- Operating Revenues Increase 5.6
Percent
- Net Income Increased $3.5 Million or $0.29 Per
Share
- 2018 Corporate Sustainability Report
Issued
Connecticut Water Service, Inc. (Nasdaq: CTWS) (“Connecticut
Water” or “CTWS”) announced net income of $2.2 million or $0.19
earnings per basic common share (“EPS”) for the first quarter of
2019 on total revenues of $27.9 million. Total revenues include
revenues generated by Connecticut Water’s three business segments:
Water Operations, Service and Rentals, and Real Estate. In the
first quarter of 2018, Connecticut Water had a net loss of $1.2
million or an EPS loss of $0.10, on total revenues of $26.4
million. Non-GAAP Adjusted Net Income*, which excludes merger and
acquisition costs, for the first quarter of 2019 increased from the
same period in the prior year by $1.2 million.
The improved results in the 2019 first quarter were primarily
driven by increased base rate revenues in Connecticut, which were
partially offset by increased tax, depreciation, and interest
expense.
“Our strong performance in the first quarter reflects our
commitment to serving families and communities in Connecticut and
Maine with high-quality, reliable water and wastewater service,”
stated David C. Benoit, president and CEO of CTWS. “We believe our
combination with SJW Group will help support a continued strong
track record in these areas, as detailed in our recently filed
merger approval applications in Connecticut and Maine. We look
forward to completing this transaction and realizing its many
benefits for the customers, employees and communities across our
service territory.”
Infrastructure ReplacementMaine Water files for
Water Infrastructure Charge (“WISC”) increases with MPUC on a
system-by-system basis. The current average of approved WISC
surcharges of all divisions of Maine Water is 5.7 percent. The
maximum WISC surcharge allowed in Maine ranges from 10 to 20
percent, depending on the size of the water system.
The current Water Infrastructure and Conservation Adjustment
(“WICA”) charge is 2.15 percent for Connecticut Water Company and
is 9.31 percent for Avon Water. Heritage Village Water has not
filed for a WICA surcharge.
WICA and WISC allow for recovery of eligible infrastructure
replacements, including system pipes, hydrants and valves, leak
detection equipment and meters that further water conservation
goals, on a semi-annual basis. Since the adoption of WICA in 2007,
Connecticut Water Company has replaced more than 124 miles of aging
water main with an average age of 75 years. WISC became available
in Maine in 2013 and has been used by Maine Water to
replace 12 miles of aging water mains and pump stations, construct
storage tanks, and fund improvements to water treatment
facilities.
Combination with SJW Group As previously
announced on April 3, 2019, Connecticut Water and SJW Group jointly
filed a new application with the Connecticut Public Utilities
Regulatory Authority (“PURA”) for approval of the proposed merger
of Connecticut Water and SJW Group. PURA has set a tentative
final decision date on the application for July 31, 2019.
As previously announced on May 3, 2019, Maine Water Company
(“Maine Water”), an operating subsidiary of Connecticut Water,
filed a new application with the Maine Public Utilities Commission
(“MPUC”) for approval of the proposed merger.
SJW Group and Connecticut Water also continue to work with the
California Public Utilities Commission (“CPUC”) in response to the
CPUC’s Order Instituting Investigation (“OII”) of the proposed
merger. The CPUC recently suspended its OII pending a final
decision by PURA.
Corporate Sustainability ReportAs previously
announced on April 22, 2019, Connecticut Water issued its 2018
Corporate Sustainability Report. The report demonstrates the
achievements and activities of its subsidiaries in Connecticut and
Maine in achieving environmental and social goals. The report is
available at http://ir.ctwater.com.
About CTWSCTWS is one of the 10 largest
U.S.-based publicly traded water utilities, and is listed on the
Nasdaq Global Select Market under the ticker symbol CTWS. Through
its regulated utility subsidiaries, CTWS serves more than 136,000
water customers, or more than 425,000 people in 80 communities
across Connecticut and Maine, and more than 3,000 wastewater
customers in Southbury, Connecticut.
Additional information regarding results, performance or
achievements noted in this news release is available in CTWS's Form
10-Q that was filed with the U.S. Securities and Exchange
Commission (the SEC) earlier today. A link to the Form 10-Q filing
can be found at http://ir.ctwater.com.
* A description of Non-GAAP Adjusted Net Income is provided
below under the heading “Use and Definition of Non-GAAP Financial
Measures” and a reconciliation to GAAP financial measures is
provided in the table below.
Use and Definition of Non-GAAP Financial
MeasuresWe consider Adjusted Net Income as a key business
metric, which is a Non-GAAP financial measure.
We define Adjusted Net Income as Net Income excluding certain
material items outside of normal business operations. For
this Non-GAAP financial measure, we consider these items to be
expenses related to mergers and acquisitions. This
includes costs incurred in 2019 and 2018 for the proposed merger
with SJW.
Adjusted Net Income is a supplemental financial measure used by
us and by external users of our financial statements and is
considered to be an indicator of the operational strength and
performance of our business. Adjusted Net Income allows us to
assess our performance without regard to the impact of matters that
we do not consider indicative of the operating performance of our
business.
We use Adjusted Net Income to facilitate a comparison of our
operating performance on a consistent basis from period to period
that, when viewed in combination with our results prepared in
accordance with GAAP, provides a more complete understanding of
factors and trends affecting our business. We believe
Adjusted Net Income assists our Board of Directors, management and
investors in comparing our operating performance on a consistent
basis from period to period because they remove the impact of
certain material items outside of normal business operations (such
as the costs incurred for the proposed merger with SJW) from our
operating results.
Despite the importance of this Non-GAAP financial measure in
analyzing our business, measuring and determining incentive
compensation and otherwise evaluating our operating performance,
Adjusted Net Income is not a measurement of financial performance
under GAAP, may have limitations as an analytical tool and should
not be considered in isolation from, or as an alternative to, Net
Income or any other measure of our performance derived in
accordance with GAAP. Adjusted Net Income is not a measure of
profitability under GAAP.
We also urge you to review the reconciliation of this Non-GAAP
financial measure included in the Results of Operations section of
the Quarterly Report on Form 10-Q for three months ended March 31,
2019. To properly and prudently evaluate our business, we
encourage you to review the Condensed Consolidated Financial
Statements and related notes included elsewhere in our Form 10-Q
and to not rely on any single financial measure to evaluate our
business. In addition, because the Adjusted Net Income
measure is susceptible to varying calculations, such Non-GAAP
financial measures may differ from, and may therefore not be
comparable to, similarly titled measures used by other
companies.
The following table provides a reconciliation of Net Income to
Non-GAAP Adjusted Net Income for the three months ended March 31,
2019 and 2018:
|
|
2019 |
|
|
2018 |
|
Net Income |
$ |
2,238 |
|
$ |
(1,227 |
) |
Merger and Acquisition
Costs |
|
925 |
|
|
3,261 |
|
Financing Costs |
|
99 |
|
|
5 |
|
Adjusted Net Income |
$ |
3,262 |
|
$ |
2,039 |
|
Connecticut Water Service, Inc. &
Subsidiaries
Condensed Consolidated Selected Financial Data
(unaudited)
(In thousands except
per share amounts) |
March 31, 2019 |
|
March 31, 2018 |
|
|
|
|
Operating Revenues |
$ |
26,246 |
|
$ |
24,853 |
|
Other Water Operations Revenues |
|
336 |
|
|
373 |
|
Real Estate Revenues |
|
-- |
|
|
-- |
|
Service and Rentals Revenues |
|
1,275 |
|
|
1,205 |
|
Total Revenues |
$ |
27,857 |
|
$ |
26,431 |
|
Total Operating Expenses |
$ |
21,043 |
|
$ |
20,575 |
|
Other Utility Income, Net of Taxes |
$ |
199 |
|
$ |
267 |
|
Total Utility Operating Income |
$ |
5,402 |
|
$ |
4,545 |
|
Gain on Property Transactions, Net of Taxes |
$ |
12 |
|
$ |
-- |
|
Non-Water Sales Earnings (Services and Rentals), Net
of Taxes |
$ |
486 |
|
$ |
396 |
|
Net Income (Loss) |
$ |
2,238 |
|
$ |
(1,227 |
) |
Net Income (Loss) Applicable to Common
Shareholders |
$ |
2,238 |
|
$ |
(1,236 |
) |
Basic Earnings (Loss) Per Average Common
Share |
$ |
0.19 |
|
$ |
(0.10 |
) |
Diluted Earnings (Loss) Per Average Common
Share |
$ |
0.19 |
|
$ |
(0.10 |
) |
Basic Weighted Average Common Shares Outstanding |
|
11,962 |
|
|
11,862 |
|
Diluted Weighted Average Common Shares
Outstanding |
|
12,060 |
|
|
12,080 |
|
Book Value Per Share |
$ |
24.31 |
|
$ |
23.94 |
|
Condensed Consolidated Balance Sheets
(unaudited)
(In thousands) |
March 31, 2019 |
December 31, 2018 |
|
ASSETS |
|
|
Net Utility Plant |
$ |
745,132 |
$ |
739,793 |
Current Assets |
|
40,115 |
|
38,658 |
Other Assets |
|
178,389 |
|
174,892 |
|
Total Assets |
$ |
963,636 |
$ |
953,343 |
|
CAPITALIZATION AND LIABILITIES |
|
|
Shareholders’ Equity |
$ |
293,282 |
$ |
294,136 |
Long-Term Debt |
|
257,382 |
|
257,511 |
Current Liabilities |
|
84,501 |
|
79,053 |
Other Liabilities and Deferred Credits |
|
192,665 |
|
187,562 |
Contributions in Aid
of Construction |
|
135,806 |
|
135,081 |
Total Capitalization
and Liabilities |
$ |
963,636 |
$ |
953,343 |
Forward-Looking StatementsThis press release
contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, as amended. Some
of these forward-looking statements can be identified by the use of
forward-looking words such as “believes,” “expects,” “may,” “will,”
“should,” “seeks,” “approximately,” “intends,” “plans,”
“estimates,” “projects,” “strategy,” or “anticipates,” or the
negative of those words or other comparable terminology.
The accuracy of such statements is subject to a number of risks,
uncertainties and assumptions including, but not limited to, the
following factors: (1) the risk that the conditions to the closing
of the SJW Group transaction are not satisfied; (2) the risk that
the regulatory approvals required for the proposed transaction are
not obtained at all, or if obtained, on the terms expected or on
the anticipated schedule; (3) the risk that the California Public
Utilities Commission’s (“CPUC”) investigation may cause delays in
or otherwise adversely affect the proposed transaction and that SJW
Group may be required to consummate the proposed transaction prior
to the CPUC’s issuance of an order with respect to its
investigation; (4) the effect of water, utility, environmental and
other governmental policies and regulations; (5) litigation
relating to the proposed transaction; (6) the ability of each party
to meet expectations regarding timing, completion and accounting
and tax treatments of the proposed transaction; (7) the occurrence
of any event, change or other circumstance that could give rise to
the termination of the merger agreement between the parties to the
proposed transaction; (8) changes in demand for water and other
products and services; (9) unanticipated weather conditions; (10)
catastrophic events such as fires, earthquakes, explosions, floods,
ice storms, tornadoes, terrorist acts, physical attacks,
cyber-attacks, or other similar occurrences that could adversely
affect the facilities, operations, financial condition, results of
operations and reputation of Connecticut Water; (11) risks that the
proposed transaction disrupts the current plans and operations of
Connecticut Water; (12) potential difficulties in employee
retention as a result of the proposed transaction; (13) unexpected
costs, charges or expenses resulting from the proposed transaction;
(14) the effect of the announcement or pendency of the proposed
transaction on business relationships, operating results, and
business generally, including, without limitation, competitive
responses to the proposed transaction; (15) risks related to
diverting management’s attention from ongoing business operations
of Connecticut Water; and (16) legislative and economic
developments.
In addition, actual results are subject to other risks and
uncertainties that relate more broadly to Connecticut Water’s
overall business and financial condition, including those more
fully described in its filings with the SEC , including,
without limitation, its Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 2019. Forward-looking
statements are not guarantees of performance, and speak only as of
the date made, and neither Connecticut Water nor its management
undertakes any obligation to update or revise any forward-looking
statements except as required by law.
News media/Investor contact:
Daniel J. Meaney, APR
Director of Corporate Communications
Connecticut Water Service, Inc.
93 West Main Street, Clinton, CT 06413-1600
(860) 664-6016
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