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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 June 30, 2009
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
|
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
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Accelerated
Filer x
|
Non-Accelerated
Filer o
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Smaller
Reporting Company o
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Part
I, Item 1: Financial Statements
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Page
3
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Page
4
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Page
5
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Page
6
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Page
7
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Page
8
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Page
9
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Page
10
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Page
14
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Page
19
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Page
19
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Page
19
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Page
19
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Page
19
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Page
20
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Page
20
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Exhibit
31.1
Exhibit
31.2
Exhibit
32
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Page
21
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Connecticut
Water Service, Inc. and Subsidiaries
|
||||||||
At
June 30, 2009 and December 31, 2008
|
||||||||
(Unaudited)
|
||||||||
(In
thousands)
|
||||||||
June
30,
|
December
31,
|
|||||||
ASSETS
|
2009
|
2008
|
||||||
Utility
Plant
|
$ | 421,516 | $ | 410,471 | ||||
Construction
Work in Progress
|
9,242 | 4,577 | ||||||
430,758 | 415,048 | |||||||
Accumulated
Provision for Depreciation
|
(120,182 | ) | (115,815 | ) | ||||
Net
Utility Plant
|
310,576 | 299,233 | ||||||
Other
Property and Investments
|
5,978 | 6,034 | ||||||
Cash
and Cash Equivalents
|
283 | 684 | ||||||
Accounts
Receivable (Less Allowance, 2009 - $423; 2008 - $376)
|
6,397 | 6,653 | ||||||
Accrued
Unbilled Revenues
|
5,457 | 5,372 | ||||||
Materials
and Supplies, at Average Cost
|
1,185 | 1,095 | ||||||
Prepayments
and Other Current Assets
|
2,082 | 1,976 | ||||||
Total
Current Assets
|
15,404 | 15,780 | ||||||
Unamortized
Debt Issuance Expense
|
7,075 | 7,318 | ||||||
Unrecovered
Income Taxes
|
23,048 | 22,856 | ||||||
Pension
Benefits
|
8,677 | 8,911 | ||||||
Post-retirement
Benefits Other Than Pension
|
2,554 | 2,570 | ||||||
Goodwill
|
3,608 | 3,608 | ||||||
Deferred
Charges and Other Costs
|
5,868 | 6,121 | ||||||
Total
Regulatory and Other Long-Term Assets
|
50,830 | 51,384 | ||||||
Total
Assets
|
$ | 382,788 | $ | 372,431 | ||||
CAPITALIZATION AND
LIABILITIES
|
||||||||
Common
Stockholders' Equity
|
$ | 104,146 | $ | 103,476 | ||||
Preferred
Stock
|
772 | 772 | ||||||
Long-Term
Debt
|
92,094 | 92,227 | ||||||
Total
Capitalization
|
197,012 | 196,475 | ||||||
Current
Portion of Long Term Debt
|
8 | 8 | ||||||
Interim
Bank Loans Payable
|
17,771 | 12,074 | ||||||
Accounts
Payable and Accrued Expenses
|
6,546 | 5,700 | ||||||
Accrued
Interest
|
848 | 870 | ||||||
Other
Current Liabilities
|
319 | 418 | ||||||
Total
Current Liabilities
|
25,492 | 19,070 | ||||||
Advances
for Construction
|
40,465 | 38,928 | ||||||
Contributions
in Aid of Construction
|
50,268 | 49,420 | ||||||
Deferred
Federal and State Income Taxes
|
31,113 | 30,472 | ||||||
Unfunded
Future Income Taxes
|
18,128 | 18,128 | ||||||
Long-Term
Compensation Arrangements
|
18,774 | 18,331 | ||||||
Unamortized
Investment Tax Credits
|
1,469 | 1,497 | ||||||
Other
Long-Term Liabilities
|
67 | 110 | ||||||
Total
Long-Term Liabilities
|
160,284 | 156,886 | ||||||
Commitments
and Contingencies
|
||||||||
Total
Capitalization and Liabilities
|
$ | 382,788 | $ | 372,431 |
|
||||||||
Connecticut
Water Service, Inc. and Subsidiaries
|
||||||||
At
June 30, 2009 and December 31, 2008
|
||||||||
(Unaudited)
|
||||||||
(In
thousands, except share data)
|
||||||||
June
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Common
Stockholders' Equity
|
||||||||
Common
Stock Without Par Value Authorized - 25,000,000 Shares;
|
$ | 67,330 | $ | 66,412 | ||||
Shares
Issued and Outstanding: 2009 - 8,526,304 ; 2008 -
8,463,269
|
||||||||
Stock
Issuance Expense
|
(1,608 | ) | (1,608 | ) | ||||
Retained
Earnings
|
38,926 | 39,285 | ||||||
Accumulated
Other Comprehensive Loss
|
(502 | ) | (613 | ) | ||||
Total
Common Stockholders' Equity
|
104,146 | 103,476 | ||||||
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
|
9,625 | 9,635 | ||||||
5.125%
1998 Series B, due 2028
|
7,615 | 7,615 | ||||||
4.40% 2003A
Series, due 2020
|
8,000 | 8,000 | ||||||
5.00% 2003C
Series, due 2022
|
14,795 | 14,915 | ||||||
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
|
14,935 | 14,935 | ||||||
5.00% 2007
A Series, due 2037
|
15,000 | 15,000 | ||||||
Total
The Connecticut Water Company
|
92,020 | 92,150 | ||||||
Unregulated
Secured
|
||||||||
6.39%
NewAlliance Bank, Due 2017
|
82 | 85 | ||||||
Total
Connecticut Water Service, Inc.
|
92,102 | 92,235 | ||||||
Less
Current Portion
|
(8 | ) | (8 | ) | ||||
Total
Long-Term Debt
|
92,094 | 92,227 | ||||||
Total
Capitalization
|
$ | 197,012 | $ | 196,475 |
|
||||||||
Connecticut
Water Service, Inc. and Subsidiaries
|
||||||||
For
the Three Months Ended June 30, 2009 and 2008
|
||||||||
(Unaudited)
|
||||||||
(In
thousands, except per share amounts)
|
||||||||
2009
|
2008
|
|||||||
Operating
Revenues
|
$ | 15,147 | $ | 16,020 | ||||
Operating
Expenses
|
||||||||
Operation
and Maintenance
|
8,400 | 8,023 | ||||||
Depreciation
|
1,449 | 1,523 | ||||||
Income
Taxes
|
840 | 1,166 | ||||||
Taxes
Other Than Income Taxes
|
1,436 | 1,481 | ||||||
Total
Operating Expenses
|
12,125 | 12,193 | ||||||
Net
Operating Revenues
|
3,022 | 3,827 | ||||||
Other
Utility Income, Net of Taxes
|
193 | 155 | ||||||
Total
Utility Operating Income
|
3,215 | 3,982 | ||||||
Other
Income (Deductions), Net of Taxes
|
||||||||
Non-Water
Sales Earnings
|
253 | 204 | ||||||
Allowance
for Funds Used During Construction
|
35 | 19 | ||||||
Other
|
(120 | ) | (21 | ) | ||||
Total
Other Income, Net of Taxes
|
168 | 202 | ||||||
Interest
and Debt Expense
|
||||||||
Interest
on Long-Term Debt
|
978 | 1,029 | ||||||
Other
Interest Charges
|
40 | 105 | ||||||
Amortization
of Debt Expense
|
99 | 99 | ||||||
Total
Interest and Debt Expense
|
1,117 | 1,233 | ||||||
Net
Income
|
2,266 | 2,951 | ||||||
Preferred
Stock Dividend Requirement
|
10 | 10 | ||||||
Net
Income Applicable to Common Stock
|
$ | 2,256 | $ | 2,941 | ||||
Weighted
Average Common Shares Outstanding:
|
||||||||
Basic
|
8,512 | 8,416 | ||||||
Diluted
|
8,513 | 8,421 | ||||||
Earnings
Per Common Share:
|
||||||||
Basic
|
$ | 0.27 | $ | 0.35 | ||||
Diluted
|
$ | 0.27 | $ | 0.35 | ||||
Dividends
Per Common Share
|
$ | 0.2225 | $ | 0.2175 |
|
||||||||
Connecticut
Water Service, Inc. and Subsidiaries
|
||||||||
For
the Six Months Ended June 30, 2009 and 2008
|
||||||||
(Unaudited)
|
||||||||
(In
thousands, except per share amounts)
|
||||||||
2009
|
2008
|
|||||||
Operating
Revenues
|
$ | 28,528 | $ | 29,589 | ||||
Operating
Expenses
|
||||||||
Operation
and Maintenance
|
16,600 | 15,221 | ||||||
Depreciation
|
3,082 | 3,119 | ||||||
Income
Taxes
|
847 | 1,784 | ||||||
Taxes
Other Than Income Taxes
|
2,909 | 2,947 | ||||||
Total
Operating Expenses
|
23,438 | 23,071 | ||||||
Net
Operating Revenues
|
5,090 | 6,518 | ||||||
Other
Utility Income, Net of Taxes
|
348 | 276 | ||||||
Total
Utility Operating Income
|
5,438 | 6,794 | ||||||
Other
Income (Deductions), Net of Taxes
|
||||||||
Non-Water
Sales Earnings
|
462 | 394 | ||||||
Allowance
for Funds Used During Construction
|
59 | 34 | ||||||
Other
|
(263 | ) | (43 | ) | ||||
Total
Other Income, Net of Taxes
|
258 | 385 | ||||||
Interest
and Debt Expense
|
||||||||
Interest
on Long-Term Debt
|
1,987 | 2,085 | ||||||
Other
Interest Charges
|
101 | 240 | ||||||
Amortization
of Debt Expense
|
198 | 198 | ||||||
Total
Interest and Debt Expense
|
2,286 | 2,523 | ||||||
Net
Income
|
3,410 | 4,656 | ||||||
Preferred
Stock Dividend Requirement
|
19 | 19 | ||||||
Net
Income Applicable to Common Stock
|
$ | 3,391 | $ | 4,637 | ||||
Weighted
Average Common Shares Outstanding:
|
||||||||
Basic
|
8,502 | 8,405 | ||||||
Diluted
|
8,503 | 8,411 | ||||||
Earnings
Per Common Share:
|
||||||||
Basic
|
$ | 0.40 | $ | 0.55 | ||||
Diluted
|
$ | 0.40 | $ | 0.55 | ||||
Dividends
Per Common Share
|
$ | 0.4450 | $ | 0.4350 |
|
||||||||
Connecticut
Water Service, Inc. and Subsidiaries
|
||||||||
For
the Three Months Ended June 30, 2009 and 2008
|
||||||||
(Unaudited)
|
||||||||
(In
thousands)
|
||||||||
2009
|
2008
|
|||||||
Net
Income Applicable to Common Stock
|
$ | 2,256 | $ | 2,941 | ||||
Other
Comprehensive Income, net of tax
|
||||||||
Qualified
Cash Flow Hedging Instrument (Expense) Income,
|
||||||||
net
of tax (benefit) expense of $(14) in 2009 and $38 in
2008
|
(22 | ) | 59 | |||||
Adjustment
to Pension and Post-Retirement Benefits Other
|
||||||||
Than
Pension, net of tax benefit of $1 in 2009 and $0 in 2008
|
-- | -- | ||||||
Unrealized
gain on investments, net of tax expense of $52
|
70 | -- | ||||||
Comprehensive
Income
|
$ | 2,304 | $ | 3,000 | ||||
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
|
||||||||
For
the Six Months Ended June 30, 2009 and 2008
|
||||||||
(Unaudited)
|
||||||||
(In
thousands)
|
||||||||
2009
|
2008
|
|||||||
Net
Income Applicable to Common Stock
|
$ | 3,391 | $ | 4,637 | ||||
Other
Comprehensive Income, net of tax
|
||||||||
Qualified
Cash Flow Hedging Instrument Income (Expense),
|
||||||||
net
of tax expense (benefit) of $20 in 2009 and $(42) in
2008
|
31 | (66 | ) | |||||
Adjustment
to Pension and Post-Retirement Benefits Other
|
||||||||
Than
Pension, net of tax benefit of $1 in 2009 and 2008
|
(1 | ) | (1 | ) | ||||
Unrealized
gain on investments, net of tax expense of $52
|
81 | -- | ||||||
Comprehensive
Income
|
$ | 3,502 | $ | 4,570 |
|
||||||||
Connecticut
Water Service, Inc. and Subsidiaries
|
||||||||
For
the Three Months Ended June 30, 2009 and 2008
|
||||||||
(Unaudited)
|
||||||||
(In
thousands, except per share amounts)
|
||||||||
2009
|
2008
|
|||||||
Balance
at Beginning of Period
|
$ | 38,547 | $ | 37,142 | ||||
Net
Income Before Preferred Dividends
|
2,266 | 2,951 | ||||||
40,813 | 40,093 | |||||||
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 - 2009 $0.2225 per share; 2008 $0.2175 per share
|
1,877 | 1,818 | ||||||
1,887 | 1,828 | |||||||
Balance
at End of Period
|
$ | 38,926 | $ | 38,265 | ||||
CONSOLIDATED
STATEMENTS OF RETAINED EARNINGS
|
||||||||
For
the Six Months Ended June 30, 2009 and 2008
|
||||||||
(Unaudited)
|
||||||||
(In
thousands, except per share amounts)
|
||||||||
2009
|
2008
|
|||||||
Balance
at Beginning of Period
|
$ | 39,285 | $ | 37,272 | ||||
Net
Income Before Preferred Dividends
|
3,410 | 4,656 | ||||||
42,695 | 41,928 | |||||||
Dividends
Declared:
|
||||||||
Cumulative
Preferred, Class A, $0.20 per share
|
6 | 6 | ||||||
Cumulative
Preferred, Series $0.90, $0.225 per share
|
13 | 13 | ||||||
Common
Stock - 2009 $0.445 per share; 2008 $0.435 per share
|
3,750 | 3,644 | ||||||
3,769 | 3,663 | |||||||
Balance
at End of Period
|
$ | 38,926 | $ | 38,265 |
|
||||||||
Connecticut
Water Service, Inc. and Subsidiaries
|
||||||||
For
the Six Months Ended June 30, 2009 and 2008
|
||||||||
(Unaudited)
|
||||||||
(In
thousands)
|
||||||||
2009
|
2008
|
|||||||
Operating
Activities:
|
||||||||
Net
Income
|
$ | 3,410 | $ | 4,656 | ||||
Adjustments
to Reconcile Net Income to Net Cash Provided by
|
||||||||
Operating
Activities:
|
||||||||
Deferred
Revenues
|
119 | (896 | ) | |||||
Allowance
for Funds Used During Construction
|
(96 | ) | (56 | ) | ||||
Depreciation
(including $353 in 2009, $318 in 2008 charged to other
accounts)
|
3,435 | 3,437 | ||||||
Change
in Assets and Liabilities:
|
||||||||
Decrease
(Increase) in Accounts Receivable and Accrued Unbilled
Revenues
|
240 | (1,637 | ) | |||||
Increase
in Other Current Assets
|
(193 | ) | (1,507 | ) | ||||
Decrease
in Other Non-Current Items
|
1,605 | 1,003 | ||||||
Increase
(Decrease) in Accounts Payable, Accrued Expenses and Other
|
||||||||
Current
Assets
|
26 | (45 | ) | |||||
Increase
in Deferred Income Taxes and Investment Tax Credits, Net
|
400 | 919 | ||||||
Total
Adjustments
|
5,536 | 1,218 | ||||||
Net
Cash and Cash Equivalents Provided by Operating Activities
|
8,946 | 5,874 | ||||||
Investing
Activities:
|
||||||||
Company
Financed Additions to Utility Plant
|
(10,157 | ) | (7,136 | ) | ||||
Advances
from Others for Construction
|
(355 | ) | (171 | ) | ||||
Net
Additions to Utility Plant Used in Continuing Operations
|
(10,512 | ) | (7,307 | ) | ||||
Purchase
of Ellington Acres Company, net of cash acquired of $26
|
(1,469 | ) | -- | |||||
Purchase
of Eastern and H2O Services Assets
|
-- | (3,500 | ) | |||||
Net
Cash and Cash Equivalents Used in Investing Activities
|
(11,981 | ) | (10,807 | ) | ||||
Financing
Activities:
|
||||||||
Proceeds
from Interim Bank Loans
|
17,771 | 14,175 | ||||||
Repayment
of Interim Bank Loans
|
(12,074 | ) | (6,459 | ) | ||||
Proceeds
from Issuance of Common Stock
|
485 | 484 | ||||||
Proceeds
from the Exercise of Stock Options
|
-- | 90 | ||||||
Repayment
of Long-Term Debt Including Current Portion
|
(133 | ) | (28 | ) | ||||
Costs
Incurred to Issue Long-Term Debt and Common
Stock
|
-- | (1 | ) | |||||
Advances
from (Refunds to) Others for Construction
|
355 | 171 | ||||||
Cash
Dividends Paid
|
(3,770 | ) | (3,655 | ) | ||||
Net
Cash and Cash Equivalents Provided by Financing Activities
|
2,634 | 4,777 | ||||||
Net
Decrease in Cash and Cash Equivalents
|
(401 | ) | (156 | ) | ||||
Cash
and Cash Equivalents at Beginning of Period
|
684 | 337 | ||||||
Cash
and Cash Equivalents at End of Period
|
$ | 283 | $ | 181 | ||||
Non-Cash
Investing and Financing Activities:
|
||||||||
Non-Cash
Contributed Utility Plant
|
$ | 860 | $ | 2,317 | ||||
Short-term
Investment of Bond Proceeds Held in Restricted Cash
|
-- | $ | 8,361 | |||||
Supplemental
Disclosures of Cash Flow Information:
|
||||||||
Cash
Paid for:
|
||||||||
Interest
|
$ | 2,214 | $ | 2,357 | ||||
State
and Federal Income Taxes
|
$ | 410 | $ | 1,410 |
Three
Months
|
Six
Months
|
|||||||||||||||
Period
ended June 30
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
Service
Cost
|
$ | 388 | $ | 324 | $ | 727 | $ | 630 | ||||||||
Interest
Cost
|
507 | 488 | 1,012 | 953 | ||||||||||||
Expected
Return on Plan Assets
|
(543 | ) | (532 | ) | (1,114 | ) | (1,060 | ) | ||||||||
Amortization
of:
|
||||||||||||||||
Transition
Obligation
|
-- | -- | 1 | 1 | ||||||||||||
Prior
Service Cost
|
17 | 17 | 34 | 34 | ||||||||||||
Net
Loss
|
104 | 46 | 199 | 71 | ||||||||||||
Net
Periodic Benefit Cost
|
$ | 473 | $ | 343 | $ | 859 | $ | 629 |
Three
Months
|
Six
Months
|
|||||||||||||||
Period
ended June 30
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
Service
Cost
|
$ | 113 | $ | 130 | $ | 236 | $ | 316 | ||||||||
Interest
Cost
|
117 | 138 | 240 | 329 | ||||||||||||
Expected
Return on Plan Assets
|
(68 | ) | (68 | ) | (136 | ) | (136 | ) | ||||||||
Other
|
56 | -- | 112 | -- | ||||||||||||
Amortization
of:
|
||||||||||||||||
Transition
Obligation
|
-- | 30 | -- | 60 | ||||||||||||
Prior
Service Cost
|
(102 | ) | -- | (203 | ) | -- | ||||||||||
Recognized
Net Loss
|
50 | 11 | 103 | 101 | ||||||||||||
Net
Periodic Benefit Cost
|
$ | 166 | $ | 241 | $ | 352 | $ | 670 |
Three
months ended June 30,
|
2009
|
2008
|
||||||
Common
Shares Outstanding End of Period:
|
8,526,304 | 8,430,354 | ||||||
Weighted
Average Shares Outstanding (Days Outstanding Basis):
|
||||||||
Basic
|
8,512,412 | 8,415,527 | ||||||
Diluted
|
8,512,669 | 8,421,149 | ||||||
Basic
Earnings per Share
|
$ | 0.27 | $ | 0.35 | ||||
Dilutive
Effect of Unexercised Stock Options
|
-- | -- | ||||||
Diluted
Earnings per Share
|
$ | 0.27 | $ | 0.35 | ||||
Six
Months ended June 30,
|
||||||||
Weighted
Average Shares Outstanding (Days Outstanding Basis):
|
||||||||
Basic
|
8,502,418 | 8,405,097 | ||||||
Diluted
|
8,502,946 | 8,411,012 | ||||||
Basic
Earnings per Share
|
$ | 0.40 | $ | 0.55 | ||||
Dilutive
Effect of Unexercised Stock Options
|
-- | -- | ||||||
Diluted
Earnings per Share
|
$ | 0.40 | $ | 0.55 | ||||
Level
1
|
Level
2
|
Level
3
|
||||||||||
Assets:
|
||||||||||||
Investments
|
$ | 942 | $ | -- | $ | -- |
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
|
-- | -- | -- | -- | ||||||||||||
Service
and Rentals
|
1,226 | 414 | 161 | 253 | ||||||||||||
Total
|
$ | 16,688 | $ | 3,321 | $ | 1,055 | $ | 2,266 |
Three
Months Ended June 30, 2008
|
||||||||||||||||
Segment
|
Revenues
|
Pre-Tax
Income
|
Income
Tax Expense
|
Net
Income
|
||||||||||||
Water
Activities
|
$ | 16,259 | $ | 3,985 | $ | 1,238 | $ | 2,747 | ||||||||
Real
Estate Transactions
|
-- | -- | -- | -- | ||||||||||||
Service
and Rentals
|
1,270 | 339 | 135 | 204 | ||||||||||||
Total
|
$ | 17,529 | $ | 4,324 | $ | 1,373 | $ | 2,951 |
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
|
-- | -- | -- | -- | ||||||||||||
Service
and Rentals
|
2,303 | 757 | 295 | 462 | ||||||||||||
Total
|
$ | 31,437 | $ | 4,615 | $ | 1,205 | $ | 3,410 |
Six
Months Ended June 30, 2008
|
||||||||||||||||
Segment
|
Revenues
|
Pre-Tax
Income
|
Income
Tax Expense
|
Net
Income
|
||||||||||||
Water
Activities
|
$ | 30,074 | $ | 6,190 | $ | 1,928 | $ | 4,262 | ||||||||
Real
Estate Transactions
|
-- | -- | -- | -- | ||||||||||||
Service
and Rentals
|
2,337 | 646 | 252 | 394 | ||||||||||||
Total
|
$ | 32,411 | $ | 6,836 | $ | 2,180 | $ | 4,656 |
June
30, 2009
|
December
31, 2008
|
|||||||
Total
Plant and Other Investments:
|
||||||||
Water
|
$ | 315,887 | $ | 304,591 | ||||
Non-Water
|
667 | 676 | ||||||
316,554 | 305,267 | |||||||
Other
Assets:
|
||||||||
Water
|
64,283 | 64,734 | ||||||
Non-Water
|
1,951 | 2,430 | ||||||
66,234 | 67,164 | |||||||
Total
Assets
|
$ | 382,788 | $ | 372,431 |
Business
Segment
|
June
30, 2009
|
June
30, 2008
|
Increase/(Decrease)
|
|||
Water
Activities
|
$2,013,000
|
$2,747,000
|
$(734,000)
|
|||
Real
Estate Transactions
|
--
|
--
|
--
|
|||
Services
and Rentals
|
253,000
|
204,000
|
49,000
|
|||
Total
|
$2,266,000
|
$2,951,000
|
$(685,000)
|
·
|
The
water production for the second quarter declined approximately
6%. The majority of this decline was related to lower
residential demand due to the extremely wet and cool second quarter of
2009.
|
·
|
During
the second quarter of 2009, Windsor Locks, CT, part of our largest service
area, experienced rain on 63 of 91 days, including 24 of 30 days in
June. In the same period of 2008, there was rain on 53 days
with 20 days in June. Total rainfall accumulation in the second
quarter of 2009 was 13.2 inches, an increase of an inch from
2008. In addition to the rainfall, June 2009 was unusually
cool; the average high temperature during the month was 75 degrees,
compared to an average high of 81 degrees in 2008. Poor weather
conditions primarily impact the outdoor water usage of residential
customers.
|
·
|
Industrial
revenues decreased by $205,000, or 37%, to $345,000 when compared to the
second quarter of 2008, primarily due to the adverse economic conditions
facing companies in the region. A portion of the decrease was
due to industrial customers cutting back on shifts and other budget
cuts. Additionally, another large industrial customer began
using a process to recycle water used during their manufacturing
processes, leading to a reduction in
consumption.
|
Expense
Components
|
June
30, 2009
|
June
30, 2008
|
Increase/(Decrease)
|
|||||||||
Employee
benefit costs
|
$ | 1,222,000 | $ | 1,043,000 | $ | 179,000 | ||||||
Outside
services
|
481,000 | 327,000 | 154,000 | |||||||||
Water
treatment (including chemical costs)
|
533,000 | 453,000 | 80,000 | |||||||||
Insurance
|
296,000 | 244,000 | 52,000 | |||||||||
Vehicles
|
377,000 | 338,000 | 39,000 | |||||||||
Customer
|
279,000 | 249,000 | 30,000 | |||||||||
Labor
|
2,986,000 | 3,058,000 | (72,000 | ) | ||||||||
Utility
costs
|
797,000 | 859,000 | (62,000 | ) | ||||||||
Investor
relations
|
181,000 | 205,000 | (24,000 | ) | ||||||||
Other
|
1,248,000 | 1,247,000 | 1,000 | |||||||||
Total
|
$ | 8,400,000 | $ | 8,023,000 | $ | 377,000 |
-
|
Employee
benefit costs increased over 2008 levels, primarily due to an increase in
costs associated with medical and pension expenses. Medical
costs increased due to additional claims filed in the current year
compared to 2008, offset partially by reduced medical administration
costs. Pension costs increased primarily due to the impact of
return on investments that were below actuarial assumptions in
2008. Outside services increased over prior years primarily due
to increased legal costs associated with the Perry Street issued detailed
in “Commitments and Contingencies”, consulting costs associated with the
Company’s ERP and the increased use of temporary labor. Water
treatment costs increased primarily due to an increase in the cost of key
chemicals, despite a decrease in production when compared to the prior
year. The increase in the costs of chemicals was partially
offset by a reduction in the costs to operate our treatment facilities due
to decreases in our testing costs. Insurance costs increased
primarily due to increased premiums on the Company’s general liability
insurance. Labor costs decreased in 2009 by approximately
$72,000 due to a large number of ongoing capital projects, including the
implementation of an Enterprise Resource Planning (ERP) system, resulting
in less labor costs being charged to Operation and Maintenance
expense. Utility costs have decreased over the prior year
primarily due to a reduction in communication costs. Investor
relation costs decreased due to a reduction in proxy mailing and
notification related costs.
|
-
|
The
Company saw a modest decrease in its Depreciation expense due to the
negotiated reduction in depreciation rates that will result in a temporary
reduction in rates for customers, despite an increase in the Company’s
Utility Plant investment.
|
-
|
Income
Tax expense associated with Water Activities decreased due to lower
pre-tax income in 2009.
|
Business
Segment
|
June
30, 2009
|
June
30, 2008
|
Increase/(Decrease)
|
|||||||||
Water
Activities
|
$ | 2,948,000 | $ | 4,262,000 | $ | (1,314,000 | ) | |||||
Real
Estate Transactions
|
-- | -- | -- | |||||||||
Services
and Rentals
|
462,000 | 394,000 | 68,000 | |||||||||
Total
|
$ | 3,410,000 | $ | 4,656,000 | $ | (1,246,000 | ) |
·
|
Residential
water consumption for the first six months declined approximately
4%. The majority of this decline was related to lower
residential demand due to the extremely wet and cool second quarter of
2009.
|
·
|
Industrial
revenues decreased by $188,000, or 22%, to $687,000 when compared to the
first half of 2008, primarily due to the economic condition facing
companies in the region. A portion of the decrease is due to
industrial customers cutting back on shifts and other budget
cuts. Additionally, another large industrial customer began
using a process to recycle water used during their manufacturing
processes, leading to a reduction in
consumption.
|
·
|
Partially
offsetting the declining usage described above, was the implementation of
the second phase of the Company’s 2006 rate increase that was effective
April 1, 2008. As a result, the first quarter of 2009 included
an increase of rates of approximately 4.5% that was not included in rates
in the first quarter of 2008.
|
Expense
Components
|
June
30, 2009
|
June
30, 2008
|
Increase/(Decrease)
|
|||||||||
Outside
services
|
$ | 1,002,000 | $ | 652,000 | $ | 350,000 | ||||||
Water
treatment (including chemical costs)
|
1,067,000 | 855,000 | 212,000 | |||||||||
Purchased
water
|
510,000 | 303,000 | 207,000 | |||||||||
Labor
|
5,996,000 | 5,813,000 | 183,000 | |||||||||
Employee
benefit costs
|
2,504,000 | 2,353,000 | 151,000 | |||||||||
Maintenance
|
844,000 | 747,000 | 97,000 | |||||||||
Vehicles
|
722,000 | 628,000 | 94,000 | |||||||||
Insurance
|
562,000 | 475,000 | 87,000 | |||||||||
Other
|
3,393,000 | 3,395,000 | (2,000 | ) | ||||||||
Total
|
$ | 16,600,000 | $ | 15,221,000 | $ | 1,379,000 |
-
|
Outside
services increased over prior years primarily due to increased legal costs
associated with the Perry Street issued detailed in “Commitments and
Contingencies”, consulting costs associated with the Company’s ERP and the
increased use of temporary labor. Water treatment costs
increased primarily due to an increase in the cost of key chemicals,
despite a decrease in production when compared to prior
year. Purchased water expense increased primarily due to a
negotiated reduction of bills related to 2007 consumption that the Company
realized as a reduction of expense in the first quarter of
2008. During 2009, the Company was billed for water as it was
purchased from neighboring utilities at the negotiated
rates. Labor costs increased in 2009 due to an increase in
employees, increased maintenance and repair work in both our Northeast and
Southwest Regions, and regular wage increases effective as of April 1,
2009. Employee benefit costs increased primarily due to an
increase in costs associated with medical and pension expenses, partially
offset by a decrease in post-retirement medical costs. Medical
costs increased due to additional claims filed in the current year
compared to 2008. Pension costs increased primarily due to a
lower return on investments within the pension
plan. Maintenance expense increased over the prior year due to
increased main break costs in our Northern and Mansfield
divisions.
|
-
|
The
Company saw a slight decrease in its Depreciation expense due to the
negotiated reduction in depreciation rates that will result in a temporary
reduction in rates for customers, despite an increase in the Company’s
Utility Plant investment.
|
-
|
Income
Tax expense associated with Water Activities decreased due to lower
pre-tax income and a lower effective tax rate in 2009 associated with a
combination of state tax credits and benefit plan
contributions.
|
For
|
Withheld
|
|||||||
Lisa
J. Thibdaue
|
20,123,549 | 1,260,273 | ||||||
Carol
P. Wallace
|
20,776,370 | 617,452 | ||||||
Donald
B. Wilbur
|
20,720,963 | 662,859 |
For
|
Withheld
|
Abstain
|
||||||||||
PricewaterhouseCoopers,
LLP
|
20,745,570 | 428,973 | 209,279 |
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).
|
|
10.1
|
Line
of credit agreement dated June 29, 2009 between CoBank, ACB and
Connecticut Water Service, Inc. (Exhibit 10.1 to Form 8-K filed July 2,
2009).
|
|
10.2*
|
Second
Amendment to Reimbursement and Credit Agreement, dated as of August 23,
2007, between The Connecticut Water Company and Citizen’s Bank of Rhode
Island 2004 A Series.
|
|
10.3*
|
Second
Amendment to Reimbursement and Credit Agreement, dated as of August 23,
2007, between The Connecticut Water Company and Citizen’s Bank of Rhode
Island 2004 B Series.
|
|
10.4*
|
Second
Amendment to Reimbursement and Credit Agreement, dated as of August 23,
2007, between The Connecticut Water Company and Citizen’s Bank of Rhode
Island 2004 Series Variable Rate, due 2029.
|
|
10.5*
|
Third
Amendment to Reimbursement and Credit Agreement, dated as of June 1, 2009,
between The Connecticut Water Company and Citizen’s Bank of Rhode Island
2004 A Series.
|
|
10.6*
|
Third
Amendment to Reimbursement and Credit Agreement, dated as of June 1, 2009,
between The Connecticut Water Company and Citizen’s Bank of Rhode Island
2004 B Series.
|
|
10.7*
|
Third
Amendment to Reimbursement and Credit Agreement, dated as of June 1, 2009,
between The Connecticut Water Company and Citizen’s Bank of Rhode Island
2004 Series Variable Rate, due 2029.
|
|
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
|
Connecticut
Water Service, Inc.
(Registrant)
|
|
Date: August
7, 2009
|
By: /s/ David C.
Benoit
David
C. Benoit
Vice
President – Finance and
Chief
Financial Officer
|
Date: August
7, 2009
|
By: /s/ Nicholas A.
Rinaldi
Nicholas
A. Rinaldi
Controller
|