0000898430-01-502440.txt : 20011008
0000898430-01-502440.hdr.sgml : 20011008
ACCESSION NUMBER: 0000898430-01-502440
CONFORMED SUBMISSION TYPE: S-3
PUBLIC DOCUMENT COUNT: 3
FILED AS OF DATE: 20010919
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: SOUTHWEST WATER CO
CENTRAL INDEX KEY: 0000092472
STANDARD INDUSTRIAL CLASSIFICATION: WATER SUPPLY [4941]
IRS NUMBER: 951840947
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: S-3
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-69662
FILM NUMBER: 1740627
BUSINESS ADDRESS:
STREET 1: 225 N BARRANCA AVE
STREET 2: STE 200
CITY: WEST COVINA
STATE: CA
ZIP: 91791-1605
BUSINESS PHONE: 8189151551
MAIL ADDRESS:
STREET 1: 225 N BARRANCA AVENUE
STREET 2: SUITE 200
CITY: WEST COVINA
STATE: CA
ZIP: 91791-1605
FORMER COMPANY:
FORMER CONFORMED NAME: SUBURBAN WATER SYSTEMS
DATE OF NAME CHANGE: 19751202
S-3
1
ds3.txt
FORM S-3
As filed with the Securities and Exchange Commission on September 19, 2001
Registration No. 333-_________
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
SOUTHWEST WATER COMPANY
(Exact name of registrant as specified in its charter)
Delaware 95-1840947
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
225 North Barranca Avenue, Suite 200
West Covina, California 91791-1605
(626) 915-1551
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Peter J. Moerbeek
Chief Financial Officer
Southwest Water Company
225 North Barranca Avenue, Suite 200
West Covina, California 91791-1605
(626) 915-1551
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
James W. Daniels
Latham & Watkins
650 Town Center Drive, 20th Floor
Costa Mesa, California 92626
(714) 540-1235
Approximate date of commencement of proposed sale to the public: From time to
time after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or reinvestment plans, please check the following box. [_]
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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) 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. [_]
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. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of Securities to be Amount to be Offering Price per Aggregate Offering Amount of
Registered Registered (1) Unit (1) (2) (3) Price (2) (3) Registration Fee (4)
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01
per share (5) 91,981 shares $13.15 $1,209,550 $303
---------------------------------------------------------------------------------------------------------------------------------
(1) This Registration Statement shall also cover any additional shares of
common stock which may become issuable by reason of any stock dividend,
stock split, recapitalization or other similar transaction effected without
the receipt of considerations which results in an increase in the number of
the outstanding common shares of the Company.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
(3) Based upon the average of the high and low prices of shares of common stock
reported on the Nasdaq National Market on September 17, 2001.
(4) Calculated in accordance with Rule 457(o) under the Securities Act of 1933.
(5) Pursuant to Southwest Water Company's Rights Agreement dated April 6, 1998,
each share of common stock being registered in this prospectus includes one
preferred share purchase right. Prior to the occurrence of specific
events, the preferred share purchase rights will not be exercisable or
evidenced separately from the common stock.
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, or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
SUBJECT TO COMPLETION DATED SEPTEMBER 19, 2001
[GRAPHIC]
91,981 SHARES
SOUTHWEST WATER COMPANY
COMMON STOCK
On August 31, 2001, we issued 91,981 shares of our common stock to
shareholders of Operations Technologies, Inc., a Georgia corporation, or OpTech,
in connection with our acquisition of 90% of the outstanding shares of OpTech.
This prospectus may be used by former shareholders of Optech to resell the
common shares received by them in the OpTech acquisition transaction. We will
not receive any proceeds from the sale of shares covered by this prospectus.
See "Plan of Distribution."
Our common stock is traded on the Nasdaq National Market under the symbol
"SWWC". The last reported sales price of our common stock on September 17, 2001
was $13.30 per share.
Investing in our common stock involves a high degree of risk. See "Risk
Factors" beginning on page 5.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
The date of this prospectus is _________ ___, 2001.
TABLE OF CONTENTS
Forward-Looking Statements............................... 3
Prospectus Summary....................................... 4
Risk Factors............................................. 5
Southwest Water Company.................................. 9
Use of Proceeds.......................................... 11
Selling Stockholders..................................... 11
Plan of Distribution..................................... 12
Common Stock Dividends and Price Range................... 14
Description of Common Stock.............................. 15
Legal Matters............................................ 19
Experts.................................................. 19
Where You Can Find More Information...................... 20
FORWARD-LOOKING STATEMENTS
In addition to historical information, we have made forward-looking statements
in this prospectus and in the documents incorporated by reference in this
prospectus, such as those pertaining to our capital resources and performance of
our operations. "Forward-looking statements" are projections, plans, objectives
or assumptions about us. Forward-looking statements involve numerous risks and
uncertainties, and you should not place undue reliance on these statements
because we cannot assure you that the events or circumstances reflected in these
statements will actually occur. Forward-looking statements can be identified by
the use of forward-looking terminology such as "believes," "expects," "may,"
"will," "should," "seeks," "approximately," "intends," "plans," "pro forma,"
"estimates," "anticipates" or the negative thereof or other variations thereof
or comparable terminology, or by discussions of strategy, plans or intentions.
Forward-looking statements are necessarily dependent on assumptions, data or
methods that may be incorrect, imprecise or incapable of being realized. The
following factors, among others set forth in our filings with the Securities and
Exchange Commission or in our press releases, could cause actual results and
future events to differ materially from those set forth or contemplated in our
forward-looking statements:
. Risks related to our common stock;
. Weather and seasonal variations;
. Competition;
. Failure to effectively and efficiently manage our growth;
. Rate regulation and rates of return;
. Certain litigation and other risks regarding water quality and
contamination;
. Financing capital expenditures; and
. Volatile operating costs.
Readers are cautioned not to place undue reliance on forward-looking statements.
We assume no obligation to update forward-looking statements.
3
PROSPECTUS SUMMARY
The following summary sets forth certain pertinent facts and may not contain
all of the information that might be important to you. You should read the
entire prospectus, as well as the documents incorporated by reference in this
prospectus, before making an investment decision. In particular, see the
information presented under the captions "Southwest Water Company," "Risk
Factors," "Description of Common Stock" and "Where You Can Find More
Information." All references in this prospectus to "Southwest Water Company,"
the "Company," "our Company," "we," "us," or "our" mean and include Southwest
Water Company and its subsidiaries.
Southwest Water Company
We provide a broad range of utility and utility management services. We own
regulated water and wastewater utilities that we operate and manage and that
provide approximately 42% of our gross revenue. In addition, we operate and
manage water and wastewater treatment facilities owned by cities, municipal
utility districts, public agencies and private entities and also provide utility
submetering, installation and billing and collection services. Approximately 58%
of our gross revenue is from this market segment.
We conduct our business through seven subsidiaries: Suburban Water Systems,
New Mexico Utilities, Windermere Utility Company, Hornsby Bend Utility Company,
ECO Resources, Operations Technologies and Master Tek International. Our
geographical coverage includes water and wastewater utility operations, as well
as contract operations, in California, New Mexico, Mississippi, Georgia and
Texas. We provide utility submetering and billing and collection services in 28
states nationwide.
Our principal executive offices are located at 225 North Barranca, Suite 200,
West Covina, CA 91791-1605, and our telephone number is (626) 915-1551.
Acquisition of Operations Technologies
In August 2001, we completed the acquisition of 90% of Operations
Technologies, Inc., or OpTech, a Georgia corporation, for a combination of
stock, promissory notes and cash. The stock component consisted of 91,981 shares
of our common stock, while the promissory note and cash components consisted of
$3,000,000 and $3,530,000, respectively. The acquisition agreement provided that
we would register for resale the shares of our common stock we issued to the
shareholders of OpTech. Prior to this registration, all of the shares received
by the former OpTech shareholders were "restricted securities" under the
Securities Act of 1933, as amended, (the "Securities Act").
4
RISK FACTORS
You should carefully consider the following risk factors, in addition to the
other information in this prospectus and the documents incorporated by reference
in this prospectus, before investing in our common stock. You should recognize
that risks in addition to those set forth may be significant presently or in the
future, and the risks described may affect your investment in our common stock
to a greater or lesser extent than indicated.
Risks Related to our Common Stock
Our outstanding indebtedness may adversely affect our financial condition and
the value of our common stock.
We have a substantial amount of indebtedness, which bears interest at various
rates. Our leveraged position poses risks to the holders of our common stock,
including the risks that:
. A substantial portion of our cash flow will be dedicated to the
payment of interest on our existing and future indebtedness;
. Our leveraged position may impair our ability to obtain financing in
the future or to make dividend payments on our common stock; and
. Our leveraged position may make us more vulnerable to economic
downturns and may limit our ability to withstand competitive
pressures.
We are a holding company that depends on cash flow from our subsidiaries to meet
our debt service obligations.
As a holding company, we conduct all of our operations exclusively through our
subsidiaries and our only significant assets are our investments in these
subsidiaries. This means that we are dependent on dividends or other
distributions of funds from our subsidiaries to meet our debt service and other
obligations, including payment of dividends to the holders of our common stock.
Our subsidiaries are separate legal entities and have no obligation to pay any
dividends due on our common stock or to provide us with funds for our payment
obligations, whether by dividends, distributions, loans or other payments. In
addition, any payment of dividends, distributions, loans or advances by our
subsidiaries to us could be subject to statutory or contractual restrictions.
Payments to us by our subsidiaries will also be contingent upon our
subsidiaries' earnings and business considerations.
The market price of our shares of common stock may fluctuate.
The market price of our common stock may fluctuate depending on many factors,
such as the stock market in general and our performance. We do not have direct
control over all of the factors that affect our stock price.
Risks Related To Our Business
Our regulated and non-regulated operations are subject to weather and
seasonality considerations.
Our regulated water utility operations are seasonal. Therefore, the results of
operations for one period do not indicate results to be expected in another
period. Rainfall and weather conditions affect our utility operations, with most
water consumption occurring during the third quarter of each year when weather
tends to be hot and dry. Drought conditions may result in lower revenue due to
consumer conservation efforts and a shortage of water supply. Drought
conditions may also result in increased water costs to us and adversely affect
our profitability. Conversely, unusually wet conditions may result in decreased
customer demand, lower revenues and lower profit to us.
5
Our contract operations business conducted by our subsidiaries ECO Resources
and OpTech, can also be seasonal in nature. For example, heavy rainfall limits
ECO Resources' and OpTech's ability to perform certain billable work such as
pipeline maintenance, manhole rehabilitation and other outdoor services.
The water, wastewater management and utility submetering businesses are highly
competitive.
The water and wastewater management business is highly competitive in the
United States. Municipal employees perform the majority of water and wastewater
utility operations. A significant portion of ECO Resources' and OpTech's
marketing effort requires demonstrating to elected officials and municipal
authorities that outsourcing utility operations is beneficial to a city. We
cannot assure you that any city will choose to outsource or will select ECO
Resources or OpTech as its operator at the end of the sales effort. Although
industry renewal rates are high, municipalities periodically change operators or
terminate outsourcing at the end of a contract. ECO Resources' or OpTech's
inability to renew their existing contracts could have a material adverse impact
on us. In addition, a city or municipal utility district could cancel a long-
term contract without notice. This would result in loss of revenue and operating
profits and could involve us in litigation if a breach of contract occurs.
ECO Resources and OpTech compete with several larger companies whose size,
customer base, technical expertise and capital resources may restrict the
ability of ECO Resources or OpTech to compete successfully for certain
operations and maintenance contracts. The recent success of ECO Resources and
OpTech is a result of their ability to obtain contracts from smaller cities,
other public agencies and municipal utility districts (with populations up to
50,000). We cannot assure you that ECO Resources or OpTech will be able to
effectively compete in this market in the future.
Master Tek International's, or Master Tek's, utility submetering,
installation, billing and collection business is also highly competitive. While
industry contract renewal rates are high, management companies and owners of
multi-family dwellings periodically change billing and collection companies. In
addition, Master Tek competes with several larger competitors whose size,
customer base and capital resources may restrict Master Tek's ability to compete
successfully for certain contracts. This is a relatively new industry and may
attract other large competitors.
We may fail to effectively manage growth.
During the past few years, we have expanded our business both through internal
growth and through acquisitions. We are actively seeking acquisitions and joint
ventures in each of our business lines. The success of our future business
development and growth opportunities depends on our ability to attract and
retain experienced and qualified persons to operate and manage our new business
ventures. We cannot assure you that we will successfully manage our growth, and
failure to do so could have a material adverse effect on our future results of
operations.
The rates we charge in our regulated businesses are established by governmental
agencies.
Our water utilities are all subject to regulation by governmental agencies in
their respective jurisdictions. Rates established by these agencies are
intended to permit each utility to recover its costs and earn a reasonable rate
of return on common equity. Each utility may file and process general rate
applications on a periodic basis. Since the established rates may be in effect
for several years, the utilities attempt to anticipate cost increases and apply
for rates sufficient to permit recovery of those cost increases when incurred.
Suburban Water Systems, or Suburban, has been directed by the California
Public Utilities Commission, or the CPUC, to file a general rate application by
March 2002. Windermere Utility Company filed for a general rate increase in May
2001, and new rates under the pending filing became effective June 4, 2001
subject to final regulatory approval. A date for the hearing has not yet been
set by the Texas Natural Resources Conservation Commission, or TNRCC. New
Mexico Utilities and Hornsby Bend Utility Company are not currently seeking any
rate increases; however, future construction expenditures and increasing
operating expenses may result in periodic requests for rate increases. To date,
our utility subsidiaries have been successful in obtaining rates sufficient to
cover their costs and provide a sufficient rate of return. We cannot assure you
that current or future
6
rate applications will result in favorable rates or that any rate increases
permitted will be granted in time to offset cost increases as they occur.
Failure to achieve timely and favorable rate increases could adversely affect
our profitability.
Our business is subject to litigation risks concerning water quality and
contamination.
We have been named as defendants in several lawsuits alleging water
contamination in the Main San Gabriel Basin. These lawsuits list hundreds of
plaintiffs who receive or have received water from the Main San Gabriel Basin
and list as defendants several alleged industrial polluters and all or most of
the non-municipally owned water producers in the Main San Gabriel Basin. The
plaintiffs allege that water consumers have suffered physical injuries or death
as the result of pollutants in the water delivered to them. In September 1999,
the California 2nd District Court of Appeal dismissed certain of the lawsuits.
The California Supreme Court has agreed to review this decision. We anticipate
that the California Supreme Court will hear oral arguments during 2001. The
several lawsuits not involved in the appeal are currently inactive pending the
decision of the California Supreme Court. We have requested defense and
indemnification from our liability insurance carriers for these lawsuits.
Several of the liability insurance carriers are currently absorbing the costs of
defense of the lawsuits.
The basis for the dismissal by the Court of Appeal is that the CPUC has final
jurisdiction over service and water quality matters. In 2000, the CPUC completed
a review that included all of the larger regulated water producers in the Main
San Gabriel Basin. The CPUC concluded that these water producers met all state
water standards. If the California Supreme Court upholds the dismissal of the
lawsuits, it is unknown whether the plaintiffs will seek recourse through new
legislation or through the CPUC and what effect, if any, this may have on us.
If the California Supreme Court permits these lawsuits to proceed, a number of
events will occur. First, the lawsuits would be tried on their merits. If the
lawsuits were decided against us, and if the results were upheld on appeal, we
would then seek relief from our insurance carriers. If we were unsuccessful, we
would file for a rate increase from the CPUC. If we were unable to obtain rate
relief, our financial results could be adversely affected due to costs incurred,
including judgments or settlements, defense costs and additional costs to
improve water quality. We can give you no assurance as to the outcome of this
process.
Over the years, Suburban's operations have been impacted by three categories
of contaminants present in quantities exceeding state and Federal water
standards. In 1979, volatile organic compounds were detected; in 1997,
perchlorate was detected; and in 1998, the substance N-nitrosodimethylamine, or
NDMA, was detected. These contaminants were discovered in the Main San Gabriel
Basin, the primary source of groundwater for Suburban. Through various methods,
including removal of wells from Suburban's distribution system and the
construction of water treatment facilities, water currently delivered to
Suburban's customers meets all applicable state and Federal standards. However,
we cannot assure you that, in the future, Suburban will be able to reduce the
amounts of any contaminants in its wells to acceptable levels, or that the costs
of such removal will be fully recoverable from Suburban's customers through rate
relief.
Suburban has taken measures to ensure that it has an adequate supply of
potable water that meets all applicable governmental standards, though the costs
of such water may be higher than the water Suburban produces. That supply
includes arrangements for water purchases from other water purveyors and from
the Metropolitan Water District, which imports water from both the Colorado
River and from the California State Water Project. The cost of purchased water
could have a significant adverse effect on our results of operations if Suburban
is unsuccessful in obtaining rate relief.
The Environmental Protection Agency, or the EPA, has conducted numerous
studies of underground water in the Main San Gabriel Basin and in 1984
designated the Main San Gabriel Basin as a Super-fund site. Several large
industrial companies were named as potentially responsible parties for allegedly
causing the contamination. Suburban's facilities were not named as sources of
the contamination. However, certain government officials have suggested that,
because of their pumping operations, the Main San Gabriel Basin water producers
may have clean-up liability under certain environmental statutes. The EPA is
expected to continue to identify sources of contamination in order to establish
legal responsibility for clean-up costs. Currently, neither the EPA nor any
other governmental agency has identified Suburban or other water producers as
potentially responsible parties. We cannot assure you, however, that Suburban
will not be
7
identified as a potentially responsible party in the future. In that case, our
future results of operations could be adversely affected if Suburban is required
to pay clean-up costs and is not allowed to recover such costs from its
customers through rate relief.
Costs associated with testing of Suburban's water supplies have increased and
are expected to increase further as regulatory agencies adopt additional
monitoring requirements. Suburban may use alternate sources of water, or may
request rate relief from the CPUC to offset these rising costs. The potential
impact of these costs and the costs associated with any other contaminant
remediation on Suburban's results of operations is not fully known at this time.
Such costs could be significant and could have an adverse effect on our future
results of operations if Suburban is unsuccessful in obtaining rate relief.
Although we believe that all water currently delivered by Suburban meets all
applicable governmental standards, we cannot assure you that we have identified
all water quality issues that may affect us now or in the future. We also
cannot assure you that governmental authorities will not seek to recover clean-
up costs from Suburban in the future, or that potentially responsible parties
will not seek contributions from Suburban for clean-up costs. These matters
could have an adverse effect on our future results of operations if Suburban
were unable to obtain rate relief.
Our water utility business requires significant capital expenditures.
The water utility business is capital intensive. On an annual basis, our water
utilities spend significant sums for additions to or replacement of property,
plant and equipment. During calendar years 2000, 1999 and 1998, our combined
utilities spent $10,768,000, $9,509,000, and $7,097,000, respectively, for these
purposes. Our combined budget for calendar year 2001 for these purposes is
approximately $13,000,000.
Our non-regulated businesses may require funds for capital projects in the
future. Recently, ECO Resources has looked to expand its operations by financing
or joint venturing water plants or treatment plants with customers and potential
customers. Future growth of OpTech may require funds for similar financing or
joint venture arrangements. Growth of Master Tek may also require capital for
installation of telemetering equipment.
We obtain the funds for these capital projects from operations, contributions
by developers and others and advances from developers (which must be repaid). We
also periodically borrow money for these purposes. We maintain bank lines of
credit that we can use for these purposes, and we have substantial capacity to
issue secured debt. We cannot assure you that these sources will continue to be
adequate or that the cost of funds will remain at levels permitting us to remain
profitable. If adequate, affordable funds are not available, certain capital
projects may be deferred. Continued deferral of such projects may in turn affect
our revenue and profitability.
The costs of producing our products and services are volatile and have been
increasing.
The cost of water (whether produced from our own wells or purchased from
outside sources), electric power and natural gas represents a substantial
portion (approximately 47% in 2000) of the combined operating costs of our water
utilities. Purchased water is significantly more expensive than water produced
by our utilities. As a result, each utility attempts to produce as much as
possible of the water it delivers and to use water purchases only to supplement
its own production. Factors such as drought, water contamination and customer
demand can increase water purchases and the overall cost of water for our
utilities. Such factors are not within our control and may decrease our
profitability if we are unable to obtain rate increases from a regulatory
agency.
Electric power costs in California have increased dramatically in the last
year and are likely to continue to increase in the near term. The cost of
natural gas has increased significantly in the United States in recent years.
Our response to these increases is to utilize energy efficient techniques,
install new and better equipment and seek rate relief from the regulating
agencies. We may not, however, have the ability to completely offset the effect
of these cost increases. Such increases are not within our control and may
decrease our profitability if we are unable to obtain rate increases from
regulatory agencies.
8
SOUTHWEST WATER COMPANY
Southwest Water Company was incorporated in California in 1954 and
reincorporated in Delaware in 1988. Southwest Water Company is a publicly held
holding company and conducts no business operations itself. All operations are
conducted through our subsidiaries which provide a broad range of services
including water production and distribution, wastewater collection and treatment
and utility submetering. We own regulated public water utilities. State
regulatory agencies oversee the operations of our utilities as well as establish
the rates that we can charge for our services. We also operate and manage water
and wastewater treatment facilities which are owned by cities, public agencies,
municipal utility districts and private companies under contract. These
facilities are also subject to regulatory oversight; however, the pricing of our
services is not subject to regulation. We serve more than 1.5 million people in
29 states nationwide.
We own and operate water and wastewater utilities through four subsidiaries.
Suburban, New Mexico Utilities and Hornsby Bend Utility Company are wholly owned
and we also own 80% of Windermere Utility Company. Through two subsidiaries, ECO
Resources and 90%-owned OpTech, we operate and manage water and wastewater
treatment facilities owned by cities, public agencies, municipal utility
districts and private entities. Nationwide, we provide utility submetering and
billing and collection services through our 80%-owned subsidiary, Master Tek.
Suburban Water Systems
Suburban is a regulated public water utility that produces and supplies water
for residential, commercial, industrial and public authority use, and for
private and public fire protection service under the jurisdiction of the CPUC.
Suburban's service area contains a population of approximately 300,000 people
within Los Angeles and Orange Counties, California. Suburban owns 14 active
wells that pump water from two major groundwater basins in the Southern
California coastal watershed. Suburban also purchases water from two mutual
water companies that also produce their water from one of the basins. In
addition, Suburban purchases water from the San Gabriel Municipal Water District
and has interconnections with other water purveyors for supplemental and
emergency sources of supply. During 2000, Suburban accounted for approximately
35% of our total revenue.
New Mexico Utilities
New Mexico Utilities is a regulated public water utility that provides water
supply and sewage collection services for residential, commercial, irrigation
and fire protection customers under the jurisdiction of the New Mexico Public
Regulation Commission. New Mexico Utilities' service area contains a population
of approximately 28,000 people within the northwest portion of the City of
Albuquerque, New Mexico and the northern portion of Bernalillo County, New
Mexico. New Mexico Utilities owns five wells and four reservoirs. New Mexico
Utilities' wells produce water from the Rio Grande Underground Basin. During
2000, New Mexico Utilities accounted for approximately 6% of our total revenue.
Windermere Utility Company and Hornsby Bend Utility Company
Windermere Utility Company and Hornsby Bend Utility Company are two small
public water utilities operating near Austin, Texas. Both are regulated public
water utilities that provide water supply and sewage collection services for
residential, commercial, irrigation and fire protection customers under the
jurisdiction of the TNRCC. Together, these utilities currently provide water
supply and sewage collection and treatment services to approximately 4,800
customers. Their service areas are located near the city of Austin, Texas and
contain a population of about 17,000 people. During 2000, Windermere Utility
Company and Hornsby Bend Utility Company, which were acquired in October 2000,
accounted for approximately 1% of our total revenue.
9
ECO Resources
ECO Resources provides contract water and wastewater system management,
operations and maintenance services in the states of Texas, Mississippi, New
Mexico and California. ECO Resources' services include facility and equipment
maintenance and repair, sewer pipeline cleaning, water and wastewater
operations, billing and collection services and state-certified laboratory
analysis. ECO Resources does not own any of the water sources, water production
facilities, water distribution systems, wastewater collection systems or
wastewater treatment facilities that it operates for its clients. ECO Resources
has two distinct types of contractual relationships: time and material contracts
(primarily with municipal utility districts in Texas) and fixed fee operations
and maintenance contracts. Areas served by ECO Resources have an aggregate
population of approximately 580,000 people. During 2000, ECO Resources
accounted for approximately 52% of our total revenue.
Operations Technologies
OpTech, was acquired in August 2001, and provides contract water and
wastewater system management, operations and maintenance services and public
works services in the states of Georgia and Mississippi. OpTech's services
include facility and equipment maintenance and repair, water and wastewater
operations, street maintenance, public works services such as maintaining
ditches and repairing potholes, billing and collection services. OpTech does not
own any of the water systems, water production facilities, water distribution
systems, wastewater collection systems or wastewater treatment facilities that
it operates for its clients. OpTech's contracts are all fixed fee operations and
maintenance contracts. Areas served by OpTech have an aggregate population of
approximately 315,000 people. Since OpTech was acquired in August 2001, it did
not account for any of our total revenue in 2000.
Master Tek International
Master Tek is engaged in the utility submetering business, which involves the
installation of electronic equipment in apartments, condominiums, mobile home
parks and other multi-family dwellings to monitor each resident's usage of
various utilities. Submetering allows water, gas and electricity usage to be
measured and charged to each individual residential unit. In addition, Master
Tek provides billing, collection and customer relations services for these usage
charges. The billing process involves the transmission of utility usage data
via radio frequency and telephone lines to Master Tek's headquarters near
Denver, Colorado, where service representatives prepare bills and handle
customer inquiries. Currently, Master Tek provides service to approximately
140,000 dwelling units in 28 states throughout the country. During 2000, Master
Tek accounted for approximately 6% of our total revenue.
10
USE OF PROCEEDS
The selling stockholders will receive all of the proceeds from the sale of the
common stock sold pursuant to this prospectus. We will not receive any proceeds
from these sales.
SELLING STOCKHOLDERS
The following table sets forth specific information as of the date of this
prospectus with respect to the ownership by the selling stockholders of the
common stock offered for sale by this prospectus. The table identifies the
number of shares of common stock owned by the selling stockholders as of
September 10, 2001, which represents the maximum number of shares of common
stock that may be sold by the selling stockholders with this prospectus. The
selling stockholders may offer all, some or none of their shares of our common
stock. Accordingly, we cannot estimate the amount of common stock that will be
held by each selling stockholder upon termination of any of these sales made
pursuant to this prospectus. In addition, since the date the selling
stockholders provided information regarding their ownership of the shares, they
may have sold, transferred or otherwise disposed of all or a portion of their
shares of our common stock in transactions exempt from the requirements of the
Securities Act.
--------------------------------------------------------------------------------------------------------------------
Number of Shares
Number of Shares Owned Owned as a
Prior to the Offering and Percentage of the
Being Offered under this Outstanding Common
Selling Stockholder Prospectus (1) Stock
--------------------------------------------------------------------------------------------------------------------
Robert W. Monette 26,662 0.31%
Carl J. Pope 1,826 0.02%
Hancock Bank Custodian FBO Carl J. Pope IRA 34,443 0.40%
Carl Padgett 1,096 0.01%
Walter Hinkle 8,901 0.10%
Donald Simmons 2,905 0.03%
Bailey Wilkins 1,907 0.02%
Betty P. Wilkins 1,907 0.02%
Louise M. Shelton 1,907 0.02%
Hancock Bank Custodian FBO Theresa L. Shull IRA 4,767 0.05%
Stan Beck 5,660 0.06%
--------------------------------------------------------------------------------------------------------------------
___________________________
(1) Based on information available to us on September 10, 2001.
Each of the selling stockholders set forth above acquired their shares in
connection with our acquisition of 90% of OpTech in August 2001. Prior to our
acquisition of OpTech, Robert W. Monette held the position of President with
OpTech. Upon the consummation of the OpTech acquisition, OpTech became our 90%
owned subsidiary and Robert W. Monette remained President of OpTech and became a
Vice President of Southwest Water Company.
Prior to this registration, all of the shares received by the selling
stockholders in connection with the OpTech acquisition were "restricted
securities" under the Securities Act.
Information concerning the selling stockholders may change from time to time.
When necessary, any changed information will be set forth in a prospectus
supplement to this prospectus.
11
PLAN OF DISTRIBUTION
This prospectus relates to the offer and sale from time to time by the selling
stockholders of up to 91,981 shares of our common stock. We are registering the
offer and sale of these shares by the selling stockholders, but our registration
does not necessarily mean that any of these shares will be offered or sold by
the selling stockholders. We will not receive any proceeds from the sale of the
shares by the selling stockholders. All costs, expenses and fees in connection
with the registration of these shares will be borne by us.
The shares may be offered and sold at various times by the selling
stockholders. The selling stockholders will act independently of us in making
decisions with respect to these shares and may offer their shares in one of more
of the following transactions:
. on the Nasdaq National Market;
. in the over-the-counter market;
. in transactions other than on such exchanges or in the over-the-counter
market;
. in brokerage transactions;
. in block trades;
. through put or call options;
. in privately negotiated transactions;
. through the settlement of short sales;
. by pledge to secure debts and other obligations;
. in open market sales in reliance upon Rule 144 of the Securities Act;
. in connection with the writing of non-traded and exchange-traded call
options, in hedge transactions and in settlement of other transactions in
standardized or over-the-counter options; or
. in a combination of any of the above transactions.
These transactions may include block transactions in which the same broker
acts as agent for both sides of the trade. The shares may be sold in one or
more transactions at:
. fixed prices;
. prevailing market prices at the time of sale;
. varying prices determined at the time of sale; or
. negotiated prices.
Each of the selling stockholders reserves the sole right to accept and,
together with their agents, to reject in whole or in part any proposed purchase
of their shares.
The selling stockholders may sell their shares from time to time to purchasers
directly or through underwriters, dealers or agents, who may receive
compensation in the form of discounts, concessions or commissions from the
selling stockholders and/or the purchasers of the shares for whom they may act
as an agent (which compensation as to a particular broker-dealer might be in
excess of customary commissions). The selling stockholders have advised us that
they have not entered into any agreements, understandings or arrangements with
any underwriters or broker-dealers regarding the sale of their shares. To our
knowledge, there are currently no plans, arrangements or understandings between
any selling stockholder and any underwriter, broker-dealer or agent regarding
the sale of our common stock by the selling stockholders.
The selling stockholders and any broker-dealers or agents that participate in
the distribution of their shares may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, and any profit on the sale of
their shares by them and any commissions received by any broker-dealers or
agents might be deemed to be underwriting commissions under the Securities Act.
Selling stockholders who are deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act will be subject to the prospectus delivery
requirements of the Securities Act. We have informed the selling stockholders
that the anti-manipulative provisions of Regulation M promulgated under the
Securities Exchange Act of 1934, as amended, may apply to their sales in the
market.
12
With respect to a particular offering by the selling stockholders of their
shares, to the extent required, an accompanying prospectus supplement or, if
appropriate, a post-effective amendment to the registration statement of which
this prospectus is a part will be prepared and will set forth the following
information:
. the number of share of common stock to be offered and sold;
. the names of the selling stockholders;
. the respective purchase price and public offering prices and other material
terms of the offering;
. the names of any participating agents, broker-dealers or underwriters; and
. any applicable commission, discounts, concession and other items
constituting compensation from the selling stockholders.
We will pay all of our expenses incidental to registration, offering and sale
of the common stock to the public, but each selling stockholder will be
responsible for payment of commissions, concessions, fees and discounts of
underwriters, broker-dealers and agents, if any, and for all transfer taxes
applicable to the sale of the common stock.
13
COMMON STOCK DIVIDENDS AND PRICE RANGE
Our common stock is traded on the Nasdaq National Market under the symbol
"SWWC". The following table shows the range of market prices of our common stock
for the periods indicated. The prices shown reflect inter-dealer prices without
retail markup, markdown or commissions and may not necessarily represent actual
transactions. Our current quarterly dividend rate is $.056 per common share.
Market Price
Range
-------------- Dividends
High Low Paid Per Share
------ ------ ---------------
1999
----
First Quarter............................... $ 8.73 $ 6.67 $.043
Second Quarter.............................. $ 9.60 $ 5.90 $.043
Third Quarter............................... $14.37 $ 9.07 $.043
Fourth Quarter.............................. $14.90 $ 9.20 $.048
2000
----
First Quarter............................... $12.70 $ 8.40 $.048
Second Quarter.............................. $11.50 $ 8.30 $.048
Third Quarter............................... $11.20 $ 9.20 $.056
Fourth Quarter.............................. $13.40 $ 9.90 $.056
2001
----
First Quarter............................... $13.75 $11.50 $.056
Second Quarter.............................. $14.94 $11.70 $.056
Third Quarter (through September 17, 2001).. $15.62 $12.05 $.056*
___________
* $.056 represents the dividend we expect to pay per share of common stock for
the third quarter of 2001.
14
DESCRIPTION OF COMMON STOCK
Authorized Shares
Under our Certificate of Incorporation, we are currently authorized to issue
25,000,000 shares of common stock at a par value of $0.01 per share. As of
September 10, 2001, there were 8,718,767 shares of common stock issued and
outstanding. In addition, as of such date there were:
a) 615,315 shares of common stock reserved for issuance under our dividend
reinvestment and employee stock purchase plan;
b) 916,667 shares of common stock reserved for issuance under our stock option
plans;
c) 88,593 shares of common stock reserved for issuance upon the exercise of
certain stock purchase warrants issued in connection with the purchase of a
water system from the City of West Covina, California;
d) 562,500 shares, of which 300,000 to 562,500 shares of common stock which
may be issued at any time during the years 2005 through 2010 upon the
exercise of certain put and call stock rights issued in connection with the
purchase of the remaining minority interest in Windermere Utility Company;
and
e) 1,120,000 shares of common stock reserved for issuance upon the exercise of
certain convertible subordinate debentures due July 1, 2021.
We are also authorized to issue up to 3,000 shares of Series E Convertible
Preferred Stock as compensation to certain business brokers for obtaining water
and sewer contracts for our 99%-owned subsidiary, Inland Pacific Water Company
(IPWC). IPWC is primarily a marketing vehicle for contract operations in the
Inland Empire area of California. None of the Series E Convertible Preferred
Stock has been issued to date, and no contracts requiring such issuance appear
imminent at this time. Any Series E Convertible Preferred Stock, if issued,
would be entitled to dividends based upon an agreed formula. The Series E
Convertible Preferred Stock, if issued, would vest over the lives of the long-
term (10 to 15 year) water or sewer contracts obtained by the brokers and, to
the extent vested, would be convertible into our common stock at the rate of
1,000 shares of common stock for each share of Series E Convertible Preferred
Stock, subject to certain adjustments.
We are currently authorized to issue 250,000 preferred shares at a par value
of $.01 per share. As of September 10, 2001, there were 10,288 Series A
Preferred shares outstanding. Series A Preferred stockholders are entitled to
annual dividends of $2.625 per share and are entitled to five votes per share on
all matters voted on by the stockholders.
Common Stock
During the past four years, we increased the number of shares of common stock
outstanding through a series of stock splits and stock dividends. Since
December 31, 1997, the number of outstanding shares of our common stock has
increased from 3,330,207 shares to 8,718,767 shares as of September 10, 2001.
We cannot assure you that we will continue such stock splits and stock dividends
in the future.
Holders of our common stock are entitled to one vote for each share held on
all matters voted on by stockholders, including the election of directors. Upon
liquidation or dissolution, the holders of common stock will be entitled to
share ratably in the assets legally available for the distribution to
stockholders after payment of liabilities and subject to the prior rights of any
holders of preferred stock then outstanding. Holders of our common stock do not
have subscription, sinking fund, preemptive, redemption or conversion
privileges. The rights, preferences and privileges of holders of common stock
are subject to the rights of the holders of shares of any series of preferred
stock that is issued or may be issued in the future.
Under the Delaware General Corporation Law, we may pay dividends out of
"surplus" (as determined in accordance with the Delaware General Corporation
Law) or, if there is no surplus, out of net profits for the fiscal
15
year in which the dividends are declared and/or the preceding fiscal year
(subject to certain restrictions). Subject to the preferences or other rights of
any of our preferred stock that may be issued from time to time, holders of our
common stock are entitled to participate ratably in dividends on the common
stock as declared by our Board of Directors. The Board of Directors establishes
our dividend policy. Subject to legal and contractual restrictions, our Board's
decisions regarding dividends are based on all considerations that in its
business judgment are relevant at the time, including past and projected
earnings, cash flows, economic, business and securities market conditions and
anticipated developments concerning our business and operations. Currently we
pay dividends on a quarterly basis. Please see the section entitled "Common
Stock Dividends and Price Range" for information about the dividends paid during
the past two years. We cannot guarantee that, in the future, we will have funds
available to pay dividends, or that our Board of Directors will declare
dividends.
Transfer Agent and Registrar
The Transfer Agent and Registrar of our common stock is Mellon Investor
Services, LLC, P.O. Box 3315, South Hackensack, New Jersey, 07606 and their
phone number is (800) 356-2017.
Anti-takeover Effects of Certain Provisions
Our Certificate of Incorporation and Bylaws, the Delaware General Corporation
Law and the Stockholder Rights Plan, described below, contain provisions that
may discourage or delay the acquisition of control of our Company by means of a
tender offer, open market purchases, a proxy contest or otherwise.
Purposes of Provisions of Certificate of Incorporation and Bylaws
The relevant provisions of our Certificate of Incorporation and Bylaws are
intended to discourage certain types of transactions that may involve an actual
or threatened change of control of our Company and to encourage any person who
might seek to acquire control of our Company to negotiate with our Board. We
believe generally that the interests of our stockholders would be served best if
any change in control results from negotiations with our Board of the proposed
terms. However, to the extent that these provisions do discourage takeover
attempts, they could make it more difficult to accomplish transactions that are
opposed by the incumbent board and could deprive stockholders of opportunities
to realize takeover premiums for their shares.
The description below is a summary only. We encourage you to read our
Certificate of Incorporation, our Bylaws and our Stockholder Rights Plan, each
of which we have filed with the Securities and Exchange Commission, or SEC.
Classification of our Board
We have a classified Board of Directors, comprised of seven directors, divided
into three classes. The terms of the directors will expire as follows:
. the term of our one Class I director will expire at the annual meeting of
stockholders held in 2002;
. the term of our three Class II directors will expire at the annual meeting of
stockholders held in 2003; and
. the term of our three Class III directors will expire at the annual meeting of
stockholders held in 2004.
The structure of the classified board is intended to promote continuity and
stability of our management and policies since a majority of the directors
serving at any given time will have prior experience as our directors. The
classification of directors could make it more difficult for stockholders to
quickly change the composition of our Board. At least two annual meetings of
stockholders, instead of one, would generally be required to effect a change in
the majority of our Board.
Number of Directors
Our Certificate of Incorporation provides that the number of directors shall
be no less than seven and shall not exceed nine. Our Board of Directors is
currently comprised of seven persons. The exact number of
16
directors is set by resolution from time to time of the majority of the
directors then in office. Interim vacancies on our Board, or vacancies created
by an increase in the number of directors, may be filled by a majority of the
directors then in office. A director appointed to fill a vacancy will hold
office for the remainder of the term of the class of director in which the
vacancy occurred or the new directorship was created.
Stockholder Action
Our Certificate of Incorporation requires all stockholder action to be taken
at an annual or special meeting of stockholders and prohibits stockholder action
by written consent. Our Certification of Incorporation and Bylaws also provide
that special meetings of stockholders may be called only by the Board of
Directors pursuant to a resolution adopted by a majority of the authorized
directors, or by one or more stockholders holding at least 20% of the voting
power of all then outstanding shares of the Company's capital stock entitled to
vote at any meeting of the stockholders. This may have the effect of delaying
consideration of a stockholder proposal until the next annual meeting of the
stockholders.
Requirements for Advance Notification of Stockholder Nominations and Proposals
Our Bylaws establish an advance notice procedure of 90 days for nominations,
other than by or at the direction of our board, of candidates for election as
directors at, and for proposals to be brought before, an annual meeting of
stockholders. These provisions are intended to facilitate planning for the
conduct of our annual meeting of stockholders and to provide time for proposals
to be fully evaluated. These provisions may have the effect of precluding a
nomination or the conduct of business at a particular meeting if the advance
notice and other proper procedures are not followed. These provisions may also
deter a potential acquirer from conducting a solicitation of proxies to elect
its own slate of directors or from otherwise attempting to obtain control, even
if the conduct of such solicitation or such attempt might be beneficial to the
stockholders.
Preferred Stock and Additional Common Stock
Our Board's authority to issue shares of common stock and preferred stock and
to fix by resolution the terms and conditions of each series of preferred stock
may either impede or facilitate the completion of a merger, tender offer or
other takeover attempt. For example, the issuance of new shares might impede a
business combination if the terms of those shares include series voting rights
that would enable the holder to block business combinations, or the issuance of
new shares might facilitate a business combination if those shares have general
voting rights sufficient to cause an applicable percentage vote requirement to
be satisfied. Our Board of Directors will make any determination regarding
issuance of additional shares based on its business judgment.
Shareholder Approval of Business Combinations
Our Certificate of Incorporation contains provisions which provide that,
subject to certain exceptions, we may not engage in certain "business
combinations" with any "interested stockholder" or "reorganizations" unless
there is an affirmative vote of at least two-thirds of the voting power of all
then outstanding shares of voting stock, voting together as a single class, a
majority of which must be voting stock other than that of which an interested
stockholder or its affiliate is the beneficial owner.
Under certain circumstances, such provisions make it more difficult for a
person who would be an "interested stockholder" to effect various business
combinations with a corporation. We anticipate that these provisions may
encourage companies interested in acquiring us to negotiate in advance with our
Board of Directors.
Stockholder Rights Plan
In 1998, we adopted a Stockholder Rights Plan and have issued, for each share
of our common stock, one preferred share purchase right, or a Right. As long as
the Rights are attached to our common stock, we will issue one Right (subject to
adjustment) with each new share of common stock so that all such shares will
have attached Rights. When exercisable, each Right will entitle the registered
holder to purchase from us one one-hundredth of a share of Series B Junior
Participating Preferred Stock, or Preferred Share, at an original price of
17
$65.00 per one one-hundredth of a Preferred Share, subject to adjustment. The
description and terms of the Rights are set forth in our Stockholder Rights Plan
available from Mellon Investor Services, LLC, our Rights Agent.
Until the earlier to occur of (i) ten (10) days following a public
announcement that a person or group of affiliated or associated persons has
acquired, or obtained the right to acquire, beneficial ownership of 15% or more
of our common stock (an "Acquiring Person") or (ii) ten (10) business days (or
such later date as may be determined by action of our board prior to such time
as any person or group of affiliated persons becomes an Acquiring Person)
following the commencement or announcement of an intention to make a tender
offer or exchange offer which would result in the beneficial ownership by a
person or group of 15% or more of our common stock, the earlier of (i) and (ii)
being called the Distribution Date, the Rights will be evidenced, with respect
to any of our common stock certificates outstanding as of the adoption of the
Plan, by such common stock certificate together with a summary of rights.
The Plan provides that until the Distribution Date (or earlier redemption,
exchange, termination, or expiration of the Rights), the Rights will be
transferred with and only with our common stock. Until the Distribution Date (or
earlier redemption or expiration of the Rights), new common stock certificates
issued after the adoption of the Plan will contain a notation incorporating the
Plan by reference. Until the Distribution Date (or earlier redemption,
exchange, termination or expiration of the Rights), the surrender or transfer of
any certificates for our common stock, with or without such notation or a copy
of a summary of rights, will also constitute the transfer of the Rights
associated with the common stock represented by such certificate. As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights ("Right Certificates") will be mailed to holders of record of our
common stock as of the close of business on the Distribution Date and such
separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on April 6, 2008, subject to our right to extend such date (the "Final
Expiration Date"), unless earlier redeemed or exchanged by us or terminated.
Each Preferred Share purchasable upon exercise of the Rights will be
entitled, when, as and if declared, to a minimum preferential quarterly dividend
payment of $1.00 per share but will be entitled to an aggregate quarterly
dividend of 100 times the dividend, if any, declared per share of our common
stock. In the event of our liquidation, dissolution or winding up, the holders
of the Preferred Shares will be entitled to a minimum preferential liquidation
payment of $100 per share (plus any accrued but unpaid dividends) and will be
entitled to an aggregate payment of 100 times the payment made per share of our
common stock. Each Preferred Share will have 100 votes and will vote together
with our common stock. Finally, in the event of any merger, consolidation or
other transaction in which our common stock is exchanged, each Preferred Share
will be entitled to receive 100 times the amount received per share of our
common stock. Preferred Shares will not be redeemable. These rights are
protected by customary antidilution provisions. Because of the nature of the
Preferred Share's dividend, liquidation and voting rights, the value of one one-
hundredth of a Preferred Share purchasable upon exercise of each Right should
approximate the value of one share of our common stock.
The purchase price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of the Preferred
Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights
or warrants to subscribe for or purchase Preferred Shares or convertible
securities at less than the current market price of the Preferred Shares or
(iii) upon the distribution to holders of the Preferred Shares of evidences of
indebtedness, cash, securities or assets (excluding regular periodic cash
dividends at a rate not in excess of 125% of the rate of the last regular
periodic cash dividend theretofore paid or, in case regular periodic cash
dividends have not theretofore been paid, at a rate not in excess of 50% of the
average of our net income per share for the four quarters ended immediately
prior to the payment of such dividend, or dividends payable in Preferred Shares
(which dividends will be subject to the adjustment described in clause (i)
above)) or of subscription rights or warrants (other than those referred to
above).
In the event that a Person becomes an Acquiring Person, or if we were the
surviving corporation in a merger with an Acquiring Person or any affiliate or
associate of an Acquiring Person, and our common stock was not changed or
exchanged, each holder of a Right, other than Rights that are or were acquired
or
18
beneficially owned by the Acquiring Person (which Rights will thereafter be
void), will thereafter have the right to receive upon exercise that number of
shares of our common stock having a market value of two times the then current
purchase price of the Right. In the event that, after a person has become an
Acquiring Person, we were acquired in a merger or other business combination
transaction or more than 50% of our assets or earning power were sold, each
holder of a Right shall thereafter have the right to receive, upon the exercise
thereof at the then current purchase price of the Right, that number of shares
of common stock of the acquiring company which at the time of such transaction
would have a market value of two times the then current purchase price of the
Right.
At any time after a Person becomes an Acquiring Person and prior to the
earlier of one of the events described in the last sentence of the previous
paragraph or the acquisition by such Acquiring Person of 50% or more of our
outstanding common stock, the board may cause us to exchange the Rights (other
than Rights owned by an Acquiring Person which will have become void), in whole
or in part, for shares of our common stock at an exchange rate of one share of
our common stock per Right (subject to adjustment).
No adjustment in the purchase price of a Right will be required until
cumulative adjustments require an adjustment of at least 1% in such purchase
price. No fractional Preferred Shares or shares of our common stock will be
issued (other than fractions of Preferred Shares which are integral multiples of
one one-hundredth of a Preferred Share, which may, at our election, be evidenced
by depository receipts), and in lieu thereof, a payment in cash will be made
based on the market price of the Preferred Shares or shares of our common stock
on the last trading date prior to the date of exercise.
The Rights may be redeemed in whole, but not in part, at a price of $.01 per
Right (the "Redemption Price") by our board at any time prior to the time that
an Acquiring Person has become such. The redemption of the Rights may be made
effective at such time, on such basis and with such conditions as our Board, in
its sole discretion, may establish. Immediately upon any redemption of the
Rights, the right to exercise the Rights will terminate and the only right of
the holders of Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no rights
as one of our stockholders beyond those as an existing stockholder, including,
without limitation, the right to vote or to receive dividends.
Any of the provisions of the Plan may be amended by our Board for so long as
the Rights are then redeemable, and after the Rights are no longer redeemable,
we may amend or supplement the Plan in any manner that does not adversely affect
the interests of the holders of the Rights.
This summary description of the Rights does not purport to be complete, and
is qualified in its entirety by reference to the Plan, which is incorporated by
reference to our Report on Form 8-K filed with the SEC on April 23, 1998.
LEGAL MATTERS
Certain legal matters, including the validity of the common stock offered
hereby, will be passed upon for us by Latham & Watkins.
EXPERTS
The consolidated financial statements of Southwest Water Company as of
December 31, 2000 and 1999, and for each of the years in the three-year period
ended December 31, 2000, which are incorporated in this prospectus by reference
to the Annual Report on Form 10-K, have been incorporated by reference herein in
reliance upon the report of KPMG LLP, independent auditors, incorporated by
reference herein, and upon the authority of said firm as experts in auditing and
accounting.
19
WHERE YOU CAN FIND MORE INFORMATION
Available Information
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any materials we file with the
SEC at the SEC's Public Reference Room located at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may obtain information on the operation of the
public reference rooms by calling the SEC at 1-800-SEC-0330. We file
information electronically with the SEC. The SEC maintains an Internet site
that contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC. The address of the
SEC's Internet site is http://www.sec.gov. You also may inspect copies of these
-------------------
materials and other information about us at the Nasdaq National Market, 33
Whitehall Street, New York, New York 10004.
Incorporation by Reference
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus, and information that we will file later with the
SEC will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings that we will make
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934, before the termination of the offering of the common stock under
this prospectus:
. Report on Form 8-K dated April 23, 1998;
. Annual Report on Form 10-K for the fiscal year ended December 31, 2000;
. Quarterly Report on Form 10-Q for the three months ended March 31, 2001;
. Proxy Statement for Annual Meeting of Stockholders held on May 22, 2001;
. Quarterly Report on Form 10-Q for the three months ended June 30, 2001;
. The description of our common stock contained in our Registration Statement
on Form 8-B (File No. 0-8176) filed with the SEC on July 7, 1988, including
any subsequently filed amendments and reports updating such description;
and
. Report on Form 8-K dated September 19, 2001.
Any statement contained in a document which, or a portion of which, is
incorporated by reference herein shall be deemed to be modified or superceded
for purposes of this prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein, modifies or supercedes such statement. Any
such statement so modified or superceded shall not be deemed, except as so
modified or superceded, to constitute a part of this prospectus.
This prospectus incorporates important business and financial information
about us that is not included in or delivered with the prospectus. This
information is available without charge to security holders upon written or oral
request. You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Southwest Water Company
225 N. Barranca Ave., Suite 200
West Covina, CA 91791-1605
Attention: Secretary
Telephone Number: (626) 915-1551
e-mail address: http://www.southwestwater.com
-----------------------------
This prospectus is part of a Registration Statement which we filed with the
SEC. We have omitted certain parts of the Registration Statement in accordance
with the rules and regulations of the SEC; therefore, this prospectus does not
contain all of the information included in the Registration Statement. For
further information, we refer you to the Registration Statement filed on Form S-
3 (No. 333-__________) including exhibits, schedules, and the documents
incorporated by reference therein. We have not authorized anyone to provide you
with any information that differs from that contained in this prospectus.
Accordingly, you should not rely on any information that is not contained in
this prospectus. We are not making an offer of these securities in any state
where the offer is not permitted. You should not assume that the information in
this prospectus is accurate as of any date other than the date on the front
cover of this prospectus.
20
[GRAPHIC]
91,981 SHARES
SOUTHWEST WATER COMPANY
COMMON STOCK
______________
PROSPECTUS
______________
We have not authorized any dealer, salesperson or other person to give any
information or to make any representations to you other than the information
contained in this prospectus. You must not rely on any information or
representations not contained in this prospectus. The information contained in
this prospectus is current only as of the date on the cover page of the
prospectus, and may change after that date. By delivering this prospectus, we do
not imply that there have been no changes in the information contained in this
prospectus or in our affairs since the date of the prospectus.
__________ __, 2001
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses payable by us in
connection with the issuance and distribution of the common stock being
registered (all amounts are estimated except the SEC registration fee):
SEC Registration Fee............... $ 303
Legal Fees and Expenses............ 10,000
Accounting Fees and Costs.......... 5,000
Miscellaneous...................... 4,697
-------
TOTAL.............................. $20,000
Item 15. Indemnification of Directors and Officers.
Statutory Provisions
Section 102(b)(7) of the General Corporation Law of the State of Delaware
(the "DGCL") enables a corporation in its certificate of incorporation to
eliminate or limit the personal liability of members of its board of directors
to the corporation or its stockholders for monetary damages for violations of a
director's fiduciary duty of care. Such a provision would have no effect on the
availability of equitable remedies, such as an injunction or rescission, for
breach of a fiduciary duty. In addition, no such provision may eliminate or
limit the liability of a director for breaching his duty of loyalty, failing to
act in good faith, engaging in intentional misconduct or knowingly violating a
law, paying an unlawful dividend or approving an illegal stock repurchase or
obtaining an improper personal benefit.
Section 145 of the DGCL empowers a corporation to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is, or was, a director, officer,
employee or agent of the corporation, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with an action, suit or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. No
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper. Additionally, a corporation is required to indemnify its
directors and officers against expenses to the extent that such directors or
officers have been successful on the merits or otherwise in any action, suit or
proceeding or in defense of any claim, issue or matter therein.
Indemnification can be made by the corporation only upon a determination
that indemnification is proper in the circumstances because the party seeking
indemnification has met the applicable standard of conduct as set forth in the
DGCL. The indemnification provided by the DGCL shall not be deemed exclusive of
any other rights to which those seeking indemnification may be entitled under
any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise. A corporation also has the power to purchase and maintain insurance
on behalf of any person, whether or not the corporation would have the power to
indemnify him against such liability. The indemnification provided by the DGCL
shall, unless otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
II-1
Our Certificate of Incorporation and Bylaws
Our Certificate of Incorporation limits our directors' liability for
monetary damages to us and our stockholders for breaches of fiduciary duty
except under the circumstances outlined in Section 102(b)(7) of the DGCL as
described above under "Statutory Provisions." Our Bylaws extend indemnification
rights to the fullest extent authorized by the DGCL to directors and officers
involved in any action, suit or proceeding where the basis of such involvement
is such person's alleged action in an official capacity or in another capacity
while serving as a director or officer of our Company. Our Bylaws also permit us
to maintain insurance to protect ourselves and any of our directors, officers,
employees or agents against any expense, liability or loss incurred as a result
of any action, suit or proceeding whether or not we would have the power to
indemnify the person under the DGCL. Our Bylaws also authorize us to enter into
a contract with any of our directors, officers, employees or agents providing
for indemnification rights equivalent to or, if our Board of Directors so
determines, greater than, those provided for in our Bylaws.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, we have been informed that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Act and is therefore unenforceable.
II-2
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
Exhibit No. Description of Exhibit
----------- ----------------------
4.1A Agreement and Plan of Merger of Registrant dated May 25, 1988
(incorporated by reference to Exhibit 2 to Registrant's Form 10-K
Report for the year ended December 31, 1988).
4.1B Registrant's Restated Certificate of Incorporation dated April
4,1988 (incorporated by reference to Exhibit 3.1 to Registrant's
Form 8-B Report filed with the Commission on July 5, 1988).
4.1C Certificate of Amendment of Article Four of Articles of
Incorporation dated March 30, 1995 (incorporated by reference to
Exhibit 3.1B to Registrant's Form 10-Q Report for the quarter
ended March 31, 1995).
4.1D Certificate of Amendment of Restated Certificate of Incorporation
dated June 4, 1998 (incorporated by reference to Appendix A of
Registrant's 1998 Proxy Statement filed with the Commission on
April 20, 1998).
4.1E Certificate of Correction of Amendment of Restated Certificate of
Incorporation dated September 14, 1998 (incorporated by reference
to Exhibit 3.1D of Registrant's Form 10-K Report for the year
ended December 31, 1999).
4.1F Certificate of Designation of Series E Convertible Preferred
Stock Of Southwest Water Company dated January 12, 2000
(incorporated by reference to Exhibit 3.1E of Registrant's Form
10-K Report for the year ended December 31, 1999).
4.2A Registrant's Bylaws as amended April 4, 1988 (incorporated by
reference to Exhibit 3.2 to Registrant's Form 8-B Report filed
with the Commission on July 5, 1988).
4.2B Amendment to Registrant's Bylaws dated March 15, 1991
(incorporated by reference to Exhibit 3.2A to Registrant's Form
10-K Report for the year ended December 31, 1990).
4.2C Amendment to Registrant's Bylaws dated June 27, 1995
(incorporated by reference to Exhibit 3.2B to Registrant's Form
10-K Report for the year ended December 31, 1995).
4.2D Amendment to Registrant's Bylaws dated December 12, 1996
(incorporated by reference to Exhibit 3.2C to Registrant's Form
10-K Report for the year ended December 31, 1996).
4.3 Stockholder's Rights Plan dated April 6, 1998 (incorporated by
reference to the Registrant's Form 8-K Report filed with the
Commission April 23, 1998).
4.4 Agreement and Plan of Merger by and among Southwest Water
Company, OPT Acquisition Subsidiary, Inc., Operations
Technologies, Inc., Operations Technologies Shareholder Trust and
Robert W. Monette, dated as of August 31, 2001 (incorporated by
reference to Exhibit 99.1 of the Registrant's Form 8-K filed with
the Commission September 19, 2001).
II-3
5 Opinion of Latham and Watkins.
23.1 Consent of Latham and Watkins (included in Opinion filed as Exhibit
5).
23.2 Consent of KPMG LLP.
24 Power of Attorney (included on signature page of this Registration
Statement).
II-4
Item 17. Undertakings.
A. 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 of 1933;
(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 a prospectus
filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective Registration Statement; and
(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 (i) and (ii) do not apply if the
information required to be included in a post effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act of 1934 that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, 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.
B. The undersigned Registrant hereby undertakes 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 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's Annual Report pursuant to Section 15(d) of the Securities Exchange Act of
1934) 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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Act, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act, and
will be governed by the final adjudication of such issue.
II-5
SIGNATURES
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 this Registration Statement 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 West Covina, California
on the 19/th/ day of September 2001.
Southwest Water Company
By:/s/ ANTON C. GARNIER
-----------------------
Anton C. Garnier
President, Chief Executive Officer and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Anton C. Garnier and Peter J. Moerbeek, or either
of them, his or her true and lawful attorney-in-fact and agent, with full power
of substitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, or their substitutes, may lawfully 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 by the following persons in the
capacities indicated and on the 19/th/ day of September 2001.
Signature Title
--------- -----
/s/ ANTON C. GARNIER President, Chief Executive Officer and Director
-------------------- (Chief Executive Officer)
Anton C. Garnier
/s/ PETER J. MOERBEEK Chief Financial Officer, Secretary and Director
--------------------- (Principal Financial Officer)
Peter J. Moerbeek
/s/THOMAS C. TEKULVE Vice President, Finance
-------------------- (Principal Accounting Officer)
Thomas C. Tekulve
/s/H. FREDERICK CHRISTIE Director
------------------------
H. Frederick Christie
/s/MONROE HARRIS Director
----------------
Monroe Harris
/s/DONOVAN D. HUENNEKENS Director
------------------------
Donovan D. Huennekens
/s/MAUREEN A. KINDEL Director
--------------------
Maureen A. Kindel
/s/RICHARD G. NEWMAN Director
--------------------
Richard G. Newman
II-6
EXHIBIT INDEX
Exhibit No. Description of Exhibit
----------- ----------------------
4.1A Agreement and Plan of Merger of Registrant dated May 25, 1988
(incorporated by reference to Exhibit 2 to Registrant's Form 10-K
Report for the year ended December 31, 1988).
4.1B Registrant's Restated Certificate of Incorporation dated April
4,1988 (incorporated by reference to Exhibit 3.1 to Registrant's
Form 8-B Report filed with the Commission on July 5, 1988).
4.1C Certificate of Amendment of Article Four of Articles of
Incorporation dated March 30, 1995 (incorporated by reference to
Exhibit 3.1B to Registrant's Form 10-Q Report for the quarter
ended March 31, 1995).
4.1D Certificate of Amendment of Restated Certificate of Incorporation
dated June 4, 1998 (incorporated by reference to Appendix A of
Registrant's 1998 Proxy Statement filed with the Commission on
April 20, 1998).
4.1E Certificate of Correction of Amendment of Restated Certificate of
Incorporation dated September 14, 1998 (incorporated by reference
to Exhibit 3.1D of Registrant's Form 10-K Report for the year
ended December 31, 1999).
4.1F Certificate of Designation of Series E Convertible Preferred
Stock Of Southwest Water Company dated January 12, 2000
(incorporated by reference to Exhibit 3.1E of Registrant's Form
10-K Report for the year ended December 31, 1999).
4.2A Registrant's Bylaws as amended April 4, 1988 (incorporated by
reference to Exhibit 3.2 to Registrant's Form 8-B Report filed
with the Commission on July 5, 1988).
4.2B Amendment to Registrant's Bylaws dated March 15, 1991
(incorporated by reference to Exhibit 3.2A to Registrant's Form
10-K Report for the year ended December 31, 1990).
4.2C Amendment to Registrant's Bylaws dated June 27, 1995
(incorporated by reference to Exhibit 3.2B to Registrant's Form
10-K Report for the year ended December 31, 1995).
4.2D Amendment to Registrant's Bylaws dated December 12, 1996
(incorporated by reference to Exhibit 3.2C to Registrant's Form
10-K Report for the year ended December 31, 1996).
4.3 Stockholder's Rights Plan dated April 6, 1998 (incorporated by
reference to the Registrant's Form 8-K Report filed with the
Commission April 23, 1998).
4.4 Agreement and Plan of Merger by and among Southwest Water
Company, OPT Acquisition Subsidiary, Inc., Operations
Technologies, Inc., Operations Technologies Shareholder Trust and
Robert W. Monette, dated as of August 31, 2001 (incorporated by
reference to Exhibit 99.1 of the Registrant's Form 8-K filed with
the Commission September 19, 2001).
5 Opinion of Latham and Watkins.
23.1 Consent of Latham and Watkins (included in Opinion filed as Exhibit
5).
23.2 Consent of KPMG LLP.
24 Power of Attorney (included on signature page of this Registration
Statement).
EX-5
3
dex5.txt
OPINION OF LATHAM AND WATKINS
EXHIBIT 5
[LETTERHEAD OF LATHAM & WATKINS]
September 19, 2001
Southwest Water Company
225 North Barranca Avenue, Suite 200
West Covina, California 91791-1605
Re: Registration of 91,981 shares of common stock, par value $.01 per
-----------------------------------------------------------------
share, of Southwest Water Company on Form S-3
---------------------------------------------
Ladies and Gentlemen:
In connection with the registration for resale of 91,981 shares of
common stock, par value $.01 per share (the "Shares"), of Southwest Water
------
Company, a Delaware corporation (the "Company"), under the Securities Act of
-------
1933, as amended, on Form S-3 filed with the Securities and Exchange Commission
on September 19, 2001 (the "Registration Statement"), you have requested our
----------------------
opinion with respect to the matters set forth below.
In our capacity as your special securities counsel in connection with
such registration, we are familiar with the proceedings taken by the Company in
connection with the authorization, issuance and sale of the Shares. In
addition, we have made such legal and factual examinations and inquiries,
including an examination of originals or copies certified or otherwise
identified to our satisfaction of such documents, corporate records and
instruments, as we have deemed necessary or appropriate for purposes of this
opinion.
In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, and the
conformity to authentic original documents of all documents submitted to us as
copies.
We are opining herein as to the effect on the subject transaction only
of the General Corporation Law of the State of Delaware, and we express no
opinion with respect to the applicability thereto, or the effect thereon, of the
laws of any other jurisdiction or, in the case of Delaware, any other laws, or
as to any matters of municipal law or the laws of any other local agencies
within the state.
Subject to the foregoing, it is our opinion as of the date hereof that
the Shares have been duly authorized and are validly issued, fully paid and
nonassessable.
LATHAM & WATKINS
September 19, 2001
Page 2
We consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to our firm contained under the
heading "Legal Matters."
Very truly yours,
/s/ Latham & Watkins
EX-23.2
4
dex232.txt
CONSENT OF KPMG LLP
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors
Southwest Water Company:
We consent to the use of our reports incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the Registration Statement.
/s/ KPMG LLP
Los Angeles, California
September 19, 2001