Edgar Filing: AQUA AMERICA INC

December 31,

Property, plant and equipment, at cost

38ff557848844e9

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended June 30, 2014

☐ 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)


Pennsylvania	23-1702594
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

762 W. Lancaster Avenue, Bryn Mawr, Pennsylvania	19010 -3489
(Address of principal executive offices)	(Zip Code)

(610) 527-8000
(Registrant’s telephone number, including area code)

(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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12(b)-2 of the Exchange Act.:


Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐ (do not check if a smaller reporting company)	Smaller reporting company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of

July 25, 2014: 177,180,169

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AQUA AMERICA, INC. AND SUBSIDIARIES

TABLE OF CONTENTS


	Page
Part I – Financial Information

Item 1. Financial Statements:

Consolidated Balance Sheets (unaudited) – June 30, 2014 and December 31, 2013	2

Consolidated Statements of Net Income (unaudited) - Three Months Ended June 30, 2014 and 2013	3

Consolidated Statements of Net Income (unaudited) Six Months Ended June 30, 2104 and 2013	4

Consolidated Statements of Comprehensive Income (unaudited) – Three and Six Months Ended June 30, 2014 and 2013	5

Consolidated Statements of Capitalization (unaudited) – June 30, 2014 and December 31, 2013	6

Consolidated Statement of Equity (unaudited) – Six Months Ended June 30, 2014	7

Consolidated Statements of Cash Flow (unaudited) – Six Months Ended June 30, 2014 and 2013	8

Notes to Consolidated Financial Statements (unaudited)	9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3. Quantitative and Qualitative Disclosures About Market Risk	34

Item 4. Controls and Procedures	34

Part II – Other Information

Item 1. Legal Proceedings		34

Item 1A. Risk Factors		35

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		36

Item 6. Exhibits		36

Signatures		37

Exhibit Index		38

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AQUA AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands of dollars, except per share amounts)

(UNAUDITED)



	June 30,		December 31,
Assets	2014		2013
Property, plant and equipment, at cost	$	5,500,281	$	5,350,868
Less: accumulated depreciation		1,266,441		1,212,300
Net property, plant and equipment		4,233,840		4,138,568
Current assets:
Cash and cash equivalents		3,858		5,058
Accounts receivable and unbilled revenues, net		100,474		94,704
Deferred income taxes		41,867		40,038
Inventory, materials and supplies		12,294		11,353
Prepayments and other current assets		12,995		18,954
Assets of discontinued operations held for sale		30,330		30,747
Total current assets		201,818		200,854

Regulatory assets		630,305		585,140
Deferred charges and other assets, net		51,346		50,290
Investment in joint venture		46,170		48,695
Funds restricted for construction activity		47		47
Goodwill		27,999		28,223
Total assets	$	5,191,525	$	5,051,817
Liabilities and Equity
Aqua America stockholders' equity:
Common stock at $.50 par value, authorized 300,000,000 shares, issued 178,451,832 and 177,928,922 as of June 30, 2014 and December 31, 2013	$	89,226	$	88,964
Capital in excess of par value		751,853		743,335
Retained earnings		773,717		729,272
Treasury stock, at cost, 1,273,171 and 1,178,323 shares as of June 30, 2014 and December 31, 2013		(29,431)		(27,082)
Accumulated other comprehensive income		793		346
Total Aqua America stockholders' equity		1,586,158		1,534,835

Noncontrolling interest		223		208
Total equity		1,586,381		1,535,043

Long-term debt, excluding current portion		1,481,449		1,468,583
Commitments and contingencies (See Note 13)		-		-

Current liabilities:
Current portion of long-term debt		118,116		86,288
Loans payable		40,362		36,740
Accounts payable		38,112		65,815
Accrued interest		13,097		13,615
Accrued taxes		8,911		14,176
Other accrued liabilities		31,390		33,596
Liabilities of discontinued operations held for sale		27,985		29,649
Total current liabilities		277,973		279,879

Deferred credits and other liabilities:
Deferred income taxes and investment tax credits		926,447		866,211
Customers' advances for construction		78,394		73,892
Regulatory liabilities		283,707		281,014
Other		68,121		81,552
Total deferred credits and other liabilities		1,356,669		1,302,669

Contributions in aid of construction		489,053		465,643
Total liabilities and equity	$	5,191,525	$	5,051,817

See notes to consolidated financial statements beginning on page 9 of this report.

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AQUA AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF NET INCOME

(In thousands, except per share amounts)

(UNAUDITED)


	Three Months Ended
	June 30,
	2014		2013

Operating revenues	$	195,307	$	193,943

Operating expenses:
Operations and maintenance		70,375		70,412
Depreciation		31,226		29,311
Amortization		746		1,368
Taxes other than income taxes		13,026		13,102
Total operating expenses		115,373		114,193

Operating income		79,934		79,750

Other expense (income):
Interest expense, net		19,093		19,208
Allowance for funds used during construction		(937)		(490)
(Gain) loss on sale of other assets		(140)		109
Equity loss in joint venture		1,251		1,154
Income from continuing operations before income taxes		60,667		59,769
Provision for income taxes		5,849		6,765
Income from continuing operations		54,818		53,004

Discontinued operations:
Income from discontinued operations before income taxes		1,253		943
Provision for income taxes		502		361
Income from discontinued operations		751		582
Net income attributable to common shareholders	$	55,569	$	53,586

Income from continuing operations per share:
Basic	$	0.31	$	0.30
Diluted	$	0.31	$	0.30

Income from discontinued operations per share:
Basic	$	0.00	$	0.00
Diluted	$	0.00	$	0.00

Net income per common share:
Basic	$	0.31	$	0.30
Diluted	$	0.31	$	0.30

Average common shares outstanding during the period:
Basic		177,058		175,983
Diluted		178,012		177,078

Cash dividends declared per common share	$	0.152	$	0.292

See notes to consolidated financial statements beginning on page 9 of this report.

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AQUA AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF NET INCOME

(In thousands, except per share amounts)

(UNAUDITED)



	Six Months Ended
	June 30,
	2014		2013

Operating revenues	$	377,979	$	372,495

Operating expenses:
Operations and maintenance		142,061		138,206
Depreciation		62,207		58,356
Amortization		1,879		2,745
Taxes other than income taxes		25,128		26,500
		231,275		225,807

Operating income		146,704		146,688

Other expense (income):
Interest expense, net		38,403		38,483
Allowance for funds used during construction		(2,104)		(1,042)
Loss on sale of other assets		208		17
Equity loss in joint venture		1,937		1,810
Income from continuing operations before income taxes		108,260		107,420
Provision for income taxes		11,041		13,552
Income from continuing operations		97,219		93,868

Discontinued operations:
Income from discontinued operations before income taxes		2,025		9,868
Provision for income taxes		816		3,585
Income from discontinued operations		1,209		6,283
Net income attributable to common shareholders	$	98,428	$	100,151

Income from continuing operations per share:
Basic	$	0.55	$	0.53
Diluted	$	0.55	$	0.53

Income from discontinued operations per share:
Basic	$	0.01	$	0.04
Diluted	$	0.01	$	0.04

Net income per common share:
Basic	$	0.56	$	0.57
Diluted	$	0.55	$	0.57

Average common shares outstanding during the period:
Basic		176,949		175,701
Diluted		177,868		176,598

Cash dividends declared per common share	$	0.304	$	0.432

See notes to consolidated financial statements beginning on page 9 of this report.

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AQUA AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands of dollars)

(UNAUDITED)



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013


Net income attributable to common shareholders	$	55,569	$	53,586	$	98,428	$	100,151
Other comprehensive income, net of tax:
Unrealized holding gain (loss) on investments, net of tax expense (benefit) of $68 and $(18) for the three months and $106 and $(23) for the six months ended, June 30, respectively		126		(33)		198		(42)
Reclassification adjustment for loss reported in net income, net of tax benefit of $49 for the three months and $134 and $49 for the six months ended, June 30, respectively (1) (2)		-		90		249		90
Comprehensive income	$	55,695	$	53,643	$	98,875	$	100,199

(1) Amount of pre-tax loss of $139 reclassified from accumulated other comprehensive income to loss on sale of other assets on the consolidated statements of net income for the three months ended June 30, 2013.
(2) Amount of pre-tax loss of $383 and $139 reclassified from accumulated other comprehensive income to loss on sale of other assets on the consolidated statements of net income for the six months ended June 30, 2014 and 2013, respectively.

See notes to consolidated financial statements beginning on page 9 of this report.

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AQUA AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CAPITALIZATION

(In thousands of dollars, except per share amounts)

(UNAUDITED)



		June 30,		December 31,
		2014		2013
Aqua America stockholders' equity:
Common stock, $.50 par value		$	89,226	$	88,964
Capital in excess of par value			751,853		743,335
Retained earnings			773,717		729,272
Treasury stock, at cost			(29,431)		(27,082)
Accumulated other comprehensive income			793		346
Total Aqua America stockholders' equity			1,586,158		1,534,835

Noncontrolling interest			223		208

Total equity			1,586,381		1,535,043

Long-term debt:
Long-term debt of subsidiaries (substantially secured by utility plant):
Interest Rate Range	Maturity Date Range
0.00% to 0.99%	2023 to 2033		5,794		5,035
1.00% to 1.99%	2014 to 2035		26,148		28,615
2.00% to 2.99%	2024 to 2031		16,709		14,903
3.00% to 3.99%	2016 to 2047		166,232		167,365
4.00% to 4.99%	2020 to 2048		444,460		447,296
5.00% to 5.99%	2015 to 2043		256,414		284,362
6.00% to 6.99%	2015 to 2036		64,934		64,924
7.00% to 7.99%	2022 to 2027		34,743		35,056
8.00% to 8.99%	2021 to 2025		19,099		19,283
9.00% to 9.99%	2018 to 2026		28,500		28,500
10.40%	2018		6,000		6,000
			1,069,033		1,101,339

Notes payable to bank under revolving credit agreement, variable rate, due March 2017			77,000		-
Unsecured notes payable:
Notes at 3.57% due 2027			50,000		50,000
Notes ranging from 4.62% to 4.87%, due 2014 through 2024			171,400		171,400
Notes ranging from 5.01% to 5.95%, due 2015 through 2037			232,132		232,132
			1,599,565		1,554,871
Current portion of long-term debt			118,116		86,288
Long-term debt, excluding current portion			1,481,449		1,468,583
Total capitalization		$	3,067,830	$	3,003,626

See notes to consolidated financial statements beginning on page 9 of this report.

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AQUA AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF EQUITY

(In thousands of dollars)

(UNAUDITED)




									Accumulated
			Capital in						Other
	Common		Excess of		Retained		Treasury		Comprehensive		Noncontrolling
	Stock		Par Value		Earnings		Stock		Income		Interest		Total
Balance At December 31, 2013	$	88,964	$	743,335	$	729,272	$	(27,082)	$	346	$	208	$	1,535,043
Net income		-		-		98,428		-		-		15		98,443
Other comprehensive income, net of income tax of $240		-		-		-		-		447		-		447
Dividends		-		-		(53,787)		-		-		-		(53,787)
Repurchase of stock (94,853 shares)		-		-		-		(2,349)		-		-		(2,349)
Equity compensation plan (212,920 shares)		107		(107)		-		-		-		-		-
Exercise of stock options (309,990 shares)		155		4,537		-		-		-		-		4,692
Stock-based compensation		-		3,149		(196)		-		-		-		2,953
Employee stock plan tax benefits		-		1,301		-		-		-		-		1,301
Other		-		(362)		-		-		-		-		(362)
Balance At June 30, 2014	$	89,226	$	751,853	$	773,717	$	(29,431)	$	793	$	223	$	1,586,381

See notes to consolidated financial statements beginning on page 9 of this report.

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AQUA AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOW

(In thousands of dollars)

(UNAUDITED)



	Six Months Ended
	June 30,
	2014		2013
Cash flows from operating activities:
Net income	$	98,428	$	100,151
Income from discontinued operations		1,209		6,283
Income from continuing operations		97,219		93,868
Adjustments to reconcile income from continuing operations
to net cash flows from operating activities:
Depreciation and amortization		64,086		61,101
Deferred income taxes		7,845		17,681
Provision for doubtful accounts		3,141		2,016
Stock-based compensation		3,538		2,694
Gain on sale of utility system		-		(1,025)
Loss on sale of other assets		208		17
Net increase in receivables, inventory and prepayments		(11,087)		(4,561)
Net increase (decrease) in payables, accrued interest, accrued taxes and other accrued liabilities		4,740		(10,841)
Other		(15,050)		(2,795)
Operating cash flows from continuing operations		154,640		158,155
Operating cash flows (used in) from discontinued operations, net		(582)		1,252
Net cash flows from operating activities		154,058		159,407
Cash flows from investing activities:
Property, plant and equipment additions, including the non-equity component of allowance for funds used during construction of $649 and $944		(131,966)		(134,722)
Acquisitions of utility systems and other, net		(4,467)		(10,721)
Additions to funds restricted for construction activity		-		(5)
Release of funds previously restricted for construction activity		-		394
Net proceeds from the sale of utility system and other assets		308		113
Investment in joint venture		-		(9,800)
Other		(30)		(343)
Investing cash flows used in continuing operations		(136,155)		(155,084)
Investing cash flows from discontinued operations, net		2		51,124
Net cash flows used in investing activities		(136,153)		(103,960)
Cash flows from financing activities:
Customers' advances and contributions in aid of construction		3,182		2,159
Repayments of customers' advances		(1,294)		(928)
Net proceeds of short-term debt		3,622		31,704
Proceeds from long-term debt		116,074		172,069
Repayments of long-term debt		(70,910)		(226,914)
Change in cash overdraft position		(19,128)		(1,330)
Proceeds from issuing common stock		-		6,816
Proceeds from exercised stock options		4,692		20,662
Stock-based compensation windfall tax benefits		1,217		-
Repurchase of common stock		(2,349)		(11,710)
Dividends paid on common stock		(53,787)		(49,192)
Other		(362)		-
Financing cash flows used in continuing operations		(19,043)		(56,664)
Financing cash flows used in discontinued operations, net		(62)		(32)
Net cash flows used in financing activities		(19,105)		(56,696)
Net decrease in cash and cash equivalents		(1,200)		(1,249)
Cash and cash equivalents at beginning of period		5,058		5,521
Cash and cash equivalents at end of period	$	3,858	$	4,272

See notes to consolidated financial statements beginning on page 9 of this report.

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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. and subsidiaries (the “Company”) at June 30, 2014, the consolidated statements of net income and comprehensive income for the three and six months ended June 30, 2014 and 2013 the consolidated statements of cash flow for the six months ended June 30, 2014 and 2013, and the consolidated statement of equity for the six months ended June 30, 2014 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 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, 2013. The results of operations for interim periods may not be indicative of the results that may be expected for the entire year. The December 31, 2013 consolidated balance sheet data presented herein was derived from the Company’s December 31, 2013 audited consolidated financial statements, but does not include all disclosures and notes normally provided in annual financial statements. All common share, per common share, stock unit, and per stock unit data, for all periods presented, has been adjusted to give effect to the September 1, 2013 five-for-four stock split effected in the form of a 25% stock distribution (see Note 5). Certain prior period amounts have been reclassified to conform to the reporting of discontinued operations (see Note 4).

Note 2 – Goodwill

The following table summarizes the changes in the Company’s goodwill, by business segment:



	Regulated
	Segment		Other		Consolidated

Balance at December 31, 2013	$	24,102	$	4,121	$	28,223
Reclassifications to utility plant acquisition adjustment		(202)		-		(202)
Other		(22)		-		(22)
Balance At June 30, 2014	$	23,878	$	4,121	$	27,999

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AQUA AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

The reclassification of goodwill to utility plant acquisition adjustment in the table above results from a mechanism approved by the applicable public utility commission. The mechanism provides for the transfer over time, and the recovery through customer rates, of goodwill associated with certain acquisitions upon achieving certain objectives.

Note 3 – Acquisitions

Subsequent to the quarter ended June 30, 2014, in August, the Company acquired Tri-State Grouting, which is a non-regulated business that specializes in the cleaning, televising, and trenchless repair of storm and sanitary sewer pipes and appurtenances. The total purchase price consisted of $3,010, of which a total of $810 is contingent upon satisfying certain annual performance targets over a three-year period.

In May 2014, the Company entered into an asset purchase agreement for the acquisition of the water and wastewater utility system assets of North Maine Utilities owned by the Village of Glenview, Illinois serving approximately 7,200 customers, for cash at closing of up to $22,000, subject to final adjustment pursuant to the purchase agreement. Closing of this acquisition is anticipated to occur in mid-2015.

In March 2014, the Company acquired the wastewater utility system assets of Penn Township located in Chester County, Pennsylvania serving approximately 800 customers. The total purchase price consisted of $3,668 in cash.

In March 2013, the Company acquired the water and wastewater utility system assets of Total Environmental Solutions, Inc. located in Clearfield County, Pennsylvania serving approximately 4,200 customers. The total purchase price consisted of $10,350 in cash.

Note 4 – Discontinued Operations

Discontinued Operations – In September 2012, the Company began to market for sale its water and wastewater operations in Florida, which served approximately 38,000 customers, and the Company’s wastewater treatment facility in Georgia. In March, April, and December 2013, through five separate sales transactions, the Company completed the sale of its water and wastewater utility systems in Florida, which concluded its regulated operations in Florida. The Company received total net proceeds from these sales of $88,934 and recognized a gain on sale of $21,178 ($13,766 after-tax). One of the Company’s sales in Florida, which was completed in March 2013, and represented approximately 8% of its customers served in Florida, remained subject to customary regulatory review, for which the Company received the regulator’s decision approving the sale in June 2014. On March 12, 2014, the Company completed the sale of its wastewater treatment facility in Georgia.

The City of Fort Wayne, Indiana (the “City”) authorized the acquisition by eminent domain of the northern portion of the utility system of one of the Company’s operating subsidiaries in Indiana (the “Northern Assets”). In January 2008, the Company reached a settlement with the City to transition the

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AQUA AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

Northern Assets in February 2008 upon receipt of the City’s initial valuation payment of $16,911. The settlement agreement specifically stated that the final valuation of the Northern Assets will be determined through a continuation of the legal proceedings that were filed challenging the City’s valuation. On February 12, 2008, the Company turned over the Northern Assets to the City upon receipt of the initial valuation payment. The proceeds received by the Company are in excess of the book value of the assets relinquished. No gain has been recognized due to the contingency over the final valuation of the assets. The net book value of the Northern Assets has been removed from the consolidated balance sheet and the difference between the net book value and the initial payment received has been deferred and is recorded in other accrued liabilities on the Company’s consolidated balance sheet. Once the contingency is resolved and the asset valuation is finalized, through the finalization of the litigation between the Company and the City, the amounts deferred will be recognized in the Company’s consolidated statement of net income. On March 16, 2009, oral argument was held on certain procedural aspects with respect to the valuation evidence that may be presented and whether the Company is entitled to a jury trial. On October 12, 2010, the Wells County Indiana Circuit Court ruled that the Company is not entitled to a jury trial, and that the Wells County judge should review the City of Fort Wayne Board of Public Works’ assessment based upon a “capricious, arbitrary or an abuse of discretion” standard. The Company appealed the Wells County Indiana Circuit Court’s decision to the Indiana Court of Appeals. On January 13, 2012, the Indiana Court of Appeals reached a decision upholding the Wells County Indiana Circuit Court decision. On February 10, 2012, the Company filed a petition for transfer requesting that the Indiana Supreme Court review the matter. On April 11, 2013, the Indiana Supreme Court ruled that the statute at issue gives the Company the right to a full evidentiary hearing before a jury regarding the value of the assets and remanded the case to the trial court for a proceeding consistent with that ruling. The Northern Assets relinquished represent approximately 0.4% of the Company’s total assets.

In addition, in December 2012, the Fort Wayne City Council considered an ordinance that sought to declare it a “public convenience and necessity” to acquire certain of the Company's water utility system assets located in the southwest section of the City and in Allen County (the “Southern Assets”), and if negotiations with Fort Wayne officials were to fail, to condemn the Southern Assets. The first public hearing on the ordinance was held on January 22, 2013 and a subsequent hearing scheduled for February 5, 2013 was not held due to ongoing settlement discussions between the parties. As part of such settlement discussions, the parties negotiated an acquisition agreement that was approved by the City on May 13, 2014. The acquisition agreement will settle both the acquisition of the Southern Assets and the dispute concerning the Northern Assets. The acquisition agreement establishes an aggregate purchase price of $67,011 for the Southern and Northern Assets. The City has already paid Aqua Indiana $16,911 for the Northern Assets. The completion of the transaction is conditioned upon approval by various regulatory bodies. If this transaction is consummated, the Company will expand its sewer customer base by accepting new wastewater from the City. The transaction is not expected to close until the fourth quarter of 2014. The Company continues to evaluate its legal and operational options on an ongoing basis. The planned sale of these operations is accounted for as a discontinued operation held for sale beginning in the first quarter of 2014.

The operating results, cash flows, and financial position of the Company’s operations named above, during the periods owned, have been presented in the Company’s consolidated statements of net income,

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AQUA AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

consolidated statements of cash flow, and consolidated balance sheets as discontinued operations. These operations were included in the Company’s “Regulated” segment.

A summary of discontinued operations presented in the consolidated statements of net income include the following:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Operating revenues	$	1,720	$	4,120	$	3,299	$	11,613
Total operating expenses		467		2,193		1,140		7,213
Operating income		1,253		1,927		2,159		4,400
Other (income) expense:
Loss (gain) on sale		-		982		134		(5,469)
Other, net		-		2		-		1
Income from discontinued operations before income taxes		1,253		943		2,025		9,868
Provision for income taxes		502		361		816		3,585
Income from discontinued operations	$	751	$	582	$	1,209	$	6,283

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AQUA AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

The assets and liabilities of discontinued operations presented in the consolidated balance sheets include the following: