Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
---------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ___________
Commission File Number 1-8060
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AQUARION COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 06-0852232
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
835 Main Street, Bridgeport, Connecticut 06601
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 335-2333
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(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of July 27, 1995:
Common Stock
No Par Value (Stated Value: $1) 6,671,496
- ------------------------------- ------------------
Class Number of Shares
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
AQUARION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
Quarter Ended June 30, Six Months Ended June 30,
----------------------- ---------------------------
1995 1994 1995 1994
-------- ------- ------- -------
(In thousands, except share data)
Operating revenues $28,414 $29,619 $54,016 $55,469
Costs and expenses:
Operating 10,465 11,013 19,811 20,410
General and administrative 4,493 4,622 8,446 8,722
Depreciation 2,905 2,980 5,814 5,962
Interest expense 2,243 2,029 4,293 4,173
Taxes other than income taxes 2,993 3,136 6,213 6,276
------- ------- ------- -------
Total costs and expenses 23,099 23,780 44,577 45,543
------- ------- ------- -------
5,315 5,839 9,439 9,926
Allowance for funds used during
construction 176 104 288 190
------- ------- ------- -------
Income before income taxes 5,491 5,943 9,727 10,116
Income taxes 2,384 2,371 4,229 3,970
------- ------- ------- -------
Net income $3,107 $ 3,572 $5,498 $ 6,146
======= ======= ====== =======
Per share $ 0.47 $ 0.55 $ 0.83 $ 0.95
======= ======= ======= =======
Weighted average common shares outstanding 6,655,383 6,509,710 6,638,757 6,497,919
========= ========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements.
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AQUARION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
UNAUDITED
Quarter Ended June 30, Six Months Ended June 30,
---------------------- -------------------------
1995 1994 1995 1994
------ ------ ------ ------
(In thousands, except share data)
RETAINED EARNINGS
Beginning of period $16,331 $14,923 $16,628 $15,015
Net income 3,107 3,572 5,498 6,146
------- ------- ------- -------
19,438 18,495 22,126 21,161
Deduct: Cash dividends declared on common stock,
$.405 per share per quarter in 1995 and
1994 2,702 2,606 5,390 5,272
------- ------- ------- -------
End of period $16,736 $15,889 $16,736 $15,889
======= ======= ======= =======
The accompanying notes are an integral part of these consolidated financial statements.
-3-
AQUARION COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED
June 30, December 31,
ASSETS 1995 1994
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(In thousands)
Property, plant and equipment $399,053 $378,708
Less: accumulated depreciation 129,061 123,166
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Net property, plant and equipment 269,992 255,542
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Current assets:
Cash and cash equivalents 201 1,335
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Accounts receivable:
Customers 15,385 15,946
Miscellaneous 1,427 1,158
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16,812 17,104
Less: allowance for doubtful accounts 2,950 2,762
------- --------
13,862 14,342
Accrued revenues 10,491 9,596
Inventories 4,104 3,077
Prepaid expenses 8,375 8,006
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Total current assets 37,033 36,356
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Goodwill 10,080 10,283
Recoverable income taxes 46,874 47,099
Other assets 24,418 22,665
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$388,397 $371,945
======== ========
The accompanying notes are an integral part of these consolidated financial statements.
-4-
AQUARION COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED
LIABILITIES AND June 30, December 31,
SHAREHOLDERS' EQUITY 1995 1994
--------- ------------
(In thousands, except share data)
Shareholders' equity:
Preferred stock, no par value, authorized 2,500,000
shares not to exceed aggregate value of $25,000,000,
issuable in series-none issued $ - $ -
Common stock, stated value: $1
Authorized-16,000,000 shares
Issued-6,752,791 shares in 1995 and 6,690,013 shares
in 1994 6,753 6,690
Capital in excess of stated value 96,088 94,152
Retained earnings 16,736 16,628
-------- --------
119,577 117,470
Less: cost of treasury stock, 81,306 shares in 1995 and
84,992 shares in 1994 2,231 2,338
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Total shareholders' equity 117,346 115,132
-------- --------
Redeemable preferred stock of subsidiaries 330 330
-------- --------
Long-term debt and other obligations 121,542 111,466
-------- --------
Current liabilities:
Short-term borrowings, unsecured 7,500 -
Current maturities of long-term debt 4,075 4,077
Accounts payable and accrued liabilities 11,456 12,832
Dividends payable 2,702 2,675
Accrued interest 2,115 2,035
Taxes other than income taxes 1,413 1,532
Income taxes (201) 4,171
-------- ----------
Total current liabilities 29,060 27,322
-------- ----------
Advances for construction 24,144 23,407
Contributions in aid of construction 21,735 21,589
Deferred land sale gains 479 427
Accrued postretirement benefit cost 3,057 2,231
Recoverable income taxes 6,005 6,005
Deferred taxes 64,699 64,036
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$388,397 $371,945
======== ========
The accompanying notes are an integral part of these consolidated financial statements.
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AQUARION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
Six months ended June 30,
--------------------------
1995 1994
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(In thousands)
Cash flows from operating activities:
Net income $5,498 $6,146
Adjustments reconciling net income to net cash
provided by operating activities:
Depreciation and amortization 6,317 6,428
Allowance for funds used during construction (288) (190)
Provision for losses on accounts receivable 442 609
Deferred and prepaid income taxes, net 889 1,240
Proceeds from sale of surplus land, net of gains 760 1,063
Change in assets and liabilities (NOTE 3) (8,052) (4,633)
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Net cash provided by operating activities 5,566 10,663
------- -------
Cash flows from investing activities:
Capital additions, excluding an allowance
for funds used during construction (20,452) (7,165)
Advances and contributions in aid of construction 1,052 972
Refunds on advances for construction (169) (473)
Other investing activities (436) 293
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Net cash used in investing activities (20,005) (6,373)
-------- -------
Cash flows from financing activities:
Net proceeds from short-term borrowings 7,500 700
Proceeds from the issuance of common stock, net 1,399 975
Proceeds from the issuance of long-term debt 10,110 -
Principal payments on long-term debt (36) (36)
Common dividends paid (5,363) (5,253)
Bond finance charges (305) (156)
------- -------
Net cash used in financing activities 13,305 (3,770)
------- -------
Net increase (decrease) in cash and cash equivalents (1,134) 520
Cash and cash equivalents, beginning of period 1,335 90
------- -------
Cash and cash equivalents, end of period $201 $610
------- -------
The accompanying notes are an integral part of these consolidated financial statements.
-6-
AQUARION COMPANY
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
UNAUDITED
---------
Aquarion Company (Aquarion) is a holding company whose subsidiaries are
engaged both in the regulated utility business of public water supply and in
various nonutility businesses. Aquarion's utility subsidiary, Bridgeport
Hydraulic Company (BHC) and BHC's subsidiary, Stamford Water Company (SWC),
(collectively, the Utilities) collect, treat and distribute water for
residential, commercial and industrial customers, to other utilities for
resale and for private and municipal fire protection. The Utilities provide
water to customers in 23 communities with a population of approximately
500,000 people in Fairfield, New Haven, and Litchfield Counties in
Connecticut, including communities served by other utilities to which BHC
makes water available on a wholesale basis for back-up supply or peak demand
purposes through BHC's Southwest Regional Pipeline. BHC is the largest
investor-owned water company in Connecticut and, with its SWC subsidiary, is
among the ten largest investor-owned water companies in the nation. The
Utilities are regulated by several Connecticut agencies, including the
Connecticut Department of Public Utility Control (DPUC). Aquarion and its
subsidiaries (collectively, the Company) are also engaged in various
nonutility activities. The Company conducts an environmental testing
laboratory business through its Industrial and Environmental Analysts, Inc.
group of laboratories which analyze contaminants in hazardous waste, soil, air
and water (IEA). Additionally, the Company is engaged in various utility
management service businesses through Hydrocorp, Inc. (Hydrocorp) and Aquarion
Management Services, Inc. (AMS), owns a forest products business through
Timco, Inc. (Timco) and owns a real estate subsidiary, Main Street South
Corporation (MSSC).
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The accompanying consolidated financial statements of the Company have
been prepared in accordance with generally accepted accounting principles for
interim financial information, with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X and as applied in the case of rate-regulated public
utilities, comply with the Uniform System of Accounts and rate making
practices prescribed by the DPUC. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. The results of operations are not
necessarily indicative of the results of operations for the calendar year.
For example, water consumption is less in the first quarter of the year than
during the warmer months. The laboratory testing business is seasonal as well
with traditionally lower first quarter revenues. Other factors affecting the
comparability of various accounting periods include the timing of rate
increases granted the Utilities and the timing and magnitude of property
sales. For further information, refer to the consolidated financial
statements and accompanying footnotes included in the Company's annual report
on Form 10-K for the year ended December 31, 1994.
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NOTE 2 - INVENTORIES
- --------------------
Inventories were comprised of the following (in thousands):
June 30, December 31,
1995 1994
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(Unaudited)
Lumber and logs $2,348 $1,333
Materials and supplies 1,756 1,744
------ ------
$4,104 $3,077
====== ======
NOTE 3 - SUPPLEMENTAL DISCLOSURE FOR CONSOLIDATED STATEMENTS OF
- ---------------------------------------------------------------
CASH FLOWS
- ----------
Changes in assets and liabilities for the six month period ended June
30, are set forth below (in thousands):
1995 1994
------ ------
(Unaudited)
Increase in accounts receivable $ (856) $(2,123)
(Increase) decrease in inventory (1,027) 368
Increase in prepayments (369) (386)
Decrease in accounts payable and accrued liabilities (550) (39)
(Decrease) increase in interest and taxes payable (4,410) 39
Net changes in other noncurrent balance sheet items (840) (2,492)
------- --------
$(8,052) $(4,633)
======= =======
Supplemental cash flow information:
Cash paid for:
Interest $4,109 $4,662
Income taxes $7,775 $3,030
NOTE 4 - SALE OF SURPLUS LAND
- -----------------------------
For the first six months of 1995, the Company sold approximately 26
acres of surplus land in eight separate transactions for a total of
$1,110,000. Total gains approximated $350,000, or $.05 per share.
NOTE 5 - ACQUISITIONS
- ---------------------
Aquarion has entered into an agreement to acquire The New Canaan Water
Company ("NCWC") and Ridgefield Water Supply Company ("RWSC") for Aquarion
common stock with a market value of $3,500,000 and the repayment of certain
indebtedness of The New Canaan Company ("NCC") in an amount not to exceed
$130,000, less the amount of certain transaction costs and liabilities to be
paid by Aquarion at closing. The acquisition and a related property exchange
have been approved by the DPUC but remain contingent upon the approval of the
Department of Public Health ("DPH," formerly the Department of Public Health
and Addiction Services) of an application for a permit to transfer the
reservoir from the NCWC to the Second Taxing District ("STD"). On August 2,
1995 the DPUC extended its
-8-
approvals to September 30, 1995, in a reopened proceeding which, among
other matters, also extended NCWC's deadline for repayment of a
$1,250,000 loan until September 30, 1995 and confirmed that proceeds of
the sale of a certain parcel of land that abuts the reservoir would
be applied toward repayment of such loan. The parties have agreed to
extend their acquisition agreement and the related property exchange agreement
until September 30, 1995, although the agreement by one party is subject
to ratification by the party's governing body. There is no certainty that
the parties will agree to further extensions if the transaction
has not closed by that time.
On June 1, 1995, the Company completed the previously announced
acquisition of all of the operating assets of Kent Water Company, a privately
held water company serving 315 customers in Kent, Connecticut, for $60,000 in
cash and the assumption of debt of $1,200,000. Kent Water Company has annual
revenues of approximately $200,000.
On July 11, 1995, the Company filed an application with the DPUC to
acquire all of the operating assets of Lakeside Water Company for $100,000 in
cash and the assumption of Lakeside's CDA loan of approximately $101,000.
Lakeside, which has 160 customers, serves Southbury, Connecticut and has
approximate annual revenues of $48,000.
On July 25, 1995, the Company filed an application with the DPUC to
acquire all of the operating assets of Timber Trails Community Service
Corporation's Water Division for $15,000 in cash, with the option to purchase
two additional parcels of land for future improvements to serve existing
customers. Timber Trails, which has 114 customers, serves Sherman and New
Fairfield, Connecticut and has approximate annual revenues of $50,000.
NOTE 6 - TERMINATION OF AGREEMENT
- ---------------------------------
In November 1994, Timco entered into an agreement with the Public
Service Company of New Hampshire ("PSNH") under which Timco agreed to
terminate its long-term rate order with PSNH. Under this rate order, Timco
sold electricity produced at its cogeneration plant to PSNH. PSNH paid Timco
$8,195,105 in exchange for the assignment of the rate order to PSNH and a
release of PSNH's obligations to buy power from Timco. As a result of this
transaction, Timco will not have these cogeneration revenues in the future.
Revenues from electricity cogeneration were approximately $1,700,000 for the
first six months of 1994 and approximately $3,000,000 for the year-ended
December 31, 1994.
NOTE 7 - RATE MATTERS
- ---------------------
On July 20, 1995, BHC filed an application with the DPUC for a
Construction-Work-in-Progress (CWIP) water rate surcharge of 3.00 percent of
current revenues to recover 90 percent of the carrying costs, through June 30,
1995, of capital used in the construction of a filter plant at its Hemlocks
Reservoir in Fairfield, Connecticut. This plant, mandated by the Federal Safe
Drinking Water Act of 1974 (SDWA), as amended, is estimated to cost
approximately $50,000,000. This application updated the CWIP rate surcharge
of 1.97 percent granted in May 1995.
BHC will continue to file quarterly applications for increases in the
CWIP rate surcharge as construction continues through 1997, at which time the
filtration facilities are expected to be operational and subject to general
ratemaking regulations.
-9-
Item 2. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations
- -----------------------------------
Management's Discussion and Analysis of the Results of Operations and
Financial Condition contained in Aquarion's Annual Report on Form 10-K for the
year ended December 31, 1994 (1994 Form 10-K) should be read in conjunction
with the comments below.
Capital Resources and Liquidity
- -------------------------------
Capital Expenditures
--------------------
The Company invested $20,452,000 in property, plant and equipment in the
first six months of 1995, compared with $7,165,000 for the same 1994 period.
The Utilities accounted for approximately $18,640,000 of plant additions
during the current six month period, including $7,982,000 expended on SDWA
mandated filtration facilities, approximately $1,700,000 for the acquisition
of Kent Water Company, and approximately $1,500,000 invested in hardware and
software primarily for a new computer system for the Utility Operations.
Environmental testing laboratories and forest products operations accounted
for approximately $1,800,000 of plant additions in 1995. Management estimates
that capital expenditures will total $41,500,000 in 1995, of which
approximately $39,000,000 will be for water utility construction programs.
Nonutility capital expenditures will approximate $2,500,000 in 1995, primarily
for laboratory equipment, and computer equipment and software at IEA.
Financing Activities
--------------------
Due to the magnitude of the Company's construction programs and the
capital-intensive nature of the public water supply business, financing has
been provided from both internal and external sources. Historically, the
Company's ability to finance its capital expenditures has depended
substantially on rate relief. Pursuant to DPUC regulations, BHC is deriving
additional revenues through the implementation of a CWIP rate surcharge in
conjunction with the construction of its Hemlocks Reservoir filtration plant.
The current surcharge of 1.97 percent will increase the Company's revenues by
$1,194,000 on an annual basis. This surcharge, however, is expected to
increase quarterly as BHC will continue to file quarterly applications during
the construction period.
On May 11, 1995, BHC issued a $30,000,000 unsecured note in
consideration for a loan of the proceeds from the issuance by the Connecticut
Development Authority (CDA) of an equal amount of tax-exempt Water Facilities
Revenue Bonds. The tax-exempt CDA bonds have a 40-year maturity and initially
bear interest at a weekly rate. At the option of the Company, the bonds may
be converted or reconverted from time to time to or from a daily, weekly or
flexible rate mode and with the consent of the CDA to a multiannual (fixed for
periods of one year or multiples thereof) rate mode. In addition, the bonds,
with the consent of the CDA, may be converted for their remaining term to bear
interest at a fixed rate. While the bonds are in the daily, weekly or
flexible rate modes, a letter of credit facility or substitute credit facility
will be maintained. The proceeds of this bond issuance are to be used to
finance costs incurred in the construction of the Hemlocks Reservoir
Filtration Project and the filtration facilities at BHC's Lakeville and
Norfolk Reservoirs. Under the terms of the CDA bonds, proceeds are to be
requisitioned from a construction fund held by a trustee for planned capital
improvements and, at least initially, used to reduce short-term borrowings
incurred to finance the cost of construction. At June 30, 1995, the Company
had requisitioned approximately $10,100,000 for the filtration projects.
The percentage of capital expenditures financed by net cash from
operating activities was 27 percent and 100 percent for the six months ended
June 30, 1995 and 1994, respectively. (See
-10-
"Consolidated Financial Statements-Consolidated Statements of Cash Flows.")
The remainder has been provided from external financing sources.
The Company obtained funds of $1,052,000 from advances and contributions
in aid of construction from developers and customers for the
six months ended June 30, 1995.
Funds from external sources historically have been borrowed on a short-
term basis and periodically refinanced through long-term debt or equity
issues. In May 1995, Aquarion renewed unsecured revolving credit agreements
with five banks. These agreements, which are renewed annually provide
$50,000,000 ($10,000,000 with each bank) of short-term credit availability on
a committed basis. At June 30, 1995, $7,500,000 of short-term borrowings
under the agreements was outstanding.
The Company obtained funds of $1,345,000 from issuances of Common Stock
under its Dividend Reinvestment and Common Stock Purchase Plan (the "Plan")
for the six months ended June 30, 1995.
Future Financing Requirements
-----------------------------
The Company's ability to finance future utility construction programs
depends substantially on rate relief. Rate relief has an impact on cash flow
from operating activities and consequently affects the Company's ability to
obtain external financing, since sufficient operating cash flows are necessary
to maintain certain debt coverage ratios to allow for the issuance of
additional debt securities. Additionally, rate relief will have an impact on
the Company's ability to generate sufficient cash flows to provide a
reasonable return in the form of dividends to Aquarion's stockholders. In
light of the Company's substantial need for additional funds, the Company will
need additional debt and equity capital to finance future utility
construction. The type, amount and timing of new financings will be based on
the Company's general financial policies regarding capitalization, as well as
on market conditions and other economic factors.
Results of Operations for the six months
- ----------------------------------------
ended June 30, 1995 and 1994
- ----------------------------
Net income for the six months ended June 30, 1995 was $5,498,000
compared with $6,146,000 for the same 1994 period.
Operating results during the first six months of 1995 reflect the impact
of lower revenues from Real Estate sales and the Utilities as well as a higher
utility effective tax rate in 1995 compared with the previous year.
Operating revenues for the first six months of 1995 decreased $1,453,000
from the comparable 1994 period. Forest Products experienced a decrease in
revenues of $1,652,000, due to the termination of the cogeneration operation
in November 1994. Property Sales revenues decreased by $645,000 due primarily
to a strong second quarter of sales in 1994. Revenues from the Utilities
decreased $461,000, principally due to reduced 1995 consumption compared to
1994. Revenues from the Laboratories increased $1,383,000, reflecting the
impact of higher sampling receipts in 1995. Revenues from the Utility
Management Services businesses account for the remainder of the variance.
Operating expenses for the first six months of 1995 decreased $599,000
from the comparable 1994 period. Forest products experienced a decrease in
operating expenses of $1,201,000 which was primarily the result of the
termination of the cogeneration operation. Operating expenses from property
sales decreased by $179,000 due to the decreased volume in Land Sales program.
The Laboratories experienced an increase in operating expenses of $721,000
which was largely due to higher operating costs associated
-11-
with the increased sampling receipts in 1995. Operating expenses from the
Utilities and Utility Management Service businesses account for the remainder
of the variance.
General and administrative expenses for the first six months of 1995
decreased $276,000 from the comparable 1994 period. Expenses from the
Utilities decreased $375,000 primarily due to lower costs associated with bad
debt expense, health insurance, pension and employee benefits expenses
partially offset by increased costs for payroll and outside services. This
decrease was partially offset by an increase in consulting fees at the
Laboratories and in other Corporate expenses . Forest Products, Real Estate
and the Utility Management Services businesses account for the remainder of
the variance.
Depreciation expense for the first six months of 1995 was $148,000 lower
than the 1994 comparable period. This decrease is primarily attributable to
the retirement of the Cogeneration Plant at the Timco facility.
Interest expense for the first six months of 1995 was $120,000 higher
than the 1994 comparable period due to the interest expense associated with
the 1995 debt issuance by BHC of $30,000,000 and higher short-term borrowing
rates partially offset by lower outstanding average short-term debt.
Taxes other than income taxes for the first six months of 1995 decreased
$63,000 over the comparable 1994 period. Decreased property taxes of $182,000
offset by increased payroll taxes of $119,000 account for this variance.
Income taxes for the six months of 1995 were $259,000 higher than the
comparable 1994 period. The 1994 effective tax rate was lower as a result of
the tax benefits associated with non-recurring refinancings.
Results of Operations for the three months
- ------------------------------------------
ended June 30, 1995 and 1994
- ----------------------------
Net income for the three months ended June 30, 1995 was $3,107,000
compared with $3,572,000 for the same 1994 period.
Operating results during the second quarter of 1995 reflect the impact
of lower revenues from Property Sales in 1995 compared with the previous
year's quarter.
Operating revenues during the second quarter of 1995 decreased
$1,205,000 from the comparable 1994 period. Forest Products experienced a
decrease in revenues of $900,000, due to the termination of the cogeneration
operation in November 1994. Property Sales revenues decreased by $785,000 due
to a higher level of sales in the second quarter of 1994. Revenues from the
Laboratories increased $537,000, reflecting the impact of higher sampling
receipts in the second quarter of 1995. Revenues from the Utilities and
Utility Management Services businesses account for the remainder of the
variance.
Operating expenses during the second quarter of 1995 decreased $548,000
from the comparable 1994 period. Forest Products experienced a decrease in
operating expenses of $704,000 which was primarily the result of the
termination of the cogeneration operation. Operating expenses from property
sales decreased by $159,000 due to the lower level of land sales in 1995. The
Laboratories experienced an increase in operating expenses of $323,000 which
was largely due to higher operating costs associated
-12-
with the increased sampling receipts in the second quarter of 1995. Operating
expenses from the Utilities and Utility Management Service businesses account
for the remainder of the variance.
General and administrative expenses during the second quarter of 1995
decreased $129,000 from the comparable 1994 period. Expenses from the
Utilities decreased $282,000 primarily due to lower costs associated with bad
debt expense, health insurance, pension and employee benefits expenses
partially offset by increased costs for outside services. The Laboratories
experienced an increase in general and administrative expenses of $84,000 for
consulting fees, and Corporate expenses increased by $60,000 in 1995. Forest
Products, Real Estate and the Utility Management Services businesses account
for the remainder of the variance.
Depreciation expense for the second quarter of 1995 was $75,000 lower
than the 1994 comparable period. This decrease is primarily attributable to
the retirement of the Cogeneration Plant at the Timco facility.
Interest expense for the second quarter of 1995 was $214,000 higher than
the 1994 comparable period. This increase was largely attributable to the
interest expense associated with the 1995 debt issuance by BHC of $30,000,000
and higher short-term borrowing rates.
Taxes other than income taxes for the second quarter of 1995 decreased
$143,000 over the comparable 1994 period. Decreased property taxes of
$199,000 partially offset by increased payroll taxes of $56,000 account for
this variance.
Significant changes in balance sheet accounts
- ---------------------------------------------
for the six months ended June 30, 1995
- --------------------------------------
The increase of $1,027,000 in inventory is largely the result of the
Forest Products division's build-up of inventory to reach their normal level
of summer inventory.
Short-term borrowings increased by $7,500,000 primarily due to increased
construction costs for normal utility construction projects. Short-term debt
was reduced in the fourth quarter 1994 with the proceeds received from PSNH in
connection with the termination of the cogeneration operation.
The decrease of $1,376,000 in accounts payable and accrued liabilities
is principally due to lower general accounts payable and accrued payroll
costs.
Income taxes payable decreased by $4,372,000 due primarily to the
payment of taxes related to the 1994 termination of the long-term rate order
with PSNH, which did not have to be reflected in earlier estimated tax
payments and accelerated state tax payments in 1995.
Accrued postretirement benefit costs increased by $826,000 in 1995 which
was largely the result of the recognition of the transition obligation
resulting from the Company's adoption of FASB No. 106 "Employers Accounting
for Postretirement Benefits Other than Pensions" in 1993. As allowed by
FASB No. 106, the Company has elected to recognize the transition obligation
of $10,471,000 over 20 years.
-13-
PART II. OTHER INFORMATION
--------------------------
ITEM 1. - LEGAL PROCEEDINGS
- ---------------------------
All legal proceedings have previously been reported on the Annual Report
on Form 10-K in Part I, Item 3 for the year ended December 31, 1994.
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -------------------------------------------------------------
All "Submission of Matters to a Vote of Security Holders" have been
previously reported on Form 10-Q in Part II, Item 4 for the quarter ended
March 31, 1995.
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
- ------------------------------------------
(a) Exhibits.
27 Financial Data Schedule (filed herewith).
(b) The Company did not file a report on Form 8-K for the six
months ended June 30, 1995.
-14-
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AQUARION COMPANY
Date: August 3, 1995 By /s/JANET M. HANSEN
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Janet M. Hansen
Senior Vice President,
Chief Financial Officer and
Treasurer
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