Note 4 Discontinued Operations and Other Dispositions

Discontinued Operations - In July 2011, the Company entered into a definitive agreement with Connecticut Water Service, Inc. to sell its regulated water operations in Maine for cash of approximately $35,800 at closing plus certain assumed liabilities, including debt of approximately $17,500. The purchase price is subject to certain adjustments at closing. This subsidiary is included in the Regulated segment, and as of September 30, 2011, the carrying amount of Maine's assets and liabilities were $60,844 and $48,202, respectively. The Company's Maine operations serve approximately 16,000 customers. The sale is conditioned, among other things, on the receipt of regulatory approvals, and is expected to close in the first quarter of 2012. In the third quarter, the Company recognized additional income tax expense of $4,501 for the additional deferred tax liabilities that arise from the difference between the stock and tax basis of the Company's investment in its Aqua Maine subsidiary. The completion of this transaction will conclude the Company's operations in Maine.

In July 2011, the Company entered into a definitive agreement with American Water to sell its regulated water operations in New York for cash of approximately $42,000 at closing plus certain assumed liabilities, including debt of approximately $23,000. This subsidiary is included in the Regulated segment, and as of September 30, 2011, the carrying amount of New York's assets and liabilities were $108,883 and $66,619, respectively. In the third quarter, the Company recognized additional income tax expense of $2,937 for the additional deferred tax liabilities that arise from the difference between the stock and tax basis of the Company's investment in its Aqua New York subsidiary. The Company's New York operations serve approximately 51,000 customers. The purchase price is subject to certain adjustments at closing, and closing is conditioned upon the closing of the Company's acquisition of American Water's regulated water and wastewater operations in Ohio, and is subject to applicable regulatory approvals. The sale is expected to close in the first quarter of 2012. The completion of this transaction will conclude the Company's operations in New York.

Based on an assessment of the sale prices and the carrying values of the Company's planned dispositions of its Maine and New York operations, there is no anticipated impairment of our long-lived assets or goodwill expected to be recognized as a result of the sale agreements. However, in the third quarter of 2011, the Company recognized an estimated loss on disposition of $1,254 primarily due to the cessation of depreciation in its New York operations.

The operating results, cash flows, and financial position of the Company's subsidiaries named above have been presented in the Company's Consolidated Statements of Income and Comprehensive Income, Consolidated Statements of Cash Flow, and Consolidated Balance Sheets as discontinued operations.

A summary of discontinued operations presented in the Consolidated Statements of Income and Comprehensive Income include the following:


	September 30,		September 30,
	2011	2010	2011	2010
Operating revenues	$ 31,849	$ 31,755	$ 14,224	$ 14,320
Total operating expenses	22,689	22,924	7,269	8,056
Operating income	9,160	8,831	6,955	6,264
Estimated loss on disposition	1,254	-	1,254	-
Other expense, net	1,712	1,446	563	517
Income from discontinued operations before income taxes	6,194	7,385	5,138	5,747
Provision for income taxes	9,931	2,981	9,531	2,326
(Loss) income from discontinued operations	$ (3,737)	$ 4,404	$ (4,393)	$ 3,421

The assets and liabilities of discontinued operations presented in the Consolidated Balance Sheets include the following:

	September 30,	December 31,
	2011	2010
Property, plant and equipment, at cost	$ 168,463	$ 165,935
Property, plant and equipment, at cost	$ 168,463	$ 165,935
Less: accumulated depreciation	56,923	55,492
Net property, plant and equipment	111,540	110,443
Current assets	12,768	8,858
Regulatory assets	30,685	29,399
Goodwill	12,316	12,316
Other assets	2,418	2,483
Assets of discontinued operations held for sale	169,727	163,499

Long-term debt, excluding current portion	40,307	40,606
Current liabilities	7,741	4,039
Deferred income taxes and investment tax credits	30,110	22,407
Contributions in aid of construction	9,794	9,656
Other liabilities	26,869	26,891
Liabilities of discontinued operations held for sale	114,821	103,599

Net assets	$ 54,906	$ 59,900

Other Dispositions – The following dispositions have not been presented as discontinued operations in the Company's consolidated financial statements as the Company does not believe that disclosure of the following disposed water and wastewater utility systems as discontinued operations is meaningful to the reader of the financial statements for making investment decisions either individually or in the aggregate.

In June 2011, the Company sold a water and wastewater utility system for net proceeds of $4,106. The sale resulted in the recognition of a gain on the sale, net of expenses, of $1,580 in the second quarter of 2011, and is reported in the consolidated statements of income and comprehensive income as a reduction to operations and maintenance expense. Further, an additional amount of contingent gain was deferred pending the final regulatory treatment afforded to such item.

In May 2011, the Company sold its regulated water and wastewater operations in Missouri for net proceeds of $3,225. This sale of the Company's Missouri operations concluded the bulk of our regulated utility operations in Missouri.

In January 2011, the Company sold a water and wastewater utility system in Texas for net proceeds of $3,118. The sale resulted in the recognition of a gain on the sale of these assets, net of expenses, of $2,452. The gain is reported in the consolidated statements of income and comprehensive income as a reduction to operations and maintenance expense.

The City of Fort Wayne, Indiana (the "City") has authorized the acquisition by eminent domain of the northern portion of the utility system of one of the operating subsidiaries that the Company acquired in connection with the AquaSource acquisition in 2003. In 2008, the Company reached a settlement with the City to transition the northern portion of the system in 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 portion of the Company's system 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 portion of the system 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. Once the contingency is resolved and the asset valuation is finalized, through the finalization of the litigation between the Company and the City of Fort Wayne, the amounts deferred will be recognized in the Company's consolidated income statement. 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 disagreed with the Court's decision and as such on November 11, 2010, requested that the Wells County Indiana Circuit Court certify those issues for an interim appeal. The Wells County Indiana Circuit Court granted that request and on March 7, 2011, the Indiana Court of Appeals granted the Company's request to review the decision of those issues on appeal. On July 6, 2011, the Company filed its appeal with the Indiana Court of Appeals. The case is now pending before the Indiana Court of Appeals. Depending upon the outcome of all of the legal proceedings the Company may be required to refund a portion of the initial valuation payment, or may receive additional proceeds. The northern portion of the utility system relinquished represents approximately 0.4% of the Company's total assets.