BRYN MAWR, Pa.--(BUSINESS WIRE)--
Aqua America, Inc. (NYSE: WTR) announced today that it intends to adopt
the repair tax accounting change for its Pennsylvania subsidiary on Aqua
America's 2012 federal income tax return to be filed in September 2013.
This change, which the company previously announced it was evaluating,
allows a tax deduction for investments that were formerly capitalized
for tax purposes. The company will use flow-through accounting for the
tax benefits of the repair tax accounting change per its previously
disclosed Pennsylvania rate order from June 2012. The proposed action is
a frequently implemented tax benefit that has been used by numerous
companies, including utilities in recent years.
"We believe that the use of this tax policy is a ‘win-win' for customers
and shareholders as the rate order should allow Aqua Pennsylvania to
continue its infrastructure improvement program without increasing
customer rates in 2013, while still providing the company with the
opportunity to continue its strong financial performance," said Aqua
America Chairman Nicholas DeBenedictis. As a result of implementing this
tax accounting change, Aqua Pennsylvania water customers will see their
rates reduced by 2.82 percent beginning in January 2013 (through the
suspension of its Distribution System Improvement Charge - DSIC) and no
rate increases in 2013, even though the company plans to spend more than
$200 million on water system improvements in 2013. Aqua Pennsylvania has
spent $1.8 billion in needed infrastructure improvements over the last
10 years to provide reliable service to customers.
The company is analyzing the projected impact of the repair tax
accounting change on Aqua America's 2012 and 2013 financial results
based on an in-depth study of its capital expenditures that is still in
progress using the assistance of a large multi-national accounting firm.
The financial impact of the study will be included within the 2012
consolidated financial statements of Aqua America, Inc., which will be
audited by PricewaterhouseCoopers, LLC. The study is analyzing the
company's spending to determine the specific units of property that will
be deductible under this accounting change. The company currently
estimates this action could increase 2012 net income by 15 to 20 percent
(all recognized in the fourth quarter). The repair tax deduction is
anticipated to continue in 2013 and future years, consisting of a
deduction for qualifying annual capital expenditures, currently
projected to be at a level in 2013 similar to the level for 2012, and
initiation of a 10-year amortization of the deduction for qualifying
capital expenditures made prior to 2012 (the catch-up adjustment), which
is subject to a number of factors and is still being estimated. This
accounting change and its treatment under the Pennsylvania rate order
will offset the impact of DSIC suspension, i.e., no Pennsylvania water
rate increases in 2013.
Aqua America is one of the largest U.S.-based, publicly-traded water
utilities and serves almost 3 million residents in Pennsylvania, Ohio,
Illinois, Texas, New Jersey, Indiana, Virginia, Florida, North Carolina,
and Georgia. Aqua America is listed on the New York Stock Exchange under
the ticker symbol WTR.
This release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995, including, among
others, the accounting treatment for the repair tax accounting change,
the projected timing and amount of the repair tax accounting charge, the
impact of the repair tax accounting change on the company and on
ratepayers, the continuation of the company's infrastructure investment
program, and the impact of the repair tax accounting change on the
company's opportunity to continue its financial performance. There are
important factors that could cause actual results to differ materially
from those expressed or implied by such forward-looking statements
including: changes in the tax or regulatory treatment of the repair tax
accounting change, changes to the parameters used to calculate the
repair tax deduction, an IRS review of the repair deduction, general
economic business conditions; housing and customer growth trends;
unfavorable weather conditions; the success of certain cost containment
initiatives; the extent to which rate increase requests are granted and
the timing of rate awards; changes in regulations or regulatory
treatment; availability and the cost of capital; disruptions in the
credit markets; the success of growth initiatives; and other factors
discussed in our Annual Report on Form 10-K for the period ending
December 31, 2011, which is on file with the SEC. We undertake no
obligation to publicly update or revise any forward-looking statement.
WTRF
Aqua America, Inc.
Brian Dingerdissen
Director, Investor
Relations
610-645-1191
bjdingerdissen@aquaamerica.com
or
Donna
Alston
Manager, Communications
610-645-1095
dpalston@aquaamerica.com
Source: Aqua America, Inc.
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