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Previous: PUBLIC STORAGE PARTNERS II LTD, 10-Q, 1997-11-12 |
Next: CENTRAL FIDELITY BANKS INC, 10-Q, 1997-11-12 |
<PAGE> 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 September 30, 1997 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.
3,017,810
Number of shares of common stock outstanding, September 30, 1997
<PAGE> 2
CONNECTICUT WATER SERVICE, INC.
Financial Report
September 30, 1997 and 1996
TABLE OF CONTENTS
PART I, ITEM 1: FINANCIAL STATEMENTS
Consolidated Balance Sheets at September 30, 1997
and December 31, 1996 Page 3
Consolidated Statements of Capitalization at
September 30, 1997 and December 31, 1996 Page 4
Consolidated Statements of Income for Three Months
Ended September 30, 1997 and 1996 Page 5
Consolidated Statements of Income for Nine Months
Ended September 30, 1997 and 1996 Page 6
Consolidated Statements of Income for Twelve Months
Ended September 30, 1997 and 1996 Page 7
Consolidated Statements of Retained Earnings for Three
Months Ended September 30, 1997 and 1996 Page 8
Consolidated Statements of Retained Earnings for Nine
Months Ended September 30, 1997 and 1996 Page 8
Consolidated Statements of Retained Earnings for Twelve
Months Ended September 30, 1997 and 1996 Page 8
Consolidated Statements of Cash Flows for Nine Months
Ended September 30, 1997 and 1996 Page 9
Notes to Consolidated Financial Statements Page 10
PART I, ITEM 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations Page 11-12
Signature Page Page 13
<PAGE> 3
Page 3
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AT SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997 DEC. 31,
ASSETS (UNAUDITED) 1996
--------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Utility Plant
Utility Plant $ 201,849 $ 195,223
Construction Work in Progress 9,651 8,940
Utility Plant Acquisition Adjustments (1,206) (1,206)
--------- ---------
210,294 202,957
Accumulated Provision for Depreciation (51,507) (49,059)
--------- ---------
Net Utility Plant 158,787 153,898
--------- ---------
Investments 1,536 1,290
--------- ---------
Current Assets
Cash 834 35
Accounts Receivable (Less Allowance, 1997- $151; 1996 - $140) 3,930 3,736
Accrued Unbilled Revenues 3,089 2,830
Prepayments and Other Current Assets 1,662 736
--------- ---------
Total Current Assets 9,515 7,337
--------- ---------
Deferred Charges
Unamortized Debt Issuance Expense 5,086 5,212
Taxes Recoverable Through Future Rates 9,000 9,000
Postretirement Benefits Other Than Pension Recoverable
Through Future Rates 1,036 1,036
Recoverable Contamination Clean-Up Costs 5,400 5,400
Prepaid Income Taxes on Contributions in Aid of Construction 600 528
Other Costs 1,221 939
--------- ---------
Total Deferred Charges 22,343 22,115
--------- ---------
TOTAL ASSETS $ 192,181 $ 184,640
========= =========
CAPITALIZATION AND LIABILITIES
Capitalization (See accompanying statements)
Common Stockholders' Equity $ 55,923 $ 54,395
Preferred Stock 772 772
Long-Term Debt 54,563 54,430
--------- ---------
Total Capitalization 111,258 109,597
--------- ---------
Current Liabilities
Interim Bank Loans Payable 10,611 5,795
Accounts Payable and Accrued Taxes and Interest 6,928 7,166
Accrued Recoverable Contamination Clean-Up Costs 300 300
Other 2,167 1,951
--------- ---------
Total Current Liabilities 20,006 15,212
--------- ---------
Long-Term Liabilities
Accrued Recoverable Contamination Clean-Up Costs 2,534 2,757
Advances for Construction 14,191 13,600
Contributions in Aid of Construction 18,566 18,563
Deferred Federal Income Taxes 13,467 12,717
Unfunded Future Income Taxes 9,000 9,000
Unfunded Postretirement Benefits Other Than Pension 1,036 1,036
Unamortized Investment Tax Credits 2,123 2,158
--------- ---------
Total Long-Term Liabilities 60,917 59,831
--------- ---------
TOTAL CAPITALIZATION AND LIABILITIES $ 192,181 $ 184,640
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
Page 4
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
AT SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997 DEC. 31,
(UNAUDITED) 1996
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Common Stockholders' Equity
Common Stock Without Par Value Authorized - 7,500,000 Shares;
Shares Issued and Outstanding: 1997 - 3,017,810; 1996 - 3,012,083 $ 43,833 $ 43,672
Stock Issuance Expense (1,238) (1,216)
Retained Earnings 13,328 11,939
----------- -----------
Total Common Stockholders' Equity 55,923 54,395
----------- -----------
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
First Mortgage Bonds
6.9% Series Q, due 2021 10,000 10,000
5 7/8% Series R, due 2022 14,800 14,830
6.65% Series S, due 2020 8,000 8,000
5 3/4% 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
----------- -----------
Total First Mortgage Bonds 54,400 54,430
5.5% Note, Due 2002 163 0
----------- -----------
Total Long-Term Debt 54,563 54,430
----------- -----------
TOTAL CAPITALIZATION $ 111,258 $ 109,597
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
Page 5
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
(UNAUDITED) (UNAUDITED)
----------- -----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Operating Revenues $ 10,855 $ 10,981
----------- -----------
Operating Expenses
Operation 3,280 2,999
Maintenance 447 402
Depreciation 866 817
Federal Income Taxes 1,400 1,495
Connecticut Corporation Business Taxes 380 365
Municipal Taxes 801 831
Payroll Taxes 126 98
Connecticut Gross Earnings Tax 0 549
----------- -----------
Total Operating Expenses 7,300 7,556
----------- -----------
Utility Operating Income 3,555 3,425
----------- -----------
Other Income (Deductions)
Interest 23 30
Allowance for Funds Used During Construction 155 88
Other 109 (29)
Taxes on Other Income (113) 5
----------- -----------
Total Other Income (Deductions) 174 94
----------- -----------
Interest and Debt Expense
Interest on Long-Term Debt 865 865
Other Interest Charges 168 64
Amortization of Debt Expense 32 47
----------- -----------
Total Interest and Debt Expense 1,065 976
----------- -----------
Net Income 2,664 2,543
Preferred Stock Dividend Requirement 10 10
----------- -----------
Net Income Applicable to Common Stockholders $ 2,654 $ 2,533
=========== ===========
Weighted Average Common Shares Outstanding 3,017 3,010
=========== ===========
Earnings Per Average Common Share $ 0.88 $ 0.84
=========== ===========
Dividends Per Common Share $ 0.435 $ 0.43
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
Page 6
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
(UNAUDITED) (UNAUDITED)
----------- -----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Operating Revenues $ 29,500 $ 29,344
----------- -----------
Operating Expenses
Operation 9,789 9,709
Maintenance 1,455 1,244
Depreciation 2,605 2,461
Federal Income Taxes 2,921 3,240
Connecticut Corporation Business Taxes 704 795
Municipal Taxes 2,424 2,441
Payroll Taxes 395 408
Connecticut Gross Earnings Tax 924 1,466
Organizational Charges 423 0
----------- -----------
Total Operating Expenses 21,640 21,764
----------- -----------
Utility Operating Income 7,860 7,580
----------- -----------
Other Income (Deductions)
Interest 72 78
Allowance for Funds Used During Construction 470 202
Other 290 18
Taxes on Other Income (219) 11
----------- -----------
Total Other Income (Deductions) 613 309
----------- -----------
Interest and Debt Expense
Interest on Long-Term Debt 2,595 2,595
Other Interest Charges 430 198
Amortization of Debt Expense 126 141
----------- -----------
Total Interest and Debt Expense 3,151 2,934
----------- -----------
Net Income 5,322 4,955
Preferred Stock Dividend Requirement 29 29
----------- -----------
Net Income Applicable to Common Stockholders $ 5,293 $ 4,926
=========== ===========
Weighted Average Common Shares Outstanding 3,016 2,993
=========== ===========
Earnings Per Average Common Share $ 1.75 $ 1.65
=========== ===========
Dividends Per Common Share $ 1.295 $ 1.27
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 7
Page 7
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
(UNAUDITED) (UNAUDITED)
----------- -----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Operating Revenues $ 38,748 $ 38,475
----------- -----------
Operating Expenses
Operation 13,044 13,336
Maintenance 1,875 1,937
Depreciation 3,459 3,181
Federal Income Taxes 3,559 3,775
Connecticut Corporation Business Taxes 843 942
Municipal Taxes 3,267 3,243
Payroll Taxes 482 508
Connecticut Gross Earnings Tax 1,388 1,923
Organizational Charges 423 0
----------- -----------
Total Operating Expenses 28,340 28,845
----------- -----------
Utility Operating Income 10,408 9,630
----------- -----------
Other Income (Deductions)
Interest 173 131
Allowance for Funds Used During Construction 605 216
Other 219 57
Taxes on Other Income (251) (31)
----------- -----------
Total Other Income (Deductions) 746 373
----------- -----------
Interest and Debt Expense
Interest on Long-Term Debt 3,460 3,460
Other Interest Charges 551 280
Amortization of Debt Expense 173 188
----------- -----------
Total Interest and Debt Expense 4,184 3,928
----------- -----------
Net Income 6,970 6,075
Preferred Stock Dividend Requirement 38 38
----------- -----------
Net Income Applicable to Common Stockholders $ 6,932 $ 6,037
=========== ===========
Weighted Average Common Shares Outstanding 3,015 2,991
=========== ===========
Earnings Per Average Common Share $ 2.30 $ 2.02
=========== ===========
Dividends Per Common Share $ 1.725 $ 1.69
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 8
Page 8
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
(UNAUDITED) (UNAUDITED)
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Balance at Beginning of Period $ 11,986 $ 10,357
Net Income 2,664 2,543
----------- -----------
14,650 12,900
----------- -----------
Dividends Declared:
Cumulative Preferred, Class A, $.20 per share 3 3
Cumulative Preferred, Series $.90, $.225 per share 7 7
Common Stock - 1997 $.435 per share; 1996 $.43 per share 1,312 1,294
----------- -----------
1,322 1,304
----------- -----------
Balance at End of Period $ 13,328 $ 11,596
=========== ===========
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Balance at Beginning of Period $ 11,939 $ 10,468
Net Income 5,322 4,955
----------- -----------
17,261 15,423
----------- -----------
Dividends Declared:
Cumulative Preferred, Class A, $.60 per share 9 9
Cumulative Preferred, Series $.90, $.675 per share 20 20
Common Stock - 1997 $1.295 per share; 1996 $1.27 per share 3,904 3,798
----------- -----------
3,933 3,827
----------- -----------
Balance at End of Period $ 13,328 $ 11,596
=========== ===========
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Balance at Beginning of Period $ 11,596 $ 10,596
Net Income 6,970 6,075
----------- -----------
18,566 16,671
----------- -----------
Dividends Declared:
Cumulative Preferred, Class A, $.80 per share 12 12
Cumulative Preferred, Series $.90, $.90 per share 26 26
Common Stock - 1997 $1.725 per share; 1996 $1.69 per share 5,200 5,037
----------- -----------
5,238 5,075
----------- -----------
Balance at End of Period $ 13,328 $ 11,596
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 9
Page 9
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
(UNAUDITED) (UNAUDITED)
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Operating Activities:
Net Income Before Preferred Dividends of Parent $ 5,322 $ 4,955
----------- -----------
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation (including $88 in 1997, $82 in 1996 charged to other accounts) 2,693 2,543
Change in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable and Accrued Unbilled Revenues (454) (366)
(Increase) Decrease in Other Current Assets (926) (970)
(Increase) Decrease in Other Non-Current Items (697) (495)
Increase (Decrease) in Accounts Payable, Accrued Expenses and
Other Current Liabilities (21) (1,295)
Increase (Decrease) in Deferred Federal Income Taxes and
Investment Tax Credits, Net 715 705
----------- -----------
Total Adjustments 1,310 122
----------- -----------
Net Cash Provided by Operating Activities 6,632 5,077
----------- -----------
Investing Activities:
Gross Additions to Utility Plant (including Allowance for Funds
Used During Construction of $470 in 1997 and $202 in 1996) (7,619) (5,613)
----------- -----------
Financing Activities:
Proceeds from Interim Bank Loans 10,611 4,895
Repayment of Interim Bank Loans (5,795) (2,646)
Increase (Reduction) of Long-Term Debt Including Current Portion 133 (30)
Proceeds from Issuance of Common Stock 160 1,154
Advances, Contributions and Funds From Others for Construction, Net of (Refunds) 631 903
Costs Incurred to Issue Long-Term Debt, Preferred Stock, and Common Stock (22) 0
Cash Dividends Paid (3,932) (3,827)
----------- -----------
Net Cash Provided by (Used in) Financing Activities 1,786 449
----------- -----------
Net Increase (Decrease) in Cash 799 (87)
Cash at Beginning of Year 35 124
----------- -----------
Cash at End of Year $ 834 $ 37
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Interest (Net of Amounts Capitalized) $ 3,591 $ 3,397
Income Taxes $ 2,875 $ 2,415
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 10
Page 10
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
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 10-K.
The results for interim periods are not necessarily indicative of
results to be expected for the year since the consolidated earnings are subject
to seasonal factors.
2. 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:
<TABLE>
<CAPTION>
3 Months Ended 12 Months Ended
---------------------- -----------------------------------
9/30/97 9/30/96 9/30/97 9/30/96 12/31/96
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Common Shares Outstanding:
January 1, 1996 -- -- -- -- 2,966,757
October 1, 1996 & 1995
respectively -- -- 3,011,433 2,948,397 --
July 1, 1997 & 1996
respectively 3,017,101 3,010,091 -- -- --
Common Shares Issued:
To DRIP - December 15, 1995 -- -- -- 18,360 --
To 401-K - January 2, 1996 -- -- -- 703 703
To PSP - February 16, 1996 -- -- -- 4,220 4,220
To DRIP - March 15, 1996 -- -- -- 18,615 18,615
To 401-K - March 30, 1996 -- -- -- 743 743
To DRIP - June 15 1996 -- -- -- 18,299 18,299
To 401-K - June 30, 1996 -- -- -- 754 754
To PSP - July 1, 1996 -- 687 -- 687 687
To 401-K - September 30, 1996 -- 655 -- 655 655
To 401-K - December 31, 1996 -- -- 650 -- 650
To PSP - February 14, 1997 -- -- 3,526 -- --
To 401-K - March 30, 1997 -- -- 677 -- --
To CSE - June 13, 1997 -- -- 40 -- --
To 401-K - June 30, 1997 -- -- 775 -- --
To CSE - September 15, 1997 41 -- 41 -- --
To 401-K - September 30, 1997 668 -- 668 -- --
--------- --------- --------- --------- ---------
Common Shares Outstanding:
September 30, 1997 & 1996
respectively 3,017,810 3,011,433 3,017,810 3,011,433
========= ========= ========= =========
December 31, 1996 3,012,083
=========
Weighted Average Common Shares Outstanding:
Days outstanding basis 3,017,115 3,010,310 3,014,670 2,990,514 2,997,337
========= ========= ========= ========= =========
</TABLE>
DRIP = Dividend Reinvestment Plan
PSP = Performance Stock Program
401-K = Company contribution to employees' 401-K savings plan
CSE = Common Stock Equivalents
<PAGE> 11
Page 11
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
3. The Consolidated Statements of Income reflect the summation of Organizational
Charges associated with a Company early retirement program offered to qualifying
employees. These charges represent the actuarially determined FASB 88 expense
for pension benefits for the 16 employees who accepted the offer of early
retirement and the costs of administrative services related to the early
retirement plan.
4. Effective July 1, 1997, the Company reduced customer water bill rates by 5%.
This reduction is a result of the repeal of the Connecticut Gross Earnings Tax
(GET) on private and investor owned water companies. This rate reduction is
equivalent to the reduced cost to the Company due to the elimination of the GET.
There is no earnings impact on the company as a result of this rate decrease.
Effective October 1, 1997, the Company increased customer water bill
rates by .486%. This increase is comprised of the following: 1) an .562%
increase for the collection of additional FASB 106 expenses for Postretirement
Benefits Other Than Pension and 2) a .076% decrease in rates due to the
legislative elimination of the Connecticut sales tax on certain operations and
maintenance expense items.
PART I, ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CORPORATE RESOURCES
At September 30, 1997 the Company had $1,389,000 of unused lines of
interim bank loan credit available.
RESULT OF OPERATIONS
THE FOLLOWING FACTORS HAD A SIGNIFICANT EFFECT UPON THE COMPANY'S NET
INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AS COMPARED WITH THE NET
INCOME FOR THE SAME PERIOD LAST YEAR.
Net income applicable to common stock for the three months ended
September 30, 1997 increased from that of September 30, 1996 by $121,000, or
$.04 per average common share. The increase in net income resulted from a
$130,000 increase in operating income and a $80,000 increase in other income and
deductions, partially offset by a $89,000 increase in interest and debt expense.
The increase in operating income is primarily due to increased customer
water consumption. The corresponding increase in operating revenues was more
than offset by the State of Connecticut's elimination of its Gross Earnings tax
on water companies effective July 1, 1997 and the Subsidiary's corresponding
decrease in rates that passed this expense reduction along to rate payers. The
tax elimination and the Subsidiary's rate decrease reduced both the Subsidiary's
revenues and tax expense by approximately $550,000, thereby having no impact on
earnings. The $550,000 reduction in revenue was partially offset by $424,000 of
increased revenues due primarily to the hot, dry 1997 summer weather in
comparison to the wet, cool 1996 summer, which caused customers' 1997 water
consumption to increase. The net increase in operating income pertaining to
increased customer water consumption was partially offset by increased operation
and maintenance expense related to normal ongoing maintenance work and higher
employee benefits and payroll costs.
<PAGE> 12
Page 12
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
Other income and deductions increased due to significant growth in the
Subsidiary's "non-rate" revenue activity in 1997 and increased AFUDC. Non-rate
revenue activity includes contract operations for municipal and private water
companies as well as selected land sales.
The increase in interest and debt expense is primarily due to the
higher average balance of interim loans outstanding in 1997.
THE FOLLOWING FACTORS HAD A SIGNIFICANT EFFECT UPON THE COMPANY'S NET
INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AS COMPARED WITH THE NET
INCOME FOR THE SAME PERIOD LAST YEAR.
Net income applicable to common stock for the nine months ended
September 30, 1997 increased from that of September 30, 1996 by $367,000, or
$.10 per average common share, on an increased number of common shares
outstanding. The increase in net income resulted from a $280,000 increase in
operating income and a $304,000 increase in other income and deductions
partially offset by a $217,000 increase in interest and debt expense.
The increase in operating income is primarily due to increased customer
water consumption. The corresponding increase in operating revenues was
partially offset by the State of Connecticut's elimination of its Gross Earnings
tax on water companies effective July 1, 1997 and the Subsidiary's corresponding
decrease in rates that passed this expense reduction along to rate payers. The
tax elimination and the Subsidiary's rate decrease reduced both the Subsidiary's
revenues and tax expense by approximately $550,000, thereby having no impact on
earnings. The $550,000 reduction in revenue was offset by approximately $700,000
of increased revenues due primarily to the hot, dry 1997 summer weather in
comparison to the wet, cool 1996 summer, which caused customers' 1997 water
consumption to increase. The net increase in operating income pertaining to
increased customer water consumption was partially offset by the Organizational
Charges related to the Subsidiary's 1997 early retirement program and increased
operation and maintenance expense related to normal ongoing maintenance work and
higher employee benefits costs.
Other income and deductions increased due to significant growth in the
Subsidiary's "non-rate" revenue activity in 1997 and increased AFUDC. Non-rate
revenue activity includes contract operations for municipal and private water
companies as well as selected land sales.
The increase in interest and debt expense is primarily due to the
higher average balance of interim loans outstanding in 1997.
<PAGE> 13
Page 13
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: November 12, 1997 By /s/ David C. Benoit
David C. Benoit
Vice President - Finance
Date: November 12, 1997 By: /s/ Peter J. Bancroft
Peter J. Bancroft
Assistant Treasurer
<TABLE> <S> <C>
<ARTICLE> OPUR1
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 158,787
<OTHER-PROPERTY-AND-INVEST> 1,536
<TOTAL-CURRENT-ASSETS> 9,515
<TOTAL-DEFERRED-CHARGES> 22,343
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 192,181
<COMMON> 42,595
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 13,328
<TOTAL-COMMON-STOCKHOLDERS-EQ> 55,923
0
772
<LONG-TERM-DEBT-NET> 54,563
<SHORT-TERM-NOTES> 10,611
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 70,312
<TOT-CAPITALIZATION-AND-LIAB> 192,181
<GROSS-OPERATING-REVENUE> 29,500
<INCOME-TAX-EXPENSE> 3,625
<OTHER-OPERATING-EXPENSES> 18,015
<TOTAL-OPERATING-EXPENSES> 21,640
<OPERATING-INCOME-LOSS> 7,860
<OTHER-INCOME-NET> 613
<INCOME-BEFORE-INTEREST-EXPEN> 8,473
<TOTAL-INTEREST-EXPENSE> 3,151
<NET-INCOME> 5,322
29
<EARNINGS-AVAILABLE-FOR-COMM> 5,293
<COMMON-STOCK-DIVIDENDS> 3,904
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 6,632
<EPS-PRIMARY> 1.75
<EPS-DILUTED> 1.75
</TABLE>
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