-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RorvfqthSCLSyWsRpGD+aBOiItEabQLG+Tw5qBW+6hUf8lcgaqEuHj2vIhm6a8mH P1lCPvmX4zSHlzwU70qlcA== 0000898430-96-001799.txt : 19960515 0000898430-96-001799.hdr.sgml : 19960515 ACCESSION NUMBER: 0000898430-96-001799 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NASD 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08176 FILM NUMBER: 96562279 BUSINESS ADDRESS: STREET 1: 225 N BARRANCA AVE 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 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED 03/31/96 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - ----- EXCHANGE ACT OF 1934 FOR THE PERIOD ENDED MARCH 31, 1996 OR - ----- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ Commission file number: 0-8176 [LOGO OF SOUTHWEST WATER COMPANY] SOUTHWEST WATER COMPANY (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 95-1840947 (STATE OR JURISDICTION OF (IRS EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 225 NORTH BARRANCA AVENUE, SUITE 200 WEST COVINA, CALIFORNIA 91791-1605 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (818) 915-1551 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. On April 30, 1996, there were 2,589,882 common shares outstanding. SOUTHWEST WATER COMPANY AND SUBSIDIARIES INDEX Page No. -------- Part I. Financial Information: - ------- Item 1. Financial Statements: Condensed Consolidated Balance Sheets - March 31, 1996 and December 31, 1995 3 Condensed Consolidated Statements of Income - Three months ended March 31, 1996 and 1995 4 Condensed Consolidated Statements of Cash Flows - Three months ended March 31, 1996 and 1995 5 Notes to Condensed Consolidated Financial Statements 6 - 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 -10 Part II. Other Information: - -------- Item 1. Legal Proceedings 10 Item 6. Exhibits and Reports on Form 8-K 10 Signatures 11 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS SOUTHWEST WATER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31, 1996 1995 ---------- ------------ (Unaudited) ASSETS (In thousands) Current Assets: Cash and cash equivalents $720 $784 Customers' accounts receivable, net 7,631 7,785 Other current assets 2,792 2,528 -------- ------- 11,143 11,097 Property, Plant and Equipment: Utility property, plant and equipment - at cost 108,612 106,280 Contract operations property, plant and equipment - at cost 6,073 6,273 -------- ------- 114,685 112,553 Less accumulated depreciation and amortization 32,733 32,286 -------- ------- 81,952 80,267 Other Assets 5,909 6,092 -------- ------- $99,004 $97,456 ======== ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt and bank notes payable $11,820 $9,075 Accounts payable 1,151 2,269 Other current liabilities 6,848 7,019 -------- ------- 19,819 18,363 Other Liabilities and Deferred Credits: Long-term debt 19,600 19,600 Advances for construction 8,179 8,200 Contributions in aid of construction 16,626 16,380 Deferred income taxes 3,403 3,238 Other liabilities and deferred credits 2,440 2,429 -------- ------- Total Liabilities and Deferred Credits 70,067 68,210 Stockholders' Equity: Cumulative preferred stock 517 519 Common stock 26 26 Paid-in capital 18,793 18,715 Retained earnings 9,654 10,045 Unamortized value of restricted stock issued (53) (59) -------- ------- Total Stockholders' Equity 28,937 29,246 -------- ------- $99,004 $97,456 ======== =======
See accompanying notes. 3 SOUTHWEST WATER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended March 31, --------------------------- 1996 1995 --------- --------- (In thousands except per share amounts) OPERATING REVENUES $13,989 $11,290 OPERATING EXPENSES: Direct operating expenses 11,275 9,020 Selling, general and administrative 2,311 2,119 ------- ------- 13,586 11,139 ------- ------- OPERATING INCOME 403 151 OTHER INCOME (EXPENSE): Interest expense (659) (560) Interest income 31 25 Gain on sale of land - 84 Other 10 6 ------- ------- (618) (445) ------- ------- LOSS BEFORE INCOME TAX BENEFIT (215) (294) Income tax benefit (90) (123) ------- ------- NET LOSS (125) (171) Dividends on preferred shares (7) (7) ------- ------- NET LOSS APPLICABLE TO COMMON SHARES ($132) ($178) ======= ======= LOSS PER COMMON SHARE (NOTE 5): Primary ($0.05) ($0.07) ======= ======= Fully diluted ($0.05) ($0.07) ======= ======= CASH DIVIDENDS PER COMMON SHARE (NOTE 5) $0.10 $0.095 ======= ======= WEIGHTED-AVERAGE OUTSTANDING COMMON AND COMMON EQUIVALENT SHARES (NOTE 5): Primary 2,582 2,544 ======= ======= Fully diluted 2,582 2,544 ======= =======
See accompanying notes. 4 SOUTHWEST WATER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31, ---------------------- 1996 1995 ----- ----- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES, NET ($202) ($100) CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (2,662) (1,878) CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings of short-term debt 2,745 1,675 Contributions in aid of construction 288 270 Net proceeds from dividend reinvestment and employee stock purchase plans 64 60 Additions to advances for construction - 13 Dividends paid (254) (249) Payments on advances for construction (43) (42) ----- ----- Net cash provided by financing activities 2,800 1,727 ----- ----- Net decrease in cash and cash equivalents (64) (251) Cash and cash equivalents at beginning of year 784 828 ----- ----- Cash and cash equivalents at end of quarter $720 $577 ===== ===== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $605 $557 Income taxes $425 $8 Non-cash contributions in aid of construction conveyed to Company by developers $56 -
See accompanying notes. 5 SOUTHWEST WATER COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Southwest Water Company (the Company) and its subsidiaries provide water management services through contract and utility operations. The accompanying unaudited consolidated condensed financial statements reflect all adjustments which, in the opinion of the Company's management, are necessary to present fairly the financial position of the Company as of March 31, 1996, and the Company's results of operations for the three months ended March 31, 1996. All such adjustments are of a normal recurring nature. Certain reclassifications have been made to the 1995 financial statements to conform to the 1996 presentation. 2. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These condensed consolidated financial statements should be read in conjunction with the financial statements and related notes contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. 3. The results of operations for the three months ended March 31, 1996 are not necessarily indicative of the results to be expected for the full year. The first quarter of each year is normally the lowest in terms of average customer water usage for the Company's water utilities due to heavier rainfall and lower temperature levels. The Company's contract operations business can also be seasonal in nature. Heavy rainfall during a quarter may reduce contract operations revenue since it hampers the Company's ability to perform billable work such as pipeline maintenance, manhole rehabilitation, and outdoor services. 4. For the three months ended March 31, 1996, the computations of primary and fully diluted earnings per common share have been calculated using the weighted-average number of common shares and dilutive common equivalent shares outstanding during the period, after recognition of dividend requirements on preferred shares. For the three months ended March 31, 1995, fully diluted earnings per share were computed based upon the weighted-average number of common shares and dilutive common equivalent shares outstanding, assuming that the 9.5% convertible subordinated debentures were converted at the beginning of the period and the related interest for the period, net of income taxes, was eliminated. The 9.5% convertible debentures were retired on August 15, 1995. 5. The 1995 loss per common share, cash dividends per common share and weighted-average outstanding common and common equivalent shares have been restated to reflect a 5% stock dividend granted to stockholders of record on January 2, 1996. 6. Effective January 1, 1996, the Company was subject to Statement of Financial Accounting Standard No. 121 (SFAS No. 121) "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Under SFAS No. 121, the Company is required to review for impairment long-lived assets, including regulatory assets, as well as costs excluded from rate base by regulators. The Company expects that SFAS No. 121 will not have a material impact on the Company's results of operations or financial condition. 7. Effective January 1, 1996, the Company was subject to Statement of Financial Accounting Standard No. 123 (SFAS No. 123) "Accounting for Stock- Based Compensation." The 6 Company has chosen to retain the current approach for recognizing stock- based compensation expense as set forth in APB Opinion No. 25 "Accounting for Stock Issued to Employees". The pro forma impact of recording stock- based compensation on the fair value method of accounting will be disclosed in the notes to the Company's year-end financial statements. SFAS No. 123 will not have an impact on the Company's results of operations or financial condition. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES: Liquidity and capital resources of the Company are influenced primarily by construction expenditures at Suburban Water Systems (Suburban) for the replacement and renovation of existing water utility facilities and by construction expenditures for new water and wastewater utility facilities at New Mexico Utilities, Inc. (NMUI). To a lesser extent, liquidity is influenced by the Company's continuing investment in ECO Resources Inc. (ECO). At March 31, 1996, the Company had cash and cash equivalent balances totaling $720,000 and unused lines of credit from three commercial banks of $3,580,000 with total line of credit capacity of $14,500,000. During the first three months of 1996, the Company borrowed a net $2,745,000 on its lines of credit primarily to meet construction requirements. Additional short-term borrowing is anticipated during 1996 to meet construction requirements. On April 17, 1996, one of the lines of credit was renewed and its borrowing capacity was increased by $1,500,000. The two remaining lines of credit expire on various dates in 1996, and the Company anticipates renewing these lines in the normal course of business. The Company's additions to property, plant and equipment were $2,718,000 for the three months ended March 31, 1996, representing an increase of $840,000 over the same period in 1995. This increase relates primarily to utility plant additions at NMUI in response to increased residential and commercial construction in NMUI's service area. Of the total additions, $344,000 was received by the Company's utilities through developer contributions in aid of construction. The Company anticipates continuing its construction programs at the current level during the next nine months. The Company has initiated negotiations with investment bankers and anticipates obtaining long-term financing during the second or third quarter of 1996. Proceeds from this financing would be used to repay short-term debt and fund ongoing construction requirements. The Company has remaining borrowing capacity under its First Mortgage Bond Indentures of approximately $27,725,000. The amount of additional borrowings available to the Company under the indentures and lines of credit currently in place is limited by certain financial covenants that restrict additional borrowings at March 31, 1996, to a maximum of approximately $11,400,000. The amount and timing of future long-term financing will depend on various factors including the timeliness and adequacy of rate increases, the availability of capital, and the Company's ability to meet interest and fixed charge coverage requirements. Regulatory approval is required for any long-term financing agreement by Suburban and NMUI. If the Company were unable to renew its existing lines of credit or obtain additional long-term financing, capital spending would be reduced or delayed 7 until new financing arrangements were secured. Such financing arrangements could include seeking equity financing through a private placement or a public offering. REGULATORY AFFAIRS AND INFLATION: The rates and operations of the Company's utilities are regulated by the California Public Utilities Commission (CPUC) and the New Mexico Public Utility Commission (NMPUC). The rates allowed are intended to provide a reasonable return on common equity. The Company anticipates that future construction expenditures and increased direct operating expenses will require periodic requests for rate increases. In December 1995, Suburban and the CPUC staff negotiated a rate increase of 4.25% ($1.1 million), with two additional increases for inflation in 1997 and 1998. Final CPUC approval was received on April 19, 1996 with the new rates effective April 24, 1996. The rate increase authorizes Suburban to earn a 10% return on common equity. In December 1995, NMUI was granted an 8% general sewer rate increase by the NMPUC, effective January 1996, which will result in additional annual revenues of $124,000. From 1989 through 1995, Suburban recorded pretax gains on five land transactions which aggregated $1,900,000. In 1994, the CPUC ruled on the 1989 sale and allowed Suburban to retain $210,000 in income, in accordance with CPUC accounting regulations, as opposed to distributing it to ratepayers in the form of water rate reductions. The Water Utility Infrastructure Improvement Act of 1995 was passed by the California Assembly and Senate and signed by the governor on August 10, 1995. This law provides that water utilities selling real property that is no longer necessary or useful may invest the net proceeds in utility plant. Any net proceeds (and the interest thereon) not invested in an eight-year period shall be allocated to ratepayers. While Suburban's remaining transactions from the 1989-1995 period are subject to CPUC review, the proceeds were invested in utility plant, and, therefore, management believes these gains should not affect water rates. No regulatory liability has been recorded in the condensed consolidated financial statements. The California legislature has held hearings discussing the CPUC's organization and operation. Among other options, the CPUC has proposed consideration of performance-based rate making, which provides incentives for utilities to operate more efficiently and improve productivity, and is intended to reduce regulatory burden and promote efficiency among utilities. Ratepayers and stockholders would both likely benefit from improved productivity. Legislative and CPUC developments are closely monitored by the Company and by the various water industry associations in which the Company actively participates. Whether such legislative or CPUC developments will be enacted, or, if enacted, what the terms of such developments would be, is not known by the Company. Therefore, management cannot predict the impact of final legislative or CPUC developments on the Company's financial condition or results of operations. The operations of ECO are not regulated. ECO's long-term water and wastewater service contracts typically include annual inflation adjustments. Most contracts with municipal utility districts are short-term contracts and do not generally include inflation adjustments. 8 ENVIRONMENTAL AFFAIRS: The Company's operations are subject to water and wastewater pollution prevention standards and water and wastewater quality regulations of the United States Environmental Protection Agency (EPA) and various state regulatory agencies. The EPA and state regulatory agencies continue to promulgate new regulations mandated by the Federal Water Pollution Control Act, the Safe Drinking Water Act, and the Resource Conservation and Recovery Act. To date, the Company has not experienced any material adverse effects upon its operations resulting from compliance with governmental regulations. Costs associated with the testing of the Company's water supplies however, have increased and are expected to increase further as the regulatory agencies adopt additional monitoring requirements. The Company believes that future incremental costs of complying with governmental regulations, including capital expenditures, if any, will be recoverable through increased rates and contract operations revenues. However, there is no assurance that recovery of such costs will be allowed. RESULTS OF OPERATIONS: THREE MONTHS ENDED MARCH 31, 1996 VERSUS THREE MONTHS ENDED MARCH 31, 1995 - -------------------------------------------------------------------------- Fully diluted losses per common share decreased from $.07 in 1995 to $.05 in 1996. Results for the first three months of 1995 include a net gain of $50,000, or $.02 per fully diluted share arising from the sale of surplus land owned by Suburban. Operating income increased $252,000, and, as a percentage of operating revenues, increased from 1% in 1995 to 3% in 1996. Utility operating income increased $213,000 due primarily to a significant increase in NMUI's customer base and to an increase in water consumption by Suburban's customers. ECO experienced a decrease in its operating loss of $174,000 compared to 1995, due primarily to improved gross profit margins on billable and project services and operating profits recorded on new contracts entered into in 1995 after the first quarter. Parent company expenses increased $135,000 primarily due to higher payroll expenses and other reserves recorded. Operating revenues - ------------------ Operating revenues increased $2,699,000 or 24%. Water utility operating revenues increased $477,000. An increase of water consumption by Suburban's customers due to warmer weather in comparison to 1995 resulted in an increase in revenues of $308,000. NMUI added 199 new water customers in the first three months of 1996, which contributed to a 43% increase in water consumption and an increase in water revenues of $108,000. Higher sewer collection volume at NMUI led to an increase in sewer revenues of $61,000. ECO's revenues increased $2,222,000 primarily as a result of revenues from new contracts entered into in 1995 after the first quarter and increased billable and project services. Direct operating expenses - ------------------------- Direct operating expenses increased $2,255,000 or 25%. As a percentage of operating revenues, these expenses were 81% in 1996 and 80% in 1995. Water utility direct operating expenses increased $163,000. Suburban recorded higher water production expenses related to the corresponding increase in water consumption by Suburban customers. ECO's direct operating expenses increased $2,092,000, resulting primarily from higher expenses associated with new contracts and increased billable work. 9 Selling, general and administrative - ----------------------------------- Selling, general and administrative expenses increased $192,000 or 9%. As a percentage of operating revenues, these expenses decreased from 19% in 1995 to 17% in 1996. Selling, general and administrative expenses at Suburban and NMUI increased $101,000 primarily due to higher payroll, associated payroll benefits and legal expenses. ECO's selling, general and administrative expenses decreased $44,000. As discussed above, general and administrative expenses of the parent company increased $135,000. Interest expense - ---------------- Interest expense increased $99,000 primarily due to the Company maintaining higher line of credit balances with borrowings used primarily to meet construction requirements. PART II - OTHER INFORMATION Item 1. Legal Proceedings - -------------------------- The Company is the subject of certain litigation arising from the ordinary course of operations. The Company believes the ultimate resolution of such matters will not materially affect its consolidated financial condition, results of operations or cash flow. There have been no significant changes in the various litigation matters as described in the Company's 1995 Form 10-K Report. Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (a) Exhibits furnished pursuant to Item 601 of Regulation S-K 10.10A First Amendment to Loan Agreement dated October 10, 1995, between New Mexico Utilities, Inc. and Sunwest Bank of Albuquerque, filed herewith. 10.10B Second Amendment to Loan Agreement and Promissory Note dated April 17, 1996, between New Mexico Utilities, Inc. and Sunwest Bank of Albuquerque, filed herewith. 27 Financial Data Schedule (b) Reports on Form 8-K There were no reports on Form 8-K filed for the three months ended March 31, 1996. 10 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. SOUTHWEST WATER COMPANY ----------------------- (Registrant) Dated: May 13, 1996 /s/ PETER J. MOERBEEK - ------------------- --------------------- Peter J. Moerbeek, Vice President Finance and Chief Financial Officer 11 EX-10.10A 2 FIRST AMEND. TO LOAN AGREEMENT DATED 10/10/95 Exhibit 10.10A FIRST AMENDMENT TO LOAN AGREEMENT This Amendment made this 10th day of October, 1995 by and between Sunwest Bank of Albuquerque, National Association, a national banking association ("Bank") and New Mexico Utilities, Inc., corporation ("Borrower"). WHEREAS, on January 25, 1995 Bank and Borrower entered into a certain Business Loan Agreement ("Agreement") pursuant to the terms and conditions of which credit has been extended by Bank to Borrower; WHEREAS, Borrower and Lender and desirous of amending the Agreement upon the following terms and conditions. FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged by the undersigned, Bank and Borrower agree as follows: 1. Paragraph 2 (a) i shall be deleted in its entirety and the following substituted there: i. The per annum interest on the outstanding principal balance (the "Interest Rate") shall be at a rate equal to the Chase Manhattan Bank Prime Rate established form time to time by the Bank; the Interest Rate shall be adjusted coincident with any change in the rate and applied prospectively, 2. Except as expressly amended hereby, the terms and conditions of the Agreement and the documents executed and delivered in conjunction with the credit extended thereunder shall remain in full force and effect and are hereby ratified: BORROWER: New Mexico Utilities, Inc. a New Mexico corporation BY: /s/ ROBERT L. SWARTWOUT ----------------------- Robert L. Swartwout, President BY: /s/ WILLIAM C. JASURA ---------------------- William C. Jasura, Vice President and Chief Financial Officer GRANTOR: Southwest Water Company, a Delaware corporation BY: /s/ PETER J. MOERBEEK --------------------- Peter J. Moerbeek, V.P. Finance and Chief Financial Officer BANK: Sunwest Bank of Albuquerque, N.A., a national association BY: /s/ DON K. PADGETT ------------------ Don K. Padgett, Vice President EX-10.10B 3 SECOND AMEND. TO LOAN AGMT AND PROMISSORY NOTE Exhibit 10.10B SECOND AMENDMENT TO LOAN AGREEMENT This Amendment made this 17th day of April, 1996 by and between SUNWEST BANK OF ALBUQUERQUE, NATIONAL ASSOCIATION, a national banking association ("BANK") and New Mexico Utilities, Inc. a New Mexico corporation ("BORROWER"). WHEREAS, on January 25, 1995 Bank and borrower entered into a certain Loan Agreement ("Loan Agreement") pursuant to the terms and conditions of which credit has been extended by Bank to Borrower; WHEREAS, Bank and Borrower entered into a First Amendment to Loan Agreement dated October 10, 1995 (the "First Amendment"). (The "Loan Agreement" and "First Amendment" jointly referred to as "Agreement"). WHEREAS, Borrower and Bank are desirous of amending the Agreement upon the following terms and conditions. FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged by the undersigned, Bank and Borrower agree as follows: 1. Paragraph 1. Note A: shall be amended by deleting the phrase "Two Million and No/100 Dollars ($2,000,000.00)" and substituting therefor the phrase "Three Million Five Hundred Thousand and No/100 Dollars ($3,500,000.00)". 2. Paragraph 2. (a) (i) shall be amended by adding the following sentence: If Chase Manhattan Bank shall be acquired or merged into another bank, the Interest Rate shall equal the prime of such acquiring bank or the survivor of any merger. 3. Paragraph 2. (a) (iii) shall be amended by deleting the phrase "March 31, 1996" and substituting therefor the phrase "April 30, 1997". Except as expressly amended hereby, the terms and conditions of the Agreement and the documents executed and delivered in conjunction with the credit extended thereunder shall remain in full force and effect and are hereby ratified. BORROWER: New Mexico Utilities, Inc., a New Mexico corporation BY: /s/ WILLIAM C. JASURA --------------------- William C. Jasura, Vice President Finance & Chief Financial Officer GUARANTOR: Southwest Water Company, a Delaware Corporation BY: /s/ PETER J. MOERBEEK --------------------- Peter Moerbeek, Vice President Finance & Chief Financial Officer BANK: SUNWEST BANK OF ALBUQUERQUE, NATIONAL ASSOCIATION, a national association BY: /s/ DON K. PADGETT ------------------ Don K. Padgett, Vice President Exhibit 10.10B SUNWEST BANK PROMISSORY NOTE of Albuquerque, N.A. P.O. Box 25500 Albuquerque, NM 87125-5500 (505) 765-2211 "BANK" "BORROWER" New Mexico Utilities, Inc. A New Mexico Corporation FOR VALUE RECEIVED, Borrower promises to pay to the order of Bank, its successors and assigns at Albuquerque, New Mexico (or such other place as the Bank may designate) (i) the principal amount of Five Hundred Thousand and no/100 Dollars ($500,000.00), or so much thereof as is advanced; (ii) the fees and other charges as provided herein; and (iii) per annum interest on the outstanding principal balance from April 17, 1996, until paid at the rate of [_] ______% [_] equal to the index rate for this loan which is Chase Manhattan Bank, N.A. New York, New York, prime rate in effect from time to time and which is published by Chase Manhattan Bank, N.A., with a minimum rate of N/A% per annum and a maximum rate of N/A% per annum. The initial index rate is 8.250%. Adjustments in the interest rate will be effective as announced and may increase or decrease: [_] the amount of the regular payments; [_] the amount of interest payments; [_] the amount of the single or final payment. If the index rate is discontinued then the interest rate shall be the rate being charged by Bank on similar loans. Borrower agrees to pay as follows: [_] Interest on the 30th day of every single month beginning May 30, 1996, and continuing until this Note is paid in full. This Loan is payable in full on April 30, 1997. Borrower must repay the outstanding principal balance of the loan and unpaid interest then due. The Bank is under no obligation to refinance the loan at that time. Borrower shall pay Bank a late charge of N/A% or N/A, whichever is less, of any installment not received by Bank within N/A days after the installment is due. All payments shall be applied first to reduce fees and charges other than interest, then to reduce interest, then to reduce principal. [_] This is a multiple advance note. Borrower has received $434,953.67 and future principal advances are contemplated. No principal advances will be made after April 30, 1997. [_] Repaying a part of the principal will entitle Borrower to additional advances unless an event of default has occurred, or the open-end feature has expired. [_] Repaying a part of the principal will not entitle Borrower to additional advances. Each of the following are events of default under this Note: (i) Failure to make a payment on time or in the amount due; (ii) Default under any document made in connection with or securing this Note; (iii) Borrower's default on any other loan or agreement with Bank; (iv) Borrower's death, incompetency, bankruptcy or insolvency;(v) any written statement or financial information provided by Borrower is untrue or inaccurate; or (vi) any other event which reasonably causes Bank to be insecure about being repaid or about the adequacy of the security for this Note. Upon the occurrence of any event of default contained in this Note or in any document securing this Note, Bank may (i) declare the principal amount, accrued interest thereon and fees and other charges provided in this Note, immediately due and payable without notice or demand and enforce its rights under any document securing the indebtedness evidenced by this Note, (ii) set off the amount Borrower owes Bank against any funds on deposit with Bank, (iii) if this is a multiple advance note, refuse to make any further advances under this Note, retain the proceeds of any checks, drafts, notes or other instruments or acceptances which it may hold or have in the process of collection the account of any of the makers, endorsers and guarantors hereof and may apply such proceeds (together with any funds on deposit withheld by Bank) to the payment of the indebtedness evidenced by this Note, and (v) use any remedy available under state or federal law. No delay or omission on the part of Bank in exercising any right hereunder shall operate as a waiver of such right or of any other right under this Note. A waiver on any occasion shall not be construed as a bar to, or waiver of, any such right or remedy on any future occasion. Every maker, endorser and guarantor of this Note, or the indebtedness represented hereby waives presentment, demand, notice, protest, and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this note and assents to any extension or postponement of the time of payment or other indulgence, to the addition or release of any other party or person primarily or secondarily liable on this note or to the addition or release of any security interest or collateral securing this note. Any time this Note is placed in the hands of an attorney for collection, or to defend or enforce any of the Bank's rights hereunder, Borrower shall pay to the Bank its reasonable attorneys' fees, together with all court costs and other expenses. If no default exists hereunder, Borrower may prepay at any time, without premium or fee, the entire indebtedness or any part thereof evidenced by this Note and prepayments shall be applied in the manner scheduled payments are applied unless Borrower directs Bank to apply such prepayment in reduction of the outstanding principal indebtedness. Partial prepayments shall not postpone the due date of any subsequent monthly installments or change the amount of such installments (other than the amount of interest) and shall not postpone the due date for payment of the indebtedness evidenced by this Note. Borrower has delivered and shall deliver to Bank within 120 days after the end of each annual accounting period of Borrower and at such other times as Bank may request, copies of its balance sheet, income statement, cash flow analysis, list of contingent liabilities and such other financial information as Bank may require, all in reasonable detail, and Borrower warrants and represents to Bank that the financial information delivered, and to be delivered, is and will be true and correct in all material respects, prepared in accordance with generally accepted accounting principles, consistently applied throughout the period indicated, within a time and in a form acceptable to Bank. Borrower shall also deliver to Bank copies of its federal income tax returns 30 days after filing, or if such return is not filed on or before its due date, Borrower shall deliver to Bank copies of the appropriate IRS extension form reflecting IRS approval of Borrower's request for extension, if required. Borrower acknowledges that a contract, promise or commitment to loan money or to grant, extend or renew credit or any modification thereof, in an amount greater that Twenty-Five Thousand Dollars ($25,000), not primarily for personal, family or household purposes, made by a financial institution shall not be enforceable unless in writing and signed by the party to be charged or that party's authorized representative. [_] This Note is being executed pursuant to a Loan Agreement ("Agreement") dated 01/25/95, amended 10/10/95 and 04/17/96, and to the extent the terms of this Note are inconsistent with the Agreement, the terms of the Agreement shall control. This Note is secured by the following: DATED this 17th day of April, 1996. New Mexico Utilities, Inc. By: Southwest Water Company a New Mexico Corporation a Delaware Corporation By: /s/ WILLIAM C. JASURA By: /s/ PETER J. MOERBEEK --------------------- --------------------- William C. Jasura, Vice President Peter J. Moerbeek, Vice President Finance and Chief Financial Officer Finance and Chief Financial Officer Borrower's Primary Business Address: Borrower's Notice Address: 4700 Irving Blvd., N.W., Suite 201 4700 Irving Blvd., N.W., Suite 201 Albuquerque, NM 87114 Albuquerque, NM 87114 Borrower's Telephone Number: TIN/SS#: 85-0205240 Business (505) 898-2661 SUNWEST BANK PROMISSORY NOTE of Albuquerque, N.A. P.O. Box 25500 Albuquerque, NM 87125-5500 (505) 765-2211 "BANK" "BORROWER" New Mexico Utilities, Inc. A New Mexico Corporation FOR VALUE RECEIVED, Borrower promises to pay to the order of Bank, its successors and assigns at Albuquerque, New Mexico (or such other place as the Bank may designate) (i) the principal amount of Three Million Five Hundred Thousand and No/100 Dollars ($3,500,000.00), or so much thereof as is advanced; (ii) the fees and other charges as provided herein; and (iii) per annum interest on the outstanding principal balance from April 17, 1996, until paid at the rate of [_] ______% [_] equal to the index rate for this loan which is Chase Manhattan Bank, N.A. New York, New York, prime rate in effect from time to time and which is published by Chase Manhattan Bank, N.A., with a minimum rate of N/A% per annum and a maximum rate of N/A% per annum. The initial index rate is 8.250%. Adjustments in the interest rate will be effective as announced and may increase or decrease: [_] the amount of the regular payments; [_] the amount of interest payments; [_] the amount of the single or final payment. If the index rate is discontinued then the interest rate shall be the rate being charged by Bank on similar loans. Borrower agrees to pay as follows: [_] Interest on the 30th day of every single month beginning May 30, 1996, and continuing until this Note is paid in full. This Loan is payable in full on April 30, 1997. Borrower must repay the outstanding principal balance of the loan and unpaid interest then due. The Bank is under no obligation to refinance the loan at that time. Borrower shall pay Bank a late charge of N/A% or N/A, whichever is less, of any installment not received by Bank within N/A days after the installment is due. All payments shall be applied first to reduce fees and charges other than interest, then to reduce interest, then to reduce principal. [_] This is a multiple advance note. Borrower has received $550,000.00 and future principal advances are contemplated. No principal advances will be made after April 30, 1997. [_] Repaying a part of the principal will entitle Borrower to additional advances unless an event of default has occurred, or the open-end feature has expired. [_] Repaying a part of the principal will not entitle Borrower to additional advances. Each of the following are events of default under this Note: (i) Failure to make a payment on time or in the amount due; (ii) Default under any document made in connection with or securing this Note; (iii) Borrower's default on any other loan or agreement with Bank; (iv) Borrower's death, incompetency, bankruptcy or insolvency;(v) any written statement or financial information provided by Borrower is untrue or inaccurate; or (vi) any other event which reasonably causes Bank to be insecure about being repaid or about the adequacy of the security for this Note. Upon the occurrence of any event of default contained in this Note or in any document securing this Note, Bank may (i) declare the principal amount, accrued interest thereon and fees and other charges provided in this Note, immediately due and payable without notice or demand and enforce its rights under any document securing the indebtedness evidenced by this Note, (ii) set off the amount Borrower owes Bank against any funds on deposit with Bank, (iii) if this is a multiple advance note, refuse to make any further advances under this Note, retain the proceeds of any checks, drafts, notes or other instruments or acceptances which it may hold or have in the process of collection the account of any of the makers, endorsers and guarantors hereof and may apply such proceeds (together with any funds on deposit withheld by Bank) to the payment of the indebtedness evidenced by this Note, and (v) use any remedy available under state or federal law. No delay or omission on the part of Bank in exercising any right hereunder shall operate as a waiver of such right or of any other right under this Note. A waiver on any occasion shall not be construed as a bar to, or waiver of, any such right or remedy on any future occasion. Every maker, endorser and guarantor of this Note, or the indebtedness represented hereby waives presentment, demand, notice, protest, and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this note and assents to any extension or postponement of the time of payment or other indulgence, to the addition or release of any other party or person primarily or secondarily liable on this note or to the addition or release of any security interest or collateral securing this note. Any time this Note is placed in the hands of an attorney for collection, or to defend or enforce any of the Bank's rights hereunder, Borrower shall pay to the Bank its reasonable attorneys' fees, together with all court costs and other expenses. If no default exists hereunder, Borrower may prepay at any time, without premium or fee, the entire indebtedness or any part thereof evidenced by this Note and prepayments shall be applied in the manner scheduled payments are applied unless Borrower directs Bank to apply such prepayment in reduction of the outstanding principal indebtedness. Partial prepayments shall not postpone the due date of any subsequent monthly installments or change the amount of such installments (other than the amount of interest) and shall not postpone the due date for payment of the indebtedness evidenced by this Note. Borrower has delivered and shall deliver to Bank within 120 days after the end of each annual accounting period of Borrower and at such other times as Bank may request, copies of its balance sheet, income statement, cash flow analysis, list of contingent liabilities and such other financial information as Bank may require, all in reasonable detail, and Borrower warrants and represents to Bank that the financial information delivered, and to be delivered, is and will be true and correct in all material respects, prepared in accordance with generally accepted accounting principles, consistently applied throughout the period indicated, within a time and in a form acceptable to Bank. Borrower shall also deliver to Bank copies of its federal income tax returns 30 days after filing, or if such return is not filed on or before its due date, Borrower shall deliver to Bank copies of the appropriate IRS extension form reflecting IRS approval of Borrower's request for extension, if required. Borrower acknowledges that a contract, promise or commitment to loan money or to grant, extend or renew credit or any modification thereof, in an amount greater that Twenty-Five Thousand Dollars ($25,000), not primarily for personal, family or household purposes, made by a financial institution shall not be enforceable unless in writing and signed by the party to be charged or that party's authorized representative. [_] This Note is being executed pursuant to a Loan Agreement ("Agreement") dated 01/25/95, amended 10/10/95 and 04/17/96, and to the extent the terms of this Note are inconsistent with the Agreement, the terms of the Agreement shall control. This Note is secured by the following: DATED this 17th day of April, 1996. New Mexico Utilities, Inc. By: Southwest Water Company a New Mexico Corporation a Delaware Corporation By:/s/ WILLIAM C. JASURA By:/s/ PETER J. MOERBEEK --------------------- --------------------- William C. Jasura, Vice President Peter J. Moerbeek, Vice President Finance and Chief Financial Officer Finance and Chief Financial Officer Borrower's Primary Business Address: Borrower's Notice Address: 4700 Irving Blvd., N.W., Suite 201 4700 Irving Blvd., N.W., Suite 201 Albuquerque, NM 87114 Albuquerque, NM 87114 Borrower's Telephone Number: TIN/SS#: 85-0205240 Business (505) 898-2661 EX-27 4 FINANCIAL DATA SCHEDULE
5 1 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 720,000 0 7,796,000 165,000 0 11,143,000 114,685,000 32,733,000 99,004,000 19,819,000 19,600,000 0 517,000 26,000 28,394,000 99,004,000 0 13,989,000 0 11,275,000 2,321,000 59,000 659,000 (215,000) (90,000) (125,000) 0 0 0 (125,000) (.05) (.05)
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