (90)
Other current assets 212 (10)
Accounts payable and accrued expenses 849 1,161
Federal income taxes 1,282 299
Customer deposits 14 31
Net cash provided by operating activities 4,932 3,693
Cash flows from investing activities:
Additions to utility plant and other property (7,607) (4,568)
Proceeds from sales of other property 156 -
Customer advances for construction 1,485 3,234
Refunds of customer advances for construction (1,402) (991)
Other investing activities, net (379) (17)
Net cash used by investing activities (7,747) (2,342)
Cash flows from financing activities:
Increase (decrease) in notes payable to banks 4,780 (11,842)
Proceeds from long-term debt - 14,000
Payments of long-term debt (1,215) (1,277)
Increase in construction funds
held by Trustee - (13)
Cash dividends (2,439) (2,406)
Proceeds from issuance of common stock 318 299
Net cash provided (used) by
financing activities 1,444 (1,239)
Increase (decrease) in cash and cash equivalents (1,371) 112
Cash and cash equivalents at beginning of period 2,889 1,813
Cash and cash equivalents at end of period $ 1,518 1,925
====== ======
Supplemental disclosures of cash flow information-
Cash paid for:
Interest on long-term debt and notes payable
to banks, net of capitalized interest $ 2,704 2,178
Income taxes $ 56 414
The accompanying notes are an integral part of the
consolidated financial statements.
</TABLE>
IWC RESOURCES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
BASIS OF PRESENTATION
The foregoing consolidated financial statements are unaudited.
However, in the opinion of management, all adjustments (comprising
only normal recurring accruals) necessary for a fair presentation
of the financial statements have been included. Results for any
interim period are not necessarily indicative of results to be
expected for the year. The consolidated financial statements
include the accounts of IWC Resources Corporation (Resources) and
its wholly owned subsidiaries. The term "Company" refers to the
consolidated operations of Resources and its subsidiaries.
Through its water utility subsidiaries, the Company owns and
operates waterworks systems supplying water for residential,
commercial and industrial uses, and for fire protection in
Indianapolis, Indiana, and the surrounding area. These
subsidiaries are regulated by the Indiana Utility Regulatory
Commission (Commission), and their accounting policies, which are
substantially consistent with generally accepted accounting
principles, are governed by the Commission. The Company also owns
and operates businesses which are involved in utility line
locating, data processing and other utility-related services, and
real estate sales and development. All significant intercompany
accounts and transactions have been eliminated in consolidation.
A summary of the Company's significant accounting policies is set
forth in Notes to Consolidated Financial Statements in the
Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
CURRENT EVENTS
Rate Case
On August 10, 1994, the Commission approved the merger of
Indianapolis Water Company (IWC) and Zionsville Water Corporation
and an immediate increase in their combined rates of approximately
$1.3 million or 2%. IWC had requested an increase in combined
annual revenues of $8.9 million, or 14%.
The Commission deferred increasing IWC's rates to cover
implementation of accrual accounting for postretirement life
insurance and healthcare benefits (OPRBs), in accordance with
Statement of Financial Accounting Standards No. 106 (SFAS No. 106),
pending a determination of an appropriate restricted fund for the
related revenues. The annual rate effect of such higher costs (3%
of the requested 14% increase in combined annual revenues), has
been deferred as a regulatory asset, with the Commission's
authorization, to be ultimately recoverable. On April 26, 1995,
the Commission approved a grantor trust for these funds, as agreed
upon by IWC and the Utility Consumer Counselor (UCC) and a related
annual increase in IWC's water rates of approximately $1.8 million,
to cover current costs and the amortization of the regulatory asset
over approximately 18 years.
The Grantor Trust provides for the transfer to the Trust monthly
and subsequent investing and disbursing by the Trust of all amounts
received by IWC in rates to cover its OPRB obligations. The Trust
Agreement contains certain provisions which limit investment
activities, provide for annual reporting and, in the event that
Trust funds are no longer needed for OPRB purposes, directs payment
of the remaining funds to IWC ratepayers.
On September 23, 1994, IWC filed a petition with the Commission for
approval of a new schedule of rates and charges. The increase in
revenues ultimately sought by IWC was approximately $5.1 million,
or 7.7%, based on water consumption for the twelve months ended
June 30, 1994. IWC prefiled evidence in support of the request on
November 21, 1994, and supplementary evidence on March 9-10, 1995.
On April 5, 1995, the UCC, four intervening customers and IWC filed
a Stipulation and Settlement Agreement, which was revised on
April 27, 1995, setting forth the parties' agreement resolving all
issues in this case and their recommendation that the Commission
approve an annual increase in IWC's rates of $2,547,000 or 4%. The
parties further agreed not to seek an adjustment in IWC's basic
rates and charges prior to April 1, 1997, subject to IWC's interim
right to request approval of new rates to cover operating expenses
connected with implementing measures which might be required to be
taken in connection with new National Pollutant Discharge
Elimination System permits which IWC anticipates receiving for
wastewater discharges at its Fall Creek and White River Stations
(NPDES permits). The parties agreed that IWC may request that the
Commission approve, in a separate proceeding, prior to April 1,
1997, the continuation of the allowance for funds used during
construction (debt component only), and the deferral of
depreciation, on such capital expenditures made in connection with
the NPDES permits and IWC's anticipated South Well Field Station
until a rate base determination in IWC's next rate case. On May
10, 1995, Commission approved the parties' settlement and the
related rate increase.
On March 22, 1995, the Commission granted IWC authority to issue,
on or before December 31, 1996, an aggregate of $30 million in
securities, to consist of not more than $18 million in the form of
long-term debt and/or preferred equity, and, assuming favorable
market conditions, at least $12 million in common equity. The
timing and amount of the securities to be issued will be based on
fund requirements and market conditions. IWC currently anticipates
issuing $18 million of term debt in 1995. Proceeds from the
issuance of these securities will be used for the construction,
extension and improvement of its facilities, plant and distribution
system, reimbursement of IWC's treasury for plant capital
expenditures previously made, and the discharge or refunding of
short-term debt and higher cost long-term debt.
-2-
Notes Payable to Banks and Long-term Debt
In March 1995, the Company prepaid $1,150,000 in principal amount
of its 12-7/8% Series Bonds, due $230,000 in each of the years 1998
through 2002, at a premium of $65,000. Funds used to prepay the
amount were derived from proceeds of the sale of common shares
through the Company's Dividend Reinvestment and Share Purchase
Plan.
COMMITMENTS AND CONTINGENCIES
Pursuant to the 1986 Amendments of the Safe Drinking Water Act, the
United States Environmental Protection Agency (EPA) continues to
propose new drinking water standards and requirements which, if
promulgated, could be costly and require substantial changes in
current operations of the Company. The outcome of EPA's proposals
are uncertain at this time. Additionally, the Indiana Department
of Environmental Management issues permits for discharges from the
Company's treatment stations, the terms and limitations of which
can, and may well be, onerous and expensive.
The Company has agreements with four key executives which provide
that in the event of change of control of the Company, each
executive vests in a three-year employment contract at his then
existing level of compensation.
RECLASSIFICATIONS
Certain amounts as of March 31, 1994 have been reclassified to
conform with the 1995 presentation.
-3-
IWC Resources Corporation and Subsidiaries
Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
The most significant changes in the consolidated financial
condition and results of operations of IWC Resources Corporation
and subsidiaries (Company) are attributable to the combined
operations of its two segments: (1) water utilities and (2)
utility-related services. These segments are discussed more
fully in Notes to Consolidated Financial Statements, Segment
Reporting, in the Company's Annual Report on Form 10-K for the
year ended December 31, 1994.
The Company's results of operations for both water utilities and
utility-related services segments are seasonal in nature with
the higher proportion of operating revenues and operating
earnings being realized in the second and third quarters of the
year than the first and fourth quarters. Such seasonality is
considered by the Company in developing its budgets by quarter.
Three Months Ended March 31, 1995, Compared with
Three Months Ended March 31, 1994
During the three months ended March 31, 1995, operating revenues
and operation and administration expenses were $17,066,000 and
$8,601,000, respectively, for the water utilities segment and
$6,448,000 and $7,305,000, respectively, for the utility-related
services segment. This compares to operating revenues and
operation and administration expenses of $16,085,000 and
$8,641,000, respectively, for the water utilities segment and
$5,274,000 and $5,459,000, respectively, for the utility-related
services segment during the three months ended March 31, 1994.
The improvement in operating results in the water utilities
segment is due primarily to an increase in water rates effective
August 10, 1994, and a reduction in certain expenses resulting
from a milder winter in 1995 as compared to the same period in
1994. Operating results in the utility-related services segment
declined as anticipated and is primarily due to expenses
incurred associated with the expansion of business in this
segment.
-4-
Following is a discussion and analysis of actual operating results.
Total operating revenues increased $2,155,000 (10.l%). Operating
revenues applicable to the water utilities segment increased
$371,000, excluding an increase of $610,000 in income taxes collected
from developers, representing a 2.3% increase over 1994, and is
primarily due to a 2% increase in water rates which was approved by
the Indiana Utility Regulatory Commission effective August 10, 1994.
The increase in utility-related services segment operating revenues
of $1,174,000 is due primarily to the continued expansion of business
contracts at several operating locations.
Total operation and administration expenses increased $1,806,000
(12.8%). Operation and administration expenses applicable to the
water utilities segment decreased $40,000 (.5%). Labor expenses
decreased $179,000 (5.1%) mainly due to the net effects of a
reduction in maintenance repairs experienced resulting from milder
weather in 1995 as compared to the extremely cold weather in January
and February of 1994, and a general wage increase, effective January
1, 1995. Materials and transportation costs decreased $128,000
(18.8%) largely due to the reduction in maintenance activities. The
cost of outside services increased $115,000 (7.9%) chiefly due to an
increase in consulting and other services. Insurance expense
increased $97,000 (10.0%) reflecting higher health and general
liability insurance premium costs. Regulatory expenses increased
$97,000 (33.5%) primarily due to increased rate case expenses.
Operation and administration expenses applicable to the
utility-related services segment increased $1,846,000 (33.8%). Labor
expenses increased $1,123,000 (32.0%) primarily due to the addition
of employees resulting from the expansion of business in this
segment. Materials expense decreased $76,000 (14.3%) primarily due
to start-up costs incurred in 1994. Transportation costs increased
$205,000 (60.4%) primarily due to the increase in the number of
vehicles and associated costs to maintain the existing fleet.
Insurance expense increased $142,000 (24.4%) primarily due to higher
healthcare premiums and increases in general liability and worker's
compensation insurance premiums. Fringe benefit costs, including
pension related benefits, increased $218,000 (67.8%) primarily due to
the cost of increased benefits provided to an increasing employee
base. Cable cut costs increased $95,000 (58.1%) primarily due to the
expansion of business and the increased costs associated with cuts.
Depreciation increased $287,000 (15.6%) of which $173,000 is
applicable to the utility-related services segment. The increase in
water utilities segment and utility-related services segment
depreciation represents a 7.7% and 47.1% increase, respectively, over
1994 and is primarily due to additional utility plant and other
property placed in service.
-5-
Taxes, other than income taxes, increased $365,000 (19.1%) of which
$165,000 is applicable to the utility-related services segment. The
increase in taxes, other than income taxes in the water utilities
segment, represents an 11.9% increase over 1994, and is primarily due
to an increase in property taxes resulting from additional plant in
service. The increase in such taxes in the utility-related services
segment amounts to 39.1% and is due primarily to additional payroll
taxes resulting from the increased employee base.
The increase in interest expense, net, of $357,000 (19.7%) is largely
due to the combined effects of higher total debt outstanding and
higher interest rates. Other, net, increased $983,000 primarily due
to gain on sales of other property and pretax earnings of an
unconsolidated partnership interest.
Income taxes increased $422,000 (48.4%) primarily due to the net
effects of an increase of $610,000 in income taxes collected from
developers and lower pretax earnings.
-6-
Liquidity and Capital Resources
At the present time, the majority of the Company's business
activities are conducted through its water utilities. In 1993, the
Company acquired SM&P which diversified the Company's operations.
The Company may, in the future, become involved in other water
utilities and utility-related activities through the acquisition or
formation of additional subsidiaries. The source of capital to
finance these subsidiaries will be determined at the time they are
established or acquired. However, the Company does not intend to
enter into any business that would impair the Company's primary
commitment to maintain and develop its water utilities to meet the
current and future needs of their customers.
Cash Flows From Operating Activities
Cash flows from operating activities result primarily from net
earnings adjusted for non-cash items such as depreciation and
deferred taxes and changes in operating assets and liabilities. The
seasonal nature of the Company's business typically results in higher
operating revenues in the second and third quarters of the year than
in the first and fourth quarters. Fluctuations in accounts payable
and accrued expenses result primarily from property taxes and timing
of payments, whereas federal income taxes vary with pretax earnings
and the level of taxable customer advances for construction received
by the Company.
Cash Flows From Investing Activities
Cash flows from investing activities fluctuate primarily as a result
of additions to utility plant and other property and the level of
customer advances for construction, net of refunds.
During 1994, the Company added $28,256,000 to utility plant and other
property and approximately 113 miles of new mains were placed in
service. The Company received approximately $9,200,000 in new
customer advances for construction of new mains in 1994 and refunded
approximately $2,200,000. Such advances are subject to refund over a
ten-year period based on the addition of new customers to the
constructed mains.
The Company continues to experience significant growth in its
distribution system. The Company received $1,485,000 in new customer
advances and refunded $1,402,000 in customer advances during the
three months ended March 31, 1995, compared to $3,234,000 and
$991,000, respectively, during the three months ended March 31,
1994. The Company also added $7,607,000 to utility plant and other
property during the three months ended March 31, 1995, compared to
$4,568,000 during the three months ended March 31, 1994.
-7-
Cash Flows From Financing Activities
Cash flows from financing activities consist primarily of the
Company's borrowings, dividend payments and sales of common stock.
The Company utilizes borrowings against its lines of credit with
local banks for its short-term cash needs.
In January 1994, the Company prepaid $1,200,000 in principal amount
of its 12-7/8% Series Bonds at a premium of $77,000 and in March
1995, prepaid an additional $1,150,000 in principal amount of these
bonds at a premium of $65,000. Funds used to prepay the amounts in
1994 and 1995 were derived from proceeds of the sale of common shares
through the Company's Dividend Reinvestment and Share Purchase Plan.
During March 1994, the Company issued $14,000,000 of 6.31% Senior
Notes due in 2001. Proceeds from the notes were used to repay
$13,700,000 in short-term notes payable to banks.
In March 1995, the Commission gave IWC approval to issue on or before
December 31, 1996, up to $30 million in principal amount of long-term
debt, preferred stock and common equity capital.
Approximately 95%, 99%, and 110% of net earnings applicable to common
and common equivalent shares were declared payable in cash dividends
during 1994, 1993, and 1992, respectively. Long-term debt, as a
percentage of total capital and long-term debt, increased to 55.4% at
December 31, 1994, compared to 52.6% at December 31, 1993, and 56.2%
at December 31, 1992. The increase in 1994 in the "debt ratio" was
primarily due to the net effects of the issuance of new long-term
debt of $14,000,000, issuance of common stock through the Company's
dividend reinvestment and restricted stock plans of $1,239,000 and an
increase in retained earnings of $486,000.
At March 31, 1995, the Company had lines of credit for working
capital purposes of $23,200,000; borrowings under the lines at this
date were $20,821,000.
-8-
Capital Expenditures
Capital expenditures for 1995 are budgeted at approximately
$33,000,000 and will be financed primarily from internally generated
cash, customer advances for construction, short-term bank borrowings,
and long-term financings. Capital expenditures for the five-year
period 1995 through 1999 are budgeted at approximately $111,000,000
with the major portion for new mains and distribution and plant
facilities. The Company anticipates that it will be necessary during
the five-year period 1995 through 1999 to secure additional outside
financing from both short- and long-term debt and equity capital in
order to finance planned capital expenditures and long-term debt
maturities.
Projected capital expenditures do not include any construction
projects that IWC could be required to undertake to comply with
legislative or regulatory environmental or water quality requirements
that may be imposed in the future. If IWC is required to adopt new
methods of water treatment, the costs involved may be substantial.
Capital costs are presently estimated at $27,000,000 for ozonation
and $105,000,000 for granular activated carbon (GAC). Additionally,
IWC is subject to regulatory requirements regarding discharges from
its treatment plants. Such costs should be recoverable through water
rates, but only after appropriate regulatory action.
Environmental Matters
The Company's utility operations are subject to pollution control and
water quality control regulations, including those issued by the
Environmental Protection Agency (EPA), the Indiana Department of
Environmental Management (IDEM), the Indiana Water Pollution Control
Board and the Indiana Department of Natural Resources. Under the
Federal Clean Water Act and Indiana's regulations, the Company must
obtain National Pollutant Discharge Elimination System (NPDES)
permits for discharges from its White River, Fall Creek, Thomas W.
Moses and the Geist treatment stations. The Company's current NPDES
permits were to expire June 30, 1989, for White River and Fall Creek
stations, and December 31, 1990, for Thomas W. Moses treatment
station and April 30, 1994 for Geist treatment station. Applications
for renewal of the permits have been filed with, but not finalized
by, IDEM (these permits continue in effect pending review of the
applications). IDEM has authority to propose new requirements and
restrictions with respect to these permits and such limitations could
be difficult and expensive. The full impact of any such restrictions
cannot be assessed with certainty at this time. The Company
anticipates, however, that the capital costs and expense of
compliance with such restrictions could be significant.
-9-
Under the federal Safe Drinking Water Act (SDWA), the Company is
subject to regulation by EPA of the quality of water it sells and
treatment techniques it uses to make the water potable. EPA
promulgates nationally applicable maximum contaminant levels (MCLs)
for "contaminants" found in drinking water. Management believes that
the Company is currently in compliance with all MCLs promulgated to
date. EPA has continuing authority, however, to issue additional
regulations under the SDWA, and Congress amended the SDWA in July
1986 to require EPA, within a three-year period, to promulgate MCLs
for over 80 chemicals not then regulated. EPA has been unable to
meet the three-year deadline, but has promulgated MCLs for many of
these chemicals and has proposed additional MCLs. Management of the
Company believes that it will be able to comply with the promulgated
MCLs and those now proposed without any change in treatment
technique, but anticipates that in the future, because of EPA
regulations, the Company may have to change its method of treating
drinking water to include ozonation and/or GAC. In either case, the
capital costs could be significant (currently estimated at
$27,000,000 for ozonation and $105,000,000 for GAC), as would be the
Company's increase in annual operating costs (currently estimated at
$1,400,000 for ozonation and $5,600,000 for GAC). Actual costs could
exceed these estimates. The Company would expect to recover such
costs through its water rates; however, such recovery may not
necessarily be timely.
Under a 1991 law enacted by the Indiana Legislature, a water utility,
including the utility subsidiaries of the Company, may petition the
Indiana Utility Regulatory Commission (Commission) for prior approval
of its plans and estimated expenditures required to comply with
provisions of, and regulations under, the Federal Clean Water Act and
SDWA. Upon obtaining such approval, the utility may include, to the
extent of its estimated costs as approved by the Commission, such
costs in its rate base for ratemaking purposes and recover its costs
of developing and implementing the approved plans if statutory
standards are met. The capital costs for such new systems, equipment
or facilities or modifications of existing facilities may be included
in the utility's rate base upon completion of construction of the
project or any part thereof. While use of this statute is voluntary
on the part of a utility, if utilized, it should allow utilities a
greater degree of confidence in recovering major costs incurred to
comply with environmentally related laws on a timely basis.
-10-
Inflation, Rate Changes and Seasonality
Under normal conditions and particularly during periods of inflation,
water utility revenues from increased water consumption will not keep
pace with the increase in operating costs. Therefore, periodic water
rate and service charge adjustments are necessary, with the frequency
of such increases being partially determined by the amount of
inflation.
Results for any interim period are not indicative of results to be
expected for the year. Typically, the seasonal nature of the
Company's business results in a higher proportion of operating
revenues being realized in the second and third quarters of the year
than the first and fourth quarters of the year.
-11-
Part II. OTHER INFORMATION
IWC RESOURCES CORPORATION AND SUBSIDIARIES
March 31, 1995
Item 4. Submission of Matters to Vote of Security Holders
The annual meeting of the shareholders of the Company was
held on April 20, 1995.
Election of Directors
The following table sets forth the nominees elected at the
annual meeting, and the number of votes cast for, or
withheld, as well as the number of broker non-votes, with
respect to each nominee. The number of abstentions recorded
is not applicable to the election of directors.
Votes Votes Broker
Nominee Cast for Withheld Non-Votes
Joseph D. Barnette, Jr. 4,798,380 98,760 0
Otto N. Frenzel III 4,827,767 69,373 0
Fred E. Schlegel 4,837,110 60,030 0
Susan O. Connor 4,783,393 113,747 0
J. A. Rosenfeld 4,822,988 74,152 0
Other Matters Voted Upon at the Meeting
KPMG Peat Marwick LLP was appointed as auditor for the
Company for 1995. There were 4,808,963 votes cast in favor,
18,692 votes cast against and 69,485 abstentions were
recorded and zero broker non-votes were recorded with
respect to such appointment.
Item 6. Exhibits and Reports on Form 8-K
(a) exhibits 27 - Financial Data Schedule
(b) reports on Form 8-K No reports on Form 8-K were
filed during the quarter
ended March 31, 1995.
-12-
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.
IWC RESOURCES CORPORATION
(Registrant)
By:
J. A. Rosenfeld, Executive
Vice President (Principal
Financial Officer) duly
authorized to sign this
report on behalf of the
registrant
Date
James P. Lathrop, Controller
(Principal Accounting
Officer)
Date
-14-
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This schedule contains summary financial information extracted from the
consolidated balance sheet as of March 31, 1995, and from the consolidated
statements of earnings and cash flows for the three months then ended, and is
qualified in its entirety by reference to such financial statements.
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