Filed Pursuant to Rule 424(b)(5)
Registration No. 333-104290
PROSPECTUS SUPPLEMENT
(To Prospectus dated April 25, 2003)
1,300,000 Shares
PHILADELPHIA SUBURBAN CORPORATION
Common Stock
------------------------
We are selling 1,300,000 shares of our common stock with this prospectus
supplement and the accompanying prospectus.
Our common stock is listed on the New York Stock Exchange and the
Philadelphia Stock Exchange under the symbol "PSC." The last reported sale
price of our common stock on the New York Stock Exchange on May 13, 2003 was
$23.08 per share.
Investing in our common stock involves risk. See "Risk Factors" beginning on
page 5 of the accompanying prospectus.
The underwriters have an option to purchase a maximum of 195,000 additional
shares of our common stock from us to cover over-allotments of shares, if any.
Per Share Total
--------- -----------
Public offering price ............................... $23.08 $30,004,000
Underwriting discount and commissions ............... $ 0.88 $ 1,144,000
Proceeds to Philadelphia Suburban Corporation ....... $22.20 $28,860,000
The underwriters expect to deliver the shares to purchasers on or about May
19, 2003.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
Edward D. Jones & Co., L.P. Janney Montgomery Scott LLC
The date of this prospectus supplement is May 13, 2003
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Page
----
About this Prospectus Supplement ........................................ S-2
Philadelphia Suburban Corporation ....................................... S-3
Use of Proceeds ......................................................... S-3
Underwriting ............................................................ S-4
Legal Matters ........................................................... S-5
PROSPECTUS
Page
----
About this Prospectus ................................................... 1
Forward-Looking Statements .............................................. 2
Philadelphia Suburban Corporation ....................................... 4
Risk Factors ............................................................ 5
Use of Proceeds ......................................................... 7
Certain Ratios .......................................................... 7
Description of Capital Stock ............................................ 8
Description of Depositary Shares ........................................ 10
Description of Debt Securities .......................................... 11
Description of Common Stock Purchase Contracts and Common Stock Purchase
Units ................................................................... 18
Plan of Distribution .................................................... 19
Where You Can Find More Information ..................................... 21
Legal Matters ........................................................... 21
Experts ................................................................. 21
You should rely only on the information contained in this prospectus
supplement, the accompanying prospectus and the documents we have incorporated
by reference in the accompanying prospectus. We have not, and the underwriters
have not, authorized anyone to provide you with different information. We are
not making an offer of the shares of common stock in any jurisdiction where
the offer or sale is not permitted. You should not assume that the information
provided by this prospectus supplement or the accompanying prospectus or the
information we have previously filed with the Securities and Exchange
Commission that is incorporated by reference in the accompanying prospectus is
accurate as of any date other than their respective dates. For purposes of
this prospectus supplement and the accompanying prospectus, when we refer to
"us," "we," "our, "ours," or the "Company," we are describing Philadelphia
Suburban Corporation and its direct and indirect subsidiaries, except in the
context otherwise indicated. In addition, references to Pennsylvania Suburban
Water Company refer to our wholly-owned subsidiary, Pennsylvania Suburban
Water Company, and its subsidiaries, and references to Consumers Water Company
refer to our wholly-owned subsidiary, Consumers Water Company, and its
subsidiaries.
S-1
ABOUT THIS PROSPECTUS SUPPLEMENT
We provide information to you about this offering of shares of our common
stock in two parts. The first part is the prospectus supplement, which
describes the specific details regarding this offering. The second part is the
accompanying prospectus, which provides general information, some of which may
not apply to this offering. The accompanying prospectus refers to additional
documents we have filed, and may file in the future with the SEC, which are
incorporated by reference in the accompanying prospectus. For purposes of this
offering, references to the accompanying prospectus also refer to the
documents incorporated by reference therein, including our Annual Report on
Form 10-K for the year ended December 31, 2002, our Quarterly Report on Form
10-Q for the quarter ended March 31, 2003 and our Current Report on Form 8-K
dated January 14, 2003, filed with the SEC prior to the completion of this
offering. If information in this prospectus supplement is inconsistent with
the accompanying prospectus, you should rely on this prospectus supplement.
Except as the context otherwise indicates, the information in this prospectus
supplement assumes no exercise of the underwriters' over-allotment option.
Certain statements in this prospectus supplement, the accompanying
prospectus and the documents incorporated by reference in the accompanying
prospectus, are forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934 made based upon, among other things, our current assumptions,
expectations and beliefs concerning future developments and their potential
effect on us. These forward-looking statements involve risks, uncertainties
and other factors, many of which are outside our control, that may cause our
actual results, performance or achievements to be materially different from
any future results, performance or achievements expressed or implied by these
forward-looking statements. In some cases you can identify forward-looking
statements where statements are preceded by, followed by or include the words
"believes," "expects," "anticipates," "plans" or similar expressions.
Given these uncertainties, you should not place undue reliance on these
forward-looking statements. You should read this prospectus supplement, the
accompanying prospectus and the documents incorporated by reference in the
accompanying prospectus completely and with the understanding that our actual
future results may be materially different from what we expect. These forward-
looking statements represent our estimates and assumptions only as of the date
of the applicable document. Except for our ongoing obligations to disclose
material information under the federal securities laws, we may not be
obligated to update these forward-looking statements, even though our
situation may change in the future. We qualify all of our forward-looking
statements by these cautionary statements.
S-2
PHILADELPHIA SUBURBAN CORPORATION
Philadelphia Suburban Corporation is the holding company for regulated
utilities providing water or wastewater services to approximately two million
people in Pennsylvania, Ohio, Illinois, New Jersey, Maine and North Carolina.
Our two primary subsidiaries are Pennsylvania Suburban Water Company, a
regulated public utility that provides water or wastewater services to
approximately 1.3 million residents in the suburban areas north and west of
the City of Philadelphia and in 18 other counties in Pennsylvania, and
Consumers Water Company, a holding company for several regulated public
utility companies that provide water or wastewater service to approximately
700,000 residents in various communities in Ohio, Illinois, New Jersey and
Maine. Other of our smaller subsidiaries provide water or wastewater services
in parts of Pennsylvania, North Carolina and Ohio. Some of our subsidiaries
provide wastewater services to a population of approximately 40,000 people in
Pennsylvania, Illinois, New Jersey and North Carolina. In addition, we provide
water and wastewater service to approximately 45,000 people 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 customers.
We have paid dividends for 58 consecutive years. We increased our dividend
to shareholders by 5.7 percent, to $0.56 on an annualized basis, effective
with our December 1, 2002 dividend payment. This increase represented the
twelfth time that we have increased our dividend in the last 11 years.
We entered into a purchase agreement with DQE, Inc. ("DQE") and AquaSource,
Inc. ("AquaSource") dated July 29, 2002, as amended by Amendment No. 1 dated
March 4, 2003, pursuant to which we agreed to acquire four operating water and
wastewater subsidiaries of AquaSource and assume selected, integrated
operating and maintenance contracts and related assets. The purchase agreement
provides for a target cash purchase price of approximately $205 million which
is subject to various adjustments. If the transaction is completed, we will
purchase operating utilities, including assets and franchises that serve
approximately 130,000 water and wastewater customer accounts in eleven states,
and selected water and wastewater operating contracts that serve approximately
40,000 customers in seven of the eleven states. The acquisition is subject to
certain regulatory approvals, and we expect to obtain the requisite approvals
in mid-2003. In addition, we currently are seeking to sell certain smaller
AquaSource systems in an effort intended to allow us to operate the total
AquaSource system more efficiently following the consummation of the
transaction.
USE OF PROCEEDS
We intend to use the net proceeds from this offering of approximately $28.8
million (after the payment of offering expenses) to repay approximately $22
million in principal amount of indebtedness outstanding as of May 7, 2003,
which bears interest at 2.33% per annum and is due on October 24, 2003. We
incurred this indebtedness 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. The balance of the net
proceeds will be used for working capital and for other general corporate
purposes.
S-3
UNDERWRITING
Subject to the terms and conditions of an underwriting agreement dated as of
the date of this prospectus supplement, each of the underwriters named below
have severally agreed to purchase from the Company the following respective
number of shares of common stock at a public offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus supplement:
Underwriters Number
-------------- of Shares
---------
Edward D. Jones & Co., L.P. ........................................ 780,000
Janney Montgomery Scott LLC ........................................ 520,000
---------
Total ........................................................... 1,300,000
=========
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares of common stock offered hereby are subject
to certain conditions precedent and that the underwriters will purchase all of
the shares of common stock offered by this prospectus supplement, other than
those covered by the over-allotment option described below, if any of these
shares are purchased.
We have been advised by the underwriters that they propose to offer the
shares of common stock to the public at the public offering price set forth on
the cover of this prospectus supplement and to certain dealers at a price that
represents a concession not in excess of $0.53 per share under the public
offering price. After the public offering, the underwriters may change the
offering price and other selling terms.
We have granted to the underwriters an option, exercisable not later than 30
days after the date of this prospectus supplement, to purchase up to 195,000
additional shares of common stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus supplement. The underwriters may exercise this option only to cover
over-allotments made in connection with the sale of the common stock offered
by this prospectus supplement. To the extent that the underwriters exercise
this option, each of the underwriters will become obligated, subject to
certain conditions, to purchase approximately the same percentage of these
additional shares of common stock as the number of shares of common stock to
be purchased by it in the above table bears to the total number of shares of
common stock offered by this prospectus supplement. We will be obligated,
pursuant to the option, to sell these additional shares of common stock to the
underwriters to the extent the option is exercised. If any additional shares
of common stock are purchased, the underwriters will offer the additional
shares on the same terms as those on which the shares are being offered.
The underwriting discounts and commissions per share are equal to the public
offering price per share of common stock less the amount paid by the
underwriters to us per share of common stock. The underwriting discounts and
commissions are 3.8% of the public offering price. We have agreed to pay the
underwriters the following discounts and commissions, assuming either no
exercise or full exercise by the underwriters of the underwriters' over-
allotment option:
Total Fees
Without Exercise of
Over-Allotment Option With Full Exercise of
Fee per share --------------------- Over-Allotment Option
------------- --------------------- ---------------------
Discounts and commissions paid by us............................. $0.88 $1,144,000 $1,315,600
In addition, we estimate that our total expenses of this offering, excluding
underwriting discounts and commissions, will be approximately $100,000.
We have agreed to indemnify the underwriters against some specified types of
liabilities, including liabilities under the Securities Act, and to contribute
to payments the underwriters may be required to make in respect of any of
these liabilities.
Each of our officers and directors, have agreed not to offer, sell, contract
to sell or otherwise dispose of, or enter into any transaction that is
designed to, or could be expected to, result in the disposition of any shares
of our common stock or other securities convertible into or exchangeable or
exercisable for shares of
S-4
our common stock or derivatives of our common stock owned by these persons
prior to this offering or common stock issuable upon exercise of options or
warrants held by these persons for a period of 30 days after the date of this
prospectus supplement without the prior written consent of the underwriters.
This consent may be given at any time without public notice.
We have agreed that we will not issue, offer, sell, contract to sell, pledge
or otherwise dispose of, directly or indirectly, or file with the Securities
and Exchange Commission a registration statement under the Securities Act
relating to, any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock, or publicly
disclose the intention to make any offer, sale, pledge, disposition or filing,
without the prior written consent of the underwriters for a period of 30 days
after the date of this prospectus supplement. This agreement does not apply to
grants of stock options or restricted stock pursuant to the terms of an equity
compensation or similar plan in effect on the date of the underwriting
agreement, up to 200,000 shares of common stock issued under our acquisition
shelf registration statement or the issuance of shares of common stock
pursuant to the terms of our dividend reinvestment and direct stock purchase
plan.
The underwriters have advised us that they do not intend to confirm sales to
any account over which they exercise discretionary authority.
In connection with this offering, the underwriters may purchase and sell
shares of our common stock in the open market. These transactions may include
short sales, purchases to cover positions created by short sales and
stabilizing transactions.
Short sales involve the sale by the underwriters of a greater number of
shares than they are required to purchase in the offering. Covered short sales
are sales made in an amount not greater than the underwriters option to
purchase additional shares of common stock from the Company in this offering.
The underwriters may close out any covered short position by either exercising
their option to purchase additional shares or purchasing shares in the open
market. In determining the source of shares to close out the covered short
position, the underwriters will consider, among other things, the price of
shares available for purchase in the open market as compared to the price at
which they may purchase shares through the over-allotment option.
Naked short sales are any sales in excess of the over-allotment option. The
underwriters must close out any naked short position by purchasing shares in
the open market. A naked short position is more likely to be created if
underwriters are concerned that there may be downward pressure on the price of
the shares in the open market prior to the completion of the offering.
Stabilizing transactions consist of various bids for or purchases of our
common stock made by the underwriters in the open market prior to the
completion of the offering.
The underwriters may impose a penalty bid. This occurs when a particular
underwriter repays to the other underwriters a portion of the underwriting
discount received by it because they have repurchased shares sold by or for
the account of that underwriter in stabilizing or short covering transactions.
Purchases to cover a short position and stabilizing transactions may have
the effect of preventing or slowing a decline in the market price of our
common stock. Additionally, these purchases, along with the imposition of the
penalty bid, may stabilize, maintain or otherwise affect the market price of
our common stock. As a result, the price of our common stock may be higher
than the price that might otherwise exist in the open market. These
transactions may be effected on the New York Stock Exchange, in the over-the-
counter market or otherwise.
Some of the underwriters or their affiliates have provided investment
banking services to us in the past and may do so in the future. They receive
customary fees and commissions for these services.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania.
Certain legal matters in connection with this offering will be passed upon for
the underwriters by Davis Polk & Wardwell, New York, New York.
S-5
PROSPECTUS
$250,000,000
PHILADELPHIA SUBURBAN CORPORATION
Common Stock
Preferred Stock
Common Stock Purchase Contracts
Common Stock Purchase Units
Depositary Shares
Debt Securities
This prospectus relates to common stock, preferred stock, common stock
purchase contracts, common stock purchase units, depositary shares and debt
securities that Philadelphia Suburban Corporation may sell from time to time
in one or more offerings. The aggregate public offering price of the
securities we may sell in these offerings will not exceed $250,000,000. This
prospectus will allow us to issue securities over time. We will provide a
prospectus supplement each time we issue securities, which will inform you
about the specific terms of that offering and may also supplement, update or
amend information contained in this document. You should read this prospectus
and each applicable prospectus supplement carefully before you invest.
Our common stock is listed on the New York Stock Exchange and the
Philadelphia Stock Exchange under the symbol "PSC." The last reported sale
price of our common stock on the New York Stock Exchange on April 25, 2003 was
$22.46 per share. We have not yet determined whether any of the other
securities that may be offered by this prospectus will be listed on any
exchange, inter-dealer quotation system or over-the-counter market. If we
decide to seek listing of any such securities upon issuance, the prospectus
supplement relating to those securities will disclose the exchange, quotation
system or market on which the securities will be listed.
Investing in our securities involves risk. See "Risk Factors" beginning on
page 5 of this prospectus. You should read carefully this document and any
applicable prospectus supplement before you invest.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The date of this prospectus is April 25, 2003.
TABLE OF CONTENTS
Page
----
About this Prospectus ................................................... 1
Forward-Looking Statements .............................................. 2
Philadelphia Suburban Corporation ....................................... 4
Risk Factors ............................................................ 5
Use of Proceeds ......................................................... 7
Certain Ratios .......................................................... 7
Description of Capital Stock ............................................ 8
Description of Depositary Shares ........................................ 10
Description of Debt Securities .......................................... 11
Description of Common Stock Purchase Contracts and Common Stock Purchase
Units.................................................................. 18
Plan of Distribution .................................................... 19
Where You Can Find More Information ..................................... 21
Legal Matters ........................................................... 21
Experts ................................................................. 21
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission using a "shelf" registration process. Under
this shelf process, we may, from time to time, sell common stock, preferred
stock, common stock purchase contracts, common stock purchase units,
depositary shares and debt securities in one or more offerings. The aggregate
public offering price of the securities we sell in these offerings will not
exceed $250,000,000. This prospectus provides you with a general description
of the securities we may offer. Each time we sell any securities under this
prospectus, we will provide a prospectus supplement that will contain specific
information about the terms of that offering. The prospectus supplement also
may add, update or change information contained in this prospectus. You should
read this prospectus and the applicable prospectus supplement together with
the additional information described below under the heading "Where You Can
Find More Information" before you decide whether to invest in the securities.
The registration statement (including the exhibits) of which this prospectus
is a part contains additional information about us and the securities we may
offer by this prospectus. Specifically, we have filed certain legal documents
that control the terms of the securities offered by this prospectus as
exhibits to the registration statement. We will file certain other legal
documents that will control the terms of the securities we may offer by this
prospectus as exhibits to the registration statement or to reports we file
with the SEC. The registration statement and the reports can be read at the
SEC website or at the SEC offices mentioned under the heading "Where You Can
Find More Information."
You should rely only upon the information contained in, or incorporated
into, this prospectus and the applicable prospectus supplement that contains
specific information about the securities we are offering. We have not
authorized any other person to provide you with different information. If
anyone provides you with different or inconsistent information, you should not
rely on it. We are not making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this document is accurate only as of the date on
the front cover of this document. Our business, financial condition, results
of operations and prospects may have changed since that date.
Except as otherwise provided in this prospectus, unless the context
otherwise requires, references in this prospectus to "we," "us" and "our"
refer to Philadelphia Suburban Corporation and its direct and indirect
subsidiaries. In addition, references to Pennsylvania Suburban Water refer to
our wholly-owned subsidiary, Pennsylvania Suburban Water Company, and its
subsidiaries, and references to Consumers Water refer to our wholly-owned
subsidiary, Consumers Water Company, and its subsidiaries. To understand our
offering of these securities fully, you should read this entire document
carefully, including particularly the "Risk Factors" section and the documents
identified in the section titled "Where You Can Find More Information", as
well as the applicable prospectus supplement that contains specific
information about the securities we are offering.
1
FORWARD-LOOKING STATEMENTS
Certain statements in this prospectus, or incorporated by reference in this
prospectus, are forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934 made based upon, among other things, our current assumptions,
expectations and beliefs concerning future developments and their potential
effect on us. These forward-looking statements involve risks, uncertainties
and other factors, many of which are outside our control, that may cause our
actual results, performance or achievements to be materially different from
any future results, performance or achievements expressed or implied by these
forward-looking statements. In some cases you can identify forward-looking
statements where statements are preceded by, followed by or include the words
"believes," "expects," "anticipates," "plans" or similar expressions. Forward-
looking statements in this prospectus and any related prospectus supplement,
or incorporated by reference in this prospectus and any related prospectus
supplement, include, but are not limited to, statements regarding:
o projected capital expenditures and related funding requirements;
o developments and trends in the water and wastewater utility
industries;
o dividend payment projections;
o opportunities for future acquisitions and success of pending
acquisitions;
o the capacity of our water supplies and facilities;
o the development of new services and technologies by us or our
competitors;
o the availability of qualified personnel;
o general economic conditions;
o acquisition-related costs and synergies; and
o the forward-looking statements contained under the heading "Forward-
Looking Statements" in the section entitled "Management's Discussion
and Analysis" from the portion of our 2002 Annual Report to
Shareholders incorporated by reference herein and made a part hereof.
Because forward-looking statements involve risks and uncertainties, there
are important factors that could cause actual results to differ materially
from those expressed or implied by these forward-looking statements, including
but not limited to:
o changes in general economic, business and financial market conditions;
o changes in government regulations and policies, including
environmental and public utility regulations and policies;
o changes in environmental conditions, including those that result in
water use restrictions;
o abnormal weather conditions;
o changes in capital requirements;
o changes in our credit rating;
o our ability to integrate businesses, technologies or services which we
may acquire;
o our ability to manage the expansion of our business;
o the extent to which we are able to develop and market new and improved
services;
o the effect of the loss of major customers;
o our ability to retain the services of key personnel and to hire
qualified personnel as we expand;
o unanticipated capital requirements;
o increasing difficulties in obtaining insurance and increased cost of
insurance;
2
o cost overruns relating to improvements or the expansion of our
operations; and
o civil disturbance or terroristic threats or acts.
Given these uncertainties, you should not place undue reliance on these
forward-looking statements. You should read this prospectus, the documents
that we incorporate by reference in this prospectus and any applicable
prospectus supplement completely and with the understanding that our actual
future results may be materially different from what we expect. These forward-
looking statements represent our estimates and assumptions only as of the date
of this prospectus. Except for our ongoing obligations to disclose material
information under the federal securities laws, we are not obligated to update
these forward-looking statements, even though our situation may change in the
future. We qualify all of our forward-looking statements by these cautionary
statements.
3
PHILADELPHIA SUBURBAN CORPORATION
Philadelphia Suburban Corporation is the holding company for regulated
utilities providing water or wastewater services to approximately two million
people in Pennsylvania, Ohio, Illinois, New Jersey, Maine and North Carolina.
Our customer base is diversified among residential, commercial and industrial
water customers and wastewater customers. Residential customers make up the
largest component of our customer base, representing approximately two-thirds
of our total water revenues.
Our two primary subsidiaries are Pennsylvania Suburban Water Company, a
regulated public utility that provides water or wastewater services to
approximately 1.3 million residents in the suburban areas north and west of
the City of Philadelphia and in 18 other counties in Pennsylvania, and
Consumers Water Company, a holding company for several regulated public
utility companies that provide water or wastewater service to approximately
700,000 residents in various communities in Ohio, Illinois, New Jersey and
Maine. Other of our smaller subsidiaries provide water or wastewater services
in parts of Pennsylvania, North Carolina and Ohio. Some of our subsidiaries
provide wastewater services to a population of approximately 40,000 people in
Pennsylvania, Illinois, New Jersey and North Carolina. In addition, we provide
water and wastewater service to approximately 45,000 people 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 customers.
We believe that acquisitions will continue to be an important source of
growth for us. In 1999, we acquired Consumers Water Company which added
approximately 245,000 customers to our customer base in five states. Exclusive
of the Consumers Water Company acquisition, we have completed 92 acquisitions
or other growth ventures during the five years ended December 31, 2002 adding
approximately 75,400 customers to our customer base. We entered into a
purchase agreement with DQE, Inc. and AquaSource, Inc. dated July 29, 2002, as
amended by Amendment No. 1 dated March 4, 2003, pursuant to which we agreed to
acquire four operating water and wastewater subsidiaries of AquaSource, Inc.
and assume selected, integrated operating and maintenance contracts and
related assets. The purchase agreement provides for a target cash purchase
price of approximately $205 million subject to various adjustments. If the
transaction is completed, we will purchase operating utilities, including
assets and franchises that serve approximately 130,000 water and wastewater
customer accounts in 11 states, and selected water and wastewater operating
contracts that serve approximately 40,000 customers in seven of these states.
We are actively exploring other opportunities to expand our utility operations
through acquisitions and otherwise.
With more than 50,000 community water systems and approximately 16,000
wastewater systems in the United States, the water industry is the most
fragmented of the major utility industries (i.e., the telephone, natural gas,
electric and water industries). We believe that there are many potential water
and wastewater system acquisition candidates. We believe the factors driving
consolidation of these systems are:
o the benefits of economies of scale;
o increasingly stringent environmental regulations;
o the need for capital investment; and
o the need for technological and managerial expertise.
Our principal executive office is located at 762 W. Lancaster Avenue, Bryn
Mawr, Pennsylvania 19010-3489, and our telephone number is 610-527-8000. Our
website may be accessed at www.suburbanwater.com. Neither the contents of our
website, nor any other website that may be accessed from our website, is
incorporated in or otherwise considered a part of this prospectus.
4
RISK FACTORS
You should carefully consider the following risk factors and the section
entitled "Forward-Looking Statements" before you decide to buy our securities.
Our business requires significant capital expenditures and the rates we charge
our customers are subject to regulation. If we are unable to obtain government
approval of our requests for rate increases, or if approved rate increases are
untimely or inadequate to cover our investments, our profitability may suffer.
The water utility business is capital intensive. On an annual basis, we
spend significant sums for additions to or replacement of property, plant and
equipment. Our ability to maintain and meet our financial objectives is
dependent upon the rates we charge our customers. These rates are subject to
approval by the public utility commissions of the states in which we operate.
We file rate increase requests, from time to time, to recover our investments
in utility plant and expenses. Once a rate increase petition is filed with a
public utility commission, the ensuing administrative and hearing process may
be lengthy and costly. The timing of our rate increase requests are therefore
partially dependent upon the estimated cost of the administrative process in
relation to the investments and expenses that we hope to recover through the
rate increase to the extent approved. We can provide no assurances that any
future rate increase request will be approved by the appropriate state public
utility commission; and, if approved, we cannot guarantee that these rate
increases will be granted in a timely or sufficient manner to cover the
investments and expenses for which we initially sought the rate increase.
Our operating costs could be significantly increased in order to comply with
new or stricter regulatory standards imposed by federal and state
environmental agencies.
Our water and wastewater services are governed by various federal and state
environmental protection and health and safety laws and regulations, including
the federal Safe Drinking Water Act, the Clean Water Act and similar state
laws, and state and federal regulations issued under these laws by the United
States Environmental Protection Agency and state environmental regulatory
agencies. These laws and regulations establish, among other things, criteria
and standards for drinking water and for discharges into the waters of the
United States and states. Pursuant to these laws, we are required to obtain
various environmental permits from environmental regulatory agencies for our
operations. We cannot assure you that we have been or will be at all times in
total compliance with these laws, regulations and permits. If we violate or
fail to comply with these laws, regulations or permits, we could be fined or
otherwise sanctioned by regulators. Environmental laws and regulations are
complex and change frequently. These laws, and the enforcement thereof, have
tended to become more stringent over time. While we have budgeted for future
capital and operating expenditures to maintain compliance with them and our
permits, it is possible that new or stricter standards could be imposed that
will raise our operating costs. Although these costs may be recovered in the
form of higher rates, there can be no assurance that the various state public
utility commissions that govern our business would approve rate increases to
enable us to recover such costs. In summary, we cannot assure you that our
costs of complying with, or discharging liability under, current and future
environmental and health and safety laws will not adversely affect our
business, results of operations or financial condition.
Our business is subject to seasonal fluctuations, which could affect demand
for our water service and our revenues.
Demand for our water during the warmer months is generally greater than
during cooler months due primarily to additional requirements for water in
connection with irrigation systems, swimming pools, cooling systems and other
outside water use. Throughout the year, and particularly during typically
warmer months, demand will vary with temperature and rainfall levels. In the
event that temperatures during the typically warmer months are cooler than
normal, or if there is more rainfall than normal, the demand for our water may
decrease and adversely affect our revenues.
Drought conditions may impact our ability to serve our current and future
customers, and may impact our customers' use of our water, which may adversely
affect our financial condition and results of operations.
We depend on an adequate water supply to meet the present and future demands
of our customers. Drought conditions could interfere with our sources of water
supply and could adversely affect our ability to
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supply water in sufficient quantities to our existing and future customers. An
interruption in our water supply could have a material adverse effect on our
financial condition and results of operations. Moreover, governmental
restrictions on water usage during drought conditions may result in a
decreased demand for our water, even if our water reserves are sufficient to
serve our customers during these drought conditions, which may adversely
affect our revenues and earnings.
An important element of our growth strategy is the acquisition of water and
wastewater systems. Any pending or future acquisitions we decide to undertake
may involve risks.
An important element of our growth strategy is the acquisition and
integration of water and wastewater systems in order to broaden our current,
and move into new, service areas. We will not be able to acquire other
businesses if we cannot identify suitable acquisition opportunities or reach
mutually agreeable terms with acquisition candidates. It is our intent, when
practical, to integrate any businesses we acquire with our existing
operations. The negotiation of potential acquisitions as well as the
integration of acquired businesses could require us to incur significant costs
and cause diversion of our management's time and resources. Future
acquisitions by us could result in:
o dilutive issuances of our equity securities;
o incurrence of debt and contingent liabilities;
o fluctuations in quarterly results; and
o other acquisition-related expenses.
Some or all of these items could have a material adverse effect on our
business and our ability to finance our business. The businesses and other
assets we acquire in the future may not achieve sales and profitability that
justify our investment and any difficulties we encounter in the integration
process could interfere with our operations and reduce our operating margins.
In addition, as consolidation becomes more prevalent in the water and
wastewater industries, the prices for suitable acquisition candidates may
increase to unacceptable levels and limit our ability to grow through
acquisitions.
Contamination to our water supply may result in disruption in our services and
litigation which could adversely affect our business, operating results and
financial condition.
Our water supplies are subject to contamination, including contamination
from the development of naturally-occurring compounds, chemicals in
groundwater systems, pollution resulting from man-made sources and possible
terrorist attacks. In the event that our water supply is contaminated, we may
have to interrupt the use of that water supply until we are able to substitute
the flow of water from an uncontaminated water source. In addition, we may
incur significant costs in order to treat the contaminated source through
expansion of our current treatment facilities, or development of new treatment
methods. If we are unable to substitute water supply from an uncontaminated
water source, or to adequately treat the contaminated water source in a cost-
effective manner, there may be an adverse effect on our revenues, operating
results and financial condition. The costs we incur to decontaminate a water
source or an underground water system could be significant and could adversely
affect our business, operating results and financial condition and may be
recoverable in rates. We could also be held liable for consequences arising
out of human exposure to hazardous substances in our water supplies or other
environmental damage. For example, private plaintiffs have the right to bring
personal injury or other toxic tort claims arising from the presence of
hazardous substances in our drinking water supplies. Our insurance policies
may not be sufficient to cover the costs of these claims.
In addition to the potential pollution of our water supply as described
above, in the wake of the September 11, 2001 terrorist attacks and the ensuing
threats to the nation's health and security, we have taken steps to increase
security measures at our facilities and heighten employee awareness of threats
to our water supply. We have also tightened our security measures regarding
the delivery and handling of certain chemicals used in our business. We have
and will continue to bear increased costs for security precautions to protect
our facilities, operations and supplies. These costs may be significant. We
are currently not aware of any specific threats to our facilities, operations
or supplies; however, it is possible that we would not be in a position to
control the outcome of terrorist events should they occur.
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We depend significantly on the services of the members of our senior
management team, and the departure of any of those persons could cause our
operating results to suffer.
Our success depends significantly on the continued individual and collective
contributions of our senior management team. The loss of the services of any
member of our senior management or the inability to hire and retain
experienced management personnel could harm our operating results.
USE OF PROCEEDS
Unless we otherwise specify in the applicable prospectus supplement, we
intend to use the net proceeds from the sale of the securities we may offer by
this prospectus to fund future acquisitions of municipally owned and investor-
owned water and wastewater systems, including the pending acquisition of the
regulated water and wastewater operations and related contract operations of
AquaSource, Inc., to integrate any businesses that we acquire into our
existing business, to purchase and maintain plant equipment, to repay
indebtedness due on October 24, 2003 which as of March 27, 2003 was
outstanding in principal amount of $22 million and on which interest was
accruing at 2.33% per annum, which we incurred in connection with the purchase
of 1.2 million shares of our common stock from Vivendi Environnement, S.A. and
its affiliates in October, 2002, as well as for working capital and other
general corporate purposes. Our management will have broad discretion in the
allocation of net proceeds from the sale of any securities sold by us.
CERTAIN RATIOS
Our ratio of earnings to fixed charges and ratio of earnings to combined
fixed charges and preferred stock dividends for the periods indicated below
were as follows:
Year Ended December 31,
----------------------------------
2002 2001 2000 1999 1998
---- ---- ---- ---- ---- ---
Ratio of earnings to fixed charges .................................................... 3.56 3.37 3.03 2.74 3.22
Ratio of earnings to combined fixed charges and preferred stock dividends ............. 3.56 3.37 3.03 2.73 3.20
The ratios of earnings to fixed charges and the ratios of earnings to
combined fixed charges and preferred stock dividends were computed by dividing
earnings by fixed charges and by combined fixed charges and preferred stock
dividends, respectively. For the purpose of these computations, earnings have
been calculated by adding fixed charges (excluding capitalized interest) to
income from continuing operations. Fixed charges consist of interest cost,
whether expensed or capitalized, amortization of deferred financing costs and
the estimated interest portion of rental expense charged to income.
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DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock sets forth material terms and
provisions of our common stock and preferred stock. You should read our
current amended and restated articles of incorporation for more detailed terms
of our capital stock.
As of March 21, 2003, our authorized capital stock was 101,770,819 shares,
consisting of:
o 100,000,000 shares of common stock, par value $0.50 per share, of
which 68,060,196 shares were outstanding; and
o 1,770,819 shares of preferred stock, par value $1.00 per share, of
which 1,720 shares of our Series B Preferred Stock were issued and
outstanding and 100,000 shares of our Series A Junior Participating
Preferred Stock were reserved for future issuance in connection with
our shareholder rights plan.
Common Stock
Voting Rights
Holders of our common stock are entitled to one vote for each share held by
them at all meetings of the shareholders and are not entitled to cumulate
their votes for the election of directors.
Dividend Rights and Limitations
Holders of our common stock may receive dividends when declared by our board
of directors. Because we are a holding company, the funds we use to pay any
dividends on our common stock are derived predominantly from the dividends
that we receive from our subsidiaries, Pennsylvania Suburban Water and
Consumers Water, and the dividends they receive from their subsidiaries.
Therefore, our ability to pay dividends to holders of our common stock depends
upon our subsidiaries' earnings, financial condition and ability to pay
dividends. Most of our subsidiaries are subject to regulation by state utility
commissions and the amounts of their earnings and dividends are affected by
the manner in which they are regulated. In addition, they are subject to
restrictions on the payment of dividends contained in their various debt
agreements. Under our most restrictive debt agreements, the amount available
for payment of dividends to us as of December 31, 2002 was approximately $225
million of Pennsylvania Suburban Water's retained earnings and $45 million of
Consumers Water's retained earnings. Payment of dividends on our common stock
is also subject to the preferential rights of the holders of preferred stock
to receive full cumulative dividends, both past and current.
Liquidation Rights
In the event that we liquidate, dissolve or wind-up, the holders of our
common stock are entitled to share ratably in all of the assets that remain
after we pay our liabilities. This right is subject, however, to the prior
distribution rights of any outstanding preferred stock.
Preferred Stock
Under our certificate of incorporation, we are authorized to issue up to
1,770,819 shares of preferred stock of which 32,200 shares have been
designated Series B Preferred Stock, $1.00 par value, and 100,000 shares have
been designated and reserved for issuance as Series A Junior Participating
Preferred Stock, $1.00 par value per share, in connection with our shareholder
rights plan. As of December 31, 2002, 1,720 shares of the Series B Preferred
Stock were outstanding.
Our board of directors has the authority, from time to time and without
further action by our shareholders, to divide our unissued capital stock into
one or more classes and one or more series within any class and to make
determinations of the designation and number of shares of any class or series
and determinations of the voting rights, preferences, limitations and special
rights, if any, of the shares of any class or series. The rights, preferences,
limitations and special rights of different classes of capital stock may
differ with respect to dividend rates, amounts payable on liquidation, voting
rights, conversion rights, redemption provisions, sinking fund provisions and
other matters. The rights, preferences, privileges and
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restrictions of each series may be fixed by the designations of that series
set forth in either a restated version of the certificate of incorporation or
a certificate of designations relating to that series.
The issuance of preferred stock may have the effect of delaying, deferring
or preventing a change of control of us without further action by our
shareholders. The issuance of preferred stock with voting and conversion
rights may also adversely affect the voting power of the holders of our common
stock. In certain circumstances, an issuance of preferred stock could have the
effect of decreasing the market price of our common stock.
Whenever preferred stock is to be sold pursuant to this prospectus, we will
file a prospectus supplement relating to that sale which will specify:
o the number of shares in the series of preferred stock;
o the designation for the series of preferred stock by number, letter or
title that will distinguish the series from any other series of
preferred stock;
o the dividend rate, if any, and whether dividends on that series of
preferred stock will be cumulative, noncumulative or partially
cumulative;
o the voting rights of that series of preferred stock, if any;
o any conversion provisions applicable to that series of preferred
stock;
o any redemption or sinking fund provisions applicable to that series of
preferred stock;
o the liquidation preference per share of that series of preferred
stock; and
o the terms of any other preferences or rights, if any, applicable to
that series of preferred stock.
Shareholder Rights Plan
Pursuant to our shareholders rights plan, current or future holders of our
common stock have the right to purchase a fraction of a share of our Series A
Junior Participating Preferred Stock for each of outstanding share of common
stock held by them. Upon the occurrence of certain events, each right would
entitle the holder to purchase from us one one-thousandth of a share of Series
A Junior Participating Preferred Stock at an exercise price of $90 per one-
thousandth of a share, subject to adjustment. The rights are exercisable in
certain circumstances, such as when a person or group acquires 20% or more of
our common stock or if the holder of 20% or more of our common stock engages
in certain transactions with us. In the latter case, the right to purchase
Series A Junior Participating Preferred Stock would be exercisable by each
holder, but not the acquiring person, to purchase shares of our common stock
at a substantial discount from the market price. Additionally, pursuant to our
shareholders rights plan, if, after the date that a person has become the
holder of 20% or more of our common stock, any person or group merges with us
or engages in certain other transactions with us, each holder of a right,
other than the acquirer, will have the right to purchase common stock of the
surviving corporation at a substantial discount from the market price. These
rights are subject to redemption by us in certain circumstances. These rights
have no voting or dividend rights and, until exercisable, cannot trade
separately from our common stock and have no dilutive effect on our earnings.
This plan expires on March 1, 2008.
Anti-Takeover Provisions
Pennsylvania State Law Provisions
We are subject to various anti-takeover provisions of the Pennsylvania
Business Corporation Law of 1988, as amended. Generally, these provisions are
triggered if any person or group acquires, or discloses an intent to acquire,
20% or more of a corporation's voting power, unless the acquisition is under a
registered firm commitment underwriting or, in certain cases, approved by the
board of directors. These provisions:
o provide the other shareholders of the corporation with certain rights
against the acquiring group or person;
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o prohibit the corporation from engaging in a broad range of business
combinations with the acquiring group or person; and
o restrict the voting and other rights of the acquiring group or person.
In addition, as permitted by Pennsylvania law, an amendment to our articles
of incorporation or other corporate action that is approved by shareholders
may provide mandatory special treatment for specified groups of nonconsenting
shareholders of the same class. For example, an amendment to our articles of
incorporation or other corporate action may provide that shares of common
stock held by designated shareholders of record must be cashed out at a price
determined by the corporation, subject to applicable dissenters' rights.
Articles of Incorporation and Bylaw Provisions
Certain provisions of our articles of incorporation and bylaws may have the
effect of discouraging unilateral tender offers or other attempts to take over
and acquire our business. These provisions might discourage some potentially
interested purchaser from attempting a unilateral takeover bid for us on terms
which some shareholders might favor. Our articles of incorporation require
that certain fundamental transactions must be approved by the holders of 75%
of the outstanding shares of our capital stock entitled to vote on the matter
unless at least 50% of the members of the board of directors has approved the
transaction, in which case the required shareholder approval will be the
minimum approval required by applicable law. The fundamental transactions that
are subject to this provision are those transactions that require approval by
shareholders under applicable law or the articles of incorporation. These
transactions include certain amendments of our articles of incorporation or
bylaws, certain sales or other dispositions of our assets, certain issuances
of our capital stock, or certain transactions involving our merger,
consolidation, division, reorganization, dissolution, liquidation or winding
up. Our articles of incorporation and bylaws provide that:
o a special meeting of shareholders may only be called by the chairman,
the president, the board of directors or shareholders entitled to cast
a majority of the votes which all shareholders are entitled to cast at
the particular meeting;
o nominations for election of directors may be made by any shareholder
entitled to vote for election of directors if the name of the nominee
and certain information relating to the nominee is filed with our
corporate secretary not less than 14 days nor more than 50 days before
any meeting of shareholders to elect directors; and
o certain advance notice procedures must be met for shareholder
proposals to be made at annual meetings of shareholders. These advance
notice procedures generally require a notice to be delivered not less
than 90 days nor more than 120 days before the anniversary date of the
immediately preceding annual meeting of shareholders.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is EquiServe Trust
Company, N.A.
DESCRIPTION OF DEPOSITARY SHARES
We may, at our option, offer fractional shares of our preferred stock,
rather than whole shares of our preferred stock. In the event we do so, we
will issue receipts for depositary shares, each of which will represent a
fraction (to be set forth in the prospectus supplement relating to offering of
the depositary shares) of a share of the related series of preferred stock.
The shares of our preferred stock represented by depositary shares will be
deposited under a deposit agreement between us and a bank or trust company
selected by us having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000. Subject to the terms of
the deposit agreement, each owner of a depositary share will be entitled, in
proportion to the applicable fraction of a share of preferred stock,
represented by the depositary share to all of the rights and preferences of
the preferred stock represented by the depositary shares (including dividend,
voting, redemption, conversion and liquidation rights).
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The above description of depositary shares is only a summary, is not
complete and is subject to, and is qualified in its entirety by the
description in the applicable prospectus supplement and the provisions of the
deposit agreement, which will contain the form of depositary receipt. A copy
of the deposit agreement will be filed with the SEC as an exhibit to or
incorporated by reference in the registration statement of which this
prospectus is a part.
DESCRIPTION OF DEBT SECURITIES
Please note that in this section entitled Description of Debt Securities,
references to "we," "us," "ours" or "our" refer only to Philadelphia Suburban
Corporation and not to its consolidated subsidiaries. Also, in this section,
references to holders mean those who own debt securities registered in their
own names, on the books that we maintain or the trustee maintains for this
purpose, and not those who own beneficial interests in debt securities
registered in street name or in debt securities issued in book-entry form
through one or more depositaries. Owners of beneficial interests in the debt
securities should read the section below entitled "--Book-Entry Procedures and
Settlement."
General
The debt securities offered by this prospectus will be our unsecured
obligations, except as otherwise set forth in an accompanying prospectus
supplement, and will be either senior or subordinated debt. We will issue
senior debt under a senior debt indenture, and we will issue subordinated debt
under a subordinated debt indenture. We sometimes refer to the senior debt
indenture and the subordinated debt indenture individually as an indenture and
collectively as the indentures. We have filed forms of the indentures with the
SEC as exhibits to the registration statement of which this prospectus forms a
part. You can obtain copies of the indentures by following the directions
outlined in "Where You Can Find More Information," or by contacting the
applicable indenture trustee.
A form of each debt security, reflecting the particular terms and provisions
of a series of offered debt securities, will be filed with the SEC at the time
of the offering and incorporated by reference as exhibits to the registration
statement of which this prospectus forms a part.
The following briefly summarizes certain material provisions that may be
included in the indentures. Other terms, including pricing and related terms,
will be disclosed for a particular issuance in an accompanying prospectus
supplement. You should read the more detailed provisions of the applicable
indenture, including the defined terms, for provisions that may be important
to you. You should also read the particular terms of a series of debt
securities, which will be described in more detail in an accompanying
prospectus supplement. So that you may easily locate the more detailed
provisions, the numbers in parentheses below refer to sections in the
applicable indenture or, if no indenture is specified, to sections in each of
the indentures. Wherever particular sections or defined terms of the
applicable indenture are referred to, such sections or defined terms are
incorporated into this prospectus by reference, and the statement in this
prospectus is qualified by that reference.
The trustee under each indenture will be determined at the time of issuance
of debt securities, and the name of the trustee will be provided in an
accompanying prospectus supplement.
The indentures provide that our senior or subordinated debt securities may
be issued in one or more series, with different terms, in each case as we
authorize from time to time. We also have the right to "reopen" a previous
issue of a series of debt securities by issuing additional debt securities of
such series without the consent of the holders of debt securities of the
series being reopened or any other series. Any additional debt securities of
the series being reopened will have the same ranking, interest rate, maturity
and other terms as the previously issued debt securities of that series. These
additional debt securities, together with the previously issued debt
securities of that series, will constitute a single series of debt securities
under the terms of the applicable indenture.
Types of Debt Securities
We may issue fixed or floating rate debt securities.
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Fixed rate debt securities will bear interest at a fixed rate described in
the prospectus supplement. This type includes zero coupon debt securities,
which bear no interest and are often issued at a price lower than the
principal amount. United States federal income tax consequences and other
special considerations applicable to any debt securities issued at a discount
will be described in the applicable prospectus supplement.
Upon the request of the holder of any floating rate debt security, the
calculation agent will provide the interest rate then in effect for that debt
security, and, if determined, the interest rate that will become effective on
the next interest reset date. The calculation agent's determination of any
interest rate, and its calculation of the amount of interest for any interest
period, will be final and binding in the absence of manifest error.
All percentages resulting from any interest rate calculation relating to a
debt security will be rounded upward or downward, as appropriate, to the next
higher or lower one hundred-thousandth of a percentage point. All amounts used
in or resulting from any calculation relating to a debt security will be
rounded upward or downward, as appropriate, to the nearest cent, in the case
of U.S. dollars, or to the nearest corresponding hundredth of a unit, in the
case of a currency other than U.S. dollars, with one-half cent or one-half of
a corresponding hundredth of a unit or more being rounded upward.
In determining the base rate that applies to a floating rate debt security
during a particular interest period, the calculation agent may obtain rate
quotes from various banks or dealers active in the relevant market, as
described in the prospectus supplement. Those reference banks and dealers may
include the calculation agent itself and its affiliates, as well as any
underwriter, dealer or agent participating in the distribution of the relevant
floating rate debt securities and its affiliates.
Information in the Prospectus Supplement
The prospectus supplement for any offered series of debt securities will
describe the following terms, as applicable:
o the title;
o whether the debt is senior or subordinated;
o whether the debt securities are secured or unsecured and, if secured,
the collateral securing the debt;
o the total principal amount offered;
o the percentage of the principal amount at which the debt securities
will be sold and, if applicable, the method of determining the price;
o the maturity date or dates;
o whether the debt securities are fixed rate debt securities or floating
rate debt securities;
o if the debt securities are fixed rate debt securities, the yearly rate
at which the debt security will bear interest, if any, and the
interest payment dates;
o if the debt security is an original issue discount debt security, the
yield to maturity;
o if the debt securities are floating rate debt securities, the interest
rate basis; any applicable index currency or maturity, spread or
spread multiplier or initial, maximum or minimum rate; the interest
reset, determination, calculation and payment dates; and the day count
used to calculate interest payments for any period;
o the date or dates from which any interest will accrue, or how such
date or dates will be determined, and the interest payment dates and
any related record dates;
o if other than in U.S. dollars, the currency or currency unit in which
payment will be made;
o the denominations in which the currency or currency unit of the
securities will be issuable if other than denominations of $1,000 and
integral multiples thereof;
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o the terms and conditions on which the debt securities may be redeemed
at our option;
o any obligation we may have to redeem, purchase or repay the debt
securities at the option of a holder upon the happening of any event
and the terms and conditions of redemption, purchase or repayment;
o the names and duties of the trustee and any co-trustees, depositaries,
authenticating agents, calculation agents, paying agents, transfer
agents or registrars for the debt securities;
o any material provisions of the applicable indenture described in this
prospectus that do not apply to the debt securities;
o a discussion of United States federal income tax, accounting and
special considerations, procedures and limitations with respect to the
debt securities;
o whether and under what circumstances we will pay additional amounts to
holders in respect of any tax assessment or government charge, and, if
so, whether we will have the option to redeem the debt securities
rather than pay such additional amounts; and
o any other specific terms of the debt securities that are consistent
with the provisions of the indenture.
The terms on which a series of debt securities may be convertible into or
exchangeable for other of our securities or any other entity will be set forth
in the prospectus supplement relating to such series. Such terms will include
provisions as to whether conversion or exchange is mandatory, at the option of
the holder or at our option. The terms may include provisions pursuant to
which the number of other securities to be received by the holders of such
series of debt securities may be adjusted.
We will issue the debt securities only in registered form. As currently
anticipated, debt securities of a series will trade in book-entry form, and
global notes will be issued in physical (paper) form, as described below under
"--Book-Entry Procedures and Settlement." Unless otherwise provided in the
accompanying prospectus supplement, we will issue debt securities denominated
in U.S. dollars and only in denominations of $1,000 and integral multiples
thereof.
The prospectus supplement relating to offered debt securities denominated in
a foreign or composite currency will specify the denomination of the offered
debt securities.
The debt securities may be presented for exchange, and debt securities other
than a global security may be presented for registration of transfer, at the
principal corporate trust office of the trustee named in the applicable
prospectus supplement. Holders will not have to pay any service charge for any
registration of transfer or exchange of debt securities, but we may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection with such registration of transfer (Section 3.05).
Payment and Paying Agents
Distributions on the debt securities other than those represented by global
notes will be made in the designated currency against surrender of the debt
securities at the principal corporate trust office of the trustee named in the
applicable prospectus supplement. Payment will be made to the registered
holder at the close of business on the record date for such payment. Interest
payments will be made at the principal corporate trust office of the trustee
named in the applicable prospectus supplement, or by a check mailed to the
holder at his registered address. Payments in any other manner will be
specified in the applicable prospectus supplement.
Calculation Agents
Calculations relating to floating rate debt securities and indexed debt
securities will be made by the calculation agent, an institution that we
appoint as our agent for this purpose. We may appoint one of our affiliates as
calculation agent. We may appoint a different institution to serve as
calculation agent from time to time after the original issue date of the debt
security without your consent and without notifying you of the change. The
initial calculation agent will be identified in the applicable prospectus
supplement.
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Senior Debt
We may issue senior debt securities under the senior debt indenture. Senior
debt will rank on a basis equal in priority with all our other debt except our
subordinated debt.
Subordinated Debt
We may issue subordinated debt securities under the subordinated debt
indenture. Subordinated debt will rank subordinated and junior in right of
payment, to the extent set forth in the subordinated debt indenture, to all
our senior debt.
If we default in the payment of any principal of, or premium, if any, or
interest on any senior debt when it becomes due and payable after any
applicable grace period, then, unless and until the default is cured or waived
or ceases to exist, we cannot make a payment on account of or redeem or
otherwise acquire the subordinated debt securities.
If there is any insolvency, bankruptcy, liquidation or other similar
proceeding relating to us or our property, then all senior debt must be paid
in full before any payment may be made to any holders of subordinated debt
securities.
Furthermore, if we default in the payment of the principal of and accrued
interest on any subordinated debt securities that is declared due and payable
upon an event of default under the subordinated debt indenture, holders of all
our senior debt will first be entitled to receive payment in full in cash
before holders of such subordinated debt can receive any payments.
Except as may be otherwise set forth in an accompanying prospectus
supplement, senior debt means:
o the principal, premium, if any, and interest in respect of
indebtedness for money borrowed and indebtedness evidenced by
securities, notes, debentures, bonds or other similar instruments
issued, including, as to us, the senior debt securities;
o all capitalized lease obligations;
o all obligations representing the deferred purchase price of property;
and
o all deferrals, renewals, extensions and refundings of obligations of
the type referred to above.
However, senior debt does not include:
o the subordinated debt securities;
o any indebtedness that by its terms is subordinated to, or ranks in
priority on an equal basis with, subordinated debt securities; and
o items of indebtedness (other than capitalized lease obligations) that
would not appear as liabilities on a balance sheet prepared in
accordance with accounting principles generally accepted in the United
States of America.
Covenants
The accompanying prospectus supplement will contain any covenants applicable
to the debt securities.
Modification of the Indentures
The indentures will provide that we and the relevant trustee may enter into
supplemental indentures to establish the form and terms of any new series of
debt securities without obtaining the consent of any holder of debt securities
(Section 9.01).
We and the trustee may, with the consent of the holders of at least a
majority in aggregate outstanding principal amount of the debt securities of a
series, modify the applicable indenture or the rights of the holders of the
securities of such series.
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No such modification may, without the consent of each holder of an affected
security:
o extend the fixed maturity of any such security;
o reduce the rate or change the time of payment of interest on such
security;
o reduce the principal amount of such securities or the premium, if any,
on such security;
o change any obligation of ours to pay additional amounts with respect
to such security;
o reduce the amount of the principal payable on acceleration of such
security if issued originally at a discount;
o adversely affect the right of repayment or repurchase of such security
at the option of the holder;
o reduce or postpone any sinking fund or similar provision with respect
to such security;
o change the currency or currency unit in which such security is payable
or the right of selection thereof;
o impair the right to sue for the enforcement of any payment with
respect to such security on or after the maturity of such security;
o reduce the percentage of the aggregate outstanding principal amount of
debt securities of the series referred to above whose holders need to
consent to the modification or a waiver without the consent of such
holders; or
o change any obligation of ours with respect to such security to
maintain an office or agency (Section 9.02).
Defaults
Except as may be otherwise set forth in an accompanying prospectus
supplement, each indenture will provide that events of default regarding any
series of debt securities will be:
o our failure to pay for 30 days required interest on any debt security
of such series;
o our failure to pay principal or premium, if any, on any debt security
of such series when due;
o our failure to make any required scheduled installment payment for 30
days on debt securities of such series;
o our failure to perform for 90 days after notice any other covenant in
the relevant indenture other than a covenant included in the relevant
indenture solely for the benefit of a series of debt securities other
than such series; and
o certain events of bankruptcy or insolvency, whether voluntary or not
(Section 5.01).
Except as may be otherwise set forth in an accompanying prospectus
supplement, if an event of default regarding debt securities of any series
issued under the indentures should occur and be continuing, either the trustee
or the holders of 25% in the principal amount of outstanding debt securities
of such series may declare each debt security of that series due and payable
(Section 5.02). We may be required to file annually with the trustee a
statement of an officer as to the fulfillment by us of our obligations under
the indenture during the preceding year.
No event of default regarding one series of debt securities issued under an
indenture is necessarily an event of default regarding any other series of
debt securities.
Holders of a majority in aggregate principal amount of the outstanding debt
securities of any series will be entitled to control certain actions of the
trustee under the indentures and to waive past defaults regarding such series
(Sections 5.12 and 5.13). The holders of debt securities generally will not be
able to require the trustee to take any action, unless one or more of such
holders provides to the trustee reasonable security or indemnity (Section
6.02).
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If an event of default occurs and is continuing regarding a series of debt
securities, the trustee may use any sums that it holds under the relevant
indenture for its own reasonable compensation and expenses incurred prior to
paying the holders of debt securities of such series (Section 5.06).
Before any holder of any series of debt securities may institute action for
any remedy, except payment on such holder's debt security when due, the
holders of not less than 25% in principal amount of the debt securities of
that series outstanding must request the trustee to take action. Holders must
also offer and give the satisfactory security and indemnity against
liabilities incurred by the trustee for taking such action (Sections 5.07 and
5.08).
Defeasance
Except as may otherwise be set forth in an accompanying prospectus
supplement, after we have deposited with the trustee, cash or government
securities, in trust for the benefit of the holders sufficient to pay the
principal of, premium, if any, and interest on the debt securities of such
series when due, and satisfied certain other conditions, including receipt of
an opinion of counsel that holders will not recognize taxable gain or loss for
United States federal income tax purposes, then:
o we will be deemed to have paid and satisfied our obligations on all
outstanding debt securities of such series, which is known as
defeasance and discharge (Section 14.02); or
o we will cease to be under any obligation, other than to pay when due
the principal of, premium, if any, and interest on such debt
securities, relating to the debt securities of such series, which is
known as covenant defeasance (Section 14.03).
When there is a defeasance and discharge, the applicable indenture will no
longer govern the debt securities of such series, we will no longer be liable
for payments required by the terms of the debt securities of such series and
the holders of such debt securities will be entitled only to the deposited
funds. When there is a covenant defeasance, however, we will continue to be
obligated to make payments when due if the deposited funds are not sufficient.
Governing Law
Unless otherwise stated in the prospectus supplement, the debt securities
and the indentures will be governed by Pennsylvania law.
Concerning the Trustee under the Indentures
We may have banking and other business relationships with the trustee named
in the prospectus supplement, or any subsequent trustee, in the ordinary
course of business.
Form, Exchange and Transfer
We will issue debt securities only in registered form; no debt securities
will be issued in bearer form. We will issue each debt security in book-entry
form only, unless otherwise specified in the applicable prospectus supplement.
We will issue any common stock issuable upon conversion of any debt security
being offered in both certificated and book-entry form, unless otherwise
specified in the applicable prospectus supplement. Debt securities in book-
entry form will be represented by a global security registered in the name of
a depositary, which will be the holder of all the debt securities represented
by the global security. Those who own beneficial interests in a global
security will do so through participants in the depositary's system, and the
rights of these indirect owners will be governed solely by the applicable
procedures of the depositary and its participants. Only the depositary will be
entitled to transfer or exchange a debt security in global form, since it will
be the sole holder of the debt security. These book-entry securities are
described below under "--Book-Entry Procedures and Settlement."
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If any debt securities are issued in non-global form or cease to be book-
entry securities (in the circumstances described in the next section), the
following will apply to them:
o The debt securities will be issued in fully registered form in
denominations stated in the prospectus supplement. You may exchange
debt securities for debt securities of the same series in smaller
denominations or combined into fewer debt securities of the same
series of larger denominations, as long as the total amount is not
changed.
o You may exchange, transfer, present for payment or exercise debt
securities at the office of the relevant trustee or agent indicated in
the prospectus supplement. You may also replace lost, stolen,
destroyed or mutilated debt securities at that office. We may appoint
another entity to perform these functions or may perform them.
o You will not be required to pay a service charge to transfer or
exchange the debt securities, but you may be required to pay any tax
or other governmental charge associated with the transfer or exchange.
The transfer or exchange, and any replacement, will be made only if
our transfer agent is satisfied with your proof of legal ownership.
The transfer agent may also require an indemnity before replacing any
debt securities.
o If we have the right to redeem, accelerate or settle any debt
securities before their maturity or expiration, and we exercise that
right as to less than all those debt securities, we may block the
transfer or exchange of those debt securities during the period
beginning 15 days before the day we mail the notice of exercise and
ending on the day of that mailing, in order to freeze the list of
holders to prepare the mailing. We may also refuse to register
transfers of or exchange any debt security selected for early
settlement, except that we will continue to permit transfers and
exchanges of the unsettled portion of any debt security being
partially settled.
o If fewer than all of the debt securities represented by a certificate
that are payable or exercisable in part are presented for payment or
exercise, a new certificate will be issued for the remaining amount of
securities.
Book-Entry Procedures and Settlement
Most offered debt securities will be book-entry (global) securities. Upon
issuance, all book-entry securities will be represented by one or more fully
registered global securities, without coupons. Each global security will be
deposited with, or on behalf of, The Depository Trust Company, or DTC, a
securities depository, and will be registered in the name of DTC or a nominee
of DTC. DTC will thus be the only registered holder of these debt securities.
Purchasers of debt securities may only hold interests in the global notes
through DTC if they are participants in the DTC system. Purchasers may also
hold interests through a securities intermediary -- banks, brokerage houses
and other institutions that maintain securities accounts for customers -- that
has an account with DTC or its nominee. DTC will maintain accounts showing the
security holdings of its participants, and these participants will in turn
maintain accounts showing the security holdings of their customers. Some of
these customers may themselves be securities intermediaries holding securities
for their customers. Thus, each beneficial owner of a book-entry security will
hold that debt security indirectly through a hierarchy of intermediaries, with
DTC at the top and the beneficial owner's own securities intermediary at the
bottom.
The debt securities of each beneficial owner of a book-entry security will
be evidenced solely by entries on the books of the beneficial owner's
securities intermediary. The actual purchaser of the debt securities will
generally not be entitled to have the debt securities represented by the
global securities registered in its name and will not be considered the owner
under the declaration. In most cases, a beneficial owner will also not be able
to obtain a paper certificate evidencing the holder's ownership of debt
securities. The book-entry system for holding securities eliminates the need
for physical movement of certificates and is the system through which most
publicly traded common stock is held in the United States. However, the laws
of some jurisdictions require some purchasers of securities to take physical
delivery of their securities in definitive form. These laws may impair the
ability to transfer book-entry securities.
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A beneficial owner of book-entry securities represented by a global security
may exchange the securities for definitive (paper) securities only if:
o DTC is unwilling or unable to continue as depositary for such global
security and we do not appoint a qualified replacement for DTC within
90 days; or
o We in our sole discretion decide to allow some or all book-entry
securities to be exchangeable for definitive securities in registered
form.
Unless we indicate otherwise, any global security that is exchangeable will
be exchangeable in whole for definitive securities in registered form, with
the same terms and of an equal aggregate principal amount. Definitive
securities will be registered in the name or names of the person or persons
specified by DTC in a written instruction to the registrar of the securities.
DTC may base its written instruction upon directions that it receives from its
participants.
In this prospectus, for book-entry securities, references to actions taken
by security holders will mean actions taken by DTC upon instructions from its
participants, and references to payments and notices of redemption to security
holders will mean payments and notices of redemption to DTC as the registered
holder of the securities for distribution to participants in accordance with
DTC's procedures.
DTC is a limited purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a clearing corporation
within the meaning of the New York Uniform Commercial Code and a clearing
agency registered under section 17A of the Securities Exchange Act of 1934.
The rules applicable to DTC and its participants are on file with the SEC.
We will not have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interest in the book-entry securities or for maintaining, supervising or
reviewing any records relating to the beneficial ownership interests.
DESCRIPTION OF COMMON STOCK PURCHASE CONTRACTS AND
COMMON STOCK PURCHASE UNITS
We may issue stock purchase contracts, representing contracts entitling or
obligating holders to purchase from us, and us to sell to the holders, a
specified number of shares or amount of common stock at a future date or
dates. The price per share of common stock may be fixed at the time each
contract is issued or may be determined by reference to a specific formula set
forth in the contract. Each common stock purchase contract may be issued
separately or as a part of a unit, which is referred to in this prospectus as
a "common stock purchase unit," each consisting of a common stock purchase
contract and, as security for the holder's obligation to purchase the common
stock under the contract, the following:
o our senior debt securities or subordinated debt securities described
under "Description of Debt Securities;"
o debt obligations of third parties, including U.S. Treasury securities;
o any other asset as security described in the applicable prospectus
supplement; or
o any combination of the foregoing.
Each common stock purchase contract may require us to make periodic payments
to the holder of the common stock purchase unit or vice versa, and such
payments may be unsecured or prefunded on some basis discussed in the
applicable prospectus supplement. Each common stock purchase contract may
require holders to secure their obligations thereunder in a specified manner
and, in certain circumstances, we may deliver a newly issued prepaid common
stock purchase contract, which is referred to as a "prepaid security," upon
release to a holder of any collateral securing such holder's obligations under
the original contract.
The applicable prospectus supplement will describe the terms of any common
stock purchase contract or common stock purchase unit and, if applicable,
prepaid security. The description in the prospectus supplement will not
purport to be complete and will be qualified in its entirety by reference to
the contracts, units, the collateral arrangements and depositary arrangements,
if applicable, relating to such contracts or units and, if
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applicable, the prepaid securities and the documents pursuant to which such
prepaid securities will be issued. The applicable prospectus supplement will
also describe the material United States federal income tax considerations
applicable to the common stock purchase contracts and common stock purchase
units.
PLAN OF DISTRIBUTION
We may sell the securities that we may offer by this prospectus:
o directly to one or more purchasers;
o through agents;
o to and through one or more underwriters;
o to and through one or more dealers; or
o through a combination of any such method of sale.
The distribution of securities pursuant to any applicable prospectus
supplement may be effected from time to time in one or more transactions
either:
o at a fixed price or prices which may be changed;
o at market prices prevailing at the time of sale;
o at prices related to such prevailing market prices; or
o at negotiated prices.
We will describe in the prospectus supplement, the particular terms of the
offering of the securities, including the following: the names of any
underwriters, the purchase price and the proceeds we will receive from the
sale, any underwriting discounts and other items constituting underwriters'
compensation, any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers, any securities exchanges
on which the securities of the series may be listed, and any other information
we think is important.
Securities may be sold directly by us or through agents designated by us
from time to time. Any agent, who may be deemed to be an "underwriter" as that
term is defined in the Securities Act of 1933, as amended, or the Securities
Act, involved in the offer or sale of the securities for which this prospectus
is delivered will be named, and any commissions payable by us to that agent
will be set forth, in the prospectus supplement. Unless otherwise indicated in
the prospectus supplement, any agent will be acting on a best efforts basis
for the period of its appointment.
One or more firms, referred to as "remarketing firms," may also offer or
sell the securities, if the prospectus supplement so indicates, in connection
with a remarketing arrangement upon their purchase. Remarketing firms will act
as principals for their own accounts or as agents for us. These remarketing
firms will offer or sell the securities in accordance with the terms of the
securities. The prospectus supplement will identify any remarketing firm and
the terms of its agreement, if any, with us and will describe the remarketing
firm's compensation. Remarketing firms may be deemed to be underwriters in
connection with the securities they remarket. Remarketing firms may be
entitled under agreements that may be entered into with us to indemnification
by us against certain civil liabilities, including liabilities under the
Securities Act, and may be customers of, engage in transactions with or
perform services for us in the ordinary course of business.
If an underwriter is, or underwriters are, utilized in the sale of
securities, we will execute an underwriting agreement with such underwriters
at the time of such sale to them. The securities will be acquired by the
underwriters for their own account and may be resold from time to time in one
or more transactions, including negotiated transactions, either at a fixed
public offering price, or at varying prices determined at the time of sale.
The securities may be either offered to the public through underwriting
syndicates represented by managing underwriters or by underwriters without a
syndicate.
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If a dealer is utilized in the sale of securities, we will sell the
securities to the dealer, as principal. The dealer, who may be deemed to be an
"underwriter" may then resell the securities to the public at varying prices
to be determined by such dealer at the time of resale. Any initial offering
price and any discounts or concessions allowed or reallowed or paid to dealers
may be changed from time to time.
Underwriters, dealers and agents may be entitled, under agreements that may
be entered into with us, to indemnification by us against civil liabilities
arising out of this prospectus, including liabilities under the Securities
Act, or to contribution for payments which the agents or underwriters may be
required to make relating to those liabilities. Any agents and underwriters
may be customers of, engage in transactions with, or perform services for, us
in the ordinary course of business.
If so indicated in the applicable prospectus supplement, we will authorize
underwriters, dealers or other persons to solicit offers by certain
institutions to purchase the securities from us pursuant to contracts
providing for payment and delivery on a future date or dates set forth in the
applicable prospectus supplement. Institutions with which such contracts may
be made may include, but are not limited to, commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions and others. The obligations of any purchaser under any
such contract will not be subject to any conditions except that the purchase
of any securities shall not at the time of delivery be prohibited under the
laws of the jurisdiction to which such purchaser is subject, and if any of the
securities being offered are also sold to underwriters, we shall have sold to
such underwriters the securities not for delayed delivery. The underwriters,
dealers and such other persons will not have any responsibility with respect
to the validity or performance of such contracts. The prospectus supplement
relating to such contracts will set forth the price to be paid for the
securities pursuant to such contracts, the commissions payable for
solicitation of such contracts and the date or dates in the future for
delivery of offered shares pursuant to such contracts.
To facilitate an offering of the securities, certain persons participating
in the offering may engage in transactions that stabilize, maintain, or
otherwise affect the price of the shares. This may include over-allotments or
short sales of the shares, which involves the sale by persons participating in
the offering of more shares than we have sold to them. In such circumstances,
such persons would cover the over-allotments or short positions by purchasing
in the open market or by exercising the over-allotment option granted to such
persons. In addition, such persons may stabilize or maintain the price of our
securities by bidding for or purchasing any of our securities in the open
market or by imposing penalty bids, whereby selling concessions allowed to
dealers participating in any such offering may be reclaimed if shares that
they sold are repurchased in connection with stabilization transactions. The
effect of these transactions may be to stabilize or maintain the market price
of the shares at a level above that which might otherwise prevail in the open
market. Such transactions, if commenced, may be discontinued at any time.
Any series of securities may be a new issue of securities with no
established trading market. Any underwriter may make a market in the
securities, but will not be obligated to do so, and may discontinue any market
making at any time without notice. We cannot and will not give any assurances
as to the liquidity of the trading market for any of our securities.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room. You may also obtain our SEC filings from the SEC's website at
http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by
referring you to those documents. Statements made in this prospectus as to the
contents of any contract, agreement or other documents are not necessarily
complete, and, in each instance, we refer you to a copy of such document filed
as an exhibit to the registration statement, of which this prospectus is a
part, or otherwise filed with the SEC. The information incorporated by
reference is considered to be part of this prospectus. When we file
information with the SEC in the future, that information will automatically
update and supersede this information. We incorporate by reference the
documents listed below and any future filings we will make with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until we sell all of the securities covered by this prospectus:
o Our Annual Report on Form 10-K for the fiscal year ended December 31,
2002, including portions of our 2002 Annual Report to Shareholders and
our definitive Proxy Statement for the 2003 Annual Meeting of
Shareholders incorporated therein by reference;
o Our Current Report on Form 8-K filed on January 14, 2003; and
o The description of our common stock set forth in our Registration
Statement on Form 8-A, including any amendments or reports filed for
the purpose of updating such description.
You may request a copy of these filings, at no cost, by writing or
telephoning us at:
Philadelphia Suburban Corporation
762 W. Lancaster Avenue
Bryn Mawr, PA 19010-3489
Telephone: 610-527-8000
Attention: Roy H. Stahl, Corporate Secretary
You should rely only on the information contained in or incorporated by
reference in this prospectus and any supplements to this prospectus. We have
not authorized anyone to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely
on it. You should not assume that the information provided in this prospectus
or incorporated by reference in this prospectus is accurate as of any date
other than the date on the front of this prospectus or the date of those
documents. Our business, financial condition, results of operations and
prospects may have changed since those dates.
LEGAL MATTERS
The validity of the securities that may be offered hereby will be passed
upon for us by Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference to the Annual Report on Form 10-K for the year ended December 31,
2002 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
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1,300,000 Shares
PHILADELPHIA SUBURBAN CORPORATION
Common Stock
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PROSPECTUS SUPPLEMENT
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Edward D. Jones & Co., L.P.
Janney Montgomery Scott LLC
May 13, 2003
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