|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 2010 or
|
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
|
Connecticut
(State or other jurisdiction of
incorporation or organization)
|
06-0739839
(I.R.S. Employer Identification No.)
|
93 West Main Street, Clinton, CT
(Address of principal executive office)
|
06413
(Zip Code)
|
Large Accelerated Filer o
|
Accelerated Filer x
|
Non-Accelerated Filer o
|
Smaller Reporting Company o
|
Part I, Item 1: Financial Statements (Unaudited)
|
|
Page 3
|
|
Page 4
|
|
Page 5
|
|
Page 6
|
|
Page 7
|
|
Page 8
|
|
Page 9
|
|
Page 10
|
|
Page 13
|
|
Page 18
|
|
Page 18
|
|
Page 18
|
|
Page 19
|
|
Page 19
|
|
Page 19
|
|
Exhibit 31.1
Exhibit 31.2
Exhibit 32
|
Page 20
|
Connecticut Water Service, Inc. and Subsidiaries
|
||||||||
At June 30, 2010 and December 31, 2009
|
||||||||
(Unaudited)
|
||||||||
(In thousands)
|
||||||||
June 30,
|
December 31,
|
|||||||
ASSETS
|
2010
|
2009
|
||||||
Utility Plant
|
$ | 455,193 | $ | 441,412 | ||||
Construction Work in Progress
|
5,294 | 6,751 | ||||||
460,487 | 448,163 | |||||||
Accumulated Provision for Depreciation
|
(127,065 | ) | (122,961 | ) | ||||
Net Utility Plant
|
333,422 | 325,202 | ||||||
Other Property and Investments
|
5,312 | 5,513 | ||||||
Cash and Cash Equivalents
|
454 | 5,437 | ||||||
Accounts Receivable (Less Allowance, 2010 - $610; 2009 - $472)
|
8,973 | 6,502 | ||||||
Accrued Unbilled Revenues
|
6,655 | 5,416 | ||||||
Materials and Supplies, at Average Cost
|
1,231 | 1,136 | ||||||
Prepayments and Other Current Assets
|
2,442 | 1,471 | ||||||
Total Current Assets
|
19,755 | 19,962 | ||||||
Restricted Cash
|
9,391 | 12,697 | ||||||
Unamortized Debt Issuance Expense
|
7,499 | 7,766 | ||||||
Unrecovered Income Taxes
|
26,046 | 25,649 | ||||||
Pension Benefits
|
6,560 | 6,897 | ||||||
Post-Retirement Benefits Other Than Pension
|
2,421 | 2,496 | ||||||
Goodwill
|
3,608 | 3,608 | ||||||
Deferred Charges and Other Costs
|
6,850 | 5,486 | ||||||
Total Regulatory and Other Long-Term Assets
|
62,375 | 64,599 | ||||||
Total Assets
|
$ | 420,864 | $ | 415,276 | ||||
CAPITALIZATION AND LIABILITIES
|
||||||||
Common Stockholders' Equity
|
$ | 109,031 | $ | 108,569 | ||||
Preferred Stock
|
772 | 772 | ||||||
Long-Term Debt
|
111,740 | 111,955 | ||||||
Total Capitalization
|
221,543 | 221,296 | ||||||
Interim Bank Loans Payable
|
27,942 | 25,000 | ||||||
Accounts Payable and Accrued Expenses
|
6,663 | 6,538 | ||||||
Accrued Taxes
|
-- | 18 | ||||||
Accrued Interest
|
1,001 | 954 | ||||||
Other Current Liabilities
|
181 | 546 | ||||||
Total Current Liabilities
|
35,787 | 33,056 | ||||||
Advances for Construction
|
39,658 | 39,543 | ||||||
Contributions in Aid of Construction
|
52,173 | 52,072 | ||||||
Deferred Federal and State Income Taxes
|
33,480 | 32,454 | ||||||
Unfunded Future Income Taxes
|
20,689 | 20,451 | ||||||
Long-Term Compensation Arrangements
|
16,070 | 14,898 | ||||||
Unamortized Investment Tax Credits
|
1,408 | 1,437 | ||||||
Other Long-Term Liabilities
|
56 | 69 | ||||||
Total Long-Term Liabilities
|
163,534 | 160,924 | ||||||
Commitments and Contingencies
|
||||||||
Total Capitalization and Liabilities
|
$ | 420,864 | $ | 415,276 | ||||
The accompanying footnotes are an integral part of these consolidated financial statements.
|
Connecticut Water Service, Inc. and Subsidiaries
|
||||||||
At June 30, 2010 and December 31, 2009
|
||||||||
(Unaudited)
|
||||||||
(In thousands, except share data)
|
||||||||
June 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
Common Stockholders' Equity
|
||||||||
Common Stock Without Par Value Authorized - 25,000,000 Shares;
|
$ | 69,945 | $ | 68,896 | ||||
Shares Issued and Outstanding: 2010 - 8,639,859 ; 2009 - 8,573,744
|
||||||||
Stock Issuance Expense
|
(1,610 | ) | (1,610 | ) | ||||
Retained Earnings
|
41,231 | 41,785 | ||||||
Accumulated Other Comprehensive Loss
|
(535 | ) | (502 | ) | ||||
Total Common Stockholders' Equity
|
109,031 | 108,569 | ||||||
Preferrred Stock
|
||||||||
Cumulative Preferred Stock of Connecticut Water Service, Inc.
|
||||||||
Series A Voting, $20 Par Value; Authorized, Issued and
|
||||||||
Outstanding 15,000 Shares, Redeemable at $21.00 Per Share
|
300 | 300 | ||||||
Series $.90 Non-Voting, $16 Par Value; Authorized 50,000 Shares
|
||||||||
Issued and Outstanding 29,499 Shares, Redeemable at $16.00 Per Share
|
472 | 472 | ||||||
Total Preferred Stock of Connecticut Water Service, Inc.
|
772 | 772 | ||||||
Long-Term Debt
|
||||||||
The Connecticut Water Company
|
||||||||
Unsecured Water Facilities Revenue Refinancing Bonds
|
||||||||
5.05% 1998 Series A, due 2028
|
9,590 | 9,625 | ||||||
5.125% 1998 Series B, due 2028
|
7,535 | 7,600 | ||||||
4.40% 2003A Series, due 2020
|
8,000 | 8,000 | ||||||
5.00% 2003C Series, due 2022
|
14,795 | 14,795 | ||||||
Var. 2004 Series Variable Rate, due 2029
|
12,500 | 12,500 | ||||||
Var. 2004 Series A, due 2028
|
5,000 | 5,000 | ||||||
Var. 2004 Series B, due 2028
|
4,550 | 4,550 | ||||||
5.00% 2005 A Series, due 2040
|
14,885 | 14,885 | ||||||
5.00% 2007 A Series, due 2037
|
14,885 | 15,000 | ||||||
5.10% 2009 A Series, due 2039
|
20,000 | 20,000 | ||||||
Total Long-Term Debt
|
111,740 | 111,955 | ||||||
Total Capitalization
|
$ | 221,543 | $ | 221,296 | ||||
The accompanying footnotes are an integral part of these consolidated financial statements.
|
Connecticut Water Service, Inc. and Subsidiaries
|
||||||||
For the Three Months Ended June 30, 2010 and 2009
|
||||||||
(Unaudited)
|
||||||||
(In thousands, except per share amounts)
|
||||||||
2010
|
2009
|
|||||||
Operating Revenues
|
$ | 15,901 | $ | 15,147 | ||||
Operating Expenses
|
||||||||
Operation and Maintenance
|
8,001 | 8,400 | ||||||
Depreciation
|
1,734 | 1,449 | ||||||
Income Taxes
|
1,120 | 840 | ||||||
Taxes Other Than Income Taxes
|
1,505 | 1,436 | ||||||
Total Operating Expenses
|
12,360 | 12,125 | ||||||
Net Operating Revenues
|
3,541 | 3,022 | ||||||
Other Utility Income, Net of Taxes
|
173 | 193 | ||||||
Total Utility Operating Income
|
3,714 | 3,215 | ||||||
Other Income (Deductions), Net of Taxes
|
||||||||
Non-Water Sales Earnings
|
200 | 253 | ||||||
Allowance for Funds Used During Construction
|
20 | 35 | ||||||
Other
|
(152 | ) | (120 | ) | ||||
Total Other Income, Net of Taxes
|
68 | 168 | ||||||
Interest and Debt Expense
|
||||||||
Interest on Long-Term Debt
|
1,162 | 978 | ||||||
Other Interest Charges
|
193 | 40 | ||||||
Amortization of Debt Expense
|
115 | 99 | ||||||
Total Interest and Debt Expense
|
1,470 | 1,117 | ||||||
Net Income
|
2,312 | 2,266 | ||||||
Preferred Stock Dividend Requirement
|
10 | 10 | ||||||
Net Income Applicable to Common Stock
|
$ | 2,302 | $ | 2,256 | ||||
Weighted Average Common Shares Outstanding:
|
||||||||
Basic
|
8,522 | 8,439 | ||||||
Diluted
|
8,624 | 8,513 | ||||||
Earnings Per Common Share:
|
||||||||
Basic
|
$ | 0.28 | $ | 0.27 | ||||
Diluted
|
$ | 0.27 | $ | 0.27 | ||||
Dividends Per Common Share
|
$ | 0.2275 | $ | 0.2225 | ||||
The accompanying footnotes are an integral part of these consolidated financial statements.
|
Connecticut Water Service, Inc. and Subsidiaries
|
||||||||
For the Six Months Ended June 30, 2010 and 2009
|
||||||||
(Unaudited)
|
||||||||
(In thousands, except per share amounts)
|
||||||||
2010
|
2009
|
|||||||
Operating Revenues
|
$ | 29,702 | $ | 28,528 | ||||
Operating Expenses
|
||||||||
Operation and Maintenance
|
16,091 | 16,600 | ||||||
Depreciation
|
3,415 | 3,082 | ||||||
Income Taxes
|
1,529 | 847 | ||||||
Taxes Other Than Income Taxes
|
3,023 | 2,909 | ||||||
Total Operating Expenses
|
24,058 | 23,438 | ||||||
Net Operating Revenues
|
5,644 | 5,090 | ||||||
Other Utility Income, Net of Taxes
|
353 | 348 | ||||||
Total Utility Operating Income
|
5,997 | 5,438 | ||||||
Other Income (Deductions), Net of Taxes
|
||||||||
Non-Water Sales Earnings
|
436 | 462 | ||||||
Allowance for Funds Used During Construction
|
51 | 59 | ||||||
Other
|
(265 | ) | (263 | ) | ||||
Total Other Income, Net of Taxes
|
222 | 258 | ||||||
Interest and Debt Expense
|
||||||||
Interest on Long-Term Debt
|
2,329 | 1,987 | ||||||
Other Interest Charges
|
279 | 101 | ||||||
Amortization of Debt Expense
|
229 | 198 | ||||||
Total Interest and Debt Expense
|
2,837 | 2,286 | ||||||
Net Income
|
3,382 | 3,410 | ||||||
Preferred Stock Dividend Requirement
|
19 | 19 | ||||||
Net Income Applicable to Common Stock
|
$ | 3,363 | $ | 3,391 | ||||
Weighted Average Common Shares Outstanding:
|
||||||||
Basic
|
8,512 | 8,429 | ||||||
Diluted
|
8,612 | 8,503 | ||||||
Earnings Per Common Share:
|
||||||||
Basic
|
$ | 0.40 | $ | 0.40 | ||||
Diluted
|
$ | 0.39 | $ | 0.40 | ||||
Dividends Per Common Share
|
$ | 0.4550 | $ | 0.4450 | ||||
The accompanying footnotes are an integral part of these consolidated financial statements.
|
Connecticut Water Service, Inc. and Subsidiaries
|
||||||||
For the Three Months Ended June 30, 2010 and 2009
|
||||||||
(Unaudited)
|
||||||||
(In thousands)
|
||||||||
2010
|
2009
|
|||||||
Net Income Applicable to Common Stock
|
$ | 2,302 | $ | 2,256 | ||||
Other Comprehensive Income, net of tax
|
||||||||
Qualified Cash Flow Hedging Instrument Expense,
|
||||||||
net of tax benefit of $0 in 2010 and $14 in 2009
|
-- | (22 | ) | |||||
Adjustment to Pension and Post-Retirement Benefits Other
|
||||||||
Than Pension, net of tax expense of $1 in 2010 and 2009
|
-- | -- | ||||||
Unrealized (loss)/gain on investments, net of tax benefit (expense) of
|
||||||||
$35 in 2010 and $(52) in 2009
|
(55 | ) | 70 | |||||
Comprehensive Income
|
$ | 2,247 | $ | 2,304 | ||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
||||||||
For the Six Months Ended June 30, 2010 and 2009
|
||||||||
(Unaudited)
|
||||||||
(In thousands)
|
||||||||
2010 | 2009 | |||||||
Net Income Applicable to Common Stock
|
$ | 3,363 | $ | 3,391 | ||||
Other Comprehensive Income, net of tax
|
||||||||
Qualified Cash Flow Hedging Instrument Income,
|
||||||||
net of tax expense of $0 in 2010 and $20 in 2009
|
1 | 31 | ||||||
Adjustment to Pension and Post-Retirement Benefits Other
|
||||||||
Than Pension, net of tax benefit of $1 in 2010 and 2009
|
(1 | ) | (1 | ) | ||||
Unrealized (loss)/gain on investments, net of tax benefit (expense) of
|
||||||||
$21 in 2010 and $(52) in 2009
|
(33 | ) | 81 | |||||
Comprehensive Income
|
$ | 3,330 | $ | 3,502 | ||||
The accompanying footnotes are an integral part of these consolidated financial statements.
|
Connecticut Water Service, Inc. and Subsidiaries
|
||||||||
For the Three Months Ended June 30, 2010 and 2009
|
||||||||
(Unaudited)
|
||||||||
(In thousands, except per share amounts)
|
||||||||
2010
|
2009
|
|||||||
Balance at Beginning of Period
|
$ | 40,890 | $ | 38,547 | ||||
Net Income
|
2,312 | 2,266 | ||||||
43,202 | 40,813 | |||||||
Dividends Declared:
|
||||||||
Cumulative Preferred, Class A, $0.20 per share
|
3 | 3 | ||||||
Cumulative Preferred, Series $0.90, $0.225 per share
|
7 | 7 | ||||||
Common Stock - 2010 $0.2275 per share; 2009 $0.2225 per share
|
1,961 | 1,877 | ||||||
1,971 | 1,887 | |||||||
Balance at End of Period
|
$ | 41,231 | $ | 38,926 | ||||
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
|
||||||||
For the Six Months Ended June 30, 2010 and 2009
|
||||||||
(Unaudited)
|
||||||||
(In thousands, except per share amounts)
|
||||||||
2010 | 2009 | |||||||
Balance at Beginning of Period
|
$ | 41,785 | $ | 39,285 | ||||
Net Income
|
3,382 | 3,410 | ||||||
45,167 | 42,695 | |||||||
Dividends Declared:
|
||||||||
Cumulative Preferred, Class A, $0.40 per share
|
6 | 6 | ||||||
Cumulative Preferred, Series $0.90, $0.45 per share
|
13 | 13 | ||||||
Common Stock - 2010 $0.455 per share; 2009 $0.445 per share
|
3,917 | 3,750 | ||||||
3,936 | 3,769 | |||||||
Balance at End of Period
|
$ | 41,231 | $ | 38,926 | ||||
The accompanying footnotes are an integral part of these consolidated financial statements.
|
Connecticut Water Service, Inc. and Subsidiaries
|
||||||||
For the Six Months Ended June 30, 2010 and 2009
|
||||||||
(Unaudited)
|
||||||||
(In thousands)
|
||||||||
2010
|
2009
|
|||||||
Operating Activities:
|
||||||||
Net Income
|
$ | 3,382 | $ | 3,410 | ||||
Adjustments to Reconcile Net Income to Net Cash Provided by
|
||||||||
Operating Activities:
|
||||||||
Deferred Revenues
|
119 | 119 | ||||||
Allowance for Funds Used During Construction
|
(85 | ) | (96 | ) | ||||
Depreciation (including $401 in 2010, $353 in 2009 charged to other accounts)
|
3,816 | 3,435 | ||||||
Change in Assets and Liabilities:
|
||||||||
(Increase) Decrease in Accounts Receivable and Accrued Unbilled Revenues
|
(3,710 | ) | 240 | |||||
Increase in Prepayments and Other Current Assets
|
(1,060 | ) | (193 | ) | ||||
Decrease in Other Non-Current Items
|
1,916 | 1,605 | ||||||
Increase in Accounts Payable, Accrued Expenses and Other
|
||||||||
Current Liabilities
|
14 | 26 | ||||||
Increase in Deferred Income Taxes and Investment Tax Credits, Net
|
837 | 400 | ||||||
Total Adjustments
|
1,847 | 5,536 | ||||||
Net Cash and Cash Equivalents Provided by Operating Activities
|
5,229 | 8,946 | ||||||
Investing Activities:
|
||||||||
Company Financed Additions to Utility Plant
|
(11,693 | ) | (10,157 | ) | ||||
Advances from Others for Construction
|
(118 | ) | (355 | ) | ||||
Net Additions to Utility Plant Used in Continuing Operations
|
(11,811 | ) | (10,512 | ) | ||||
Purchase of Customer Contracts
|
(900 | ) | -- | |||||
Purchase of water systems, net of cash acquired of $0 in 2010 and $26 in 2009
|
(297 | ) | (1,469 | ) | ||||
Release of restricted cash
|
3,300 | -- | ||||||
Net Cash and Cash Equivalents Used in Investing Activities
|
(9,708 | ) | (11,981 | ) | ||||
Financing Activities:
|
||||||||
Proceeds from Interim Bank Loans
|
27,942 | 17,771 | ||||||
Repayment of Interim Bank Loans
|
(25,000 | ) | (12,074 | ) | ||||
Proceeds from Issuance of Common Stock
|
486 | 485 | ||||||
Proceeds from the Exercise of Stock Options
|
102 | -- | ||||||
Costs Incurred to Issue Long-Term Debt and Common Stock
|
(1 | ) | -- | |||||
Repayment of Long-Term Debt Including Current Portion
|
(215 | ) | (133 | ) | ||||
Advances from Others for Construction
|
118 | 355 | ||||||
Cash Dividends Paid
|
(3,936 | ) | (3,770 | ) | ||||
Net Cash and Cash Equivalents (Used in) Provided by Financing Activities
|
(504 | ) | 2,634 | |||||
Net Decrease in Cash and Cash Equivalents
|
(4,983 | ) | (401 | ) | ||||
Cash and Cash Equivalents at Beginning of Period
|
5,437 | 684 | ||||||
Cash and Cash Equivalents at End of Period
|
$ | 454 | $ | 283 | ||||
Non-Cash Investing and Financing Activities:
|
||||||||
Non-Cash Contributed Utility Plant
|
$ | 129 | $ | 860 | ||||
Short-term Investment of Bond Proceeds Held in Restricted Cash
|
$ | 9,391 | -- | |||||
Supplemental Disclosures of Cash Flow Information:
|
||||||||
Cash Paid for:
|
||||||||
Interest
|
$ | 2,629 | $ | 2,214 | ||||
State and Federal Income Taxes
|
$ | 1,376 | $ | 410 | ||||
The accompanying footnotes are an integral part of these consolidated financial statements.
|
Three Months
|
Six Months
|
|||||||||||||||
Period ended June 30
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
Service Cost
|
$ | 425 | $ | 388 | $ | 834 | $ | 727 | ||||||||
Interest Cost
|
545 | 507 | 1,087 | 1,012 | ||||||||||||
Expected Return on Plan Assets
|
(615 | ) | (543 | ) | (1,254 | ) | (1,114 | ) | ||||||||
Amortization of:
|
||||||||||||||||
Transition Obligation
|
-- | -- | 1 | 1 | ||||||||||||
Prior Service Cost
|
18 | 17 | 35 | 34 | ||||||||||||
Net Loss
|
163 | 104 | 301 | 199 | ||||||||||||
Net Periodic Benefit Cost
|
$ | 536 | $ | 473 | $ | 1,004 | $ | 859 |
Three Months
|
Six Months
|
|||||||||||||||
Period ended June 30
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
Service Cost
|
$ | 142 | $ | 113 | $ | 283 | $ | 236 | ||||||||
Interest Cost
|
152 | 117 | 287 | 240 | ||||||||||||
Expected Return on Plan Assets
|
(76 | ) | (68 | ) | (153 | ) | (136 | ) | ||||||||
Other
|
56 | 56 | 112 | 112 | ||||||||||||
Amortization of:
|
||||||||||||||||
Prior Service Cost
|
(102 | ) | (102 | ) | (203 | ) | (203 | ) | ||||||||
Recognized Net Loss
|
99 | 50 | 165 | 103 | ||||||||||||
Net Periodic Benefit Cost
|
$ | 271 | $ | 166 | $ | 491 | $ | 352 |
Three months ended June 30,
|
2010
|
2009
|
||||||
Common Shares Outstanding End of Period:
|
8,639,859 | 8,526,304 | ||||||
Weighted Average Shares Outstanding (Days Outstanding Basis):
|
||||||||
Basic
|
8,521,840 | 8,438,865 | ||||||
Diluted
|
8,624,319 | 8,512,669 | ||||||
Basic Earnings per Share
|
$ | 0.28 | $ | 0.27 | ||||
Dilutive Effect of Unexercised Stock Options
|
(0.01 | ) | -- | |||||
Diluted Earnings per Share
|
$ | 0.27 | $ | 0.27 | ||||
Six Months ended June 30,
|
||||||||
Weighted Average Shares Outstanding (Days Outstanding Basis):
|
||||||||
Basic
|
8,512,120 | 8,429,103 | ||||||
Diluted
|
8,611,917 | 8,502,946 | ||||||
Basic Earnings per Share
|
$ | 0.40 | $ | 0.40 | ||||
Dilutive Effect of Unexercised Stock Options
|
(0.01 | ) | -- | |||||
Diluted Earnings per Share
|
$ | 0.39 | $ | 0.40 | ||||
Level 1
|
Level 2
|
Level 3
|
||||||||||
Assets:
|
||||||||||||
Investments
|
$ | 726 | $ | -- | $ | -- |
Level 1
|
Level 2
|
Level 3
|
||||||||||
Assets:
|
||||||||||||
Investments
|
$ | 1,151 | $ | -- | $ | -- |
Three Months Ended June 30, 2010
|
||||||||||||||||
Segment
|
Revenues
|
Pre-Tax Income
|
Income Tax Expense
|
Net Income
|
||||||||||||
Water Activities
|
$ | 16,205 | $ | 3,261 | $ | 1,149 | $ | 2,112 | ||||||||
Real Estate Transactions
|
-- | -- | -- | -- | ||||||||||||
Services and Rentals
|
1,267 | 340 | 140 | 200 | ||||||||||||
Total
|
$ | 17,472 | $ | 3,601 | $ | 1,289 | $ | 2,312 |
Three Months Ended June 30, 2009
|
||||||||||||||||
Segment
|
Revenues
|
Pre-Tax Income
|
Income Tax Expense
|
Net Income
|
||||||||||||
Water Activities
|
$ | 15,462 | $ | 2,907 | $ | 894 | $ | 2,013 | ||||||||
Real Estate Transactions
|
-- | -- | -- | -- | ||||||||||||
Services and Rentals
|
1,226 | 414 | 161 | 253 | ||||||||||||
Total
|
$ | 16,688 | $ | 3,321 | $ | 1,055 | $ | 2,266 |
Six Months Ended June 30, 2010
|
||||||||||||||||
Segment
|
Revenues
|
Pre-Tax Income
|
Income Tax Expense
|
Net Income
|
||||||||||||
Water Activities
|
$ | 30,337 | $ | 4,550 | $ | 1,604 | $ | 2,946 | ||||||||
Real Estate Transactions
|
-- | -- | -- | -- | ||||||||||||
Services and Rentals
|
2,347 | 734 | 298 | 436 | ||||||||||||
Total
|
$ | 32,684 | $ | 5,284 | $ | 1,902 | $ | 3,382 |
Six Months Ended June 30, 2009
|
||||||||||||||||
Segment
|
Revenues
|
Pre-Tax Income
|
Income Tax Expense
|
Net Income
|
||||||||||||
Water Activities
|
$ | 29,134 | $ | 3,858 | $ | 910 | $ | 2,948 | ||||||||
Real Estate Transactions
|
-- | -- | -- | -- | ||||||||||||
Services and Rentals
|
2,303 | 757 | 295 | 462 | ||||||||||||
Total
|
$ | 31,437 | $ | 4,615 | $ | 1,205 | $ | 3,410 |
June 30, 2010
|
December 31, 2009
|
|||||||
Total Plant and Other Investments:
|
||||||||
Water Activities
|
$ | 338,152 | $ | 330,151 | ||||
Non-Water
|
582 | 564 | ||||||
338,734 | 330,715 | |||||||
Other Assets:
|
||||||||
Water Activities
|
79,707 | 77,622 | ||||||
Non-Water
|
2,423 | 6,939 | ||||||
82,130 | 84,561 | |||||||
Total Assets
|
$ | 420,864 | $ | 415,276 |
Business Segment
|
June 30, 2010
|
June 30, 2009
|
(Decrease)/Increase
|
|||||||||
Water Activities
|
$ | 2,112,000 | $ | 2,013,000 | $ | 99,000 | ||||||
Real Estate Transactions
|
-- | -- | -- | |||||||||
Services and Rentals
|
200,000 | 253,000 | (53,000 | ) | ||||||||
Total
|
$ | 2,312,000 | $ | 2,266,000 | $ | 46,000 |
Expense Components
|
June 30, 2010
|
June 30, 2009
|
Increase/(Decrease)
|
|||||||||
Labor
|
$ | 3,111,000 | $ | 2,986,000 | $ | 125,000 | ||||||
Post retirement medical
|
271,000 | 171,000 | 100,000 | |||||||||
Pension
|
537,000 | 473,000 | 64,000 | |||||||||
Water treatment (including chemical costs)
|
589,000 | 533,000 | 56,000 | |||||||||
Utility costs
|
823,000 | 797,000 | 26,000 | |||||||||
Investor Relations
|
159,000 | 181,000 | (22,000 | ) | ||||||||
Regulatory commission expense
|
1,000 | 62,000 | (61,000 | ) | ||||||||
Property and liability insurance
|
219,000 | 296,000 | (77,000 | ) | ||||||||
Customer
|
196,000 | 279,000 | (83,000 | ) | ||||||||
Medical
|
379,000 | 494,000 | (115,000 | ) | ||||||||
Outside services
|
326,000 | 481,000 | (155,000 | ) | ||||||||
Other
|
1,390,000 | 1,647,000 | (257,000 | ) | ||||||||
Total
|
$ | 8,001,000 | $ | 8,400,000 | $ | (399,000 | ) |
-
|
Operating and Maintenance expenses declined 4.8% in the second quarter of 2010 due to several reasons:
|
·
|
Outside services decreased primarily due to a reduction in consulting costs that were higher in 2009 due to the implementation of an Enterprise Resource Planning (ERP) system and a reduction in temporary labor in 2010 as part of cost containment efforts;
|
·
|
Medical costs decreased in 2010 due to a decrease in claims filed and an increase in contributions from employees;
|
·
|
Customer costs decreased primarily due to a reduction in postage and customer communication costs, partially offset by an increase in bad debt expense;
|
·
|
The decrease in regulatory commission expense was due to the capitalized costs associated with the 2007 rate case being fully amortized during 2009. The Company expects to begin to amortize costs associated with the 2010 rate case recently approved by the DPUC during the second half of 2010; and
|
·
|
The primary driver in the decrease in Other expense is due to the mark-to-market adjustment related to stock awards of certain employees. The Company adjusts the value of those stock awards at the end of each reporting period based on the Company’s stock price on the last day of that period.
|
-
|
These decreases were partially offset by the following:
|
·
|
The increase in labor costs was primarily attributable to annual wage increases, partially offset by labor capitalized to the ERP system. The Company implemented the ERP in the first quarter of 2010 and expects Labor costs to continue to grow during the remainder of 2010 when compared to 2009. During 2009, many employees were spending considerable time on this project, requiring the Company to capitalize those labor costs. Upon implementation of the ERP system on March 22, 2010, most of the employees who had been involved in the project resumed working on their normal responsibilities, resulting in a higher percentage of employee time to be expensed. However, the Company will continue to focus on capital projects related to WICA and other field related improvements;
|
·
|
Pension and post-retirement medical costs increased due primarily to a decrease in the discount rate used to determine the liabilities of the plans and to the decline in market value of plan assets in prior periods;
|
·
|
Water treatment costs were higher due to an increase in the costs to remove and dispose waste at water treatment facilities and an increase in the cost of chemicals used in the treatment process; and
|
·
|
Utility costs increased due to increased communication costs in the control services group, which uses remote sensors to monitor our systems’ performance.
|
-
|
The Company saw an approximate 19.7% increase in its Depreciation expense due to an increase in the Company’s Utility Plant investment and a reduction in depreciation rates approved by the DPUC during the second quarter of 2009.
|
-
|
Income Tax expense associated with Water Activities increased due to an increase in pre-tax income and a higher effective tax rate in 2010.
|
Business Segment
|
June 30, 2010
|
June 30, 2009
|
(Decrease)/Increase
|
|||||||||
Water Activities
|
$ | 2,946,000 | $ | 2,948,000 | $ | (2,000 | ) | |||||
Real Estate Transactions
|
-- | -- | -- | |||||||||
Services and Rentals
|
436,000 | 462,000 | (26,000 | ) | ||||||||
Total
|
$ | 3,382,000 | $ | 3,410,000 | $ | (28,000 | ) |
Expense Components
|
June 30, 2010
|
June 30, 2009
|
Increase/(Decrease)
|
|||||||||
Pension
|
$ | 1,005,000 | $ | 859,000 | $ | 146,000 | ||||||
Post retirement medical
|
491,000 | 356,000 | 135,000 | |||||||||
Water treatment (including chemical costs)
|
1,147,000 | 1,067,000 | 80,000 | |||||||||
Utility costs
|
1,811,000 | 1,746,000 | 65,000 | |||||||||
Purchased water
|
558,000 | 510,000 | 48,000 | |||||||||
Labor
|
5,946,000 | 5,996,000 | (50,000 | ) | ||||||||
Customer
|
416,000 | 509,000 | (93,000 | ) | ||||||||
Regulatory commission expense
|
3,000 | 124,000 | (121,000 | ) | ||||||||
Medical
|
811,000 | 989,000 | (178,000 | ) | ||||||||
Outside services
|
783,000 | 1,002,000 | (219,000 | ) | ||||||||
Other
|
3,120,000 | 3,442,000 | (322,000 | ) | ||||||||
Total
|
$ | 16,091,000 | $ | 16,600,000 | $ | (509,000 | ) |
-
|
Operating and Maintenance expenses declined 3.1% in the first half of 2010 largely due to cost containment and the employee focus on capital projects, both administrative and field-related, early in 2010. Factors contributing to this decline include:
|
·
|
Outside services decreased primarily a reduction in legal costs associated with the favorable resolution of an on-going legal matter in our Unionville division and a reduction in temporary labor in 2010 as part of cost containment.
|
·
|
Medical costs decreased in 2010 due to a decrease in claims filed and an increase in contributions from employees.
|
·
|
The decrease in regulatory commission expense was due to the capitalized costs associated with the 2007 rate case being fully amortized during 2009. The Company expects to begin to amortize costs associated with the 2010 rate case recently approved by the DPUC during the second half of 2010.
|
·
|
Customer costs decreased primarily due to a reduction in postage and customer communication costs, partially offset by an increase in bad debt expense.
|
·
|
The decrease in labor costs was primarily attributable to the ongoing employee focus on capital projects, specifically, the ERP. During 2009, many employees were spending considerable time on this project, allowing the Company to capitalize those labor costs. The ERP system was implemented in the first quarter of 2010 and the Company expects to capitalize fewer hours related to the project throughout the remainder of 2010. However, the Company will continue to focus on capital projects related to WICA and other field related improvements.
|
·
|
The primary driver in the decrease in Other expense is due to the mark-to-market adjustment related to stock awards of certain employees. The Company adjusts the value of those stock awards at the end of each reporting period based on the Company’s stock price on the last day of that period.
|
-
|
These decreases were partially offset by the following:
|
·
|
Pension and post-retirement medical costs increased due primarily to a decrease in the discount rate used to determine the liabilities of the plans and to the decline in market value of plan assets in prior periods.
|
·
|
Water treatment costs were higher due to an increase in the costs to remove and dispose waste at water treatment facilities and an increase in the cost of chemicals used in the treatment process.
|
·
|
Utility costs increased due to higher power and communication costs. Communication costs increased primarily in the control services group, which uses remote sensors to monitor our systems’ performance.
|
·
|
Purchased water costs increased in the period due to an increase in water supplied by a neighboring utility in our Unionville system.
|
-
|
The Company saw an approximate 10.8% increase in its Depreciation expense due to an increase in the Company’s Utility Plant investment and a reduction in depreciation rates approved by the DPUC during the second quarter of 2009.
|
-
|
Income Tax expense associated with Water Activities increased due to the higher effective tax rate in 2010. The driver of the lower effective tax rate in 2009 was the recognition of state tax credits associated with infrastructure investment made by the Company.
|
-
|
Interest Expense increased by $551,000, or 24.1%, primarily due to the issuance of $20,000,000 in debt during December 2009. Additionally, interest and fees on the Company’s lines of credit increased due to higher balances throughout 2010 when compared to 2009.
|
·
|
projected capital expenditures and related funding requirements;
|
·
|
the availability and cost of capital;
|
·
|
developments, trends and consolidation in the water and wastewater utility industries;
|
·
|
dividend payment projections;
|
·
|
our ability to successfully acquire and integrate regulated water and wastewater systems, as well as unregulated businesses, that are complementary to our operations and the growth of our business;
|
·
|
the capacity of our water supplies, water facilities and wastewater facilities;
|
·
|
the impact of limited geographic diversity on our exposure to unusual weather;
|
·
|
the impact of conservation awareness of customers and more efficient plumbing fixtures and appliances on water usage per customer;
|
·
|
our capability to pursue rate increase requests on a timely successful basis;
|
·
|
our authority to carry on our business without unduly burdensome restrictions;
|
·
|
our ability to maintain our operating costs at the lowest possible level, while providing good quality water service;
|
·
|
our ability to obtain fair market value for condemned assets;
|
·
|
the impact of fines and penalties;
|
·
|
changes in laws, governmental regulations and policies, including environmental, health and water quality and public utility regulations and policies;
|
·
|
the decisions of governmental and regulatory bodies, including decisions to raise or lower rates;
|
·
|
our ability to successfully extend and expand our service contract work within our Service and Rentals Segment;
|
·
|
the development of new services and technologies by us or our competitors;
|
·
|
the availability of qualified personnel;
|
·
|
the condition of our assets;
|
·
|
the impact of legal proceedings;
|
·
|
general economic conditions;
|
·
|
the profitability of our Real Estate Segment, which is subject to the amount of land we have available for sale and/or donation, the demand for any available land, the continuation of the current state tax benefits relating to the donation of land for open space purposes and regulatory approval for land dispositions; and
|
·
|
acquisition-related costs and synergies.
|
·
|
changes in general economic, business, credit and financial market conditions;
|
·
|
changes in government regulations and policies, including environmental and public utility regulations and policies;
|
·
|
changes in environmental conditions, including those that result in water use restrictions;
|
·
|
unusual weather conditions;
|
·
|
increases in energy and fuel costs;
|
·
|
unfavorable changes to the federal and/or state tax codes;
|
·
|
significant changes in, or unanticipated, capital requirements;
|
·
|
significant changes in our credit rating or the market price of our common stock;
|
·
|
our ability to integrate businesses, technologies or services which we have acquired or may acquire;
|
·
|
our ability to manage the expansion of our business;
|
·
|
the extent to which we are able to develop and market new and improved services;
|
·
|
the continued demand by telecommunication companies for antenna site leases on our property;
|
·
|
the effect of the loss of major customers;
|
·
|
our ability to retain the services of key personnel and to hire qualified personnel;
|
·
|
labor disputes;
|
·
|
increasing difficulties in obtaining insurance and increased cost of insurance;
|
·
|
cost overruns relating to improvements or the expansion of our operations;
|
·
|
increases in the costs of goods and services;
|
·
|
civil disturbance or terroristic threats or acts; and
|
·
|
changes in accounting pronouncements.
|
Exhibit
Number
|
Description
|
||
3.1 |
Certificate of Incorporation of Connecticut Water Service, Inc. amended and restated as of April, 1998. (Exhibit 3.1 to Form 10-K for the year ended 12/31/98).
|
||
3.2 |
By Laws, as amended, of Connecticut Water Service, Inc. as amended and restated as of August 12, 1999. (Exhibit 3.2 to Form 10-K for the year ended 12/31/99).
|
||
3.3 |
Certification of Incorporation of The Connecticut Water Company effective April, 1998. (Exhibit 3.3 to Form 10-K for the year ended 12/31/98).
|
||
3.4 |
Certificate of Amendment to the Certificate of Incorporation of Connecticut Water Service, Inc. dated August 6, 2001 (Exhibit 3.4 to Form 10-K for the year ended 12/31/01).
|
||
3.5 |
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Connecticut Water Service, Inc. dated April 23, 2004. (Exhibit 3.5 to Form 10-Q for the quarter ended March 31, 2003).
|
||
31.1 | * |
Rule 13a-14 Certification of Eric W. Thornburg, Chief Executive Officer.
|
|
31.2 | * |
Rule 13a-14 Certification of David C. Benoit, Chief Financial Officer.
|
|
32 | ** |
Certification of Eric W. Thornburg, Chief Executive Officer, and David C. Benoit, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
* filed herewith
|
|||
** furnished herewith
|
Connecticut Water Service, Inc.
(Registrant)
|
|
Date: August 6, 2010
|
By: /s/ David C. Benoit
David C. Benoit
Vice President – Finance and
Chief Financial Officer
|
Date: August 6, 2010
|
By: /s/ Nicholas A. Rinaldi
Nicholas A. Rinaldi
Controller
|