-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RrxGmpv8KSKl+294z03yAp6QenzexvL2eg28IPDlxuabC1yZI7vhBLgxZbhQs7bz bk8HKqzqS1o4f1nMkJJSfw== 0000914039-01-500251.txt : 20020410 0000914039-01-500251.hdr.sgml : 20020410 ACCESSION NUMBER: 0000914039-01-500251 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONNECTICUT WATER SERVICE INC / CT CENTRAL INDEX KEY: 0000276209 STANDARD INDUSTRIAL CLASSIFICATION: WATER SUPPLY [4941] IRS NUMBER: 060739839 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08084 FILM NUMBER: 1785962 BUSINESS ADDRESS: STREET 1: 93 W MAIN ST CITY: CLINTON STATE: CT ZIP: 06413 BUSINESS PHONE: 8606698630 MAIL ADDRESS: STREET 1: 93 WEST MAIN ST CITY: CLINTON STATE: CT ZIP: 06413 10-Q 1 y54730e10-q.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 2001 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 0-8084 Connecticut Water Service, Inc. (Exact name of registrant as specified in its charter) Connecticut 06-0739839 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 93 West Main Street, Clinton, CT 06413-1600 (Address of principal executive offices) (Zip Code) (860) 669-8636 (Registrant's telephone number, including area code) Not Applicable (Former name, address and former fiscal year, if changed 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 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 [ ] APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a count. Yes [ ] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 7,635,057 Number of shares of common stock outstanding, September 30, 2001 CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES Financial Report September 30, 2001 and 2000
TABLE OF CONTENTS PART I, ITEM 1: FINANCIAL STATEMENTS Consolidated Balance Sheets at September 30, 2001 and December 31, 2000 Page 3 Consolidated Statements of Capitalization at September 30, 2001 and December 31, 2000 Page 4 Consolidated Statements of Income for Three Months Ended September 30, 2001 and 2000 Page 5 Consolidated Statements of Income for Nine Months Ended September 30, 2001 and 2000 Page 6 Consolidated Statements of Income for Twelve Months Ended September 30, 2001 and 2000 Page 7 Consolidated Statements of Retained Earnings for Three, Six and Nine Months Ended September 30, 2001 and 2000 Page 8 Consolidated Statements of Cash Flows for Nine Months Ended September 30, 2001 and 2000 Page 9 Notes to Consolidated Financial Statements Page 10-11 PART I, ITEM 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Page 11-13 Signature Page Page 14
Page 3 CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AT SEPTEMBER 30, 2001 AND DECEMBER 31, 2000 (IN THOUSANDS)
DEC. 31, SEPTEMBER 30, 2000 2001 (UNAUDITED (UNAUDITED) AND RESTATED) ------------- ------------- ASSETS Utility Plant Utility Plant $ 263,440 $ 257,634 Construction Work in Progress 8,550 8,359 Utility Plant Acquisition Adjustments (1,256) (1,256) --------- --------- 270,734 264,737 Accumulated Provision for Depreciation (75,300) (71,568) --------- --------- Net Utility Plant 195,434 193,169 --------- --------- Other Property and Investments 3,140 3,039 --------- --------- Current Assets Cash 1,548 314 Accounts Receivable (Less Allowance, 2001 - $259; 2000 - $218) 6,141 4,831 Accrued Unbilled Revenues 3,759 3,229 Materials and Supplies, at Average Cost 833 795 Prepayments and Other Current Assets 962 122 --------- --------- Total Current Assets 13,243 9,291 --------- --------- Deferred Charges and Regulatory Assets Unamortized Debt Issuance Expense 5,363 5,530 Unrecovered Income Taxes 9,104 9,040 Postretirement Benefits Other Than Pension 949 953 Other Costs 1,428 1,524 --------- --------- Total Deferred Charges and Regulatory Assets 16,844 17,047 --------- --------- TOTAL ASSETS $ 228,661 $ 222,546 ========= ========= CAPITALIZATION AND LIABILITIES Capitalization (See accompanying statements) Common Stockholders' Equity $ 70,695 $ 67,110 Preferred Stock 847 847 Minority Interest -- 117 Long-Term Debt 65,931 66,283 --------- --------- Total Capitalization 137,473 134,357 --------- --------- Current Liabilities Current Portion of Long Term Debt 306 280 Interim Bank Loans Payable 3,298 1,800 Accounts Payable, Accrued Taxes and Accrued Interest 5,063 7,436 Other 185 101 --------- --------- Total Current Liabilities 8,852 9,617 --------- --------- Long-Term Liabilities Advances for Construction 18,712 17,062 Contributions in Aid of Construction 28,346 27,009 Deferred Federal Income Taxes 18,916 18,165 Unfunded Future Income Taxes 8,546 8,546 Long-term Compensation Arrangements 5,830 5,758 Unamortized Investment Tax Credits 1,986 2,032 Commitments and Contingencies --------- --------- Total Long-Term Liabilities 82,336 78,572 --------- --------- TOTAL CAPITALIZATION AND LIABILITIES $ 228,661 $ 222,546 ========= =========
The accompanying notes are an integral part of these financial statements. Page 4 CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CAPITALIZATION AT SEPTEMBER 30, 2001 AND DECEMBER 31, 2000 (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
DEC. 31, SEPTEMBER 30, 2000 2001 (UNAUDITED (UNAUDITED) AND RESTATED) ------------- ------------- Common Stockholders' Equity Common Stock Without Par Value Authorized - 15,000,000 Shares; $ 49,581 $ 48,617 Shares Issued and Outstanding: 2001 - 7,635,057; 2000 - 7,604,594 Stock Issuance Expense (1,385) (1,385) Retained Earnings 22,499 19,878 --------- --------- Total Common Stockholders' Equity 70,695 67,110 --------- --------- Preferred Stock Cumulative Preferred Stock of Connecticut Water Service, Inc. Series A Voting, $20 Par Value; Authorized, Issued and Outstanding 15,000 Shares, Redeemable at $21.00 Per Share 300 300 Series $.90 Non-Voting, $16 Par Value; Authorized 50,000 Shares Issued and Outstanding 29,499 Shares, Redeemable at $16.00 Per Share 472 472 --------- --------- Total Preferred Stock of Connecticut Water Service, Inc. 772 772 --------- --------- Cumulative Preferred Stock of Barnstable Water Company Voting, $100 Par Value; Authorized, Issued and Outstanding 750 shares. Redeemable at $105 per share 75 75 --------- --------- Total Preferred Stock 847 847 --------- --------- Minority Interest -- 117 --------- --------- Long-Term Debt The Connecticut Water Company First Mortgage Bonds 5.875% Series R, due 2022 14,670 14,670 6.65% Series S, due 2020 8,000 8,000 5.75% Series T, due 2028 5,000 5,000 5.3% Series U, due 2028 4,550 4,550 6.94% Series V, due 2029 12,050 12,050 --------- --------- 44,270 44,270 Unsecured Water Facilities Revenue Refinancing Bonds 5.05% 1998 Series A, due 2028 9,730 9,770 5.125% 1998 Series B, due 2028 7,770 7,830 Other 5.5% Unsecured Promissory Note 42 71 --------- --------- Total Connecticut Water Company 61,812 61,941 --------- --------- Crystal Water Utilities Corporation 8.0% New London Trust, Due 2017 128 130 --------- --------- Crystal Water Company of Danielson 7.82% Connecticut Development Authority, Due 2020 499 507 8.0% New London Trust, Due 2011 2,067 2,170 --------- --------- Total Crystal 2,566 2,677 --------- --------- Chester Realty 6% Note Payable, Due 2006 106 115 --------- --------- Barnstable Water Company 10.2% Indianapolis Life Insurance Co., Due 2011 1,625 1,700 --------- --------- Total Connecticut Water Service, Inc. 66,237 66,563 --------- --------- Less Current Portion 306 280 --------- --------- Total Long-Term Debt 65,931 66,283 --------- --------- TOTAL CAPITALIZATION $ 137,473 $ 134,357 ========= =========
The accompanying notes are an integral part of these financial statements. Page 5 CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2000 2001 (UNAUDITED (UNAUDITED) AND RESTATED) ----------- ------------ Operating Revenues $ 13,538 $ 12,353 -------- -------- Operating Expenses Operation and Maintenance 5,282 4,455 Depreciation 1,196 1,204 Income Taxes 2,009 1,657 Taxes Other Than Income Taxes 1,164 1,262 -------- -------- Total Operating Expenses 9,651 8,578 -------- -------- Utility Operating Income 3,887 3,775 -------- -------- Other Income (Deductions), Net of Taxes Gain (Loss) on Property Transactions 11 (1) Non-Water Sales Earnings 92 52 Allowance for Funds Used During Construction 110 109 Merger Costs (1) (50) Other 15 16 -------- -------- Total Other Income (Deductions), Net of Taxes 227 126 -------- -------- Interest and Debt Expense Interest on Long-Term Debt 1,011 1,037 Other Interest Charges 93 121 Amortization of Debt Expense 55 55 -------- -------- Total Interest and Debt Expense 1,159 1,213 -------- -------- Net Income Before Preferred Dividends 2,955 2,688 Preferred Stock Dividend Requirement 10 10 -------- -------- Net Income Applicable to Common Stock $ 2,945 $ 2,678 ======== ======== Weighted Average Common Shares Outstanding: Basic 7,618 7,604 Diluted 7,678 7,636 Earnings Per Common Share: Basic $ 0.39 $ 0.35 Diluted $ 0.38 $ 0.35 Dividends Per Common Share $ 0.20 $ 0.20
The accompanying notes are an integral part of these financial statements. Page 6 CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2000 2001 (UNAUDITED (UNAUDITED) AND RESTATED) ----------- ------------ Operating Revenues $ 34,740 $ 33,412 -------- -------- Operating Expenses Operation and Maintenance 14,374 13,444 Depreciation 3,654 3,571 Income Taxes 4,221 3,729 Taxes Other Than Income Taxes 3,288 3,477 -------- -------- Total Operating Expenses 25,537 24,221 -------- -------- Utility Operating Income 9,203 9,191 -------- -------- Other Income (Deductions), Net of Taxes Gain (Loss) on Property Transactions 1,121 58 Non-Water Sales Earnings 262 188 Allowance for Funds Used During Construction 308 312 Merger Costs (352) (149) Other 114 94 -------- -------- Total Other Income (Deductions), Net of Taxes 1,453 503 -------- -------- Interest and Debt Expense Interest on Long-Term Debt 3,041 3,084 Other Interest Charges 285 318 Amortization of Debt Expense 167 167 -------- -------- Total Interest and Debt Expense 3,493 3,569 -------- -------- Net Income Before Preferred Dividends 7,163 6,125 Preferred Stock Dividend Requirement 29 29 -------- -------- Net Income Applicable to Common Stock $ 7,134 $ 6,096 ======== ======== Weighted Average Common Shares Outstanding: Basic 7,612 7,605 Diluted 7,657 7,633 Earnings Per Common Share: Basic $ 0.94 $ 0.80 Diluted $ 0.93 $ 0.80 Dividends Per Common Share $ 0.59 $ 0.58
The accompanying notes are an integral part of these financial statements. Page 7 CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2000 2001 (UNAUDITED (UNAUDITED) AND RESTATED) ----------- ------------ Operating Revenues $ 45,325 $ 44,021 -------- -------- Operating Expenses Operation and Maintenance 19,310 18,512 Depreciation 4,800 4,684 Income Taxes 5,071 4,719 Taxes Other Than Income Taxes 4,468 4,545 -------- -------- Total Operating Expenses 33,649 32,460 -------- -------- Utility Operating Income 11,676 11,561 -------- -------- Other Income (Deductions), Net of Taxes Gain (Loss) on Property Transactions 1,595 98 Non-Water Sales Earnings 429 223 Allowance for Funds Used During Construction 412 444 Merger Costs (613) (149) Other 140 167 -------- -------- Total Other Income (Deductions), Net of Taxes 1,963 783 -------- -------- Interest and Debt Expense Interest on Long-Term Debt 4,056 4,096 Other Interest Charges 427 403 Amortization of Debt Expense 223 221 -------- -------- Total Interest and Debt Expense 4,706 4,720 -------- -------- Net Income Before Preferred Dividends 8,933 7,624 Preferred Stock Dividend Requirement 38 38 -------- -------- Net Income Applicable to Common Stock $ 8,895 $ 7,586 ======== ======== Weighted Average Common Shares Outstanding: Basic 7,610 7,602 Diluted 7,649 7,632 Earnings Per Common Share: Basic $ 1.17 $ 1.00 Diluted $ 1.16 $ 0.99 Dividends Per Common Share $ 0.78 $ 0.79
The accompanying notes are an integral part of these financial statements. Page 8 CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF RETAINED EARNINGS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2000 2001 (UNAUDITED (UNAUDITED) AND RESTATED) ---------- ------------ Balance at Beginning of Period $21,101 $18,411 Net Income Before Preferred Dividends of Parent 2,955 2,688 ------- ------- 24,056 21,099 ------- ------- Dividends Declared: Cumulative Preferred, Class A, $.20 per share 3 3 Cumulative Preferred, Series $.90, $.225 per share 7 7 Common Stock - 2001 $0.202 per share; 2000 $0.20 per share 1,547 1,524 ------- ------- 1,557 1,534 ------- ------- Balance at End of Period $22,499 $19,565 ======= =======
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2000 2001 (UNAUDITED (UNAUDITED) AND RESTATED) ---------- ------------ Balance at Beginning of Period $19,878 $17,910 Net Income Before Preferred Dividends of Parent 7,163 6,125 ------- ------- 27,041 24,035 ------- ------- Dividends Declared: Cumulative Preferred, Class A, $.40 per share 9 9 Cumulative Preferred, Series $.90, $.45 per share 20 20 Common Stock - 2001 $0.59 per share; 2000 $0.58 per share 4,513 4,441 ------- ------- 4,542 4,470 ------- ------- Balance at End of Period $22,499 $19,565 ======= =======
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2000 2001 (UNAUDITED (UNAUDITED) AND RESTATED) ---------- ------------ Balance at Beginning of Period $19,565 $18,003 Net Income Before Preferred Dividends of Parent 8,933 7,624 ------- ------- 28,498 25,627 ------- ------- Dividends Declared: Cumulative Preferred, Class A, $.80 per share 12 12 Cumulative Preferred, Series $.90, $.90 per share 26 26 Common Stock - 2001 $0.78 per share; 2000 $0.79 per share 5,961 6,024 ------- ------- 5,999 6,062 ------- ------- Balance at End of Period $22,499 $19,565 ======= =======
The accompanying notes are an integral part of these financial statements. Page 9 CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (IN THOUSANDS)
2000 2001 (UNAUDITED (UNAUDITED) AND RESTATED) ---------- ------------ Operating Activities: Net Income Before Preferred Dividends of Parent $ 7,163 $ 6,125 ------- ------- Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation (including $119 in 2001, $112 in 2000 charged to other accounts) 3,773 3,683 Change in Assets and Liabilities: (Increase) Decrease in Accounts Receivable and Accrued Unbilled Revenues (1,840) (655) (Increase) Decrease in Other Current Assets (878) (705) (Increase) Decrease in Other Non-Current Items 174 (38) Increase (Decrease) in Accounts Payable, Accrued Expenses and Other Current Liabilities (2,289) (429) Increase (Decrease) in Deferred Federal Income Taxes and Investment Tax Credits, Net 705 526 ------- ------- Total Adjustments (355) 2,382 ------- ------- Net Cash Provided by (Used for) Operating Activities 6,808 8,507 ------- ------- Investing Activities: Gross Additions to Utility Plant (including Allowance for Funds Used During Construction of $308 in 2001 and $312 in 2000) (6,071) (5,358) ------- ------- Financing Activities: Proceeds from Interim Bank Loans 3,298 2,581 Repayment of Interim Bank Loans (1,800) (3,061) Proceeds from Issuance of Common Stock 964 154 Minority Interest (117) (19) Repayment of Long-Term Debt (326) (632) Advances, Contributions and Funds From Others for Construction, Net 3,020 1,370 Cash Dividends Paid (4,542) (4,470) ------- ------- Net Cash Provided by (Used in) Financing Activities 497 (4,077) ------- ------- Net Increase (Decrease) in Cash 1,234 (928) Cash at Beginning of Year 314 1,127 ------- ------- Cash at End of Period $ 1,548 $ 199 ======= ======= Supplemental Disclosures of Cash Flow Information: Cash Paid During the Year for: Interest (Net of Amounts Capitalized) $ 3,516 $ 3,482 State and Federal Income Taxes $ 2,324 $ 2,740
The accompanying notes are an integral part of these financial statements. Page 10 CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The consolidated financial statements included herein have been prepared by CONNECTICUT WATER SERVICE, INC. (the Company), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for interim periods. Certain information and footnote disclosures have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. The results for interim periods are not necessarily indicative of results to be expected for the year since consolidated earnings are subject to seasonal factors. On September 7, 2001 the Company effected a three-for-two stock split. The distribution of these shares increased the number of shares outstanding by 2,562,052 shares. All outstanding common shares and per share amounts in this report have been restated to reflect this stock split. Appropriate adjustments to reflect this stock split were made to the Company's Performance Stock Program. 2. Earnings per average common share are calculated by dividing net income applicable to common stock by the average number of shares of common stock outstanding during the respective periods as detailed below: Page 11 CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES Following is restated for September 2001 three-for-two stock split:
3 Months Ended 12 Months Ended 9/30/01 9/30/00 9/30/01 9/30/00 12/31/00 --------- --------- --------- --------- --------- Common Shares Outstanding: January 1, 2000 -- -- -- -- 7,596,141 October 1, 2000 & 1999 respectively -- -- 7,604,362 7,595,982 -- July 1, 2001 & 2000 respectively 7,609,506 7,604,149 -- -- -- Common Shares Issued: To CSE - December 15, 1999 -- -- -- 159 -- To PSP - January 13, 2000 -- -- -- 15,148 15,148 To CSE - February 17, 2000 -- -- -- (7,605) (7,605) To CSE - March 15, 2000 -- -- -- 217 217 To CSE - June 15, 2000 -- -- -- 248 248 To CSE - September 15, 2000 -- 213 -- 213 213 To CSE - December 15, 2000 -- -- 232 -- 232 To PSP - January 13, 2001 -- -- 8,607 -- -- To PSP - February 17, 2001 -- -- (4,216) -- -- To CSE - March 15, 2001 -- -- 282 -- -- To CSE - June 15, 2001 -- -- 239 -- -- Liquidation of Fractional Shares (752) -- (752) -- -- Exercised Stock Options 26,071 -- 26,071 -- -- To CSE - September 15, 2001 232 -- 232 -- -- --------- --------- -------- --------- --------- Common Shares Outstanding: September 30, 2001 & 2000 respectively 7,635,057 7,604,362 7,635,057 7,604,362 ========= ========= ========= ========= December 31, 2000 7,604,594 ========= Weighted Average Common Shares Outstanding: Days outstanding basis Basic 7,617,554 7,604,186 7,610,344 7,602,437 7,604,546 ========= ========= ========= ========= ========= Fully Diluted 7,677,316 7,636,190 7,649,595 7,631,945 7,632,928 ========= ========= ========= ========= =========
PSP = Performance Stock Program CSE = Common Stock Equivalents PART I, ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CORPORATE RESOURCES The Company has a total of $9,000,000 in lines of credit provided by two banks. As of September 30, 2001 approximately $5,700,000 of these lines were unused and available to the Company. Page 12 CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES RESULTS OF OPERATIONS THE FOLLOWING FACTORS HAD A SIGNIFICANT EFFECT UPON THE COMPANY'S NET INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 AS COMPARED TO THE NET INCOME FOR THE SAME PERIOD LAST YEAR. Net income applicable to common stock for the three months ended September 30, 2001 increased from that of September 30, 2000 by $267,000, or $.04 per basic average common share. The increase in net income resulted from $112,000 higher utility operating income, a $101,000 increase in net other income (deductions) and a $54,000 decrease in interest and debt expense. The increase in utility operating income was primarily due to the following: - a 9.6% increase in operating revenue due to increased water consumption brought on by a hotter, dryer summer and customer growth - a reduction in taxes other than income taxes resulting from property tax rebatements and property tax revaluations partially offset by - an increase in operation and maintenance expense - increased income tax expense primarily due to increased earnings The increase in net other income (deductions) was partially due to an increase in profits from the Company's Linebacker (SM) service line maintenance program related to increased customer enrollment. THE FOLLOWING FACTORS HAD A SIGNIFICANT EFFECT UPON THE COMPANY'S NET INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AS COMPARED TO THE NET INCOME FOR THE SAME PERIOD LAST YEAR. Net income applicable to common stock for the nine months ended September 30, 2001 increased from that of September 30, 2000 by $1,038,000 or $.14 per basic average common share. The increased income resulted from $950,000 higher net other income (deductions), a $76,000 decrease in interest and debt expense and a $12,000 increase in utility operating income. The major reasons for the higher net other income (deductions) were: - a $1,063,000 increase in net gains on property transactions resulting primarily from tax benefits the Company received for its January 2001 donation of 134 acres of land to the Town of Middlebury, Connecticut - a $74,000, or 39% increase in net non-water sales earnings partially due to increased customer participation in its Linebacker (SM) service line maintenance program and increased earnings from sales of emergency and pool water partially offset by - a $203,000 increase in merger costs related to the Company's acquisition of Barnstable Holding Company which was consummated in February 2001. Page 13 CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES The major causes of the higher utility operating income were: - a 4.0% increase in operating revenues partially due to a hotter, dryer summer and to over 1,000 new customers added to Company's water systems during the past 12 months - a 5.4% reduction in taxes other than income taxes resulting from property tax rebatements partially offset by - a 6.9% increase in operation and maintenance expense partially due to higher treatment and utility costs - a 2.3% increase in depreciation expense due to the Company's increased investment in utility plant - a 13.2% increase in income tax expense primarily due to increased earnings and book/tax timing adjustments FORWARD LOOKING INFORMATION This report, including management's discussion and analysis, contains certain forward looking statements regarding the Company's results of operations and financial position. These forward looking statements are based on current information and expectations, and are subject to risks and uncertainties, which could cause the Company's actual results to differ materially from expected results. Page 14 SIGNATURES 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. Connecticut Water Service, Inc. (Registrant) Date: November 8, 2001 By /s/ David C. Benoit David C. Benoit Vice President - Finance Date: November 8, 2001 By: /s/ Peter J. Bancroft Peter J. Bancroft Assistant Treasurer -----END PRIVACY-ENHANCED MESSAGE-----