ITEM 1 - BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS.
Although the Company's antecedents date back to 1907, it evolved directly from the merger of two separate firms in 1929, resulting in the incorporation of American Concrete Pipe Co. on April 22, 1929. Various name changes occurred between that time and 1942, at which time the Company's name became American Pipe and Construction Co. By the late 1960s the Company was almost exclusively engaged in manufacturing and had expanded its product lines to include not only concrete and steel pipe but also high-performance protective coatings, ready-mix concrete, aggregates and reinforced thermosetting resin pipe and fittings.
At the beginning of 1970, the Company's name was changed to Ameron, Inc. In the meantime, other manufactured products had been added to its product lines. These included concrete and steel poles for street and area lighting, and tapered steel vertical and cantilevered poles for traffic signals. In 1984, the Company acquired a major domestic fiberglass pipe business, including a manufacturing plant in Burkburnett, Texas, and certain trade names and patent rights. In 1988, the Company expanded its ability to serve the water transmission and distribution market through the acquisition of a major steel pipe fabricating facility in Fontana, California.
Further details or commentary on the year's operations can be found in the Annual Report, which is Exhibit 13 to this report on Form 10-K, and which should be read in conjunction with this report.
(B) FINANCIAL INFORMATION AS TO INDUSTRY SEGMENTS.
The information contained in Notes (1), (4) and (14) of Notes to Consolidated Financial Statements on pages 38, 39, 43, 46 and 47 of the Annual Report is incorporated herein by reference.
(C) NARRATIVE DESCRIPTION OF BUSINESS.
(1) For geographical and operational convenience, the Company is organized into divisions. These divisions are combined into the following groups serving the following-described industry segments.
a) The Protective Coatings Systems group develops, manufactures and markets high-performance coatings and surfacer systems on a world-wide basis. These products are utilized for the preservation of major structures, such as metallic and concrete facilities and equipment, to prevent their degradation by corrosion, abrasion, marine fouling and other forms of chemical and physical attack. The primary markets served include marine, offshore, petrochemical, power generation, petroleum, chemical, steel, pulp and paper, railroad, bridges, mining, metal processing and original equipment manufacturing. These products are marketed by direct
sales, as well as through manufacturers' representatives, distributors and licensees. Competition is based upon quality, price and service. Manufacture of these products is carried out in the Company's plants in California and Arkansas, by a wholly-owned subsidiary in The Netherlands, by jointly-owned operations in Mexico and Saudi Arabia and by various third party licensees. The Company licenses its patents, trademarks, know-how and technical assistance to various of its subsidiary and affiliated companies and to various third party licensees.
b) The Fiberglass Pipe Systems group develops, manufactures and markets filament-wound and molded fiberglass pipe and fittings. These products are used by a wide range of process industries, including industrial, petroleum, chemical processing and petrochemical industries, for service station replacement piping systems, aboard marine vessels and on offshore oil platforms, and are marketed as an alternative to metallic piping systems which ultimately fail under corrosive operating conditions. These products are marketed by direct sales, as well as through manufacturers' representatives, distributors and licensees. Competition is based upon quality, price and service. Manufacture of these products is carried out in the Company's plants in Texas and South Carolina, by wholly-owned subsidiaries in The Netherlands and Singapore, and by a jointly-owned affiliate in Saudi Arabia.
c) The Concrete and Steel Pipe Systems group supplies products and services used in the construction of pipeline facilities for various utilities. Eight plants are located in three of the continental western states. These plants manufacture concrete cylinder pipe, prestressed concrete cylinder pipe, steel pipe and reinforced concrete pipe for water transmission, storm and industrial waste water and sewage collection. These products are marketed by direct selling using the Company's own personnel and by competitive bidding. Customers include local, state and federal agencies, developers and general contractors. Normally no one customer or group of customers will account for sales equal to or greater than 10 percent of the Company's consolidated revenue. However, occasionally, when more than one unusually large project is in progress, combined sales to all U.S. government agencies and/or general contractors for those agencies can reach those proportions. Besides competing with several other concrete pipe manufacturers located in the market area, alternative products such as ductile iron, asbestos cement, and clay pipe compete with the Company's concrete and steel pipe products, but ordinarily these other materials do not offer the full diameter range produced by the Company. Principal methods of competition are price, delivery schedule and service. The Company's technology is used in the Middle East through affiliated companies whose activities are not reflected in the amounts reported for this industry segment. This segment also includes the manufacturing and marketing on a world-wide basis through direct sales of polyvinyl chloride sheet lining for the protection of concrete pipe and cast-in- place concrete structures from the corrosive effects of sewer gases, acids and industrial chemicals. Competition is based on quality, price and service. Manufacture of this product is carried out in the Company's plant in California. This segment also includes engineered design, fabrication and direct sale of specialized proprietary equipment which is outside the regular business of the other segments of the Company's businesses. Competition for such work is based upon quality, price and service. Manufacture of such equipment is carried out in the Company's plant in California.
d) The Construction & Allied Products group includes the HC&D division, which suppllies ready-mix concrete, crushed and sized basaltic aggregates, dune sand, concrete pipe and box culverts, primarily to the construction industry in Hawaii. These products are marketed through direct sales. Ample raw materials are available locally in Hawaii and, as to rock products, the
Company has exclusive rights to a quarry containing many years' reserves. Within the market area there are competitors for each of the segment's products. No single competitor offers the full range of products sold by the Company in Hawaii. The principal methods of competition are in price and service, since an appreciable portion of the segment's business is obtained through competitive bidding.
This segment also includes the operations of the Pole Products & Systems division, which manufactures and markets concrete and steel poles for highway, street and outdoor area lighting and for traffic signals. Sales are nationwide, but with a stronger concentration in the western states. Marketing is handled by the Company's own sales force and by outside sales agents. Competition for such products is mainly based on price, but with some consideration for service and delivery. Manufacture of these products is carried out in in two plants in California, as well as plants in Washington and Oklahoma.
e) Except as individually shown in the above descriptions of industry segments, the following comments or situations apply to all segments:
(i) Because of the number of manufacturing locations and the variety of raw materials essential to the business, no critical situations exist with respect to supply of materials. The Company has multiple sources for raw materials. A program continues in operation to minimize any potential effect which may be anticipated to result from any foreseeable inadequacy of energy supplies. The effects of increases in costs of energy are being mitigated to the extent practical through conservation and through addition or substitution of equipment to manage the use and reduce consumption of energy.
(ii) The Company owns certain patents and trademarks, both U.S. and foreign, related to its products. It licenses these proprietary items to some extent in the U.S., and to a greater degree abroad. These patents, trademarks, and licenses do not constitute a material portion of the Company's business. No franchises or concessions exist.
(iii) Many of the Company's products are used in connection with capital goods, water and sewage transmission and construction of capital facilities. Favorable or adverse effects on general sales volume and earnings can result from weather conditions. Normally, sales volume and earnings will be lowest in the first fiscal quarter, seasonal effects typically accelerate or slow the business volume and normally do not bring about severe changes in full-year activity.
(iv) With respect to working capital items, the Company does not encounter any requirements which are not common to other companies engaged in the same industries. No unusual amounts of inventory are required to meet seasonal delivery requirements. All of the Company's industry segments turn their inventory between four and eleven times annually. Average days' sales in accounts receivable range between 39 and 81 for all segments.
(v) The value of backlog orders at November 30, 1993 and 1992 by industry segment is shown below. Substantially all of the November 30, 1993 backlog is expected to be billed and recorded as sales during the year 1994.
Backlog at November 30, 1993 declined 37.8% from the prior year's level. The $25.7 million decrease in the Fiberglass Pipe Systems segment reflects the completion of several large crude oil projects overseas. The lower backlog of the Concrete and Steel Pipe Systems segment resulted from a decline in public spending for large water transmission systems and reduced construction activity in the Company's geographic markets. Backlog declined in the Construction and Allied Products segment because of reduced construction activity in Hawaii. The increase in backlog for the Protective Coatings Systems segment reflects an increase in overseas project orders.
(vi) There was no significant change in competitive conditions or the competitive position of the Company in the industries and localities in which it operates. There is no knowledge of any single competitive situation which would be material to an understanding of the business.
(vii) Sales contracts in all of the Company's business segments normally consists of purchase orders, which in some cases are issued pursuant to master purchase agreements. Longer term contracts seldom involve commitments of more than one year by the Company, and exceptions are not deemed material by management. Payment is normally due from 30 to 60 days after shipment, with progress payments prior to shipment in some circumstances. It is the Company's practice to require letters of credit prior to shipment of foreign orders, subject to limited exceptions. The Company does not voluntarily extend long-term credit to purchasers of its products.
(2) a) Approximate expense during each of the last three fiscal years for Research and Development costs is shown under the caption in Note (1) of Notes to Consolidated Financial Statements on page 38 of the Annual Report, which information is incoporated herein by reference.
b) The Corporation's business is not dependent on any single customer or few customers, the loss of any one or more of whom would have a material adverse effect on its business.
c) For many years the Corporation has been consistently installing or improving devices to control or eliminate the discharge of pollutants into the environment. Accordingly, compliance with federal, state, and locally enacted provisions relating to protection of the environment is not having, and is not expected to have, a material effect upon the Corporation's capital expenditures, earnings, or competitive position.
d) At year-end the Corporation and its consolidated subsidiaries employed approximately 2,868 persons. Of those, approximately 1,340 were covered by labor union contracts, and there are six separate bargaining agreements subject to renegotiation in 1994. Management does not presently anticipate a strike or other labor disturbance in connection with renegotiation of these agreements; however, the possibility of such an occurrence exists.
(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES.
The information contained in Notes (4) and (14) of Notes to Consolidated Financial Statements on pages 39, 43, 46 and 47 of the Annual Report is incorporated herein by reference.
Export sales in the aggregate from domestic operations during the last three fiscal years were:
ITEM 2

ITEM 2 - DESCRIPTION OF PROPERTY
(A) The location and general character of principal plants and other materially important physical properties used in the Company's operations is tabulated below. Property is owned in fee except where otherwise indicated by footnote. In addition to the property shown, the Company owns vacant land adjacent to or in the proximity of some of its operating locations and holds this property available for use when it may be needed to accommodate expanded or new operations. Property listed does not include any temporary project sites which are generally leased for the duration of the respective projects. With the exception of the Kailua, Oahu property, shown under the Construction & Allied Products industry segment, there are no material leases with respect to which expiration or inability to renew would have any material adverse effect on the Company's operations. The lease term on the Kailua property extends to the year 2012. This is the principal source of quarried rock and aggregates for the Company's operations on Oahu, Hawaii and, in management's opinion, reserves are adequate for its requirements during the term of the lease.
(B) The Company believes that its existing facilities are adequate for current and presently foreseeable operations. Because of the cyclical nature of certain of the Company's operations, and the substantial amounts involved in some individual orders, the level of utilization of particular facilities may vary significantly from time to time in the normal course of operations.
INDUSTRY SEGMENT - GROUP
Division - Location Description ------------------- ----------- PROTECTIVE COATINGS SYSTEMS
Protective Coatings Systems division - USA Brea, CA Office, Plant, Laboratory Little Rock, AR Office, Plant
Ameron B.V. Geldermalsen, The Netherlands Office, Plant
FIBERGLASS PIPE SYSTEMS
Fiberglass Pipe Systems division - USA Burkburnett, TX Office, Plant Spartanburg, SC Plant
Ameron B.V. Geldermalsen, The Netherlands Office, Plant
Ameron (Pte) Ltd. Singapore *Office, Plant
CONCRETE AND STEEL PIPE SYSTEMS
Southern Division Rancho Cucamonga, CA *Office Etiwanda, CA Plant Lakeside, CA Plant South Gate, CA Plant Palmdale, CA Plant Phoenix, AZ Office, Plant
Northern Division Tracy, CA Office, Plant Portland, OR Office, Plant
Steel Fabrication division Fontana, CA *Office, Plant
Protective Linings division Brea, CA Office, Plant
Fabrication Plant South Gate, CA Office, Plant
CONSTRUCTION & ALLIED PRODUCTS
HC&D division Honolulu, Oahu, HI *Office, Plant Kailua, Oahu, HI *Plant, Quarry Barbers Point, Oahu, HI *Plant Puunene, Maui, HI *Office, Plant, Quarry
Pole Products & Systems division Fillmore, CA Office, Plant Oakland, CA *Plant Everett, WA *Office, Plant Tulsa, OK *Office, Plant
CORPORATE Corporate Headquarters Pasadena, CA *Office
Corporate Research & Engineering South Gate, CA Office, Laboratory
*Leased
ITEM 3

ITEM 3 - LEGAL PROCEEDINGS
On August 22, 1988, Fontana Pipe and Fabrication, Inc. filed a civil lawsuit against the Company in the United States District Court, District of Oregon. The action stemmed from the purchase by the Company in 1988 of the assets of a steel fabrication plant located in Fontana, California which had been owned by Kaiser Steel Corporation. The amounts claimed by the plaintiff were substantial. The case went to trial in October, 1989 and resulted in a judgment in favor of the Company. Following two appeals to the Ninth Circuit Court of Appeals by plaintiff, this lawsuit was settled in September 1993 on terms deemed to be favorable to the Company.
On January 24, 1992, the Central Arizona Water Conservation District ("CAWCD") filed an action for damages against several parties, including the Company, in United States District Court, District of Arizona, in connection with six prestressed concrete pipe siphons furnished and installed in the 1970's as part of the Central Arizona Project ("CAP"), a federal project to bring water from the Colorado River to Arizona. The CAWCD also filed separate actions against the U.S. Bureau of Reclamation ("USBR") in the United States Claims Court and with the Arizona Projects Office of the USBR in connection with the CAP siphons. The CAWCD alleges that the six CAP siphons are defective and that the USBR and the defendants in the U.S. District Court action are liable for the repair or replacement of those siphons at a claimed estimated cost of $146.7 million. The Company has internally, as well as through independent third party consultants, conducted engineering analyses regarding this issue and believes that the siphons were manufactured in accordance with the project specifications and other contract requirements, and therefore it is not liable for any claims relating to the siphons. The Company has recorded reserves that it believes are adequate to cover costs associated with the Company's vigorous defense of its position in this matter. The Company and its legal counsel believe that it has meritorious defenses to this action and that resultant liability, if any, should not have a material adverse effect on the financial position of the Company and its results of operations.
On July 22, 1992, the Company was served with a complaint in an action brought by the City and County of San Francisco ("CCSF") in Superior Court, County of San Francisco, State of California against the Company and two co-defendants, in connection with a pipeline referred to as San Andreas Pipeline No. 3, a water transmission pipeline that was installed between 1980 and 1982. The Company furnished the pipe used in that pipeline. In its complaint, plaintiff alleges that the pipeline is defective and seeks damages of approximately $44 million to replace the entire pipeline. The Company has recorded reserves that it believes are adequate to cover costs associated with the Company's vigorous defense of its position in this matter. The Company believes that it has meritorious defenses to this action and that resultant liability, if any, should not have a material adverse effect on the financial position of the Company and its results of operations.
In addition, certain other claims, suits and complaints, which arise in the ordinary course of business, have been filed or are pending against the Company. Management believes that these matters, and the matters discussed above, are either adequately reserved, covered by insurance, or would not have an adverse
material effect on the financial position of the Company and its results of operations if disposed of unfavorably.
The Company is also subject to federal, state and local laws and regulations concerning the environment and is currently participating in administrative proceedings at several sites under these laws. It is difficult to estimate with any certainty the total cost of remediation, the timing and extent of remedial actions required by governmental authorities, and the amount of the Company's liability, if any, in proportion to that of other potentially responsible parties. While the Company finds it difficult to estimate with any certainty the total cost of remediation at the several sites which are subject to environmental regulatory proceedings, on the basis of currently available information, the Company does not believe it likely that the outcome of such environmental regulatory proceedings will have a material adverse effect on the Company's financial position or its results of operations. This conclusion is based on the location and type of contamination of each site, potential recovery from insurance carriers and existing reserves. When it has been possible to reasonably estimate the Company's liability with respect to these matters, provisions have been made as appropriate.
ITEM 4

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(Not Applicable)
ITEM 4A - EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth information with respect to individuals who served as executive officers as of November 30, 1993 and who are not directors of the Company. All executive officers are appointed by the Board of Directors to serve at the discretion of the Board of Directors.
All of the executive officers named above have held high level managerial or executive positions with the Company for more than the past five years except Mr. Steinkamp, who joined the Company in 1990 as Corporate Director of Manufacturing and in 1992 was named Vice President, Manufacturing. He was previously with Dayton Superior Corporation since 1982 where he was Vice President, Northern Division and in 1987 Vice President, Operations.
PART II
ITEM 5

ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock, $2.50 Par Value, of the Corporation, its only outstanding class of common equity, is traded on the New York Stock Exchange, the only exchange on which it is presently listed. On February 9, 1994, there were 1,925 stockholders of record of such stock.
Dividends have been paid each quarter during the prior two years and for many years in the past. Information as to the amount of dividends paid during the reporting period and the high and low sales prices of the Corporation's Common Stock during that period are set out under the caption Per Share Data shown on page 44 of the Annual Report, which information is incorporated herein by reference.
Terms of lending agreements which place restrictions on cash dividends are discussed in Note (9) of Notes to Consolidated Financial Statements on page 42 of the Annual Report, which is incorporated herein by reference.
ITEM 6

ITEM 6 - SELECTED FINANCIAL DATA
The information required by this item is contained in the Selected Consolidated Financial Information shown on page 29 of the Annual Report, which information is incorporated herein by reference.
ITEM 7

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information required by this item with respect to fiscal years 1993 and 1992 is shown under Ameron 1993 Financial Review on pages 30-32 of the Annual Report, which information is incorporated herein by reference. The information required for 1991 is as follows:
RESULTS OF OPERATIONS-1991 COMPARED WITH 1990
SALES. During 1991, sales rose 4.3 percent to $465 million. The higher revenues were attributable primarily to sales of steel pipe, protective coatings and linings, and fiberglass pipe products.
Protective coatings and linings sales were higher than in 1990, due principally to the addition of operations in the United Kingdom and Spain, and increased marine coatings sales to a United States government agency. However, domestic and Canadian sales of industrial protective coatings were flat, reflecting continued recessionary conditions in several markets. The European protective coatings operation was impacted by the delay in the start-up of the next phase of a large North African project, which resumed in 1992.
Sales of fiberglass pipe products increased because of continued strong domestic demand for service station rehabilitation piping systems, and increased deliveries to North Africa and the Middle East resulting from petroleum-related and infrastructure development in those regions.
Concrete and steel pipe sales were higher than last year, due mainly to welded steel pipe sold to two major water projects in Southern California, and sales of prestressed concrete pipe for a large tunnel liner project. However, the Company's concrete pipe operations were impacted by the economic downturn and competitive pricing pressures, as well as limitations imposed by certain water agencies on the utilization of prestressed concrete cylinder pipe as a result of problems encountered with several pipelines in the United States. In addition, at the beginning of 1992, the Central Arizona Water Conservation District filed an action for damages in connection with six prestressed concrete pipe siphons furnished and installed in the 1970s as part of the Central Arizona Project. The Company's technical staff is working with water agencies and other concrete pipe manufacturers to determine solutions to the pipeline problems. Although near term revenues from this product are expected to be reduced, demand increased in 1991 for welded steel pipe throughout California, thus offsetting much of the effect of the drop-off in sales of prestressed concrete cylinder pipe.
Construction product sales declined from 1990, due primarily to a decrease in activity for both concrete and steel pole products as a result of delays in public spending and the sharp drop-off in housing starts and construction. Partially offsetting the reduced pole products sales were moderate gains by the construction products operations in Hawaii, which continued to experience high demand for ready-mix concrete and aggregates in both commercial and public sector markets.
GROSS PROFIT. The gross profit margin decreased by .7 percent to 25.5 percent in 1991. Profit margins on sales of protective coatings and linings increased because of improved product pricing achieved by the domestic industrial and marine coatings operations. Higher margins on fiberglass pipe product sales were attributable to manufacturing efficiencies stemming from higher production volumes and better pricing on fiberglass pipe products sold abroad. The decline in construction activity during 1991 furthered price competition and lowered production volumes at several of the concrete pipe operations, causing overall margins on concrete pipe products to decrease. Construction products profit margins declined as a result of significant price competition in steel traffic and lighting pole markets and increased manufacturing costs resulting from lower production volumes, as well as price competition for ready-mix concrete in Hawaii.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses were higher than in 1990, due mainly to the addition of the British and Spanish protective coatings operations, which were not included in the 1990 consolidated results. Other factors affecting selling, general and administrative expenses include increased costs associated with the expansion of marine and protective coatings marketing activities, legal expenses, and additional provisions for insurance, doubtful accounts, and other contingencies.
INTEREST EXPENSE. Interest expense increased marginally in 1991, due principally to slightly higher borrowing levels maintained throughout the year.
WRITE DOWN OF ASSETS AND RESTRUCTURING COSTS. The Company recorded repositioning costs of approximately $5.6 million and wrote down related fixed assets of approximately $8.9 million after an in-depth evaluation by management of the long-term profitability and rate of return on investment potential for each of the Company's major product lines. Based on this evaluation, management determined that the Company's overall long-term rate of return could be increased if certain facilities were consolidated and if capital and management were redeployed among certain product lines to those with the greatest long-term potential. As a result, management decided to de-emphasize certain product lines and promote and emphasize alternative products that it considered to be more viable and technologically appropriate on a long-term basis. The Company's restructuring activities were also a further response to the lingering effects of the domestic recession and shifting of the Company's productive capabilities to lower cost, more competitive products.
GAIN FROM SALE OF ASSETS. During the fourth quarter of 1991, the Company sold, under the threat of condemnation, its headquarters facility for $21 million, resulting in a pre-tax gain of $15 million.
OTHER INCOME. Royalties and fees from affiliated companies were higher than last year because of the increased level of sales activity at licensees and foreign affiliated companies. Gains from foreign currency transactions compared favorably to the prior year's losses, reflecting the strength of the U.S. dollar against the Dutch guilder and the Canadian dollar. Other income includes a legal settlement of $770,000 received from resolution of a prior class action lawsuit.
EQUITY IN LOSSES OF AFFILIATED COMPANIES. Equity in losses of jointly-owned affiliated companies was primarily the result of economic downturns experienced by several of the affiliates. The losses of Gifford-Hill-American, Inc., a 50- percent-owned concrete pressure pipe manufacturer, reflect ongoing weak demand in the Texas concrete pipe market, coupled with the bankruptcy loss of Gifford- Hill-American's wholly-owned "Lock-Joint" subsidiary. Tamco, a 50-percent- owned steel mini-mill, also reported lower operating results due to the downturn in construction activity in California, while Ameron Saudi Arabia, Ltd., endured the effects of the Gulf War. Partially offsetting these declines were the improved performance of both Oasis-Ameron, Ltd. and Bondstrand, Ltd., which benefitted from increased demand for protective coatings and fiberglass pipe, respectively, in Saudi Arabia.
ITEM 8

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The Consolidated Financial Statements, the report thereon of Arthur Andersen & Co. dated January 13, 1994, Notes to Consolidated Financial Statements and Quarterly Financial Data, comprising pages 33 through 47 of the Annual Report, are incorporated herein by reference.
ITEM 9

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
(Not applicable) PART III
ITEM 10

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS
Information with respect to the directors is contained under the section entitled, "Election of Directors" in the Corporation's Proxy Statement which was filed on February 25, 1994 in connection with the Annual Meeting of Stockholders to be held on March 28, 1994. Such information is incorporated herein by reference.
Information with respect to the executive officers of the Corporation is located in Part I, Item 4A of this report.
ITEM 11

ITEM 11 - EXECUTIVE COMPENSATION*
ITEM 12

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT*
ITEM 13

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS*
*The information required by Items 11, 12 and 13 is contained in the Corporation's Proxy Statement which was filed on February 25, 1994 in connection with the 1994 Annual Meeting of Stockholders to be held on March 28, 1994. Such information is incorporated herein by reference.
PART IV
ITEM 14

ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) (1) FINANCIAL STATEMENTS:
The financial statements to be filed hereunder are cross-referenced, in the index immediately following, to the Annual Report, as to sections incorporated herein by reference.
(i) Summarized information as to the financial condition and results of operations for Gifford-Hill-American, Inc., Ameron Saudi Arabia, Ltd., Bondstrand, Ltd, Oasis-Ameron, Ltd. and Tamco are presented in Note (4) of Notes to Consolidated Financial Statements on page 39 of the Annual Report, which information is incorporated herein by reference.
(A) (2) FINANCIAL STATEMENT SCHEDULES:
The following additional financial data should be read in conjunction with the consolidated financial statements in the 1993 Annual Report. Schedules not included with this additional financial data have been omitted because they are either not applicable, not required, not significant, or the required information is provided in the consolidated financial statements or notes thereto.
(B) REPORTS ON FORM 8-K
No report on Form 8-K was filed by the Corporation during the last quarter of the fiscal year ended November 30, 1993.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and the Board of Directors, Ameron, Inc.:
We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Ameron, Inc.'s Annual Report to Stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated January 13, 1994. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in the index above are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Los Angeles, California January 13, 1994
AMERON, INC. AND SUBSIDIARIES SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT (In thousands)
AMERON, INC. AND SUBSIDIARIES SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT (In thousands)
AMERON, INC. AND SUBSIDIARIES SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED NOVEMBER 30, 1993 (In thousands)
AMERON, INC. AND SUBSIDIARIES SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED NOVEMBER 30, 1992 (In thousands)
AMERON, INC. AND SUBSIDIARIES SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED NOVEMBER 30, 1991 (In thousands)
AMERON, INC. AND SUBSIDIARIES SCHEDULE IX - SHORT TERM BORROWINGS (In thousands)
The increased interest rates in 1993 reflect a higher percentage of short-term borrowings owed by the Company's Colombian subsidiary.
AMERON, INC. AND SUBSIDIARIES SCHEDULE X SUPPLEMENTARY INCOME STATEMENT INFORMATION (In thousands)
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.
AMERON, INC.
By: /s/Javier Solis _______________________________________________ Javier Solis, Senior Vice President & Secretary
Date: February 25, 1994
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: /s/James S. Marlen Chief Executive Officer, President --------------------- and Director (Principal Executive James S. Marlen Officer)
Date: /s/Gary Wagner Senior Vice President and Chief --------------------- Financial Officer, Treasurer Gary Wagner (Principal Financial and Accounting Officer)
Date: /s/Donald H. Albrecht Director --------------------- Donald H. Albrecht
Date: /s/Victor K. Atkins Director --------------------- Victor K. Atkins
Date: /s/John F. King Director --------------------- John F. King
Date: /s/William I. McKay Director --------------------- William I. McKay
Date: /s/Richard J. Pearson Director --------------------- Richard J. Pearson
Date: /s/Lawrence R. Tollenaere Director, Chairman of the Board ------------------------- Lawrence R. Tollenaere
Date: ________________________________ Director Robert Toxe
Date: ________________________________ Director F. H. Fentener van Vlissingen


Item 1. Business
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DESCRIPTION OF THE BUSINESS OF THE COMPANY
Weyerhaeuser Company (the company) was incorporated in the state of Washington in January 1900, as Weyerhaeuser Timber Company. It is principally engaged in growing and harvesting of timber and the manufacture, distribution and sale of forest products, real estate development and construction, and financial services. Its principal business segments include timberlands and wood products, pulp and paper products, real estate, and financial services. A description of each of these business segments follows.
Timberlands and Wood Products
The company owns approximately 5.5 million acres of commercial forestland in the United States (50% in the South and 50% in the Pacific Northwest), most of it highly productive and located extremely well to serve both domestic and international markets. The company has, additionally, long-term license arrangements in Canada covering approximately 17.8 million acres (of which 14 million acres are considered to be productive forestland). The combined total timber inventory on these U.S. and Canadian lands is approximately 245 million cunits (a cunit is 100 cubic feet of solid wood), of which approximately 75% is softwood species. The relationship between cubic measurement and the quantity of end products that may be produced from timber varies according to the species, size and quality of timber, and will change through time as the mix of these variables changes. To sustain the timber supply from its fee timberland, the company is engaged in extensive planting, suppression of nonmerchantable species, precommercial and commercial thinning and fertilization and operational pruning, all of which increase the yield from its fee timberland acreage.
Weyerhaeuser Company and Subsidiaries
Part I Item 1. Business - Continued
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The company's wood products businesses produce and sell softwood lumber, plywood and veneer; composite panels; oriented strand board; hardboard; hardwood lumber and plywood; doors; treated products; logs; chips and timber. These products are sold primarily through the company's own sales organizations. Building materials are sold to wholesalers, retailers and industrial users.
Sales by volumes by major product class are as follows (millions):
Selected product prices:
Weyerhaeuser Company and Subsidiaries
Part I Item 1. Business - Continued
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Pulp and Paper Products
The company's pulp and paper products businesses include: Pulp, which manufactures chemical wood pulp for world markets; Newsprint, which manufactures newsprint at the company's North Pacific Paper Corporation mill and markets it to West Coast and Japanese newspaper publishers; Paper, which manufactures and markets a range of both coated and uncoated fine papers through paper merchants and printers; Containerboard Packaging, which manufactures linerboard and corrugating medium, which is primarily used in the production of corrugated shipping containers and manufactures and markets corrugated shipping containers for industrial and agricultural packaging; Paperboard, which manufactures bleached paperboard that is used for production of liquid containers and is marketed to West Coast and Pacific Rim customers; Recycling, which operates an extensive wastepaper collection system and markets it to company mills and worldwide customers; Chemicals, which produces chlorine, caustic and tall oil, which are used principally by the company's pulp and paper operations; and Personal Care Products, which manufactures disposable diapers sold under the private-label brands of many of North America's largest retailers (this business was sold in February 1993 through an initial public offering of stock).
Sales volumes by major product class are as follows (thousands):
Selected product prices (per ton):
Weyerhaeuser Company and Subsidiaries
Part I Item 1. Business - Continued
- -----------------------------------------------------------------------------
Real Estate
The company, through its real estate subsidiary, Weyerhaeuser Real Estate Company, is a builder/developer of for-sale housing and apartments, develops commercial and residential lots for sale to users and other builders, builds commercial buildings for sale to institutional investors, and is an investor in joint ventures and limited partnerships.
Volumes sold:
Financial Services
The company, through its financial services subsidiary, Weyerhaeuser Financial Services, Inc., is involved in a range of financial services. The principal operating unit is Weyerhaeuser Mortgage Company, which has origination offices in 12 states, with a servicing portfolio of $8.4 billion covering approximately 112,000 loans throughout the country. Mortgages are resold in the secondary market through mortgage-backed securities to financial institutions and investors. Through its insurance services organization, it also offers a broad line of property, life and disability insurance. GNA Corporation, a subsidiary that specialized in the sale of life insurance annuities and mutual funds to the customers of financial institutions, was sold in April 1993. Republic Federal Savings & Loan Association, a subsidiary that operated in Southern California through 1991, was dissolved in 1992.
Volume information (millions):
Weyerhaeuser Company and Subsidiaries
Part I Item 2.

Item 2. Properties
- -----------------------------------------------------------------------------
Timberlands and Wood Products
Facilities and annual production are summarized by major product class as follows (millions):
Principal manufacturing facilities are located as follows:
Softwood lumber and plywood Hardwood doors Alabama, Arkansas, Georgia, Idaho, Wisconsin Mississippi, North Carolina, Oklahoma, Oregon, Composite panels Washington, and Georgia, North Carolina, Alberta, British Columbia, and Oregon and Wisconsin Saskatchewan, Canada Oriented strand board Hardwood lumber Michigan, North Carolina, Arkansas, Oklahoma, Pennsylvania, and Alberta, Canada Washington, and Wisconsin Hardboard Oregon
Weyerhaeuser Company and Subsidiaries
Part I Item 2. Properties - Continued
- ------------------------------------------------------------------------------
Pulp and Paper Products
Facilities and annual production are summarized by major product class as follows (thousands):
Principal manufacturing facilities are located as follows:
Pulp Containerboard Georgia, Mississippi, North North Carolina, Oklahoma, Carolina, Washington, and Oregon, and Washington Alberta, British Columbia, and Saskatchewan, Canada Packaging Arizona, California, Florida, Newsprint Georgia, Hawaii, Illinois, Washington Indiana, Iowa, Kentucky, Maine, Michigan, Minnesota, Paper Mississippi, Missouri, Nebraska, Mississippi, North Carolina, New Jersey, New York, North Washington, Wisconsin, and Carolina, Ohio, Oregon, Saskatchewan, Canada Tennessee, Texas, Virginia, Washington, and Wisconsin Paperboard Washington Recycling California, Colorado, Iowa, Kansas, Maryland, North Carolina, Oklahoma, Oregon, Texas, Virginia, Washington, and British Columbia, Canada
Chemicals Georgia, Mississippi, North Carolina, Oklahoma, Washington, and Saskatchewan, Canada
Weyerhaeuser Company and Subsidiaries
Part I Item 2. Properties - Continued
- -----------------------------------------------------------------------------
Real Estate
Principal operations are located as follows:
Weyerhaeuser Company and Subsidiaries
Part I Item 2. Properties - Continued
- -----------------------------------------------------------------------------
Financial Services
Principal operations are located as follows:
Weyerhaeuser Company and Subsidiaries
Part I Item 3.

Item 3. Legal Proceedings
- ------------------------------------------------------------------------------
Trial began in May 1992 in a federal income tax refund case that the company filed in July 1989 in the United States Claims Court. The complaint seeks a refund of federal income taxes that the company contends it overpaid in 1977 through 1983. The alleged overpayments are the result of the disallowance of certain timber casualty losses and certain deductions claimed by the company arising from export transactions. The refund sought was approximately $29 million, plus statutory interest from the dates of the alleged overpayments. The company has reached an agreement with the United States Department of Justice to settle the portion of the case relating to export transactions. That settlement has been approved by the Joint Committee on Taxation of the U.S. Congress. The tax refund remaining in dispute is approximately $9 million plus statutory interest from the dates of the alleged overpayments. The court has not entered a decision on the remaining issue.
On March 6, 1992, the company filed a complaint in the Superior Court for King County, Washington against a number of insurance companies. The complaint seeks a declaratory judgment that the insurance companies named as defendants are obligated under the terms and conditions of the policies sold by them to the company to defend the company and to pay, on the company's behalf, certain claims asserted against the company. The claims relate to alleged environmental damage to third-party sites and to some of the company's own property to which allegedly toxic material was delivered or on which allegedly toxic material was placed in the past. Since December 1992, the company has agreed to settlements with six of the defendants. In July 1993, the trial court dismissed fourteen of the thirty-five sites named in the complaint. Appeal of those dismissals was heard by the Washington State Supreme Court on February 22, 1994. Trial on two sites is scheduled for October 1994.
In April 1991, the United States Environmental Protection Agency (EPA) issued an amended complaint adding the company as an additional defendant in an administrative proceeding under the Toxic Substances Control Act (TSCA). The proceeding seeks penalties of $171,000 from all defendants with respect to alleged improper storage and record keeping between 1980 and 1989 for certain transformers which contained polychlorinated biphenyls. The transformers, which the company sold in 1980, were located at the company's former hardboard siding mill in Doswell, Virginia. The company is currently negotiating with the EPA to settle the matter with no admission of liability or penalties.
In April 1992, the Georgia Department of Natural Resources, Environmental Protection Division issued a Notice of Violation to the company's Adel, Georgia particleboard plant citing violations of particulate emission standards. A consent order was entered into on September 18, 1992 assessing a $35,000 penalty and a stipulated penalty of $100 per day until the facility is in full compliance with particulate emission requirements. The Consent Order sets a compliance deadline of January 31, 1994. The Consent Order also requires that the company demonstrate that the facility is in compliance with regulations under the Prevention of Significant Deterioration (PSD) regulations under the Clean Air Act. The company has submitted compliance data and is awaiting the State's concurrence that it satisfies the consent order requirements.
The company has undertaken a review of all its wood products facilities for compliance with the PSD regulations and has disclosed PSD compliance issues to certain state agencies and the EPA. The company and the State of Mississippi Department of Environmental Quality (DEQ) have entered into a consent agreement concerning PSD regulations at two company facilities in Mississippi involving penalties of $170,000. The State of Alabama has issued a compliance order with penalties totaling $100,000 for noncompliance with PSD regulations at the company's Millport facility. The company and North Carolina's Division of Environmental Management have entered into a consent agreement for its Elkin, North Carolina facility involving penalties of $140,000 and are currently negotiating a separate consent agreement for its Moncure, North Carolina facility involving penalties of $140,000. The company has signed a consent agreement including penalties of $140,000 relating to PSD issues at the company's Wright City, Oklahoma facility with the State of Oklahoma Department of Environmental Quality. The company is negotiating a consent agreement with the State of Arkansas concerning PSD related issues for two facilities in that state involving $375,000 in total penalties for both facilities. Region V of the EPA has issued a Notice of Violation for permit violations at the company's Grayling, Michigan facility. The company is negotiating settlement of those alleged permit violations and other PSD related issues with the Michigan Department of Natural Resources and the EPA that may involve penalties of up to $416,000. In September 1992, the EPA issued a Section 114 Request for Information concerning PSD compliance at the company's oriented strand board and medium density fiberboard mills. In June 1993, the EPA issued a similar Section 114 request for the company's plywood and particleboard mills. The company is also undertaking a review of its pulp and paper facilities for PSD compliance.
Weyerhaeuser Company and Subsidiaries
Part I Item 3. Legal Proceedings - Continued
- ------------------------------------------------------------------------------
On April 9, 1993, the company entered into a Stipulated Final Order (SFO) with the Oregon Department of Environmental Quality for alleged air emissions in excess of permit levels and PSD noncompliance at the company's North Bend, Oregon containerboard facility. The SFO establishes a compliance schedule for installing control technology. A supplemental SFO assessed upfront penalties of $247,000 and penalties of $500 per day until compliance is demonstrated. The SFO requires demonstrated compliance by December 1993 and a historical evaluation of the facility's PSD status. The company has submitted a plant site PSD review to the state and is awaiting its review.
In August 1992, the EPA issued an administrative complaint for the assessment of $215,000 in civil penalties against the company's Longview, Washington facility. The penalties are based upon alleged violations of the record keeping and storage provisions of the polychlorinated biphenyls rules contained in the TSCA. The company and the EPA settled the complaint for a maximum penalty of $118,150, 50% of which was paid when the settlement was signed. Payment of the remaining 50% was deferred and will be eliminated based on the expenditure of more than $118,150 by the company to dispose of PCB contaminated transformers at Longview during 1993.
On November 2, 1992, an action was filed against the company in the Circuit Court for the First Judicial District of Hinds County, Mississippi on behalf of a purported class of riparian property owners in Mississippi and Alabama whose properties are located on the Tennessee Tombigbee Waterway, Aliceville Lake, Cedar Creek and the Magoway Creek. The complaint seeks $1 billion in compensatory and punitive damages for diminution in property value, personal injuries and mental anguish allegedly resulting from the discharge of purported hazardous substances, including dioxins and furans, by the company's pulp and paper mill in Columbus, Mississippi and the alleged fraudulent concealments of such discharge. The complaint also seeks an injunction prohibiting future releases and the removal of hazardous substances allegedly released in the past. On August 20, 1993, a companion action was filed in Green County, Alabama on behalf of a similar purported class of riparian owners with essentially the same claims as the Mississippi case. The action was removed to the Federal District Court for the Northern District of Alabama, which subsequently remanded the case to state court.
Trial began in January 1994 in the United States District Court for the District of Alaska of claims filed against Weyerhaeuser by two corporations with which Weyerhaeuser had entered into financing arrangements, a marketing agreement, and a technical assistance agreement. The plaintiffs claim that Weyerhaeuser breached contractual and common law duties by allegedly failing to adequately market and ship the plaintiffs' products, misrepresenting its marketing and shipping capabilities, and acting to further its interests at the plaintiffs' expense. The plaintiffs in the First Amended Complaint, filed in May 1992, seek an unstated amount of damages described as more than $50 million in compensatory damages plus not less than $75 million in punitive damages. The claim for punitive damages has been dismissed by the trial court.
The company is also a party to various proceedings relating to the clean up of hazardous waste sites under the Comprehensive Environmental Response Compensation and Liability Act, commonly known as "Superfund," and similar state laws. The Environmental Protection Agency and/or various state agencies have notified the company that it may be a potentially responsible party with respect to other hazardous waste sites as to which no proceedings have been instituted against the company. The company is also a party to other legal proceedings generally incidental to its business. Although the final outcome of any legal proceeding is subject to a great many variables and cannot be predicted with any degree of certainty, the company presently believes that any ultimate liability resulting from the legal proceedings discussed herein, or all of them combined, would not have a material effect on the company's financial position.
Weyerhaeuser Company and Subsidiaries
Part III Item 10. Directors and Executive Officers of the Registrant
- ----------------------------------------------------------------------------
Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- -----------------------------------------------------------------------------
Financial Statements Weyerhaeuser Company and Subsidiaries 1
Financial Statement Schedules Schedule V - Property and Equipment Schedule VI - Allowance for Depreciation and Amortization of Property and Equipment Schedule VIII - Valuation and Qualifying Accounts Schedule IX - Short-term Borrowings Schedule X - Supplementary Income Statement Information
Exhibits Exhibit 3 - Articles of Incorporation and Bylaws Exhibit 10 - Material Contracts (a) Agreement with N. E. Johnson (b) Agreement with W. R. Corbin Exhibit 11 - Statement Re: Computation of Per Share Earnings (incorporated by reference to page 52 of the 1993 Weyerhaeuser Company Annual Report) Exhibit 13 - Portions of the 1993 Weyerhaeuser Company Annual Report specifically incorporated by reference herein Exhibit 22 - Subsidiaries of the Registrant Exhibit 24 - Consents of Experts and Counsel
Reports on Form 8-K The registrant has not filed a report on Form 8-K during the last fiscal quarter of the period for which this Form 10-K is filed.
1 Incorporated in Part II, Item 8


ITEM 1. BUSINESS
THE COMPANY
Delmarva Power & Light Company (the Company) was incorporated in Delaware in 1909 and in Virginia in 1979. The Company's wholly-owned subsidiaries, also incorporated in Delaware, include Delmarva Energy Company, Delmarva Industries, Inc., Delmarva Services Company, and Delmarva Capital Investments, Inc. For a discussion of the Company's subsidiaries, see "Subsidiaries" on page I-11.
The Company is a public utility which provides electric service on the Delmarva Peninsula in an area consisting of about 5,700 square miles with a population of approximately one million. The Company also provides gas service in an area consisting of about 275 square miles with a population of approximately 457,000 in northern Delaware, including the City of Wilmington.
SEGMENT INFORMATION
See Note 17 of the Notes to Consolidated Financial Statements contained in the Company's 1993 Annual Report to Stockholders filed as Exhibit 13.
COMPETITION
Competition is increasing for certain electric and gas energy markets historically served by regulated utilities. In recent years, changing laws and governmental regulations, interest in self-generation, and competition from nonregulated energy suppliers are providing some utility customers with alternative sources to satisfy their electric and gas needs.
Electric Business
The Public Utility Regulatory Policies Act of 1978 (PURPA) facilitated the entry of potential competitors into the electric generation business. Under PURPA, a utility may be required to purchase the electricity generated by qualifying facilities at prices reflecting the utility's avoided cost as determined by utility procedures or state regulatory bodies.
The Energy Policy Act of 1992 (the Energy Act) enabled the Federal Energy Regulatory Commission (FERC) to order the provision of transmission service (wheeling of electricity) for wholesale (resale) electricity producers and also provided for the creation of a new category of electric power producers called exempt wholesale generators (EWGs). These provisions of the Energy Act have enhanced the ability of utilities and non-utility generators to compete to serve resale customers currently served by a particular utility. Partly as a result of the Energy Act, industry-wide resale markets are experiencing increased competition. In 1993, gross electric revenues from the Company's resale business were $105.0 million or 13.0% of billed electric sales revenues.
In response to the changing environment in the electric utility industry, the Company has modified existing strategies and also developed new strategies. From a customer or market perspective, the Company has concluded that focusing on growing the retail portion of the business provides the best opportunity to meet the twin objectives of satisfying customers' needs while providing a fair return to shareholders. During 1993, the Company began to develop new products and services for its retail markets and to hold preliminary discussions with certain municipalities in Delaware to either purchase their electric systems or enter into long-term supply contracts. In December 1993, the Company offered $103.5 million to purchase the electric system of the City of Dover, Delaware (Dover). Dover has approximately 18,500 electric customers and annual revenues from electricity sales of about $37 million. Although the Company expects that the impact on earnings from the potential purchase would be minimal over the first year or two, incremental earnings are
I-1
expected once economies of scale are achieved. It is the Company's understanding that other parties have shown interest in the generation segment of Dover's business, but none have shown interest in purchasing Dover's entire electric system. In February 1994, PECO Energy Company (PECO), formerly known as Philadelphia Electric Company, announced that it is evaluating its strategic alternatives with respect to Conowingo Power Company (COPCO), its Maryland subsidiary, including determining the level of interest that other companies may have in acquiring COPCO. The Company has expressed an interest to PECO in acquiring COPCO and will seek to participate in an acquisition process if such a process is commenced. See "Other Regulatory Matters--Conowingo Power Company" on page I-15 for a further discussion of certain regulatory proceedings related to COPCO in which the Company has intervened.
Although the Energy Act permits competition for wholesale customers only, competitive forces exist within the retail market and are expected to increase. Large retail customers (i.e. commercial and industrial customers) have choices to reduce their energy costs, including self-generation and relocation to the service territories of other utilities with lower rates. In addition, regulatory authorities may permit the retail wheeling of electricity, thereby permitting utilities and non-utility generators to compete to serve large retail customers currently served by a particular utility. The Company is positioned well for these competitive forces. The Company's prices for large retail customers are among the lowest in the region and are competitive with alternative sources of energy such as self-generation. The Company's average price for commercial customers in 1992 was 7.04 cents per kilowatt hour (kwh) compared to a regional average of 8.64 cents per kwh. The Company's average price for industrial customers in 1992 was 4.63 cents per kwh compared to a regional average of 6.59 cents per kwh. These regional averages are based on 1992 data for 27 utilities within a 300 mile radius of the Company. In order to keep customer prices competitive, the Company is stepping up its efforts to reduce costs.
The Company believes it should have the ability to offer flexible pricing in order to compete to serve large retail customers. Such changes in pricing methods could require modification to the existing regulatory process. In Delaware, the Governor has convened a task force "to recommend reforms to the existing regulatory process, structure and organization that will improve utility efficiency and encourage utility innovation, while assuring continued availability of utility services at affordable and competitive prices." The task force includes representatives from the Delaware Public Service Commission (DPSC), utilities (including the Company), industrial customers, government, and the public. The task force plans to issue recommendations that can be introduced as legislation in June 1994 in the General Assembly.
In the resale market, the Company is seeking to reduce the risk associated with a customer switching energy suppliers on short notice because providing electricity service requires investments in capital-intensive facilities which have long lives and require long lead-times for construction. In the Company's most recent resale base rate case, its resale customers agreed to provide a two-year notice for load reductions up to 30% and a five-year notice for load reductions greater than 30%.
Prior to this agreement, Old Dominion Electric Cooperative (ODEC), a resale customer, advised the Company that it would purchase up to 150 megawatts (MW) from another utility, beginning January 1, 1995. The Company is continuing to negotiate a partial-requirements service agreement (to serve the balance of ODEC's load) and a transmission service agreement (to transport the electricity ODEC plans to purchase from another utility) to become effective January 1, 1995. The maximum reduction in annual non-fuel revenues that could result from ODEC's purchase of 150 MW from another utility is estimated to be about $24 million or $0.24 per share based on projected shares outstanding in 1995. To mitigate the potential impact of this loss of business and expected increases in operating costs, the Company is pursuing off-system sales of capacity and energy (targeted increase in revenues: $10-$20 million), intensifying cost control efforts (targeted decrease in costs: $15-$20 million), and if necessary, may apply for increases in customer rates (targeted increase in revenues: $10-$15 million). The Company expects that some combination of these strategies will reduce, or possibly eliminate, the adverse earnings per share effect; however, the ultimate effect on future earnings depends on the degree of success experienced by the Company in implementing its strategies.
I-2
Gas Business
As a result of FERC initiatives, the interstate gas pipeline system has been opened further to permit the transportation of natural gas by end users, including the Company's gas customers. The Company has in place local transportation tariffs to complement this interstate pipeline service. As a result, some Company gas customers now buy gas directly from producers and transport the gas to their facilities in Delaware, paying a transportation fee to the Company for the use of the Company's gas transmission and distribution facilities.
An issue contested in the Company's most recent gas base rate case involved the conditions under which firm customers would be able to switch to non-firm service such as Interruptible Gas Transportation (IGT) service. The Company's tariff in effect prior to this case did not allow firm customers to switch to non-firm service. The Company had proposed in this case to allow firm customers to switch to non-firm service with three years' advance notice. Intervenors in the case, comprised of a group of large firm and non-firm industrial gas customers, sought DPSC approval to allow switching to non-firm service with little or no prior notice. In July 1993, the DPSC approved a three-year notice requirement for firm customers switching to non-firm service. This notice period will mitigate the effect on the Company's results of operations of customers switching from firm to non-firm service.
In a related matter, during the proceedings in the Company's most recent gas base rate case, the Company's largest firm gas customer filed a complaint in the Delaware Chancery Court seeking rescission of its current firm service agreement with the Company and other relief, including non-firm service as an IGT customer. This case was settled in October 1993, with the customer agreeing for a three-year period to transport or pay for a minimum amount of gas equal to 75% of the average amount of gas it has taken over the past three years. This settlement will not have a material impact on the Company's results of operations.
ELECTRIC OPERATIONS
Installed Capacity
The net installed summer electric generating capacity available to the Company to serve its peak load as of December 31, 1993 is presented below. The Company plans to maintain a balanced approach to energy supply, including conservation and load management, purchases of capacity and energy from other utilities and nonutility generators, and construction of new generating capacity. For a discussion of the energy supply plan, see "Challenge 2000 Plan" which begins on page I-4.
The net generating capacity available for operations at any time may be less than the total net installed generating capacity due to generating units being temporarily out of service for inspection, maintenance, repairs, or unforeseen circumstances. See "Item 2

ITEM 2. PROPERTIES
Substantially all utility plants and properties of the Company are subject to the lien of the Mortgage under which the Company's First Mortgage Bonds are issued.
The Company's electric properties are located in Delaware, Maryland, Virginia, Pennsylvania, and New Jersey. The following table sets forth the net installed generating capacity available to the Company to serve its peak load as of December 31, 1993.
- -------- (A) Company portion of jointly owned plants. (B) Represents capacity owned by a refinery customer which is available to the Company to serve its peak load.
I-22
Major transmission and distribution lines owned and in service are as follows:
The Company's electric transmission and distribution system includes 1,338 transmission poleline miles of overhead lines, 5 transmission cable miles of underground cables, 6,634 distribution poleline miles of overhead lines, and 4,294 cable miles of distribution underground cables.
The Company has a liquefied natural gas plant located in Wilmington, Delaware with a storage capacity of 3.045 million gallons and a planned sendout capacity of 25,000 Mcf per day.
The Company also owns four natural gas city gate stations at various locations in its gas service territory. These stations have a total sendout capacity of 125,000 Mcf per day.
The following table sets forth the Company's gas pipeline miles:
-------- * Includes 11 miles of joint-use gas pipeline that is used 10% for gas and 90% for electric.
The Company owns and occupies office buildings in Wilmington and Christiana, Delaware and Salisbury, Maryland, and also owns elsewhere in its service area a number of properties that are used for office, service, and other purposes.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
In October 1992, the Company's largest firm gas customer filed a complaint in the Delaware Chancery Court seeking rescission of its current firm service agreement with the Company and other relief, including non-firm service as an interruptible Gas Transportation customer. For a discussion of the outcome of this case, see "Competition--Gas Business" on page I-3.
In November 1992, DCTC-Glendon, Inc., a subsidiary of the Company, filed a lawsuit in the U.S. District Court for the Eastern District of Pennsylvania against Energenics/Glendon, Inc. (EGI) and Joseph M. Reibman (Reibman), the sole shareholder of EGI. In July 1993, the court entered an order granting EGI's and Reibman's motion to file omitted counterclaims and add counterclaim defendants, including the Company, various subsidiaries of the Company, and certain individual officers and employees of the Company and its subsidiaries. In February 1994, DCTC-Glendon, Inc., Delcap, Reibman and the counterclaim defendants settled the litigation and all claims made by the parties were dismissed with prejudice.
In June 1993, the Delaware Coastal Zone Industrial Control Board (the "Board") adopted regulations (the "Regulations") under Delaware's Coastal Zone Act which would, among other things, prohibit the Company from constructing new power-generating facilities or expanding any of its existing power-generating facilities outside a designated boundary. In July 1993, the Company filed a complaint in the Delaware Superior Court seeking to have the Regulations declared null and void. In addition, the Company joined with
I-23
other affected parties in filing a complaint in July 1993 in the Delaware Chancery Court. The Chancery Court complaint alleges procedural violations of the Freedom of Information Act by the Board in the passage of the Regulations and requests that the Regulations be declared null and void. The Company cannot predict the outcome of either of these lawsuits.
On December 14, 1993, Star filed a complaint against the Company in Delaware Chancery Court alleging that the Company overcharged it for pension and tax- related costs under a contract entered into by the parties' predecessors in 1955. The complaint asks for a refund and damages totalling $9.3 million. While the Company believes that it did not overcharge Star and is defending its position, it cannot predict the outcome of the lawsuit.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders, through the solicitation of proxies or otherwise.
I-24
PART II
ITEM 5.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is listed on the New York and Philadelphia Stock Exchanges and has unlisted trading privileges on the Cincinnati, Midwest, and Pacific Stock Exchanges and had the following dividends declared and high/low prices by quarter for the years 1993 and 1992.
The Company had 58,225 registered holders of common stock as of December 31, 1993.
The Charter and the Mortgage securing the Company's outstanding bonds contain restrictions on the payment of dividends on common stock which would become applicable if its capital and retained earnings fall below certain specific levels or if preferred stock dividends are in arrears.
The retained earnings available for dividends on common stock as of December 31, 1993 were approximately $223,814,000 under the most restrictive of these provisions.
While the Board of Directors intends to continue the practice of paying dividends quarterly, amounts and dates of such dividends as may be declared will necessarily be dependent upon the Company's future earnings, financial requirements, and other factors. For a further discussion of dividends, refer to the "Dividends" section of Management's Discussion and Analysis of Financial Condition and Results of Operations included in the 1993 Annual Report to Stockholders, incorporated by reference herein.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
This information is contained on page 18 of the 1993 Annual Report to Stockholders filed herein as Exhibit 13, which portion of such Annual Report is hereby incorporated by reference herein.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This information is contained on pages 19 through 26 of the 1993 Annual Report to Stockholders filed herein as Exhibit 13, which portion of such Annual Report is hereby incorporated by reference herein. Refer to the "Competition" section of Part I herein for an update to the disclosure included in the "Competition" section of Management's Discussion and Analysis of Financial Condition and Results of Operations concerning strategies to mitigate the expected loss of revenues in 1995 due to the decision of a resale customer (ODEC) to purchase up to 150 MW from another utility.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, notes 1 through 18 to consolidated financial statements, and related report thereon of Coopers & Lybrand, independent accountants, appear on pages 27 through 46 of the 1993 Annual Report to Stockholders filed herein as Exhibit 13, which portion of such Annual Report is hereby incorporated by reference herein.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
II-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders Delmarva Power & Light Company Wilmington, Delaware
Our report, which includes an explanatory paragraph regarding the Company's changes in its methods of accounting for unbilled revenues, income taxes, and postretirement benefits other than pensions, on the consolidated financial statements of Delmarva Power & Light Company has been incorporated by reference in this Form 10-K from page 27 of the 1993 Annual Report to Stockholders of Delmarva Power & Light Company. In connection with our audits of such financial statements, we have also audited the related financial statement schedules listed in the index in Item 14 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein.
Coopers & Lybrand
2400 Eleven Penn Center Philadelphia, Pennsylvania February 4, 1994
II-2
PART III
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
"Proposal No. 1 -- Election of Directors" is incorporated by reference herein from the Definitive Proxy Statement which is expected to be filed on or about April 21, 1994, and information about the executive officers of the registrant is included under Item 1.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
"Executive Compensation" is incorporated by reference herein from the Definitive Proxy Statement which is expected to be filed on or about April 21, 1994.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
"Proposal No. 1 -- Election of Directors" is incorporated by reference herein from the Definitive Proxy Statement which is expected to be filed on or about April 21, 1994.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
III-1
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:
1. Financial Statements--The following financial statements are contained in the Company's 1993 Annual Report to Stockholders filed as Exhibit 13 hereto and incorporated herein by reference.
2. Financial Statement Schedules--The following financial statement schedules are contained in Part IV of this report.
All other schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule or because the information required is included in the respective financial statements or the notes thereto.
3. Schedule of Operating Statistics for the three years ended December 31, 1993 can be found on page IV-14 of this report.
4. Exhibits
IV-1
b) Reports on Form 8-K (filed during the reporting period):
A Report on Form 8-K dated October 28, 1993, containing a press release of the Company concerning third quarter earnings, was filed with the Commission.
IV-2
DELMARVA POWER & LIGHT COMPANY
SCHEDULE V--UTILITY PLANT PROPERTY FOR THE YEAR ENDED DECEMBER 31, 1993 (THOUSANDS OF DOLLARS)
IV-3
DELMARVA POWER & LIGHT COMPANY
SCHEDULE V -- UTILITY PLANT PROPERTY -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 1993 (THOUSANDS OF DOLLARS)
- -------- (a) Construction and nuclear fuel expenditures, including AFUDC. (b) Includes transfers from construction work in progress and transfers of land and facilities to/from non-utility property, plant held for future use or other functions. (c) Transfers to plant in service. (d) Amortization of acquisition adjustment which is charged against utility operating income. (e) Includes transfers between functions and adjustments to prior closings.
IV-4
DELMARVA POWER & LIGHT COMPANY
SCHEDULE V -- UTILITY PLANT PROPERTY FOR THE YEAR ENDED DECEMBER 31, 1992 (THOUSANDS OF DOLLARS) - --------------------------------------------------------------------------------
IV-5
DELMARVA POWER & LIGHT COMPANY
SCHEDULE V -- UTILITY PLANT PROPERTY -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 1992 (THOUSANDS OF DOLLARS)
- -------- (a) Construction and nuclear fuel expenditures, including AFUDC. (b) Includes transfers from construction work in progress and transfers of land and facilities to/from non-utility property, plant held for future use or other functions. (c) Transfers to plant in service. (d) Amortization of acquisition adjustment which is charged against utility operating income. (e) Includes transfers between functions and adjustments to prior closings. (f) Reclassified to other property for financial reporting purposes.
IV-6
DELMARVA POWER & LIGHT COMPANY
SCHEDULE V -- UTILITY PLANT PROPERTY FOR THE YEAR ENDED DECEMBER 31, 1991 (THOUSANDS OF DOLLARS)
IV-7
DELMARVA POWER & LIGHT COMPANY
SCHEDULE V -- UTILITY PLANT PROPERTY -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 1991 (THOUSANDS OF DOLLARS)
- -------- (a) Construction and nuclear fuel expenditures, including AFUDC. (b) Includes transfers from construction work in progress and transfers of land and facilities to/from non-utility property, plant held for future use or other functions. (c) Transfers to plant in service. (d) Amortization of acquisition adjustment which is charged against utility operating income. (e) Includes transfers between functions and adjustments to prior closings. (f) Includes sale of Delaware City Plant.
IV-8
DELMARVA POWER & LIGHT COMPANY
SCHEDULE VI -- CONSOLIDATED ACCUMULATED DEPRECIATION AND AMORTIZATION (UTILITY PLANT) FOR THE YEAR ENDED DECEMBER 31, 1993 (THOUSANDS OF DOLLARS)
- -------- (a) Charged to clearing accounts for which subsequent distribution was made to operating and other accounts. (b) Includes removal cost net of salvage.
IV-9
DELMARVA POWER & LIGHT COMPANY
SCHEDULE VI -- CONSOLIDATED ACCUMULATED DEPRECIATION AND AMORTIZATION (UTILITY PLANT) FOR THE YEAR ENDED DECEMBER 31, 1992 (THOUSANDS OF DOLLARS)
- -------- (a) Charged to clearing accounts for which subsequent distribution was made to operating and other accounts. (b) Includes removal cost net of salvage.
IV-10
DELMARVA POWER & LIGHT COMPANY
SCHEDULE VI -- CONSOLIDATED ACCUMULATED DEPRECIATION AND AMORTIZATION (UTILITY PLANT) FOR THE YEAR ENDED DECEMBER 31, 1991 (THOUSANDS OF DOLLARS)
- -------- (a) Charged to clearing accounts for which subsequent distribution was made to operating and other accounts. (b) Includes removal cost net of salvage. (c) Includes sale of Delaware City Plant.
IV-11
DELMARVA POWER & LIGHT COMPANY
SCHEDULE IX -- SHORT-TERM BORROWINGS FOR THE THREE YEARS ENDED DECEMBER 31, 1993
- -------- (a) Average daily balance based on 365 days. (b) Weighted average monthly rates for debt outstanding. (c) Loan Participation Agreements--Short-term bank loans which are remarketed to investors. (d) Subsidiary debt.
IV-12
DELMARVA POWER & LIGHT COMPANY
SCHEDULE X -- SUPPLEMENTAL INCOME STATEMENT INFORMATION FOR THE THREE YEARS ENDED DECEMBER 31, 1993 (THOUSANDS OF DOLLARS)
- -------- Note: Other information has been omitted since the required information either is not present in amounts sufficient to require submission or is included in the respective financial statements or the notes thereto.
IV-13
DELMARVA POWER & LIGHT COMPANY
OPERATING STATISTICS FOR THE THREE YEARS ENDED DECEMBER 31, 1993
The table below sets forth selected financial and operating statistics for the electric and gas divisions for the three years ended December 31, 1993.
- -------- (1) Based on average number of customers during period.
IV-14
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.
Delmarva Power & Light Company (Registrant)
Dated: March 22, 1994 /s/ Barbara S. Graham By__________________________________ (Barbara S. Graham, Vice President and Chief Financial 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 DATE INDICATED.
SIGNATURE TITLE DATE
/s/ (Howard E. Cosgrove) Chairman of the Board, March 22, 1994 ..................................... President, Chief (Howard E. Cosgrove) Executive Officer, and Director
/s/ (H. Ray Landon) Executive Vice March 22, 1994 ..................................... President and (H. Ray Landon) Director
/s/ (Barbara S. Graham) Vice President and March 22, 1994 ..................................... Chief Financial (Barbara S. Graham) Officer
/s/ (James P. Lavin) Comptroller and Chief March 22, 1994 ..................................... Accounting Officer (James P. Lavin)
/s/ (Michael G. Abercrombie) Director March 22, 1994 ..................................... (Michael G. Abercrombie)
/s/ (Elwood P. Blanchard, Jr.) Director March 22, 1994 ..................................... (Elwood P. Blanchard, Jr.)
/s/ (Robert D. Burris) Director March 22, 1994 ..................................... (Robert D. Burris)
/s/ (Audrey K. Doberstein) Director March 22, 1994 ..................................... (Audrey K. Doberstein)
/s/ (James H. Gilliam, Jr.) Director March 22, 1994 ..................................... (James H. Gilliam, Jr.)
/s/ (Sarah I. Gore) Director March 22, 1994 ..................................... (Sarah I. Gore)
/s/ (James C. Johnson, III) Director March 22, 1994 ..................................... (James C. Johnson, III)
/s/ (James T. McKinstry) Director March 22, 1994 ..................................... (James T. McKinstry)
IV-15
DELMARVA POWER & LIGHT COMPANY 1993 ANNUAL REPORT ON FORM 10-K EXHIBIT INDEX
Exhibit Page Number Description Number - ------ ----------- ------
3-C Copy of the Company's Certificate of Designation and Articles of Amendment establishing the 6 3/4% Preferred Stock.
3-D Copy of the Company's By-laws as amended September 30, 1993.
4-J Copy of the Eighty-Fourth Supplemental Indenture.
4-K Copy of the Eighty-Fifth Supplemental Indenture.
10-F Copy of the severance agreement with members of management.
10-G Copy of the current listing of members of management who have signed the severance agreement.
12-A Computation of ratio of earnings to fixed charges.
12-B Computation of ratio of earnings to fixed charges and preferred dividends.
13 Certain portions of the 1993 Annual Report to Stockholders which are incorporated by reference in this Form 10-K.
23 Consent of Independent Accountants.