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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 2011 or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
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Connecticut
(State or other jurisdiction of
incorporation or organization)
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06-0739839
(I.R.S. Employer Identification No.)
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93 West Main Street, Clinton, CT
(Address of principal executive office)
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06413
(Zip Code)
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Large Accelerated Filer o
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Accelerated Filer x
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Non-Accelerated Filer o
(Do not check if smaller reporting company)
|
Smaller Reporting Company o
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Part I, Item 1: Financial Statements (Unaudited)
|
|
Exhibit 31.1
Exhibit 31.2
Exhibit 32
Exhibit 101.INS
Exhibit 101.SCH
Exhibit 101.CAL
Exhibit 101.DEF
Exhibit 101.LAB
Exhibit 101.PRE
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Connecticut Water Service, Inc. and Subsidiaries
|
||||||||
At September 30, 2011 and December 31, 2010
|
||||||||
(Unaudited)
|
||||||||
(In thousands)
|
||||||||
September 30,
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December 31,
|
|||||||
ASSETS
|
2011
|
2010
|
||||||
Utility Plant
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$ | 479,471 | $ | 467,589 | ||||
Construction Work in Progress
|
7,453 | 4,013 | ||||||
486,924 | 471,602 | |||||||
Accumulated Provision for Depreciation
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(132,369 | ) | (127,383 | ) | ||||
Net Utility Plant
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354,555 | 344,219 | ||||||
|
||||||||
Other Property and Investments
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5,484 | 5,568 | ||||||
|
||||||||
Cash and Cash Equivalents
|
1,004 | 952 | ||||||
Accounts Receivable (Less Allowance, 2011 - $1,494; 2010 - $1,061)
|
10,496 | 10,135 | ||||||
Accrued Unbilled Revenues
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7,932 | 6,344 | ||||||
Materials and Supplies, at Average Cost
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1,182 | 1,248 | ||||||
Prepayments and Other Current Assets
|
3,558 | 1,749 | ||||||
Total Current Assets
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24,172 | 20,428 | ||||||
Restricted Cash
|
-- | 1,226 | ||||||
Unamortized Debt Issuance Expense
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6,946 | 7,334 | ||||||
Unrecovered Income Taxes
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23,652 | 24,696 | ||||||
Pension Benefits
|
5,289 | 6,296 | ||||||
Post-Retirement Benefits Other Than Pension
|
5,728 | 5,451 | ||||||
Goodwill
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3,608 | 3,608 | ||||||
Deferred Charges and Other Costs
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6,159 | 6,385 | ||||||
Total Regulatory and Other Long-Term Assets
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51,382 | 54,996 | ||||||
Total Assets
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$ | 435,593 | $ | 425,211 | ||||
CAPITALIZATION AND LIABILITIES
|
||||||||
Common Stockholders' Equity
|
$ | 117,986 | $ | 113,191 | ||||
Preferred Stock
|
772 | 772 | ||||||
Long-Term Debt
|
111,305 | 111,675 | ||||||
Total Capitalization
|
230,063 | 225,638 | ||||||
Interim Bank Loans Payable
|
30,723 | 26,342 | ||||||
Accounts Payable and Accrued Expenses
|
5,660 | 6,552 | ||||||
Accrued Taxes
|
1,465 | 598 | ||||||
Accrued Interest
|
1,290 | 993 | ||||||
Other Current Liabilities
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449 | 617 | ||||||
Total Current Liabilities
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39,587 | 35,102 | ||||||
Advances for Construction
|
36,732 | 36,719 | ||||||
Contributions in Aid of Construction
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56,007 | 55,761 | ||||||
Deferred Federal and State Income Taxes
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35,666 | 34,246 | ||||||
Unfunded Future Income Taxes
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18,823 | 19,474 | ||||||
Long-Term Compensation Arrangements
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17,263 | 16,747 | ||||||
Unamortized Investment Tax Credits
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1,329 | 1,376 | ||||||
Other Long-Term Liabilities
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123 | 148 | ||||||
Total Long-Term Liabilities
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165,943 | 164,471 | ||||||
Commitments and Contingencies
|
||||||||
Total Capitalization and Liabilities
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$ | 435,593 | $ | 425,211 | ||||
The accompanying footnotes are an integral part of these consolidated financial statements.
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Connecticut Water Service, Inc. and Subsidiaries
|
||||||||
At September 30, 2011 and December 31, 2010
|
||||||||
(Unaudited)
|
||||||||
(In thousands, except share data)
|
||||||||
September 30,
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December 31,
|
|||||||
2011
|
2010
|
|||||||
Common Stockholders' Equity
|
||||||||
Common Stock Without Par Value Authorized - 25,000,000 Shares;
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$ | 73,197 | $ | 71,636 | ||||
Shares Issued and Outstanding: 2011 - 8,742,036; 2010 - 8,676,849
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||||||||
Stock Issuance Expense
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(1,613 | ) | (1,612 | ) | ||||
Retained Earnings
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46,927 | 43,603 | ||||||
Accumulated Other Comprehensive Loss
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(525 | ) | (436 | ) | ||||
Total Common Stockholders' Equity
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117,986 | 113,191 | ||||||
Preferred Stock
|
||||||||
Cumulative Preferred Stock of Connecticut Water Service, Inc.
|
||||||||
Series A Voting, $20 Par Value; Authorized, Issued and
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||||||||
Outstanding 15,000 Shares, Redeemable at $21.00 Per Share
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300 | 300 | ||||||
Series $.90 Non-Voting, $16 Par Value; Authorized 50,000 Shares
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||||||||
Issued and Outstanding 29,499 Shares, Redeemable at $16.00 Per Share
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472 | 472 | ||||||
Total Preferred Stock of Connecticut Water Service, Inc.
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772 | 772 | ||||||
Long-Term Debt
|
||||||||
The Connecticut Water Company
|
||||||||
Unsecured Water Facilities Revenue Refinancing Bonds
|
||||||||
5.05% 1998 Series A, due 2028
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9,550 | 9,580 | ||||||
5.125% 1998 Series B, due 2028
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7,505 | 7,530 | ||||||
4.40% 2003A Series, due 2020
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8,000 | 8,000 | ||||||
5.00% 2003C Series, due 2022
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14,795 | 14,795 | ||||||
Var. 2004 Series Variable Rate, due 2029
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12,500 | 12,500 | ||||||
Var. 2004 Series A, due 2028
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5,000 | 5,000 | ||||||
Var. 2004 Series B, due 2028
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4,550 | 4,550 | ||||||
5.00% 2005 A Series, due 2040
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14,805 | 14,885 | ||||||
5.00% 2007 A Series, due 2037
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14,600 | 14,835 | ||||||
5.10% 2009 A Series, due 2039
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20,000 | 20,000 | ||||||
Total Long-Term Debt
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111,305 | 111,675 | ||||||
Total Capitalization
|
$ | 230,063 | $ | 225,638 | ||||
The accompanying footnotes are an integral part of these consolidated financial statements.
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Connecticut Water Service, Inc. and Subsidiaries
|
||||||||
For the Three Months Ended September 30, 2011 and 2010
|
||||||||
(Unaudited)
|
||||||||
(In thousands, except per share amounts)
|
||||||||
2011
|
2010
|
|||||||
Operating Revenues
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$ | 20,628 | $ | 21,006 | ||||
Operating Expenses
|
||||||||
Operation and Maintenance
|
8,624 | 8,564 | ||||||
Depreciation
|
1,940 | 1,771 | ||||||
Income Taxes
|
3,574 | 2,527 | ||||||
Taxes Other Than Income Taxes
|
1,661 | 1,620 | ||||||
Organizational Review Charge
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-- | 820 | ||||||
Total Operating Expenses
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15,799 | 15,302 | ||||||
Net Operating Revenues
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4,829 | 5,704 | ||||||
Other Utility Income, Net of Taxes
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225 | 206 | ||||||
Total Utility Operating Income
|
5,054 | 5,910 | ||||||
Other Income (Deductions), Net of Taxes
|
||||||||
Gain (Loss) on Property Transactions
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114 | (7 | ) | |||||
Non-Water Sales Earnings
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296 | 190 | ||||||
Allowance for Funds Used During Construction
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48 | 82 | ||||||
Other
|
(328 | ) | (41 | ) | ||||
Total Other Income, Net of Taxes
|
130 | 224 | ||||||
Interest and Debt Expense
|
||||||||
Interest on Long-Term Debt
|
1,142 | 1,151 | ||||||
Other Interest Charges
|
201 | 226 | ||||||
Amortization of Debt Expense
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107 | 106 | ||||||
Total Interest and Debt Expense
|
1,450 | 1,483 | ||||||
Net Income
|
3,734 | 4,651 | ||||||
Preferred Stock Dividend Requirement
|
10 | 10 | ||||||
Net Income Applicable to Common Stock
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$ | 3,724 | $ | 4,641 | ||||
Weighted Average Common Shares Outstanding:
|
||||||||
Basic
|
8,622 | 8,542 | ||||||
Diluted
|
8,729 | 8,645 | ||||||
Earnings Per Common Share:
|
||||||||
Basic
|
$ | 0.43 | $ | 0.54 | ||||
Diluted
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$ | 0.42 | $ | 0.54 | ||||
Dividends Per Common Share
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$ | 0.2375 | $ | 0.2325 | ||||
The accompanying footnotes are an integral part of these consolidated financial statements.
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Connecticut Water Service, Inc. and Subsidiaries
|
||||||||
For the Nine Months Ended September 30, 2011 and 2010
|
||||||||
(Unaudited)
|
||||||||
(In thousands, except per share amounts)
|
||||||||
2011
|
2010
|
|||||||
Operating Revenues
|
$ | 53,976 | $ | 50,708 | ||||
Operating Expenses
|
||||||||
Operation and Maintenance
|
24,461 | 24,655 | ||||||
Depreciation
|
5,724 | 5,186 | ||||||
Income Taxes
|
6,459 | 4,056 | ||||||
Taxes Other Than Income Taxes
|
4,773 | 4,643 | ||||||
Organizational Review Charge
|
-- | 820 | ||||||
Total Operating Expenses
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41,417 | 39,360 | ||||||
Net Operating Revenues
|
12,559 | 11,348 | ||||||
Other Utility Income, Net of Taxes
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613 | 559 | ||||||
Total Utility Operating Income
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13,172 | 11,907 | ||||||
Other Income (Deductions), Net of Taxes
|
||||||||
Gain (Loss) on Property Transactions
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114 | (7 | ) | |||||
Non-Water Sales Earnings
|
708 | 626 | ||||||
Allowance for Funds Used During Construction
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118 | 133 | ||||||
Other
|
(419 | ) | (306 | ) | ||||
Total Other Income, Net of Taxes
|
521 | 446 | ||||||
Interest and Debt Expense
|
||||||||
Interest on Long-Term Debt
|
3,432 | 3,480 | ||||||
Other Interest Charges
|
470 | 505 | ||||||
Amortization of Debt Expense
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319 | 335 | ||||||
Total Interest and Debt Expense
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4,221 | 4,320 | ||||||
Net Income
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9,472 | 8,033 | ||||||
Preferred Stock Dividend Requirement
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29 | 29 | ||||||
Net Income Applicable to Common Stock
|
$ | 9,443 | $ | 8,004 | ||||
Weighted Average Common Shares Outstanding:
|
||||||||
Basic
|
8,601 | 8,522 | ||||||
Diluted
|
8,711 | 8,623 | ||||||
Earnings Per Common Share:
|
||||||||
Basic
|
$ | 1.10 | $ | 0.94 | ||||
Diluted
|
$ | 1.08 | $ | 0.93 | ||||
Dividends Per Common Share
|
$ | 0.7025 | $ | 0.6875 | ||||
The accompanying footnotes are an integral part of these consolidated financial statements.
|
Connecticut Water Service, Inc. and Subsidiaries
|
||||||||
For the Three Months Ended September 30, 2011 and 2010
|
||||||||
(Unaudited)
|
||||||||
(In thousands)
|
||||||||
2011
|
2010
|
|||||||
Net Income Applicable to Common Stock
|
$ | 3,724 | $ | 4,641 | ||||
Other Comprehensive Income, net of tax
|
||||||||
Qualified Cash Flow Hedging Instrument Expense,
|
||||||||
net of tax benefit of $1 in 2011 and 2010
|
1 | 1 | ||||||
Adjustment to Pension and Post-Retirement Benefits Other
|
||||||||
Than Pension, net of tax benefit of $3 in 2011 and $0 in 2010
|
(5 | ) | (1 | ) | ||||
Unrealized (loss) gain on investments, net of tax benefit (expense) of
|
||||||||
$49 in 2011 and $(27) in 2010
|
(77 | ) | 42 | |||||
Comprehensive Income
|
$ | 3,643 | $ | 4,683 | ||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
||||||||
For the Nine Months Ended September 30, 2011 and 2010
|
||||||||
(Unaudited)
|
||||||||
(In thousands)
|
||||||||
2011 | 2010 | |||||||
Net Income Applicable to Common Stock
|
$ | 9,443 | $ | 8,004 | ||||
Other Comprehensive Income, net of tax
|
||||||||
Qualified Cash Flow Hedging Instrument Income,
|
||||||||
net of tax benefit of $1 in 2011 and 2010
|
2 | 2 | ||||||
Adjustment to Pension and Post-Retirement Benefits Other
|
||||||||
Than Pension, net of tax benefit of $8 in 2011 and $1 in 2010
|
(13 | ) | (2 | ) | ||||
Unrealized (loss) gain on investments, net of tax benefit (expense) of
|
||||||||
$50 in 2011 and $(6) in 2010
|
(78 | ) | 9 | |||||
Comprehensive Income
|
$ | 9,354 | $ | 8,013 | ||||
The accompanying footnotes are an integral part of these consolidated financial statements.
|
Connecticut Water Service, Inc. and Subsidiaries
|
||||||||
For the Three Months Ended September 30, 2011 and 2010
|
||||||||
(Unaudited)
|
||||||||
(In thousands, except per share amounts)
|
||||||||
2011
|
2010
|
|||||||
Balance at Beginning of Period
|
$ | 45,276 | $ | 41,231 | ||||
Net Income
|
3,734 | 4,651 | ||||||
49,010 | 45,882 | |||||||
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 - 2011 $0.2375 per share; 2010 $0.2325 per share
|
2,073 | 2,010 | ||||||
2,083 | 2,020 | |||||||
Balance at End of Period
|
$ | 46,927 | $ | 43,862 | ||||
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
|
||||||||
For the Nine Months Ended September 30, 2011 and 2010
|
||||||||
(Unaudited)
|
||||||||
(In thousands, except per share amounts)
|
||||||||
2011 | 2010 | |||||||
Balance at Beginning of Period
|
$ | 43,603 | $ | 41,785 | ||||
Net Income
|
9,472 | 8,033 | ||||||
53,075 | 49,818 | |||||||
Dividends Declared:
|
||||||||
Cumulative Preferred, Class A, $0.60 per share
|
9 | 9 | ||||||
Cumulative Preferred, Series $0.90, $0.675 per share
|
20 | 20 | ||||||
Common Stock - 2011 $0.7025 per share; 2010 $0.6875 per share
|
6,119 | 5,927 | ||||||
6,148 | 5,956 | |||||||
Balance at End of Period
|
$ | 46,927 | $ | 43,862 | ||||
The accompanying footnotes are an integral part of these consolidated financial statements.
|
Connecticut Water Service, Inc. and Subsidiaries
|
||||||||
For the Nine Months Ended September 30, 2011 and 2010
|
||||||||
(Unaudited)
|
||||||||
(In thousands)
|
||||||||
2011
|
2010
|
|||||||
Operating Activities:
|
||||||||
Net Income
|
$ | 9,472 | $ | 8,033 | ||||
Adjustments to Reconcile Net Income to Net Cash Provided by
|
||||||||
Operating Activities:
|
||||||||
Deferred Revenues
|
179 | 179 | ||||||
Allowance for Funds Used During Construction
|
(117 | ) | (133 | ) | ||||
Depreciation (including $604 in 2011 and 2010 charged to other accounts)
|
6,328 | 5,790 | ||||||
Change in Assets and Liabilities:
|
||||||||
Increase in Accounts Receivable and Accrued Unbilled Revenues
|
(1,949 | ) | (8,522 | ) | ||||
Increase in Prepayments and Other Current Assets
|
(1,744 | ) | (2,044 | ) | ||||
Decrease in Other Non-Current Items
|
2,322 | 213 | ||||||
Increase in Accounts Payable, Accrued Expenses and Other
|
||||||||
Current Liabilities
|
154 | 1,427 | ||||||
Increase in Deferred Income Taxes and Investment Tax Credits, Net
|
1,766 | 1,650 | ||||||
Total Adjustments
|
6,939 | (1,440 | ) | |||||
Net Cash and Cash Equivalents Provided by Operating Activities
|
16,411 | 6,593 | ||||||
Investing Activities:
|
||||||||
Company Financed Additions to Utility Plant
|
(16,119 | ) | (19,271 | ) | ||||
Advances from Others for Construction
|
(248 | ) | (47 | ) | ||||
Net Additions to Utility Plant Used in Continuing Operations
|
(16,367 | ) | (19,318 | ) | ||||
Purchase of Customer Contracts
|
-- | (900 | ) | |||||
Purchase of water systems, net of cash acquired of $0 in 2011 and 2010
|
(216 | ) | (297 | ) | ||||
Release of restricted cash
|
1,226 | 8,930 | ||||||
Net Cash and Cash Equivalents Used in Investing Activities
|
(15,357 | ) | (11,585 | ) | ||||
Financing Activities:
|
||||||||
Proceeds from Interim Bank Loans
|
30,722 | 31,039 | ||||||
Repayment of Interim Bank Loans
|
(26,342 | ) | (25,000 | ) | ||||
Proceeds from Issuance of Common Stock
|
742 | 736 | ||||||
Proceeds from the Exercise of Stock Options
|
146 | 102 | ||||||
Costs Incurred to Issue Long-Term Debt and Common Stock
|
-- | (1 | ) | |||||
Repayment of Long-Term Debt Including Current Portion
|
(370 | ) | (240 | ) | ||||
Advances from Others for Construction
|
248 | 47 | ||||||
Cash Dividends Paid
|
(6,148 | ) | (5,956 | ) | ||||
Net Cash and Cash Equivalents (Used in) Provided by Financing Activities
|
(1,002 | ) | 727 | |||||
Net Increase (Decrease) in Cash and Cash Equivalents
|
52 | (4,265 | ) | |||||
Cash and Cash Equivalents at Beginning of Period
|
952 | 5,437 | ||||||
Cash and Cash Equivalents at End of Period
|
$ | 1,004 | $ | 1,172 | ||||
Non-Cash Investing and Financing Activities:
|
||||||||
Non-Cash Contributed Utility Plant
|
$ | 221 | $ | 623 | ||||
Short-term Investment of Bond Proceeds Held in Restricted Cash
|
$ | -- | $ | 3,757 | ||||
Supplemental Disclosures of Cash Flow Information:
|
||||||||
Cash Paid for:
|
||||||||
Interest
|
$ | 3,778 | $ | 3,734 | ||||
State and Federal Income Taxes
|
$ | 3,745 | $ | 1,931 | ||||
The accompanying footnotes are an integral part of these consolidated financial statements.
|
Three Months
|
Nine Months
|
|||||||||||||||
Period ended September 30
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Service Cost
|
$ | 381 | $ | 417 | $ | 1,142 | $ | 1,251 | ||||||||
Interest Cost
|
534 | 544 | 1,601 | 1,631 | ||||||||||||
Expected Return on Plan Assets
|
(614 | ) | (626 | ) | (1,842 | ) | (1,880 | ) | ||||||||
Amortization of:
|
||||||||||||||||
Transition Obligation
|
-- | 1 | 1 | 2 | ||||||||||||
Prior Service Cost
|
18 | 17 | 52 | 52 | ||||||||||||
Net Loss
|
171 | 151 | 515 | 452 | ||||||||||||
Net Periodic Benefit Cost
|
$ | 490 | $ | 504 | $ | 1,469 | $ | 1,508 |
Three Months
|
Nine Months
|
|||||||||||||||
Period ended September 30
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Service Cost
|
$ | 128 | $ | 142 | $ | 474 | $ | 425 | ||||||||
Interest Cost
|
146 | 143 | 479 | 430 | ||||||||||||
Expected Return on Plan Assets
|
(66 | ) | (77 | ) | (200 | ) | (230 | ) | ||||||||
Other
|
57 | 57 | 169 | 169 | ||||||||||||
Amortization of:
|
||||||||||||||||
Prior Service Cost
|
(203 | ) | (101 | ) | (467 | ) | (304 | ) | ||||||||
Recognized Net Loss
|
156 | 82 | 460 | 247 | ||||||||||||
Net Periodic Benefit Cost
|
$ | 218 | $ | 246 | $ | 915 | $ | 737 |
Three months ended September 30,
|
2011
|
2010
|
||||||
Common Shares Outstanding End of Period:
|
8,742,036 | 8,653,619 | ||||||
Weighted Average Shares Outstanding (Days Outstanding Basis):
|
||||||||
Basic
|
8,621,809 | 8,541,505 | ||||||
Diluted
|
8,728,527 | 8,644,691 | ||||||
Basic Earnings per Share
|
$ | 0.43 | $ | 0.54 | ||||
Dilutive Effect of Unexercised Stock Options
|
(0.01 | ) | -- | |||||
Diluted Earnings per Share
|
$ | 0.42 | $ | 0.54 | ||||
Nine Months ended September 30,
|
||||||||
Weighted Average Shares Outstanding (Days Outstanding Basis):
|
||||||||
Basic
|
8,600,686 | 8,522,023 | ||||||
Diluted
|
8,710,995 | 8,622,941 | ||||||
Basic Earnings per Share
|
$ | 1.10 | $ | 0.94 | ||||
Dilutive Effect of Unexercised Stock Options
|
(0.02 | ) | (0.01 | ) | ||||
Diluted Earnings per Share
|
$ | 1.08 | $ | 0.93 | ||||
(in thousands)
|
Level 1
|
Level 2
|
Level 3
|
|||||||||
Asset Type:
|
||||||||||||
Money Market Fund
|
$ | 83 | $ | -- | $ | -- | ||||||
Mutual Funds:
|
||||||||||||
Equity Funds (1)
|
772 | -- | -- | |||||||||
Total
|
$ | 855 | $ | -- | $ | -- |
(in thousands)
|
Level 1
|
Level 2
|
Level 3
|
|||||||||
Asset Type:
|
||||||||||||
Money Market Fund
|
$ | 107 | $ | -- | $ | -- | ||||||
Mutual Funds:
|
||||||||||||
Equity Funds (1)
|
494 | -- | -- | |||||||||
Index Funds (2)
|
160 | -- | -- | |||||||||
Total
|
$ | 761 | $ | -- | $ | -- |
(1)
|
Mutual funds consisting primarily of equity securities.
|
(2)
|
Mutual funds consisting primarily of funds linked to indices.
|
Three Months Ended September 30, 2011
|
||||||||||||||||
Segment
|
Revenues
|
Pre-Tax Income
|
Income Tax Expense (Benefit)
|
Net Income
|
||||||||||||
Water Activities
|
$ | 21,040 | $ | 6,804 | $ | 3,480 | $ | 3,324 | ||||||||
Real Estate Transactions
|
-- | -- | (114 | ) | 114 | |||||||||||
Services and Rentals
|
1,194 | 498 | 202 | 296 | ||||||||||||
Total
|
$ | 22,234 | $ | 7,302 | $ | 3,568 | $ | 3,734 |
Three Months Ended September 30, 2010
|
||||||||||||||||
Segment
|
Revenues
|
Pre-Tax Income
|
Income Tax Expense
|
Net Income (Loss)
|
||||||||||||
Water Activities
|
$ | 21,403 | $ | 7,073 | $ | 2,605 | $ | 4,468 | ||||||||
Real Estate Transactions
|
-- | -- | 7 | (7 | ) | |||||||||||
Services and Rentals
|
1,315 | 311 | 121 | 190 | ||||||||||||
Total
|
$ | 22,718 | $ | 7,384 | $ | 2,733 | $ | 4,651 |
Nine Months Ended September 30, 2011
|
||||||||||||||||
Segment
|
Revenues
|
Pre-Tax Income
|
Income Tax Expense (Benefit)
|
Net Income
|
||||||||||||
Water Activities
|
$ | 55,088 | $ | 15,133 | $ | 6,483 | $ | 8,650 | ||||||||
Real Estate Transactions
|
-- | -- | (114 | ) | 114 | |||||||||||
Services and Rentals
|
3,457 | 1,196 | 488 | 708 | ||||||||||||
Total
|
$ | 58,545 | $ | 16,329 | $ | 6,857 | $ | 9,472 |
Nine Months Ended September 30, 2010
|
||||||||||||||||
Segment
|
Revenues
|
Pre-Tax Income
|
Income Tax Expense
|
Net Income (Loss)
|
||||||||||||
Water Activities
|
$ | 51,740 | $ | 11,623 | $ | 4,209 | $ | 7,414 | ||||||||
Real Estate Transactions
|
-- | -- | 7 | (7 | ) | |||||||||||
Services and Rentals
|
3,662 | 1,045 | 419 | 626 | ||||||||||||
Total
|
$ | 55,402 | $ | 12,668 | $ | 4,635 | $ | 8,033 |
September 30, 2011
|
December 31, 2010
|
|||||||
Total Plant and Other Investments:
|
||||||||
Water Activities
|
$ | 359,426 | $ | 349,221 | ||||
Non-Water
|
613 | 566 | ||||||
360,039 | 349,787 | |||||||
Other Assets:
|
||||||||
Water Activities
|
73,676 | 72,600 | ||||||
Non-Water
|
1,878 | 2,824 | ||||||
75,554 | 75,424 | |||||||
Total Assets
|
$ | 435,593 | $ | 425,211 |
Business Segment
|
September 30, 2011
|
September 30, 2010
|
Increase/(Decrease)
|
|||||||||
Water Activities
|
$ | 3,324,000 | $ | 4,468,000 | $ | (1,144,000 | ) | |||||
Real Estate Transactions
|
114,000 | (7,000 | ) | 121,000 | ||||||||
Services and Rentals
|
296,000 | 190,000 | 106,000 | |||||||||
Total
|
$ | 3,734,000 | $ | 4,651,000 | $ | (917,000 | ) |
Expense Components
|
September 30, 2011
|
September 30, 2010
|
Increase/(Decrease)
|
|||||||||
Maintenance
|
$ | 638,000 | $ | 368,000 | $ | 270,000 | ||||||
Other benefits
|
137,000 | 8,000 | 129,000 | |||||||||
Vehicles
|
459,000 | 377,000 | 82,000 | |||||||||
Outside services
|
393,000 | 320,000 | 73,000 | |||||||||
Medical
|
482,000 | 418,000 | 64,000 | |||||||||
Investor relations
|
103,000 | 81,000 | 22,000 | |||||||||
Property and liability insurance
|
240,000 | 266,000 | (26,000 | ) | ||||||||
Post retirement medical
|
217,000 | 246,000 | (29,000 | ) | ||||||||
Utility costs
|
826,000 | 923,000 | (97,000 | ) | ||||||||
Labor
|
2,946,000 | 3,085,000 | (139,000 | ) | ||||||||
Customer
|
223,000 | 375,000 | (152,000 | ) | ||||||||
Other
|
1,960,000 | 2,097,000 | (137,000 | ) | ||||||||
Total
|
$ | 8,624,000 | $ | 8,564,000 | $ | 60,000 |
-
|
This increase, approximately 0.7% in the third quarter of 2011 when compared to the same period in 2010, was due largely to cost containment efforts by our employees, including the following:
|
·
|
Customer costs decreased by $152,000 in the third quarter of 2011 primarily due to a decrease in uncollectible accounts as the Company continues to work towards the resolution of billing and collection issues that arose as part of the ERP implementation discussed in the “Liquidity and Capital Resources” section above;
|
·
|
Labor costs have decreased by $139,000 primarily due to the Organizational Review undertaken during July of 2010. As a result of this review, discussed above, the Company eliminated approximately 15 positions that centered on traditional managerial, officer and overhead positions;
|
·
|
Utility costs were down $97,000 when compared to the same period of 2010 due principally to reduced electrical power costs. During the fourth quarter of 2010, the Company received lower rates on its electricity through new suppliers and improved efficiency at several of the Company’s locations as a result of energy audits. To date, energy audits have been performed at many of our facilities and we expect to further improve efficiencies in our electrical usage;
|
·
|
Post retirement medical costs decreased by $29,000 due to a change made in the plan during the second quarter of 2011 to limit the life-time benefits of participants to $100,000; and
|
·
|
Property and liability insurance decreased approximately $26,000 in 2011 primarily due to cost reductions in our package and workers’ compensation policies. The package policy, which covers our fleet of vehicles, decreased primarily to a reduction in our fleet levels. Workers’ compensation decreased due to a reduction in employee levels late in the third quarter of 2010.
|
-
|
The decreases described above were partially offset by the following increases to O&M expense:
|
·
|
Maintenance costs increased by approximately $270,000 as a result of the Company’s efforts during the clean-up of Tropical Storm Irene. After assuring our customers’ water supply had not been compromised, the Company made an effort to assist local communities that were without power for up to a week. During this time, the Company offered several locations where our neighbors who had lost power and were not connected to our water supply could fill up containers with potable water;
|
·
|
Other benefits increased primarily due to a decrease in the amount of benefits being capitalized as part of work on capital projects due to the ongoing work to resolve issues in the customer service module of our ERP system during the third quarter of 2010. When employees work on a capital project, a portion of their benefits is charged to the project;
|
·
|
Outside services increased by approximately $73,000 in the third quarter of 2011 when compared to the same period 2010 due primarily to the upgrade of certain accounting software packages and costs associated with an employment search engagement; and
|
·
|
Medical costs increased $64,000 over the prior year primarily due to an increase in claims.
|
-
|
The Company saw an approximate 9.5% increase in its Depreciation expense from the three months ended September 30, 2010 compared to the same period in 2011. The primary driver of this increase was due to an increase in the Company’s Utility Plant investment. A portion of the higher Utility Plant balance was related to the implementation of the Company’s ERP system that went into service in the first quarter of 2010 which is depreciated at a higher rate than our typical water delivery infrastructure. In the first year of service, the Company only takes one-half year of depreciation on its long-lived assets, therefore depreciation related to the ERP system in 2010 was less than in 2011. The Company’s prior ERP system was fully depreciated prior to the implementation of the new system.
|
-
|
Income Tax expense associated with Water Activities increased by $1,047,000 in the third quarter of 2011 when compared to the same period in 2010 due to higher pre-tax book income and also due to a higher effective tax rate. The increase in the effective tax rate is primarily attributable to a change in pension and PBOP contribution assumptions along with the effect of incremental federal tax rates. This increase is partially offset by a change in assumption regarding the future utilization of our charitable contribution carryforwards.
|
-
|
Other costs increased by $287,000 in the third quarter of 2011 when compared to the same period in 2010 primarily due to costs associated with the announced purchase of AM.
|
Business Segment
|
September 30, 2011
|
September 30, 2010
|
Increase/(Decrease)
|
|||||||||
Water Activities
|
$ | 8,650,000 | $ | 7,414,000 | $ | 1,236,000 | ||||||
Real Estate Transactions
|
114,000 | (7,000 | ) | 121,000 | ||||||||
Services and Rentals
|
708,000 | 626,000 | 82,000 | |||||||||
Total
|
$ | 9,472,000 | $ | 8,033,000 | $ | 1,439,000 |
Expense Components
|
September 30, 2011
|
September 30, 2010
|
Increase/(Decrease)
|
|||||||||
Maintenance
|
$ | 1,491,000 | $ | 1,212,000 | $ | 279,000 | ||||||
Vehicles
|
1,304,000 | 1,135,000 | 169,000 | |||||||||
Post retirement medical
|
915,000 | 737,000 | 178,000 | |||||||||
Regulatory commission expense
|
269,000 | 151,000 | 118,000 | |||||||||
Medical
|
1,323,000 | 1,228,000 | 95,000 | |||||||||
Investor relations
|
447,000 | 376,000 | 71,000 | |||||||||
Pension
|
1,469,000 | 1,507,000 | (38,000 | ) | ||||||||
Water treatment (including chemicals)
|
1,897,000 | 1,938,000 | (41,000 | ) | ||||||||
Property and liability insurance
|
707,000 | 808,000 | (101,000 | ) | ||||||||
Outside services
|
953,000 | 1,103,000 | (150,000 | ) | ||||||||
Utility costs
|
2,516,000 | 2,734,000 | (218,000 | ) | ||||||||
Labor
|
8,613,000 | 9,031,000 | (418,000 | ) | ||||||||
Other
|
2,557,000 | 2,695,000 | (138,000 | ) | ||||||||
Total
|
$ | 24,461,000 | $ | 24,655,000 | $ | (194,000 | ) |
-
|
This decrease, approximately 0.8% in the first nine months of 2011 when compared to the same period in 2010, was largely due to cost containment efforts by our employees, including the following:
|
·
|
Labor costs have decreased by $418,000 primarily due to the Organizational Review undertaken during July of 2010. As a result of this review, discussed above, the Company eliminated approximately 15 positions that centered on traditional managerial, officer and overhead positions;
|
·
|
Utility costs were down $218,000 when compared to the same period of 2010 due principally to reduced electrical power costs. In December 2010, the Company received lower rates on its electricity through new suppliers and improved efficiency at several of the Company’s locations as a result of energy audits. To date, energy audits have been performed at many of our facilities and we expect to further improve efficiencies in our electrical usage;
|
·
|
Outside services decreased by $150,000 primarily due to a reduction in consulting, and legal expenses. The reduction in consulting was primarily due to training services provided prior to the launch of the Company’s Enterprise Resource Planning (ERP) system early in 2010. These decreases were partially offset by and costs associated with an employment search engagement;
|
·
|
Property and liability insurance decreased $101,000 in 2011 primarily due to cost reductions in our package and workers’ compensation policies. The package policy, which covers our fleet of vehicles, decreased primarily to a reduction in our fleet levels. Workers’ compensation decreased due to a reduction in headcount in the third quarter of 2010; and
|
-
|
Non-cost containment decreases to O&M expense include the following:
|
·
|
Water treatment costs decreased approximately $41,000 primarily as a result of a reduction in water produced at our water treatment plants; and
|
-
|
The decreases described above were partially offset by the following:
|
·
|
Maintenance costs increased by approximately $279,000 as a result of the Company’s efforts during the clean-up of Tropical Storm Irene. After assuring our customers’ water supply had not been compromised, the Company made an effort to assist local communities that were without power for up to a week. During this time, the Company offered several locations where our neighbors who had lost power and were not connected to our water supply could fill up containers with potable water;
|
·
|
Post retirement medical expense increased by $178,000 over 2010 levels primarily due to a decrease in the discount rate used to determine the future liabilities of the plans and to a decline in the market value of the plans’ assets in prior years. During the second quarter of 2011, the Company made a change to its Post retirement medical plan to limit the life-time benefits of participants to $100,000; and
|
·
|
Regulatory commission expense increased $118,000 over prior year due to costs associated with the rate case filed in 2010. Per PURA regulations, costs associated with general rate cases are captured on the balance sheet and amortized over an approved period. During 2010, costs associated with the 2006 rate case became fully amortized.
|
-
|
The Company saw an approximate 10.4% increase in its Depreciation expense in the first nine months of 2010 to the same period in 2011. The primary driver of this increase was due to an increase in the Company’s Utility Plant investment. A portion of the higher Utility Plant balance was related to the implementation of the Company’s ERP system that went into service in the first quarter of 2010 which is depreciated at a higher rate than our typical water delivery infrastructure. The Company’s prior ERP system was fully depreciated prior to the implementation of the new system.
|
-
|
Income Tax expense associated with Water Activities increased by $2,406,000 due to higher pre-tax book income and also due to a higher effective tax rate. The increase in the effective tax rate is primarily attributable to a change in pension and PBOP contribution assumptions along with the effect of incremental federal tax rates. This increase is partially offset by a change in assumption regarding the future utilization of our charitable contribution carryforwards.
|
-
|
Other costs increased by $113,000 in the first nine months of 2011 when compared to the same period in 2010 primarily due to costs associated with the announced purchase of AM.
|
·
|
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, including the pending acquisition of Aqua Maine, Inc. 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 and local government/town approvals 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
|
|
2.1
|
Stock Purchase Agreement between Connecticut Water Service, Inc. and Aqua America, Inc., dated July 26, 2011. (Exhibit 2.1 to Form 8-K filed on July 27, 2011).
|
|
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 December 31, 1998).
|
|
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 December 31, 1999).
|
|
3.3
|
Certification of Incorporation of The Connecticut Water Company effective April, 1998. (Exhibit 3.3 to Form 10-K for the year ended December 31, 1998).
|
|
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 December 31, 2001).
|
|
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).
|
|
10.1
|
Dividend Reinvestment and Common Stock Purchase Plan, amended and restated as of August 4, 2011 (Exhibit 4 to Form S-3 Registration Statement filed on Sept. 16, 2011).
|
|
10.2
|
Second Amendment to Promissory Note and Supplement, dated July 26, 2011, between Connecticut Water Service, Inc. and CoBank ACB. (Exhibit 10.1 to Form 8-K filed on July 29, 2011).
|
|
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.
|
|
101.INS**
|
XBRL Instance Document
|
|
101.SCH**
|
XBRL Taxonomy Extension Schema
|
|
101.CAL**
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
101.DEF**
|
XBRL Taxonomy Extension Definition Linkbase
|
|
101.LAB**
|
XBRL Taxonomy Extension Label Linkbase
|
|
101.PRE**
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
* filed herewith
|
||
** furnished herewith
|
Connecticut Water Service, Inc.
(Registrant)
|
|
Date: November 8, 2011
|
By: /s/ David C. Benoit
David C. Benoit
Vice President – Finance and
Chief Financial Officer
|
Date: November 8, 2011
|
By: /s/ Nicholas A. Rinaldi
Nicholas A. Rinaldi
Controller
|