Exhibit 99.2
Connecticut Water Service, Inc. 93 West Main Street Clinton, Connecticut 06413-1600 | |
2009 Mid-Year Report
Dear Shareholders:
I am pleased to inform you that on August 12, 2009, your Board of Directors increased the annual dividend rate on common shares by two cents to 91 cents per share, which is 2.2% above the current cash dividend. Over the past two years, the Company’s dividend has increased nearly 4.6%. The Company has raised its dividend payment in each of the last 40 years, and it has paid a dividend without interruption or reduction in every quarter since its founding 53 years ago. In addition to the dividend increase, there have been other important developments at the Company.
Financial Performance
Unusually wet and cool weather persisted through much of the spring and early summer. In fact, in Connecticut we experienced the 13th wettest June in the past 115 years, and the coolest in the past 24 years. Revenues in the second quarter were down nearly 6% compared to the second quarter of 2008. For the first 6 months of 2009 we reported earnings of $0.40 per share compared to $0.55 per share for the same period in 2008. We have taken measures to mitigate the weather’s temporary impact on our business, but remain focused on our long-term strategy to grow earnings. The Company anticipates the sale of a conservation easement to the Town of Windsor Locks in the second-half of 2009 and estimates that it will generate approximately $1 million in net income and contribute to 2009 earnings.
WICA Surcharge
On July 2nd, we placed our first Water Infrastructure and Conservation Adjustment (WICA) surcharge of 0.95% on customer bills. WICA allows us to recover investments in water main replacement and other conservation-related infrastructure improvements between rate cases. WICA projects must be preapproved by regulators and in service before a surcharge can be implemented. The WICA surcharge may be adjusted on a semi-annual basis. The program benefits all stakeholders; investing in pipe replacement reduces leakage, improves water quality and reliability of service to customers. In addition, construction dollars flow to local contractors, creating local jobs, and shareholders begin earning on their investment sooner. The program has been a great success to date.
Legend Hill Acquisition
In early September, we completed the acquisition of the Legend Hill water system in Madison, Connecticut. The acquisition gives us the equivalent of 120 new residential customers and allowed us to solve a water quality problem at the Legend Hill condominiums and two nearby public schools. The wells owned by the schools and condominium complex all had levels of uranium that were higher than allowed by drinking water standards. We worked with local and state officials on a creative solution to bring safe water to the condos and schools. We purchased the Legend Hill system for $1, installed uranium treatment equipment, and piping to bring the treated water to the schools – all within 9 months and in time for the beginning of this school year.
Achievements
Connecticut Water was named one of America’s Top 100 Fastest Growing Small Businesses by Fortune Small Business magazine. — The Company was recognized by the U.S. EPA for our commitment to safe drinking water with the Directors Award for our participation in the Partnership for Safe Drinking Water. Connecticut Water is one of only 16 utilities in the nation to receive the Directors Award for 10 years. — We also participated in ABC’s Extreme Makeover Home Edition project in Suffield, Connecticut. The episode is scheduled to air this September.
On behalf of the more than 200 professionals who work hard to keep your company successful, I thank you for your continued support.
Very truly yours,
/s/Eric W. Thornburg
Eric W. Thornburg
Chairman, President and CEO
Connecticut Water Service, Inc. & Subsidiaries
Condensed Consolidated Statements of Income (unaudited)
| | Three Months Ended | Six Months Ended |
| | June 30, | June 30, |
| (In thousands except per share amounts) | 2009 | 2008 | 2009 | 2008 |
| | | | | |
| Operating Revenues | $15,147 | $16,020 | $28,528 | $29,589 |
| Other Utility Income, Net of Taxes | $193 | $155 | $348 | $276 |
| Utility Operating Income | $3,215 | $3,982 | $5,438 | $6,794 |
| Gain on Property Transactions, Net of Taxes | $-- | $-- | $-- | $-- |
| Non-Water Sales Earnings (Services and Rentals), Net of Taxes | $253 | $204 | $462 | $394 |
| Net Income | $2,266 | $2,951 | $3,410 | $4,656 |
| Net Income Applicable to Common Shareholders | $2,256 | $2,941 | $3,391 | $4,637 |
| Basic Earnings Per Average Common Share | $0.27 | $0.35 | $0.40 | $0.55 |
| Diluted Earnings Per Average Common Share | $0.27 | $0.35 | $0.40 | $0.55 |
| Basic Weighted Average Common Shares Outstanding | 8,512 | 8,416 | 8,502 | 8,405 |
| Diluted Weighted Average Common Shares Outstanding | 8,513 | 8,421 | 8,503 | 8,411 |
| Book Value Per Share | $12.21 | $12.10 | $12.21 | $12.10 |
Condensed Consolidated Balance Sheets (unaudited)
| (In thousands) | June 30, 2009 | June 30, 2008 |
| |
| ASSETS | | |
| Net Utility Plant | $310,576 | $288,393 |
| Current Assets | 15,404 | 25,980 |
| Other Assets | 56,808 | 59,839 |
| |
| Total Assets | $382,788 | $374,212 |
| |
| CAPITALIZATION AND LIABILITIES | | |
| Shareholders’ Equity | $104,146 | $101,996 |
| Preferred Stock | 772 | 772 |
| Long-Term Debt | 92,094 | 92,256 |
| Current Liabilities | 25,492 | 22,495 |
| Other Liabilities and Deferred Credits | 160,284 | 156,693 |
| Total Capitalization and Liabilities | $382,788 | $374,212 |
| | Equity Type | Record Date | Payable Date | Rate |
| | | | | |
| Dividends Declared | Common (NASDAQ GS:CTWS) | September 1, 2009 | September 15, 2009 | $0.2275 |
| Preferred A (not publicly traded) | October 1, 2009 | October 15, 2009 | $0.20 |
| Preferred 90 (NASDAQ:CTWSP) | October 19,2009 | November 2,2009 | $0.225 |
| | | | | |
| | | | | |
| | | | | |
| | Declaration date | Record Date | Payable Date | |
| Proposed Next Common Stock Dividend Dates | November 20, 2009 | December 1, 2009 | December 15, 2009 | |
| November 20, 2009 | March 1, 2010 | March 15, 2010 | |
| Connecticut Water Service, Inc. | Stock Transfer, Dividend Disbursing Agent and |
| 93 West Main Street | Agent to Administer Dividend Reinvestment Plan |
| Clinton, Connecticut 06413-1600 | Registrar and Transfer Company |
| FAX: (860) 669 5579 | 10 Commerce Drive, Cranford, NJ 07016 |
| Shareholder Info: 1 (800) 428-3985, Ext. 3016 | 1 (800) 368-5948 |
Website: www.ctwater.com | On-line information: http://www.rtco.com |
