CONNECTICUT WATER SERVICE INC / CT, 10-Q filed on 5/8/2017
Quarterly Report
Document and Entity Information
3 Months Ended
Mar. 31, 2017
Entity Information [Line Items]
 
Entity Registrant Name
CONNECTICUT WATER SERVICE INC / CT 
Entity Central Index Key
0000276209 
Current Fiscal Year End Date
--12-31 
Entity Filer Category
Accelerated Filer 
Document Type
10-Q 
Document Period End Date
Mar. 31, 2017 
Document Fiscal Year Focus
2017 
Document Fiscal Period Focus
Q1 
Amendment Flag
false 
Entity Common Stock, Shares Outstanding
11,564,346 
CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
ASSETS
 
 
Utility Plant
$ 817,897 
$ 777,860 
Construction Work in Progress
40,679 
33,748 
Gross Utility Plant
858,576 
811,608 
Accumulated Provision for Depreciation
(221,966)
(210,212)
Net Utility Plant
636,610 
601,396 
Other Property and Investments
9,445 
9,071 
Cash and Cash Equivalents
2,955 
1,564 
Accounts Receivable (Less Allowance, 2017 - $1,155; 2016 - $1,100)
11,648 
13,024 
Accrued Unbilled Revenues
8,000 
8,171 
Materials and Supplies
1,708 
1,536 
Prepayments and Other Current Assets
6,797 
5,069 
Total Current Assets
31,108 
29,364 
Unrecovered Income Taxes - Regulatory Asset
97,386 
93,264 
Pension Benefits - Regulatory Asset
11,826 
12,266 
Post-Retirement Benefits Other Than Pension - Regulatory Asset
205 
265 
Goodwill
43,045 
30,427 
Deferred Charges and Other Costs
8,924 
8,449 
Total Regulatory and Other Long-Term Assets
161,386 
144,671 
Total Assets
838,549 
784,502 
CAPITALIZATION AND LIABILITIES
 
 
Common Stock Without Par Value: Authorized - 25,000,000 Shares - Issued and Outstanding: 2017 - 11,564,346; 2016 - 11,248,458
163,139 
145,739 
Retained Earnings (Accumulated Deficit)
92,007 
91,213 
Accumulated Other Comprehensive Loss
(821)
(924)
Common Stockholders' Equity
254,325 
236,028 
Preferred Stock
772 
772 
Long-Term Debt
205,589 
197,047 
Total Capitalization
460,686 
433,847 
Debt, Current
5,185 
4,859 
Interim Bank Loans Payable
35,089 
32,953 
Accounts Payable and Accrued Expenses
8,412 
13,116 
Accrued Interest
1,486 
1,012 
Customer Refund Liability, Current
501 
855 
Other Current Liabilities
3,165 
2,330 
Total Current Liabilities
53,838 
55,125 
Advances for Construction
22,844 
19,127 
Deferred Federal and State Income Taxes
52,083 
50,558 
Unfunded Future Income Taxes
95,279 
90,977 
Long-Term Compensation Arrangements
34,097 
33,540 
Unamortized Investment Tax Credits
1,170 
1,189 
Refund to Customers - Regulatory Liability
43 
108 
Other Long-Term Liabilities
4,887 
5,074 
Total Long-Term Liabilities
210,403 
200,573 
Contributions in Aid of Construction
113,622 
94,957 
Commitments and Contingencies
Total Capitalization and Liabilities
$ 838,549 
$ 784,502 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Issued
11,564,346 
11,248,458 
Outstanding
11,564,346 
11,248,458 
ASSETS
 
 
Allowance
$ 1,155 
$ 1,100 
Capitalization, Long-term Debt and Equity [Abstract]
 
 
Common Stock, No Par Value
$ 0 
$ 0 
Common Stock, Shares Authorized
25,000,000 
25,000,000 
CONSOLIDATED STATEMENTS OF INCOME (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Operating Expenses
 
 
Operation and Maintenance
$ 11,236 
$ 11,289 
Depreciation
3,692 
3,398 
Income Taxes
(190)
393 
Taxes Other Than Income Taxes
2,605 
2,449 
Total Operating Expenses
17,343 
17,529 
Net Operating Revenues
22,463 
21,552 
Net Regulated Operating Revenue
5,120 
4,023 
Other Utility Income, Net of Taxes
165 
155 
Total Utility Operating Income
5,285 
4,178 
Gain (Loss) on Disposition of Oil and Gas and Timber Property
33 
Other Income (Deductions), Net of Taxes
 
 
Non-Water Sales Earnings
258 
395 
Allowance for Funds Used During Construction
336 
232 
Other
(9)
(32)
Total Other Income, Net of Taxes
618 
595 
Interest and Debt Expense
 
 
Interest on Long-Term Debt
2,061 
1,736 
Interest Income (Expense), Net
(260)
(142)
Amortization of Debt Expense
34 
31 
Total Interest and Debt Expense
1,835 
1,625 
Net Income
4,068 
3,148 
Preferred Stock Dividend Requirement
Net Income Applicable to Common Stock
$ 4,059 
$ 3,139 
Weighted Average Common Shares Outstanding:
 
 
Basic (in shares)
11,139,110 
10,992,486 
Diluted (in shares)
11,364,879 
11,211,283 
Earnings Per Common Share:
 
 
Basic (in dollars per share)
$ 0.36 
$ 0.29 
Diluted (in dollars per share)
$ 0.36 
$ 0.28 
Dividends Per Common Share (in dollars per share)
$ 0.2825 
$ 0.2675 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Statement of Comprehensive Income [Abstract]
 
 
Net Income
$ 4,068 
$ 3,148 
Other Comprehensive Income, net of tax
 
 
Reclassification to Pension and Post-Retirement Benefits Other Than Pension, net of tax (expense) of $(25) and $(22) for the three months ended March 31, 2017 and 2016, respectively
39 
35 
Unrealized (loss) gain on investments, net of tax (expense) benefit of $(41) and $10 for the three months ended March 31, 2017 and 2016, respectively
64 
(15)
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent
103 
20 
Comprehensive Income
$ 4,171 
$ 3,168 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Other Comprehensive Income, net of tax
 
 
Reclassification to Pension and Post-Retirement Benefits Plans, net of tax (expense) benefit of
$ (25)
$ (22)
Unrealized Investment loss, net of tax expense of
$ (41)
$ 10 
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Balance at Beginning of Period
$ 91,213 
 
Net Income
4,068 
3,148 
Retained Earnings before Dividends
95,281 
83,526 
Dividends Declared:
 
 
Cumulative Preferred, Class A, $0.20 per share for the three months ended March 31, 2017 and 2016, respectively
Common Stock - $0.2825 per share and $0.2675 per share for the three months ended March 31, 2017 and 2016, respectively
3,265 
2,996 
Total Dividends Declared
3,274 
3,005 
Balance at End of Period
92,007 
80,521 
Series A Voting
 
 
Dividends Declared:
 
 
Cumulative Preferred, Class A, $0.20 per share for the three months ended March 31, 2017 and 2016, respectively
Cumulative Preferred Stock
 
 
Dividends Declared:
 
 
Cumulative Preferred, Class A, $0.20 per share for the three months ended March 31, 2017 and 2016, respectively
$ 6 
$ 6 
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (Parenthetical)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dividends Declared:
 
 
Common Stock (in dollars per share)
$ 0.2825 
$ 0.2675 
Cumulative Preferred Stock
 
 
Dividends Declared:
 
 
Preferred Stock (in dollars per share)
$ 0.225 
$ 0.225 
Series A Voting
 
 
Dividends Declared:
 
 
Preferred Stock (in dollars per share)
$ 0.20 
$ 0.20 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Proceeds from Sale of Land Held-for-investment
$ 212 
$ 0 
Net Additions to Utility Plant Used in Continuing Operations
10,163 
11,753 
Cash Acquired from Acquisition
1,336 
Operating Activities:
 
 
Net Income
4,068 
3,148 
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
 
 
Deferred Revenues
(513)
(340)
Provision for Deferred Income Taxes and Investment Tax Credits, Net
(528)
710 
Allowance for Funds Used During Construction
(336)
(232)
Depreciation (including $271 and $243 in 2017 and 2016, respectively, charged to other accounts)
3,963 
3,641 
Gain (Loss) on Sale of Properties
33 
Change in Assets and Liabilities:
 
 
Increase in Accounts Receivable and Accrued Unbilled Revenues
1,892 
1,408 
Increase in Prepayments and Other Current Assets
(1,068)
(2,536)
(Increase) Decrease in Other Non-Current Items
909 
(532)
Increase in Accounts Payable, Accrued Expenses and Other Current Liabilities
(1,692)
(3,513)
Total Adjustments
2,594 
(1,394)
Net Cash and Cash Equivalents Provided by Operating Activities
6,662 
1,754 
Investing Activities:
 
 
Release of restricted cash
649 
Net Cash and Cash Equivalents Used in Investing Activities
(8,615)
(11,104)
Financing Activities:
 
 
Proceeds from Interim Bank Loans
35,089 
29,472 
Repayment of Interim Bank Loans
(32,953)
(16,085)
Proceeds from the Issuance of Long-Term Debt
5,000 
Proceeds from Issuance of Common Stock
339 
425 
Costs to Issue Long-Term Debt and Common Stock
(2)
Repayment of Long-Term Debt Including Current Portion
(808)
(762)
Advances from Others for Construction
 
114 
Repayments of Advances for Construction
(47)
 
Cash Dividends Paid
(3,274)
(3,005)
Net Cash and Cash Equivalents (Used in) Provided by Financing Activities
3,344 
10,159 
Net (Decrease) Increase in Cash and Cash Equivalents
1,391 
809 
Cash and Cash Equivalents at Beginning of Period
1,564 
731 
Cash and Cash Equivalents at End of Year
2,955 
1,540 
Non-Cash Investing and Financing Activities:
 
 
Non-Cash Contributed Utility Plant
2,152 
431 
Cash Paid for:
 
 
Interest
1,384 
871 
State and Federal Income Taxes
$ 190 
$ 130 
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
 
 
Depreciation charged to other accounts
$ 271 
$ 243 
Basis of Preparation of Financials
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]
1.
Basis of Preparation of Financials

The condensed consolidated financial statements included herein have been prepared by Connecticut Water Service, Inc. (the “Company”) and its wholly-owned subsidiaries, pursuant to the rules and regulations of the Securities and Exchange Commission and reflect all adjustments that are of a normal recurring nature 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.  The Company’s primary operating subsidiaries are: The Connecticut Water Company (“Connecticut Water”) and The Heritage Village Water Company (“HVWC”) in the State of Connecticut and The Maine Water Company (“Maine Water”) in the State of Maine. The Condensed Consolidated Balance Sheet at December 31, 2016 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.  It is suggested that these condensed 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 for the fiscal year ended December 31, 2016 (the “10-K”).

The results for interim periods are not necessarily indicative of results to be expected for the year since the consolidated earnings are subject to seasonal factors.  Effective February 27, 2017, the Company acquired HVWC, discussed further in Note 11 below.  As a result, the Company’s Condensed Consolidated Balance Sheet at December 31, 2016 and the Condensed Consolidated Statements of Net Income, Condensed Consolidated Statements of Comprehensive Income, Condensed Consolidated Statements Retained Earnings and Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2016 do not include HVWC.  The Condensed Consolidated Statements of Net Income, Condensed Consolidated Statements of Comprehensive Income, Condensed Consolidated Statements Retained Earnings and Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2017 do include HVWC’s results for the approximate one month the Company owned HVWC during the period. HVWC’s assets and liabilities are included in the Condensed Consolidated Balance Sheet as of March 31, 2017.

As noted in Note 11 below, HVWC serves approximately 4,700 water customers in the Towns of Southbury, Middlebury, and Oxford, Connecticut and approximately 3,000 wastewater customers in the Town of Southbury, Connecticut. The results of the wastewater line of business are included in the Company’s Water Operations segment.

Regulatory Matters

The rates we charge our water customers in Connecticut and Maine are established under the jurisdiction of and are approved by the Connecticut Public Utilities Regulatory Authority (“PURA”) and the Maine Public Utilities Commission (“MPUC”), respectively. It is our policy to seek rate relief as necessary to enable us to achieve an adequate rate of return. Connecticut Water’s allowed return on equity and return on rate base, effective March 31, 2017, were 9.75% and 7.32%, respectively. HVWC’s blended waster and wastewater allowed returns on equity and returns on rate base, effective March 31, 2017, were 10.10% and 7.19%, respectively. Maine Water’s average allowed return on equity and return on rate base, effective March 31, 2017, were 9.50% and 7.96%, respectively. The PURA establishes rates in Connecticut on a company-wide basis while the MPUC approves Maine Water’s rates on a division-by-division basis. Both Connecticut Water and Maine Water are allowed to add surcharges to customers’ bills in order to recover certain approved capital projects in between full rate cases, as well as approved surcharges for Water Revenue Adjustments, as discussed in more detail below, in Connecticut. HVWC has not added surcharges to customers’ bills in order to recover certain approved capital projects as of March 31, 2017, however, HVWC has begun to utilize Water Revenue Adjustments as of March 31, 2017.

Avon Water Company Acquisition
On October 11, 2016, the Company entered into an Agreement and Plan of Merger (the “Avon Agreement”) with The Avon Water Company, a specially-chartered Connecticut corporation (“Avon Water”). Founded in 1911, Avon Water serves about 4,800 customers in the Farmington Valley communities of Avon, Farmington, and Simsbury, Connecticut, and is located near Connecticut Water’s existing operations in Avon and Farmington.

The Boards of Directors of the Company and Avon Water have each unanimously approved the Avon Agreement and the transactions contemplated thereby. Consummation of the merger is subject to regulatory, Avon Water shareholder and other specified approvals described below and is expected to be consummated by the end of the third quarter of 2017.

Under the terms of the Avon Agreement, each of the 121,989 Avon Water common stock shares outstanding at the time of the closing of the merger will be exchanged and converted into the right to receive the following merger consideration: (i) a cash payment of $50.37; and (ii) a stock consideration component, consisting of 4.38 shares of Company Common Stock, provided that the Company’s Share Price (as defined below) over a specified period prior to the closing date of the merger is equal to or greater than $45.00 but less than or equal to $52.00. If the Company’s Share Price is less than $45.00 as of the closing date, each share of Avon Water common stock issued and outstanding at the time of the closing of the merger will be exchanged and converted into the right to receive that number of shares of Company Common Stock equal to 197.10 divided by the Company’s Share Price, rounded to the nearest hundredth. If the Company’s Share Price is more than $52.00 as of the closing date, each share of Avon Water common stock issued and outstanding at the time of the closing of the merger will be exchanged and converted into the right to receive that number of shares of Company Common Stock equal to 227.76 divided by the Company’s Share Price, rounded to the nearest hundredth. The “Company’s Share Price” is determined by calculating an average of the closing prices for shares of the Company’s Common Stock on the Nasdaq Stock Market, LLC for the twenty trading days immediately preceding the third business day prior to the closing of the Merger. Holders of Avon Water common stock prior to the Merger will receive cash in lieu of fractional shares of Company Common Stock.

The Avon Agreement contains customary representations and warranties regarding, on the one hand, Avon Water, its business and operations and related matters, and, on the other hand, the Company, made by the parties as of specified dates, and customary affirmative and negative covenants with respect to the conduct of Avon Water’s business prior to the closing. In the Avon Agreement, Avon Water has agreed that its Board of Directors will, subject to certain exceptions, recommend adoption of the Avon Agreement by Avon Water shareholders and the transactions contemplated by the Avon Agreement. Avon Water has also agreed: (i) to cause a special meeting of shareholders of Avon Water to be held to consider the approval and adoption of the Agreement and the transactions contemplated thereby; and (ii) not to solicit proposals relating to alternative business combination transactions or, subject to certain exceptions, enter into discussions concerning confidential information in connection with alternative business combination transactions.

The obligation of the parties to complete the merger is subject to the satisfaction or waiver on or prior to the closing date of certain specified conditions, including the following: (i) receipt of final and non-appealable orders from each of PURA and the MPUC approving the merger in form and substance reasonably acceptable to the parties; (ii) approval of the merger by the affirmative vote of the holders of not less than two-thirds (66 2/3rd %) Avon Water’s issued and outstanding shares of common stock as required under the Connecticut Business Corporation Act; (iii) the receipt of all other necessary consents or approvals to the merger; (iv) approval for listing of the Company Common Stock to be issued in the merger on the Nasdaq Stock Market, LLC; (v) the absence of laws, orders, judgments and injunctions that restrain, enjoin or otherwise prohibit consummation of the Merger; (vi) effectiveness under the Securities Act of the Company’s registration statement on Form S-4 relating to the issuance of the Company Common Stock in the merger and absence of any stop order in respect thereof or proceedings by the SEC for that purpose; (vii) the receipt of a legal opinion from counsel to Avon Water regarding certain corporate law matters; (viii) the receipt of a customary tax opinion from counsel to the Company that will state that the merger will qualify as a tax-free reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986; (ix) the accuracy of representations and warranties with respect to the businesses of Avon Water and the Company and compliance by Avon Water and the Company with their respective covenants contained in the Avon Agreement; (xi) no event(s) occurring that could reasonably be expected to result in either a “Company Material Adverse Effect” or a “CWS Material Adverse Effect” (each, as defined in the Avon Agreement) and (xii) holders of no more than 5% of Avon Water’s common stock have exercised appraisal rights under Connecticut law.

The Avon Agreement contains certain termination rights for both the Company and Avon Water and further provides that, in connection with the termination of the Avon Agreement under specified circumstances, Avon Water may be required to pay to the Company, or the Company may be required to pay to Avon Water, a termination fee of $200,000 in cash, as liquidated damages.

On March 29, 2017, the parties amended the Avon Agreement to extend the End Date (as defined in the Avon Agreement) from March 31, 2017 to June 30, 2017. The Amendment also amends the Avon Agreement to permit Avon Water to pay additional cash dividends prior to June 30, 2017.

During the fourth quarter of 2016, Connecticut Water filed an application with PURA seeking approval of the transaction. On April 12, 2017, PURA approved the transaction.

Maine Water Land Sale
On March 11, 2016, Maine Water entered into a purchase and sale agreement with the Coastal Mountains Land Trust, a Maine nonprofit corporation (the “Land Trust”) pursuant to which Maine Water agreed to sell two conservation easements to the Land Trust on approximately 1,300 acres of land located in the towns of Rockport, Camden and Hope, in Knox County, Maine valued in the aggregate at $3.1 million.  The land had a book value of approximately $600,000 at March 31, 2017 and December 31, 2016 and is included in “Utility Plant” on the Company’s “Condensed Consolidated Balance Sheets”. The easements and purchase prices are as follows:

1.Ragged Mountain Mirror Lake Conservation Easement: $1,875,000; and
2.Grassy Pond conservation Easement: $600,000.

The two easement sale and donation transactions are expected to close no later than December 31, 2017 and December 31, 2019, respectively.  Maine Water will make a $200,000 contribution to the Land Trust upon completion of the closing of the first easement sale.  Maine Water also expects to claim a charitable deduction for the $600,000 in excess of the fair market value of the second easement over the $600,000 sale price.

Connecticut Rates
Connecticut Water’s Water Infrastructure Conservation Adjustment (“WICA”) was 7.13% and 4.19% at March 31, 2017 and 2016, respectively. On January 26, 2017, Connecticut Water filed a WICA application with the PURA requesting a 1.09% surcharge to customers’ bills, representing approximately $8.5 million in WICA related projects. Additionally, on February 9, 2017, Connecticut Water filed its annual WICA reconciliation which requested a 0.06% surcharge, which would replace the 0.03% reconciliation adjustment filed in January 2016. During March 2017, PURA approved both applications as filed, and, effective April 1, 2017, Connecticut Water’s cumulative WICA surcharge was 8.25%. As of March 31, 2017, HVWC has not filed for a WICA surcharge.

Since 2013, Connecticut law has authorized a Water Revenue Adjustment (“WRA”) to reconcile actual water demands with the demands projected in the last general rate case and allows companies to adjust rates as necessary to recover the revenues approved by PURA in the last general rate case. The WRA removes the financial disincentive for water utilities to develop and implement effective water conservation programs. The WRA allows water companies to defer on the balance sheet, as a regulatory asset or liability, for later collection from or crediting to customers the amount by which actual revenues deviate from the revenues allowed in the most recent general rate proceedings, including WICA proceedings. Additionally, projects eligible for WICA surcharges were expanded to include energy conservation projects, improvements required to comply with streamflow regulations, and improvements to acquired systems.

Connecticut Water and HVWC’s allowed revenues for the three months ended March 31, 2017, as approved by PURA during each company’s most recent general rate case and including subsequently approved WICA surcharges, are approximately $17.8 million. Through normal billing for the three months ended March 31, 2017, revenue for Connecticut Water and HVWC would have been approximately $17.2 million had the WRA not been implemented. As a result of the implementation of the WRA, Connecticut Water and HVWC recorded $0.6 million in additional revenue for the three months ended March 31, 2017.

Maine Rates
In Maine, the overall, cumulative Water Infrastructure Charge (“WISC”) for all divisions was 6.6% and 3.1% as of March 31, 2017 and 2016, respectively.

A water revenue adjustment mechanism law in Maine became available to regulated water utilities in Maine on October 15, 2015. Maine Water is currently precluded from seeking new rates due to various agreements with the MPUC, but is evaluating how and when this new mechanism can be implemented.
Pension and Other Post-Retirement Benefits
Pension and Other Post-Retirement Benefits
2.
Pension and Other Post-Retirement Benefits

The following tables set forth the components of pension and other post-retirement benefit costs for the three months ended March 31, 2017 and 2016.

Pension Benefits
Components of Net Periodic Cost (in thousands):
 
Three Months
Period ended March 31,
2017
 
2016
Service Cost
$
514

 
$
521

Interest Cost
794

 
794

Expected Return on Plan Assets
(1,101
)
 
(979
)
Amortization of:
 

 
 

Prior Service Cost
4

 
4

Net Recognized Loss
545

 
511

Net Periodic Benefit Cost
$
756

 
$
851



The Company anticipates making a total contribution of approximately $2,971,000 in 2017 for the 2016 plan year during the three months ended March 31, 2017.

Post-Retirement Benefits Other Than Pension (PBOP)
Components of Net Periodic Cost (in thousands):
 
Three Months
Period ended March 31,
2017
 
2016
Service Cost
$
93

 
$
103

Interest Cost
133

 
136

Expected Return on Plan Assets
(88
)
 
(85
)
Other
56

 
56

Amortization of:
 

 
 

Prior Service Credit
(45
)
 
(100
)
Recognized Net Loss
(9
)
 
8

Net Periodic Benefit Cost
$
140

 
$
118

Earnings per Share
Earnings per Share
3.
Earnings per Share

Earnings per weighted average common share are calculated by dividing net income applicable to common stock by the weighted average number of shares of common stock outstanding during the respective periods as detailed below (diluted shares include the effect of stock awards):

Three months ended March 31,
2017
 
2016
Common Shares Outstanding End of Period:
11,564,346

 
11,218,582

Weighted Average Shares Outstanding (Days Outstanding Basis):
 

 
 

Basic
11,139,110

 
10,992,486

Diluted
11,364,879

 
11,211,283

 
 
 
 
Basic Earnings per Share
$
0.36

 
$
0.29

Dilutive Effect of Stock Awards

 
(0.01
)
Diluted Earnings per Share
$
0.36

 
$
0.28



Total unrecognized compensation expense for all stock awards was approximately $0.7 million as of March 31, 2017 and will be recognized over a weighted average period of 1.4 years.
New Accounting Pronouncements
Recently Adopted and New Accounting Pronouncements
4.
Recently Adopted and New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” (“No. 2014-09”) which amends its guidance related to revenue recognition. ASU No. 2014-09 requires an entity to recognize revenue as performance obligations are met, in order to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration the entity is entitled to receive for those goods or services. The following steps are applied in the updated guidance: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation. ASU No. 2014-09 is effective for public companies for fiscal years, and interim periods within those years, beginning after December 15, 2016, and can be adopted either retrospectively to each prior reporting period presented or as a cumulative-effect adjustment as of the date of adoption, however early adoption is not permitted. On April 1, 2015, the FASB voted for a one-year deferral of the effective date of ASU No. 2014-09, making ASU No. 2014-09 effective for public companies for fiscal years, and interim periods within those years, beginning after December 15, 2017. The Company is currently determining its implementation approach, retrospectively to each prior reporting period presented or retrospectively with a cumulative effect adjustment to retained earnings for initial application, and assessing the impact that this guidance may have on our consolidated financial position, including its impact on the Company’s contracted services provided to water utilities and the impact ASU No. 2014-09 will have on the Company’s accounting surrounding Contributions in Aid of Construction.

In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory,” (“ASU No. 2015-11”) which applies to inventory that is measured using first-in, first-out (“FIFO”) or average cost. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost or net realizable value, which is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is unchanged under the updated guidance for inventory that is measured using last-in, last-out (“LIFO”). This ASU is effective for annual and interim periods beginning after December 15, 2016, and should be applied prospectively with early adoption permitted at the beginning of an interim or annual reporting period. The Company uses average cost to value its inventory and, therefore, ASU No. 2015-11 did not have an impact on the Company.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, (“ASU No. 2016-02”), which will require lessees to recognize the following for all leases at the commencement date of a lease: a) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and b) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Public business entities should apply the amendments in ASU No. 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted for all public business entities and all nonpublic business entities upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently assessing the impact of this standard on its consolidated financial statements and footnote disclosures, but does not expect that the adoption of this guidance will materially impact our consolidated financial position.

In August 2016, the FASB issued ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments” (“ASU No. 2016-15”). The amendments ASU No. 2016-15 clarify the classification for eight different types of activities, including debt prepayment and extinguishment costs, proceeds from insurance claims and distributions from equity method investees. For public business entities, ASU No. 2016-15 is effective for financial statements issued for fiscal years beginning after December 15, 2017. The Company is currently assessing the impact of this standard on its Consolidated Statements of Cash Flows, but does not expect that the adoption of this guidance will materially impact our consolidated financial position or results of operation.

In March 2017, the FASB issued ASU 2017-07, "Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost," (“ASU 2017-07”) which amends the requirements related to the income statement presentation of the components of net periodic benefit cost for employer sponsored defined benefit pension and other postretirement benefit plans. Under ASU 2017-07, an entity must disaggregate and present the service cost component of net periodic benefit cost in the same income statement line item as other employee compensation costs arising from services rendered during the period, and only the service cost component will be eligible for capitalization. Other components of net periodic benefit cost will be presented separately from the line item that includes the service cost. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted at the beginning of an annual period in which the financial statements have not been issued. Entities must use a retrospective transition method to adopt the requirement for separate presentation of the income statement service cost and other components, and a prospective transition method to adopt the requirement to limit the capitalization of benefit cost to the service component. The Company is currently evaluating the impact of adopting this guidance.
Accumulated Other Comprehensive Income (Loss) (Notes)
Comprehensive Income (Loss) Note [Text Block]
5.
Accumulated Other Comprehensive Income

The changes in Accumulated Other Comprehensive Income (Loss) (“AOCI”) by component, net of tax, for the three months ended March 31, 2017 and 2016 are as follows (in thousands):
Three months ended March 31, 2017
 
Unrealized Gains on Investments
 
Defined Benefit Items
 
Total
Beginning Balance (a)
 
$
235

 
$
(1,159
)
 
$
(924
)
Other Comprehensive Income Before Reclassification
 
64

 

 
64

Amounts Reclassified from AOCI
 

 
39

 
39

Net current-period Other Comprehensive Income
 
64

 
39

 
103

Ending Balance
 
$
299

 
$
(1,120
)
 
$
(821
)
 
 
 
 
 
 
 
Three months ended March 31, 2016
 
Unrealized Gains on Investments
 
Defined Benefit Items
 
Total
Beginning Balance (a)
 
$
200

 
$
(1,135
)
 
$
(935
)
Other Comprehensive (Loss) Income Before Reclassification
 
(15
)
 

 
(15
)
Amounts Reclassified from AOCI
 

 
35

 
35

Net current-period Other Comprehensive (Loss) Income
 
(15
)
 
35

 
20

Ending Balance
 
$
185

 
$
(1,100
)
 
$
(915
)
 
 
 
 
 
 
 
(a) All amounts shown are net of tax. Amounts in parentheses indicate loss.

The following table sets forth the amounts reclassified from AOCI by component and the affected line item on the Condensed Consolidated Statements of Income for the three months ended March 31, 2017 and 2016 (in thousands):
Details about Other AOCI Components
 
Amounts Reclassified from AOCI Three Months Ended March 31, 2017(a)
 
Amounts Reclassified from AOCI Three Months Ended March 31, 2016(a)
 
Affected Line Items on Income Statement
Realized Gains on Investments
 
$

 
$

 
Other Income
Tax expense
 

 

 
Other Income
 
 

 

 
 
 
 
 
 
 
 
 
Amortization of Recognized Net Gain from Defined Benefit Items
 
64

 
57

 
Other Income (b)
Tax expense
 
(25
)
 
(22
)
 
Other Income
 
 
39

 
35

 
 
 
 
 
 
 
 
 
Total Reclassifications for the period, net of tax
 
$
39

 
$
35

 
 
 
 
 
 
 
 
 
(a) Amounts in parentheses indicate loss/expense.
(b) Included in computation of net periodic pension cost (see Note 2 for additional details).
Long-Term Debt
Long-Term Debt
Long-Term Debt

Long-Term Debt at March 31, 2017 and December 31, 2016 consisted of the following (in thousands):
 
2017
 
2016
Connecticut Water Service, Inc.:
 
 
 
4.09%
 
Term Loan Note
$
13,171

 
$
13,437

The Connecticut Water Company:
 
 
 
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%
 
2011 A Series, Due 2021
23,067

 
23,115

3.16%
 
CoBank Note Payable, Due 2020
8,000

 
8,000

3.51%
 
CoBank Note Payable, Due 2022
14,795

 
14,795

4.29%
 
CoBank Note Payable, Due 2028
17,020

 
17,020

4.72%
 
CoBank Note Payable, Due 2032
14,795

 
14,795

4.75%
 
CoBank Note Payable, Due 2033
14,550

 
14,550

4.36%
 
CoBank Note Payable, Due June 2036
30,000

 
30,000

4.04%
 
CoBank Note Payable, Due July 2036
19,930

 
19,930

Total The Connecticut Water Company
164,207

 
164,255

The Heritage Village Water Company
 
 
 
4.75%
 
2011 Farmington Bank Loan, Due 2034
4,569

 

The Maine Water Company:
 
 
 
8.95%
 
1994 Series G, Due 2024
7,200

 
7,200

2.68%
 
1999 Series J, Due 2019
170

 
254

0.00%
 
2001 Series K, Due 2031
574

 
615

2.58%
 
2002 Series L, Due 2022
60

 
67

1.53%
 
2003 Series M, Due 2023
321

 
341

1.73%
 
2004 Series N, Due 2024
371

 
371

0.00%
 
2004 Series O, Due 2034
113

 
120

1.76%
 
2006 Series P, Due 2026
361

 
391

1.57%
 
2009 Series R, Due 2029
207

 
217

0.00%
 
2009 Series S, Due 2029
560

 
583

0.00%
 
2009 Series T, Due 2029
1,572

 
1,634

0.00%
 
2012 Series U, Due 2042
148

 
154

1.00%
 
2013 Series V, Due 2033
1,310

 
1,335

2.52%
 
CoBank Note Payable, Due 2017
1,965

 
1,965

4.24%
 
CoBank Note Payable, Due 2024
4,500

 
4,500

4.18%
 
CoBank Note Payable, Due 2026
5,000

 

7.72%
 
Series L, Due 2018
2,250

 
2,250

2.40%
 
Series N, Due 2022
1,026

 
1,101

1.86%
 
Series O, Due 2025
790

 
790

2.23%
 
Series P, Due 2028
1,264

 
1,294

0.01%
 
Series Q, Due 2035
1,678

 
1,771

1.00%
 
Series R, Due 2025
2,250

 
2,250

Various
 
Various Capital Leases
6

 
8

Total The Maine Water Company
33,696

 
29,211

Add: Acquisition Fair Value Adjustment
311

 
321

Less: Current Portion
(5,185
)
 
(4,859
)
Less: Unamortized Debt Issuance Expense
(5,180
)
 
(5,318
)
Total Long-Term Debt
$
205,589

 
$
197,047



There are no mandatory sinking fund payments required on Connecticut Water’s outstanding bonds.  However, certain fixed rate Unsecured Water Facilities Revenue Refinancing Bonds provide for an estate redemption right whereby the estate of deceased bondholders or surviving joint owners may submit bonds to the trustee for redemption at par, subject to a $25,000 per individual holder and a 3% annual aggregate limitation.

In April 2016, Connecticut Water filed an application with PURA to issue promissory notes in the aggregate principal amount of up to $49,930,000 with CoBank, ACB (“CoBank”) under its existing Master Loan Agreement by and between Connecticut Water and CoBank dated October 29, 2012, in order for Connecticut Water to redeem its $19,930,000 2009A Series of outstanding Water Facility Revenue Bonds previously issued by the Connecticut Development Authority (the “2009A Bonds”) and to provide $30,000,000 to partially fund its ongoing construction program. On June 1, 2016, Connecticut Water issued $30,000,000, at 4.36%, in debt under its existing Master Loan Agreement with CoBank, with a maturity date of May 20, 2036. On July 7, 2016, Connecticut Water issued $19,930,000, at 4.04%, in debt under its existing Master Loan Agreement with CoBank, with a maturity date of July 7, 2036. Connecticut Water used the proceeds to immediately pay off the $19,930,000 2009A Series of outstanding Water Facility Revenue Bonds.

On January 10, 2017, Maine Water executed and delivered to CoBank a new Promissory Note and Single Advance Term Loan Supplement, dated January 10, 2017 (the “Third Promissory Note”). On the terms and subject to the conditions set forth in the Third Promissory Note issued pursuant to the Agreement, CoBank agreed to make an unsecured loan (the “Loan”) to Maine Water in the principal amount of $5,000,000 at 4.18%, due December 30, 2026. The proceeds of the Loan will be used to finance new capital expenditures and refinance existing debt owed to the Company, incurred in connection with general water system improvements.

During the first three months of 2017, the Company paid approximately $266,000 related to Connecticut Water Service’s Term Note Payable issued as part of the 2012 acquisition of Maine Water and approximately $515,000 in sinking funds related to Maine Water’s outstanding bonds.

Financial Covenants – The Company and its subsidiaries are required to comply with certain covenants in connection with various long term loan agreements.  The most restrictive of these covenants is to maintain a consolidated debt to capitalization ratio of not more than 60%. Additionally, Maine Water has restrictions on cash dividends paid based on restricted net assets. The Company and its subsidiaries were in compliance with all covenants at March 31, 2017.
Fair Value Disclosures
Fair Value Disclosures
Fair Value Disclosures

FASB Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures (“FASB ASC 820”) provides enhanced guidance for using fair value to measure assets and liabilities and expands disclosure with respect to fair value measurements.

FASB ASC 820 establishes a fair value hierarchy that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs).  The hierarchy consists of three broad levels, as follows:

Level 1 – Quoted market prices in active markets for identical assets or liabilities.
Level 2 – Inputs other than Level 1 that are either directly or indirectly observable.
Level 3 – Unobservable inputs developed using the Company’s estimates and assumptions, which reflect those that the Company believes market participants would use.

The following table summarizes our financial instruments measured at fair value on a recurring basis within the fair value hierarchy as of March 31, 2017 (in thousands):
 
Level 1
 
Level 2
 
Level 3
 
Total
Asset Type:
 
 
 
 
 
 
 
Money Market Fund
$
56

 
$

 
$

 
$
56

Mutual Funds:
 

 
 

 
 

 
 

Equity Funds (1)
1,774

 

 

 
1,774

Fixed Income Funds (2)
541

 

 

 
541

Total
$
2,371

 
$

 
$

 
$
2,371


The following table summarizes our financial instruments measured at fair value on a recurring basis within the fair value hierarchy as of December 31, 2016 (in thousands):
 
Level 1
 
Level 2
 
Level 3
 
Total
Asset Type:
 
 
 
 
 
 
 
Money Market Fund
$
122

 
$

 
$

 
$
122

Mutual Funds:
 

 
 

 
 

 
 

Equity Funds (1)
1,662

 

 

 
1,662

Fixed Income Funds (2)
534

 

 

 
534

Total
$
2,318

 
$

 
$

 
$
2,318

(1)
Mutual funds consist primarily of equity securities and are presented on the Other Property and Investments line item of the Company’s Condensed Consolidated Balance Sheets.
(2)
Mutual funds consist primarily of fixed income securities and are presented on the Other Property and Investments line item of the Company’s Condensed Consolidated Balance Sheets.

The fair value of Company Owned Life Insurance is based on the cash surrender value of the contracts. These contracts are based principally on a referenced pool of investment funds that actively redeem shares and are observable and measurable and are presented on the Other Property and Investments line item of the Company’s Condensed Consolidated Balance Sheets.

The following methods and assumptions were used to estimate the fair value of each of the following financial instruments, which are not recorded at fair value on the financial statements.

Cash and cash equivalents – Cash equivalents consist of highly liquid instruments with original maturities at the time of purchase of three months or less.  The carrying amount approximates fair value.  Under the fair value hierarchy the fair value of cash and cash equivalents is classified as a Level 1 measurement.

Company Owned Life Insurance – The fair value of Company Owned Life Insurance is based on the cash surrender value of the contracts. These contracts are based principally on a referenced pool of investment funds that actively redeem shares and are observable and measurable and are presented on the “Other Property and Investments” line item of the Company’s Consolidated Balance Sheets. The value of Company Owned Life Insurance at March 31, 2017 and December 31, 2016 was $3,181,000 and $3,075,000, respectively.

Long-Term Debt – The fair value of the Company’s fixed rate long-term debt is based upon borrowing rates currently available to the Company.  As of March 31, 2017 and December 31, 2016, the estimated fair value of the Company’s long-term debt was $221,078,000 and $210,463,000, respectively, as compared to the carrying amounts of $210,769,000 and $202,365,000, respectively. The estimated fair value of long term debt was calculated using a discounted cash flow model that uses comparable interest rates and yield curve data based on the A-rated MMD (Municipal Market Data) Index which is a benchmark of current municipal bond yields. Under the fair value hierarchy, the fair value of long term debt is classified as a Level 2 measurement.

Advances for Construction – Customer advances for construction had a carrying amount of $22,844,000 and $19,127,000 at March 31, 2017 and December 31, 2016, respectively. Their relative fair values cannot be accurately estimated since future refund payments depend on several variables, including new customer connections, customer consumption levels and future rate increases.

The fair values shown above have been reported to meet the disclosure requirements of FASB ASC 825, “Financial Instruments” (“FASB ASC 825”) and do not purport to represent the amounts at which those obligations would be settled.
Segment Reporting
Segment Reporting
Segment Reporting

The Company operates principally in three business segments: Water Operations, Real Estate Transactions, and Services and Rentals. Financial data for the segments is as follows (in thousands):
Three months ended March 31, 2017
Segment
 
Revenues
 
Pre-Tax Income
 
Income Tax Expense(Benefit)
 
Net Income
Water Operations
 
$
22,786

 
$
3,495

 
$
(282
)
 
$
3,777

Real Estate Transactions
 
212

 
55

 
22

 
33

Services and Rentals
 
1,210

 
491

 
233

 
258

Total
 
$
24,208

 
$
4,041

 
$
(27
)
 
$
4,068

Three months ended March 31, 2016
Segment
 
Revenues
 
Pre-Tax Income
 
Income Tax Expense
 
Net Income
Water Operations
 
$
21,855

 
$
2,950

 
$
197

 
$
2,753

Real Estate Transactions
 

 

 

 

Services and Rentals
 
1,231

 
537

 
142

 
395

Total
 
$
23,086

 
$
3,487

 
$
339

 
$
3,148


The revenues shown in Water Operations above consisted of revenues from water customers of $22,274,000 and $21,552,000 for the three months ended March 31, 2017 and 2016, respectively, and wastewater revenues of $189,000 for the three months ended March 31, 2017. There were no wastewater revenues in 2016. Additionally, there were revenues associated with utility plant leased to others of $323,000 and $303,000 for the three months ended March 31, 2017 and 2016, respectively. The revenues from water and wastewater customers for the three months ended March 31, 2017 and 2016 include $573,000 and $400,000 in additional revenues related to the application of the WRA, respectively.

The Company owns various small, discrete parcels of land that are no longer required for water supply purposes.  From time to time, the Company may sell or donate these parcels, depending on various factors, including the current market for land, the amount of tax benefits received for donations and the Company’s ability to use any benefits received from donations.

Assets by segment (in thousands):
 
March 31, 2017
 
December 31, 2016
Total Plant and Other Investments:
 
 
 
Water Operations
$
645,028

 
$
609,508

Non-Water
1,027

 
959

 
646,055

 
610,467

Other Assets:
 
 
 
Water Operations
190,055

 
171,674

Non-Water
2,439

 
2,361

 
192,494

 
174,035

Total Assets
$
838,549

 
$
784,502

Income Tax Expense
Income Taxes
Income Taxes

FASB ASC 740 Income Taxes (“FASB ASC 740”) addresses the determination of how tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FASB ASC 740, the Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution.

The Company adopted the Internal Revenue Service (“IRS”) temporary tangible property regulations on the Company’s 2012 Federal tax return. Since that time, the Company has been recording a provision for any possible disallowance of a portion of the repair deduction if the Company’s Federal tax return were to be reviewed by the IRS. While the Company maintains the belief that the deduction taken on its tax return is appropriate, the methodology for determining the deduction has not been agreed to by the taxing authorities.  During the Company’s review of the position through the quarter ended March 31, 2017, new information caused management to reassess the previously recorded provision. This reassessment resulted in the reversal of a portion of the provision related to the Maine subsidiary, in the amount of $1,164,000 in the first quarter of 2017. The impact of the new information on the Connecticut subsidiary’s provision is still being evaluated. Through March 31, 2017, the Company has recorded, as required by FASB ASC 740, a provision of $310,000 for a portion of the benefit that is not being returned to customers resulting from any possible tax authority challenge. The Company had previously recorded a provision of $9.4 million in the prior year for a cumulative total of $8.6 million.

From time to time, the Company may be assessed interest and penalties by taxing authorities.  In those cases, the charges would appear on the Other line item within the Other Income (Deductions), Net of Taxes section of the Company’s Condensed Consolidated Statements of Income.  There were no such charges for the three months ended March 31, 2017 and 2016.  Additionally, there were no accruals relating to interest or penalties as of March 31, 2017 and December 31, 2016.  The Company remains subject to examination by federal tax authorities for the 2013 through 2015 tax years; the State of Maine’s tax authorities for the 2013 through 2015 tax years; and the State of Connecticut’s tax authorities for the 2014 and 2015 tax years.

The Company is currently engaged in an analysis to determine the amount of expenditures related to tangible property that will be reflected on its 2016 Federal Tax Return to be filed in September 2017.  As a result, through the first quarter of 2017, the Company has estimated the portion of its infrastructure investment that will qualify as a repair deduction for 2017 and has reflected that deduction in its effective tax rate, net of any reserves.  Consistent with other differences between book and tax expenditures, the Company is required to use the flow-through method to account for any timing differences not required by the IRS to be normalized.

The Company’s effective income tax rate for the three months ended March 31, 2017 and 2016 was (0.7)% and 9.7%, respectively. The Company’s effective tax rate, excluding discrete items recorded during the three months ended March 31, 2017, was 20.5%. These discrete items include adjustments related to uncertain tax positions for the repair deduction in both Connecticut and Maine. The blended Federal and State statutory income tax rates during each period were 41%. In determining its annual estimated effective tax rate for interim periods, the Company reflects its estimated permanent and flow-through tax differences for the taxable year, including the basis difference for the adoption of the tangible property regulations.
Lines of Credit
Lines of Credit
Lines of Credit

As of March 31, 2017, the Company maintained a $15.0 million line of credit agreement with CoBank, that is currently scheduled to expire on July 1, 2020.  The Company maintained an additional line of credit of $45.0 million with RBS Citizens, N.A., with an expiration date of April 25, 2021.  As of March 31, 2017, the total lines of credit available to the Company were $60.0 million.  As of March 31, 2017 and December 31, 2016, the Company had $35.1 million and $33.0 million, respectively, of Interim Bank Loans Payable. As of March 31, 2017, the Company had $24.9 million in unused lines of credit.  Interest expense charged on lines of credit will fluctuate based on market interest rates.
Aquisitions
Business Combination Disclosure [Text Block]
11.    Acquisition

On May 10, 2016, the Company announced that it had reached an agreement to acquire The Heritage Village Water Company ("HVWC"), pending a vote of HVWC shareholders, approval by PURA and MPUC and the satisfaction of other various closing conditions, pursuant to the terms of that certain Agreement and Plan of Merger dated May 10, 2016 between and among HVWC, the Company, and HAC, Inc., the Company’s wholly-owned Maine subsidiary (the “Merger Agreement”). HVWC serves approximately 4,700 water customers in the Towns of Southbury, Middlebury, and Oxford, Connecticut and approximately 3,000 wastewater customers in the Town of Southbury, Connecticut.

Under the Merger Agreement, the acquisition was agreed to be executed through a stock-for-stock merger transaction valued at approximately $16.9 million. Holders of HVWC common stock will receive shares of the Company’s common stock in a tax-free exchange. In addition, the transaction reflects a total enterprise value of HVWC of approximately $21.5 million.

The Company received regulatory approval from MPUC on September 28, 2016 and from PURA on December 5, 2016, to proceed with the transaction. The shareholders of HVWC voted to approve the acquisition at a special meeting of HVWC’s shareholders held on February 27, 2017.

On February 27, 2017, the Company completed the acquisition of HVWC by completing the merger of Connecticut Water’s wholly-owned subsidiary HAC, Inc. with and into HVWC, with HVWC as the surviving corporation, pursuant to the terms of the Merger Agreement and Connecticut corporate law. Upon the effective time of the Merger, the holders of HVWC’s 1,620 issued and outstanding shares of common stock became entitled to receive an aggregate of 300,445 shares of the Company’s common stock in a tax-free exchange, which exchange was commenced promptly by the issuance of a letter of transmittal and related materials by Connecticut Water’s exchange agent.

The Company is still in the process of finalizing the purchase price allocation of HVWC as additional information becomes available. The following table summarizes the fair value of the net assets acquired, based on the best information available, on February 27, 2017, the date of the acquisition (in thousands):

Net Utility Plant
$
28,861

Cash and Cash Equivalents
1,336

Accounts Receivable, net
345

Prepayments and Other Current Assets
63

Materials and Supplies, at Average Cost
200

Goodwill
12,618

Deferred Charges and Other Costs
343

Total Assets Acquired
$
43,766

Advances for Construction
 
Long-Term Debt, including current portion
$
4,642

Accounts Payable and Accrued Expenses
21

Other Current Liabilities
228

Advances for Construction
1,897

Deferred Federal and State Income Taxes
1,623

Total Liabilities Assumed
$
8,411

 
 
Contributions in Aid of Construction
18,452

 
 
Net Assets Acquired
$
16,903



The estimated fair values of the assets acquired and the liabilities assumed were determined based on the accounting guidance for fair value measurement under GAAP, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value analysis assumes the highest and best use of the assets by market participants. The allocation of the purchase price includes an adjustment to fair value related to the fair value of HVWC’s long term debt. The excess of the purchase price paid over the estimated fair value of the assets acquired and the liabilities assumed was recognized as goodwill, none of which is deductible for tax purposes. Goodwill recognized as part of the acquisition of HVWC is a part of the Company’s Water Operations segment.

The following unaudited pro forma summary for the three months ended March 31, 2017 presents information as if HVWC had been acquired on January 1, 2016 and assumes that there were no other changes in our operations.  The following pro forma information does not necessarily reflect the actual results that would have occurred had the Company operated the business since January 1, 2016, nor is it necessarily indicative of the future results of operations of the combined companies (in thousands):

Three months ended March 31,
2017
 
2016
Operating Revenues
$
23,069

 
$
22,421

Other Water Activities Revenues
323

 
304

Real Estate Revenues
212

 

Service and Rentals Revenues
1,210

 
1,231

Total Revenues
$
24,814

 
$
23,956

 
 

 
 
Net Income
$
4,092

 
$
3,216

 
 

 
 
Basic Earnings per Average Share Outstanding
$
0.36

 
$
0.28

Diluted Earnings per Average Share Outstanding
$
0.35

 
$
0.28


The following table summarizes the results of HVWC for the period from February 27, 2017, the date of acquisition, to March 31, 2017 and is included in the Consolidated Statement of Income for the period (in thousands):

Period ending March 31, 2017
 
Operating Revenues
$
336

Other Water Activities Revenues

Real Estate Revenues

Service and Rentals Revenues

Total Revenues
$
336

 
 

Net Income
$
85

 
 

Basic Earnings per Average Share Outstanding
$
0.01

Diluted Earnings per Average Share Outstanding
$
0.01

Pension and Other Post-Retirement Benefits Pension and Post-Retirement Benefits (Tables)
Pension Benefits
Components of Net Periodic Cost (in thousands):
 
Three Months
Period ended March 31,
2017
 
2016
Service Cost
$
514

 
$
521

Interest Cost
794

 
794

Expected Return on Plan Assets
(1,101
)
 
(979
)
Amortization of:
 

 
 

Prior Service Cost
4

 
4

Net Recognized Loss
545

 
511

Net Periodic Benefit Cost
$
756

 
$
851

Post-Retirement Benefits Other Than Pension (PBOP)
Components of Net Periodic Cost (in thousands):
 
Three Months
Period ended March 31,
2017
 
2016
Service Cost
$
93

 
$
103

Interest Cost
133

 
136

Expected Return on Plan Assets
(88
)
 
(85
)
Other
56

 
56

Amortization of:
 

 
 

Prior Service Credit
(45
)
 
(100
)
Recognized Net Loss
(9
)
 
8

Net Periodic Benefit Cost
$
140

 
$
118

Earnings per Share Earnings per Share (Tables)
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]
Earnings per weighted average common share are calculated by dividing net income applicable to common stock by the weighted average number of shares of common stock outstanding during the respective periods as detailed below (diluted shares include the effect of stock awards):

Three months ended March 31,
2017
 
2016
Common Shares Outstanding End of Period:
11,564,346

 
11,218,582

Weighted Average Shares Outstanding (Days Outstanding Basis):
 

 
 

Basic
11,139,110

 
10,992,486

Diluted
11,364,879

 
11,211,283

 
 
 
 
Basic Earnings per Share
$
0.36

 
$
0.29

Dilutive Effect of Stock Awards

 
(0.01
)
Diluted Earnings per Share
$
0.36

 
$
0.28

Accumulated Other Comprehensive Income (Loss) (Tables)
Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]
The changes in Accumulated Other Comprehensive Income (Loss) (“AOCI”) by component, net of tax, for the three months ended March 31, 2017 and 2016 are as follows (in thousands):
Three months ended March 31, 2017
 
Unrealized Gains on Investments
 
Defined Benefit Items
 
Total
Beginning Balance (a)
 
$
235

 
$
(1,159
)
 
$
(924
)
Other Comprehensive Income Before Reclassification
 
64

 

 
64

Amounts Reclassified from AOCI
 

 
39

 
39

Net current-period Other Comprehensive Income
 
64

 
39

 
103

Ending Balance
 
$
299

 
$
(1,120
)
 
$
(821
)
 
 
 
 
 
 
 
Three months ended March 31, 2016
 
Unrealized Gains on Investments
 
Defined Benefit Items
 
Total
Beginning Balance (a)
 
$
200

 
$
(1,135
)
 
$
(935
)
Other Comprehensive (Loss) Income Before Reclassification
 
(15
)
 

 
(15
)
Amounts Reclassified from AOCI
 

 
35

 
35

Net current-period Other Comprehensive (Loss) Income
 
(15
)
 
35

 
20

Ending Balance
 
$
185

 
$
(1,100
)
 
$
(915
)
 
 
 
 
 
 
 
(a) All amounts shown are net of tax. Amounts in parentheses indicate loss.

The following table sets forth the amounts reclassified from AOCI by component and the affected line item on the Condensed Consolidated Statements of Income for the three months ended March 31, 2017 and 2016 (in thousands):
Details about Other AOCI Components
 
Amounts Reclassified from AOCI Three Months Ended March 31, 2017(a)
 
Amounts Reclassified from AOCI Three Months Ended March 31, 2016(a)
 
Affected Line Items on Income Statement
Realized Gains on Investments
 
$

 
$

 
Other Income
Tax expense
 

 

 
Other Income
 
 

 

 
 
 
 
 
 
 
 
 
Amortization of Recognized Net Gain from Defined Benefit Items
 
64

 
57

 
Other Income (b)
Tax expense
 
(25
)
 
(22
)
 
Other Income
 
 
39

 
35

 
 
 
 
 
 
 
 
 
Total Reclassifications for the period, net of tax
 
$
39

 
$
35

 
 
 
 
 
 
 
 
 
(a) Amounts in parentheses indicate loss/expense.
(b) Included in computation of net periodic pension cost (see Note 2 for additional details).
Long-Term Debt Long-Term Debt (Tables)
Schedule of Long-term Debt Instruments [Table Text Block]
Long-Term Debt at March 31, 2017 and December 31, 2016 consisted of the following (in thousands):
 
2017
 
2016
Connecticut Water Service, Inc.:
 
 
 
4.09%
 
Term Loan Note
$
13,171

 
$
13,437

The Connecticut Water Company:
 
 
 
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%
 
2011 A Series, Due 2021
23,067

 
23,115

3.16%
 
CoBank Note Payable, Due 2020
8,000

 
8,000

3.51%
 
CoBank Note Payable, Due 2022
14,795

 
14,795

4.29%
 
CoBank Note Payable, Due 2028
17,020

 
17,020

4.72%
 
CoBank Note Payable, Due 2032
14,795

 
14,795

4.75%
 
CoBank Note Payable, Due 2033
14,550

 
14,550

4.36%
 
CoBank Note Payable, Due June 2036
30,000

 
30,000

4.04%
 
CoBank Note Payable, Due July 2036
19,930

 
19,930

Total The Connecticut Water Company
164,207

 
164,255

The Heritage Village Water Company
 
 
 
4.75%
 
2011 Farmington Bank Loan, Due 2034
4,569

 

The Maine Water Company:
 
 
 
8.95%
 
1994 Series G, Due 2024
7,200

 
7,200

2.68%
 
1999 Series J, Due 2019
170

 
254

0.00%
 
2001 Series K, Due 2031
574

 
615

2.58%
 
2002 Series L, Due 2022
60

 
67

1.53%
 
2003 Series M, Due 2023
321

 
341

1.73%
 
2004 Series N, Due 2024
371

 
371

0.00%
 
2004 Series O, Due 2034
113

 
120

1.76%
 
2006 Series P, Due 2026
361

 
391

1.57%
 
2009 Series R, Due 2029
207

 
217

0.00%
 
2009 Series S, Due 2029
560

 
583

0.00%
 
2009 Series T, Due 2029
1,572

 
1,634

0.00%
 
2012 Series U, Due 2042
148

 
154

1.00%
 
2013 Series V, Due 2033
1,310

 
1,335

2.52%
 
CoBank Note Payable, Due 2017
1,965

 
1,965

4.24%
 
CoBank Note Payable, Due 2024
4,500

 
4,500

4.18%
 
CoBank Note Payable, Due 2026
5,000

 

7.72%
 
Series L, Due 2018
2,250

 
2,250

2.40%
 
Series N, Due 2022
1,026

 
1,101

1.86%
 
Series O, Due 2025
790

 
790

2.23%
 
Series P, Due 2028
1,264

 
1,294

0.01%
 
Series Q, Due 2035
1,678

 
1,771

1.00%
 
Series R, Due 2025
2,250

 
2,250

Various
 
Various Capital Leases
6

 
8

Total The Maine Water Company
33,696

 
29,211

Add: Acquisition Fair Value Adjustment
311

 
321

Less: Current Portion
(5,185
)
 
(4,859
)
Less: Unamortized Debt Issuance Expense
(5,180
)
 
(5,318
)
Total Long-Term Debt
$
205,589

 
$
197,047

Fair Value Disclosures Fair Value Disclosures (Tables)
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]
The following table summarizes our financial instruments measured at fair value on a recurring basis within the fair value hierarchy as of March 31, 2017 (in thousands):
 
Level 1
 
Level 2
 
Level 3
 
Total
Asset Type:
 
 
 
 
 
 
 
Money Market Fund
$
56

 
$

 
$

 
$
56

Mutual Funds:
 

 
 

 
 

 
 

Equity Funds (1)
1,774

 

 

 
1,774

Fixed Income Funds (2)
541

 

 

 
541

Total
$
2,371

 
$

 
$

 
$
2,371


The following table summarizes our financial instruments measured at fair value on a recurring basis within the fair value hierarchy as of December 31, 2016 (in thousands):
 
Level 1
 
Level 2
 
Level 3
 
Total
Asset Type:
 
 
 
 
 
 
 
Money Market Fund
$
122

 
$

 
$

 
$
122

Mutual Funds:
 

 
 

 
 

 
 

Equity Funds (1)
1,662

 

 

 
1,662

Fixed Income Funds (2)
534

 

 

 
534

Total
$
2,318

 
$

 
$

 
$
2,318

(1)
Mutual funds consist primarily of equity securities and are presented on the Other Property and Investments line item of the Company’s Condensed Consolidated Balance Sheets.
Segment Reporting Segment Reporting (Tables)
Financial data for the segments is as follows (in thousands):
Three months ended March 31, 2017
Segment
 
Revenues
 
Pre-Tax Income
 
Income Tax Expense(Benefit)
 
Net Income
Water Operations
 
$
22,786

 
$
3,495

 
$
(282
)
 
$
3,777

Real Estate Transactions
 
212

 
55

 
22

 
33

Services and Rentals
 
1,210

 
491

 
233

 
258

Total
 
$
24,208

 
$
4,041

 
$
(27
)
 
$
4,068

Three months ended March 31, 2016
Segment
 
Revenues
 
Pre-Tax Income
 
Income Tax Expense
 
Net Income
Water Operations
 
$
21,855

 
$
2,950

 
$
197

 
$
2,753

Real Estate Transactions
 

 

 

 

Services and Rentals
 
1,231

 
537

 
142

 
395

Total
 
$
23,086

 
$
3,487

 
$
339

 
$
3,148


Assets by segment (in thousands):
 
March 31, 2017
 
December 31, 2016
Total Plant and Other Investments:
 
 
 
Water Operations
$
645,028

 
$
609,508

Non-Water
1,027

 
959

 
646,055

 
610,467

Other Assets:
 
 
 
Water Operations
190,055

 
171,674

Non-Water
2,439

 
2,361

 
192,494

 
174,035

Total Assets
$
838,549

 
$
784,502

Aquisitions Acquisitions (Tables) (The Heritage Village Water Company [Member])
The Company is still in the process of finalizing the purchase price allocation of HVWC as additional information becomes available. The following table summarizes the fair value of the net assets acquired, based on the best information available, on February 27, 2017, the date of the acquisition (in thousands):

Net Utility Plant
$
28,861

Cash and Cash Equivalents
1,336

Accounts Receivable, net
345

Prepayments and Other Current Assets
63

Materials and Supplies, at Average Cost
200

Goodwill
12,618

Deferred Charges and Other Costs
343

Total Assets Acquired
$
43,766

Advances for Construction
 
Long-Term Debt, including current portion
$
4,642

Accounts Payable and Accrued Expenses
21

Other Current Liabilities
228

Advances for Construction
1,897

Deferred Federal and State Income Taxes
1,623

Total Liabilities Assumed
$
8,411

 
 
Contributions in Aid of Construction
18,452

 
 
Net Assets Acquired
$
16,903

The following unaudited pro forma summary for the three months ended March 31, 2017 presents information as if HVWC had been acquired on January 1, 2016 and assumes that there were no other changes in our operations.  The following pro forma information does not necessarily reflect the actual results that would have occurred had the Company operated the business since January 1, 2016, nor is it necessarily indicative of the future results of operations of the combined companies (in thousands):

Three months ended March 31,
2017
 
2016
Operating Revenues
$
23,069

 
$
22,421

Other Water Activities Revenues
323

 
304

Real Estate Revenues
212

 

Service and Rentals Revenues
1,210

 
1,231

Total Revenues
$
24,814

 
$
23,956

 
 

 
 
Net Income
$
4,092

 
$
3,216

 
 

 
 
Basic Earnings per Average Share Outstanding
$
0.36

 
$
0.28

Diluted Earnings per Average Share Outstanding
$
0.35

 
$
0.28


The following table summarizes the results of HVWC for the period from February 27, 2017, the date of acquisition, to March 31, 2017 and is included in the Consolidated Statement of Income for the period (in thousands):

Period ending March 31, 2017
 
Operating Revenues
$
336

Other Water Activities Revenues

Real Estate Revenues

Service and Rentals Revenues

Total Revenues
$
336

 
 

Net Income
$
85

 
 

Basic Earnings per Average Share Outstanding
$
0.01

Diluted Earnings per Average Share Outstanding
$
0.01

Aquisitions Goodwill Rollforward (Tables) (The Heritage Village Water Company [Member])
The Company is still in the process of finalizing the purchase price allocation of HVWC as additional information becomes available. The following table summarizes the fair value of the net assets acquired, based on the best information available, on February 27, 2017, the date of the acquisition (in thousands):

Net Utility Plant
$
28,861

Cash and Cash Equivalents
1,336

Accounts Receivable, net
345

Prepayments and Other Current Assets
63

Materials and Supplies, at Average Cost
200

Goodwill
12,618

Deferred Charges and Other Costs
343

Total Assets Acquired
$
43,766

Advances for Construction
 
Long-Term Debt, including current portion
$
4,642

Accounts Payable and Accrued Expenses
21

Other Current Liabilities
228

Advances for Construction
1,897

Deferred Federal and State Income Taxes
1,623

Total Liabilities Assumed
$
8,411

 
 
Contributions in Aid of Construction
18,452

 
 
Net Assets Acquired
$
16,903

The following unaudited pro forma summary for the three months ended March 31, 2017 presents information as if HVWC had been acquired on January 1, 2016 and assumes that there were no other changes in our operations.  The following pro forma information does not necessarily reflect the actual results that would have occurred had the Company operated the business since January 1, 2016, nor is it necessarily indicative of the future results of operations of the combined companies (in thousands):

Three months ended March 31,
2017
 
2016
Operating Revenues
$
23,069

 
$
22,421

Other Water Activities Revenues
323

 
304

Real Estate Revenues
212

 

Service and Rentals Revenues
1,210

 
1,231

Total Revenues
$
24,814

 
$
23,956

 
 

 
 
Net Income
$
4,092

 
$
3,216

 
 

 
 
Basic Earnings per Average Share Outstanding
$
0.36

 
$
0.28

Diluted Earnings per Average Share Outstanding
$
0.35

 
$
0.28


The following table summarizes the results of HVWC for the period from February 27, 2017, the date of acquisition, to March 31, 2017 and is included in the Consolidated Statement of Income for the period (in thousands):

Period ending March 31, 2017
 
Operating Revenues
$
336

Other Water Activities Revenues

Real Estate Revenues

Service and Rentals Revenues

Total Revenues
$
336

 
 

Net Income
$
85

 
 

Basic Earnings per Average Share Outstanding
$
0.01

Diluted Earnings per Average Share Outstanding
$
0.01

Basis of Preparation of Financials In text details (Details) (USD $)
3 Months Ended 9 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Sep. 30, 2016
Water Revenue Adjustment
$ 573,000 
$ 400,000 
$ 573,000 
Maine Water Company [Member]
 
 
 
Allowed Rate of Return on Equity
 
 
9.50% 
Allowed Return on Rate Base
 
 
7.96% 
The Connecticut Water Company [Member]
 
 
 
Allowed Rate of Return on Equity
 
 
9.75% 
Allowed Return on Rate Base
 
 
7.32% 
The Heritage Village Water Company [Member]
 
 
 
Allowed Rate of Return on Equity
10.10% 
 
 
Allowed Return on Rate Base
7.19% 
 
 
Pension and Other Post-Retirement Benefits Pension Benefit Cost (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Pension Plans, Defined Benefit [Member]
 
 
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
 
 
Defined Benefit Plan, Service Cost
$ 514 
$ 521 
Defined Benefit Plan, Interest Cost
794 
794 
Defined Benefit Plan, Expected Return on Plan Assets
(1,101)
(979)
Defined Benefit Plan, Amortization of Prior Service Cost (Credit)
Defined Benefit Plan, Amortization of Gains (Losses)
545 
511 
Defined Benefit Plan, Net Periodic Benefit Cost
756 
851 
Other Postretirement Benefit Plans, Defined Benefit [Member]
 
 
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
 
 
Defined Benefit Plan, Service Cost
93 
103 
Defined Benefit Plan, Interest Cost
133 
136 
Defined Benefit Plan, Expected Return on Plan Assets
(88)
(85)
Defined benefit plan amortization of regulatory assets
56 
56 
Defined Benefit Plan, Amortization of Prior Service Cost (Credit)
(45)
(100)
Defined Benefit Plan, Amortization of Gains (Losses)
(9)
Defined Benefit Plan, Net Periodic Benefit Cost
$ 140 
$ 118 
Pension and Other Post-Retirement Benefits In Text Linking (Details) (USD $)
3 Months Ended
Mar. 31, 2017
Defined Benefit Plan Disclosure [Line Items]
 
Defined Benefit Plans, Estimated Future Employer Contributions in Current Fiscal Year
$ 2,971,000 
Earnings per Share Earnings per Share (Details) (USD $)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]