10-K
1
Document Summary:
Document: 9410KEDGAR
Author:
Addressee:
Operator:
Creation Date: 03/30/1995
Modification Date: 03/30/1995
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 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 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)
Registrant's telephone number, including area code: (317) 639-1501
NONE
Securities registered pursuant to Section 12(b) of the Act
Common Stock
Title of Class
Securities registered pursuant to Section 12(g) of the Act
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 No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or in any amendment to
this Form 10-K. (X)
$126,443,870
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of January 31, 1995.
6,932,350
Indicate the number of shares of common stock outstanding March 1, 1995
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents have been incorporated by reference into
this annual report on Form 10-K:
PARTS OF FORM 10-K INTO WHICH
IDENTITY OF DOCUMENT DOCUMENT IS INCORPORATED
Annual Report to Shareholders of Registrant
for the Year Ended December 31, 1994 Parts I and II
Definitive Proxy Statement to be
filed for the 1995 Annual Meeting
of Shareholders of Registrant Part III
IWC RESOURCES CORPORATION
INDIANAPOLIS, INDIANA
ANNUAL REPORT TO SECURITIES AND EXCHANGE COMMISSION
December 31, 1994
PART I
Item 1. BUSINESS
PRODUCTS AND SERVICES
IWC Resources Corporation (Resources or, together with
its subsidiaries, the Company) is a holding company
which owns and operates six subsidiaries, including two
waterworks systems which supply water for residential,
commercial, and industrial uses and for fire protection
service in Indianapolis, Indiana and surrounding
areas. The territory served by the two utilities
covers an area of approximately 309 square miles and
includes areas in Marion, Hancock, Hamilton, Hendricks,
Boone and Morgan counties. In August 1994, Zionsville
Water Corporation was merged into Indianapolis Water
Company, as approved by the Indiana Utility Regulatory
Commission.
At year's end, Indianapolis Water Company (IWC) was
providing service to 226,795 customers. Harbour Water
Corporation (Harbour), in the Morse Reservoir area of
Hamilton County, was serving 2,538 customers.
In addition to the two water utilities, Resources has
four other wholly owned subsidiaries; SM&P Utility
Resources, Inc. (formerly SM&P Conduit Co., Inc.)
(SM&P), Waterway Holdings, Inc., Utility Data
Corporation (UDC), and IWC Services, Inc. SM&P
performs underground utility locating and marketing
services in Indiana and other states. The Company,
principally through Waterway Holdings, Inc., owns real
estate that it expects to sell or develop in the
future. UDC provides customer relations, customer
billing, and other data processing services for the
Company's two water utilities and other water and sewer
utilities. IWC Services provides laboratory water
testing services, principally for water utilities. The
Company, through IWC Services, is a majority partner in
the White River Environmental Partnership (WREP) which,
under a five-year contract entered into in December,
1993, operates and maintains two advanced wastewater
treatment facilities for the city of Indianapolis.
The Company continues to seek expansion and
diversification through the acquisition of other water
utilities and other related businesses. It is
expected, however, that the water utilities will
continue as the principal source of earnings for the
Company in the forseeable future.
INDUSTRY SEGMENT FINANCIAL INFORMATION
The Company's operations include two business segments:
regulated water utilities and unregulated
utility-related services. The water utilities segment
includes the operations of the Company's two water
utility subsidiaries. The utility-related services
segment provides utility line locating services, data
processing and billing and payment processing, and
other utility-related services to both unaffiliated
utilities and to the Company's water utilities. The
discussion of segment information, including selected
financial data included on pages 31 through 32 of the
1994 Annual Report under "Segment Information", is
incorporated herein by reference.
SECURITIES AND RATE REGULATION
The utility subsidiaries of the Company are subject to
regulation by the Indiana Utility Regulatory Commission
(Commission) which has jurisdiction over rates,
standards of service, accounting procedures, issuance
of securities and related matters. The Commission
consists of five Commissioners, appointed by the
Governor of Indiana from a list of persons selected by
a 7-member nominating committee whose members are:
appointed by the Governor (3); and the majority (2) and
minority (2) leaders of the Indiana House and Senate.
Decisions of the Commission are appealable directly to
the Indiana Court of Appeals.
Securities. The issuance of securities by
Resources is not subject to approval by the
Commission. The issuance of securities by, and changes
in the equity capital of, the Company's utility
subsidiaries, including IWC, must be approved.
Water Rates. Rates charged by the Company for
water service are approved by the Commission. It is
the Company's policy to seek rate relief when necessary
to maintain its service and financial soundness. The
Company is not permitted to submit petitions for
general rate relief more frequently than every fifteen
months and the Commission is not required to act upon
petitions within any particular time period.
-2-
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 benefits other than pensions (OPRBs), in
accordance with SFAS 106, pending a determination of an
appropriate restricted fund for the related revenues.
The rate effect of such higher costs should amount to
approximately $1.7 million (3% of the requested 14%
increase in combined annual revenues). That annual
amount, with the Commission's authorization, is now
being deferred as a regulatory asset and should
ultimately be recoverable over a period not to exceed
20 years. On October 11, 1994, IWC filed testimony
with the Commission proposing a grantor trust to hold
OPRB-related funds. The Utility Consumer Counselor
(UCC), representing ratepayers, filed testimony in
opposition to IWC's proposal, arguing that it was not
sufficiently restrictive. IWC filed testimony in
rebuttal to that of the UCC on December 16, 1994. This
matter has not yet been heard or resolved.
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 sought by IWC is
approximately $5 million, or 8%, based on water
consumption for the 12 months ended June 30, 1994. IWC
prefiled evidence in support of the request on
November 21, 1994. The UCC was required to prefile its
evidence on or before March 21, 1995. Hearings in this
case are scheduled to take place on April 3 and 10,
1995.
On September 23, 1994, IWC also filed a petition
with the Commission 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. Proceeds from the issuance of these
securities will be used for the construction, extension
and improvement of its facilities, plant and
distribution system and the discharge or refunding of
short-term debt and higher cost long-term debt. IWC
and the UCC submitted for the approval of the
Commission an agreed-upon order, which the Commission
entered March 22, 1995, approving the securities. The
timing and amount of the securities to be issued, if
approved, will be based on fund requirements and market
conditions.
-3-
COMPETITIVE CONDITIONS
The Company conducts its water utility operations,
subject to regulation by the Commission, under
indeterminate permit and related franchise rights, all
of which may be revoked for cause. Under such permit
and franchise rights, the Company may lay, maintain and
operate its mains and conduits in public streets and
ways throughout the area which it serves. Although the
permit and franchise rights granted to the Company are
not exclusive, other than private wells, there are
presently no other significant competitors operating
within most of the Company's service area, and the
Company does not anticipate that any significant
general competition will develop within the area. As
the Indianapolis metropolitan area has expanded to
include surrounding communities or previously rural
areas, the Company has faced competition for new
customers from town or rural water utilities.
The continuing regulation of the Commission covers,
among other things, matters relating to rates, service,
acquisition of properties, accounting practices, and
the issuance of securities by IWC or Harbour. The
Company does not pay a franchise tax and is not
required to renew its franchise rights periodically.
The Company's unregulated utility-related services are
currently provided in eight states. Data processing
and billing and payment processing services are
provided to the city of Indianapolis, the Company's
water utilities, and to other unaffiliated utilities
located in the state of Indiana. Underground facility
locating services are provided in the states of
Indiana, Ilinois, Missouri, Ohio, Texas, Wisconsin,
Arkansas and Minnesota. Services provided by this
segment are subject to competitive conditions and are
generally contracted for a period of three to five
years.
RECENT AND PROPOSED CHANGES IN FACILITIES
During the year ended December 31, 1994, the Company
added $28,256,000 to utility plant and other property,
of which $23,462,000 is applicable to the water
utilities segment. Approximately 113 miles of new
mains and 1,007 fire hydrants were placed in service
during the year.
-4-
During the past five years, additions to utility plant
and other property have averaged $21,922,000 annually.
The Company plans capital expenditures of approximately
$111,000,000 during the five-year period 1995-1999
primarily for further extensions and improvements to
the Company's utility distribution systems and further
additions and improvements to its treatment, pumping
and storage facilities. In 1994, the Engineering,
Business Development, Purchasing and Corporate Affairs
departments moved into the new General Office addition,
west of the original building. The addition was
constructed to alleviate crowding experienced in the
General Office which is undergoing renovation. The
Company installed an additional filter and tank at its
Harding Station facility, on the south side of its
service area, increasing the facility's treatment
capacity to 6.0 MGD, at an approximate cost of
$400,000. Construction of a booster station with
ground storage tank at Harbour was completed, helping
to increase pressure needed to provide service to
Westfield, Indiana, at an approximate cost of
$450,000. For possible capital expenditures relating
to environmental matters, which are not included above,
see "Environmental Matters."
CAPACITY OF FACILITIES AND SOURCES OF WATER SUPPLY
The combined maximum daily capacity of the Company's
treatment plants, together with the maximum daily
capacity of its two primary well fields, is 220 million
gallons per day (MGD). During 1994, the average
consumption was 122 MGD and the maximum consumption was
192 MGD. See "Operating Information by Industry
Segment."
The principal sources of IWC's present water supply are
(a) the White River, which flows through Indianapolis
from north to south and is supplemented by Morse
Reservoir on a tributary, Cicero Creek, (b) Fall Creek,
which flows from the northeast and is supplemented by
Geist Reservoir, and (c) the city of Indianapolis'
Eagle Creek Reservoir, located on Eagle Creek in
northwest Marion County, from which water is purchased
under a long-term contract. See "Properties-Source of
Water Supply."
-5-
The three large surface reservoirs are essential to
providing an adequate supply during dry periods. Two
are used to supplement low stream flows in the White
River and Fall Creek, respectively, and water is drawn
directly from the third. The reservoirs are rated at a
dependable capacity designed to maintain an adequate
supply during a repetition of the worst two-year
drought ever recorded in the Indianapolis area.
The theoretical dependable supply impounded by the
three combined reservoirs represents about 65 percent
of the total dependable supply available today with the
balance coming from natural stream flow and wells.
Wells constitute the source of supply for Harbour.
The Company has an aquifer protection plan for the
south well field in southwest Marion County. This plan
will guide the Company's development of its newest
major source of supply (40 to 50 MGD), and result in a
land use plan to protect the aquifer system from
potential contamination sources.
SEASONAL NATURE OF BUSINESS
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.
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, White River North, Fall Creek, Thomas W. Moses
and Geist treatment stations.
-6-
The Company's current NPDES permits were to expire
June 30, 1989, for White River and Fall Creek stations,
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 impose new
requirements and restrictions with respect to these
permits and such limitations could be difficult and
expensive. The full impact of 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.
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 contaminants 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
granular activated carbon (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.
-7-
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 environmental related laws on a
timely basis.
EMPLOYEES
At December 31, 1994, Resources, its subsidiaries and
affiliated partnership interest, employed 1,351 full
time employees, including 347 water utility employees
and 758 SM&P employees. Approximately one-half of the
Company's water utility employees are members of the
International Brotherhood of Firemen and Oilers Local
131, AFL-CIO (Union).
A new four-year contract between IWC and the Union was
ratified on February 28, 1995.
-8-
OPERATING INFORMATION BY INDUSTRY SEGMENT
Operating information by industry segment for each of the past five years
follows:
Operating Revenues-Industry Segment (in thousands)
1994 1993 1992 1991 1990
Water Utilities:
Residential $ 44,700 41,513 40,633 38,901 34,231
Commercial and
Industrial 20,576 18,032 16,696 15,393 14,225
Public Fire Protection 12 945 2,157 1,953 1,743
Other (1) 7,843 3,849 3,966 3,683 3,431
Total Water Utilities 73,131 64,339 63,452 59,930 53,630
Utility-Related Services(2) 36,016 17,982 - - -
Total Operating Revenues $109,147 82,321 63,452 59,930 53,630
======= ====== ====== ====== ======
(1) Includes $3,611 in income taxes collected from developers in 1994.
(2) Reporting by segment was adopted in 1993 as a result of the
acquisition of SM&P. Utility-related services for prior periods are
not material and, accordingly, have not been reclassified to conform
with the 1993 presentation.
Operating Statistics-Water Utilities
1994 1993 1992 1991 1990
Water Sold (million gallons)
Residential 21,402 20,232 20,664 22,493 20,168
Commercial and
Industrial 17,121 15,337 14,660 15,312 14,835
Public Fire Protection 38 39 29 32 46
Other 1,074 717 808 912 820
Total Water Sold 39,635 36,325 36,161 38,749 35,869
====== ====== ====== ====== ======
Daily Pumpage
(million gallons)
Maximum 192 154 161 202 177
Minimum 91 93 90 91 95
Average 122 118 115 124 117
Utility Customers (end of
year, in thousands) 229 224 219 214 210
Fire Hydrants (end of year) 25,737 24,730 24,215 23,465 23,124
Miles of Mains (end of year) 2,940 2,827 2,759 2,673 2,624
-9-
Item 2. PROPERTIES
GENERAL DESCRIPTION
The Company's water utilities' properties consist of
land, easements, rights (including water rights),
buildings, reservoirs, canal, wells, supply lines,
purification plats, pumping stations, transmission and
distribution pipes, mains and conduits, meters and
other facilities used for the collection, purification,
and storage of water, and the distribution of water to
its customers. The water systems extend from well
fields and raw water reservoirs on Cicero Creek and
Fall Creek, north and northeast of Indianapolis, and
from the intake structure in Indianapolis' Eagle Creek
Reservoir, northwest of Indianapolis, to the service
connections of the ultimate consumers. The principal
properties are all located in or near Indianapolis and,
except for Eagle Creek Reservoir, which is owned by the
city of Indianapolis, are all owned by the Company, in
fee, with the exception of its easements.
Substantially all its utility property rights and
interests, both tangible and intangible, are subject to
the lien securing first mortgage bonds.
The Company's utility-related properties consist of
data processing equipment used to provide data
processing and billing and payment processing to both
unaffiliated utilities and to the Company's water
utilities, and land, building, vehicles and locating
equipment used to provide line locating services to
unaffiliated utilities. The Company also owns parcels
of land which it holds for possible sale or
development. A general description of the principal
properties is set forth in the following paragraphs.
SOURCE OF WATER SUPPLY
WHITE RIVER: White River, supplemented by Morse
Reservoir, furnished 70% of IWC's water supply during
1994, of which 64% was provided by IWC's White River
plant and 6% was provided by IWC's new White River
North plant. The drainage area of the White River
above the intake of IWC's canal is approximately 1,200
square miles. In 1956, IWC completed Morse Reservoir
on Cicero Creek, a tributary of the White River. It is
located on approximately 1,692 acres of land owned by
IWC of which about 1,500 acres are inundated. The
storage capacity of this reservoir is approximately 6.9
billion gallons. With the reservoir supplementing the
natural flow, it is estimated by IWC that the combined
dependable flow in the White River can be maintained at
a volume sufficient to produce 88 MGD. IWC owns and
maintains a dam across White River at Broad Ripple
-10-
which serves to divert the flow into a canal. Water
diverted at the Broad Ripple dam flows by gravity in
the open canal to the White River treatment and pumping
station. IWC's White River North plant has its intake
directly on the White River.
FALL CREEK: Fall Creek, supplemented by Geist
Reservoir, provided 20% of IWC's water supply in 1994.
The area of the watershed drained by Fall Creek
upstream from the Fall Creek Station intake is
approximately 300 square miles. In 1943, IWC completed
the Geist Reservoir on Fall Creek. The reservoir is
situated on about 1,983 acres of land owned by IWC, of
which 1,890 acres are inundated, and has a storage
capacity of approximately 6.1 billion gallons. With
the reservoir supplementing the natural flow in Fall
Creek, it is estimated by IWC that the combined
dependable flow in Fall Creek can be maintained at a
volume sufficient to provide 25 MGD. At the Fall Creek
Station, IWC owns and maintains a concrete dam which
diverts the flow of the creek into the station intake.
EAGLE CREEK RESERVOIR: Raw water purchased from Eagle
Creek Reservoir, a multipurpose reservoir owned and
operated by the city of Indianapolis, provided 8% of
IWC's water supply in 1994. On October 18, 1971, IWC
and the City signed a 50-year contract, with an option
for an additional 25 years, providing for the
withdrawal, subject to certain restrictions, of up to
12.4 MGD on an annual average basis. IWC owns and
maintains a raw water intake structure, pumping
station, and pipeline within the reservoir property,
which delivers the allotted supply to its Thomas W.
Moses Treatment Plant.
WELLS: IWC owns 38 wells, of which 31 are
supplementary or auxiliary supply and seven are primary
sources of supply. The Company owns a total of 823
acres of land used for its water rights and as well
station land, of which 777 acres are located in Marion
County and 46 acres are located in Johnson County. It
is estimated that the aggregate dependable annual
average yield under a repetition of the most severe
two-year drought on record is approximately 14 MGD from
the wells. In 1994, wells provided approximately 2% of
IWC's water supply.
The source of supply for Harbour consists of five wells
having a total rated capacity and actual pumping
capacity of 3.8 MGD.
-11-
PURIFICATION
Treatment of surface water in IWC's system involves
coagulation and flocculation, after which the water
flows through the sedimentation basins and then to
gravity-type rapid filters. IWC has four primary
surface water filtration and purification plants--two
for the White River supply sources, one for the Fall
Creek supply source, and one for the Eagle Creek supply
source--equipped with rapid filters having a maximum
operating capacity aggregating 180 MGD and two ground
water treatment plants totaling 10 MGD.
The water treatment plant for Harbour Water Corporation
consists of four packaged filter iron removal units
with a combined rated capacity of 3.5 MGD, including
the new east plant which increased rated capacity by
1.5 MGD.
PUMPING
IWC owns seven principal pumping stations and eleven
booster stations. The principal pumping stations have
a total of 40 primary distribution pumps and have a
maximum capacity of 326 MGD. The booster stations have
42 pumps, all of which are electrically or diesel fuel
driven with a maximum capacity of 101 MGD. IWC has not
to date experienced, nor does it anticipate, any
shortage of electrical energy to run its pumps.
The high service pumping facilities for Harbour consist
of six electric motor-driven pumps housed in the same
buildings as the treatment plants and have a maximum
capacity of approximately 3.5 MGD.
In 1994, a booster station and finished water storage
facility was constructed in the Harbour system to
alleviate low pressure in the southwest portion of the
service area and to also supply water to the town of
Westfield which buys a daily minimum quantity of water.
FILTERED WATER STORAGE
The Company's aggregate storage capacity for finished
water is approximately 55 million gallons. IWC owns
six filtered-water underground reservoirs at its five
principal pumping stations which have an aggregate
storage capacity of 39 million gallons. The filtered
water in storage has been treated and is available to
be pumped into the distribution system. Also, there
are four elevated storage tanks with an aggregate
storage capacity of over four million gallons and two
ground storage tanks with an aggregate storage capacity
of 12 million gallons.
-12-
The filtered water in the two ground storage tanks has
been pumped by the principal pumping stations and is
available to the respective booster stations to be
pumped into the distribution system served by these
stations. The four outlying elevated storage tanks
"ride on" the distribution system and provide water by
gravity flow.
There are two ground storage tanks at Harbour, the
first located adjacent to the treatment plant with a
storage capacity of 50,000 gallons, and the second
located adjacent to the new booster station with a
storage capacity of 250,000 gallons. There is also an
elevated storage tank in the distribution system which
"rides on" the system and has a capacity of 250,000
gallons.
TRANSMISSION AND DISTRIBUTION
The Company's utility transmission and distribution
systems are composed of 2,940 miles of mains, most of
which are cast iron and ductile iron. During the past
ten years, an aggregate of 722 miles of mains, or
approximately 25% of the total, were added to the
systems. In general, the mains are located in city
streets, other public ways and occasionally in
easements. The supply mains are located partly in city
streets and partly in rights-of-way and land owned by
the Company. The Company furnishes public fire
protection service through hydrants owned by the
Company and located generally within the limits of
street rights-of-way.
UTILITY-RELATED PROPERTIES
The Company's data processing equipment is located at
IWC's general office in Indianapolis, Indiana. The
Company also owns land and a building in Noblesville,
Indiana which is the headquarters for its line locating
services, and leases (operating leases) fourteen
buildings located in eight states which are used as
district offices. Vehicles and locating equipment used
in these operations are located at the various
operating offices.
REAL ESTATE INTERESTS
At December 31, 1994, the Company owned undeveloped
non-utility land located primarily north and west of
Geist Reservoir in Hamilton County, and several
additional parcels in Marion County. The Company
continues to explore the possible sale or development
of this land.
-13-
OFFICE BUILDING
The Company's main office building and service center
was constructed in 1957 on 20 acres of land located
approximately two miles from the center of the main
business district of Indianapolis. The building houses
the general and local commercial offices of the Company
and provides a garage and building for storage of
materials and vehicles, as well as shop space for
repairs to automotive and other equipment. In May
1994, various administrative departments moved into the
new General Office addition, west of the original
building. The addition, which cost approximately
$2,000,000, was constructed to alleviate crowding
experienced in the General Office which is undergoing
renovation.
Item 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other
than ordinary routine litigation incidental to the
Company's business, to which the Company is a party or
of which any of their property is the subject, except
for certain rate case filings described on page 3 under
SECURITIES AND RATE REGULATION - Rate Case.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of
1994 to a vote of security holders of the Registrant,
through the solicitation of proxies or otherwise.
-14-
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Information regarding the trading market for the
Company's Common Shares, the range of selling prices
for each quarterly period during the past two years
with respect to the Common Shares, the approximate
number of holders of Common Shares as of December 31,
1994, the frequency and amount of dividends paid during
the past two years with respect to the Common Shares
and other matters is included under the captions "Stock
Statistics" and "Distribution of Shareholders" on page
39 of the 1994 Annual Report, which information is
incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA
The data included on page 34 of the 1994 Annual Report
under "Selected Financial Data" is incorporated herein
by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The discussion entitled "Management's Discussion and
Analysis of Financial Condition and Results of
Operations" included in the 1994 Annual Report on pages
35 through 38 is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements included in the
1994 Annual Report and listed in Item 14.1. of this
Report are incorporated herein by reference from the
1994 Annual Report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
-15-
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item regarding
nominees for Director of the Company is incorporated
herein by reference to the Company's definitive proxy
statement for its 1995 annual meeting of common
stockholders filed with the Commission pursuant to
Regulation 14A (the "1995 Proxy Statement").
The following table sets forth the current officers of
IWC Resources Corporation and its principal subsidiary,
Indianapolis Water Company, their ages, and (as
presented below in parentheses) their positions during
the past five years. There is no family relationship
between any of the officers of the Company. All
officers are elected for a term of one year.
IWC RESOURCES CORPORATION
Name Age Position
James T. Morris 51 Chairman of the Board,
Chief Executive Officer and
President (President and
Chief Operating Officer)
J. A. Rosenfeld 63 Executive Vice President
(Senior Vice President
and Treasurer; Financial
Consultant)
Kenneth N. Giffin 51 Senior Vice President-
Governmental Relations and
Real Estate
John M. Davis 43 Vice President, General
Counsel and Secretary
Alan R. Kimbell 63 Vice President-Marketing
James W. Shaffer 45 Vice President-Corporate
Affairs
James P. Lathrop 49 Controller
Jane G. Ryan 54 Assistant Secretary
-16-
INDIANAPOLIS WATER COMPANY
James T. Morris 51 Chairman of the Board and Chief
Executive Officer (President
and Chief Operating Officer)
Joseph R. Broyles 52 President and Chief Operating
Officer (Executive Vice President;
Senior Vice President-Operations)
Paul J. Doane 72 Executive Vice President
(Senior Vice President-Operations;
Vice President-Operations)
J. A. Rosenfeld 63 Executive Vice President (Senior
Vice President and Treasurer)
Kenneth N. Giffin 51 Senior Vice President-Governmental
Relations (Senior Vice President-
Human Resources and Corporate
Relations; Vice President-Human
Resources and Corporate Relations)
John M. Davis 43 Vice President, General Counsel
and Secretary
Robert F. Miller 50 Vice President-Engineering
(Principal Projects Engineer)
David S. Probst 56 Vice President-Business Development
(Vice President-Engineering
Services; Vice President-Customer
Service)
Tim K. Bumgardner 46 Vice President-Operations
(Vice President-Production;
Director of Purification)
James W. Shaffer 45 Vice President - Corporate Affairs
Martha L. Wharton 65 Vice President-Customer Service
(Vice President-Customer Relations;
Assistant Secretary)
L. M. Williams 51 Vice President - Human Resources
(Director of Human Resources and
Industrial Relations)
-17-
James P. Lathrop 49 Assistant Treasurer
Jane G. Ryan 54 Assistant Secretary
(Executive Secretary)
All of the above have been employed by the Company for more
than five years except for J. A. Rosenfeld, John M. Davis and
James W. Shaffer. Mr. Rosenfeld has been employed since
January, 1992 and was previously employed by Melvin Simon &
Associates. Mr. Davis has been employed since June, 1993 and
was previously employed by KPMG Peat Marwick LLP. Mr. Shaffer
has been employed since January, 1993 and was previously
employed by Creative Concepts, Inc.
Item 11. EXECUTIVE COMPENSATION
The information required by this Item regarding
compensation of the Company's officers and directors is
incorporated herein by reference to the Company's 1995
Proxy Statement. The Compensation Committee Report to
Shareholders and Comparative Stock Performance sections
of the Company's 1995 Proxy Statement shall not be
deemed "filed" herewith.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) The Company knows of no person who is the
beneficial owner of more than 5% of the Company's
Common Stock. Information required by this item
applicable to the Company's Redeemable Preferred Stock
follows:
Title Name and Address Amount and Nature Percent
of of of Beneficial of
Class Beneficial Owner Ownership Class
Redeemable Patrick J. Baker 17,204 shares 33-1/3%
Preferred 1913 W. 116th St.
Stock Carmel, IN 46032
Daniel S. Baker (1) 17,204 shares 33-1/3%
7285 Waterview Pt.
Noblesville, IN 46060
Diana L. Sosbey 17,204 shares 33-1/3%
8596 Twin Pt. Cir.
Indianapolis, IN 46236
(1) Mr. Daniel S. Baker is President of SM&P Utility Resources,
Inc., (formerly SM&P Conduit Co., Inc.) a wholly owned
subsidiary of the Company.
-18-
(b) The information required by this Item regarding
the number of shares of the Company's Common Stock,
beneficially owned by the nominees for Director and the
officers of the Company is incorporated herein by
reference to the Company's 1995 Proxy Statement.
(c) The Company knows of no arrangements the operation
of which may at a subsequent date result in a change of
control of the Company.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item regarding certain
relationships and related transactions is incorporated
herein by reference to the Company's 1995 Proxy
Statement.
-19-
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
The documents listed below are filed as a part of this
report except as otherwise indicated:
1. Financial Statements. The following described
consolidated financial statements found on the
pages of the 1994 Annual Report indicated below
are incorporated into Item 8 of this Report by
reference.
Description of Financial Location in 1994
Statement Item Annual Report
Independent Auditors' Report Page 33
Consolidated Balance Sheets,
December 31, 1994 and 1993 Pages 18 and 19
Consolidated Statements of
Shareholders' Equity, Years
ended December 31, 1994,
1993 and 1992 Page 20
Consolidated Statements of
Earnings, Years ended
December 31, 1994,
1993 and 1992 Page 21
Consolidated Statements of
Cash Flows, Years ended
December 31, 1994,
1993 and 1992 Page 22
Notes to Consolidated Financial
Statements, Years ended Pages 23
December 31, 1994, 1993 and 1992 through 33
2. Financial Statement Schedules.
All schedules for which provision is made in
Regulation S-X have been omitted for the reason
that they are not required, are not applicable, or
the required information is set forth in the
consolidated financial statements or notes
thereto.
3. Exhibits
The exhibits set forth on the Index to Exhibits
are incorporated herein by reference.
4. Reports on Form 8-K
No reports on Form 8-K were filed during the three
months ended December 31, 1994.
-20-
OTHER MATTERS
For the purposes of complying with the amendments to the rules
governing Form S-8 (effective July 13, 1990) under the
Securities Act of 1933, the undersigned registrant hereby
undertakes as follows, which undertaking shall be incorporated
by reference into registrant's Registration Statement on Form
S-8 No. 33-33021 (filed August 17, 1989):
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
-21-
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Registrant has duly caused this annual report to be
signed on its behalf by the undersigned thereunto duly authorized.
IWC RESOURCES CORPORATION
Registrant
Date March 28, 1995 By:
J. A. Rosenfeld, Executive
Vice President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
Date March 28, 1995 By:
James T. Morris, Chairman of the
Board, Chief Executive Officer
and President and Director
Date March 28, 1995 By:
Robert B. McConnell, Chairman of
the Executive Committee
Date March 28, 1995 By:
J. A. Rosenfeld, Executive Vice
President (Principal Financial
Officer)
Date March 28, 1995 By:
James P. Lathrop, Controller
(Principal Accounting Officer)
Date March 28, 1995 By:
Joseph R. Broyles, President
and Chief Operating Officer,
Indianapolis Water Company
and Director
Date March 28, 1995 By:
Joseph D. Barnette, Jr., Director
Date March 28, 1995 By:
Thomas W. Binford, Director
-22-
Date March 28, 1995 By:
Robert A. Borns, Director
Date March 28, 1995 By:
Murvin S. Enders, Director
Date March 28, 1995 By:
Otto N. Frenzel III, Director
Date March 28, 1995 By:
Elizabeth Grube, Director
Date March 28, 1995 By:
J. B. King, Director
Date March 28, 1995 By:
J. George Mikelsons, Director
Date March 28, 1995 By:
Thomas M. Miller, Director
Date March 28, 1995 By:
Jack E. Reich, Director
Date March 28, 1995 By:
Fred E. Schlegel, Director
-23
INDEX TO EXHIBITS
3A-1 Restated Articles of Incorporation of
Registrant, as amended to date. The copy of
this exhibit filed as Exhibit 3-A to
Registrant's Registration Statement on Form S-8
effective August 17, 1989 "Registration No.
33-30221", is incorporated by reference.
3-B Bylaws of Registrant, as amended to date. The
copy of this exhibit filed as Exhibit 3-B to
Registrant's Registration Statement on Form S-8
effective August 17, 1989 "Registration No.
33-30221", is incorporated by reference.
4.1 Sixteenth Supplemental Indenture dated as of
November 1, 1985, between Fidelity Bank,
National Association, and IWC. The copy of this
exhibit filed as Exhibit 4-A1 to IWC's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1985, is incorporated herein by
reference.
4.2 Ninth Supplemental Indenture dated as of August
1, 1967. The copy of this exhibit filed as
Exhibit 4-B5 to IWC's Annual Report on Form 10-K
for the fiscal year ended December 31, 1980, is
incorporated herein by reference.
4.3 Eleventh Supplemental Indenture dated as of
December 1, 1971. The copy of this exhibit
filed as Exhibit 4-B6 to IWC's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1980, is incorporated herein by
reference.
4.4 Seventeenth Supplemental Indenture dated as
of March 1, 1989, between Fidelity Bank,
National Association, and IWC. The copy of
this exhibit filed as Exhibit 4-A9 to
Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1988 is
incorporated herein by reference.
4.5 Eighteenth Supplemental Indenture dated as of
March 1, 1989, between Fidelity Bank,
National Association and IWC. The copy of
this exhibit filed as Exhibit 4-A10 to
Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1988, is
incorporated herein by reference.
-24-
4.6 Nineteenth Supplemental Indenture dated as
of June 1, 1989, between Fidelity Bank,
National Association, and IWC. The copy
of this exhibit filed as Exhibit 4-A9 to
Registrant's Registration Statement on
Form S-2 effective December 12, 1991
(Registration No. 33-43939), is
incorporated herein by reference.
4.7 Fourteenth Supplemental Indenture dated as
of January 15, 1978, between the Fidelity
Bank, (formerly Fidelity-Philadelphia
Trust Company) and IWC, including as
Appendix A the "Restatement of Principal
Indenture of Indianapolis Water Company,"
which, except as otherwise specified,
restates the granting clauses and all
other sections contained in the First
Mortgage dated July 1, 1936, between
Fidelity-Philadelphia Trust Company and
Registrant as amended by the Fourth,
Fifth, Sixth, Eighth, Twelfth and
Fourteenth Supplemental Indentures. A
copy of this exhibit filed as Exhibit 4-B1
to IWC's Annual Report on Form 10-K for
the fiscal year ended December 31, 1980,
is incorporated herein by reference.
4.8 Twentieth Supplemental Indenture dated as
of December 1, 1992, between Fidelity
Bank, National Association, and IWC. The
copy of this Exhibit filed as Exhibit 4-A9
to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31,
1992, is incorporated herein by reference.
4.9 Twenty-First Supplemental Indenture dated
as of December 1, 1992, between Fidelity
Bank, National Association and IWC. The
copy of this Exhibit filed as Exhibit
4-A10 to Registrant's Annual Report on
Form 10-K for the fiscal year ended
December 31, 1992, is incorporated herein
by reference.
4.10 Rights Agreement, dated as of February 9,
1988, between IWC Resources Corporation
and Bank One, Indianapolis, NA (as Rights
Agent), which includes the Form of
Certificate of Designations of Series A
Junior Participating Preferred Stock as
Exhibit A, the Form of Right Certificate
as Exhibit B and the Summary of Rights to
Purchase Preferred Shares as Exhibit C.
The copy of this exhibit filed as Exhibit
4 to the Registrant's Current Report on
Form 8-K dated February 9, 1988, is
incorporated by reference.
-25-
4.11 Indenture of Trust dated as of March 1,
1989, between IWC, City of Indianapolis,
Indiana, and Merchants National Bank &
Trust Company of Indianapolis, as
Trustee. The copy of this exhibit filed
as Exhibit 10-F to Registrant's Annual
Report on Form 10-K for the fiscal year
ended December 31, 1988, is incorporated
herein by reference.
4.12 Indenture of Trust dated as of March 1,
1989, between IWC, Town of Fishers,
Indiana, and Merchants National Bank &
Trust Company of Indianapolis, as
Trustee. The copy of this exhibit filed
as Exhibit 10-G to Registrant's Annual
Report on Form 10-K for the fiscal year
ended December 31, 1988, is incorporated
herein by reference.
4.13 Indenture of Trust dated as of December 1,
1992, between City of Indianapolis,
Indiana, and IWC to National City Bank,
Indiana, as Trustee. The copy of this
Exhibit filed as Exhibit 10-J to
Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31,
1992, is incorporated herein by reference.
4.14 Indenture of Trust, City of Indianapolis,
Indiana, and Indianapolis Water Company to
National City Bank, Indiana, as Trustee,
dated as of April 1, 1993. The copy of
this Exhibit filed as Exhibit 4.14 to
Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31,
1993, is incorporated herein by reference.
4.15 Twenty-Second Supplemental Indenture dated
as of April 1, 1993, between Indianapolis
Water Company and Fidelity Bank, National
Association. The copy of this Exhibit
filed as Exhibit 4.15 to Registrant's
Annual Report on Form 10-K for the fiscal
year ended December 31, 1993, is
incorporated herein by reference.
-26-
10.1 Agreement dated October 18, 1971, between
IWC and the Department of Public Works of
the City of Indianapolis, Indiana,
relating to the purchase of water at Eagle
Creek Reservoir. The copy of this exhibit
filed as Exhibit 5 to IWC's Statement (No.
2-55201), effective January 14, 1976, is
incorporated herein by reference.
*10.2 The description of "split dollar" life
insurance policies owned by IWC with
respect to certain officers of Registrant
is incorporated hereby by reference to the
Company's 1988 Proxy Statement.
*10.3 Form of Executive Supplemental Benefits
Plan of IWC. The copy of this exhibit
filed on Exhibit 10-D to IWC's Annual
Report on Form 10-K for the fiscal year
ended December 31, 1985, is incorporated
herein by reference.
10.4 Loan Agreement dated as of March 1, 1989,
between IWC and the City of Indianapolis,
Indiana. The copy of this exhibit filed
as Exhibit 10-D to Registrant's Annual
Report on Form 10-K for the fiscal year
ended December 31, 1988, is incorporated
herein by reference.
10.5 Loan Agreement dated as of March 1, 1989,
between IWC and Town of Fishers, Indiana.
The copy of this exhibit filed as Exhibit
10-E to Registrant's Annual Report on Form
10-K for the fiscal year ended December
31, 1988, is incorporated herein by
reference.
10.6 Guaranty Agreement dated as of March 1,
1989, between Registrant and Merchants
National Bank and Trust Company of
Indianapolis re: City of Indianapolis,
Indiana Industrial Development Bonds. The
copy of this exhibit filed as Exhibit 10-H
to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31,
1988, is incorporated herein by reference.
-27-
10.7 Guaranty Agreement dated as of March 1,
1989, between Registrant and Merchants
National Bank & Trust Company of
Indianapolis re: Town of Fishers, Indiana
Industrial Development Bonds. The copy of
this exhibit filed as Exhibit 10-I to
Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31,
1988, is incorporated herein by reference.
10.8 Loan Agreement dated as of December 1,
1992, between IWC and City of
Indianapolis, Indiana. The copy of this
exhibit filed as Exhibit 10-K to
Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31,
1992, is incorporated herein by reference.
10.9 Guaranty Agreement dated as of December 1,
1992, between Resources and National City
Bank, Indiana, as Trustee. The copy of
this exhibit filed as Exhibit 10-L to
Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31,
1992, is incorporated herein by reference.
10.10 Note Agreement dated as of March 1, 1994,
between Registrant and American United
Life Insurance Company. The copy of this
exhibit filed as Exhibit 10.10 to
Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31,
1993, is incorporated herein by reference.
10.11 Loan Agreement dated as of April 1, 1993,
between Indianapolis Water Company and
City of Indianapolis. The copy of this
exhibit filed as Exhibit 10.11 to
Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31,
1993, is incorporated herein by reference.
10.12 Guaranty Agreement between Registrant and
National City Bank, Indiana, as Trustee,
dated as of April 1, 1993. The copy of
this exhibit filed as Exhibit 10.12 to
Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31,
1993, is incorporated herein by reference.
-28-
10.13 Agreement for the Operation and
Maintenance of the City of Indianapolis,
Indiana, Advanced Wastewater Treatment
Facilities dated as of December 20, 1993,
among the City of Indianapolis, White
River Environmental Partnership, the
Registrant and certain other parties. The
copy of this exhibit filed as Exhibit
10.13 to Registrant's Annual Report on
Form 10-K for the fiscal year ended
December 31, 1993, is incorporated herein
by reference.
10.14 White River Environmental Partnership
Agreement between IWC Services, Inc., JMM
White River Corporation and LAH White
River Corporation, dated as of August 20,
1993. The copy of this exhibit filed as
Exhibit 10.14 to Registrant's Annual
Report on Form 10-K for the fiscal year
ended December 31, 1993, is incorporated
herein by reference.
10.15 Plan and Agreement of Merger among
Registrant, Resources Acquisition Corp.,
S.M.& P. Conduit Co., Inc., and its
shareholders dated as of June 14, 1993.
The copy of this exhibit filed as Exhibit
10.15 to Registrant's Annual Report on
Form 10-K for the fiscal year ended
December 31, 1993, is incorporated herein
by reference.
10.16 Executive Employment Agreement between
Registrant and James T. Morris, dated as
of December 31, 1993 (substantially
similar agreements in favor of J. A.
Rosenfeld, Joseph R. Broyles and Kenneth
N. Giffin have been omitted pursuant to
Instruction 2 to Item 601 of Regulation
S-K). The copy of this exhibit filed as
Exhibit 10.16 to Registrant's Annual
Report on Form 10-K for the fiscal year
ended December 31, 1993, is incorporated
herein by reference.
13 Registrant's Annual Report to Stockholders
for the year ended December 31, 1994.
This exhibit, except for the portions
thereof that have expressly been
incorporated by reference into this
Report, is furnished for the information
of the Commission and shall not be deemed
"filed" as part hereof.
-29-
21 Subsidiaries
23 Consent of Independent Certified Public
Accountants.
27 Financial Data Schedule
*This exhibit relates to executive compensation or benefit plans.
-30-
EX-13
2
Document Summary:
Document: ANNUALRP
Author:
Addressee:
Operator:
Creation Date: 03/29/1995
Modification Date: 03/30/1995
Identification key words:
Comments:
IWC Resources
1994 annual report
Page(s)
Letter to Shareholders 2
The Company.s Business 4
Comparative Highlights 5
Subsidiaries Report 6
Engineering and Technical Services 8
Operations 10
Service Area Map 10
Customer Service 12
Utility Plant, Distribution of Customers,
Mains, and Fire Hydrants 12
Financial Review 14
Human Resources 16
Consolidated Balance Sheets 18-19
Consolidated Statements of Shareholders. Equity 20
Consolidated Statements of Earnings 21
Consolidated Statements of Cash Flows 22
Notes to Consolidated Financial Statements 23
Independent Auditors. Report 33
Selected Financial Data 34
Management.s Discussion and Analysis of Financial Condition
and Results of Operations 35
Shareholder Information 39
Board of Directors and Officers 40
IWC Resources Corporation.s Subsidiaries
Indianapolis Water Company
Harbour Water Corporation
SM&P Utility Resources, Inc.
Waterway Holdings, Inc.
Utility Data Corporation
IWC Services, Inc.
Mission Statement
IWC Resources Corporation will provide its customers with superior products
and outstanding service, while offering our shareholders the highest possible
current return consistent with a long-term financial view. We will actively
participate in the economic growth and social well-being of the communities
in which we operate, and will create and maintain a healthy, safe, and
challenging work environment for our employees by offering ample
opportunities for personal growth and development.
We will continue to stress comprehensive long-range planning as essential to
meeting the challenges of the future, and will manage and utilize our
corporate resources to encourage community growth and vitality, while
ensuring a quality environment.
Dear Shareholder:
Overall, 1994 was a good year for IWC Resources Corporation and its
subsidiaries ("Company"). Our consolidated net earnings increased by 8
percent over 1993 to $10,142,000 or $1.47 per share compared to $9,376,000 or
$1.41 per share the prior year. Utility operating revenues were up over
$5,000,000, while utility-related services revenues more than doubled from
$17,982,000 to $36,016,000. These results are in keeping with our strategic
plan to emphasize unregulated earnings, as well as regulated earnings.
The Indianapolis Water Company's (IWC) business was good because of weather
patterns, even though it had a less than hoped for outcome in August to a rate
case originally filed in May 1993. A major piece of that case is yet to be
resolved. This deals with the funding for postretirement benefits other than
pensions. IWC currently has two additional cases pending before the Indiana
Utility Regulatory Commission and is hopeful both will be resolved by early
summer 1995. These cases relate to financing requirements and the need for
additional rate relief for IWC to meet government mandates, safe water issues
and the increased cost of doing business. The Company installed a record 113
miles of new mains during 1994. This bodes well for our future. We are very
fortunate to have our business located in the Indianapolis area. This part of
the nation continues to enjoy considerable growth and much innovation. In
1994, the Company put in place supplemental water supply service to the town
of Westfield, Indiana, and continues to explore other opportunities for
growth in the water business.
The public's interest in the quality of its water supply is very strong. Our
employees have the strongest possible commitment to provide the safest,
highest quality drinking water available, meeting or exceeding all federal,
state and local regulations..
Utility Data Corporation (UDC) had a superb year and its financial results
were exceptional. The Company is especially pleased with UDC's new
relationship with the city of Elkhart, Indiana, where it has been engaged to
provide combined water and sewer billing.
The White River Environmental Partnership (of which the Company is a majority
partner) operates and manages the advanced wastewater treatment plants for
the city of Indianapolis. This endeavor has been internationally recognized
and made a positive contribution to our Company's net earnings in its initial
year of operation. The first year it produced more than $12 million in
savings for the city of Indianapolis and substantially improved the plants'
operations and the quality of the effluent discharged, while at the same time
yielding a profit to the partnership.
SM&P Utility Resources, Inc. (SM&P), formerly SM&P Conduit Co., Inc., had its
first full year of operations as a Company subsidiary since its acquisition
in June 1993. This subsidiary enjoyed increased revenues and net earnings for
1994 and we expect the trend to continue in 1995 and beyond. We believe
quality, customer service and investment in growth are responsible for SM&P's
results. During the year, the debt portion of the SM&P purchase price was
refinanced with medium term debt at a very favorable fixed rate.
Several promotions on our senior management team occurred during 1994.
They included: J. A. Rosenfeld to executive vice president, IWC Resources and
Indianapolis Water Company; Alan R. Kimbell to vice president of marketing,
IWC Resources; Robert F. Miller to vice president and director of
engineering, Indianapolis Water Company; James W. Shaffer to vice president
of corporate affairs, IWC Resources and Indianapolis Water Company; and
Martha L. Wharton to vice president of customer service, Indianapolis Water
Company.
All of us associated with the Company are grateful to our two retiring
directors, Tom Binford and Elizabeth Grube. They have served our Company
faithfully and with distinction for many years.
We will soon have available a new opportunity for shareholders, customers and
employees to buy stock in our Company on a very favorable basis through an
enhanced Dividend Reinvestment Plan to be rolled out March 10, 1995. We
believe this will be a good opportunity for everyone associated with us.
Quality of our water and other services, a strengthened commitment to
customer service, growth which will enhance shareholder value and a desire to
be an outstanding place for our employees to work are the issues at the top
of our corporate agenda.
I am very grateful to our shareholders, our management and all of our
employees for the support this Company receives. There are many special
people associated with the Company and because of them we are superbly well
positioned for a good future.
Best wishes,
James T. Morris
Chairman
February 1995
The Company's Business
The term "Company" in this report, unless otherwise indicated, refers to the
consolidated operations of IWC Resources Corporation and its subsidiaries.
IWC Resources Corporation is a holding company. The Company owns and operates
six subsidiaries, including two waterworks systems, which supply water for
residential, commercial, and industrial uses, and fire protection service in
Indianapolis, Indiana, and surrounding areas. The territory served by the two
utilities covers an area of approximately 309 square miles, which includes
areas in Marion, Hancock, Hamilton, Hendricks, Boone, and Morgan counties in
central Indiana. In August 1994, Zionsville Water Corporation was merged into
Indianapolis Water Company, as approved by the Indiana
Utility Regulatory Commission ("Commission").
At year's end, the Company's two water utilities -- Indianapolis Water
Company and Harbour Water Corporation -- were providing service to 229,333
customers . In addition to the two water utilities, the Company has four
other wholly owned subsidiaries: SM&P Utility Resources, Inc. (SM&P),
Waterway Holdings, Inc., Utility Data Corporation (UDC), and IWC Services,
Inc. SM&P performs underground utility locating and marking services in
Indiana and other states. The Company, principally through Waterway
Holdings, Inc., owns real estate that it expects to sell or develop in the
future. UDC provides customer relations, customer billing, and other data
processing services for the Company's two water utilities and other water and
sewer utilities. IWC Services provides laboratory water testing services,
principally for water utilities.
The White River Environmental Partnership (WREP), in which the Company
participates through IWC Services as the majority partner (52%), entered into
a five -year contract in January 1994 to operate and maintain the two
advanced wastewater treatment facilities for the city of Indianapolis. WREP
is actively seeking new markets and opportunities for contract management
service pursuant to expanded governmental privatization efforts.
The Company continues to seek expansion and diversification through the
acquisition of other water utilities and other related businesses. It is
expected, however, that the water utilities will continue as the principal
source of earnings for the Company in the foreseeable future.
The utility subsidiaries of the Company are subject to regulation by the
Commission, which has jurisdiction over rates, standards of service,
accounting procedures, issuance of securities, and related matters. Utility
operations are subject to pollution control and water quality control
regulations, including those issued by the Environmental Protection Agency,
the Indiana Department of Environmental Management, the Indiana Water
Pollution Control Board, and the Indiana Department of Natural Resources.
There are competitors operating near the Company's utility service area;
however, it does not anticipate significant competition will develop within
the Company.s utility service area. Competitors include various municipal
water utilities, as well as privately owned water utilities, some of which
purchase water from the Company.
Comaprative Highlights
1994 1993
(in thousands*)
Revenues from
customers $ 109,147 $ 82,321
Operating expenses 78,918 56,543
Earnings from operations 30,229 25,778
Other expense 7,363 7,074
Earnings before income taxes 22,866 18,704
Incurred income taxes 12,724 9,328
Earnings for shareholders 10,142 9,376
Cash dividends declared to common and
convertible preferred shareholders 9,656 9,290
Retained in the business $ 486 $ 86
Average number of common and common
equivalent shares outstanding
during year 6,901 6,658
Dividends declared per common share $ 1.40 $ 1.40
Net earnings per common and common
equivalent share 1.47 1.41
Book value per common and common
equivalent share 11.38 11.20
*All amounts, except per share data, in thousands.
Subsidiaries Report
Indianapolis Water Company (IWC)
IWC is the principal utility subsidiary of the Company and serves 226,795
customers in the metropolitan Indianapolis area. IWC's service area continues
to grow at a record pace. There were 112 miles of new mains added to the
system, and 4,962 new customers connected in 1994.
In August 1994, the Indiana Utility Regulatory Commission granted IWC a 2%
increase in rates and approved the merger between IWC and its former
affiliate - - Zionsville Water Corporation. In September, a new rate case was
filed in which IWC seeks Commission approval of an increase of approximately
$5 million ( 8%). Hearings on that case are scheduled in April 1995.
Harbour Water Corporation (HWC)
HWC supplies a growing area north of Indianapolis. HWC serves 2,538
customers, a 10% increase over last year. The nearby town of Westfield,
Indiana, began purchasing water from HWC in November.
SM&P Utility Resources, Inc. (SM&P)
SM&P changed its name from SM&P Conduit Co., Inc. to reflect a broader
offering of products and services to the utility industry. Underground
facility locating remains the primary focus of the company. However, many
clients are turning to SM&P for other out-sourcing needs. SM&P continues to
experience rapid growth. With almost 800 employees serving clients in
11 states, SM&P enjoyed a 38% increase in revenues in 1994. Demand for SM&P
services looks strong for the future.
Waterway Holdings, Inc.
Waterway Holdings holds, leases, develops, and sells real estate for the
Company.
Utility Data Corporation (UDC)
UDC provides customer billing, customer relations, and data processing
services for the Company's water utilities, the city of Indianapolis sewer
operations, and similar services for several other municipal and private
utilities in Indiana. UDC continues to provide the billings, collections and
customer contacts for all IWC water and city of Indianapolis sewer customers.
During 1994, UDC added the city of Elkhart, Indiana, as a billing customer
and released an innovative new software product for calculating water line
sizes through its marketing agreement with the American Water Works
Association.
IWC Services, Inc.
IWC Services, Inc. is the majority owner (52%) of the White River
Environmental Partnership (WREP). WREP successfully completed its first 11
months of contract operation of the two advanced wastewater treatment plants
owned by the city of Indianapolis. This contract, which has a five-year term,
has a base annual revenue of $15,000,000. WREP fully met all of its contract
obligations to the city, and exceeded its projected net income to each of its
partners. The partnership is actively pursuing additional contracts in the
Indianapolis area, and other communities in Indiana and surrounding states.
Engineering and Technical Services
In May 1994, the Engineering, Business Development, Purchasing, and Corporate
Affairs departments moved into the new General Office addition, west of the
original building. The addition was constructed to alleviate crowding
experienced in the General Office which is undergoing renovation.
Design, Construction and Planning
Construction of an addition to the White River Plant Laboratory will begin in
1995 to alleviate the crowding conditions in the existing laboratory. It will
accommodate the additional equipment and personnel needed to perform the
testing and monitoring required to assure water quality. Design will begin
on the first phase of a new major plant to be built in the South Well Field,
which when completed, will have the capacity to treat 50 million gallons of
water a day, making it the second largest treatment facility owned by the
Indianapolis Water Company (IWC). Design will also start on a major storage
and pumping facility for the southeast portion of the service territory.
Over 163 miles of main extension design, which is a record by the Company,
were completed. Engineering was able to design and draft over 85% of the
projects on computer disks supplied by external engineering and development
firms and add the information to the Company's map database. Company savings
in excess of $400,000 were successfully negotiated with the city and state on
street reconstruction projects. These entities altered their design or
construction instead of the Company relocating distribution facilities at its
expense.
Land and Resource Management
The cleaning of the Riverside wells and installation of a new well collecting
line under Fall Creek tied into the White River Purification Plant, marked
the start of a three-year effort to increase the amount of ground water which
can be utilized at that facility. This cleaning and installation will
increase supply and improve flexibility.
The Company continues to be an active participant in state and local
activities related to ground-water protection. IWC's involvement in the
development of a wellhead protection ordinance for Marion County will help
assure that high-quality ground water will be available to meet the
metropolitan area's current and future water needs. IWC received a permit
from the U.S. Army Corps of Engineers to conduct a sediment removal project
in a portion of Geist Reservoir. The dredging project, expected to begin in
fall 1995, will regain nearly one billion gallons of water supply storage
lost to sedimentation since the reservoir was completed in 1943. The removal
of material will be accomplished at no cost to the Company's customers,
through a unique partnership between IWC and a local sand and gravel mining
company, which will be able to process much of the material removed for
resale as sand and gravel aggregate.
Operations
Annual pumpage increased to 47 billion gallons compared to 43.1 billion
gallons in 1993. Daily pumpage averaged 127.7 million gallons compared to
117.5 million gallons last year. This exceeded the recorded pumpage of 124.2
million gallons set in 1991. The maximum daily pumpage during 1994 occurred
on June 15 when 191.5 million gallons were distributed.
Precipitation was below average in 1994. Rainfall at Indianapolis
International Airport totaled only 31.61 inches, which was eight inches less
than average and 18 inches less than 1993. The reservoirs were all used to
maintain adequate supply. Geist Reservoir reached a minimum of 2.64 feet
below the spillway . The lowest level at Eagle Creek Reservoir was 2.46 feet
below normal pool, and at Morse Reservoir, 0.54 feet.
Stream quality was reasonably good in 1994; however, chemical use was up due
to continuing efforts to enhance water quality. The Company was notified by
the Indiana Department of Environmental Management that its current treatment
methods optimize corrosion control.
This means the Company does not have to apply a corrosion inhibiting chemical
to meet the Lead and Copper Rule provisions of a new Environmental Protection
Agency (EPA) rule dealing with the subject under the federal Safe Drinking
Water Act.
As in the past, the Company continues to comply with all water quality
requirements and to improve its laboratory to assure product quality.
Distribution system repairs increased by more than 60% mainly due to the
record cold temperatures earlier in the year.
Customer Service
The creativity and hard work of employees have continued to make the
coordination of activities among Indianapolis Water Company (IWC), the city
of Indianapolis, and Utility Data Corporation (UDC) successful. These
innovative arrangements, which combine water and sewer billings, have
received overwhelming customer approval. Throughout the past year, UDC,
which handles customer service for the Company's water utilities and markets
these services to other utilities, averaged over 11,000 customer telephone
calls, customer interviews, and in-person customer payments per week.
During the year, UDC made available to all customers a new voice response
system under which a customer may receive by telephone current account
balance information. This new system, available 24 hours a day, seven days a
week, continues to be used extensively by its customers. Planning was
completed in 1994 on another customer relations amenity -- automatic check
debiting for bill payments -- now available to customers.
Customer Service employees participated with representatives of other IWC
operating departments in a team established to improve the Company's response
to customer inquiries about system water pressure. The team concept,
encouraging dialogue among the participants, has been effective in enabling
consistent responses and better information for its customers. Organizational
changes in the Field Operations Division have effectively streamlined
communication lines between field service employees and management.
UDC continues with a commitment to enhance the service level provided to its
customers. A "Customer Satisfaction Measurement" survey was completed during
the year, which will provide a benchmark to the Company for guiding future
efforts to better meet the needs of its customers.
Utility Plant, Distribution of Customers, Mains, and Fire Hydrants
Mains Fire
Utility Plant Customers (miles) Hydrants
1994 1993 1994 1993 1994 1993 1994 1993
(in thousands)
IWC* $ 270,404 $ 256,795 226,795 221,833 2,901 2,789 25,395 24,409
Harbour 4,690 3,868 2,538 2,309 39 38 342 321
$ 275,094 $ 260,663 229,333 224,142 2,940 2,827 25,737 24,730
*Includes Zionsville Water Corporation, which was merged into Indianapolis
Water Company in 1994.
Financial Review
Consolidated net earnings were $10,142,000 for 1994 compared with $9,376,000
for 1993 based upon operating revenues of $109,147,000 in 1994 and
$82,321,000 in 1993. Earnings available for common and common equivalent
shareholders were $1.47 per share for 1994 compared with $1.41 per share for
1993. During 1994, the average number of common and common equivalent shares
outstanding increased 243,000 shares over 1993 due primarily to the shares
issued to acquire SM&P Utility Resources, Inc. (SM&P), formerly SM&P Conduit
Co., Inc., in June 1993. Cash dividends declared on common shares outstanding
totaled $1.40 per share in 1994 and 1993.
Details and a discussion of financial and operating results follow:
Operating Revenues
1994 1993
(in thousands)
Water Utilities:
Residential $ 44,700 $ 41,513
Commercial and Industrial 20,576 18,032
Public Fire Protection 12 945
Other, including $3,611 in
income taxes collected from
developers in 1994 7,843 3,849
Total Water Utilities 73,131 64,339
Utility-Related Services 36,016 17,982
$ 109,147 $ 82,321
Operating Expenses
1994 1993
(in thousands)
Operation and Administration:
Water Utilities $ 34,805 $ 31,633
Utility-Related Services 28,481 12,453
Depreciation 7,820 6,556
Taxes other than Income Taxes 7,812 5,901
$ 78,918 $ 56,543
Results of Operations
Beginning in 1993, the Company has grouped its operations according to major
segments: (1) water utilities and (2) utility-related services. The primary
component of the utility- related services segment is SM&P which was acquired
in June 1993. The major fluctuations in the utility-related services segment
are primarily due to 12 months of SM&P's operations in 1994 as compared to
six months of operations in 1993; the following discussion and analysis will
concentrate primarily on the results of operations of the water utilities
segment.
Operating revenues for the water utilities segment increased $5,181,000
(8.1%), excluding $3,611,000 in income taxes collected from developers, and
is primarily due to an 8.8% increase in total water consumption reflecting
more normal weather conditions experienced during summer 1994 as compared to
conditions experienced during summer 1993.
Operation and administration expenses for the water utilities segment
increased $3,172,000 (10.0%) over 1993.
Labor expense increased $435,000 (3.3%) mainly due to a general wage
increase, effective January 1, 1994. Power costs increased $181,000 (7.0%)
primarily due to increased pumpage. Chemical costs increased $454,000 (60.1%)
primarily due to increased usage and higher chemical costs. Materials and
transportation costs increased $477,000 (22.6%) largely due to an increase in
maintenance activities. The cost of outside services increased $279,000
(4.8%) chiefly due
to an increase in consulting and other services. Insurance expense increased
$1,009,000 (30.8%) reflecting higher health and general liability insurance
premium costs and nonrecurring credits recognized in 1993. Regulatory
expenses decreased $97,000 (33.5%) primarily due to decreased rate case
expenses. Costs of the Company's pension and other benefit plans increased
$841,000 (54.5%) primarily due to the higher costs of benefits provided.
In 1994, the operating margin (operating revenues less operation and
administration expenses) in the utility-related services segment was
$7,535,000 (20.9% ) as compared to $5,529,000 (30.8%) in 1993. The reduction
in the operating margin percent is primarily due to additional expenses
incurred necessary to service the expansion of SM&P's business in 1994.
Depreciation increased $1,264,000 (19.3%) of which $1,004,000 is applicable
to the utility-related services segment. The increase in water utilities
segment depreciation of $260,000 represents a 4.5% increase over 1993, and is
primarily due to additional plant placed in service.
Human Resources
The Company's strategic planning efforts started in 1993. As a result, a
comprehensive employee opinion survey was conducted. This survey was studied,
summarized, and shared with all employees in 30 small group meetings led by
Jean Smith, director of career planning and development. One of the major
points learned from the employee survey was that internal communications
needed improvement. Four-hour seminars for all employees were conducted
during 1994.
At year's end, there were 1,351 full-time employees of IWCR, its subsidiaries
and affiliated partnership interest:
Indianapolis Water Company 347
Utility Data Corporation 60
SM&P Utility Resources, Inc. 758
White River Environmental Partnership 180
IWC Resources Corporation 6
1,351
The John N. Hurty Service Award, representing 25 years of service to the
water utility field, was presented by the Indiana Department of Environmental
Management to nine employees. This brought the total number of employees so
honored to 339. The Company is extremely grateful for its employees'continued
loyalty and dedication.
The Thomas W. Moses Memorial Scholarship Program, which was initiated in
1986, has provided financial assistance to 69 children of employees seeking a
college education. Thirty employees were reimbursed for educational classes
taken in 1994.
During 1994, 22 employees retired from the Indianapolis Water Company (IWC)
and one from Utility Data Corporation. These retirees averaged over 31 years
of dedicated service to the Corporation.
A new four-year contract between IWC and the International Brotherhood of
Firemen and Oilers, Local 131, was ratified on February 28, 1995.
The Company is an equal opportunity employer. All applicants and employees
will receive equal opportunities for hire, promotion, and other job
opportunities without regard to race, color, religion, national origin, sex,
handicap, age, or status as a disabled or Vietnam-era veteran. In addition,
the Company complies with all affirmative action requirements applicable to
it and maintains affirmative action programs for minorities, women,
handicapped persons, and disabled and Vietnam-era veterans.
Financial Review
IWC Resources Corporation and Subsidiaries
Consolidated Balance Sheets
December 31, 1994 and 1993
ASSETS
1994 1993
(in thousands)
Current assets:
Cash and cash equivalents $ 2,889 $ 1,813
Accounts receivable, less allowance
for doubtful accounts of $190 10,124 9,515
Materials and supplies, at average cost 2,257 1,722
Other current assets 1,099 871
Total current assets 16,369 13,921
Utility plant:
Utility plant in service 343,488 323,313
Less accumulated depreciation 75,801 70,406
Net plant in service 267,687 252,907
Construction work in progress 7,407 7,756
Utility plant, net 275,094 260,663
Construction funds held by Trustee - 2,010
Other property 13,053 6,825
Goodwill, net of accumulated amortization 16,964 17,479
Deferred charges and other assets 13,902 11,545
$ 335,382 $ 312,443
LIABILITIES AND SHAREHOLDERS' EQUITY
1994 1993
(in thousands)
Current liabilities:
Notes payable to banks $ 17,674 $ 21,779
Current portion of long-term debt 1,150 1,200
Accounts payable and accrued expenses 16,295 14,380
Federal income taxes 256 392
Customer deposits 1,126 1,027
Total current liabilities 36,501 38,778
Long-term obligations:
Long-term debt, less current portion 98,225 85,375
Customer advances for construction 48,750 43,597
Other liabilities 6,079 5,069
Total long-term obligations 153,054 134,041
Deferred income taxes 31,003 28,824
Contributions in aid of construction 30,181 28,081
Preferred stock of subsidiary and
redeemable preferred stock 5,705 5,705
Shareholders. equity:
Common stock, authorized 10,000
common shares; 6,886 and 6,822 issued
and outstanding in 1994 and 1993 60,540 59,301
Retained earnings 18,398 17,912
78,938 77,213
Less unearned compensation - 199
Total shareholders' equity 78,938 77,014
Commitments and contingencies
$ 335,382 $ 312,443
The accompanying notes are an integral part of the consolidated financial
statements.
IWC Resources Corporation and Subsidiaries
Consolidated Statements of Shareholders' Equity
Years ended December 31, 1994, 1993 and 1992
Total
Common Stock Retained Unearned Shareholders'
Shares Amount Earnings Compensation Equity
(in thousands, except share data)
Balance at December 31, 1991 6,327,133 $ 48,088 $ 18,607 $ - $ 66,695
Net earnings 8,113 8,113
Dividends - $1.395 per common share (8,894) (8,894)
Common stock issued:
Dividend Reinvestment Plan 53,967 1,116 1,116
Restricted Stock Plan 26,491 524 (524) -
Compensation expense 175 175
Balance at December 31, 1992 6,407,591 49,728 17,826 (349) 67,205
Net earnings 9,376 9,376
Dividends - $1.40 per share:
Common stock (9,254) (9,254)
Redeemable preferred stock (36) (36)
Common stock issued:
Acquisition of subsidiary 356,991 8,300 8,300
Dividend Reinvestment Plan 55,646 1,236 1,236
Restricted Stock Plan 1,725 37 (37) -
Compensation expense 187 187
Balance at December 31, 1993 6,821,953 59,301 17,912 (199) 77,014
Net earnings 10,142 10,142
Dividends - $1.40 per share:
Common stock (9,620) (9,620)
Redeemable preferred stock (36) (36)
Common stock issued:
Dividend Reinvestment Plan 59,257 1,159 1,159
Restricted Stock Plan,
net of 16,189 shares tendered
for tax withholding and then
retired 5,061 80 (80) -
Compensation expense 279 279
Balance at December 31, 1994 6,886,271 $ 60,540 $ 18,398 $ - $ 78,938
The accompanying notes are an integral part of the consolidated financial
IWC Resources Corporation and Subsidiaries
Consolidated Statements of Earnings
Years ended December 31, 1994, 1993 and 1992
1994 1993 1992
(in thousands, except per share data)
Operating revenues:
Water utilities $ 73,131 $ 64,339 $ 63,452
Utility-related services 36,016 17,982 -
109,147 82,321 63,452
Operating expenses:
Operation and administration:
Water utilities 34,805 31,633 29,774
Utility-related services 28,481 12,453 -
Depreciation 7,820 6,556 5,316
Taxes other than income taxes 7,812 5,901 5,179
Total operating expenses 78,918 56,543 40,269
Operating earnings 30,229 25,778 23,183
Other income (expense):
Interest expense, net (7,959) (7,295) (6,937)
Interest income 109 208 337
Dividends on preferred stock
of subsidiary (203) (203) (203)
Other, net 690 216 930
(7,363) (7,074) (5,873)
Earnings before income taxes 22,866 18,704 17,310
Income taxes 12,724 9,328 9,197
Net earnings $ 10,142 $ 9,376 $ 8,113
Net earnings per common and common
equivalent share $ 1.47 $ 1.41 $ 1.27
Average number of common and
common equivalent shares outstanding 6,901 6,658 6,379
The accompanying notes are an integral part of the consolidated financial
statements.
IWC Resources Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Years ended December 31, 1994, 1993 and 1992
1994 1993 1992
(in thousands)
Cash flows from operating activities:
Net earnings $ 10,142 $ 9,376 $ 8,113
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 9,597 7,808 5,877
Deferred income taxes 2,179 1,241 1,832
Gain on sales of other property (783) (1,052) (855)
Provision for bad debts 430 335 314
Dividends on preferred stock
of subsidiary 203 203 203
Other, net (776) 137 (380)
Changes in operating assets
and liabilities:
Accounts receivable (1,039) 353 (591)
Materials and supplies (535) (425) 52
Other current assets (332) 1,741 (585)
Accounts payable and accrued expenses 1,915 279 1,038
Federal income taxes (187) 232 (836)
Customer deposits 99 83 20
Net cash provided by operating
activities 20,913 20,311 14,202
Cash flows from investing activities:
Additions to utility plant and other
property (28,256) (13,967) (15,751)
Proceeds from sales of other property 424 1,517 1,078
Customer advances for construction 9,175 5,748 6,503
Refunds of customer advances for
construction (2,156) (2,242) (2,360)
Acquisition of SM&P Utility Resources, Inc.,
net of cash acquired - (12,482) -
Other investing activities, net (952) (963) (287)
Net cash used by investing activities (21,765) (22,389) (10,817)
Cash flows from financing activities:
Increase (decrease) in notes payable
to banks (4,105) 12,775 (11,547)
Proceeds from long-term debt 14,000 11,600 14,836
Payments of long-term debt (1,277) (12,780) (15,953)
Decrease (increase) in construction funds
held by Trustee 2,010 (52) 335
Cash dividends (9,859) (9,493) (9,097)
Proceeds from issuance of common stock 1,159 1,236 1,116
Net cash provided (used)
by financing activities 1,928 3,286 (20,310)
Increase (decrease) in cash and
cash equivalents 1,076 1,208 (16,925)
Cash and cash equivalents at
beginning of year 1,813 605 17,530
Cash and cash equivalents at
end of year $ 2,889 $ 1,813 $ 605
Supplemental disclosure of cash flow information-
Cash paid for:
Interest on long-term debt and notes payable
to banks, net of capitalized interest $ 7,396 $ 7,104 $ 6,766
Income taxes $11,480 $ 7,488 $ 8,072
The accompanying notes are an integral part of the consolidated financial
statements.
IWC Resources Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Years ended December 31, 1994, 1993 and 1992
Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of IWC Resources
Corporation and its wholly owned subsidiaries. The term "Company" refers to
the consolidated operations of IWC Resources Corporation 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.
In November 1993, a subsidiary of the Company became majority partner in
White River Environmental Partnership (Partnership). In December 1993, the
Partnership was awarded a five-year contract by the city of Indianapolis to
manage and operate its two advanced wastewater treatment plants commencing
January 30, 1994. The Company's share of Partnership earnings, which are
reported on the equity basis, are not significant to the Company's
consolidated earnings and are included in other income.
All significant intercompany accounts and transactions have been eliminated
in consolidation.
Cash Equivalents
The Company considers all highly liquid debt instruments purchased with
maturities of three months or less to be cash equivalents.
Utility Plant
Utility plant is stated at cost which includes the cost of land, outside
contract work, labor and materials, interest and certain indirect costs
incurred
during the construction period. Such indirect costs consist of
administration, general overhead, and other costs applicable to construction
projects.
When utility plant in service is retired, except for land and land rights,
the accumulated cost of the retired property plus cost of removal and less
salvage value is charged against accumulated depreciation. If land or land
rights are sold, the net gain or loss is included in earnings. Property not
currently used in utility operations is included in other property.
Depreciation of utility plant for financial statement purposes is computed at
a composite annual rate of 1.9% as approved by the Commission.
Generally, maintenance and repairs and the cost of replacements of minor
items of property are charged to operation expense accounts as incurred.
Other Property
Other property is stated at cost less accumulated depreciation and includes
property not currently used in utility operations, real estate held for
development or resale, and property and equipment used in non-utility
businesses. Depreciable property was $11,088,000 and $6,751,000 at December
31, 1994 and 1993, respectively, and accumulated depreciation was $2,960,000
and $1,209,000 at December 31, 1994 and 1993, respectively.
Goodwill
The Company recognizes the excess of cost over fair value of tangible and
other identifiable assets acquired in business acquisitions as goodwill which
is amortized by the straight-line method over 20 or 40 years. The Company
continually evaluates the recoverability of goodwill by comparing its annual
amortization to the acquired company's pretax earnings before amortization
and by assessing whether the amortization of the remaining goodwill balance
over its re maining life can be recovered through expected future results.
Amortization expense was $511,000, $319,000 and $101,000 in 1994, 1993 and
1992, respectively. Accumulated amortization at December 31, 1994 and 1993
was $1,397,000 and $886,000, respectively.
Income Taxes
For financial statement purposes, investment tax credits are deferred and
amortized ratably over the lives of the applicable assets as prescribed by
the Commission. For income tax purposes, the credits are deducted in the
year in which the constructed or acquired property was placed in service.
In February 1992, The Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting for
Income Taxes". SFAS No. 109 requires a change from the deferred method of
accounting for income taxes to the asset and liability method. Under this
method, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
amounts for assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates which apply
to taxable income in the years in which those temporary differences are
expected to reverse. Under SFAS No. 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in the period the
change is enacted.
Effective January 1, 1993, the Company adopted SFAS No. 109. The effect of
this change in accounting for income taxes was not material to the Company's
financial condition or results of operations. Accordingly, no cumulative
effect of accounting change has been presented.
Customer Advances and
Contributions in Aid of Construction
In certain cases, customers advance funds for water main extensions. These
advances are included in customer advances for construction and are generally
refundable to the customer over a period of ten years. Advances not refunded
within ten years are permanently transferred to contributions in aid of
construction.
Revenues
Utility revenues are recognized based on water usage at rates approved by the
Commission. Service revenues are recognized as services are provided.
Pension Plans and Other
Retirement Benefits
The Company has a noncontributory defined benefit pension plan which covers
the majority of its utility employees and certain other employees. Benefits
are based on, among other factors, an employee's services rendered to date
and average monthly earnings for the 36 consecutive calendar months that
produce the highest average. The Company's funding policy is to contribute
annually at least the minimum contribution required to comply with ERISA
regulations.
The Company has an unfunded executive supplemental benefit plan which
provides additional retirement benefits to certain officers. Benefits are
based on, among other factors, an employee's age, services rendered
to date, and benefits received from the Company's noncontributory defined
benefit pension plan.
The Company also sponsors defined contribution plans covering substantially
all non-bargaining unit employees and an employee stock ownership plan
covering substantially all of its utility employees and certain other
employees.
The Company provides postretirement life insurance and healthcare benefits to
certain of its employees. Prior to 1993, the Company accounted for such
benefits on a cash basis. Effective January 1, 1993, the Company adopted
Statement of Financial Accounting Standards No. 106 (SFAS No. 106) which
requires it to accrue currently, during the period of employment, the present
value of the estimated cost of such benefits. The effects of this change,
which are not material to the Company's financial condition or results of
operations, are discussed in the note entitled
Regulatory Assets.
Reclassifications
Certain amounts for 1993 and 1992 have been reclassified to conform with the
1994 presentation.
Acquisition of
SM&P Utility Resources, Inc.
On June 14, 1993, the Company acquired SM&P Utility Resources, Inc. (formerly
SM&P Conduit Co., Inc.) (SM&P) in a transaction accounted for as a purchase.
SM&P is engaged in the business of providing a single source facility
locating service for all utilities including: gas, electric, telephone, cable
television, water and sewer. The Company also entered into not to compete
agreements with SM&P shareholders at a cost of $3,000,000. The cost of the
acquisition and agreements not to compete was paid by cash of $12,503,000 and
the issuance of 356,991 shares of the Company's common stock and 51,612
shares of the Company's Series B Redeemable Preferred Stock. Goodwill of
$16,379,000 is being amortized over 40 years, and the cost of agreements not
to compete is being amortized over their five-year lives.
A summary of the SM&P assets acquired and liabilities assumed follows:
(in thousands)
Property and equipment $ 5,021
Accounts receivable 2,968
Other current assets 1,456
Short-term notes payable (3,933)
Accounts payable
and accrued expenses (2,524)
Federal income taxes payable (364)
Net assets acquired $ 2,624
The consolidated financial statements include the results of SM&P's
operations beginning June 14, 1993. As this acquisition is not material to
the consolidated financial statements, pro forma operating results are
not presented.
Fair Value
of Financial Instruments
The following disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of Statement of Financial Account
ing Standards (SFAS) No. 107, "Disclosures about Fair Value of Financial
Instruments". The estimated fair value amounts have been determined by the
Company using available market information and appropriate valuation
methodologies. However, considerable judgment is required to interpret market
data to develop the estimates of fair value. Accordingly, the estimates
herein are not necessarily indicative of the amounts the Company could
realize in a current market exchange. The use of different market assumptions
and/or estimation methods may have a material effect on the estimated fair
value amounts.
The carrying amounts of cash equivalents and notes payable to banks
approximate fair value because of the short maturity of those instruments.
The fair value of long-term debt at December 31, 1994, is estimated to be
$104,364,000. The fair value was determined by discounting future payments at
current interest rates for similar issues.
Utility Plant in Service
A summary of utility plant in service at December 31 follows:
1994 1993
(in thousands)
Land and land rights $ 7,009 $ 9,818
Structures and improvements 49,767 46,302
Pumping station equipment 14,746 14,562
Purification system 25,492 25,290
Transmission and
distribution system 236,541 218,361
Other 9,933 8,980
$ 343,488 $ 323,313
Regulatory Assets
Deferred charges and other assets include certain costs which are capitalized
as regulatory assets and amortized pursuant to utility rate-making
proceedings. The Commission allows recovery of these assets through rates,
but not a return on investment, over periods ranging from 2 years to 30
years. A summary of regulatory assets at December 31 follows:
1994 1993
(in thousands)
Costs of postretirement
benefit obligations other
than pensions $ 3,722 $ 2,016
Income taxes 950 911
Tank painting costs 710 514
Rate proceeding costs 668 374
Debt costs 1,661 1,338
$ 7,711 $ 5,153
In December 1992, the Commission authorized all Indiana utilities, including
the utility subsidiaries of the Company, to record as a regulatory asset the
excess of accrual basis costs of postretirement life insurance and healthcare
benefits (OPRB) over the cash basis costs which were used to establish
current rates. The Company received approval to recover its OPRB costs on an
accrual basis in its rate case settled August 10, 1994, subject to the
Company's proposal and Commission's acceptance of an appropriate restricted
fund. The Company has prefiled testimony in this matter and the Utility
Consumer Counselor, representing ratepayers, has filed opposition to IWC's
proposal. This matter has not been heard or resolved. Once approved, the
regulatory asset will be amortized through 2014.
The Company is amortizing the cumulative obligation for employee services
rendered prior to adoption of SFAS No. 106 (the transition obligation) on a
delayed basis over a 20-year period.
Income taxes represent the effects of the 1993 increase in the federal
corporate tax rate on the Company's water utilities' net deferred tax
liabilities and will be amortized through 2009.
Tank painting charges and rate proceeding costs are generally being amortized
through 2009 and 1996, respectively, and result from costs required to be
deferred for regulatory purposes.
Debt issuance costs include various costs deferred for regulatory purposes
which are to be amortized over the original lives of applicable debt through
2026.
Accounts Payable and Accrued Expenses
A summary of accounts payable and accrued expenses at December 31 follows:
1994 1993
(in thousands)
Accounts payable $ 3,364 $ 2,132
Accrued property taxes 5,039 4,629
Accrued interest
on long-term debt 1,799 1,547
Accrued vacations 1,732 1,526
Other accrued expenses 4,361 4,546
$16,295 $14,380
Notes Payable to Banks and Long-term Debt
At December 31, 1994, the Company had lines of credit with banks aggregating
$23,200,000 which require a compensating cash balance of $100,000. At December
31, 1994, unused lines of credit aggregated $6,130,000. Interest on borrowings
under the lines of credit is variable(an average of 6.23% at December 31,1994).
The Company has a Controlled Disbursement Agreement with a bank which authorizes
the bank to transfer funds daily between the Company's checking and note payable
accounts. Outstanding checks drawn on this checking account are reported as a
component of notes payable to banks. At December 31, 1994 and 1993, such
outstanding checks amounted to $604,000 and $551,000, respectively.
A summary of First Mortgage Bonds (secured by utility plant) and other long-term
debt outstanding at December 31 follows:
1994 1993
(in thousands)
5-7/8% Series due 1997 $ 6,775 $ 6,775
5.20% Series due 2001 11,600 11,600
8% Series due 2001 3,000 3,000
6.31% Senior notes due 2001 14,000 -
12-7/8% Series due 2002 4,000 5,200
7-7/8% Series due 2019 40,000 40,00
9.83% Series due 2019 5,000 5,000
6.10% Series due 2022 5,000 5,000
8.19% Series due 2022 10,000 10,000
99,375 86,575
Less current portion 1,150 1,200
$98,225 $85,375
Provisions of trust indentures related to the 5-7/8% Series Bonds and the 8%
Series Bonds require annual sinking or improvement fund payments amounting to
1/2% of the maximum aggregate amount outstanding.
As permitted, this requirement has been satisfied by substituting a portion
of permanent additions to utility plant. These bonds are redeemable at the
option of the Company at varying premium amounts at different periods prior
to the respective dates of maturity.
The 5.20% Series Bonds are due and payable in full May 1, 2001. In the event
the bonds lose their tax-exempt status, mandatory redemption of the bonds is
required.
The 6.31% Senior Notes are due and payable in full March 15, 2001. Optional
redemptions by the Company are allowed in whole on or after March 15, 1997,
at the greater of par or the present value of the notes discounted at 1/2%
over the applicable Treasury rate.
The 12-7/8% Series Bonds mature at the rate of $2,000,000 on November 15 of
each of the years 1998 through 2002. Subject to certain restrictions, these
bonds are redeemable at the option of the Company at varying premium amounts
at different periods prior to the respective dates of maturity. In January
1994, 1993 and 1992, the Company prepaid $1,200,000, $1,100,000 and
$3,700,000, respectively, in principal amount of these bonds, due $1,200,000
in each of the years 1998 through 2002 at a premium of $455,000. In February
1995, the Company gave required notice to prepay in March 1995, $1,150,000 in
principal amount of these bonds, due $230,000 in each of the years 1998
through 2002 at a premium of $65,000.
The 7-7/8% Series Bonds include issues of $10,000,000 and $30,000,000, both
of which are due and payable in full March 1, 2019. In the event the bonds
lose their tax exempt status, mandatory redemption of the bonds is required.
Optional redemptions by the Company are allowed on or after March 1, 1998,
and are generally subject to a premium.
The 9.83% Series Bonds are redeemable at the option of the Company, on or
after June 15, 2014, with final redemption by June 15, 2019. Early
redemptions are subject to a premium.
The 6.10% Series Bonds are due and payable in full December 1, 2022. In the
event the bonds lose their tax exempt status, mandatory redemption of the
bonds is required. Optional redemptions by the Company are allowed on or
after December 1, 1999, and are generally subject to a premium.
The 8.19% Series Bonds are due and payable in full December 1, 2022.
Optional redemptions by the Company are allowed at any time at the greater of
par or the present value of the bonds discounted at 1/2% over the applicable
Treasury rate.
Required principal payments on long-term debt for the five years following
December 31, 1994, exclusive of obligations which may be satisfied by
permanent additions to utility plant, amount to $6,775,000 in 1997, $570,000
in 1998 and $570,000 in 1999.
Interest expense is net of an allowance for funds used during construction
(AFUDC) which is an amount capitalized for construction projects as
authorized by the Commission. AFUDC amounts capitalized were $212,000,
$160,000 and $122,000 during 1994, 1993 and 1992, respectively.
Preferred Stock of Subsidiary
The preferred stock of subsidiary represents 45,049 shares of Indianapolis
Water Company cumulative preferred stock of $100 par value per share. The
preferred stock is redeemable at the option of the subsidiary upon proper
notice at prices ranging from $100 to $105 per share plus accrued dividends
(an aggregate redemption value of $4,658,000).
Dividends on the preferred stock are payable at rates ranging from 4% to 5%
per annum.
Redeemable Preferred Stock
At December 31, 1994, 60,000 special shares of Series B Convertible
Redeemable Preferred Stock, no par value, have been authorized, of which
51,612 shares have been issued and are outstanding. The preferred stock was
issued in connection with the acquisition of SM&P and is convertible by the
holder at any time, in whole, into shares of common stock at a conversion
rate of one common share for each share of preferred stock. Mandatory
redemption of the preferred stock is required on July 14, 1998, at $23.25 per
share plus accrued dividends (an aggregate redemption value of $1,200,000).
Holders of the preferred stock are entitled to the same voting and dividend
rights as common shareholders and such shares are considered common share
equivalents in the calculation of earnings per share.
Common Stock
The Company's authorized capital stock consists of 10,000,000 common shares
and 2,000,000 special shares with no par value.
No special shares have been issued other than the 60,000 shares designated as
Series B Convertible Redeemable Preferred Stock.
The Company has a Dividend Reinvestment and Share Purchase Plan which allows
common shareholders the option of receiving their dividends in cash or common
stock and permits optional cash purchases of shares at current market values
to a maximum of $5,000 per quarter. On July 15, 1994, the Company amended
its plan to allow certain employees and utility customers of the Company or
its subsidiaries to purchase common shares. Effective March 10, 1995,
purchases
may be made with a minimum investment of $10 by employees, or $100 by
customers up to a total of $100,000 annually. A total of 500,000 authorized
but unissued common shares have been registered for purchase under the plan.
The price of common shares purchased with reinvested dividends or optional
cash payments will be 97% of the average of the means between the high and
low sale prices of the common shares as determined for the five consecutive
trading days ending on the day of purchase. Shareholders who do not choose
to participate in the plan will continue to have an option to receive their
dividends in cash.
At December 31, 1994, 477,149 shares of common stock were reserved for
issuance under the plan.
In April 1992, the Company adopted a Restricted Stock Plan under which
200,000 common shares have been reserved and may be awarded to officers and
key employees. Restricted stock plan participants are entitled to cash
dividends and voting rights on their awarded shares. Restrictions generally
limit the sale , transfer, or pledge of shares during a three-year
measurement period following the issuance of such shares. The initial
three-year measurement period concluded December 31, 1994.
The number of shares awarded under the plan are subject to adjustment at the
end of the measurement period as determined by the provisions of the plan.
The adjustment at the end of the initial three-year measurement period was an
incremental award of 21,250 shares, of which 16,189 shares were tendered by
the Company to satisfy tax withholding requirements, and retired.
Participants may vest in certain restricted shares upon death, disability or
retirement as described in the plan. In the event of a change in control of
the Company, all restrictions expire and participants may receive additional
shares as determined by provisions of the plan.
Unearned compensation recorded as of the effective dates of the awards is
amortized to expense during the three-year measurement period. At December
31, 1994, 150,534 shares were reserved for future awards.
In January 1995, the Company commenced its second three-year measurement
period and awarded 29,461 restricted shares with a market value at date of
award of $19.86 per share.
In January 1988, the Company's board of directors adopted a Shareholder
Rights Plan pursuant to which a dividend distribution of one preferred share
purchase right for each outstanding share of common stock was made to
shareholders of record on February 18, 1988. Under the plan, each right will
initially entitle shareholders to purchase one one-hundredth of a share of a
new series of preferred stock of the Company at an exercise price of $45. The
rights become exercisable when a person or group acquires 20% or more of the
Company's common stock or commences a tender offer for 30% or more of the
Company's common stock. Upon the happenings of certain events, each right not
owned by a 20% shareholder or shareholder group will entitle its holder to
purchase, at the right's then current exercise price, shares of the Company's
common stock having a value of twice that price. The rights expire in
February 1998.
Taxes
Components of taxes other than income taxes follow:
1994 1993 1992
(in thousands)
Property taxes $ 4,870 $ 4,086 $ 4,076
Other 2,942 1,815 1,103
$ 7,812 $ 5,901 $ 5,179
Components of income taxes follow:
1994 1993 1992
(in thousands)
Federal:
Currently payable $ 8,122 $ 5,864 $ 5,349
Deferred 1,971 1,119 1,611
$10,093 $ 6,983 $ 6,960
State:
Currently payable $ 2,423 $ 2,223 $ 2,016
Deferred 208 122 221
2,631 2,345 2,237
$12,724 $ 9,328 $ 9,197
The differences between actual income taxes and expected federal income taxes
using statutory rates follow:
1994 1993 1992
(in thousands)
Expected federal
income taxes $ 8,003 $ 6,546 $ 5,885
Taxes on advances
collected from
developers 2,347 - -
Taxable customer
advances for
construction 454 1,309 1,487
State income
taxes, net of
federal income
tax benefit 1,710 1,524 1,477
Other, net 210 (51) 348
$12,724 $ 9,328 $ 9,197
The tax effects of temporary differences follow:
1994 1993 1992
(in thousands)
Depreciation $ 1,961 $ 1,098 $ 1,217
Customer
advances
for construction 539 46 21
Debt redemption
premium - (12) 467
Other, net (321) 109 127
$ 2,179 $ 1,241 $ 1,832
The tax effects of significant temporary differences represented by deferred
tax assets and deferred tax liabilities at December 31 follow:
1994 1993
(in thousands)
Deferred tax assets:
Customer advances
for construction $ 1,854 $ 2,393
Accrued pension costs 694 1,013
Accrued vacations 617 574
Other 1,124 603
Total deferred
tax assets 4,289 4,583
Deferred tax liabilities:
Utility plant, principally
due to differences in
depreciation and
capitalized costs 29,324 27,363
Unamortized investment tax
credits 4,913 5,029
Debt redemption
premiums deducted
for tax 508 508
Other property bases
greater for tax 105 271
Other 442 236
Total deferred
tax liabilities 35,292 33,407
Net deferred
tax liabilities $ 31,003 $ 28,824
Customer advances for construction received after 1986 are includible in
taxable income when received and are deductible if subsequently refunded to
customers. Prior to 1994, such advances were excluded from financial statement
income. Effective September 8, 1993, the Commission granted IWC permission to
surcharge developers for income taxes on advances and reduce its water rates by
a corresponding amount. In 1994, IWC began collecting surcharges on advances
from developers which surcharges amounted to $3,611,000. Income tax surcharges
collected from developers are reported as a component of water utilities
operating revenues and income taxes and, accordingly, have no effect on net
earnings.
Pension Plans and Other Retirement Benefits
The Company has two defined benefit pension plans: (1) a noncontributory plan
which covers the majority of its utility employees and certain other employees,
and (2) an executive supplemental plan which provides additional retirement
benefits to certain officers.
The following tables set forth the plans' funded status and accrued pension
cost amounts recognized in the Company's consolidated financial statements at
December 31:
Majority Plan Supplemental Plan
1994 1993 1994 1993
(in thousands) (in thousands)
Accumulated benefit obligation $ 5,856 $ 7,221 $ 1,798 $ 1,845
Vested benefit obligation $ 5,165 $ 6,545 $ 1,726 $ 1,782
Projected benefit obligation $11,918 $13,215 $ 2,362 $ 2,298
Plan assets at fair value,
primarily listed stocks
and bank fixed income funds 10,834 10,818 - -
Projected benefit obligation
in excess of plan assets 1,084 2,397 2,362 2,298
Unrecognized net asset
(obligation) at transition 917 1,045 (55) (67)
Unrecognized loss (1,861) (2,216) (621) (786)
Additional minimum liability - - 112 400
Accrued pension cost $ 140 $ 1,226 $ 1,798 $ 1,845
Net periodic pension costs for the years ended December 31 include the
following components:
Majority Plan Supplemental Plan
1994 1993 1992 1994 1993 1992
(in thousands) (in thousands)
Service cost - benefits
earned during year $ 903 $ 769 $ 720 $ 150 $ 86 $ 96
Interest cost on
projected
benefit obligation 1,006 902 776 167 149 145
Return on plan assets 387 (562) (603) - - -
Net amortization
and deferrals (1,345) (393) (259) 67 45 43
Net periodic
pension cost $ 951 $ 716 $ 634 $ 384 $ 280 $ 284
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the projected benefit obligation were
8-1/2% and 5%, respectively, for 1994, 7-1/4% and 4-1/2%, respectively, for
1993, and 8% and 5%, respectively, for 1992. The expected long-term rate of
return on assets was 8% for 1994 and 1993 and 8-1/2% for 1992.
Contributions to the Company's defined contribution plans and its employee
stock ownership plan amounted to $489,000 and $292,000 in 1994, $352,000 and
$274,000 in 1993, and $255,000 and $250,000 in 1992, respectively.
The Company provides OPRBs to certain employees. The following tables set
forth the accumulated postretirement benefit obligation and net periodic
postretirement benefit cost amounts recognized in the Company's consolidated
financial statements at December 31:
1994 1993
(in thousands)
Accumulated post-retirement
benefit obligation:
Active employees $ 10,710 $ 11,623
Retired employees 6,495 6,012
17,205 17,635
Unrecognized transition
obligation (14,869) (15,694)
Unrecognized gain 1,450 81
Accrued postretirement
benefit cost $ 3,786 $ 2,022
Net periodic postretirement benefit costs for the years ended December 31
include the following components:
1994 1993
(in thousands)
Service cost - benefits
earned during year $ 555 $ 462
Interest cost on accumulated
postretirement benefit
obligation 1,271 1,322
Amortization of transition
obligation 826 826
Net periodic postretirement
benefit cost $ 2,652 $ 2,610
The weighted-average discount rate used to measure the accumulated
postretirement benefit obligation was 8-1/2% and 7-1/4% for the years ended
December 31, 1994 and 1993, respectively. The Company used premium growth
rates to compute assumed healthcare cost trend rates. In 1994, these rates
ranged from 12-1/5% in 1994 to 5-1/4% in 2001 and thereafter and in 1993
these rates ranged from 13% in 1993 to 5-1/4% in 2000 and thereafter. Had
these healthcare cost trend rates been higher by 1%, the net periodic
postretirement benefit cost would have been higher by $207,000 in 1994 and
the accumulated postretirement benefit obligation would have been higher by
$1,516,000 in 1994.
Segment Information
The Company's operations include two business segments: regulated water
utilities and unregulated utility-related services. The water utilities
segment includes the operations of the Company's two water utility
subsidiaries. The utility-related services segment provides utility line
locating services, data processing and billing and payment processing, and
other utility-related services to both unaffiliated utilities and to the
Company's water utilities. Intersegment activity primarily represents certain
operating cost allocations between affiliates.
Identifiable assets are those assets used exclusively in the operations of
each business segment. Corporate assets are principally comprised of cash and
certain property held for sale.
The following table shows operating revenues, operating earnings and other
summary financial information by segment as of and for the year ended
December 31, 1994 and 1993. For the year ended December 31, 1992, the
Company's operations were primarily related to water utilities and,
accordingly, information by
segment is not presented.
Utility-
Water Related Corporation
Utilities Services and Other Consolidated
1994 (in thousands)
Operating revenues:
Unaffiliated $ 73,131 $ 36,016 $ - $ 109,147
Affiliated 87 4,147 (4,234) -
Total 73,218 40,163 (4,234) 109,147
Operating earnings 26,402 3,827 - 30,229
Depreciation 6,017 1,803 - 7,820
Identifiable assets 297,354 32,335 5,981 335,382
Capital expenditures 23,462 4,774 20 28,256
Utility-
Water Related Corporation
Utilities Services and Other Consolidated
1993 (in thousands)
Operating revenues:
Unaffiliated $ 64,339 $ 17,982 $ - $ 82,321
Affiliated 242 4,025 (4,267) -
Total 64,581 22,007 (4,267) 82,321
Operating earnings 21,841 3,937 - 25,778
Depreciation 5,757 799 - 6,556
Identifiable assets 280,823 28,923 2,697 312,443
Capital expenditures 13,049 778 140 13,967
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 the 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.
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 OPRBs, in accordance with SFAS 106, pending a
determination of an appropriate restricted fund for the related revenues.
The rate effect of such higher costs should amount to approximately $1.7
million (3% of the requested 14% increase in combined annual revenues). That
annual amount, with the Commission's authorization, is now being deferred as
a regulatory asset and should ultimately be recoverable over a period not to
exceed 20 years. On October 11, 1994, IWC filed testimony with the
Commission proposing a grantor trust to hold OPRB-related funds. The Utility
Consumer Counselor (UCC), representing ratepayers, filed testimony in
opposition to IWC's proposal, arguing that it was not sufficiently
restrictive. IWC filed testimony in rebuttal to that of the UCC on December
16, 1994. This matter has not yet been heard or resolved.
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 sought by
IWC is approximately $5 million, or 8%, based on water consumption for the 12
months ended June 30, 1994. IWC prefiled evidence in support of the request
on November 21, 1994. The UCC is required to prefile its evidence on or
before March 13, 1995. Hearings in this case are scheduled to begin on
April 10, 1995.
On September 23, 1994, IWC also filed a petition with the Commission 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. Proceeds from the
issuance of these securities will be used for the construction, extension and
improvement of its facilities, plant and distribution system and the
discharge or refunding of short-term debt and higher cost long-term debt.
This matter has been set for a March 9, 1995, hearing by the Commission. The
timing and amount of the securities to be issued, if approved, will be based
on fund requirements and market conditions.
In January 1994, the Company entered into agreement with four key executives.
The agreements 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.
Quarterly Financial Data (Unaudited)
Quarters
First Second Third Fourth
(in thousands, except per share data)
1994
Operating revenues $ 21,359 $ 28,700 $ 32,106 $ 26,982
Operatng earnings 3,513 8,596 11,218 6,902
Net earnings $ 423 $ 3,227 $ 4,238 $ 2,254
Net earning per common
and common equivalent
share: $ .06 $ .47 $ .61 $ .33
1993
Operating revenues (a) $ 15,680 $ 18,501 $ 25,916 $ 22,224
Operating earnings (a) 4,208 6,473 8,878 6,219
Net earnings $ 954 $ 2,461 $ 3,427 $ 2,534
Net earning per common
and common equivalent
share $ .15 $ .38 $ .51 $ .37
(a) Certain reclassifications have been made to conform with classifications
adopted for reporting of segment information beginning December 31, 1993.
These reclassifications did not have a material effect on the quarterly
results as originally reported.
INDEPENDENT AUDITORS. REPORT
The Board of Directors
and Shareholders
IWC Resources Corporation:
We have audited the accompanying consolidated balance sheets of IWC Resources
Corporation and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of earnings, shareholders. equity and cash
flows for each of the years in the three-year period ended December 31, 1994.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of IWC
Resources Corporation and subsidiaries at December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As discussed in the Notes to Consolidated Financial Statements, effective
January 1, 1993, the Company changed its method of accounting for income
taxes and postretirement benefits other than pensions.
Indianapolis, Indiana
January 26, 1995
Selected Financial Data
The selected consolidated financial data presented below has been derived
from and should be read in conjunction with the Company's Consolidated
Financial Statements and related Notes thereto included elsewhere in this
report.
Summary of Operations Data:
Year Ended December 31,
1994 1993 1992 1991 1990
(in thousands, except per share data)
Operating revenues $ 109,147 $ 82,321 $ 63,452 $ 59,930 $ 53,630
Operating earnings 30,229 25,778 23,183 21,046 19,529
Cumulative effect of
accounting change - - - 1,280 -
Net earnings $ 10,142 $ 9,376 $ 8,113 $ 9,017 $ 5,833
Per common
and common equivalent
share:
Earnings before
cumulative effect
of accounting
change 1.47 1.41 1.27 1.45 1.11
Cumulative effect
of accounting
change - - - .24 -
Net earnings $ 1.47 $ 1.41 $ 1.27 $ 1.69 $ 1.11
Cash dividends per
common share $ 1.40 $ 1.40 $ 1.395 $ 1.38 $ 1.38
Average number of
common and common
equivalent shares
outstanding 6,901 6,658 6,379 5,335 5,251
Summary of Balance Sheet Data:
December 31,
1994 1993 1992 1991 1990
(in thousands)
Operating revenues $109,147 $ 82,321 $ 63,452 $ 59,930 $ 53,630
Utility plant, net $275,094 $260,663 $253,786 $243,573 $234,213
Total assets 335,382 312,443 275,112 279,608 253,942
Capitalization:
Long-term debt
(excluding current
portion) $ 98,225 $ 85,375 $ 86,275 $ 72,675 $ 91,675
Preferred stock of
subsidiary and
redeemable preferred
stock 5,705 5,705 4,505 4,505 4,505
Common shareholders'
equity 78,938 77,014 67,205 66,695 48,246
Total capitalization $182,868 $ 168,094 $ 157,985 $143,875 $144,426
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 Information.
Beginning in 1993, the Company has grouped its operations according to major
segments. The Company acquired SM&P Utility Resources, Inc. (formerly SM&P
Conduit Co., Inc.) (SM&P) in June 1993. As a result of this acquisition,
many of the differences between results of operations for 1994, 1993 and 1992
are primarily due to SM&P operations, which are included in the
utility-related services segment. The major fluctuations in the
utility-related services segment are primarily due to 12 months of SM&P's
operations in 1994 as compared to six months of operations in 1993; the
following discussion and analysis will concentrate primarily on the results
of operations of the water utilities segment.
1994 Compared to 1993
Operating revenues increased $26,826,000 (32.6%) of which $18,034,000 is
applicable to the utility-related services segment. The increase in water
utilities segment revenues of $5,181,000, excluding $3,611,000 in income
taxes collected from developers, represents an 8.1% increase over 1993, and
is primarily due to an 8.8% increase in total water consumption, reflecting
more normal weather conditions experienced during summer 1994 as compared to
conditions experienced during summer 1993. Water consumption is affected by
the frequency and pattern of rainfall, temperatures, the level of economic
activity, and conservation efforts.
For 1994, residential revenues increased $3,187,000 (7.7%), commercial and
industrial revenues increased $2,544,000 (14.1%), and public fire protection
and other revenues decreased $550,000 (11.5%). The decrease in public fire
protection and other revenues is primarily due to billing metered customers
rather than municipalities for certain public fire protection charges after
June 30, 1993.
Operation and administration expenses increased $19,200,000 (43.6%) of which
$16,028,000 is applicable to the utility-related services segment. The
increase in water utilities segment expenses of $3,172,000 which is
discussed below represents a 10.0% increase over 1993 and is primarily due to
the effects of inflation on the Company's costs and other factors. Labor
expenses increased $435,000 (3.3%) mainly due to a general wage increase,
effective January 1, 1 994. Power costs increased $181,000 (7.0%) primarily
due to increased pumpage. Chemical costs increased $454,000 (60.1%)
primarily due to increased usage
and higher chemical costs. Materials and transportation costs increased
$477,000 (22.6%) largely due to an increase in maintenance activities. The
cost of outside services increased $279,000 (4.8%) chiefly due to an increase
in consulting and other services. Insurance expense increased $1,009,000
(30.8%) reflecting higher health and general liability insurance premium
costs and nonrecurring credits recognized in 1993. Regulatory expenses
decreased $97,000 (33.5%) primarily due to decreased rate case expenses.
Costs of the Company's pension and other benefit plans increased $841,000
(54.5%) primarily due to the higher costs of benefits provided.
In 1994 the operating margin (operating revenues less operation and
administration expenses) in the utility-related services segment was
$7,535,000 (20.9%) compared to $5,529,000 (30.8%) in 1993. The reduction in
the operating margin percent is primarily due to additional expenses incurred
necessary to service the expansion of SM&P's business in 1994.
Depreciation increased $1,264,000 (19.3%) of which $1,004,000 is applicable
to the utility-related services segment. The increase in water utilities
segment depreciation of $260,000 represents a 4.5% increase over 1993, and is
primarily due to additional plant placed in service.
Taxes other than income taxes increased $1,911,000 (32.4%) of which
$1,111,000 is applicable to the utility-related services segment. The
remaining increase of $800,000 applicable to the water utilities segment is
primarily due to an increase in property taxes resulting from additional
plant in service.
The increase in interest expense, net, of $664,000 (9.1%) is largely due to
the combined effects of higher average debt outstanding and higher interest
rates. Other, net, increased $474,000 primarily due to pretax earnings of an
unconsolidated partnership interest.
Income taxes increased $3,396,000 (36.4%) primarily due to $3,611,000 in
income taxes collected from developers. 1993 Compared to 1992
Operating revenues increased $18,869,000 (29.7%) of which $17,982,000 is
applicable to the utility-related services segment. The increase in water
utilities segment revenues of $887,000 represents a 1.4% increase over 1992,
and is primarily due to a slight increase in total water consumption,
reflecting wet weather conditions experienced during the summer months of
1993 and a change in the mix of customers. For 1993, residential revenues
increased $880,000 (2.2%), commercial and industrial revenues increased
$1,336,000 (8.0%) , and public fire protection and other revenues decreased
$1,329,000 (21.7%). The fluctuation in residential revenues and public fire
protection and other revenues is primarily due to billing metered customers
rather than municipalities for certain public fire protection charges after
June 30, 1993.
Operation and administration expenses increased $14,312,000 (48.1%) of which
$12,453,000 is applicable to the utility-related services segment. The
increase in water utilities segment expenses of $1,859,000 which is discussed
below represents a 6.2% increase over 1992 and is primarily due to the
effects of inflation on the Company's costs. Labor costs increased $841,000
(6.3%) mainly due to a general wage increase, effective January 1, 1993.
Chemical costs increased $66,000 (9.6%) primarily due to increased usage and
higher chemical costs. The cost of outside services increased $575,000
(19.1%) chiefly due to an increase in consulting and other services. Costs of
the Company's pension and other benefit plans increased $92,000 (6.1%)
primarily due to the higher cost's of benefits provided.
Depreciation increased $1,240,000 (23.3%) of which $799,000 is applicable to
the utility-related services segment. The increase in water utilities segment
depreciation of $441,000 represents an 8.3% increase over 1992, and is
primarily due to additional plant placed in service and an increase in the
composite depreciation rate from 1.76% to 1.9% effective June 10, 1992.
Taxes other than income taxes increased $722,000 (13.9%) which is net of a
$72,000 (1.4%) decrease in such expenses for the water utilities segment. The
decrease is primarily due to a reduction in property taxes following an
appeal.
The increase in interest expense, net, of $358,000 (5.2%) is largely due to
the effects of an increase in short-term debt of $13,700,000 in connection
with the SM&P acquisition. Other, net, decreased $714,000 (76.8%) primarily
due to including earnings from certain non-utility subsidiaries in operating
earnings during 1993.
Liquidity and Capital Resources
At the present time, the majority of the Company's business activities are
conducted through its water utilities. In June 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 its 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 fluctuate primarily as a result of
additions to utility plant and other property and the level of customer
advances for construction, net of refunds. In June 1993, the Company used the
proceeds from additional short-term borrowings of $13,700,000 to acquire the
net assets of SM&P.
During 1994 and 1993, the Company added $28,256,000 and $18,988,000
(including $5,021,000 from the acquisition of SM&P), respectively, to utility
plant and other property. The Company continues to experience significant
growth in its distribution system. Approximately 113 miles of new mains were
placed in service in 1994 compared with approximately 58 miles during 1993.
The Company received approximately $9,200,000 in new customer advances for
construction of new mains in 1994 and over $5,700,000 in 1993. Such advances
are subject to refund over a ten-year period based on the addition of new
customers to the constructed mains. The Company refunded approximately
$2,200,000 during both 1994 and 1993.
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 1992, the Company used net proceeds from the Company's stock
offering in December 1991 to prepay $3,700,000 in principal amount of its
12-7/8% Series Bonds, plus applicable redemption premiums of $298,000. In
January 1993 and January 1994, the Company prepaid an additional $1,100,000
and $1,200,000 , respectively, in principal amount of these bonds at premiums
of $80,000 and $77,000, respectively. In February 1995, the Company gave
required notice to prepay in March 1995 an additional $1,150,000 in principal
amount of these bonds at a premium of $65,000. Funds used to prepay the
amounts in 1995, 1994 and 1993 were derived from proceeds of the sale of
common shares through the Company's Dividend Reinvestment and Stock
Purchase Plan.
During March 1994, the Company issued $14,000,000 of 6.31% Senior Notes due
March 15, 2001. Proceeds from these notes were used to repay $13,700,000 in
short-term notes with banks incurred for the acquisition of SM&P.
IWC filed a petition with the Commission 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. This petition is currently pending before
the Commission.
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.
During 1994, the Company increased its lines of credit for working capital
purposes to $23,200,000; borrowings under the lines were $17,070,000 at
December 31, 1994.
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 financing.
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 will 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. The Company estimates that the cost to
comply with possible cha nges to existing regulatory requirements for
discharges could aggregate $34,000,000 for additional facilities and
$2,000,000 in increased annual operating costs. Such costs and expenses
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, December 31, 1990, for Thomas W. Moses 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 impose 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.
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 containment 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.
Rate Case
On August 10, 1994, the Commission approved a 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 benefits other than pensions (OPRB), in
accordance with SFAS 106, pending a determination of an appropriate
restricted fund for the related revenues. The rate effect of such higher
costs should amount to approximately $1.7 million (3% of the requested 14%
increase in combined annual revenues). That annual amount, with the
Commission's authorization, is now being deferred as a regulatory asset and
should ultimately be recoverable over a period not to exceed 20 years. On
October 11, 1994, IWC filed testimony with the Commission proposing a grantor
trust to hold OPRB-related funds.
The Utility Consumer Counselor (UCC), representing ratepayers, filed
testimony in opposition to IWC.s proposal, arguing that it was not
sufficiently restrictive. IWC filed testimony in rebuttal to that of the UCC
on December 16, 1994. This matter has not yet been heard or resolved.
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 sought by
IWC is approximately $5 million, or 8%, based on water consumption for the 12
months ended June 30, 1994. IWC prefiled evidence in support of the request
on November 21, 1994. The UCC is required to prefile its evidence on or
before March 13, 1995. Hearings in this case are scheduled to begin on April
10, 1995.
On September 23, 1994, IWC also filed a petition with the Commission 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. Proceeds from the
issuance of these securities will be used to replenish IWC's treasury in
order to have funds available for the construction, extension and improvement
of its facilities, plant and distribution system and the discharge or
refunding of short-term debt and higher cost long-term debt. This matter has
been set for a March 9, 1995, hearing by the Commission. The timing and
amount of the securities to be issued, if approved, will be based on fund
requirements and market conditions.
Trends, Inflation and Changing Prices
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. Shareholder Information
Annual Meeting
The annual meeting of shareholders will be held at IWC Resources
Corporation's General Office, 1220 Waterway Boulevard, Indianapolis, Indiana,
at 11:00 a.m . (EST) on Thursday, April 20, 1995. Notice of the meeting, a
proxy statement and a form of proxy were mailed on or about March 10, 1995,
to all shareholders of record March 6, 1995.
Form 10-K and Financial Information
A copy of the Company's annual report on Form 10-K (including financial
statements, but without exhibits) filed with the Securities and Exchange
Commission
is available without charge upon request. Requests should be addressed to the
Shareholder Relations Department, IWC Resources Corporation, P. O. Box 1220,
Indianapolis, Indiana 46206.
Dividend Reinvestment and Share Purchase Plan
The Dividend Reinvestment and Share Purchase Plan (the "Plan.) provides a
convenient way to purchase common shares of the Corporation's stock and
without payment of any brokerage or other fees. In addition, effective March
10, 1995, the "Plan" provides for a 3% discount from the current average
market price on reinvested dividends and optional cash purchases. Holders of
record of common shares, any series of the Corporation's special shares,
certain employees a nd utility customers of the Corporation or its
subsidiaries are eligible to participate. Participants in the plan can
automatically reinvest cash dividends on all shares registered in their
names; reinvest cash dividends on less than all shares and continue to
receive cash dividends on the remaining shares in their names; invest by
making optional cash purchases of common shares in any amount in excess of
$100 ($10 in the case of employees). Brokers, nominees, and investment
companies are not eligible to elect these options.
A prospectus describing the "Plan" is available upon request by writing or
calling the Shareholder Relations Department, (317) 263-6407.
Shareholder Inquiries
Shareholders with questions concerning their accounts, dividend checks, or
stock certificates should contact the Company's stock transfer and dividend
disbursing agent as follows:
BANK ONE, INDIANAPOLIS, NA
BANK ONE CENTER/TOWER
111 Monument Circle, Suite 1611
Indianapolis, Indiana 46204
(800) 753-7107 or (317) 321-8110
Stock Statistics
The common stock of the Company is traded over-the-counter under the NASDAQ
National Market System symbol of IWCR.
The following table sets forth, on a per-share basis, the high and low sale
prices of the Company's common stock and dividends paid per share during the
last two years. Common Stock
Dividends
Declared
High Low Per Share
1994
Fourth Quarter $ 21 1/2 $ 18 1/2 35
Third Quarter 20 1/2 17 3/4 35
Second Quarter 22 1/4 19 1/4 35
First Quarter 23 20 3/4 35
1993
Fourth Quarter 24 20 3/4 35
Third Quarter 24 21 1/2 35
Second Quarter 23 1/4 21 35
First Quarter 23 3/4 20 3/4 35
Distribution of Shareholders December 31, 1994, of Record
Other
States
& Foreign
Indiana Countries Total
Holders 3,435 1,329 4,764
72% 28%
Shares 3,009,320 3,876,951 6,886,271
44% 56%
IWC Resources Corporation
Board of Directors
Joseph D. Barnette, Jr.
Chairman and Chief Executive Officer
Banc One Indiana Corporation
Thomas W. Binford
Chairman
Binford, Miles, Rodgers and Associates
Indianapolis
Robert A. Borns
Chairman of the Board
Borns Management
Indianapolis
Joseph R. Broyles*
President and Chief Operating Officer
Indianapolis Water Company
Murvin S. Enders
President
Team Enders, Inc.
Indianapolis
Otto N. Frenzel III*
Chairman of the Board
National City Bank, Indiana
Indianapolis
Elizabeth Grube
Personal Investments
Indianapolis
J. B. King
Vice President and General Counsel
Guidant Corporation
Indianapolis
Robert B. McConnell*
Chairman of the Executive Committee
IWC Resources Corporation
and Indianapolis Water Company
J. George Mikelsons
Chairman of the Board and
Chief Executive Officer
Amtran, Inc.
Indianapolis
Thomas M. Miller*
Associate
Schenkel, McVey & Associates
Indianapolis
James T. Morris*
Chairman of the Board and
Chief Executive Officer
IWC Resources Corporation
and Indianapolis Water Company
Jack E. Reich*
Chairman of the Board Emeritus
American United Life Insurance Company
Indianapolis
Fred E. Schlegel
Partner
Baker & Daniels, Attorneys
Indianapolis
*Member of Executive Committee
IWC Resources Corporation
Officers
James T. Morris
Chairman of the Board,
Chief Executive Officer and President
J. A. Rosenfeld
Executive Vice President
Kenneth N. Giffin
Senior Vice President -
Governmental Relations and Real Estate
John M. Davis
Vice President, General Counsel
and Secretary
Alan R. Kimbell
Vice President - Marketing
James W. Shaffer
Vice President - Corporate Affairs
James P. Lathrop
Controller
Jane G. Ryan
Assistant Secretary
Indianapolis Water Company
Officers
James T. Morris
Chairman of the Board
and Chief Executive Officer
Joseph R. Broyles
President and Chief Operating Officer
Paul J. Doane
Executive Vice President
J. A. Rosenfeld
Executive Vice President
Kenneth N. Giffin
Senior Vice President -
Governmental Relations
John M. Davis
Vice President, General Counsel and Secretary
Robert F. Miller
Vice President - Engineering
David S. Probst
Vice President - Business Development
Tim K. Bumgardner
Vice President - Operations
James W. Shaffer
Vice President - Corporate Affairs
Martha L. Wharton
Vice President - Customer Service
L. M. Williams
Vice President - Human Resources
James P. Lathrop
Assistant Treasurer
Jane G. Ryan
Assistant Secretary
SM&P Utility Resources, Inc. Officers
James T. Morris
Chairman of the Board
Daniel S. Baker
President
J. A. Rosenfeld
Executive Vice President and Treasurer
Mark T. McNulty
Vice President and General Manager
John M. Davis
Corporate Secretary
Hanne Konnersman
Corporate Controller &
Assistant Secretary
Utility Data Corporation Officers
James T. Morris
Chairman of the Board and President
James D. Kiefner
Executive Vice President
J.A. Rosenfeld
Vice President and Treasurer
Martha L. Wharton
Vice President - Customer Service
Arthur K. Smith
Vice President - Data Services
John M. Davis
Corporate Secretary
James P. Lathrop
Assistant Secretary and
Assistant Treasurer
EX-21
3
Document Summary:
Document: EX-21
Author:
Addressee:
Operator:
Creation Date: 03/30/1995
Modification Date: 03/30/1995
Identification key words:
Comments:
Exhibit 21
SUBSIDIARIES
IWC Resources Corporation has six wholly owned subsidiaries,
each of which is incorporated under the laws of the State of
Indiana. These corporations are Indianapolis Water Company,
Harbour Water Corporation, Utility Data Corporation, IWC
Services, Inc., SM&P Conduit Co., Inc. and Waterway Holdings,
Inc.
EX-23
4
Document Summary:
Document: EX-23
Author:
Addressee:
Operator:
Creation Date: 03/30/1995
Modification Date: 03/30/1995
Identification key words:
Comments:
Exhibit 23
Consent of Independent Certified Public Accountants
The Board of Directors
IWC Resources Corporation:
We consent to incorporation by reference in the
Registration Statement No. 33-30221 on Form S-8 and Registration
Statement No. 33-6406 on Form S-3 (originally on Form S-16) of
IWC Resources Corporation of our reports dated January 26, 1995,
relating to the consolidated balance sheets of IWC Resources
Corporation and subsidiaries as of December 31, 1994 and 1993,
and the related consolidated statements of earnings,
shareholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1994, which report appears
in the 1994 Annual Report to Shareholders and has been
incorporated by reference in the December 31, 1994 annual report
on Form 10-K of IWC Resources Corporation. Our report refers to
a change in accounting for income taxes and postretirement
benefits other than pensions.
KPMG PEAT MARWICK LLP
Indianapolis, Indiana
March 23, 1995
EX-27
5
UT
1,000
12-MOS
DEC-31-1994
DEC-31-1994
PER-BOOK
275,094
13,053
16,369
30,866
0
335,382
60,540
0
18,398
78,938
1,200
4,505
98,225
0
17,674
0
1,150
0
0
0
133,690
335,382
109,147
12,724
0
78,918
30,229
596
18,101
7,959
10,142
203
10,142
9,656
7,295
20,913
1.47
1.47