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<PAGE> 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 September 30, 1996 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.
3,011,433
Number of shares of common stock outstanding, September 30, 1996
<PAGE> 2
CONNECTICUT WATER SERVICE, INC.
Financial Report
September 30, 1996 and 1995
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
PART I, ITEM 1: FINANCIAL STATEMENTS
Consolidated Balance Sheets at September 30, 1996
and December 31, 1995 Page 3
Consolidated Statements of Capitalization at
September 30, 1996 and December 31, 1995 Page 4
Consolidated Statements of Income for Three Months
Ended September 30, 1996 and 1995 Page 5
Schedules of Operating Revenues, Taxes Other Than
Income and Other Income for Three Months
Ended September 30, 1996 and 1995 Page 6
Consolidated Statements of Income for Nine Months
Ended September 30, 1996 and 1995 Page 7
Schedules of Operating Revenues, Taxes Other Than
Income and Other Income for Nine Months
Ended September 30, 1996 and 1995 Page 8
Consolidated Statements of Income for Twelve Months
Ended September 30, 1996 and 1995 and for Twelve Months
Ended June 30, 1996 Page 9
Schedules of Operating Revenues, Taxes Other Than
Income and Other Income for Twelve Months
Ended September 30, 1996 and 1995 and for Twelve Months
Ended June 30, 1996 Page 10
Consolidated Statements of Retained Earnings for Three
Months Ended September 30, 1996 and 1995 Page 11
Consolidated Statements of Retained Earnings for Nine
Months Ended September 30, 1996 and 1995 Page 11
Consolidated Statements of Retained Earnings for Twelve
Months Ended September 30, 1996 and 1995 Page 11
Consolidated Statements of Cash Flows for Nine Months
Ended September 30, 1996 and 1995 Page 12
Notes to Consolidated Financial Statements Page 13
PART I, ITEM 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations Page 14-15
Signature Page Page 16
</TABLE>
<PAGE> 3
Page 3
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AT SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
September 30,
1996 Dec. 31,
ASSETS (Unaudited) 1995
------------- -------------
(Thousands of dollars)
<S> <C> <C>
Utility Plant
Utility Plant $ 189,657 $ 186,907
Construction Work in Progress 9,155 6,399
Utility Plant Acquisition Adjustments (1,206) (1,206)
--------- ---------
197,606 192,100
Accumulated Provision for Depreciation (48,133) (45,564)
--------- ---------
Net Utility Plant 149,473 146,536
--------- ---------
Investments 1,192 1,096
--------- ---------
Current Assets
Cash 37 124
Accounts Receivable (Less Allowance, 1996 - $172; 1995 - $164) 3,994 3,987
Accrued Unbilled Revenues 3,174 2,814
Prepayments and Other Current Assets 1,674 704
--------- ---------
Total Current Assets 8,879 7,629
--------- ---------
Deferred Charges
Unamortized Debt Issuance Expense 5,258 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 602 530
Other Costs 890 837
--------- ---------
Total Deferred Charges 21,182 21,198
--------- ---------
TOTAL ASSETS $ 180,726 $ 176,459
========= =========
CAPITALIZATION AND LIABILITIES
Capitalization (See accompanying statements)
Common Stockholders' Equity $ 54,070 $ 51,788
Preferred Stock 772 772
Long-Term Debt 54,430 54,460
--------- ---------
Total Capitalization 109,272 107,020
--------- ---------
Current Liabilities
Interim Bank Loans Payable 4,895 2,646
Accounts Payable and Accrued Taxes and Interest 6,081 7,388
Accrued Recoverable Contamination Clean-Up Costs 450 450
Other 1,838 1,826
--------- ---------
Total Current Liabilities 13,264 12,310
--------- ---------
Long-Term Liabilities
Accrued Recoverable Contamination Clean-Up Costs 1,798 2,212
Advances for Construction 13,370 12,610
Contributions in Aid of Construction 18,561 18,551
Deferred Federal Income Taxes 12,357 11,608
Unfunded Future Income Taxes 9,000 9,000
Unfunded Postretirement Benefits Other Than Pension 932 932
Unamortized Investment Tax Credits 2,172 2,216
--------- ---------
Total Long-Term Liabilities 58,190 57,129
--------- ---------
TOTAL CAPITALIZATION AND LIABILITIES $ 180,726 $ 176,459
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
Page 4
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
AT SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
September 30,
1996 Dec. 31,
(Unaudited) 1995
------------ --------------
(Thousands of dollars)
<S> <C> <C>
Common Stockholders' Equity
Common Stock Without Par Value Authorized - 7,500,000 Shares;
Shares Issued and Outstanding: 1996 - 3,011,433; 1995 - 2,966,757 $ 43,690 $ 42,536
Stock Issuance Expense (1,216) (1,216)
Retained Earnings 11,596 10,468
-------- --------
Total Common Stockholders' Equity 54,070 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 14,830 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 54,430 54,460
-------- --------
TOTAL CAPITALIZATION $109,272 $107,020
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
Page 5
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995 Increase
(Unaudited) (Unaudited) (Decrease)
------------ ------------- -----------
(In thousands except per share amounts)
<S> <C> <C> <C>
Operating Revenues (See accompanying schedule) $ 10,981 $ 12,221 ($1,240)
-------- -------- -------
Operating Expenses
Operation 2,999 3,470 (471)
Maintenance 402 482 (80)
Depreciation 817 813 4
Federal Income Taxes 1,495 1,694 (199)
Connecticut Corporation Business Taxes 365 430 (65)
Taxes Other Than Income Taxes
(See accompanying schedule) 1,478 1,534 (56)
-------- -------- -------
Total Operating Expenses 7,556 8,423 (867)
-------- -------- -------
Utility Operating Income 3,425 3,798 (373)
-------- -------- -------
Other Income (Deductions)
Interest 30 27 3
Allowance for Funds Used During Construction 88 6 82
Other (See accompanying schedule) (29) 65 (94)
Taxes on Other Income 5 (1) 6
-------- -------- -------
Total Other Income (Deductions) 94 97 (3)
-------- -------- -------
Interest and Debt Expense
Interest on Long-Term Debt 865 865 0
Other Interest Charges 64 63 1
Amortization of Debt Expense 47 47 0
-------- -------- -------
Total Interest and Debt Expense 976 975 1
-------- -------- -------
Net Income 2,543 2,920 (377)
Preferred Stock Dividend Requirement 10 10 0
-------- -------- -------
Net Income Applicable to Common Stockholders $ 2,533 $ 2,910 ($ 377)
======== ======== =======
Weighted Average Common Shares Outstanding 3,010 2,932 78
======== ======== =======
Earnings Per Average Common Share $ 0.84 $ 0.99 ($ 0.15)
======== ======== =======
Dividends Per Common Share $ 0.43 $ 0.42 $ 0.01
======== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 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 SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995 Increase
(Unaudited) (Unaudited) (Decrease)
----------- ----------- ----------
(Thousands of dollars)
<S> <C> <C> <C>
Operating Revenues:
Residential $ 6,552 $ 7,063 ($ 511)
Seasonal 133 140 (7)
Commercial 1,318 1,427 (109)
Industrial 534 519 15
Public Authority 288 347 (59)
Metered Sales - Temporary and Non-Recurring 30 35 (5)
Private Fire 229 222 7
Public Fire 1,329 1,311 18
Acquisition Surcharge and Unmetered Seasonal 45 148 (103)
Other 18 14 4
------- ------- -------
Revenues Billed 10,476 11,226 (750)
Change in Revenues Accrued 505 995 (490)
------- ------- -------
Total Operating Revenue $10,981 $12,221 ($1,240)
======= ======= =======
Taxes - Other Than Income Taxes
Municipal Taxes $ 831 $ 802 $ 29
Payroll Taxes 98 122 (24)
Connecticut Gross Earnings Tax 549 610 (61)
------- ------- -------
Total Other Taxes $ 1,478 $ 1,534 ($ 56)
======= ======= =======
Other Income
Merchandising, Jobbing and Contracting - Net ($ 40) $ 52 ($ 92)
Income from Lease of Other Physical Property - Net 7 8 (1)
Miscellaneous Non-Operating Income 8 8 0
Miscellaneous Income Deductions (4) (3) (1)
------- ------- -------
Total Other Income ($ 29) $ 65 ($ 94)
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 7
Page 7
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995 Increase
(Unaudited) (Unaudited) (Decrease)
----------- ----------- ----------
(In thousands except per share amounts)
<S> <C> <C> <C>
Operating Revenues (See accompanying schedule) $29,344 $30,219 ($875)
------- ------- ------
Operating Expenses
Operation 9,709 9,777 (68)
Maintenance 1,244 1,333 (89)
Depreciation 2,461 2,438 23
Federal Income Taxes 3,240 3,390 (150)
Connecticut Corporation Business Taxes 795 878 (83)
Taxes Other Than Income Taxes
(See accompanying schedule) 4,315 4,431 (116)
------- ------- ------
Total Operating Expenses 21,764 22,247 (483)
------- ------- ------
Utility Operating Income 7,580 7,972 (392)
------- ------- ------
Other Income (Deductions)
Interest 78 103 (25)
Allowance for Funds Used During Construction 202 38 164
Other (See accompanying schedule) 18 73 (55)
Taxes on Other Income 11 9 2
------- ------- ------
Total Other Income (Deductions) 309 223 86
------- ------- ------
Interest and Debt Expense
Interest on Long-Term Debt 2,595 2,597 (2)
Other Interest Charges 198 214 (16)
Amortization of Debt Expense 141 141 0
------- ------- ------
Total Interest and Debt Expense 2,934 2,952 (18)
------- ------- ------
Net Income 4,955 5,243 (288)
Preferred Stock Dividend Requirement 29 29 0
------- ------- ------
Net Income Applicable to Common Stockholders $ 4,926 $ 5,214 ($288)
======= ======= ======
Weighted Average Common Shares Outstanding 2,993 2,907 86
======= ======= ======
Earnings Per Average Common Share $ 1.65 $ 1.79 ($0.14)
======= ======= ======
Dividends Per Common Share $ 1.27 $ 1.26 $ 0.01
======= ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 8
Page 8
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
SCHEDULE OF OPERATING REVENUES, TAXES OTHER THAN INCOME
AND OTHER INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995 Increase
(Unaudited) (Unaudited) (Decrease)
------------ ------------ -----------
(Thousands of dollars)
<S> <C> <C> <C>
Operating Revenues:
Residential $ 17,992 $ 18,298 ($306)
Seasonal 397 404 (7)
Commercial 3,495 3,584 (89)
Industrial 1,417 1,417 0
Public Authority 754 815 (61)
Metered Sales - Temporary and Non-Recurring 39 46 (7)
Private Fire 682 658 24
Public Fire 3,987 3,934 53
Acquisition Surcharge and Unmetered Seasonal 141 148 (7)
Other 80 65 15
-------- -------- -----
Revenues Billed 28,984 29,369 (385)
Change in Revenues Accrued 360 850 (490)
-------- -------- -----
Total Operating Revenue $ 29,344 $ 30,219 ($875)
======== ======== =====
Taxes - Other Than Income Taxes
Municipal Taxes $ 2,441 $ 2,482 ($ 41)
Payroll Taxes 408 439 (31)
Connecticut Gross Earnings Tax 1,466 1,510 (44)
-------- -------- -----
Total Other Taxes $ 4,315 $ 4,431 ($116)
======== ======== =====
Other Income
Merchandising, Jobbing and
Contracting - Net ($ 44) $ 39 ($ 83)
Income from Lease of Other Physical
Property - Net 31 20 11
Miscellaneous Non-Operating Income 38 20 18
Miscellaneous Income Deductions (7) (6) (1)
-------- -------- -----
Total Other Income $ 18 $ 73 ($ 55)
======== ======== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 9
Page 9
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
AND FOR THE TWELVE MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
September 30,
1996 1995 Increase June 30, Increase
(Unaudited) (Unaudited) (Decrease) 1996 (Decrease)
----------- ----------- -------- ----------- ------------
(In thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
Operating Revenues (See accompanying schedule) $ 38,475 $39,261 ($786) $ 39,715 ($1,240)
-------- ------- ----- -------- -------
Operating Expenses
Operation 13,336 12,992 344 13,807 (471)
Maintenance 1,937 2,011 (74) 2,017 (80)
Depreciation 3,181 3,213 (32) 3,177 4
Federal Income Taxes 3,775 4,099 (324) 3,974 (199)
Connecticut Corporation Business Taxes 942 1,076 (134) 1,007 (65)
Taxes Other Than Income Taxes
(See accompanying schedule) 5,674 5,829 (155) 5,730 (56)
-------- ------- ----- -------- -------
Total Operating Expenses 28,845 29,220 (375) 29,712 (867)
-------- ------- ----- -------- -------
Utility Operating Income 9,630 10,041 (411) 10,003 (373)
-------- ------- ----- -------- -------
Other Income (Deductions)
Interest 131 129 2 128 3
Allowance for Funds Used During Construction 216 86 130 134 82
Other (See accompanying schedule) 57 73 (16) 151 (94)
Taxes on Other Income (31) 12 (43) (37) 6
-------- ------- ----- -------- -------
Total Other Income (Deductions) 373 300 73 376 (3)
-------- ------- ----- -------- -------
Interest and Debt Expense
Interest on Long-Term Debt 3,460 3,454 6 3,460 0
Other Interest Charges 280 299 (19) 279 1
Amortization of Debt Expense 188 188 0 188 0
-------- ------- ----- -------- -------
Total Interest and Debt Expense 3,928 3,941 (13) 3,927 1
-------- ------- ----- -------- -------
Net Income 6,075 6,400 (325) 6,452 (377)
Preferred Stock Dividend Requirement 38 38 0 38 0
-------- ------- ----- -------- -------
Net Income Applicable to Common Stockholders $ 6,037 $ 6,362 ($325) $ 6,414 ($ 377)
======== ======= ===== ======== =======
Weighted Average Common Shares Outstanding 2,991 2,890 101 2,971 20
======== ======= ===== ======== =======
Earnings Per Average Common Share $ 2.02 $ 2.20 ($0.18) $ 2.16 ($ 0.14)
======== ======= ===== ======== =======
Dividends Per Common Share $ 1.69 $ 1.68 $0.01 $ 1.68 $ 0.01
======== ======= ===== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 10
Page 10
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
SCHEDULE OF OPERATING REVENUES, TAXES OTHER THAN INCOME
AND OTHER INCOME
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
AND FOR THE TWELVE MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
1996 1995 Increase June 30, Increase
(Unaudited) (Unaudited) (Decrease) 1996 (Decrease)
----------- ----------- ----------- ------- ----------
(Thousands of dollars)
<S> <C> <C> <C> <C> <C>
Operating Revenues:
Residential $ 24,283 $ 24,218 $ 65 $ 24,794 ($ 511)
Seasonal 536 547 (11) 543 (7)
Commercial 4,672 4,749 (77) 4,781 (109)
Industrial 1,868 1,876 (8) 1,853 15
Public Authority 1,029 1,048 (19) 1,088 (59)
Metered Sales -
Temporary and Non-Recurring 64 45 19 69 (5)
Private Fire 907 874 33 900 7
Public Fire 5,299 5,222 77 5,281 18
Acquisition Surcharge
and Unmetered Seasonal 192 148 44 295 (103)
Other 101 84 17 97 4
-------- -------- ----- -------- -------
Revenues Billed 38,951 38,811 140 39,701 (750)
Change in Revenues Accrued (476) 450 (926) 14 (490)
-------- -------- ----- -------- -------
Total Operating Revenue $ 38,475 $ 39,261 ($786) $ 39,715 ($1,240)
======== ======== ===== ======== =======
Taxes - Other Than Income Taxes
Municipal Taxes $ 3,243 $ 3,333 ($ 90) $ 3,214 $ 29
Payroll Taxes 508 535 (27) 532 (24)
Connecticut Gross Earnings Tax 1,923 1,961 (38) 1,984 (61)
-------- -------- ----- -------- -------
Total Other Taxes $ 5,674 $ 5,829 ($155) $ 5,730 ($ 56)
======== ======== ===== ======== =======
Other Income
Merchandising, Jobbing and
Contracting - Net ($ 52) $ 25 ($ 77) $ 40 ($ 92)
Income from Lease of Other
Physical Property - Net 46 25 21 47 (1)
Miscellaneous Non-Operating Income 75 32 43 75 0
Miscellaneous Income Deductions (12) (9) (3) (11) (1)
-------- -------- ----- -------- -------
Total Other Income $ 57 $ 73 ($ 16) $ 151 ($ 94)
======== ======== ===== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 11
Page 11
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
(Unaudited) (Unaudited)
----------- -----------
(Thousands of dollars)
<S> <C> <C>
Balance at Beginning of Period $10,357 $ 8,916
Net Income 2,543 2,920
------- -------
12,900 11,836
------- -------
Dividends Declared:
Cumulative Preferred, Class A, $.20 per share 3 3
Cumulative Preferred, Series $.90, $.225 per share 7 7
Common Stock - 1996 $.43 per share; 1995 $.42 per share 1,294 1,230
------- -------
1,304 1,240
------- -------
Balance at End of Period $11,596 $10,596
======= =======
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Balance at Beginning of Period $10,468 $ 9,040
Net Income 4,955 5,243
------- -------
15,423 14,283
------- -------
Dividends Declared:
Cumulative Preferred, Class A, $.60 per share 9 9
Cumulative Preferred, Series $.90, $.675 per share 20 20
Common Stock - 1996 $1.27 per share; 1995 $1.26 per share 3,798 3,658
------- -------
3,827 3,687
------- -------
Balance at End of Period $11,596 $10,596
======= =======
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Balance at Beginning of Period $10,596 $ 9,080
Net Income 6,075 6,400
------- -------
16,671 15,480
------- -------
Dividends Declared:
Cumulative Preferred, Class A, $.80 per share 12 12
Cumulative Preferred, Series $.90, $.90 per share 26 26
Common Stock - 1996 $1.69 per share; 1995 $1.68 per share 5,037 4,846
------- -------
5,075 4,884
------- -------
Balance at End of Period $11,596 $10,596
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 12
Page 12
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
(Unaudited) (Unaudited)
----------- -----------
(Thousands of dollars)
Operating Activities:
<S> <C> <C>
Net Income Before Preferred Dividends $ 4,955 $ 5,243
------- -------
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation (including $82 in 1996, $76 in 1995 charged to other accounts) 2,543 2,514
Change in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable and Accrued Unbilled Revenues (366) (1,814)
(Increase) Decrease in Other Current Assets (970) (55)
(Increase) Decrease in Other Non-Current Items (495) (293)
Increase (Decrease) in Accounts Payable, Accrued Expenses and
Other Current Liabilities (1,295) (232)
Increase (Decrease) in Deferred Federal Income Taxes and
Investment Tax Credits, Net 705 457
------- -------
Total Adjustments 122 577
------- -------
Net Cash Provided by Operating Activities 5,077 5,820
------- -------
Investing Activities:
Gross Additions to Utility Plant (including Allowance for Funds
Used During Construction of $202 in 1996 and $38 in 1995) (5,613) (5,247)
------- -------
Financing Activities:
Proceeds from Interim Bank Loans 4,895 3,244
Repayment of Interim Bank Loans (2,646) (2,700)
Reduction of Long-Term Debt Including Current Portion (30) (140)
Proceeds from Issuance of Common Stock 1,154 1,829
Retirement of Preferred Stock 0 (30)
Advances, Contributions and Funds From Others for Construction, Net 903 1,027
Cash Dividends Paid (3,827) (3,687)
------- -------
Net Cash Provided by (Used in) Financing Activities 449 (457)
------- -------
Net Increase (Decrease) in Cash (87) 116
Cash at Beginning of Year 124 18
------- -------
Cash at End of Year $ 37 $ 134
======= =======
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Interest (Net of Amounts Capitalized) $ 3,397 $ 3,403
Income Taxes $ 2,415 $ 2,880
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 13
Page 13
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:
<TABLE>
<CAPTION>
3 Months Ended 12 Months Ended
------------------------- -----------------------------------------
9/30/96 9/30/95 9/30/96 9/30/95 12/31/95
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Common Shares Outstanding:
January 1, 1995 -- -- -- -- 2,870,559
October 1, 1995 & 1994
respectively -- -- 2,948,397 2,829,929 --
July 1, 1996 & 1995
respectively 3,010,091 2,928,817 -- -- --
Common Shares Issued:
To DRIP - Dec. 15, 1994 -- -- -- 39,980 --
To 401-K - Dec. 15, 1994 -- -- -- 650 --
To PSP - Jan. 6, 1995 -- -- -- 6,369 6,369
To DRIP - March 15, 1995 -- -- -- 27,213 27,213
To 401-K - March 30, 1995 -- -- -- 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 18,906
To 401-K - September 30, 1995 -- 674 -- 674 674
To DRIP - December 15, 1995 -- -- 18,360 -- 18,360
To 401-K - January 2, 1996 -- -- 703 -- --
To PSP - February 16, 1996 -- -- 4,220 -- --
To DRIP - March 15, 1996 -- -- 18,615 -- --
To 401-K - March 30, 1996 -- -- 743 -- --
To DRIP - June 15, 1996 -- -- 18,299 -- --
To 401-K - June 30, 1996 -- -- 754 -- --
To PSP - July 1, 1996 687 -- 687 -- --
To DRIP - September 15, 1996 -- -- -- -- --
To 401-K - September 30, 1996 655 -- 655 -- --
--------- --------- --------- --------- ---------
Common Shares Outstanding:
September 30, 1996 & 1995
respectively 3,011,433 2,948,397 3,011,433 2,948,397
========= ========= ========= =========
December 31, 1995 2,966,757
=========
Weighted Average Common Shares Outstanding:
Days outstanding basis 3,010,310 2,932,112 2,990,514 2,889,566 2,918,417
========= ========= ========= ========= =========
</TABLE>
DRIP = Dividend Reinvestment Plan
PSP = Performance Stock Program
401-K = Company contribution to employees' 401-K savings plan
<PAGE> 14
Page 14
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 September 30, 1996 the Company had $7,105,000 of unused lines of
interim bank loan credit available.
Effective August 15, 1996, the following modifications to the Company's
Dividend Reinvestment Plan (DRIP) were enacted:
- - Optional cash payments expanded from a quarterly to a monthly basis.
- - Optional cash payments can be made in the range of $25 to $1,000 per
month.
- - The 5% discount on reinvested dividends has been discontinued.
- - The Company increased its financial flexibility by adding the option of
providing DRIP shares through open market purchases, negotiated
transactions, or through the previous method of issuing new shares.
To meet its September DRIP requirement, the Company chose to purchase
shares on the open market. The purchase was financed by short-term debt which is
generally a less expensive form of financing than the prior method of issuing
equity.
RESULT OF OPERATIONS
THE FOLLOWING FACTORS HAD A SIGNIFICANT EFFECT UPON THE COMPANY'S NET
INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AS COMPARED WITH THE NET
INCOME FOR THE SAME PERIOD LAST YEAR.
Net income applicable to common stock for the nine months ended
September 30, 1996 decreased from that of September 30, 1995 by $288,000, or
$.14 a share, on an increased number of common shares outstanding. The reduction
in net income resulted from a $392,000 decrease in operating income partially
offset by a $86,000 increase in other income and a $18,000 decrease in interest
and debt expense.
Operating revenues decreased $875,000, or 2.9%. A $960,000 decrease in
metered revenues is partially offset by a $85,000 increase in non-metered
revenues. Metered revenues declined on an increased customer base primarily due
to the extreme differences in the 1996 and 1995 summer weather. In 1995, the
Company's customers, on average, consumed higher than normal volumes of water
due to the unusually hot and dry summer. In comparison, the 1996 summer weather
was cooler and wetter than normal, causing customer usage, on average, to
decline. The increase in non-metered revenue is primarily due to increases in
the basis upon which fire protection revenue is charged.
Operating expenses decreased $483,000, or 2.2%. Reduced taxable
earnings and revenues caused the related tax expenses to decline $277,000. The
remaining decrease in operating expenses is due to a $72,000 reduction in
municipal and payroll taxes, a $89,000 reduction in maintenance expense and a
$68,000 reduction in operation expense, partially offset by a $23,000 increase
in depreciation expense.
The increase in other income is primarily due to AFUDC like treatment
being recorded on the Subsidiary's investment in its Sound View water system.
The 1995 DPUC decision, approving the Subsidiary's acquisition of this system,
allows the capitalization of financing costs incurred by the Company for
acquisition and improvements in a manner similar to AFUDC until the Subsidiary's
next change in permanent rates.
The decrease in interest and debt expense is primarily due to lower
balances of short-term debt outstanding during the first six months of 1996.
<PAGE> 15
Page 15
THE FOLLOWING FACTORS HAD A SIGNIFICANT EFFECT UPON THE COMPANY'S NET
INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AS COMPARED WITH THE NET
INCOME FOR THE SAME PERIOD LAST YEAR.
Net income applicable to common stock for the three months ended
September 30, 1996 decreased from that of September 30, 1995 by $377,000, or
$.15 a share, on an increased number of common shares outstanding. The reduction
in net income primarily resulted from a $1,240,000 decrease in operating
revenue, partially offset by a $867,000 decrease in operating expenses.
The decline in operating revenues is due to a $1,166,000 decrease in
metered revenues and a $74,000 decrease in non-metered revenues. Metered
revenues decreased on a higher customer base primarily due to the extreme
differences in the 1996 and 1995 summer weather. In 1995, the Company's
customers, on average, consumed higher than normal volumes of water due to the
unusually hot and dry summer. In comparison, the 1996 summer weather was cooler
and wetter than normal, causing customer usage, on average, to decline. The
decrease in non-metered revenue is primarily due to a timing difference in the
recognition of revenues related to the customers of the Sound View water system,
acquired during the third quarter of 1995. In 1995, the first three quarters of
revenues for these flat-rate customers were recorded all in the third quarter.
In comparison, during 1996, the revenues were spread evenly throughout the year.
The decline in operating expenses is primarily due to reduced taxes
resulting from the reduction in taxable income and revenues, a decrease in
operation expense partially due to lower production, treatment and distribution
costs associated with the reduction in the volume of water sold, and a decrease
in maintenance expense.
<PAGE> 16
Page 16
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: November 12, 1996 By /s/ David C. Benoit
------------------------------
David C. Benoit
Vice President - Finance
Date: November 12, 1996 By: /s/ Peter J. Bancroft
------------------------------
Peter J. Bancroft
Assistant Treasurer
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