x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2003

OR

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission file number:  0-8176

Southwest Water Company

(Exact name of registrant as specified in its charter)

Delaware

95-1840947

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

225 North Barranca Avenue, Suite 200 West Covina, California

91791-1605

(Address of principal executive offices)

(Zip Code)

(626) 915-1551

(Registrant’s telephone number, including area code)

Yes   x

No   o

Page No.

Part I.

Financial Information:

Item 1.

Financial Statements:

Unaudited Condensed Consolidated Statements of Income -
Three Months Ended March 31, 2003 and 2002

1

Unaudited Condensed Consolidated Balance Sheets -
March 31, 2003 and December 31, 2002

2

Unaudited Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2003 and 2002

3

Notes to Unaudited Condensed Consolidated Financial Statements

4

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

12

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

19

Item 4.

Controls and Procedures

19

Part II.

Other Information:

Item 1.

Legal Proceedings

20

Item 4.

Submission of Matters to a Vote of Security Holders

21

Item 6.

Exhibits and Reports on Form 8-K

21

Signatures

22

Three Months Ended
March 31,

2003

2002

(in thousands except per share data)

Revenues:

Service operations

$

25,188

$

17,177

Utility operations

10,926

10,991

36,114

28,168

Expenses:

Operating expenses – services

22,006

14,672

Operating expenses – utilities

7,427

6,946

Selling, general and administrative expenses

5,760

4,683

35,193

26,301

Operating Income

921

1,867

Other Income (Expense):

Interest expense

(1,197

)

(1,156

)

Interest income

48

20

Gain on sale of land

—  

119

Other

(8

)

937

(1,157

)

(80

)

Income (Loss) Before Income Taxes

(236

)

1,787

Income Tax Provision (Benefit)

(87

)

623

Net Income (Loss)

(149

)

1,164

Dividends on Preferred Shares

7

7

Net Income (Loss) Available for Common Shares

$

(156

)

$

1,157

Earnings  (Loss) per Common Share:

Basic

$

(0.02

)

$

0.12

Diluted

$

(0.02

)

$

0.11

Weighted Average Outstanding Common Shares:

Basic

9,771

9,664

Diluted

10,182

10,124

March 31,
2003

December 31,
2002

(in thousands)

ASSETS

Current Assets:

Cash and cash equivalents

$

1,432

$

1,606

Customers’ accounts receivable, net

15,223

16,657

Other current assets

11,509

11,573

28,164

29,836

Property, Plant and Equipment:

Utility Group property, plant and equipment – at cost

250,279

245,134

Services Group property, plant and equipment – at cost

20,319

20,753

270,598

265,887

Less accumulated depreciation and amortization

64,300

61,954

206,298

203,933

Other Assets

35,194

34,975

$

269,656

$

268,744

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

Current portion of long-term debt

$

1,996

$

1,969

Accounts payable

9,582

11,390

Other current liabilities

17,665

18,264

29,243

31,623

Other Liabilities and Deferred Credits:

Long-term debt

60,914

60,827

Bank lines of credit

22,995

20,158

Advances for construction

7,763

7,352

Contributions in aid of construction

71,291

70,658

Deferred income taxes

8,482

8,411

Other liabilities and deferred credits

7,605

7,878

Total Liabilities and Deferred Credits

208,293

206,907

Stockholders’ Equity:

Preferred stock

512

513

Common stock

98

98

Paid-in capital

43,037

42,787

Retained earnings

17,716

18,439

Total Stockholders’ Equity

61,363

61,837

$

269,656

$

268,744

Three Months Ended
March 31,

2003

2002

(in thousands)

Cash Flows From Operating Activities:

Net income (loss)

$

(149

)

$

1,164

Stock-based compensation expense

215

203

Depreciation and amortization

2,029

1,733

Other adjustments to reconcile net income to net cash provided by operating activities

(965

)

1,237

Net cash provided by operating activities

1,130

4,337

Cash Flows From Investing Activities:

Additions to property, plant and equipment

(5,690

)

(3,522

)

Other investments, net

(8

)

165

Net cash used in investing activities

(5,698

)

(3,357

)

Cash Flows From Financing Activities:

Net borrowing (repayment) on bank lines of credit

2,837

(1,614

)

Capital improvement reimbursements

1,261

—  

Contributions in aid of construction, advances for construction and living unit equivalents

931

1,044

Net proceeds from dividend reinvestment plan, employee stock purchase plan and stock option plans

62

152

Dividends paid

(574

)

(521

)

Repayment of long-term debt and subordinated bond redemptions

(40

)

(55

)

Repayments on advance contracts

(83

)

(74

)

Net cash provided by (used in) financing activities

4,394

(1,068

)

Net decrease in cash and cash equivalents

(174

)

(88

)

Cash and cash equivalents at beginning of period

1,606

789

Cash and cash equivalents at end of period

$

1,432

$

701

Supplemental Disclosure of Cash Flow Information:

Cash paid during the period for:

Interest

$

1,050

$

1,326