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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 quarterly period ended June 30, 2003
[ ] 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 1-6659
PHILADELPHIA SUBURBAN CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1702594
- -------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
762 W. Lancaster Avenue, Bryn Mawr, Pennsylvania 19010 -3489
- ------------------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610)-527-8000
--------------------
- --------------------------------------------------------------------------------
(Former Name, former address and former fiscal year,
if changed since last report.)
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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of July 28, 2003.
69,802,692.
- -----------
Part I - Financial Information
Item 1. Financial Statements
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars, except per share amounts)
June 30, December 31,
2003 2002
---------------------------------
Assets (Unaudited)
Property, plant and equipment, at cost $ 1,882,886 $ 1,836,892
Less accumulated depreciation 353,795 346,051
---------------------------------
Net property, plant and equipment 1,529,091 1,490,841
---------------------------------
Current assets:
Cash and cash equivalents 6,600 5,915
Accounts receivable and unbilled revenues, net 59,766 57,680
Inventory, materials and supplies 5,004 4,555
Prepayments and other current assets 2,011 2,758
---------------------------------
Total current assets 73,381 70,908
---------------------------------
Regulatory assets 87,265 88,175
Deferred charges and other assets, net 27,678 23,391
Funds restricted for construction activity 36,230 43,754
---------------------------------
$ 1,753,645 $ 1,717,069
=================================
Liabilities and Stockholders' Equity
Stockholders' equity:
Common stock at $.50 par value, authorized 100,000,000 shares,
issued 70,467,153 and 70,067,784 in 2003 and 2002 $ 35,234 $ 35,034
Capital in excess of par value 328,807 317,871
Retained earnings 189,556 180,047
Minority interest 503 503
Treasury stock, 674,039 and 2,151,350 shares in 2003 and 2002 (12,539) (40,421)
Accumulated other comprehensive income 201 63
---------------------------------
Total stockholders' equity 541,762 493,097
---------------------------------
6.05% Series B cumulative preferred stock 172 172
Long-term debt, excluding current portion 584,118 582,910
Commitments - -
Current liabilities:
Current portion of long-term debt 21,803 34,265
Loans payable 109,309 115,113
Accounts payable 20,783 31,058
Accrued interest 10,068 9,269
Accrued taxes 12,580 14,500
Other accrued liabilities 22,475 22,326
---------------------------------
Total current liabilities 197,018 226,531
---------------------------------
Deferred credits and other liabilities:
Deferred income taxes and investment tax credits 191,481 187,300
Customers' advances for construction 71,009 69,790
Other 16,297 13,330
---------------------------------
Total deferred credits and other liabilities 278,787 270,420
---------------------------------
Contributions in aid of construction 151,788 143,939
---------------------------------
$ 1,753,645 $ 1,717,069
=================================
See notes to consolidated financial statements on page 6 of this report.
1
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In thousands, except per share amounts)
(UNAUDITED)
Six Months Ended
June 30,
-------------------------
2003 2002
-------------------------
Operating revenues $163,868 $ 148,284
Costs and expenses:
Operations and maintenance 61,693 56,200
Depreciation 22,811 20,200
Amortization 1,362 1,209
Taxes other than income taxes 10,266 9,935
-------------------------
96,132 87,544
-------------------------
Operating income 67,736 60,740
Other expense (income):
Interest expense, net 21,263 19,671
Allowance for funds used during construction (876) (932)
Gain on sale of other assets (220) (1,758)
-------------------------
Income before income taxes 47,569 43,759
Provision for income taxes 19,005 17,039
-------------------------
Net income 28,564 26,720
Dividends on preferred stock 5 27
-------------------------
Net income available to common stock $ 28,559 $ 26,693
=========================
Net income $ 28,564 $ 26,720
Other comprehensive income (loss), net of tax:
Unrealized gain on securities 149 345
Reclassification adjustment for gains reported in net income (11) (693)
-------------------------
Comprehensive income $ 28,702 $ 26,372
=========================
Net income per common share:
Basic $ 0.42 $ 0.39
=========================
Diluted $ 0.41 $ 0.38
=========================
Average common shares outstanding
during the period:
Basic 68,395 68,576
=========================
Diluted 69,123 69,408
=========================
See notes to consolidated financial statements on page 6 of this report.
2
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In thousands, except per share amounts)
(UNAUDITED)
Three Months Ended
June 30,
-----------------------
2003 2002
-----------------------
Operating revenues $ 83,379 $ 76,615
Costs and expenses:
Operations and maintenance 31,029 28,915
Depreciation 11,464 10,307
Amortization 650 669
Taxes other than income taxes 4,946 4,621
-----------------------
48,089 44,512
-----------------------
Operating income 35,290 32,103
Other expense (income):
Interest expense, net 10,651 9,891
Allowance for funds used during construction (500) (546)
Gain on sale of other assets (165) (1,409)
-----------------------
Income before income taxes 25,304 24,167
Provision for income taxes 10,067 9,337
-----------------------
Net income 15,237 14,830
Dividends on preferred stock 2 12
-----------------------
Net income available to common stock $ 15,235 $ 14,818
=======================
Net income $ 15,237 $ 14,830
Other comprehensive income (loss), net of tax:
Unrealized gain on securities 102 217
Reclassification adjustment for gains reported in net income (11) (466)
-----------------------
Comprehensive income $ 15,328 $ 14,581
=======================
Net income per common share:
Basic $ 0.22 $ 0.22
=======================
Diluted $ 0.22 $ 0.21
=======================
Average common shares outstanding
during the period:
Basic 68,843 68,701
=======================
Diluted 69,615 69,461
=======================
See notes to consolidated financial statements on page 6 of this report.
3
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(In thousands of dollars, except per share amounts)
June 30, December 31,
2003 2002
----------------------------------
(Unaudited)
Stockholders' equity:
Common stock, $.50 par value $ 35,234 $ 35,034
Capital in excess of par value 328,807 317,871
Retained earnings 189,556 180,047
Minority interest 503 503
Treasury stock (12,539) (40,421)
Accumulated other comprehensive income 201 63
----------------------------------
Total stockholders' equity 541,762 493,097
----------------------------------
6.05% Series B cumulative preferred stock 172 172
Long-term debt:
First Mortgage Bonds secured by utility plant:
Interest Rate Range
0.00% to 2.49% 16,527 18,009
2.50% to 2.99% 16,812 14,052
3.00% to 3.49% 5,475 4,733
3.50% to 3.99% 2,800 3,200
4.00% to 4.99% 8,135 8,135
5.00% to 5.49% 97,875 90,955
5.50% to 5.99% 76,260 86,260
6.00% to 6.49% 129,360 126,360
6.50% to 6.99% 42,000 52,000
7.00% to 7.49% 56,000 58,000
7.50% to 7.99% 23,000 23,000
8.00% to 8.49% 17,500 17,497
8.50% to 8.99% 9,000 9,000
9.00% to 9.49% 52,942 53,054
9.50% to 9.99% 44,142 44,637
10.00% to 10.50% 6,000 6,000
----------------------------------
Total First Mortgage Bonds 603,828 614,892
Notes payable, 6.05%, due 2006 788 978
Installment note payable, 9%, due in equal annual payments through 2013 1,305 1,305
----------------------------------
605,921 617,175
Current portion of long-term debt 21,803 34,265
----------------------------------
Long-term debt, excluding current portion 584,118 582,910
----------------------------------
Total capitalization $ 1,126,052 $ 1,076,179
==================================
See notes to consolidated financial statements on page 6 of this report.
4
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands of dollars)
(UNAUDITED)
Six Months Ended
June 30,
-------------------------
2003 2002
-------------------------
Cash flows from operating activities:
Net income $ 28,564 $ 26,720
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization 24,173 21,409
Deferred income taxes 4,106 2,949
Gain on sale of other assets (204) (1,758)
Net decrease (increase) in receivables, inventory and prepayments (594) 6,108
Net decrease in payables, accrued interest, accrued taxes
and other accrued liabilities (8,655) (13,151)
Other (2,067) 488
-------------------------
Net cash flows from operating activities 45,323 42,765
-------------------------
Cash flows from investing activities:
Property, plant and equipment additions, including allowance
for funds used during construction of $876 and $932 (58,562) (56,470)
Acquisitions of water and wastewater systems (114) (7,865)
Proceeds from the sale of other assets 164 5,561
Net decrease (increase) in funds restricted for construction activity 7,523 (10,364)
Other (302) (331)
-------------------------
Net cash flows used in investing activities (51,291) (69,469)
-------------------------
Cash flows from financing activities:
Customers' advances and contributions in aid of construction 4,401 4,976
Repayments of customers' advances (972) (1,705)
Net proceeds (repayments) of short-term debt (5,804) (11,932)
Proceeds from long-term debt 10,566 53,353
Repayments of long-term debt (21,147) (3,612)
Redemption of preferred stock (1) (300)
Proceeds from issuing common stock 39,353 6,486
Repurchase of common stock (687) (1,472)
Dividends paid on preferred stock (5) (27)
Dividends paid on common stock (19,051) (18,163)
Other - (1,034)
-------------------------
Net cash flows from financing activities 6,653 26,570
-------------------------
Net increase in cash and cash equivalents 685 (134)
Cash and cash equivalents at beginning of period 5,915 1,010
-------------------------
Cash and cash equivalents at end of period $ 6,600 $ 876
=========================
See notes to consolidated financial statements on page 6 of this report.
5
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of dollars, except per share amounts) (continued)
(UNAUDITED)
Note 1 Basis of Presentation
---------------------
The accompanying consolidated balance sheet and statement of
capitalization of Philadelphia Suburban Corporation ("PSC") at June 30,
2003, the consolidated statements of income and comprehensive income
for the six months and quarter ended June 30, 2003 and 2002, and the
consolidated statements of cash flow for the six months ended June 30,
2003 and 2002, are unaudited, but reflect all adjustments, consisting
of only normal recurring accruals, which are, in the opinion of
management, necessary to present fairly the consolidated financial
position, the consolidated results of operations, and the consolidated
cash flow for the periods presented. Because they cover interim
periods, the statements and related notes to the financial statements
do not include all disclosures and notes normally provided in annual
financial statements and, therefore, should be read in conjunction with
the PSC Annual Report on Form 10-K for the year ended December 31, 2002
and the Quarterly Report on Form 10-Q for the quarter ended March 31,
2003. The results of operations for interim periods may not be
indicative of the results that may be expected for the entire year.
Note 2 Acquisition
-----------
On July 31, 2003, PSC completed its acquisition of four operating water
and wastewater subsidiaries of AquaSource, Inc. (a subsidiary of DQE,
Inc.), including selected, integrated operating and maintenance
contracts and related assets (individually and collectively the
acquisition is referred to as "AquaSource") for $195,533 in cash.
Pursuant to the purchase agreement, the amount paid at closing is
subject to adjustment upon completion of a closing balance sheet and
the finalization of other adjustments that may occur over approximately
a six month period. The acquired operations of AquaSource serve over
130,000 water and wastewater customer accounts in eleven states. For
the fiscal year ended December 31, 2002, the acquired operations had
revenues of $69,541. In May 2003, PSC announced an agreement for the
sale of the AquaSource regulated and nonregulated operations located in
Connecticut and New York to a New England-based water company for an
aggregate purchase price of $5,000 and the assumption of approximately
$800 of debt. The sale of the Connecticut and New York regulated
operations is subject to state regulatory approvals and represents
approximately 2% of the acquired operations. Closing on the sale of the
Connecticut and New York operations is expected to occur by early 2004.
Note 3 Long-term Debt and Loans Payable
--------------------------------
At various times during the first half of 2003, our operating
subsidiaries issued notes payable in aggregate of $11,232 at various
rates ranging from 1% to 5.1% due at various times in 2022, 2023, and
2032.
6
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of dollars, except per share amounts) (continued)
(UNAUDITED)
In July 2003, PSC issued $135,000 of unsecured notes due 2023 and with
an interest rate of 4.87%. In July 2003, an unsecured note of $90,000
was issued by PSC. Interest under this note is based, at the borrower's
option, on either a defined base rate or an adjusted London Interbank
Offered Rate corresponding to the interest period selected. The
proceeds of these financings were used to fund the AquaSource
acquisition and to refinance existing debt.
Note 4 Water Rates
-----------
During the first six months of 2003, operating subsidiaries located in
Pennsylvania, Illinois, Ohio and Maine were granted rate increases,
representing eight rate adjustments, intended to increase total
revenues by approximately $7,730 on an annual basis. Revenues from the
rate increases realized in the first half of 2003 were approximately
$2,960.
Note 5 Stockholders' Equity
--------------------
On August 5, 2003, PSC's Board of Directors declared a 5-for-4 common
stock split effected in the form of a 25% stock distribution for
shareholders of record on November 14, 2003. The new shares will be
distributed on December 1, 2003. PSC's par value of $.50 per share will
not change as a result of the common stock distribution, and as a
result, on the distribution date an amount will be transferred from
Capital in Excess of Par Value to Common Stock to record the common
stock split. The share and per share data contained in this Quarterly
Report on Form 10-Q have not been restated to give effect to this stock
dividend.
On May 19, 2003, PSC issued 1,495,000 shares of common stock through a
shelf registration, providing proceeds of approximately $33,100, net of
expenses. The net proceeds were used to repay short-term debt,
including the repayment of $22,000 of indebtedness incurred in
connection with our repurchase of 1.2 million shares of our common
stock from affiliates of Veolia Environnement, S.A. (formerly Vivendi
Environnement, S.A.) in October 2002.
PSC reports other comprehensive income in accordance with Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive
Income." The following table summarizes the activity of accumulated
other comprehensive income:
2003 2002
---------------------
Balance at January 1, $ 63 $ 726
Unrealized holding gain arising during the period,
net of tax of $79 in 2003 and $185 in 2002 149 345
Less: reclassification adjustment for gains included
in net income, net of tax of $5 in 2003 and $372 in 2002 (11) (693)
---------------------
Other comprehensive income (loss), net of tax 138 (348)
---------------------
Balance at June 30, $ 201 $ 378
=====================
7
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of dollars, except per share amounts) (continued)
(UNAUDITED)
Note 6 Net Income per Common Share
---------------------------
Basic net income per common share is based on the weighted average
number of common shares outstanding. Diluted net income per common
share is based on the weighted average number of common shares
outstanding and potentially dilutive shares. The dilutive effect of
employee stock options is included in the computation of Diluted net
income per common share. The following table summarizes the shares, in
thousands, used in computing Basic and Diluted net income per common
share:
Six Months Ended Three Months Ended
June 30, June 30,
---------------------- ----------------------
2003 2002 2003 2002
---------------------- ----------------------
Average common shares outstanding during
the period for Basic computation 68,395 68,576 68,843 68,701
Dilutive effect of employee stock options 728 832 771 760
---------------------- ----------------------
Average common shares outstanding during
the period for Diluted computation 69,123 69,408 69,614 69,461
====================== ======================
Note 7 Stock-Based Compensation
------------------------
PSC accounts for stock-based compensation using the intrinsic value
method in accordance with APB Opinion No. 25, "Accounting for Stock
Issued to Employees." Accordingly, no compensation expense related to
granting of stock options has been recognized in the financial
statements for stock options that have been granted. Pursuant to the
disclosure requirements of SFAS No. 123, "Accounting for Stock-Based
Compensation," as amended by SFAS No. 148, pro forma net income
available to common stock and earnings per share are presented in the
following table as if compensation cost for stock options was
determined as of the grant date under the fair value method:
Six Months Ended Three Months Ended
June 30, June 30,
------------------------- -------------------------
2003 2002 2003 2002
------------------------- -------------------------
Net income available to common stock:
As reported $ 28,559 $ 26,693 $ 15,235 $ 14,818
Less: pro forma expense related to
stock options granted, net of
tax effects (810) (634) (405) (317)
------------------------- -------------------------
Pro forma $ 27,749 $ 26,059 $ 14,830 $ 14,501
========================= =========================
Basic net income per share:
As reported $ 0.42 $ 0.39 $ 0.22 $ 0.22
Pro forma 0.41 0.38 0.22 0.21
Diluted net income per share:
As reported $ 0.41 $ 0.38 $ 0.22 $ 0.21
Pro forma 0.40 0.38 0.21 0.21
The fair value of options at the date of grant was estimated using the
Black-Scholes option-pricing model.
8
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of dollars, except per share amounts) (continued)
(UNAUDITED)
Note 8 Recent Accounting Pronouncements
--------------------------------
In July 2001, the Financial Accounting Standards Board ("FASB")
approved Statement of Financial Accounting Standards ("SFAS") No. 143,
"Accounting for Asset Retirement Obligations." SFAS No. 143 requires
that the fair value of a liability for an asset retirement obligation
be recognized in the period in which it is incurred. When the liability
is initially recognized, the carrying amount of the related long-lived
asset is increased by the same amount. Over time, the liability is
accreted to its present value each period, and the capitalized cost is
depreciated over the useful life of the related asset. Upon settlement
of the liability, PSC may settle the obligation for its recorded
amount, or an alternative amount, thereby incurring a gain or loss upon
settlement. The adoption of this statement as required on January 1,
2003 did not have a material impact on PSC's results of operations or
financial position.
In April 2002, the FASB approved SFAS No. 145, "Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
Technical Corrections." SFAS No. 145, among other things, rescinds SFAS
No. 4, which required all gains and losses from the extinguishment of
debt to be classified as an extraordinary item and amends SFAS No. 13
to require that certain lease modifications that have economic effects
similar to sale-leaseback transactions be accounted for in the same
manner as sale-leaseback transactions. PSC adopted this statement in
the first quarter of 2003 and it did not have a material impact on
PSC's results of operations or financial position.
In June 2002, the FASB approved SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 requires the
recognition of costs associated with exit or disposal activities when
they are incurred rather than at the date of a commitment to an exit or
disposal plan. This statement replaces the previous accounting guidance
provided in Emerging Issues Task Force Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." SFAS No. 146 is effective for exit or disposal
activities that are initiated after December 31, 2002. PSC adopted this
standard in the first quarter of 2003 and it did not have a material
impact on PSC's results of operations or financial position.
In November 2002, the FASB issued FASB Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others," an
interpretation of SFAS No. 5, 57 and 107 and rescission of SFAS No. 34.
This interpretation clarifies the requirements of FASB Statement No. 5,
"Accounting for Contingencies" relating to the guarantor's accounting
for, and disclosure of, the issuance of certain types of guarantees.
The disclosure provisions of the interpretation are effective for
financial statements of periods ending after December 15, 2002. The
provisions for initial recognition and measurement are effective on a
prospective basis for guarantees that are issued or modified after
December 31, 2002. PSC adopted the accounting provisions of this
standard in the first quarter of 2003 and it did not have a material
impact on PSC's results of operations or financial position.
9
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of dollars, except per share amounts) (continued)
(UNAUDITED)
In April 2003, the FASB approved SFAS No. 149, "Amendment of Statement
No. 133 on Derivative Instruments and Hedging Activities." SFAS No. 149
amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities. PSC believes the adoption of this
standard will have no effect on its results of operations or financial
position. As of June 30, 2003, PSC had no derivative instruments or
hedging activities.
In May 2003, the FASB approved SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity." SFAS No. 150 establishes standards for classifying and
measuring as liabilities certain financial instruments with
characteristics of both liabilities and equity. The standard is
effective for financial instruments entered into or modified after May
31, 2003, and is otherwise effective July 1, 2003. This statement is
not expected to have an impact on PSC's results of operations or
financial position.
10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In thousands of dollars, except per share amounts)
Forward-looking Statements
--------------------------
This Management's Discussion and Analysis of Financial Condition and Results of
Operations and other sections of this Quarterly Report contain, in addition to
historical information, forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements address, among other things: our use of cash; projected capital
expenditures; liquidity; possible acquisitions and other growth ventures; the
completion of various construction projects; the projected effects of recent
accounting pronouncements; the final purchase price for AquaSource; the
completion of the sale of the Connecticut and New York AquaSource operations;
the projected annual value of rate increases, as well as information contained
elsewhere in this report where statements are preceded by, followed by or
include the words "believes," "expects," "anticipates," "plans" or similar
expressions. These statements are based on a number of assumptions concerning
future events, and are subject to a number of uncertainties and other factors,
many of which are outside our control. Actual results may differ materially from
such statements for a number of reasons, including the effects of regulation,
abnormal weather, changes in capital requirements and funding, acquisitions, and
our ability to assimilate acquired operations. We undertake no obligation to
update or revise forward-looking statements, whether as a result of new
information, future events or otherwise.
General Information
-------------------
Philadelphia Suburban Corporation ("we" or "us"), a Pennsylvania corporation, is
the holding company for regulated utilities providing water or wastewater
services to approximately 2.5 million people in 15 states, principally in
Pennsylvania, Ohio, Illinois, Texas, New Jersey and Indiana. One of our
operating subsidiaries provides water or wastewater services to approximately
1.3 million people in the suburban areas north and west of the City of
Philadelphia and in 18 other counties in Pennsylvania. In addition we provide
water and wastewater service through operating and maintenance contracts with
municipal authorities and other parties close to our operating companies'
service territories. We are the largest U.S.-based investor-owned water utility
based on number of people served.
The description of our business above reflects the effect of our July 31, 2003
acquisition of AquaSource as described in the Financial Condition section.
11
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
(In thousands of dollars, except per share amounts)
Financial Condition
-------------------
During the first half of 2003, we had $58,562 of capital expenditures, repaid
$972 of customer advances for construction and repaid debt and made sinking fund
contributions and other loan repayments of $21,147. The capital expenditures
were related to improvements to treatment plants, new water mains and customer
service lines, the rehabilitation of existing water mains, hydrants and customer
service lines, in addition to well and booster improvements.
During the first six months of 2003, the proceeds from our short-term credit
facilities, proceeds from the issuance of common stock, internally generated
funds and available working capital were used to fund the cash requirements
discussed above and to pay dividends. At various times during the first half of
2003, our operating subsidiaries issued notes payable in aggregate of $11,232 at
various rates ranging from 1% to 5.1% due at various times in 2022, 2023, and
2032. On May 19, 2003, PSC issued 1,495,000 shares of common stock through a
shelf registration, providing proceeds of approximately $33,100, net of
expenses. The net proceeds were used to repay short-term debt, including the
repayment of $22,000 of indebtedness incurred in connection with our repurchase
of 1.2 million shares of our common stock from affiliates of Veolia
Environnement, S.A. (formerly Vivendi Environnement, S.A.) in October 2002. At
June 30, 2003, we had short-term lines of credit of $179,000, of which $69,691
was available. Effective with the December 1, 2003 payment, PSC has increased
the quarterly cash dividend on common stock from $.14 per share to $.15 per
share.
On July 31, 2003, we completed the acquisition of four operating water and
wastewater subsidiaries of AquaSource, Inc. (a subsidiary of DQE, Inc.),
including selected, integrated operating and maintenance contracts and related
assets (individually and collectively the acquisition is referred to as
"AquaSource") for $195,533 in cash. Pursuant to the purchase agreement, the
amount paid at closing is subject to adjustment upon completion of a closing
balance sheet and the finalization of other adjustments that may occur over
approximately a six month period. The acquired operations of AquaSource serve
approximately 130,000 water and wastewater customer accounts in eleven states.
For the fiscal year ended December 31, 2002, the acquired operations had
revenues of $69,451. In May 2003, we announced an agreement for the sale of the
AquaSource regulated and nonregulated operations located in Connecticut and New
York to a New England-based water company for an aggregate purchase price of
$5,000 and the assumption of approximately $800 of debt. The sale of the
Connecticut and New York regulated operations is subject to state regulatory
approvals and represents approximately 2% of the acquired operations. Closing on
the sale of the Connecticut and New York operations is expected to occur by
early 2004. In July 2003, PSC issued $135,000 of unsecured notes due 2023 and
with an interest rate of 4.87%. In July 2003, an unsecured note of $90,000 was
issued by PSC. Interest under this facility is based, at the borrower's option,
on either a defined base rate or an adjusted London Interbank Offered Rate
corresponding to the interest period selected. The proceeds of these financings
were used to fund the AquaSource acquisition, and to refinance existing debt.
Management believes that internally generated funds along with existing credit
facilities and the proceeds from the issuance of long-term debt and common stock
will be adequate to meet our financing requirements for the balance of the year
and beyond.
12
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
(In thousands of dollars, except per share amounts)
Results of Operations
---------------------
Analysis of First Six Months of 2003 Compared to First Six Months of 2002
-------------------------------------------------------------------------
Revenues for the first six months increased $15,584 or 10.5% primarily due to
increased water rates granted to our Pennsylvania, New Jersey, Ohio and Maine
operating subsidiaries and additional water revenues associated with the larger
customer base due to acquisitions, offset partially by the revenues associated
with a water system sold in 2002 of $841. Higher water consumption in the first
quarter of 2003 was largely offset by the impact of lower water consumption in
the second quarter of 2003 due to unfavorable weather conditions in many of the
states where we operate. The unfavorable weather conditions, particularly the
above-average rainfall, have continued in July 2003 in our primary service
territories, and water consumption by our customers has been reduced in these
areas which may have a similar effect on our operating results.
Operations and maintenance expenses increased by $5,493 or 9.8% primarily due to
increased postretirement benefits expenses, higher maintenance expenses,
increased insurance expense, and additional operating costs associated with
acquisitions. The postretirement benefits expense increase resulted principally
from higher pension costs and increased retiree medical costs. The increased
maintenance expenses are primarily a result of additional main break repairs
resulting from the relatively harsh winter weather that was experienced in 2003.
Depreciation expense increased $2,611 or 12.9% reflecting the utility plant
placed in service since the second quarter of 2002, including the assets
acquired through system acquisitions.
Amortization increased $153 primarily due to the amortization of the costs
associated with, and other costs being recovered in, various rate filings.
Taxes other than income taxes increased by $331 or 3.3% as a result of an
increase in capital stock tax due to an increase in the base on which the tax is
applied, and an increase in state regulatory taxes.
Interest expense increased by $1,592 or 8.1% primarily due to additional
borrowings to finance on-going capital projects and acquisitions, offset
partially by decreased interest rates on borrowings.
Allowance for funds used during construction ("AFUDC") decreased by $56
primarily due to a decrease in the average balance of utility plant construction
work in progress, to which AFUDC is applied; offset partially by an increase in
the AFUDC rate as a result of tax-exempt borrowings for our multi-year
infrastructure rehabilitation plan.
Gain on sale of other assets totaled $220 in the first half of 2003 and $1,758
in the first half of 2002. The change is due to a decrease in the gain on sale
of marketable securities of $1,049 and a decrease in the gain on the sale of
land realized of $489 as compared to the same period in 2002.
Our effective income tax rate was 40.0% in the first half of 2003 and 38.9% in
the first half of 2002. The change was due to a decrease in our tax-deductible
expenses.
13
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
(In thousands of dollars, except per share amounts)
Net income available to common stock for the first six months increased by
$1,866 or 7.0%, in comparison to the same period in 2002 primarily as a result
of the factors described above. On a diluted per share basis, earnings increased
$.03 or 7.9% reflecting the change in net income and a 0.4% decrease in the
average number of common shares outstanding. The decrease in the number of
shares outstanding is primarily a result of shares repurchased in the fourth
quarter of 2002, offset partially by the shares sold or issued through the shelf
registration, dividend reinvestment plan, and employee stock purchase plan and
equity compensation plan and shares issued in connection with acquisitions.
Analysis of Second Quarter of 2003 Compared to Second Quarter of 2002
---------------------------------------------------------------------
Revenues for the quarter increased $6,764 or 8.8% primarily due to increased
water rates granted to our Pennsylvania, New Jersey, Ohio and Maine operating
subsidiaries and additional water revenues associated with the larger customer
base due to acquisitions, offset partially by reduced water consumption
associated with the wet weather experienced in a significant portion of our
service territory during the second quarter of 2003 and the revenues associated
with a water system sold in 2002 of $456. While water usage was unfavorably
impacted in the second quarter of 2002 by the effects of the drought
restrictions in Pennsylvania and New Jersey, water consumption was impacted by
an even greater degree in the second quarter of 2003 by the effects of frequent
rainfall in most of the states where we operate. The unfavorable weather
conditions, particularly the above-average rainfall, have continued in July 2003
in our primary service territories, and water consumption by our customers has
been reduced in these areas which may have a similar effect on our operating
results.
Operations and maintenance expenses increased by $2,114 or 7.3% primarily due to
increased postretirement benefits expenses, higher maintenance expenses and
increased insurance expense. The postretirement benefits expense increase
resulted principally from higher pension costs.
Depreciation expense increased $1,157 or 11.2% reflecting the utility plant
placed in service since the second quarter of 2002, including the assets
acquired through system acquisitions.
Amortization decreased $19 primarily due to the amortization of the costs
associated with, and other costs being recovered in, various rate filings.
Taxes other than income taxes increased by $325 or 7.0% as a result of an
increase in state regulatory taxes and an increase in capital stock tax due to
an increase in the base on which the tax is applied.
Interest expense increased by $760 or 7.7% primarily due to additional
borrowings to finance on-going capital projects and acquisitions, offset
partially by decreased interest rates on borrowings due to refinancing of
certain existing debt issues.
Allowance for funds used during construction ("AFUDC") decreased by $46
primarily due to a decrease in the average balance of utility plant construction
work in progress, to which AFUDC is applied; offset partially by an increase in
the AFUDC rate as a result of tax-exempt borrowings for our multi-year
infrastructure rehabilitation plan.
14
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
(In thousands of dollars, except per share amounts)
Gain on sale of other assets totaled $165 in the second quarter of 2003 and
$1,409 in the second quarter of 2002. The change is due to a decrease in the
gain on sale of marketable securities of $700 and a decrease in the gain on the
sale of land realized of $544 as compared to the second quarter of 2002.
Our effective income tax rate was 39.8% in the second quarter of 2003 and 38.6%
in the second quarter of 2002. The change was due to a decrease in our
tax-deductible expenses.
Net income available to common stock for the quarter increased by $417 or 2.8%,
in comparison to the same period in 2002 primarily as a result of the factors
described above. On a diluted per share basis, earnings increased $.01 or 4.8%
reflecting the change in net income and a 0.2% increase in the average number of
common shares outstanding.
Recent Events
-------------
Environmental Regulation - Provision of water and wastewater services is subject
to regulation under the federal Safe Drinking Water Act, the Clean Water Act and
related state laws, and under state and federal regulations issued under these
laws. These laws and regulations establish criteria and standards for drinking
water and for discharges to surface waters. In addition, we are subject to
federal and state laws and other regulations relating to solid waste disposal,
dam safety and other operations.
There are some environmental compliance issues at various water and wastewater
facilities associated with the AquaSource acquisition that was completed on July
31, 2003. We estimate that the capital expenditures required to address these
compliance issues will be approximately $65,000 over the next several years.
Various operating subsidiaries that were acquired in the AquaSource acquisition
are parties to agreements with regulatory agencies regarding environmental
compliance. These agreements are intended to provide the regulators assurance
that problems will be addressed, and they generally provide some protection from
fines, penalties and other actions while corrective measures are being
implemented. The agreements were negotiated by AquaSource prior to the
acquisition being completed, and we have assumed AquaSource's obligations under
these agreements. We expect to work directly with state environmental officials
to implement or amend these agreements as necessary. We are aware of one
instance, despite the presence of a compliance agreement, where the compliance
action plan has not resolved the compliance issue. The regulatory agency may
impose fines and penalties which are not expected to be material and for which
we would make an indemnity claim against DQE, Inc. and AquaSource, Inc. under
the purchase agreement.
Safe Drinking Water Act - The Safe Drinking Water Act establishes criteria and
procedures for the Environmental Protection Agency to develop national quality
standards for drinking water. Regulations issued pursuant to the Safe Drinking
Water Act and its amendments set standards on the amount of certain microbial
and chemical contaminants and radionuclides allowable in drinking water. Current
requirements under the Safe Drinking Water Act are not expected to have a
material impact on our operations or financial condition as we have already made
investments to meet existing water quality standards. We may, in the future, be
required to change our method of treating drinking water at certain sources of
supply if additional regulations become effective.
15
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
(In thousands of dollars, except per share amounts)
Issuance by the EPA of a rule regulating radon in tap water has been postponed
repeatedly since 1991. Limits for radon would probably become effective 4 or 5
years after issuance of any such rule. We anticipate this rule may establish a
radon level that would require treatment at a number of our wells. If the states
in which we operate elect not to implement general radon reduction programs
(Multi-Media Mitigation), then a lower limit for radon may apply and a larger
number of wells would be affected. We anticipate that states will adopt
Multi-Media Mitigation programs. The capital costs to comply with the
anticipated limit are expected to total approximately $1,000 or less than 1% of
our typical annual capital expenditures.
The Safe Drinking Water Act provides for the regulation of radionuclides other
than radon, such as radium and uranium. In December 2000, the EPA issued a final
rule regulating certain radionuclides other than radon. The rule will become
effective in December 2003, may require additional testing, and may require
additional treatment at a limited number of wells. The cost of compliance is
expected to be less than $1,000. The impact of the new rulemaking is not
expected to have a material impact on our results from operations or financial
condition.
In order to eliminate or inactivate microbial organisms, the Surface Water
Treatment Rule and the Interim Enhanced Surface Water Treatment Rule were issued
by the EPA to improve disinfection or filtration of potable water. The EPA
developed the Disinfectants-Disinfection By-products Rule to reduce consumers'
exposure to disinfectants and by-products of the disinfection process. In 1998,
the EPA issued new rules on disinfection and on surface water treatment.
Groundwater and smaller surface water systems have until December 2003 to comply
with the rules on disinfection and on surface water treatment. In the future we
may be required to install filtration or other treatment for one surface water
supply. The cost of this treatment, should it be required, is not expected to
exceed $5,000. Certain small groundwater systems could be reclassified as being
influenced by surface water. This may require additional treatment or the
development of replacement sources of supply over time, and is not expected to
exceed $5,000.
In January 2001, the EPA issued a final rule for arsenic that lowers the limit
on arsenic in potable water to a more stringent level effective by 2006, with a
provision for further time extensions for small systems. Currently, several
small well systems slightly exceed the new arsenic levels and may require
additional treatment. The cost of maintaining compliance with this new
rulemaking is not expected to exceed $1,000 and will not have a material impact
on our results from operations or financial condition.
In April 2000, the gasoline additive Methyl tert-Butyl Ether ("MtBE") was
discovered in one production well of our New Jersey operating subsidiary at
levels exceeding the New Jersey drinking water standard. The well was
immediately taken out of service and alternate water supplies were obtained. The
company responsible for the contamination has reimbursed us for a substantial
portion of the expenses incurred to-date. We continue to pursue developing a
long-term replacement supply and based on various studies we believe an
alternate water system will be needed. We have taken legal action seeking
reimbursement for the costs associated with obtaining an alternate long-term
water supply, and we expect to recover these costs from the responsible party.
16
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
(In thousands of dollars, except per share amounts)
Clean Water Act - The Clean Water Act regulates discharges from drinking water
and wastewater treatment facilities into lakes, rivers, streams, and
groundwater. We operate numerous water and wastewater facilities in a number of
states. It is our policy to obtain and maintain all required permits and
approvals for the discharge from these water and wastewater facilities, and to
comply with all conditions of those permits and other regulatory requirements. A
program is in place to monitor facilities for compliance with permitting,
monitoring and reporting for wastewater discharges. From time to time,
violations may occur which may result in fines. As described previously, various
operating subsidiaries that were acquired in the AquaSource acquisition had
entered into agreements, prior to the acquisition being completed, to address
compliance issues. Penalties or fines are not expected to have a material impact
on our results of operations or financial condition, and the required costs to
comply with the agreements previously cited are expected to be recoverable in
rates.
Solid Waste Disposal - The handling and disposal of residuals and solids from
water and wastewater treatment facilities are governed by state and federal laws
and regulations. A program is in place to monitor our facilities for compliance
with regulatory requirements, and we do not currently anticipate any major
expenditures and costs in connection with the management and disposal of
residuals and solids from our water and wastewater facilities in the future.
Economic Regulation - The City of Fort Wayne, Indiana is considering the
acquisition, by eminent domain or otherwise, of a portion of the utility assets
of one of the operating subsidiaries that we acquired in connection with the
AquaSource acquisition in July 2003. The system represents approximately 7,500
customers or approximately 1% of our total customer base. We intend to discuss
this matter with the City of Fort Wayne officials now that we have completed the
AquaSource acquisition. We believe that our Indiana operating subsidiary is
entitled to fair value market value for its assets.
Name Change - We will change our name to Aqua America, Inc. to reflect our
position as the largest U.S.-based investor-owned water utility. The name change
will become effective on October 10, 2003. Effective October 13, 2003, our
ticker symbol on the New York Stock Exchange and the Philadelphia Stock Exchange
will change to "WTR."
Disclosure regarding other recent events (AquaSource acquisition and July 2003
financings) is contained in the "Financial Condition" section of this
Management's Discussion and Analysis of Financial Condition and Results of
Operations section.
Impact of Recent Accounting Pronouncements
------------------------------------------
In July 2001, the Financial Accounting Standards Board ("FASB") approved
Statement of Financial Accounting Standards ("SFAS") No. 143, "Accounting for
Asset Retirement Obligations." SFAS No. 143 requires that the fair value of a
liability for an asset retirement obligation be recognized in the period in
which it is incurred. When the liability is initially recognized, the carrying
amount of the related long-lived asset is increased by the same amount. Over
time, the liability is accreted to its present value each period, and the
capitalized cost is depreciated over the useful life of the related asset. Upon
settlement of the liability, we may settle the obligation for its recorded
amount, or an alternative amount, thereby incurring a gain or loss upon
settlement. The adoption of this statement as required on January 1, 2003 did
not have a material impact on our results of operations or financial position.
17
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
(In thousands of dollars, except per share amounts)
In April 2002, the FASB approved SFAS No. 145, "Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." SFAS No. 145, among other things, rescinds SFAS No. 4, which
required all gains and losses from the extinguishment of debt to be classified
as an extraordinary item and amends SFAS No. 13 to require that certain lease
modifications that have economic effects similar to sale-leaseback transactions
be accounted for in the same manner as sale-leaseback transactions. We adopted
this statement in the first quarter of 2003 and it did not have a material
impact on our results of operations or financial position.
In June 2002, the FASB approved SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 requires the recognition of
costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan. This statement
replaces the previous accounting guidance provided in Emerging Issues Task Force
Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." SFAS No. 146 is effective for exit or disposal activities that
are initiated after December 31, 2002. We adopted this standard in the first
quarter of 2003 and it did not have a material impact on our results of
operations or financial position.
In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others," an interpretation of SFAS No. 5, 57 and
107 and rescission of SFAS No. 34. This interpretation clarifies the
requirements of FASB Statement No. 5, "Accounting for Contingencies" relating to
the guarantor's accounting for, and disclosure of, the issuance of certain types
of guarantees. The disclosure provisions of the interpretation are effective for
financial statements of periods ending after December 15, 2002. The provisions
for initial recognition and measurement are effective on a prospective basis for
guarantees that are issued or modified after December 31, 2002. We adopted the
accounting provisions of this standard in the first quarter of 2003 and it did
not have a material impact on our results of operations or financial position.
In April 2003, the FASB approved SFAS No. 149, "Amendment of Statement No. 133
on Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities. We believe the adoption of this standard will have no effect
on our results of operations or financial position. As of June 30, 2003, we had
no derivative instruments or hedging activities.
In May 2003, the FASB approved SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
establishes standards for classifying and measuring as liabilities certain
financial instruments with characteristics of both liabilities and equity. The
standard is effective for financial instruments entered into or modified after
May 31, 2003, and is otherwise effective July 1, 2003. This statement is not
expected to have an impact on our results of operations or financial position.
18
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
We are subject to market risks in the normal course of business,
including changes in interest and equity prices. There have been no
significant changes in our exposure to market risks since December 31,
2002. Refer to Item 7A of the Company's Annual Report on Form 10-K for
the year ended December 31, 2002 for additional information.
Item 4. Controls and Procedures
----------------------------------------------------------
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive
Officer and Chief Financial Officer, evaluated the effectiveness of
our disclosure controls and procedures as of the end of the period
covered by this report. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures as of the end of the period
covered by this report are functioning effectively to provide
reasonable assurance that the information required to be disclosed
by us in reports filed under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms. A controls system,
no matter how well designed and operated, cannot provide absolute
assurance that the objectives of the controls system are met, and
no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within a company
have been detected.
(b) Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting occurred
during our most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, our internal control
over financial reporting.
19
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
Part II. Other Information
Item 1. Legal Proceedings
-----------------
There are no pending legal proceedings to which we or any of our
subsidiaries is a party or to which any of their properties is the
subject that are expected to have a material effect on our financial
position, results of operations or cash flows.
Item 4. Results of Vote of Security Holders
-----------------------------------
The Annual Meeting of Shareholders of Philadelphia Suburban Corporation
was held on May 15, 2003 at the Springfield Country Club, 400 West
Sproul Road, Springfield, Pennsylvania, pursuant to the Notice sent on
or about April 9, 2003 to all shareholders of record at the close of
business on March 21, 2003. At that meeting, the following nominees
were elected as directors of Philadelphia Suburban Corporation for
terms expiring in the year 2006 and received the votes set forth after
their names below:
Name of Nominee For Withheld
--------------- --- --------
John F. McCaughan 53,091,020 3,680,220
Richard H. Glanton, Esq. 45,455,138 11,316,102
Nicholas DeBenedictis 53,259,071 3,512,169
Since the Board of Directors is divided into three classes with one
class elected each year to hold office for a three-year term, the term
of office for the following directors continued after the Annual
Meeting; Mary C. Carroll, G. Fred DiBona, Jr., Alan R. Hirsig, John E.
Menario and Richard L. Smoot.
Proposal II (to approve an amendment to Philadelphia Suburban
Corporation's 1994 Equity Compensation Plan) received the
following votes:
For Against Abstain No Vote
--- ------- ------- -------
31,989,608 9,253,325 901,346 14,626,961
20
PHILADELPHIA SUBURBAN CORPORATION AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit No. Description
----------- -----------
31.1 Certification of Chief Executive Officer,
pursuant to Rule 13a-14(a) under the
Securities and Exchange Act of 1934.
31.2 Certification of Chief Financial Officer,
pursuant to Rule 13a-14(a) under the
Securities and Exchange Act of 1934.
32.1 Certification of Chief Executive Officer,
pursuant 18 U.S.C. Section 1350.
32.2 Certification of Chief Financial Officer,
pursuant to 18 U.S.C. Section 1350.
(b) Reports on Form 8-K
Current Report on Form 8-K furnished on May 1, 2003, responding to
Item 12, Disclosure of Results of Operations and Financial
Condition. (Related to the Company's issuance of a press release on
April 28, 2003 announcing that it expected first quarter 2003
diluted net income per share to be significantly higher than 2002
levels and also expected to meet the Thomson First Call consensus
estimate).
Current Report on Form 8-K furnished on May 7, 2003, responding to
Item 12, Disclosure of Results of Operations and Financial
Condition. (Related to the Company's issuance of a press release on
May 7, 2003 announcing its first quarter 2003 earnings).
Current Report on Form 8-K filed on May 14, 2003, responding to
Item 5, Other Events. (Related to the Company entering into an
underwriting agreement on May 13, 2003 relating to the issuance of
up to 1,495,000 shares of PSC common stock and the opinion
regarding the legality of the securities registered by a shelf
registration statement filed on April 3, 2003).
21
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be executed on its behalf by the
undersigned thereunto duly authorized.
August 8, 2003
PHILADELPHIA SUBURBAN CORPORATION
---------------------------------
Registrant
NICHOLAS DEBENEDICTIS
---------------------------------
Nicholas DeBenedictis
Chairman and President
DAVID P. SMELTZER
---------------------------------
David P. Smeltzer
Senior Vice President - Finance
and Chief Financial Officer
22