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Connecticut Water Service Inc. Reports Operating Results (10-Q)

November 06, 2009 | About:
10qk

10qk

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Connecticut Water Service Inc. (CTWS) filed Quarterly Report for the period ended 2009-09-30.

Connecticut Water Service Inc. is a non-operating holding company whose income comes solely from its subsidiaries. The core business is water service to people throughout towns in Connecticut and Massachusetts. Connecticut Water Service Inc. has a market cap of $198.8 million; its shares were traded at around $23.32 with a P/E ratio of 24 and P/S ratio of 3.3. The dividend yield of Connecticut Water Service Inc. stocks is 3.9%. Connecticut Water Service Inc. had an annual average earning growth of 1.8% over the past 5 years.

Highlight of Business Operations:

In July 2006, the Company filed a rate application with the Department of Public Utility Control (DPUC) for Connecticut Water requesting an increase in rates of approximately $14.6 million, or 30%. On January 16, 2007, the DPUC issued its final decision and approved a Settlement Agreement, negotiated with the Office of Consumer Counsel, Connecticut s consumer advocate, and the DPUC s Prosecutorial Staff; that allowed Connecticut Water an increase in revenues of approximately $10,940,000, or 22.3%. The Settlement Agreement allowed Connecticut Water to defer a portion of the approved rate increase, approximately $3.8 million through December 31, 2007 and $4.8 million through March 31, 2008. The Company recognized that increase through recording deferred revenues and a corresponding regulatory asset, as required by the decision. On January 31, 2008, the Company filed to reopen the case, a procedure required by the Settlement Agreement, to implement the second phase. In addition to the approval for the inclusion in current rates of the previously approved deferred revenues of $4.8 million, the filing included requested recovery and a return on $15.5 million of additional capital investments made in 2007. On March 28, 2008, an 11.95% rate increase was approved. The approved rates became effective on April 1, 2008.

In November 2008, the Company was authorized by its Board of Directors to increase the available lines of credit from $21 million to $40 million. On June 30, 2009, the Company let expire one line of credit totaling $6 million and entered into a new $15 million line of credit agreement, which expires on June 25, 2010. On August 12, 2009, the Company replaced an existing line of credit from $3 million to $10 million, which expires on August 11, 2010. Finally, on September 15, 2009, the Company increased a third line of credit from $12 million to $15 million, with an expiration date of June 1, 2011. Interim Bank Loans Payable at September 30, 2009 was approximately $31.6 million and represents the outstanding aggregate balance on these lines of credit. Interest expense charged on interim bank loans will fluctuate based on market interest rates.

The Board of Directors approved a $26.4 million construction budget for 2009, net of amounts to be financed by customer advances and contributions in aid of construction. The Company is using a combination of its internally generated funds, borrowing under its available lines of credit, and the pending long term debt issuance to fund this construction budget. The Company anticipates utilization of $20 million private activity bonds issued through the Connecticut Development Authority (CDA), for a long term debt issuance in late 2009 or early 2010. In May 2009, the CDA authorized $20 million of volume capacity for the Company s capital projects in 2009; the CDA reaffirmed the authorization in October 2009. On September 8, 2009, the Company filed with the DPUC an application for the issuance of $20 million in CDA backed bonds. If approved by the DPUC, the Company expects to issue these bonds in the fourth quarter of 2009 or the first quarter of 2010. A draft decision approving the bond issuance was issued by the DPUC on October 29, 2009. A final decision is expected on November 12, 2009.

Net Income for the three months ended September 30, 2009 increased from that of the prior year by $2,924,000, which increased earnings per basic and diluted average common share by $0.33, to $0.67.

During the third quarter of 2009, the Company completed the previously announced sale of a conservation easement to the Town of Windsor Locks, CT for $2 million. The transaction generated $1.2 million in net income for the Company and contributed $0.14 in earnings per share. The Company also adjusted tax valuation allowances associated with land donations made in previous years generating approximately $147,000 in net income in the Real Estate segment. Additionally, Chester Realty, a wholly-owned, non-regulated subsidiary of the Company, sold a rental property in Killingly, CT during the third quarter of 2009, generating a small profit. There were no Real Estate transactions during the third quarter 2008.

Net Income for the nine months ended September 30, 2009 increased from that of the prior year by $1,678,000, which increased earnings per basic and diluted average common share by $0.18, to $1.07.

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