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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2007
COMMISSION FILE NUMBER 1-31374
BIW LIMITED
(Exact name of registrant as specified in its charter)
Connecticut 04-3617838
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(State of Incorporation or Organization) (I.R.S Employer I.D. No.)
230 BEAVER STREET, ANSONIA, CT 06401
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 735-1888
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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 by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
LARGE ACCELERATED FILER [ ] ACCELERATED FILER [ ] NON-ACCELERATED FILER [X]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). YES [ ] NO [X]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at May 11, 2007
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COMMON STOCK, NO PAR VALUE 1,674,579
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIW LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(UNAUDITED)
Three Months Ended
March 31,
2007 2006
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Operating revenue $ 2,304,891 $ 2,040,097
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Operating expenses:
Operating expenses 1,348,991 1,359,157
Maintenance expenses 105,894 100,073
Depreciation 273,750 268,751
Taxes other than income taxes 202,815 196,302
Taxes on income 41,712 (20,273)
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Total operating expenses 1,973,162 1,904,010
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Operating income 331,729 136,087
Amortization of deferred income
on land dispositions (net of income taxes) -- 242
Other income, net (including allowance
for funds used during construction of
$20,000 in 2007 and $14,318 in 2006) 36,745 26,468
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Income before interest expense 368,474 162,797
Interest and amortization of debt discount 262,572 201,528
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Net income (loss) $ 105,902 $ (38,731)
Retained earnings, beginning $ 8,254,588 $ 8,740,825
Dividends 284,678 282,553
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Retained earnings, ending $ 8,075,812 $ 8,419,541
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Earnings (loss) per share, basic $ .06 $ (.02)
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Earnings (loss) per share, diluted $ .06 $ (.02)
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Dividends per share $ .17 $ .17
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The accompanying notes are an integral part of these consolidated financial
statements.
2
BIW Limited
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, Dec. 31,
2007 2006
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ASSETS:
Utility plant $ 43,557,861 $ 42,628,195
Accumulated depreciation (11,077,153) (10,805,946)
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Net utility plant 32,480,708 31,822,249
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Other property, net 498,497 501,927
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Current Assets:
Accounts receivable, net of
allowance for doubtful accounts 1,025,214 1,179,559
Accrued utility revenue 677,409 664,482
Materials & supplies 354,605 312,766
Prepayments 231,704 8,135
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Total current assets 2,288,932 2,164,942
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Deferred charges 124,962 137,007
Unamortized debt expense 261,567 276,999
Regulatory asset-income taxes recoverable 672,803 672,803
Other assets 998,657 910,847
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2,057,989 1,997,656
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$ 37,326,126 $ 36,486,774
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STOCKHOLDERS' EQUITY AND LIABILITIES
Stockholders' Equity:
Common stock, no par value, authorized
5,000,000 shares; issued and outstanding
1,674,579 at 3/31/07 and 12/31/06 $ 3,125,329 $ 3,125,329
Additional paid in capital 14,832 14,832
Retained earnings 8,075,812 8,254,588
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11,215,973 11,394,749
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Long-term debt 9,000,000 9,000,000
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Current Liabilities:
Note payable 8,480,000 7,330,000
Accounts payable and accrued liabilities 1,031,334 1,249,576
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Total current liabilities 9,511,334 8,579,576
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Customers' advances for construction 607,288 611,413
Contributions in aid of construction 3,303,759 3,209,589
Accumulated provision for pension and
postretirement 245,557 245,557
Regulatory liability-income taxes refundable 111,768 111,768
Deferred income taxes 3,330,447 3,334,122
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7,598,819 7,512,449
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$ 37,326,126 $ 36,486,774
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The accompanying notes are an integral part of these consolidated financial
statements.
3
BIW Limited
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months
Ended March 31,
2007 2006
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Cash Flows From Operating Activities
Net income (loss) $ 105,902 $ (38,731)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 273,750 284,511
Amortization of deferred income, net of tax -- (242)
Deferred income taxes (3,675) (3,675)
Increases and decreases in assets and
liabilities:
Accounts receivable and accrued utility revenue 141,418 234,355
Materials and supplies (41,839) (7,335)
Prepayments (223,569) (269,026)
Accounts payable and accrued liabilities (218,242) (123,781)
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Total adjustments (72,157) 114,807
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Net cash flows provided by
operating activities 33,745 76,076
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Cash flows from investing activities:
Capital expenditures, net (839,941) (633,823)
Sale of assets 1,207 13,804
Other assets and deferred charges, net (60,333) (23,504)
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Net cash flows used in investing activities (899,067) (643,523)
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Cash flows from financing activities:
Dividends paid (284,678) (282,553)
Borrowings under line of credit 1,150,000 850,000
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Net cash flows provided by
financing activities: 865,322 567,447
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Net change in cash and cash equivalents and
cash and cash equivalents, ending $ 0 $ 0
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Supplemental disclosure of cash flow information:
Cash paid for
Interest $ 129,915 $ 68,543
Supplemental disclosure of non-cash investing
activities:
Birmingham Utilities receives contributions
of plant from builders and developers. These
contributions of plant are reported in
utility plant and in customers' advances for
construction. The contributions are deducted
from construction expenditures by BUI
Gross plant additions $ 929,986 $ 631,378
Customers' advances for construction (90,045) 2,445
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Capital expenditures, net $ 839,941 $ 633,823
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The accompanying notes are an integral part of these consolidated financial
statements.
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BIW Limited
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BIW Limited (BIW or the Company) is the parent company of (i) Birmingham
Utilities, Inc. and its wholly-owned subsidiary Eastern Connecticut Regional
Water Company, Inc. (Eastern Division), (collectively BUI or Birmingham
Utilities), a regulated public water service company that provides water service
to customers in various cities and towns in Connecticut and (ii) Birmingham H2O
Services, Inc. (BHS or H2O Services), which provides non-regulated water-related
services to other water utilities, municipalities, contractors and individuals
throughout Connecticut.
Birmingham Utilities is subject to the jurisdiction of the Connecticut
Department of Public Utility Control (DPUC) as to accounting, financing,
ratemaking, disposal of property, the issuance of long-term securities and other
matters affecting its operations. The Connecticut Department of Public Health
(the Health Department or DPH) has regulatory powers over BUI under state law
with respect to water quality, sources of supply, and the use of watershed land.
The Connecticut Department of Environmental Protection (DEP) is authorized to
regulate BUI's operations with regard to water pollution abatement, diversion of
water from streams and rivers, safety of dams and the location, construction and
alteration of certain water facilities. BUI's activities are also subject to
regulation with regard to environmental and other operational matters by
federal, state and local authorities, including, without limitation, zoning
authorities.
In addition, Birmingham Utilities is subject to regulation of its water
quality under the Federal Safe Drinking Water Act (SDWA). The United States
Environmental Protection Agency has granted to the Health Department the primary
enforcement responsibility in Connecticut under the SDWA. The Health Department
has established regulations containing maximum limits on contaminants, which
have or may have an adverse effect on health.
NOTE 1 - QUARTERLY FINANCIAL DATA
The accompanying consolidated financial statements of BIW Limited have been
prepared in accordance with accounting principles generally accepted in the
United States of America, without audit, except for the Balance Sheet for the
year ended December 31, 2006, which has been audited. The interim financial
information conforms to 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,
complies with the Uniform System of Accounts and ratemaking practices prescribed
by the DPUC. In management's opinion, these consolidated financial statements
include all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the results of operations for the interim
periods presented. Certain information and footnote disclosures required by
accounting principles generally accepted in the United States of America have
been
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omitted, pursuant to such rules and regulations; although the Company believes
that the disclosures are adequate to make the information presented not
misleading.
In the first quarter of 2006, the Company adopted Statement of Financial
Accounting Standards No. 123R, "Share-Based Payment" (SFAS 123R) using the
modified prospective method. Under the modified prospective method, compensation
cost is recognized for all share-based payments granted after the adoption of
SFAS 123R and for all awards granted to employees prior to the adoption date of
SFAS 123R that were unvested on the adoption date. Accordingly, no restatements
were made to prior periods. Prior to the adoption of SFAS 123R, the Company
applied Statement of Financial Accounting Standards No. 123, "Accounting for
Stock Based Compensation" (SFAS 123) to account for its stock option plans. As
permitted by SFAS 123, the Company had chosen to apply Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" in accounting
for its employee stock compensation plans. Accordingly, no compensation expense
was recognized for its employee stock option issuances, as stock options were
issued with an exercise price at least equal to the closing price at the date of
grant.
In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for
Defined Benefit Pension and Other Postretirement Plans, an Amendment of FASB
Statements No. 87, 88, 106, and 132(R)" (SFAS 158). SFAS 158 requires companies
to recognize the overfunded or underfunded status of a defined benefit
postretirement plan as an asset or liability in its balance sheet and to
recognize changes in the funded status in the year in which the changes occur
through comprehensive income. SFAS 158 also requires the funded status of a plan
to be measured as of the balance sheet date. The Company adopted the provisions
of SFAS 158 effective December 31, 2006. The adoption of SFAS 158 did not have a
material impact on the Company's financial statements.
For further information, refer to the financial statements and accompanying
footnotes included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2006.
Birmingham Utilities' business of selling water is to a certain extent
seasonal because water consumption normally increases during the warmer summer
months. Another factor affecting the comparability of various accounting periods
includes the timing of rate increases. In addition, H2O Services' business
activities slow in the winter months. Accordingly, annualization of the results
of operations for the three months ended March 31, 2007 and 2006 would not
necessarily accurately forecast the annual results of each year.
NOTE 2 - PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of BIW Limited
and its wholly owned subsidiaries Birmingham Utilities, Inc. and Birmingham H2O
Services, Inc. All significant intercompany balances and transactions have been
eliminated in consolidation.
NOTE 3 - WATER SERVICE RATE INCREASE
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On November 27, 2006, the DPUC granted Birmingham Utilities a 16.2 percent
water service rate increase designed to provide a $1,172,148 annual increase in
revenues and a 10.2 percent ratemaking cost of common equity. The rate order
allowed BUI to combine its Ansonia and Eastern divisions for ratemaking
purposes.
In October 2005, the Ansonia division of Birmingham Utilities filed an
application with the DPUC for a 4.4%, $258,655 water service rate increase to
account specifically for increases in purchased water costs and property taxes.
This limited rate filing is allowed under Section 16-32c of the Connecticut
General Statutes. The DPUC granted BUI's request in its entirety in January
2006.
NOTE 4 - CALCULATION OF WEIGHTED AVERAGE SHARES OUTSTANDING- DILUTED
The following table summarizes the number of common shares used in the
calculation of earnings per share.
Three Months Ended
3/31/07 3/31/06
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Weighted average shares outstanding
for earnings per share, basic 1,674,579 1,662,079
Incremental shares from assumed
conversion of stock options 5,614 14,527
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Weighted average shares outstanding
for earnings per share, diluted 1,680,193 1,676,606
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NOTE 5 - PENSION AND OTHER POSTRETIREMENT BENEFITS
Net periodic pension and other postretirement benefit costs include the
following components:
Pension Benefits Postretirement Benefits
For the three months For the three months
ended March 31, ended March 31,
2007 2006 2007 2006
------- ------- ------- -------
Components of net periodic benefit cost:
Service cost $18,421 $17,332 $ 7,303 $ 7,279
Interest cost 30,267 29,737 11,951 11,123
Expected return on plan assets (26,123) (22,850) (13,147) (11,514)
Amortization of unrecognized
transition obligation 1,468 1,468 6,345 6,345
Amortization of unrecognized
prior service cost 1,293 1,293 -- --
Recognized net actuarial loss (gain) -- 953 -- (49)
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Net periodic benefit cost $25,326 $27,933 $12,452 $13,184
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of the Financial Condition and Results
of Operations contained in the Company's Annual Report on Form 10K for the year
ended December 31, 2006 should be read in conjunction with the comments below.
Birmingham Utilities, a regulated public water service company, collects
and distributes water for domestic, commercial and industrial uses and fire
protection in the Naugatuck Valley towns of Ansonia, Derby and small parts of
Seymour, Connecticut. The Company refers to this operation as its Ansonia
Division. Water service is also provided for domestic and commercial use in 33
satellite water operations in 16 towns in eastern Connecticut, which form BUI's
Eastern Division. This division, which was acquired in 2003, was the former
Eastern Connecticut Regional Water Company, Inc.
H2O Services, the Company's non-regulated subsidiary, offers a consumer
protection program for residential service lines and provides water related
services to other water utilities, municipalities, contractors and individuals
throughout Connecticut. H2O Services operates from both the Ansonia and Eastern
Divisions as well as from another location in Guilford, CT. Non-regulated
operations from the Ansonia Division principally relate to construction
activities including the installation of water mains, services and other water
related infrastructure. Non-regulated operations at the Eastern Division
principally relate to the operation of other water systems not owned by the
Company through contract operations. Non-regulated operations from our Guilford,
CT location relate to Rhodes Pump Service, a residential pump and filter
services business.
CAPITAL RESOURCES AND LIQUIDITY
Completion of Birmingham Utilities' Long Term Capital Improvement Program
will be funded from the internal generation of funds, including rate relief, as
well as BUI's ability to raise capital from external sources. For the three
months ended March 31, 2007 and 2006, BUI's additions to utility plant, net of
customer advances, were $839,941 and $633,823 respectively (See Statement of
Cash Flows).
Birmingham Utilities has outstanding a series of first mortgage bonds in
the amount of $9,000,000 due on April 15, 2011, issued under its Mortgage
Indenture. The bonds carry an interest rate of 5.21%. The terms of the indenture
provide, among other things, limitations on (a) payment of cash dividends; and
(b) incurrence of additional bonded indebtedness. Interest is payable
semi-annually on the 15th day of April and October.
Note Payable consists of a $9,000,000 unsecured line of credit, which will
expire in September 2007. During the revolving period, Birmingham Utilities can
choose
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between variable rate options of 30, 60, 90 or 180-day LIBOR plus 100 basis
points or prime. BUI is required to pay only interest during the revolving
period. The principal is payable in full at maturity. The line of credit
requires the maintenance of certain financial ratios and net worth of
$7,500,000. BUI was in compliance with all covenants as of March 31, 2007. The
Company believes that it will be able to extend or replace the existing line of
credit upon its expiration.
Results of Operations for the Three Months Ended March 31, 2007 and 2006
- ------------------------------------------------------------------------
Operating Revenues
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Operating revenues of $2,304,891 for the first three months of 2007 are
$264,794 or 13% higher than the comparable 2006 period. The increase is
primarily due to the 16.2% rate increase granted to Birmingham Utilities, which
became effective on November 27, 2006. The increase is partially offset by a 3%
decline in H2O Services due to less demand for its services in the winter
months.
Operating and Maintenance Expenses
- ----------------------------------
Operating and maintenance expenses for the first three months of 2007 of
$1,454,885 are $4,345 lower than comparable costs for the first three months of
2006. Increased purchased water costs and power costs in the regulated
operations were offset by decreased salary expense due to a smaller workforce
achieved through a combining of positions in the two divisions. Operating
expenses for H2O Services decreased due to less construction activity.
Depreciation
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Depreciation for the first three months of 2007 of $273,750 is $4,999
higher than the comparable 2006 period, due to plant additions and improvements
made over the last two years.
Taxes Other Than Income Taxes
- -----------------------------
Taxes other than income taxes for the three month period ended March 31,
2007 is $6,513 higher than the comparable 2006 period. Increased municipal
property taxes as a result of plant additions and improvements accounts for this
increase.
Other Income
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Other income for the first three months of 2007 of $36,745 is $10,277
higher than the comparable three month period in 2006. Increased AFUDC for
capital projects accounts for the difference.
Interest Expense
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Interest expense of $262,572 recorded in the first three months of 2007 is
$61,044 higher than the comparable 2006 period. The increase in short term
borrowings as well as higher interest rates account for the additional expense.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has certain exposures to market risk related to changes
in interest rates. There have been no material changes in market risk since the
filing of the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2006.
ITEM 4T. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are designed
to ensure that information required to be disclosed in the Company's Exchange
Act reports is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms, and that such information is
accumulated and communicated to the Company's management, including its Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure based on the definition of "disclosure
controls and procedures" in Rule 13a-15(e). In designing and evaluating the
disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
As of March 31, 2007, the Company carried out an evaluation, under the
supervision and with the participation of the Company's management, including
the Company's Chief Executive Officer and the Company's Chief Financial Officer,
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures. Based on the foregoing, the Company's Chief Executive
Officer and Chief Financial Officer concluded that the Company's disclosure
controls and procedures were effective as of March 31, 2007.
There have been no changes in the Company's internal control over financial
reporting during the quarter ended March 31, 2007 that have materially affected,
or are reasonably likely to materially affect the Company internal control over
financial reporting.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS
31.1 Certification of CEO pursuant to Section 302 of Sarbanes-Oxley Act.
31.2 Certification of CFO pursuant to Section 302 of Sarbanes-Oxley Act.
32.1 Certification of CEO and CFO pursuant to Section 906 of Sarbanes-Oxley Act
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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.
BIW Limited
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Registrant
Date: May 15, 2007
By: /s/ John S. Tomac
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John S. Tomac, President
(Duly authorized officer, and
chief financial officer)
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