Advancing Infrastructure
for a Healthier Futu re
2019 Annual Report
Annual Meeting
The Annual Meeting of Shareholders of Middlesex Water Company
will be held on Tuesday, May 19, 2020 at 11:00 a.m. EDT at Delta
Hotels by Marriott Woodbridge, 515 US Highway 1 South, Iselin,
New Jersey. You may also attend the meeting online, including
submitting questions, at www.virtualshareholdermeeting.com/
MSEX2020. Shareholders of record as of March 23, 2020 will be
eligible to receive notice of, and to vote at, the 2020 Annual Meeting.
Our Company’s Common Stock trades
on the Nasdaq Global Select Market
under the stock symbol MSEX
Middlesex Water Company
was incorporated as a water
utility in 1897 and owns and
operates regulated water and
wastewater utility systems primarily
in New Jersey and Delaware. The
Company also operates water and
wastewater utility systems under
contract on behalf of munici-
pal and private clients.
Our Scope
of S ervices
$ Water Production, Treatment & Distribution
$ Design/Build/Own/Operate System Assets
$ Public Private Partnerships
$ Water & Sewer Line Maintenance
$ Full Service Municipal Contract Operations
$ Water & Wastewater System Maintenance
$ Wastewater Collection & Treatment
Family
of Companies
$ Middlesex Water Company
$ Tidewater Utilities, Inc.
$ Tidewater Environmental Services, Inc.
$ Pinelands Water Company
$ Pinelands Wastewater Company
$ Utility Service Affiliates (Perth Amboy), Inc.
$ Utility Service Affiliates, Inc.
$ Twin Lakes Utilities, Inc.
$ Southern Shores Water Company, LLC
$ White Marsh Environmental Systems, Inc.
To Our
S hareholders :
Safe drinking water is
essential to good health
and long considered one of
the most important public health
achievements of our time.
It is no wonder then, as water utilities, we are not merely
in the business of obtaining, treating and delivering water
but essentially are entrusted with the responsibility of
protecting the public health of those we serve.
This view is further evidenced by the significant attention
by our industry regarding best methods to protect
drinking water consumers from the health impacts of
lead in drinking water as well as new and emerging
contaminants such as polyfluoroalkyl substances
(PFAS). Detection of these contaminants is prompting
new legislation and regulatory proposals and an
industry-wide need for significant upgrade and
replacement of aging infrastructure and other
facilities. In addition, the U.S. Environmental
Protection Agency (USEPA) has launched the
procedural process to amend the Lead & Copper
Rule (LCR) under the Safe Drinking Water Act,
a significant change since the LCR was first
established in 1991.
As an investor-owned utility company largely under the jurisdiction of
state public utility commissions for rate-setting purposes, your company
is not overly dependent on the political process to ensure that funding or
human and other critical resources are available to meet the needs of our
customers for safe and reliable utility services. It is inherent in the regulatory
model under which we operate that we are responsible for our own destiny. We
are solely responsible for the health and safety of our customers, our employees
and therefore by extension, we are responsible for the financial health of your
company. We take this mission very seriously and invite you to seek additional
detail in our recently released Corporate Sustainability Report. Protecting public
health and overall quality of service requires our management, as well as our
investors, to take a long-term view of our business. That long-term view means that
near-term operational and financial performance, although critically important,
must be balanced with meeting the needs of the next generation, as was done by
our predecessors all the way back to 1897. Prudent and strategic investments in
utility services help to ensure the public health and the economic viability of the
communities we serve. We are grateful for the wise operational and management
decisions made by our predecessors, on which we continue to build, in the face of
a continuously evolving business and regulatory landscape.
Sustained public health and
overall quality of service requires
our management, as well as
our investors, to take a long-term
view of our business.
I’m pleased to report that we are delivering on the plans I shared
with you in last year’s letter to shareholders. In 2019, we invested
capital in numerous projects to advance our water distribution
infrastructure to help mitigate public health, operational and other
risks. Our Water For Tomorrow® capital campaign, which we have
widely publicized in recent years, is well in progress. We anticipate
investing over $295 Million from 2020 through 2022.
P roactive Investment
To Protect Drinking Water
We commenced construction of our previously announced ozone
treatment facility at our largest water treatment plant in New Jersey,
the Carl J. Olsen Treatment Plant. This project, planned to be in service
by the end of 2021, will help ensure compliance with increasingly
stringent drinking water quality regulations. The plant upgrade will
also help to mitigate the occurrence of disinfection byproducts which
can form in parts of the distribution system when chlorine is used.
Disinfection byproducts are known to be carcinogenic at elevated
levels. Although presently within acceptable regulatory limits, we are
anticipating disinfection byproducts will be subject to more stringent
regulatory requirements while we also anticipate our ability to remain
within present limits will become more challenging over time. We
have therefore undertaken this proactive approach to protecting public
health in advance of anticipated future challenges. In addition to the
construction of the ozone treatment facility, we are making various
additional improvements at the plant such as additional backup power
generation for greater reliability and redundancy.
MWC personnel use drone technology to
monitor various aspects of construction.
Our longstanding RENEW program was again implemented in 2019
where we replaced 4 miles of distribution water mains and related
service lines, as well as valves and fire hydrants in the Borough of
Carteret, New Jersey. This $11 million investment to modernize drinking
water infrastructure will help improve fire flows and enhance overall
service quality. The RENEW program has evolved in recent years to
more pipe replacement and less main cleaning and lining due to the
relative age of the pipe identified for remediation. We have continued
to execute this disciplined infrastructure investment program year-in
and year-out using a risk-based approach to identify the most pressing
needs for upgrade and replacement of pipe.
Construction begins on the ozone contactor chamber walls that will
eventually support the ozone building and new treatment equipment.
Secondary Transmission Main...
A Critical Need
One of the major elements of this capital campaign which addresses
both quality and reliability is the Western Transmission Main, a 4.5
mile, 42" water transmission main designed to provide redundancy to
an existing main in the heart of our service territory in our Middlesex
system in New Jersey. We are again reminded of the foresight of our
predecessors in identifying this need and, by putting this and other
projects into service, in certain respects, we are honoring that foresight.
We broke ground on this large transmission main in 2018 and at this
writing, this $52 million project is very near to being placed in service.
One of the factors in identifying this need was the vulnerability
associated with having a single 48" transmission main leaving the plant.
This vulnerability assessment proved accurate based on a structural
analysis associated with two breaks on this critical main this past
year. The incredible skills of our Engineering and Operations teams,
combined with support from several contract partners, resulted in robust
contingency plans in anticipation of such main break events and no
customers lost water service while these repairs were conducted. With
the completion of the Western Transmission Main, we now have the
ability to remove the 48" main from service for further evaluation and
repairs, where necessary.
Vice President
General Counsel and
Secretary Jay L. Kooper was named
2019 General Counsel of the Year,
Public Company category, by
NJBIZ, a leading New Jersey
business publication.
Planning for
Future Regulations
Regarding the issue of PFAS as previously mentioned in this letter, our
company is impacted to some extent, primarily at one of our well sites
in New Jersey, which represents a small portion of our overall supply.
This contaminant has been detected in drinking water supplies across
the country. The primary sources have been identified as fire-fighting
foam, food packaging and non-stick cookware and cleaning products
which enter the environment through air, soil and eventually surface
water and groundwater. New Jersey has adopted one of the most
stringent PFAS regulations in the nation in advance of a maximum
contaminant level expected to be issued by the USEPA in the near
future. The science surrounding PFAS is generally understood. There are,
however, varying opinions regarding the level at which human health
may be affected. Through various operating protocols, we are presently
able to deliver water to our customers while meeting the conservative
standard required by New Jersey. After examining our various sources of
supply, we commissioned a treatability study and subsequently installed
a pilot plant to determine the most effective treatment option for the
long term. We have identified the cause of the PFAS presence in this well
supply and we have initiated legal action against the polluter in federal
court. Eliminating PFAS at the source is the most efficient method for
addressing PFAS. This project is just a further example of our overall
commitment to the health and safety of our customers both for now
and for the next generation.
The safety and security of our
drinking water supply is at the
core of our mission.
The safety and security of our drinking water supply is at the core of
our mission. As a company also engaged in the business of collecting
and treating wastewater, we have a corresponding obligation to health
and safety in that regard as well. We continue to take a forward look
in anticipating increasingly stringent federal regulations regarding
wastewater effluent and we design and construct facilities to ensure the
protection of public health and the environment. Through our subsidiary
companies, we also operate several wastewater facilities under contracts
with municipal and industrial clients.
Reliable water infrastructure and access to clean
drinking water is essential to economic stability and growth.
These contract operations pose somewhat unique challenges in
that we do not own the assets and therefore do not have complete
control of the timing and cost of infrastructure upgrades and
replacements. Nonetheless, we have very skilled employees who
work with the system owners to ensure a shared understanding of
the risks and opportunities.
Our mandate as leaders in this industry, and certainly in our own
company, is to understand the inherent risks to public health and
safety in providing a supply of water for potable, fire protection and
overall economic stability purposes. We are grateful for the support
of our economic regulators for their deep understanding of our public
health mandate and the resulting need to ensure the financial health
of your company.
Accessing
Capital Markets
We are grateful for incredible support provided by our investors
throughout 2019 as we raised debt and equity capital to fund the
important initiatives described above. In November, $43.7 million was
raised from a successful equity offering of 0.8 million shares at $60.50
per share. Earlier in 2019, we offered a 5% Discount on purchases of
Middlesex Common Stock from optional cash payments made through
the Middlesex Water Company Investment Plan. We reached the
0.2 million share purchase limit well before the expiration date,
raising some $11.4 million in just eight months.
In October, our Board of Directors approved a 6.7% common
stock dividend increase, marking the 47th consecutive year of
a dividend increase.
Succession
Planning
We were pleased to welcome Ann L. Noble to our Board of Directors in
2019. Ann’s strategic planning and business credentials complement the
skills of our existing Directors. Jeffries Shein, a director for 30 years and
Lead Director since 2010, has announced he will not seek reelection to
the Board as his term expires. Please see a tribute to Mr. Shein for his
many years of service further in this letter.
2019 saw the successful integration of three new officers into the
Middlesex executive management team following the June retirement
of Richard M. Risoldi, Vice President of Operations and Chief Operating
Officer, who served Middlesex for 29 years. We thank Rick for his
exemplary technical leadership in directing numerous critical operational
initiatives during his tenure and wish him well in his retirement. I
am gratified to work with the highly experienced leadership on our
executive team and look forward to delivering on our strategy together.
Providing life-sustaining utility service has its share of challenges. But,
likewise, the landscape is rife with opportunity as those navigating
new utility requirements and regulations seek us out for technical and
operational expertise. We are proud to serve as a trusted resource to
them. We thank our employees for their continued dedication and
for working to ensure high quality water is readily available to our
customers when they need it.
David Wilkerson (left) and Bruce O’Connor (right)
discuss acquisition plans
for a seamless transition for customers.
Also in October, our subsidiary, Tidewater Utilities, Inc., added 1,000
customers with the acquisition of the J.H. Wilkerson & Sons water
companies in Delaware. Customers of these companies will be served by
Tidewater’s regulated utility business that currently serves more than
47,000 accounts throughout Delaware.
MWC was recognized by
2020 Women on Boards
for board gender diversity
in 2019.
Our Corporate Sustainability
Report, available on our website,
describes how operating
responsibly helps to
maximize long-term
shareholder value.
As an enterprise, we work diligently to eliminate,
transfer or mitigate the inherent risks in our
business to the greatest extent possible to also
help ensure the risk/reward profile is appropriate
for the financial returns expected by you, our
investors. We thank you for your continued
confidence and support for our efforts.
Sincerely,
Dennis W. Doll
Chairman, President and CEO
Chairman Dennis W. Doll and the MWC Executive Management Team
In Sincere
A ppreciation
The Board, Officers and Employees of
Middlesex Water Company extend their
heartfelt gratitude to Jeffries Shein
who is retiring from the Board of
Directors as of the Annual Meeting
of Shareholders in May 2020
following thirty years of service.
Mr. Shein has been an independent
director on the board of Middlesex
Water Company serving with distinction
Jeffries Shein
on various committees of the Board including: Ad-hoc Pricing,
Corporate Governance & Nominating, Compensation and Pension. His
long association has benefited the Company through three different
Middlesex Presidents. During his tenure, the Company achieved
numerous milestones including expansion of contract water service in
the South River Basin, securing two separate public private partnerships
with the City of Perth Amboy, company growth through the acquisitions
of subsidiaries in Delaware, Burlington County, NJ and in Pennsylvania,
expansion into wastewater operations, integration of new enterprise
resource planning technology, and significant capital improvements
such as construction of the Western Transmission Main and the new
ozone Treatment Plant under the Company’s Water for Tomorrow
infrastructure investment campaign.
Throughout his tenure on the Middlesex Board, Mr. Shein has been a
staunch advocate for the Company’s shareholders while balancing that
role against the need to appropriately support the Company’s customers
and employees and the communities we serve. He embodies the
values held by the Company of Respect, Integrity, Growth, Honesty and
Teamwork. He has given generously over the years of his expertise and
financial resources to numerous causes within the communities your
Company serves which has further elevated the profile of Middlesex
Water Company in the minds and hearts of community leaders.
Mr. Shein has been an enthusiastic champion in support of your
Company and our industry. As Lead Director since 2010, he has offered
trusted counsel and solid business insight that has contributed to
the Company’s growth and prosperity. We thank Mr. Shein for his
leadership in service to your Board and offer him our very best wishes
for the future.
Financial
Highlights
(Millions of Dollars, Except per Share Data)
2019
2018
2 0 1 7
Operating Revenues
$134.6
$138.1
$130.8
Operations and Maintenance Expenses
Depreciation
Income and Other Taxes
Interest Charges
Net Income
Earnings Applicable to Common Stock
Basic Earnings Per Share
Diluted Earnings Per Share
Cash Dividends Paid Per Share
Utility Plant
Return on Average Common Equity
68.0
16.7
11.2
7.3
33.9
33.8
2.02
2.01
0.976
876.0
12.5%
71.6
15.0
15.3
6.8
32.5
32.3
1.97
1.96
0.911
775.9
13.6%
65.5
13.9
24.7
5.5
22.8
22.7
1.39
1.38
0.858
703.5
10.2%
Stock
Listing
The Company’s common shares trade on the Nasdaq GS (Nasdaq)
Global Select Market under the trading symbol MSEX.
The following table sets forth the high and low sales price of the common stock
for the periods indicated, as reported by Nasdaq, and dividends paid.
2019
2018
High
Low
Dividend
Paid
High
Low
Dividend
Paid
Q4
Q3
Q2
Q1
$67.69
$66.10
$63.68
$60.48
$58.75
$55.30
$52.51
$51.02
$0.26
$0.24
$0.24
$0.24
$60.31
$49.00
$45.24
$43.12
$41.77
$34.74
$41.45
$33.96
$0.24
$0.22
$0.22
$0.22
Operating Revenues
(Millions of Dollars)
132.9 130.8
126.0
138.1
134.6
'15
'16
'17
'18
'19
Net Income
(Millions of Dollars)
33.9
32.5
22.7 22.8
20.0
'15
'16
'17
'18
'19
Earnings & Dividends
(Dollars per Share)
1.96
2.01
Earnings
per share
Dividends
1.38
1.38
1.22
.91
.86
.98
.78
.81
'15
'16
'17
'18
'19
Board of Directors
Dennis W. Doll
Chairman of the Board,
President & Chief Executive Officer
Middlesex Water Company
James F. Cosgrove Jr., P.E. (3, 4, 5)
Vice President & Principal
Kleinfelder
Kim C. Hanemann (1, 3)
Sr. Vice President & Chief Operating Officer
Public Service Electric & Gas Company (PSE&G)
Steven M. Klein (1, 2, 4)
President & Chief Executive Officer
Northfield Bancorp, Inc., Northfield Bank
Amy B. Mansue (1, 2)
Executive Vice President &
Chief Experience Officer
RWJBarnabas Health
Ann L. Noble (1,4)
Financial Consultant
Walter G. Reinhard, Esq. (3, 4)
(Retired) Former Partner & Of Counsel
Norris McLaughlin, P.A.
Jeffries Shein (2, 3, 5)
Managing Partner
JGT Management Co.
Committees
1. Audit
2. Compensation
3. Corporate Governance & Nominating
4. Pension
5. Ad-Hoc Pricing
Executive Management
Team
G. Christian Andreasen, Jr.
Vice President – Enterprise Engineering
Dennis W. Doll
Chairman of the Board,
President & Chief Executive Officer
Robert K. Fullagar
Vice President – Operations
Lorrie B. Ginegaw
Vice President – Human Resources
Jay L. Kooper
Vice President, General Counsel
& Secretary
A. Bruce O’Connor
Sr. Vice President, Treasurer &
Chief Financial Officer
Georgia M. Simpson
Vice President – Information Technology
Bernadette M. Sohler
Vice President – Corporate Affairs
Company Headquarters
Middlesex Water Company
485C Route 1 South, Suite 400
Iselin, NJ 08830
Telephone: 732-634-1500
MiddlesexWater.com
Trans fer Agent and Registrar
Broadridge Corporate Issuer Solutions, Inc. (Broadridge)
P.O. Box 1342
Brentwood, New York 11717
Telephone: 1-888-211-0641
E-mail: shareholder@broadridge.com
Website: http://shareholder.broadridge.com/middlesexwater
S hareholder Account Inquiries
To review the status of your shareholder account or dividend payments, transfer shares,
report a change of address or other related matters, please contact Broadridge directly
by calling 1-888-211-0641.
Independent Registered Public Accounting Firm
Baker Tilly Virchow Krause, LLP
1570 Fruitville Pike, Suite 400
Lancaster, PA 17601
Telephone: 717-740-4863
Mortgage Trustee
U.S. Bank National Association
Global Corporate Trust
333 Thornall St., Edison, NJ 08837
Investor Relations
Shareholders, analysts and others seeking information about Middlesex Water are invited
to contact our Investor Relations Department at:
Telephone: 732-638-7549 • Fax: 732-638-7515 • E-mail: bsohler@middlesexwater.com
Copies of our earnings and other releases, financial publications including our Annual Report on
SEC Form 10-K as well as 10-Q filings and dividend announcements are available without charge
upon request. These documents are also typically available within minutes of being filed on the
Investors section of our website at MiddlesexWater.com. Shareholders may also subscribe to
receive Email Alerts in this area for daily stock quotes, company news or SEC filings.
The Middlesex
Water Company
Investment Plan
The Middlesex Water Company Investment Plan provides
new and existing shareholders of its common stock with a
convenient way to build ownership in the Company through
the purchase of common shares from the Company and the
reinvestment of their cash dividends. The Prospectus and
enrollment form are available from Broadridge at http://
shareholder.broadridge.com/middlesexwater and
may also be accessed in the Investors section at
MiddlesexWater.com
2020 Dividend Schedule*
Payment Dates
Record Dates
Common
P referred
February 14
May 15
August 14
November 13
January 15
April 15
July 15
October 15
March 2
June 1
September 1
December 1
February 3
May 1
August 3
November 2
*Subject to approval by Board of Directors.
Advancing Infrastructure
for a Healthier Futu re
2019 Form 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to ______________________
For the fiscal year ended December 31, 2019
OR
Commission File Number
0-422
MIDDLESEX WATER COMPANY
(Exact name of registrant as specified in its charter)
New Jersey
(State of Incorporation)
22-1114430
(IRS employer identification no.)
485C Route 1 South, Suite 400, Iselin New Jersey 08830
(Address of principal executive offices, including zip code)
(732) 634-1500
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class:
Trading Symbol: Name of each exchange on which registered:
Common Stock, No Par Value MSEX The NASDAQ Stock Market, LLC
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes No
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 No
Indicate by check mark whether the registrant has submitted electronically and posted on their corporate web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter
period that the registrants were required to submit and post such files).
Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”
and “emerging growth company” in Rule 12(b)-2 of the Exchange Act.
Large accelerated filer
Accelerated filer Non-accelerated filer
Smaller reporting company Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes
No
The aggregate market value of the voting stock held by non-affiliates of the registrant at June 28, 2019 was $941,981,504 based on the
closing market price of $59.25 per share on the NASDAQ Global Select Market.
The number of shares outstanding for each of the registrant's classes of common stock, as of February 27, 2020:
Common Stock, No par Value 17,435,830 shares outstanding
Documents Incorporated by Reference
Proxy Statement to be filed in connection with the Registrant’s Annual Meeting of Stockholders to be held on May 19, 2020, which will be
filed with the Securities and Exchange Commission within 120 days of the end of our 2019 fiscal year, is incorporated by reference into
Part III of this Annual Report on Form 10-K to the extent described herein.
MIDDLESEX WATER COMPANY
FORM 10-K
INDEX
PAGE
1
Forward-Looking Statements
PART I
Item 1.
Business:
Overview
Financial Information
Water Supplies and Contracts
Wastewater Facilities
Employees
Competition
Regulation
Seasonality
Management
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4. Mine Safety Disclosures
Properties
Legal Proceedings
PART II
Item 5. Market for the Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Item 6.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 7A. Qualitative and Quantitative Disclosure About Market Risk
Item 8.
Item 9.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and
Director Independence
Item 14. Principal Accountant Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
Signatures
Exhibit Index
2
2
2
4
4
5
5
5
6
8
9
10
15
15
17
17
18
18
20
20
34
35
65
66
66
67
67
67
67
67
67
68
68
68
FORWARD-LOOKING STATEMENTS
Certain statements contained in this annual report and in the documents incorporated by reference constitute
“forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 and
Section 27A of the Securities Act of 1933. Middlesex Water Company (the Company) intends that these
statements be covered by the safe harbors created under those laws. They include, but are not limited to statements
as to:
-
-
-
expected financial condition, performance, prospects and earnings of the Company;
strategic plans for growth;
the amount and timing of rate increases and other regulatory matters, including the recovery of certain costs
recorded as regulatory assets;
the Company’s expected liquidity needs during the upcoming fiscal year and beyond and the sources and
availability of funds to meet its liquidity needs;
expected customer rates, consumption volumes, service fees, revenues, margins, expenses and operating
results;
financial projections;
the expected amount of cash contributions to fund the Company’s retirement benefit plans, anticipated
discount rates and rates of return on plan assets;
the ability of the Company to pay dividends;
the Company’s compliance with environmental laws and regulations and estimations of the materiality of
any related costs;
the safety and reliability of the Company’s equipment, facilities and operations;
the Company’s plans to renew municipal franchises and consents in the territories it serves;
trends; and
the availability and quality of our water supply.
-
-
-
-
-
-
-
-
-
-
These forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results
to differ materially from future results expressed or implied by the forward-looking statements. Important factors
that could cause actual results to differ materially from anticipated results and outcomes include, but are not limited
to:
-
-
-
effects of general economic conditions;
increases in competition for growth in non-franchised markets to be potentially served by the Company;
ability of the Company to adequately control selected operating expenses which are necessary to maintain
safe and proper utility services, and which may be beyond the company’s control;
availability of adequate supplies of water;
actions taken by government regulators, including decisions on rate increase requests;
new or modified water quality standards;
-
-
-
- weather variations and other natural phenomena impacting utility operations;
-
-
-
-
-
financial and operating risks associated with acquisitions and, or privatizations;
acts of war or terrorism;
changes in the pace of housing development;
availability and cost of capital resources; and
other factors discussed elsewhere in this annual report.
Many of these factors are beyond the Company’s ability to control or predict. Given these uncertainties, readers
are cautioned not to place undue reliance on any forward-looking statements, which only speak to the Company’s
understanding as of the date of this report. The Company does not undertake any obligation to release publicly any
revisions to these forward-looking statements to reflect events or circumstances after the date of this annual report
or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.
For an additional discussion of factors that may affect the Company’s business and results of operations, see Item
1A - Risk Factors.
Item 1.
Business.
Overview
PART I
Middlesex Water Company (Middlesex) was incorporated as a water utility company in 1897 and owns and
operates regulated water utility and wastewater systems in New Jersey, Delaware and Pennsylvania. Middlesex
also operates water and wastewater systems under contract on behalf of municipal and private clients in New
Jersey, Delaware and Maryland.
The terms “the Company,” “we,” “our,” and “us” refer to Middlesex Water Company and its subsidiaries,
including Tidewater Utilities, Inc. (Tidewater) and Tidewater’s wholly-owned subsidiaries, Southern Shores
Water Company, LLC (Southern Shores) and White Marsh Environmental Systems, Inc. (White Marsh). The
Company’s other subsidiaries are Pinelands Water Company (Pinelands Water) and Pinelands Wastewater
Company (Pinelands Wastewater) (collectively, Pinelands), Utility Service Affiliates, Inc. (USA), Utility Service
Affiliates (Perth Amboy) Inc., (USA-PA), Tidewater Environmental Services, Inc. (TESI) and Twin Lakes
Utilities, Inc. (Twin Lakes).
The Company’s principal executive offices are located at 485C Route 1 South, Suite 400, Iselin, New Jersey
08830. Our telephone number is (732) 634-1500. Our website address is http://www.middlesexwater.com.
Information contained on our website is not part of this Annual Report on Form 10-K. We make available, free of
charge through our website, reports and amendments filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, after such material is electronically filed with or furnished to the United States
Securities and Exchange Commission (the SEC).
Middlesex System
The Middlesex System in New Jersey provides water services to approximately 61,000 retail customers, primarily
in eastern Middlesex County, New Jersey and provides water under wholesale contracts to the City of Rahway,
Townships of Edison and Marlboro, the Borough of Highland Park and the Old Bridge Municipal Utilities
Authority. The Middlesex System treats, stores and distributes water for residential, commercial, industrial and
fire protection purposes. The Middlesex System also provides water treatment and pumping services to the
Township of East Brunswick under contract. The amount of water supply allocated to the Township of East
Brunswick is granted directly to the Township by the New Jersey Water Supply Authority. The Middlesex
System produced approximately 60% of our 2019 consolidated operating revenues.
The Middlesex System’s retail customers are located in an area of approximately 55 square miles in Woodbridge
Township, the City of South Amboy, the Boroughs of Metuchen and Carteret, portions of the Township of Edison
and the Borough of South Plainfield, all in Middlesex County, and a portion of the Township of Clark in Union
County. Retail customers include a mix of residential customers, large industrial concerns and commercial and
light industrial facilities. These customers are located in generally well-developed areas of central New Jersey.
The contract customers of the Middlesex System comprise an area of approximately 110 square miles with a
population of over 200,000. Contract sales to the Townships of Edison and Marlboro, the City of Rahway and the
Old Bridge Municipal Utilities Authority are supplemental to the water systems owned and operated by these
customers. Middlesex is the sole source of water for the Borough of Highland Park and the Township of East
Brunswick.
Middlesex provides water service to approximately 300 customers in Cumberland County, New Jersey. This
system is referred to as Bayview, and is not physically interconnected with the Middlesex System. Bayview
produced less than 1% of our 2019 consolidated operating revenues.
2
Tidewater System
Tidewater, together with its wholly-owned subsidiary, Southern Shores, provides water services to approximately
50,000 retail customers for residential, commercial and fire protection purposes in over 400 separate communities
in New Castle, Kent and Sussex Counties, Delaware. The Tidewater System produced approximately 27% of our
2019 consolidated operating revenues.
USA-PA
USA-PA operates the City of Perth Amboy, New Jersey’s (Perth Amboy) water and wastewater systems under a
10-year agreement, which expires in December 2028. There are approximately 12,000 customers comprised of
residential, commercial and industrial connections, most of which are served by both the water and wastewater
systems. In addition to performing day-to day operations, USA-PA is also responsible for emergency responses
and management of capital projects funded by Perth Amboy. USA-PA produced approximately 5% of our 2019
consolidated operating revenues.
Pinelands Systems
Pinelands Water provides water services to approximately 2,500 residential customers in Burlington County, New
Jersey. Pinelands Water is not physically interconnected with the Middlesex System. Pinelands Water produced
approximately 1% of our 2019 consolidated operating revenues.
Pinelands Wastewater provides wastewater collection and treatment services to approximately 2,500 residential
customers. Under contract, it also services one municipal wastewater system in Burlington County, New Jersey
with approximately 200 residential customers. Pinelands Wastewater produced approximately 1% of our 2019
consolidated operating revenues.
USA
USA operates the Borough of Avalon, New Jersey’s (Avalon) water utility, sewer utility and storm water system
under a ten-year operations and maintenance contract expiring in 2022. USA serves approximately 6,300 retail
In
customers in Avalon, most of which are served by both the water system and wastewater collection system.
addition to performing day-to-day operations, USA is responsible for billing, collections, customer service,
emergency responses and management of capital projects funded by Avalon.
USA also provides unregulated water and wastewater services under contract with several other smaller New
Jersey municipalities.
Under a marketing agreement with HomeServe, USA offers residential customers in New Jersey and Delaware
various water and wastewater related home maintenance programs. HomeServe is a leading national provider of
such home maintenance service programs. USA receives a service fee for the billing, cash collection and other
administrative matters associated with HomeServe’s service contracts. The agreement expires in 2021.
USA produced approximately 2% of our 2019 consolidated operating revenues.
TESI System
TESI provides wastewater collection and treatment services to approximately 3,700 retail customers in Sussex
County, Delaware. TESI produced approximately 2% of our 2019 consolidated operating revenues.
White Marsh
White Marsh operates or maintains water and/or wastewater systems that serve approximately 1,700 retail
customers under more than 40 separate contracts. White Marsh also owns two commercial properties that are
leased to Tidewater for its administrative office campus and its field operations center. White Marsh produced
approximately 2% of our 2019 consolidated operating revenues.
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Twin Lakes System
Twin Lakes provides water services to approximately 115 residential customers in Shohola, Pennsylvania. Twin
Lakes produced less than 1% of our 2019 consolidated operating revenues.
Financial Information
Consolidated operating revenues, operating income and net income are as follows:
(Thousands of Dollars)
Years Ended December 31,
2018
2017
2019
Operating Revenues
$134,598
$138,077
$130,775
Operating Income
$35,520
$37,142
$37,798
Net Income
$33,888
$32,452
$22,809
Operating revenues were earned from the following sources:
Years Ended December 31,
2017
2018
2019
Residential
Commercial
Industrial
Fire Protection
Contract Sales
Contract Operations
Other
Total
Water Supplies and Contracts
53.1 % 50.5 % 50.8 %
11.3
7.0
9.1
10.6
8.7
0.2
10.7
7.4
8.8
10.6
11.9
0.1
100.0 % 100.0 % 100.0 %
10.7
7.1
9.0
10.4
11.9
0.1
Our New Jersey, Delaware and Pennsylvania water supply systems are physically separate and are not
interconnected. In New Jersey, the Pinelands System and Bayview System are not interconnected with the
Middlesex System or each other. We believe we have adequate sources of water supply to meet the current
service requirements of our present customers in New Jersey, Delaware and Pennsylvania.
Middlesex System
Our Middlesex System, which produced approximately 13.2 billion gallons in 2019, obtains water from surface
sources and wells (groundwater sources). In 2019, surface sources of water provided approximately 72% of the
Middlesex System’s water supply, groundwater sources provided approximately 20% from 31 Company-owned
wells and the balance was purchased from a non-affiliated water utility regulated by the New Jersey Board of
Public Utilities (NJBPU) under an agreement which expires February 27, 2021. This agreement provides for
minimum purchases of 3.0 million gallons per day (mgd) of treated water with provisions for additional
purchases. The Middlesex System’s distribution storage facilities are used to supply water to customers at times
of peak demand, outages and emergencies.
The principal source of surface water for the Middlesex System is the Delaware & Raritan Canal, which is owned
by the State of New Jersey and operated as a water resource by the New Jersey Water Supply Authority
(NJWSA). Middlesex is under contract with the NJWSA, which expires November 30, 2023, and provides for
average purchases of 27.0 mgd of untreated water from the Delaware & Raritan Canal, augmented by the Round
4
Valley/Spruce Run Reservoir System. The untreated surface water is pumped to, and treated at, the Middlesex
Carl J. Olsen (CJO) Water Treatment Plant.
Water supply to Bayview customers is derived from two wells, which produced approximately 6.7 million gallons
in 2019.
Tidewater System
Our Tidewater System produced approximately 2.4 billion gallons in 2019, primarily from 181 wells. Tidewater
expects to submit applications to Delaware regulatory authorities for the approval of additional wells as growth,
customer demand and water quality warrant. Tidewater augments its water production with annual minimum
purchases of 15.0 million gallons of treated water under contract from the City of Dover, Delaware. Tidewater
does not have a central water treatment facility for the over 400 separate communities it serves. As the number
has grown, many of Tidewater’s individual systems have been interconnected, forming several regional systems
that are served by multiple water treatment facilities.
Pinelands Water System
Water supply to our Pinelands Water System is derived from four wells which produced approximately 127.4
million gallons in 2019. The aggregate pumping capacity of the four wells is 2.2 mgd.
Twin Lakes System
Water supply to Twin Lakes’ customers is derived from one well, which produced approximately 21.0 million
gallons in 2019.
Wastewater Facilities
Pinelands Wastewater System
The Pinelands Wastewater System discharges into the South Branch of the Rancocas Creek through a tertiary
treatment plant that provides clarification, sedimentation, filtration and disinfection. The total capacity of the
plant is 0.5 mgd, and the system treated approximately 101.7 million gallons in 2019.
TESI System
The TESI System is comprised of seven wastewater collection and treatment systems, which are not
interconnected. The treatment plants provide clarification, sedimentation, and disinfection. The combined total
treatment capacity of the plants is 0.7 mgd. The TESI System treated approximately 115.8 million gallons in
2019.
Employees
As of December 31, 2019, we had a total of 352 employees. None of our employees are subject to a collective
bargaining agreement. We believe our employee relations are positive. Wages and benefits are reviewed annually
and both are considered competitive within the industry and the regions where we operate.
Competition
Our business in our franchised service areas is substantially free from direct competition with other public
utilities, municipalities and other entities. However, our ability to provide contract wholesale water supply and
operations and maintenance services that are not under the jurisdiction of a state public utility commission is
subject to competition from other public utilities, municipalities and other entities. Although Tidewater and TESI
have been granted exclusive franchises for each of their existing community water and wastewater systems, their
ability to expand service areas can be affected by the Delaware Public Service Commission (DEPSC) awarding
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franchises to other regulated water and wastewater utilities with whom we compete for such franchises and for
projects.
Regulation
Our rates charged to customers for water and wastewater services, the quality of the services we provide and
certain other matters are regulated by the following state utility commissions (collectively, the Utility
Commissions):
• NJBPU;
• DEPSC; and
• Pennsylvania-Pennsylvania Public Utilities Commission (PAPUC).
Our USA, USA-PA and White Marsh subsidiaries are not regulated public utilities as related to rates and service
quality. However, they are subject to federal and state environmental regulations with respect to water quality and
wastewater effluent quality to the extent such services are provided.
We are subject to environmental and water quality regulation by the following regulatory agencies (collectively,
the Government Environmental Regulatory Agencies):
• United States Environmental Protection Agency (EPA);
• New Jersey Department of Environmental Protection (NJDEP) with respect to operations in New Jersey;
• Delaware Department of Natural Resources and Environmental Control, the Delaware Department of
Health and Social Services-Division of Public Health (DEDPH), and the Delaware River Basin
Commission (DRBC) with respect to operations in Delaware; and
• Pennsylvania Department of Environmental Protection (PADEP) with respect to operations in
Pennsylvania.
In addition, our issuances of equity securities are subject to the prior approval of the NJBPU and require
registration with the SEC. Our issuances of long-term debt securities are subject to the prior approval of the
appropriate Utility Commissions.
Regulation of Rates and Services
For regulated rate setting purposes, we account separately for operations in New Jersey, Delaware and
Pennsylvania to facilitate independent rate setting by the applicable Utility Commissions.
In determining our regulated utility rates, the respective Utility Commissions consider the revenue, expenses, rate
base of property used and useful in providing service to the public and a fair rate of return on investments within
their separate jurisdictions. Rate determinations by the respective Utility Commissions do not guarantee
achievement to us of specific rates of return for our New Jersey, Delaware and Pennsylvania regulated utility
operations. Thus, we may not achieve the stated rates of return authorized by the Utility Commissions.
In
addition, there can be no assurance that any future rate increases will be granted or, if granted, that they will be in
the amounts requested.
Middlesex Rate Matters
In November 2019, Middlesex filed a petition with the NJBPU seeking approval to reset its Purchased Water
Adjustment Clause (PWAC) tariff rate currently in effect to recover additional costs of $0.5 million for the
purchase of treated water from a non-affiliated regulated water utility regulated by the NJBPU. A PWAC is a rate
mechanism that allows for recovery of increased purchased water costs between base rate case filings. The
PWAC is reset to zero once those increased costs are included in base rates. We cannot predict whether the
NJBPU will ultimately approve, deny or reduce the amount of our request.
6
In December 2018, the NJBPU approved Middlesex’s petition to establish its PWAC tariff rate to recover
additional annual costs of less than $0.1 million, primarily for the purchase of treated water from a non-affiliated
water utility. The PWAC tariff rate became effective on January 1, 2019.
In March 2018, Middlesex’s petition to the NJBPU seeking permission to increase its base water rates was
concluded, based on a negotiated settlement, resulting in an increase in annual operating revenues of $5.5 million.
The approved base water rates were designed to recover increased operating costs as well as a return on invested
capital in rate base of $245.5 million, based on an authorized return on common equity of 9.6%. As part of the
settlement, Middlesex received approval for regulatory accounting treatment of accumulated deferred income tax
benefits associated with required adoption of tangible property regulations issued by the Internal Revenue
Service. The settlement agreement allowed for a four-year amortization period for $28.7 million of deferred
income tax benefits as well as immediate and prospective recognition of the tangible property regulations’ tax
benefits in future years. The rate increase became effective April 1, 2018.
Tidewater Rate Matters
Effective January 1, 2020, Tidewater increased its DEPSC-approved Distribution System Improvement Charge
(DSIC) rate, which is expected to generate revenues of approximately $0.5 million annually. A DSIC is a rate-
mechanism that allows water utilities to recover investments in, and generate a return on, qualifying capital
improvements made between base rate proceedings.
Effective March 1, 2019, Tidewater received approval from the DEPSC to reduce its rates to reflect the lower
corporate income tax rate enacted by the Tax Cuts and Jobs Act of 2017, resulting in a 3.35% rate decrease for
certain customer classes.
Pinelands Rate Matters
In October 2019, Pinelands Water and Pinelands Wastewater concluded their base rate case matters when the
NJBPU approved a negotiated settlement amongst the parties for a $0.5 million increase in annual base rates,
effective November 4, 2019. In March 2019, Pinelands had filed their petitions seeking permission to increase
base rates by approximately $0.7 million per year. The requests were necessitated by capital infrastructure
investments both companies had made, and increased operations and maintenance costs.
Southern Shores Rate Matters
Effective January 1, 2020, the DEPSC approved the renewal of a multi-year agreement for water service to a
2,200 unit condominium community in Sussex County, Delaware. Under the agreement, current rates will remain
in effect until December 31, 2024, but should there be unanticipated capital expenditures or regulatory related
changes in operating expenses exceeding certain thresholds during this time period, rates are permitted to be
adjusted to reflect such cost changes. Thereafter, rate increases, if any, cannot exceed the lesser of the regional
Consumer Price Index or 3%. The new agreement expires on December 31, 2029.
Twin Lakes Rate Matters
In July 2019, Twin Lakes filed a petition with the PAPUC seeking permission to increase base rates by
approximately $0.2 million per year. This request was necessitated by capital infrastructure investments Twin
Lakes has made and increased operations and maintenance costs. The matter has been fully litigated and is
subject to a decision by an Administrative Law Judge (ALJ). We cannot predict what decision the ALJ will
render or whether the PAPUC will ultimately approve or deny in part or its entirety the ALJ decision. A decision
by the PAPUC is not expected before March 31, 2020.
7
Future Rate Filings
Management monitors the need for rate relief for our regulated entities on an ongoing basis. When capital
improvements and/or increases in operation and maintenance costs require rate relief, base rate increase requests
are expeditiously filed with the respective Utility Commissions.
Water and Wastewater Quality and Environmental Regulations
Government environmental regulatory agencies regulate our operations in New Jersey, Delaware and
Pennsylvania with respect to water supply, treatment and distribution systems and the quality of the water. They
also regulate our operations with respect to wastewater collection, treatment and disposal.
Regulations relating to water quality require us to perform tests to ensure our water meets state and federal quality
requirements. In addition, government environmental regulatory agencies continuously review current regulations
governing the limits of certain organic compounds found in the water as byproducts of the treatment process. We
participate in industry-related research to identify the various types of technology that might reduce the level of
organic, inorganic and synthetic compounds found in water. The cost to water utilities to comply with the
proposed water quality standards depends in part on the limits set in the regulations and on the method selected to
treat the water to the required standards. We regularly test our water to determine compliance with existing
required government environmental regulatory agencies’ water quality standards.
Treatment of groundwater in our Middlesex System is by chlorination for primary disinfection purposes. In
addition, at certain locations, air stripping is used for removal of volatile organic compounds.
Surface water treatment in our Middlesex System is by conventional treatment; coagulation, sedimentation and
filtration. The treatment process includes pH adjustment, chlorination for disinfection, and corrosion control for
the distribution system.
Treatment of groundwater in our Tidewater System is by chlorination for disinfection purposes and, in some
cases, pH correction and filtration for nitrate and iron removal and granular activated carbon filtration for
organics removal. Chloramination is used for final disinfection at Southern Shores.
Treatment of groundwater in the Pinelands Water, Bayview and Twin Lakes Systems (primary disinfection only)
is performed at individual well sites.
Treatment of wastewater in the Pinelands Wastewater and TESI Systems includes rotating biological contactors.
Membrane bioreactors, sequential batch reactors and lagoon treatment coupled with spray irrigation are also
utilized in the TESI System.
The NJDEP, DEDPH and PADEP monitor our activities and review the results of water quality tests that are
performed for adherence to applicable regulations. Other applicable regulations include the Federal Lead and
Copper Rule, the Federal Surface Water Treatment Rule and the Federal Total Coliform Rule and regulations for
maximum contaminant levels established for various volatile organic compounds.
Seasonality
Customer demand for our water during the warmer months is generally greater than other times of the year due
primarily to additional consumption of water in connection with irrigation systems, swimming pools, cooling
systems and other outside water use. Throughout the year, and particularly during typically warmer months,
demand may vary with temperature and rainfall timing and overall levels. In the event that temperatures during
the typically warmer months are cooler than normal, or if there is more rainfall than normal, the customer demand
for our water may decrease and therefore, adversely affect our revenues.
8
Management
This table lists information concerning our executive management team:
Name
Dennis W. Doll
Age Principal Position(s)
61 President, Chief Executive Officer and Chairman of the Board of
Directors
A. Bruce O’Connor
Jay L. Kooper
Bernadette M. Sohler
Lorrie B. Ginegaw
G. Christian Andreasen, Jr. 60 Vice President-Enterprise Engineering
Robert K. Fullagar
Georgia M. Simpson
61 Senior Vice President, Treasurer and Chief Financial Officer
47 Vice President-General Counsel and Secretary
59 Vice President-Corporate Affairs
44 Vice President-Human Resources
52 Vice President-Operations
46 Vice President-Information Technology
Dennis W. Doll – Mr. Doll joined the Company in 2004 and was named President and Chief Executive Officer
and a Director of Middlesex effective January 1, 2006. In May 2010, he was first elected Chairman of the
Board. He is also Chairman for all subsidiaries of Middlesex. Prior to joining the Company, Mr. Doll had been
employed in various executive leadership roles in the regulated water utility business since 1985. Mr. Doll also
serves as a volunteer Director on selected non-profit Boards including The Water Research Foundation (current
Chairman), American Water Works Association (Executive Committee and Board Member) and Court Appointed
Special Advocates (CASA) of Middlesex County, New Jersey (Executive Committee, Board Member and
Treasurer).
A. Bruce O’Connor – Mr. O’Connor, a Certified Public Accountant, joined the Company in 1990 and was named
Vice President and Chief Financial Officer in 1996 and Treasurer in 2014. On January 1, 2019, Mr. O’Connor
was appointed Senior Vice President of Middlesex and President of Tidewater, TESI and White Marsh. Mr.
O’Connor is also the principal financial officer and a Director of all Middlesex subsidiaries.
Jay L. Kooper – Mr. Kooper joined the Company in March 2014 as Vice President and General Counsel and
serves as Secretary for the Company and all subsidiaries. Prior to joining the Company, Mr. Kooper held various
positions in private and public entities as well as in private law practice, representing electric, gas, water,
wastewater, telephone and cable companies as well as municipalities and private clients before 17 state public
utility commissions and legislatures, federal agencies and federal and state appellate courts. Mr. Kooper serves as
a volunteer director on selected non-profit utility industry-related Boards including the National Association of
Water Companies (current Director and Chairman of the New Jersey Chapter) and the New Jersey State Bar
Association’s Public Utility Law Section (current Consultor and Past Chairman) and on other non-profit boards
based in New Jersey.
Bernadette M. Sohler – Ms. Sohler joined the Company in 1994 and was named Vice President-Corporate Affairs
in March 2007. She also serves as Vice President of USA. Prior to joining the Company, Ms. Sohler held
marketing and public relations management positions in the financial services industry. Ms. Sohler serves as a
volunteer director on area Chambers of Commerce and several other non-profit Boards and is the Chair of the
New Jersey Utilities Association’s Communications Committee.
Lorrie B. Ginegaw – Ms. Ginegaw joined Tidewater in 2004 and in 2007 was promoted to Director of Human
Resources for Middlesex. In March 2012, Ms. Ginegaw was named Vice President-Human Resources. Prior to
joining the Company, Ms. Ginegaw worked in various human resources positions in the healthcare and
transportation/logistics industries. Ms. Ginegaw serves as a volunteer director on the Board of the New Jersey
Utilities Association.
G. Christian Andreasen, Jr. – Mr. Andreasen, a licensed professional engineer, joined the Company in 1982, was
named Assistant Vice President-Enterprise Engineering in January 2019 and promoted to Vice President-
Enterprise Engineering in July 2019. He is President and a Director of Pinelands Water and Pinelands
9
Wastewater. Mr. Andreasen serves as a Director of the American Water Works Association and is Vice Chair of
the NJDEP’s Water Supply Advisory Council.
Robert K. Fullagar – Mr. Fullagar, a licensed professional engineer, joined the Company in 1997, was named
Assistant Vice President-Operations in January 2019 and promoted to Vice President-Operations in July 2019.
He is President and a Director of USA-PA, USA and Twin Lakes. Mr. Fullagar serves as Sector Chair of the
New Jersey Infrastructure Advisory Committee.
Georgia M. Simpson – Ms. Simpson joined the Company in 2009, was named Assistant Vice President-
Information Technology in January 2019 and promoted to Vice President- Information Technology in July 2019.
Prior to joining the Company, Ms. Simpson held various Information Technology positions and has gained an
extensive array of technical and business computer certifications.
ITEM 1A. RISK FACTORS.
Our revenue and earnings depend on the rates we charge our customers. We cannot raise utility rates in
our regulated businesses without filing a petition with the appropriate Utility Commissions. If these
agencies modify, delay, or deny our petition, our revenues will not increase and our earnings will decline
unless we are able to reduce costs.
The NJBPU regulates our public utility companies in New Jersey with respect to rates and charges for service,
classification of accounts, awards of new service territory, acquisitions, financings and other matters. That means,
for example, that we cannot raise the utility rates we charge to our customers without first filing a petition with
the NJBPU and going through a lengthy administrative process. In much the same way, the DEPSC and the
PAPUC regulate our public utility companies in Delaware and Pennsylvania, respectively. We cannot give
assurance of when we will request approval for any such matter, nor can we predict whether these Utility
Commissions will approve, deny or reduce the amount of such requests.
Certain costs of doing business are not completely within our control. The failure to obtain any rate increase
would prevent us from increasing our revenues and, unless we are able to reduce costs, would result in reduced
earnings.
General economic conditions may materially and adversely affect our financial condition and results of
operations.
Adverse economic conditions could negatively impact our customers’ water usage demands, particularly the level
of water usage demand by our commercial and industrial customers in our Middlesex System. If water demand
by our commercial and industrial customers in our Middlesex System were negatively impacted, our financial
condition and results of operations could continue to be negatively impacted.
We are subject to environmental laws and regulations, including water quality and wastewater effluent
quality regulations, as well as other state and local regulations. Compliance with those laws and regulations
requires us to incur costs and we are subject to fines or other sanctions for non-compliance.
Government environmental regulatory agencies regulate our operations in New Jersey, Delaware and
Pennsylvania with respect to water supply, treatment and distribution systems and the quality of water.
Government environmental regulatory agencies also regulate our operations in New Jersey and Delaware with
respect to wastewater collection, treatment and disposal.
Government environmental regulatory agencies’ regulations relating to water quality require us to perform
expanded types of testing to ensure that our water meets state and federal water quality requirements. We are
subject to EPA regulations under the Federal Safe Drinking Water Act, which include the Lead and Copper Rule,
the maximum contaminant levels established for various volatile organic compounds, the Federal Surface Water
Treatment Rule and the Total Coliform Rule. There are also similar NJDEP regulations for our New Jersey water
systems. The NJDEP, DEDPH and PADEP monitor our activities and review the results of water quality tests that
10
we perform for adherence to applicable regulations. In addition, Government Environmental Regulatory Agencies
are continually reviewing regulations governing the limits of certain organic compounds found in the water as
byproducts of treatment.
We are also subject to regulations related to fire protection services in New Jersey and Delaware. In New Jersey
there is no state-wide fire protection regulatory agency. However, New Jersey regulations exist as to the size of
In Delaware, fire protection is regulated
piping required regarding the provision of fire protection services.
statewide by the Office of State Fire Marshal.
The cost of compliance with the water and wastewater effluent quality standards depends in part on the limits set
in the regulations and on the method selected to implement them. If new or more restrictive standards are
imposed, the cost of compliance could be very high and have an adverse impact on our revenues and results of
operations if we cannot recover those costs through our rates that we charge our customers. The cost of
compliance with fire protection requirements could also be high and make us less profitable if we cannot recover
those costs through our rates charged to our customers.
In addition, if we fail to comply with environmental or other laws and regulations to which our business is
subject, we could be fined or subject to other sanctions, which could adversely impact our business or results of
operations.
We depend upon our ability to raise money in the capital markets to finance some of the costs of complying
with laws and regulations, including environmental laws and regulations or to pay for some of the costs of
improvements to or the expansion of our utility system assets. Our regulated utility companies cannot issue
debt or equity securities without prior regulatory approval.
We require financing to fund the ongoing capital program for the improvement in our utility system assets and for
planned expansion of those systems. We expect to spend approximately $295 million for capital projects through
2022. We must obtain prior approval from our economic regulators to sell debt or equity securities to raise money
for these projects. If sufficient capital is not available, or the cost of capital is too high, or if the regulatory
authorities deny a petition of ours to sell debt or equity securities, we may not be able to meet the costs of
complying with environmental laws and regulations or the costs of improving and expanding our utility system
assets to the level we believe operationally prudent. This may result in the imposition of fines from environmental
regulators or restrictions on our operations which could curtail our ability to upgrade or replace utility system
assets.
We rely on our information technology systems to help manage our operations.
Our information technology systems require periodic modifications, upgrades and or replacement which subject
us to costs and risks including potential disruption of our internal control structure, substantial capital
expenditures, additional administration and operating expenses, retention of sufficiently skilled personnel to
implement and operate existing or new systems, and other risks and costs of delays or difficulties in transitioning
to new systems or of integrating new systems into our current systems. In addition, challenges implementing new
technology systems may cause disruptions in our business operations and have an adverse effect on our business
operations, if not anticipated and appropriately mitigated.
We rely on our computer, information and communications technology systems in connection with the operation
of our business, especially with respect to customer service and billing, accounting and, in some cases, the
monitoring and operation of our operating facilities. Our computer and communications systems and operations
could be damaged or interrupted by natural disasters, cyber-attacks, power loss and internet, telecommunications
or data network failures or acts of war or terrorism or similar events or disruptions. Any of these or other events
could cause service interruption, delays and loss of critical data or, impede aspects of operations and therefore,
adversely affect our financial results.
11
Cyber-attacks on entities around the world have caused operational failures and/or compromised corporate and
personal data. Such attacks could result in the loss, or compromise, of customer, financial or operational data,
disruption of billing, collections or normal field service activities, disruption of electronic monitoring and control
of operational systems and delays in financial reporting and other management functions. Possible impacts
associated with a cyber-incident may include remediation costs related to lost, stolen, or compromised data,
repairs to data processing systems, increased cyber security protection costs, adverse effects on our compliance
with regulatory and environmental laws and regulation, including standards for drinking water, litigation and
reputational damage.
Weather conditions and overuse of underground aquifers may interfere with our sources of water, demand
for water services and our ability to supply water to customers.
Our ability to meet current and future water demands of our customers depends on the availability of an adequate
supply of water. Unexpected conditions may interfere with our water supply sources. Drought and overuse of
underground aquifers may limit the availability of ground and/or surface water. Freezing weather may also
contribute to water transmission interruptions caused by water main breakage. Any interruption in our water
supply could cause a reduction in our revenue and profitability. These factors may adversely affect our ability to
supply water in sufficient quantities to our customers. Governmental drought restrictions may result in decreased
customer demand for water services and can adversely affect our revenue and earnings.
Climate variability may cause worsening of weather volatility in the future, which may impact water usage
and related revenue or may require additional expenditures to reduce the risk associated with any
increasing storm, flood and drought occurrences.
The issue of climate variability is receiving increasing attention nationally and worldwide. Some scientific
experts are predicting a worsening of weather volatility in the future associated with climate variability. If true,
increased climate variability may cause increased precipitation and flooding, increased frequency and severity of
storms and other weather events, potential degradation of water quality, decreases in available water supply,
changes in water usage patterns and increases in disruptions in service. Because of the uncertainty of weather
volatility related to climate variability, we cannot predict its potential impact on our business, financial condition,
results of operations, cash flows and liquidity. Although some or all potential expenditures and costs with respect
to our regulated businesses could be recovered through rates, there can be no assurance that the NJBPU, DEPSC
or PAPUC would authorize rate increases to enable us to recover such expenditures and costs, in whole or in part.
Our business is subject to seasonal fluctuations, which could affect demand for our water service and our
revenues.
Demand for our water during the warmer months is generally greater than during cooler months due primarily to
additional consumption of water in connection with irrigation systems, swimming pools, cooling systems and
other outdoor water use. Throughout the year, and particularly during typically warmer months, demand may vary
with temperature and rainfall levels. In the event that temperatures during the typically warmer months are cooler
than normal, or if there is more rainfall than normal, the demand for our water may decrease and adversely affect
our revenues.
Our water sources or water service provided to customers may become contaminated by naturally-
occurring or man-made compounds and events. This may cause disruption in services and impose
operational and regulatory enforcement costs upon us to restore the water to required levels of quality as
well as may damage our reputation and cause private litigation claims against us.
Our sources of water or water in our distribution systems may become contaminated by naturally-occurring or
man-made compounds or other events. In the event that any portion of our water supply sources or water
distribution systems is contaminated, we may need to interrupt service to our customers until we are able to
remediate the contamination or substitute the flow of water from an uncontaminated water source through
existing interconnections with other water purveyors or through our transmission and distribution systems, where
12
possible. We may also incur significant costs in treating any contaminated water, or remediating the effects on our
treatment and distribution systems, through the use of our current treatment facilities, or development of new
treatment methods. Our inability to substitute water supply from an uncontaminated water source, or to
adequately treat the contaminated water supply in a cost-effective manner, may reduce our revenues and make us
less profitable.
We may be unable to recover costs associated with treating or decontaminating water supplies through rates, or
recovery of these costs may not occur in a timely manner. In addition, we could be subject to claims for damages
arising from government enforcement actions or other lawsuits arising out of interruption of service or human
exposure to hazardous substances in our drinking water and water supplies. Such costs could adversely affect our
financial results.
Contamination of the water supply or the water service provided to our customers could result in substantial
injury or damage to our customers, employees or others and we could be exposed to substantial claims and
litigation, which are inherently subject to uncertainties and are potentially subject to unfavorable rulings.
Negative impacts to our profitability and our reputation may occur even if we are not responsible for the
contamination or the consequences arising out of human exposure to contamination or hazardous substances in
the water or water supplies. Pending or future claims against us could have a material adverse impact on our
business, financial condition, results of operations and cash flows.
We face competition from other water and wastewater utilities and service providers which might hinder
our growth and reduce our profitability.
We face risks of competition from other utilities or other entities authorized by federal, state or local agencies to
provide utility services. Once a state utility regulator grants a franchise to a utility to serve a specific territory, that
utility effectively has an exclusive right to service that territory. Although a new franchise offers some protection
against competitors, the pursuit of franchises is often competitive, particularly in Delaware, where new franchises
may be awarded to utilities based upon competitive negotiation. Competing entities have challenged, and may
challenge in the future, our applications for new franchises. Also, third parties entering into long-term agreements
to operate municipal utility systems may adversely affect our long-term agreements to supply water or wastewater
services on a contract basis to municipalities, which could adversely affect our financial results.
We have short-term and long-term contractual obligations for water, wastewater and storm water system
operation and maintenance under which we may incur costs in excess of payments received.
USA-PA operates and maintains the water and wastewater systems of Perth Amboy under a 10-year contract
expiring in 2028. USA operates and maintains the water, wastewater and storm water systems of Avalon under a
10-year contract expiring in 2022. These contracts do not protect us against incurring costs in excess of revenues
we earn pursuant to the contracts. There can be no absolute assurance that we will not experience losses resulting
from these contracts. Losses under these contracts, or our failure or inability to perform or renew such
agreements, may have a material adverse effect on our financial condition and results of operations.
We serve as guarantor of performance of an unaffiliated company under a contract to operate a leachate
pretreatment facility at the Monmouth County Reclamation Center in Tinton Falls, New Jersey.
Middlesex entered into agreements, expiring in 2029, with Applied Water Management, Inc. (AWM), Natural
Systems Utilities, LLC, (NSU) the parent company of AWM, and the County of Monmouth, New Jersey
(County) for the operation of a leachate pretreatment facility at the Monmouth County Reclamation Center in
Tinton Falls, New Jersey. Under the terms of the agreement, AWM operates the County-owned landfill leachate
pretreatment facility. Middlesex is the guarantor of AWM's performance under the agreement (the Guaranty), for
which Middlesex earns a fee, in addition to providing operational support if necessary. If asked to perform under
the Guaranty, Middlesex could be required to fulfill the remaining operational commitments of AWM. There can
be no absolute assurance that we will not experience losses if asked to perform under the Guaranty. Losses from
performance under this Guaranty, or our failure or inability to perform, may have a material adverse effect on our
13
financial condition and results of operations. NSU and AWM have indemnified Middlesex for any costs
Middlesex may incur in connection with its Guaranty to the County.
Capital market conditions and key assumptions may adversely impact the value of our postretirement
benefit plan assets and liabilities.
Market factors can adversely affect the rate of return on assets held in trusts to satisfy our future postretirement
benefit obligations as well negatively affect interest rates, which impacts the discount rates used in the
determination of our postretirement benefit actuarial valuations. In addition, changes in demographics, such as
increases in life expectancy assumptions, can increase future postretirement benefit obligations. Any negative
impact to these factors, either individually or a combination thereof, may have a material adverse effect on our
financial condition and results of operations.
An element of our growth strategy is the acquisition of water and wastewater assets, operations, contracts
or companies. Any pending or future acquisitions we decide to undertake will involve risks.
The acquisition and/or operation of water and wastewater systems is an element of our growth strategy. This
strategy depends on identifying suitable opportunities and reaching mutually agreeable terms with acquisition
candidates or contract parties. Further, acquisitions may result in dilution of our equity securities, incurrence of
debt and contingent liabilities, fluctuations in quarterly results and other related expenses. In addition, the assets,
operations, contracts or companies we acquire may not achieve the revenues and profitability expected.
The current concentration of our business in central New Jersey and Delaware makes us susceptible to
adverse development in local regulatory, economic, demographic, competitive and weather conditions.
Our New Jersey water and wastewater businesses provide services to customers who are located primarily in
eastern Middlesex County, New Jersey. Water service is provided under wholesale contracts to the Townships of
Edison, East Brunswick and Marlboro, the Borough of Highland Park, the Old Bridge Municipal Utilities
Authority and the City of Rahway. We also provide water and wastewater services to customers in the State of
Delaware. Our revenues and operating results are therefore subject to local regulatory, economic, demographic,
competitive and weather conditions in a relatively concentrated geographic area. A change in any of these
conditions could make it more costly for us to conduct our business.
The necessity for ongoing security has resulted, and may continue to result, in increased operating costs.
Because of physical and operational threats to the health and security of the United States of America, we employ
procedures to review and modify, as necessary, physical and other security measures at our facilities. We provide
ongoing training and communications to our employees about threats to our water supply, our assets and related
systems and our employees’ personal safety. We have incurred, and will continue to incur, costs for security
measures to protect against such risks.
Our ability to achieve organic customer growth in our market area is dependent on the residential building
market. New housing starts are one element that impacts our rate of growth and therefore, may not meet
our expectations.
We expect our revenues to increase from customer growth for our regulated water and wastewater operations as a
result of anticipated construction and sale of new housing units. If housing starts decline, or do not increase as we
have projected, as a result of economic conditions or otherwise, the timing and extent of our organic revenue
growth may not meet our expectations, our deferred project costs may not produce revenue-generating projects in
the timeframes anticipated and our financial results could be negatively impacted.
There can be no assurance we will continue to pay dividends in the future or, if dividends are paid, that
they will be in amounts similar to past dividends.
We have paid dividends on our common stock each year since 1912 and have increased the amount of dividends
paid each year since 1973. Our earnings, financial condition, capital requirements, applicable regulations and
14
other factors, including the timeliness and adequacy of rate increases, will determine both our ability to pay
dividends and the amount of those dividends. There can be no assurance that we will continue to pay dividends in
the future or, if dividends are paid, that they will be in amounts similar to past dividends.
If we are unable to pay the principal and interest on our indebtedness as it comes due or we default under
certain other provisions of our loan documents, our indebtedness could be accelerated and our results of
operations and financial condition could be adversely affected.
Our ability to pay the principal and interest on our indebtedness as it comes due will depend upon our current and
future performance. Our performance is affected by many factors, some of which are beyond our control.
We believe cash generated from operations and, if necessary, borrowings under existing credit facilities, will be
sufficient to enable us to make our debt payments as they become due. If, however, we do not generate sufficient
cash, we may be required to refinance our obligations or sell additional equity, which may be on terms that are
less favorable than we desire.
No assurance can be given that any refinancing or sale of equity will be possible when needed, or that we will be
able to negotiate acceptable terms. In addition, our failure to comply with certain provisions contained in our
trust indentures and loan agreements relating to our outstanding indebtedness could lead to a default under these
documents, which could result in an acceleration of our indebtedness.
We depend significantly on the technical and management services of our senior management team, and
the departure of any of those persons could cause our operating results to temporarily be short of our
expectations.
Our success depends significantly on the continued individual and collective contributions of our senior
management team. If we lose the services of any member of our senior management, or are unable to attract and
retain qualified senior management personnel, our operating results could be negatively impacted.
We are subject to anti-takeover measures that may be used to discourage, delay or prevent changes of
control that might benefit non-management shareholders.
Subsection 10A of the New Jersey Business Corporation Act, known as the New Jersey Shareholders Protection
Act, applies to us. The Shareholders Protection Act deters merger proposals, tender offers or other attempts to
effect changes in control that are not approved by our Board of Directors. In addition, we have a classified Board
of Directors, which means only a portion of the Director population is elected each year. A classified Board can
make it more difficult for an acquirer to gain control of the Company by voting its candidates onto the Board of
Directors and may also deter merger proposals and tender offers. Our Board of Directors also has the ability,
subject to obtaining NJBPU approval, to issue one or more series of preferred stock having such number of
shares, designation, preferences, voting rights, limitations and other rights as the Board of Directors may fix. This
could be used by the Board of Directors to discourage, delay or prevent an acquisition that the Board of Directors
determines is not in the best interest of the common shareholders.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2. PROPERTIES.
Utility Plant
The water utility plant in our systems consists of source of supply, pumping, water treatment, transmission and
distribution, general facilities and all appurtenances, including all connecting pipes.
The wastewater utility plant in our systems consist of pumping, treatment, collection mains, general facilities and
all appurtenances, including all connecting pipes.
15
Middlesex System
The Middlesex System’s principal source of surface supply is the Delaware & Raritan Canal owned by the State
of New Jersey and operated as a water resource by the NJWSA.
Water is withdrawn from the Delaware & Raritan Canal at New Brunswick, New Jersey through our intake and
pumping station, located on state-owned land bordering the canal. Water is transported through two raw water
pipelines for treatment and distribution at our CJO Water Treatment Plant in Edison, New Jersey.
The CJO Water Treatment Plant includes chemical storage and chemical feed equipment, two dual rapid mixing
basins, four upflow clarifiers which are also called superpulsators, four underground reinforced chlorine contact
tanks, twelve rapid filters containing gravel, sand and anthracite for water treatment and a steel washwater tank.
The CJO Water Treatment Plant also includes a computerized Supervisory Control and Data Acquisitions system
to monitor and control the CJO Water Treatment Plant and the water supply and distribution system in the
Middlesex System. There is an on-site State of New Jersey certified laboratory capable of performing
bacteriological, chemical, process control and advanced instrumental chemical sampling and analysis. The firm
design capacity of the CJO Water Treatment Plant is 55 mgd (60 mgd maximum capacity). The five electric
motor-driven, vertical turbine pumps presently installed have an aggregate capacity of 85 mgd.
In addition, there is a 15 mgd auxiliary pumping station located at the CJO Water Treatment Plant location. It has
a dedicated substation and emergency power supply provided by a diesel-driven generator. It pumps from the 10
million gallon distribution storage reservoir directly into the distribution system.
The transmission and distribution system is comprised of 741 miles of mains and includes 24,300 feet of 48-inch
concrete transmission main connecting the CJO Water Treatment Plant to our distribution pipe network and
related storage facilities. Also included are a 58,600 foot transmission main and a 38,800 foot transmission main,
augmented with a long-term, non-exclusive agreement with East Brunswick to transport water through the East
Brunswick system to several of our other contract customers.
The Middlesex System’s storage facilities consist of a 10 million gallon reservoir at the CJO Water Treatment
Plant, 5 million gallon and 2 million gallon reservoirs in Edison and a 2 million gallon reservoir at the Park
Avenue Well Field.
In New Jersey, we own the properties on which the Middlesex System’s 31 wells are located, the properties on
which our storage tanks are located as well as the property where the CJO Water Treatment Plant is located. We
own our operations center located at 1500 Ronson Road, Iselin, New Jersey, consisting of a 27,000 square foot
office building, 16,500 square foot maintenance facility and a 1.96 acre equipment and materials storage and
staging yard. We lease 29,036 square feet of commercial office space across the street from the Ronson Road
complex. The leased space, which is under contract through 2028, is home to our corporate administrative
departments including executive, accounting, customer service and billing, engineering, human resources,
information technology and legal.
Tidewater System
The Tidewater System is comprised of 86 production plants that vary in pumping capacity from 46,000 gallons
per day to 4.4 mgd. Water is transported to our customers through 792 miles of transmission and distribution
mains. Storage facilities include 48 tanks, with an aggregate capacity of 7.8 million gallons. The Delaware office
property, located on an eleven-acre parcel owned by White Marsh, consists of two office buildings totaling
approximately 17,000 square feet. In addition, Tidewater maintains a field operations center servicing its largest
service territory area in Sussex County, Delaware. The operations center is located on a 2.9 acre parcel owned by
White Marsh, and consists of two buildings totaling approximately 8,400 square feet.
16
Pinelands Water System
Pinelands Water owns well site and storage properties in Southampton Township, New Jersey. The Pinelands
Water storage facility is a 1.3 million gallon standpipe. Water is transported to our customers through 18 miles of
transmission and distribution mains.
Pinelands Wastewater System
Pinelands Wastewater owns a 12 acre site on which its 0.5 mgd capacity tertiary treatment plant and connecting
pipes are located. Its wastewater collection system is comprised of approximately 24 miles of sewer lines.
Bayview System
Bayview owns two well sites, which are located in Downe Township, Cumberland County, New Jersey. Water is
transported to its customers through our 4.2 mile distribution system.
TESI System
The TESI System is comprised of seven wastewater treatment systems in Southern Delaware. The treatment
plants provide clarification, sedimentation, and disinfection. The combined total capacity of the plants is 0.7 mgd.
TESI’s wastewater collection system is comprised of approximately 47.5 miles of sewer lines.
Twin Lakes System
Twin Lakes owns one operational well site, which is located in the Township of Shohola, Pike County,
Pennsylvania. Water is transported to our customers through 3.7 miles of distribution mains.
USA-PA, USA and White Marsh
Our non-regulated subsidiaries, namely USA-PA, USA and White Marsh, do not own utility plant property.
ITEM 3.
LEGAL PROCEEDINGS.
The Company is a defendant in lawsuits in the normal course of business. We believe the resolution of pending
claims and legal proceedings will not have a material adverse effect on the Company’s consolidated financial
statements.
ITEM 4.
MINE SAFETY DISCLOSURES.
Not applicable.
17
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
The Company’s common stock is traded on the NASDAQ Stock Market, LLC, under the symbol MSEX. As of
December 31, 2019, there were 1,845 holders of record.
The Company has paid dividends on its common stock each year since 1912. The payment of future dividends is
contingent upon the future earnings of the Company, its financial condition and other factors deemed relevant by
the Board of Directors at its discretion.
If four or more quarterly dividends are in arrears, the preferred shareholders, as a class, are entitled to elect two
members to the Board of Directors in addition to Directors elected by holders of the common stock. In the event
dividends on the preferred stock are in arrears, no dividends may be declared or paid on the common stock of the
Company.
In November 2019, the Company sold and issued 0.8 million shares of its common stock in a public offering
priced at $60.50 per share. The net proceeds of $43.7 million were used for general corporate purposes including
repayment of a portion of the Company’s short-term debt outstanding.
The Company issues shares of its common stock in connection with its Middlesex Water Company Investment
Plan (the Investment Plan), a direct share purchase and dividend reinvestment plan for the Company’s common
stock. Since the inception of the Investment Plan and its predecessor plan, the Company has periodically
replenished the level of authorized shares in the plans. Currently, there remains 0.4 million shares registered with
the SEC for the Investment Plan and available for potential issuance to participants. In January 2019, the
Investment Plan
Company activated a limited share purchase discount feature of the Investment Plan.
participants were invited to purchase shares directly as well as reinvest their common stock dividends at a 5%
discount. In August 2019, the 0.2 million share purchase limit was reached and the discount offer
terminated. The Company raised approximately $12.7 million through the issuance of over 0.2 million shares
under the Investment Plan during 2019.
The Company maintains a stock incentive compensation plan for certain management employees (the 2018
Restricted Stock Plan). Shares issued in connection with the 2018 Restricted Stock Plan are subject to forfeiture
by the employee in the event of termination of employment within five years of the award other than as a result of
normal retirement, death, disability or change in control. The maximum number of shares authorized for grant
under the 2018 Restricted Stock Plan is 0.3 million shares, of which approximately 94% remain available for
award.
The Company maintains a stock compensation plan for its outside directors (the Outside Director Stock
Compensation Plan). In 2019, 3,521 shares of the Company’s common stock were granted and issued to the
Company’s outside directors under the Outside Director Stock Compensation Plan. The maximum number of
shares authorized for grant under the Outside Director Stock Compensation Plan is 0.1 million. Approximately
57% of the authorized shares remain available for future.
Set forth below is a line graph comparing the yearly change in the cumulative total return (which includes
reinvestment of dividends) of a $100 investment for the Company’s common stock, a peer group of investor-
owned water utilities, and the Dow Jones Wilshire 5000 Stock Index for the period of five years commencing
December 31, 2014. The Dow Jones Wilshire 5000 Stock Index measures the performance of all U.S.
headquartered equity securities with readily available price data.
18
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among Middlesex Water Company, the Dow Jones Wilshire 5000 Stock Index and a Peer Group*
Wilshire 5000 Index
Middlesex Water Company
Peer Group*
$325
$300
$275
$250
$225
$200
$175
$150
$125
$100
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
* Peer group includes American States Water Company, Artesian Resources Corp., California Water
Service Group, SJW Corp., York Water Company and Middlesex.
Middlesex Water Company
Dow Jones Wilshire 5000 Stock Index
Peer Group
December 31,
2014
100.00
100.00
100.00
2015
119.03
100.67
108.74
2016
197.15
114.13
155.64
2017
187.44
138.08
183.60
2018
255.93
130.81
183.78
2019
309.99
171.38
228.74
19
ITEM 6. SELECTED FINANCIAL DATA.
CONSOLIDATED SELECTED FINANCIAL DATA
(Thousands Except per Share Data)
Operating Revenues
Operating Expenses:
Operations and Maintenance
Depreciation
Other Taxes
Total Operating Expenses
Operating Income
Other Income (Expense), Net
Interest Charges
Income Taxes
Net Income
Preferred Stock Dividend
Earnings Applicable to Common Stock
Earnings per Share:
Basic
Diluted
Average Shares Outstanding:
Basic
Diluted
Dividends Declared and Paid
Total Assets
Convertible Preferred Stock
Long-term Debt
2019
$
134,598
2018
138,077
$
2017
130,775
$
2016
132,906
$
2015
126,025
$
67,980
16,716
14,382
99,078
35,520
2,492
7,264
(3,140)
33,888
132
33,756
2.02
2.01
16,685
16,829
0.976
909,878
1,005
230,777
71,570
15,037
14,328
100,935
37,142
2,992
6,758
924
32,452
144
32,308
1.97
1.96
16,384
16,540
0.911
767,830
1,354
152,851
$
$
$
$
$
$
$
$
$
$
$
$
$
$
65,490
13,922
13,565
92,977
37,798
1,617
5,506
11,100
22,809
144
22,665
1.39
1.38
16,330
16,486
0.858
661,140
1,354
139,045
$
$
$
$
$
$
$
65,864
12,796
13,944
92,604
40,302
(532)
5,293
11,735
22,742
144
22,598
1.39
1.38
16,270
16,426
0.808
620,161
1,356
134,538
$
$
$
$
$
$
$
64,759
12,051
12,967
89,777
36,248
(115)
5,554
10,551
20,028
144
19,884
1.23
1.22
16,175
16,331
0.776
581,383
1,356
132,908
$
$
$
$
$
$
$
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
The following discussion of the Company’s historical results of operations and financial condition should be read
in conjunction with the Company’s consolidated financial statements and related notes.
Management’s Overview
Operations
Middlesex Water Company (Middlesex or the Company) has operated as a water utility in New Jersey since
1897, in Delaware through our wholly-owned subsidiary, Tidewater Utilities, Inc. (Tidewater), since 1992 and in
Pennsylvania through our wholly-owned subsidiary, Twin Lakes Utilities, Inc. (Twin Lakes), since 2009. We are
in the business of collecting, treating and distributing water for domestic, commercial, municipal, industrial and
fire protection purposes. We also operate water and wastewater systems under contract for governmental entities
and private entities in New Jersey, Delaware and Maryland and provide regulated wastewater services in New
Jersey and Delaware through five subsidiaries. We are regulated by public utility commissions as to rates
charged to customers for water and wastewater services, as to the quality of water service we provide and as to
certain other matters in New Jersey, Delaware and Pennsylvania. Only our Utility Service Affiliates, Inc. (USA),
Utility Service Affiliates (Perth Amboy), Inc. (USA-PA) and White Marsh Environmental Services, Inc. (White
20
Marsh) subsidiaries are not regulated public utilities as related to rates and services quality. All entities however,
are subject to environmental regulation at the federal and state levels.
Our primary New Jersey water utility system (the Middlesex System) provides water services to approximately
61,000 retail customers, primarily in central New Jersey. The Middlesex System also provides water sales under
contract to municipalities in central New Jersey with a total population of over 0.2 million. Our Bayview system
provides water services in Downe Township, New Jersey. Our other New Jersey subsidiaries, Pinelands Water
Company (Pinelands Water) and Pinelands Wastewater Company (Pinelands Wastewater)
(collectively,
Pinelands), provide water and wastewater services to approximately 2,500 customers in Southampton Township,
New Jersey.
Our Delaware subsidiaries, Tidewater and Southern Shores Water Company, LLC (Southern Shores), provide
water services to approximately 50,000 retail customers in New Castle, Kent and Sussex Counties, Delaware.
Tidewater’s subsidiary, White Marsh, services approximately 1,700 customers in Kent and Sussex Counties, as
well as portions of Maryland, through various operations and maintenance contracts.
Our Tidewater Environmental Services, Inc. (TESI) subsidiary provides wastewater services to approximately
3,700 retail customers in Sussex Counties, Delaware.
USA-PA operates the water and wastewater systems for the City of Perth Amboy, New Jersey (Perth Amboy)
under a 10-year operations and maintenance contract expiring in 2028. In addition to performing day-to day
operations, USA-PA is also responsible for emergency response and management of capital projects funded by
Perth Amboy.
USA operates the Borough of Avalon, New Jersey’s (Avalon) water utility, sewer utility and storm water system
under a 10-year operations and maintenance contract expiring in 2022. In addition to performing day-to-day
operations, USA is responsible for billing, collections, customer service, emergency response and management of
capital projects funded by Avalon. Under a marketing agreement with HomeServe, USA offers residential
customers in New Jersey and Delaware water and wastewater related services and home maintenance programs.
HomeServe is a leading national provider of such home maintenance service programs. USA receives a service
fee for the billing, cash collection and other administrative matters associated with HomeServe’s service
contracts. USA also provides unregulated water and wastewater services under contract with several New Jersey
municipalities.
Our Pennsylvania subsidiary, Twin Lakes, provides water services to 115 retail customers in the Township of
Shohola, Pike County, Pennsylvania.
Recent Developments
Capital Construction Program - The Company’s multi-year capital construction program encompasses
numerous projects designed to upgrade and replace utility infrastructure as well as enhance the integrity and
reliability of assets to better serve the current and future generations of water and wastewater customers. The
Company plans to invest approximately $124 million in 2020 in connection with this plan for projects that
include, but are not limited to:
• Enhanced treatment process at the Company’s largest water treatment plant in Edison, New Jersey, to
mitigate the formation of disinfection by-products that can develop during the water treatment process;
• Enhanced treatment processes at the Company’s primary wellfield in South Plainfield, New Jersey to
comply with new more stringent water quality regulations and integrate surge mitigation along with
revisions to corrosion control and chlorination;
• Replacement of approximately six miles of water mains including service lines, valves, fire hydrants and
meters in Edison and South Amboy, New Jersey;
• Construction of a new replacement wastewater treatment plant to serve our customers in the Town of
Milton, Delaware;
21
• Relocation of water meters from inside customers’ premises to exterior meter pits to allow more timely
access by crews in emergencies, enhance customer safety and convenience and reduce non-revenue water;
and
• Additional standby emergency power generation.
Tidewater Acquires Water Systems – In November 2019, Tidewater completed a $1.8 million Delaware Public
Service Commission (DEPSC)-approved purchase of the water utility assets of J.H. Wilkerson and Son, Inc. and
transfer of the Certificate of Public Convenience and Necessity in order for Tidewater to serve the approximate
1,000 customers currently connected to eight community water systems located mostly in eastern Sussex County,
Delaware. The DEPSC also authorized Tidewater to maintain the existing customer rates.
Common Stock Offering - In November 2019, the Company sold and issued 0.8 million shares of common stock
in a public offering priced at $60.50 per share. The net proceeds of $43.7 million were used for general corporate
purposes including repayment of a portion of the Company’s outstanding short-term debt.
Strategy for Growth
Our strategy for profitable growth is focused on the following key areas:
•
Invest in projects, products and services that complement our core water and wastewater competencies;
• Timely and adequate recovery of infrastructure investments and other costs to maintain service quality;
• Prudent acquisitions of investor and municipally-owned water and wastewater utilities; and
• Operation of municipal and industrial water and wastewater systems on a contract basis which meet our
risk profile.
Rates
Middlesex - In November 2019, Middlesex filed a petition with the New Jersey Board of Public Utilities
(NJBPU) seeking approval to reset its Purchased Water Adjustment Clause (PWAC) tariff rate currently in effect
to recover additional costs of $0.5 million for the purchase of treated water from a non-affiliated regulated water
utility regulated by the NJBPU. A PWAC is a rate mechanism that allows for recovery of increased purchased
water costs between base rate case filings. The PWAC is reset to zero once those increased costs are included in
base rates. We cannot predict whether the NJBPU will ultimately approve, deny or reduce the amount of our
request.
In December 2018, the NJBPU approved Middlesex’s petition to establish its PWAC tariff rate to recover
additional annual costs of less than $0.1 million, primarily for the purchase of treated water from a non-affiliated
water utility. The PWAC tariff rate became effective on January 1, 2019.
In March 2018, Middlesex’s petition to the NJBPU seeking permission to increase its base water rates was
concluded, based on a negotiated settlement, resulting in an increase in annual operating revenues of $5.5 million.
The approved base water rates were designed to recover increased operating costs as well as a return on invested
capital in rate base of $245.5 million, based on an authorized return on common equity of 9.6%. As part of the
settlement, Middlesex received approval for regulatory accounting treatment of accumulated deferred income tax
benefits associated with required adoption of tangible property regulations issued by the Internal Revenue
Service. The settlement agreement allowed for a four-year amortization period for $28.7 million of deferred
income tax benefits as well as immediate and prospective recognition of the tangible property regulations’ tax
benefits in future years. The rate increase became effective April 1, 2018.
Tidewater - Effective January 1, 2020, Tidewater increased its DEPSC-approved Distribution System
Improvement Charge (DSIC) rate, which is expected to generate revenues of approximately $0.5 million
annually. A DSIC is a rate-mechanism that allows water utilities to recover investments in, and generate a return
on, qualifying capital improvements made between base rate proceedings.
22
Effective March 1, 2019, Tidewater received approval from the DEPSC to reduce its rates to reflect the lower
corporate income tax rate enacted by the Tax Cuts and Jobs Act of 2017 (the Tax Act), resulting in a 3.35% rate
decrease for certain customer classes.
Pinelands - In October 2019, Pinelands Water and Pinelands Wastewater concluded their base rate case matters
when the NJBPU approved a negotiated settlement amongst the parties for a $0.5 million increase in annual base
rates, effective November 4, 2019. In March 2019, Pinelands had filed their petitions seeking permission to
increase base rates by approximately $0.7 million per year. The requests were necessitated by capital
infrastructure investments both companies had made, and increased operations and maintenance costs.
Southern Shores - Effective January 1, 2020, the DEPSC approved the renewal of a multi-year agreement for
water service to a 2,200 unit condominium community in Sussex County, Delaware. Under the agreement,
current rates will remain in effect until December 31, 2024, but should there be unanticipated capital expenditures
or regulatory related changes in operating expenses exceeding certain thresholds during this time period, rates are
permitted to be adjusted to reflect such cost changes. Thereafter, rate increases, if any, cannot exceed the lesser of
the regional Consumer Price Index or 3%. The new agreement expires on December 31, 2029.
Twin Lakes - In July 2019, Twin Lakes filed a petition with the Pennsylvania Public Utilities Commission
(PAPUC) seeking permission to increase base rates by approximately $0.2 million per year. This request was
necessitated by capital infrastructure investments Twin Lakes has made and increased operations and
maintenance costs. The matter has been fully litigated and is subject to a decision by an Administrative Law
Judge (ALJ). We cannot predict what decision the ALJ will render or whether the PAPUC will ultimately
approve or deny in part or its entirety the ALJ decision. A decision by the PAPUC is not expected before March
31, 2020.
Outlook
Our ability to increase operating income and net income is based significantly on four factors: weather, adequate
and timely rate relief, effective cost management and customer growth (which are evident in comparison
discussions in the Results of Operations section below). Weather patterns over the last three years in our service
territories, which resulted in lower customer demand for water, may reoccur in 2020. As operating costs are
anticipated to increase in 2020 in a variety of categories, we continue to implement plans to further streamline
operations and further reduce, and mitigate increases in, operating costs. Changes in customer water usage habits,
as well as increases in capital expenditures and operating costs, are significant factors in determining the timing
and extent of rate increase requests.
Organic residential customer growth for 2020 is expected to be consistent with that experienced in recent years.
The Company has projected to spend approximately $295 million on its 2020-2022 capital investment program,
including approximately $53 million for the upgrade of Middlesex’s main water treatment plant in New Jersey,
$34 million on our RENEW Program, our ongoing initiative to eliminate unlined mains in the Middlesex System,
$25 million for wellfield upgrades in the Middlesex System, $13 million for construction of a new replacement
wastewater treatment plant in Milton, Delaware and $13 million to relocate water meters from inside customers’
premises to exterior meter pits in our Middlesex system.
Operating Results by Segment
The Company has two operating segments, Regulated and Non-Regulated. Our Regulated segment contributed
approximately 91%, 88% and 88% of total revenues for the years ended December 31, 2019, 2018 and 2017,
respectively and approximately 93%, 93% and 94% of net income for the years ended December 31, 2019, 2018
and 2017, respectively. The discussion of the Company’s results of operations is on a consolidated basis and
includes significant factors by subsidiary. The segments in the tables included below are comprised of the
following companies: Regulated- Middlesex, Tidewater, Pinelands, Southern Shores, TESI and Twin Lakes; Non-
Regulated- USA, USA-PA, and White Marsh.
23
Results of Operations for 2019 as Compared to 2018
(In Millions)
Years Ended December 31,
2019
Non-
Regulated
Total
2018
Non-
Regulated
Total
Regulated
$122.8
60.5
16.5
14.2
$138.1
71.6
15.0
14.3
31.6 3.9 35.5 34.2 3.0 37.2
$134.6
68.0
16.7
14.4
$16.4
12.8
0.2
0.4
$11.8
7.5
0.2
0.2
Regulated
$121.7
58.8
14.8
13.9
2.9
2.5
2.8 (0.3)
0.1
6.7
7.3
7.2
1.2 (3.2) (0.1)
(4.4)
$30.5
$31.6
$33.9
$2.3
0.1
0.1
1.0
$2.0
3.0
6.8
0.9
$32.5
Revenues
Operations and maintenance expenses
Depreciation expense
Other taxes
Operating income
Other income (expense), net
Interest expense
Income taxes
Net income
Operating Revenues
Operating revenues for the year ended December 31, 2019 decreased $3.5 million from the same period in 2018.
This decrease was related to the following factors:
• Middlesex System total revenues remained consistent with the same period in 2018 due to the following:
o Reduced water consumption related to lower demand from our industrial and contract customers,
resulting in reduced revenues of $1.2 million; and
o Effective April 1, 2018, a NJBPU-approved base rate increase resulted in higher revenues of $1.2
million;
• Tidewater System revenues increased $1.0 million primarily due to additional customers, which was
mitigated by reduced base tariff rates. The reduction in base rates was approved by the DEPSC and
became effective March 1, 2019, and was prompted by the lower corporate income tax rate enacted under
the Tax Act. There is a corresponding decrease in income tax expense; and
• Non-regulated revenues decreased $4.6 million, primarily due to changes resulting from USA-PA’s new
10-year contract with Perth Amboy. Under the new contract, effective January 1, 2019, USA-PA has
direct management control for wastewater services, for which USA-PA is compensated. Under the prior
contract, USA-PA utilized, and was compensated for, subcontracted wastewater services. Elimination of
these subcontracted wastewater services resulted in a related decrease in operations and maintenance
expense along with an increase in operating margin; and
• All other operating revenue categories increased $0.1 million.
Operation and Maintenance Expense
Operation and maintenance expenses for the year ended December 31, 2019 decreased $3.6 million from the
same period in 2018, primarily related to the following factors:
• Operation and maintenance expenses in our non-regulated subsidiaries decreased $5.2 million, primarily
due to our new Perth Amboy operating contract, effective January 1, 2019, under which USA-PA no
longer incurs sub-contractor fees for wastewater services. This results in a related decrease in operating
revenues along with an increase in operating margin;
• Retirement benefit plan expenses decreased $0.4 million primarily due to lower actuarially-determined
retirement benefit plan service expense;
24
• Labor costs increased $2.1 million due to increased headcount, increased average labor rates and
payments relative to certain retiring employees; and
• All other operation and maintenance expense categories decreased $0.1 million.
Depreciation
Depreciation expense for the year ended December 31, 2019 increased $1.7 million from the same period in 2018
due to a higher level of utility plant in service.
Other Taxes
Other taxes for the year ended December 31, 2019 increased $0.1 million from the same period in 2018 primarily
due to higher payroll taxes offset by lower revenue related taxes on lower revenues in our Middlesex system.
Other Income, net
Other Income, net for the year ended December 31, 2019 decreased $0.5 million from the same period in 2018,
primarily due to higher actuarially-determined retirement benefit plan non-service expense, White Marsh contract
compliance costs, TESI business development costs and the sale of wastewater franchise rights by our TESI
subsidiary in 2018. These decreases were partially offset by higher Allowance for Funds Used During
Construction resulting from a higher level of capital construction projects in progress.
Interest Charges
Interest charges for the year ended December 31, 2019 increased $0.5 million from the same period in 2018 due
to higher average short-term and long-term debt outstanding in 2019 as compared to 2018 partially offset by
lower interest associated with IRS examinations of the Company’s federal income tax returns.
Income Taxes
Income taxes for year ended December 31, 2019 decreased $4.1 million from the same period in 2018, primarily
due to lower pre-tax income and the regulatory accounting treatment of tax benefits associated with the adoption
of the tangible property regulations, prescribed by the IRS, which was approved in Middlesex’s 2018 base rate
case decision. In addition, Tidewater’s effective income tax rate was decreased in March 2019, reflecting the rate
reduction approved by the DEPSC to reflect the lower corporate income tax rate resulting from implementation of
the Tax Act. This has resulted in a corresponding decrease in operating revenues.
Net Income and Earnings Per Share
Net income for the year ended December 31, 2019 increased $1.4 million as compared with the same period in
2018. Basic earnings per share were $2.02 and $1.97 for the years ended December 31, 2019 and 2018,
respectively. Diluted earnings per share were $2.01 and $1.96 for the years ended December 31, 2019 and 2018,
respectively.
25
Results of Operations for 2018 as Compared to 2017
(In Millions)
Years Ended December 31,
2018
Non-
Regulated
Regulated
Total
Regulated
2017
Non-
Regulated
Total
Revenues
Operations and maintenance expenses
Depreciation expense
Other taxes
Operating income
Other income (expense), net
Interest expense
Income taxes
Net income
Operating Revenues
$121.7
58.8
14.8
13.9
$130.8
65.5
13.9
13.6
34.2 3.0 37.2 35.2 2.6 37.8
$115.3
53.2
13.7
13.2
$138.1
71.6
15.0
14.3
$15.5
12.3
0.2
0.4
$16.4
12.8
0.2
0.4
2.9
6.7
(0.1)
$30.5
0.1
0.1
1.0
$2.0
3.0
6.8
0.9
$32.5
1.5
5.4
9.8
$21.5
0.1
0.1
1.3
$1.3
1.6
5.5
11.1
$22.8
Operating revenues for the year ended December 31, 2018 increased $7.3 million from the same period in 2017.
This increase was related to the following factors:
• Middlesex System revenues increased $4.9 million due to the following:
o Effective April 1, 2018, a NJBPU-approved base rate increase resulted in higher revenues of $4.3
million;
o Higher water demand from Contract customers of $0.6 million;
• Tidewater System revenues increased $1.4 million due to additional customers;
• Non-Regulated revenues rose by $0.9 million as White Marsh increased the number of contracts to
operate water and wastewater systems and increased the level of supplemental services to existing
customers under contract.; and
• All other operating revenue categories increased $0.1 million.
Operation and Maintenance Expense
Operation and maintenance expenses for the year ended December 31, 2018 increased $6.1 million from the same
period in 2017, primarily related to the following factors:
• Variable production costs increased $1.2 million due to increased volumes and higher rates paid for
purchased water and higher treatment costs due to weather-impacted changes in raw water quality;
• Labor costs rose $1.5 million due to increases in headcount for regulatory and other operational needs,
wage increases overall averaging approximately 3% and overtime costs for weather related water main
break activity;
• Employee healthcare and business liability insurance costs increased $0.9 million due to higher net policy
premiums;
• Higher employee retirement related incentive compensation costs of $0.4 million;
• Higher rent expense of $0.4 million due to an increase in the square footage of commercial office space
under lease to accommodate various operational and administrative needs;
• Compliance with the State of New Jersey Water Quality Accountability Act increased regulatory related
costs by $0.3 million;
• Transportation expenses increased $0.3 million due to higher fuel prices;
26
• Higher weather-related water main break repair activity in our Middlesex system resulted in additional
$0.3 million of non-labor costs;
• Higher information technology costs of $0.2 million due to increased licensing fees; and
• All other operation and maintenance expense categories increased $0.6 million.
Depreciation
Depreciation expense for the year ended December 31, 2018 increased $1.1 million from the same period in 2017
due to a higher level of utility plant in service.
Other Taxes
Other taxes for the year ended December 31, 2018 increased $0.8 million from the same period in 2017 primarily
due to higher revenue related taxes on increased revenues in our Middlesex system.
Other Income, net
Other Income, net for the year ended December 31, 2018 increased $1.4 million from the same period in 2017
primarily due to higher Allowance for Funds Used During Construction resulting from a higher level of capital
projects in progress, higher actuarially-determined retirement benefit plan non-service credits and the sale of
wastewater franchise rights by our TESI subsidiary.
Interest Charges
Interest charges for the year ended December 31, 2018 increased $1.3 million from the same period in 2017 due
to higher average amounts of total debt outstanding, increased short-term debt interest rates and accrued interest
associated with the IRS examination of the Company’s 2014 federal income tax return.
Income Taxes
Income taxes for the year ended December 31, 2018 decreased $10.2 million from the same period in 2017,
primarily due to regulatory accounting treatment of tangible property regulations tax deductions, which were
approved in Middlesex’s most recent base rate case and a lower effective tax rate resulting from the Tax Act.
Net Income and Earnings Per Share
Net income for the year ended December 31, 2018 increased $9.6 million as compared with the same period in
2017. Basic earnings per share were $1.97 and $1.39 for the years ended December 31, 2018 and 2017,
respectively. Diluted earnings per share were $1.96 and $1.38 for the years ended December 31, 2018 and 2017,
respectively.
Liquidity and Capital Resources
Cash Flows from Operating Activities
Cash flows from operating activities are largely influenced by four factors: weather, adequate and timely rate
increases, effective cost management and customer growth. The effect of those factors on net income is discussed
in the Results of Operations section above.
For the year ended December 31, 2019, cash flows from operating activities decreased $9.8 million to $36.1
million. The majority of the decrease resulted from higher income tax and interest payments. Utility plant
expenditures for the period were primarily funded by financing activities.
Increases in certain operating costs impact our liquidity and capital resources. We continually monitor the need
for timely rate filing to minimize the lag between the time we experience increased operating costs and capital
expenditures and the time we receive appropriate rate relief. There can be no assurances however that our
regulated subsidiaries’ respective utility commissions will approve base water and/or wastewater rate increase
requests in whole or in part or when the decisions will be rendered.
27
Cash Flows from Investing Activities
For the year ended December 31, 2019, cash flows used in investing activities increased $17.0 million to $89.1
million, which was attributable to higher utility plant expenditures.
For further discussion on the Company’s future capital expenditures and expected funding sources, see “Capital
Expenditures and Commitments” below.
Cash Flows from Financing Activities
For the year ended December 31, 2019, cash flows provided by financing activities increased $68.4 million to
$93.9 million. The majority of the increase in cash flows provided by financing activities is due to the net
increase in long-term debt funding, Middlesex’s November 2019 common stock offering and increased proceeds
from the issuance of common stock under the Middlesex Water Company Investment Plan (the Investment Plan),
which was partially offset by a reduction in the Company’s short-term debt balances.
For further discussion on the Company’s short-term and long-term debt, see “Sources of Liquidity” below.
Capital Expenditures and Commitments
To fund our capital program, we use internally generated funds, short-term and long-term debt borrowings,
proceeds from sales of common stock under the Investment Plan and, when market conditions are favorable,
proceeds from sales to the public of our common stock.
The table below summarizes our estimated capital expenditures for the years 2020-2022.
Distribution/Network System
Production System
Information Technolgy (IT) Systems
Other
Total Estimated Capital Expenditures
$
2020
2021
2022
2020-2022
(Millions)
54
60
2
8
124
$
56
43
1
12
112
$
49
8
1
1
59
$
$
159
111
4
21
295
Our estimated capital expenditures for the items listed above are primarily comprised of the following:
• Distribution/Network System-Projects associated with installation and relocation of water mains and
service lines and wastewater collection systems, construction of water storage tanks, installation and
replacement of hydrants and meters and our RENEW Program. RENEW is our ongoing initiative to
eliminate unlined water mains in the Middlesex System. In connection with our RENEW Program, we
expect to spend approximately $12 million in 2020, $12 million in 2021 and $11 million in 2022.
• Production System-Projects associated with our water production and water/wastewater treatment plants,
including $53 million of expenditures between 2020 and 2022 for the upgrade of the Carl J. Olsen (CJO)
water treatment plant, $25 million of expenditures between 2020 and 2022 for wellfield upgrades in our
Middlesex System and $13 million of expenditures between 2020 and 2021 for construction of a new
replacement wastewater treatment plant in Milton, Delaware.
IT Systems-Further upgrade of our enterprise resource planning system and hardware and software
purchases for our other IT systems.
•
• Other-Purchase of transportation equipment, tools, furniture, laboratory equipment, security systems and
other general infrastructure needs including improvements to our operations center in Iselin, New Jersey.
The actual amount and timing of capital expenditures is dependent on the need for replacement of existing
infrastructure, customer growth, residential new home construction and sales, project scheduling and continued
refinement of project scope and costs.
28
To pay for our capital program in 2020, we plan on utilizing some or all of the following:
Internally generated funds;
•
• Short-term borrowings, as needed, through $140 million of available lines of credit with several financial
institutions. As of December 31, 2019, there was $120.0 million of available credit under these lines (see
discussion under “Sources of Liquidity-Short-term Debt” below);
• Proceeds from the New Jersey and Delaware State Revolving Fund (SRF). SRF programs provide low
cost financing for projects that meet certain water quality and system improvement benchmarks (see
discussion under “Sources of Liquidity-Long-term Debt” below);
• Proceeds from the issuance and sale of First Mortgage Bonds through the New Jersey Economic
Development Authority (NJEDA) (see discussion under “Sources of Liquidity-Long-term Debt” below);
• Proceeds from the Investment Plan (see discussion under “Sources of Liquidity-Common Stock” below);
and
• Proceeds from a common stock sale (see discussion under “Sources of Liquidity-Common Stock” below).
Sources of Liquidity
Short-term Debt. The Company had available lines of credit of $140.0 million at December 31, 2019, and the
outstanding borrowings under the credit lines were $20.0 million, at a weighted average interest rate of 2.86%.
The weighted average daily amounts of borrowings outstanding under the Company’s credit lines and the weighted
average interest rates on those amounts were $52.4 million and $37.3 million at 3.33% and 3.17% for the years ended
December 31, 2019 and 2018, respectively.
Long-term Debt. Subject to regulatory approval, the Company periodically issues long-term debt to fund its
investments in utility plant and other assets. To the extent possible, the Company finances qualifying capital
projects under SRF loan programs in New Jersey and Delaware. These government programs provide financing at
interest rates that are typically below rates available in the broader financial markets. A portion of the borrowings
under the New Jersey SRF is interest-free. Under the New Jersey SRF program, borrowers first enter into a
construction loan agreement with the New Jersey Infrastructure Bank (NJIB) at a below market interest rate. The
interest rate on the Company’s current construction loan borrowings is zero percent (0%). When construction on
the qualifying project is substantially complete, NJIB will coordinate the conversion of the construction loan into
a long-term securitized loan with a portion of the principal balance having a stated interest rate of zero percent
(0%) and a portion of the principal balance at a market interest rate at the time of closing using the credit rating of
the State of New Jersey. The current term of the long-term loans offered through the NJIB is up to thirty years.
The NJIB generally schedules its long-term debt financings in May and November. Middlesex currently has two
projects that are in the construction loan phase of New Jersey SRF program:
1)
2)
In April 2018, the NJBPU approved Middlesex’s request to participate in the NJIB loan program to fund
the construction of a large-diameter transmission pipeline from the CJO water treatment plant and
interconnect with our distribution system. Middlesex closed on a $43.5 million NJIB interest-free
construction loan in August 2018. Through December 31, 2019, Middlesex has drawn a total of $31.8
million and expects to draw down the remaining proceeds through the first quarter of 2020.
In March 2018, the NJBPU approved Middlesex’s request to participate in the NJIB loan program to fund
the 2018 RENEW Program, which is an ongoing initiative to eliminate all unlined water distribution
mains in the Middlesex system. Middlesex closed on an $8.7 million NJIB construction loan in
September 2018 and completed drawing on the proceeds in October 2019.
The Company expects that the large-diameter transmission pipeline and the 2018 RENEW construction loans will
be included in the NJIB May 2020 long-term debt financing program.
In September 2018, the NJIB announced changes to the SRF program for project funding priority ranking, the
proportions of interest free loans and market interest rate loans and overall loan limits on interest free loan
29
balances to investor-owned water utilities. These changes affect SRF projects for which the construction loan
closes after September 2018. Under the new guidelines, the principal balance having a stated interest rate of zero
percent (0%) is 25% of the loan balance with the remaining portion of 75% having a market based interest rate.
This is limited to the first $10.0 million of the loan. Loan amounts above $10.0 million do not participate in the
0% rate program, but do participate at the market based interest rate. As a result of all these changes, the
Company’s future capital funding plan does not include participating in the NJIB SRF program.
In order to help ensure adherence to its comprehensive financing plan, Middlesex received approval from the
NJBPU in February 2019 to issue and sell up to $140 million of First Mortgage Bonds (FMB) through the
NJEDA in one or more transactions through December 31, 2022. Because the interest paid to the bondholders is
exempt from federal and New Jersey income taxes, the interest rate on debt issued through the NJEDA is
generally lower than otherwise achievable in the traditional taxable corporate bond market. However, the interest
received by the bondholder is subject to the Alternative Minimum Tax.
In August 2019, Middlesex priced and closed on an NJEDA debt financing transaction of $53.7 million by issuing
FMBs designated as Series 2019A ($32.5 million at coupon interest rate of 4.0%) and Series 2019B ($21.2
million at coupon interest rate of 5.0%). The proceeds, including an issuance premium of $7.1 million, are being
used to finance several projects under the Water For Tomorrow capital program initiated by the Company to
upgrade and replace aging water utility infrastructure. The total proceeds of $60.8 million, initially recorded as
Restricted Cash on the balance sheet, is held in escrow by a bond trustee and are drawn down by requisition for
the qualifying projects. Through December 31, 2019, Middlesex has drawn a total of $17.3 million and currently
expects to draw the remaining $43.8 million of proceeds, currently included in Restricted Cash, through the third
quarter of 2021.
In May 2018, Middlesex repaid its RENEW 2017 interest-free construction loan by issuing to the NJIB FMBs in
the amount of $9.5 million designated as Series 2018A ($7.1 million) and Series 2018B ($2.4 million). The
interest rate on the Series 2018A bond is zero and the interest rate on the Series 2018B bond ranges between 3.0%
and 5.0%. The final maturity date for these FMBs is August 1, 2047, with scheduled debt service payments over
the life of the loans.
In March 2018, the DEPSC approved Tidewater’s request to borrow up to $0.9 million under the Delaware SRF
program to fund the replacement of an entire water distribution system of a small Delaware community.
Tidewater closed on the SRF loan in May 2018. In April 2019, Tidewater received approval from the DEPSC to
increase the borrowing to $1.7 million based on revised project cost estimates. Tidewater closed on the additional
SRF loan in October 2019.
Through December 31, 2019, Tidewater has drawn a total of $1.3 million and
expects to draw down the remaining proceeds through the first quarter of 2020.
In 2019, the NJIB de-obligated principal payments of $0.1 million on Series NN of the Company’s FMBs.
Substantially all of the utility plant of the Company is subject to the lien of its mortgage, which includes debt
service and capital ratio covenants. The Company is in compliance with all of its mortgage covenants and
restrictions.
Common Stock.
In November 2019, the Company sold and issued 0.8 million shares of common stock in a
public offering priced at $60.50 per share. The net proceeds of $43.7 million were used for general corporate
purposes including repayment of a portion of the Company’s short-term debt outstanding.
In January 2019, the Company activated a limited share purchase discount feature of the Investment Plan.
Investment Plan participants were invited to purchase shares directly as well as reinvest their common stock
dividends at a 5% discount. In August 2019, the 0.2 million share purchase limit was reached and the discount
offer terminated. The Company raised approximately $12.7 million through the issuance of over 0.2 million
shares under the Investment Plan during 2019.
30
In order to fully fund the ongoing large investment program in our utility plant infrastructure and maintain a
balanced capital structure for a regulated water utility, Middlesex may offer for sale additional shares of its
common stock. The amount, the timing and the sales method of the common stock is dependent on the timing of
the construction expenditures, the level of additional debt financing and financial market conditions. As approved
by the NJBPU, the Company is authorized to issue and sell up to 0.7 million shares of its common stock in one or
more transactions through December 31, 2022.
Contractual Obligations
In the course of normal business activities, the Company enters into a variety of contractual obligations and
commercial commitments. Some result in direct obligations on the Company’s balance sheet while others are
commitments, some firm and some based on uncertainties, which are disclosed in the Company’s consolidated
financial statements.
The table below presents our known contractual obligations for the periods specified as of December 31, 2019.
Payment Due by Period
(Millions of Dollars)
Total
Less than
1 Year
2-3
Years
4-5
Years
More
than 5
Years
Long-term Debt
Notes Payable
Interest on Long-term Debt
Purchased Water Contracts
Commercial Office Leases
Total
$ 234.4 $ 7.2 $ 13.8 $ 12.1 $ 201.3
-
-
20.0
124.4
13.9
158.1
-
7.2
16.9
8.4
4.4
1.6
$ 437.8 $ 42.1 $ 36.5 $ 29.1 $ 330.1
-
12.4
3.0
1.6
20.0
7.4
6.7
0.8
The table above does not reflect any anticipated cash payments for retirement benefit plan obligations. The effect
on the timing and amount of these payments resulting from potential changes in actuarial assumptions and returns
on plan assets cannot be estimated. In 2019, the Company contributed $5.3 million to its retirement benefit plans
and expects to contribute approximately $5.0 million in 2020.
Critical Accounting Policies and Estimates
The application of accounting policies and standards often requires the use of estimates, assumptions and
judgments. The Company regularly evaluates these estimates, assumptions and judgments, including those related
to the calculation of pension and other retirement benefits, unbilled revenues, and the recoverability of certain
assets, including regulatory assets. The Company bases its estimates, assumptions and judgments on historical
experience and current operating environment. Changes in any of the variables that are used for the Company’s
estimates, assumptions and judgments may lead to significantly different financial statement results.
Our critical accounting policies are set forth below.
Regulatory Accounting
We maintain our books and records in accordance with accounting principles generally accepted in the United
States of America. Middlesex and certain of its subsidiaries, which account for approximately 91% of Operating
Revenues and 99% of Total Assets, are subject to regulation in the states in which they operate. Those companies
are required to maintain their accounts in accordance with regulatory authorities’ rules and guidelines, which may
differ from other authoritative accounting pronouncements. In those instances, the Company follows the guidance
31
in the Financial Accounting Standards Board Accounting Standards Codification Topic 980 Regulated
Operations (Regulatory Accounting).
In accordance with Regulatory Accounting, costs and obligations are deferred if it is probable that these items
will be recognized for rate-making purposes in future rates. Accordingly, we have recorded costs and obligations,
which will be amortized over various future periods. Any change in the assessment of the probability of rate-
making treatment will require us to change the accounting treatment of the deferred item. We have no reason to
believe any of the deferred items that are recorded will be treated differently by the regulators in the future.
Revenues
The Company’s revenues are primarily generated from regulated tariff-based sales of water and wastewater
services and non-regulated operation and maintenance contracts for services on water and wastewater systems
owned by others. Revenue from contracts with customers is recognized when control of a promised good or
service is transferred to customers at an amount that reflects the consideration to which the entity expects to be
entitled in exchange for those goods and services.
The Company’s regulated revenue from contracts with customers is derived from tariff-based sales that result
from the obligation to provide water and wastewater services to residential, industrial, commercial, fire-protection
and wholesale customers. The Company’s residential customers are billed quarterly while most of the Company’s
industrial, commercial, fire-protection and wholesale customers are billed monthly. Payments by customers are
due between 15 to 30 days after the invoice date. The Company recognizes revenue as the water and wastewater
services are delivered to customers as well as records unbilled revenues estimated from the last meter reading date
to the end of the accounting period utilizing factors such as historical customer data, regional weather indicators
and general economic conditions in its service territories. Unearned Revenues and Advance Service Fees include
fixed service charge billings in advance to Tidewater customers that are recognized as service is provided to the
customer.
Non-regulated service contract revenues consist of base service fees as well as fees for additional billable services
provided to customers. Fees are billed monthly and are due within 30 days after the invoice date. The Company
considers the amounts billed to represent the value of these services provided to customers. These contracts
expire at various times through December 2028 and thus contain remaining performance obligations for which the
Company expects to recognize revenue in the future. These contracts also contain customary termination
provisions.
Almost all of the amounts included in operating revenues are from contracts with customers.
Retirement Benefit Plans
We maintain a noncontributory defined benefit pension plan (Pension Plan) which covers all currently active
employees who were hired prior to April 1, 2007. In addition, the Company maintains an unfunded supplemental
plan for its executive officers.
The Company has a retirement benefit plan other than pensions (Other Benefits Plan) for substantially all of its
retired employees. Employees hired after March 31, 2007 are not eligible to participate in the Other Benefits Plan.
Coverage includes healthcare and life insurance.
The costs for providing retirement benefits are dependent upon numerous factors, including actual plan
experience and assumptions of future experience. Future retirement benefit plan obligations and expense will
depend on future investment performance, changes in future discount rates and various other demographic factors
related to the population participating in the Company’s retirement benefit plans, all of which can change
significantly in future years.
32
The allocation by asset category of retirement benefit plan assets at December 31, 2019 and 2018 is as follows:
Pension Plan
Other Benefits Plan
2018 Target
2019
2018 Target
Asset Category
Equity Securities
Debt Securities
Cash
Real Estate/Commodities
Total
2019
61.5% 59.5%
36.5% 36.5%
1.6%
2.4%
100.0% 100.0%
0.5%
1.5%
55%
38%
2%
5%
60.0%
33.0%
7.0%
0.0%
54.7%
37.3%
8.0%
0.0%
100.0% 100.0%
43%
50%
2%
5%
The primary assumptions used for determining future postretirement benefit plans’ obligations and costs are as
follows:
• Discount Rate - calculated based on market rates for long-term, high-quality corporate bonds specific to
the expected duration of our Pension Plan and Other Benefits Plan’s liabilities;
• Compensation Increase - based on management projected future employee compensation increases;
• Long-Term Rate of Return - determined based on expected returns from our asset allocation for our
Pension Plan and Other Benefits Plan assets;
• Mortality –The Company utilizes the Society of Actuaries’ mortality table (Pri-2012) (Mortality
Improvement Scale MP2019 for the 2019 valuation); and
• Healthcare Cost Trend Rate - based on management projected future healthcare costs.
The discount rate, compensation increase rate and long-term rate of return used to determine future obligations of
our postretirement benefit plans as of December 31, 2019 are as follows:
Discount Rate
Compensation Increase
Long-term Rate of Return
Pension Plan
3.12%
3.00%
7.00%
Other Benefits Plan
3.12%
3.00%
7.00%
For the 2019 valuation, costs and obligations for our Other Benefits Plan assumed an 8.0% annual rate of increase
in the per capita cost of covered healthcare benefits in 2020 with the annual rate of increase declining 1.0% per
year for 2021-2022 and 0.5% per year for 2023-2024, resulting in an annual rate of increase in the per capita cost
of covered healthcare benefits of 5% by year 2024.
The following is a sensitivity analysis for certain actuarial assumptions used in determining projected benefit
obligations (PBO) and expenses for our postretirement benefit plans:
Pension Plan
Actuarial Assumptions
Discount Rate 1% Increase
Discount Rate 1% Decrease
Estimated
Increase/
(Decrease)
on PBO
(000s)
Estimated
Increase/
(Decrease)
on Expense
(000s)
$ (13,849) $ (1,149)
17,563 1,379
33
Other Benefits Plan
Actuarial Assumptions
Discount Rate 1% Increase
Discount Rate 1% Decrease
Healthcare Cost Trend Rate 1% Increase
Healthcare Cost Trend Rate 1% Decrease
Recent Accounting Standards
Estimated
Increase/
(Decrease)
on PBO
(000s)
Estimated
Increase/
(Decrease)
on Expense
(000s)
$ (8,346) $ (814)
10,837 1,017
9,036 1,374
(7,143) (1,085)
See Note 1(r) of the Notes to Consolidated Financial Statements for a discussion of recent accounting
pronouncements.
ITEM 7A.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed to market risk associated with changes in interest rates and commodity prices. The Company is
subject to the risk of fluctuating interest rates in the normal course of business. Our policy is to manage interest
rates through the use of fixed rate long-term debt and, to a lesser extent, variable rate short-term debt. The
Company’s interest rate risk related to existing fixed rate, long-term debt is not material due to the term of the
majority of our First Mortgage Bonds, which have final maturity dates ranging from 2021 to 2059. Over the next
twelve months, approximately $7.2 million of the current portion of existing long-term debt instruments will
mature. The Company manages its interest rate risk related to existing variable-rate short-term debt by limiting
our variable rate exposure. Applying a hypothetical change in the rate of interest charged by 10% on those fixed-
and variable-rate borrowings would not have a material effect on our earnings.
Our risks associated with commodity price increases for chemicals, electricity and other commodities are reduced
through contractual arrangements and the ability to recover price increases through rates. Non-performance by
these commodity suppliers could have a material adverse impact on our results of operations, financial position
and cash flows.
We are exposed to credit risk for both our Regulated and Non-Regulated business segments. Our Regulated
operations serve residential, commercial, industrial and municipal customers while our Non-Regulated operations
engage in business activities with developers, government entities and other customers. Our primary credit risk is
exposure to customer default on contractual obligations and the associated loss that may be incurred due to the
non-payment of customer accounts receivable balances. Our credit risk is managed through established credit and
collection policies which are in compliance with applicable regulatory requirements and involve monitoring of
customer exposure and the use of credit risk mitigation measures such as letters of credit or prepayment
arrangements. Our credit portfolio is diversified with no significant customer or industry concentrations. In
addition, our Regulated businesses are generally able to recover all prudently incurred costs including
uncollectible customer accounts receivable expenses and collection costs through rates.
The Company's retirement benefit plan assets are exposed to the market price variations of debt and equity
securities. Changes to the Company's retirement benefit plan assets’ value can impact the Company's retirement
benefit plan expense, funded status and future minimum funding requirements. Our risk is reduced through our
ability to recover retirement benefit plan costs through customer rates.
34
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Middlesex Water Company:
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets and consolidated statements of capital stock and
long-term debt of Middlesex Water Company (the "Company") as of December 31, 2019 and 2018, the related
consolidated statements of income, common stockholders' equity, and cash flows for each of the three years in the
period ended December 31, 2019, and the related notes (collectively referred to as the "consolidated financial
statements"). We also have audited the Company’s internal control over financial reporting as of December 31,
2019, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position
of the Company as of December 31, 2019 and 2018, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2019, in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established
in Internal Control – Integrated Framework: (2013) issued by COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over
financial reporting, included in the accompanying Management’s Report on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on the Company's consolidated financial statements and an
opinion on the Company’s internal control over financial reporting based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")
and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free
of material misstatement, whether due to error or fraud and whether effective internal control over financial
reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the consolidated financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements. Our audit of internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered necessary in the circumstances. We believe that our
audits provide a reasonable basis for our opinions.
35
Definition and Limitations of Internal Control Over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company's internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the consolidated financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or
complex judgments. We determined that there are no critical audit matters.
/s/ Baker Tilly Virchow Krause, LLP
We have served as the Company's auditor since 2006.
Lancaster, Pennsylvania
February 27, 2020
36
65,490
13,922
13,565
92,977
37,798
702
915
1,617
5,506
MIDDLESEX WATER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
Operating Revenues
Operating Expenses:
Operations and Maintenance
Depreciation
Other Taxes
Years Ended December 31,
2018
2017
2019
$
134,598
$
138,077
$
130,775
67,980
16,716
14,382
71,570
15,037
14,328
Total Operating Expenses
99,078
100,935
Operating Income
35,520
37,142
Other Income (Expense):
Allowance for Funds Used During Construction
Other Income (expense), net
Total Other Income, net
Interest Charges
3,146
(654)
2,492
7,264
1,362
1,630
2,992
6,758
Income before Income Taxes
30,748
33,376
33,909
Income Taxes
Net Income
(3,140)
924
33,888
32,452
Preferred Stock Dividend Requirements
132
144
11,100
22,809
144
Earnings Applicable to Common Stock
$
33,756
$
32,308
$
22,665
Earnings per share of Common Stock:
Basic
Diluted
Average Number of
Common Shares Outstanding :
Basic
Diluted
$
$
2.02
2.01
$
$
1.97
1.96
$
$
1.39
1.38
16,685
16,829
16,384
16,540
16,330
16,486
See Notes to Consolidated Financial Statements.
37
MIDDLESEX WATER COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31,
2019
December 31,
2018
ASSETS
UTILITY PLANT:
CURRENT ASSETS:
AND OTHER ASSETS:
Water Production
Transmission and Distribution
General
Construction Work in Progress
TOTAL
Less Accumulated Depreciation
UTILITY PLANT - NET
Cash and Cash Equivalents
Accounts Receivable, net
Unbilled Revenues
Materials and Supplies (at average cost)
Prepayments
TOTAL CURRENT ASSETS
Operating Lease Right of Use Asset
Preliminary Survey and Investigation Charges
Regulatory Assets
Restricted Cash
Non-utility Assets - Net
Other
TOTAL DEFERRED CHARGES AND OTHER ASSETS
TOTAL ASSETS
$
$
$
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common Stock, No Par Value
Retained Earnings
TOTAL COMMON EQUITY
Preferred Stock
Long-term Debt
TOTAL CAPITALIZATION
CURRENT
LIABILITIES:
Current Portion of Long-term Debt
Notes Payable
Accounts Payable
Accrued Taxes
Accrued Interest
Unearned Revenues and Advanced Service Fees
Other
TOTAL CURRENT LIABILITIES
COMMITMENTS AND CONTINGENT LIABILITIES (Note 4)
DEFERRED CREDITS
AND OTHER LIABILITIES: Lease Obligations
Customer Advances for Construction
Accumulated Deferred Income Taxes
Employee Benefit Plans
Regulatory Liabilities
Other
TOTAL DEFERRED CREDITS AND OTHER LIABILITIES
CONTRIBUTIONS IN AID OF CONSTRUCTION
TOTAL CAPITALIZATION AND LIABILITIES
$
See Notes to Consolidated Financial Statements.
3838
160,870
556,517
83,043
75,520
875,950
170,220
705,730
2,230
11,908
7,183
5,445
2,367
29,133
5,944
2,054
110,479
44,269
10,370
1,899
175,015
909,878
215,125
108,667
323,792
2,084
230,777
556,653
7,178
20,000
23,306
7,635
2,031
1,211
3,620
64,981
23,905
5,732
54,408
34,671
69,152
2,546
190,414
97,830
909,878
$
$
$
156,423
512,202
74,371
32,878
775,874
157,387
618,487
3,705
11,762
7,293
5,411
2,644
30,815
-
5,254
99,236
1,956
9,989
2,093
118,528
767,830
157,354
91,433
248,787
2,433
152,851
404,071
7,343
48,500
19,325
14,230
1,289
1,036
2,640
94,363
22,572
-
47,270
30,661
79,112
2,730
182,345
87,051
767,830
MIDDLESEX WATER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization
Provision for Deferred Income Taxes and ITC
Equity Portion of AFUDC
Cash Surrender Value of Life Insurance
Stock Compensation Expense
Changes in Assets and Liabilities:
Accounts Receivable
Unbilled Revenues
Materials & Supplies
Prepayments
Accounts Payable
Accrued Taxes
Accrued Interest
Employee Benefit Plans
Unearned Revenue & Advanced Service Fees
Other Assets and Liabilities
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
Utility Plant Expenditures, Including AFUDC of $1,149 in 2019, $443 in 2018 and
$221 in 2017
NET CASH USED IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of Long-term Debt
Proceeds from Issuance of Long-term Debt
Proceeds from Premium Issuance of Long-term Debt
Net Short-term Bank Borrowings
Deferred Debt Issuance Expense
Common Stock Issuance Expense
Proceeds from Issuance of Common Stock
Payment of Common Dividends
Payment of Preferred Dividends
Construction Advances and Contributions-Net
NET CASH PROVIDED BY FINANCING ACTIVITIES
NET CHANGES IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY:
Utility Plant received as Construction Advances and Contributions
Long-term Debt Deobligation
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash Paid During the Year for:
Interest
Interest Capitalized
Income Taxes
See Notes to Consolidated Financial Statements.
39
39
Years Ended December 31,
2019
2018
2017
$
33,888
$
32,452
$
22,809
17,232
(11,719)
(1,997)
(252)
637
(146)
110
(34)
277
3,981
(6,595)
742
(1,112)
175
866
36,053
(89,125)
(89,125)
(7,343)
78,967
7,083
(28,500)
(769)
(357)
56,784
(16,165)
(132)
4,342
93,910
40,838
5,661
46,499
7,770
130
6,938
1,149
10,339
$
$
$
$
$
$
15,780
(8,724)
(919)
27
1,084
(977)
(294)
(1,293)
(236)
5,396
2,812
196
(2,114)
85
2,589
45,864
(72,094)
(72,094)
(7,024)
22,076
-
20,500
(880)
-
1,150
(14,930)
(144)
4,746
25,494
(736)
6,397
5,661
3,835
-
6,113
443
4,689
$
$
$
$
$
$
14,846
7,944
(481)
(209)
840
(656)
(409)
(24)
(384)
1,586
(967)
9
(1,920)
28
(169)
42,843
(50,301)
(50,301)
(6,159)
11,523
-
16,000
(230)
-
1,234
(14,002)
(144)
1,315
9,537
2,079
4,318
6,397
3,778
-
5,616
221
2,754
$
$
$
$
$
$
MIDDLESEX WATER COMPANY
CONSOLIDATED STATEMENTS OF CAPITAL STOCK AND LONG-TERM DEBT
(In thousands)
December 31,
2019
December 31,
2018
Common Stock, No Par Value
Shares Authorized -
40,000
Shares Outstanding - 2019 - 17,434; 2018 - 16,403
Retained Earnings
TOTAL COMMON EQUITY
Cumulative Preferred Stock, No Par Value:
Shares Authorized -
Shares Outstanding - 2019-20; 2018-23
120
Convertible:
Shares Outstanding, $7.00 Series - 10
Shares Outstanding, $8.00 Series - 2019-0; 2018-3
Nonredeemable:
Shares Outstanding, $7.00 Series - 1
Shares Outstanding, $4.75 Series - 10
TOTAL PREFERRED STOCK
Long-term Debt:
8.05%, Amortizing Secured Note, due December 20, 2021
6.25%, Amortizing Secured Note, due May 19, 2028
6.44%, Amortizing Secured Note, due August 25, 2030
6.46%, Amortizing Secured Note, due September 19, 2031
4.22%, State Revolving Trust Note, due December 31, 2022
3.60%, State Revolving Trust Note, due May 1, 2025
3.30% State Revolving Trust Note, due March 1, 2026
3.49%, State Revolving Trust Note, due January 25, 2027
4.03%, State Revolving Trust Note, due December 1, 2026
4.00% to 5.00%, State Revolving Trust Bond, due August 1, 2021
0.00%, State Revolving Fund Bond, due August 1, 2021
3.64%, State Revolving Trust Note, due July 1, 2028
3.64%, State Revolving Trust Note, due January 1, 2028
3.45%, State Revolving Trust Note, due August 1, 2031
6.59%, Amortizing Secured Note, due April 20, 2029
7.05%, Amortizing Secured Note, due January 20, 2030
5.69%, Amortizing Secured Note, due January 20, 2030
4.45%, Amortizing Secured Note, due April 20, 2040
4.47%, Amortizing Secured Note, due April 20, 2040
3.75%, State Revolving Trust Note, due July 1, 2031
2.00%, State Revolving Trust Note, due February 1, 2036
2.00%, State Revolving Trust Note, due November 1, 2038
3.75%, State Revolving Trust Note, due November 30, 2030
0.00% Construction Loans
First Mortgage Bonds:
0.00%, Series Z, due August 1, 2019
5.25% to 5.75%, Series AA, due August 1, 2019
0.00%, Series BB, due August 1, 2021
4.00% to 5.00%, Series CC, due August 1, 2021
0.00%, Series EE, due August 1, 2023
3.00% to 5.50%, Series FF, due August 1, 2024
0.00%, Series GG, due August 1, 2026
4.00% to 5.00%, Series HH, due August 1, 2026
0.00%, Series II, due August 1, 2024
3.40% to 5.00%, Series JJ, due August 1, 2027
0.00%, Series KK, due August 1, 2028
5.00% to 5.50%, Series LL, due August 1, 2028
0.00%, Series MM, due August 1, 2030
3.00% to 4.375%, Series NN, due August 1, 2030
0.00%, Series OO, due August 1, 2031
2.00% to 5.00%, Series PP, due August 1, 2031
5.00%, Series QQ, due October 1, 2023
3.80%, Series RR, due October 1, 2038
4.25%, Series SS, due October 1, 2047
0.00%, Series TT, due August 1, 2032
3.00% to 3.25%, Series UU, due August 1, 2032
0.00%, Series VV, due August 1, 2033
3.00% to 5.00%, Series WW, due August 1, 2033
0.00%, Series XX, due August 1, 2047
3.00% to 5.00%, Series YY, due August 1, 2047
0.00%, Series 2018A, 2017 RENEW due August 1, 2047
3.00%-5.00%, Series 2018B, 2017 RENEW due August 1, 2047
4.00%, Series 2019A, due August 1, 2059
5.00%, Series 2019B, due August 1, 2059
SUBTOTAL LONG-TERM DEBT
Add: Premium on Issuance of Long-term Debt
Less: Unamortized Debt Expense
Less: Current Portion of Long-term Debt
TOTAL LONG-TERM DEBT
See Notes to Consolidated Financial Statements.
4040
$
$
$
$
$
215,125
108,667
323,792
1,005
-
79
1,000
2,084
643
3,535
2,987
3,267
175
1,405
309
349
446
60
50
214
69
851
3,255
2,521
5,171
8,946
3,320
1,829
1,013
1,309
955
40,467
-
-
241
331
1,456
2,440
632
710
429
588
807
928
1,037
1,190
1,806
660
9,915
22,500
23,000
1,957
755
2,004
755
10,627
3,785
6,678
2,320
32,500
21,200
234,397
8,064
(4,506)
(7,178)
230,777
$
$
$
$
$
157,354
91,433
248,787
1,005
349
79
1,000
2,433
924
3,955
3,267
3,547
228
1,632
351
389
501
111
88
235
77
907
3,604
2,771
5,684
9,387
3,483
1,954
1,064
-
1,024
16,509
113
155
362
489
1,876
2,980
723
795
520
671
898
1,010
1,137
1,415
1,956
700
9,915
22,500
23,000
2,107
800
2,147
795
11,006
3,860
6,917
2,365
-
-
162,904
1,259
(3,969)
(7,343)
152,851
MIDDLESEX WATER COMPANY
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
(In thousands)
Balance at January 1, 2017
16,296
$
153,045
$
65,392
$
218,437
Common
Stock
Shares
Common
Stock
Amount
Retained
Earnings
Total
Net Income
Dividend Reinvestment & Common Stock Purchase Plan
Restricted Stock Award, Net - Employees
Stock Award - Board Of Directors
Shares Forefeited
Cash Dividends on Common Stock ($0.858 per share)
Cash Dividends on Preferred Stock
Balance at December 31, 2017
Net Income
Dividend Reinvestment & Common Stock Purchase Plan
Restricted Stock Award, Net - Employees
Stock Award - Board Of Directors
Shares Forefeited
Cash Dividends on Common Stock ($0.911 per share)
Cash Dividends on Preferred Stock
Balance at December 31, 2018
Net Income
Dividend Reinvestment & Common Stock Purchase Plan
Restricted Stock Award, Net - Employees
Stock Award - Board Of Directors
Shares Forefeited
Conversion of $8.00 Convertible Preferred Stock
Issuance of Common Stock
Cash Dividends on Common Stock ($0.976 per share)
Cash Dividends on Preferred Stock
Common Stock Expenses
Balance at December 31, 2019
See Notes to Consolidated Financial Statements.
-
32
22
4
(2)
-
-
16,352
-
27
22
4
(2)
-
-
16,403
-
226
18
4
(18)
41
760
-
-
-
17,434
-
1,234
724
147
(30)
-
-
155,120
-
1,150
975
147
(38)
-
-
157,354
-
12,738
907
196
(466)
350
44,046
-
-
-
215,125
$
$
$
22,809
-
-
-
-
(14,002)
(144)
74,055
32,452
-
-
-
-
(14,930)
(144)
91,433
33,888
-
-
-
-
-
-
(16,165)
(132)
(357)
108,667
$
$
$
22,809
1,234
724
147
(30)
(14,002)
(144)
229,175
32,452
1,150
975
147
(38)
(14,930)
(144)
248,787
33,888
12,738
907
196
(466)
350
44,046
(16,165)
(132)
(357)
323,792
$
$
$
41
MIDDLESEX WATER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Organization, Summary of Significant Accounting Policies and Recent Developments
(a) Organization - Middlesex Water Company (Middlesex) is the parent company and sole shareholder of
Tidewater Utilities, Inc. (Tidewater), Tidewater Environmental Services, Inc. (TESI), Pinelands Water Company
(Pinelands Water) and Pinelands Wastewater Company (Pinelands Wastewater) (collectively, Pinelands), Utility
Service Affiliates, Inc. (USA), Utility Service Affiliates (Perth Amboy) Inc. (USA-PA) and Twin Lakes Utilities,
Inc. (Twin Lakes). Southern Shores Water Company, LLC (Southern Shores) and White Marsh Environmental
Systems, Inc. (White Marsh) are wholly-owned subsidiaries of Tidewater.
Middlesex Water Company has operated as a water utility in New Jersey since 1897, in Delaware, through our
wholly-owned subsidiary, Tidewater, since 1992 and in Pennsylvania, through our wholly-owned subsidiary,
Twin Lakes, since 2009. We are in the business of collecting, treating, distributing and selling water for
domestic, commercial, municipal, industrial and fire protection purposes. We also operate New Jersey municipal
water, wastewater and storm water systems under contract and provide unregulated water and wastewater services
in New Jersey and Delaware through our subsidiaries. Our rates charged to customers for water and wastewater
services, the quality of services we provide and certain other matters are regulated in New Jersey, Delaware and
Pennsylvania by the New Jersey Board of Public Utilities (NJBPU), Delaware Public Service Commission
(DEPSC) and Pennsylvania Public Utilities Commission (PAPUC), respectively. Our USA, USA-PA and White
Marsh subsidiaries are not regulated utilities.
Certain reclassifications have been made to the prior year financial statements to conform with current period
presentation. The reclassifications are immaterial to the overall presentation of our consolidated financial
statements.
(b) Principles of Consolidation – The financial statements for Middlesex and its wholly-owned subsidiaries (the
Company) are reported on a consolidated basis. All significant intercompany accounts and transactions have been
eliminated. Other financial investments in which the Company holds a 50% or less voting interest and cannot
exercise control over the operation and policies of the investments are accounted for under the equity method of
accounting. Under the equity method of accounting, the Company records its investment interests in Non-Utility
Assets and its percentage share of the earnings or losses of the investees in Other Income (Expense).
(c) System of Accounts – Middlesex, Pinelands Water and Pinelands Wastewater maintain their accounts in
accordance with the Uniform System of Accounts prescribed by the NJBPU. Tidewater, TESI and Southern
Shores maintain their accounts in accordance with DEPSC requirements. Twin Lakes maintains its accounts in
accordance with PAPUC requirements.
(d) Regulatory Accounting - We maintain our books and records in accordance with accounting principles
generally accepted in the United States of America. Middlesex and certain of its subsidiaries, which account for
91% of Operating Revenues and 99% of Total Assets, are subject to regulation in the state in which they operate.
Those companies are required to maintain their accounts in accordance with regulatory authorities’ rules and
guidelines, which may differ from other authoritative accounting pronouncements. In those instances, the
Company follows the guidance provided in Accounting Standards Codification (ASC) 980, Regulated
Operations.
In accordance with ASC 980, Regulated Operations, costs and obligations are deferred if it is probable that these
items will be recognized for rate-making purposes in future rates. Accordingly, we have recorded costs and
obligations, which will be amortized over various future periods. Any change in the assessment of the probability
of rate-making treatment will require us to change the accounting treatment of the deferred item. We have no
reason to believe any of the deferred items that are recorded will be treated differently by the regulators in the
future. For additional information, see Note 2 – Rate and Regulatory Matters.
42
(e) Retirement Benefit Plans - We maintain a noncontributory defined benefit pension plan (Pension Plan)
which covers all active employees who were hired prior to April 1, 2007. In addition, the Company maintains an
unfunded supplemental plan for a limited number of its executive officers. The Company has a retirement benefit
plan other than pensions (Other Benefits Plan) for substantially all of its retired employees. Employees hired after
March 31, 2007 are not eligible to participate in this plan. Coverage includes healthcare and life insurance.
The Company’s costs for providing retirement benefits are dependent upon numerous factors, including actual
plan experience and assumptions of future experience. Retirement benefit plan obligations and expense are
determined based on investment performance, discount rates and various other demographic factors related to the
population participating in the Company’s retirement benefit plans, all of which can change significantly in future
years. For more information on the Company’s Retirement Benefit Plans, see Note 7 – Employee Benefit Plans.
(f) Utility Plant – Utility Plant is stated at original cost as defined for regulatory purposes. Property accounts are
charged with the cost of betterments and major replacements of property. Cost includes direct material, labor and
indirect charges for pension benefits and payroll taxes. The cost of labor, materials, supervision and other
expenses incurred in making repairs and minor replacements and in maintaining the properties is charged to the
appropriate expense accounts. At December 31, 2019, there was no event or change in circumstance that would
indicate that the carrying amount of any long-lived asset was not recoverable.
(g) Depreciation – Depreciation is computed by each regulated member of the Company utilizing a rate approved
by the applicable regulatory authority. The accumulated provision for depreciation is charged with the cost of
property retired, less salvage. The following table sets forth the range of depreciation rates for the major utility
plant categories used to calculate depreciation for the years ended December 31, 2019, 2018 and 2017. These
rates have been approved by the NJBPU, DEPSC or PAPUC:
Source of Supply
Pumping
Water Treatment
General Plant
Wastewater Collection
1.15% - 3.44%
2.00% - 5.39%
1.65% - 7.09%
2.08% - 17.84%
1.42% - 1.81%
Transmission and Distribution (T&D):
T&D – Mains
T&D – Services
T&D – Other
1.10% - 3.13%
2.12% - 3.16%
1.61% - 4.63%
Non-regulated fixed assets consist primarily of office buildings, furniture and fixtures, and transportation
equipment. These assets are recorded at original cost and depreciation is calculated based on the estimated useful
lives, ranging from 3 to 42 years.
(h) Preliminary Survey and Investigation (PS&I) Costs – In the design of water and wastewater systems that
the Company ultimately intends to construct, own and operate certain expenditures are incurred to advance those
project activities. These PS&I costs are recorded as deferred charges on the balance sheet because these costs are
expected to be recovered through future rates charged to customers as the underlying projects are placed into
service as utility plant. If it is subsequently determined that costs for a project recorded as PS&I are not
recoverable through rates charged to our customers, the applicable PS&I costs are recorded as Other Expense on
the statement of income at that time.
(i) Customers’ Advances for Construction (CAC) – Utility plant and/or cash advances are provided to the
Company by customers, real estate developers and builders in order to extend utility service to their properties.
These transactions are recorded as CAC. Contractual Refunds of CACs in the form of cash are made by the
Company and are based on either additional operating revenues generated from new customers or as new
customers are connected to the respective system. After all refunds are made and/or contract terms have expired,
any remaining balance is transferred to Contributions in Aid of Construction.
Contributions in Aid of Construction (CIAC) – CIAC include direct non-refundable contributions of utility
plant and/or cash and the portion of CAC that becomes non-refundable.
43
CAC and CIAC are not depreciated in accordance with regulatory requirements. In addition, these amounts
reduce the investment base for purposes of setting rates.
(j) Allowance for Funds Used During Construction (AFUDC) - Middlesex and its regulated subsidiaries
capitalize AFUDC, which represents the cost of financing projects during construction. AFUDC is added to the
construction costs of individual projects exceeding specific cost and construction period thresholds established for
each company and then depreciated along with the rest of the utility plant’s costs over its estimated useful life.
AFUDC is calculated using each company’s weighted cost of debt and equity as approved in their most recent
respective regulatory rate order. The AFUDC rates for the years ended December 31, 2019, 2018 and 2017 for
Middlesex and Tidewater are as follows:
Middlesex
Tidewater
2017
2019
2018
6.50% 6.50% 6.73%
7.92% 7.92% 7.92%
(k) Accounts Receivable – We record bad debt expense based on historical write-offs combined with an
evaluation of current conditions. The allowance for doubtful accounts was $1.4 million and $1.0 million as of
December 31, 2019 and 2018, respectively. For the years ended December 31, 2019, 2018 and 2017, bad debt
expense was $1.0 million, $0.8 million and $0.5 million, respectively. For the years ended December 31, 2019,
2018 and 2017, write-offs were $0.6 million, $0.7 million and $0.5 million, respectively.
(l) Revenues - The Company’s revenues are primarily generated from regulated tariff-based sales of water and
wastewater services and non-regulated operation and maintenance contracts for services on water and wastewater
systems owned by others. Revenue from contracts with customers is recognized when control of a promised good
or service is transferred to customers at an amount that reflects the consideration to which the entity expects to be
entitled in exchange for those goods and services.
The Company’s regulated revenue from contracts with customers is derived from tariff-based sales that result
from the obligation to provide water and wastewater services to residential, industrial, commercial, fire-protection
and wholesale customers. The Company’s residential customers are billed quarterly while most of the
Company’s industrial, commercial, fire-protection and wholesale customers are billed monthly. Payments by
customers are due between 15 to 30 days after the invoice date. The Company recognizes revenue as the water
and wastewater services are delivered to customers as well as records unbilled revenues estimated from the last
meter reading date to the end of the accounting period utilizing factors such as historical customer data, regional
weather indicators and general economic conditions in its service territories. Unearned Revenues and Advance
Service Fees include fixed service charge billings in advance to Tidewater customers that are recognized as
service is provided to the customer.
Non-regulated service contract revenues consist of base service fees as well as fees for additional billable services
provided to customers. Fees are billed monthly and are due within 30 days after the invoice date. The Company
considers the amounts billed to represent the value of these services provided to customers. These contracts
expire at various times through December 2028 and thus contain remaining performance obligations for which the
Company expects to recognize revenue in the future. These contracts also contain customary termination
provisions.
Almost all of the amounts included in operating revenues and accounts receivable are from contracts with
customers. The Company records its allowance for doubtful accounts based on historical write-offs combined
with an evaluation of current economic conditions within its service territories.
The Company’s contracts do not contain any significant financing components.
44
The Company’s operating revenues are comprised of the following:
Regulated Tariff Sales
Residential
Commercial
Industrial
Fire Protection
Wholesale
Non-Regulated Contract Operations
Total Revenue from Contracts with Customers
Other Regulated Revenues
Other Non-Regulated Revenues
Inter-segment Elimination
Total Revenue
(In Thousands)
Years Ended December 31,
2018
2017
2019
$
$
$
71,487
15,198
9,390
12,291
14,319
11,773
134,458
393
404
(657)
134,598
$
$
$
69,785
14,844
10,183
12,099
14,655
16,374
137,940
335
404
(602)
138,077
$
$
$
66,483
13,956
9,321
11,812
13,553
15,508
130,633
329
404
(591)
130,775
(m) Unamortized Debt Expense and Premiums on Long-Term Debt - Unamortized Debt Expense and
Premiums on Long-Term Debt, included on the consolidated balance sheet in long-term debt, are amortized over
the lives of the related debt issues.
(n) Income Taxes - Middlesex files a consolidated federal income tax return for the Company and income taxes
are allocated based on the separate return method. Investment tax credits have been deferred and are amortized
over the estimated useful life of the related property. In the event that there are interest and penalties associated
with income tax adjustments from income tax authority examinations, these amounts will be reported under
interest expense and other expense, respectively. For more information on income taxes, see Note 3 – Income
Taxes.
(o) Cash and Cash Equivalents - For purposes of reporting cash flows, the Company considers all highly liquid
investments with original maturity dates of three months or less to be cash equivalents. Cash and cash equivalents
represent bank balances and money market funds with investments maturing in less than 90 days.
(p) Restricted Cash – Restricted cash includes cash proceeds from loan transactions entered into through
government financing programs and are held in trusts for specific capital expenditures or debt service.
(q) Use of Estimates - Conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts in the financial
statements. Actual results could differ from those estimates.
(r) Recent Accounting Pronouncements
Revenue Recognition - The Financial Accounting Standards Board (FASB) issued guidance, which replaces
most of the existing guidance with a single set of principles for recognizing revenue from contracts with
customers. The guidance became effective January 1, 2018 and did not have a material impact on the Company’s
financial statements. Disclosures related to Revenue Recognition are included above in Revenues.
Recognition and Measurement of Financial Assets and Financial Liabilities - The FASB issued guidance
which (i) requires all investments in equity securities, except those accounted for under the equity method of
accounting or that result in consolidation of the investee, unincorporated joint ventures and limited liability
companies, to be carried at fair value through net income, (ii) requires an incremental recognition and disclosure
requirement related to the presentation of fair value changes of financial liabilities for which the fair value option
has been elected, (iii) amends several disclosure requirements, including the methods and significant assumptions
45
used to estimate fair value or a description of the changes in the methods and assumptions used to estimate fair
value, and (iv) requires disclosure of the fair value of financial assets and liabilities measured at amortized cost at
the amount that would be received to sell the asset or paid to transfer the liability. The guidance became effective
January 1, 2018 and did not have a material impact on the Company’s financial statements.
Statement of Cash Flows - The FASB issued guidance which amends the previous guidance on the classification
of certain cash receipts and payments in the statement of cash flows. The primary purpose of the amendment is to
reduce the diversity in practice that has resulted from the lack of consistent principles on this topic. The guidance
became effective January 1, 2018 and did not have a material impact on the Company’s financial statements.
Restricted Cash - The FASB issued guidance related to the classification and presentation of restricted cash in
the statement of cash flows, which requires entities to a) include restricted cash balances in its cash and cash-
equivalent balances in the statement of cash flows and b) include a reconciliation of cash and cash-equivalents per
the statement of financial position as compared to the statement of cash flows. Changes in restricted cash and
restricted cash equivalents that result from transfers between cash, cash equivalents, and restricted cash and
restricted cash equivalents will not be presented as cash flow activities in the statement of cash flows. In addition,
an entity with a material balance of amounts described as restricted cash and restricted cash equivalents must
disclose information about the nature of the restrictions. The guidance became effective January 1, 2018 and did
not have a material impact on the Company’s financial statements.
Employee Benefit Plans-Net Periodic Benefit Cost – The FASB issued guidance which requires entities to (1)
disaggregate the current-service-cost component from the other components of net benefit cost and present it with
other current compensation costs for related employees in the income statement and (2) present the other
components elsewhere in the income statement and outside of income from operations if that subtotal is
presented. In addition, the guidance requires entities to disclose the income statement lines that contain the other
components if they are not presented on appropriately described separate lines. The guidance became effective
January 1, 2018 and did not have a material impact on the Company’s financial statements. As a result of
adopting this guidance, the consolidated statement of income for the year ended December 31, 2017 was revised,
which resulted in increases in Operations and Maintenance expense and Other Income (Expense), net of $0.8
million.
Leases - The FASB issued guidance related to leases which requires lessees to recognize a lease liability (a
lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis) and a right-of-
use asset (an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease
term). The guidance became effective on January 1, 2019. The Company elected the optional transition method
of adoption option to apply the requirements of the standard in the period of adoption with no restatement of prior
periods. The Company utilized the package of transition practical expedients provided by the new guidance,
including carrying forward prior conclusions related to contracts that contain leases and lease classification. The
Company also utilized the transition practical expedient permitting entities to forgo the evaluation of existing land
easement arrangements to determine if they contain a lease. Land easement arrangements, or modifications to
existing arrangements, entered into after adoption of this guidance will need to be evaluated to determine if they
meet the definition of a lease. The adoption of this guidance resulted in the recording of a $6.7 million right-of-
use asset, a $7.1 million lease liability and a $0.4 million regulatory asset on the Company’s consolidated balance
sheet as of January 1, 2019. For further discussion, see “Leases” in Note 4 – Commitments and Contingent
Liabilities.
There are no other new adopted or proposed accounting guidance that the Company is aware of that could have a
material impact on the Company’s consolidated financial statements.
46
Note 2 - Rate and Regulatory Matters
Rate Matters
Middlesex - In November 2019, Middlesex filed a petition with the NJBPU seeking approval to reset its
Purchased Water Adjustment Clause (PWAC) tariff rate currently in effect to recover additional costs of $0.5
million for the purchase of treated water from a non-affiliated regulated water utility regulated by the NJBPU. A
PWAC is a rate mechanism that allows for recovery of increased purchased water costs between base rate case
filings. The PWAC is reset to zero once those increased costs are included in base rates. We cannot predict
whether the NJBPU will ultimately approve, deny or reduce the amount of our request.
In December 2018, the NJBPU approved Middlesex’s petition to establish its PWAC tariff rate to recover
additional annual costs of less than $0.1 million, primarily for the purchase of treated water from a non-affiliated
water utility. The PWAC tariff rate became effective on January 1, 2019.
In March 2018, Middlesex’s petition to the NJBPU seeking permission to increase its base water rates was
concluded, based on a negotiated settlement, resulting in an increase in annual operating revenues of $5.5 million.
The approved base water rates were designed to recover increased operating costs as well as a return on invested
capital in rate base of $245.5 million, based on an authorized return on common equity of 9.6%. As part of the
settlement, Middlesex received approval for regulatory accounting treatment of accumulated deferred income tax
benefits associated with required adoption of tangible property regulations issued by the Internal Revenue
Service. The settlement agreement allowed for a four-year amortization period for $28.7 million of deferred
income tax benefits as well as immediate and prospective recognition of the tangible property regulations’ tax
benefits in future years. The rate increase became effective April 1, 2018.
Tidewater - Effective January 1, 2020, Tidewater increased its DEPSC-approved Distribution System
Improvement Charge (DSIC) rate, which is expected to generate revenues of approximately $0.5 million
annually. A DSIC is a rate-mechanism that allows water utilities to recover investments in, and generate a return
on, qualifying capital improvements made between base rate proceedings.
In November 2019, Tidewater completed a $1.8 million DEPSC-approved purchase of the water utility assets of
J.H. Wilkerson and Son, Inc. and transfer of the Certificate of Public Convenience and Necessity in order for
Tidewater to serve the approximate 1,000 customers currently connected to eight community water systems
located mostly in eastern Sussex County, Delaware. The DEPSC also authorized Tidewater to maintain the
existing customer rates.
Effective March 1, 2019, Tidewater received approval from the DEPSC to reduce its rates to reflect the lower
corporate income tax rate enacted by the Tax Cuts and Jobs Act of 2017 (the Tax Act), resulting in a 3.35% rate
decrease for certain customer classes.
Pinelands - In October 2019, Pinelands Water and Pinelands Wastewater concluded their base rate case matters
when the NJBPU approved a negotiated settlement amongst the parties for a $0.5 million increase in annual base
rates, effective November 4, 2019. In March 2019, Pinelands had filed their petitions seeking permission to
increase base rates by approximately $0.7 million per year. The requests were necessitated by capital
infrastructure investments both companies had made, and increased operations and maintenance costs.
Southern Shores - Effective January 1, 2020, the DEPSC approved the renewal of a multi-year agreement for
water service to a 2,200 unit condominium community in Sussex County, Delaware. Under the agreement,
current rates will remain in effect until December 31, 2024, but should there be unanticipated capital expenditures
or regulatory related changes in operating expenses exceeding certain thresholds during this time period, rates are
permitted to be adjusted to reflect such cost changes. Thereafter, rate increases, if any, cannot exceed the lesser of
the regional Consumer Price Index or 3%. The new agreement expires on December 31, 2029.
47
Twin Lakes - In July 2019, Twin Lakes filed a petition with the PAPUC seeking permission to increase base
rates by approximately $0.2 million per year. This request was necessitated by capital infrastructure investments
Twin Lakes has made and increased operations and maintenance costs. The matter has been fully litigated and is
subject to a decision by an Administrative Law Judge (ALJ). We cannot predict what decision the ALJ will
render or whether the PAPUC will ultimately approve or deny in part or in its entirety the ALJ decision. A
decision by the PAPUC is not expected before March 31, 2020.
Regulatory Matters
We have recorded certain costs as regulatory assets because we expect full recovery of, or are currently
recovering, these costs in the rates we charge customers. These deferred costs have been excluded from rate base
and, therefore, we are not earning a return on the unamortized balances. These items are detailed as follows:
Regulatory Assets
Retirement Benefits
Income Taxes
Rate Cases, Tank Painting, and Other
Total
(Thousands of Dollars)
December 31,
2018
2019
$39,158
$44,281
55,232
60,151
6,047 4,846
$99,236
$110,479
Remaining
Recovery Periods
Various
Various
2-10 years
Retirement benefits include pension and other retirement benefits that have been recorded on the Consolidated
Balance Sheet in accordance with the guidance provided in ASC 715, Compensation – Retirement Benefits.
These amounts represent obligations in excess of current funding, which the Company believes will be fully
recovered in rates set by the regulatory authorities.
The recovery period for income taxes is dependent upon when the temporary differences between the tax and
book treatment of various items reverse.
In December 2017, the Tax Act was signed into law making significant changes to the Internal Revenue Code,
including a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31,
2017. The tariff rates charged to customers in the Company’s regulated companies include recovery of income
taxes at the statutory rate at the time those rates are approved by the respective state public utility commissions
that regulate each of our regulated subsidiaries. As of December 31, 2019 and December 31, 2018, the Company
has recorded regulatory liabilities of $31.5 million and $31.7 million, respectively for excess income taxes
collected through rates due to the lower income tax rate under the Tax Act. These regulatory liabilities are
overwhelmingly related to utility plant depreciation deduction timing differences, which are subject to Internal
Revenue Service (IRS) normalization rules. The IRS rules limit how quickly the excess taxes attributable to
accelerated taxes can be returned to customers. The conclusion of Middlesex’s and Pinelands’ base rate cases and
the resulting rates implemented in April 2018 and November 2019, respectively, reflect the impact of the Tax Act
on their revenue requirements. In February 2019, Tidewater received approval from the DEPSC to reduce its
rates to reflect the lower corporate income tax rate enacted by the Tax Act (see Rate Matters-Tidewater above).
As part of Middlesex’s March 2018 base water rate settlement with the NJBPU, Middlesex received approval for
regulatory accounting treatment of accumulated deferred income tax benefits associated with the adoption of
tangible property regulations issued by the IRS (see Rate Matters-Middlesex above), and, as of December 31,
2019 and 2018, the Company has recorded $24.2 million and $34.6 million of related regulatory liabilities.
The Company uses composite depreciation rates for its regulated utility assets, which is currently an acceptable
method under generally accepted accounting principles and is widely used in the utility industry. Historically,
under the composite depreciation method, the anticipated costs of removing assets upon retirement are provided
for over the life of those assets as a component of depreciation expense. The Company recovers certain asset
48
retirement costs through rates charged to customers as an approved component of depreciation expense. As of
December 31, 2019 and 2018, the Company has approximately $13.4 million and $12.8 million, respectively, of
expected costs of removal recovered currently in rates in excess of actual costs incurred as regulatory liabilities.
Note 3 – Income Taxes
Income tax expense differs from the amount computed by applying the statutory rate on book income subject to
tax for the following reasons:
Income Tax at Statutory Rate
Tax Effect of:
Utility Plant Related
Tangible Property Repairs
State Income Taxes – Net
Tax Act
Other
Total Income Tax Expense
Income tax expense is comprised of the following:
(Thousands of Dollars)
Years Ended December 31,
2019
2017
2018
$ 6,457 $ 7,009 $ 11,868
(802) 422 (1,016)
(10,156) (7,763)
-
1,173 1,207 895
- (610)
49 (37)
$ 924 $ 11,100
-
188
$ (3,140)
(Thousands of Dollars)
Years Ended December 31,
2018
2017
2019
Current:
Federal
State
Deferred:
Federal
State
Investment Tax Credits
Total Income Tax Expense
$ 2,090
$ (3,822) $ (188)
2,246 2,073 1,066
7,713
(726) (338)
(761) (545)
310
(77) (78) (79)
$ 924 $ 11,100
$ (3,140)
As part of Middlesex’s March 2018 base water rate settlement with the NJBPU, Middlesex received approval for
regulatory accounting treatment of accumulated deferred income tax benefits associated with the adoption of
tangible property regulations issued by the IRS as well as immediate recognition of current year tangible property
regulations tax benefits (see Note 2 – Rate and Regulatory Matters). This results in significant reductions in the
Company’s effective income tax rate, current income tax expense and deferred income tax expense.
49
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets
and liabilities for financial purposes and the amounts used for income tax purposes. The components of the net
deferred tax liability are as follows:
Utility Plant Related
Customer Advances
Employee Benefits
Investment Tax Credits (ITC)
Other
Total Deferred Tax Liability and ITC
(Thousands of Dollars)
December 31,
2019
2018
$ 50,608 $ 44,777
(3,661) (3,702)
6,543 5,490
519 596
399 109
$ 54,408 $ 47,270
As part of its 2014 Federal income tax return, the Company adopted the final IRS tangible property regulations
and changed its accounting method for the tax treatment of expenditures that qualified as deductible repairs. The
adoption resulted in a net reduction of $17.6 million in taxes previously remitted to the IRS, for which the
Company has already sought and received the tax refunds. A reserve provision against refunded taxes of $2.3
million was recorded in 2015 at the time of filing its change in accounting method based on a possible challenge
by the IRS during an audit examination. The Company’s 2014 federal income tax return was subsequently
selected for examination by the IRS. In 2018, the Company increased its income tax reserve provision to $4.1
million. During the first quarter of 2019, the Company agreed to certain modifications of its accounting method
for expenditures that qualify as deductible repairs and the IRS concluded its audit of the Company’s 2014 federal
income tax return. The modifications also impacted the Company’s filed 2015, 2016 and 2017 federal income tax
returns. In March 2019 and June 2019, the Company paid $0.8 million in income taxes and $0.1 million in
interest, respectively, in connection with the conclusion and closing of the 2014 and 2015 tax return audits. In
October 2019, the Company paid $1.9 million in income taxes in connection with the conclusion and closing of
the 2016 and 2017 tax return audits. As of December 31, 2019, the Company has reduced its income tax reserve
provision and interest expense liability to $0.5 million and $0.1 million, respectively.
The statutory review periods for federal income tax returns for the years prior to 2016 have been closed. Other
than the effects of the provision against refundable taxes discussed above, there are no unrecognized tax benefits
resulting from prior period tax positions.
Note 4 - Commitments and Contingent Liabilities
Water Supply - Middlesex has an agreement with the New Jersey Water Supply Authority (NJWSA) for the
purchase of untreated water through November 30, 2023, which provides for an average purchase of 27.0 million
gallons a day (mgd). Pricing is set annually by the NJWSA through a public rate making process. The agreement
has provisions for additional pricing in the event Middlesex overdrafts or exceeds certain monthly and annual
thresholds.
Middlesex also has an agreement with a non-affiliated water utility regulated by the NJBPU for the purchase of
treated water. This agreement, which expires February 27, 2021, provides for the minimum purchase of 3.0 mgd
of treated water with provisions for additional purchases.
Tidewater contracts with the City of Dover, Delaware to purchase treated water of 15.0 million gallons annually.
50
Purchased water costs are shown below:
(Millions of Dollars)
Years Ended December 31,
2018
2017
2019
Untreated
Treated
Total Costs
$ 3.4 $ 3.6 $ 2.8
3.2 3.2 3.3
$ 6.6 $ 6.8 $ 6.1
Guarantees - As part of an agreement with the County of Monmouth, New Jersey (County), Middlesex serves as
guarantor of the performance of Applied Water Management, Inc. (AWM), an unaffiliated wastewater treatment
contractor, to operate a County-owned leachate pretreatment facility at the Monmouth County Reclamation
Center in Tinton Falls, New Jersey. The performance guaranty is effective through 2029 unless another guarantor,
acceptable to the County, replaces Middlesex before such date. Under agreements with AWM and Natural
Systems Utilities, LLC (NSU), the parent company of AWM, Middlesex earns a fee for providing the
performance guaranty. In addition, Middlesex may provide operational support to the facility, as needed, and
AWM and NSU, serving as guarantor to Middlesex with respect to the performance of AWM, agree to indemnify
Middlesex against any claims that may arise under the Middlesex guaranty to the County.
If requested to perform under the guaranty to the County and, if AWM and NSU, as guarantor to Middlesex, do
not fulfill their obligations to indemnify Middlesex against any claims that may arise under the Middlesex
guaranty to the County, Middlesex would be required to fulfill the remaining operational commitment of AWM.
The liability and asset for the guaranty are included in Other Non-Current Liabilities and Other Non-Current
Assets on the balance sheet and are approximately $1.4 million and $1.5 million as of December 31, 2019 and
2018, respectively.
In November 2019, Middlesex was first notified that the County terminated its Agreement with AWM. AWM has
filed a lawsuit against the County in the Superior Court of New Jersey, Monmouth County that in part contests
the County’s exercise of this termination. Middlesex is examining the current status of its performance guaranty
in light of these developments and continues to monitor this litigation for its implications on the future need to
continue with the guaranty.
Leases - The Company determines if an arrangement is a lease at inception. Generally, a lease agreement exists if
the Company determines that the arrangement gives the Company control over the use of an identified asset and
obtains substantially all of the benefits from the identified asset.
The Company has entered into an operating lease of office space for administrative purposes, expiring in 2030.
The Company has not entered into any finance leases. The exercise of a lease renewal option for the Company’s
administrative offices is solely at the discretion of the Company.
The right-of-use (ROU) asset recorded represents the Company’s right to use an underlying asset for the lease
term and lease liability represents the Company’s obligation to make lease payments arising from the lease. Lease
ROU assets and liabilities are recognized at commencement date based on the present value of lease payments
over the lease term. The Company’s operating lease does not provide an implicit discount rate and as such the
Company used an estimated incremental borrowing rate (4.03%) based on the information available at
commencement date in determining the present value of lease payments.
Given the impacts of accounting for regulated operations, and the resulting recognition of expense at the amounts
recovered in customer rates, expenditures for operating leases are consistent with lease expense and was $0.7
million, $0.5 million and $0.1 million for the years ended December 31, 2019, 2018 and 2017, respectively.
51
Information related to operating lease ROU assets and lease liabilities is as follows:
ROU Asset at Lease Inception
Accumulated Amortization
Current ROU Asset
(In Millions)
December 31, 2019
7.3
$
(1.4)
5.9
$
The Company’s future minimum operating lease commitments as of December 31, 2019 are as follows:
2020
2021
2022
2023
2024
Thereafter
Total Lease Payments
Imputed Interest
Present Value of Lease Payments
Less Current Portion*
Non-Current Lease Liability
(In Millions)
December 31, 2019
0.8
0.8
0.8
0.8
0.8
4.4
8.4
(2.0)
6.4
(0.7)
5.7
$
$
*Included in Other Current Liabilities
Construction –The Company has projected to spend approximately $124 million in 2020, $112 million in 2021
and $59 million in 2022 on its construction program. The Company has entered into several contractual
construction agreements that in total obligate it to expend an estimated $63 million in the future. The actual
amount and timing of capital expenditures is dependent on the need for replacement of existing infrastructure,
customer growth, residential new home construction and sales, project scheduling and continued refinement of
project scope and costs. There is no assurance that projected customer growth and residential new home
construction and sales will occur.
Contingencies – Based on our operations in the heavily-regulated water and wastewater industries, the Company
is routinely involved in disputes, claims, lawsuits and other regulatory and legal matters, including responsibility
for fines and penalties relative to regulatory compliance. At this time, Management does not believe the final
resolution of any such matters, whether asserted or unasserted, will have a material adverse effect on the
Company’s financial position, results of operations or cash flows. In addition, the Company maintains business
insurance coverage that may mitigate the effect of any current or future loss contingencies.
Change in Control Agreements – The Company has Change in Control Agreements with its executive officers
that provide compensation and benefits in the event of termination of employment in connection with a change in
control of the Company.
52
Note 5 – Short-term Borrowings
Information regarding the Company’s short-term borrowings for the years ended December 31, 2019 and 2018 is
summarized below:
Established Lines at Year-End
Maximum Amount Outstanding
Average Outstanding
Notes Payable at Year-End
Weighted Average Interest Rate
Weighted Average Interest Rate at
Year-End
(Millions of Dollars)
2019
$140.0
59.4
52.4
20.0
3.33%
2018
$92.0
48.5
37.3
48.5
3.17%
2.86%
3.57%
The maturity dates for the Notes Payable as of December 31, 2019 are in January 2020 and are extendable at the
discretion of the Company.
Interest rates for short-term borrowings are below the prime rate with no requirement for compensating balances.
Note 6 - Capitalization
All the transactions discussed below related to the issuance of securities were approved by either the NJBPU or
DEPSC, except where otherwise noted.
Common Stock
In November 2019, the Company sold and issued 0.8 million shares of common stock in a public offering priced
at $60.50 per share. The net proceeds of $43.7 million were used for general corporate purposes including
repayment of a portion of the Company’s short-term debt.
The Company issues shares of its common stock in connection with its Middlesex Water Company Investment
Plan (the Investment Plan), a direct share purchase and dividend reinvestment plan for the Company’s common
stock. Since the inception of the Investment Plan and its predecessor plan, the Company has periodically
replenished the level of authorized shares in the plans. Currently, there remains 0.4 million shares registered with
the SEC for the Investment Plan and available for potential issuance to participants. In January 2019, the
Company activated a limited share purchase discount feature of the Investment Plan. Investment Plan
participants were invited to purchase shares directly as well as reinvest their common stock dividends at a 5%
discount. In August 2019, the 0.2 million share purchase limit was reached and the discount offer
terminated. The Company raised approximately $12.7 million through the issuance of over 0.2 million shares
under the Investment Plan during 2019.
The Company issues shares under a restricted stock plan for certain management employees, which is described
in Note 7 – Employee Benefit Plans.
The Company maintains a stock plan for its outside directors (the Outside Director Stock Compensation Plan).
For the years ended December 31, 2019, 2018 and 2017, 3,521, 4,004, and 3,976 shares, respectively, of
Middlesex common stock were granted and issued to the Company’s outside directors under the Outside Director
Stock Compensation Plan and 56,643 shares remain available for future awards. The maximum number of shares
authorized for grant under the Outside Director Stock Compensation Plan is 100,000.
In the event dividends on the preferred stock are in arrears, no dividends may be declared or paid on the common
stock of the Company.
53
Preferred Stock
At December 31, 2019 and 2018, there were 0.1 million shares of preferred stock authorized and less than 0.1
million shares of preferred stock outstanding. There were no preferred stock dividends in arrears.
The Company may not pay any dividends on its common stock unless full cumulative dividends to the preceding
dividend date for all outstanding shares of preferred stock have been paid or set aside for payment. If four or more
quarterly dividends are in arrears, the preferred shareholders, as a class, are entitled to elect two members to the
Board of Directors in addition to Directors elected by holders of the common stock.
In addition, if Middlesex
were to liquidate, holders of preferred stock would be paid back the stated value of their preferred shares before
any distributions could be made to common stockholders.
The conversion feature of the no par $7.00 Series Cumulative and Convertible Preferred Stock allows the security
holders to exchange one convertible preferred share for twelve shares of the Company's common stock. In
addition, the Company may redeem up to 10% of the outstanding convertible stock in any calendar year at a price
equal to the fair value of twelve shares of the Company's common stock for each share of convertible stock
redeemed.
In 2019, all remaining outstanding no par $8.00 Series Cumulative and Convertible Preferred Stock (3,000 shares
or approximately $0.3 million) were converted into 41,142 shares of common stock.
Long-term Debt
Subject to regulatory approval, the Company periodically issues long-term debt to fund its investments in utility
plant and other assets. To the extent possible, the Company finances qualifying capital projects under State
Revolving Fund (SRF) loan programs in New Jersey and Delaware. These government programs provide
financing at interest rates that are typically below rates available in the broader financial markets. A portion of the
borrowings under the New Jersey SRF is interest-free. Under the New Jersey SRF program, borrowers first enter
into a construction loan agreement with the New Jersey Infrastructure Bank (NJIB) at a below market interest
rate. The interest rate on the Company’s current construction loan borrowings is zero percent (0%). When
construction on the qualifying project is substantially complete, NJIB will coordinate the conversion of the
construction loan into a long-term securitized loan with a portion of the principal balance having a stated interest
rate of zero percent (0%) and a portion of the principal balance at a market interest rate at the time of closing
using the credit rating of the State of New Jersey. The current term of the long-term loans offered through the
NJIB is up to thirty years.
The NJIB generally schedules its long-term debt financings in May and November. Middlesex currently has two
projects that are in the construction loan phase of New Jersey SRF program:
1)
2)
In April 2018, the NJBPU approved Middlesex’s request to participate in the NJIB loan program to fund
the construction of a large-diameter transmission pipeline from the Carl J. Olsen water treatment plant and
interconnect with our distribution system. Middlesex closed on a $43.5 million NJIB interest-free
construction loan in August 2018. Through December 31, 2019, Middlesex has drawn a total of $31.8
million and expects to draw down the remaining proceeds through the first quarter of 2020.
In March 2018, the NJBPU approved Middlesex’s request to participate in the NJIB loan program to fund
the 2018 RENEW Program, which is an ongoing initiative to eliminate all unlined water distribution
mains in the Middlesex system. Middlesex closed on an $8.7 million NJIB construction loan in
September 2018 and completed drawing on the proceeds in October 2019.
The Company expects that the large-diameter transmission pipeline and the 2018 RENEW construction loans will
be included in the NJIB May 2020 long-term debt financing program.
In September 2018, the NJIB announced changes to the SRF program for project funding priority ranking, the
proportions of interest free loans and market interest rate loans and overall loan limits on interest free loan
54
balances to investor-owned water utilities. These changes affect SRF projects for which the construction loan
closes after September 2018. Under the new guidelines, the principal balance having a stated interest rate of zero
percent (0%) is 25% of the loan balance with the remaining portion of 75% having a market based interest rate.
This is limited to the first $10.0 million of the loan. Loan amounts above $10.0 million do not participate in the
0% rate program, but do participate at the market based interest rate. As a result of all these changes, the
Company’s future capital funding plan does not include participating in the NJIB SRF program.
In order to help ensure adherence to its comprehensive financing plan, Middlesex received approval from the
NJBPU in February 2019 to issue and sell up to $140 million of First Mortgage Bonds (FMB) through the New
Jersey Economic Development Authority (NJEDA) in one or more transactions through December 31, 2022.
Because the interest paid to the bondholders is exempt from federal and New Jersey income taxes, the interest rate
on debt issued through the NJEDA is generally lower than otherwise achievable in the traditional taxable
corporate bond market. However, the interest received by the bondholder is subject to the Alternative Minimum
Tax.
In August 2019, Middlesex priced and closed on an NJEDA debt financing transaction of $53.7 million by issuing
FMBs designated as Series 2019A ($32.5 million at coupon interest rate of 4.0%) and Series 2019B ($21.2
million at coupon interest rate of 5.0%). The proceeds, including an issuance premium of $7.1 million, are being
used to finance several projects under the Water For Tomorrow capital program initiated by the Company to
upgrade and replace aging water utility infrastructure. The total proceeds of $60.8 million, initially recorded as
Restricted Cash on the balance sheet, is held in escrow by a bond trustee and are drawn down by requisition for
the qualifying projects. Through December 31, 2019, Middlesex has drawn a total of $17.3 million and currently
expects to draw the remaining $43.8 million of proceeds, currently included in Restricted Cash, through the third
quarter of 2021.
In May 2018, Middlesex repaid its RENEW 2017 interest-free construction loan by issuing to the NJIB FMBs in
the amount of $9.5 million designated as Series 2018A ($7.1 million) and Series 2018B ($2.4 million). The
interest rate on the Series 2018A bond is zero and the interest rate on the Series 2018B bond ranges between 3.0%
and 5.0%. The final maturity date for both bonds is August 1, 2047, with scheduled debt service payments over
the life of the loans.
In March 2018, the DEPSC approved Tidewater’s request to borrow up to $0.9 million under the Delaware SRF
program to fund the replacement of an entire water distribution system of a small Delaware community.
Tidewater closed on the SRF loan in May 2018. In April 2019, Tidewater received approval from the DEPSC to
increase the borrowing to $1.7 million based on revised project cost estimates. Tidewater closed on the additional
SRF loan in October 2019.
Through December 31, 2019, Tidewater has drawn a total of $1.3 million and
expects to draw down the remaining proceeds through the first quarter of 2020.
Bond Series QQ, RR, SS, 2019A and 2019B are term bonds with single maturity dates subsequent to 2024.
Principal repayments for all series of the Company’s long-term debt except for Bond Series BB, CC, EE, FF and
II extend beyond 2024. The aggregate annual principal repayment obligations for all long-term debt over the next
five years are shown below:
Year
2020
2021
2022
2023
2024
(Millions of Dollars)
Annual Maturities
$ 7.2
$ 7.2
$ 6.7
$ 6.2
$ 6.0
55
The weighted average interest rate on all long-term debt at December 31, 2019 and 2018 was 3.17% and 3.30%,
respectively. Except for the Amortizing Secured Notes ($33.6 million), all of the Company’s outstanding long-
term debt has been issued through the NJEDA ($109.1 million), the NJIB SRF program ($82.7 million) and the
Delaware SRF program ($8.9 million).
In 2019, the NJIB de-obligated principal payments of $0.1 million on Series NN of the Company’s FMBs.
Substantially all of the utility plant of the Company is subject to the lien of its mortgage, which includes debt
service and capital ratio covenants. The Company is in compliance with all of its mortgage covenants and
restrictions.
Earnings Per Share
The following table presents the calculation of basic and diluted earnings per share (EPS) for the years ended
December 31, 2019, 2018 and 2017. Basic EPS is computed on the basis of the weighted average number of shares
outstanding. Diluted EPS assumes the conversion of both the Convertible Preferred Stock $7.00 Series and $8.00
Series (fully converted into common stock in September 2019).
(In Thousands, Except Per Share Amounts)
2018
2017
2019
Basic:
Net Income
Preferred Dividend
Earnings Applicable to Common Stock
Basic EPS
Diluted:
Earnings Applicable to Common Stock
$7.00 Series Dividend
$8.00 Series Dividend
Adjusted Earnings Applicable to Common
Stock
Diluted EPS
Fair Value of Financial Instruments
16,685
Income Shares
$33,888
(132)
$33,756
$2.02
16,685
16,384
Income Shares
$32,452
(144)
$32,308
$1.97
16,384
16,330
Income Shares
$22,809
(144)
$22,665
$1.39
16,330
$33,756
67
12
$33,835
$2.01
16,685
115
29
16,829
$32,308
67
24
$32,399
$1.96
16,384
115
41
16,540
$22,665
67
24
$22,756
$1.38
16,330
115
41
16,486
The following methods and assumptions were used by the Company in estimating its fair value disclosure for
financial instruments for which it is practicable to estimate that value. The carrying amounts reflected in the
consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable and notes
payable approximate their respective fair values due to the short-term maturities of these instruments. The fair
value of First Mortgage and State Revolving Fund Bonds (collectively, the Bonds) issued by Middlesex is based
on quoted market prices for similar issues. Under the fair value hierarchy, the fair value of cash and cash
equivalents is classified as a Level 1 measurement and the fair value of notes payable and the Bonds in the table
below are classified as Level 2 measurements. The carrying amount and fair value of the Bonds were as follows:
Bonds
(Thousands of Dollars)
At December 31,
2019
2018
Carrying
Amount
$151,361
Fair
Value
$160,772
Carrying
Amount
$101,411
Fair
Value
$102,789
56
For other long-term debt issuances for which there is no quoted market price and there is not an active trading
market, it was not practicable to estimate their fair value. For details, including carrying value, interest rate and
due date on these series of long-term debt, please refer to those series of long-term debt described as “Amortizing
Secured Note”, “State Revolving Trust Note” and “Construction Loans” on the Consolidated Statements of
Capital Stock and Long-Term Debt. The carrying amount of these instruments was $83.0 million and $61.5
million at December 31, 2019 and 2018, respectively. Customer advances for construction have carrying amounts
of $23.9 million and $22.6 million at December 31, 2019 and 2018, respectively. Their relative fair values cannot
be accurately estimated since future refund payments depend on several variables, including new customer
connections, customer consumption levels and future rate increases.
Note 7 - Employee Benefit Plans
Pension Benefits
The Company’s Pension Plan covers all active employees hired prior to April 1, 2007. Employees hired after
March 31, 2007 are not eligible to participate in this plan, but can participate in a defined contribution profit
sharing plan that provides an annual contribution at the discretion of the Company, based upon a percentage of
the participants’ annual paid compensation. In order to be eligible for contribution, the eligible employee must be
employed by the Company on December 31st of the year to which the contribution relates. The Company
maintains an unfunded supplemental plan for a limited number of its executive officers. The Accumulated
Benefit Obligation for the Company’s Pension Plan at December 31, 2019 and 2018 was $87.6 million and $73.1
million, respectively.
Other Benefits
The Company’s Other Benefits Plan covers substantially all of its current retired employees. Employees hired
after March 31, 2007 are not eligible to participate in this plan. Coverage includes healthcare and life insurance.
Accrued retirement benefit costs are recorded each year.
Regulatory Treatment of Over/Underfunded Retirement Obligations
Because the Company is subject to regulation in the states in which it operates, it is required to maintain its
accounts in accordance with the regulatory authority’s rules and guidelines, which may differ from other
authoritative accounting pronouncements. In those instances, the Company follows the guidance of ASC 980,
Regulated Operations. Based on prior regulatory practice, and in accordance with the guidance in ASC 980,
Regulated Operations, the Company records underfunded Pension Plan and Other Benefits Plan obligation costs,
which otherwise would be recognized in Other Comprehensive Income under ASC 715, Compensation –
Retirement Benefits, as a Regulatory Asset, and expects to recover those costs in rates charged to customers.
The Company uses a December 31 measurement date for all of its employee benefit plans. The tables below set
forth information relating to the Company’s Pension Plan and Other Benefits Plan for 2019 and 2018.
57
(Thousands of Dollars)
Pension Plan
Other Benefits Plan
December 31,
2019
2018
2019
2018
Change in Projected Benefit Obligation:
Beginning Balance
Service Cost
Interest Cost
Actuarial (Gain) Loss
Benefits Paid
Ending Balance
$ 83,927 $ 88,013 $ 48,474 $ 54,345
2,171 2,426 839 1,135
3,426 3,061 1,984 1,898
14,188 (7,018) 4,671 (8,160)
(2,821) (2,555) (802) (744)
$ 100,891 $ 83,927 $ 55,166 $ 48,474
(Thousands of Dollars)
Pension Plan
Other Benefits Plan
December 31,
2019
2018
2019
2018
Change in Fair Value of Plan Assets:
Beginning Balance
Actual Return on Plan Assets
Employer Contributions
Benefits Paid
Ending Balance
$ 66,771 $ 69,215 $ 34,622 $ 36,083
12,753 (3,524) 5,192 (2,161)
3,677 3,635 1,601 1,444
(2,821) (2,555) (802) (744)
$ 80,380 $ 66,771 $ 40,613 $ 34,622
Funded Status
$ (20,511) $ (17,156) $ (14,553) $ (13,852)
(Thousands of Dollars)
Pension Plan
Other Benefits Plan
December 31,
2019
2018
2019
2018
Amounts Recognized in the Consolidated
Balance Sheets consist of :
Current Liability
Noncurrent Liability
Net Liability Recognized
$ 393 $ 347 $ -
$ -
20,118 16,809 14,553 13,852
$ 20,511 $ 17,156 $ 14,553 $ 13,852
58
(Thousands of Dollars)
Pension Plan
Other Benefits Plan
Years Ended December 31,
2019
2018
2017
2019
2018
2017
Components of Net Periodic Benefit Cost
Service Cost
Interest Cost
Expected Return on Plan Assets
Amortization of Net Actuarial Loss
Amortization of Prior Service Credit
Net Periodic Benefit Cost*
$ 2,171 $ 2,426 $ 2,399 $ 839 $ 1,135 $ 1,089
3,426 3,061 3,143 1,984 1,898 1,964
(4,694) (4,871) (4,489) (2,451) (2,550) (2,406)
1,618 1,658 1,566 1,319 1,787 1,781
-
(1,607) (1,728)
$ 2,521 $ 2,274 $ 2,619 $ 1,691 $ 663 $ 700
-
-
-
*Service cost is included in Operations and Maintenance expense on the consolidated statements of income; all
other amounts are included in Other Income (Expense), net.
Amounts that are expected to be amortized from Regulatory Assets into Net Periodic Benefit Cost in 2020 are as
follows:
(Thousands of Dollars)
Pension
Plan
$2,059
Other
Benefits
Plan
$1,351
Actuarial Loss
The discount rate and compensation increase rate for determining our postretirement benefit plans’ benefit
obligations and costs as of and for the years ended December 31, 2019, 2018 and 2017, respectively, are as
follows:
Pension Plan
2019
2018
2017
Other Benefits Plan
2018
2017
2019
Weighted Average Assumptions:
Expected Return on Plan Assets
Discount Rate for:
Benefit Obligation
Benefit Cost
Compensation Increase for:
Benefit Obligation
Benefit Cost
7.00%
7.00%
7.50%
7.00%
7.00%
7.50%
3.12%
4.15%
3.00%
3.00%
4.15%
3.53%
3.00%
3.00%
3.53%
4.06%
3.00%
3.00%
3.12%
4.15%
3.00%
3.00%
4.15%
3.53%
3.00%
3.00%
3.53%
4.06%
3.00%
3.00%
The compensation increase assumption for the Other Benefits Plan is attributable to life insurance provided to
qualifying employees upon their retirement. The insurance coverage will be determined based on the employee’s
base compensation as of their retirement date.
The Company utilizes the Society of Actuaries’ mortality table (Pri-2012) (Mortality Improvement Scale MP2019
for the 2019 valuation).
For the 2019 valuation, costs and obligations for our Other Benefits Plan assumed an 8.0% annual rate of increase
in the per capita cost of covered healthcare benefits in 2020 with the annual rate of increase declining 1.0% per
year for 2021-2022 and 0.5% per year for 2023-2024, resulting in an annual rate of increase in the per capita cost
of covered healthcare benefits of 5% by year 2024.
59
A one-percentage point change in assumed healthcare cost trend rates would have the following effects on the
Other Benefits Plan:
Effect on Current Year Service and Interest Costs
Effect on Projected Benefit Obligation
(Thousands of Dollars)
1 Percentage Point
Increase
545
$
$ 9,036
Decrease
$ (424)
$ (7,143)
The following benefit payments, which reflect expected future service, are expected to be paid:
(Thousands of Dollars)
Year
Pension Plan
2020 $ 3,152
2021 3,144
2022 3,309
2023 3,720
2024 4,652
2025-2029 26,501
$ 44,478
Totals
Other Benefits Plan
$ 1,426
1,639
1,916
2,006
2,089
11,652
$ 20,728
Benefit Plans Assets
The allocation of plan assets at December 31, 2019 and 2018 by asset category is as follows:
Pension Plan
Other Benefits Plan
Asset Category
Equity Securities
Debt Securities
Cash
Real Estate/Commodities
Total
2018 Target
2019
61.5% 59.5%
36.5% 36.5%
1.6%
2.4%
100.0% 100.0%
0.5%
1.5%
55%
38%
2%
5%
2019
2018 Target
54.7%
37.3%
8.0%
0.0%
100.0% 100.0%
60.0%
33.0%
7.0%
0.0%
43%
50%
2%
5%
Two outside investment firms each manage a portion of the Pension Plan asset portfolio. One of those investment
firms also manages the Other Benefits Plan asset portfolio. Quarterly meetings are held between the Company’s
Pension Committee of the Board of Directors and the investment managers to review their performance and asset
allocation. If the actual asset allocation is outside the targeted range, the Pension Committee reviews current
market conditions and advice provided by the investment managers to determine the appropriateness of
rebalancing the portfolio.
The objective of the Company is to maximize the long-term return on retirement plan assets, relative to a
reasonable level of risk, maintain a diversified investment portfolio and maintain compliance with the Employee
Retirement Income Security Act of 1974. The expected long-term rate of return is based on the various asset
categories in which plan assets are invested and the current expectations and historical performance for these
categories.
Equity securities include Middlesex common stock in the amounts of $1.2 million (1.6% of total Pension Plan
assets) and $1.0 million (1.6% of total Pension Plan assets) as of December 31, 2019 and 2018, respectively.
Fair Value Measurements
Accounting guidance provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to
measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for
60
identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3
measurements). The three levels of the fair value hierarchy are described as follows:
• Level 1 – Inputs to the valuation methodology are unadjusted quoted market prices for identical assets or
liabilities in accessible active markets.
• Level 2 – Inputs to the valuation methodology that are observable, either directly or indirectly, such as
quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs
that are observable or can be corroborated by observable market data for substantially the full term of the
assets or liabilities. If the asset or liability has a specified contractual term, the Level 2 input must be
observable for substantially the full term of the asset or liability.
• Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value
measurement.
Certain investments in cash and cash equivalents, equity securities, and commodities are valued based on quoted
market prices in active markets and are classified as Level 1 investments. Certain investments in cash and cash
equivalents, equity securities and fixed income securities are valued using prices received from pricing vendors
that utilize observable inputs and are therefore classified as Level 2 investments.
The following tables present Middlesex’s Pension Plan assets measured and recorded at fair value within the fair
value hierarchy:
Mutual Funds
Money Market Funds
Common Equity Securities
Total Investments
Mutual Funds
Money Market Funds
Common Equity Securities
Total Investments
(Thousands of Dollars)
As of December 31, 2019
Level 1
69,565
397
10,418
80,380
Level 2
-
-
-
-
$
$
Level 3
-
-
-
-
$
$
(Thousands of Dollars)
As of December 31, 2018
Level 1
57,014
1,074
8,683
66,771
Level 2
-
-
-
-
$
$
Level 3
-
-
-
-
$
$
$
$
$
$
Total
69,565
397
10,418
80,380
Total
57,014
1,074
8,683
66,771
$
$
$
$
The following tables present Middlesex’s Other Benefits Plan assets measured and recorded at fair value within
the fair value hierarchy:
(Thousands of Dollars)
As of December 31, 2019
Mutual Funds
Money Market Funds
Agency/US/State/Municipal Debt
Total Investments
Level 1
24,361
2,859
-
27,220
$
$
Level 2
-
-
13,393
13,393
$
$
Level 3
-
-
-
-
$
$
Total
24,361
2,859
13,393
40,613
$
$
61
(Thousands of Dollars)
As of December 31, 2018
Mutual Funds
Money Market Funds
Agency/US/State/Municipal Debt
Total Investments
Level 1
18,924
2,769
-
21,693
$
$
Level 2
-
-
12,929
12,929
$
$
Level 3
-
-
-
-
$
$
Total
18,924
2,769
12,929
34,622
$
$
Benefit Plans Contributions
For the Pension Plan, Middlesex made total cash contributions of $3.7 million in 2019 and expects to make
approximately $3.4 million of cash contributions in 2020.
For the Other Benefits Plan, Middlesex made total cash contributions of $1.6 million in 2019 and expects to make
approximately $1.6 million of cash contributions in 2020.
401(k) Plan
The Company maintains a 401(k) defined contribution plan, which covers substantially all employees with more
than 1,000 hours of service. Under the terms of the Plan, the Company matches 100% of a participant’s
contributions, which do not exceed 1% of a participant’s compensation, plus 50% of a participant’s contributions
exceeding 1%, but not more than 6%. The Company’s matching contribution was $0.7 million, $0.6 million and
$0.6 million for the years ended December 31, 2019, 2018 and 2017, respectively.
For those employees hired after March 31, 2007, and still actively employed on December 31, 2019, the
Company approved, and will fund, a discretionary contribution of $0.7 million which was based on 5.0% of
eligible 2019 compensation. For the years ended December 31, 2018 and 2017, the Company made discretionary
contributions of $0.6 million and $0.5 million, respectively, for qualifying employees.
Stock-Based Compensation
The Company has a stock compensation plan for certain management employees (the 2018 Restricted Stock
Plan). Shares issued in connection with the 2018 Restricted Stock Plan are subject to forfeiture by the employee
in the event of termination of employment within five years of the award other than as a result of normal
retirement, death, disability or change in control. The maximum number of shares authorized for grant under the
2018 Restricted Stock Plan is 0.3 million shares, of which approximately 94% remain available for award.
The Company recognizes compensation expense at fair value for the 2018 Restricted Stock Plan awards in
accordance with ASC 718, Compensation – Stock Compensation. Compensation expense is determined by the
market value of the stock on the date of the award and is being amortized over a five-year period.
62
The following table presents information on the 2018 Restricted Stock Plan:
Balance, January 1, 2017
Granted
Vested
Forfeited
Amortization of Compensation Expense
Balance, December 31, 2017
Granted
Vested
Forfeited
Amortization of Compensation Expense
Balance, December 31, 2018
Granted
Vested
Forfeited
Amortization of Compensation Expense
Balance, December 31, 2019
Weighted
Average
Grant Price
$36.95
$36.53
$55.99
Shares
(thousands)
132
22
(20)
(2)
-
132
22
(27)
(2)
-
125
18
(28)
(18)
-
97
Unearned
Compensation
(thousands)
$1,764
799
-
(54)
(724)
$1,785
827
-
(18)
(956)
$1,638
975
-
-
(907)
$1,706
The fair value of vested restricted shares was $1.7 million and $1.3 million as of December 31, 2019 and 2018,
respectively.
Note 8 – Business Segment Data
The Company has identified two reportable segments. One is the regulated business of collecting, treating and
distributing water on a retail and wholesale basis to residential, commercial, industrial and fire protection
customers in parts of New Jersey, Delaware and Pennsylvania. This segment also includes regulated wastewater
systems in New Jersey and Delaware. The Company is subject to regulations as to its rates, services and other
matters by the states of New Jersey, Delaware and Pennsylvania with respect to utility service within these states.
The other segment is primarily comprised of non-regulated contract services for the operation and maintenance of
municipal and private water and wastewater systems in New Jersey and Delaware.
Inter-segment transactions relating to operational costs are treated as pass-through expenses. Finance charges on
inter-segment loan activities are based on interest rates that are below what would normally be charged by a third
party lender.
63
Operations by Segments:
Revenues:
Regulated
Non – Regulated
Inter-segment Elimination
Consolidated Revenues
Operating Income:
Regulated
Non – Regulated
Consolidated Operating Income
Depreciation:
Regulated
Non – Regulated
Consolidated Depreciation
Other Income (Expense), Net:
Regulated
Non – Regulated
Inter-segment Elimination
Consolidated Other Income (Expense), Net
Interest Charges:
Regulated
Non – Regulated
Inter-segment Elimination
Consolidated Interest Charges
Income Taxes:
Regulated
Non – Regulated
Consolidated Income Taxes
Net Income:
Regulated
Non – Regulated
Consolidated Net Income
Capital Expenditures:
Regulated
Non – Regulated
Total Capital Expenditures
Assets:
Regulated
Non – Regulated
Inter-segment Elimination
Consolidated Assets
(Thousands of Dollars)
Years Ended December 31,
2019
2018
2017
$ 123,078
12,177
(657)
$ 134,598
$
31,805
3,715
$ 35,520
$ 16,481
235
$ 16,716
$
3,018
(253)
(273)
$ 2,492
$ 7,456
81
(273)
7,264
$
$ (4,317)
1,177
$ (3,140)
$ 31,602
2,286
$ 33,888
$ 88,858
267
$ 89,125
$ 121,901
16,778
(602)
$ 138,077
$ 115,454
15,912
(591)
$ 130,775
$ 34,127
3,015
$ 37,142
$ 35,130
2,668
$ 37,798
$ 14,846
191
$ 15,037
$ 13,732
190
$ 13,922
$
$
$
$
3,284
119
(411)
2,992
7,060
109
(411)
6,758
$ (54)
978
$ 924
$ 30,405
2,047
$ 32,452
$ 71,493
601
$ 72,094
$
$
2,020
64
(467)
1,617
$ 5,855
118
(467)
$ 5,506
$ 9,848
1,252
$ 11,100
$ 21,447
1,362
$ 22,809
$ 50,078
223
$ 50,301
(Thousands of Dollars)
As of
December 31, 2019
As of
December 31, 2018
$910,081
9,686
(9,889)
$909,878
$764,749
8,994
(5,913)
$767,830
64
Note 9 - Quarterly Data - Unaudited
Financial information for each quarter of 2019 and 2018 is as follows:
2019
1st
(Thousands of Dollars, Except per Share Data)
3rd
2nd
4th
Total
Operating Revenues
Operating Income
Net Income
Basic Earnings per Share
Diluted Earnings per Share
Common Dividend Per Share
High/Low Common Stock Price
$ 30,698 $ 33,393 $ 37,769 $ 32,738 $ 134,598
7,028 8,950 11,983 7,559 35,520
6,552 8,146 11,119 8,071 33,888
$ 0.40 $ 0.49 $ 0.67 $ 0.46 $ 2.02
$ 0.39 $ 0.49 $ 0.67 $ 0.46 $ 2.01
$ 0.2400 $ 0.2400 $ 0.2400 $ 0.2563 $ 0.9763
$60.48/$51.02 $63.68/$52.51 $66.10/$55.30 $67.69/$58.75
2018
1st
2nd
3rd
4th
Total
Operating Revenues
Operating Income
Net Income
Basic Earnings per Share
Diluted Earnings per Share
Common Dividend Per Share
High/Low Common Stock Price
$ 31,177 $ 34,919 $ 38,713 $ 33,268 $ 138,077
6,350 10,721 12,918 7,153 37,142
4,494 8,675 12,290 6,993 32,452
$ 0.27 $ 0.52 $ 0.75 $ 0.43 $ 1.97
$ 0.27 $ 0.52 $ 0.74 $ 0.43 $ 1.96
$ 0.2238 $ 0.2238 $ 0.2238 $ 0.2400 $ 0.9114
$41.45/$33.96 $45.24/$34.74 $49.00/$41.77 $60.31/$43.12
The information above, in the opinion of the Company, includes all adjustments consisting only of normal
recurring accruals necessary for a fair presentation of such amounts. The business of the Company is subject to
seasonal fluctuation with the peak period usually occurring during the summer months. The quarterly earnings
per share amounts above may differ slightly from previous filings due to the effects of rounding.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
65
ITEM 9A.
CONTROLS AND PROCEDURES
(1) Disclosure controls and procedures are controls and other procedures that are designed to ensure that
information required to be disclosed in Company reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the Securities and Exchange
Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in Company reports filed under the
Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive
Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding disclosure.
As required by Rule 13a-15 under the Exchange Act, an evaluation of the effectiveness of the design and
operation of the Company’s disclosure controls and procedures was conducted by the Company’s Chief
Executive Officer along with the Company’s Chief Financial Officer for the quarter ended December 31, 2019.
Based upon that evaluation the Company’s Chief Executive Officer and the Company’s Chief Financial Officer
concluded:
(a) Disclosure controls and procedures were effective as of the end of the period covered by this report.
(b) No changes in internal control over financial reporting occurred during our most recent fiscal quarter that
has materially affected, or are reasonably likely to materially affect, internal control over financial reporting.
Accordingly, management believes the consolidated financial statements included in this report fairly present in
all material respects our financial condition, results of operations and cash flows for the periods presented.
(2) Management’s Report on Internal Control Over Financial Reporting
The management of Middlesex Water Company (Middlesex or the Company) is responsible for establishing and
maintaining adequate internal control over financial reporting as defined in Exchange Act Rule 13A-15(f) and
15d-15(f). Middlesex’s internal control system was designed to provide reasonable assurance to the Company’s
management and Board of Directors of adequate preparation and fair presentation of the published financial
statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance with respect to the adequacy of
financial statement preparation and presentation. Middlesex’s management assessed the effectiveness of the
Company’s internal control over financial reporting as of December 31, 2019. In making this assessment,
management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control-Integrated Framework (2013 framework). Based on our assessment, we
believe that as of December 31, 2019, the Company’s internal control over financial reporting is operating as
designed and is effective based on those criteria.
Middlesex’s independent registered public accounting firm has audited the effectiveness of our internal control
over financial reporting as of December 31, 2019 as stated in their report which is included herein.
/s/ Dennis W. Doll
Dennis W. Doll
President and
Chief Executive Officer
/s/ A. Bruce O’Connor
A. Bruce O’Connor
Senior Vice President, Treasurer and
Chief Financial Officer
Iselin, New Jersey
February 27, 2020
ITEM 9B. OTHER INFORMATION.
None.
66
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Information with respect to Directors of Middlesex Water Company is included in Middlesex Water Company’s
Proxy Statement for the 2020 Annual Meeting of Stockholders and is incorporated herein by reference.
Information regarding the Executive Officers of Middlesex Water Company is included under Item 1. in Part I of
this Annual Report.
ITEM 11. EXECUTIVE COMPENSATION.
This Information for Middlesex Water Company is included in Middlesex Water Company’s Proxy Statement for
the 2020 Annual Meeting of Stockholders and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS.
This information for Middlesex Water Company is included in Middlesex Water Company’s Proxy Statement for
the 2020 Annual Meeting of Stockholders and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
This information for Middlesex Water Company is included in Middlesex Water Company’s Proxy Statement for
the 2020 Annual Meeting of Stockholders and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
This information for Middlesex Water Company is included in Middlesex Water Company’s Proxy Statement for
the 2020 Annual Meeting of Stockholders and is incorporated herein by reference.
67
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
1.
The following Financial Statements and Supplementary Data are included in Part II- Item 8. of this
Annual Report:
PART IV
Consolidated Balance Sheets at December 31, 2019 and 2018.
Consolidated Statements of Income for each of the three years in the period ended
December 31, 2019.
Consolidated Statements of Cash Flows for each of the three years in the period ended
December 31, 2019.
Consolidated Statements of Capital Stock and Long-term Debt as of December 31, 2019 and 2018.
Consolidated Statements of Common Stockholders’ Equity for each of the three years in the period
ended December 31, 2019.
2.
3.
Notes to Consolidated Financial Statements.
Financial Statement Schedules
All Schedules are omitted because of the absence of the conditions under which they are required or
because the required information is shown in the financial statements or notes thereto.
Exhibits
See Exhibit listing immediately following the signature page.
ITEM 16. FORM 10-K SUMMARY.
None.
68
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
MIDDLESEX WATER COMPANY
By:
/s/ Dennis W. Doll
Dennis W. Doll
President and Chief Executive Officer
Date:
February 27, 2020
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following
persons, on behalf of the registrant and in the capacities indicated on February 27, 2020.
By:
By:
/s/ A. Bruce O’Connor
A. Bruce O’Connor
Senior Vice President, Treasurer and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
/s/ Dennis W. Doll
Dennis W. Doll
Chairman of the Board, President, Chief Executive Officer and Director
(Principal Executive Officer)
By:
By:
/s/ James F. Cosgrove Jr.
James F. Cosgrove Jr.
Director
/s/ Kim C. Hanemann
Kim C. Hanemann
Director
By:
Steven M. Klein
Director
/s/ Steven M. Klein
By:
Amy B. Mansue
/s/ Amy B. Mansue
Director
By:
Ann L. Noble
/s/ Ann L. Noble
Director
By:
Walter G. Reinhard
/s/ Walter G. Reinhard
By:
Director
/s/ Jeffries Shein
Jeffries Shein
Director
69
EXHIBIT INDEX
Exhibits designated with an asterisk (*) are filed herewith. The exhibits not so designated have heretofore been
filed with the Commission and are incorporated herein by reference to the documents indicated in the previous
filing columns following the description of such exhibits. Exhibits designated with a dagger (t) are management
contracts or compensatory plans.
Previous
Registration
No.
Filing’s
Exhibit
No.
Exhibit No.
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
Document Description
The Restated Certificate of Incorporation, filed as Exhibit 3.1 to the
Company’s Annual Report on Form 10-K for the Year ended
December 31, 1998.
Certificate of Amendment
the Restated Certificate of
to
Incorporation, filed with the State of New Jersey on June 20, 1997,
filed as Exhibit 3.1 to the Company’s Annual Report on Form 10-K
for the year ended December 31, 1997.
the Restated Certificate of
to
Certificate of Amendment
Incorporation, filed with the State of New Jersey on May 27, 1998,
filed as Exhibit 3.1 to the Company’s Annual Report on Form 10-K
for the year ended December 31, 1998.
the Restated Certificate of
to
Certificate of Amendment
Incorporation, filed with the State of New Jersey on June 10, 1998,
filed as Exhibit 3.1 to the Company’s Annual Report on Form 10-K
for the year ended December 31, 1998.
Certificate of Correction of Middlesex Water Company filed with the
State of New Jersey on April 30, 1999, filed as Exhibit 3.3 to the
Company’s Annual Report on Form 10-K/A-2 for the year ended
December 31, 2003.
Certificate of Amendment to the Restated Certificate of Incorporation
of Middlesex Water Company, filed with the State of New Jersey on
February 17, 2000, filed as Exhibit 3.4 to the Company’s Annual
Report on Form 10-K/A-2 for the year ended December 31, 2003.
Certificate of Amendment to the Restated Certificate of Incorporation
of Middlesex Water Company, filed with the State of New Jersey on
June 5, 2002, filed as Exhibit 3.5 to the Company’s Annual Report on
Form 10-K/A-2 for the year ended December 31, 2003.
Certificate of Amendment
the Restated Certificate of
to
Incorporation, filed with the State of New Jersey on June 19, 2007,
filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K
filed April 30, 2010.
Certificate of Amendment
the Restated Certificate of
to
Incorporation, filed with the State of New Jersey on September 4,
2019, filed as Exhibit 3.1 to the Company’s Current Report on Form
8-K filed September 6, 2019.
Certificate of Amendment
the Restated Certificate of
to
Incorporation, filed with the State of New Jersey on September 19,
2019, filed as Exhibit 3.1 to the Company’s Current Report on Form
8-K filed September 23, 2019.
70
Previous
Registration
No.
Filing’s
Exhibit
No.
2-55058
2(a)
2-15795
4(a)-4(f)
33-54922
10.4-10.9
33-31476
10.13
33-54922
10.24
EXHIBIT INDEX
Exhibit No.
3.11
3.12
4.1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.9(a)
Document Description
By-laws of the Company, as amended, filed as Exhibit 4.1 to the
Company’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2010.
Amendments to the by-laws of the Company, included as Exhibit
3(ii) to the Company’s Current Report on Form 8-K dated
November 22, 2017.
Form of Common Stock Certificate.
Water Service Agreement, dated February 28, 2006, between the
Company and Elizabethtown Water Company, filed as Exhibit 10
of the Company’s Quarterly Report on Form 10-Q for the quarter
ended March 31, 2006.
Mortgage, dated April 1, 1927, between the Company and Union
County Trust Company, as Trustee, as supplemented by
Supplemental Indentures, dated as of October 1, 1939 and April 1,
1949.
Supplemental Indenture, dated as of July 1, 1964 and June 15,
1991, between the Company and Union County Trust Company, as
Trustee.
Agreement for a Supply of Water, dated as of July 27, 2011,
between the Company and the Old Bridge Municipal Utilities
Authority, filed as Exhibit No. 10.4 of the Company’s Quarterly
Report on Form 10-Q for the quarter ended September 30, 2011.
Water Supply Agreement, dated as of July 14, 1987, between the
Company and
the Marlboro Township Municipal Utilities
Authority, as amended.
Water Purchase Contract, dated as of September 25, 2003,
between the Company and the New Jersey Water Supply
Authority, filed as Exhibit No. 10.7 of the Company’s Annual
Report on Form 10-K for the year ended December 31, 2003 .
Treatment and Pumping Agreement, dated October 1, 2014,
between the Company and the Township of East Brunswick, filed
as Exhibit No. 10.7 of the Company’s Annual Report on Form 10-
K for the year ended December 31, 2016.
Water Supply Agreement, dated June 4, 1990, between the
Company and Edison Township.
Agreement for a Supply of Water, dated January 1, 2006, between
the Company and the Borough of Highland Park, filed as Exhibit
No. 10.1 of the Company’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2006.
Amendment to Agreement for a Supply of Water, dated as of
December 1, 2015, between the Company and the Borough of
Highland Park, filed as Exhibit No. 10.9(a) of the Company’s
Annual Report on Form 10-K for the year ended December 31,
2015.
71
EXHIBIT INDEX
Exhibit No.
(t)10.10
(t)10.11(a)
(t)10.11(b)
(t)10.12(a)
(t)10.12(b)
(t)10.12(c)
(t)10.12(d)
(t)10.12(e)
Document Description
Middlesex Water Company Supplemental Executive Retirement
Plan, filed as Exhibit 10.13 of the Company’s Quarterly Report
on Form 10-Q for the quarter ended September 30, 1999.
Middlesex Water Company 2018 Restricted Stock Plan, filed as
Appendix A to the Company’s Definitive Proxy Statement,
dated and filed April 12, 2018.
Registration Statement, Form S-8, under the Securities Act of
1933, filed December 18, 2008, relating to the Middlesex Water
Company Outside Director Stock Compensation Stock Plan.
Change in Control Termination Agreement, dated as of January
1, 2009, between the Company and Dennis W. Doll, filed as
Exhibit 10.13(a) of the Company’s Annual Report on Form 10-
K for the year ended December 31, 2008.
Change in Control Termination Agreement, dated as of January
1, 2009, between the Company and A. Bruce O’Connor, filed as
Exhibit 10.13(b) of the Company’s Annual Report on Form 10-
K for the year ended December 31, 2008.
Change in Control Termination Agreement, dated as of March
1, 2012, between the Company and Lorrie B. Ginegaw, filed as
Exhibit 10.13(e) of the Company’s Annual Report on Form 10-
K for the year ended December 31, 2011.
Change in Control Termination Agreement, dated as of January
1, 2009, between the Company and Bernadette M. Sohler, filed
as Exhibit 10.13(h) of the Company’s Annual Report on Form
10-K for the year ended December 31, 2008.
Change in Control Termination Agreement, dated as of March
17, 2014, between the Company and Jay L. Kooper, filed as
Exhibit 10.12(g) of the Company’s Quarterly Report on Form
10-Q for the quarter ended June 30, 2014.
*(t)10.12(f) (1) Change in Control Termination Agreement, dated as of July 1,
2019, between the Company and G. Christian Andreasen.
*(t)10.12(g) (1) Change in Control Termination Agreement, dated as of July 1,
2019, between the Company and Robert K. Fullagar.
*(t)10.12(h) (1) Change in Control Termination Agreement, dated as of July 1,
10.13
10.13(a)
2019, between the Company and Georgia M. Simpson.
Transmission Agreement, dated October 16, 1992, between
the Company and the Township of East Brunswick.
to Transmission
Amendment, dated November 28, 2016,
Agreement between the Company and the Township of East
Brunswick, filed as Exhibit No. 10.13(a) of the Company’s
Annual Report on Form 10-K for the year ended December 31,
2016.
72
Previous
Registration
No.
Filing’s
Exhibit
No.
333-156269
33-54922
10.23
Previous
Registration
No.
Filing’s
Exhibit
No.
Exhibit No.
10.16
10.17
10.18
10.19
10.20
10.21
10.22
EXHIBIT INDEX
Document Description
Contract, dated August 20, 2018, between the City of Perth
Amboy and Utility Service Affiliates (Perth Amboy), Inc., filed
as Exhibit 10.16 of the Company’s Quarterly Report on Form
10-Q for the quarter ended September 30, 2018.
Twenty-Fifth Supplemental Indenture, dated October 15, 1999,
between the Company and First Union National Bank; Loan
Agreement, dated November 1, 1999 between the New Jersey
Environmental Infrastructure Trust and the Company (Series Z),
filed as Exhibit No. 10.25 of the Company’s Annual Report on
Form 10-K for the year ended December 31, 1999.
Twenty-Sixth Supplemental Indenture, dated October 15, 1999,
between the Company and First Union National Bank; Loan
Agreement, dated November 1, 1999 between the New Jersey
Environmental Infrastructure Trust and the Company (Series
AA), filed as Exhibit No. 10.26 of the Company’s Annual
Report on Form 10-K for the year ended December 31, 1999.
Twenty-Seventh Supplemental Indenture, dated October 15,
2001, between the Company and First Union National Bank;
Loan Agreement, dated November 1, 2001, between the State of
New Jersey and the Company (Series BB), filed as Exhibit No.
10.22 of the Company’s Annual Report on Form 10-K for the
year ended December 31, 2001.
Twenty-Seventh Supplemental Indenture, dated October 15,
2001, between the Company and First Union National Bank;
Loan Agreement, dated November 1, 2001, between the New
Jersey Environmental Infrastructure Trust and the Company
(Series CC), filed as Exhibit No. 10.22 of the Company’s
Annual Report on Form 10-K for the year ended December 31,
2001.
Thirtieth Supplemental Indenture, dated October 15, 2004,
the Company and Wachovia Bank, National
between
Association; Loan Agreement, dated November 1, 2004,
between the State of New Jersey and the Company (Series EE),
filed as Exhibit No. 10.26 of the Company’s for the year ended
December 31, 2004.
Thirty-First Supplemental Indenture, dated October 15, 2004,
between
the Company and Wachovia Bank, National
Association; Loan Agreement, dated November 1, 2004,
between the New Jersey Environmental Infrastructure Trust and
the Company (Series FF), filed as Exhibit No. 10.27 of the
Company’s Annual Report on Form 10-K for the year ended
December 31, 2004.
73
Exhibit No.
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
EXHIBIT INDEX
Document Description
Promissory Note and Supplement, dated October 15, 2014,
between Tidewater Utilities, Inc. and CoBank, ACB;
Amendment to Combination Water Utility Real Estate
Mortgage and Security Agreement, effective October 15,
2014, between Tidewater Utilities, Inc. and CoBank, ACB,
filed as Exhibit 10.23 of the Company’s Annual Report on
Form 10-K for the year ended December 31, 2014.
Agreement for a Supply of Water, dated April 1, 2006,
between the Company and the City of Rahway, filed as
Exhibit No. 10.2 of the Company’s Quarterly Report on
Form 10-Q for the quarter ended March 31, 2006.
Loan Agreement, dated November 1, 2006, between the
State of New Jersey and the Company (Series GG), filed as
Exhibit No. 10.30 of the Company’s Annual Report on Form
10-K for the year ended December 31, 2006.
Loan Agreement, dated November 1, 2006, between the New
Jersey Environmental Infrastructure Trust and the Company
(Series HH), filed as Exhibit No. 10.31 of the Company’s
Annual Report on Form 10-K for the year ended December
31, 2006.
Loan Agreement, dated November 1, 2007, between New
Jersey Environmental Infrastructure Trust and the Company
(Series II), filed as Exhibit No. 10.32 of the Company’s
Annual Report on Form 10-K for the year ended December
31, 2007.
Loan Agreement, dated November 1, 2007, between the
State of New Jersey and the Company (Series JJ), filed as
Exhibit 10.33 of the Company’s Annual Report on Form 10-
K for the year ended December 31, 2007.
Loan Agreement, dated November 1, 2008, between New
Jersey Environmental Infrastructure Trust and the Company
dated as of (Series KK), filed as Exhibit 10.34 of the
Company’s Annual Report on Form 10-K for the year ended
December 31, 2008.
Loan Agreement, dated November 1, 2008, between the
State of New Jersey and the Company (Series LL), filed as
Exhibit 10.35 of the Company’s Annual Report on Form 10-
K for the year ended December 31, 2008.
Prospectus Supplement, filed September 6, 2019, relating to
the Middlesex Water Company Investment Plan.
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Exhibit
No.
Exhibit No.
10.32
10.32(a)
10.33
10.33(a)
10.33(b)
EXHIBIT INDEX
Document Description
Amended and Restated Line of Credit Note, dated October
22, 2019, between the Company, Pinelands Wastewater
Company, Tidewater Environmental Services,
Inc.,
Tidewater Utilities, Inc., Utility Service Affiliates (Perth
Amboy) Inc., Utility Service Affiliates Inc. and While Marsh
Environmental Systems, Inc., and PNC Bank, N.A., filed as
Exhibit 10.32 of the Company’s Quarterly Report on Form
10-Q for the quarter ended September 30, 2019.
Amendment to the Amended and Restated Line of Credit
Note, both dated October 22, 2019, between the Company,
Pinelands Wastewater Company, Tidewater Environmental
Services, Inc., Tidewater Utilities, Inc., Utility Service
Affiliates (Perth Amboy) Inc., Utility Service Affiliates Inc.
and While Marsh Environmental Systems, Inc., and PNC
Bank, N.A., filed as Exhibit 10.32(a) of the Company’s
Quarterly Report on Form 10-Q for the quarter ended
September 30, 2019.
Uncommitted Line of Credit, dated September 25, 2015,
between the Company, Tidewater Utilities, Inc., White
Marsh Environmental Systems, Inc., Pinelands Water
Company, Pinelands Wastewater Company, Utility Service
Affiliates, Inc., Utility Service Affiliates (Perth Amboy) Inc.,
Tidewater Environmental Services, Inc., and Bank of
America, N.A, filed as Exhibit 10.33 of the Company’s
Quarterly Report on Form 10-Q for the quarter ended
September 30, 2015.
Amendment, dated September 19, 2017, to the Uncommitted
Line of Credit between the Company, Tidewater Utilities,
Inc., White Marsh Environmental Systems, Inc., Pinelands
Water Company, Pinelands Wastewater Company, Utility
Service Affiliates, Inc., Utility Service Affiliates (Perth
Amboy) Inc., Tidewater Environmental Services, Inc., and
Bank of America, N.A., filed as Exhibit 10.33(a) of the
Company’s Quarterly Report on Form 10-Q for the quarter
ended September 30, 2017.
Amendment, dated September 14, 2018, to Uncommitted
Line of Credit between the Company, Tidewater Utilities,
Inc., White Marsh Environmental Systems, Inc., Pinelands
Water Company, Pinelands Wastewater Company, Utility
Service Affiliates, Inc., Utility Service Affiliates (Perth
Amboy) Inc., Tidewater Environmental Services, Inc., and
Bank of America, N.A., filed as Exhibit 10.33(b) of the
Company’s Quarterly Report on Form 10-Q for the quarter
ended September 30, 2018.
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No.
Exhibit No.
10.33(c)
10.34
10.35
10.36
10.37
10.38
10.39
10.40
10.41
EXHIBIT INDEX
Document Description
Amendment, dated September 23, 2019, to the Uncommitted
Line of Credit between the Company, Tidewater Utilities,
Inc., White Marsh Environmental Systems, Inc., Pinelands
Water Company, Pinelands Wastewater Company, Utility
Service Affiliates, Inc., Utility Service Affiliates (Perth
Amboy) Inc., Tidewater Environmental Services, Inc., and
Bank of America, N.A., filed as Exhibit 10.33(c) to the
Company’s Current Report on Form 8-K filed September 25,
2019.
Third Amendment to Promissory Note and Supplement,
dated as of March 7, 2017, between Tidewater Utilities, Inc.
and CoBank, ACB, filed as Exhibit 10.34 of the Company’s
Quarterly Report on Form 10-Q for the quarter ended March
31, 2017.
Loan Agreement, dated December 1, 2010, between the State
of New Jersey and the Company (Series MM), filed as
Exhibit 10.41 of the Company’s Annual Report on Form 10-
K for the year ended December 31, 2010.
Loan Agreement, dated December 1, 2010, between New
Jersey Environmental Infrastructure Trust and the Company
(Series NN), filed as Exhibit 10.42 of the Company’s Annual
Report on Form 10-K for the year ended December 31, 2010.
Loan Agreement, dated May 1, 2012, between the State of
New Jersey and the Company, (Series OO), filed as Exhibit
10.43 of the Company’s Quarterly Report on Form 10-Q for
the quarter ended June 30, 2012.
Loan Agreement, dated May 1, 2012, between New Jersey
Environmental Infrastructure Trust and the Company (Series
PP), filed as Exhibit 10.44 of the Company’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2012.
Loan Agreement, dated November 1, 2012, between the New
Jersey Economic Development Authority and the Company
(Series QQ, RR & SS), filed as Exhibit 10.41 of the
Company’s Annual Report on Form 10-K for the year ended
December 31, 2012.
Loan Agreement, dated May 1, 2013, between the State of
New Jersey and the Company (Series TT), filed as Exhibit
10.42 of the Company’s Quarterly Report on Form 10-Q for
the quarter ended June 30, 2013.
Loan Agreement, dated May 1, 2013, between New Jersey
Environmental Infrastructure Trust and the Company (Series
UU), filed as Exhibit 10.43 of the Company’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2013.
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No.
Exhibit No.
10.42
10.43
10.44
10.45
10.46
10.47
10.48
10.49
10.50
EXHIBIT INDEX
Document Description
Loan Agreement, dated May 1, 2014, between New Jersey
Environmental Infrastructure Trust and the Company (Series
VV), filed as Exhibit 10.43 of the Company’s Quarterly Report
on Form 10-Q for the quarter ended June 30, 2014.
Loan Agreement, dated May 1, 2014, between New Jersey
Environmental Infrastructure Trust and the Company (Series
WW), filed as Exhibit 10.44 of the Company’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2014.
Loan Agreement, dated November 1, 2017, between New
Jersey Environmental Infrastructure Trust and the Company
(Series XX), filed as Exhibit 10.44 of the Company’s Annual
Report on Form 10-K for the year ended December 31, 2017.
Loan Agreement, dated November 1, 2017, between New
Jersey Environmental Infrastructure Trust and the Company
(Series YY), filed as Exhibit 10.45 of the Company’s Annual
Report on Form 10-K for the year ended December 31, 2017.
Loan Agreement, dated May 1, 2018, between New Jersey
Environmental Infrastructure Trust and the Company (Series
2018A), filed as Exhibit 10.46 of the Company’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2018.
Loan Agreement, dated May 1, 2018, between New Jersey
Environmental Infrastructure Trust and the Company (Series
2018B), filed as Exhibit 10.47 of the Company’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2018.
Middlesex Water Company Note Relating To:
The
Construction Financing Loan Program of the New Jersey
f/k/a New Jersey Environmental
Infrastructure Bank
Infrastructure Trust, dated August 1, 2018, filed as Exhibit
10.48 of the Company’s Quarterly Report on Form 10-Q for
the quarter ended September 30, 2018.
The
Middlesex Water Company Note Relating To:
Construction Financing Loan Program of the New Jersey
Infrastructure Bank
f/k/a New Jersey Environmental
Infrastructure Trust, dated September 12, 2018, filed as
Exhibit 10.49 of the Company’s Quarterly Report on Form
10-Q for the quarter ended September 30, 2018.
Loan Agreement, dated August 1, 2019, between New
Jersey Economic Development Authority and the Company,
filed as Exhibit 10.50 to the Company’s Current Report on
Form 8-K filed September 6, 2019.
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EXHIBIT INDEX
Exhibit No.
*21 (1)
*23.1 (1)
*31 (1)
*31.1 (1)
*32 (1)
*32.1 (1)
101.INS*
101.SCH*
101.CAL*
101.DEF*
101.LAB*
101.PRE*
104*
Document Description
Middlesex Water Company Subsidiaries.
Consent of Independent Registered Public Accounting Firm,
Baker Tilly Virchow Krause, LLP.
Section 302 Certification by Dennis W. Doll pursuant to Rules
13a-14 and 15d-14 of the Securities Exchange Act of 1934.
Section 302 Certification by A. Bruce O’Connor pursuant to
Rules 13a-14 and 15d-14 of the Securities Exchange Act of
1934.
Section 906 Certification by Dennis W. Doll pursuant to 18
U.S.C.§1350.
Section 906 Certification by A. Bruce O’Connor pursuant to
18 U.S.C.§1350.
XBRL Instance Document– the instance document does not
appear in the Interactive Data File because its XBRL tags are
embedded within the Inline XBRL document.
Inline XBRL Taxonomy Extension Schema Document
Inline XBRL Taxonomy Extension Calculation Linkbase
Document
Inline XBRL Taxonomy Extension Definition Linkbase
Document
Inline XBRL Taxonomy Extension Label Linkbase Document
Inline XBRL Taxonomy Extension Presentation Linkbase
Document
Cover Page Interactive Data File – the cover page interactive
data file does not appear in the Interactive Data File because
its XBRL tags are embedded within the Inline XBRL
document.
(1) These documents were included in the 2019 Form 10-K, as filed with the United States
Securities and Exchange Commission and will be provided upon specific request.
78
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