-4.
Consolidated operating expenses increased by $2.7 million, or 7.6%, for the full year,
from 2017 to 2018, mainly due to higher maintenance related costs, production costs,
increased depreciation costs, and labor related costs.
Interest expense increased slightly in 2018 when compared to 2017 due to interest costs
associated with the additional financed amounts for capital projects which have been
incurred for ongoing infrastructure replacement, in conformity with the Company’s key
mission objectives.
Pre-tax loss for the fourth quarter decreased to $1.5 million in 2018 versus $2.0 million
in 2017, due to the increase in revenues which was offset by increased operating
expenses, primarily maintenance and production related, and depreciation costs, year-
over-year.
The pre-tax loss for the year decreased from $5.3 million in 2017 to $3.7 million in
2018, or 30.2%, due to the $4.4 million in increased revenues discussed previously,
offset by the increased operating costs year-over-year, which resulted in the lower pre-
tax loss in 2018.
Dividends paid to the sole shareholder in both 2018 and 2017 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 20/7 Tax Cuts and Jobs Act (“TCJA”)
which made broad and complex changes to the U.S. tax code. A tariff change request is
in process with the NH Public Utilities Commission, requesting the implementation of a
“gross up” component related to this newly taxable element of the Company’s ongoing
business operations, in order to mitigate further impacts of the TCJA for this item going
forward, as it relates to rate payer shared costs. Due to these two significant items, the
year-to-date results reflect a tax provision of approximately -47.1% of pre-tax income
for 2018, compared to the statutory tax rate expense of 27.24%,
Earnings Before Interest, Taxes, Depreciation and Amortization increased in the fourth
quarter from $2.7 million in 2017 to $3.5 million in 2018, or 29.6%, due to increased
revenues as discussed previously, offset by operating expense variations (excluding
interest).
Earnings Before Interest, Taxes, Depreciation and Amortization for 2018 increased
from 2017 by approximately $2.1 million, or 15.8%, again due to higher revenues
earned year-over-year, offset by operating expense increases, excluding interest
expense.
