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, 1998
-----------------
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
-----------------
(Exact name of registrant as specified in its charter)
Delaware 06-0852232
------------------------ ---------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
835 Main Street, Bridgeport, Connecticut 06604-4995
---------------------------------------- --------------
(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 changes 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 August 7, 1998:
Common Stock
No Par Value (Stated Value: $1) 7,446,785
--------------------------------- ------------------
Class Number of Shares
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
_________________________________
AQUARION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
Quarter Ended June 30, Six Months Ended June 30,
---------------------- -------------------------
1998 1997 1998 1997
------ ------ ------ ------
(In thousands, except share data)
<C> <C> <C> <C> <C>
Operating revenues $26,827 $26,522 $52,210 $49,911
------- ------- ------- -------
Costs and expenses:
Operating 7,214 7,415 14,685 13,549
General and administrative 3,734 3,892 7,587 8,012
Depreciation 3,543 2,959 7,068 5,938
Interest expense 2,658 2,936 5,344 5,812
Taxes other than income taxes 2,411 3,189 4,943 6,419
------- ------- ------- -------
Total costs and expenses 19,560 20,391 39,627 39,730
------- ------- ------- -------
7,267 6,131 12,583 10,181
Allowance for funds used during construction 42 214 89 451
------- ------- ------- -------
Income before income taxes 7,309 6,345 12,672 10,632
Income taxes 3,301 2,809 5,629 4,708
------- ------- ------- -------
Net income $4,008 $3,536 $7,043 $5,924
======= ======= ======= =======
Basic earnings per share $0.54 $0.50 $0.95 $0.84
======= ======= ======= =======
Weighted average common shares outstanding 7,408,374 7,094,729 7,387,445 7,065,837
========= ========= ========= =========
Diluted earnings per share $0.53 $0.49 $0.93 $0.83
========= ========= ========= ========
Weighted average common shares outstanding 7,579,111 7,166,573 7,558,181 7,137,681
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE>
<PAGE>
AQUARION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
UNAUDITED
<TABLE>
<CAPTION>
Quarter Ended June 30, Six Months Ended June 30,
---------------------- -------------------------
1998 1997 1998 1997
------ ------ ------ ------
(In thousands, except share data)
<S> <C> <C> <C> <C>
Beginning of period $19,628 $15,852 $19,624 $16,324
Net Income 4,008 3,536 7,043 5,924
------- ------- ------- -------
23,636 19,388 26,667 22,248
Deduct: Cash dividends declared on
common stock, $.41 per share for
each of the 1st and 2nd quarters
1998 and $.405 per share for
each of the 1st and 2nd quarters
1997 3,050 2,897 6,081 5,757
------- ------- ------- -------
End of period $20,586 $16,491 $20,586 $16,491
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE>
<PAGE>
AQUARION COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------- ------------
(Unaudited)
(In thousands)
<S> <C> <C>
Property, plant and equipment $491,099 $481,833
Less: accumulated depreciation 149,037 142,125
-------- --------
Net property, plant and equipment 342,062 339,708
======== ========
Current assets:
Cash and cash equivalents 334 851
-------- --------
Accounts receivable from customers 10,835 10,789
Less: allowance for doubtful accounts 2,037 1,782
-------- --------
8,798 9,007
Accrued revenues 10,510 10,411
Inventories 4,018 3,740
Prepaid expenses 11,174 10,980
Other current assets 6,398 6,443
-------- --------
Total current assets 41,232 41,432
-------- --------
Prepaid taxes 12,354 12,354
Recoverable income taxes 41,766 41,741
Other assets 18,890 19,774
-------- --------
$456,304 $455,009
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE>
<PAGE>
AQUARION COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------- ------------
(Unaudited)
(In thousands, except share data)
<S> <C> <C>
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-7,427,073 shares in 1998 and 7,330,721 shares
in 1997 7,427 7,331
Capital in excess of stated value 109,665 107,004
Retained earnings 20,586 19,624
Less: minimum pension liability adjustment 81 97
-------- --------
Total shareholders' equity 137,597 133,862
-------- --------
Long-term debt and other obligations 141,380 151,380
-------- --------
Current liabilities
Short-term borrowings, unsecured 6,100 9,000
Current maturities of long-term debt 15,000 5,000
Accounts payable and accrued liabilities 13,754 15,592
Dividends payable 3,044 3,005
Accrued interest 3,033 3,011
Taxes other than income taxes 848 755
Income taxes 1,816 2,018
--------- --------
Total current liabilities 43,595 38,381
--------- --------
Advances for construction 25,065 24,263
Contributions in aid of construction 31,044 30,951
Deferred land sale gains 413 384
Accrued postretirement benefit cost 5,361 4,664
Recoverable income taxes 6,067 6,052
Deferred taxes 65,782 65,072
-------- --------
$456,304 $455,009
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
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<PAGE>
<PAGE>
AQUARION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION)
Six Months Ended June 30,
-------------------------
1998 1997
------ ------
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $7,043 $ 5,924
Adjustments reconciling net income to net cash provided
by operating activities:
Depreciation and amortization 7,426 6,380
Allowance for funds used during construction (89) (451)
Provision for losses on accounts receivable 221 175
Deferred and prepaid income taxes, net 700 (4,743)
Proceeds from sale of surplus land, net of gains 1,457 164
Change in assets and liabilities (Note 3) (3,128) 5,979
------- -------
Net cash provided by operating activities 13,630 13,428
------- -------
Cash flows from investing activities:
Capital additions, excluding an allowance for funds
used during construction (9,251) (12,761)
Advances and contributions in aid of construction 1,130 1,464
Refunds on advances for construction (235) (190)
Proceeds from disposition of subsidiary - 8,565
Other investing activities 394 (208)
------- -------
Net cash used in investing activities (7,962) (3,130)
------- -------
Cash flows from financing activities:
Principal payments in short-term borrowings (2,900) -
Net proceeds from short-term borrowings - 1,200
Proceeds from the issuance of common stock, net 2,757 1,607
Principal payments on long-term debt - (15,000)
Proceeds from the issuance of long-term debt - 7,893
Common dividends paid (6,042) (5,703)
Bond finance charges - (281)
------ -------
Net cash used in financing activities (6,185) (10,284)
------ -------
Net (decrease) increase in cash and cash equivalents (517) 14
Cash and cash equivalents, beginning of period 851 470
------ -------
Cash and cash equivalents, end of period $ 334 $ 484
====== =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
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<PAGE>
AQUARION COMPANY
-----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
UNAUDITED
---------
Aquarion Company (Aquarion or the Company) 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
subsidiaries, BHC Company (BHC) which consists of an Eastern division,
formerly Bridgeport Hydraulic Company and a Western division, formerly
Stamford Water Company, New Canaan Water Company and Ridgefield Water Supply
Company, and Sea Cliff Water Company (SCWC) (collectively, the Utilities),
collect, treat and distribute water for residential, commercial and industrial
customers, for other utilities for resale and for private and municipal fire
protection. The Utilities provide water to customers in 30 communities with a
population of approximately 500,000 people in Connecticut and Long Island, New
York, 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 SCWC, is among the ten largest
investor-owned water companies in the nation. The Utilities are regulated by
several Connecticut and New York agencies, including the Connecticut
Department of Public Utility Control (DPUC) and the New York Public Service
Commission (PSC). The Company conducts a timber processing business, Timco,
Inc. (Timco), owns a real estate subsidiary, Main Street South Corporation
(MSSC) and provides utility management services through Aquarion Management
Services, Inc. (AMS).
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, 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 ratemaking practices prescribed
by the Company's regulating authorities. 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 only 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. Water consumption is less in the first quarter of the year
than during the warmer months. 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. The consolidated
financial information contained herein should be read in conjunction with the
consolidated financial statements and accompanying footnotes included in the
Company's 1997 Annual Report to Shareholders and incorporated by reference in
the Company's Annual Report on Form 10-K for the year ended December 31, 1997.
In February 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 128, "Earnings Per Share" (SFAS 128), which establishes new standards
for computing and presenting earnings per share. SFAS 128 is effective for
financial statements issued for
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<PAGE>
periods ending after December 15, 1997. Adoption of SFAS 128 did not
materially affect the financial statements for the quarter and six months
ended June 30, 1998.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which establishes standards for reporting and display of
comprehensive income and its components, such as minimum pension liability, in
a full set of general-purpose financial statements. This statement is
effective for fiscal years beginning after December 15, 1997. Adoption of
this statement did not have a significant impact on the Company's financial
statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information," which establishes standards for the
method of reporting information about operating segments in annual financial
statements and in interim reports issued to shareholders. This statement is
effective for financial statements for periods beginning after December 15,
1997, although quarterly disclosure is not required until the first quarter of
1999. The Company does not expect adoption of this statement to have a
significant impact on future disclosures of segment related information.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes a new model for
accounting for derivative and hedging activities and supersedes and amends a
number of existing standards. SFAS 133 is effective for fiscal years
beginning after June 15, 1999. Upon initial application, all derivatives are
required to be recognized in the statement of financial position as either
assets or liabilities and measured at fair value. Changes in the fair value
of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part
of a hedge transaction and, if it is, the type of hedge transaction. In
addition, all hedging relationships must be reassessed and documented pursuant
to the provisions of SFAS 133. The Company does not expect adoption of this
statement to have a significant impact on its financial position or results of
operations.
NOTE 2 - INVENTORY
- ------------------
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---------- ------------
(Unaudited)
<S> <C> <C>
Lumber and logs $2,928 $2,561
Materials and supplies 1,090 1,179
------ ------
$4,018 $3,740
====== ======
</TABLE>
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<PAGE>
NOTE 3 - SUPPLEMENTAL DISCLOSURE FOR CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------
Changes in assets and liabilities and supplemental cash flow information
for the six-month period ended June 30, are set forth below (in thousands):
<TABLE>
<CAPTION)
1998 1997
-------- --------
(Unaudited)
<S> <C> <C>
Changes in assets and liabilities:
Increase in accounts receivable $ (111) $(1,659)
Increase in inventory (278) (957)
Increase in prepayments (194) (763)
Decrease in other current assets 45 7,482
(Decrease) increase in accounts payable and accrued
liabilities (1,838) 274
Decrease in interest and taxes payable (87) (554)
Net changes in other noncurrent balance sheet items (665) 2,156
------- -------
$(3,128) $ 5,979
======= =======
Supplemental cash flow information:
Cash paid for:
Interest $ 5,214 $ 5,140
Income taxes $ 5,045 $ 3,350
</TABLE>
NOTE 4 - SALE AND DISCONTINUED OPERATIONS
- -----------------------------------------
On March 25, 1997, the Company executed a stock purchase agreement,
effective December 31, 1996, completing the stock sale of Industrial and
Environmental Analysts, Inc. (IEA), its environmental testing laboratory
business, for approximately $10,000,000. Accordingly, IEA's results were
recorded as a discontinued operation for the year ended December 31, 1996.
For the period January 1, 1997 through March 25, 1997, operating revenues from
discontinued operations were approximately $4,984,000 and the pre-tax
operating loss was approximately $86,000. Losses for the period from
January 1, 1997 through March 25, 1997 were fully reimbursed by the purchaser
in conjunction with the terms of the stock purchase agreement.
NOTE 5 - RATE MATTERS
- ---------------------
Rates. On March 16, 1998, BHC's Western division filed an application with
the DPUC for a 4.1 percent water service rate increase designed to provide a
$620,000 increase in annual water service revenues. It is anticipated that
the new rates, if approved, will become effective in the fourth quarter of
1998.
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<PAGE>
<PAGE>
On July 31, 1997, BHC's Eastern Division received a decision from the DPUC
approving a 12.7 percent water service rate increase, which became effective
on August 1, 1997, designed to provide an $8,300,000 increase in annual water
service revenues. This increase replaced the Construction Work In Progress
water service rate surcharge, which was 9.49 percent prior to July 1, 1997,
and resulted in a 3.2 percent marginal increase.
BHC's Eastern and Western Divisions' rates reflect the repeal of the
Connecticut gross earnings tax for services rendered after July 1, 1997, which
resulted in a 5.0 percent reduction in rates and expenses.
NOTE 6 - SALE OF SURPLUS LAND
- -----------------------------
For the first six months of 1998, the Company sold approximately 20 acres
of surplus land with proceeds totaling $2,023,000. Total gains, including
recognition of deferred gains from prior land sales of $65,000, approximated
$608,000.
In June 1998, the Aspetuck Land Trust, a non-profit land preservation
organization, exercised a statutory right of first refusal allowing it to
purchase, at the original contract terms, the 640 acre portion of the Trout
Brook Valley property owned by BHC for approximately $12,400,000. Connecticut
statutes afford the buyer fifteen months to close, or until September 8, 1999.
Prior to this exercise, in February 1997, Aquarion and its BHC subsidiary had
entered into a contract to sell the entire Trout Brook Valley property for
approximately $14,000,000 to a private developer. The Trout Brook Valley
property consists of 640 acres owned by BHC and 90 acres owned by Aquarion,
which will not be purchased by the Aspetuck Land Trust. The sale has been
approved by the DPUC. The Company anticipates that the after-tax gain from
the current sale will be approximately $6,000,000, to be recognized over an
applicable amortization period. In its decision approving the original sale,
the DPUC granted the company a 10-year amortization period, which provides
ratepayers with 55 percent and shareholders with 45 percent of the after-tax
gain on approximately 60 percent of BHC's portion of the property. Due to the
change in purchaser and its intended use of the property as open space, the
Company is considering filing an amended application with the DPUC seeking a
shorter amortization period.
-10-
<PAGE>
<PAGE>
In July 1998, the Company entered into a contract with the City of Shelton,
Connecticut to sell six parcels of land located in Shelton for approximately
$7,000,000. The purchase is contingent upon regulatory and Board approvals.
The anticipated closing date is expected to be in late 1998 or early 1999.
The Company anticipates that the after-tax gain from this transaction will be
approximately $4,500,000, to be recognized over an applicable amortization
period, assuming similar treatment is allowed by the DPUC as in the past with
regard to the sharing of proceeds between the shareholders and the ratepayers.
The Company will receive a tax deduction for a charitable contribution based
on the difference between the sale price and the fair market value of the
property. No assurances can be given at this time that the required
contingencies will be satisfied and the sale closed.
MSSC owns a two-third's share, through a joint venture, of approximately
7.7 acres of real property in Shelton, Connecticut. In December 1997, the
joint venture was formally notified of an eminent domain action undertaken on
behalf of the City of Shelton, with an accompanying notice of value of
approximately $95,000. The Company does not agree with this value and has
initiated an appeal process to obtain a higher value for this property. Based
on this notice of value, the loss to be recognized by the Company on this
transaction would be approximately $387,000.
NOTE 7 - EARNINGS PER SHARE
- ---------------------------
In accordance with SFAS 128, the following table presents the calculation
of the basic and diluted earnings per share computations for the quarter and
six months ended June 30, 1998 and 1997, respectively.
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Income Shares Per-Share
In thousands, except per share data (Numerator) (Denominator) Amount
-------------- ------------- ---------
For the quarter ended June 30, 1998
Basic earnings per share
Net income $ 4,008 7,408 $ 0.54
============
Effect of dilutive stock options - 171
--------------- -----
Diluted earnings per share
Net income giving effect to dilutive stock options $ 4,008 7,579 $ 0.53
============== ===== ============
For the quarter ended June 30, 1997
Basic earnings per share
Net income $ 3,536 7,095 $ 0.50
============
Effect of dilutive stock options - 72
-------------- -----
Diluted earnings per share
Net income giving effect to dilutive stock options $ 3,536 7,167 $ 0.49
============== ===== ============
For the six months ended June 30, 1998
Basic earnings per share
Net income $ 7,043 7,387 $ 0.95
============
Effect of dilutive stock options - 171
--------------- -----
Diluted earnings per share
Net income giving effect to dilutive stock options $ 7,043 7,558 $ 0.93
============== ===== ===========
For the six months ended June 30, 1997
Basic earnings per share
Net income $ 5,924 7,066 $ 0.84
============
Effect of dilutive stock options - 72
-------------- -----
Diluted earnings per share
Net income giving effect to dilutive stock options $ 5,924 7,138 $ 0.83
============== ===== ===========
</TABLE>
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 and Financial Condition contained in Aquarion's 1997
Annual Report to Shareholders
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<PAGE>
<PAGE>
and incorporated by reference in Aquarion's Annual Report on Form 10-K for the
year ended December 31, 1997 should be read in conjunction with the discussion
below.
Capital Resources and Liquidity
- -------------------------------
Capital Expenditures
---------------------
The Company invested $9,251,000 in property, plant and equipment in the
first six months of 1998, compared with $12,761,000 for the same 1997 period.
The 1997 period includes $4,700,000 related to the Warner Water Treatment
Plant, which was placed in service on July 1, 1997. The Utilities accounted
for approximately $8,600,000 of plant additions during the current six month
period. Management estimates that capital expenditures will total $18,000,000
in 1998, of which approximately $17,000,000 will be for water utility
construction programs.
Financing Activities
--------------------
The Company's capital expenditures have historically been financed from
several sources including internally generated funds, rate relief, proceeds
from debt financings, sales of common stock, and short-term borrowings under
the Company's revolving credit agreements.
Due to its declining capital requirements, the Company did not renew its
unsecured revolving committed credit agreements which expired on May 10, 1998
and has negotiated with some of its lenders to establish $40,000,000 of
uncommitted lines of credit to finance short-term borrowings.
The percentage of capital expenditures financed by net cash from
operating activities was 100 percent for the six months ended June 30, 1998
and 1997. In addition, the Company obtained funds of $1,648,000 from
issuances of Common Stock under its Dividend Reinvestment and Common Stock
Purchase Plan for the six months ended June 30, 1998. The Company also
obtained funds of $1,083,000 from stock options exercised for the six months
ended June 30, 1998. The Utilities also received $1,130,000 from advances
and contributions in aid of construction from developers and customers for
the six months ended June 30, 1998.
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<PAGE>
On February 3, 1997, BHC converted the interest rate on its $30,000,000
unsecured note, issued in 1995 in consideration for a loan of the proceeds
from the issuance by the Connecticut Development Authority of an equal amount
of tax-exempt Water Facilities Revenue Bonds, from a variable rate to a fixed
rate of 6.15 percent, for a term of 38 years.
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. 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 the Company's shareholders. 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.
Year 2000 Compliance
--------------------
The Company established a Year 2000 task force which has determined that
our core business applications are compliant based on vendor's written
compliance statements. Testing for these systems is expected to be completed
by December 1998. Several ancillary systems were identified as non-compliant
and had already been scheduled for replacement by December, 1998.
In addition, other critical computerized operations, including treatment
plant automation systems, have been inventoried by Company personnel who are
currently assessing our risk and will make a report to senior management by
year end. The Company is currently interviewing outside consultants to review
it's Year 2000 compliance and contingency plan and make any necessary
recommendations, which are expected by year end. Interfaces used to exchange
information with outside vendors will also be tested to ensure compliance.
This testing is expected to be completed in 1999.
In accordance with its accounting policies, the Company capitalizes
software and computer equipment costs and expenses maintenance costs. It is
not anticipated that these costs will be
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<PAGE>
material or affect the Company's earnings per share. The Company cannot
predict the effect on it's business of any Year 2000 problems of other
entities such as suppliers, customers and service providers.
Results of Operations for the six months and
--------------------------------------------
three months ended June 30, 1998 and 1997
-----------------------------------------
Net income for the six months ended June 30, 1998 was $7,043,000
compared with $5,924,000 for the same 1997 period. Net income for the three
months ended June 30, 1998 was $4,008,000 versus $3,536,000 for the comparable
1997 period. Operating results during the first six months of 1998 are higher
due to increased land sales and improved results from the Company's Utility
operations.
Operating revenues increased $2,299,000 and $305,000 for the six months
and three months ended June 30, 1998 from the comparable 1997 periods. This
increase was primarily attributable to increased real estate sales of
$1,691,000 and $507,000 for the six months and three months ended June 30,
1998, and higher revenues from the Utilities of $921,000 and $216,000 for the
six months and three months ended June 30, 1998, due to rate relief granted
BHC's Eastern Division effective August 1, 1997. This increase in water
service rates was partially offset by the reduction in rates associated with
the repeal of the Connecticut gross earnings tax.
Operating expenses increased $1,136,000 for the first six months of 1998
compared to the 1997 period. This increase was primarily attributable to
higher costs associated with increased land sales of $1,019,000 and higher
operating expenses at the Utilities of $517,000 associated with the Warner
Water Treatment Plant, which was placed into service on July 1, 1997. These
increases were partially offset by lower expenses from timber processing due
to a decreased sales volume. Operating expenses decreased $201,000 for the
three months ended June 30, 1998 compared to the 1997 period due to reduced
operating costs at Timco, partially offset by increased operating expenses
related to increased land sales.
General and administrative expenses decreased $425,000 and $158,000 for
the six months and three months ended June 30, 1998 from the comparable 1997
periods. Expenses from the
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<PAGE>
Utilities decreased $468,000 and $232,000, respectively, due to decreased
outside services costs and a higher pension credit.
Depreciation expense increased $1,130,000 and $584,000 for the six
months and three months ended June 30, 1998 from the 1997 comparable periods
due primarily to the Warner Water Treatment Plant being placed into service on
July 1, 1997.
Interest expense for the six months and three months ended June 30, 1998
was $468,000 and $278,000 lower than the comparable 1997 periods due to
reduced debt in 1998.
Taxes other than income taxes for the six months and three months ended
June 30, 1998 decreased $1,476,000 and $778,000 from the comparable 1997
periods due primarily to the repeal of the Connecticut gross earnings tax.
Income taxes for the six months and the three months ended June 30, 1998
were $921,000 and $492,000 higher than the comparable 1997 periods due to
higher taxable income.
Forward looking information
- ---------------------------
In addition to the historical information contained herein, this report
contains a number of "forward-looking statements," within the meaning of the
Securities and Exchange Act of 1934. Such statements address future events
and conditions concerning capital expenditures, liquidity and capital
resources, financial condition, results of operations, gains recorded from
land sales and accounting matters. Actual results in each case could differ
materially from those projected in such statements. Factors that may cause
actual results to differ include, without limitation, interest rates, economic
factors, weather variations, seasonality and Year 2000 issues.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
Not Applicable.
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<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Previously reported in the Company's Quarterly Report on Form 10-Q for
the quarterly period ended March 31, 1998.
Item 6. Exhibits and Reports on Form 8-K
---------------------------------
(a) Exhibits
27 Financial Data Schedule for the quarter ended June 30, 1998
(b) The Company did not file a report on Form 8-K during the quarter
ended June 30, 1998.
-17-
<PAGE>
<PAGE>
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 11, 1998 By /s/JANET M. HANSEN
--------------------------- -------------------------------
Janet M. Hansen
Executive Vice President
Chief Financial Officer and
Treasurer
-18-
<PAGE>
<PAGE>
Exhibit Index
Exhibit 1 Financial Date Schedule for the quarter ended June 30, 1998
-19-
<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the June 30, 1998
Aquarion Company form 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
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0
0
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