PICO Holdings 2007 Form S-3
As
filed with the Securities And Exchange Commission on March 15,
2007
Registration
No. 333-_______
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
_______________
FORM
S-3
REGISTRATION
STATEMENT
Under
THE
SECURITIES ACT OF 1933
PICO
HOLDINGS, INC.
(Exact
Name of Registrant as Specified in Its Charter)
_______________
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California
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94-2723335
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(State or
Other Jurisdiction of Incorporation or
Organization)
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(IRS
Employer Identification Number)
|
| |
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875
Prospect Street, Suite 301
La
Jolla, California 92037
(858)
456-6022
(Address,
Including Zip Code, and Telephone Number, Including
Area
Code, of Registrant’s Principal Executive Offices)
_______________
James
F. Mosier, Esq.
875
Prospect Street, Suite 301
La
Jolla, California 92037
(858)
456-6022
(Name,
Address, Including Zip Code, and Telephone Number, Including
Area
Code, of Agent for Service)
_______________
Copies
to:
Marty
B. Lorenzo, Esq.
DLA
Piper US LLP
4365
Executive Drive, Suite 1100
San
Diego, CA 92121
Telephone:
(858) 677-1400
Facsimile:
(858) 677-1477
_______________
Approximate
date of commencement of proposed sale to the public:
As
soon
as practicable after the Effective Date of this Registration
statement.
If
the
only securities being registered on this Form are being offered pursuant to
dividend or interest reinvestment plans, please check the following box.
*
If
any of
the securities being registered on this Form are to be offered on a delayed
or
continuous basis pursuant to Rule 415 under the Securities Act of 1933,
other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. T
If
this
Form is filed to register additional securities for an offering pursuant to
Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. *
If
this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. *
If
this
Form is a registration statement pursuant to General Instruction I.D. or a
post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box. *
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please
check the following box. *
CALCULATION
OF REGISTRATION FEE
|
Title
of Shares
to
be Registered
|
Amount
to
be
Registered
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Proposed
Maximum
Aggregate
Price
Per
Share (1)
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Proposed
Maximum
Aggregate
Offering
Price
|
Amount
of
Registration
Fee
|
|
Common
Stock ($0.001 par value)
|
2,823,000
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$38.50
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$108,685,500
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$3,337
|
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(1)
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Estimated
solely for the purpose of computing the registration fee required
by
Section 6(b) of the Securities Act and computed pursuant to
Rule 457(c) under the Securities Act based upon the average of the
high and low prices of our common stock on March 9, 2007, as reported
on
The NASDAQ Global Market.
|
The
Registrant hereby amends this Registration Statement on such date or dates
as
may be necessary to delay its effective date until the Registrant shall file
a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
|
The
information in this prospectus is not complete and may be changed.
We may
not sell these securities until the registration statement filed
with the
Securities and Exchange Commission is effective. This prospectus
is not an
offer to sell these securities and it is not soliciting an offer
to buy
these securities in any state where the offer or sale is not
permitted.
|
SUBJECT
TO COMPLETION, DATED MARCH 15, 2007
PROSPECTUS
PICO
Holdings, inc.
2,823,000
shares of Common Stock
The
shareholders of PICO Holdings, Inc. listed within this prospectus are selling
shares of PICO common stock under this prospectus. The selling shareholders
are
offering all of the 2,823,000 shares represented by this prospectus. We
will not receive any of the proceeds from the sale of shares by the selling
shareholders. Our common stock is traded on The NASDAQ Global Market under
the
symbol “PICO.” On March 14 , 2007, the last reported sale price for our common
stock on The NASDAQ Global Market was $40.35 per share.
The
shares of our common stock or interests therein may be sold from time to time
by
the selling shareholders directly to one or more purchasers (including pledgees)
or through brokers, dealers or underwriters who may act solely as agents or
who
may acquire shares as principals, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices, at negotiated prices,
or at fixed prices, which may be changed. See “Plan of Distribution” in this
prospectus. We may also describe the plan of distribution for any particular
offering of these securities in any prospectus supplement. If any brokers,
dealers or underwriters are involved in the sale of any securities in respect
of
which this prospectus is being delivered, we will disclose their names and
the
nature or our arrangements with them in a prospectus supplement
Investing
in our common stock involves risks. See “Risk Factors” beginning on
page 2.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION
HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
________________
The
date
of this prospectus is ______, 2007.
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Page
Number
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1
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PROSPECTUS
SUMMARY
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1
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RISK
FACTORS
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2
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USE
OF PROCEEDS
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7
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PLAN
OF DISTRIBUTION
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7
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SELLING
SHAREHOLDERS
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8
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LEGAL
MATTERS
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10
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EXPERTS
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10
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INCORPORATION
BY REFERENCE
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10
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WHERE
YOU CAN FIND MORE INFORMATION
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10
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10
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SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus and the documents incorporated by reference into it contain
“forward-looking statements” within the meaning of the private securities
litigation reform act of 1995. Specifically, without limitation, forward-looking
statements include statements regarding our business, financial condition,
results of operations, and prospects, including statements about our
expectations, beliefs, intentions, anticipated developments, and other
information concerning future matters. Words such as “expects,” “anticipates,”
“intends,” “plans,” “believes,” “seeks,” “estimates,” and similar expressions or
variations of such words are intended to identify forward-looking statements,
but are not the exclusive means of identifying forward-looking statements in
this prospectus.
Although
forward-looking statements in this prospectus and in the documents incorporated
by reference into this prospectus, represent the good faith judgment of our
management, such statements can only be based on facts and factors currently
known by us. Consequently, forward-looking statements are inherently subject
to
risks and uncertainties, and the actual results and outcomes could differ from
those discussed in or anticipated by the forward-looking statements. Factors
that could cause or contribute to such differences in results and outcomes
include, without limitation, those discussed under the heading “risk factors”
and elsewhere in our filings with the securities and exchange commission that
are incorporated by reference into this prospectus. Readers are urged not to
place undue reliance on these forward-looking statements, which speak only
as of
the date of this prospectus. We undertake no obligation to revise or update
any
forward-looking statement in order to reflect any event or circumstance which
may arise after the date of this prospectus. Readers are urged to carefully
review and consider the various disclosures made in this prospectus and our
filings with the Securities and Exchange Commission, which attempt to advise
interested parties of the risks and factors which may affect our business,
financial condition, results of operations, and prospects.
PROSPECTUS
SUMMARY
The
items in the following summary are described in more detail in this prospectus
or in the documents incorporated or deemed incorporated by reference herein
or
therein. This summary provides an overview of selected information and does
not
contain all of the information that you should consider. Therefore, you should
also read the more detailed information in this prospectus and the documents
incorporated by reference herein or therein. All references to “PICO,” “we,”
“us,” “our,” and similar terms refer to PICO Holdings, Inc. and its subsidiaries
on a consolidated basis.
Our
Company
PICO
Holdings, Inc. is a diversified holding company. We seek to build and operate
businesses where significant value can be created from the development of unique
assets, and to acquire businesses which we identify as undervalued and where
our
participation can aid in the recognition of the business’s fair value, as well
as create additional value.
Our
objective is to maximize long-term shareholder value. We manage our operations
to achieve a superior return on net assets over the long term, as opposed to
short-term earnings.
Our
business is separated into four major operating segments:
| · |
Water
Resource and Water Storage
Operations;
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| · |
Real
Estate Operations;
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Business
Acquisitions & Financing (which contains businesses, interests in
businesses, and other parent company assets);
and
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| · |
Insurance
Operations in “Run Off ”.
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Each
of
these business segments is discussed in greater detail in the information
incorporated by reference into this prospectus.
Currently
our major consolidated subsidiaries are:
| · |
Vidler
Water Company, Inc. (“Vidler”), a business we started more than 10 years
ago, which develops and owns water resources and water storage operations
in the southwestern United States, primarily in Nevada and
Arizona;
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| · |
Nevada
Land and Resource Company, LLC (“Nevada Land”), an operation that we have
built since we acquired the company more than 10 years ago, which
currently owns over 500,000 acres
of land in Nevada, and certain mineral rights and water rights related
to
the property;
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| · |
Physicians
Insurance Company of Ohio (“Physicians”), which is “running off” its
medical professional liability insurance loss reserves, and was our
original business historically;
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Citation
Insurance Company (“Citation”), which is “running off’ its historical
property & casualty and workers’ compensation loss reserves. Citation
was acquired because it was complimentary to our other insurance
operations at the time; and
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Global
Equity AG, which holds our interest in Jungfraubahn Holding AG
(“Jungfraubahn”). Jungfraubahn is a public company, whose shares trade on
the SWX Swiss Exchange, that operates railway and related tourism
and
transport activities in the Swiss Alps. We believed that Jungfraubahn
was
significantly undervalued at the time we acquired our interest, which
was
primarily acquired between 1999 and
2003.
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During
2006, HyperFeed Technologies, Inc., an 80% owned subsidiary of PICO, filed
for
Chapter 7 bankruptcy protection. HyperFeed is accounted for in our consolidated
financial statements for 2006 and prior years as a discontinued operation.
See
“Discontinued
Operations.”
The
address of our main office is 875 Prospect Street, Suite 301, La Jolla,
California 92037, and our telephone number is (858) 456-6022.
PICO
was
incorporated in 1981 and began operations in 1982. The company was known as
Citation Insurance Group until a reverse merger with Physicians Insurance
Company of Ohio on November 20, 1996. After the reverse merger, the former
shareholders of Physicians owned approximately 80% of Citation Insurance Group,
the Board of Directors and management of Physicians replaced their Citation
counterparts, and Citation Insurance Group changed its name to PICO Holdings,
Inc. You should be aware that some data on Bloomberg and other information
services pre-dating the reverse merger relates to the old Citation Insurance
Group only, and does not reflect the performance of Physicians Insurance Company
of Ohio prior to the merger.
The
Offering
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Common
stock offered by the Selling Shareholders
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2,823,000 shares
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Use
of proceeds
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We
will not receive any of the proceeds from the sale of shares by the
selling shareholders.
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NASDAQ
Global Market symbol
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PICO
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The
following information sets forth factors that could cause our actual results
to
differ materially from those contained in forward-looking statements we have
made in this prospectus and those we may make from time to time. Before making
an investment decision, you should carefully consider the following risks,
together with other matters described in this prospectus or incorporated herein
by reference including our consolidated financial statements and related notes.
If any of the following risks occurs, our business, financial condition or
operating results could be harmed. In such case, the trading price of our
securities could decline, in some cases significantly. The risks described
below
are not the only ones we face. Additional risks not presently known to us,
or
that we currently deem immaterial, may also impair our business operations.
As a
result of any of these risks, our business could be harmed, the trading price
of
our common stock could decline and you may lose all or part of your investment.
The documents incorporated by reference may update or supplement these risk
factors from time to time.
Our
future water revenues are uncertain and depend on a number of factors that
may
make our revenue streams and profitability volatile.
We
engage
in various water resource acquisition, management, development, and sale and
lease activities. Accordingly, our future profitability will primarily be
dependent on our ability to develop and sell or lease water and water rights.
Our long-term profitability will be affected by various factors, including
the
timing of water resource acquisitions, regulatory approvals and permits
associated with such acquisitions, transportation arrangements, and changing
technology. We may also encounter unforeseen technical difficulties which could
result in construction delays and cost increases with respect to our water
resource and water storage development projects. Moreover, our profitability
is
significantly affected by changes in the market price of water. Future prices
of
water may fluctuate widely as demand is affected by climatic, demographic and
technological factors. Additionally, to the extent that we possess junior or
conditional water rights, during extreme climatic conditions, such as periods
of
low flow or drought, our water rights could be subordinated to superior water
rights holders. Many of the factors described above are not within our control.
One or more of these factors could impact the profitability of our water
resources and cause our results of operations to be volatile.
Our
water activities may become concentrated in a limited number of assets, making
our growth and profitability vulnerable to fluctuations in local economies
and
governmental regulations.
In
the
future, we anticipate that a significant amount of Vidler’s revenues and asset
value will come from a limited number of assets, including our water resources
in Nevada and Arizona and the Vidler Arizona Recharge Facility. Water resources
in this region are scarce and we may not be successful in continuing to acquire
and develop additional water assets. If we are unable to develop additional
water assets, our revenues will be derived from a limited number of assets,
primarily located in Arizona and Nevada. As a result of this concentration,
our
invested capital and results of operation will be vulnerable to fluctuations
in
local economies and governmental regulations.
Vidler’s
Arizona Recharge facility is one of the few private sector water storage sites
in Arizona. To date, we have stored more than 100,000 acre feet at the facility
for our own account. We have not stored any water on behalf of any customers,
and have not as yet generated any revenue from the recharge facility. We believe
that the best economic return on the asset will come from storing water in
surplus years for sale in dry years; however we cannot assure you that we will
ultimately be able sell the stored water at a price sufficient to provide an
adequate return on the capital we have invested in the facility.
A
subsidiary of Vidler’s is constructing a pipeline approximately 35 miles long,
to deliver water from Fish Springs Ranch to the northern valleys of Reno,
Nevada. Vidler estimates that the total cost of the pipeline will be in the
$78
million to $83 million range, and completion is estimated to be late 2007 or
early 2008. To date, Vidler has only entered into sale agreements for a very
small proportion of the total amount of water that will be conveyed through
the
pipeline to the northern valleys of Reno. By the time construction of the
pipeline has been completed, we anticipate that negotiations will have begun
with the principal buyers of this water, who will largely be real estate
developers. Although the current market value of water in the area greatly
exceeds the total estimated cost of the pipeline and the water to be supplied,
we cannot assure you that the sales prices we obtain will provide an adequate
return on capital employed in the project. Furthermore, if our negotiations
do
not result in prices that are acceptable to us, we may choose to monetize the
water at a later time, which would have an adverse effect on our near-term
revenues and cash flows.
Our
water sales may meet with political opposition in certain locations, thereby
limiting our growth in these areas.
The
water
rights we hold and the transferability of these rights to other uses and places
of use are governed by the laws concerning the laws concerning water rights
in
the states of Arizona, California, and Nevada. Our sale of water resources
is
subject to the risks of delay associated with receiving all necessary regulatory
approvals and permits. Additionally, the transfer of water rights from one
use
to another may affect the economic base of a community and will, in some
instances, be met with local opposition. Moreover, certain of the end users
of
our water rights, namely municipalities, regulate the use of water in order
to
manage growth, thereby creating additional requirements that we must satisfy
to
sell and convey water resources. If we are unable to effectively sell and convey
water rights, our liquidity will suffer and our revenues would
decline.
The
fair values of our real estate and water assets are linked to external growth
factors.
The
real
estate and water assets we hold have fair values that are significantly affected
by the growth in population and the general state of the local economies where
our real estate and water assets are located, primarily in the states of Arizona
and Nevada.
The
current decline in the U.S. housing market, including the housing markets in
Arizona and Nevada, may lead to a near-term slowdown in demand for our real
estate and water assets, which could cause a decline in our revenues and income.
While we do not expect long-term demand for our assets to decline, a slowdown
in
the housing market may impact the timing of our monetization of our real estate
and water assets. Any prolonged delay in the monetization of our assets may
have
an adverse effect on our business, financial condition, results of operations,
and cash flows.
Variances
in physical availability of water, along with environmental and legal
restrictions and legal impediments, could impact profitability from our water
rights.
We
value
our water assets, in part, based upon the amounts of acre-feet of water we
anticipate from water rights applications and permitted rights. The water rights
held by us and the transferability of these rights to other uses and places
of
use are governed by the laws; concerning water rights in the states of Arizona,
Colorado and Nevada. The volumes of water actually derived from the water rights
applications or permitted rights may vary considerably based upon physical
availability and may be further limited by applicable legal restrictions. As
a
result, the amounts of acre-feet anticipated from the water rights applications
or permitted rights do not in every case represent a reliable, firm annual
yield
of water, but in some cases describe the face amount of the water right claims
or management’s best estimate of such entitlement. Additionally, we may face
legal restrictions on the sale or transfer of some of our water rights, which
may affect their commercial value. If we were unable to transfer or sell our
water rights, we may lose some or all of our value in our water rights
acquisitions.
We
may not receive all of the permitted water rights we expect from the water
rights applications we have filed in Nevada.
We
have
filed certain water rights applications in Nevada, primarily as part of the
water teaming agreement with Lincoln County. Vidler expends the capital required
to enable the filed applications to be converted into permitted water rights.
We
only expend capital in those areas where our initial investigations lead us
to
believe that we can obtain a sufficient quantity of water to provide an adequate
return on the capital employed in the project. These capital expenditures
largely consist of drilling and engineering costs for water production, costs
of
monitoring wells, and legal and consulting costs for hearings with the State
Engineer, and National Environmental Protection Act, or “NEPA”, compliance
costs. Until the State Engineer permits the water rights, there can be no
assurance that we will be awarded all of the water which we expect based on
the
results of our drilling and our legal position. Any significant reduction in
the
quantity of water awarded to us from our expectations could adversely affect
our
revenues, profitability, and cash flows.
Our
sale of water may be subject to environmental regulations which would impact
the
profitability of such sales.
The
quality of the water we lease or sell may be subject to regulation by the United
States Environmental Protection Agency acting pursuant to the federal Safe
Drinking Water Act. While environmental regulations do not directly affect
us,
the regulations regarding the quality of water distributed affects our intended
customers and may, therefore, depending on the quality of our water, impact
the
price and terms upon which we may in the future sell our water rights. If we
need to reduce the price of our water rights in order to make a sale to our
intended customers, our results of operations could suffer.
Purchasers
of our real estate and water assets may default on their obligations to us
and
adversely affect our results of operations and cash flow.
In
certain circumstances., we finance sales of real estate and water assets, and
we
secure such financing through deeds of trust on the property, which are only
released once the financing has been fully paid off. Purchasers of our real
estate and water assets may default on their financing obligations. Such
defaults may have an adverse effect on our business, financial condition, and
the results of operations and cash flows.
If
we do not successfully locate, select and manage acquisitions and investments,
or if our acquisitions or investments otherwise fail or decline in value, our
financial condition could suffer.
We
invest
in businesses that we believe are undervalued or that will benefit from
additional capital, restructuring of operations or improved competitiveness
through operational efficiencies. If a business in which we invest fails or
its
fair value declines, we could experience a material adverse effect on our
business, financial condition, the results of operations and cash flows.
Additionally, we may not be able to find sufficient opportunities to make our
business strategy successful. Our failure to successfully locate, select and
manage acquisition and investment opportunities could have a material adverse
effect on our business, financial condition, the results of operations and
cash
flows. Such business failures, declines in fair values, and/or failure to
successfully locate, select and manage acquisitions or investments could result
in an inferior return on shareholders’ equity. We could also lose part or all of
our capital in these businesses and experience reductions in our net income,
cash flows, assets and shareholders’ equity.
Failure
to successfully manage newly acquired companies could adversely affect our
business.
Our
management of the operations of acquired businesses requires significant
efforts, including the coordination of information technologies, research and
development, sales and marketing, operations, and finance. These efforts result
in additional expenses and involve significant amounts of our management’s time
and could distract our management from the day-to-day operations of our
business. The diversion of our management’s attention from the day-to-day
operations, or difficulties encountered in the integration process, could have
a
material adverse effect on our business, financial condition, and the results
of
operations and cash flows. If we fail to integrate acquired businesses into
our
operations successfully, we may be unable to achieve our strategic goals and
the
value of your investment could suffer.
Our
acquisitions may result in dilution to our shareholders and increase
liabilities.
We
make
selective acquisitions of companies that we believe could benefit from our
resources of additional capital, business expertise or existing operations.
We
endeavor to enhance and realize additional value to these acquired companies
through our influence and control. Any acquisition could result in the use
of a
significant portion of our available cash, significant dilution to you, and
significant acquisition-related charges. Acquisitions may also result in the
assumption of liabilities, including liabilities that are unknown or not fully
known to us at the time of the acquisition, which could have a material adverse
effect on us.
Our
acquisitions and investments may yield low or negative returns for an extended
period of time, which could temporarily or permanently depress our return on
shareholders’ equity, and we may not realize the value of the funds we
invest.
We
generally make acquisitions and investments that tend to be long term in nature,
and for the purpose of realizing additional value by means of appropriate levels
of shareholder influence and control. We acquire businesses that we believe
to
be undervalued or may benefit from additional capital, restructuring of
operations or management or improved competitiveness through operational
efficiencies with our existing operations. We may not be able to develop
acceptable revenue streams and investment returns through the businesses we
acquire, and as a result we may lose part or all of our investment in these
assets. Additionally, when any of our acquisitions do not achieve acceptable
rates of return or we do not realize the value of the funds invested, we may
write down the value of such acquisitions or sell the acquired businesses at
a
loss. Some of our prior acquisitions have lost either part or all of the capital
we invested. Unsuccessful acquisitions could have negative impacts on our cash
flows, income, assets and shareholders’ equity, which may be temporary or
permanent. Moreover, the process we employ to enhance value in our acquisitions
and investments can consume considerable amounts of time and resources.
Consequently, costs incurred as a result of these acquisitions and investments
may exceed their revenues and/or increases in their values for an extended
period of time. Ultimately, however, we may not be able to develop the potential
of these assets that we originally anticipated.
Our
ability to achieve an acceptable rate of return on any particular investment
is
subject to a number of factors which may be beyond our control, including
increased competition and loss of market share, quality of management, cyclical
or uneven financial results, technological obsolescence, foreign currency risks
and regulatory delays.
We
may not be able to sell our investments when it is advantageous to do so and
we
may have to sell these investments at a discount to fair
value.
No
active
market exists for some of the companies in which we invest. We acquire stakes
in
private companies that are not as liquid as investments in public companies.
Additionally, some of our acquisitions may be in restricted or unregistered
stock of U.S. public companies. Moreover, even our investments for which there
is an established market are subject to dramatic fluctuations in their market
price. These illiquidity factors may affect our ability to divest some of our
acquisitions and could affect the value that we receive for the sale of such
investments and have a negative impact on our results of
operations.
Our
acquisitions of and investments in foreign companies subject us to additional
market and liquidity risks which could affect the value of our
stock.
We
have
acquired, and may continue to acquire, shares of stock in foreign public
companies. Typically, these foreign companies are not registered with the SEC
and regulation of these companies is under the jurisdiction of the relevant
foreign country. The respective foreign regulatory regime may limit our ability
to obtain timely and comprehensive financial information for the foreign
companies in which we have invested. In addition, if a foreign company in which
we invest were to take actions which could be deleterious to its shareholders,
foreign legal systems may make it difficult or time-consuming for us to
challenge such actions. These factors may affect our ability to acquire
controlling stakes, or to dispose of our foreign investments, or to realize
the
full fair value of our foreign investments. In addition, investments in foreign
countries may give rise to complex cross-border tax issues. We aim to manage
our
tax affairs efficiently, but given the complexity of dealing with domestic
and
foreign tax jurisdictions, we may have to pay tax in both the U.S. and in
foreign countries, and we may be unable to offset any U.S. tax liabilities
with
foreign tax credits. If we are unable to manage our foreign tax issues
efficiently, our financial condition and the results of operations and cash
flows could be adversely affected. In addition, we are subject to foreign
exchange risk through our acquisitions of stocks in foreign public companies.
We
attempt to mitigate this foreign exchange risk by borrowing funds in the same
currency to purchase the stocks. Significant fluctuations in the foreign
currencies in which we hold investments or consummate transactions, could
negatively impact our financial condition and the results of operations and
cash
flows.
Volatile
fluctuations in our insurance reserves could cause our financial condition
to be
materially misstated.
Although
we provide reserves that management believes are adequate, the actual losses
could be greater. Our insurance subsidiaries may not have established reserves
that are adequate to meet the ultimate cost of losses arising from claims.
It
has been, and will continue to be, necessary for our insurance subsidiaries
to
review and make appropriate adjustments to reserves for claims and expenses
for
settling claims. Inadequate reserves could cause our financial condition to
fluctuate from period to period and cause our financial condition to appear
to
be better than it actually is for periods in which insurance claims reserves
are
understated. In subsequent periods when we discover the underestimation and
pay
the additional claims, our cash needs will be greater than expected and our
financial results of operations for that period will be worse than they would
have been had our reserves been accurately estimated originally.
The
inherent uncertainties in estimating loss reserves are greater for some
insurance products than for others, and are dependent on various factors
including:
| · |
the
length of time in reporting claims;
|
| · |
the
diversity of historical losses among
claims;
|
| · |
the
amount of historical information available during the estimation
process;
|
| · |
the
degree of impact that changing regulations and legal precedents may
have
on open claims; and
|
| · |
the
consistency of reinsurance programs over
time.
|
Because
medical malpractice liability, commercial property and casualty, and workers’
compensation claims may not be completely paid off for several years, estimating
reserves for these types of claims can be more uncertain than estimating
reserves for other types of insurance. As a result, precise reserve estimates
cannot be made for several years following the year for which reserves were
initially established. During the past several years, the levels of the reserves
for our insurance subsidiaries have been very volatile. We have had to
significantly increase and decrease these reserves in the past several years.
Significant increases in the reserves may be necessary in the future, and the
level of reserves for our insurance subsidiaries may be volatile in the future.
These increases or volatility may have an adverse effect on our business,
financial condition, and the results of operations and cash flows.
If
we underestimate the amount of reinsurance we need or if the companies with
which we have reinsurance agreements default on their obligations, we may be
unable to cover claims made and that would have a material adverse effect on
our
results of operations.
We
have
reinsurance agreements on all of our insurance books of business with
reinsurance companies. We purchase reinsurance based upon our assessment of
the
overall direct underwriting risk. It is possible that we may underestimate
the
amount of reinsurance required to achieve the desired level of net claims risk,
and a claim may exceed the combined value of our reserve and the amount of
reinsurance available. Additionally, our reinsurers could default on amounts
owed to us for their portion of the direct insurance claim. Our insurance
subsidiaries, as direct writers of lines of insurance, have ultimate
responsibility for the payment of claims, and any defaults by reinsurers may
result in our established reserves not being adequate to meet the ultimate
cost
of losses arising from claims. If claims made exceed the amount of our direct
reserves and the available reinsurance, we may be subject to regulatory action
or litigation and our results of operation would suffer as a
result.
State
regulators could require changes to our capitalization and/or to the operations
of our insurance subsidiaries, and/or place them into rehabilitation or
liquidation.
Beginning
in 1994, Physicians and Citation became subject to the provisions of the
Risk-Based Capital for Insurers Model Act which has been adopted by the National
Association of Insurance Commissioners for the purpose of helping regulators
identify insurers that may be in financial difficulty. The Model Act contains
a
formula which takes into account asset risk, credit risk, underwriting risk
and
all other relevant risks. Under this formula, each insurer is required to report
to regulators using formulas which measure the quality of its capital and the
relationship of its modified capital base to the level of risk assumed in
specific aspects of its operations. The formula does not address all of the
risks associated with the operations of an insurer. The formula is intended
to
provide a minimum threshold measure of capital adequacy by an individual
insurance company and does not purport to compute a target level of capital.
Companies which fall below the threshold will be placed into one of four
categories: Company Action Level, where the insurer must submit a plan of
corrective action; Regulatory Action Level, where the insurer must submit such
a
plan of corrective action, the regulator is required to perform such examination
or analysis the Superintendent of Insurance considers necessary and the
regulator must issue a corrective order; Authorized Control Level, which
includes the above actions and may include rehabilitation or liquidation; and
Mandatory Control Level, where the regulator must rehabilitate or liquidate
the
insurer. As of December 31, 2006, all of our insurance subsidiaries’ risk-based
capital results exceeded the Company Action Level. However, we cannot assure
you
that insurance subsidiaries’ risk-based capital results will exceed the Company
Action Level in the future. If the risk-based capital of any of our insurance
subsidiaries fails to exceed the Company Action Level, we will be subject to
the
regulatory action described above and our results of operations could
suffer.
If
we are required to register as an investment company, we will be subject to
a
significant regulatory burden and our results of operations will
suffer.
At
all
times we intend to conduct our business so as to avoid being regulated as an
investment company under the Investment Company Act of 1940. However, if we
were
required to register as an investment company, our ability to use debt would
be
substantially reduced, and we would be subject to significant additional
disclosure obligations and restrictions on our operational activities. Because
of the additional requirements imposed on an investment company with regard
to
the distribution of earnings, operational activities and the use of debt, in
addition to increased expenditures due to additional reporting responsibilities,
our cash available for investments would be reduced. The additional expenses
would reduce income. These factors would adversely affect our business,
financial condition, and the results of operations and cash flows.
We
are directly impacted by international affairs, which directly exposes us to
the
adverse effects of any foreign economic or governmental
instability.
As
a
result of global investment diversification, our business, financial condition,
the results of operations and cash flows may be adversely affected
by:
| · |
exposure
to fluctuations in exchange rates;
|
| · |
the
imposition of governmental
controls;
|
| · |
the
need to comply with a wide variety of foreign and U.S. export
laws;
|
| · |
political
and economic instability;
|
| · |
changes
in tariffs and taxes;
|
| · |
volatile
interest rates;
|
| · |
changes
in certain commodity prices;
|
| · |
exchange
controls which may limit our ability to withdraw
money;
|
| · |
the
greater difficulty of administering business overseas;
and
|
| · |
general
economic conditions outside the United
States.
|
Changes
in any or all of these factors could result in reduced market values of
investments, loss of assets, additional expenses, reduced investment income,
reductions in shareholders’ equity due to foreign currency fluctuations and a
reduction in our global diversification.
Because
our operations are diverse, analysts and investors may not be able to evaluate
us adequately, which may negatively influence our share
price.
PICO
is a
diversified holding company with operations in real estate and related water
rights and mineral rights; water resource development and water storage;
insurance operations in run-off; and business acquisitions and financing. Each
of these areas is unique, complex in nature, and difficult to understand. In
particular, the water resource business is a developing industry within the
western United States with very little historical data, very few experts and
a
limited following of analysts. Because we are complex, analysts and investors
may not be able to adequately evaluate our operations and PICO in total. This
could cause analysts and investors to make inaccurate evaluations of our stock,
or to overlook PICO in general. As a result, the trading volume and price of
our
stock could suffer.
Fluctuations
in the market price of our common stock may affect your ability to sell your
shares.
The
trading price of our common stock has historically been, and we expect to
continue to be, subject to fluctuations. The market price of our common stock
may be significantly impacted by:
| · |
quarterly
variations in financial performance and
condition;
|
| · |
shortfalls
in revenue or earnings from levels forecast by securities
analysts;
|
| · |
changes
in estimates by such analysts;
|
| · |
our
competitors’ announcements of extraordinary events such as
acquisitions;
|
| · |
general
economic conditions.
|
Our
results of operations have been subject to significant fluctuations,
particularly on a quarterly basis, and our future results of operations could
fluctuate significantly from quarter to quarter and from year to year. Causes
of
such fluctuations may include the inclusion or exclusion of operating earnings
from newly acquired or sold operations. At December 31, 2006, the closing price
of our common stock on the NASDAQ Global Market was $34.77 per share, compared
to $20.77 at December 31, 2004. On a quarterly basis between these two dates,
closing prices have ranged from a high of $35.53 to a low of $20.93. Statements
or changes in opinions, ratings, or earnings estimates made by brokerage firms
or industry analysts relating to the markets in which we do business or relating
to us specifically could result in an immediate and adverse effect on the market
price of our common stock. Such fluctuations in the market price of our common
stock could affect the value of your investment and your ability to sell your
shares.
We
may not be able to retain key management personnel we need to succeed, which
could adversely affect our ability to successfully operate our
businesses.
To
run
our day-to-day operations and to successfully manage newly acquired companies
we
must, among other things, continue to attract and retain key management. We
rely
on the services of several key executive officers. If they depart, it could
have
a significant adverse effect. Messrs. Langley and Hart, our Chairman and CEO,
respectively, are key to the implementation of our strategic focus, and our
ability to successfully develop our current strategy is dependent upon our
ability to retain the services of Messrs. Langley and Hart.
We
use estimates and assumptions in preparing financial statements in accordance
with accounting principles generally accepted in the United States of
America.
The
preparation of our financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts
of
assets and liabilities, disclosure of contingent liabilities at the date of
financial statements and the reported amount of revenues and expenses during
the
reporting period. We regularly evaluate our estimates, which are based on
historical experience and on various other assumptions that are believed to
be
reasonable under the circumstances. The result of these evaluations forms the
basis for our judgments about the carrying values of assets and liabilities
and
the reported amount of revenues and expenses that are not readily apparent
from
other sources. The carrying values of assets and liabilities and the reported
amount of revenues and expenses may differ by using different assumptions.
In
addition, in future periods, in order to incorporate all known experience at
that time, we may have to revise assumptions previously made which may change
the amount of previously reported assets and liabilities. This potential
subsequent change in amount may have a material adverse effect on our business,
financial condition, and the results of operations and cash flows.
Repurchases
of our common stock could have a negative effect on our cash flows and our
stock
price.
Our
Board
of Directors has authorized the repurchase of up to $10 million of our common
stock. The stock purchases may be made from time to time at prevailing prices
though open market, or negotiated transactions, depending on market conditions,
and will be funded from available cash resources of the company. Such
repurchases may have a negative impact on our cash flows, and could result
in
market pressure to sell our common stock.
Future
changes in financial accounting standards may cause adverse unexpected revenue
fluctuations and affect our reported results of
operations.
A
change
in accounting standards could have a significant effect on our reported results
and may even affect our reporting transactions completed before the change
is
effective. New accounting pronouncements and varying interpretations of
pronouncements have occurred and may occur in the future. Changes to existing
rules or the questioning of current practices may adversely affect our reported
financial results or the way we conduct our business.
Compliance
with changing regulation of corporate governance and public disclosure may
result in additional expenses.
Changing
laws, regulations and standards relating to corporate governance and public
disclosure, SEC regulations and NASDAQ Stock Market rules, are creating
uncertainty for companies such as ours. These new or changed laws, regulations
and standards are subject to varying interpretations in many cases due to their
lack of specificity, and as a result, their application in practice may evolve
over time as new guidance is provided by regulatory and governing bodies, which
could result in continuing uncertainty regarding compliance matters and higher
costs necessitated by ongoing revisions to disclosure and governance practices.
We are committed to maintaining high standards of corporate governance and
public disclosure. As a result, our efforts to comply with evolving laws,
regulations and standards have resulted in, and are likely to continue to result
in, increased general and administrative expenses and a diversion of management
time and attention from revenue-generating activities to compliance activities.
In particular, our efforts to maintain compliance with Section 404 of the
Sarbanes-Oxley Act of 2002 and the related regulations regarding our required
assessment of our internal controls over financial reporting and our external
auditors’ audit of that assessment has required the commitment of substantial
financial and managerial resources. We expect these efforts to require the
continued commitment of significant resources. Further, our board members,
chief
executive officer, and chief financial officer could face an increased risk
of
personal liability in connection with the performance of their duties and we
may
be required to indemnify them for any expenses incurred in defending against
claims. As a result, we may have difficulty attracting and retaining qualified
board members and executive officers, which could harm our business. If our
efforts to comply with new or changes laws, regulations, and standards differ
from the activities intended by regulatory or governing bodies due to
ambiguities related to practice, our reputation could be harmed.
Absence
of dividends could reduce our attractiveness to investors.
Some
investors favor companies that pay dividends, particularly in market downturns.
We have never declared or paid any cash dividends on our common stock. We
currently intend to retain any future earnings for funding growth and,
therefore, we do not currently anticipate paying cash dividends on our common
stock.
We
may need additional capital in the future to fund the growth of our business,
and financing may not be available.
We
currently anticipate that our available capital resources and operating income
will be sufficient to meet our expected working capital and capital expenditure
requirements for at least the next 12 months. However, we cannot assure you
that
such resources will be sufficient to fund the long-term growth of our business.
We may raise additional funds through public or private debt or equity
financings if such financings become available on favorable terms, but such
financing may dilute the interests of our stockholders. We cannot assure you
that any additional financing we need will be available on terms favorable
to
us, or at all. If adequate funds are not available or are not available on
acceptable terms, we may not be able to take advantage of unanticipated
opportunities or otherwise respond to competitive pressures. In any such case,
our business, operating results or financial condition could be materially
adversely affected.
Litigation
may harm our business or otherwise distract our
management.
Substantial,
complex or extended litigation could cause us to incur large expenditures and
distract our management. For example, lawsuits by employees, stockholders or
customers could be very costly and substantially disrupt our business.
Additionally, our subsidiaries may become involved in litigation that could
necessitate our management’s attention and require us to expend our resources.
We or our subsidiaries will have disputes from time to time with companies
or
individuals, and we cannot assure that that we will always be able to resolve
such disputes out of court or on terms favorable to us.
THE
FOREGOING FACTORS, INDIVIDUALLY OR IN AGGREGATE, COULD MATERIALLY ADVERSELY
AFFECT OUR OPERATING RESULTS AND CASH FLOWS AND FINANCIAL CONDITION AND COULD
MAKE COMPARISON OF HISTORIC OPERATING RESULTS AND CASH FLOWS AND BALANCES
DIFFICULT OR NOT MEANINGFUL.
USE
OF PROCEEDS
We
will
not receive any proceeds from sales of the shares.
PLAN
OF DISTRIBUTION
The
shares of our common stock covered by the registration statement, of which
this
prospectus is a part, are being offered on behalf of the selling shareholders,
which as used herein includes donees, pledgees, transferees or other
successors-in-interest disposing of shares of our common stock or interests
therein received after the date of this prospectus from a selling shareholder
as
a gift, pledge, partnership distribution or other transfer. We will not receive
any proceeds from the sale of shares of our common stock covered by the
registration statement, of which this prospectus is a part, or interests
therein. The shares of our common stock or interests therein may be sold from
time to time by the selling shareholders directly to one or more purchasers
(including pledgees) or through brokers, dealers or underwriters who may act
solely as agents or who may acquire shares as principals, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices, or at fixed prices, which may be changed. The
shares of our common stock may be sold by one or more of, or a combination
of,
the following methods, to the extent permitted by applicable law:
| · |
a
block trade in which the selling shareholder’s broker or dealer will
attempt to sell the shares as agent, but may position and resell
all or a
portion of the block as a principal to facilitate the
transaction;
|
| · |
a
broker or dealer may purchase the common stock as a principal and
then
resell the common stock for its own account pursuant to this
prospectus;
|
| · |
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
| · |
ordinary
brokerage transactions and transactions in which the broker solicits
purchasers;
|
| · |
privately
negotiated transactions;
|
| · |
by
pledge to secure debts or other
obligations;
|
| · |
put
or call transactions;
|
| · |
to
cover hedging transactions;
|
| · |
underwritten
offerings; or
|
| · |
any
other legally available means.
|
To
the
extent required, this prospectus may be amended or supplemented from time to
time to describe a specific plan of distribution. If the plan of distribution
involves an arrangement with a broker-dealer for the sale of shares through
a
block trade, special offering, exchange distribution or secondary distribution
or a purchase by a broker or dealer, the supplement will disclose:
| · |
the
name of the selling shareholder and of the participating
broker-dealer(s);
|
| · |
the
number of shares involved;
|
| · |
the
price at which the shares were
sold;
|
| · |
the
commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
|
|
· |
that such broker-dealer(s) did not conduct any investigation to verify
the
information set out or incorporated by reference in this prospectus;
and
|
| · |
other
facts material to the transaction.
|
In
effecting sales, broker-dealers engaged by the selling shareholders may arrange
for other broker-dealers to participate in the resales.
The
selling shareholders may enter into hedging transactions with broker-dealers
in
connection with distributions of the shares or otherwise. In these transactions,
broker-dealers may engage in short sales of the shares in the course of hedging
the positions they assume with the selling shareholders. The selling
shareholders may also sell shares short and redeliver the shares to close out
such short positions. The selling shareholders may enter into options or other
transactions with broker-dealers that require the delivery to the broker-dealer
of the shares. The broker-dealer may then resell or otherwise transfer such
shares pursuant to this prospectus. The selling shareholders also may loan
or
pledge the shares to a broker-dealer. The broker-dealer may sell the shares
so
loaned, or upon default, the broker-dealer may sell the pledged shares pursuant
to this prospectus.
Broker-dealers
or agents may receive compensation in the form of commissions, discounts or
concessions from the selling shareholder. Broker-dealers or agents may also
receive compensation from the purchasers of the shares for whom they act as
agents or to whom they sell as principal, or both. Compensation as to a
particular broker-dealer might be in excess of customary commissions and will
be
in amounts to be negotiated in connection with the sale. Broker-dealers or
agents and any other participating broker-dealers or the selling shareholders
may be deemed to be “underwriters” within the meaning of Section 2(11) of the
Securities Act of 1933 (the “Securities Act”) in connection with sales of the
shares. Accordingly, any such commission, discount or concession received by
them and any profit on the resale of the shares purchased by them may be deemed
to be underwriting discounts or concessions under the Securities
Act.
The
selling shareholders and any broker-dealers, agents or underwriters that
participate with the selling shareholders in the distribution of the issued
and
outstanding shares of common stock may be deemed to be “underwriters” within the
meaning of the Securities Act, in which event any commissions received by these
broker-dealers, agents or underwriters and any profits realized by the selling
shareholders on the resales of the securities may be deemed to be underwriting
commissions or discounts under the Securities Act. If the selling shareholders
are deemed to be underwriters, the selling shareholders may be subject to
certain statutory and regulatory liabilities, including liabilities imposed
pursuant to Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under
the Securities Exchange Act of 1934. In addition, the selling shareholders
may
be subject to the prospectus delivery requirements of the Securities Act, unless
an exemption therefrom is available.
Any
shares covered by the registration statement, of which this prospectus is a
part, that qualify for sale pursuant to Rule 144 under the Securities Act may
be
sold under Rule 144 rather than pursuant to this prospectus. The shares may
only
be sold through registered or licensed brokers or dealers if required under
applicable state securities laws. In addition, in certain states the shares
may
not be sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
The
selling stockholders may pledge or grant a security interest in some or all
of
the shares of Common Stock owned by them and, if they default in the performance
of their secured obligations, the pledgees or secured parties may offer and
sell
the shares of Common Stock from time to time pursuant to this prospectus or
any
amendment to this prospectus under Rule 424(b)(3) or other applicable provision
of the Securities Act of 1933, as amended, amending, if necessary, the list
of
selling stockholders to include the pledgee, transferee or other successors
in
interest as selling stockholders under this prospectus. The selling stockholders
also may transfer and donate the shares of Common Stock in other circumstances
in which case the transferees, donees, pledgees or other successors in interest
will be the selling beneficial owners for purposes of this
prospectus.
We
will
bear all costs, expenses and fees in connection with the registration of the
shares, including registration and filing fees, printing and duplication
expenses, administrative expenses, legal fees and accounting fees. If the shares
are sold through underwriters or broker-dealers, the selling shareholders will
be responsible for underwriting discounts, underwriting commissions and agent
commissions. The selling shareholders may agree to indemnify any broker-dealer
or agent that participates in transactions involving sales of the shares against
certain liabilities, including liabilities arising under the Securities Act.
We
have agreed to indemnify the selling shareholders against specified liabilities,
including specified liabilities under the Securities Act, and such selling
shareholders agreed to indemnify us against certain liabilities, including
liabilities under the Securities Act. The selling shareholders may sell all,
some or none of the shares offered by this prospectus or interests
therein.
We
are
registering the shares of common stock covered by this prospectus on behalf
of
the selling shareholders named in the following table. We issued the shares
to
the selling shareholder in a private placement transaction in February 2007.
The
following table sets forth certain information known to us regarding the
ownership of our common stock as of February 28, 2007.
|
Name
and Address
of
Beneficial Owner
|
Shares
Beneficially
Owned
Before Offering (1)
|
Number
of Shares Offered
|
Number
of Shares Owned After the Offering (2)
|
|
Altairis
Offshore
c/o
Polar Securities, Inc.
372
Bay St. 21st floor
Toronto,
Ontario, M5H-2W9
Canada
|
51,300
|
51,300
|
0
|
|
Altairis
Offshore Levered
c/o
Polar Securities, Inc.
372
Bay St. 21st floor
Toronto,
Ontario, M5H-2W9
Canada
|
41,700
|
41,700
|
0
|
|
Altairis
Investments L.P.
372
Bay St. 21st. Floor
Toronto,
Ontario M5H-2W9
Canada
|
7,000
|
7,000
|
0
|
|
BMO/PICO
Partners
c/o
Huddleston Bolen, LLP.
611
Third Ave.
Huntington,
WV 25701
|
540,000
|
540,000
|
0
|
|
Capital
Ventures International
101
California St. Suite 3250
San
Francisco, CA 94111
|
100,000
|
100,000
|
0
|
|
Fidelity
Advisor Series I: Fidelity Advisor Balanced Fund
82
Devonshire Street, E31C
Boston,
MA 02109
|
170,416
|
21,150
|
149,266
|
|
Fidelity
Puritan Trust: Fidelity Balanced Fund
82
Devonshire Street, E31C
Boston,
MA 02109
|
2,557,728
|
393,390
|
2,164,338(3)
|
|
Highbridge
International LLC.
c/o
Highbridge Capital Management, LLC.
9
West 57th Street; 27th Floor
New
York, NY 10019
|
270,000
|
270,000
|
0
|
|
Investcorp
Interlachen Multi Strategy Master Fund Limited
c/o
Interlachen Capital Group LP
800
Nicollet Mall, Suite 2500
Minneapolis,
MN 55402
|
75,000
|
75,000
|
0
|
|
Iroquois
Master Fund Ltd.
641
Lexington Ave. 26th Floor
New
York, NY 10022
|
170,000
|
170,000
|
0
|
|
Mercury
Global Alpha Fund, LP.
c/o
Mercury Partners, LLC.
3
River Road
Greewich,
CT 06807
|
81,750
|
50,000
|
31,750
|
|
Mercury
Real Estate Securities Fund, LP.
c/o
Mercury Partners, LLC.
3
River Road
Greewich,
CT 06807
|
30,000
|
30,000
|
0
|
|
Mercury
Real Estate Securities Offshore Fund Ltd.
c/o
Mercury Partners, LLC.
3
River Road
Greewich,
CT 06807
|
70,000
|
70,000
|
0
|
|
Mercury
Special Situations Fund, LP.
c/o
Mercury Partners, LLC.
3
River Road
Greewich,
CT 06807
|
104,337
|
70,000
|
34,337
|
|
Mercury
Special Situations Offshore Fund, Ltd.
c/o
Mercury Partners, LLC.
3
River Road
Greewich,
CT 06807
|
151,507
|
105,000
|
46,507
|
|
Morgan
Stanley & Co. Inc.
1585
Broadway, 38th Floor
New
York, NY 10036
|
249,447
|
225,000
|
24,447
|
|
Radcliffe
SPC, Ltd. for and on behalf of the Class A Segregated Portfolio
c/o
RG Capital Management, LP
3
Bala Plaza-East, Suite 501
Bala
Cynwyd, PA 19004
|
200,000
|
200,000
|
0
|
|
The
Dalrymple Global Resources Master Fund, LP.
3300
Oak Lawn Ave. Ste. 650
Dallas,
TX 75219
|
50,000
|
50,000
|
0
|
|
UBS
O’Connor LLC. fbo O’Connor Global Convertible Arbitrage II Master
Ltd.
One
North Wacker Drive
Chicago,
IL 60606
|
10,665
|
10,665
|
0
|
|
UBS
O’Connor LLC. fbo O’Connor Global Convertible Arbitrage Master
Ltd.
One
North Wacker Drive
Chicago,
IL 60606
|
124,335
|
124,335
|
0
|
|
UBS
O’Connor LLC. fbo O’Connor PIPES Corporate Strategies Master
Ltd.
One
North Wacker Drive
Chicago,
IL 60606
|
135,000
|
135,000
|
0
|
|
Variable
Insurance Products Fund III: Balanced Portfolio
82
Devonshire Street, E31C
Boston,
MA 02109
|
49,856
|
8,460
|
41,396
|
|
ZLP
Master Opportunity Fund, Ltd.
Harborside
Financial Center, Plaza 10, Suite 301
Jersey
City, NJ 07311
|
75,000
|
75,000
|
0
|
____________________________
(1)
Except
as
indicated pursuant to applicable community property laws, the persons named
in
the table have sole voting and investment power with respect to all shares
of
common stock, which they each hold.
(2)
Assumes
that all shares registered pursuant to this Registration Statement are sold.
The
selling shareholders may sell all, some or none of their shares pursuant to
this
Registration Statement. The Registration Statement is being filed to register
the shares purchased by the selling shareholders. None of the selling
shareholders has informed us of their intent to sell their shares.
(3)
Represents
11.6% of Registrant’s total number of outstanding shares of common
stock.
Each
of
the selling shareholders represented that it acquired the shares for investment
and with no present intention of public sale or distribution of such shares.
In
recognition of the fact that investors, even though purchasing common stock
without a view to distribution, may wish to be legally permitted to sell their
shares when they deem the sale to be appropriate, we have filed with the
Commission a registration statement, with respect to the resale of the shares
from time to time and we have agreed to prepare and file such amendments and
supplements to the Registration statement as may be necessary to keep the
Registration statement effective until the shares are no longer required to
be
registered for the sale by the selling shareholders. The selling shareholders
may sell all, some or none of their shares pursuant to this Registration
Statement. Except as set forth in the table, none of the selling shareholders
has had a material relationship with us in the past three years.
LEGAL
MATTERS
The
validity of the shares is being passed upon by DLA Piper US LLP, San Diego,
California.
The
financial statements and management's report on the effectiveness of internal
control over financial reporting incorporated in this prospectus by reference
from the Company's Annual Report on Form 10-K for the year ended December 31,
2006 have been audited by Deloitte & Touche LLP, an independent registered
public accounting firm, as stated in their reports (which report on the
financial statements expresses an unqualified opinion and includes an
explanatory paragraph relating to a change in the method of accounting for
share-based payment as required by Statement of Financial Accounting Standards
No. 123(R), Share-Based Payment, effective January 1, 2006), which are
incorporated herein by reference, and have been so incorporated in reliance
upon
the reports of such firm given upon their authority as experts in accounting
and
auditing.
INCORPORATION
BY REFERENCE
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. The information incorporated by reference is considered to
be
part of this prospectus, and information that we file later with the SEC 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.
| (1) |
Our
Annual Report on Form 10-K for the fiscal year ended December 31,
2006,
filed with the SEC on
March 12, 2007.
|
Any
statement contained in a document that is incorporated by reference is modified
or superseded for all purposes to the extent that a statement contained in
this
prospectus (or in any other document that is subsequently filed with the SEC
and
incorporated by reference) modifies or is contrary to that previous statement.
Any statement so modified or superseded is not deemed a part of this prospectus,
except as so modified or superseded.
We
will
provide without charge to each person to whom this prospectus is delivered,
upon
oral or written request, a copy of any or all of the foregoing documents
incorporated herein by reference (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into the information
that this prospectus incorporates). Written or telephone requests should be
directed to James F. Mosier at PICO Holdings, Inc., 875 Prospect Street, Suite
301, La Jolla, California 92037, telephone number (858)
456-6022.
You
should rely only on the information incorporated by reference or provided in
this prospectus or any supplement. We have not authorized anyone else to provide
you with different information. The selling shareholders will not make an offer
of these shares in any state where the offer is not permitted. You should not
assume that the information in this prospectus or any supplement is accurate
as
of any date other that the date on the front of those documents.
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 with the SEC at the
SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You
can obtain information on the operation of the public reference room by calling
the SEC at 1-800-SEC-0330. Our common stock is traded on The NASDAQ Global
Market. Reports and other information concerning us can also be inspected at
the
offices of the National Association of Securities Dealers, Inc., Market Listing
Section, 1735 K Street, N.W., Washington, D.C. 20006. Such reports and other
information may also be inspected without charge at a Web site maintained by
the
SEC. The address of the site is http:\\www.sec.gov. As soon as reasonably
practicable after our reports are electronically filed with the SEC, they are
made available for viewing without charge on our website (www.picoholdings.com).
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
14. Other Expenses of Issuance and Distribution.
Other
expenses in connection with the registration of the common stock hereunder
will
be substantially as follows:
|
Item
|
Company
Expense
|
|
SEC
Registration Fee
|
$
3,337
|
|
Printing
and engraving expenses*
|
$1,000
|
|
Legal
fees and expenses*
|
$55,000
|
|
Accounting
Fees and expenses*
|
$20,000
|
|
Miscellaneous*
|
$20,663
|
|
Total
|
$100,000
|
* Estimated
for purposes of this filing.
Item
15. Indemnification of Directors and Officers.
Pursuant
to provisions of the California General Corporation Law (the “CGCL”),
Registrant’s Articles of Incorporation include a provision which eliminates the
personal liability of its directors to Registrant and its shareholders for
monetary damages to the fullest extent permissible under California law. This
limitation has no effect on a director’s liability (i) for acts or
omissions that involve intentional misconduct or a knowing and culpable
violation of law, (ii) for acts or omissions that a director believes to be
contrary to the best interest of Registrant or its shareholders or that involve
the absence of good faith on the part of the director, (iii) for any
transaction from which a director derived an improper benefit, (iv) for
acts or omissions that show a reckless disregard for the director’s duty to
Registrant or its shareholders in circumstances in which the director was aware,
or should have been aware, in the ordinary course of performing a director’s
duties, of a risk of serious injury to Registrant or its shareholders,
(v) for acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director’s duty to Registrant
or its shareholders, (vi) under Section 310 of the CGCL (concerning
contracts or transactions between the corporation and a director) or
(vii) under Section 316 of the CGCL (concerning a director’s liability
for improper distributions, loans and guarantees). The provision does not
eliminate liability of a director for any acts or omissions which occurred
prior
to November 18, 1988, the effective date of Registrant’s amended Articles
of Incorporation including such provision, and it does not eliminate or limit
the liability of an officer for any act or omission as an officer,
notwithstanding that the officer is also a director or that his or her actions,
if negligent or improper, have been ratified by the Board of Directors. Further,
the provision has no effect on claims arising under federal or state securities
laws and does not affect the availability of injunctions and other equitable
remedies available to Registrant’s shareholders for any violation of a
director’s fiduciary duty to Registrant or its shareholders. Although the
validity and scope of the legislation underlying the provision have not yet
been
interpreted to any significant extent by the California courts, the provision
may relieve directors of monetary liability to Registrant for grossly negligent
conduct, including conduct in situations involving attempted takeovers of
Registrant.
Registrant’s
Articles of Incorporation also include a section authorizing Registrant to
indemnify its officers, directors and other agents through bylaw provisions,
agreements with such agents, vote of shareholders or otherwise in excess of
the
indemnification permitted by Section 317 of the CGCL, subject only to the
limits set forth in Section 204 of the CGCL with respect to actions for
breach of duty to the corporation and its shareholders. The Registrant has
entered into agreements with its executive officers and directors to provide
indemnity to such persons to the maximum extent permitted under applicable
law.
The
By-Laws expressly provide that Registrant shall have the right to purchase
and
maintain insurance against any liability asserted against or incurred by
officers, directors and other agents, whether or not Registrant would have
the
power to indemnify such person against the liability insured against. The
Registrant has obtained directors and officers liability and company
reimbursement insurance pursuant to three policies currently in effect, referred
to as the D & O Policies. The D & O Policies are subject to customary
exclusions.
Section 317
of the California General Corporation law makes provisions for the
indemnification of officers, directors and other corporate agents in terms
sufficiently broad to indemnify such persons, under certain circumstances,
against such liabilities (including reimbursement of expenses
incurred) arising under the Securities Act.
Item
16. Exhibits.
|
Exhibit
Number
|
Description
of Document
|
|
5.1
|
Opinion
of DLA Piper US LLP.
|
|
23.1
|
Consent
of Independent Registered Public Accounting Firm.
|
|
23.2
|
Consent
of DLA Piper US LLP (Included in Exhibit 5.1).
|
|
24.1
|
Power
of Attorney (included in the Signature Page contained in Part II
of the
Registration statement).
|
A. The
undersigned Registrant hereby undertakes:
(1) To
file,
during any period in which offers or sales are being made, a post-effective
amendment to this registration statement:
(i) To
include any prospectus required by section 10(a)(3) of the Securities Act of
1933 (the “Securities Act”);
(ii) To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding
the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum aggregate offering
price set forth in the “Calculation of Registration Fee” table in the effective
registration statement;
(iii) To
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement; provided, however, that
paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required
to
be included in a post-effective amendment by those paragraphs is contained
in
periodic reports filed by the Registrant pursuant to Section 13 or Section
15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in
the
registration statement.
(2) That,
for
the purpose of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To
remove
from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the
offering.
B. The
undersigned Registrant hereby undertakes that, for purposes of determining
any
liability under the Securities Act, each filing of the Registrant’s annual
report pursuant to section 13(a) or section 15(d) of the Securities Exchange
Act
of 1934 that is incorporated by reference in the registration statement shall
be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be
the initial bona fide offering thereof.
C. The
undersigned Registrant hereby undertakes to deliver or cause to be delivered
with the prospectus, to each person to whom the prospectus is sent or given,
the
latest annual report to security holders that is incorporated by reference
in
the prospectus and furnished pursuant to and meeting the requirements of
Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and,
where interim financial information required to be presented by Article 3 of
Regulation S-X are not set forth in the prospectus, to deliver, or cause to
be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
D. Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers, and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by
the final adjudication of such issue.
E. The
undersigned Registrant hereby undertakes that:
(1) For
the
purposes of determining any liability under the Securities Act, the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities
Act
shall be deemed to be part of the registration statement as of the time it
was
declared effective.
(2) For
the
purposes of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to
be a new registration statement relating to the securities offered therein,
and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
SIGNATURES
Pursuant
to the requirements of the Securities Act, the Registrant certifies that it
has
reasonable grounds to believe that it meets all of the requirements of filing
on
Form S-3 and has duly caused this amended Registration statement to be signed
on
its behalf by the undersigned, thereunto duly authorized in the City of San
Diego, State of California, on March 14, 2007.
PICO
Holdings, Inc.
John
R.
Hart
Chief
Executive Officer, President and Director
(Principal
Executive Officer)
POWER
OF ATTORNEY
KNOW
ALL
PERSONS BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints John R. Hart, Maxim C. W. Webb and James F.
Mosier, Esq., and each of them, as his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in
his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and to
sign
any registration statement for the same offering covered by this Registration
Statement that is to be effective upon filing pursuant to Rule 462(b)
promulgated under the Securities Act of 1933 and all post-effective amendments
thereto, and to file the same, with all exhibits thereto, and other documents
in
connection therewith, with the Securities and Exchange Commission, granting
unto
said attorneys-in-fact and agents, and each of them, full power and authority
to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act, this Registration Statement and
Power
of Attorney has been signed by the following persons in the capacities and
on
the dates indicated:
|
Signature
|
|
|
Title(s)
|
|
|
Date
|
|
|
_____________
Ronald
Langley
|
Chairman
of the Board
|
|
|
/s/
John R. Hart
John
R. Hart
|
Chief
Executive Officer, President and Director (Principal Executive
Officer)
|
March 14,
2007
|
|
/s/
Maxim C.W. Webb
Maxim
C. W. Webb
|
Chief
Financial Officer and Treasurer (Chief Accounting Officer)
|
March 14,
2007
|
|
S.
Walter Foulkrod,
III, Esq.
|
Director
|
|
|
/s/
Richard D. Ruppert, MD
Richard
D. Ruppert, MD
|
Director
|
March 14,
2007
|
|
/s/
Carlos C. Campbell
Carlos
C. Campbell
|
Director
|
March 14,
2007
|
|
/s/
Kenneth J. Slepicka
Kenneth
J. Slepicka
|
Director
|
March 14,
2007
|
|
/s/
John D. Weil
John
D. Weil
|
Director
|
March 14,
2007
|
INDEX
TO EXHIBITS
|
Exhibit
Number
|
Description
of Document
|
|
5.1
|
Opinion
of DLA Piper US LLP.
|
|
23.1
|
Consent
of Independent Registered Public Accounting Firm.
|
|
23.2
|
Consent
of DLA Piper US LLP (Included in Exhibit 5.1).
|
|
24.1
|
Power
of Attorney (included in the Signature Page contained in Part II
of the
Registration statement).
|