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Consolidated operating expenses increased by $0.8 million, or 2.1%, for the full year,
from 2019 to 2020, mainly due to the higher direct production costs, as well as labor and
benefit costs, as previously discussed.
Interest expense increased in 2020 when compared to 2019 due to interest costs
associated with: (1) the additional financed amounts for capital projects which have been
incurred for ongoing infrastructure replacement, in conformity with the Company’s key
mission objectives; (2) interest costs associated with a $2.5 million Paycheck Protection
Program Loan which was received on May 7, 2020 as part of the Coronavirus Aid, Relief
and Economic Security Act; and (3) increased debt amortization costs associated with the
write-off to maturity in 2014 and 2015 of escrow deposits required to facilitate the
advanced refunding of existing debt, which resulted from the issuance of $73.6 million of
taxable bonds by Pennichuck Water Works on August 26, 2020.
Pre-tax loss for the fourth quarter decreased to $1.8 million in 2020 versus $1.9 million in
2019, due to the increase in revenues as previously discussed.
The pre-tax loss for the year decreased from $5.0 million in 2019 to $1.5 million in 2020,
or 26%, due to the $5.2 million increase in revenues partially offset by expense increases,
as discussed previously, which resulted in the lower pre-tax loss in 2020.
Dividends paid to the sole shareholder in both 2020 and 2019 were consistent with, and
were paid pursuant to, the CBFRR structure provided for in the New Hampshire Public
Utilities Commission’s Order approving the City’s ownership of the Company.
The Income Tax Provision in the current year reflects the tax accounting for the amortization
of the Municipal Acquisition Regulatory Asset, which is not deductible for tax purposes, and
as such, constitutes a permanent difference in the deductibility of those amortization
expenses for tax purposes, as opposed to their inclusion in the GAAP based financial
statements. The Income Tax Provision (Benefit) also reflects the taxation of CIAC as
income for Regulated Water Utilities, due to the elimination of an exemption allowed prior to
the passage of the 2017 Tax Cuts and Jobs Act (“TCJA”) which made broad and complex
changes to the U.S. tax code. However, on November 27, 2019, the regulated utilities
received NHPUC approval on the requested amendments to their tariffs which now allow for
recovery of tax costs from developers and other CIAC contributors. This will now allow the
regulated utilities to fully fund the associated tax liability, which resulted from the change in
the 2017 federal tax law, for all CIAC contributions from independent third parties. Due to
these two significant items, the year-to-date results reflect a tax provision of approximately -
34.2% of pre-tax income for 2020, compared to the statutory tax rate expense of 27.08%.
Earnings Before Interest, Taxes, Depreciation and Amortization increased in the fourth
quarter from $3.2 million in 2019 to $4.0 million in 2020, or 25.0%, due to an increase in
revenues as discussed previously, over-and-above any operating expense increases.
Earnings Before Interest, Taxes, Depreciation and Amortization for 2020 increased
from 2019 by approximately $4.4 million, or 29.9%, again due to increased revenues
earned year-over-year, over-and-above operating expense increases.
