Annual Report (Form 10-K), fiscal year 1993

ITEM 1. BUSINESS - ----------------- General
Aquarion Company ("Aquarion") is a holding company whose subsidiaries are engaged both in the regulated utility business of public water supply and in various nonutility businesses.
Aquarion's utility subsidiary, Bridgeport Hydraulic Company ("BHC"), and its subsidiary, Stamford Water Company ("SWC", together with BHC, the "Utilities") collect, treat and distribute water to residential, commercial and industrial customers, to other utilities for resale and for private and municipal fire protection. The Utilities provide water to customers in 22 communities with a population of approximately 492,000 people in Fairfield, New Haven and Litchfield Counties in Connecticut, including communities served by other utilities to which water is available on a wholesale basis for back-up supply or peak demand purposes through the Regional Pipeline. BHC is the largest investor-owned water company in Connecticut and, with its SWC subsidiary, is among the 10 largest investor-owned water companies in the nation. The Utilities are regulated by several Connecticut agencies, including the Connecticut Department of Public Utility Control (the "DPUC").
Aquarion is also engaged in various nonutility activities. The Company conducts an environmental testing laboratory business through its Industrial and Environmental Analysts group of subsidiaries (collectively, "IEA"). IEA performs testing to determine the nature and quantity of contamination in sampled materials, including hazardous wastes, soil, air and water. IEA provides a range of environmental analytical testing capabilities, including routine and customized analysis of organic and inorganic contaminants. IEA's testing services are conducted at six regional environmental testing laboratories in Connecticut, Florida, Illinois, Massachusetts, New Jersey and North Carolina. IEA's laboratories are subject to governmental regulation at both state and federal levels. IEA's clients include engineering consulting firms, industrial and commercial corporations and federal, state and local governmental entities. The laboratories located in North Carolina, New Jersey and Connecticut participate in the U.S. Environmental Protection Agency's Contract Laboratory Program.
Aquarion owns Timco, Inc. ("Timco"), a small forest products and electricity cogeneration company based in New Hampshire. At Timco's sawmill complex, lumber is cut and packaged for sale to wholesalers and retailers. The cogeneration plant produces electricity which is sold to a public utility and low cost steam for drying the lumber and heating some of the sawmill buildings. Aquarion Company is also engaged in several small utility management service businesses through its Hydrocorp, Inc. ("Hydrocorp") and Aquarion Management Services, Inc. ("AMS") subsidiaries and owns Main Street South Corporation ("MSSC"), a small real estate subsidiary formed in 1969 to assist the Utilities in marketing surplus land.
The Company was incorporated in Delaware as The Hydraulic Company in 1969 to become the parent company to BHC, a Connecticut corporation founded in 1857. The corporate name was changed to Aquarion Company in April 1991. The Company's executive offices are located at 835 Main Street, Bridgeport, Connecticut 06601-2353 and its telephone number is (203) 335-2333.
Recent Developments
Rates. In filing its rate application with the Connecticut Department of Public Utility Control (DPUC) in February 1993, BHC had requested a 35 percent water service rate increase designed to provide a $17,500,000 increase in annual water service revenues and a return on common equity of 12.75 percent. Prior to the final decision, BHC lowere request by a total of $1,400,000 by restructuring long-term debt to reduce annual interest costs and by reducing property taxes and other miscellaneous expenses. The request included the replacement of a construction work in progress water service rate surcharge (CWIP rate surcharge) previously granted to BHC pursuant to DPUC regulations to recover 90 percent of the carrying costs of capital used in its Easton Lake Filtration Construction Project mandated by the federal Safe Drinking Water Act of 1974 (the "SDWA"). During 1993 and 1992, BHC derived revenues of $1,937,000 and $1,532,000, respectively, from the CWIP rate surcharge. Effective August 1, 1993, the DPUC awarded BHC a 20.7 percent water service rate increase designed to provide a $10,400,000 annual increase in revenues and a 11.6 percent return on common equity. The DPUC approved a 22.5 percent water services rate increase for SWC effective August 28, 1991, designed to increase annual revenues by $2,276,000 and provide a 12.85 percent return on its common equity. Effective January 1, 1991, BHC was awarded a 15 percent rate increase designed to increase annual revenues by $6,983,000 and provide a 13.25 percent return on its common equity. There is no certainty that any given rate increase will produce the intended level of revenues or the allowed return on equity. See "Public Water Supply--Rates and Regulation."
Pending Utility Acquisition. Aquarion has proposed to acquire The New Canaan Water Company and Ridgefield Water Supply Company for Aquarion common stock with a market value of $3,500,000 on or about the closing date. The acquisition and a related property exchange have been approved by the DPUC but remain contingent upon certain other regulatory approvals satisfactory to the parties. Proceedings to obtain the regulatory approvals are pending. The parties have agreed to extend their acquisition agreement and the related property exchange agreement until March 31, 1994. There is no certainty that the parties will agree to further extensions if the transaction has not closed by that time. See "Industry Segment Information."
Sale of Facilities. On March 15, 1993 IEA sold its Vermont laboratory which performed qualification and certification of and consulting for high purity gas delivery systems and ultrapure water systems, as well as some microbiological testing. In addition, in October 1993 IEA sold the assets of its air testing division to TRC, Inc. of Hartford, Connecticut. See "Environmental Laboratories."
Other. Native Americans who allege that they constitute the Golden Hill Paugussett Tribe of Indians (the "Paugussett Indians") have taken an appeal to the U.S. Court of
Appeals for the Second Circuit for the dismissal by the U.S. District Court in Connecticut of their suit seeking to restore claimed rights to certain lands in various towns in Fairfield and New Haven Counties. Newspaper reports during 1993 indicated that they have announced plans to claim further lands, including all land in the municipalities of Monroe, Shelton and Trumbull. BHC, which has not been named as a defendant to date, owns land in these communities, including land it considers surplus. It is not possible at this time to determine whether any further suit will be filed or, if so, whether BHC will be named a defendant, nor is it possible to determine what effect, if any, the filing of any such suit might have on the marketability of real property in these communities or, should the Paugussett Indians prevail, whether there would be any effect on the operations of BHC.
Utility Construction Program
The Utilities are engaged in a continuing construction program mandated by legislative and regulatory requirements, as well as for infrastructure replacements. The Utilities expended $16,300,000, $21,727,000 and $13,969,000 in 1993, 1992 and 1991, respectively, for plant additions and modifications of existing plant facilities, excluding an allowance for funds used during construction ("AFUDC"). The expenditures were made primarily for installations of water mains, service connections and meters and such special projects as the Easton Lake and the Litchfield Division supply and distribution system improvements.
Utility capital expenditures for 1993 aggregated $16,300,000 and budgeted expenditures for 1994, most of which management believes should not be postponed, are approximately $34,200,000. Approximately half of these expenditures will be devoted to compliance with the SDWA, which requires filtration or alternative water treatment measures for BHC's major, unfiltered surface water supplies. The total capital cost of water filtration or alternative treatment measures for such supplies through December 31, 1993 was approximately $28,400,000, of which $26,800,000 related to construction of the Easton Lake filtration facility. Management estimates that the total of such costs from 1994 through 1996 will approximate $50,000,000, without adjustment for inflation, including $15,300,000 expected to be incurred in 1994. Approximately $48,000,000 of the projected 1994 through 1996 water treatment costs will be incurred in construction of the filtration facility for the Hemlocks reservoir. The remaining $2,000,000 of estimated filtration expenditures over the next four years is budgeted for SDWA-related facilities for BHC's Lakeville and Norfolk Reservoirs. Part of the cost associated with the Hemlocks facility is expected to be offset by CWIP rate surcharges which, at the DPUC's discretion, permit the recovery of 90 percent of the carrying cost of capital used in construction of SDWA-mandated water treatment facilities. Management cannot predict whether future federal, state or local regulation may require additional capital expenditures.
The Company's ability to finance its future construction programs depends in part on future rate relief and the level of CWIP rate surcharges. In light of the Company's substantial need for additional funds, the Company will need additional debt and equity capital to finance future utility construction. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Capital Resources and Liquidity" and "Business--Public Water Supply--Rates and Regulation."
Industry Segment Information
The Company's operations are grouped into four industry segments: public water supply; environmental laboratories and utility management services; forest products; and real estate. The consolidated operating revenues of the Company for the year ended December 31, 1993 were derived from the following sources: 66 percent from public water supply, 22 percent from environmental laboratories and utility management services, 12 percent from forest products, and less than 1 percent from real estate, including both MSSC and surplus utility land sales. For additional information concerning each segment for each of the years ended December 31, 1993, 1992 and 1991, see "Note 11" of "Notes to Consolidated Financial Statements" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations."
Public Water Supply
Service Area. The Utilities are engaged in the collection, treatment and distribution of water for public and private use to residential, commercial, and industrial users, and for municipal and private fire protection services in 22 communities in parts of Fairfield, Litchfield and New Haven counties in Connecticut. The Utilities also sell, as requested, water for redistribution to customers of the First and Second Taxing Districts' Water Departments of the City of Norwalk, Connecticut, Connecticut-American Water Company, and NCWC through the Southwest Regional Pipeline in Fairfield County.
The communities served by the Utilities as of December 31, 1993, have a population of approximately 492,000, and the total number of customer accounts as of that date was approximately 123,900. The Utilities' service areas, primarily residential in nature, have experienced an average growth in accounts of approximately 1 percent per year over the last ten years. Industrial use has declined significantly in that time period, and the residential characteristics of the area have changed, indicating an increase in the percentage of apartment dwellings and condominium units. Management does not anticipate any significant growth in residential consumption in the foreseeable future, and expects continued decline in industrial use.
The operating revenues of the Utilities for the twelve months ended December 31, 1993 were derived from the following sources: 59 percent from residential customers, 17 percent from commercial customers, 5 percent from industrial customers, 14 percent from fire protection customers, and 5 percent from other sources.
Seasonality. The business of the Utilities is subject to seasonal fluctuations and weather variations. The demand for water during the warmer months is generally greater than during the cooler months, primarily due to additional water requirements of industrial and residential cooling systems, and various private and public outdoor uses such as lawn and golf course sprinkling. From year to year and season to season, demand will vary with rainfall and temperature levels.
Water Supply. Water is available from both surface and subsurface sources. During 1993, approximately 97 percent of the water supplied by the Utilities was provided by impounding reservoirs, 2 percent by producing wells and 1 percent by purchased water. As of December 31, 1993, the Utilities' reservoirs, well fields and interconnections with other water utilities had an aggregate safe daily yield of 112.3 million gallons. Safe yield is an estimate of the supply capability during an extended drought. The average daily demand for water from the Utilities in 1993 was 69.3 million gallons per day ("MGD"). The reservoirs of the Utilities have an aggregate storage capacity of 29.4 billion gallons.
All of the Utilities' reservoirs and active wells are located on property owned by the Utilities. Management believes it has an adequate water supply to satisfy the current and projected needs of its customers within its territorial service area through at least the year 2040. During historical drought periods in the northeastern United States, the Utilities have been able to accommodate the needs of their own customers and to offer relief to supplement the supplies to neighboring communities by water sales to utilities with which it has pipeline interconnections. Supply and distribution needs of the Utilities undergo constant review, and the Utilities continue to explore and develop additional ground water supplies and study alternative surface water sources to meet anticipated future water requirements.
The Connecticut Water Diversion Policy Act, enacted in 1982, prohibits any future diversions of surface or ground water without a permit from the DEP. Although this law "grandfathers" existing surface and ground water supplies which existed when it was enacted, any subsequent water diversion which might be effected by the Utilities is subject to a lengthy permit application process and approval by the DEP. Diversion permits granted pursuant to this law are subject to renewal when their terms, which typically run from five to ten years, expire.
Rates and Regulation. The Utilities are incorporated under and operate as public water utilities by virtue of authority granted by Special Acts adopted by the Connecticut legislature (the "Acts"). These Acts have granted a non-exclusive franchise, unlimited in duration, to provide public water supply to private and public customers in designated municipalities and adjacent areas. The Acts also authorize the Utilities to lay their mains and conduits in any public street, highway, or public ground; to use the water of certain rivers, streams, or other waters in Fairfield, Litchfield and New Haven counties and from certain locations along and in the Housatonic River and its tributaries, subject to such consents and approvals as may be required by law; and to exercise the po domain in connection with lands, springs, streams or ponds and any rights or interests therein which are expedient to or necessary for furnishing public water supply. In the event of the exercise of such condemnation powers, the Utilities must pay appropriate compensation to those injuriously affected by such taking.
The Utilities are subject to regulation by the DPUC, which has jurisdiction with respect to rates, service, accounting procedures, issuance of securities, dispositions of utility property and other related matters.
Rates charged by each of BHC and SWC are subject to approval by the DPUC. The Utilities continually review the need for increases of water rates, and historically have sought
rate relief in a timely manner in light of increases in operating costs, additional investment in utility plant and related financing costs, as well as other factors. For information concerning rate increases granted in 1993 and 1991, see "Item 1. Business. Recent Developments, Rates.", above.
The DPUC may allow a surcharge to be applied to rates in order to provide a current cash return to water utilities on the major portions of CWIP applicable to facilities, including filtration plants, required for compliance with the SDWA. See "Environmental Regulations." The surcharge is adjusted quarterly, subject to DPUC approval, to reflect increased CWIP expenditures for SDWA facilities. In connection with BHC's construction of filtration facilities at its Easton Lake Reservoir, the DPUC granted BHC an initial .94 percent CWIP rate surcharge in September 1990, which amount was incrementally increased on a quarterly basis to 7.35 percent at the time new rates became effective and the Easton facility became operational and subject to general ratemaking regulations. There is no CWIP surcharge in effect at present, although BHC intends to apply for a CWIP surcharge with respect to its planned filtration facilities when appropriate.
Aquarion is neither an operating utility company nor a "public service company" within the meaning of the Connecticut General Statutes and is not presently subject to general regulation by the DPUC. DPUC approval is necessary, however, before Aquarion may acquire or exercise control over any Connecticut public service company. DPUC approval is also required before any other entity can acquire or exercise, or attempt to exercise, control of Aquarion.
Connecticut regulations govern the sale of water company land and treatment of land sale proceeds. See "Item 2.



ITEM 2. PROPERTIES -------------------
The Company
BHC owns a 20,000 square foot headquarters building and a 44,370 square foot Operations Center in Bridgeport, and leases an additional 22,000 square feet of office, laboratory and garage space in Bridgeport for utility operations. SWC owns its 13,618 square foot headquarters and operations facility in Stamford, Connecticut. Aquarion owns nonutility land totaling approximately 99 acres in Easton and Litchfield, Connecticut.
Property
At December 31, 1993, BHC owned in the aggregate 11 active reservoirs and approximately 1,640 miles of water mains, of which approximately 77 miles have been laid in the past five years. In addition, SWC owned 5 active reservoirs at year end. The rights to locate and maintain water transmission and distribution mains are secured by charter, easement and permit and are generally perpetual. Water is delivered to the distribution system from four major and several smaller reservoirs and forty-two producing wells. Eight additional reservoirs are used for storage purposes and are interconnected with the distribution reservoirs.
BHC owns two dual media filtration plants for treatment of its Trap Falls and Easton Lake reservoir systems, which plants have capacities of 25 and 20 MGD, respectively. SWC owns a 24 MGD rapid-sand and activated-carbon filtration plant for treatment of its entire reservoir system.
BHC owns approximately 19,000 acres of real property located in Fairfield, New Haven, and Litchfield Counties, Connecticut, most of which consists of reservoirs and surrounding watershed. All but 1,360 specified acres of such property are subject to the first lien arising under the BHC Indenture securing its First Mortgage Bonds. SWC owns approximately 2,400 acres of real property located in Stamford and New Canaan, Connecticut, and in Pound Ridge and Lewisboro, New York, which consist almost
exclusively of reservoirs and surrounding watershed, pumps, standpipes and building facilities.
The DPHAS regulates public water company lands according to a three-tiered classification system. Class I lands cannot be sold, leased or transferred. The DPHAS may authorize a transfer or change in use of Class II lands only upon a finding that there will be no adverse impact upon the public water supply and that any use restrictions required as a condition of transfer are enforceable against subsequent owners and occupants of the lands. Class III lands, which are non-watershed, are not presently subject to regulation by the DPHAS. BHC has identified approximately 2,300 acres of land it believes are surplus to its water supply needs, and therefore would qualify as Class III land. All of this Class III land, which includes approximately 570 acres which have never been in rate base, is available for sale, although all of it may not be marketable. Up to 530 additional acres could become available if the DPHAS approves the abandonment of a former reservoir system in New Haven County and reclassifies existing watershed property as Class III land, as requested by the Company.
Real property may not be sold or transferred by a water utility without the prior approval of the DPUC an with other restrictions imposed by Connecticut law. State laws and regulations govern, among other things, to whom certain water company lands may be transferred, with preference given to other water companies, the municipality in which the property is located and the State of Connecticut, in that order. Additionally, the disposition of the proceeds of any permissible sale is subject to state law.
Until changed by statute in 1988, it had been the practice of the DPUC to apply gains from the sale of surplus water company land that had ever been in the rate base as an offset against operating expenses, thereby substituting profits from the sale of such land for revenues which would otherwise be provided through rates. Legislation enacted in 1988, the Equitable Sharing Statute, required the DPUC to "equitably allocate" the economic benefits of the net proceeds from the sales of Class III land which was previously in the utility's rate base between the Company's ratepayers and its shareholders. Ratepayers do not share in gains from the sale of land which has never been in rate base.
The Equitable Sharing Statute was clarified by a 1990 amendment which provides that the economic benefits from the sale of former-rate-base, Class III land which promotes a perpetual public interest in open space or recreational use shall be allocated "substantially in favor" of shareholders when 25 percent or more of the land sold is to be used for open space or recreational purposes.
Two decisions involving 1990 land sales, resulted in allocations of the respective gain on the sales of 75 percent and 43 percent, respectively, to BHC's shareholder.
In November 1993 the DPUC gave BHC approval to sell 25.78 acres of surplus, off-watershed land in Shelton, Connecticut. BHC plans to subdivide the land into eleven building lots. BHC also received approval from the DPUC in December 1993 to sell 34.55 acres of surplus, off-watershed land in Weston, Connecticut. BHC plans to subdivide the land into ten building lots. Each case involves former rate base land, and 25 percent of
the land to be sold will be conveyed to the host municipality to be preserved as open space. Under the terms of both decisions, approximately two-thirds of the net proceeds from the land sales will be allocated to shareholders and the remaining one-third allocated to ratepayers through amortization into BHC's rate base over a five year period. All such net proceeds must be used for reinvestment in utility plant.
The Company leases all of its laboratory facilities, except for the Massachusetts laboratory, which it owns. Aquarion owns 50 percent of Key Partners III, a partnership which owns IEA's North Carolina laboratory and headquarters facility. The smallest of IEA's laboratories occupies approximately 6,750 square feet. The largest, located in Cary, North Carolina, occupies approximately 30,000 square feet. The Company believes that the laboratory facilities owned or leased are adequate for its present and anticipated future needs and that the amounts paid for all the leases into which it has entered are reasonable.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS --------------------------
The registrant has nothing to report for this item.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY ------------------------------------------------------------
The registrant has nothing to report for this item.
PART II
ITEM 5.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED --------------------------------------------------------------- STOCKHOLDER MATTERS -------------------
Page 45 of the Company's Annual Report to Shareholders for the year ended December 31, 1993 is incorporated by reference herein pursuant to Rule 12b-23 of the Securities and Exchange Act of 1934 (the "Act") and to Instruction G(2) to Form 10-K.
Aquarion has declared and paid quarterly dividends on its common stock without interruption since its organization in 1969, and prior thereto, BHC paid dividends annually on its common stock without interruption since 1890. Dividends, when declared, are normally paid on the 30th day of January, April, July and October.
The earnings of Aquarion are derived from its investments in its subsidiaries, particularly BHC. Aquarion's future ability to pay dividends to holders of its Common Stock is dependent upon the continued payment by BHC of dividends to Aquarion. BHC's ability to pay dividends will depend upon timely and adequate rate relief, compliance with restrictions under certain of the BHC debt instruments and other factors. In addition, no dividends on BHC's common stock can be paid during any period in which BHC's preferred stock dividends are in arrears.
Dividends on Aquarion common stock can be paid only out of net profits and surplus of the Company. Aquarion's ability to pay dividends is further restricted by the terms of Aquarion's 8 1/2 percent unsecured Senior Notes due January 1994 , which were replaced by a 5.95% unsecured Senior Note due January 1999 and 7.8 percent unsecured Senior Notes due June 1997 (the "Aquarion Notes"). As of December 31, 1993, the applicable restrictions would have permitted payment of additional dividends on Aquarion's common stock of up to $31,000,000.
While Aquarion's Board of Directors intends to continue the practice of declaring cash dividends on a quarterly basis, no assurance can be given as to future dividends or dividend rates since they will be determined in light of a number of factors, including earnings, cash flow, and Aquarion and BHC's financial requirements. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations--Capital Resources and Liquidity."
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA -------------------------------------
See Page 1 ("Selected Financial Data") and Pages 44 - 45 ("Supplemental Financial Data") of the Company's Annual Report to Shareholders for the year ended December 31, 1993, which is incorporated by reference herein pursuant to Rule 12b-23 of the Act and Instruction G(2) to Form 10-K.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ---------------------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS -----------------------------------
See Page 1 ("Selected Financial Data") and Pages 17 - 23 of the Company's Annual Report to Shareholders for the year ended December 31, 1993, which is incorporated by reference herein pursuant to Rule 12b-23 of the Act and Instruction G(2) to Form 10-K.
ITEM 8.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ---------------------------------------------------------
The consolidated financial statements, together with the report thereon of Price Waterhouse, dated January 31, 1994, appearing on Pages 24 - 22 and Page 1 ("Selected Financial Data") and Pages 44 - 45 ("Supplemental Financial Data") of the accompanying 1993 Annual Report to Shareholders of Aquarion Company are incorporated by reference herein pursuant to Rule 12b-23 of the Act and Instruction G(2) to Form 10-K.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON -------------------------------------------------------------- ACCOUNTING AND FINANCIAL DISCLOSURE -----------------------------------
The registrant has nothing to report for this item.
PART III.
ITEM 10.



ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ----------------------------------------------------------------
The information as to directors required by Item 10 is set forth at Pages 2 - 8 of the Company's Definitive Proxy Statement, dated March 21, 1994 relating to the proposed Annual Meeting of Shareholders to be held on April 26, 1994, filed with the Commission pursuant to Regulation 14a under the Act, and is incorporated by referenced herein pursuant to Rule 12b-23 of the Act and Instruction G(3) to Form 10-K.
Executive Officers
The executive officers of the registrant are listed below. These officers were elected to the offices indicated on April 27, 1993, except as otherwise noted, for a term expiring with the 1994 annual meeting of directors. Except as indicated, all have been with registrant and its predecessors in an executive capacity for more than five years. There are no family relationships among members of the executive officers. There were no arrangements or undertakings between any of the officers listed below and any other person pursuant to which he or she was selected as an officer.
Served as Office, Business Experience Officer Executive Officer Age During Past Five Years Since ----------------- --- ------------------------ -----
Jack E. McGregor 59 President (since 1988) 1985 Chief Executive Officer (since January 1990) Chief Operating Officer (1988 to January 1990) and Executive Vice President (1985 to 1988) of the Company. Director of People's Bank and Physicians Health Services, Inc. Director and Member of Executive Committee, National Association of Water Companies. Trustee of Fairfield University and Yale-New Haven Hospital.
Richard K. Schmidt, Ph.D 49 Senior Vice President 1992 (since April 1993) of the Company; President and Chief Executive Officer of IEA (since March 1992); formerly President and Chief Operating Officer (1984-1992) of Mechanical Technology, Inc.
James S. McInerney 56 Senior Vice President 1989 (since April 1992) of the Company; President (since April 1991) and Chief Operating Officer (since January 1990) of BHC, and Chairman and Chief Executive Officer (since January 1990) of Stamford Water Company. Executive Vice President (1990 to April 1991) and Vice President (1989) of BHC and President, Stamford Water Company (1977 to January 1990). Mr. McInerney is a Director, President or Vice President of certain of the Company's other subsidiaries.
Served as Office, Business Experience Officer Executive Officer Age During Past Five Years Since ----------------- --- ------------------------ -----
Janet M. Hansen 51 Senior Vice President 1983 (since April 1993), Chief Financial Officer (since April 1992) and Treasurer (since 1988) of the Company and Vice President (since 1989), Chief Financial Officer (since April 1991) and Treasurer (since 1985) of BHC; Mrs. Hansen is Vice President and Treasurer (since April 1991) of IEA and Chairman of the Board and Chief Executive Officer (since April 1992) of Timco. Mrs. Hansen is also Vice President, Chief Financial Officer and Treasurer of certain of the Company's other subsid- iaries. Director of Gateway Bank.
Larry L. Bingaman 43 Vice President, Corporate 1990 Relations and Secretary (since April 1993); Vice President, Marketing and Communications (since 1990) of the Company; Formerly Director of Communications for United Technologies' Sikorsky Aircraft Division (1989 to June 1990).
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION ------------------------------------
Pages 8 - 13 of the Company's Definitive Proxy Statement, dated March 21, 1994, relating to the proposed Annual Meeting of Shareholders to be held on April 26, 1994, filed with the Commission pursuant to Regulation 14a under the Act are incorporated by reference herein pursuant to Rule 12b-23 of the Act and Instruction G(3) to Form 10-K.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND ----------------------------------------------------------------- MANAGEMENT ----------
Pages 5 - 6 of the Company's Definitive Proxy Statement, dated March 21, 1994, relating to the proposed Annual Meeting of Shareholders to be held on April 26, 1994, filed with the Commission pursuant to Regulation 14a under the Act, are incorporated by reference herein pursuant to Rule 12b-23 of the Act and Instruction G(3) to Form 10-K.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ------------------------------------------------------------
The registrant has nothing to report for this item.
PART IV.
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON ----------------------------------------------------------------- FORM 8-K --------
a) The following documents are filed as part of this report:
Page in Annual Report* ------------- (1) Consolidated Statements of Income for the three years ended December 31, 1993 24 Consolidated Balance Sheets at December 31, 1993 and 1992 25-26
Consolidated Statements of Cash Flows for the three years ended December 31, 1993 27 Consolidated Statements of Shareholders' Equity for the three years ended December 31, 1993 28 Notes to Consolidated Financial Statements 29-41 Report of Independent Accountants 42
Selected Financial Data 1 Supplemental Financial Information 44-45 * Incorporated by reference from the indicated pages of the 1993 Annual Report to Shareholders. ____________________
(2) Financial Statement Schedules:
Report of Independent Accountants on Financial Statement Schedules, see Page hereto. Index to Additional Financial Information, see Page hereto.
The Financial Statement Schedules above should be read in conjunction with the Consolidated Financial Statements in the 1993 Annual Report to Shareholders. All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.
(b) Reports on Form 8-K.
The Company did not file a report on Form 8-K for the fourth quarter of the year ended December 31, 1993.
(c) Exhibits: Each document referred to below is incorporated by reference to the files of the Commission, unless the reference is preceded by an asterisk (*). Each management contract, compensatory plan or arrangement required to be filed as an exhibit hereto is preceded by a double asterisk (**).
3(a) Restated Certificate of Incorporation of Aquarion, as amended.(1)
3(b) By-laws of Aquarion, as amended. (6)
4(a) Rights Agreement between Aquarion and The Chase Manhattan Bank, N.A. setting forth description of Preferred Stock Purchase Rights distributed to holders of Aquarion Common Stock.(6)
10(a) First Mortgage Indenture of BHC dated June 1, 1924.(2)
10(b) Seventeenth Supplemental Mortgage of BHC dated as September 1, 1960.(2)
10(c) Nineteenth Supplemental Mortgage of BHC dated as of August 1, 1965.(1)
10(d) Twentieth Supplemental Mortgage of BHC dated as of November 1, 1968.(1)
10(e) Loan Agreement of BHC dated as of October 15, 1984.(1)
10(f) Loan and Trust Agreement as of November 1, 1984.(1)
10(g) Note Agreement of Aquarion dated December 28, 1990.(3)
10(h) Note Agreement of BHC dated January 24, 1991.(3)
10(i) Note Agreement of Aquarion dated as of May 19, 1992.
**10(j) Aquarion Long-Term Incentive Plan.(1)
10(k) Joint Venture Agreement betwee Brennan, Jr., William A. Brennan and Main Street South Corporation dated February 23, 1979.(4)
**10(l) Employment Agreement between Aquarion and James S. McInerney, dated June 1, 1990.
**10(m) Employment Agreement between Aquarion and Janet M. Hansen dated November 1, 1992.
**10(n) Agreement between Aquarion and William S. Warner dated October 15, 1989.(5)
**10(o) Employment Agreement between Aquarion and Jack E. McGregor dated January 1, 1990.(5)
**10(p) Form of Stock Option Award Agreement for options granted pursuant to Long-Term Incentive Plan.(5)
10(q) Purchase Agreement dated July 28, 1989 by and among Frederick T. Doane, Heike A. Doane and Aquarion.(3)
10(r) Purchase Agreement dated July 10, 1990 by and among Robert L. MacDonald and Aquarion.(3)
10(s) Stock Purchase Agreement dated November 5, 1990 between Paul B. Priest, A C Laboratories, Inc. and Aquarion.(3)
10(t) Stock Purchase Agreement dated as of December 7, 1990 between Aquarion and the sellers listed on Schedule 2. 1 thereof.(3)
**10(u) Employment Agreement between Aquarion and Larry L. Bingaman dated June 11, 1990.(3)
10(v) Amendment dated September 12, 1991 to the Stock Purchase Agreement dated as of December 7, 1990.(1)
10(w) Purchase and Sale Agreement dated September 12, 1991, by and among YWC Technologies, Inc., Bird Corporation, YWC, Inc., Interim Dewatering Services, Inc., Ad+Soil, Inc. and Aquarion.(1)
10(x) Agreement for Construction Management Services dated April 18, 1991 between BHC and Gilbane Building Company.(1)
**10(y) Employment Agreement between Industrial and Environmental Analysts, Inc. and Dr. Richard K. Schmidt dated April 1, 1992.
**10(z) Employment Agreement between Industrial and Environmental Analysts, Inc. and David C. Houle dated September 1, 1992.
10(aa) Loan Agreement of BHC dated as of June 1, 1990.(6)
10(bb) First Mortgage Bonds, Series C and Preferred Stock, 1968 Series, Purchase Agreement of SWC dated July 1968.
10(cc) Revolving Credit Agreement dated May 14, 1993.(7)
10(dd) Loan Agreement of BHC dated as of June 1, 1993. (7)
10(ee) Forward Purchase Agreement of BHC (1994A Series) dated June 9, 1993.(7)
10(ff) Loan Agreement of SWC dated September 1, 1993.
*10(gg) Loan Agreement of BHC dated December 1, 1993.
*10(hh) Note Agreement of Aquarion dated January 4, 1994.
*13(a) Annual Report to Shareholders for the year ended December 31, 1993.
*22(a) Subsidiaries of Aquarion
*24(a) Consent of Independent Accountants for Aquarion Company is contained in Report of Independent Accountants on page hereof.
*25(a) Power of Attorney. ____________________
(1) Filed as part of Aquarion's Form 8 Amendment to its Form 10-Q for the quarter ended September 30, 1991, filed February 19, 1992.
(2) Filed as an Exhibit to BHC's Registration Statement on Form S-1, File Number 2-23434, dated April 26, 1965.
(3) Filed as part of the Annual Report of the Company on Form 10-K for the year ended December 31, 1990.
(4) Filed as part of the Amendment No. 1 to the Company's Registration Statement as Form S-7, File No. 2-74305, dated November 5, 1981.
(5) Filed as part of the Company's Annual Report on Form 10-K for the year ended December 31, 1989.
(6) Filed as part of the Company's Annual Report on Form 10-K for the year ended December 31, 1991.
(7) Filed as part of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1993.
SIGNATURES ----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Aquarion Company ________________ (Registrant)
Date ----
By /s/Janet M. Hansen March 23, 1994 ------------------------------------------------ Janet M. Hansen Senior Vice President, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer)
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.
By * March 23, 1994 ------------------------------------------------ William S. Warner Chairman of the Board of Directors and Director
By * March 23, 1994 ------------------------------------------------ Jack E. McGregor President, Chief Executive Officer and Director
By March 23, 1994 ------------------------------------------------ George W. Edwards, Jr. Director
By ------------------------------------------------ Geoffrey Etherington Director
By * March 23, 1994 ------------------------------------------------ Norwick R.G. Goodspeed Director
By * March 23, 1994 ------------------------------------------------ Janet D. Greenwood Director
By * March 23, 1994 ------------------------------------------------ Donald M. Halsted, Jr. Director
By ------------------------------------------------ Eugene D. Jones Director
By * March 23, 1994 ------------------------------------------------ Larry L. Pflieger Director
By * March 23, 1994 ------------------------------------------------ G. Jackson Ratcliffe Director
By * March 23, 1994 ------------------------------------------------ John A. Urquhart Director
*By /s/Janet M. Hansen ------------------------------------------------ Janet M. Hansen Attorney-in-fact
INDEX TO ADDITIONAL FINANCIAL INFORMATION -----------------------------------------
The consolidated financial statements, together with the report of Price Waterhouse thereon, dated January 31, 1994, appearing on Pages 24 - 45 of the accompanying 1993 Annual Report to Shareholders are incorporated by reference in this Form 10-K Annual Report. With the exception of the aforementioned information and the information incorporated in Items 1, 5, 6, 7 and 8, the 1993 Annual Report to Shareholders is not to be deemed filed as part of this report. The following financial information should be read in conjunction with the consolidated financial statements in such 1993 Annual Report to Shareholders. Financial Statement Schedules not included in this Form 10-K Annual Report have been omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.
ADDITIONAL FINANCIAL INFORMATION --------------------------------
Page ----
Property, plant and equipment (Schedule V) for the years 1993, 1992 and 1991
Accumulated depreciation, depletion and amortization of property, plant and equipment (Schedule VI) for the years 1993, 1992 and 1991
Supplementary income statement information (Schedule X) for the years 1993, 1992 and 1991
REPORT OF INDEPENDENT ACCOUNTANTS ON ------------------------------------ FINANCIAL STATEMENT SCHEDULES -----------------------------
To the Board of Directors of Aquarion Company
Our audits of the consolidated financial statements referred to in our report dated January 31, 1994 appearing on Page 42 of the 1993 Annual Report to Shareholders of Aquarion Company, (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedules listed in item 14(a) of this Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
/s/Price Waterhouse --------------------- Price Waterhouse
Stamford, Connecticut January 31, 1994
EXHIBIT 22(a) -------------
Subsidiaries of the Registrant ------------------------------
Bridgeport Hydraulic Company, incorporated in the State of Connecticut
Stamford Water Company, incorporated in the State of Connecticut
Main Street South Corporation, incorporated in the State of Connecticut
Timco, Inc., incorporated in the State of Connecticut
Hydrocorp, Inc., incorporated in the State of Delaware
Industrial and Environmental Analysts, Inc., incorporated in the State of Vermont
Industrial and Environmental Analysts, Inc. - Massachusetts, incorporated in the State of Massachusetts
Industrial and Environmental Analysts, Inc. - New Jersey, incorporated in the State of Delaware
Industrial and Environmental Analysts, Inc. - Illinois, incorporated in the State of Delaware
Industrial and Environmental Analysts, Inc. - Florida,incorporated in the State of Florida
SRK Holding, Inc., incorporated in the State of Connecticut
THC Acquisition Corp., incorporated in the State of Delaware
YWC, Inc., incorporated in the State of Connecticut
Aquarion Management Services, Inc., incorporated in the State of Delaware
EXHIBIT 24(a) -------------
Consent of Independent Accountants ----------------------------------
The Consent of Independent Accountants for Aquarion Company is contained in the Report of Independent Accountants on page of this Form 10-K.