1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED March 31, 1995 OR ( ) 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 0-8084 Connecticut Water Service, Inc. (Exact name of registrant as specified in its charter) Connecticut 06-0739839 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 93 West Main Street, Clinton, CT 06413 (Address of principal executive offices) (Zip Code) (860) 669-8636 (Registrant's telephone number, including area code) Not Applicable (Former name, 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 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 X No --- --- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a count. Yes No --- --- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 2,991,038 Number of shares of common stock outstanding, March 31, 1996 2 CONNECTICUT WATER SERVICE, INC. Financial Report March 31, 1996 and 1995 TABLE OF CONTENTS PART I, ITEM 1: FINANCIAL STATEMENTS Consolidated Balance Sheets at March 31, 1996 and December 31, 1995 Page 3 Consolidated Statements of Capitalization at March 31, 1996 and December 31, 1995 Page 4 Consolidated Statements of Income for Three Months Ended March 31, 1996 and 1995 Page 5 Schedules of Operating Revenues, Taxes Other Than Income and Other Income for Three Months Ended March 31, 1996 and 1995 Page 6 Consolidated Statements of Income for Twelve Months Ended March 31, 1996 and 1995 and for Twelve Months Ended December 31, 1995 Page 7 Schedules of Operating Revenues, Taxes Other Than Income and Other Income for Twelve Months Ended March 31, 1996 and 1995 and for Twelve Months Ended December 31, 1995 Page 8 Consolidated Statements of Retained Earnings for Three Months Ended March 31, 1996 and 1995 Page 9 Consolidated Statements of Retained Earnings for Twelve Months Ended March 31, 1996 and 1995 Page 9 Consolidated Statements of Cash Flows for Three Months Ended March 31, 1996 and 1995 Page 10 Notes to Consolidated Financial Statements Page 11 PART I, ITEM 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Page 12 PART II, ITEM 4: Submission of Matters to a Vote of Security Holders Page 13 Signature Page Page 14 3 Page 3 Connecticut Water Service, Inc. and Subsidiary CONSOLIDATED BALANCE SHEETS At March 31, 1996 and December 31, 1995 March 31, 1996 Dec. 31, ASSETS (Unaudited) 1995 - ------ ----------- -------- (Thousands of dollars) Utility Plant Utility Plant $ 187,978 $ 186,907 Construction Work in Progress 6,156 6,399 Utility Plant Acquistion Adjustments (1,206) (1,206) --------- --------- 192,928 192,100 Accumulated Provision for Depreciation (46,482) (45,564) --------- --------- Net Utility Plant 146,446 146,536 --------- --------- Investments 1,184 1,096 --------- --------- Current Assets Cash 769 124 Accounts Receivable (Less Allowance, 1996- $162; 1995 - $164) 3,598 3,987 Accrued Unbilled Revenues 2,649 2,814 Prepayments and Other Current Assets 1,807 704 --------- --------- Total Current Assets 8,823 7,629 --------- --------- Deferred Charges Unamortized Debt Issuance Expense 5,352 5,399 Taxes Recoverable Through Future Rates 9,000 9,000 Postretirement Benefits Other Than Pension Recoverable Through Future Rates 932 932 Recoverable Contamination Clean-Up Costs 4,500 4,500 Prepaid Income Taxes on Contributions in Aid of Construction 554 530 Other Costs 927 837 --------- --------- Total Deferred Charges 21,265 21,198 --------- --------- Total Assets $ 177,718 $ 176,459 ========= ========= CAPITALIZATION AND LIABILITIES Capitalization (See accompanying statements) Common Stockholders' Equity $ 52,381 $ 51,788 Preferred Stock 772 772 Long-Term Debt 54,460 54,460 --------- --------- Total Capitalization 107,613 107,020 --------- --------- Current Liabilities Interim Bank Loans Payable 5,009 2,646 Accounts Payable and Accrued Taxes and Interest 5,447 7,388 Accrued Recoverable Contamination Clean-Up Costs 450 450 Other 1,817 1,826 --------- --------- Total Current Liabilities 12,723 12,310 --------- --------- Long-Term Liabilities Accrued Recoverable Contamination Clean-Up Costs 2,123 2,212 Advances for Construction 12,957 12,610 Contributions in Aid of Construction 18,561 18,551 Deferred Federal Income Taxes 11,608 11,608 Unfunded Future Income Taxes 9,000 9,000 Unfunded Postretirement Benefits Other Than Pension 932 932 Unamortized Investment Tax Credits 2,201 2,216 --------- --------- Total Long-Term Liabilities 57,382 57,129 --------- --------- Total Capitalization and Liabilities $ 177,718 $ 176,459 ========= ========= The accompanying notes are an integral part of these financial statements. 4 Page 4 Connecticut Water Service, Inc. and Subsidiary CONSOLIDATED STATEMENTS OF CAPITALIZATION At March 31, 1996 and December 31, 1995 March 31, 1996 Dec. 31, (Unaudited) 1995 ----------- ---- (Thousands of dollars) Common Stockholders' Equity Common Stock Without Par Value Authorized - 7,500,000 Shares; Shares Issued and Outstanding: 1996 - 2,991,038; 1995 - 2,966,757 $ 43,199 $ 42,536 Stock Issuance Expense (1,216) (1,216) Retained Earnings 10,398 10,468 -------- -------- Total Common Stockholders' Equity 52,381 51,788 -------- -------- Cumulative Preferred Stock of Connecticut Water Service, Inc. Series A Voting, $20 Par Value; Authorized, Issued and Outstanding 15,000 Shares, Redeemable at $21.00 Per Share 300 300 Series $.90 Non-Voting, $16 Par Value; Authorized 50,000 Shares Issued and Outstanding 29,499 Shares, Redeemable at $16.00 Per Share 472 472 -------- -------- Total Preferred Stock of Connecticut Water Service, Inc. 772 772 -------- -------- Long-Term Debt The Connecticut Water Company First Mortgage Bonds 6.9% Series Q, due 2021 10,000 10,000 5 7/8% Series R, due 2022 14,860 14,860 6.65% Series S, due 2020 8,000 8,000 5 3/4% Series T, due 2028 5,000 5,000 5.3% Series U, due 2028 4,550 4,550 6.94% Series V, due 2029 12,050 12,050 -------- -------- Total Long-Term Debt 54,460 54,460 -------- -------- Total Capitalization $107,613 $107,020 ======== ======== The accompanying notes are an integral part of these financial statements. 5 Page 5 Connecticut Water Service, Inc. and Subsidiary CONSOLIDATED STATEMENTS OF INCOME For the Three Months Ended March 31, 1996 and 1995 1996 1995 Increase (Unaudited) (Unaudited) (Decrease) ----------- ----------- ---------- (In thousands except per share amounts) Operating Revenues (See accompanying schedule) $ 9,087 $ 8,819 $ 268 ------- ------- ------- Operating Expenses Operation 3,343 3,056 287 Maintenance 446 419 27 Depreciation 820 813 7 Federal Income Taxes 770 767 3 Connecticut Corporation Business Taxes 189 200 (11) Taxes Other Than Income Taxes (See accompanying schedule) 1,449 1,479 (30) ------- ------- ------- Total Operating Expenses 7,017 6,734 283 ------- ------- ------- Utility Operating Income 2,070 2,085 (15) ------- ------- ------- Other Income (Deductions) Interest 24 42 (18) Allowance for Funds Used During Construction 52 16 36 Other (See accompanying schedule) 30 (1) 31 Taxes on Other Income (1) 1 (2) ------- ------- ------- Total Other Income (Deductions) 105 58 47 ------- ------- ------- Interest and Debt Expense Interest on Long-Term Debt 865 867 (2) Other Interest Charges 75 82 (7) Amortization of Debt Expense 47 47 0 ------- ------- ------- Total Interest and Debt Expense 987 996 (9) ------- ------- ------- Net Income 1,188 1,147 41 Preferred Stock Dividend Requirement 10 10 0 ------- ------- ------- Net Income Applicable to Common Stockholders $ 1,178 $ 1,137 $ 41 ======= ======= ======= Weighted Average Common Shares Outstanding 2,973 2,880 93 ======= ======= ======= Earnings Per Average Common Share $ 0.40 $ 0.39 $ 0.01 ======= ======= ======= Dividends Per Common Share $ 0.42 $ 0.42 $ 0.00 ======= ======= ======= The accompanying notes are an integral part of these financial statements. 6 Page 6 Connecticut Water Service, Inc. and Subsidiary SCHEDULE OF OPERATING REVENUES, TAXES OTHER THAN INCOME AND OTHER INCOME For the Three Months Ended March 31, 1996 and 1995 1996 1995 Increase (Unaudited) (Unaudited) (Decrease) ----------- ----------- ---------- (Thousands of dollars) Operating Revenues: Residential $ 5,772 $ 5,612 $ 160 Seasonal 132 132 0 Commercial 1,062 1,041 21 Industrial 430 441 (11) Public Authority 224 213 11 Metered Sales - Temporary and Non-Recurring 0 0 0 Private Fire 226 218 8 Public Fire 1,329 1,311 18 Acquisition Surcharge and Unmetered Seasonal 51 0 51 Other 26 16 10 ------- ------- ------- Revenues Billed 9,252 8,984 268 Change in Revenues Accrued (165) (165) 0 ------- ------- ------- Total Operating Revenue $ 9,087 $ 8,819 $ 268 ======= ======= ======= Taxes - Other Than Income Taxes Municipal Taxes $ 806 $ 841 $ (35) Payroll Taxes 190 197 (7) Connecticut Gross Earnings Tax 453 441 12 ------- ------- ------- Total Other Taxes $ 1,449 $ 1,479 $ (30) ======= ======= ======= Other Income Merchandising, Jobbing and Contracting - Net $ (7) $ (16) $ 9 Income from Lease of Other Physical Property - Net 16 7 9 Miscellaneous Non-Operating Income 23 10 13 Miscellaneous Income Deductions (2) (2) 0 ------- ------- ------- Total Other Income $ 30 $ (1) $ 31 ======= ======= ======= The accompanying notes are an integral part of these financial statements. 7 Page 7 Connecticut Water Service, Inc. and Subsidiary CONSOLIDATED STATEMENTS OF INCOME For the Twelve Months Ended March 31, 1996 and 1995 and for the Twelve Months Ended December 31, 1995 March 31, 1996 1995 Increase Dec. 31, Increase (Unaudited) (Unaudited) (Decrease) 1995 (Decrease) ----------- ----------- ---------- -------- ---------- (In thousands except per share amounts) Operating Revenues (See accompanying schedule) $ 39,618 $ 38,084 $ 1,534 $ 39,350 $ 268 -------- -------- -------- -------- -------- Operating Expenses Operation 13,691 12,868 823 13,404 287 Maintenance 2,053 1,959 94 2,026 27 Depreciation 3,165 3,129 36 3,158 7 Federal Income Taxes 3,928 3,750 178 3,925 3 Connecticut Corporation Business Taxes 1,014 976 38 1,025 (11) Taxes Other Than Income Taxes (See accompanying schedule) 5,760 5,773 (13) 5,790 (30) -------- -------- -------- -------- -------- Total Operating Expenses 29,611 28,455 1,156 29,328 283 -------- -------- -------- -------- -------- Utility Operating Income 10,007 9,629 378 10,022 (15) -------- -------- -------- -------- -------- Other Income (Deductions) Interest 138 118 20 156 (18) Allowance for Funds Used During Construction 88 104 (16) 52 36 Preferred Stock Dividends of Subsidiary 0 (1) 1 0 0 Other (See accompanying schedule) 143 22 121 112 31 Taxes on Other Income (35) 18 (53) (33) (2) -------- -------- -------- -------- -------- Total Other Income (Deductions) 334 261 73 287 47 -------- -------- -------- -------- -------- Interest and Debt Expense Interest on Long-Term Debt 3,460 3,465 (5) 3,462 (2) Other Interest Charges 289 319 (30) 296 (7) Amortization of Debt Expense 188 188 0 188 0 -------- -------- -------- -------- -------- Total Interest and Debt Expense 3,937 3,972 (35) 3,946 (9) -------- -------- -------- -------- -------- Net Income 6,404 5,918 486 6,363 41 Preferred Stock Dividend Requirement 38 38 0 38 0 -------- -------- -------- -------- -------- Net Income Applicable to Common Stockholders $ 6,366 $ 5,880 $ 486 $ 6,325 $ 41 ======== ======== ======== ======== ======== Weighted Average Common Shares Outstanding 2,950 2,835 115 2,918 32 ======== ======== ======== ======== ======== Earnings Per Average Common Share $ 2.16 $ 2.07 $ 0.09 $ 2.17 $ (0.01) ======== ======== ======== ======== ======== Dividends Per Common Share $ 1.68 $ 1.66 $ 0.02 $ 1.68 $ 0.00 ======== ======== ======== ======== ======== The accompanying notes are an integral part of these financial statements. 8 Page 8 Connecticut Water Service, Inc. and Subsidiary SCHEDULE OF OPERATING REVENUES, TAXES OTHER THAN INCOME AND OTHER INCOME For the Twelve Months Ended March 31, 1996 and 1995 and for the Twelve Months Ended December 31, 1995 1996 1995 Increase Dec. 31, Increase (Unaudited) (Unaudited) (Decrease) 1995 (Decrease) ----------- ----------- ---------- ---- ---------- (Thousands of dollars) Operating Revenues: Residential $ 24,749 $ 23,845 $ 904 $ 24,589 $ 160 Seasonal 543 547 (4) 542 1 Commercial 4,782 4,685 97 4,761 21 Industrial 1,857 1,939 (82) 1,868 (11) Public Authority 1,101 916 185 1,090 11 Metered Sales - Temporary and Non-Recurring 71 29 42 71 0 Private Fire 891 861 30 883 8 Public Fire 5,264 5,183 81 5,246 18 Acquisition Surcharge and Unmetered Seasonal 51 0 51 0 51 Other 295 79 216 284 11 -------- -------- -------- -------- ----- Revenues Billed 39,604 38,084 1,520 39,334 270 Change in Revenues Accrued 14 0 14 16 (2) -------- -------- -------- -------- ----- Total Operating Revenue $ 39,618 $ 38,084 $ 1,534 $ 39,350 $ 268 ======== ======== ======== ======== ===== Taxes - Other Than Income Taxes Municipal Taxes $ 3,249 $ 3,354 $( 105) $ 3,284 $( 35) Payroll Taxes 532 516 16 539 (7) Connecticut Gross Earnings Tax 1,979 1,903 76 1,967 12 -------- -------- -------- -------- ----- Total Other Taxes $ 5,760 $ 5,773 $( 13) $ 5,790 $( 30) ======== ======== ======== ======== ===== Other Income Merchandising, Jobbing and Contracting - Net $ 40 $( 15) $ 55 $ 31 $ 9 Income from Lease of Other Physical Property - Net 44 23 21 35 9 Miscellaneous Non-Operating Income 70 22 48 57 13 Miscellaneous Income Deductions (11) (8) (3) (11) 0 -------- -------- -------- -------- ----- Total Other Income $ 143 $ 22 $ 121 $ 112 $ 31 ======== ======== ======== ======== ===== The accompanying notes are an integral part of these financial statements. 9 Page 9 Connecticut Water Service, Inc. and Subsidiary CONSOLIDATED STATEMENTS OF RETAINED EARNINGS For the Three Months Ended March 31, 1996 and 1995 1996 1995 (Unaudited) (Unaudited) ----------- ----------- (Thousands of dollars) Balance at Beginning of Period $10,468 $ 9,040 Net Income 1,188 1,147 ------- ------- 11,656 10,187 ------- ------- Dividends Declared: Cumulative Preferred, Class A, $.20 per share 3 3 Cumulative Preferred, Series $.90, $.225 per share 7 7 Common Stock - 1996 $.42 per share; 1995 $.42 per share 1,248 1,208 ------- ------- 1,258 1,218 ------- ------- Balance at End of Period $10,398 $ 8,969 ======= ======= For the Twelve Months Ended March 31, 1996 and 1995 Balance at Beginning of Period $ 8,969 $ 7,790 Net Income 6,404 5,918 ------- ------- 15,373 13,708 ------- ------- Dividends Declared: Cumulative Preferred, Class A, $.80 per share 12 12 Cumulative Preferred, Series $.90, $.90 per share 26 26 Common Stock - 1996 $1.68 per share; 1995 $1.66 per share 4,937 4,701 ------- ------- 4,975 4,739 ------- ------- Balance at End of Period $10,398 $ 8,969 ======= ======= The accompanying notes are an integral part of these financial statements. 10 Page 10 Connecticut Water Service, Inc. and Subsidiary CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 1996 and 1995 1996 1995 (Unaudited) (Unaudited) ----------- ----------- (Thousands of dollars) Operating Activities: Net Income Before Preferred Dividends of Parent $ 1,188 $ 1,147 ------- ------- Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation (including $25 in 1996, $24 in 1995 charged to other accounts) 845 838 Change in Assets and Liabilities: (Increase) Decrease in Accounts Receivable and Accrued Unbilled Revenues 555 610 (Increase) Decrease in Other Current Assets (1,103) (703) (Increase) Decrease in Other Non-Current Items (245) (93) Increase (Decrease) in Accounts Payable, Accrued Expenses and Other Current Liabilities (1,950) (2,235) Increase (Decrease) in Deferred Federal Income Taxes and Investment Tax Credits, Net (15) (14) ------- ------- Total Adjustments (1,913) (1,597) ------- ------- Net Cash Provided by Operating Activities (725) (450) ------- ------- Investing Activities: Gross Additions to Utility Plant (including Allowance for Funds Used During Construction of $52 in 1996 and $17 in 1995) (829) (596) ------- ------- Financing Activities: Proceeds from Interim Bank Loans 5,009 4,406 Repayment of Interim Bank Loans (2,646) (2,700) Reduction of Long-Term Debt Including Current Portion 0 (130) Proceeds from Issuance of Common Stock 663 740 Retirement of Preferred Stock 0 (30) Advances, Contributions and Funds From Others for Construction, Net 431 (8) Costs Incurred to Issue Long-Term Debt, Preferred Stock, and Common Stock 0 (1) Cash Dividends Paid (1,258) (1,218) ------- ------- Net Cash Provided by (Used in) Financing Activities 2,199 1,059 ------- ------- Net Increase (Decrease) in Cash 645 13 Cash at Beginning of Year 124 18 ------- ------- Cash at End of Year $ 769 $ 31 ======= ======= Supplemental Disclosures of Cash Flow Information: Cash Paid During the Year for: Interest (Net of Amounts Capitalized) $ 1,527 $ 1,531 Income Taxes $ 300 $ 700 The accompanying notes are an integral part of these financial statements. 11 Page 11 CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The consolidated financial statements included herein have been prepared by CONNECTICUT WATER SERVICE, INC. (the Company), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for interim periods. Certain information and footnote disclosures have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on 10-K. The results for interim periods are not necessarily indicative of results to be expected for the year since the consolidated earnings are subject to seasonal factors. 2. Earnings per average common share are calculated by dividing net income applicable to common stock by the average number of shares of common stock outstanding during the respective periods as detailed: 3 Months Ended 12 Months Ended ------------------------ ---------------------------------------- 3/31/96 3/31/95 3/31/96 3/31/95 12/31/95 --------- --------- --------- --------- --------- Common Shares Outstanding: January 1, 1995 -- -- -- -- 2,870,559 April 1, 1995 & 1994 respectively -- -- 2,904,827 2,803,397 -- January 1, 1996 & 1995 respectively 2,966,757 2,870,559 -- -- -- Common Shares Issued: To DRIP - June 15, 1994 -- -- -- 9,878 -- To 401-K - June 30, 1994 -- -- -- 637 -- To DRIP - Sept. 15, 1994 -- -- -- 15,397 -- To 401-K - Sept. 30, 1994 -- -- -- 620 -- To DRIP - Dec. 15, 1994 -- -- -- 39,980 -- To 401-K - Dec. 15, 1994 -- -- -- 650 -- To PSP - Jan. 6, 1995 -- 6,369 -- 6,369 6,369 To DRIP - March 15, 1995 -- 27,213 -- 27,213 27,213 To 401-K - March 30, 1995 -- 686 -- 686 686 To DRIP - June 15, 1995 -- -- 23,328 -- 23,328 To 401-K - June 30, 1995 -- -- 662 -- 662 To DRIP - September 15, 1995 -- -- 18,906 -- 18,906 To 401-K - September 30, 1995 -- -- 674 -- 674 To DRIP - December 15, 1995 -- -- 18,360 -- 18,360 To 401-K - January 2, 1996 703 -- 703 -- -- To PSP- February 16, 1996 4,220 -- 4,220 -- -- To DRIP - March 15, 1996 18,615 -- 18,615 -- -- To 401-K - March 30, 1996 743 -- 743 -- -- -------- -------- -------- -------- -------- Common Shares Outstanding: March 31, 1996 & 1995 respectively 2,991,038 2,904,827 2,991,038 2,904,827 ========= ========= ========= ========= December 31, 1995 2,966,757 ========= Weighted Average Common Shares Outstanding: Days outstanding basis 2,973,041 2,879,890 2,949,531 2,834,574 2,812,456 ========= ========= ========= ========= ========= DRIP = Dividend Reinvestment Plan PSP = Performance Stock Program 401-K = Company contribution to employees' 401-K savings plan 12 Page 12 CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY PART I, ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CORPORATE RESOURCES At March 31, 1996 the Company had $3,991,000 of unused lines of interim bank loan credit available. RESULT OF OPERATIONS THE FOLLOWING FACTORS HAD A SIGNIFICANT EFFECT UPON THE COMPANY'S NET INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1996 AS COMPARED WITH THE NET INCOME FOR THE SAME PERIOD LAST YEAR. Net income applicable to common stock for the three months ended March 31, 1996 increased from that of March 31, 1995 by $41,000, or $.01, per average common share on an increased number of common shares. The improvement in net income resulted from a $268,000 increase in operating revenue, a $47,000 increase in other income and deductions, and a $9,000 decrease in interest and debt expense, partially offset by a $283,000 increase in operating expense. The increase in operating revenues is due to a $181,000 increase in metered revenues, resulting from increases in residential and commercial consumption of 3.1% and 1.5%, respectively, and a $87,000 increase in unmetered revenues, primarily resulting from the 400 new customers acquired in August 1995 with the purchase of the Sound View system. The increase in other income and deductions is primarily due to a gain realized from the sale of real estate in the first quarter of 1996, and an increase in AFUDC relating to the Subsidiary's investment in the Sound View system. The 1995 DPUC decision approving the Subsidiary's acquisition of the Sound View system allows the capitalization of financing costs incurred by the Company for the acquisition and improvements to the system in a manner similar to AFUDC until the Subsidiary's next change in permanent rates. Operating expenses increased 4.2%. The increased expenses include higher wages and employee fringe benefit costs, higher pumping and treatment power costs relating to the increased water production associated with the higher revenues, higher maintenance costs, including snow removal costs resulting from the greater snowfall in 1996, and amortization of Sound View system acquisition costs. 13 Page 13 CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY PART II, ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On April 26, 1996, at its annual meeting, the stockholders of Connecticut Water Service, Inc. elected the following directors for a three year term until 1999: Number of Common Shares Cast --------------------------------------------------------- Abstentions Affirmative Negative and Non-Votes ----------- -------- ------------- Harold E. Bigler, Jr. 2,484,861 -- 37,490 Astrid T. Hanzalek 2,481,874 -- 40,477 Frederick E. Hennick 2,481,904 -- 40,447 Donald B. Wilbur 2,488,306 -- 34,045 Preferred Series A stockholders cast 8,270 affirmative votes for each of the Directors listed above. There were no abstentions. Directors whose term of office continue until 1997 are Francis E. Baker, Rudolph E. Luginbuhl, Harvey G. Moger, and Warren C. Packard. Directors whose term of office continue until 1998 are Marshall T. Chiaraluce, William F. Guillaume, Marcia L. Hincks, William C. Lichtenfels, and Robert F. Neal. Other matters voted on at the annual meeting was the appointment of Arthur Andersen LLP as independent auditor: Number of Shares Cast -------------------------------------------------------- Abstentions Affirmative Negative and Non-Votes ----------- -------- ------------- Common Stock 2,453,499 31,855 36,966 Preferred Series A Stock 8,170 100 -- Each share of common stock is entitled to three votes and each share of Cumulative Preferred Stock, Series A, is entitled to one vote. 14 Page 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Connecticut Water Service, Inc. (Registrant) Date: May 13, 1996 By /s/ David C. Benoit David C. Benoit Vice President - Finance Date: May 13, 1996 By: /s/ Peter J. Bancroft Peter J. Bancroft Assistant Treasurer