SECURITIES AND EXCHANGE COMMISSION Washington, D. c. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1984

Commission file number 0-4831.

THE HYDRAULIC COMPANY (Exact name of registrant as specified in its charter)

DELAWARE (State or other jurisdiction of incorporation or organization)

835 Main Street, Bridgeport, Connecticut (Address of principal executive offices)

06-0852232 (I.R.S. Employer Identification No.)

06601 (Zip Code)

Registrant's telephone number, including area code (203) 367-6621

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Common Stock, no par value

Name of each exchange on which registered New York Stock Exchange

Securities registered pursuant to Section 12 (g) of the Act:

None (Title of class)

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 X NO

The aggregate market value of the voting stock held by nonaffiliates of the registrant. $65,532,137 (Computed by reference to the closing price of the Registrant's Common Stock on March 15, 1985, as published in The Wall Street Journal report of the New York Stock Exchange-Composite Transactions).

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.

Class Common Stock, no par value

Outstanding at March 15, 1985 2,762,712 shares

The following documents have been incorporated by reference:

1. Annual Report to Stockholders for the year ended December 31, 1984 -Part I, Item 1, Item 2; Part II, Item 5, Item 6, Item 7 and Item 8; Part IV.

2. Definitive Proxy Statement, Dated March 25, 1985 for Annual Meeting of Stockholders to be held April 23, 1985 - Part III.

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PART I.

ITEM 1. BUSINESS

General

The Hydraulic Company (the "Company") is a Delaware holding corporation with its principal office at 835 Main Street, Bridgeport, Connecticut 06601 (telephone number: (203) 367-6621). The Company was organized in 1969 and is the parent of Bridgeport Hydraulic Company ("BHC") and its subsidiary Stamford Water Company ("SWC"), acquired in March 1984, both of which are Connecticut public service water companies regulated by the Connecticut Department of Public Utility Control (the "DPUC"). The Company is also engaged in non-utility businesses through its other subsidiaries, including Timco, Inc. ("Timco"), which is involved in the forest products industry, and Main Street South Corporation ("MSSC"), a small subsidiary which has· various real estate interests. The Company provides administrative and management services to its subsidiaries, for which it is compensated.

Following the affirmative vote of holders of more than two-thirds of the outstanding shares of common stock of SWC and approval by the DPUC, the Company completed its acquisition of the common stock of SWC in March 1984 for approximately $7,300,000, including acquisition costs. Pursuant to the terms of an agreement executed in November 1983, BHC, which had owned approximately 12.7% of SWC's outstanding common stock prior thereto, is now the sole stockholder of SWC's common stock. SWC is engaged in the sale and distribution of water for residential, commercial, industrial, municipal and fire protection purposes in the City of Stamford, Connecticut.

In March 1983, the DPUC approved BHC's application filed December 15, 1982 to merge its wholly owned subsidiary Litchfield County Water Company ("LCWC") into BHC. The merger became effective May 31, 1983, LCWC was merged into BHC. All references herein to BHC include its Litchfield County Division. See "DPUC Regulation."

Construction Program

Utility

BHC and SWC engage in a continuing construction program based upon present legislative and regulatory requirements and anticipated future water requirements of their customers. BHC during the years 1982 through 1984, and SWC in 1984 expended an aggregate of $27,743,000 for plant additions and modifications of existing plant facilities, excluding an allowance for funds used during construction ("AFUDC"). The expenditures were primarily made for installations of water mains and meters, the construction and alteration of wells and pumping stations and SWC's filtration facility.

It is anticipated that during 1985 BHC and SWC will spend approximately $17,500,000 for construction programs. Of that amount, approximately $7 1 600,000 is expected to be required by the federal Safe

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Drinking Water Act of 1974 ("SDWA"). Included as SDWA projects are the southwestern Connecticut regional pipeline interconnection, through which BHC will supply water to communities in lower Fairfield County, and the lower Naugatuck Valley regional pipeline interconnection, which will replace BHC's Seymour reservoir supply. It is expected that SWC will complete construction of their water filtration plant required by the SDWA in 1985. As of December 31, 1984, expenditures on the water filtration plant amounted to $10,579,936, excluding an allowance for funds used during construction. Management cannot currently predict the aggregate additional capital expenditures that may be required under future federal, state or local regulation. If, however, all of the surface water supplies of BHC required filtration due to government regulation or deterioration in existing water quality, substantial additional capital expenditures would be required. Under such circumstances, management estimates these costs could exceed $85,000,000 through 1990.

Non-Utility

From 1982 through 1984, Timco expended an aggregate of approximately $4,792,000, excluding capitalized interest, on plant improvements, primarily in connection with the installation at the Center Barnstead location of additional kiln capacity of approximately 250,000 board feet, sawmill expansion, and a cogeneration system consisting principally of a wood-fired boiler and turbine. The boiler is fired by wood waste from the Pittsfield and Center Barnstead operations and produces all steam necessary for kilns and heating mills at the Center Barnstead location, and also electric power through the turbine. The cogeneration system eliminated the need to purchase oil to fuel the kilns and heat mills and produces electric power which is currently being sold to a public utility in New Hampshire. It is anticipated that in 1985 Timco will spend approximately $2 1 000,000 for its construction program.

Financing Requirements

The consolidated overall capital requirements of the Company, and sources of capital, for the years 1982 through 1984 and as presently estimated for 1985 are outlined on page 13 of the Company's Annual Report, incorporated by reference herein.

Of the total 1985 estimated capital requirements of $23,700,000, which includes $19,500,000 for construction expenditures and $4 1 200,000 for payment of debt maturities and sinking fund obligations, $5,575,000 already has been financed through tax exempt debt. Management anticipates that the remaining capital requirements will be financed through internally generated funds, cash and short-term investments held at December 31, 1984, advances and contributions in aid of construction and short-term debt.

Internally generated funds provided a substantial portion of the Company's construction expenditures. The Company's ratio of net internal cash flow to gross property additions, excluding AFUDC, was 57%, 81% and 60%, respectively for 1982, 1983 and 1984. The public

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utility industry is capital-intensive and, because BHC and SWC represent the largest operating segment of the Company, management believes this ratio is one of the key measurements of liquidity, or cash adequacy.

The Company's ability to finance future utility construction programs depends in part on future rate relief. Rate relief will have an impact on both internally generated funds and the ability to obtain external financings. In addition, rate relief is required in order to maintain certain debt and preferred stock coverage ratios which, combined with common stock dividends, are necessary to allow the issuance of debt and equity securities. The type and amount of new financings will be based on the Company's general financial policies regarding capitalization and payout ratios, as well as on market conditions and other economic factors.

The Company's term loan, dated January 6, 1981, of which $3,250,000 was outstanding as of December 31, 1984, prohibits the incurrence or the guaranty of any debt (in excess of $3,000,000 of short-term debt) by the Company or its subsidiaries unless consolidated earnings available for fixed charges (as defined in the term loan agreement) during a period of twelve consecutive calendar months within the fifteen calendar months immediately preceding the first day of the month in which the proposed debt is to be incurred or guaranteed are not less than 200% of pro forma fixed charges (as defined in the term loan) for such twelve-month period. This term loan has an interest rate which is attached to floating prime. As of December 31, 1984, on the basis of this test, the Company and its subsidiaries could have issued or guaranteed additional long-term debt in the amount of $33 1 900 1 000 as permitted by this coverage requirement (making available a total of $36,900,000 in short and long-term borrowing capacity of the Company).

Subject to compliance with the coverage requirements of the term loan at December 31, 1984, the Company had $19,000,000 of credit available under existing bank lines, along with $2,775,000 representing cash and short-term investments.

Under the terms of BHC's Preferred Stock, of which on December 31, 1984 there were 57,125 shares outstanding, no additional preferred stock can be issued (other than to refinance all outstanding Preferred Stock) unless, under the provisions currently in effect, income of BHC before interest charges for twelve consecutive months ending not more than ninety days prior to the issuance thereof is at least 1-1/2 times the aggregate of the annual interest charges on all indebtedness and the annual dividend requirements on all preferred stock on a pro forma basis immediately after the issuance of such shares. On December 31, 1984, based on the net earnings of BHC, the Preferred Stock coverage ratio was 2.19.

Industry Segment Information

The Company's operations are grouped into three industry segments public water supply, forest products and real estate. For

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information concerning operating revenues, operating income, indentifiable assets, capital expenditures and depreciation expense for each segment for each of the years ended December 31, 1984, 1983 and 1982, see Note 12 of the Notes to Consolidated Financial Statements of the Company's Annual Report to Stockholders for the year ended December 31, 1984, incorporated by reference herein. The consolidated operating revenues of the Company for the year ended December 31, 1984 were derived from the following sources: 80% from public water supply, 14% from forest products and 6% from real estate. Additional information with respect to the three industry segments is contained below.

Public Water Supply

Service Areas

BHC is engaged in the collection, purification and distribution of water for residential, commercial, industrial and fire protection services in the Cities of Bridgeport and Shelton and the contiguous Towns of Easton, Fairfield, Monroe, Stratford, Trumbull, Wilton and Westport, all located in Fairfield County, and the Towns of Seymour, Beacon Falls and Oxford, all located in New Haven County, and the Towns of Litchfield, Salisbury, North Canaan, Norfolk and Cornwall, all located in Litchfield County, Connecticut. BHC also sells, as requested, water for redistribution to the First and Second Taxing Districts of the City of Norwalk, Connecticut.

SWC services the City of Stamford in Fairfield County and also supplies Connecticut-American Water Company, a public utility located in the adjacent Town of Darien; with a portion of that company's water requirements for distribution and resale.

The population of the communities served by BHC as of December 31, 1984 was approximately 367,000 persons, and the total number of accounts as of that date was approximately 94,000. The residential characteristics of the area have changed, indicating an increase in the percentage of apartment dwellings and condominium units. Management presently anticipates little or no growth in industrial water deliveries on a long-term basis and a relatively modest growth rate in residential consumption.

The operating revenues of BHC for the twelve months ended December 31, 1984 were derived from the following sources: 59.7% from residential customers, 13.2% from commercial customers, 12.0% from industrial customers, 14.9% from municipal fire protection customers and .2% from other customers.

SWC's service area has an estimated total population of 82,000 persons, and the total number of accounts as of December 31, 1984 was approximately 18,500.

The business of BHC and SWC is subject to seasonal fluctuations. The demand for water during the warmer months is generally greater than during the cooler months due primarily to additional water requirements

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of industrial and residential cooler systems, private and public swimming pools and lawn sprinklers. Throughout the year, and particularly during the warmer months, demand will vary with rainfall and temperature levels.

Water Supply

Water is available from both surface and subsurface sources. During 1984, approximately 93% of the supply of BHC was provided by impounding reservoirs and 7% by producing wells. BHC's surface and storage facilities are separated into five area systems: the Hemlocks, Easton, Trap Falls, Seymour and Litchfield Systems. As of December 31, 1984, BHC's reservoirs and well fields had an aggregate storage capacity of 24.8 billion gallons and a maximum daily safe yield of 78.2 million gallons. Safe yield is an estimate of the supply capability during an extended drought.

All of BHC's reservoirs and active wells are located on property owned by it in fee. BHC believes it has an adequate water supply to satisfy current and projected needs of its customers within its territorial service area at least through 1990 and further believes that it has identified all the water supply sources needed to meet the needs of its service area through the year 2030. Substantially all of the land included in identified future water supply areas is owned by BHC. During the pervasive dry spell which affected the northeastern region of the United States in late 1980 through the first half of 1981, BHC was able to accommodate the needs of its own customers and to offer relief to others via water sales to neighboring utilities. Continuous studies are made to determine BHC's supply and distribution needs, and BHC continues to explore and develop additional ground water supplies and study alternative surface water sources to meet anticipated future water requirements.

SWC owns, in fee, five reservoirs, together with contiguous land in the watershed, located in the City of Stamford and in the Town of New Canaan, in the State of Connecticut, and in the Towns of Pound Ridge and Lewisboro, in the State of New York. The aggregate capacity of the reservoirs is approximately 5.1 billion gallons with flashboards. SWC has a maximum daily safe yield of 17.5 million gallons per day. SWC and the Company are currently reviewing the best means of satisfying SWC's projected water needs. In this regard, it is currently expected that the proposed regional pipeline interconnection from BHC would provide additional water to SWC in future years.

In 1982, the Connecticut Water Diversion Policy Act was enacted which requires that all future diversions of surface and ground water receive a permit from the Connecticut Department of Environmental Protection ("DEP"). This law "grandfathers" existing surface and ground water supplies, requiring that these be registered with the DEP. BHC and SWC have filed registrations for all of their supplies. While it is expected that the DEP will accept all of BHC's and SWC's existing supplies for registration, it is possible that there could be some question as to the capacity of the supplies being registered, which could have a negative effect on future planning.

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Date

Minimum Stream Flow Standards established by the DEP in 1980 require operators of water supply impoundments and reservoirs to release certain amounts of water from such impoundments and reservoirs into downstream waters. The effect of the release of such water from BHC'c and SWC's reservoirs is minimal, and, in the opinion of management, does not impair the ability of BHC and SWC to supply water to their respective customers. However, the DEP has proposed changes in these standards which, if implemented as proposed, could have a significant adverse effect on BHC's and SWC's supply capacities.

DPUC Regulation

BHC and SWC are subject to regulation by the DPUC, which has jurisdiction with respect to rates, service, accounting procedures, issuance of securities, dispositions of utility property and other related matters. The five members of the DPUC are appointed by the Governor of the State of Connecticut with the advice and consent of both houses of the Connecticut legislature.

The following table sets forth information as to recent rate increases granted by the DPUC and its predecessors to BHC:

Allowed Return

of % Total % on Allowed Return

Appli- Amount Increase Effective Increase Increase Common on Rate cation Requested Requested Date Granted Granted Equity Base

6/29/81 9,400,000 34% 12/08/81 5,963,000 21% 15.17% 11.62%

10/20/83 8,200,000 24% 3/14/84 4,736,000 14% 15.00% 11.26%

In connection with the DPUC's approval of the merger of LCWC into BHC (see "General") the DPUC approved a three-phase equalization of water service rates between BHC and LCWC. The first phase of rate equalization went into effect May 31, 1983, yielding additional annual revenue of $50,632 which represents an 8.7% increase for LCWC customers. The second phase in the rate equalization went into effect March 27, 1984, yielding additional annual revenue of $118,178 which represents an 18.6% increase, and the third phase will occur when BHC's next rate increase is approved by the DPUC.

In SWC's last rate increase, effective March 1, 1982, the DPUC authorized an increase in revenues by approximately $1,344,000 or approximately 27% which represented a rate of return of 12.25% on rate base and 16% on the common equity. In 1979, the DPUC approved a surcharge to be applied to rates charged by SWC, in order to provide a current cash return on the major portions of SWC's construction work in progress ("CWIP") applicable to the water filtration plant required by the federal Safe Drinking Water Act of 1974 ( "SDWA"). The surcharge, which has been collected since 1981, is adjusted quarterly, subject to DPUC approval, to reflect increased CWIP expenditures for SDWA facilities. The DPUC has granted SWC the full amount of each quarterly

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adjustment requested by SWC. On March 5, 1985, SWC was authorized by the DPUC to increase the surcharge to 41.66% of base rates for service rendered to all customers on and after March 11, 1985 pursuant to the provisions of the CWIP procedures of the DPUC. SWC intends to continue to apply for surcharges to its rates at quarterly intervals. After the filtration plant is completed and new rates become effective, SWC will no longer be entitled to the CWIP surcharge. When the filtration plant is in operation, SWC's operating and maintenance expenses, property taxes and depreciation charges related to the filtration plant are expected to increase significantly. SWC also will have substantially increased interest costs. SWC's earnings may be affected by termination of the allowance for funds used during construction. However, on March 22, 1985, SWC applied to the DPUC for an increase in rates to coincide with the termination of the allowance for funds used during construction. SWC's rate application with the DPUC requests an increase of $2,400,000 or 27% over operating revenues. It is expected the DPUC will render its decision on such application on or before August 7, 1985.

BHC and SWC continuously review the necessity of filing applications for increases in rates charged for water service. Connecticut law gives the DPUC 150 days (and the possibility of a thirty-day extension thereafter) to act upon a proposed rate increase. If the DPUC does not act within the time allowed, the proposed rates may be put into effect subject to possible refund.

Pursuant to the first rate orders issued with respect to each company by the DPUC after the passage of the Economic Recovery Tax Act of 1981 ("ERTA"), BHC and SWC use the normalized method of accounting with respect to the accelerated cost recovery system depreciation and the investment tax credit associated with 1981 and subsequent plant additions, as required by ERTA for eligibility for such depreciation and credit. This use of the normalized method is an exception to the DPUC regulations which otherwise require that BHC and SWC apply the "flow-through" method of accounting for certain current tax reductions. The flow-through method is based on the expectation that any additional federal income taxes which may be payable in future years will be allowed for ratemaking purposes.

The Company is not an operating utility company nor a "public service company" within the meaning of the Connecticut General Statutes and is not presently subject to general regulation by the DPUC. DPUC approval is necessary, however, before the Company may acquire or exercise control over any Connecticut public service company. DPUC approval is also required before any other entity can acquire or exercise, or attempt to exercise, control of the Company.

Environmental Regulations

BHC and SWC are also subject to regulation by the Connecticut Department of Health Services ("DHS") with respect to water quality matters, use of water from surface and underground sources, and the location, construction and operation of water supply facilities and the sale of certain utility property. Plans for new water supply systems

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or enlargement of existing water supply systems also must be submitted to the DHS for approval. The DEP is authorized to regulate the operations of BHC and SWC with respect to water pollution abatement, diversion of water from surface and underground sources, and the location, construction and alteration of dams and other water obstructions.

The Federal Clean water Act requires permits for discharges of effluents into navigable waters and requires that all discharges of pollutants comply with federally approved State water quality standards. DEP has adopted, and the Federal government has approved, water quality standards for receiving waters. A joint Federal and State permit system has been established to insure that applicable effluent limitations and water quality standards are met in connection with the construction and operation of facilities which affect or discharge into State or interstate waters. BHC and SWC have received the necessary discharge permits with respect to all of their water treatment facilities requiring, such permits.

BHC and SWC are subject to regulation of water quality under the SDWA. The SDWA provides for the establishment of uniform minimum national quality standards by the United States Environmental Protection Agency (the "EPA"), as well as governmental authority to specify the type of treatment process to be used for public drinking water. EPA has published interim primary and certain secondary drinking water standards pursuant to the SDWA, but has not yet adopted treatment techniques. The EPA regulations set limits for, among other things, certain organic and inorganic chemical contaminants, odor, turbidity, microbiological contaminants, radioactivity and color. The DHS .adopted regulations which are in some cases more stringent than the federal regulations.

BHC's surface supplies are derived from protected upland sources which yield relatively high quality water. Prior to the advent of the SDWA in 1974, water treatment methods generally consisted of the addition of disinfection and corrosion control chemicals in compliance with then existing standards. More stringent federal and state standards, which evolved as a result of the SDWA, necessitated the installation of mechanical filtration at BHC's Trap Falls reservoir supply, as well as SWC's supply system: also, the Seymour reservoir supply is scheduled to be retired and replaced with a pipeline interconnection which will deliver filtered water purchased from an adjoining system. The two remaining large BHC surface supplies, Hemlocks and Easton, are in material compliance with current standards and mechanical filtration has not heretofore been required.

Future federal or state regulations or a deterioration in existing water quality could require mechanical filtration of the Hemlocks and Easton reservoirs in the future. The Company currently estimates that capital costs of such filtration facilities could be approximately $85,000,000 (in 1984 dollars) through the year 1990. The Company is engaged in studies to determine treatability and to identify optimum design alternatives so that it will be in a position to proceed with filtration for the Hemlocks and Easton supplies when the need arises,

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but the exact nature of timing of filtration or the availability of possible alternative measures is not presently determinable.

BHC and SWC believe they are in substantial compliance with regulations promulgated by the EPA and the DHS for the control of certain organic chemical contaminants in drinking water and do not anticipate a significant economic or operational impact from either existing or proposed regulations dealing with additional organic chemical contaminants. The EPA is also required to review its interim primary drinking water regulations as stipulated by SDWA and revise the regulations as may be indicated. An advance notice of proposed rule making has been issued by the EPA which could lead to more stringent revised regulations requiring costly mechanical filtration, as noted above. However, the Company cannot presently predict the final form of these revised regulations or their impact on BHC and SWC.

Federal and State regulations and controls concerning water quality, pollution and the effluent from treatment facilities are still in the process of development and it is not possible to predict the scope of regulations or standards which may be established in the future, or the cost and effect of existing and potential regulations and legislation upon any of the existing and proposed facilities and operations of BHC and SWC. Further, recent and possible future developments with respect to the identification and measurement of various elements in water supplies and concern with respect to the impact of one or more of such elements on public health, together with possible contamination of wells and other water sources, may in the future require BHC and SWC to replace or modify all or portions of their various water supplies, to develop replacement supplies and/or to implement new treatment techniques. Any such developments would significantly increase BHC's and SWC's operating costs and capital requirements. The Company expects, however, that all such expenditures and costs should ultimately be recoverable through rates for water service, but there can be no assurance that this will be the case.

Water quality tests are made continuously at all of BHC's and SWC's water sources, and all sources. presently are producing water of acceptable quality. The Company believes that BHC and SWC are presently in material compliance with all Federal, State and local regulations concerning water quality with the exception of the Seymour Reservoir System, which the Company ultimately intends to retire from service. An exemption from compliance with such regulations was obtained for the Seymour Reservoir System pending approval of a plan to bring BHC's water supply to Seymour into compliance. Such a plan with revisions was approved by the DHS on March 27, 1984. Pursuant to the plan, BHC anticipates replacing the Seymour Reservoir System with an interconnection with water supplies of the South Central Connecticut Regional Water Authority ("SCCRWA"). This project will require construction of a major pipeline together with pumping and storage facilities of which BHC's share will amount to approximately $3,000,000.

BHC and SWC are subject to the requirements of the National Dam Inspection Act which requires the United States Army Corps of Engineers

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to inspect certain dams. BHC owns 19 dams and SWC owns 5 dams. To date, 15 of said dams have been inspected and, although certain modifications and further studies have been required, no material problems with respect to these dams have been reported. While the Company recognizes that a certain degree of risk attaches to BHC's and SWC's ownership of dams in connection with their water collection systems, the Company believes that BHC and SWC will be able to comply with any modifications to their dams that are likely to be required as a result of these inspections. The Company does not presently believe that the cost of such compliance will be substantial.

While the construction of dams, reservoirs and other facilities necessary to the impounding, storage and withdrawal of water in connection with public water supplies is a permitted use under the Connecticut Inland Wetlands and Water Courses Act, BHC and SWC are required, pursuant to other statutory provisions, to obtain permits from the Connecticut Commissioner of the DEP ("Commissioner") for the location, construction or alteration of any dam or reservoir and to secure the approval of the Commissioner for the diversion and use of water from any surface or ground source for public use. Various criteria must be satisfied under the respective statutes and regulations of the DEP in order to obtain such permits or approvals and the Commissioner has the power to impose such conditions as he deems reasonably necessary in connection with such permits or approvals in order to assure compliance with such statutes. BHC and SWC have taken all compliance actions required to date.

SWC may be subject to health, safety and environmental regulation by various state and local authorities in New York State with respect to its properties located in New York. SWC does not provide water to any customers in New York.

Forest Products

In September 1979, the Company activated Timco to engage in the forest products industry. On October 7, 1981, Timco acquired all of the outstanding common stock of Pittsfield Box & Lumber Co., Inc. ("PB&L") and on October 15, 1981, PB&L was merged into Timco. Timco's operations are based in New Hampshire and consist of a sawmill complex, a box shop and a wood-waste energy cogeneration plant. The sawmill complex processes primarily Eastern white pine into boards of various sizes for use in exterior and interior construction, which are sold through independent brokers, distributors, lumber yards and retail outlets. On a more limited scale, the sawmill complex also processes hardwood, primarily red oak, for use in furniture manufacturing. The box shop produces wooden crates used primarily in the commercial fishing trade. The cogeneration plant, which is located at the sawmill complex, produces low-cost steam for drying lumber, and heating mills and electricity which is sold to Public Service Company of New Hampshire. Timco obtains the timber used in its products from land, with respect to which it has purchased stumpage rights and from independent loggers.

Timco's products are marketed in the Northeast and Mid-Atlantic regions. The demand for Timco's lumber and box products is

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to inspect certain dams. BHC owns 19 dams and SWC owns 5 dams. To date, 15 of said dams have been inspected and, although certain modifications and further studies have been required, no material problems with respect to these dams have been reported. While the Company recognizes that a certain degree of risk attaches to BHC's and SWC's ownership of dams in connection with their water collection systems, the Company believes that BHC and SWC will be able to comply with any modifications to their dams that are likely to be required as a result of these inspections. The Company does not presently believe that the cost of such compliance will be substantial.

While the construction of dams, reservoirs and other facilities necessary to the impounding, storage and withdrawal of water in connection with public water supplies is a permitted use under the Connecticut Inland Wetlands and Water Courses Act, BHC and SWC are required, pursuant to other statutory provisions, to obtain permits from the Connecticut Commissioner of the DEP ("Commissioner") for the location, construction or alteration of any dam or reservoir and to secure the approval of the Commissioner for the diversion and use of water from any surface or ground source for public use. Various · criteria must be satisfied under the respective statutes and regulations of the DEP in order to obtain such permits or approvals and the Commissioner has the power to impose such conditions as he deems reasonably necessary in connection with such permits or approvals in order to assure compliance with such statutes. BHC and SWC have taken all compliance actions required to date.

SWC may be subject to health, safety and environmental regulation by various state and local authorities in New York State with respect to its properties located in New York. SWC does not provide water to any customers in New York.

Forest Products

In September 1979, the Company activated Timco to engage in the forest products industry. On October 7, 1981, Timco acquired all of the outstanding common stock of Pittsfield Box & Lumber Co., Inc. ("PB&L") and on October 15, 1981, PB&L was merged into Timco. Timco's operations are based in New Hampshire and consist of a sawmill complex, a box shop and a wood-waste energy cogeneration plant. The sawmill complex processes primarily Eastern white pine into boards of various sizes for use in exterior and interior construction, which are sold through independent brokers, distributors, lumber yards and retail outlets. On a more limited scale, the sawmill complex also processes hardwood, primarily red oak, for use in furniture manufacturing. The box shop produces wooden crates used primarily in the commercial fishing trade. The cogeneration plant, which is located at the sawmill complex, produces low-cost steam for drying lumber, and heating mills and electricity which is sold to Public Service Company of New Hampshire. Timco obtains the timber used in its products from land, with respect to which it has purchased stumpage rights and from independent loggers.

Timco's products are marketed in the Northeast and Mid-Atlantic regions. The demand for Timco's lumber and box products is

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traditionally lower during the winter season when inventory is accumulated in anticipation of increases in demand during warm weather. The demand for wooden crates used by the fishing industry is also dependent upon conditions in the commercial fishing industry in New England. The areas of the forest products industry in which Timco operates have been experiencing increasing timber costs which have not been offset by increases in the prices of finished products due to highly competitive market conditions. These industry conditions have adversely affected Timco's operations.

Timco presently owns approximately 120 acres at its Center Barnstead location and 7.5 acres at its Pittsfield location, along with 158 acres located in New Hampshire. In 1982, Timco sold 68 acres located in Maine and in 1983, sold 155 acres in New Hampshire.

Real Estate

MSSC, a small non-utility subsidiary with various real estate interests, presently owns, either directly or in an equal joint venture, approximately 130 acres of real property in Southbury and Shelton, Connecticut. In Shelton, MSSC has contracted to sell, subject to the receipt of certain governmental approvals, the remaining 19 acres, approximately, of an 85 acre tract it purchased for development in 1980. In September and December 1984, MSSC sold approximately 15 acres of land in this tract for a total consideration of $575,000. MSSC also has a 50% interest in a joint venture which, in November 1984, sold a 145,000 square foot warehousing facility on approximately 2.75 acres in Shelton for $2,193,500. The joint venture continues to own an adjacent unimproved parcel of approximately 7 acres. In Southbury, MSSC owns slightly·more than 100 acres out of 194 acres purchased through joint venture arrangements in 1980 and 1981 for single-family residential development. In February 1984, MSSC acquired the interests of its joint venture partners in Southbury.

Competition

BHC's and SWC's operations are relatively free from competition by . other water companies. The forest products processing and marketing industries of Timco, as well as MSSC's real estate activities, are highly competitive, particularly with respect to pricing.

Employee Relations

As of December 31, 1984, the Company and its subsidiaries employed a total 411 persons.

ITEM 2. PROPERTIES

The Company

The Company's main office is located in Bridgeport, Connecticut. The Company does not directly own any real property, as its properties are owned by its operating subsidiaries.

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Operating Authority

BHC and SWC were incorporated uhder and operate as public water utilities by virtue of authority granted by Special Acts adopted by the Connecticut Legislature. These Acts have granted a non-exclusive franchise, unlimited in duration, to provide public water supply to private and public customers in designated municipalities and adjacent areas. The Acts also authorize BHC and SWC to lay their mains and conduits in any public street, highway, or public ground in their respective territories, to use the water of any river, stream, or other waters in Fairfield County, certain locations along and in the Housatonic River and its tributaries, without infringing on vested rights of others in such waters, subject to such consents and approvals of public authorities and others as may be required by law, and to exercise the power of eminent domain in connection with lands, springs, streams or ponds,and any rights of interests therein which are expedient to or necessary for furnishing public water supply. In the event of the exercise of such condemnation powers, BHC and SWC must pay appropriate compensation to those injuriously affected by such taking.

Property

BHC owns approximately 19,700 acres of real property lo-cated in Fairfield, New Haven, and Litchfield Counties, Connecticut, most of which consists of reservoirs and surrounding watershed. The remaining portion of the property is owned by it in fee. Such property is subject to the first lien arising under the Indenture securing BHC's outstanding first mortgage bonds, except that under the Indenture approximately 1,360 specified acres may be sold by BHC without property substitutions.

SWC owns approximately 2,400 acres of real property located in Stamford and New Canaan, Connecticut, and in Pound Ridge and Lewisboro, New York, which is used almost exclusively for reservoirs and surrounding watershed, pumps, standpipes and building facilities. Substantially all of SWC's property is subject to the first lien arising under the Indenture securing SWC's outstanding first mortgage bonds.

Connecticut law presently imposes the following restrictions upon the disposition of property owned by public water companies: (a) no property may be sold or otherwise transferred without the prior approval of, the DPUC~ (b) the sale, transfer and change in the use of watershed lands (lands draining into a public water supply) and certain non-watershed lands which are contiguous to reservoirs and their tributaries are subject to regulation by the DHS~ and (c) when a public service water company intends to transfer or dispose of an interest in its unimproved real property, the municipality in which such property is located and then the State of Connecticut must first be offered the option to acquire such interest. If the municipality or the State chooses to exercise that option, and the purchase price cannot be established by agreement, the acquisition may be accomplished by eminent domain. Based upon prior dispositions by BHC of its excess

- 13 -

land, management believes that acquisition of excess land by the State or municipalities would be for a price essentially equivalent to the price which would be received from a private sale.

The DHS classifies public water company lands. Class I lands cannot be sold, leased or transferred. Pursuant to DHS regulations with respect to the sale of public water company land, the DHS may authorize a transfer of Class II lands only upon a finding that there will be no adverse impact upon the public water supply and that any use restrictions required as a condition of the transfer are enforceable against subsequent owners and occupants of the lands. The remaining non-watershed lands, which are designated as Class III lands, are not presently subject to regulation by the DHS. Approximately 2,750 acres are Class III lands. However, BHC estimates that of such lands, less than 1,000 acres are presently commercially saleable, and almost 400 of these acres are presently subject to options or sale contracts with third parties.

Gains from the sale of land no longer used for water purposes, but which at one time had been so used and included in rate base, are required under current DPUC regulations to be offset against operating expenses. In a ratemaking proceeding, the DPUC has customarily implemented these regulations by substituting profits from the sale of such lands for revenues which would otherwise have been allowed BHC and SWC through increased customer rates. Effectively, this means that BHC's and SWC's customers, rather than its stockholders, obtain the economic benefit of profits arising from the sale of such land. Finally, the DEP is authorized to conduct a study and coordinate the possible acquisition of certain water company lands by the State of Connecticut, or political subdivisions thereof, and requires water companies to file with the DEP five and twenty-year forecasts, with biennial revisions, of proposed sales and development of water company lands.

BHC owns a filtration plant for_ treatment of its Trap Falls Reservoir System, which plant has a capacity of 25 million gallons per day (mgd). At December 31, 1984, BHC owned in the aggregate approximately 1,510 miles of water mains, substantially all of which are made of cast iron in diameters ranging from one to forty-eight inches and of which approximately 77 miles have been laid in the past five years. The rights to locate and maintain water transmission and distribution mains are secured by charter, easement and permit and are generally of a perpetual nature. Water is delivered to the distribution system from four major and two minor reservoirs and forty-two producing wells. Eight additional reservoirs are used for storage purposes and are interconnected with the distribution reservoirs. Delivery from the surface supply system is made by gravity, with the exception of the Trap Falls System which utilizes a combination of electric and stand-by diesel pumping facilities. BHC currently owns and operates throughout its system 138 pumps having pumping capacities of 63 mgd for low lift and gravity service, 119 mgd for high lift service and 92 mgd for distribution and booster services.

- 14 -

Plant additions (excluding allowance for funds used during construction) from January 1, 1982 through December 31, 1984 are described under Item l - "Business - Construction Program."

Certain non-utility properties owned by the Company's subsidiaries, MSSC and Timco, are described under Item l - "Business -Forest Products" and "Business - Real Estate."

ITEM 3. LEGAL PROCEEDINGS

By letter dated November 26, 1984, the DPUC notified BHC that the DPUC had received, and intended to investigate, allegations concerning improprieties relating to BHC's testing of water meters and its reporting thereon to the DPUC. While the DPUC has not informed BHC of the specific allegations it has received, media reports as to the intended investigation suggest that such allegations charge that BHC has improperly tested meters, has improperly reported meter test results to the DPUC, and has failed to adjust customer billings in cases where inaccurate meters over-registered or under-registered actual consumption. DPUC regulations provide that if a meter has over-registered by more than two percent and the time at which the error first developed cannot be determined, the customer's bill shall be adjusted for the excess amount paid on the assumption that the over-registration existed for half the period of time since the meter was last tested. None of BHC's meters are tested less frequently than every twelve years. ~ased upon preliminary investigation to date, BHC management does not believe that the allegations are well-founded or that, if substantiated, they would result in a material adverse impact upon the Company's financial condition. BHC is cooperating fully with the DPUC in its investigation.·

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The registrant has nothing to report for this item.

EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of the registrant are listed below. These officers were elected to the offices indicated on April 24, 1984, except as otherwise noted, for a term expiring with the 1985 annual meeting of directors. Except as indicated, all have been with registrant and its predecessors in an executive capacity for more than five years. There are no family relationships between members of the executive office. There were no arrangements or undertakings between any of the officers listed below and any other person pursuant to which he or she was selected as an officer.

Office, Business Experience Executive Officer Age During Past Five Years

Frederick B. Silliman 69 Chairman of the Board of Directors of the Company (prior to May 1982,

- 15 -

Served as

Officer Since

1950

William S. Warner

Joseph J. Murphy

Charles W. Horsfall

Russell B. Hintz

Martha w. Bodurtha

Robert H. Reinert

Anthony M. Macleod

Raymond c. Smedberg

Chairman, President and Chief Executive Officer): Chairman of the Board of Directors of Bridgeport Hydraulic Company.

60 President and Chief Executive Officer of the Company (1981 to 1982, Vice Chairman, prior to 1981 Executive Vice President); President and Chief Executive Officer of Bridgeport Hydraulic Company: Chairman of the Board, President and Chief Executive Officer of Timco, Inc.: Chairman of the Board of Main Street South Corporation.

46 Executive Vice President, Treasurer and Chief Financial Officer of the Company: Executive Vice President and Treasurer of Bridgeport Hydraulic Company.

62 Secretary of the Company; Vice Pres­ident and Secretary of Bridgeport Hydraulic Company.

40 Controller of the Company; Vice President and Controller of Bridgeport Hydraulic Company.

60 Assistant Secretary of the Company and Bridgeport Hydraulic Company.

49 Executive Vice President of Bridgeport Hydraulic Company.

37 Vice President and General Counsel of the Company and of Bridgeport Hydraulic Company as of January 1984 (1982-1983, Vice President, Secretary and Chief Counsel of The Flintkote Company; 1980-1982, Secretary and Chief Counsel; 1977-1980, Division Attorney).

40 Executive Vice President of Bridgeport Hydraulic Company (1980 to 1983, Vice President of Operation, prior to 1980 Assistant Vice President).

- 16 -

1956

1979

1964

1975

1979

1963

1984

1979

PART II.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Page 33 of the Company's Annual Report to Stockholders for the year ended December 31, 1984 is incorporated by reference herein pursuant to Instruction G(2) to Form 10-K.

The Company's present ability to pay dividends to holders of its Common Stock is dependent primarily upon the continued payment by BHC of dividends to the Company. While the Board of Directors intends to continue the practice of declaring cash dividends on a quarterly basis, no assurance can be given as to future dividends since they will be determined in the light of earnings, the financial requirements of the Company and other factors. Dividends can only be paid out of net profits and surplus of the Company. Payment of dividends on the Company's Common Stock is further restricted under the term loan dated January 6, 1981. Unrestricted retained earnings amounted to $9 1 313,000 at December 31, 1984, under the provisions of the term loan.

BHC's Series A and Series B Preferred Stock ("Preferred Stock") also restrict the payment of dividends on its common stock. Under the most restrictive provisions of the Preferred Stock, $18,766,000 of BHC's retained earnings were available for payment of dividends on its common stock as of December 31, 1984. In addition, no dividends on BHC's common stock can be paid during any period in which Preferred Stock dividends are in arrears. Amendments under BHC's First Mortgage Indenture, which are expected to take effect at a future date, would also include dividend restrictions comparable to those of the most restrictive provisions of the Preferred Stock.

ITEM 6. SELECTED FINANCIAL DATA

See the inside front cover of the Company's Annual Report to Stockholders for the year ended December 31, 1984, which is incorporated by reference herein pursuant to Instruction G(2) to Form 10-K.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Pages 13 and 14 of the Company's Annual Report to Stockholders for the year ended December 31, 1984 are incorporated by reference herein pursuant to Instruction G(2) to Form 10-K.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements, together with the report thereon of Price Waterhouse, dated February 1, 1985, appearing on pages 15-28 and 31 and the supplementary data appearing on the inside front cover and pages 29-33 of the accompanying 1984 Annual Report to Stockholders of The Hydraulic Company are incorporated by reference herein pursuant to Instruction G(2) to Form 10-K.

- 17 -

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

The registrant has nothing to report for this item.

PART III.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information as to directors required by Item 10 is set forth at pages 2-4 of the Company's Definitive Proxy Statement, dated March 25, 1985, relating to the proposed Annual Meeting of Stockholders to be held on April 23, 1985, filed with the Commission pursuant to Regulation 14a under the Securities Exchange Act of 1934, and is incocporated by reference herein pursuant to Instruction G(3) to Form 10-K.

For information with respect to the executive officers of the registrant, see "Executive Officers of the Registrant" at the end of Part I.

ITEM 11. EXECUTIVE COMPENSATION

Pages 5-7 of the Company's Definitive Proxy Statement, dated March 25, 1985, relating to the proposed Annual Meeting of· Stockholders to be held on April 23, 1985, filed with the Commission pursuant to Regulation 14a under the Securities Exchange Act of 1934 are incorporated by reference herein pursuant to Instruction G(3) to Form 10-K.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Pages 2-4 of the Company's Definitive Proxy Statement, dated March 25, 1985, relating to the proposed Annual Meeting of Stockholders to be held on April 23, 1985, filed with the Commission pursuant to Regulation 14a under the Securities Exchange Act of 1934, are incorporated by reference herein pursuant to In ,truction G(3) to Form 10-K.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The registrant has nothing to report for this item.

- 18 -

PART IV.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

Page in Annual Report*

(1) Financial Statements of the Company:

Consolidated Statement of Income for the three years ended December 31, 1984

Consolidated Balance Sheet at December 31, 1984 and 1983

Consolidated Statement of Stockholders' Equity for the three years ended December 31, 1984

Consolidated Statement of Changes in Financial Position for the three years ended December 31, 1984

Analysis of Changes in Working Capital for the three -years ended December 31, 1984

Notes to Consolidated Financial Statements Report of Independent Accountants Selected Financial Data'

15

16-17

18

19

20 21-28 31

Inside Front Cover

*Incorporated by reference from the indicated pages of the 1984 Annual Report to Stockholders.

(2) Financial Statement Schedules:

Report of Independent Accountants on Financial Statement Schedules, see page F-2 hereto.

Index to Additional Financial Information, see page F-1 hereto.

The Financial Statement Schedules above should be read in conjunction with the Consolidated Financial Statements in the 1984 Annual Report to Stockholders. All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

(b) Reports on Form 8-K.

During the last quarter of 1984, no Form 8-K was filed.

- 19 -

(c) Exhibits:

In the following exhibit list, each document is incorporated by reference to the files of the Commission, unless the reference to the document in the list is preceded by an asterisk.

Exhibit No. Document

3(a) Restated Certificate of Incorporation of The Hydraulic Company (filed as part of Amendment No. 1 to The Hydraulic Company Registration Statement on Form S-2, Registration No. 2-91580, dated June 21, 1984).

3(b) By-laws of The Hydraulic Company, as last amended March 29, 1981 (filed as part of The Hydraulic Company Form 10-K for the year ended December 31, 1983).

4-1 Specimen of Common Stock Certificate (filed as part of Amendment No. 1 to The Hydraulic Company Registration Statement on Form S-7 Registration No. 2-74305, dated November 5, 1981).

4-2 First Mortgage Indenture of Bridgeport Hydraulic Company dated June 1, 1924 (filed as part of Amendment -No. 1 to Bridgeport Hydraulic Company Registration Statement on Form S-1, Registration No. 2-23434, dated April 26, 1965).

4-3 Fourteenth Supplemental Mortgage of Bridgeport Hydraulic Company dated as of October 1, 1952 (filed as part of Amendment No. 1 to Bridgeport Hydraulic Company Registration Statement on Form S-1, Registration No. 2-23434, dated April 26, 1965).

4-4 Sixteenth Supplemental Mortgage of Bridgeport Hydraulic Company dated as of September 1, 1957 (filed as part of Amendment No. 1 to Bridgeport Hydraulic Company Registration Statement on Form S-1, Registration No. 2-23434, dated April 26, 1965).

4-5 Seventeenth Supplemental Mortgage of Bridgeport Hydraulic Company dated as of September 1, 1960 (filed as part of Amendment No. 1 to Bridgeport Hydraulic Company Registration Statement on Form S-1, Registration No. 2-23434, dated April 26, 1965).

4-6 Eighteenth Supplemental Mortgage of Bridgeport Hydraulic Company dated as of August 1, 1962 (filed as part of Amendment No. 1 to Bridgeport Hydraulic Company Registration Statement on Form S-1, Registration No. 2-23434, dated April 26, 1965).

- 20 -

4-7

4-8

4-9

4-10

4-11

4-12

4-13

4-14

4-15

10-1

10-2

Nineteenth Supplemental Mortgage of Bridgeport Hydraulic Company dated as of August 1, 1965 (filed as part of Bridgeport Hydraulic Company Form 8-K, dated September 9, 1965).

Twentieth Supplemental Mortgage of Bridgeport Hydraulic Company dated as of November 1, 1968 (filed as part of Bridgeport Hydraulic Company Form 8-K, dated December 9, 1968).

Bridgeport Hydraulic Company, 9-7/8% Preferred Stock Series A Purchase Agreement dated December 7, 1970 (filed as part of The Hydraulic Company Form 8-K, dated March 11, 1971).

Twenty First Supplemental Mortgage of Bridgeport Hydraulic Company dated March 1, 1975 (filed as part of The Hydraulic Company Form 8-K, dated March 31, 1975).

Bridgeport Hydraulic Company 11% Preferred Stock Series B Purchase Agreement dated March 26, 1975 (filed as part of The Hydraulic Company Form 10-K for the year ended December 31, 1974).

Twenty Second Supplemental Mortgage of Bridgeport Hydraulic Company dated September 1, 1978 (filed as part of The Hydraulic Company Form 10-K for the year ended December 31, 1978).

Twenty Third Supplemental Mortgage of Bridgeport Hydraulic Company dated as of July 1, 1980 (filed as part of Amendment No. 1 to The Hydraulic Company Registration Statement on Form S-7, Registration No. 2-68751, dated September 10, 1980).

The Hydraulic Company Employee Stock Ownership Plan (filed as part of The Hydraulic Company Form 10-K for the year ended December 31, 1983).

The Hydraulic Company Dividend Reinvestment and Common Stock Purchase Plan (filed as part of Registration Statement No. 2-84916, dated July 31, 1984).

Term Loan, dated January 6, 1981, between The Hydraulic Company and each of the Society for Savings, Industrial National Bank of Rhode Island, Hartford National Bank and Trust Company and New England Merchants National Bank (the "Term Loan") (filed as part of The Hydraulic Company Form 10-K for the year ended December 31, 1980).

Amendments to the Term Loan, dated August 14, 1981 (filed as part of The Hydraulic Company Registration Statement on Form S-7, Registration No. 2-74305, dated October 5, 1981).

- 21 -

10-3

10-4

10-5

10-6

10-7

10-8

10-9

10-10

10-11

*10-12

Waivers of applicability of certain provisions of the Term Loan to the acquisition of Pittsfield Box & Lumber Co., Inc. and the Industrial Development Authority of the State of New Hampshire Bond Financing, dated October 14, 1981 (filed as part of Amendment No. 1 to The Hydraulic Company Registration Statement on Form S-7 Registration No. 2-74305, dated November 5, 1981).

Purchase Agreement between Timco, Inc. and each of the Stockholders of Pittsfield Box & Lumber Co., Inc., dated October 1, 1981 (filed as part of The Hydraulic Company Registration Statement on Form S-7 Registration No. 2-74305, dated October 5, 1981).

Plan of Merger between Timco, Inc. and Pittsfield Box & Lumber Co., Inc., effective as of October 5, 1981 (filed as part of The Hydraulic Company Form 8-K, dated October 21, 1981).

Copy of Directors and Officers Liability Policy Number DOL 4761516, The Home Insurance Company, dated September 25, 1983, covering The Hydraulic Company and its subsidiary companies, (filed as part of The Hydraulic Company Form 10-K for the year ended December 31, 1983).

Joint Venture Agreement between John J. Brennan, Jr., William A. Brennan and Main Street South Corporation dated February 23, 1979 (filed as part of Amendment No. 1 to The Hydraulic Company Registration Statement on Form S-7, Registration ·No. 2-74305, dated November 5, 1981).

Loan Agreement dated as of August 1, 1982 filed as part of The Hydraulic Company Form 10-K for the year ended December 31, 1982).

Reimbursement Agreement dated as of August 1, 1982 (filed as part of The Hydraulic Company Form 10-K for the year ended December 31, 1982).

Agreement of Merger among Stamford Water Company, The Hydraulic Company, Bridgeport Hydraulic Company and H-S Holdings, Inc. (filed as part of The Hydraulic Company Form 8-K, dated December 21, 1983).

Waivers of applicability of certain provisions of the Term Loan to the acquisition of Stamford Water Company, dated August 23, 1983 (filed as part of The Hydraulic Company Form 10-K for the year ended December 31, 1983).

Loan Agreement dated as of October 15, 1984 (filed as part of The Hydraulic Company Form 10-~ dated December 31, 1984).

- 22 -

*10-13

*10-14

*10-15

*10-16

*10-17

*13-1

*22-1

*24-1

Loan and Trust Agreement as of November 1, 1984 (filed as part of The Hydraulic Company Form 10-K dated December 31, 1984).

Copy of Directors and Officers Liability Policy Number 949-53-41 National Union Fire Insurance Company, dated June 27, 1984, covering The Hydraulic Company and its subsidiary companies (filed as part of The Hydraulic Company Form 10-K for the year ended December 31, 1984).

Employment Agreement between The Hydraulic Company and William S. Warner dated January 1, 1985 (filed as part of The Hydraulic Company Form 10-K for the year ended December 31, 1984).

Employment Agreement between The Hydraulic Company and Joseph J. Murphy dated January 1, 1985 (filed as part of The Hydraulic Company Form 10-K for the year ended December 31, 1984).

Employment Agreement between The Hydraulic Company and Anthony M. Macleod dated January 1, 1985 (filed as part of The Hydraulic Company Form 10-K for the year ended December 31, 1984).

Annual Report to Stockholders for the year ended December 31, 1984.

Subsidiaries of The Hydraulic Company.

Consent of Independent Accountants.

- 23 -

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

The Hydraulic Company (Registrant)

J BY.~"____ / .-- A

/ (

. Jos~ph J. Murphy "--Execut_i.Ne Vice President and Treasurer

(Chief Financial Officer)

Date

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

- -]jy ::;::>~-::~(::' l • d• -&~ /:"-< <: ' • n.~ ·- ~ /' Frederick B. Si~liman

Chairman of the Board of Directors

By----"-(0-~a~~-f',.,e· /..-FL--~-~--:Y~tr---.. -a~· ~--~ ........ -~--<.....-,........---w i 1\Yfiim s . wtiriie / Pre~1dent & C · Executive Officer & Director

By . \. . / ) :,.< or· r

--~----~~~~~~-----~/--------Russell B. Hintz Controller (Principal Accounting Officer)

_,--· - / I ,

By /(__.X __ .(_--{--/ I<._·:~.~- '~'--->-7 ~::\..-.'-... "--r

Norwick R. Goodspeep Di I

- 24 -

Date

-) /_, ,;?< .... __ ) I I (_I :

i , -

Date

,_·) /.---? ;:·' ,' i:-; Date

Date

~ / -~"; < / v:··---:---1.. .. _,_ ·(_,' '.l _,

Date

Date

~&r I Bate

a;~~· By __ =-----~~--~-----------------Roger Lewis

Director

By -~--~r 4/ )~ Newman M. Marsilius

S-~· Date

Director

By __ ~--~~~~~~~~-------­George Director

By_~~--+-----­ ~/du/o{ Eugene H. Remmer Date Direc o

By ____ ~~~~--~--~----------John Director

- 25 -

F-1

INDEX TO ADDITIONAL FINANCIAL INFORMATION

The financial statements, together with the report thereon of Price Waterhouse, dated February 1, 1985, appearing on pages 15-28 and 31 of the accompanying 1984 Annual Report to Stockholders of The Hydraulic Company are incorporated by reference in this Form 10-K Annual Report. With the exception of the aforementioned information and the information incorporated in Items 1, 2, 5, 6, 7 and 8, the 1984 Annual Report to Stockholders is not to be deemed filed as part of this report. The following financial information should be read in conjunction with the financial statements in such 1984 Annual Report to Stockholders. Financial statement schedules not included in this Form 10-K Annual Report have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

ADDITIONAL FINANCIAL INFORMATION

Property, plant and equipment (Schedule V) for the years 1984, 1983 and 1982

Accumulated depreciation, depletion and amortization of property, plant and equipment (Schedule VI) for the years 1984, 1983 and 1982

Short-term borrowings (Schedule IX) for the years 1984, 1983 and 1982

Supplementary income statement information (Schedule X) for the years 1984, 1983 and 1982

- 26 -

F-3

F-4

F-5

F-6

F-2

REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES

To the Board of Directors of The Hydraulic Company:

Our examination of the consolidated financial statements referred to in our report dated February 1, 1985 appearing on page 31 of the 1984 Annual Report to Stockholders of The Hydraulic Company, (which report and financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an examination of the Financial Statement Schedules listed in the index on page F-1. In our opinion, these Financial Statement Schedules present fairly the information set forth therein when read in conjunction with the related consolidated financial statements.

Bridgeport, Connecticut February 1, 1985

- 27 -

Price Waterhouse

SCHEDULE V - Property, plant and equipment

Description

1984: Organization Source of supply plant Pumping plant Water treatment Transmission and distribution plant General plant Construction work in progress Utility plant held for future use Non-utility plant

Total

1983: --organization

Source of supply plant Pumping plant Water treatment Transmission and distribution plant General plant Construction work in progress Utility plant held for future use Non-utility plant

Total

1982: Organization Source of supply plant Pumping plant Water treatment Transmission and distribution plant General plant Construction work in progress Utility plant held for future use Non-utility plant

Total

Balance at beginning of

period

$ 180 15,542 6,658

14,180 106,985

8,143 2,005

309 9,515

$163,517

$ 180 14,355

6,343 13,920

102,384 7,285 1,094

309 9,427

$155,297

$ 180 14,178

6,003 13,833 98,338

5,935 774 309

5,229 $144,779

F-3

Other Additions changes at cost Retirements add (deduct)

$ 362 788 267

7,300 1,270 3,634

559 $14,180

$ 1,100 315 260

4,648 977 911

287 $ 8,498

$ 185 346

87 4,130 1,659

320

4,341 $11,068

(Thousands of dollars)

( 1)

(4)

( 1)

( 1)

(2)

$ 19

70 173

1 47

$ -no

$ 47 119

$ 8 6

84 300

99 $ 497

$ 5 4,775

641 857

13,726 895

7,149 1,278

$29,326

$ 87

(87) $ __ _

$

$

( 9)

(44) (53)

(4)

(3)

(1) In 1984, 1983 and 1982, the change in transmission and distribution is due to normal plant expansion.

(2) In 1982, the change in non-utility plant is due to plant improvements for increased capacity and productivity at Timco's New Hampshire sawmill facility. It includes additions of a cogeneration facility, four kilns and the upgrading of three sawmills.

(3) Represents the acquisition of Stamford Water Company.

(4) The change in work in progress is primarily due to the construction of a filtration plant for Stamford Water Company's system.

EM I-185

Balance at end of period

$ 185 20,679 8,068

15,304 127,941

10,135 12,788

1,586 10,027

$206,713

$ 180 15,542

6,658 14,180

106,985 8,143 2,005

309 9,515

$163,517

$ 180 14,355

6,343 13,920

102,384 7,285 1,094

309 9,427

$155,297

[\.)

F-4

SCHEDULE VI - Accumulated depreciation, depletion and amortization of property, plant and equipment

Description

1984: --sDurce of supply plant

Pumping plant Water treatment plant Transmission and distribution plant General plant Non-utility plant

Total

1983: --sDurce of supply plant

Pumping plant Water treatment plant Transmission and distribution plant General plant Non-utility plant

Total

Balance at beginning of

period

$ 4,754 2,190 1,8·23

29,088 3,374 1,556

$42,785

$ 4,551 1,952 1,563

27,090 3,213

809 $39,178

Additions Other charged to changes

costs and expenses Retirements add (deduct) (Thousands of dollars)

$ 262 $ $1,173 276 23 503 429 587

2,342 123 5,206 433 127 602 782 12

$4,524 $285 $8,071 ( 2)

$ 203 $ $ 238 260

1,997 99 100 ( 1) 261 100 775 28

$3,734 $227 $100

\..0 1982: --sDurce of supply plant

Pumping plant Water treatment plant Transmission and distribution plant General plant Non-utility plant

Total

$ 4,368 1,734 1,306

25,232 3,342

239 $36,221

(1) Billings to State of Connecticut for relocation of facilities.

(2) Represents the acquisition of Stamford Water Company.

EM I-183

$ 192 $ 9 $ -224 6 257

1,902 128 84 ( 1) 168 297 570

$3,313 $440 $84

Balance at end of period

$ 6,189 2,946 2,839

36,513 4,282 2,326

$~5, 095

$ 4,754 2,190 1,823

29,088 3,374 1,556 $~

$ 4,551 1,952 1,563

27,090 3,213

809 $39,"T78

w 0

SCHEDULE IX - Short-term borrowings

Category of aggregate short-term borrowings

1984: Bank borrowings (1)

1983: Bank borrowings

1982: Bank borrowings

Balance at end of

period

$1,750

Weighted average interest

rate

10.8%

F-5

Maximum amount

outstanding during the

period (Thousands of

$10,400

$ 1,750

$ 3,150

Average amount

outstanding during the

period(2) dollars)

$2,950

$ 292

$ 788

Weighted average

interest rate during the

period(3)

7.8%

8.4%

13.1%

(1) These unsecured bank borrowings are either payable on demand or are payable in 90 days and renewed as they become due. Included in the 1984 bank borrowings was a $6,000,000 promissory note. In June 1984, the foregoing amount was repaid from the proceeds of the Company's common stock offering.

(2) Average borrowings are based on month-end balances.

(3) Weighted average interest rates, during the year, are calculated by dividing short-term interest expense by average borrowings during the year.

EM I-361

F-6

SCHEDULE X - Supplementary income statement information

1984* 1983 1982 (Thousands of dollars)

Maintenance and repairs $2,230 $1,815

Depreciation 4,571 3,734

Taxes other than payroll and income taxes:

Property 3,937 3,456 Gross earnings and

franchise taxes 2,248 1,775

*Results include 10 months of SWC which was acquired in March 1984.

$1,782

3,313

3,434

1,780

Other "Supplementary income statement information" that otherwise would be required has been omitted since the amounts were less than 1% of total revenues during each of the above years.

EM I-418

- 31 -

Exhibit 22-1 Subsidiaries of the Registrant

Bridgeport Hydraulic Company, incorporated in the State of Connecticut

Stamford Water Company, a subsidiary of Bridgeport Hydraulic Company, incorporated in the State of Connecticut

Main Street South Corporation, incorporated in the State of Connecticut

Timco, Inc., incorporated in the State of Connecticut

EXHIBIT 24-1

CONSENT OF INDEPENDENT ACCOUNTANTS FOR THE HYDRAULIC COMPANY

We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 2-84916) of The Hydraulic Company of our report dated February 1, 1985 appearing on page 31 of the Annual Report to Stockholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedules which appears on page F-2 of this Form 10-K.

Bridgeport, Connecticut March 2 7 , 198 5

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Price Waterhouse