UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 8-K/A
Amendment
No. 2
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
May 20,
2008 (January 31, 2008)
Date of Report
(Date of Earliest Event Reported)
(Date of earliest
event reported)
(Exact name of
registrant as specified in its charter)
Delaware
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0-8176
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95-1840947
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(State or other
jurisdiction
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(Commission File
Number)
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(I.R.S. Employer
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of
incorporation)
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Identification
No.)
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One
Wilshire Building
624 South
Grand Avenue, Suite 2900
Los
Angeles, CA 90017-3782
(Address,
including zip code, of principal executive offices)
(213)
929-1800
(Registrants
telephone number, including area code)
None
(Former name or
former address, if changed since last report)
Check the appropriate box
below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
o
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o
Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
o
Pre-commencement communications
pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
EXPLANATORY
NOTE
This Amendment No. 2 on Form 8-K is being filed to correct a
typographical error in the dates used in Amendment No. 1. The date May 19, 2008
is being changed in this amendment to May 20, 2008.
EXPLANATORY
NOTE
As reported in a Current
Report on Form 8-K filed by SouthWest Water Company (the Company) on February 6,
2008 (the Initial Report), the Company completed the acquisition of the
assets of a wastewater collection system and related wastewater treatment plant
(commonly referred to as the Riverview Wastewater System) on January 31,
2008. This Amendment No. 1 on Form 8-K/A (the Amendment) is being
filed to amend Item 9.01 of the Initial Report to provide the audited
historical financial statements and unaudited pro forma financial information
required by Item 9.01 of Form 8-K.
Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
The Initial Report is
hereby amended by deleting the paragraph in Item 9.01(a) and replacing it
with the following:
The Riverview Wastewater
System was one small component of a municipal water and wastewater utility
representing approximately 5.0% of the utilitys consolidated utility plant and
4.5% of its consolidated revenues. The system was acquired in 1986 and
underwent significant expansion from 1990 to 1997. The Riverview Wastewater
System has never been operated as a stand-alone business and separate
accounting records have never been maintained for the system. As an Alabama
municipal utility, historical accounting records were archived in accordance
with record retention policies administered by the Government Records Division
of the Alabama Department of Archives and History. Those policies require that
transactional accounting records be destroyed after seven years.
As a result of the
forgoing circumstances, audited financial statements for the Riverview
Wastewater System could not be prepared. In lieu of audited financial
statements, the following audited and unaudited abbreviated financial
statements are attached to this Amendment and are incorporated herein by
reference:
1
Refer to the notes to the
abbreviated financial statements for more detailed explanations of the
financial information filed herewith.
(b) Pro Forma Financial Information.
The Initial Report is
hereby amended by deleting the paragraph in Item 9.01(b) and replacing it
with the following:
The following unaudited
pro forma financial information of the Riverview Wastewater System is attached
to this Amendment and is incorporated herein by reference:
(d) Exhibits.
Exhibit
Number
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Exhibit Description
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23
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*
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Consent
of Independent Registered Public Accounting Firm
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99.1
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**
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Press
release dated February 6, 2008 announcing the acquisition of the
Riverview Wastewater System
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*
Filed
herewith
**
Previously
filed with the Initial Report.
2
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
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SOUTHWEST WATER COMPANY
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(Registrant)
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Date: May 20,
2008
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By:
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/S/ CHERYL L. CLARY
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Name: Cheryl L. Clary
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Title:
Chief Financial
Officer
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3
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors
SouthWest Water Company
Los Angeles, California
We have audited the accompanying statement of assets acquired and
liabilities assumed of the Riverview Wastewater System acquired by SouthWest
Water Company from the Birmingham Waterworks and Sewer Board (the Companies)
as of January 31, 2008, as described in Note 1, and the statements of revenues
and direct expenses for the years ended December 31, 2007 and 2006. These abbreviated
financial statements are the responsibility of the Companies management. Our
responsibility is to express an opinion on these abbreviated financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the abbreviated financial statements are free of material misstatement. The
companies are not required to have, nor were we engaged to perform, an audit of
their internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the companies
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the abbreviated financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall abbreviated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
The accompanying abbreviated financial statements were prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission as described in Note 1 and are not intended to be a
complete presentation of the Riverview Wastewater Systems assets and
liabilities or its revenues and expenses.
In our opinion, the abbreviated financial statements referred to above
present fairly, in all material respects, the assets acquired and liabilities
assumed of the Riverview Wastewater System as of January 31, 2008, as described
in Note 1, and the revenues and direct expenses for the years ended December
31, 2007 and 2006 in conformity with accounting principles generally accepted in
the United States of America.
The accompanying statements of revenues and direct expenses were
derived from the Birmingham Waterworks and Sewer Boards historical accounting
records and may not necessarily be indicative of the results if the Riverview Wastewater
System had been operated as a stand-alone entity. Portions of certain revenues
and direct expenses represent allocations made from corporate office items
applicable to the Birmingham Waterworks and Sewer Board as a whole.
/s/ Barfield Murphy Shank &
Smith, P.C.
Birmingham, Alabama
May 20, 2008
F-1
RIVERVIEW WASTEWATER SYSTEM
STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
JANUARY 31, 2008
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January 31,
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2008
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(In
thousands)
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ASSETS
ACQUIRED
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Utility plant:
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Land
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$
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2,557
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Structures and
improvements
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6,016
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Collection
sewersforce
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393
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Collection
sewersgravity
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12,198
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Pump stations
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2,166
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Total assets
acquired
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23,330
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LIABILITIES
ASSUMED
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Total liabilities
assumed
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NET
ASSETS ACQUIRED
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$
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23,330
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See notes to abbreviated
financial statements.
F-2
RIVERVIEW WASTEWATER SYSTEM
STATEMENTS OF REVENUES AND DIRECT EXPENSES
YEARS ENDED DECEMBER 31, 2007 AND 2006
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2007
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2006
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(In thousands)
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Revenues:
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Operating
revenues
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$
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5,174
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$
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4,477
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Direct expenses:
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Specifically
identifiable expenses:
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Electrical power
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388
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344
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Labor
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335
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328
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Maintenance
materials
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197
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230
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Other
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1
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2
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Total specifically
identifiable expenses
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921
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904
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Allocated
expenses:
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Labor
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806
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716
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Maintenance
materials
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167
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152
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Other
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2
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3
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Total allocated
expenses
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975
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871
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Total direct expenses
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1,896
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1,775
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Revenues in
excess of direct expenses
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$
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3,278
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$
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2,702
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See notes to abbreviated
financial statements.
F-3
RIVERVIEW WASTEWATER SYSTEM
NOTES TO ABBREVIATED FINANCIAL STATEMENTS
JANUARY 31, 2008 AND DECEMBER 31, 2007 AND 2006
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Nature of
Business
The Riverview Wastewater
System (Riverview) consists of approximately 50 miles of wastewater
collection sewers and a 1.5 million gallons per day tertiary wastewater
treatment plant. Riverview serves portions of Jefferson and Shelby Counties in
Alabama and is located from the Perimeter Park development in southeast
Jefferson County to the Highland Lakes development in northwest Shelby County,
along the U.S. Highway 280 corridor. The service area covers approximately
4,860 acres of developed residential and light commercial properties, the
majority of which are single-family residential homes, apartments, and
condominiums, with limited commercial development support facilities. As of December 31,
2007, Riverview served approximately 12,000 residents through approximately
4,100 connections.
As of December 31,
2007, Riverview was owned and operated by the Birmingham Waterworks and Sewer
Board, a stand-alone non-profit entity (BWWSB) established in 1951 as a
public corporation under a charter by a municipal government agency. BWWSB owns
and operates two businesses: a water utility serving approximately 600,000
residents and a wastewater collection system and treatment plant (commonly
referred to collectively as a wastewater utility) serving approximately 12,000
residents. The water and wastewater utilities are both rate-regulated public
utilities with defined service areas.
On January 31, 2008,
SWWC Utilities, Inc., a wholly-owned subsidiary of SouthWest Water Company
(SouthWest) purchased the assets and assumed the liabilities of Riverview for
$22,500,000.
Basis of
Presentation
BWWSB management has
represented to SouthWest that it did not operate Riverview as a stand-alone
business and that its independent public accountants have never been required
to audit and report separately on the operations or net assets of Riverview.
The accompanying abbreviated financial statements were prepared at the request
of SouthWest for the purpose of providing information it needed to comply with
the rules and regulations of the Securities and Exchange Commission. These
abbreviated financial statements are not intended to be a complete presentation
of Riverviews assets and liabilities nor its revenues and expenses. These abbreviated
financial statements are derived from BWWSBs historical accounting records
using the accounting policies further described below, which are in accordance
with the accounting principles generally accepted in the United States and are
not necessarily indicative of the results that would have been achieved if
Riverview had operated as a separate, stand-alone business.
F-4
RIVERVIEW WASTEWATER SYSTEM
NOTES TO ABBREVIATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2008 AND DECEMBER 31, 2007 AND 2006
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Basis of Presentation (Continued)
BWWSB can specifically identify
the assets and liabilities directly attributable to Riverview which were
acquired by SouthWest as well as Riverviews revenues and direct expenses. All
financing and administrative functions are performed by BWWSB on behalf of both
of its businesses. The assets and liabilities associated with these shared
activities are not being acquired or assumed by SouthWest.
The cost of shared
administrative functions such as billing and collections, customer service call
centers, general accounting, information technology, treasury, legal, public
relations, insurance and human resources are not allocated by BWWSB to its two
businesses because of the relative size of Riverview to the other businesses
not being acquired. BWWSB management has represented that there is practically
no incremental cost in providing these administrative services to Riverview,
which comprises less than 2% of the total customers served. Riverview does not
maintain its own bank accounts or debt structure, therefore, operating cash
flow and capital expenditure funding needs are provided by BWWSB. Riverview is
not responsible for any debt service and it is not charged interest.
BWWSB maintains
sufficient accounting records to prepare separate financial information for
Riverview with respect to the revenues and direct expenses associated with
Riverview for the years ended December 31, 2007 and 2006. BWWSB is unable
to provide sufficient accounting records to support its historical cost and net
book value of the assets acquired because those records have been destroyed. As
an Alabama municipal utility, BWWSB follows the record retention policies
administered by the Government Records Division of the Alabama Department of
Archives and History which requires the destruction of those transactional
records after seven years. As a result, it is not possible to prepare complete,
historical, stand-alone GAAP financial statements for Riverview.
As an alternative, the
abbreviated financial statements contained herein were prepared to assist
SouthWest in complying with the rules and regulations of the Securities
and Exchange Commission. The statement of assets acquired and liabilities
assumed as of January 31, 2008 is prepared based on the purchase price
allocation SouthWest will use to record the acquisition in its financial
statements. The statements of revenues and direct expenses for the years ended December 31,
2007 and 2006 are prepared based on historical information provided by BWWSB.
The abbreviated financial statements presented are not indicative of the
financial condition or results of operations of Riverview going forward due to
operational changes in the business and the omission of various shared
administrative and capital expenses outlined above.
F-5
RIVERVIEW WASTEWATER SYSTEM
NOTES TO ABBREVIATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2008 AND DECEMBER 31, 2007 AND 2006
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Use of
Estimates
The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates.
Utility
Plant
Utility plant assets are
carried at cost. The capitalized costs include the original purchase price and
direct costs of the acquisition such as legal, accounting, engineering, and
appraisal fees. The total capitalized costs were allocated among individual
asset categories based upon the estimated respective replacement costs, less
depreciation.
Revenue
Recognition
Operating revenues
consist primarily of charges for services and are reported at the estimated net
realizable amounts from customers for services rendered.
Direct
Expenses
There are two types of
direct expenses charged to Riverview: specifically identifiable expenses and
allocated expenses. Specifically identifiable expenses include electrical
power, direct labor and fringe, chemicals, supplies, etc. Allocated expenses
include allocations for supervision, labor, overhead, and maintenance-related
material. These functions are performed by the BWWSB on behalf of both of its
businesses and allocated to each business based on measures relevant to the
expenses being allocated which BWWSB believes are reasonable under the
circumstances.
Cash Flows
As outlined above,
Riverview does not maintain its own bank accounts or debt structure, therefore,
operating cash flow and capital expenditure funding needs are provided by
BWWSB. Riverview is not responsible for any debt service and it is not charged interest.
F-6
RIVERVIEW WASTEWATER SYSTEM
NOTES TO ABBREVIATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2008 AND DECEMBER 31, 2007 AND 2006
NOTE 2.
COMMITMENTS AND
CONTINGENCIES
Contractual
Agreements
In connection with
purchase of Riverview, Southwest assumed certain construction, installation and
inspection contracts from BWWSB. Future payments to construction and
engineering firms are expected to total approximately $4,100,000 as of January
31, 2008. Southwest expects the payments will be made during 2008.
F-7
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON SUPPLEMENTAL INFORMATION
The Board of Directors
SouthWest Water Company
Los Angeles, California
Our report on our audits
of the statement of assets acquired and liabilities assumed of the Riverview
Wastewater System acquired from the Birmingham Waterworks and Sewer Board (the
Company) as of January 31, 2008, as described in Note 1, and the
statements of revenues and direct expenses for the years ended December 31,
2007 and 2006 appears on page F-1. Those audits were conducted for the
purpose of forming an opinion on the basic abbreviated financial statements
taken as a whole. The following historical cost and accumulated depreciation of
the assets acquired and liabilities assumed of the Riverview Wastewater System
as of December 31, 2007 is presented for purposes of additional analysis
and is not a required part of the basic abbreviated financial statements. Such
information has not been subjected to the auditing procedures applied in the
audit of the basic abbreviated financial statements, and, accordingly, we
express no opinion on it.
/s/ Barfield Murphy Shank &
Smith, P.C.
Birmingham, Alabama
May 20, 2008
F-8
RIVERVIEW WASTEWATER SYSTEM
SUMMARY OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
DECEMBER 31, 2007 (UNAUDITED)
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December 31,
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|
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2007
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(Unaudited)
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(In thousands)
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ASSETS
ACQUIRED
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Utility plant:
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Cost
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$
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38,677
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Less accumulated
depreciation
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(12,740
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)
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Total assets
acquired
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25,937
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LIABILITIES
ASSUMED
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Total
liabilities assumed
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|
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NET
ASSETS ACQUIRED
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$
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25,937
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See report of independent
registered public accounting firm on supplemental information.
F-9
UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED FINANCIAL DATA
Forward-Looking Statements
Statements
contained in this section may be deemed to be forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. Such statements are
intended to be covered by the safe harbor for forward-looking statements
provided by the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are typically identified by words and phrases such
as anticipate, believe, belief, expect, estimate, project, plan, intend,
continue, predict, may, will, should, strategy, will likely
result, will likely continue, and similar expressions. These forward-looking
statements are based largely on managements expectations and are subject to a
number of uncertainties. Actual results could differ materially from these
forward-looking statements. Other than as required by applicable law, SouthWest
Water Company undertakes no obligation to publicly update or revise
forward-looking statements.
Basis of
Presentation
The unaudited condensed
pro forma consolidated balance sheet is presented to reflect the acquisition of
the Riverview Wastewater System (Riverview) as if it had occurred on December 31,
2007. The unaudited condensed pro forma consolidated statement of operations is
presented to reflect the acquisition of Riverview as if it had occurred on January 1,
2007.
The pro forma adjustments
are based upon available information and assumptions management believes are
reasonable under the circumstances. The unaudited condensed pro forma
consolidated financial data and accompanying notes should be read in
conjunction with our historical audited and unaudited financial statements and
related notes and the audited abbreviated financial information and related
notes of Riverview. The pro forma financial data does not purport to represent
what our actual results of operations or actual financial position would have
been if the transaction described above in fact occurred on such date or to
project our results of operations or financial position for any future period
or date.
P-1
UNAUDITED
CONDENSED PRO FORMA CONSOLIDATED FINANCIAL DATA
CONSOLIDATED BALANCE SHEET
December 31, 2007
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SouthWest
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Riverview
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|
|
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|
Water
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Assets
|
|
Pro Forma
|
|
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(In thousands)
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Historical (1)
|
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Acquired (2)
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Adjustments
|
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Pro Forma
|
|
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Assets
|
|
|
|
|
|
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Current Assets:
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|
|
|
|
|
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Cash and cash
equivalents
|
|
$
|
2,950
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$
|
|
|
$
|
|
|
$
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2,950
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Accounts
receivable, net
|
|
26,005
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|
|
|
|
|
26,005
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Assets held for
sale
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|
16,013
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|
|
|
|
16,013
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|
Other current assets
|
|
16,617
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|
|
|
|
|
16,617
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|
Total current
assets
|
|
61,585
|
|
|
|
|
|
61,585
|
|
|
|
|
|
|
|
|
|
|
|
Property, Plant
and Equipment, Net:
|
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|
|
|
|
|
|
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Regulated
utilities
|
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399,146
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25,937
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|
(2,607
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)(3)
|
422,476
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Non-regulated
operations
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|
18,757
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|
|
|
|
|
18,757
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Total property,
plant and equipment, net
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|
417,903
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|
25,937
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|
(2,607
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)
|
441,233
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|
|
|
|
|
|
|
|
|
|
|
Other Assets:
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
17,349
|
|
|
|
|
|
17,349
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|
Intangible
assets
|
|
2,539
|
|
|
|
|
|
2,539
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|
Other assets
|
|
17,033
|
|
|
|
|
|
17,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
516,409
|
|
$
|
25,937
|
|
$
|
(2,607
|
)
|
$
|
539,739
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders Equity
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
14,930
|
|
$
|
|
|
$
|
|
|
$
|
14,930
|
|
Liabilities
related to assets held for sale
|
|
4,297
|
|
|
|
|
|
4,297
|
|
Current portion
of long-term debt
|
|
1,937
|
|
|
|
|
|
1,937
|
|
Other current
liabilities
|
|
25,020
|
|
|
|
|
|
25,020
|
|
Total current
liabilities
|
|
46,184
|
|
|
|
|
|
46,184
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Debt:
|
|
|
|
|
|
|
|
|
|
Revolving credit
facility
|
|
51,000
|
|
|
|
23,330
|
(4)
|
74,330
|
|
Other long-term
debt
|
|
94,353
|
|
|
|
|
|
94,353
|
|
Total long-term
debt
|
|
145,353
|
|
|
|
23,330
|
|
168,683
|
|
|
|
|
|
|
|
|
|
|
|
Other
Liabilities and Deferred Credits:
|
|
|
|
|
|
|
|
|
|
Deferred income
taxes
|
|
28,102
|
|
|
|
|
|
28,102
|
|
Advances for
construction
|
|
9,210
|
|
|
|
|
|
9,210
|
|
Contributions in
aid of construction
|
|
115,442
|
|
|
|
|
|
115,442
|
|
Other
liabilities and deferred credits
|
|
12,924
|
|
|
|
|
|
12,924
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders
equity
|
|
159,194
|
|
|
|
|
|
159,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
516,409
|
|
$
|
|
|
$
|
23,330
|
|
$
|
539,739
|
|
See
accompanying notes to unaudited condensed pro forma consolidated financial
data.
P-2
UNAUDITED
CONDENSED PRO FORMA CONSOLIDATED FINANCIAL DATA
STATEMENT OF OPERATIONS
Year Ended December 31, 2007
|
|
SouthWest
|
|
Riverview
|
|
|
|
|
|
|
|
Water
|
|
Revenue and
|
|
Pro Forma
|
|
|
|
(In thousands)
|
|
Historical (1)
|
|
Expenses (5)
|
|
Adjustments
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Utility Group
|
|
$
|
93,370
|
|
$
|
5,174
|
|
$
|
|
|
$
|
98,544
|
|
Services Group
|
|
123,977
|
|
|
|
|
|
123,977
|
|
Total revenues
|
|
217,347
|
|
5,174
|
|
|
|
222,521
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Utility Group
operating expenses
|
|
52,765
|
|
1,896
|
|
587
|
(6)
|
55,248
|
|
Services Group
operating expenses
|
|
107,884
|
|
|
|
|
|
107,884
|
|
Selling, general
and administrative expenses
|
|
36,624
|
|
|
|
120
|
(7)
|
36,744
|
|
Impairment of
goodwill
|
|
17,215
|
|
|
|
|
|
17,215
|
|
Total expenses
|
|
214,488
|
|
1,896
|
|
707
|
|
217,091
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
2,859
|
|
3,278
|
|
(707
|
)
|
5,430
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
(7,696
|
)
|
|
|
(1,571
|
)(8)
|
(9,267
|
)
|
Interest income
|
|
618
|
|
|
|
|
|
618
|
|
Other, net
|
|
(6
|
)
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
Income (loss)
from continuing operations before income taxes
|
|
(4,225
|
)
|
3,278
|
|
(2,278
|
)
|
(3,225
|
)
|
Provision for
income taxes
|
|
795
|
|
|
|
384
|
(9)
|
1,179
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss)
from continuing operations
|
|
(5,020
|
)
|
3,278
|
|
(2,662
|
)
|
(4,404
|
)
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
dividends
|
|
(24
|
)
|
|
|
|
|
(24
|
)
|
|
|
|
|
|
|
|
|
|
|
Income (loss)
from continuing operations applicable to common stockholders
|
|
$
|
(5,044
|
)
|
$
|
3,278
|
|
$
|
(2,662
|
)
|
$
|
(4,428
|
)
|
|
|
|
|
|
|
|
|
|
|
Loss per common
share from continuing operations applicable to common stockholders:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.21
|
)
|
|
|
|
|
$
|
(0.18
|
)
|
Diluted
|
|
(0.21
|
)
|
|
|
|
|
(0.18
|
)
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
24,101
|
|
|
|
|
|
24,101
|
|
Diluted (10)
|
|
24,101
|
|
|
|
|
|
24,101
|
|
See
accompanying notes to unaudited condensed pro forma consolidated financial
data.
P-3
UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED FINANCIAL DATA
NOTES TO
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED FINANCIAL DATA
1)
Reflects the
historical financial position and results of operation of SouthWest Water
Company derived from its audited historical financial statements included in
its Form 10-K for year ended December 31, 2007 filed on March 31,
2008. Those audited financial statements and accompanying notes should be read
in conjunction this pro forma financial data.
2)
Reflects the
unaudited historical cost, net of accumulated depreciation, of Riverview assets
acquired as of December 31, 2007.
3)
Reflects the
adjustment required to reduce the historical net carrying value of the
Riverview assets acquired to a $23.3 million fair value based on the total
purchase price paid to acquire the assets ($22.5 million in cash at closing
plus approximately $0.8 million of acquisition related expenses).
The purchase price
allocation is preliminary and may change upon completion of the final
valuations of the assets acquired, including the final determination of the
amount of asset retirement obligations assumed, if any. We expect these amounts
will be finalized by December 31, 2008.
Changes in the
purchase price allocation may result in additional asset classifications that
would affect the remaining expected useful life over which the assets are
depreciated (see 6 below) but would not change the amount allocated. The amount
of the asset retirement obligation recorded, if any, would be completely offset
by a regulated utility asset of the same amount since any amounts incurred
would be recoverable from customers through rates charged in future periods.
4)
Reflects borrowings
under the revolving credit facility to acquire the Riverview assets.
5)
Reflects the audited
historical revenues and direct expenses for Riverview. Excludes depreciation
and costs for administrative functions such as accounting, billing, credit and
collection, customer call centers and depreciation that were not allocated to
Riverview by its former owner.
P-4
UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED FINANCIAL DATA
NOTES TO UNAUDITED CONDENSED PRO
FORMA CONSOLIDATED FINANCIAL DATA
(CONTINUED)
6)
Reflects depreciation
expense based upon the fair value of the assets acquired and their remaining
expected useful lives as of the acquisition date as follows:
Structures and
improvements
|
|
25 years
|
|
Collection
sewers force
|
|
25 years
|
|
Collection
sewers gravity
|
|
50 years
|
|
Pump stations
|
|
25 years
|
|
The depreciable lives are
preliminary estimates and may change upon completion of the final valuations of
the assets acquired, which includes the depreciable categories to which they
are assigned. Depreciable categories with a remaining expected useful life of
less than 25 years may be created, which would increase depreciation expense.
The impact of any changes is not expected to be material.
7)
Reflects additional
expenses for administrative functions we expect we will incur for the cost of
functions that were not allocated to Riverview by its former owner. The
additional expenses are based on our experience with similar acquisitions we
have completed in prior periods under similar circumstances.
8)
Reflects additional
interest expense, net of a reduction in unused credit facility fees, resulting
from the $23.3 million of borrowings related to the acquisition at the 6.88%
incremental annual effective interest rate in effect during the year ended December 31,
2007.
The annual rate of
interest charged on the credit facility is variable, at our option, based on a
margin either over the LIBOR rate or under the prime rate. The weighted average
interest rate on the $84.5 million of borrowings outstanding under the credit facility
was 3.51% on January 31, 2008, the date the acquisition occurred. A 0.125%
(125 basis points) change in interest rates charged would change annual
interest expense by approximately $106,000 ($65,000, net of tax).
9)
Reflects an
additional provision for income taxes resulting from the acquisition of
Riverview at our 38.38% combined federal and state statutory effective tax rate
for the year ended December 31, 2007. Riverview was not a stand-alone tax
paying entity prior its acquisition therefore the adjustment reflects the
incremental taxes we would have likely incurred on the pre-tax income of
Riverview, net of the pro forma adjustments.
10)
Excludes 318,000 of
shares of common stock considered to be antidilutive because the Company
incurred a loss during the period.
P-5
Southwest Water (NASDAQ:SWWC)
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Southwest Water (NASDAQ:SWWC)
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