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x
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE QUARTERLY PERIOD ENDED March 31, 2009
or
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE TRANSITION PERIOD FROM
|
Connecticut
(State
or other jurisdiction of
incorporation
or organization)
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06-0739839
(I.R.S.
Employer Identification No.)
|
93
West Main Street, Clinton, CT
(Address
of principal executive office)
|
06413
(Zip
Code)
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Large
Accelerated Filer o
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Accelerated
Filer x
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Non-Accelerated
Filer o
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Smaller
Reporting Company o
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Part
I, Item 1: Financial Statements
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Page
3
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Page
4
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Page
5
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Page
6
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Page
7
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Page
8
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Page
9
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Page
13
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Page
17
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Page
17
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Page
18
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Page
18
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Page
18
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Page
18
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Page
19
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Connecticut
Water Service, Inc. and Subsidiaries
|
||||||||
CONSOLIDATED BALANCE SHEETS
|
||||||||
At
March 31, 2009 and December 31, 2008
|
||||||||
(Unaudited)
|
||||||||
(In
thousands)
|
||||||||
March
31,
|
December
31,
|
|||||||
ASSETS
|
2009
|
2008
|
||||||
Utility
Plant
|
$ | 416,608 | $ | 410,471 | ||||
Construction
Work in Progress
|
6,383 | 4,577 | ||||||
422,991 | 415,048 | |||||||
Accumulated
Provision for Depreciation
|
(118,655 | ) | (115,815 | ) | ||||
Net
Utility Plant
|
304,336 | 299,233 | ||||||
Other
Property and Investments
|
5,897 | 6,034 | ||||||
Cash
and Cash Equivalents
|
792 | 684 | ||||||
Accounts
Receivable (Less Allowance, 2009 - $417; 2008 - $376)
|
6,198 | 6,653 | ||||||
Accrued
Unbilled Revenues
|
4,749 | 5,372 | ||||||
Materials
and Supplies, at Average Cost
|
1,162 | 1,095 | ||||||
Prepayments
and Other Current Assets
|
3,688 | 1,976 | ||||||
Total
Current Assets
|
16,589 | 15,780 | ||||||
Unamortized
Debt Issuance Expense
|
7,197 | 7,318 | ||||||
Unrecovered
Income Taxes
|
23,086 | 22,856 | ||||||
Pension
Benefits
|
8,798 | 8,911 | ||||||
Post-retirement
Benefits Other Than Pension
|
2,562 | 2,570 | ||||||
Goodwill
|
3,608 | 3,608 | ||||||
Deferred
Charges and Other Costs
|
5,894 | 6,121 | ||||||
Total
Regulatory and Other Long-Term Assets
|
51,145 | 51,384 | ||||||
Total
Assets
|
$ | 377,967 | $ | 372,431 | ||||
CAPITALIZATION AND
LIABILITIES
|
||||||||
Common
Stockholders' Equity
|
$ | 103,192 | $ | 103,476 | ||||
Preferred
Stock
|
772 | 772 | ||||||
Long-Term
Debt
|
92,216 | 92,227 | ||||||
Total
Capitalization
|
196,180 | 196,475 | ||||||
Current
Portion of Long Term Debt
|
8 | 8 | ||||||
Interim
Bank Loans Payable
|
16,153 | 12,074 | ||||||
Accounts
Payable and Accrued Expenses
|
5,317 | 5,700 | ||||||
Accrued
Interest
|
897 | 870 | ||||||
Other
Current Liabilities
|
348 | 418 | ||||||
Total
Current Liabilities
|
22,723 | 19,070 | ||||||
Advances
for Construction
|
39,949 | 38,928 | ||||||
Contributions
in Aid of Construction
|
50,200 | 49,420 | ||||||
Deferred
Federal and State Income Taxes
|
30,801 | 30,472 | ||||||
Unfunded
Future Income Taxes
|
18,127 | 18,128 | ||||||
Long-Term
Compensation Arrangements
|
18,415 | 18,331 | ||||||
Unamortized
Investment Tax Credits
|
1,484 | 1,497 | ||||||
Other
Long-Term Liabilities
|
88 | 110 | ||||||
Total
Long-Term Liabilities
|
159,064 | 156,886 | ||||||
Commitments
and Contingencies
|
||||||||
Total
Capitalization and Liabilities
|
$ | 377,967 | $ | 372,431 |
Connecticut
Water Service, Inc. and Subsidiaries
|
||||||||
CONSOLIDATED STATEMENTS OF
CAPITALIZATION
|
||||||||
At
March 31, 2009 and December 31, 2008
|
||||||||
(Unaudited)
|
||||||||
(In
thousands, except share data)
|
||||||||
March
31,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Common
Stockholders' Equity
|
||||||||
Common
Stock Without Par Value Authorized - 25,000,000 Shares;
|
$ | 66,802 | $ | 66,412 | ||||
Shares
Issued and Outstanding: 2009 - 8,505,395 ; 2008 -
8,463,269
|
||||||||
Stock
Issuance Expense
|
(1,608 | ) | (1,608 | ) | ||||
Retained
Earnings
|
38,547 | 39,285 | ||||||
Accumulated
Other Comprehensive (Loss) Income
|
(549 | ) | (613 | ) | ||||
Total
Common Stockholders' Equity
|
103,192 | 103,476 | ||||||
Preferrred
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 | ||||||
Long-Term
Debt
|
||||||||
The
Connecticut Water Company
|
||||||||
Unsecured
Water Facilities Revenue Refinancing Bonds
|
||||||||
5.05% 1998
Series A, due 2028
|
9,625 | 9,635 | ||||||
5.125%
1998 Series B, due 2028
|
7,615 | 7,615 | ||||||
4.40% 2003A
Series, due 2020
|
8,000 | 8,000 | ||||||
5.00% 2003C
Series, due 2022
|
14,915 | 14,915 | ||||||
Var. 2004
Series Variable Rate, due 2029
|
12,500 | 12,500 | ||||||
Var. 2004
Series A, due 2028
|
5,000 | 5,000 | ||||||
Var. 2004
Series B, due 2028
|
4,550 | 4,550 | ||||||
5.00% 2005
A Series, due 2040
|
14,935 | 14,935 | ||||||
5.00% 2007
A Series, due 2037
|
15,000 | 15,000 | ||||||
Total
The Connecticut Water Company
|
92,140 | 92,150 | ||||||
Unregulated
Secured
|
||||||||
6.39%
NewAlliance Bank, Due 2017
|
84 | 85 | ||||||
Total
Connecticut Water Service, Inc.
|
92,224 | 92,235 | ||||||
Less
Current Portion
|
(8 | ) | (8 | ) | ||||
Total
Long-Term Debt
|
92,216 | 92,227 | ||||||
Total
Capitalization
|
$ | 196,180 | $ | 196,475 |
Connecticut
Water Service, Inc. and Subsidiaries
|
||||||||
CONSOLIDATED STATEMENTS OF
INCOME
|
||||||||
For
the Three Months Ended March 31, 2009 and 2008
|
||||||||
(Unaudited)
|
||||||||
(In
thousands, except per share amounts)
|
||||||||
2009
|
2008
|
|||||||
Operating
Revenues
|
$ | 13,381 | $ | 13,569 | ||||
Operating
Expenses
|
||||||||
Operation
and Maintenance
|
8,200 | 7,198 | ||||||
Depreciation
|
1,633 | 1,596 | ||||||
Income
Taxes
|
7 | 618 | ||||||
Taxes
Other Than Income Taxes
|
1,473 | 1,466 | ||||||
Total
Operating Expenses
|
11,313 | 10,878 | ||||||
Net
Operating Revenues
|
2,068 | 2,691 | ||||||
Other
Utility Income, Net of Taxes
|
155 | 121 | ||||||
Total
Utility Operating Income
|
2,223 | 2,812 | ||||||
Other
Income (Deductions), Net of Taxes
|
||||||||
Non-Water
Sales Earnings
|
209 | 190 | ||||||
Allowance
for Funds Used During Construction
|
24 | 15 | ||||||
Other
|
(143 | ) | (22 | ) | ||||
Total
Other Income, Net of Taxes
|
90 | 183 | ||||||
Interest
and Debt Expense
|
||||||||
Interest
on Long-Term Debt
|
1,009 | 1,056 | ||||||
Other
Interest Charges
|
61 | 135 | ||||||
Amortization
of Debt Expense
|
99 | 99 | ||||||
Total
Interest and Debt Expense
|
1,169 | 1,290 | ||||||
Net
Income
|
1,144 | 1,705 | ||||||
Preferred
Stock Dividend Requirement
|
9 | 9 | ||||||
Net
Income Applicable to Common Stock
|
$ | 1,135 | $ | 1,696 | ||||
Weighted
Average Common Shares Outstanding:
|
||||||||
Basic
|
8,492 | 8,395 | ||||||
Diluted
|
8,493 | 8,401 | ||||||
Earnings
Per Common Share:
|
||||||||
Basic
|
$ | 0.13 | $ | 0.20 | ||||
Diluted
|
$ | 0.13 | $ | 0.20 | ||||
Dividends
Per Common Share
|
$ | 0.2225 | $ | 0.2175 |
Connecticut
Water Service, Inc. and Subsidiaries
|
||||||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME
|
||||||||
For
the Three Months Ended March 31, 2009 and 2008
|
||||||||
(Unaudited)
|
||||||||
(In
thousands)
|
||||||||
2009
|
2008
|
|||||||
Net
Income Applicable to Common Stock
|
$ | 1,135 | $ | 1,696 | ||||
Other
Comprehensive Income, net of tax
|
||||||||
Qualified
Cash Flow Hedging Instrument Income (Expense),
|
||||||||
net
of tax expense (benefit) of $34 in 2009 and ($80) in
2008
|
54 | (125 | ) | |||||
Adjustment
to Pension and Post-Retirement Benefits Other
|
||||||||
Than
Pension, net of tax expense (benefit) of $0 in 2009 and ($1) in
2008
|
(1 | ) | (1 | ) | ||||
Unrealized
gain on investments
|
11 | -- | ||||||
Comprehensive
Income
|
$ | 1,199 | $ | 1,570 |
Connecticut
Water Service, Inc. and Subsidiaries
|
||||||||
CONSOLIDATED STATEMENTS OF RETAINED
EARNINGS
|
||||||||
For
the Three Months Ended March 31, 2009 and 2008
|
||||||||
(Unaudited)
|
||||||||
(In
thousands, except per share amounts)
|
||||||||
2009
|
2008
|
|||||||
Balance
at Beginning of Period
|
$ | 39,285 | $ | 37,272 | ||||
Net
Income Before Preferred Dividends
|
1,144 | 1,705 | ||||||
40,429 | 38,977 | |||||||
Dividends
Declared:
|
||||||||
Cumulative
Preferred, Class A, $.20 per share
|
3 | 3 | ||||||
Cumulative
Preferred, Series $.90, $.225 per share
|
6 | 6 | ||||||
Common
Stock - 2009 $.2225 per share; 2008 $.2175 per share
|
1,873 | 1,826 | ||||||
1,882 | 1,835 | |||||||
Balance
at End of Period
|
$ | 38,547 | $ | 37,142 |
Connecticut
Water Service, Inc. and Subsidiaries
|
||||||||
CONSOLIDATED STATEMENTS OF CASH
FLOWS
|
||||||||
For
the Three Months Ended March 31, 2009 and 2008
|
||||||||
(Unaudited)
|
||||||||
(In
thousands)
|
||||||||
2009
|
2008
|
|||||||
Operating
Activities:
|
||||||||
Net
Income
|
$ | 1,144 | $ | 1,705 | ||||
Adjustments
to Reconcile Net Income to Net Cash Provided by
|
||||||||
Operating
Activities:
|
||||||||
Deferred
Revenues
|
60 | (956 | ) | |||||
Allowance
for Funds Used During Construction
|
(40 | ) | (24 | ) | ||||
Depreciation
(including $204 in 2009, $132 in 2008 charged to other
accounts)
|
1,837 | 1,880 | ||||||
Change
in Assets and Liabilities:
|
||||||||
Decrease
in Accounts Receivable and Accrued Unbilled Revenues
|
1,146 | 1,152 | ||||||
Increase
in Other Current Assets
|
(1,777 | ) | (2,044 | ) | ||||
Decrease
in Other Non-Current Items
|
821 | 449 | ||||||
Decrease
in Accounts Payable, Accrued Expenses and
|
||||||||
Other
Current Liabilities
|
(892 | ) | (527 | ) | ||||
Increase
in Deferred Income Taxes and
|
||||||||
Investment
Tax Credits, Net
|
67 | 587 | ||||||
Total
Adjustments
|
1,222 | 517 | ||||||
Net
Cash and Cash Equivalents Provided by Operating Activities
|
2,366 | 2,222 | ||||||
Investing
Activities:
|
||||||||
Company
Financed Additions to Utility Plant
|
(3,215 | ) | (3,535 | ) | ||||
(Advances
from) Refunds to Others for Construction
|
(25 | ) | 28 | |||||
Net
Additions to Utility Plant Used in Continuing Operations
|
(3,240 | ) | (3,507 | ) | ||||
Purchase
of Ellington Acres Company, net of cash acquired of $26
|
(1,469 | ) | -- | |||||
Purchase
of Eastern and H2O Services Assets
|
-- | (3,500 | ) | |||||
Net
Cash and Cash Equivalents Used in Investing Activities
|
(4,709 | ) | (7,007 | ) | ||||
Financing
Activities:
|
||||||||
Net
Proceeds from Interim Bank Loans
|
16,153 | 12,698 | ||||||
Net
Repayment of Interim Bank Loans
|
(12,074 | ) | (6,459 | ) | ||||
Proceeds
from Issuance of Common Stock
|
242 | 245 | ||||||
Repayment
of Long-Term Debt Including Current Portion
|
(12 | ) | (1 | ) | ||||
Costs
Incurred to Issue Long-Term Debt and Common
Stock
|
-- | (5 | ) | |||||
Advances
from (Refunds to) Others for Construction
|
25 | (28 | ) | |||||
Cash
Dividends Paid
|
(1,883 | ) | (1,827 | ) | ||||
Net
Cash and Cash Equivalents Provided by Financing Activities
|
2,451 | 4,623 | ||||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
108 | (162 | ) | |||||
Cash
and Cash Equivalents at Beginning of Period
|
684 | 337 | ||||||
Cash
and Cash Equivalents at End of Period
|
$ | 792 | $ | 175 | ||||
Non-Cash
Investing and Financing Activites
|
||||||||
Non-Cash
Contributed Utility Plant
|
$ | 593 | $ | 1,320 | ||||
Short-term
Investment of Bond Proceeds Held in Restricted Cash
|
-- | $ | 8,220 | |||||
Supplemental
Disclosures of Cash Flow Information:
|
||||||||
Cash
Paid for:
|
||||||||
Interest
|
$ | 1,093 | $ | 1,540 | ||||
State
and Federal Income Taxes
|
$ | 50 | $ | 432 |
Three
Months
|
||||||||
Period
ended March 31
|
2009
|
2008
|
||||||
Service
Cost
|
$ | 339 | $ | 306 | ||||
Interest
Cost
|
505 | 465 | ||||||
Expected
Return on Plan Assets
|
(571 | ) | (528 | ) | ||||
Amortization
of:
|
||||||||
Transition
Obligation
|
1 | 1 | ||||||
Prior
Service Cost
|
17 | 17 | ||||||
Net
Loss
|
95 | 25 | ||||||
Net
Periodic Benefit Cost
|
$ | 386 | $ | 286 |
Three
Months
|
||||||||
Period
ended March 31
|
2009
|
2008
|
||||||
Service
Cost
|
$ | 123 | $ | 186 | ||||
Interest
Cost
|
123 | 191 | ||||||
Expected
Return on Plan Assets
|
(68 | ) | (68 | ) | ||||
Other
|
56 | -- | ||||||
Amortization
of:
|
||||||||
Transition
Obligation
|
-- | 30 | ||||||
Prior
Service Cost
|
(101 | ) | -- | |||||
Recognized
Net Loss
|
53 | 90 | ||||||
Net
Periodic Benefit Cost
|
$ | 186 | $ | 429 |
Three
months ended March 31,
|
2009
|
2008
|
||||||
Common
Shares Outstanding
|
||||||||
End
of Period:
|
8,505,395 | 8,410,911 | ||||||
Weighted
Average Shares Outstanding (Days Outstanding Basis):
|
||||||||
Basic
|
8,492,314 | 8,394,667 | ||||||
Diluted
|
8,493,111 | 8,400,868 | ||||||
Basic
Earnings per Share
|
$ | 0.13 | $ | 0.20 | ||||
Dilutive
Effect of Unexercised Stock Options
|
-- | -- | ||||||
Diluted
Earnings per Share
|
$ | 0.13 | $ | 0.20 | ||||
(in
thousands)
|
Level
1
|
Level
2
|
Level
3
|
|||||||||
Assets:
|
||||||||||||
Investments
|
$ | 894 | $ | -- | $ | - |
Three Months Ended March 31,
2009
|
||||||||||||||||
Segment
|
Revenues
|
Pre-Tax Income
|
Income Tax Expense
|
Net Income
|
||||||||||||
Water
Activities
|
$ | 13,672 | $ | 951 | $ | 16 | $ | 935 | ||||||||
Real
Estate Transactions
|
-- | -- | -- | -- | ||||||||||||
Service
and Rentals
|
1,077 | 343 | 134 | 209 | ||||||||||||
Total
|
$ | 14,749 | $ | 1,294 | $ | 150 | $ | 1,144 |
Three Months Ended March 31,
2008
|
||||||||||||||||
Segment
|
Revenues
|
Pre-Tax Income
|
Income Tax Expense
|
Net Income
|
||||||||||||
Water
Activities
|
$ | 13,815 | $ | 2,205 | $ | 690 | $ | 1,515 | ||||||||
Real
Estate Transactions
|
-- | -- | -- | -- | ||||||||||||
Service
and Rentals
|
1,067 | 307 | 117 | 190 | ||||||||||||
Total
|
$ | 14,882 | $ | 2,512 | $ | 807 | $ | 1,705 |
March 31, 2009
|
December 31, 2008
|
|||||||
Total
Plant and Other Investments:
|
||||||||
Water
|
$ | 309,561 | $ | 304,591 | ||||
Non-Water
|
672 | 676 | ||||||
310,233 | 305,267 | |||||||
Other
Assets:
|
||||||||
Water
|
65,593 | 64,734 | ||||||
Non-Water
|
2,141 | 2,430 | ||||||
67,734 | 67,164 | |||||||
Total
Assets
|
$ | 377,967 | $ | 372,431 |
Business Segment
|
March 31, 2009
|
March 31, 2008
|
Increase/(Decrease)
|
|||||||||
Water
Activities
|
$ | 935,000 | $ | 1,515,000 | $ | (580,000 | ) | |||||
Real
Estate Transactions
|
-- | -- | -- | |||||||||
Services
and Rentals
|
209,000 | 190,000 | 19,000 | |||||||||
Total
|
$ | 1,144,000 | $ | 1,705,000 | $ | (561,000 | ) |
-
|
Operation
and Maintenance expense increased by $1,002,000 primarily due to the
following components:
|
Expense Components
|
March 31, 2009
|
March 31, 2008
|
Increase/(Decrease)
|
|||||||||
Labor
|
$ | 3,010,000 | $ | 2,755,000 | $ | 255,000 | ||||||
Purchased
water
|
222,000 | 22,000 | 200,000 | |||||||||
Outside
services
|
521,000 | 325,000 | 196,000 | |||||||||
Water
treatment (including chemical costs)
|
534,000 | 402,000 | 132,000 | |||||||||
Maintenance
|
394,000 | 287,000 | 107,000 | |||||||||
Utility
costs
|
949,000 | 858,000 | 91,000 | |||||||||
Vehicles
|
345,000 | 290,000 | 55,000 | |||||||||
Property
and liability insurance
|
266,000 | 231,000 | 35,000 | |||||||||
Employee
benefit costs
|
1,281,000 | 1,310,000 | (29,000 | ) | ||||||||
Regulatory
commission expense
|
62,000 | 93,000 | (31,000 | ) | ||||||||
Other
|
616,000 | 625,000 | (9,000 | ) | ||||||||
Total
|
$ | 8,200,000 | $ | 7,198,000 | $ | 1,002,000 |
-
|
Labor
costs increased in 2009 by approximately $255,000 due to an increase in
employees, increased maintenance and repair work in both our Northern and
Southern Regions, and regular wage increases effective as of April 1,
2008. Purchased water expense increased primarily due to a
negotiated reduction of bills related to 2007 consumption that the Company
realized as a reduction of expense in the first quarter of
2008. During 2009, the Company was billed for water as it was
purchased from neighboring utilities at the negotiated
rates. Outside services increased over prior years primarily
due to increased legal expense, primarily due to work on regulatory
matters, acquisitions and the 19 Perry Street issue described below in
“Commitments and Contingencies.” Water treatment costs
increased primarily due to an increase in the cost of key chemicals,
despite a decrease in production when compared to prior
year. Maintenance expense increased over the prior year due to
increased main break costs in our Northern and Mansfield divisions and
hydrant painting. Utility costs increased over the prior year,
primarily due to higher costs for power and communication systems,
partially off-set by lower fuel oil costs. Employee benefits
costs decreased due to a reduction in post-retirement medical costs
associated with the Company’s health and welfare plan, partially offset by
pension cost increases.
|
-
|
The
Company saw a slight increase in its Depreciation expense due to increased
Utility Plant balances.
|
-
|
Income
Tax expense associated with Water Activities decreased significantly due
to the fixed capital tax credit for the State of Connecticut and the
effect of the expected 2009 plan year pension contribution, which is
larger than the 2009 pension
expense.
|
Exhibit
Number
|
Description
|
|
3.1
|
Certificate
of Incorporation of Connecticut Water Service, Inc. amended and restated
as of April, 1998. (Exhibit 3.1 to Form 10-K for the year ended
12/31/98).
|
|
3.2
|
By
Laws, as amended, of Connecticut Water Service, Inc. as amended and
restated as of August 12, 1999. (Exhibit 3.2 to Form 10-K for the year
ended 12/31/99).
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3.3
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Certification
of Incorporation of The Connecticut Water Company effective April,
1998. (Exhibit 3.3 to Form 10-K for the year ended
12/31/98).
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3.4
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Certificate
of Amendment to the Certificate of Incorporation of Connecticut Water
Service, Inc. dated August 6, 2001 (Exhibit 3.4 to Form 10-K for the year
ended 12/31/01).
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3.5
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Certificate
of Amendment to the Amended and Restated Certificate of Incorporation of
Connecticut Water Service, Inc. dated April 23, 2004. (Exhibit
3.5 to Form 10-Q for the quarter ended March 31, 2003).
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31.1*
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Rule
13a-14 Certification of Eric W. Thornburg, Chief Executive
Officer.
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31.2*
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Rule
13a-14 Certification of David C. Benoit, Chief Financial
Officer.
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32*
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Certification
of Eric W. Thornburg, Chief Executive Officer, and David C. Benoit, Chief
Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
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*
filed herewith
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Connecticut
Water Service, Inc.
(Registrant)
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Date: May
8, 2009
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By: /s/ David C.
Benoit
David
C. Benoit
Vice
President – Finance and
Chief
Financial Officer
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Date: May
8, 2009
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By: /s/ Nicholas A.
Rinaldi
Nicholas
A. Rinaldi
Controller
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