1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(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, 2001
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 0-8084
Connecticut Water Service, Inc.
(Exact name of registrant as specified in its charter)
Connecticut 06-0739839
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
93 West Main Street, Clinton, CT 06413-1600
(Address of principal executive offices) (Zip Code)
(860) 669-8636
(Registrant's telephone number, including area code)
Not Applicable
(Former name, 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 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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a count. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
5,072,598
Number of shares of common stock outstanding, June 30, 2001
2
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
Financial Report
June 30, 2001 and 2000
TABLE OF CONTENTS
PART I, ITEM 1: FINANCIAL STATEMENTS
Consolidated Balance Sheets at June 30, 2001
and December 31, 2000 Page 3
Consolidated Statements of Capitalization at
June 30, 2001 and December 31, 2000 Page 4
Consolidated Statements of Income for Three Months
Ended June 30, 2001 and 2000 Page 5
Consolidated Statements of Income for Six Months
Ended June 30, 2001 and 2000 Page 6
Consolidated Statements of Income for Twelve Months
Ended June 30, 2001 and 2000 Page 7
Consolidated Statements of Retained Earnings for Three
Months Ended June 30, 2001 and 2000 Page 8
Consolidated Statements of Retained Earnings for Six
Months Ended June 30, 2001 and 2000 Page 8
Consolidated Statements of Retained Earnings for Twelve
Months Ended June 30, 2001 and 2000 Page 8
Consolidated Statements of Cash Flows for Six Months
Ended June 30, 2001 and 2000 Page 9
Notes to Consolidated Financial Statements Page 10-11
PART I, ITEM 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations Page 11-13
Signature Page Page 14
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Page 3
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AT JUNE 30, 2001 AND DECEMBER 31, 2000
(IN THOUSANDS)
DEC. 31,
JUNE 30, 2000
2001 (UNAUDITED
(UNAUDITED) AND RESTATED)
----------- ------------
ASSETS
Utility Plant
Utility Plant $ 261,796 $ 257,634
Construction Work in Progress 6,960 8,359
Utility Plant Acquisition Adjustments (1,256) (1,256)
--------- ---------
267,500 264,737
Accumulated Provision for Depreciation (74,163) (71,568)
--------- ---------
Net Utility Plant 193,337 193,169
--------- ---------
Other Property and Investments 3,133 3,039
--------- ---------
Current Assets
Cash 792 314
Accounts Receivable (Less Allowance, 2001 - $251; 2000 - $218) 4,992 4,831
Accrued Unbilled Revenues 3,414 3,229
Materials and Supplies, at Average Cost 872 795
Prepayments and Other Current Assets 203 122
--------- ---------
Total Current Assets 10,273 9,291
--------- ---------
Deferred Charges and Regulatory Assets
Unamortized Debt Issuance Expense 5,418 5,530
Unrecovered Income Taxes 9,083 9,040
Postretirement Benefits Other Than Pension 953 953
Other Costs 1,509 1,524
--------- ---------
Total Deferred Charges and Regulatory Assets 16,963 17,047
--------- ---------
TOTAL ASSETS $ 223,706 $ 222,546
========= =========
CAPITALIZATION AND LIABILITIES
Capitalization (See accompanying statements)
Common Stockholders' Equity $ 68,625 $ 67,110
Preferred Stock 847 847
Minority Interest -- 117
Long-Term Debt 65,993 66,283
--------- ---------
Total Capitalization 135,465 134,357
--------- ---------
Current Liabilities
Current Portion of Long Term Debt 305 280
Interim Bank Loans Payable 2,798 1,800
Accounts Payable, Accrued Taxes and Accrued Interest 3,954 7,436
Other 256 101
--------- ---------
Total Current Liabilities 7,313 9,617
--------- ---------
Long-Term Liabilities
Advances for Construction 17,627 17,062
Contributions in Aid of Construction 28,320 27,009
Deferred Federal Income Taxes 18,666 18,165
Unfunded Future Income Taxes 8,546 8,546
Long-term Compensation Arrangements 5,768 5,758
Unamortized Investment Tax Credits 2,001 2,032
Commitments and Contingencies
--------- ---------
Total Long-Term Liabilities 80,928 78,572
--------- ---------
TOTAL CAPITALIZATION AND LIABILITIES $ 223,706 $ 222,546
========= =========
The accompanying notes are an integral part of these financial statements.
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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CAPITALIZATION
At June 30, 2001 and December 31, 2000
(In thousands, except share amounts)
DEC. 31,
JUNE 30, 2000
2001 (UNAUDITED
(UNAUDITED) AND RESTATED)
------------ ------------
Common Stockholders' Equity
Common Stock Without Par Value Authorized - 7,500,000 Shares; $ 48,909 $ 48,617
Shares Issued and Outstanding: 2001 - 5,072,598; 2000 - 5,069,324
Stock Issuance Expense (1,385) (1,385)
Retained Earnings 21,101 19,878
------------ ------------
Total Common Stockholders' Equity 68,625 67,110
------------ ------------
Preferred 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
------------ ------------
Cumulative Preferred Stock of Barnstable Water Company
Voting, $100 Par Value; Authorized, Issued and Outstanding
750 shares. Redeemable at $105 per share 75 75
------------ ------------
Total Preferred Stock 847 847
------------ ------------
Minority Interest -- 117
------------ ------------
Long-Term Debt
The Connecticut Water Company
First Mortgage Bonds
5.875% Series R, due 2022 14,670 14,670
6.65% Series S, due 2020 8,000 8,000
5.75% Series T, due 2028 5,000 5,000
5.3% Series U, due 2028 4,550 4,550
6.94% Series V, due 2029 12,050 12,050
------------ ------------
44,270 44,270
Unsecured Water Facilities Revenue Refinancing Bonds
5.05% 1998 Series A, due 2028 9,745 9,770
5.125% 1998 Series B, due 2028 7,770 7,830
Other
5.5% Unsecured Promissory Note 51 71
------------ ------------
Total Connecticut Water Company 61,836 61,941
------------ ------------
Crystal Water Utilities Corporation
8.0% New London Trust, Due 2017 128 130
------------ ------------
Crystal Water Company of Danielson
7.82% Connecticut Development Authority, Due 2020 501 507
8.0% New London Trust, Due 2011 2,102 2,170
------------ ------------
Total Crystal 2,603 2,677
------------ ------------
Chester Realty
6% Note Payable, Due 2006 106 115
------------ ------------
Barnstable Water Company
10.2% Indianapolis Life Insurance Co., Due 2011 1,625 1,700
------------ ------------
Total Connecticut Water Service, Inc. 66,298 66,563
------------ ------------
Less Current Portion 305 280
------------ ------------
Total Long-Term Debt 65,993 66,283
------------ ------------
TOTAL CAPITALIZATION $ 135,465 $ 134,357
============ ============
The accompanying notes are an integral part of these financial statements.
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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2001 AND 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2000
2001 (UNAUDITED
(UNAUDITED) AND RESTATED)
------------ ------------
Operating Revenues $ 10,974 $ 10,834
------------ ------------
Operating Expenses
Operation and Maintenance 4,652 4,558
Depreciation 1,233 1,182
Income Taxes 1,351 1,150
Taxes Other Than Income Taxes 887 1,077
------------ ------------
Total Operating Expenses 8,123 7,967
------------ ------------
Utility Operating Income 2,851 2,867
------------ ------------
Other Income (Deductions), Net of Taxes
Gain (Loss) on Property Transactions (7) 39
Non-Water Sales Earnings 106 75
Allowance for Funds Used During Construction 99 103
Merger Costs (31) (38)
Other 76 44
------------ ------------
Total Other Income (Deductions), Net of Taxes 243 223
------------ ------------
Interest and Debt Expense
Interest on Long-Term Debt 1,002 1,027
Other Interest Charges 112 121
Amortization of Debt Expense 56 56
------------ ------------
Total Interest and Debt Expense 1,170 1,204
------------ ------------
Net Income Before Preferred Dividends 1,924 1,886
Preferred Stock Dividend Requirement 10 10
------------ ------------
Net Income Applicable to Common Stock $ 1,914 $ 1,876
============ ============
Weighted Average Common Shares Outstanding:
Basic 5,072 5,069
Diluted 5,106 5,084
Earnings Per Common Share:
Basic $ 0.38 $ 0.37
Diluted $ 0.37 $ 0.37
Dividends Per Common Share $ 0.30 $ 0.29
The accompanying notes are an integral part of these financial statements.
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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2000
2001 (UNAUDITED
(UNAUDITED) AND RESTATED)
------------ ------------
Operating Revenues $ 21,202 $ 21,059
------------ ------------
Operating Expenses
Operation and Maintenance 9,092 8,989
Depreciation 2,458 2,367
Income Taxes 2,212 2,072
Taxes Other Than Income Taxes 2,124 2,215
------------ ------------
Total Operating Expenses 15,886 15,643
------------ ------------
Utility Operating Income 5,316 5,416
------------ ------------
Other Income (Deductions), Net of Taxes
Gain (Loss) on Property Transactions 1,110 59
Non-Water Sales Earnings 170 136
Allowance for Funds Used During Construction 198 203
Merger Costs (351) (99)
Other 99 78
------------ ------------
Total Other Income (Deductions), Net of Taxes 1,226 377
------------ ------------
Interest and Debt Expense
Interest on Long-Term Debt 2,030 2,047
Other Interest Charges 192 197
Amortization of Debt Expense 112 112
------------ ------------
Total Interest and Debt Expense 2,334 2,356
------------ ------------
Net Income Before Preferred Dividends 4,208 3,437
Preferred Stock Dividend Requirement 19 19
------------ ------------
Net Income Applicable to Common Stock $ 4,189 $ 3,418
============ ============
Weighted Average Common Shares Outstanding:
Basic 5,073 5,069
Diluted 5,099 5,087
Earnings Per Common Share:
Basic $ 0.83 $ 0.67
Diluted $ 0.82 $ 0.67
Dividends Per Common Share $ 0.59 $ 0.58
The accompanying notes are an integral part of these financial statements.
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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE TWELVE MONTHS ENDED JUNE 30, 2001 AND 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2000
2001 (UNAUDITED
(UNAUDITED) AND RESTATED)
------------ ------------
Operating Revenues $ 44,140 $ 45,401
------------ ------------
Operating Expenses
Operation and Maintenance 18,483 19,184
Depreciation 4,809 4,679
Income Taxes 4,719 5,333
Taxes Other Than Income Taxes 4,567 4,447
------------ ------------
Total Operating Expenses 32,578 33,643
------------ ------------
Utility Operating Income 11,562 11,758
------------ ------------
Other Income (Deductions), Net of Taxes
Gain (Loss) on Property Transactions 1,583 130
Non-Water Sales Earnings 277 162
Allowance for Funds Used During Construction 411 414
Merger Costs (640) (149)
Other 257 199
------------ ------------
Total Other Income (Deductions), Net of Taxes 1,888 756
------------ ------------
Interest and Debt Expense
Interest on Long-Term Debt 4,083 4,088
Other Interest Charges 478 429
Amortization of Debt Expense 222 223
------------ ------------
Total Interest and Debt Expense 4,783 4,740
------------ ------------
Net Income Before Preferred Dividends 8,667 7,774
Preferred Stock Dividend Requirement 38 38
------------ ------------
Net Income Applicable to Common Stock $ 8,629 $ 7,736
============ ============
Weighted Average Common Shares Outstanding:
Basic 5,071 5,066
Diluted 5,094 5,085
Earnings Per Common Share:
Basic $ 1.70 $ 1.53
Diluted $ 1.69 $ 1.52
Dividends Per Common Share $ 1.18 $ 1.17
The accompanying notes are an integral part of these financial statements.
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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE THREE MONTHS ENDED JUNE 30, 2001 AND 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2000
2001 (UNAUDITED
(UNAUDITED) AND RESTATED)
------------ ------------
Balance at Beginning of Period $ 20,703 $ 18,003
Net Income Before Preferred Dividends of Parent 1,924 1,886
------------ ------------
22,627 19,889
------------ ------------
Dividends Declared:
Cumulative Preferred, Class A, $.20 per share 3 3
Cumulative Preferred, Series $.90, $.225 per share 7 7
Common Stock - 2001 $.30 per share; 2000 $.29 per share 1,516 1,468
------------ ------------
1,526 1,478
------------ ------------
Balance at End of Period $ 21,101 $ 18,411
============ ============
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2000
2001 (UNAUDITED
(UNAUDITED) AND RESTATED)
------------ ------------
Balance at Beginning of Period $ 19,878 $ 17,910
Net Income Before Preferred Dividends of Parent 4,208 3,437
------------ ------------
24,086 21,347
------------ ------------
Dividends Declared:
Cumulative Preferred, Class A, $.40 per share 6 6
Cumulative Preferred, Series $.90, $.45 per share 13 13
Common Stock - 2001 $.59 per share; 2000 $.58 per share 2,966 2,917
------------ ------------
2,985 2,936
------------ ------------
Balance at End of Period $ 21,101 $ 18,411
============ ============
FOR THE TWELVE MONTHS ENDED JUNE 30, 2001 AND 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2000
2001 (UNAUDITED
(UNAUDITED) AND RESTATED)
------------ ------------
Balance at Beginning of Period $ 18,411 $ 16,532
Net Income Before Preferred Dividends of Parent 8,667 7,774
------------ ------------
27,078 24,306
------------ ------------
Dividends Declared:
Cumulative Preferred, Class A, $.80 per share 12 12
Cumulative Preferred, Series $.90, $.90 per share 26 26
Common Stock - 2001 $1.18 per share; 2000 $1.17 per share 5,939 5,857
------------ ------------
5,977 5,895
------------ ------------
Balance at End of Period $ 21,101 $ 18,411
============ ============
The accompanying notes are an integral part of these financial statements.
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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(IN THOUSANDS)
2000
2001 (UNAUDITED
(UNAUDITED) AND RESTATED)
------------ ------------
Operating Activities:
Net Income Before Preferred Dividends of Parent $ 4,208 $ 3,437
------------ ------------
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation (including $100 in 2001, $75 in 2000 charged to other accounts) 2,575 2,442
Change in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable and Accrued Unbilled Revenues (346) (223)
(Increase) Decrease in Other Current Assets (158) 43
(Increase) Decrease in Other Non-Current Items -- 43
Increase (Decrease) in Accounts Payable, Accrued Expenses and
Other Current Liabilities (3,327) (2,318)
Increase (Decrease) in Deferred Federal Income Taxes and
Investment Tax Credits, Net 470 506
------------ ------------
Total Adjustments (786) 493
------------ ------------
Net Cash Provided by (Used for) Operating Activities 3,422 3,930
------------ ------------
Investing Activities:
Gross Additions to Utility Plant (including Allowance for Funds
Used During Construction of $198 in 2001 and $203 in 2000) (2,766) (2,582)
------------ ------------
Financing Activities:
Proceeds from Interim Bank Loans 2,798 3,081
Repayment of Interim Bank Loans (1,800) (3,061)
Proceeds from Issuance of Common Stock 292 42
Minority Interest (117) (11)
Repayment of Long-Term Debt (265) (364)
Advances, Contributions and Funds From Others for Construction, Net 1,899 933
Cash Dividends Paid (2,985) (2,936)
------------ ------------
Net Cash Provided by (Used in) Financing Activities (178) (2,316)
------------ ------------
Net Increase (Decrease) in Cash 478 (968)
Cash at Beginning of Year 314 1,127
------------ ------------
Cash at End of Period $ 792 $ 159
============ ============
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Interest (Net of Amounts Capitalized) $ 2,206 $ 2,047
State and Federal Income Taxes $ 1,760 $ 2,167
The accompanying notes are an integral part of these financial statements.
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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements included herein have been prepared by
CONNECTICUT WATER SERVICE, INC. (the Company), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission and reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for interim periods. Certain information and footnote
disclosures have been omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these consolidated financial
statements be read in conjunction with the financial statements and the notes
thereto included in the Company's latest annual report on Form 10-K.
The results for interim periods are not necessarily indicative of
results to be expected for the year since consolidated earnings are subject to
seasonal factors.
2. On May 30, 2001 the Connecticut Department of Pubic Utility Control (DPUC)
approved the Company's subsidiary, The Crystal Water Company's request to donate
approximately 340 acres of land to the Town of Killingly, Connecticut over a
three year period starting in 2002. The land to be donated has a total fair
market value of $2,995,000. Primarily as a result of Connecticut tax legislation
granting tax credits for the donation of land for open space purposes, these
donations will result in an after tax gain of approximately $1,500,000. The
Company expects that the donations will be made in three phases, one in each of
the calendar years of 2002, 2003 and 2004.
On July 25, 2001 the DPUC approved approximately 10 acres of land to
be donated the Town of Avon, Connecticut. The land has a fair market value of
$225,000. Primarily as a result of Connecticut tax legislation granting tax
credits for the donation of land for open space purposes, the donation will
result in an after tax gain of approximately $150,000. The Company expects that
the donation will be made in the calendar year 2002.
3. In June 2001, the FASB issued SFAS No. 141 "Business Combinations" which
eliminates the pooling-of-interests method of accounting and requires the use of
the purchase method for future business combinations. Also in June 2001, the
FASB issued SFAS No. 142 "Goodwill and Other Intangible Assets" requiring that
certain goodwill and other intangible assets acquired after June 30, 2001 not be
amortized effective January 1, 2002 subject to a fair value-based test.
These new accounting standards will not have a material effect on the
Company's financial position or results of operations.
4. On August 6, 2001 at a Special Meeting of its shareholders, the Company's
shareholders approved the amendment to the Company's Amended and Restated
Certificate of Incorporation increasing the number of authorized shares of
common stock to 15,000,000 from 7,500,000 shares.
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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
5. Earnings per average common share are calculated by dividing net income
applicable to common stock by the average number of shares of common stock
outstanding during the respective periods as detailed below:
3 Months Ended 12 Months Ended
6/30/01 6/30/00 6/30/01 6/30/00 12/31/00
---------- ---------- ---------- ---------- ----------
Common Shares Outstanding:
January 1, 2000 -- -- -- -- 5,063,687
July 1, 2000 & 1999
respectively -- -- 5,069,026 5,063,456 --
April 1, 2001 & 2000
respectively 5,072,439 5,068,861 -- -- --
Common Shares Issued:
To CSE - September 15, 1999 -- -- -- 125 --
To CSE - December 15, 1999 -- -- -- 106 --
To PSP - January 13, 2000 -- -- -- 10,099 10,099
To CSE - February 17, 2000 -- -- -- (5,070) (5,070)
To CSE - March 15, 2000 -- -- -- 145 145
To CSE - June 15, 2000 -- 165 -- 165 165
To CSE - September 15, 2000 -- -- 142 -- 142
To CSE - December 15, 2000 -- -- 155 -- 156
To PSP - January 13, 2001 -- -- 5,738 -- --
To PSP - February 17, 2001 -- -- (2,810) -- --
To CSE - March 15, 2001 -- -- 188 -- --
To CSE - June 15, 2001 159 -- 159 -- --
---------- ---------- ---------- ---------- ----------
Common Shares Outstanding:
June 30, 2001 & 2000
respectively 5,072,598 5,069,026 5,072,598 5,069,026
========== ========== ========== ==========
December 31, 2000 5,069,324
==========
Weighted Average Common Shares Outstanding:
Days outstanding basis
Basic 5,072,467 5,068,890 5,070,910 5,066,483 5,069,291
========== ========== ========== ========== ==========
Fully Diluted 5,106,077 5,083,929 5,093,716 5,085,652 5,088,180
========== ========== ========== ========== ==========
PSP = Performance Stock Program
CSE = Common Stock Equivalents
PART I, ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CORPORATE RESOURCES
The Company has a total of $9,000,000 in lines of credit provided by
two banks. As of June 30, 2001 approximately $6,200,000 of these lines were
unused and available to the Company.
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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS
THE FOLLOWING FACTORS HAD A SIGNIFICANT EFFECT UPON THE COMPANY'S NET
INCOME FOR THE THREE MONTHS ENDED JUNE 30, 2001 AS COMPARED TO THE NET INCOME
FOR THE SAME PERIOD LAST YEAR.
Net income applicable to common stock for the three months ended June
30, 2001 increased from that of June 30, 2000 by $38,000, or $.01 per basic
average common share. The increase in net income resulted from $20,000 higher
net other income (deductions), a $34,000 decrease in interest and debt expense
and a $16,000 decrease in utility operating income.
The increase in net other income (deductions) was partially due to an
increase in profits from the Company's Linebacker (SM) service line maintenance
program related to increased customer enrollment.
The decrease in utility operating income was primarily due to the
following:
- a 2% increase in operation and maintenance expense
- increased depreciation expense due to the Company's increased
investment in utility plant
- increased income tax expense partially due to book/tax timing
adjustments
partially offset by
- increased operating revenues partially due to over 1,000 new
customers added to the Company's water systems during the past
12 months
- a reduction in taxes other than income taxes resulting from
property tax rebatements
THE FOLLOWING FACTORS HAD A SIGNIFICANT EFFECT UPON THE COMPANY'S NET
INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2001 AS COMPARED TO THE NET INCOME FOR
THE SAME PERIOD LAST YEAR.
Net income applicable to common stock for the six months ended June 30,
2001 increased from that of June 30, 2000 by $771,000 or $.16 per basic average
common share. The increased income resulted from $849,000 higher net other
income (deductions), a $22,000 decrease in interest and debt expense and a
$100,000 decrease in utility operating income.
The major reasons for the higher net other income (deductions) were:
- a $1,051,000 increase in net gains on property transactions
resulting primarily from tax benefits the Company received for
its January 2001 donation of 134 acres of land to the Town of
Middlebury, Connecticut
- a $34,000, or 25% increase in net non-water sales earnings
partially due to increased customer participation in its
Linebacker (SM) service line maintenance program
partially offset by
- a $252,000 increase in merger costs related to the Company's
acquisition of Barnstable Holding Company which was
consummated in February 2001.
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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
The major causes of the lower utility operating income were:
- a 1.1% increase in operation and maintenance expense partially
due to higher treatment and utility costs
- a 3.8% increase in depreciation expense due to the Company's
increased investment in utility plant
- a 6.7% increase in income tax expense primarily due to
book/tax timing adjustments
partially offset by
- a .7% increase in operating revenues partially due to over
1,000 new customers added to Company's water systems during
the past 12 months
- a 4.1% reduction in taxes other than income taxes resulting
from property tax rebatements.
FORWARD LOOKING INFORMATION
This report, including management's discussion and analysis, contains
certain forward looking statements regarding the Company's results of operations
and financial position. These forward looking statements are based on current
information and expectations, and are subject to risks and uncertainties, which
could cause the Company's actual results to differ materially from expected
results.
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SIGNATURES
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.
Connecticut Water Service, Inc.
(Registrant)
Date: August 8, 2001 By /s/ David C. Benoit
David C. Benoit
Vice President - Finance
Date: August 8, 2001 By: /s/ Peter J. Bancroft
Peter J. Bancroft
Assistant Treasurer