Filed by Bowne Pure Compliance
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 10-Q
(Mark One)
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| þ |
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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 June 30, 2007
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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 to
Commission File Number 1-6659
AQUA AMERICA, INC.
(Exact name of registrant as specified in its charter)
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| Pennsylvania
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23-1702594 |
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|
(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.) |
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| 762 W. Lancaster Avenue, Bryn Mawr, Pennsylvania
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19010-3489 |
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| (Address of principal executive offices)
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(Zip Code) |
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| Registrant’s telephone number, including area code:
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(610)527-8000 |
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|
(Former Name, former address and former fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or
a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule
12b-2 of the Exchange Act.
Large Accelerated Filer þ Accelerated Filer o Non-Accelerated Filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes o No þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of
July 23, 2007.
132,967,789 .
AQUA AMERICA, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
1
Part 1 – Financial Information
Item 1. Financial Statement
AQUA AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars, except per share amounts)
(UNAUDITED)
| |
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|
|
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|
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|
June 30, |
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December 31, |
|
| Assets |
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
|
Property, plant and equipment, at cost |
|
$ |
3,398,777 |
|
|
$ |
3,185,111 |
|
Less: accumulated depreciation |
|
|
751,999 |
|
|
|
679,116 |
|
|
|
|
|
|
|
|
Net property, plant and equipment |
|
|
2,646,778 |
|
|
|
2,505,995 |
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|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
11,498 |
|
|
|
44,039 |
|
Accounts receivable and unbilled revenues, net |
|
|
89,432 |
|
|
|
72,149 |
|
Materials and supplies |
|
|
9,859 |
|
|
|
8,359 |
|
Prepayments and other current assets |
|
|
8,310 |
|
|
|
10,153 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
119,099 |
|
|
|
134,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory assets |
|
|
177,542 |
|
|
|
165,063 |
|
Deferred charges and other assets, net |
|
|
39,724 |
|
|
|
38,075 |
|
Funds restricted for construction activity |
|
|
58,898 |
|
|
|
11,490 |
|
Goodwill |
|
|
34,493 |
|
|
|
22,580 |
|
|
|
|
|
|
|
|
|
|
$ |
3,076,534 |
|
|
$ |
2,877,903 |
|
|
|
|
|
|
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|
Liabilities and Stockholders’ Equity |
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|
|
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|
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Common stockholders’ equity: |
|
|
|
|
|
|
|
|
Common stock at $.50 par value, authorized 300,000,000 shares,
issued 133,601,217 and 133,017,325 in 2007 and 2006 |
|
$ |
66,801 |
|
|
$ |
66,509 |
|
Capital in excess of par value |
|
|
560,742 |
|
|
|
548,806 |
|
Retained earnings |
|
|
329,225 |
|
|
|
319,113 |
|
Treasury stock, 688,746 and 691,746 shares in 2007 and 2006 |
|
|
(12,914 |
) |
|
|
(12,992 |
) |
Accumulated other comprehensive income |
|
|
412 |
|
|
|
194 |
|
|
|
|
|
|
|
|
Total common stockholders’ equity |
|
|
944,266 |
|
|
|
921,630 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest |
|
|
1,858 |
|
|
|
1,814 |
|
Long-term debt, excluding current portion |
|
|
1,040,069 |
|
|
|
951,660 |
|
Commitments and contingencies |
|
|
— |
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|
|
— |
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|
|
|
|
|
|
|
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Current liabilities: |
|
|
|
|
|
|
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|
Current portion of long-term debt |
|
|
34,169 |
|
|
|
31,155 |
|
Loans payable |
|
|
175,451 |
|
|
|
119,150 |
|
Accounts payable |
|
|
26,729 |
|
|
|
49,406 |
|
Accrued interest |
|
|
15,701 |
|
|
|
14,050 |
|
Accrued taxes |
|
|
11,878 |
|
|
|
19,350 |
|
Other accrued liabilities |
|
|
20,857 |
|
|
|
22,500 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
284,785 |
|
|
|
255,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Deferred credits and other liabilities: |
|
|
|
|
|
|
|
|
Deferred income taxes and investment tax credits |
|
|
287,104 |
|
|
|
273,199 |
|
Customers’ advances for construction |
|
|
76,892 |
|
|
|
76,820 |
|
Regulatory liabilities |
|
|
12,519 |
|
|
|
11,592 |
|
Other |
|
|
85,213 |
|
|
|
64,879 |
|
|
|
|
|
|
|
|
Total deferred credits and other liabilities |
|
|
461,728 |
|
|
|
426,490 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Contributions in aid of construction |
|
|
343,828 |
|
|
|
320,698 |
|
|
|
|
|
|
|
|
|
|
$ |
3,076,534 |
|
|
$ |
2,877,903 |
|
|
|
|
|
|
|
|
See notes to consolidated financial statements beginning on page 8 of this report.
2
AQUA AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In thousands, except per share amounts)
(UNAUDITED)
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|
|
|
|
|
|
|
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|
Six Months Ended |
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June 30, |
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| |
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
Operating revenues |
|
$ |
287,925 |
|
|
$ |
249,698 |
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
Operations and maintenance |
|
|
123,629 |
|
|
|
106,749 |
|
Depreciation |
|
|
40,592 |
|
|
|
34,085 |
|
Amortization |
|
|
2,442 |
|
|
|
2,002 |
|
Taxes other than income taxes |
|
|
22,747 |
|
|
|
16,151 |
|
|
|
|
|
|
|
|
|
|
|
189,410 |
|
|
|
158,987 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
98,515 |
|
|
|
90,711 |
|
|
|
|
|
|
|
|
|
|
Other expense (income): |
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
32,990 |
|
|
|
28,916 |
|
Allowance for funds used during construction |
|
|
(1,463 |
) |
|
|
(2,198 |
) |
Gain on sale of other assets |
|
|
(388 |
) |
|
|
(743 |
) |
|
|
|
|
|
|
|
Income before income taxes |
|
|
67,376 |
|
|
|
64,736 |
|
Provision for income taxes |
|
|
26,791 |
|
|
|
25,786 |
|
|
|
|
|
|
|
|
Net income |
|
$ |
40,585 |
|
|
$ |
38,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
40,585 |
|
|
$ |
38,950 |
|
Other comprehensive income, net of tax: |
|
|
|
|
|
|
|
|
Unrealized holding gain on investments |
|
|
218 |
|
|
|
199 |
|
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
40,803 |
|
|
$ |
39,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.31 |
|
|
$ |
0.30 |
|
|
|
|
|
|
|
|
Diluted |
|
$ |
0.30 |
|
|
$ |
0.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding
during the period: |
|
|
|
|
|
|
|
|
Basic |
|
|
132,504 |
|
|
|
129,522 |
|
|
|
|
|
|
|
|
Diluted |
|
|
133,404 |
|
|
|
130,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per common share |
|
$ |
0.2300 |
|
|
$ |
0.2138 |
|
|
|
|
|
|
|
|
See notes to consolidated financial statements beginning on page 8 of this report.
3
AQUA AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In thousands, except per share amounts)
(UNAUDITED)
| |
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
| |
|
June 30, |
|
| |
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
Operating revenues |
|
$ |
150,624 |
|
|
$ |
131,749 |
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
Operations and maintenance |
|
|
63,334 |
|
|
|
55,433 |
|
Depreciation |
|
|
20,456 |
|
|
|
17,255 |
|
Amortization |
|
|
1,233 |
|
|
|
888 |
|
Taxes other than income taxes |
|
|
10,831 |
|
|
|
8,084 |
|
|
|
|
|
|
|
|
|
|
|
95,854 |
|
|
|
81,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
54,770 |
|
|
|
50,089 |
|
|
|
|
|
|
|
|
|
|
Other expense (income): |
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
16,441 |
|
|
|
14,744 |
|
Allowance for funds used during construction |
|
|
(742 |
) |
|
|
(1,280 |
) |
Gain on sale of other assets |
|
|
(319 |
) |
|
|
(476 |
) |
|
|
|
|
|
|
|
Income before income taxes |
|
|
39,390 |
|
|
|
37,101 |
|
Provision for income taxes |
|
|
15,663 |
|
|
|
14,715 |
|
|
|
|
|
|
|
|
Net income |
|
$ |
23,727 |
|
|
$ |
22,386 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
23,727 |
|
|
$ |
22,386 |
|
Other comprehensive income, net of tax: |
|
|
|
|
|
|
|
|
Unrealized holding gain on investments |
|
|
213 |
|
|
|
199 |
|
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
23,940 |
|
|
$ |
22,585 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.18 |
|
|
$ |
0.17 |
|
|
|
|
|
|
|
|
Diluted |
|
$ |
0.18 |
|
|
$ |
0.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding
during the period: |
|
|
|
|
|
|
|
|
Basic |
|
|
132,652 |
|
|
|
129,860 |
|
|
|
|
|
|
|
|
Diluted |
|
|
133,520 |
|
|
|
130,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per common share |
|
$ |
0.1150 |
|
|
$ |
0.1069 |
|
|
|
|
|
|
|
|
See notes to consolidated financial statements beginning on page 8 of this report.
4
AQUA AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(In thousands of dollars, except per share amounts)
(UNAUDITED)
| |
|
|
|
|
|
|
|
|
| |
|
June 30, |
|
|
December 31, |
|
| |
|
2007 |
|
|
2006 |
|
Common stockholders’ equity: |
|
|
|
|
|
|
|
|
Common stock, $.50 par value |
|
$ |
66,801 |
|
|
$ |
66,509 |
|
Capital in excess of par value |
|
|
560,742 |
|
|
|
548,806 |
|
Retained earnings |
|
|
329,225 |
|
|
|
319,113 |
|
Treasury stock |
|
|
(12,914 |
) |
|
|
(12,992 |
) |
Accumulated other comprehensive income |
|
|
412 |
|
|
|
194 |
|
|
|
|
|
|
|
|
Total common stockholders’ equity |
|
|
944,266 |
|
|
|
921,630 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt: |
|
|
|
|
|
|
|
|
Long-term debt of subsidiaries (substantially
secured by utility plant): |
|
|
|
|
|
|
|
|
Interest Rate Range |
|
|
|
|
|
|
|
|
0.00% to 2.49% |
|
|
29,655 |
|
|
|
25,740 |
|
2.50% to 2.99% |
|
|
25,538 |
|
|
|
25,272 |
|
3.00% to 3.49% |
|
|
5,089 |
|
|
|
17,220 |
|
3.50% to 3.99% |
|
|
5,532 |
|
|
|
6,073 |
|
4.00% to 4.99% |
|
|
80,615 |
|
|
|
30,645 |
|
5.00% to 5.49% |
|
|
274,610 |
|
|
|
262,496 |
|
5.50% to 5.99% |
|
|
86,500 |
|
|
|
79,000 |
|
6.00% to 6.49% |
|
|
97,730 |
|
|
|
94,360 |
|
6.50% to 6.99% |
|
|
22,000 |
|
|
|
22,000 |
|
7.00% to 7.49% |
|
|
10,979 |
|
|
|
13,288 |
|
7.50% to 7.99% |
|
|
24,656 |
|
|
|
24,778 |
|
8.00% to 8.49% |
|
|
26,174 |
|
|
|
26,288 |
|
8.50% to 8.99% |
|
|
9,000 |
|
|
|
9,000 |
|
9.00% to 9.49% |
|
|
43,968 |
|
|
|
46,101 |
|
9.50% to 9.99% |
|
|
38,244 |
|
|
|
38,738 |
|
10.00% to 10.50% |
|
|
6,000 |
|
|
|
6,000 |
|
|
|
|
|
|
|
|
|
|
|
786,290 |
|
|
|
726,999 |
|
Unsecured notes payable, 4.87%, maturing in
various installments 2010 through 2023 |
|
|
135,000 |
|
|
|
135,000 |
|
Unsecured notes payable, 5.95%, due in 2023 through 2034 |
|
|
40,000 |
|
|
|
40,000 |
|
Unsecured notes payable, 5.64%, due in 2014 through 2021 |
|
|
20,000 |
|
|
|
20,000 |
|
Unsecured notes payable, 5.54%, due in 2013 through 2018 |
|
|
30,000 |
|
|
|
30,000 |
|
Unsecured notes payable, 5.01%, due 2015 |
|
|
18,000 |
|
|
|
18,000 |
|
Unsecured notes payable, 5.20%, due 2020 |
|
|
12,000 |
|
|
|
12,000 |
|
Unsecured notes payable, 5.63%, due 2022 |
|
|
15,000 |
|
|
|
— |
|
Unsecured notes payable, 5.83%, due 2037 |
|
|
15,000 |
|
|
|
— |
|
Unsecured notes payable, 5.50%, due 2017 |
|
|
2,132 |
|
|
|
— |
|
Notes payable, 6.05%, maturing in 2007 and 2008 |
|
|
816 |
|
|
|
816 |
|
|
|
|
|
|
|
|
|
|
|
1,074,238 |
|
|
|
982,815 |
|
Current portion of long-term debt |
|
|
34,169 |
|
|
|
31,155 |
|
|
|
|
|
|
|
|
Long-term debt, excluding current portion |
|
|
1,040,069 |
|
|
|
951,660 |
|
|
|
|
|
|
|
|
Total capitalization |
|
$ |
1,984,335 |
|
|
$ |
1,873,290 |
|
|
|
|
|
|
|
|
See notes to consolidated financial statements beginning on page 8 of this report.
5
AQUA AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMMON STOCKHOLDERS’ EQUITY
(In thousands of dollars)
(UNAUDITED)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
| |
|
|
|
|
|
Capital in |
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
| |
|
Common |
|
|
excess of |
|
|
Retained |
|
|
Treasury |
|
|
Comprehensive |
|
|
|
|
| |
|
Stock |
|
|
par value |
|
|
earnings |
|
|
Stock |
|
|
Income |
|
|
Total |
|
Balance at December 31, 2006 |
|
$ |
66,509 |
|
|
$ |
548,806 |
|
|
$ |
319,113 |
|
|
$ |
(12,992 |
) |
|
$ |
194 |
|
|
$ |
921,630 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
40,585 |
|
|
|
— |
|
|
|
— |
|
|
|
40,585 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
unrealized holding gain on
investments,
net of income tax of $117 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
218 |
|
|
|
218 |
|
Dividends paid |
|
|
— |
|
|
|
— |
|
|
|
(30,473 |
) |
|
|
— |
|
|
|
— |
|
|
|
(30,473 |
) |
Sale of stock (232,439 shares) |
|
|
109 |
|
|
|
4,612 |
|
|
|
— |
|
|
|
330 |
|
|
|
— |
|
|
|
5,051 |
|
Repurchase of stock (11,049
shares) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(252 |
) |
|
|
— |
|
|
|
(252 |
) |
Equity Compensation Plan (55,000
shares) |
|
|
28 |
|
|
|
(28 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Exercise of stock options
(310,502 shares) |
|
|
155 |
|
|
|
3,755 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,910 |
|
Stock-based compensation |
|
|
— |
|
|
|
2,626 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,626 |
|
Employee stock plan tax benefits |
|
|
— |
|
|
|
971 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
971 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2007 |
|
$ |
66,801 |
|
|
$ |
560,742 |
|
|
$ |
329,225 |
|
|
$ |
(12,914 |
) |
|
$ |
412 |
|
|
$ |
944,266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements beginning on page 8 of this report.
6
AQUA AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands of dollars)
(UNAUDITED)
| |
|
|
|
|
|
|
|
|
| |
|
Six Months Ended |
|
| |
|
June 30, |
|
| |
|
2007 |
|
|
2006 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
40,585 |
|
|
$ |
38,950 |
|
Adjustments to reconcile net income to net
cash flows from operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
43,034 |
|
|
|
36,087 |
|
Deferred income taxes |
|
|
4,797 |
|
|
|
4,863 |
|
Gain on sale of other assets |
|
|
(388 |
) |
|
|
(743 |
) |
Stock-based compensation |
|
|
2,344 |
|
|
|
1,929 |
|
Net increase in receivables, inventory and prepayments |
|
|
(14,875 |
) |
|
|
(7,631 |
) |
Net decrease in payables, accrued interest, accrued
taxes and other accrued liabilities |
|
|
(19,807 |
) |
|
|
(29,941 |
) |
Other |
|
|
5,250 |
|
|
|
4,527 |
|
|
|
|
|
|
|
|
Net cash flows from operating activities |
|
|
60,940 |
|
|
|
48,041 |
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Property, plant and equipment additions, including allowance
for funds used during construction of $1,463 and $2,198 |
|
|
(107,669 |
) |
|
|
(121,936 |
) |
Acquisitions of utility systems and other, net |
|
|
(41,346 |
) |
|
|
(2,804 |
) |
Proceeds from the sale of other assets |
|
|
1,067 |
|
|
|
753 |
|
Additions to funds restricted for construction activity |
|
|
(49,890 |
) |
|
|
(1,544 |
) |
Release of funds previously restricted for construction activity |
|
|
4,159 |
|
|
|
21,166 |
|
Other |
|
|
1,880 |
|
|
|
(256 |
) |
|
|
|
|
|
|
|
Net cash flows used in investing activities |
|
|
(191,799 |
) |
|
|
(104,621 |
) |
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Customers’ advances and contributions in aid of construction |
|
|
5,308 |
|
|
|
5,367 |
|
Repayments of customers’ advances |
|
|
(2,324 |
) |
|
|
(1,908 |
) |
Net proceeds (repayments) of short-term debt |
|
|
56,301 |
|
|
|
(7,266 |
) |
Proceeds from long-term debt |
|
|
85,990 |
|
|
|
45,814 |
|
Repayments of long-term debt |
|
|
(19,242 |
) |
|
|
(20,130 |
) |
Change in cash overdraft position |
|
|
(6,646 |
) |
|
|
11,257 |
|
Proceeds from exercised stock options |
|
|
3,910 |
|
|
|
5,405 |
|
Stock-based compensation windfall tax benefits |
|
|
695 |
|
|
|
1,501 |
|
Proceeds from issuing common stock |
|
|
5,051 |
|
|
|
42,308 |
|
Repurchase of common stock |
|
|
(252 |
) |
|
|
(692 |
) |
Dividends paid on common stock |
|
|
(30,473 |
) |
|
|
(27,649 |
) |
|
|
|
|
|
|
|
Net cash flows from financing activities |
|
|
98,318 |
|
|
|
54,007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
|
(32,541 |
) |
|
|
(2,573 |
) |
Cash and cash equivalents at beginning of period |
|
|
44,039 |
|
|
|
11,872 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
11,498 |
|
|
$ |
9,299 |
|
|
|
|
|
|
|
|
See notes to consolidated financial statements beginning on page 8 of this report.
7
AQUA AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of dollars, except per share amounts)
(UNAUDITED)
|
|
|
| Note 1 |
|
Basis of Presentation |
The accompanying consolidated balance sheets and statements of
capitalization of Aqua America, Inc. (the “Company”) at June
30, 2007, the consolidated statements of income and
comprehensive income for the six months and three months ended
June 30, 2007 and 2006, the consolidated statements of cash
flow for the six months ended June 30, 2007 and 2006, and the
consolidated statement of common stockholders’ equity for the
six months ended June 30, 2007, are unaudited, but reflect all
adjustments, consisting of only normal recurring accruals,
which are, in the opinion of management, necessary to present
fairly the consolidated financial position, the consolidated
changes in common stockholders’ equity, the consolidated
results of operations, and the consolidated cash flow for the
periods presented. Because they cover interim periods, the
statements and related notes to the financial statements do
not include all disclosures and notes normally provided in
annual financial statements and, therefore, should be read in
conjunction with the Company’s Annual Report on Form 10-K for
the year ended December 31, 2006 and the Quarterly Report on
Form 10-Q for the quarter ended March 31, 2007. The results
of operations for interim periods may not be indicative of the
results that may be expected for the entire year.
The following table summarizes the changes in the Company’s goodwill, by business
segment:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Regulated |
|
|
|
|
|
|
|
| |
|
Segment |
|
|
Other |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006 |
|
$ |
18,537 |
|
|
$ |
4,043 |
|
|
$ |
22,580 |
|
Goodwill acquired during
year |
|
|
11,848 |
|
|
|
— |
|
|
|
11,848 |
|
Reclassifications to
utility plant
acquisition adjustment |
|
|
(12 |
) |
|
|
— |
|
|
|
(12 |
) |
Other |
|
|
(3 |
) |
|
|
80 |
|
|
|
77 |
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2007 |
|
$ |
30,370 |
|
|
$ |
4,123 |
|
|
$ |
34,493 |
|
|
|
|
|
|
|
|
|
|
|
In January 2007, the Company recorded goodwill of $10,808 upon completing its
acquisition of New York Water Service Corporation. In April 2007, the Company
recorded goodwill of $1,040 upon completing the acquisition of Aquarion Water Company
of Sea Cliff, Inc.
8
AQUA AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(In thousands of dollars, except per share amounts)
(UNAUDITED)
|
|
|
| Note 3 |
|
Long-term Debt and Loans Payable |
In January 2007, the Company’s Pennsylvania operating subsidiary, Aqua Pennsylvania,
Inc., issued $50,000 of tax-exempt bonds secured by a supplement to its first
mortgage indenture at the following terms: $25,000 at 4.43% due 2040 and $25,000 at
4.44% due 2041. The proceeds are restricted to funding certain capital projects
during the period 2007 through 2009. In March 2007, the Company issued $30,000 of
unsecured notes of which $15,000 are due in 2022 with an interest rate of 5.63% and
$15,000 are due in 2037 with an interest rate of 5.83%. Proceeds from the sales of
these notes were used to repay short-term borrowings. During the first half of 2007,
our operating subsidiaries issued notes payable in aggregate of $7,851 at rates
ranging from 1.0% to 5.5% due from 2017 to 2035.
Pursuant to our strategy to grow through acquisitions, on January
1, 2007 the Company completed the acquisition of the capital stock
of New York Water Service Corporation (“New York Water”) for
$28,866 in cash, as adjusted pursuant to the purchase agreement
primarily based on working capital at closing, and the assumption
of $23,000 of long-term debt. The acquired operation provides
water service to 44,792 customers in several water systems located
in Nassau County, Long Island, New York. The operating results of
New York Water have been included in our consolidated financial
statements beginning January 1, 2007. Under the purchase method of
accounting, the purchase price is allocated to the net tangible and
intangible assets based upon their estimate fair values at the date
of the acquisition. The Company is in the process of finalizing
the allocation of the purchase price. The purchase price
allocation is as follows, subject to final adjustments:
| |
|
|
|
|
| |
|
January 1, |
|
| |
|
2007 |
|
Property, plant and equipment, net |
|
$ |
42,057 |
|
Current assets |
|
|
9,207 |
|
Other long-term assets |
|
|
14,384 |
|
Goodwill |
|
|
10,808 |
|
|
|
|
|
Total assets acquired |
|
|
76,456 |
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
1,852 |
|
Long-term debt |
|
|
23,000 |
|
Other long-term liabilities |
|
|
22,738 |
|
|
|
|
|
Total liabilities assumed |
|
|
47,590 |
|
|
|
|
|
|
|
|
|
|
Net assets acquired |
|
$ |
28,866 |
|
|
|
|
|
9
AQUA AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(In thousands of dollars, except per share amounts)
(UNAUDITED)
|
|
|
| Note 5 |
|
Net Income per Common Share |
Basic net income per common share is based on the weighted average number of common
shares outstanding. Diluted net income per common share is based on the weighted
average number of common shares outstanding and potentially dilutive shares. The
dilutive effect of employee stock options and shares issuable under the forward
equity sale agreement (from the date the Company entered into the forward equity sale
agreement to the settlement date) is included in the computation of diluted net
income per common share. The dilutive effect of stock options and shares issuable
under the forward equity sale agreement is calculated using the treasury stock method
and expected proceeds upon exercise of the stock options and settlement of the
forward equity sale agreement. The following table summarizes the shares, in
thousands, used in computing basic and diluted net income per common share:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Six Months Ended |
|
|
Three Months Ended |
|
| |
|
June 30, |
|
|
June 30, |
|
| |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
Average common shares outstanding during
the period for basic computation |
|
|
132,504 |
|
|
|
129,522 |
|
|
|
132,652 |
|
|
|
129,860 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock options |
|
|
839 |
|
|
|
1,212 |
|
|
|
819 |
|
|
|
1,092 |
|
Forward equity shares |
|
|
61 |
|
|
|
— |
|
|
|
49 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding during
the period for diluted computation |
|
|
133,404 |
|
|
|
130,734 |
|
|
|
133,520 |
|
|
|
130,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months and three months ended June 30, 2007, employee stock options to purchase
1,151,700 shares of common stock were excluded from the calculations of diluted net income per
share as the calculated proceeds from the options’ exercise were greater than the average
market price of the Company’s common stock during these periods. For the six months and three
months ended June 30, 2006, employee stock options to purchase 610,100 shares of common stock
were excluded from the calculations of diluted net income per share as the calculated proceeds
from the options’ exercise were greater than the average market price of the Company’s common
stock during these periods.
10
AQUA AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(In thousands of dollars, except per share amounts)
(UNAUDITED)
|
|
|
| Note 6 |
|
Stockholders’ Equity |
In August 2006, the Company entered into a forward equity sale agreement for
3,525,000 shares of common stock with a third-party (the “forward purchaser”). In
connection with the forward equity sale agreement, the forward purchaser borrowed an
equal number of shares of the Company’s common stock from stock lenders and sold the
borrowed shares to the public. The Company will not receive any proceeds from the
sale of its common stock by the forward purchaser until settlement of the forward
equity sale agreement. The actual proceeds to be received by the Company will vary
depending upon the settlement date, the number of shares designated for settlement on
that settlement date and the method of settlement. The Company intends to use any
proceeds received upon settlement of the forward equity sale agreement to fund the
Company’s future capital expenditure program and acquisitions, and for working
capital and other general corporate purposes. The forward equity sale agreement is
accounted for as an equity instrument and was recorded at a fair value of $0 at
inception. It will not be adjusted so long as the Company continues to meet the
accounting requirements for equity instruments.
The Company may elect to settle the forward equity sale agreement by means of a
physical share settlement, net cash settlement, or net share settlement, on a
settlement date or dates, no later than August 1, 2008. The forward equity sale
agreement provides that the forward sale price will be computed based upon the
initial forward sale price of $21.857 per share. Under limited circumstances or
certain unanticipated events, the forward purchaser also has the ability to require
the Company to physically settle the forward equity sale agreement in shares prior to
the maturity date. The maximum number of shares that could be required to be issued
by the Company to settle the forward equity sale agreement is 3,525,000 shares. As
of June 30, 2007, a net cash settlement under the forward equity sale agreement would
have resulted in a payment by the Company to the forward purchaser of $1,008 or a net
share settlement would have resulted in the issuance of 44,827 shares by the Company
to the forward purchaser. For each increase or decrease of one dollar in the average
market price of the Company’s common stock above or below the forward sale price on
June 30, 2007, the cash settlement option from the Company’s perspective would
decrease or increase by $3,525 and the net share settlement option would decrease by
150,064 shares or increase by 164,030 shares, respectively.
11
AQUA AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(In thousands of dollars, except per share amounts)
(UNAUDITED)
|
|
|
| Note 7 |
|
Stock-based Compensation |
Under the Company’s 2004 Equity Compensation Plan (the “2004 Plan”), as approved by
the shareholders to replace the 1994 Equity Compensation Plan (the “1994 Plan”),
qualified and nonqualified stock options may be granted to officers, key employees
and consultants at prices equal to the market price of the stock on the day of the
grant. Officers and key employees may also be granted dividend equivalents and
restricted stock. Restricted stock may also be granted to non-employee members of
the Board of Directors. The 2004 Plan authorizes 4,900,000 shares for issuance under
the plan. A maximum of 50% of the shares available for issuance under the 2004 Plan
may be issued as restricted stock and the maximum number of shares that may be
subject to grants under the plans to any one individual in any one year is 200,000.
Awards under the 2004 Plan are made by a committee of the Board of Directors. At
June 30, 2007, 2,910,837 shares underlying stock option and restricted stock awards
were still available for grant under the 2004 Plan, although under the terms of the
2004 Plan, terminated, expired or forfeited grants under the 1994 Plan and shares
withheld to satisfy tax withholding requirements under the plan may be re-issued
under the plan.
Stock Options—During the six months ended June 30, 2007 and 2006, the Company
recognized compensation cost associated with stock options as a component of
operations and maintenance expense of $1,634 and $1,490, respectively. During the
three months ended June 30, 2007 and 2006, the Company recognized compensation cost
associated with stock options as a component of operations and maintenance expense of
$867 and $828, respectively. For the six months ended June 30, 2007 and 2006, the
Company recognized income tax benefits associated with stock options in its income
statement of $239 and $183, respectively. For the three months ended June 30, 2007
and 2006, the Company recognized income tax benefits associated with stock options in
its income statement of $132 and $21, respectively. In addition, the Company
capitalized compensation costs associated with stock options within property, plant
and equipment of $284 and $222 during the six months ended June 30, 2007 and 2006;
and $132 and $125 during the three months ended June 30, 2007 and 2006, respectively.
The fair value of options was estimated at the grant date using the Black-Scholes
option-pricing model. The per share weighted-average fair value at the date of grant
for stock options granted during the six months ended June 30, 2007 and 2006 was
$5.52 and $7.82 per option, respectively. There were no stock options granted during
the three months ended June 30, 2007 and 2006. The following assumptions were used
in the application of this valuation model:
| |
|
|
|
|
|
|
|
|
| |
|
2007 |
|
|
2006 |
|
Expected term (years) |
|
|
5.2 |
|
|
|
5.2 |
|
Risk-free interest rate |
|
|
4.7 |
% |
|
|
4.7 |
% |
Expected volatility |
|
|
22.5 |
% |
|
|
25.8 |
% |
Dividend yield |
|
|
1.95 |
% |
|
|
1.76 |
% |
12
AQUA AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(In thousands of dollars, except per share amounts)
(UNAUDITED)
Historical information was the principal basis for the selection of the expected
term and dividend yield. The expected volatility is based on a weighted-average
combination of historical and implied volatilities over a time period that
approximates the expected term of the option. The risk-free interest rate was
selected based upon the U.S. Treasury yield curve in effect at the time of grant for
the expected term of the option.
The following table summarizes stock option transactions for the six months ended
June 30, 2007:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Weighted |
|
|
Weighted |
|
|
|
|
| |
|
|
|
|
|
Average |
|
|
Average |
|
|
Aggregate |
|
| |
|
|
|
|
|
Exercise |
|
|
Remaining |
|
|
Intrinsic |
|
| |
|
Shares |
|
|
Price |
|
|
Life (years) |
|
|
Value |
|
Options: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at beginning of
period |
|
|
3,364,778 |
|
|
$ |
16.72 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
613,850 |
|
|
|
23.26 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(44,808 |
) |
|
|
24.42 |
|
|
|
|
|
|
|
|
|
Expired |
|
|
(20,742 |
) |
|
|
23.68 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(310,502 |
) |
|
|
12.59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of period |
|
|
3,602,576 |
|
|
$ |
18.06 |
|
|
|
6.8 |
|
|
$ |
20,290 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of period |
|
|
2,393,671 |
|
|
$ |
14.97 |
|
|
|
5.7 |
|
|
$ |
19,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock—During the six months ended June 30, 2007 and 2006, the
Company recorded stock-based compensation related to restricted stock awards as
operations and maintenance expense in the amounts of $710 and $439, respectively.
During the three months ended June 30, 2007 and 2006, the Company recorded
stock-based compensation related to restricted stock awards as operations and
maintenance expense in the amounts of $513 and $334, respectively. The following
table summarizes nonvested restricted stock transactions for the six months ended
June 30, 2007:
| |
|
|
|
|
|
|
|
|
| |
|
Number |
|
|
Weighted |
|
| |
|
of |
|
|
Average |
|
| |
|
Shares |
|
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
Nonvested shares at beginning of period |
|
|
56,888 |
|
|
$ |
23.98 |
|
Granted |
|
|
55,000 |
|
|
|
23.27 |
|
Vested |
|
|
(37,443 |
) |
|
|
21.85 |
|
Forfeited |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
Nonvested shares at end of period |
|
|
74,445 |
|
|
$ |
24.53 |
|
|
|
|
|
|
|
|
13
AQUA AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(In thousands of dollars, except per share amounts)
(UNAUDITED)
|
|
|
| Note 8 |
|
Pension Plans and Other Postretirement Benefits |
The Company maintains qualified defined benefit pension plans, nonqualified pension
plans and other postretirement benefit plans for certain of its employees. The net
periodic benefit cost is based on estimated values provided by independent actuaries.
The following tables provide the components of net periodic benefit costs:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Pension Benefits |
|
| |
|
Six Months Ended |
|
|
Three Months Ended |
|
| |
|
June 30, |
|
|
June 30, |
|
| |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
Service cost |
|
$ |
2,478 |
|
|
$ |
2,550 |
|
|
$ |
1,221 |
|
|
$ |
1,275 |
|
Interest cost |
|
|
5,782 |
|
|
|
5,132 |
|
|
|
2,856 |
|
|
|
2,566 |
|
Expected return on plan assets |
|
|
(5,587 |
) |
|
|
(4,750 |
) |
|
|
(2,876 |
) |
|
|
(2,375 |
) |
Amortization of transition asset |
|
|
(87 |
) |
|
|
(106 |
) |
|
|
(58 |
) |
|
|
(53 |
) |
Amortization of prior service cost |
|
|
95 |
|
|
|
116 |
|
|
|
64 |
|
|
|
58 |
|
Amortization of actuarial loss |
|
|
794 |
|
|
|
960 |
|
|
|
533 |
|
|
|
480 |
|
Capitalized costs |
|
|
(1,290 |
) |
|
|
(998 |
) |
|
|
(697 |
) |
|
|
(526 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
2,185 |
|
|
$ |
2,904 |
|
|
$ |
1,043 |
|
|
$ |
1,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Other |
|
| |
|
Postretirement Benefits |
|
| |
|
Six Months Ended |
|
|
Three Months Ended |
|
| |
|
June 30, |
|
|
June 30, |
|
| |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
Service cost |
|
$ |
570 |
|
|
$ |
560 |
|
|
$ |
299 |
|
|
$ |
280 |
|
Interest cost |
|
|
1,007 |
|
|
|
836 |
|
|
|
516 |
|
|
|
418 |
|
Expected return on plan assets |
|
|
(751 |
) |
|
|
(640 |
) |
|
|
(374 |
) |
|
|
(320 |
) |
Amortization of transition
obligation |
|
|
221 |
|
|
|
406 |
|
|
|
197 |
|
|
|
203 |
|
Amortization of prior service cost |
|
|
(199 |
) |
|
|
(366 |
) |
|
|
(177 |
) |
|
|
(183 |
) |
Amortization of actuarial loss |
|
|
95 |
|
|
|
176 |
|
|
|
84 |
|
|
|
88 |
|
Amortization of regulatory asset |
|
|
76 |
|
|
|
76 |
|
|
|
38 |
|
|
|
38 |
|
Capitalized costs |
|
|
(454 |
) |
|
|
(398 |
) |
|
|
(244 |
) |
|
|
(210 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
565 |
|
|
$ |
650 |
|
|
$ |
339 |
|
|
$ |
314 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company contributed $805 in April 2007 and $1,421 in July 2007 to its
defined benefit pension plans and intends to contribute $6,202 during the balance of
2007. In addition, the Company expects to contribute approximately $3,382 for the
funding of its other postretirement benefits during 2007.
14
AQUA AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(In thousands of dollars, except per share amounts)
(UNAUDITED)
|
|
|
| Note 9 |
|
Water and Wastewater Rates |
During the first six months of 2007, certain of the Company’s operating divisions in
New Jersey, Ohio, Virginia and four other states were granted rate increases designed
to increase total operating revenues on an annual basis by approximately $5,321.
In December 2006, the Company’s operating subsidiaries in Florida filed an
application with the Florida Public Service Commission (“FPSC”) designed to increase
water and wastewater rates by $7,298 on an annual basis. The application is
currently pending before the FPSC and in April 2007 the Company commenced billing for
a portion of the requested rates, in accordance with authorization from the FPSC.
The additional revenue billed and collected prior to the final ruling is subject to
refund based on the outcome of the ruling. The revenue recognized by the Company
reflects an estimate of the final outcome of the ruling. As of June 30, 2007, the
Company has deferred $2,073 of rate case expenses and recognized $571 of revenue that
is subject to refund based on the outcome of the final commission order. In the
event the Company’s request is denied completely or in part, it could be required to
refund some or all of the revenue billed to date, and write-off some or all of the
rate case expense deferral. Based on the Company’s review of the present
circumstances, no additional reserve or change in estimate adjustments are required
for the revenue recognized to date or to the deferred rate case expense.
In 2004, the Company’s operating subsidiaries in Texas filed an application with the
Texas Commission on Environmental Quality (“TCEQ”) to increase rates by $11,920 over
a multi-year period. The application seeks to increase annual revenues in phases and
is accompanied by a plan to defer and amortize a portion of the Company’s
depreciation, operating and other tax expense over a similar multi-year period, such
that the impact on operating income approximates the requested amount during the
first years that the new rates are in effect. The application is currently pending
before the TCEQ and several parties have joined the proceeding to challenge the rate
request. The Company commenced billing for the requested rates and implemented the
deferral plan in 2004. The additional revenue billed and collected prior to the final
ruling is subject to refund based on the outcome of the ruling. The revenue
recognized and the expenses deferred by the Company reflect an estimate of the final
outcome of the ruling. As of June 30, 2007, the Company has deferred $12,382 of
operating costs and $3,169 of rate case expenses and recognized $20,247 of revenue
that is subject to refund based on the outcome of the final
commission order. Based on the Company’s review of the present
circumstances, no additional reserve or change in estimate
adjustments are required for the revenue recognized to date or to the
deferred rate case expense.
15
AQUA AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(In thousands of dollars, except per share amounts)
(UNAUDITED)
|
|
|
| Note 10 |
|
Taxes Other than Income Taxes |
The following table provides the components of taxes other than income taxes:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Six Months Ended |
|
|
Three Months Ended |
|
| |
|
June 30, |
|
|
June 30, |
|
| |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property |
|
$ |
12,080 |
|
|
$ |
6,835 |
|
|
$ |
5,642 |
|
|
$ |
3,557 |
|
Capital Stock |
|
|
1,711 |
|
|
|
1,825 |
|
|
|
854 |
|
|
|
921 |
|
Gross receipts, excise and
franchise |
|
|
3,934 |
|
|
|
3,394 |
|
|
|
2,059 |
|
|
|
1,863 |
|
Payroll |
|
|
3,635 |
|
|
|
3,190 |
|
|
|
1,569 |
|
|
|
1,261 |
|
Other |
|
|
1,387 |
|
|
|
907 |
|
|
|
707 |
|
|
|
482 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total taxes other than income |
|
$ |
22,747 |
|
|
$ |
16,151 |
|
|
$ |
10,831 |
|
|
$ |
8,084 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property taxes increased during the six months and three months ended June 30,
2007 primarily as a result of the acquisition of New York Water and the associated
property taxes of $3,462 and $1,731, respectively.
16
AQUA AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(In thousands of dollars, except per share amounts)
(UNAUDITED)
|
|
|
| Note 11 |
|
Segment Information |
The Company has identified fourteen operating segments and has one reportable segment
named the Regulated segment. The reportable segment is comprised of thirteen
operating segments for our water and wastewater regulated utility companies which are
organized by the states where we provide these services. In addition, one segment is
not quantitatively significant to be reportable and is comprised of the businesses
that provide on-site septic tank pumping, sludge hauling services and certain other
non-regulated water and wastewater services. This segment is included as a component
of “Other” in the tables below. Also included in “Other” are corporate costs that
have not been allocated to the Regulated segment and intersegment eliminations.
The following tables present information about the Company’s reportable segment:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Three Months Ended |
|
| |
|
June 30, 2007 |
|
|
June 30, 2006 |
|
| |
|
Regulated |
|
|
Other |
|
|
Consolidated |
|
|
Regulated |
|
|
Other |
|
|
Consolidated |
|
Operating revenues |
|
$ |
147,026 |
|
|
$ |
3,598 |
|
|
$ |
150,624 |
|
|
$ |
130,746 |
|
|
$ |
1,003 |
|
|
$ |
131,749 |
|
Operations and
maintenance
expense |
|
|
60,932 |
|
|
|
2,402 |
|
|
|
63,334 |
|
|
|
54,428 |
|
|
|
1,005 |
|
|
|
55,433 |
|
Depreciation |
|
|
20,911 |
|
|
|
(455 |
) |
|
|
20,456 |
|
|
|
17,947 |
|
|
|
(692 |
) |
|
|
17,255 |
|
Operating income |
|
|
53,408 |
|
|
|
1,362 |
|
|
|
54,770 |
|
|
|
49,366 |
|
|
|
723 |
|
|
|
50,089 |
|
Interest expense,
net of AFUDC |
|
|
15,136 |
|
|
|
563 |
|
|
|
15,699 |
|
|
|
10,549 |
|
|
|
2,915 |
|
|
|
13,464 |
|
Income tax |
|
|
15,707 |
|
|
|
(44 |
) |
|
|
15,663 |
|
|
|
15,775 |
|
|
|
(1,060 |
) |
|
|
14,715 |
|
Net income |
|
|
22,874 |
|
|
|
853 |
|
|
|
23,727 |
|
|
|
23,518 |
|
|
|
(1,132 |
) |
|
|
22,386 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Six Months Ended |
|
|
Six Months Ended |
|
| |
|
June 30, 2007 |
|
|
June 30, 2006 |
|
| |
|
Regulated |
|
|
Other |
|
|
Consolidated |
|
|
Regulated |
|
|
Other |
|
|
Consolidated |
|
Operating revenues |
|
$ |
281,614 |
|
|
$ |
6,311 |
|
|
$ |
287,925 |
|
|
$ |
247,784 |
|
|
$ |
1,914 |
|
|
$ |
249,698 |
|
Operations and
maintenance
expense |
|
|
118,520 |
|
|
|
5,109 |
|
|
|
123,629 |
|
|
|
106,601 |
|
|
|
148 |
|
|
|
106,749 |
|
Depreciation |
|
|
41,495 |
|
|
|
(903 |
) |
|
|
40,592 |
|
|
|
35,475 |
|
|
|
(1,390 |
) |
|
|
34,085 |
|
Operating income |
|
|
97,086 |
|
|
|
1,429 |
|
|
|
98,515 |
|
|
|
87,868 |
|
|
|
2,843 |
|
|
|
90,711 |
|
Interest expense,
net of AFUDC |
|
|
29,881 |
|
|
|
1,646 |
|
|
|
31,527 |
|
|
|
21,220 |
|
|
|
5,498 |
|
|
|
26,718 |
|
Income tax |
|
|
27,591 |
|
|
|
(800 |
) |
|
|
26,791 |
|
|
|
27,227 |
|
|
|
(1,441 |
) |
|
|
25,786 |
|
Net income |
|
|
39,954 |
|
|
|
631 |
|
|
|
40,585 |
|
|
|
40,164 |
|
|
|
(1,214 |
) |
|
|
38,950 |
|
Capital expenditures |
|
|
105,946 |
|
|
|
1,723 |
|
|
|
107,669 |
|
|
|
121,586 |
|
|
|
350 |
|
|
|
121,936 |
|
17
AQUA AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(In thousands of dollars, except per share amounts)
(UNAUDITED)
| |
|
|
|
|
|
|
|
|
| |
|
June 30, |
|
|
December 31, |
|
| |
|
2007 |
|
|
2006 |
|
Total assets: |
|
|
|
|
|
|
|
|
Regulated |
|
$ |
3,053,623 |
|
|
$ |
2,819,385 |
|
Other |
|
|
22,911 |
|
|
|
58,518 |
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
3,076,534 |
|
|
$ |
2,877,903 |
|
|
|
|
|
|
|
|
|
|
|
| Note 12 |
|
Recent Accounting Pronouncements |
In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB
Interpretation No. (“FIN”) 48, “Accounting for Uncertainty in Income Taxes—An
Interpretation of FASB Statement No. 109,” which prescribes a recognition threshold
and measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. The Company adopted the
provisions of FIN 48 as of January 1, 2007 and has analyzed filing positions in its
federal and state jurisdictions where it is required to file income tax returns, as
well as for all open tax years in these jurisdictions. The Company’s reserve for
uncertain tax positions was insignificant upon adoption of FIN 48 and the Company did
not record a cumulative effect adjustment related to the adoption of FIN 48. The
Company believes its income tax filing positions and deductions will be sustained
under audit and it believes it does not have significant uncertain tax positions
that, in the event of adjustment, will result in a material effect on its results of
operations or financial position. The Company has elected to recognize accrued
interest and penalties related to uncertain tax positions as income tax expense. As
of June 30, 2007, the Company’s Federal income tax returns for all years through 2002
have been closed. Tax years 2003 through 2006 remain open to examination by the
major taxing jurisdictions to which we are subject, however, 2004 and 2005 Federal
income tax returns have been settled through examination.
18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
AQUA AMERICA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In thousands of dollars, except per share amounts)
Forward-looking Statements
This Management’s Discussion and Analysis of Financial Condition and Results of Operations and
other sections of this Quarterly Report contain, in addition to historical information,
forward-looking statements within the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements address, among other things: our use of cash; projected
capital expenditures; liquidity; possible acquisitions and other growth ventures; the completion of
various construction projects; the projected timing and annual value of rate increases; the
recovery of certain costs and capital investments through rate increase requests; the projected
effects of recent accounting pronouncements, as well as information contained elsewhere in this
report where statements are preceded by, followed by or include the words “believes,” “expects,”
“anticipates,” “plans,” “intends,” “will,” “continue” or similar expressions. These statements are
based on a number of assumptions concerning future events, and are subject to a number of
uncertainties and other factors, many of which are outside our control. Actual results may differ
materially from such statements for a number of reasons, including the effects of regulation,
abnormal weather, changes in capital requirements and funding, acquisitions, and our ability to
assimilate acquired operations. In addition to these uncertainties or factors, our future results
may be affected by the factors and risk factors set forth in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2006. We undertake no obligation to update or revise
forward-looking statements, whether as a result of new information, future events or otherwise.
General Information
Nature of Operations - Aqua America, Inc. (“we” or “us”), a Pennsylvania corporation, is the
holding company for regulated utilities providing water or wastewater services to what we estimate
to be approximately 2.8 million people in Pennsylvania, Ohio, North Carolina, Illinois, Texas, New
Jersey, New York, Florida, Indiana, Virginia, Maine, Missouri, and South Carolina. Our largest
operating subsidiary, Aqua Pennsylvania, Inc., provides water or wastewater services to
approximately one-half of the total number of people we serve, which are located in the suburban
areas north and west of the City of Philadelphia and in 23 other counties in Pennsylvania. Our
other subsidiaries provide similar services in 12 other states. In addition, we provide water and
wastewater service through operating and maintenance contracts with municipal authorities and other
parties, and septage hauling services, close to our utility companies’ service territories.
19
AQUA AMERICA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
(In thousands of dollars, except per share amounts)
Financial Condition
During the first half of 2007, we had $107,669 of capital expenditures, acquired water and
wastewater systems for $41,346, repaid $2,324 of customer advances for construction and repaid debt
and made sinking fund contributions and other loan repayments of $19,242. The capital expenditures
were related to improvements to treatment plants, new and rehabilitated water mains, tanks,
hydrants, and service lines, well and booster improvements, and other.
At June 30, 2007, we had $11,498 of cash and cash equivalents compared to $44,039 at December 31,
2006. During the first half of 2007, we used the proceeds from the issuance of long-term debt, the
proceeds from the issuance of common stock, internally generated funds and available working
capital to fund the cash requirements discussed above and to pay dividends. In January 2007, our
Pennsylvania operating subsidiary, Aqua Pennsylvania, Inc., issued $50,000 of tax-exempt bonds
secured by a supplement to its first mortgage indenture with a weighted-average maturity of 33.5
years and with a weighted-average interest rate of 4.435%. The proceeds are restricted to funding
certain capital projects during the period 2007 through 2009. In March 2007, the Company issued
$30,000 of unsecured notes with a weighted-average maturity of 22.5 years and a weighted-average
interest rate of 5.73%. We used the proceeds from the sales of these notes to repay short-term
borrowings. During the first half of 2007, our operating subsidiaries issued notes payable in
aggregate of $7,851 at rates ranging from 1.0% to 5.5% due from 2017 to 2035. At June 30, 2007, we
had short-term lines of credit of $237,500, of which $62,049 was available.
Management believes that internally generated funds along with existing credit facilities and the
proceeds from the issuance of long-term debt and common stock will be adequate to meet our
financing requirements for the balance of the year and beyond.
Results of Operations
Analysis of First Six Months of 2007 Compared to First Six Months of 2006
Revenues for the first six months increased $38,227 or 15.3% primarily due to additional revenues
of $20,483 resulting from increased water and wastewater rates implemented in various operating
subsidiaries, additional revenues of $15,447 associated with acquisitions, and $1,171 of additional
sewer revenues. Acquisitions provided additional operating revenues in the Regulated segment of
$11,350, primarily from the New York Water Service acquisition, and $4,097 of additional revenues
in Other as provided by the acquisition of several septage businesses during 2006.
Operations and maintenance expenses increased by $16,880 or 15.8% primarily due to additional
expenses associated with acquisitions of $8,072, increased water production costs of $2,101,
additional bad debt expense of $865, the receipt in the first quarter of 2006 of $1,500 relating to
a waiver of certain contractual rights without a corresponding amount in the current year, and
normal increases in other operating costs. Of the total acquisition expenses, $4,338 was associated with
the New York Water Service acquisition that was completed on January 1, 2007 and other acquisitions
in the Regulated segment. The receipt of the $1,500 was a one-time payment recognized in the first
quarter of 2006 as a reduction to operations and maintenance expense. The increased water
production costs, principally purchased power and chemicals, were associated with vendor price
increases.
20
AQUA AMERICA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
(In thousands of dollars, except per share amounts)
Depreciation expense increased $6,507 or 19.1% reflecting the utility plant placed in service since
June 30, 2006, including the assets acquired through system acquisitions.
Amortization increased $440 or 22.0% due to the amortization of the costs associated with, and
other costs being recovered in, various rate filings.
Taxes other than income taxes increased by $6,596 or 40.8% due to additional property taxes
associated with the acquired operations of New York Water Service of $3,462, and additional state
and local taxes incurred in the first half of 2007.
Interest expense increased by $4,074 or 14.1% primarily due to additional borrowings to finance
capital projects and increased interest rates on short-term borrowings.
Allowance for funds used during construction (“AFUDC”) decreased by $735 primarily due to a
decrease in the average balance of utility plant construction work in progress, to which AFUDC is
applied; offset partially by an increase in the AFUDC rate which is based on short-term interest
rates.
Gain on sale of other assets totaled $388 in the first half of 2007 and $743 in the first half of
2006. The decrease of $355 is due to the timing of sales of land.
Our effective income tax rate was 39.8% in the first half of 2007 and 2006. The effective income
tax rate can vary over time due to changes in our expenses that are not tax-deductible.
Net income for the first six months increased by $1,635 or 4.2%, in comparison to the same period
in 2006 primarily as a result of the factors described above. On a diluted per share basis,
earnings were unchanged reflecting the change in net income and a 2.0% increase in the average
number of common shares outstanding. The increase in the number of shares outstanding is primarily
a result of the additional shares sold or issued through the employee stock and incentive plan,
dividend reinvestment plan and the 2,250,000 additional shares issued by us in public offerings in
June and August 2006.
21
AQUA AMERICA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
(In thousands of dollars, except per share amounts)
Analysis of Second Quarter of 2007 Compared to Second Quarter of 2006
Revenues for the quarter increased $18,875 or 14.3% primarily due to additional revenues of $10,144
resulting from increased water and wastewater rates implemented in various operating subsidiaries,
additional revenues of $8,522 associated with acquisitions, and $406 of additional sewer revenues.
Acquisitions provided additional operating revenues in the Regulated segment of $6,100, primarily
from the New York Water Service acquisition, and $2,422 of additional revenues in Other as provided
by the acquisition of several septage businesses during 2006.
Operations and maintenance expenses increased by $7,901 or 14.3% primarily due to additional
expenses associated with acquisitions of $4,803, increased water production costs of $921,
additional bad debt expense of $410 and normal increases in other operating costs. Of the total
acquisition expenses, $2,844 were associated with the New York Water Service acquisition that was
completed on January 1, 2007 and other acquisitions in the Regulated segment. The increased water
production costs, principally purchased power and chemicals, were associated with vendor price
increases.
Depreciation expense increased $3,201 or 18.6% reflecting the utility plant placed in service since
June 30, 2006, including the assets acquired through system acquisitions.
Amortization increased $345 or 38.9% due to the amortization of the costs associated with, and
other costs being recovered in, various rate filings.
Taxes other than income taxes increased by $2,747 or 34.0% due to additional property taxes
associated with the acquired operations of New York Water Service of $1,731, and additional state
and local taxes incurred in the second quarter of 2007.
Interest expense increased by $1,697 or 11.5% primarily due to additional borrowings to finance
capital projects and increased interest rates on short-term borrowings.
Allowance for funds used during construction (“AFUDC”) decreased by $538 primarily due to a
decrease in the average balance of utility plant construction work in progress, to which AFUDC is
applied; offset partially by an increase in the AFUDC rate which is based on short-term interest
rates.
Gain on sale of other assets totaled $319 in the second quarter of 2007 and $476 in the second
quarter of 2006. The decrease of $157 is due to the timing of sales of land.
Our effective income tax rate was 39.8% in the second quarter of 2007 and 39.7% in the second
quarter of 2006. The change was due to a decrease in our expenses that are not tax-deductible.
22
AQUA AMERICA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
(In thousands of dollars, except per share amounts)
Net income for the quarter increased by $1,341 or 6.0%, in comparison to the same period in 2006
primarily as a result of the factors described above. On a diluted per share basis, earnings
increased $0.01 reflecting the change in net income and a 2.0% increase in the average number of
common shares outstanding. The increase in the number of shares outstanding is primarily a result of the
additional shares sold or issued through the employee stock and incentive plan, dividend
reinvestment plan and the 2,250,000 additional shares issued by us in public offerings in June and
August 2006.
Impact of Recent Accounting Pronouncements
In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No.
(“FIN”) 48, “Accounting for Uncertainty in Income Taxes—An Interpretation of FASB Statement No.
109,” which prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be taken in a tax
return. We adopted the provisions of FIN 48 as of on January 1, 2007 and have analyzed filing
positions in its federal and state jurisdictions where we are required to file income tax returns,
as well as for all open tax years in these jurisdictions. Our reserve for uncertain tax positions
was insignificant upon adoption of FIN 48 and we did not record a cumulative effect adjustment
related to the adoption of FIN 48. We believe our income tax filing positions and deductions will
be sustained under audit and we believe we do not have significant uncertain tax positions that, in
the event of adjustment, will result in a material effect on our results of operations or financial
position. We have elected to recognize accrued interest and penalties related to uncertain tax
positions as income tax expense. As of June 30, 2007, our Federal income tax returns for all years
through 2002 have been closed. Tax years 2003 through 2006 remain open to examination by the major
taxing jurisdictions to which we are subject, however, 2004 and 2005 Federal income tax returns
have been settled through examination.
Recent Events
The City of Fort Wayne, Indiana has authorized the acquisition, by eminent domain or otherwise, of
a portion of the utility assets of one of the operating subsidiaries that the Company acquired in
connection with the AquaSource acquisition in 2003. We had challenged whether the City is
following the correct legal procedures in connection with the City’s attempted condemnation and a
recent Indiana Supreme Court ruling supported the City’s position. We continue to challenge the
City’s valuation of this portion of our system. The portion of the system under consideration
represents approximately 1% of our total customer base. While we continue to discuss this matter
with officials from the City of Fort Wayne, we continue to legally protect our interests in this
proceeding.
23
AQUA AMERICA, INC. AND SUBSIDIARIES
|
|
|
| Item 3. |
|
Quantitative and Qualitative Disclosures About Market Risk |
We are subject to market risks in the normal course of business, including changes in
interest rates and equity prices. There have been no significant changes in our
exposure to market risks since December 31, 2006. Refer to Item 7A of the Company’s
Annual Report on Form 10-K for the year ended December 31, 2006 for additional
information.
|
|
|
| Item 4. |
|
Controls and Procedures |
| |
(a) |
|
Evaluation of Disclosure Controls and Procedures |
Our management, with the participation of our Chief Executive Officer and Chief
Financial Officer, evaluated the effectiveness of our disclosure controls and
procedures as of the end of the period covered by this report. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded that
our disclosure controls and procedures as of the end of the period covered by this
report are effective such that the information required to be disclosed by us in
reports filed under the Securities Exchange Act of 1934 is (i) recorded,
processed, summarized and reported within the time periods specified in the SEC’s
rules and forms and (ii) accumulated and communicated to our management, including
the Chief Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding disclosure.
| |
(b) |
|
Changes in Internal Control over Financial Reporting |
No change in our internal control over financial reporting occurred during our
most recent fiscal quarter that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.
24
AQUA AMERICA, INC. AND SUBSIDIARIES
Part II. Other Information
|
|
|
| Item 1. |
|
Legal Proceedings |
In December 2006, the Company’s operating subsidiaries in Florida filed an
application with the Florida Public Service Commission (“FPSC”). The application is
currently pending before the FPSC and in April 2007 the Company commenced billing for
a portion of the requested rates, in accordance with authorization from the FPSC.
The additional revenue billed and collected prior to the final ruling is subject to
refund based on the outcome of the ruling. The revenue recognized by the Company
reflects an estimate of the final outcome of the ruling. In the event the Company’s
request is denied completely or in part, it could be required to refund some or all
of the revenue billed to date, and write-off some or all of the rate case expense
deferral. For more information, refer to “Note 9 — Water and Wastewater Rates” to
the Consolidated Financial Statements of Aqua America, Inc. and subsidiaries in this
Quarterly Report on Form 10-Q for the quarter ended June 30, 2007.
In 2004, our subsidiaries in Texas filed an application with the Texas Commission on
Environmental Quality to increase rates over a multi-year period. In accordance with
authorization from the Texas Commission on Environmental Quality, our subsidiaries
commenced billing for the requested rates and deferred recognition of certain
expenses for financial statement purposes. Several parties have joined the
proceeding to challenge the rate request. In the event our request is denied
completely or in part, we could be required to refund some or all of the revenue
billed to-date, and write-off some or all of the regulatory asset for the expense
deferral. For more information, see the description under the section captioned
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations — Results of Operations” in our Annual Report on Form 10-K for the year
ended December 31, 2006, and refer to “Note 9 — Water and Wastewater Rates” to the
Consolidated Financial Statements of Aqua America, Inc. and subsidiaries in this
Quarterly Report on Form 10-Q for the quarter ended June 30, 2007.
There are no other pending legal proceedings to which we or any of our subsidiaries
is a party or to which any of their properties is the subject that are material or
are expected to have a material effect on our financial position, results of
operations or cash flows.
There have been no material changes to the risks disclosed in our
Annual Report on Form 10-K for the year ended December 31, 2006
(“Form 10-K”) under “Part 1, Item 1A — Risk Factors”. The risks
described in our Form 10-K are not the only risks facing the
Company. Additional risks that we do not presently know or that
we currently believe are immaterial could also impair our
business or financial position.
25
AQUA AMERICA, INC. AND SUBSIDIARIES
|
|
|
| Item 2. |
|
Unregistered Sales of Equity Securities and Use of Proceeds |
The following table summarizes Aqua America’s purchases of its common stock for the
quarter ended June 30, 2007:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuer Purchases of Equity Securities |
|
| |
|
|
|
|
|
|
|
|
|
Total |
|
|
Maximum |
|
| |
|
|
|
|
|
|
|
|
|
Number of |
|
|
Number of |
|
| |
|
|
|
|
|
|
|
|
|
Shares |
|
|
Shares |
|
| |
|
|
|
|
|
|
|
|
|
Purchased |
|
|
that May |
|
| |
|
|
|
|
|
|
|
|
|
as Part of |
|
|
Yet be |
|
| |
|
Total |
|
|
|
|
|
|
Publicly |
|
|
Purchased |
|
| |
|
Number |
|
|
Average |
|
|
Announced |
|
|
Under the |
|
| |
|
of Shares |
|
|
Price Paid |
|
|
Plans or |
|
|
Plan or |
|
| Period |
|
Purchased (1) |
|
|
per Share |
|
|
Programs |
|
|
Programs (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 1 - 30, 2007 |
|
|
4,510 |
|
|
$ |
22.58 |
|
|
|
— |
|
|
|
548,278 |
|
May 1 - 31, 2007 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
|
548,278 |
|
June 1 - 30, 2007 |
|
|
2,094 |
|
|
$ |
22.26 |
|
|
|
— |
|
|
|
548,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
6,604 |
|
|
$ |
22.48 |
|
|
|
— |
|
|
|
548,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
(1) |
|
These amounts consist of shares we purchased from our employees
who elected to pay the exercise price of their stock options (and then hold
shares of the stock) upon exercise by delivering to us (and, thus, selling)
shares of Aqua America common stock in accordance with the terms of our equity
compensation plans that were previously approved by our shareholders and
disclosed in our proxy statements. This feature of our equity compensation
plans is available to all employees who receive option grants under the plans.
We purchased these shares at their fair market value, as determined by reference
to the closing price of our common stock on the day prior to the option
exercise. |
| |
(2) |
|
On August 5, 1997, our Board of Directors authorized a common
stock repurchase program that was publicly announced on August 7, 1997, for up
to 1,007,351 shares. No repurchases have been made under this program since
2000. The program has no fixed expiration date. The number of shares
authorized for purchase was adjusted as a result of the stock splits effected in
the form of stock distributions since the authorization date. |
26
AQUA AMERICA, INC. AND SUBSIDIARIES
|
|
|
| Item 4. |
|
Submission of Matters to a Vote of Security Holders |
The Annual Meeting of Shareholders of Aqua America, Inc. was held on May 24, 2007 at
the Springfield Country Club, 400 West Sproul Road, Springfield, Pennsylvania,
pursuant to the Notice sent on or about April 10, 2007 to all shareholders of record
at the close of business on April 2, 2007. At that meeting the following nominees
were elected as directors of Aqua America, Inc. for terms expiring in the year 2010
and received the votes set forth after their names below:
| |
|
|
|
|
|
|
|
|
| Name of Nominee |
|
For |
|
Withheld |
William P. Hankowsky |
|
|
105,619,666 |
|
|
|
3,052,078 |
|
Richard L. Smoot |
|
|
102,036,674 |
|
|
|
6,635,069 |
|
Andrew J. Sordoni, III |
|
|
106,864,317 |
|
|
|
1,807,426 |
|
Since the Board of Directors is divided into three classes with one class elected
each year to hold office for a three-year term, the term of office for the following
directors continued after the Annual Meeting: Mary C. Carroll; Nicholas
DeBenedictis; Richard H. Glanton, Esq.; Lon R. Greenberg; Dr. Constantine Papadakis;
and Ellen T. Ruff.
| |
|
|
| Exhibit No. |
|
Description |
|
|
|
31.1
|
|
Certification of Chief Executive Officer, pursuant
to Rule 13a-14(a)
under the Securities and Exchange Act of 1934. |
|
|
|
31.2
|
|
Certification of Chief Financial Officer, pursuant
to Rule 13a-14(a) under the Securities and Exchange Act of 1934. |
|
|
|
32.1
|
|
Certification of Chief Executive Officer, pursuant to 18 U.S.C.
Section 1350. |
|
|
|
32.2
|
|
Certification of Chief Financial Officer, pursuant to 18 U.S.C.
Section 1350. |
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be executed on its behalf by the undersigned thereunto duly authorized.
August 6, 2007
| |
|
|
|
|
AQUA AMERICA, INC. |
|
|
|
|
|
Registrant |
|
|
|
|
|
NICHOLAS DEBENEDICTIS |
|
|
|
|
|
Nicholas DeBenedictis |
|
|
Chairman, President and |
|
|
Chief Executive Officer |
|
|
|
|
|
DAVID P. SMELTZER |
|
|
|
|
|
David P. Smeltzer |
|
|
Chief Financial Officer |
28
EXHIBIT INDEX
| |
|
|
| Exhibit No. |
|
Description |
|
|
|
31.1
|
|
Certification of Chief Executive Officer, pursuant to Rule
13a-14(a) under the Securities and Exchange Act of 1934. |
|
|
|
31.2
|
|
Certification of Chief Financial Officer, pursuant to Rule
13a-14(a) under the Securities and Exchange Act of 1934. |
|
|
|
32.1
|
|
Certification of Chief Executive Officer, pursuant to 18
U.S.C. Section 1350. |
|
|
|
32.2
|
|
Certification of Chief Financial Officer, pursuant to 18
U.S.C. Section 1350. |
29