SouthWest Water Company Delays Filing 2008 Form 10-k
March 13 2009 - 2:06PM
Business Wire
SouthWest Water Company (NASDAQ:SWWC), a leading provider of
water, wastewater and public works services, today said it has
filed a Form 12b-25 with the Securities and Exchange Commission
indicating that it will not be able to file its Form 10-K by March
31, 2009, the extended due date of the filing.
As announced on November 10, 2008, the company said that it
would restate prior period financial statements after management
discovered errors relating to establishing the rate of depreciation
of acquired assets along with accounting for revenues and related
costs associated with the installation of water and sewer taps.
PricewaterhouseCoopers (PwC), which had previously been appointed
as the company�s independent public accountant for the period
beginning January 1, 2008, was also engaged to re-audit the
company�s financial statements for the two years ended December 31,
2007.
In connection with the ongoing comprehensive financial review,
management has identified deficiencies in its internal controls
over financial reporting during and prior to the restatement
periods. Although management has not completed its assessment, it
is expected that the assessment of the control deficiencies, either
individually or in combination, is likely to result in a conclusion
that material weaknesses existed. As such, management has expanded
the review to include additional procedures and analysis to
compensate for insufficient controls. The company believes that the
extra time and expense associated with these additional procedures
will aid in assuring that no further issues are present and an
appropriate remediation plan is in place.
The expanded review has resulted in the identification of
additional matters that will require restatement of previously
reported results. These matters include errors related to the
company�s accounting for acquisitions and the capitalization of
certain utility assets. Additional errors will likely cause the
range of the restatement to exceed the previously disclosed range
of a cumulative reduction in net income of $4.0 million to $8.0
million from 2000 through 2008. The company is unable to estimate a
range at this time because of the complexity of the mutually
dependent nature of some of the items, but anticipates it will be
able to provide more clarity within the next few weeks.
SouthWest Water also noted that its debt agreements require it
to maintain specified financial ratios and to comply with other
restrictive covenants. Management believes that as a result of
balance sheet impacts identified in the restatement, its total
capitalization ratio may exceed its covenant limit of 60% for a
period of time. As of March 31, 2009, the company will also be out
of compliance with its previously announced extension of its
reporting deadline from its banking syndicate. The company is in
discussions regarding obtaining an amendment to its current
agreement. In the unlikely event that the company is unable to
obtain the amendment prior to filing its 2008 Form 10-K, its
outstanding long-term indebtedness would be required to be
classified as a current liability. While the company is confident
that it will be able to obtain the amendment, if it is unable to do
so or unable to obtain alternative financing arrangements, there
would be a material adverse impact to the business.
The company continues to work diligently to complete the
restatement of prior period statements. As soon as practical the
company will file a Form 10-K for the year ended December 31, 2008;
amended Form 10-Qs for the quarterly periods ended March 31, 2008
and June 30, 2008, and its Form 10-Q for the third quarter ended
September 30, 2008.
SouthWest Water Company provides a broad range of operations,
maintenance and management services, including water production,
treatment and distribution; wastewater collection and treatment;
customer service; and utility infrastructure construction
management. The company owns regulated public utilities and also
serves cities, utility districts and private companies under
contract. More than two million people in 10 states depend on
SouthWest Water for high-quality, reliable service. Additional
information may be found on the company�s website:
www.swwc.com.
This document contains �forward-looking statements� within the
meaning of the Private Securities Litigation Reform Act of 1995.
These statements, including expectations relating to the
anticipated timing of further clarity on the range and amounts of
restatement issues, and its ability to obtain an amendment from its
banking syndicate, involve risks and uncertainties, as well as
assumptions that, if they prove incorrect or never materialize,
could cause the results of the company to differ materially from
those expressed or implied by such forward-looking statements.
Actual results may differ materially from these expectations due to
unexpected developments discovered in the process of the expanded
review of the financial statements and other factors. The company
assumes no obligation to update these forward-looking statements to
reflect any change in future events.
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