As filed with the Securities and Exchange Commission on July 8, 2002.
SECURITIES AND EXCHANGE COMMISSION
Form
---------------
FORM S-3
--------------- Philadelphia Suburban Corporation
Pennsylvania 23-1702594 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) --------------- 762 W. Lancaster Avenue
--------------- Roy H. Stahl
--------------- Copies to:
Stephen A. Jannetta
Richard A. Silfen
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, Pennsylvania 19103-2921
(215) 963-5000
---------------
Approximate date of commencement of proposed sale to the public: As soon as practicable From time
to time after this Registration Statement is declared effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. o
[ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the “Securities Act”"Securities Act"), other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. o
[x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462 under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. o
[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. o
[ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. o
Proposed Maximum | Proposed Maximum | |||||||
Amount | Offering Price | Aggregate Offering | Amount of | |||||
Title of Shares to be Registered | to be Registered | Per Unit(1) | Price(1) | Registration Fee | ||||
Common Stock, par value $.50 per share | 9,885,256 | $18.56 | $183,470,351 | $16,880 | ||||
Preferred Stock Purchase Rights | (2) | (2) | (2) | (3) | ||||
[ ]
(1) Estimated solely for the purposecomputing the registration fee, pursuantEach Class of Amount to Rule 457 under theOffering Price Aggregate Amount Of
Securities Act, and, in accordance with Rule 457(c) under the Securities Act, based on the average of the high and low reported sale prices of the common stock of Philadelphia Suburban Corporation on the New YorkTo Be Registered be Registered Per Unit Offering Price Registration Fee
- ---------------------------------------------------------------------------------------------------------------------------
Exchange on July 5, 2002.par value $.50 per
share (1)......................
Preferred Stock, par value $ 1.00
per share......................
Common Stock Purchase Contracts (2)
Each share of our common stock includes one preferred stock purchase right. Common Stock Purchase Units (2)..
Depositary Shares(3).............
Debt Securities..................
Total(7)......................... $250,000,000 (4) 100% (4)(5) $250,000,000 (4)(5)(6) $20,225
- ---------------------------------------------------------------------------------------------------------------------------
(3) Pursuant to Rule 457(i) of the Securities Act, there is no additional filing fee with respect to the preferred stock purchase rights, because there will not be any additional consideration received in connection with these rights.
(1) Includes rights to purchase shares of our Series A Junior Participating
Preferred Stock pursuant to the Rights Agreement dated March 1, 1998. No
separate consideration is paid for these rights and, as a result, the
registration fee for these rights is included in the fee for the common
stock.
(2) Represents contracts entitling or obligating holders to purchase from the
Registrant, and for the Registrant to sell to the holders, a specified
number or amount of shares of common stock at a future date or dates. The
common stock purchase contracts may be issued separately or as a part of a
common stock purchase unit, consisting of a common stock purchase contract
and a security or other asset as security for the holder's obligation to
purchase the common stock under the common stock purchase contract.
(3) Represents depositary shares, evidenced by depositary receipts, issued
pursuant to a deposit agreement. In the event the Registrant issues
fractional interests in shares of the preferred stock registered hereunder,
depositary receipts will be distributed to purchasers of such fractional
interests, and such shares of preferred stock will be issued to a depositary
under the terms of a deposit agreement.
(4) Represents an indeterminate number or aggregate principal amount of the
securities being registered for issuance at various times and at
indeterminate prices, with an aggregate public offering price not to exceed
$250,000,000 or the equivalent thereof in one or more currencies, foreign
currency units or composite currencies. Such amount represents the issue
price rather than the principal amount of any debt securities issued at
original issue discount or liquidation value of any shares of preferred
stock.
(5) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933, as amended.
(6) Exclusive of accrued interest, distributions and dividends, if any.
(7) This registration statement also registers such indeterminate amounts of
securities as may be issued upon conversion, exercise or settlement of, or
in exchange for, the securities registered hereunder and, pursuant to Rule
416(a) under the Securities Act of 1933, as amended, such indeterminable
number of shares as may be issued from time to time as a result of
anti-dilution provisions thereof or upon conversion or exchange as a result
of stock splits, stock dividends or similar transactions.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until thethis Registration Statement
shall become effective on such date as the Commission, acting pursuant to saidsuch
Section 8(a), may determine.
SUBJECT TO COMPLETION, DATED JULY , 2002
8,595,875 Shares
Common Stock
The shares of our
Preferred Stock
Common Stock Purchase Contracts
Common Stock Purchase Units
Depositary Shares
Debt Securities
-----------------
This prospectus relates to common stock, are being sold bypreferred stock, common stock
purchase contracts, common stock purchase units, depositary shares and debt
securities that Philadelphia Suburban Corporation may sell from time to time in
one or more offerings. The aggregate public offering price of the selling shareholders.securities we
may sell in these offerings will not exceed $250,000,000. This prospectus will
allow us to issue securities over time. We will not receive anyprovide a prospectus supplement
each time we issue securities, which will inform you about the specific terms of
the proceeds from the shares of our common stock sold by the selling shareholders.
that offering and may also supplement, update or amend information contained in
this document. You should read this prospectus and each applicable prospectus
supplement carefully before you invest.
Our common stock is listed on the New York Stock Exchange and the
Philadelphia Stock Exchange under the symbol “PSC.”"PSC." The last reported sale price
of our common stock on the New York Stock Exchange on July 5, 2002April 2, 2003 was $18.56$22.32
per share.
We have not yet determined whether any of the other securities that
may be offered by this prospectus will be listed on any exchange, inter-dealer
quotation system or over-the-counter market. If we decide to seek listing of any
such securities upon issuance, the prospectus supplement relating to those
securities will disclose the exchange, quotation system or market on which the
securities will be listed.
Investing in our common stocksecurities involves risk. See “Risk Factors”"Risk Factors" beginning
on page 65 of this prospectus.
The underwriters have an option to purchase a maximum of 1,289,381 additional shares of our common stock from the selling shareholders to cover over-allotments of shares, if any.
The underwriters expect to deliver the shares to purchasers on or about , 2002.
You should read carefully this document and any applicable prospectus supplement before you invest. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Joint Book-Running Managers
-----------------
The date of this prospectus is , 2002
This page intentionally left blank.
TABLE OF CONTENTS
Unless
-----------------
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission using a "shelf" registration process.
Under this shelf process, we may, from time to time, sell common stock,
preferred stock, common stock purchase contracts, common stock purchase units,
depositary shares and debt securities in one or more offerings. The aggregate
public offering price of the securities we sell in these offerings will not
exceed $250,000,000. This prospectus provides you with a general description of
the securities we may offer. Each time we sell any securities under this
prospectus, we will provide a prospectus supplement that will contain specific
information about the terms of that offering. The prospectus supplement also may
add, update or change information contained in this prospectus. You should read
this prospectus and the applicable prospectus supplement together with the
additional information described below under the heading "Where You Can Find
More Information" before you decide whether to invest in the securities.
The registration statement (including the exhibits) of which this
prospectus is a part contains additional information about us and the securities
we may offer by this prospectus. Specifically, we have filed certain legal
documents that control the terms of the securities offered by this prospectus as
exhibits to the registration statement. We will file certain other legal
documents that will control the terms of the securities we may offer by this
prospectus as exhibits to the registration statement or to reports we file with
the SEC. The registration statement and the reports can be read at the SEC
website or at the SEC offices mentioned under the heading "Where You Can Find
More Information."
You should rely only upon the information contained in, or incorporated
into, this prospectus and the applicable prospectus supplement that contains
specific information about the securities we are offering. We have not
authorized any other person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. We are not making an offer to sell these securities in any jurisdiction
where the offer or sale is not permitted. You should assume that the information
appearing in this document is accurate only as of the date on the front cover of
this document. Our business, financial condition, results of operations and
prospects may have changed since that date.
Except as otherwise provided in this prospectus, unless the context
otherwise requires, references in this prospectus to “we,” “us”"we," "us" and “our”"our" refer
to Philadelphia Suburban Corporation and its direct and indirect subsidiaries.
In addition, references to Pennsylvania Suburban Water refer to our wholly-owned
subsidiary, Pennsylvania Suburban Water Company, and its subsidiaries, and
references to Consumers Water refer to our wholly-owned subsidiary, Consumers
Water Company, and its subsidiaries.
You To understand our offering of these
securities fully, you should rely only onread this entire document carefully, including
particularly the information contained in this prospectus"Risk Factors" section and the documents incorporated by reference. We have not authorized anyone to provide you withidentified in the
section titled "Where You Can Find More Information", as well as the applicable
prospectus supplement that contains specific information different from that contained in this prospectus. The information in this document may only be accurate onabout the date of this document.
securities we
are offering.
1
Certain statements in this prospectus, or incorporated by reference in
this prospectus, are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934 made based upon, among other things, our current assumptions,
expectations and beliefs concerning future developments and their potential
effect on us. These forward-looking statements involve risks, uncertainties and
other factors, many of which are outside our control, that may cause our actual
results, performance or achievements to be materially different from any future
results, performance or achievements expressed or implied by these
forward-looking statements. In some cases you can identify forward-looking
statements where statements are preceded by, followed by or include the words
“believes,” “expects,” “anticipates,” “plans”"believes," "expects," "anticipates," "plans" or similar expressions.
Forward-looking statements in this prospectus and any related prospectus
supplement, or incorporated by reference in this prospectus and any related
prospectus supplement, include, but are not limited to, statements regarding:
o projected capital expenditures and related funding requirements; o developments and trends in the water and wastewater utility industries; o dividend payment projections; o opportunities for future acquisitions and success of pending acquisitions; o the capacity of our water supplies and facilities; o the development of new services and technologies by us or our competitors; o the availability of qualified personnel; o general economic conditions; o acquisition-related costs and synergies; and o the forward-looking statements contained under the heading "Forward-Looking Statements" in the section entitled "Management's Discussion and Analysis" from the portion of our 2002 Annual Report to Shareholders incorporated by reference herein and made a part hereof. Because forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including but not limited to:
o changes in general economic, business and financial market
conditions;
o changes in government regulations and policies, including
environmental and public utility regulations and policies;
o changes in environmental conditions, including those that result in
water use restrictions;
o abnormal weather conditions;
o changes in capital requirements;
2
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Given these uncertainties, you should not place undue reliance on these
forward-looking statements. You should read this prospectus, and the documents that
we incorporate by reference in this prospectus
PROSPECTUS SUMMARY
This summary highlights material information contained elsewhere in this prospectus. Because it is a summary, it may not contain all of the information that may be important to you. Before making an investment decision, you should read this entire prospectus as well as the documents incorporated by reference herein. Unless otherwise indicated, the information in this prospectus assumes that the underwriters’ over-allotment option is not exercised.
Philadelphia Suburban Corporation
3
22.0 million
people in Pennsylvania, Ohio, Illinois, New Jersey, Maine and North Carolina.
Our customer base is diversified among residential, commercial and industrial
water customers and wastewater customers. Residential customers make up the
largest component of our customer base, representing approximately two-thirds of
our total water revenues.
Our two primary subsidiaries are Pennsylvania Suburban Water Company, a
regulated public utility that provides water or wastewater services to
approximately 1.3 million residents in the suburban areas north and west of the
City of Philadelphia and in eleven18 other counties in Pennsylvania, and Consumers
Water Company, a holding company for several regulated public utility companies
that provide water or wastewater service to approximately 700,000 residents in
various communities in Ohio, Illinois, Maine, New Jersey and Ohio.Maine. Other of our
smaller subsidiaries provide water or wastewater services in parts of
Pennsylvania, North Carolina and Ohio.
We are among the largest investor-owned water utilities Some of our subsidiaries provide
wastewater services to a population of approximately 40,000 people in
the United States based on the number of customers.Pennsylvania, Illinois, New Jersey and North Carolina. In addition, we provide
water and wastewater service to approximately 35,00045,000 people through operating
and maintenance contracts with municipal authorities and other parties close to
our operating companies’companies' service territories. SomeWe are the largest U.S.-based
investor-owned water utility based on number of our subsidiaries provide wastewater collection, treatment and disposal services (primarily residential) to approximately 40,000 people in Pennsylvania, Illinois, New Jersey and North Carolina.
customers.
We believe that acquisitions will continue to be an important source of
growth for us. In 1999, we acquired Consumers Water Company which added
approximately 245,000 customers to our customer base in five states. Exclusive
of the Consumers Water Company merger in 1999acquisition, we have completed as of March 31, 2002, 7592 acquisitions or
other growth ventures during the past five years ended December 31, 2002 adding
approximately 67,30075,400 customers to our customer base. We entered into a purchase
agreement with DQE, Inc. and AquaSource, Inc. dated July 29, 2002, as amended by
Amendment No. 1 dated March 4, 2003, pursuant to which we agreed to acquire four
operating water and wastewater subsidiaries of AquaSource, Inc. and assume
selected, integrated operating and maintenance contracts and related assets. The
largestpurchase agreement provides for a target cash purchase price of approximately
$205 million subject to various adjustments. If the transaction is completed, we
will purchase operating utilities, including assets and franchises that serve
approximately 130,000 water and wastewater customer accounts in 11 states, and
selected water and wastewater operating contracts that serve approximately
40,000 customers in seven of these transactions was the acquisition of the water utility assets of Bensalem Township in December 1999, which added 14,945 customers.states. We are actively exploring other
opportunities to expand our utility operations through acquisitions orand
otherwise.
With more than 50,000 community water systems and approximately 16,000
wastewater systems in the United States, the water industry is the most
fragmented of the major utility industries (telephone,(i.e., the telephone, natural gas,
electric and water)water industries). We believe that there are many potential water
and wastewater system acquisition candidates. We believe the factors driving
consolidation of these systems are:
1
Recent Developments
Pennichuck Acquisition
On April 29, 2002, we entered into an Agreement
o the benefits of economies of scale;
o increasingly stringent environmental regulations;
o the need for capital investment; and
Plan of Merger with Pennichuck Corporation pursuant to which we agreed to acquire Pennichuck through a merger of one of our wholly-owned subsidiaries with Pennichuck. As part ofo the proposed merger, we will issue shares of our common stock in exchangeneed for all of the outstanding shares of Pennichuck common stock. The proposed merger is subject to certain regulatory approvalstechnological and must be approved by Pennichuck’s shareholders. We are currently in the process of working with Pennichuck to prepare the proxy statement–prospectus that will be filed with the SEC in connection with the proposed transaction. Pennichuck is a holding company based in Nashua, New Hampshire whose operating utility subsidiaries serve approximately 28,200 water customers in service territories located in southern and central New Hampshire, and whose non-regulated operating subsidiaries develop real estate and provide water-related operating and management contract services.
Status of Pending Rate Cases
In November 2001, Pennsylvania Suburban Water Company filed an application with the Pennsylvania Public Utility Commission requesting a $28,000,000, or 13.4%, increase in annual revenues. We currently expect a ruling from the Pennsylvania Public Utility Commission concerning this rate increase request by August 9, 2002.
In addition, we have received approval for seven rate increases to date in 2002 in Ohio, North Carolina and Maine resulting in an increase in annual revenues of approximately $1,100,000. We have also filed other requests for rate increases in New Jersey and Ohio seeking approximately a $3,800,000 increase in annual revenues. We currently expect to receive rulings on these requests in the second half of 2002.
managerial expertise. Our principal executive office is located at 762 W. Lancaster Avenue, Bryn Mawr, Pennsylvania 19010-3489, and our telephone number is 610-527-8000.
2
The Offering
3
Summary Consolidated Financial Data
The following table sets forth certain summary consolidated financial data derived
Our website may be accessed at www.suburbanwater.com. Neither the contents of
our website, nor any other website that may be accessed from our audited consolidated financial statements for the years ended December 31, 1999, 2000 and 2001 and from our unaudited interim consolidated financial statements for the three months ended March 31, 2001 and 2002. The unaudited interim financial statements include,website, is
incorporated in the opinionor otherwise considered a part of our management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of our financial position and results of operations for the interim periods presented. You should read this summary consolidated financial data together with our historical consolidated financial statements and the notes thereto in the documents that we incorporate by reference in this prospectus.
Three Months | |||||||||||||||||||||
Years Ended December 31, | Ended March 31, | ||||||||||||||||||||
1999 | 2000 | 2001 | 2001 | 2002 | |||||||||||||||||
(unaudited) | |||||||||||||||||||||
(in thousands, except per share and operating data) | |||||||||||||||||||||
Income Statement Data: | |||||||||||||||||||||
Operating revenues | $ | 256,546 | $ | 274,014 | $ | 307,280 | $ | 70,193 | $ | 71,669 | |||||||||||
Operating income | 100,265 | (1) | 116,789 | (2) | 134,340 | 28,944 | 28,637 | ||||||||||||||
Depreciation and amortization | 31,903 | 34,100 | 40,168 | 9,475 | 10,433 | ||||||||||||||||
Gain on sale of other assets, net of tax(3) | 468 | 2,994 | 2,041 | 1,678 | 209 | ||||||||||||||||
Income from continuing operations, exclusive of certain non-recurring items | 44,980 | (4) | 50,654 | (5) | 60,111 | 13,112 | (6) | 11,890 | |||||||||||||
Net income available to common stock | 36,275 | (7) | 52,784 | (8) | 60,005 | 13,085 | (6) | 11,875 | |||||||||||||
Per Common Share Data:(9) | |||||||||||||||||||||
Diluted income per common share: | |||||||||||||||||||||
Income from continuing operations, exclusive of certain non-recurring items | $ | 0.70 | (4) | $ | 0.77 | (5) | $ | 0.87 | $ | 0.19 | (6) | $ | 0.17 | ||||||||
Net income | 0.56 | (7) | 0.81 | (8) | 0.87 | 0.19 | (6) | 0.17 | |||||||||||||
Cash dividends paid per common share | 0.45 | 0.47 | 0.50 | 0.124 | 0.1325 | ||||||||||||||||
Book value per share of common stock | 5.69 | 6.38 | 6.90 | 6.48 | 6.96 | ||||||||||||||||
Average common shares outstanding (diluted)(9) | 64,539 | 65,414 | 68,755 | 68,247 | 69,300 | ||||||||||||||||
Operating Data: | |||||||||||||||||||||
Number of customers | 557,462 | 579,219 | 602,510 | 586,155 | 605,671 |
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December 31, | March 31, | |||||||||||||||||||||
2000 | 2001 | 2001 | 2002 | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||
Total assets | $ | 1,413,723 | $ | 1,560,339 | $ | 1,436,895 | $ | 1,577,230 | ||||||||||||||
Property, plant & equipment, net | 1,251,427 | 1,368,115 | 1,270,253 | 1,396,299 | ||||||||||||||||||
Capitalization: | ||||||||||||||||||||||
Long-term debt, including current portion | $ | 472,712 | $ | 531,455 | $ | 487,805 | $ | 534,973 | ||||||||||||||
Stockholders’ equity | 432,347 | 473,833 | 442,419 | 478,958 | ||||||||||||||||||
Total capitalization | $ | 905,059 | $ | 1,005,288 | $ | 930,224 | $ | 1,013,931 | ||||||||||||||
March 31, 2002 | |||||||||||||||||
Actual | As Adjusted(10) | ||||||||||||||||
Amount | Percent | Amount | Percent | ||||||||||||||
(unaudited) | |||||||||||||||||
Capitalization: | |||||||||||||||||
Long-term debt(11) | $ | 534,973 | 52.8 | % | $ | 534,973 | |||||||||||
Stockholders’ equity | 478,958 | 47.2 | % | ||||||||||||||
Total capitalization(11) | $ | 1,013,931 | 100.0 | % | $ | 100.0 | % | ||||||||||
Short-term debt: | |||||||||||||||||
Loans payable to banks under short-term lines of credit and revolving credit agreements | $ | 119,780 | $ | ||||||||||||||
5
You should carefully consider the following risk factors and the
section entitled “Forward-Looking Statements”"Forward-Looking Statements" before you decide to buy our
common stock.
securities. Our business requires significant capital expenditures and the rates we charge our customers are subject to regulation. If we are unable to obtain government approval of our requests for rate increases, or if approved rate increases are untimely or inadequate to cover our investments, our profitability may suffer.
The water utility business is capital intensive. On an annual basis, we spend significant sums for additions to or replacement of property, plant and equipment. Our ability to maintain and meet our financial objectives is dependent upon the rates we charge our customers. These rates are subject to approval by the public utility commissions of the states in which we operate. We file rate increase requests, from time to time, to recover our investments in utility plant and expenses. Once a rate increase petition is filed with a public utility commission, the ensuing administrative and hearing process may be lengthy and costly. The timing of our rate increase requests are therefore partially dependent upon the estimated cost of the administrative process in relation to the investments and expenses that we hope to recover through the rate increase to the extent approved. We can provide no assurances that any future rate increase request will be approved by the appropriate state public utility commission; and, if approved, we cannot guarantee that these rate increases will be granted in a timely or sufficient manner to cover the investments and expenses for which we initially sought the rate increase.
Our operating costs could be significantly increased in order to comply with new or stricter regulatory standards imposed by federal and state environmental agencies.
Our water and wastewater services are governed by various federal and state environmental protection and health and safety laws and regulations, including the federal Safe Drinking Water Act, the Clean Water Act and similar state laws, and state and federal regulations issued under these laws by the United States Environmental Protection Agency and state environmental regulatory agencies. These laws and regulations establish, among other things, criteria and standards for drinking water and for discharges into the waters of the United States and states. Pursuant to these laws, we are required to obtain various environmental permits from environmental regulatory agencies for our operations. We cannot assure you that we have been or will be at all times in total compliance with these laws, regulations and permits. If we violate or fail to comply with these laws, regulations or permits, we could be fined or otherwise sanctioned by regulators. Environmental laws and regulations are complex and change frequently. These laws, and the enforcement thereof, have tended to become more stringent over time. While we have budgeted for future capital and operating expenditures to maintain compliance with them and our permits, it is possible that new or stricter standards could be imposed that will raise our operating costs. Although these costs may be recovered in the form of higher rates, there can be no assurance that the various state public utility commissions that govern our business would approve rate increases to enable us to recover such costs. In summary, we cannot assure you that our costs of complying with, or discharging liability under, current and future environmental and health and safety laws will not adversely affect our business, results of operations or financial condition.
Our business is subject to seasonal fluctuations, which could affect demand for our water service and our revenues.
Demand for our water during the warmer months is generally greater than
during cooler months due primarily to additional requirements for water in
connection with coolingirrigation systems, swimming pools, irrigationcooling systems and other
outside water use. Throughout the year, and particularly during typically warmer
months, demand will vary with temperature and rainfall levels. In the event that
temperatures during the typically warmer months are cooler than expected,normal, or if
there is more rainfall than expected,normal, the demand for our water may decrease and
adversely affect our revenues.
6
Drought conditions may impact our ability to serve our current and future
customers, and may impact our customers’customers' use of our water, which may adversely
affect our financial condition and results of operations.
5
An important element of our growth strategy is the acquisition of water and wastewater systems. Any pending or future acquisitions we decide to undertake may involve risks.
An important element of our growth strategy is the acquisition and
integration of water and wastewater systems in order to broaden our current, and
move into new, service areas. We will not be able to acquire other businesses if
we cannot identify suitable acquisition opportunities or reach mutually
agreeable terms with acquisition candidates. Further, we may be requiredIt is our intent, when practical,
to integrate any businesses we acquire with our existing operations. The
negotiation of potential acquisitions as well as the integration of acquired
businesses could require us to incur significant costs and cause diversion of
our management’smanagement's time and resources. Future acquisitions by us could result in:
o dilutive issuances of our equity securities; o incurrence of debt and contingent liabilities; o fluctuations in quarterly results; and o other acquisition-related expenses. |
Some or all of these items could have a material adverse effect on our business and our ability to finance our business. The businesses and other assets we acquire in the future may not achieve sales and profitability that justify our investment and any difficulties we encounter in the integration process could interfere with our operations and reduce our operating margins. In addition, as consolidation becomes more prevalent in the water and wastewater industries, the prices for suitable acquisition candidates may increase to unacceptable levels and limit our ability to grow through acquisitions.
Contamination to our water supply may result in disruption in our services and litigation which could adversely affect our business, operating results and financial condition.
Our water supplies are subject to contamination, including
contamination from the development of naturally-occurring compounds, and chemicals
in groundwater systems, and pollution resulting from man-made sources.sources and possible
terrorist attacks. In the event that our water supply is contaminated, we may
have to interrupt the use of that water supply until we are able to substitute
the flow of water from an uncontaminated water source. In addition, we may incur
significant costs in order to treat the contaminated source through expansion of
our current treatment facilities, or development of new treatment methods. If we
are unable to substitute water supply from an uncontaminated water source, or to
adequately treat the contaminated water source in a cost-effective manner, there
may be an adverse effect on our revenues, operating results and financial
condition. The costs we incur to decontaminate a water source or an underground
water system could be significant and could adversely affect our business,
operating results and financial condition.
condition and may be recoverable in rates. We
could also be held liable for consequences arising out of human exposure to
hazardous substances in our water supplies or other environmental damage. For
example, private plaintiffs have the right to bring personal injury or other
toxic tort claims arising from the presence of hazardous substances in our
drinking water supplies. Our insurance policies may not be sufficient to cover
the costs of these claims.
6
nation’snation's health and security, we have taken steps to increase
security measures at our facilities and heighten employee awareness of threats
to our water supply. We have also tightened our security measures regarding the
delivery and handling of certain chemicals used in our business. We have and
will continue to bear increased costs for security precautions to protect our
facilities, operations and supplies. These costs may be significant. We are
7
We could also be held liable for consequences arising out of human exposure to hazardous substances in our water supplies or other environmental damage. For example, private plaintiffs have the right to bring personal injury or other toxic tort claims arising from the presence of hazardous substances in our drinking water supplies. Our insurance policies may not be sufficient to cover the costs of these claims.
We depend significantly on the services of the members of our senior management team, and the departure of any of those persons could cause our operating results to suffer.
Our success depends significantly on the continued individual and collective contributions of our senior management team. The loss of the services of any member of our senior management or the inability to hire and retain experienced management personnel could harm our operating results.
8
RELATIONSHIP WITH VIVENDI ENVIRONNEMENT S.A.
General
Vivendi Environnement S.A., through its subsidiaries, is our largest shareholder. Vivendi Environnement is one of the leading providers of environmental management services
7
world. Vivendi Environnement provides water and wastewater, waste management, energy and transportation servicesapplicable prospectus supplement, we
intend to a wide range of public authorities, industrial and commercial customers and individuals arounduse the world. Vivendi Environnement’s main shareholder, Vivendi Universal, owns approximately 48% of the shares of Vivendi Environnement. Upon the consummation of a capital increase currently being effected by Vivendi Environnement (which is expected to close on or about August 2, 2002), Vivendi Universal will own approximately 41% of the shares of Vivendi Environnement and will continue to be Vivendi Environnement’s main shareholder. Vivendi Environnement, through its subsidiaries, owned approximately 16.1% of our outstanding common stock as of July 1, 2002. Vivendi Environnement has announced that its decision to sell its interest in our company is part of Vivendi Environnement’s overall strategy to divest non-core assets and focus on leveraging its technology to establish long-term public-private partnerships with municipalities in the United States. We are filing the registration statement, of which this prospectus is a part, to facilitate the orderly re-distribution of a portion of the shares held by Vivendi Environnement’s subsidiaries into the market. In addition, we have agreed, as described below, to repurchase from Vivendi Water S.A. up to 2,500,000 shares of our common stock at the public offering price set forth on the cover page of this prospectus. Following the offering and our repurchase of shares from Vivendi Water S.A., Vivendi Environnement and its subsidiaries will not own any shares of our common stock.
We have had and continue to have various discussions with representatives of Vivendi Environnement’s subsidiary, United States Filter Corporation, exploring possible joint activities or alliances in such areas as water treatment devices, contract operations of water and wastewater systems and joint materials purchasing. For example, we have provided consulting services in the areas of customer services and information technology in support of United States Filter’s contract operations proposal to the City of Indianapolis (which United States Filter won). Notwithstanding Vivendi Environnement’s decision to sell its shares in us, United States Filter and we expect to continue these discussions and joint projects and explore other potential areas of cooperation following this offering.
Agreement to Repurchase Shares and Financing Plan
We entered into a Registration and Stock Purchase Agreement with Vivendi Environnement and the Selling Shareholders on July 8, 2002. The following is a summary of the material provisions of the Registration and Stock Purchase Agreement, a copy of which is filed as an exhibit to the registration statement of which this prospectus is a part. The summary is qualified in its entirety by reference to the Registration and Stock Purchase Agreement, which is incorporated by reference herein.
The Registration and Stock Purchase Agreement provides that we will purchase from Vivendi Water S.A. up to 2,500,000 shares of our common stock held by Vivendi Water S.A. at the public offering price set forth on the cover page of this prospectus. If the underwriters elect to exercise their over-allotment option, the number of shares that we will be obligated to purchase from Vivendi Water S.A. will be reduced by the number of shares purchased by the underwriters in exercising such over-allotment option. We have agreed to pay Vivendi Environnement 50% of the aggregate amount of underwriting discounts and commissions paid by Vivendi Environnement or deducted by the underwriters in connection with the exercise of the over-allotment option.
The Registration and Stock Purchase Agreement requires that we prepare and file the registration statement of which this prospectus is a part and use commercially reasonable efforts to have the registration statement become effective. In addition, the Registration and Stock Purchase Agreement provides that Vivendi Environnement will pay the reasonable and documented expenses we incur in connection with the preparation and filing of the registration statement of which this prospectus is a part.
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It is our intention to fund the purchase of the shares from Vivendi Water S.A. described above with the proceeds from a short-term credit facility. Interest under this short-term facility will be on terms substantially similar to our current short-term lines of credit. It is our current intention to repay these short-term borrowings with proceeds from the issuance of common stock or an instrument convertible into our common stock.
USE OF PROCEEDS
We will not receive any of thenet proceeds from the sale of the securities we may offer by
this prospectus to fund future acquisitions of municipally owned and
investor-owned water and wastewater systems, including the pending acquisition
of the regulated water and wastewater operations and related contract operations
of AquaSource, Inc., to integrate any businesses that we acquire into our
existing business, to purchase and maintain plant equipment, to repay
indebtedness due on October 24, 2003 which as of March 27, 2003 was outstanding
in principal amount of $22 million and on which interest was accruing at 2.33%
per annum, which we incurred in connection with the purchase of 1.3 million
shares of our common stock offeredfrom Vivendi Environnement, S.A. and its affiliates
in October, 2002, as well as for working capital and other general corporate
purposes. Our management will have broad discretion in the allocation of net
proceeds from the sale of any securities sold by the selling shareholders.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The following table shows the highus.
CERTAIN RATIOS
Our ratio of earnings to fixed charges and low intraday sales prices for our commonratio of earnings to
combined fixed charges and preferred stock as reported on the New York Stock Exchange composite transactions reporting system and the cash dividends paid per share for the periods indicated. Our commonindicated
below were as follows:
The ratios of earnings to fixed charges and the ratios of earnings to
combined fixed charges and preferred stock is listed ondividends were computed by dividing
earnings by fixed charges and by combined fixed charges and preferred stock
dividends, respectively. For the New York and Philadelphia Stock Exchanges and is traded under the symbol “PSC.”
Quarterly Cash | |||||||||||||
High | Low | Dividends Paid | |||||||||||
2000 | |||||||||||||
First Quarter | $ | 14.08 | $ | 10.56 | $ | 0.1152 | |||||||
Second Quarter | 15.96 | 11.60 | 0.1152 | ||||||||||
Third Quarter | 15.56 | 12.80 | 0.1152 | ||||||||||
Fourth Quarter | 19.95 | 13.56 | 0.124 | ||||||||||
2001 | |||||||||||||
First Quarter | $ | 19.39 | $ | 15.65 | $ | 0.124 | |||||||
Second Quarter | 20.40 | 16.60 | 0.124 | ||||||||||
Third Quarter | 23.28 | 18.66 | 0.124 | ||||||||||
Fourth Quarter | 24.64 | 20.80 | 0.1325 | ||||||||||
2002 | |||||||||||||
First Quarter | $ | 24.61 | $ | 21.10 | $ | 0.1325 | |||||||
Second Quarter | 25.00 | 18.49 | 0.1325 | ||||||||||
Third Quarter (through July 5, 2002) | 20.01 | 18.43 | — |
On July 5, 2002 the last reported sale pricepurpose of our common stock on the New York Stock Exchange was $18.56 per share. As of July 3, 2002, there were approximately 21,138 holders of record of our common stock.
In August 2001, our board of directors approved an increase of 6.9% in our dividend rate. As a result of this authorization, beginning with the dividend payment on December 1, 2001, the annual dividend rate increased to $0.53 per share. The increase in the December 1, 2001 dividend is the eleventh increase in our dividend in the past 10 years. Our board of directors also declared a 5-for-4 common stock split, effected in the form of a 25% stock distribution for all common shares outstanding, to shareholders of record on November 16, 2001. The new shares were distributed on December 1, 2001. The share and per share data, including the dividend, contained in this prospectusthese computations, earnings have
been restatedcalculated by adding fixed charges (excluding capitalized interest) to
give effect to this stock split. This stock split representsincome from continuing operations. Fixed charges consist of interest cost,
whether expensed or capitalized, amortization of deferred financing costs and
the fourth stock split issued in the form of a stock distribution in the last six years.
We or our predecessor companies have paid dividends each year since 1944. We presently intend to pay quarterly cash dividends in the future on March 1, June 1, September 1 and December 1, subject to our earnings and financial condition, regulatory requirements and such other factors as our board of directors may deem relevant.
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We offer holders of record of less than 100,000 shares of our common stock the opportunity to reinvest part or all of the dividend payments on their shares of common stock through purchases of original issue common stock without payment of any brokerage commission or service charge through our dividend reinvestment and direct stock purchase plan. The purchase price for original issue shares of common stock purchased through the reinvestment of dividends is 95% of the average of the high and low prices of common stock for each of the five trading days immediately preceding the dividend payment date as reported on the New York Stock Exchange composite transactions reporting system. At June 30, 2002, holders of 17.3% of the shares of our common stock outstanding participated in the dividend reinvestmentestimated interest portion of this plan. This plan also permits shareholders and investorsrental expense charged to invest up to $250,000 annually in our common stock in the open market through our transfer agent without payment of any brokerage commission or service charge.
THE WATER AND WASTEWATER UTILITY INDUSTRIES
With more than 50,000 community water systems in the U.S. (84% of which serve less than 3,300 customers), the water industry is the most fragmented of the major utility industries (telephone, natural gas, electric and water). The nation’s water systems range in size from large municipally-owned systems, such as the New York City water system that serves approximately 9 million people, to small systems, where a few customers share a common well. In the states where we operate, we believe there are over 8,700 public water systems of widely varying size. While the water industry remains highly fragmented, the nation’s larger investor-owned water utilities have experienced significant consolidation since 1998, with only five of the ten largest companies (companies with a market equity capitalization in excess of $100 million) remaining independent or not currently under agreement of sale.
Several important factors have contributed to the consolidation in the industry. The water industry is the most capital intensive of the utilities, with more capital invested per dollar of revenue than any other utility. Companies in the water industry, both municipally-owned and investor-owned, endeavor to provide reliable water service at affordable prices to their customers, while meeting stringent federal and state water quality standards and regulations. Continued capital investment is necessary to (1) repair and replace aging water distribution infrastructure, (2) expand existing systems in response to community growth and development, and (3) invest in new treatment plants and technology to meet water quality standards. In its Second Report to Congress in February 2001, the United States Environmental Protection Agency, or EPA, estimated that the nation’s water systems must invest a minimum of $141.6 billion through 2018 to meet the requirements of the Safe Drinking Water Act of 1974, as amended. Advancing technology and the increasingly stringent drinking water regulations have transformed the drinking water industry into one that now demands a level of technological expertise that was previously not required. The costs associated with meeting more stringent water quality standards, coupled with the costs of replacing aging infrastructure, have caused many small, and some large, water utilities to sell their systems to larger, better capitalized water utilities that can afford the costs of making the necessary investments in their systems and have the requisite economies of scale.
Although not as fragmented as the water industry, the wastewater industry in the United States also presents opportunities for consolidation. According to an EPA survey of publicly-owned wastewater treatment facilities in 1996, there are approximately 16,000 such facilities in the nation serving approximately 72% of the United States population. The vast majority of wastewater facilities are government-owned rather than privately-owned. The EPA survey also indicated that there are approximately 3,500 wastewater facilities in operation or planned in the six states where we operate. The EPA estimates that approximately $140 billion will need to be invested in the nation’s wastewater systems over the next 20 years to meet environmental standards.
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Because of the fragmented nature of the water and wastewater utility industries, we believe that there are many potential water system acquisition candidates throughout the United States. We believe the factors driving consolidation of these water systems are:
We believe that acquisitions will continue to be an important source of growth for us. We intend to continue to pursue acquisitions of municipally-owned and investor-owned water systems of all sizes that provide services in areas adjacent to our existing service territories or in new service areas. We engage in continuing activities with respect to potential acquisitions, including calling on prospective sellers, performing analyses and investigations of acquisition candidates, making preliminary acquisition proposals and negotiating the terms of potential acquisitions.
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PHILADELPHIA SUBURBAN CORPORATION
General
We are a holding company for regulated utilities providing water or wastewater services to approximately 2 million people in Pennsylvania, Ohio, Illinois, New Jersey, Maine and North Carolina. Our two primary subsidiaries are Pennsylvania Suburban Water Company, a regulated public utility that provides water or wastewater services to approximately 1.3 million residents in the suburban areas north and west of the City of Philadelphia and in eleven other counties in Pennsylvania, and Consumers Water Company, a holding company for several regulated public utility companies that provide water or wastewater service to approximately 700,000 residents in various communities in Ohio, Illinois, New Jersey and Maine. Other of our smaller subsidiaries provide water or wastewater services in parts of Pennsylvania, North Carolina and Ohio.
We are among the largest investor-owned water utilities in the United States based on number of customers. In addition, we provide water and wastewater service to approximately 35,000 people through operating and maintenance contracts with municipal authorities and other parties close to our operating companies’ service territories. Some of our subsidiaries provide wastewater services to approximately 40,000 primarily residential customers in Pennsylvania, Illinois, New Jersey and North Carolina. For the three months ended March 31, 2002, the operating revenues associated with wastewater services were approximately 3% of our consolidated operating revenues. Our ratio of customers to employees as of March 31, 2002 was over 600 to 1, which is one of the best ratios, from an efficiency perspective, in the water utility industry. Including all acquisitions or other growth ventures, our customer base increased at an annual compound rate of 4.1% during the three-year period of 1999 through 2001.
Our customer base is diversified among residential, commercial, industrial and wastewater customers. Residential customers make up the largest component of our customer base, with these customers representing approximately two-thirds of our total water revenues. Substantially all of our customers are metered, which allows us to measure and bill our customers’ water consumption. Water consumption per customer is affected by local weather conditions during the year, especially during the late spring and early summer. In general, during these seasons, an extended period of dry weather increases water consumption, while above average rainfall decreases water consumption. Also, an increase in the average temperature generally causes an increase in water consumption. On occasion, abnormally dry weather in our service areas can result in governmental authorities declaring drought warnings and water use restrictions in the affected areas. The geographic diversity of our customer base reduces our exposure to extreme or unusual weather conditions in any one area of our service territory.
Acquisition Strategy
We are actively exploring opportunities to expand our utility operations through acquisitions or otherwise. As of March 31, 2002, exclusive of the Consumers Water merger in March 1999, we had completed 75 acquisitions or other growth ventures during the past five years. These transactions have added, as of March 31, 2002, approximately 67,300 customers to our customer base during this five-year period.
On April 29, 2002, we entered into an Agreement and Plan of Merger with Pennichuck Corporation pursuant to which we agreed to acquire Pennichuck through a merger of one of our wholly-owned subsidiaries with Pennichuck. As part of the proposed merger, we will issue shares of our common stock in exchange for all of the outstanding shares of Pennichuck common stock. The proposed merger is subject to certain regulatory approvals and must be approved by Pennichuck’s shareholders. We are currently in the process of working with Pennichuck to prepare the proxy statement–prospectus that will be filed with the SEC in connection with the proposed transaction. Pennichuck is a holding company based in Nashua, New Hampshire whose operating utility subsidiaries serve approximately 28,200 water customers in service territories located in southern and central New Hampshire, and whose non-regulated operating subsidiaries develop real estate and provide water-related operating and management contract services.
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We believe that acquisitions will continue to be an important source of growth for us. We intend to continue to pursue acquisitions of municipally-owned and investor-owned water systems of all sizes that provide services in areas adjacent to our existing service territories or in new service areas. We engage in continuing activities with respect to potential acquisitions, including calling on prospective sellers, performing analyses and investigations of acquisition candidates, making preliminary acquisition proposals and negotiating the terms of potential acquisitions.
We believe that any municipally-owned water or wastewater systems that we would acquire would be purchased with cash, while any investor-owned water or wastewater systems that we would acquire would be purchased with cash, shares of our common stock, shares of our preferred stock or a combination of each. We expect to generate the cash needed for acquisitions initially with the proceeds from the issuance of short-term debt, with subsequent repayment from earnings, the proceeds from the issuance of long-term debt and the proceeds from equity sold through our dividend reinvestment plan and our equity offerings. When we issue shares in connection with an acquisition, subject to the requirements of Rule 145 under the Securities Act of 1933, as amended, and any contractual restrictions, the shares may be resold immediately following the consummation of any such transaction. We are not currently a party to any definitive agreement or binding letter of intent with respect to a material acquisition.
Water Supplies and Water Facilities
Our water utility operations obtain their water supplies from surface water sources such as reservoirs, lakes, ponds, rivers and streams, in addition to obtaining water from wells and purchasing water from other water suppliers. Less than 10% of our water sales are purchased from other suppliers. We believe that we have all of the necessary permits to obtain the water we distribute. Our supplies are sufficient for anticipated daily demand and normal peak demand under normal weather conditions. Our supplies by service area are as follows:
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We believe that the capacities of our sources of supply, and our water treatment, pumping and distribution facilities are generally sufficient to meet the present requirements of our customers. On a continuing basis, we make system improvements and additions to capacity in response to changing regulatory standards, changing patterns of consumption and increases in the number of customers. The various state public utility commissions have generally recognized the operating and capital costs associated with these improvements in setting water rates.
On occasion, drought warnings and water use restrictions are issued by governmental authorities for portions of our service territories in response to extended periods of dry weather conditions. The timing and duration of the warnings and restrictions can have an impact on our water revenues and net income.
In general, water consumption in the summer months is affected by drought warnings and restrictions to a higher degree because nonessential and recreational use of water is at its highest during the summer months. At times other than the summer months, warnings and restrictions generally have less of an effect on water consumption.
In November 2001, a drought warning was declared in nine counties in Pennsylvania, including one of the five counties we serve in southeastern Pennsylvania. A drought warning calls for a 10 to 15 percent voluntary reduction of water use, particularly non-essential uses of water. In February 2002, a drought emergency was declared in 24 counties in Pennsylvania, including all five of the counties we serve in southeastern Pennsylvania. A drought emergency imposes a ban on non-essential water use.
On June 14, 2002 drought restrictions were relaxed in two of the counties we serve in southeastern Pennsylvania, moving from a drought emergency back to a drought warning. On June 27, 2002 we applied for a waiver of restrictions for portions of our southeastern Pennsylvania service territory due to the fact that our nine billion gallon reservoir system was as of that date, at approximately 85 percent capacity overall — nearly normal for this time of year.
Presently, a drought emergency ban remains in place in three of the counties we serve in southeastern Pennsylvania, while a less restrictive drought warning is in place in the other two counties that we serve.
Properties
Our properties consist of transmission and distribution mains and conduits, water treatment plants, pumping facilities, wells, tanks, meters, supply lines, dams, reservoirs, buildings, vehicles, land, easements, rights and other facilities and equipment used for the operation of our systems, including the collection, treatment, storage and distribution of water. Substantially all of our properties are owned by our subsidiaries and are subject to liens of mortgage or indentures. These liens secure bonds, notes and other evidences of long-term indebtedness of our subsidiaries. For certain properties that we acquired through the exercise of the power of eminent domain and certain other properties we purchased, we hold title for water supply purposes only. We own, operate and maintain approximately 7,500 miles of transmission and distribution mains, 19 water treatment plants and 17 wastewater treatment plants. Some properties are
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Net Property, | ||||
Plant and | ||||
Equipment | ||||
(000’s) | ||||
Pennsylvania | 996,262 | |||
Ohio | 152,652 | |||
Illinois | 124,570 | |||
New Jersey | 81,106 | |||
Maine | 34,604 | |||
North Carolina | 10,542 | |||
Inter-company eliminations and other | (3,437 | ) | ||
$ | 1,396,299 | |||
We believe that our properties are maintained in good condition and in accordance with current standards of good waterworks industry practice. We believe that the facilities used in the operation of our business are in good condition in terms of suitability, adequacy and utilization.
Our corporate offices are leased from Pennsylvania Suburban Water and located in Bryn Mawr, Pennsylvania.
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EXECUTIVE OFFICERS
The following table sets forth information with respect to our executive officers as of July 8
2002:
Mr. DeBenedictis has served as our President and Chairman since May 1993. He served as our President and Chief Executive Officer from July 1992 to May 1993. He has served as Chairman and Chief Executive Officer, Pennsylvania Suburban Water Company since July 1992. He served as President, Pennsylvania Suburban Water Company from February 1995 to January 1999. Mr. DeBenedictis served as Senior Vice President for corporate affairs of PECO Energy Company (now known as Exelon) from April 1989 through June 1992. From December 1986 to April 1989, he served as President of the Greater Philadelphia Chamber of Commerce and from 1983 to 1986 he served as the Secretary of the Pennsylvania Department of Environmental Resources. Mr. DeBenedictis is a director of Exelon Corporation, Provident Mutual Life Insurance Company, P.H. Glatfelter Company and Met-Pro Corporation and a member of the advisory boards of PNC Bank in Philadelphia and Southern New Jersey and Pennoni Associates. He also serves on the Board of the Greater Philadelphia Chamber of Commerce, the Pennsylvania Business Roundtable, and Hahnemann/MCP University and is a Trustee of Drexel University.
Mr. Coulter has served as President, Pennsylvania Suburban Water Company — Philadelphia Suburban Division since December 2001. He served as President, Philadelphia Suburban Water Company from January 1999 to December 2001. He served as Senior Vice President — Production, Philadelphia Suburban Water Company from February 1996 to January 1999. He served as Vice President — Production, Philadelphia Suburban Water Company from April 1989 to February 1996. Mr. Coulter served in a number of other positions with Philadelphia Suburban Water Company from 1971 to 1989.
Mr. Riegler has served as our Senior Vice President — Engineering and Environmental Affairs since January 1999. He served as Senior Vice President — Operations, Philadelphia Suburban Water Company from April 1989 to January 1999. Mr. Riegler served in a number of other positions with Philadelphia Suburban Water Company from 1982 to 1989.
Mr. Stahl has served as our Executive Vice President and General Counsel since May 2000. He has served as our Secretary since June 2001. He served as our Senior Vice President and General Counsel from April 1991 to May 2000. Mr. Stahl served in a number of other positions in our legal department from 1984 to 1991.
Mr. Smeltzer has served as our Senior Vice President — Finance and Chief Financial Officer since December 1999. He served as our Vice President — Finance and Chief Financial Officer from May 1999 to December 1999. He served as Vice President — Rates and Regulatory Relations, Philadelphia Suburban Water Company from March 1991 to May 1999. Mr. Smeltzer served as Vice President — Controller of Philadelphia Suburban Water Company from March 1986 to March 1991.
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SELLING SHAREHOLDERS
The selling shareholders intend to dispose of the shares of our common stock as described previously under the caption “Relationship with Vivendi Environnement S.A.” and also under the caption “Underwriting” below. As of July 1, 2002, the selling shareholders owned 11,095,875 shares of our common stock (approximately 16.1% of our common stock outstanding). Following the offering and our repurchase of shares from Vivendi Water S.A., Vivendi Environnement and its subsidiaries will not own any shares of our common stock.
The following table sets forth certain information regarding the beneficial ownership of our common stock by the selling shareholders, and as adjusted to give effect to the sale of the shares of our common stock described in this prospectus.
Shares Beneficially | ||||||||||||||||
Shares | Owned After Offering | |||||||||||||||
Beneficially | Number of | |||||||||||||||
Owned Prior to | Shares Being | Number of | ||||||||||||||
Name of Selling Shareholders | Offering | Offered(1) | Shares(2) | Percent | ||||||||||||
Vivendi Water S.A. | 10,334,221 | 7,834,221 | 0 | 0 | % | |||||||||||
52, rue d’Anjou 75008 Paris France | ||||||||||||||||
Vivendi North America Company | 761,654 | 761,654 | 0 | 0 | % | |||||||||||
60 East 42nd Street, 36th Floor New York, NY 10165 |
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The following description of our capital stock sets forth material terms and provisions of our common stock and preferred stock. You should read our current amended and restated articles of incorporation for more detailed terms of our capital stock.
As of June 30, 2002,March 21, 2003, our authorized capital stock was 101,770,819
shares. Those shares, consistedconsisting of:
o 100,000,000 shares of common stock, par value $0.50 per share, of which 68,060,196 shares were outstanding; and o 1,770,819 shares of preferred stock, par value $1.00 per share, of which 1,720 shares of our Series B Preferred Stock were issued and outstanding and 100,000 shares of our Series A Junior Participating Preferred Stock were reserved for future issuance in connection with our shareholder rights plan. Common Stock
Voting Rights
Holders of our common stock are entitled to one vote for each share held by them at all meetings of the shareholders and are not entitled to cumulate their votes for the election of directors.
Dividend Rights and Limitations
Holders of our common stock may receive dividends when declared by our
board of directors. Because we are a holding company, the funds we use to pay
any dividends on our common stock are derived predominantly from the dividends
that we receive from our subsidiaries, Pennsylvania Suburban Water and Consumers
Water, and the dividends they receive from their subsidiaries. Therefore, our
ability to pay dividends to holders of our common stock depends upon our
subsidiaries’subsidiaries' earnings, financial condition and ability to pay dividends. Most
of our subsidiaries are subject to regulation by state utility commissions and
the amounts of their earnings and dividends are affected by the manner in which
they are regulated. In addition, they are subject to restrictions on the payment
of dividends contained in their various debt agreements. Under our most
restrictive debt agreements, the amount available for payment of dividends to us
as of MarchDecember 31, 2002 was approximately $214$225 million of Pennsylvania Suburban
Water’sWater's retained earnings and $51$45 million of Consumers Water’sWater's retained
earnings. Payment of dividends on our common stock is also subject to the
preferential rights of the holders of preferred stock to receive full cumulative
dividends, both past and current.
Liquidation Rights
In the event that we liquidate, dissolve or wind-up, the holders of our common stock are entitled to share ratably in all of the assets that remain after we pay our liabilities. This right is subject, however, to the prior distribution rights of any outstanding preferred stock.
Preferred Stock
Under our certificate of incorporation, we are authorized to issue up
to 1,770,819 shares of preferred stock of which 32,200 shares have been
designated Series B Preferred Stock, $1.00 par value, and 100,000 shares have
been designated and reserved for issuance as Series A Junior Participating
Preferred Stock, $1.00 par value per share, in connection with our shareholder
rights plan. As of December 31, 2002, 1,720 shares of the Series B Preferred
Stock were outstanding.
Our board of directors has the authority, from time to time and without
further action by our shareholders, to divide the preferredour unissued capital stock into
one or more classes and one or more series within any class and to make
determinations of the designation and number of shares of any class or series
and to fixdeterminations of the voting rights, preferences, limitations and determine relativespecial
rights, and preferencesif any, of the shares of any class or series. The rights, preferences,
limitations and special rights of different classes of capital stock may differ
with respect to dividend rates, amounts payable on liquidation, voting rights,
conversion rights, redemption provisions, sinking fund provisions and other
matters. The rights, preferences, privileges and restrictions of each series.
Series B Preferred Stock
Asseries may
be fixed by the designations of June 30, 2002,that series set forth in either a restated
version of the onlycertificate of incorporation or a certificate of designations
relating to that series.
9
outstanding was our Series B Preferred Stock,by number, letter
or title that will distinguish the series from any other series of
which there were 8,160 shares outstanding. Holderspreferred stock;
o the dividend rate, if any, and whether dividends on that series of
our Series B Preferred Stock are entitledpreferred stock will be cumulative, noncumulative or partially
cumulative;
o the voting rights of that series of preferred stock, if any;
o any conversion provisions applicable to receive cumulative quarterly dividends equalthat series of preferred
stock;
o any redemption or sinking fund provisions applicable to $1.5125that series
of preferred stock;
o the liquidation preference per share of that series of preferred
stock; and
o the terms of any other preferences or at a rate equalrights, if any, applicable to
6.05% per year. In the event that we liquidate, dissolve or wind-up, holdersseries of Series B Preferred Stock are entitled to receive $100 per share plus an amount equal to any accrued but unpaid cumulative dividends together with any interest that has accrued on those dividends. Our Series B Preferred Stock ranks seniorpreferred stock.
Shareholder Rights Plan
Pursuant to our Series A Junior Participating Preferred Stock, if issued, and our common stock with respect to the right to receive dividends and the right to the distribution of our assets upon liquidation.
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The Series B Preferred Stock is not convertible into any other classshareholders rights plan, current or series of our capital stock. We obtained the right to redeem, in whole or in part, up to 6,440 shares of Series B Preferred Stock each year starting on December 1, 2001 at a price equal to $100 per share plus any accrued and unpaid dividends together with any interest that has accrued on those dividends through the date of redemption. In December 2001, 6,440 shares were redeemed at the liquidation value of $100 per share. The holder chose to receive a five-year note for the redemption proceeds of $644,000 at an interest rate of 6.05%. In January 2002, an additional 3,000 shares were redeemed at the holders’ option in cash at the liquidation value of $100 per share. The Series B Preferred Stock is not subject to or entitled to the benefit of a sinking fund.
So long as any shares of our Series B Preferred Stock are outstanding, we may not adopt any amendment to our articles of incorporation that would adversely affect, in any material respect, the rights or preferences of the Series B Preferred Stock without the affirmative vote of thefuture holders of a majority of the Series B Preferred Stock.
Shareholder Rights Plan
Holders of
our common stock own, andhave the holders of the shares of common stock issued in this offering will receive, one right to purchase a fraction of a share of our Series
A Junior Participating Preferred Stock for each of outstanding share of common
stock. These rights are issued pursuant to a shareholders rights plan.stock held by them. Upon the occurrence of certain events, each right would
entitle the holder to purchase from us one one-thousandth of a share of Series A
Junior Participating Preferred Stock at an exercise price of $90 per
one-thousandth of a share, subject to adjustment. The rights are exercisable in
certain circumstances, ifsuch as when a person or group acquires 20% or more of
our common stock or if the holder of 20% or more of our common stock engages in
certain transactions with us. In thatthe latter case, eachthe right to purchase Series A
Junior Participating Preferred Stock would be exercisable by each holder, other thanbut
not the acquiring person, to purchase shares of our common stock at a
substantial discount from the market price. In addition,Additionally, pursuant to our
shareholders rights plan, if, after the date that a person has become the holder
of 20% or more of our common stock, any person or group merges with us or
engages in certain other transactions with us, each holder of a right, entitles the holder, other
than the acquirer, will have the right to purchase common stock of the surviving
corporation at a substantial discount from the market price. These rights are
subject to redemption by us in certain circumstances. These rights have no
voting or dividend rights and, until exercisable, cannot trade separately from
our common stock and have no dilutive effect on our earnings. This plan expires
on March 1, 2008.
State Law
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Pennsylvania State Law Provisions
We are subject to various anti-takeover provisions of the Pennsylvania
Business Corporation Law of 1988, as amended. Generally, these provisions are
triggered if any person or group acquires, or discloses an intent to acquire,
20% or more of a corporation’scorporation's voting power, unless the acquisition is under a
registered firm commitment underwriting or, in certain cases, approved by the
board of directors. These provisions:
o provide the other shareholders of the corporation with certain rights against the acquiring group or person; o prohibit the corporation from engaging in a broad range of business combinations with the acquiring group or person; and o restrict the voting and other rights of the acquiring group or person. |
In addition, as permitted by Pennsylvania law, an amendment to our
articles of incorporation or other corporate action that is approved by
shareholders may provide mandatory special treatment for specified groups of
nonconsenting shareholders of the same class. For example, an amendment to our
articles of incorporation or other corporate action may provide that shares of
common stock held by designated shareholders of record must be cashed out at a
price determined by the corporation, subject to applicable dissenters’dissenters' rights.
20
Articles of Incorporation and Bylaw Provisions
Certain provisions of our articles of incorporation and bylaws may have the effect of discouraging unilateral tender offers or other attempts to take over and acquire our business. These provisions might discourage some potentially interested purchaser from attempting a unilateral takeover bid for us on terms which some shareholders might favor. Our articles of incorporation require that certain fundamental transactions must be approved by the holders of 75% of the outstanding shares of our capital stock entitled to vote on the matter unless at least 50% of the members of the board of directors has approved the transaction, in which case the required shareholder approval will be the minimum approval required by applicable law. The fundamental transactions that are subject to this provision are those transactions that require approval by shareholders under applicable law or the articles of incorporation. These transactions include certain amendments of our articles of incorporation or bylaws, certain sales or other dispositions of our assets, certain issuances of our capital stock, or certain transactions involving our merger, consolidation, division, reorganization, dissolution, liquidation or winding up. Our articles of incorporation and bylaws provide that:
o a special meeting of shareholders may only be called by the
chairman, the president, the board of directors or shareholders
entitled to cast a majority of the votes which all shareholders are
entitled to cast at the particular meeting;
o nominations for election of directors may be made by any shareholder
entitled to vote for election of directors if the name of the
nominee and certain information relating to the nominee is filed
with our corporate secretary not less than 14 days nor more than 50
days before any meeting of shareholders to elect directors; and
o certain advance notice procedures must be met for shareholder
proposals to be made at annual meetings of shareholders. These
advance notice procedures generally require a notice to be delivered
not less than 90 days nor more than 120 days before the anniversary
date of the immediately preceding annual meeting of shareholders.
|
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is EquiServe Trust Company, N.A.
21
UNDERWRITING
11
and conditions of
the underwritingdeposit agreement, each owner of a depositary share will be entitled, in
proportion to the underwriters named below, through their representatives Deutsche Bank Securities Inc. and UBS Warburg LLC have severally agreedapplicable fraction of a share of preferred stock, represented
by the depositary share to purchase from the selling shareholders the following respective number of shares of common stock at a public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus:
The underwriting agreement provides that the obligations of the several underwriters to purchase the shares of common stock offered hereby are subject to certain conditions precedent and that the underwriters will purchase all of the sharesrights and preferences of commonthe preferred
stock offered by this prospectus, other than those coveredrepresented by the over-allotment option described below, if anydepositary shares (including dividend, voting,
redemption, conversion and liquidation rights).
The above description of thesedepositary shares are purchased.
We have been advisedis only a summary, is not
complete and is subject to, and is qualified in its entirety by the representativesdescription
in the applicable prospectus supplement and the provisions of the underwriters thatdeposit
agreement, which will contain the underwriters propose to offer the sharesform of common stock to the public at the public offering price set forth on the cover of this prospectus and to dealers at a price that represents a concession not in excess of $ per share under the public offering price. The underwriters may allow, and these dealers may re-allow, a concession of not more than $ per share to other dealers. After the public offering, representativesdepository receipt. A copy of the
underwriters may change the offering price and other selling terms.
Vivendi Water S.A. has granted to the underwriters an option, exercisable not later than 30 days after the date of this prospectus, to purchase up to 1,289,381 additional shares of common stock at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus. The underwriters may exercise this option only to cover over-allotments made in connectiondeposit agreement will be filed with the sale of the common stock offeredSEC as an exhibit to or incorporated by
this prospectus. To the extent that the underwriters exercise this option, each of the underwriters will become obligated, subject to certain conditions, to purchase approximately the same percentage of these additional shares of common stock as the number of shares of common stock to be purchased by itreference in the above table bears to the total number of shares of common stock offered by this prospectus. Vivendi Water S.A. will be obligated, pursuant to the option, to sell these additional shares of common stock to the underwriters to the extent the option is exercised. If any additional shares of common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares are being offered.
The underwriting discounts and commissions per share are equal to the public offering price per share of common stock less the amount paid by the underwriters to the selling shareholders per share of common stock. The underwriting discounts and commissions are % of the public offering price. The
22
We estimate that our share of the total expenses of this offering, excluding underwriting discounts and commissions, will be nominal.
We and the selling shareholders have agreed to indemnify the underwriters against some specified types of liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required to make in respect of any of these liabilities.
Each of our executive officers and directors have agreed not to offer, sell, sell short or otherwise dispose of, directly or indirectly, any shares of our common stock or other capital stock, or any other securities convertible, exchangeable or exercisable for our common stock owned by these persons prior to this offering, or request the registration for the offer or sale of these securities for a period of 90 days after the effective date of the registration statement of which this prospectus is a part,part.
12
prior written consent of Deutsche Bankthe holders of debt securities of the series being
reopened or any other series. Any additional debt securities of the series being
reopened will have the same ranking, interest rate, maturity and other terms as
the previously issued debt securities of that series. These additional debt
securities, together with the previously issued debt securities of that series,
will constitute a single series of debt securities under the terms of the
applicable indenture.
Types of Debt Securities
Inc.We may issue fixed or floating rate debt securities.
Fixed rate debt securities will bear interest at a fixed rate described
in the prospectus supplement. This type includes zero coupon debt securities,
which bear no interest and UBS Warburg LLC. This consentare often issued at a price lower than the principal
amount. United States federal income tax consequences and other special
considerations applicable to any debt securities issued at a discount will be
described in the applicable prospectus supplement.
13
givenredeemed at our option;
o any obligation we may have to redeem, purchase or repay the debt
securities at the option of a holder upon the happening of any event
and the terms and conditions of redemption, purchase or repayment;
o the names and duties of the trustee and any co-trustees,
depositaries, authenticating agents, calculation agents, paying
agents, transfer agents or registrars for the debt securities;
o any material provisions of the applicable indenture described in
this prospectus that do not apply to the debt securities;
o a discussion of United States federal income tax, accounting and
special considerations, procedures and limitations with respect to
the debt securities;
o whether and under what circumstances we will pay additional amounts
to holders in respect of any tax assessment or government charge,
and, if so, whether we will have the option to redeem the debt
securities rather than pay such additional amounts; and
o any other specific terms of the debt securities that are consistent
with the provisions of the indenture.
The terms on which a series of debt securities may be convertible into
or exchangeable for other of our securities or any other entity will be set
forth in the prospectus supplement relating to such series. Such terms will
include provisions as to whether conversion or exchange is mandatory, at the
option of the holder or at our option. The terms may include provisions pursuant
to which the number of other securities to be received by the holders of such
series of debt securities may be adjusted.
We will issue the debt securities only in registered form. As currently
anticipated, debt securities of a series will trade in book-entry form, and
global notes will be issued in physical (paper) form, as described below under
"--Book-Entry Procedures and Settlement." Unless otherwise provided in the
accompanying prospectus supplement, we will issue debt securities denominated in
U.S. dollars and only in denominations of $1,000 and integral multiples thereof.
The prospectus supplement relating to offered debt securities
denominated in a foreign or composite currency will specify the denomination of
the offered debt securities.
The debt securities may be presented for exchange, and debt securities
other than a global security may be presented for registration of transfer, at
the principal corporate trust office of the trustee named in the applicable
prospectus supplement. Holders will not have to pay any service charge for any
registration of transfer or exchange of debt securities, but we may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection with such registration of transfer (Section 3.05).
Payment and Paying Agents
Distributions on the debt securities other than those represented by
global notes will be made in the designated currency against surrender of the
debt securities at the principal corporate trust office of the trustee named in
the applicable prospectus supplement. Payment will be made to the registered
holder at the close of business on the record date for such payment. Interest
payments will be made at the principal corporate trust office of the trustee
named in the applicable prospectus supplement, or by a check mailed to the
holder at his registered address. Payments in any other manner will be specified
in the applicable prospectus supplement.
15
public notice.
your consent and without notifying you of the change. The
initial calculation agent will be identified in the applicable prospectus
supplement.
Senior Debt
We may issue senior debt securities under the senior debt indenture.
Senior debt will rank on a basis equal in priority with all our other debt
except our subordinated debt.
Subordinated Debt
We may issue subordinated debt securities under the subordinated debt
indenture. Subordinated debt will rank subordinated and junior in right of
payment, to the extent set forth in the subordinated debt indenture, to all our
senior debt.
If we default in the payment of any principal of, or premium, if any,
or interest on any senior debt when it becomes due and payable after any
applicable grace period, then, unless and until the default is cured or waived
or ceases to exist, we cannot make a payment on account of or redeem or
otherwise acquire the subordinated debt securities.
If there is any insolvency, bankruptcy, liquidation or other similar
proceeding relating to us or our property, then all senior debt must be paid in
full before any payment may be made to any holders of subordinated debt
securities.
Furthermore, if we default in the payment of the principal of and
accrued interest on any subordinated debt securities that is declared due and
payable upon an event of default under the subordinated debt indenture, holders
of all our senior debt will first be entitled to receive payment in full in cash
before holders of such subordinated debt can receive any payments.
Except as may be otherwise set forth in an accompanying prospectus
supplement, senior debt means:
o the principal, premium, if any, and interest in respect of
indebtedness for money borrowed and indebtedness evidenced by
securities, notes, debentures, bonds or other similar instruments
issued, including, as to us, the senior debt securities;
o all capitalized lease obligations;
o all obligations representing the deferred purchase price of
property; and
o all deferrals, renewals, extensions and refundings of obligations of
the type referred to above.
However, senior debt does not include:
o the subordinated debt securities;
o any indebtedness that by its terms is subordinated to, or ranks in
priority on an equal basis with, subordinated debt securities; and
o items of indebtedness (other than capitalized lease obligations)
that would not appear as liabilities on a balance sheet prepared in
accordance with accounting principles generally accepted in the
United States of America.
16
agreeddeposited with the trustee, cash or government
securities, in trust for the benefit of the holders sufficient to pay the
principal of, premium, if any, and interest on the debt securities of such
series when due, and satisfied certain other conditions, including receipt of an
opinion of counsel that holders will not recognize taxable gain or loss for
United States federal income tax purposes, then:
o we will be deemed to have paid and satisfied our obligations on all
outstanding debt securities of such series, which is known as
defeasance and discharge (Section 14.02); or
o we will cease to be under any obligation, other than to pay when due
the principal of, premium, if any, and interest on such debt
securities, relating to the debt securities of such series, which is
known as covenant defeasance (Section 14.03).
When there is a defeasance and discharge, the applicable indenture will
no longer govern the debt securities of such series, we will no longer be liable
for payments required by the terms of the debt securities of such series and the
holders of such debt securities will be entitled only to the deposited funds.
When there is a covenant defeasance, however, we will continue to be obligated
to make payments when due if the deposited funds are not sufficient.
18
issue, offer, sell, contractbe entitled to sell, pledgehave the debt securities represented by the global
securities registered in its name and will not be considered the owner under the
declaration. In most cases, a beneficial owner will also not be able to obtain a
paper certificate evidencing the holder's ownership of debt securities. The
book-entry system for holding securities eliminates the need for physical
movement of certificates and is the system through which most publicly traded
common stock is held in the United States. However, the laws of some
jurisdictions require some purchasers of securities to take physical delivery of
their securities in definitive form. These laws may impair the ability to
transfer book-entry securities.
A beneficial owner of book-entry securities represented by a global
security may exchange the securities for definitive (paper) securities only if:
o DTC is unwilling or unable to continue as depositary for such global
security and we do not appoint a qualified replacement for DTC
within 90 days; or
o We in our sole discretion decide to allow some or all book-entry
securities to be exchangeable for definitive securities in
registered form.
Unless we indicate otherwise, disposeany global security that is exchangeable
will be exchangeable in whole for definitive securities in registered form, with
the same terms and of directlyan equal aggregate principal amount. Definitive securities
will be registered in the name or indirectly,names of the person or persons specified by
DTC in a written instruction to the registrar of the securities. DTC may base
its written instruction upon directions that it receives from its participants.
In this prospectus, for book-entry securities, references to actions
taken by security holders will mean actions taken by DTC upon instructions from
its participants, and references to payments and notices of redemption to
security holders will mean payments and notices of redemption to DTC as the
registered holder of the securities for distribution to participants in
accordance with DTC's procedures.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a clearing
corporation within the meaning of the New York Uniform Commercial Code and a
clearing agency registered under section 17A of the Securities Exchange Act of
1934. The rules applicable to DTC and its participants are on file with the SEC.
We will not have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interest in the book-entry securities or for maintaining, supervising or
reviewing any records relating to the beneficial ownership interests.
20
Exchange Commissionany commissions payable by us to that
agent will be set forth, in the prospectus supplement. Unless otherwise
indicated in the prospectus supplement, any agent will be acting on a registration statementbest
efforts basis for the period of its appointment.
One or more firms, referred to as "remarketing firms," may also offer
or sell the securities, if the prospectus supplement so indicates, in connection
with a remarketing arrangement upon their purchase. Remarketing firms will act
as principals for their own accounts or as agents for us. These remarketing
firms will offer or sell the securities in accordance with the terms of the
securities. The prospectus supplement will identify any remarketing firm and the
terms of its agreement, if any, with us and will describe the remarketing firm's
compensation. Remarketing firms may be deemed to be underwriters in connection
with the securities they remarket. Remarketing firms may be entitled under
agreements that may be entered into with us to indemnification by us against
certain civil liabilities, including liabilities under the Securities Act, relating to, any sharesand
may be customers of, our common stockengage in transactions with or perform services for us in
the ordinary course of business.
If an underwriter is, or underwriters are, utilized in the sale of
securities, convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, or grant any options whatsoever in respect of our shares, without the prior written consent of Deutsche Bank Securities Inc. and UBS Warburg LLC for a period of 90 days after the date of this prospectus. This agreement does not apply to grants of stock options pursuant to the terms of a stock option or similar plan in effect on the date of thewe will execute an underwriting agreement shareswith such underwriters at
the time of common stock issued in connection with our proposed acquisition of Pennichuck Corporation, the issuance of upsuch sale to 150,000 shares of common stock under our shelf registration statement for the acquisition of small water systems or the issuance of shares of common stock pursuant to the terms of our Dividend Reinvestment and Direct Stock Purchase Plan.
them. The representatives of the underwriters have advised us that the underwriters do not intend to confirm sales to any account over which they exercise discretionary authority.
In connection with the offering, the underwriters may purchase and sell shares of our common stock in the open market. These transactions may include short sales, purchases to cover positions created by short sales and stabilizing transactions.
Short sales involve the salesecurities will be acquired by the
underwriters for their own account and may be resold from time to time in one or
more transactions, including negotiated transactions, either at a fixed public
offering price, or at varying prices determined at the time of sale. The
securities may be either offered to the public through underwriting syndicates
represented by managing underwriters or by underwriters without a greater numbersyndicate.
22
shares than they aresecurities, we will sell the
securities to the dealer, as principal. The dealer, who may be deemed to be an
"underwriter" may then resell the securities to the public at varying prices to
be determined by such dealer at the time of resale. Any initial offering price
and any discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time.
Underwriters, dealers and agents may be entitled, under agreements that
may be entered into with us, to indemnification by us against civil liabilities
arising out of this prospectus, including liabilities under the Securities Act,
or to contribution for payments which the agents or underwriters may be required
to purchasemake relating to those liabilities. Any agents and underwriters may be
customers of, engage in transactions with, or perform services for, us in the
offering. Covered short sales are sales madeordinary course of business.
If so indicated in an amount not greater than the applicable prospectus supplement, we will
authorize underwriters, optiondealers or other persons to solicit offers by certain
institutions to purchase additional shares of common stockthe securities from the selling shareholdersus pursuant to contracts providing
for payment and delivery on a future date or dates set forth in the offering.applicable
prospectus supplement. Institutions with which such contracts may be made may
include, but are not limited to, commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and others. The obligations of any purchaser under any such
contract will not be subject to any conditions except that the purchase of any
securities shall not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject, and if any of the securities
being offered are also sold to underwriters, we shall have sold to such
underwriters the securities not for delayed delivery. The underwriters, may close outdealers
and such other persons will not have any covered short position by either exercising their optionresponsibility with respect to purchase additional sharesthe
validity or purchasing sharesperformance of such contracts. The prospectus supplement relating to
such contracts will set forth the price to be paid for the securities pursuant
to such contracts, the commissions payable for solicitation of such contracts
and the date or dates in the open market. In determiningfuture for delivery of offered shares pursuant to
such contracts.
To facilitate an offering of the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchasesecurities, certain persons
participating in the open market as compared to the price at which theyoffering may purchase shares through the over-allotment option.
Naked short sales are any salesengage in excess of the over-allotment option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if underwriters are concernedtransactions that there may be downward pressure on the price of the shares in the open market prior to the completion of the offering.
Stabilizing transactions consist of various bids for or purchases of our common stock made by the underwriters in the open market prior to the completion of the offering.
23
The underwriters may impose a penalty bid. This occurs when a particular underwriter repays to the other underwriters a portion of the underwriting discount received by it because the representatives of the underwriters have repurchased shares sold by or for the account of that underwriter in stabilizing or short covering transactions.
Purchases to cover a short position and stabilizing transactions may have the effect of preventing or slowing a decline in the market price of our common stock. Additionally, these purchases, along with the imposition of the penalty bid, may stabilize,
maintain, or otherwise affect the market price of our common stock. As a result,the shares. This may include
over-allotments or short sales of the shares, which involves the sale by persons
participating in the offering of more shares than we have sold to them. In such
circumstances, such persons would cover the over-allotments or short positions
by purchasing in the open market or by exercising the over-allotment option
granted to such persons. In addition, such persons may stabilize or maintain the
price of our common stocksecurities by bidding for or purchasing any of our securities in
the open market or by imposing penalty bids, whereby selling concessions allowed
to dealers participating in any such offering may be higher thanreclaimed if shares that
they sold are repurchased in connection with stabilization transactions. The
effect of these transactions may be to stabilize or maintain the market price of
the shares at a level above that which might otherwise existprevail in the open
market. TheseSuch transactions, if commenced, may be effected on the New York Stock Exchange,discontinued at any time.
Any series of securities may be a new issue of securities with no
established trading market. Any underwriter may make a market in the over-the-countersecurities,
but will not be obligated to do so, and may discontinue any market or otherwise.
Somemaking at any
time without notice. We cannot and will not give any assurances as to the
liquidity of the underwriters or their affiliates have provided investment banking services to us in the past and may do so in the future. They receive customary fees and commissionstrading market for these services.
any of our securities.
23
We file annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC’sSEC's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference room. You may also obtain our SEC filings from the SEC’sSEC's
website at http://www.sec.gov.
The SEC allows us to “incorporate"incorporate by reference”reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. Statements made in this prospectus as to the
contents of any contract, agreement or other documents are not necessarily
complete, and, in each instance, we refer you to a copy of such document filed
as an exhibit to the registration statement, of which this prospectus is a part,
or otherwise filed with the SEC. The information incorporated by reference is
considered to be part of this prospectus. When we file information with the SEC
in the future, that information will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings we will make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 until we sell all of the sharessecurities
covered by this prospectus:
o Our Annual Report on Form 10-K for the fiscal year ended December
31, 2002, including portions of our 2002 Annual Report to
Shareholders and our definitive Proxy Statement for the 2003 Annual
Meeting of Shareholders incorporated therein by reference;
o Our Current Report on Form 8-K filed on January 14, 2003; and
o The description of our common stock that we have registered are sold:
set forth in our Registration Statement on Form 8-A, including any amendments or reports filed for the purpose of updating such description. You may request a copy of these filings, at no cost, by writing or telephoning us at:
Philadelphia Suburban Corporation
You should rely only on the information contained in or incorporated by
reference in this prospectus and any supplements to this prospectus. We have not, and the underwriters have not
authorized anyone to provide you with different information.
24
24
The validity of the shares of common stocksecurities that may be offered hereby will be
passed upon for us by Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania.
Certain legal matters in connection with this offering will be passed upon for the selling shareholders by Cleary, Gottlieb, Steen & Hamilton, Paris, France, and for the underwriters by Davis Polk & Wardwell, New York, New York.
EXPERTS
The consolidated financial statements as of December 31, 2000 and 2001, and for each of the two years in the period ended December 31, 2001 incorporated in this prospectus
by reference to the Annual Report on Form 10-K of Philadelphia Suburban Corporation and subsidiaries for the year ended December 31,
2001,2002 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The consolidated statements of income and comprehensive income and cash flow of Philadelphia Suburban Corporation and subsidiaries for the year ended December 31, 1999, included in Philadelphia Suburban Corporation’s annual report on Form 10-K for the year ended December 31, 2001 have been incorporated by reference herein in reliance upon the report of KPMG LLP, independent accountants, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
25
8,595,875 Shares
Philadelphia Suburban Corporation
Common Stock
Joint Book-Running Managers
Deutsche Bank Securities
, 2002
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table shows the estimated expensessets forth an estimate of the issuancecosts and distributionexpenses
payable by Philadelphia Suburban Corporation in connection with the offerings
described in this registration statement. In addition to the costs and expenses
estimated below, we may pay any selling commissions and brokerage fees and any
applicable fees and disbursements with respect to securities registered by this
prospectus that we sell, but these fees cannot be predicted with any certainty
at this time. All of the securities offered hereby:
Securities and Exchange Commission Registration Fee | $ | 16,880 | |||
Printing | |||||
Accounting Services | |||||
Legal Services | |||||
Transfer Agent Fees | |||||
Miscellaneous | |||||
Total | $ | ||||
amounts shown are estimates except the Securities and Exchange Commission ("SEC") registration fee. Securities and Exchange Commission registration fee.......... $ 20,225 Printing..................................................... 145,000 Accounting services.......................................... 95,000 Legal services............................................... 235,000 Trustee services............................................. 39,250 Rating agency fees........................................... 50,000 Miscellaneous................................................ 60,000 --------- Total................................................... $ 644,475 ========= Item 15. Indemnification of Directors and Officers
Sections 1741 and 1742 of the Pennsylvania Business Corporation Law of
1988, as amended (the “BCL”"BCL"), provide that, unless otherwise restricted in its
bylaws, a business corporation may indemnify directors and officers against
liabilities they may incur as such provided that the particular person acted in
good faith and in a manner he or she reasonably believed to be in, or not
opposed to, the best interests of the corporation, and, with respect to any
criminal proceeding, had no reasonable cause to believe his or her conduct was
unlawful. In general, the power to indemnify under these sections does not exist
in the case of actions against a director or officer by or in the right of the
corporation if the person otherwise entitled to indemnification shall have been
adjudged to be liable to the corporation unless it is judicially determined
that, despite the adjudication of liability but in view of all the circumstances
of the case, the person is fairly and reasonably entitled to indemnification for
specified expenses. Section 1743 of the BCL requires a business corporation to
indemnify directors and officers against expenses they may incur in defending
actions against them in such capacities if they are successful on the merits or
otherwise in the defense of such actions.
Section 1713 of the BCL permits the shareholders to adopt a bylaw
provision relieving a director (but not an officer) of personal liability for
monetary damages except where (i) the director has breached the applicable
standard of care, and (ii) such conduct constitutes self-dealing, willful
misconduct or recklessness. This Section also provides that a director may not
be relieved of liability for the payment of taxes pursuant to any federal, state
or local law or of liability or responsibility under a criminal statute. Section
4.01 of the Registrant’sRegistrant's bylaws limits the liability of any director of the
Registrant to the fullest extent permitted by Section 1713 of the BCL.
Section 1746 of the BCL grants a corporation broad authority to
indemnify its directors, officers and other agents for liabilities and expenses
incurred in such capacity, except in circumstances where the act or failure to
act giving rise to the claim for indemnification is determined by a court to
have constituted willful misconduct or recklessness. Article VII of the
Registrant’sRegistrant's bylaws provides indemnification of directors, officers and other
agents of the Registrant broader than the indemnification permitted by Section
1741 of the BCL and pursuant to the authority of Section 1746 of the BCL.
II-1
Unlike the provisions of BCL Sections 1741 and 1742, Article VII does not require the Registrant to determine the availability of indemnification by the procedures or the standard of conduct specified in Sections 1741 or 1742 of the BCL. A person who has incurred an indemnifiable expense or liability has a right to be indemnified independent of any procedures or determinations that would otherwise be required, and that right is enforceable against the Registrant as long as indemnification is not prohibited by law. To the extent indemnification is permitted only for a portion of a liability, the bylaw provisions require the Registrant to indemnify such portion. If the indemnification provided for in Article VII is unavailable for any reason in respect of any liability or portion thereof, the bylaws require the Registrant to make a contribution toward the liability. Indemnification rights under the bylaws do not depend upon the approval of any future board of directors.
Section 7.04 of the Registrant’sRegistrant's bylaws also authorizes the Registrant
to further effect or secure its indemnification obligations by entering into
indemnification agreements, maintaining insurance, creating a trust fund,
granting a security interest in its assets or property, establishing a letter of
credit, or using any other means that may be available from time to time.
Section 1747 of the BCL also enables a business corporation to purchase and
maintain insurance on behalf of a person who is or was serving as a
representative of the corporation or is or was serving at the request of the
corporation as a representative of another entity against any liability asserted
against that representative in his capacity as such, whether or not the
corporation would have the power to indemnify him against that liability under
the BCL.
The Registrant maintains, on behalf of its directors and officers, insurance protection against certain liabilities arising out of the discharge of their duties, as well as insurance covering the Registrant for indemnification payments made to its directors and officers for certain liabilities. The premiums for such insurance are paid by the Registrant.
Item 16. Exhibits
The exhibits filed as part of this registration statement are as follows:
Number | Description | |||
-------- --------------------------------------------------------------------------
|
Statement with respect to shares of Preferred Stock filed with the Commonwealth of Pennsylvania.
5.1** Opinion of Morgan, Lewis & Bockius | ||||
Ratios. 23.1 | Consent of Morgan, Lewis & Bockius LLP (included in Exhibit 5.1) | |||
.
23.2* Consent of PricewaterhouseCoopers | ||||
LLP. 24.1 | Powers of Attorney (included on |
pages). 25.1*** |
__________
* Filed herewith.
** To be filed by amendment or as an exhibit to a document to be incorporated
by reference in the prospectus forming a part of this registration
statement.
*** To be filed pursuant to the Trust Indenture Act of 1939, as amended.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant
to rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Sections 13 or 15(d) of the Exchange Act that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes that:
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that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
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The undersigned hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act (the "Act") in accordance with the
rules and regulations prescribed by the Securities and Exchange Commission under
Section 305(b)(2) of the Act.
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Bryn Mawr, Commonwealth of Pennsylvania, on this
8th3rd day of July, 2002.
April, 2003. PHILADELPHIA SUBURBAN CORPORATION BY: /s/ Nicholas DeBenedictis ----------------------------------------- Nicholas DeBenedictis Chairman and Chief Executive Officer |
Each person in so signing below also makes, constitutes and appoints Roy H. Stahl, Executive Vice President, and David P. Smeltzer, Senior Vice President, and each of them acting alone, his or her true and lawful attorney-in-fact, with full power of substitution, to execute and cause to be filed with the Securities and Exchange Commission pursuant to the requirements of the Securities Act of 1933, as amended, any and all amendments and post-effective amendments to this Registration Statement, and including any Registration Statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, with exhibits thereto and other documents in connection therewith, and hereby ratifies and confirms all that said attorney-in-fact or his substitute or substitutes may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
Title | Date | |||
- --------- ----- ----- | Director, Chairman and Chief Executive April 3, 2003 - ---------------------------- Officer (Principal Executive Officer) | |||
Nicholas DeBenedictis /s/ David P. Smeltzer | Senior Vice | |||
/s/ Mary C. Carroll | Director | |||
April 3, 2003 - ---------------------------- Mary C. Carroll /s/ G. Fred DiBona, Jr. | Director | |||
Glanton Director April 3, 2003 - ---------------------------- Richard H. Glanton, Esq. | ||||
/s/ Alan R. Hirsig | Director |
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April 3, 2003 - ---------------------------- Alan R. Hirsig /s/ John F. McCaughan | Director | |||
April 3, 2003 - ---------------------------- John F. McCaughan /s/ John E. Menario | Director | |||
April 3, 2003 - ---------------------------- John E. Menario /s/ Richard L. Smoot | Director |
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INDEX TO EXHIBITS