CLINTON, Conn., Aug. 08, 2019 (GLOBE NEWSWIRE) --
- Operating Revenues Increased 2.5 Percent
- Net Income Increased $1.0 Million, or $0.09 per Share
Connecticut Water Service, Inc. (CTWS) (“Connecticut Water”) announced net income of $5.8 million or $0.48 earnings per basic common share (“EPS”) for the second quarter of 2019 on total revenues of $32.3 million. Total revenues include revenues generated by Connecticut Water’s three business segments: Water Operations, Service and Rentals, and Real Estate. In the second quarter of 2018, Connecticut Water had net income of $4.7 million or EPS of $0.39 on total revenues of $31.5 million. Non-GAAP Adjusted Net Income*, which excludes merger and acquisition costs, for the second quarter of 2019 increased from the same period in the prior year by $0.9 million.
The improvements in results in 2019 were primarily driven by increased base rate revenues in Connecticut, as well as increases in Water Infrastructure and Conservation Adjustment (“WICA”) and Water Infrastructure Charge (“WISC”) surcharges. These improved revenues were partially offset by increased tax, depreciation and interest expenses.
The Company reported net income of $8.0 million, or EPS of $0.67, on total revenues of $60.2 million in the first six months of 2019. In the same period of 2018, the Company had net income of $3.5 million, or $0.29 EPS, on total revenues of $58.0 million. The improvements in year-to-date results are the same as those identified for the second quarter.
* 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 at the end of this release.
“In the second quarter of 2019, we made significant progress toward our combination with SJW Group,” stated David C. Benoit, president and CEO of CTWS. Mr. Benoit added, “The settlement agreement we entered into with the Connecticut Office of Consumer Counsel and the Department of Energy and Environmental Protection, when combined with the binding commitments in the merger application filed with the Connecticut Public Utilities Regulatory Authority, provides compelling benefits to customers, employees, communities and the environment. We are working with the parties in the Maine regulatory process to deliver similar benefits in Maine. We are eager to begin delivering the full benefits offered through the combination with SJW Group.”
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. On July 3, Connecticut Water, SJW Group, the Connecticut Office of Consumer Counsel (“OCC”) and the Connecticut Department of Energy and Environmental Protection (“DEEP”) filed a settlement agreement negotiated by the parties with the PURA. The settlement agreement modified some of the underlying commitments and provides for eight additional binding commitments that offer benefits to customers, communities and the environment. PURA is scheduled to issue a final decision on the application for approval of the proposed merger on September 4. The PURA docket number for the proceeding is 19-04-02.
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. On June 24, 2019, MPUC extended the review period to October 29, 2019. MPUC assigned docket number 2019-00096 to the application and has not yet established a final decision date.
As of June 30, there was a WICA credit of 0.4 percent for Connecticut Water Company and a WICA charge of 9.29 percent for Avon Water. Heritage Village Water has not filed for a WICA surcharge.
Maine Water files for 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.
WICA and WISC allow for recovery of eligible infrastructure replacements on a semiannual basis. Since the adoption of WICA in 2007, Connecticut Water Company has replaced more than 130 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 treatment improvements.
CTWS 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 ("SEC") earlier today. A link to the Form 10-Q filing can be found at http://ir.ctwater.com.
Use and Definition of Non-GAAP Financial Measures
We 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, including any short-term borrowing costs. 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 Group) 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 six months ended June 30, 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 tables provide a reconciliation of Net Income to Non-GAAP Adjusted Net Income for the three months ended June 30, 2019 and 2018, and six months ended June 30, 2019 and 2018:
|For the three months ended June 30, 2019 and 2018:|
|Merger and Acquisition Costs||2,171||2,391|
|Adjusted Net Income||$||8,062||$||7,148|
|For the six months ended June 30, 2019 and 2018:|
|Merger and Acquisition Costs||3,096||5,652|
|Adjusted Net Income||$||11,324||$||9,188|
Connecticut Water Service, Inc. & Subsidiaries
Condensed Consolidated Selected Financial Data (unaudited)
|Three Months Ended June 30,||Six Months Ended June 30,|
|(In thousands except per share amounts)||2019||2018||2019||2018|
|Other Water Operations Revenues||382||363||718||736|
|Real Estate Revenues||--||--||--||--|
|Service and Rentals Revenues||1,260||1,277||2,535||2,482|
|Total Operating Expenses||$||20,848||$||20,325||$||41,891||$||40,900|
|Other Utility Income, Net of Taxes||$||283||$||248||$||482||$||515|
|Total Utility Operating Income||$||10,099||$||9,827||$||15,501||$||14,372|
|Gain on Property Transactions, Net of Taxes||$||11||$||--||$||23||$||--|
|Non-Water Sales Earnings (Services and Rentals), Net of Taxes||$||404||$||432||$||890||$||828|
|Net Income Applicable to Common Shareholders||$||5,786||$||4,728||$||8,024||$||3,492|
|Basic Earnings Per Average Common Share||$||0.48||$||0.39||$||0.67||$||0.29|
|Diluted Earnings Per Average Common Share||$||0.48||$||0.39||$||0.67||$||0.29|
|Basic Weighted Average Common Shares Outstanding||11,970||11,884||11,966||11,873|
|Diluted Weighted Average Common Shares Outstanding||12,065||12,083||12,062||12,082|
|Book Value Per Share||$||24.49||$||23.87||$||24.49||$||23.87|
Condensed Consolidated Balance Sheets (unaudited)
|(In thousands)||June 30, 2019||December 31, 2018|
|Net Utility Plant||$||756,380||$||739,793|
|CAPITALIZATION AND LIABILITIES|
|Other Liabilities and Deferred Credits||196,585||187,562|
|Contributions in Aid of Construction||136,436||135,081|
|Total Capitalization and Liabilities||$||981,427||$||953,343|
This 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 June 30, 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.
Daniel J. Meaney, APR
Director of Public Affairs and Corporate Communications
Connecticut Water Service, Inc.
93 West Main Street, Clinton, CT 06413-1600