CLINTON, Conn., March 14, 2016 (GLOBE NEWSWIRE) -- Connecticut Water Service, Inc. (NASDAQ:CTWS) announced net income of $22.8 million, or earnings per basic average share (EPS) of $2.07, on total revenues of $103.1 million in 2015. In 2014, the Company had net income of $21.3 million, or $1.95 EPS, on total revenues of $101.5 million.
2015 Operating Results
The increase in net income was attributable to the regulated operations in both Maine and Connecticut. In Maine, a combination of revenue growth from recovery of infrastructure investment and a general rate increase for the Biddeford and Saco Division of The Maine Water Company (Maine Water) drove the improved financial performance. Additionally, in June 2015, the Maine Public Utilities Commission (MPUC) approved via Stipulation Agreement (Agreement) Maine Water’s treatment of Internal Revenue Service (IRS) Repair Tax Regulations retroactive to January 1, 2014, providing benefits to both customers and shareholders. In Connecticut, timely recovery of continued investment in infrastructure resulted in income growth. Additionally, lower income tax expense, resulting in part from the immediate deductibility of much of that investment, contributed to the earnings increase.
Eric W. Thornburg, President and CEO of CTWS, stated, “Investment in infrastructure, which is imperative to water quality and customer health and safety, continues to be a growth driver for the Company and benefits customers and the environment. In 2015, we invested $47.8 million in our infrastructure including pipes, pumps, storage tanks, cyber security, and water treatment. That represents an infrastructure investment of more than $370 for each customer.” Mr. Thornburg added, “We are pleased to be making investments in the infrastructure in our systems and that $23.4 million of such investments are eligible for timely rate recovery through Water Infrastructure and Conservation Adjustment in Connecticut (WICA) and the Water Infrastructure Charge (WISC) in Maine.”
Net income in the Company’s core business, the Water Activities segment, was $21.0 million, on revenues of $97.5 million. In the same period of 2014, net income from the segment totaled $19.8 million, on revenues of $95.5 million. The increase in revenues in 2015 was attributable to the recovery of costs for completed infrastructure replacement projects through the WISC in Maine and WICA in Connecticut, and rate decisions authorized in Maine by the MPUC.
The Services and Rentals segment contributed net income of $1.4 million in 2015. In 2014, the segment contributed $1.5 million in net income. The Real Estate segment generated net income of $349,000 in 2015 through transactions of non-water supply land in the third quarter. In 2014, the segment produced income of $50,000.
Total operating expenses in 2015 increased $543,000, or about 0.8%, to $69.4 million compared to $68.9 million in 2014. Operating results reflected increased expenses related to benefits, payroll, and outside resources retained for cyber security, succession planning and overall risk management initiatives. The increases were largely offset by a reduction in income tax expense driven by the repair tax deduction and the 2015 Stipulation Agreement in Maine. In addition, a $1.2 million income tax benefit was recorded in the first quarter of 2015 resulting from the reversal of a previously recorded provision related to an IRS audit of the Company’s 2012 Federal Income Tax Return which was completed during the first quarter of 2015 with no change to the Company’s tax liability.
Fourth Quarter Operating Results
In the fourth quarter of 2015, net income was $2.2 million, or EPS of $0.20, compared to $2.4 million, or EPS of $0.21 reported in the same period of 2014. The 2015 fourth quarter decline was directly associated with increased operating costs noted previously (outside resources retained for cyber security, succession planning and overall risk management initiatives) incurred in the Water Activities Segment.
In the fourth quarter of 2015, net income in the Company’s core business, the Water Activities Segment, was $1.9 million, or EPS of $0.17, on revenues of $21.2 million. In the same period of 2014, net income from the segment totaled $2.1 million, or EPS of $0.19, on revenues of $21.2 million.
The Real Estate segment generated a loss of $2,000 during the fourth quarter. In the same quarter of 2014, the segment produced income of $46,000. The Services and Rentals Segment contributed income of $354,000, in the fourth quarter of 2015. In the fourth-quarter of 2014, the segment generated $262,000 of net income.
Total operating expenses in the fourth quarter of 2015 increased to $17.7 million from $17.3 million in the fourth quarter of 2014. Operating results in the fourth quarter reflected increased expenses related to benefits, payroll and outside resources retained for cyber security, succession planning, and overall risk management.
Quarterly Dividend
On January 21, 2016, CTWS’s Board of Directors declared a quarterly cash dividend payment of $0.2675 per common share payable on March 15, 2016, for all shareholders of record as of March 1, 2016.
Infrastructure Investment
In 2015, capital expenditures were $47.8 million, with $23.4 million, or 49%, of that invested in infrastructure replacement that is recoverable through WISC and WICA. On November 20, 2015, the CTWS Board approved a 2016 capital spending plan of $65.9 million that includes $22.6 million in WICA and WISC projects.
Regulatory Developments
On January 27, 2016, The Connecticut Water Company (Connecticut Water) filed an application with the Connecticut Public Utilities Regulatory Authority (PURA) to increase the WICA surcharge by a total of 1.03% to recover costs of recently completed infrastructure replacement projects. If PURA approves the request as submitted, the cumulative WICA surcharge would be 5.12% on customer bills issued on or after April 1, 2016. WICA charges are capped by law at 10%.
Maine Water files for WISC charges on a division-by-division basis for each of its 10 divisions. So far in 2016, an increase in the WISC has been approved and has been made effective in one division and another application is pending before the MPUC for another division, and is expected to become effective in 2016. Current WISC’s in Maine range from 0.88% to 6.12%.
A newly passed water revenue adjustment law in Maine became effective October 15, 2015. With rate stay outs until 2016 and 2017 in most of its regulatory divisions as part of Maine Water’s most recent decisions, Maine Water is now evaluating how and when this new mechanism can be implemented.
CTWS is the largest publicly traded water company based in New England. Through its wholly-owned public water utility subsidiaries, Connecticut Water and Maine Water, the Company provides drinking water to approximately 124,000 customers, or about 400,000 people, throughout the states of Connecticut and Maine.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this press release are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. Any statements contained in this press release that are not statements of historical fact, including statements based upon, among other things, our current assumptions, expectations and beliefs concerning future developments and their potential effect on Connecticut Water Service, Inc., may be deemed to be forward-looking statements. These forward-looking statements involve risks, uncertainties and other factors, many of which are outside our control, which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. In some cases you can identify forward-looking statements where statements are preceded by, followed by or include the words “believes,” “expects,” “anticipates,” “plans,” “future,” “potential,” “probably,” “predictions,” “continue” or the negative of such terms or similar expressions.
Because forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including but not limited to: changes in general economic, business, credit and financial market conditions; changes in environmental conditions, including those that result in water use restrictions, abnormal weather conditions; increases in energy and fuel costs; unfavorable changes to the federal and/or state tax codes; significant changes in, or unanticipated, capital requirements; significant changes in our credit rating or the market price of our common stock; our ability to integrate businesses, technologies or services which we may acquire; our ability to manage the expansion of our business; the extent to which we are able to develop and market new and improved services; the continued demand by telecommunication companies for antenna site leases on our property; the effect of the loss of major customers; our ability to retain the services of key personnel and to hire qualified personnel as we expand; labor disputes; increasing difficulties in obtaining insurance and increased cost of insurance; cost overruns relating to improvements or the expansion of our operations; increases in the costs of goods and services; civil disturbance or terroristic threats or acts; changes in accounting pronouncements; and the outcome of the review of the Company’s Connecticut state tax filings by the Connecticut Department of Revenue Services. Accordingly, the Company's actual results may differ materially from those contemplated by these forward-looking statements. Investors, therefore, are cautioned against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Additional information regarding the factors that may cause actual results to differ materially from these forward-looking statements is available in our filings with the Securities and Exchange Commission, including the risks and uncertainties identified in Part I, Item 1A - Risk Factors of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.
These forward-looking statements speak only as of the date of this press release, and the Company does not assume any obligation to update or revise any forward-looking statement made in this press release or that may from time to time be made by or on behalf of the Company. Information may also be obtained from the Company Contact: Daniel J Meaney, APR, Director of Corporate Communications, 93 West Main Street, Clinton, CT 06413-1600, (860) 664-6016.
Connecticut Water Service, Inc. & Subsidiaries
Condensed Consolidated Selected Financial Data (unaudited)
| (In thousands except per share amounts) | December 31, 2015 | December 31, 2014 | |||||
| Operating Revenues | $ | 96,041 | $ | 94,020 | |||
| Other Water Activities Revenues | 1,431 | 1,496 | |||||
| Real Estate Revenues | 14 | 243 | |||||
| Service and Rentals Revenues | 5,602 | 5,784 | |||||
| Total Revenues | $ | 103,088 | $ | 101,543 | |||
| Total Operating Expenses | $ | 69,399 | $ | 68,856 | |||
| Other Utility Income, Net of Taxes | $ | 797 | $ | 833 | |||
| Total Utility Operating Income | $ | 27,439 | $ | 25,997 | |||
| Gain on Property Transactions, Net of Taxes | $ | 349 | $ | 50 | |||
| Non-Water Sales Earnings (Services and Rentals), Net of Taxes | $ | 1,394 | $ | 1,471 | |||
| Net Income | $ | 22,761 | $ | 21,319 | |||
| Net Income Applicable to Common Shareholders | $ | 22,723 | $ | 21,281 | |||
| Basic Earnings Per Average Common Share | $ | 2.07 | $ | 1.95 | |||
| Diluted Earnings Per Average Common Share | $ | 2.04 | $ | 1.92 | |||
| Basic Weighted Average Common Shares Outstanding | 10,958 | 10,893 | |||||
| Diluted Weighted Average Common Shares Outstanding | 11,164 | 11,091 | |||||
| Book Value Per Share | $ | 20.01 | $ | 18.83 | |||
Condensed Consolidated Balance Sheets (unaudited)
| (In thousands) | December 31, 2015 | December 31, 2014 | ||||
| ASSETS | ||||||
| Net Utility Plant | $ | 546,284 | $ | 506,939 | ||
| Current Assets | 27,029 | 36,168 | ||||
| Other Assets | 143,205 | 128,082 | ||||
| Total Assets | $ | 716,518 | $ | 671,189 | ||
| CAPITALIZATION AND LIABILITIES | ||||||
| Shareholders’ Equity | $ | 223,977 | $ | 209,451 | ||
| Preferred Stock | 772 | 772 | ||||
| Long-Term Debt | 177,654 | 176,601 | ||||
| Current Liabilities | 36,939 | 23,622 | ||||
| Other Liabilities and Deferred Credits | 186,128 | 176,372 | ||||
| Contributions in Aid of Construction | 91,048 | 84,371 | ||||
| Total Capitalization and Liabilities | $ | 716,518 | $ | 671,189 | ||