SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 2
CURRENT REPORT
Pursuant To Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 10, 1999
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PHILADELPHIA SUBURBAN CORPORATION
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(Exact name of registrant as specified in its charter)
Pennsylvania 1-6659 23-1702594
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
762 W. Lancaster Avenue, Bryn Mawr, Pennsylvania 19010
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(Address of principal executive offices) (Zip Code)
(610) 527-8000
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or former address, if changed since last report.)
As indicated in the Registrant's Form 8-K as filed with the Securities and
Exchange Commission on March 12, 1999 ("Form 8-K") and Amendment No. 1 to the
Form 8-K as filed with the Commission on May 5, 1999 ("Amendment No. 1"), the
financial and pro forma financial information required to be filed therewith
would be filed not later than 60 days after March 12, 1999. Accordingly, this
Amendment No. 2 to Form 8-K ("Amendment No. 2") amends and modifies Item 7 of
the Form 8-K to read in its entirety as follows:
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
The financial statements of Consumers Water Company for the period
ended December 31, 1998 and the notes thereto, and the report of
Arthur Andersen LLP, independent auditors, thereon were filed as
Exhibit 7.1 to Amendment No. 1, and such Exhibit is incorporated
herein by reference.
(b) Pro Forma Financial Information (Unaudited)
The pro forma condensed combined balance sheet (unaudited) as of
December 31, 1998 and the pro forma combined statement of income
(unaudited) for the three years ended December 31, 1998, 1997 and 1996
and the notes thereto,are filed as Exhibit 7.2 to this Amendment No. 2
and such Exhibit is incorporated herein by reference.
(c) Exhibits
7.1 Financial Statements of Consumers Water Company as of and for the
year ended December 31, 1998.
7.2 Pro forma condensed combined balance sheet (unaudited) as of
December 31, 1998 and the pro forma combined statement of income
(unaudited) for the three years ended December 31, 1998, 1997 and
1996 and the notes thereto.
23.1 Consent of Arthur Andersen LLP
-2-
SIGNATURE
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.
PHILADELPHIA SUBURBAN CORPORATION
Date: May 11, 1999 /s/ Roy H. Stahl
--------------------------------
Name: Roy H. Stahl
Title: Senior Vice President and
General Counsel
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EXHIBIT INDEX
Exhibit Page
7.1 Financial Statements of Consumers Water Company as of and --
for the year ended December 31, 1998. (Filed as Exhibit 7.1
to Current Report on Form 8-K/A, Amendment No. 1, dated
May 5, 1999.)
7.2 Pro forma condensed combined balance sheet (unaudited) as of 5
December 31, 1998 and the pro forma combined statementof
income (unaudited) for the three years ended December 31,
1998, 1997 and 1996 and the notes thereto
23.1 Consent of Arthur Andersen LLP (Filed as Exhibit 23.1 to --
Current Report on Form 8-K/A, Amendment No. 1, dated
May 5, 1999.)
-4-
EXHIBIT 7.2
PHILADELPHIA SUBURBAN CORPORATION
PRO FORMA FINANCIAL INFORMATION
SUMMARY
On March 10, 1999, Philadelphia Suburban Corporation ("PSC"
or the "Company") and Consumers Water Company ("CWC") completed a
merger (the "Merger") whereby CWC was merged with and into a
wholly-owned subsidiary of the Company. The Merger was effected
pursuant to the June 27, 1998 merger agreement, which was amended and
restated by the parties effective August 5, 1998. The Merger was
completed after the transaction received the approvals from the state
utility commissions in each state in which the companies operate. The
shareholders of each company approved the Merger at special meetings
held on November 16, 1998. Pursuant to the merger agreement, the
Company issued 13,014,015 shares of common stock in exchange for all
of the outstanding stock of CWC. CWC common shareholders received
1.432 shares of the Company's Common Stock for each CWC common share
and CWC preferred shareholders received 5.649 shares of the Company's
Common Stock for each preferred share. The Merger has been accounted
for as a pooling-of-interests under Accounting Principles Board
Opinion No. 16. CWC serves approximately 226,000 customers in service
territories covering parts of Pennsylvania, Ohio, Illinois, New Jersey
and Maine.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following historical financial information of PSC and CWC for fiscal
years 1998, 1997 and 1996 presented herein has been derived from the audited
consolidated financial statements of PSC and CWC and includes pro forma
adjustments to give effect as if the Merger had been completed as of the
beginning of the earliest period presented. For purposes of financial reporting,
the Merger has been accounted for under the pooling-of-interests method of
accounting. Accordingly, the assets and liabilities of PSC and CWC have been
recorded at their historical amounts. This information is not necessarily
indicative of the financial results that would have occurred had the Merger been
consummated on the dates for which the Merger is being given effect, or the
merged companies' future financial results.
1
PHILADELPHIA SUBURBAN CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1998
(Amounts in thousands)
(Unaudited)
PSC CWC Pro Forma Pro Forma
Historical Historical Adjustments Combined
--------------------------------------- ----------
Assets
Property, plant and equipment, at cost $745,532 $503,089 $ -- $1,248,621
Less accumulated depreciation 135,724 96,703 -- 232,427
------------------------------------ ----------
Net property, plant and equipment 609,808 406,386 -- 1,016,194
Current assets:
Cash 664 7,583 -- 8,247
Accounts receivable and unbilled revenue, net 27,231 13,537 -- 40,768
Inventory, materials and supplies 1,909 1,948 -- 3,857
Prepayments and other current assets 1,152 5,874 -- 7,026
------------------------------------ ----------
Total current assets 30,956 28,942 -- 59,898
------------------------------------ ----------
Regulatory assets 53,578 4,119 -- 57,697
Deferred charges and other assets, net 6,100 16,844 (3,368)(4) 19,576
------------------------------------ ----------
$700,442 $456,291 $(3,368) $1,153,365
==================================== ==========
Liabilities and Stockholders' Equity
Stockholders' equity:
Cumulative preferred stock $ 3,220 $ 1,044 $(1,044)(1) $ 3,220
Common stock 14,130 9,020 (2,533)(2) 20,617
Capital in excess of par value 160,440 80,440 3,577 (3) 244,457
Retained earnings 66,447 25,236 (8,596)(4) 83,087
Minority interest -- 2,589 -- 2,589
Treasury stock (9,478) -- -- (9,478)
------------------------------------ ----------
Total stockholders' equity 234,759 118,329 (8,596) 344,492
------------------------------------ ----------
Long--term debt, excluding current portion 261,826 151,483 -- 413,309
Current liabilities:
Loans payable and current portion of long-term debt 7,757 19,839 -- 27,596
Accounts payable 16,694 8,554 -- 25,248
Other accrued liabilities 19,397 25,780 5,228 (4) 50,405
------------------------------------ ----------
Total current liabilities 43,848 54,173 5,228 103,249
------------------------------------ ----------
Deferred credits and other liabilities:
Deferred income taxes and investment tax credits 91,128 35,681 -- 126,809
Customers' advances for construction and other 42,661 21,928 -- 64,589
------------------------------------ ----------
Total deferred credits and other liabilities 133,789 57,609 -- 191,398
------------------------------------ ----------
Contributions in aid of construction 26,220 74,697 -- 100,917
------------------------------------ ----------
$700,442 $456,291 $(3,368) $1,153,365
==================================== ==========
See accompanying notes to Pro Forma Condensed Combined Financial Statements.
2
PHILADELPHIA SUBURBAN CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(Amounts in thousands, except per share amounts)
(Unaudited)
PSC CWC Pro Forma Pro Forma
Historical Historical Adjustments Combined
------------------------------------- ---------
Operating revenues $150,977 $99,741 $ -- $250,718
Costs and expenses:
Operations and maintenance 58,174 41,965 -- 100,139
Depreciation 15,355 11,834 -- 27,189
Amortization 734 1,541 2,275
Taxes other than income taxes 10,035 11,895 -- 21,930
------------------------------------ --------
Total costs and expenses 84,298 67,235 -- 151,533
Operating income 66,679 32,506 -- 99,185
Interest expense 18,976 12,826 -- 31,802
Gains on sales of properties -- (6,733) -- (6,733)
Other (721) (296) -- (1,017)
------------------------------------ --------
Income from continuing operations
before income taxes 48,424 26,709 -- 75,133
Provision for income taxes 19,605 10,513 -- 30,118
------------------------------------ --------
Income from continuing operations $ 28,819 $16,196 $ -- $ 45,015
==================================== ========
Income per share from continuing operations:
Basic $ 1.04 $ 1.80 $ -- $ 1.11
==================================== ========
Diluted $ 1.03 $ 1.80 $ -- $ 1.10
==================================== ========
Average common shares outstanding
during the period:
Basic 27,408 9,005 3,949 40,362
==================================== ========
Diluted 27,876 9,022 3,956 40,854
==================================== ========
See accompanying notes to Pro Forma Condensed Combined Financial Statements.
3
PHILADELPHIA SUBURBAN CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(Amounts in thousands, except per share amounts)
(Unaudited)
PSC CWC Pro Forma Pro Forma
Historical Historical Adjustments Combined
--------------------------------------- ---------
Operating revenues $136,171 $98,991 $ -- $235,162
Costs and expenses:
Operations and maintenance 55,899 40,672 -- 96,571
Depreciation 14,311 11,270 -- 25,581
Amortization 269 2,127 2,396
Taxes other than income taxes 8,893 12,452 -- 21,345
----------------------------------- --------
Total costs and expenses 79,372 66,521 -- 145,893
Operating income 56,799 32,470 -- 89,269
Interest expense 17,890 14,774 -- 32,664
Gains on sales of properties -- (690) (690)
Other (152) (195) -- (347)
----------------------------------- --------
Income from continuing operations
before income taxes 39,061 18,581 -- 57,642
Provision for income taxes 15,873 6,559 -- 22,432
----------------------------------- --------
Income from continuing operations $ 23,188 $12,022 $ -- $ 35,210
=================================== ========
Income per share from continuing operations:
Basic $ 0.89 $ 1.36 $ -- $ 0.91
=================================== ========
Diluted $ 0.88 $ 1.36 $ -- $ 0.90
=================================== ========
Average common shares outstanding
during the period:
Basic 25,908 8,857 3,885 38,650
=================================== ========
Diluted 26,273 8,859 3,886 39,018
=================================== ========
See accompanying notes to Pro Forma Condensed Combined Financial Statements.
4
PHILADELPHIA SUBURBAN CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(Amounts in thousands, except per share amounts)
(Unaudited)
PSC CWC Pro Forma Pro Forma
Historical Historical Adjustments Combined
-------------------------------------- ---------
Operating revenues $122,503 $93,810 $ -- $216,313
Costs and expenses:
Operations and maintenance 51,615 41,325 -- 92,940
Depreciation 13,068 10,128 -- 23,196
Amortization 265 1,816 2,081
Taxes other than income taxes 8,265 11,823 -- 20,088
----------------------------------- --------
Total costs and expenses 73,213 65,092 -- 138,305
Operating income 49,290 28,718 -- 78,008
Interest expense 15,311 14,163 -- 29,474
Loss on sales of properties -- 342 342
Other 230 (592) -- (362)
----------------------------------- --------
Income from continuing operations
before income taxes 33,749 14,805 -- 48,554
Provision for income taxes 13,971 5,379 -- 19,350
----------------------------------- --------
Income from continuing operations $ 19,778 $ 9,426 $ -- $ 29,204
=================================== ========
Income per share from continuing operations:
Basic $ 0.79 $ 1.09 $ -- $ 0.78
=================================== ========
Diluted $ 0.78 $ 1.09 $ -- $ 0.77
=================================== ========
Average common shares outstanding
during the period:
Basic 24,966 8,625 3,785 37,376
=================================== ========
Diluted 25,262 8,628 3,786 37,676
=================================== ========
See accompanying notes to Pro Forma Condensed Combined Financial Statements.
5
PHILADELPHIA SUBURBAN CORPORATION
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(In thousands of dollars, except per share amounts)
(Unaudited)
Description of Transaction and Basis of Presentation
On March 10, 1999, PSC and CWC completed a Merger whereby CWC was merged
with and into a wholly-owned subsidiary of the Company. The Merger was effected
pursuant to the June 27, 1998 merger agreement, which was amended and restated
by the parties effective August 5, 1998. The Merger was completed after the
transaction received the approvals from the state utility commissions in each
state in which the companies operate. The shareholders of each company approved
the Merger at special meetings held on November 16, 1998.
Pursuant to the merger agreement, the Company issued 13,014,015 shares of
common stock in exchange for all of the outstanding stock of CWC on March 10,
1999. CWC common shareholders received 1.432 shares of the Company's Common
Stock for each CWC common share and CWC preferred shareholders received 5.649
shares of the Company's Common Stock for each preferred share. The Merger has
been accounted for as a pooling-of-interests under Accounting Principles Board
Opinion No. 16 and accordingly, PSC's historical consolidated financial
statements subsequent to the Merger will be restated to include the accounts and
results of CWC.
Financial Statement Classifications
As necessary for fair presentation of the pro forma financial statements,
amounts previously reported by PSC and CWC have been reclassified for
consistency of presentation.
Pro Forma Adjustments
(1) Redemption of CWC Preferred Stock (in exchange for PSC Common Stock).
(2) The table below sets forth the pro forma adjustments to Common Stock:
December 31, 1998
---------------------------
Number Dollars in
of Shares Thousands
----------- ----------
Conversion of CWC Preferred Stock
to PSC Common Stock 58,964 $ 29
Less: Redemption of outstanding CWC
Common Stock (in exchange for
PSC Common Stock) (9,020,037) (9,020)
Amount of PSC Common Stock, par value
$0.50 per share, to be issued for
CWC Common Stock 12,916,693 6,458
----------- ------
Pro forma adjustment to Common Stock 3,955,620 $(2,533)
=======
Historical balance of PSC Common Stock
outstanding, par value $0.50 per share 27,726,654
Historical balance of CWC Common Stock
outstanding, par value $1.00 per share 9,020,037
-----------
Pro forma historical balance of PSC
Common Stock outstanding, par value
$0.50 per share 40,702,311
===========
6
PHILADELPHIA SUBURBAN CORPORATION
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (continued)
(In thousands of dollars, except per share amounts)
(Unaudited)
The number of shares issued on the date of consummation of the Merger has
been based on the number of shares of CWC Common Stock (9,046,824 shares)
and CWC Preferred Stock (10,438 shares) outstanding on the date of
consummation and the actual exchange ratio of 1.432 for the CWC common
shares and 5.649 for the CWC preferred shares.
(3) Reflects adjustment to capital in excess of par value resulting from the
exchange of CWC Common Stock and CWC Preferred Stock for PSC Common Stock.
(4) Reflects adjustment of $8,596, net of tax benefits of $1,525, for
merger-related costs, consisting primarily of fees for investment bankers,
attorneys, accountants, financial printing, other administrative charges
and restructuring costs of $2,462, net of tax benefits of $1,325, that
includes severance and other costs associated with the closing of CWC's
corporate office. As of December 31, 1998, $3,368 was paid and deferred by
PSC and CWC and $6,753 was incurred in the first quarter of 1999. The total
merger transaction costs of $10,121, less tax benefits of $1,525, have been
charged-off in the first quarter of 1999.
Pro Forma Income Per Share from Continuing Operations
Pro forma income per share from continuing operations gives effect to the
exchange of CWC Common Stock and CWC Preferred Stock for PSC Common Stock based
on the exchange ratio as described in the Description of Transaction and Basis
of Presentation Footnote.
7
