Annual Meeting
The Annual Meeting of Shareholders of Middlesex Water Company
will be held on Tuesday, May 25, 2021 at 11:00 a.m. EDT. You may
attend the meeting online, including submitting questions, at www.
VirtualShareholderMeeting.com/MSEX2021. Shareholders of record
as of March 29, 2021 will be eligible to receive notice of, and to vote
at, the 2021 Annual Meeting.
Our Company’s Common Stock trades
on the Nasdaq Global Select Market
under the symbol MSEX.
Middlesex Water Company was
incorporated in New Jersey as a water
utility in 1897 and owns and operates
regulated water and wastewater utility
systems in New Jersey and Delaware.
The Company also operates water and
wastewater utility systems under contract
on behalf of municipal and
private clients.
Our Scope of Services
$ 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.
$ Southern Shores Water Company, LLC
$ White Marsh Environmental Systems, Inc.
On the cover: Angelo is part of our amazing team of licensed plant operators whose technical expertise
helps ensure safe drinking water 24/7, 365 days year. The Company’s Emergency Operations and Business
Continuity planning framework helps to ensure essential operations employees are prepared to maintain
plant operations, water distribution and wastewater collection infrastructure, information technology
and address customer concerns in unexpected circumstances.
Dear Shareholder:
Like me, I’m assuming you are
weary of Covid-19, and are
looking forward to life resembling
something more like what we used
to know. But as we know, this is
no time to be complacent as we
still have work to do to ensure the
full health of our citizens and our
economy. This all holds true for
your company as well.
Throughout 2020, your management team at Middlesex
Water Company has shared with employees, the
media, regulators, political officials, investors and
others, through a variety of forums, all of the many
things we have done, and continue to do, in response
Dennis W. Doll
Chairman, President and CEO
to the pandemic. All of these efforts have been
undertaken to keep your company operationally and
fiscally strong, to promote the health and safety of our
employees, to continue to meet our customers’ needs
and to support the communities we serve. As a result of
these operational efforts and related communications
throughout 2020, I do not intend to make the pandemic
and our related response a prominent focus of this
letter. I would however, like to draw attention to the
many things we do at your company to help ensure
our preparedness, our resilience and our overall
sustainability under emergency conditions of all types.
As you might expect, any and all efforts we undertake
in these areas are all about mitigating, eliminating or
transferring unacceptable risk as effectively as we can.
Anticipating and Addressing Risk
Clearly, every organization manages risks of various forms every day
and the water and wastewater utility industry is no different. Separate from
the need to ensure public health and safety relative to water quality, is the
need to anticipate, and prepare for, threats relative to weather, environmental
hazards, operational hazards, the safety of our employees, cyber intrusions,
brand and reputation and overall operational and financial integrity.
Our approach to addressing these potential threats is relatively
straightforward. We identify the potential threats. We design systems
and processes to address those threats. We implement relevant systems
and processes, and we test their effectiveness in simulated scenarios.
In addition, we train our employees incessantly.
Our Enterprise Risk Management Program continues to be at the heart of
our ability to effectively anticipate, and therefore mitigate, the effect of
emergencies of various types. It begins with our onboarding process for new
employees, then to ongoing safety and related hazard training, to routine
discussions of identifiable threats, to training and management relative to
our mature risk reporting system, to drills and tabletop exercises, etc. These
activities all form the framework for emergency preparedness and our related
response to emergencies or other unanticipated events.
In addition to managing our internal systems
and processes, we network with our peers in the
industry and we play leadership roles in various
organizations relevant to our operations to
ensure we remain current with best practices. One
example of that commitment to best practices in
emergency preparedness and resiliency is with
our Middlesex Vice President–Operations, Robert
Fullagar. Bob currently serves as sector chair for
the New Jersey Infrastructure Advisory Committee
where he represents investor and municipally-
owned water and wastewater utilities throughout
the State of New Jersey in matters pertaining to
resiliency. He is also a member of the New Jersey
Domestic Security Preparedness Task Force-Water
and Wastewater Sector Security and Resiliency
Working Group as well as President of his local
volunteer fire company.
Water Sector Recognition Robert Fullagar was among
several industry professionals honored by the NJ Water
Association in December 2020 for their efforts related to
the water sector’s response to the COVID-19 pandemic and
operational resiliency initiatives.
Our commitment to emergency preparedness and its impact on business
continuity is significant. That commitment is not just a matter of preparing
for emergencies in the near term, but also, designing and constructing
utility infrastructure to mitigate potential threats relative to water supply
and distribution well into the future. One clear example in this area is the
completion in 2020 of our 42" diameter, 4.5 mile “Western Transmission
Main” in New Jersey, as referenced in this letter last year. The eventual need
for this project had been contemplated for many years. Upon completion of
this project in mid-2020, this new main immediately proved its value when
the existing 48" transmission main serving that portion of the distribution
system experienced several leaks, requiring it to be removed from service
for several weeks for repair. The operational consequences of those leaks,
absent the Western Transmission Main, would have been significantly
more challenging, potentially impacting service to a significant number
of customers, including impacting fire protection. Ultimately, there were
no service disruptions relative to these repairs and the entire process to
remediate the risks was managed flawlessly.
Other significant projects to mitigate risk, which are well underway
in New Jersey, include upgrades at the Carl J. Olsen water treatment
plant, upgrades to our raw water intake station on the Delaware and
Raritan Canal, and improvements to our largest wellfield to remediate
the effects under new regulations for perfluoroalkyl chemicals in this
relatively small, but important, portion of our water supply. Significant
components of these projects include enhanced treatment capabilities
in anticipation of challenges meeting more stringent water quality
regulations, additional backup power generation and further mitigating
impact on the environment resulting from the water treatment process.
Our Delaware operations are also implementing major improvements
to a variety of facilities to increase reliability of water supply in selected
areas of our service territory, as well as to enhance treatment capabilities
and also mitigate environmental impacts.
Organizational Efficiency
Included in our focus on risk mitigation, resiliency and sustainability for
the long term, is the need to protect our operations from more general
and immediate threats in the form of potential cyber intrusions. The
threat is real and unfortunately, as is well-known, there is no absolute
protection for any organization from cyber intrusions. Cybersecurity, as
an organizational discipline, has grown dramatically in recent years and
Middlesex Water Company places high importance on this area both
as to technical protocols and training of our employees. Through both
partnerships with external organizations and use of our own in-house
expertise, our cybersecurity program has grown and matured over time,
as have the threats we continually work to address.
The growing worldwide attention on all matters related to Environmental,
Social and Governance (ESG) issues has moved high on your company’s
list of priorities as well. Our focus on ESG has expanded to include a
direct link to mitigating risk. Our company has always managed risk
from an ESG perspective, despite the fact that those efforts were never
historically characterized, as they are now, as part of an overall ESG
framework. We launched our inaugural Corporate Sustainability Report
in the first half of 2020 and subsequently, engaged third-party experts
to refine our ESG program and assist with developing and reporting
on metrics which both we, and investors, believe measurably improve
our overall effectiveness as an organization, mitigate risk and produce
societal benefits. We are excited to share our progress with investors as
this initiative becomes further embedded in our company culture and
continues to mature in the coming months and years.
Stephanie is one of our helpful Customer
Service Representatives who assists customers
with everything from bill payment arrangements
to addressing questions and concerns, whether
she is in the office or working remotely.
Nigel, a member of our Information Technology
team, provides technical support to onsite &
remote workers, supporting business continuity
and cybersecurity best practices.
LaDon is one of our senior-level Water Operators
at our Carl J. Olsen Water Treatment Plant.
LaDon uses his vast knowledge and
experience to keep the plant running
at optimal performance.
Matt is an Instrument Technician. His duties
include installing, repairing and calibrating
process instrumentation essential to the
operation of the water treatment plant and
the production of high quality water.
In addition to sharing all of the above efforts regarding risk mitigation
and business continuity, I’m happy to report that those operational
efforts contributed significantly to our financial performance in 2020.
Despite the fact that much of our workforce needed to work remotely
throughout 2020 due to the pandemic, we maintained continuous
quality service to our customers, we kept our capital program largely
on track with our 2020 plan with only minor changes in priorities,
and we delivered overall productivity even more effectively than we
could have anticipated under the circumstances. Our investments in
technology over time facilitated this incredibly favorable outcome.
The hardware and software played a critical role but it is the incredible
expertise and commitment of our Information Technology group
that facilitated this favorable outcome. All of this work and the work
of all of our dedicated employees enabled us to deliver top-line
growth, an increase in earnings per share and a 6.3% increase in
the common dividend.
Customer Growth
Other significant developments included robust organic customer
growth in our Delaware operations, the addition of a 10-year contract to
operate the water and wastewater systems of the Borough of Highland
Park, New Jersey and additional sales of water to both residential
and wholesale contract customers. Although the ongoing pandemic
has severely impacted many businesses, we are fortunate that
our company and our industry continue to remain strong. Even
with our improved financial results in 2020, increasing operating
expenses and our ongoing utility plant investments that help ensure
water service reliability and quality will require us to petition our
economic regulators in New Jersey in 2021 for recovery of these
expenses and investments.
Helping Communities Succeed
Our gratitude for our ability to effectively navigate the effects of the
pandemic had prompted our company and its employees to contribute
financial support to a variety of non-profit organizations throughout
2020, many of which have been food banks within the areas where we
provide utility service. We believe our commitment to supporting our
communities is not only the right thing to do but also, there is a clear link
between the health of our communities and the health of our company
for the fact that we depend on each other for our mutual success.
Rachel is a Process Control Technician.
Her duties include monitoring daily
plant functions, assessing demand and adjusting
processes to meet those demands.
Samantha is a Lab Coordinator/Utility Worker.
She divides her time between supporting
laboratory efficiency and performance and
the operation of the water distribution and
the wastewater collection facilities.
The continued commitment of our employees to leadership in all aspects of their
respective disciplines resulted in numerous awards granted to individuals and the
company throughout 2020. A sampling of the many honors received in 2020 include
Middlesex Water Company in New Jersey
being named one of New Jersey’s Top
Workplaces by NJ.com, a 2020 Professional
Excellence Award granted by the New Jersey
Law Journal to our legal department under
the leadership of our Vice President, General
Counsel & Secretary, Jay Kooper; a Top 10
Influential Women of Water Award from the Mazars USA Women in Water Summit to
our Vice President – Corporate Affairs, Bernadette Sohler; a Living Water Award finalist
honor from the National Association of Water Companies to our Vice President – Human
Resources, Lorrie Ginegaw; and our largest Delaware subsidiary, Tidewater Utilities, being
named a Superstar in Business by the Delaware State Chamber of Commerce. While we
by no means undertake these efforts for the accolades, it is gratifying to know that our
mission and the manner in which we execute it is viewed by independent third parties as
contributing to the success of our industry and also producing peripheral societal benefits.
Although our stated company values have been widely shared over time internally with
our employees and externally as well, in 2020, we renewed our focus on those stated
values. Those values are embodied in the acronym RIGHT, Respect, Integrity, Growth,
Honesty and Teamwork. Our intent was not to modify these values but rather, to provide
additional specificity where some of the behaviors we espouse as a company were
not previously sufficiently detailed in our written words. One example of this is where
although Diversity, Equity and Inclusion have always been an important part of our
company culture, we had not previously given these areas the prominence in our written
words we believe they deserve.
I would like to close this letter by welcoming our newest Director to your Board, Joshua M.
Bershad, M.D. Dr. Bershad has a wealth of technical and business knowledge across a wide
variety of diverse disciplines which will prove invaluable in your Board’s deliberations.
Further detail regarding Dr. Bershad’s background and experience can be found in our
Proxy Statement. We very much look forward to his contributions to our company.
On behalf of the Board of Directors, I thank you for your continued support and confidence
in Middlesex Water Company.
Sincerely,
Dennis W. Doll
Chairman, President and CEO
Dennis Doll, Georgia Simpson and
Bernadette Sohler attend the Mazars USA Women
of Water Summit where Sohler was among those
recognized with an award and Simpson addressed
attendees on cybersecurity best practices.
Tidewater Utilities, Inc. was named a
2020 Superstar in Business
by the Delaware State Chamber of Commerce.
Joshua Bershad, M.D.
Middlesex Water Company welcomed
Dr. Bershad to the Board in December.
Investments In
System Reliability
and Resiliency
Remain On Course
In October 2019, Middlesex Water
began construction of a new Ozone
Treatment Facility and various other
upgrades at the Carl J. Olsen Treatment
Plant in Edison, NJ which provides
water to a population of nearly
half a million residents. Progress
continued throughout the COVID-19
pandemic with construction crews
taking precautionary measures and
adhering to all safety guidelines. The
approximately $72 million investment,
which is expected to be placed in
service in the second quarter of 2021,
will replace sodium hypochlorite with
ozone as the primary disinfectant
in the water treatment process and
will help ensure compliance with
increasingly stringent drinking water
quality regulations.
Why Ozone?
Ozone disinfects pathogenic organisms
found in water more effectively
than chlorine and is currently the
most widely used water disinfection
method in the world. In addition
to deactivating pathogens, it also
helps to improve taste & odor and is
effective in addressing compounds
of emerging concern. In addition to
more effective water treatment, ozone
disinfection is more sustainable as it
allows operators to reduce the use of
other chemicals added to address taste
& odor and disinfection by-products.
Perforated baffle walls pictured here are designed to maximize performance and
improve efficiency of ozone mixing within the contact basins.
Ozone must be injected into the water after it is produced on-site.
The ozone injectors seen here mix in a side-stream of
ozonated water to ensure every drop of water moving
through the pipes is adequately disinfected.
Ensuring the safety
and reliability of
drinking water supplies
Water travels through the Ozone Valve Chamber shown here
prior to biologically active filtration.
Mike is the Director of Project Delivery at
Middlesex Water and has been responsible for
coordinating and delivering the project for operations.
Main building of the Ozone treatment facility in the final stages of completion.
The Ozone Treatment
Plant is expected
to begin operations
in the second quarter
of 2021.
Financial Highlights
Operating Revenues
(Millions of Dollars)
132.9 130.8
138.1 134.6
141.6
(Millions of Dollars, Except per Share Data)
2020
2019
2018
Operating Revenues
$141.6
$134.6
$138.1
Operations and Maintenance Expenses
Depreciation
Income and Other Taxes
Interest Charges
Net Income
Earnings Applicable to Common Stock
Diluted Earnings Per Share
Cash Dividends Paid Per Share
Utility Plant
Return on Average Common Equity
70.8
18.5
10.8
7.5
38.4
38.3
2.18
1.04
982.0
11.5%
68.0
16.7
11.2
7.3
33.9
33.8
2.01
0.97
876.0
12.5%
71.6
15.0
15.3
6.8
32.5
32.3
1.96
0.91
775.9
13.6%
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.
2020
2019
High
Low
Dividend
Paid
High
Low
Dividend
Paid
Q4
Q3
Q2
Q1
$76.08
$69.89
$72.41
$69.92
$61.81
$59.61
$53.70
$48.79
$0.27
$0.26
$0.26
$0.26
$67.69
$66.10
$63.68
$60.48
$58.75
$55.30
$52.51
$51.02
$0.26
$0.24
$0.24
$0.24
'16
'17
'18
'19
'20
Net Income
(Millions of Dollars)
38.4
33.9
32.5
22.7
22.8
'16
'17
'18
'19
'20
Earnings & Dividends
(Dollars per Share)
2.18
Earnings
per share
Dividends
1.96
2.01
1.38
1.38
.81
.86
.91
1.04
.98
'16
'17
'18
'19
'20
Prepared Unexpected
for
the
2020 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, 2020
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
Smaller reporting company Emerging growth company
Accelerated filer Non-accelerated filer
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report.
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 30, 2020 was $1,152,416,738 based on the
closing market price of $67.18 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 25, 2021:
Common Stock, No par Value 17,474,598 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 25, 2021, which will be
filed with the Securities and Exchange Commission within 120 days of the end of our 2020 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
Forward-Looking Statements
PAGE
1
PART I
Item 1. Business:
Overview
Financial Information
Water Supplies and Contracts
2
2
2
4
4
5
Wastewater Facilities
5
Human Capital Management
Competition
7
Regulation 7
10
Seasonality
Management
10
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Properties
11
17
17
18
18
PART II 19
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. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Financial Statements and Supplementary Data
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
19
21
21
36
37
66
67
67
68
68
68
68
68
68
69
69
69
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;
-
-
-
-
-
- other factors discussed elsewhere in this annual report.
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;
impact of the Novel Coronavirus (COVID-19) or other pandemic; and
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 primarily in New Jersey and Delaware. Middlesex also operates
water and wastewater systems under contract on behalf of municipal and private clients primarily in New Jersey
and Delaware.
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 59% of our 2020 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 2020 consolidated operating revenues.
2
Tidewater System
Tidewater, together with its wholly-owned subsidiary, Southern Shores, provides water services to approximately
52,000 retail customers for residential, commercial and fire protection purposes in over 430 separate communities
in New Castle, Kent and Sussex Counties, Delaware. The Tidewater System produced approximately 28% of our
2020 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 2020
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 2020 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 2020
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 6,400 retail
customers in Avalon, most of which are served by both the water system and wastewater collection system. In
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 operates the Borough of Highland Park, New Jersey’s (Highland Park) water utility and sewer utility under a
ten-year operations and maintenance contract expiring in 2030. USA serves approximately 3,300 mostly retail
customers in Highland Park. The contract commenced July 1, 2020.
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 July 2021 and
renewal discussions are underway.
USA produced approximately 2% of our 2020 consolidated operating revenues.
TESI System
TESI provides wastewater collection and treatment services to approximately 3,900 retail customers in Sussex
County, Delaware. TESI produced approximately 2% of our 2020 consolidated operating revenues.
3
White Marsh
White Marsh operates or maintains water and/or wastewater systems that serve approximately 1,900 retail
customers under more than 36 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 1% of our 2020 consolidated operating revenues.
Financial Information
Consolidated operating revenues, operating income and net income are as follows:
(Thousands of Dollars)
Years Ended December 31,
2019
2018
2020
Operating Revenues
$141,592
$134,598
$138,077
Operating Income
$37,420
$35,520
$37,142
Net Income
$38,425
$33,888
$32,452
Operating revenues were earned from the following sources:
Years Ended December 31,
2020
2018
2019
Residential
Commercial
Industrial
Fire Protection
Contract Sales
Contract Operations
Other
Total
54.2 %
10.9
6.7
8.8
10.7
8.6
0.1
53.1 %
11.3
7.0
9.1
10.6
8.7
0.2
100.0 % 100.0 % 100.0 %
50.5 %
10.7
7.4
8.8
10.6
11.9
0.1
Water Supplies and Contracts
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 13.7 billion gallons in 2020, obtains water from surface
sources and wells (groundwater sources). In 2020, surface sources of water provided approximately 64% of the
Middlesex System’s water supply, groundwater sources provided approximately 27% 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, 2026. 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.
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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
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 6.2 million gallons
in 2020.
Tidewater System
Our Tidewater System produced approximately 2.5 billion gallons in 2020, primarily from 180 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 430 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 owned by Tidewater.
Pinelands Water System
Water supply to our Pinelands Water System is derived from four wells which produced approximately 124.3
million gallons in 2020. The aggregate pumping capacity of the four wells is 2.2 mgd.
Wastewater Facilities
Pinelands Wastewater System
The Pinelands Wastewater System discharges into the South Branch of the Rancocas Creek through a wastewater
treatment plant that provides clarification, sedimentation, filtration and disinfection. The total capacity of the plant
is 0.5 mgd, and the system treated approximately 97.0 million gallons in 2020.
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 125.6 million gallons in 2020.
Human Capital Management
The Company aims to attract and retain the best employees by offering competitive compensation packages along
with career development and training opportunities in a safe, supportive and inclusive work environment. Our
mission, our business philosophy and the way we deliver for our customers, our shareholders and our employees is
rooted in what we, as an enterprise, believe to be our core values of Respect, Integrity, Growth, Honesty and
Teamwork. Our employees’ success is a key element of the Company’s success.
Workforce
As of December 31, 2020, the Company employed 348 employees. None of our employees are subject to a
collective bargaining agreement. We believe our employee relations are positive.
Employee Compensation and Benefits
We offer comprehensive competitive employee compensation and benefit programs consistent with employee
positions, skill levels, experience, knowledge and geographic location. These programs are independently
evaluated by a nationally recognized consulting firm to gauge effectiveness and are benchmarked against industry
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peers and the overall markets in which we operate our businesses. Compensation increases and incentive
compensation are based on merit, which is communicated to employees and well documented in our bi-annual
performance evaluation process. Benefits include a variety of programs to enhance employee overall physical,
mental and financial health and well-being, including healthcare insurance, employer funded retirement savings
plans, life insurance, disability insurance, accident insurance, tuition reimbursement, flu shots, wellness newsletters
and webinars, incentive programs for achieving fitness milestones, financial counseling, elder care assistance,
substance abuse support and more.
Safety
The Company has implemented safety programs and management practices to promote a culture of safety to protect
its employees. This includes required trainings for employees, as well as specific qualifications and certifications
for certain operational employees. These active and on-going workplace health and safety training programs and
policies keep our rates of occupational injury and illness low. All employees have been empowered to report and
immediately stop work which, in their opinion, is unsafe or is not consistent with our safety policies and procedures.
They can take this action without fear of reprisal.
In response to the Novel Coronavirus (COVID-19) pandemic, the Company implemented significant changes that
it determined were in the best interest of our employees and customers, as well as in addition to complying with
government emergency orders and regulations. While the nature of our utility services business necessitated our
operating workforce continue to operate in the field and at treatment facilities, we implemented numerous measures
to help ensure the safety of those employees, and the public, amidst the pandemic. We closed our administrative
offices in late March 2020 and arranged for all affected employees to be able work remotely. In late June 2020, we
reopened our offices to accommodate 25% capacity for employees only and those offices remain closed to the
public and visitors. For further discussion of the impact of COVID-19 on the Company, see Item 7 - Management’s
Discussion and Analysis of Financial Condition and Results of Operation, Recent Developments, Novel
Coronavirus (COVID-19).
Employee Development and Training
The Company supports and utilizes various training and educational programs and has developed additional
company-wide and project-specific employee training and educational programs, including tuition assistance for
full time employees enrolled in pre-approved undergraduate or graduate courses or professional licensing courses.
All employees receive training to identify and report operational and financial risks as well as risks to Company
brand and reputation, which fosters a personal culture of accountability and reinforces our commitment to a safe
and sustainable workplace. All employees receive cybersecurity training and other education regarding the
handling of sensitive data. Our Executive Management team and our Board of Directors continually assess
succession plans, leadership development and policies and strategies regarding recruitment, retention, career
development, diversity, equity and inclusion. Formalized succession planning strategies have been developed for
key leadership positions.
Diversity, Equity & Inclusion (DEI)
The Company is committed to DEI based upon our belief that embracing DEI benefits all stakeholders by
maintaining a workforce with a variety of skills and perspectives as a result of their diverse backgrounds and
experiences. Specific DEI initiatives are in progress to further enhance our culture of belonging.
The Company is focused on recruitment of diverse candidates as well as on internal talent development of its diverse
leaders so that all employees are provided with an opportunity to advance their careers within the Company. The
Company solicited our employees’ perceptions of the Company’s focus on DEI with a comprehensive survey,
followed-up with numerous meetings of groups of employees to discuss the results of the survey and to further
engage our employees on matters of DEI. We expect to continue to monitor the results of our DEI efforts and
continually explore opportunities to further engage our employees to ensure our actions are in-fact fully consistent
with our stated Company core values.
6
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 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 Public Utility 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 our regulated utility operations 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 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 2020, 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 $1.1 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
7
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 March 2020, the NJBPU approved Middlesex’s petition to reset its PWAC tariff rate to recover additional costs
of $0.6 million for the purchase of treated water from a non-affiliated water utility regulated by the NJBPU. The
new PWAC rate became effective on April 4, 2020.
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 prospective recognition of the income tax benefits for the immediate deduction of repair costs
on tangible property. The rate increase became effective April 1, 2018.
Tidewater Rate Matters
Effective January 1, 2021, Tidewater increased its DEPSC-approved Distribution System Improvement Charge
(DSIC) rate, which is expected to generate revenues of approximately $0.6 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
Effective November 4, 2019, Pinelands Water and Pinelands Wastewater received approval from the NJBPU to
increase its base rates by $0.5 million. The increased revenues 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.
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.
Regulatory Service Matters
Twin Lakes provides water services to approximately 115 residential customers in Shohola, Pennsylvania. In 2020,
Twin Lakes filed a petition requesting the PAPUC to exercise its discretion under Section 529 of the Pennsylvania
Public Utility Code (the Code) to order the acquisition of Twin Lakes by a public utility as defined by the Code.
The PAPUC assigned an Administrative Law Judge (ALJ) to adjudicate the matter and submit a decision to the
PAPUC. Pre-filed testimony was submitted by all parties and an evidentiary hearing was held by the ALJ in early
8
January 2021. The briefing schedule concluded on February 25, 2021 and a decision by the ALJ is expected to be
issued in the second quarter of 2021. A final PAPUC Order on this matter is expected to also be issued during the
second quarter of 2021. Separately, in January 2021, the PAPUC issued an Order appointing a large Pennsylvania
based investor-owned water utility as the receiver (the Receiver Utility) of the Twin Lakes system effective January
15, 2021 with the receivership to remain in place until the final outcome of the Section 529 proceeding. In
connection with this receivership, the Receiver Utility’s responsibilities will include operating and maintaining the
system assets in compliance with all state, federal and local laws and regulations, maintaining existing or necessary
permits, licenses, approvals, authorizations, orders, consents, registrations or filings, providing a list of
recommended capital improvements, providing all supervision and personnel necessary and responding to system
emergencies by taking necessary action to ensure the continued provision of adequate, efficient, safe and reasonable
service. We cannot predict whether the PAPUC will ultimately approve or deny the Section 529 petition. Twin
Lakes’ PAPUC-approved annual revenues and rate base are currently set at $0.2 million and $1.5 million,
respectively, and its financial results, total assets and financial obligations are not material to the Company.
COVID-19
The NJBPU and the DEPSC have allowed for potential future recovery in customer rates of additional costs related
to COVID-19. Neither jurisdiction has yet to establish a timeline or definitive formal procedures for seeking cost
recovery (for further discussion of the impact of COVID-19 on the Company, see Item 7 - Management’s
Discussion and Analysis of Financial Condition and Results of Operation, Recent Developments, Novel
Coronavirus (COVID-19)).
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 adjustment 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 and Bayview 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.
9
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.
Management
This table lists information concerning our executive management team:
Name
Dennis W. Doll
Age Principal Position(s)
62
President, Chief Executive Officer and Chairman of the Board of
Directors
62 Senior Vice President, Treasurer and Chief Financial Officer
A. Bruce O’Connor
G. Christian Andreasen, Jr. 61 Vice President-Enterprise Engineering
Robert K. Fullagar
Lorrie B. Ginegaw
Jay L. Kooper
Georgia M. Simpson
Bernadette M. Sohler
53 Vice President-Operations
45 Vice President-Human Resources
48 Vice President-General Counsel and Secretary
47 Vice President-Information Technology
60 Vice President-Corporate Affairs
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 on the
Board of the non-profit Court Appointed Special Advocates (CASA) of Middlesex County, New Jersey (Executive
Committee, Board Member and Treasurer) and as Director, Emeritus of The Water Research Foundation.
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.
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 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.
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
10
transportation/logistics industries. Ms. Ginegaw serves as a volunteer director on the Board of the New Jersey
Utilities Association.
Jay L. Kooper – Mr. Kooper joined the Company in 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, including Temple B’Nai Abraham in Livingston, New Jersey (current Vice President and Trustee) and the
Crohn’s and Colitis Foundation’s New Jersey Chapter.
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. Ms. Simpson serves as a member of the Delaware Cyber Security
Advisory Council, the Society for Information Management, New Jersey chapter and the Project Management
Institute, New Jersey chapter.
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.
ITEM 1A. RISK FACTORS.
Operational Risks
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.
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 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
11
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.
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.
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.
Regulatory Risks
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.
12
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.
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
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
piping required regarding the provision of fire protection services. In Delaware, fire protection is regulated
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.
Financial Risks
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 from external sources 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 $314 million for
capital projects through 2023. 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.
13
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
expand regulated 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 agreements to
operate municipal utility systems may adversely affect the management of our long-term agreements to supply
water or wastewater services on a contract basis to those 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 and USA operate and maintain water and wastewater systems for three New Jersey municipalities under
10-year contracts expiring in 2022, 2028 and 2030, respectively. 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.
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.
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.
14
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 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.
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.
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.
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.
15
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.
General Risks
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.
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.
The Novel Coronavirus (COVID-19) pandemic and the attempt to contain it may harm our business, results
of operations, financial condition and liquidity.
On March 13, 2020, the United States declared the COVID-19 pandemic a national emergency. The impact that
COVID-19 will have on the Company, our customers and our vendors prospectively depends on numerous
uncertainties, including the severity and duration of the pandemic, sufficiency of the government’s vaccination
program and actions which could potentially be taken by federal or state governmental and/or regulatory authorities
and could have an adverse effect on the Company’s business, results of operations, financial condition, and
liquidity.
16
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.
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.
We believe our water and wastewater utility plant facilities are sufficient for the operations of the Company.
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 746 miles of mains and includes 24,300 feet of 48-inch
concrete transmission main and 23,400 feet of 42-inch ductile iron 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.
17
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 adjacent to the Ronson Road complex. The leased
space, which is under contract through 2028, houses our corporate administrative functions including executive,
accounting, customer service and billing, engineering, human resources, information technology and legal.
Tidewater System
The Tidewater System is comprised of 87 production plants that vary in pumping capacity from 46,000 gallons per
day to 4.4 mgd. Water is transported to our customers through 836 miles of transmission and distribution mains.
Storage facilities include 47 tanks, with an aggregate capacity of 8.0 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
in Sussex County, Delaware. The operations center is located on a 2.9 acre parcel owned by White Marsh, and
consists of three buildings totaling approximately 12,000 square feet.
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 wastewater 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.
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.
18
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, 2020, there were 1,818 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. The Company raised approximately $1.2
million through the issuance of shares under the Investment Plan during 2020. In 2019, the Company raised
approximately $12.7 million primarily through a limited duration six-month share purchase discount feature of the
Investment Plan. The 0.2 million share purchase limit was reached and the discount offer ceased prior to the original
ending date.
The Company maintains a long-term incentive compensation plan where awards are made in the form of restricted
common stock for certain management employees (the 2018 Restricted Stock Plan). Shares of restricted common
stock issued in connection with the 2018 Restricted Stock Plan are subject to forfeiture by the employee in the event
of termination of employment for any reason within five years of the award, other than as a result of retirement at
normal retirement age, 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 89% remain available for award.
The Company maintains a stock compensation plan for its outside directors (the Outside Director Stock
Compensation Plan) as a component of Director compensation. In 2020, shares of the Company’s common stock
valued at $0.2 million 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 53% 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 S&P 500 Stock Index for the period of five years commencing December 31, 2015. The
S&P 500 Stock Index measures the stock performance of 500 large companies listed on stock exchanges in the
United States.
19
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among Middlesex Water Company, the S&P 500 Stock Index and a Peer Group*
S&P 500
Middlesex Water Company
Peer Group*
$325
$300
$275
$250
$225
$200
$175
$150
$125
$100
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
* Peer group includes American States Water Company, Artesian Resources Corp., California Water
Service Group, SJW Corp., York Water Company and Middlesex.
Middlesex Water Company
S&P 500 Stock Index
Peer Group
December 31,
2015
100.00
100.00
100.00
2016
165.64
111.96
141.98
2017
157.49
136.40
172.22
2018
215.04
130.42
186.65
2019
260.50
171.49
203.80
2020
301.63
203.04
234.07
20
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 Per Share
Total Assets
Convertible Preferred Stock
Long-term Debt
2020
$
141,592
2019
134,598
$
2018
138,077
$
2017
130,775
$
2016
132,906
$
70,796
18,472
14,904
104,172
37,420
4,379
7,493
(4,119)
38,425
120
38,305
$
67,980
16,716
14,382
99,078
35,520
2,492
7,264
(3,140)
33,888
132
33,756
$
71,570
15,037
14,328
100,935
37,142
2,992
6,758
924
32,452
144
32,308
$
65,490
13,922
13,565
92,977
37,798
1,617
5,506
11,100
22,809
144
22,665
$
65,864
12,796
13,944
92,604
40,302
(532)
5,293
11,735
22,742
144
22,598
$
$
$
2.19
2.18
$
$
2.02
2.01
$
$
1.97
1.96
$
$
1.39
1.38
$
$
1.39
1.38
17,459
17,574
1.041
976,470
1,005
273,244
$
$
$
$
16,685
16,829
0.976
909,878
1,005
230,777
$
$
$
$
16,384
16,540
0.911
767,830
1,354
152,851
$
$
$
$
16,330
16,486
0.858
661,140
1,354
139,045
$
$
$
$
16,270
16,426
0.808
620,161
1,356
134,538
$
$
$
$
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
and in Delaware through our wholly-owned subsidiary, Tidewater Utilities, Inc. (Tidewater), since 1992. 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 primarily in New Jersey and Delaware and provide regulated wastewater services in New Jersey
and Delaware through five subsidiaries. We are regulated by state public utility commissions as to rates charged
to customers for water and wastewater services, as to the quality of water and wastewater services we provide and
as to certain other matters in the states in which our regulated subsidiaries operate. Only our Utility Service
Affiliates, Inc. (USA), Utility Service Affiliates (Perth Amboy), Inc. (USA-PA) and White Marsh Environmental
Services, Inc. (White Marsh) subsidiaries are not regulated public utilities as related to rates and services quality.
21
All municipal or commercial entities whose utility operations are managed by these 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 52,000 retail customers in New Castle, Kent and Sussex Counties, Delaware. Tidewater’s
subsidiary, White Marsh, services approximately 1,900 customers in Kent and Sussex Counties through various
operations and maintenance contracts.
Our Tidewater Environmental Services, Inc. (TESI) subsidiary provides wastewater services to approximately
3,900 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. Beginning July 1, 2020, USA began operating the Borough of Highland Park,
New Jersey’s (Highland Park) water and wastewater systems under a 10-year operations and maintenance contract.
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.
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 $134 million in 2021 in connection with this plan for projects that include, but are not limited
to:
• Completion of construction of a facility to provide an 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, as well as other improvements;
• Construction of a facility to provide an enhanced treatment process at the Company’s largest wellfield in
South Plainfield, New Jersey to comply with new state water quality regulations relative to poly- and
perfluoroalkyl substances, collectively referred to as PFAS, and integrate surge protection to mitigate spikes
in water pressures along with enhancements to corrosion control and chlorination processes;
• Renovations and related construction at our 37-year old Middlesex Operations facility in New Jersey,
including more efficient work space to meet the evolved needs of the business, enhancements to information
technology infrastructure, improved energy efficiency and regulatory requirements;
22
• Replacement of approximately four miles of water mains including service lines, valves, fire hydrants and
meters in Metuchen, New Jersey; and
• Construction of a new upgraded wastewater treatment plant to serve our customers in the Town of Milton,
Delaware.
Novel Coronavirus (COVID-19) - On March 13, 2020, the United States had declared the COVID-19 pandemic
a national emergency. The ongoing impact on changing economic conditions due to COVID-19 continues to be
uncertain and could affect the Company’s results of operations, financial condition and liquidity in the future. While
the Company’s operations and capital construction program have not been significantly disrupted to-date from
COVID-19, we are unable to assess with certainty the impact that COVID-19 will have on our business, our
customers and our vendors prospectively, due to numerous uncertainties, including the continued severity and
duration of the pandemic, sufficiency of the government’s vaccination program and actions which could potentially
be taken by federal or state governmental and/or regulatory authorities.
The New Jersey Board of Public Utilities (NJBPU) and the Delaware Public Service Commission (DEPSC) have
allowed for potential future recovery of COVID-19 related incremental costs through customer rates by the
regulated utilities under their respective jurisdictions. Neither jurisdiction has yet to establish a timetable or
definitive formal procedures for seeking cost recovery. We will continue to monitor the COVID-19 situation and
evaluate its impact on the Company’s business, results of operations, financial condition and liquidity.
Contract Operations – In May 2020, USA, through a competitive bidding process, was awarded a ten-year, $8.3
million contract to operate and maintain Highland Park’s water and wastewater systems. The contract commenced
July 1, 2020.
Private Placement Loan – In November 2020, Middlesex closed on a $40.0 million, 2.90% private placement loan
with a maturity date of November 2050 by issuing first mortgage bonds (FMBs). Proceeds were used to reduce the
Company’s existing short-term borrowings under its lines of credit and for the Company’s 2020 capital program.
Twin Lakes Utilities, Inc. (Twin Lakes) - Twin Lakes provides water services to approximately 115 residential
customers in Shohola, Pennsylvania. In 2020, Twin Lakes filed a petition requesting the Pennsylvania Public
Utilities Commission (PAPUC) to exercise its discretion under Section 529 of the Pennsylvania Public Utility Code
(the Code) to order the acquisition of Twin Lakes by a public utility as defined by the Code. The PAPUC assigned
an Administrative Law Judge (ALJ) to adjudicate the matter and submit a decision to the PAPUC. Pre-filed
testimony was submitted by all parties and an evidentiary hearing was held by the ALJ in early January 2021. The
briefing schedule concluded on February 25, 2021 and a decision by the ALJ is expected to be issued in the second
quarter of 2021. A final PAPUC Order on this matter is expected to also be issued during the second quarter of
2021. Separately, in January 2021, the PAPUC issued an Order appointing a large Pennsylvania based investor-
owned water utility as the receiver (the Receiver Utility) of the Twin Lakes system effective January 15, 2021 with
the receivership to remain in place until the final outcome of the Section 529 proceeding. In connection with this
receivership, the Receiver Utility’s responsibilities will include operating and maintaining the system assets in
compliance with all state, federal and local laws and regulations, maintaining existing or necessary permits, licenses,
approvals, authorizations, orders, consents, registrations or filings, providing a list of recommended capital
improvements, providing all supervision and personnel necessary and responding to system emergencies by taking
necessary action to ensure the continued provision of adequate, efficient, safe and reasonable service. We cannot
predict whether the PAPUC will ultimately approve or deny the Section 529 petition. Twin Lakes’ PAPUC-
approved annual revenues and rate base are currently set at $0.2 million and $1.5 million, respectively, and its
financial results, total assets and financial obligations are not material to the Company.
23
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 2020, 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 $1.1 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 March 2020, the NJBPU approved Middlesex’s petition to reset its PWAC tariff rate to recover additional costs
of $0.6 million for the purchase of treated water from a non-affiliated water utility regulated by the NJBPU. The
new PWAC rate became effective on April 4, 2020.
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 prospective recognition of the income tax benefits for the immediate deduction of repair costs
on tangible property. The rate increase became effective April 1, 2018.
Tidewater Rate Matters
Effective January 1, 2021, Tidewater increased its DEPSC-approved Distribution System Improvement Charge
(DSIC) rate, which is expected to generate revenues of approximately $0.6 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 (the Tax Act), resulting in a 3.35% rate
decrease for certain customer classes.
Pinelands Rate Matters
Effective November 4, 2019, Pinelands Water and Pinelands Wastewater received approval from the NJBPU to
increase its base rates by $0.5 million. The increased revenues 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
24
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.
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 which can result in lower customer
demand for water may occur in 2021. As operating costs are anticipated to increase in 2021 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.
An additional factor that may affect our outlook in 2021 is the impact of COVID-19 on the general economy and
the resulting impact on our customers. For example, while many commercial and industrial business operations
have curtailed operations as a result of COVID-19 in the respective states in which we operate, potentially resulting
in lower water demand for those classes of customer, usage by residential customers has increased due to remote
working arrangements (for further discussion of the impact of COVID-19 on the Company, see Recent
Developments, Novel Coronavirus (COVID-19) above). In addition, our customer collection efforts for Middlesex
and Pinelands have been suspended based on State of Emergency Orders (SEOs). Meanwhile, these SEOs have
declared utility construction projects to be essential and therefore, are allowed to continue subject to nationally-
established COVID-19 safety precautions.
Organic residential customer growth for our Tidewater system is expected to be comparable to that experienced in
2020, which was approximately 5%.
The Company has projected it will spend approximately $314 million for its 2021-2023 capital investment program,
including approximately $18 million for the upgrade of Middlesex’s primary water treatment plant in New Jersey,
$43 million on our RENEW Program, our ongoing initiative to replace water mains in the Middlesex System, $38
million for wellfield treatment upgrades in the Middlesex System and $14 million for construction of a new
replacement wastewater treatment plant in Milton, Delaware.
Operating Results by Segment
The Company has two operating segments, Regulated and Non-Regulated. Our Regulated segment contributed
approximately 91%, 91% and 88% of total revenues for the years ended December 31, 2020, 2019 and 2018,
respectively and approximately 93%, 93% and 93% of net income for the years ended December 31, 2020, 2019
and 2018, 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.
25
Results of Operations for 2020 as Compared to 2019
(In Millions)
Years Ended December 31,
2020
Non-
Regulated
Regulated
Total
Regulated
2019
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
$129.5
62.5
18.3
14.7
$134.6
68.0
16.7
14.4
34.0 3.4 37.4 31.6 3.9 35.5
$141.6
70.8
18.5
14.9
$122.8
60.5
16.5
14.2
$12.1
8.3
0.2
0.2
$11.8
7.5
0.2
0.2
0.1
4.3
7.5 -
2.5
2.8 (0.3)
4.4
0.1
7.3
7.2
7.5
1.2 (3.2)
1.0 (4.1) (4.4)
$33.9
$31.6
$38.4
$2.3
$2.5
(5.1)
$35.9
Operating revenues for the year ended December 31, 2020 increased $7.0 million from the same period in 2019 due
to the following factors:
• Middlesex System revenues increased $3.1 million due to increased customer water consumption resulting
from increased demand from our residential and wholesale contract customers;
• Tidewater System revenues increased $2.9 million due to additional customers and related residential
developer connection fees;
• Pinelands revenues increased $0.5 million due to the base rate increase that went into effect in November
2019;
• Non-regulated revenues increased $0.3 million due to USA’s new contract to operate and maintain the
Highland Park’s water and wastewater systems (for further information, see discussion under Recent
Developments-Contract Operations) and increased supplemental services under existing contracts; and
• All other revenue categories increased $0.2 million.
Operation and Maintenance Expense
Operation and maintenance expenses for the year ended December 31, 2020 increased $2.8 million from the same
period in 2019 due to the following factors:
• Variable production costs increased $1.7 million due to higher customer water consumption and higher
treatment costs due to weather-impacted changes in raw water quality;
• Retirement benefit plan expenses increased $0.8 million primarily due to higher actuarially-determined
retirement benefit plan service expense;
• Bad debt expense increased $0.4 million due to expected increases in future write-offs due to COVID-19;
and
• All other operation and maintenance expense categories decreased $0.1 million.
Depreciation
Depreciation expense for the year ended December 31, 2020 increased $1.8 million from the same period in 2019
due to a higher level of utility plant in service.
26
Other Taxes
Other taxes for the year ended December 31, 2020 increased $0.5 million from the same period in 2019 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, 2020 increased $1.9 million from the same period in 2019
primarily due to higher Allowance for Funds Used During Construction resulting from a higher level of capital
projects in progress and lower actuarially-determined non-service expense for our employee retirement benefit
plans partially offset by higher new business development costs.
Interest Expense
Interest expense for the year ended December 31, 2020 increased $0.2 million from the same period in 2019 due to
higher average balance of debt outstanding partially offset by lower average interest rates on both long-term and
short-term borrowings.
Income Taxes
The benefit from income taxes for the year ended December 31, 2020 increased overall by $1.0 million from the
same period in 2019, primarily due to the regulatory accounting treatment of tax benefits associated with repair
expenditures on tangible property owned by Middlesex, partially offset by higher pre-tax income.
Net Income and Earnings Per Share
Net income for the year ended December 31, 2020 increased $4.5 million as compared with the same period in
2019. Basic earnings per share were $2.19 and $2.02 for the year ended December 31, 2020 and 2019, respectively.
Diluted earnings per share were $2.18 and $2.01 for the year ended December 31, 2020 and 2019, respectively.
Results of Operations for 2019 as Compared to 2018
(In Millions)
Years Ended December 31,
2019
Non-
Regulated
Regulated
Total
Regulated
2018
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
$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
$121.7
58.8
14.8
13.9
$134.6
68.0
16.7
14.4
$16.4
12.8
0.2
0.4
$11.8
7.5
0.2
0.2
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
$33.9
$2.3
$31.6
0.1
0.1
1.0
$2.0
3.0
6.8
0.9
$32.5
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
27
o An NJBPU-approved base rate increase, implemented in April 2018, resulted in higher revenues of
$1.2 million;
• Tidewater System revenues increased $1.0 million primarily due to additional customers, but was mitigated
by reduced base tariff rates as approved by the DEPSC in March 2019. The lower rate 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;
• 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 non-service expense for our employee retirement benefit plans,
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 debt outstanding in 2019 as compared to 2018 partially offset by lower interest assessment from the
IRS examination of the Company’s federal income tax returns.
28
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 repair
expenditures on tangible property owned by Middlesex. 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 2017 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.
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, 2020, cash flows from operating activities increased $17.3 million to $53.4
million. The increase in cash flows from operating activities primarily resulted from reduced income tax payments,
timing of vendor payments and higher net income.
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.
Cash Flows from Investing Activities
For the year ended December 31, 2020, cash flows used in investing activities increased $16.5 million to $105.6
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, 2020, cash flows provided by financing activities decreased $77.7 million to
$16.2 million. The decrease in cash flows provided by financing activities is due to net lower proceeds from the
issuance of long-term debt and common stock and a reduction in net short-term bank borrowings.
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.
29
The table below summarizes our estimated capital expenditures for the years 2021-2023.
2021
2022
2023
2021-2023
(Millions)
Distribution/Network System
Production System
Information Technolgy (IT) Systems
Information Technology (IT) Systems
Other
Total Estimated Capital Expenditures
59
66
1
1
8
134
$
60
26
4
4
7
97
$
66
10
2
2
5
83
$
$
$
185
102
7
7
20
314
Our estimated capital expenditures for the items listed above are primarily comprised of the following:
• Distribution/Network System-Projects associated with replacement, installation and relocation of water
mains and service lines and wastewater collection systems, construction of water storage tanks, installation
and replacement of hydrants, meters and meter pits and our RENEW Program. RENEW is our ongoing
initiative to replace water mains in the Middlesex System. In connection with our RENEW Program, we
expect to spend approximately $11 million in 2021, $13 million in 2022 and $11 million in 2023.
• Production System-Projects associated with our water production and water/wastewater treatment plants,
including $18 million of expenditures in 2021 for the upgrade of the Carl J. Olsen (CJO) water treatment
plant, $38 million of expenditures between 2021 and 2022 for wellfield treatment upgrades in our Middlesex
System and $14 million of expenditures between 2021 and 2022 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 and could be impacted if the effects of the COVID-19 pandemic continue for
an extended period of time.
To pay for our capital program in 2021, we plan on utilizing some or all of the following:
Internally generated funds;
•
• Short-term borrowings, as needed, through $110 million of available lines of credit with several financial
institutions. As of December 31, 2020, there was $2.0 million borrowed under these lines (see discussion
under “Sources of Liquidity-Short-term Debt” below);
• Proceeds from the 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);
• Remaining proceeds from the issuance and sale of FMBs through the New Jersey Economic Development
Authority (NJEDA) in August 2019 (see discussion under “Sources of Liquidity-Long-term Debt” below);
• Proceeds from the sale and issuance of FMBs in private placement offerings and/or through the NJEDA;
• 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).
30
Sources of Liquidity
Short-term Debt. In January 2021, the Company reduced its’ available lines of credit from $140 million to $110
million. The outstanding borrowings under the credit lines at December 31, 2020 were $2.0 million, at a weighted
average interest rate of 1.04%.
The weighted average daily amounts of borrowings outstanding under the Company’s credit lines and the weighted
average interest rates on those amounts were $28.3 million and $52.4 million at 1.55% and 3.33% for the years ended
December 31, 2020 and 2019, respectively.
Long-term Debt. Subject to regulatory approval, the Company periodically issues long-term debt to fund its
investments in utility plant. 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 term of the long-term loans currently 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 the New Jersey SRF program as follows:
1) In April 2018, the NJBPU approved Middlesex’s request to participate in the NJIB loan program to fund
the construction of a 4.5 mile large-diameter transmission pipeline from the Carl J. Olsen water treatment
plant in Edison, New Jersey and interconnect with our distribution system. Middlesex closed on a $43.5
million NJIB interest-free construction loan in August 2018. Through December 31, 2020, Middlesex has
drawn a total of $41.9 million and expects to draw any remaining funding requests on this construction loan
in the first quarter of 2021.
2) 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 unlined water distribution mains in
the Middlesex system. Middlesex closed on an $8.7 million NJIB construction loan in September 2018 and
completed withdrawal of 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 2021 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 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 currently does not include participating in the NJIB SRF program.
In May 2020, Middlesex received approval from the NJBPU to borrow up to $100 million, in one or more private
placement transactions through December 31, 2023 to help fund Middlesex’s multi-year capital construction
program. In November 2020, Middlesex closed on a $40.0 million private placement loan with a payment maturity
date of November 2050 and an interest rate of 2.90% by issuing a FMB designated as Series 2020A. Proceeds from
31
this loan were used to reduce the Company’s existing short-term borrowings under its lines of credit and for the
Company’s 2020 capital 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 FMBs 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 a 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, are held in escrow by a bond trustee and are drawn down by requisition for the qualifying
projects. Through December 31, 2020, Middlesex has drawn a total of $55.1 million and currently expects to draw
the remaining $5.7 million of proceeds, currently included in Restricted Cash, through the second quarter of 2021.
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 and completed withdrawal of the proceeds in April 2020.
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.
The Company raised approximately $1.2 million through the issuance of shares under the Investment Plan during
2020. In 2019, the Company raised approximately $12.7 million primarily through a limited duration six-month
share purchase discount feature of the Investment Plan. The 0.2 million share purchase limit was reached and the
discount offer ceased prior to the original ending date.
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.
32
The table below presents our known contractual obligations for the periods specified as of December 31, 2020.
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
$ 277.2 $ 7.3
2.0
2.0
8.3
185.6
6.5
25.8
7.7
0.8
$ 498.3 $ 24.9
$ 22.9
$ 11.6 $ 235.4
- - -
13.8
15.7
12.6
1.6
$ 52.8
147.8
6.2 0.5
3.6
1.7
$ 33.3 $ 387.3
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 2020, the Company contributed $4.5 million to its retirement benefit plans
and expects to contribute approximately $4.2 million in 2021.
We do not currently have, nor have we ever had, any relationships with unconsolidated entities or financial
partnerships, such as entities often referred to as structured finance or special purpose entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements, or for other contractually narrow or
limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts.
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
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.
33
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 Company 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 June 2030 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.
The allocation by asset category of retirement benefit plan assets at December 31, 2020 and 2019 is as follows:
Pension Plan
2019 Target
Other Benefits Plan
2019
Target
2020
Asset Category
Equity Securities
Debt Securities
Cash
Real Estate/Commodities
Total
2020
60.6% 61.5%
37.5% 36.5%
0.5%
1.5%
100.0% 100.0%
1.2%
0.7%
55%
38%
2%
5%
62.3%
31.0%
6.7%
0.0%
60.0%
33.0%
7.0%
0.0%
100.0% 100.0%
43%
50%
2%
5%
34
The primary assumptions used for determining future retirement 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 MP2020 for the 2020 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 retirement benefit plans as of December 31, 2020 are as follows:
Discount Rate
Compensation Increase
Long-term Rate of Return
Pension Plan
2.37%
3.00%
7.00%
Other Benefits Plan
2.37%
3.00%
7.00%
For the 2020 valuation, costs and obligations for our Other Benefits Plan assumed an 7.5% annual rate of increase
in the per capita cost of covered healthcare benefits in 2021 with the annual rate of increase declining 0.5% per year
for 2022-2027, resulting in an annual rate of increase in the per capita cost of covered healthcare benefits of 4.5%
by year 2027.
The following is a sensitivity analysis for certain actuarial assumptions used in determining projected benefit
obligations (PBO) and expenses for our retirement benefit plans:
Pension Plan
Actuarial Assumptions
Discount Rate 1% Increase
Discount Rate 1% Decrease
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)
$ (16,249) $ (1,385)
20,685 1,672
Estimated
Increase/
(Decrease)
on PBO
(000s)
Estimated
Increase/
(Decrease)
on Expense
(000s)
$ (8,411) $ (955)
11,012 1,202
8,845 1,576
(6,941) (1,234)
See Note 1(r) of the Notes to Consolidated Financial Statements for a discussion of recent accounting
pronouncements.
35
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 $7.3 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.
36
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, 2020 and 2019, the related
consolidated statements of income, common stockholders' equity, and cash flows for each of the three years in the
period ended December 31, 2020, 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,
2020, 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, 2020 and 2019, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 2020, 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, 2020, 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.
37
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
The critical audit matters communicated below are matters arising from the current period audit of the 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 US, LLP
Baker Tilly US, LLP (formerly known as Baker Tilly Virchow Krause, LLP)
We have served as the Company's auditor since 2006.
Lancaster, Pennsylvania
February 25, 2021
38
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,
2019
2018
2020
$
141,592
$
134,598
$
138,077
70,796
18,472
14,904
67,980
16,716
14,382
71,570
15,037
14,328
Total Operating Expenses
104,172
99,078
100,935
Operating Income
37,420
35,520
37,142
Other Income (Expense):
Allowance for Funds Used During Construction
Other Income (Expense), net
Total Other Income, net
Interest Charges
4,016
363
4,379
7,493
3,146
(654)
2,492
7,264
1,362
1,630
2,992
6,758
Income before Income Taxes
34,306
30,748
33,376
Income Taxes
Net Income
(4,119)
(3,140)
924
38,425
33,888
32,452
Preferred Stock Dividend Requirements
120
132
144
Earnings Applicable to Common Stock
$
38,305
$
33,756
$
32,308
Earnings per share of Common Stock:
Basic
Diluted
Average Number of
Common Shares Outstanding :
Basic
Diluted
$
$
2.19
2.18
$
$
2.02
2.01
$
$
1.97
1.96
17,459
17,574
16,685
16,829
16,384
16,540
See Notes to Consolidated Financial Statements.
39
MIDDLESEX WATER COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
UTILITY PLANT:
CURRENT ASSETS:
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 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)
OTHER LIABILITIES:
Customer Advances for Construction
Lease Obligations
Accumulated Deferred Income Taxes
Employee Benefit Plans
Regulatory Liabilities
Other
TOTAL OTHER LIABILITIES
December 31,
2020
$
168,080
648,763
85,056
80,055
981,954
185,356
796,598
December 31,
2019
$
160,870
556,517
83,043
75,520
875,950
170,220
705,730
4,491
14,569
7,065
5,112
2,886
34,123
5,209
5,192
118,144
5,913
11,207
84
145,749
976,470
$
$
217,451
128,757
346,208
2,084
273,244
621,536
7,255
2,000
30,443
10,138
2,137
1,255
3,620
56,848
23,404
5,042
61,297
34,426
60,792
1,135
186,096
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
CONTRIBUTIONS IN AID OF CONSTRUCTION
TOTAL CAPITALIZATION AND LIABILITIES
111,990
976,470
$
97,830
909,878
$
See Notes to Consolidated Financial Statements.
40
40
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
Equity Portion of Allowance for Funds Used During Construction (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 $1,513 in 2020, $1,149 in 2019 and
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
Years Ended December 31,
2019
2020
2018
$
38,425
$
33,888
$
32,452
20,838
(13,490)
(2,503)
(391)
1,096
(2,661)
118
333
(519)
7,137
2,503
106
(1,377)
44
3,696
53,355
(105,619)
(105,619)
(7,472)
50,316
-
(18,000)
(148)
(37)
1,230
(18,178)
(120)
8,578
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
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
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
16,169
(36,095)
46,499
10,404
$
93,910
40,838
5,661
46,499
$
25,494
(736)
6,397
5,661
$
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.
$
$
5,080
258
$
$
7,770
130
$
3,835
$
-
$
$
$
7,644
1,513
2,509
$
$
$
6,938
1,149
10,339
$
$
$
6,113
443
4,689
41
41
MIDDLESEX WATER COMPANY
CONSOLIDATED STATEMENTS OF CAPITAL STOCK AND LONG-TERM DEBT
(In thousands)
Common Stock, No Par Value
Shares Authorized -
Shares Outstanding -
40,000
2020 - 17,473; 2019 - 17,434
Retained Earnings
TOTAL COMMON EQUITY
Cumulative Preferred Stock, No Par Value:
Shares Authorized -
Shares Outstanding -
120
20
Convertible:
Shares Outstanding, $7.00 Series - 10
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 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, 2due August 1, 2047
3.00%-5.00%, Series 2018B, due August 1, 2047
4.00%, Series 2019A, due August 1, 2059
5.00%, Series 2019B, due August 1, 2059
2.90%, Series 2020A, due November 18, 2050
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.
42
42
December 31,
2020
December 31,
2019
$
217,451
$
215,125
128,757
346,208
$
108,667
323,792
$
1,005
1,005
79
1,000
2,084
$
79
1,000
2,084
$
$
336
3,115
2,707
2,987
119
1,170
266
307
389
-
11
192
62
793
2,907
2,271
4,658
8,506
3,156
1,699
961
1,543
883
50,536
$
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
119
164
1,036
1,870
541
620
338
500
719
846
937
1,105
1,656
600
9,915
22,500
23,000
1,806
705
1,861
715
10,247
3,710
6,246
2,211
32,500
21,200
40,000
277,241
7,669
(4,411)
(7,255)
273,244
$
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
$
MIDDLESEX WATER COMPANY
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
(In thousands)
Balance at Janaury 1, 2018
16,352
$
155,120
$
74,055
$
229,175
Common
Stock
Shares
Common
Stock
Amount
Retained
Earnings
Total
-
1,150
975
147
(38)
-
-
157,354
$
32,452
-
-
-
-
(14,930)
(144)
91,433
$
32,452
1,150
975
147
(38)
(14,930)
(144)
248,787
$
-
12,738
907
196
(466)
350
44,046
-
-
-
215,125
$
33,888
-
-
-
-
-
-
(16,165)
(132)
(357)
108,667
$
-
1,230
851
245
-
-
-
217,451
$
38,425
-
-
-
(18,178)
(120)
(37)
128,757
$
33,888
12,738
907
196
(466)
350
44,046
(16,165)
(132)
(357)
323,792
$
$
38,425
1,230
851
245
(18,178)
(120)
(37)
346,208
$
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
Net Income
Dividend Reinvestment & Common Stock Purchase Plan
Restricted Stock Award - Net - Employees
Restricted Stock Award - Board of Directors
Cash Dividends on Common Stock ($1.041 per share)
Cash Dividends on Preferred Stock
Common Stock Expenses
Balance at December 31, 2020
See Notes to Consolidated Financial Statements.
-
27
22
4
(2)
-
-
16,403
-
226
18
4
(18)
41
760
-
-
-
17,434
-
19
16
4
-
-
-
17,473
43
43
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 and in Delaware, through our
wholly-owned subsidiary, Tidewater, since 1992. 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.
(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.
(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, as well as a defined contribution plan in which
all employees are eligible to participate. 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.
44
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, 2020, 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, 2020, 2019 and 2018. 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
1.10% - 3.13%
T&D – Services 2.12% - 3.16%
1.61% - 4.63%
T&D – Other
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.
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.
45
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, 2020, 2019 and 2018 for
Middlesex and Tidewater are as follows:
Middlesex
Tidewater
2018
2020
2019
6.50% 6.50% 6.50%
7.92% 7.92% 7.92%
(k) Accounts Receivable – We record bad debt expense based on a variety of factors such as our customers’
payment history, current economic conditions and trending reasonable and supportable forecasts on expected
collectability of accounts receivable. The allowance for doubtful accounts was $2.1 million and $1.4 million as of
December 31, 2020 and 2019, respectively. For the years ended December 31, 2020, 2019 and 2018, bad debt
expense was $1.1 million, $1.0 million and $0.8 million, respectively. For the years ended December 31, 2020,
2019 and 2018, write-offs were $0.5 million, $0.6 million and $0.7 million, respectively. During 2020, the Company
increased its allowance for doubtful accounts for expected increases in accounts receivable write-offs due to the
financial impact of Novel Coronavirus (COVID-19) on customers (for further discussion of COVID-19, see Note
1 (s), COVID-19).
(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 Company 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 June 2030 and 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.
46
The Company’s operating revenues are comprised of the following:
(In Thousands)
Years Ended December 31,
2019
2018
2020
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
$
$
$
76,798
15,448
9,512
12,374
15,187
12,130
141,449
532
415
(804)
141,592
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
$
$
$
$
$
$
(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. Certain income and expense items are accounted for in different
time periods for financial reporting than for income tax reporting purposes. Deferred income taxes are provided on
differences between the tax basis of assets and liabilities and the amounts at which they are carried in the
consolidated financial statements. 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
Leases - The Financial Accounting Standards Board (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 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
47
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.
Credit Losses on Financial Instruments - The FASB issued guidance on the measurement of credit losses on
financial instruments, including trade receivables, which requires expected credit losses to be measured based on
historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of
the reported amount of financial assets. The new guidance became effective January 1, 2020. For the Company,
this applies primarily to accounts receivable and unbilled revenue balances. The adoption of this guidance did not
have a material impact on the Company’s consolidated financial statements.
Expected credit losses on accounts receivable and unbilled revenues are based on historical write-offs combined
with an evaluation of current conditions and reasonable and supportable forecasts. Customer accounts are written
off when collection efforts have been exhausted.
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.
(s) COVID-19 - On March 13, 2020, the United States declared the COVID-19 pandemic a national emergency.
The ongoing impact on changing economic conditions due to COVID-19 continues to be uncertain and could affect
the Company’s results of operations, financial condition and liquidity in the future. While the Company’s operations
and capital construction program have not been significantly disrupted to date from COVID-19, we are unable to
assess with certainty the impact that COVID-19 will have on our business, our customers and our vendors
prospectively, due to numerous uncertainties, including the continued severity duration of the pandemic, sufficiency
of the government’s vaccination program and actions which could potentially be taken by federal or state
governmental and/or regulatory authorities.
The NJBPU and the DEPSC have allowed for potential future recovery of COVID-19 related incremental costs
through customer rates by the regulated utilities under their respective jurisdictions. Neither jurisdiction has yet to
establish a timetable or definitive formal procedures for seeking cost recovery. We will continue to monitor the
COVID-19 situation and evaluate its impact on the Company’s business, results of operations, financial condition
and liquidity.
Note 2 - Rate and Regulatory Matters
Rate Matters
Middlesex - In November 2020, 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 $1.1 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 March 2020, the NJBPU approved Middlesex’s petition to reset its PWAC tariff rate to recover additional costs
of $0.6 million for the purchase of treated water from a non-affiliated water utility regulated by the NJBPU. The
new PWAC rate became effective on April 4, 2020.
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 income tax benefits associated with
48
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 prospective
recognition of the income tax benefits for the immediate deduction of repair costs on tangible property. The rate
increase became effective April 1, 2018.
Tidewater - Effective January 1, 2021, Tidewater increased its DEPSC-approved Distribution System
Improvement Charge (DSIC) rate, which is expected to generate revenues of approximately $0.6 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 ( 2017 Tax Act), resulting in a 3.35% rate
decrease for certain customer classes.
Pinelands - Effective November 4, 2019, Pinelands Water and Pinelands Wastewater received approval from the
NJBPU to increase its base rates by $0.5 million. The increased revenues 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 Utilities, Inc. (Twin Lakes) - Twin Lakes provides water services to approximately 115 residential
customers in Shohola, Pennsylvania. In 2020, Twin Lakes filed a petition requesting the PAPUC to exercise its
discretion under Section 529 of the Pennsylvania Public Utility Code (the Code) to order the acquisition of Twin
Lakes by a public utility as defined by the Code. The PAPUC assigned an Administrative Law Judge (ALJ) to
adjudicate the matter and submit a decision to the PAPUC. Pre-filed testimony was submitted by all parties and an
evidentiary hearing was held by the ALJ in early January 2021. The briefing schedule concluded on February 25,
2021 and a decision by the ALJ is expected to be issued in the second quarter of 2021. A final PAPUC Order on
this matter is expected to also be issued during the second quarter of 2021. Separately, in January 2021, the PAPUC
issued an Order appointing a large Pennsylvania based investor-owned water utility as the receiver (the Receiver
Utility) of the Twin Lakes system effective January 15, 2021 with the receivership to remain in place until the final
outcome of the Section 529 proceeding. In connection with this receivership, the Receiver Utility’s responsibilities
will include operating and maintaining the system assets in compliance with all state, federal and local laws and
regulations, maintaining existing or necessary permits, licenses, approvals, authorizations, orders, consents,
registrations or filings, providing a list of recommended capital improvements, providing all supervision and
personnel necessary and responding to system emergencies by taking necessary action to ensure the continued
provision of adequate, efficient, safe and reasonable service. We cannot predict whether the PAPUC will ultimately
approve or deny the Section 529 petition. Twin Lakes’ PAPUC-approved annual revenues and rate base are
currently set at $0.2 million and $1.5 million, respectively, and its financial results, total assets and financial
obligations are not material to the Company.
49
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,
2020
2019
$44,281
$45,419
60,151
66,759
5,966 6,047
$110,479
$118,144
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.
The 2017 Tax Act reduced the statutory corporate federal income tax rate from 35% to 21% . The tariff rates
charged to customers effective prior to 2018 in the Company’s regulated companies include recovery of income
taxes at the statutory rate in effect at the time those rates were approved by the respective state public utility
commissions. As of December 31, 2020 and December 31, 2019, the Company has recorded regulatory liabilities
of $31.0 million and $31.5 million, respectively for excess income taxes collected through rates due to the lower
income tax rate under the 2017 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
current base rates for Middlesex, Pinelands and Twin Lakes’ customers became effective after 2017 and reflect the
impact of the 2017 Tax Act on their revenue requirements. In February 2019, Tidewater received approval from
the DEPSC to reduce its base rates to reflect the lower statutory corporate income tax rate enacted by the 2017 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 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, 2020 and 2019, the Company has
recorded $14.9 million and $24.2 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 retirement
costs through rates charged to customers as an approved component of depreciation expense. As of December 31,
2020 and 2019, the Company has approximately $14.9 million and $13.4 million, respectively, of expected costs
of removal recovered currently in rates in excess of actual costs incurred as regulatory liabilities.
50
Note 3 – Income Taxes
Income tax (benefit) 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
Other
Total Income Tax (Benefit) Expense
(Thousands of Dollars)
Years Ended December 31,
2018
2019
2020
$ 7,204 $ 6,457 $ 7,009
(1,356) (802) 422
(11,298) (10,156) (7,763)
1,364 1,173 1,207
(33)
49
$ (4,119) $ (3,140) $ 924
188
Income tax (benefit) expense is comprised of the following:
(Thousands of Dollars)
Years Ended December 31,
2019
2018
2020
Current:
Federal
State
Deferred:
Federal
State
Investment Tax Credits
Total Income Tax (Benefit) Expense
$ (4,281) $ (3,822) $ (188)
2,598 2,246 2,073
(1,490) (726) (338)
(871) (761) (545)
(75) (77) (78)
$ 924
$ (4,119) $ (3,140)
As part of Middlesex’s March 2018 base water rate settlement with the NJBPU, Middlesex received approval for
regulatory accounting treatment of income tax benefits associated with the adoption of tangible property regulations
issued by the IRS as well as prospective recognition of the income tax benefits for the immediate deduction of
repair costs on tangible property (see Note 2 – Rate and Regulatory Matters). This results in significant reductions
in the Company’s effective income tax rate, current income tax (benefit) expense and deferred income tax (benefit)
expense.
51
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:
(Thousands of Dollars)
December 31,
2020
2019
Utility Plant Related
Customer Advances
Employee Benefits
Investment Tax Credits
Other
Total Accumulated Deferred Income Taxes
$ 56,868 $ 50,608
(3,626) (3,661)
7,339 6,543
445 519
271 399
$ 61,297 $ 54,408
The Company’s federal income tax returns for the tax years 2014 through 2017 were selected for examination by
the IRS, which included the tax year in which the Company had adopted the final IRS tangible property regulations
and changed its accounting method for the tax treatment of expenditures that qualified as deductible repairs. As a
result of the audit examination, the Company agreed to certain modifications of its accounting method for
expenditures that qualify as deductible repairs. In 2019, the Company paid $2.7 million in income taxes and $0.1
million in interest in connection with the conclusion of the 2014 through 2017 federal income tax return audits. As
of December 31, 2020, 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 2017 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 NJBPU-regulated water utility for the purchase of treated
water. This agreement, which expires February 27, 2026, provides for the minimum purchase of 3.0 mgd of treated
water with provisions for additional purchases if needed.
Tidewater contracts with the City of Dover, Delaware to purchase treated water of 15.0 million gallons annually.
Purchased water costs are shown below:
(Millions of Dollars)
Years Ended December 31,
2019
2018
2020
Untreated
Treated
Total Costs
$ 3.4 $ 3.4 $ 3.6
3.6 3.2 3.2
$ 7.0 $ 6.6 $ 6.8
52
Guarantees - As part of an agreement with the County of Monmouth, New Jersey (County), prior to 2020 Middlesex
had served as guarantor of the performance of an unaffiliated wastewater treatment contractor and partner
(Contractor), to operate a County-owned leachate pretreatment facility.
In November 2019, Middlesex was notified that the County terminated its Agreement with the Contractor. The
Contractor had initiated legal action against the County that in part contests the County’s exercise of this
termination. The County filed a counter-claim against the Contractor’s parent company and has brought Middlesex
into the suit as a third-party defendant. We continue to monitor this litigation; however, given the cancellation of
the underlying operating contract by the County and the continuation of the litigation matter, we do not anticipate
having to perform under the guaranty nor do we anticipate the ultimate outcome will have a material impact on the
Company’s results of operations or financial condition. Based on the foregoing, the liability and asset for the
guaranty, included in Other Non-Current Liabilities and Other Non-Current Assets on the balance sheet, was
reduced from $1.4 million as of December 31, 2019 to $0 at December 31, 2020.
Leases - The Company determines if an arrangement is a lease at the inception of the lease. 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 an operating lease for 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 $0.8
million, $0.7 million and $0.5 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Information related to operating lease ROU assets is as follows:
(In Millions)
December 31,
2020
2019
ROU Asset at Lease Inception
Accumulated Amortization
Current ROU Asset
7.3
(2.1)
5.2
$
$
$
$
7.3
(1.4)
5.9
53
The Company’s future minimum operating lease commitments as of December 31, 2020 are as follows:
2021
2022
2023
2024
2025
Thereafter
Total Lease Payments
Imputed Interest
Present Value of Lease Payments
Less Current Portion*
Non-Current Lease Liability
(In Millions)
December 31, 2020
0.8
0.8
0.8
0.8
0.8
3.6
7.6
(1.9)
5.7
(0.7)
5.0
$
$
*Included in Other Current Liabilities
Construction –The Company has projected to spend approximately $134 million in 2021, $97 million in 2022 and
$83 million in 2023 on its construction program. The Company has entered into several contractual construction
agreements that in total obligate it to expend an estimated $19 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 and could be impacted if the effects of the COVID-19 pandemic continue for an extended period of time (for
further discussion of the impact of COVID-19 on the Company, see Note 1(s) COVID-19). 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.
Note 5 – Short-term Borrowings
Information regarding the Company’s short-term borrowings for the years ended December 31, 2020 and 2019 is
summarized below:
Average Amount Outstanding
Weighted Average Interest Rate
Notes Payable at Year-End
Weighted Average Interest Rate at
Year-End
(Millions of Dollars)
2020
$28.3
1.55%
$2.0
2019
$52.4
3.33%
$20.0
1.04%
2.86%
The Company maintained lines of credit aggregating $140.0 million at December 31, 2020 and 2019.
54
(Millions)
As of December 31, 2020
$
Outstanding Available Maximum Credit Type
-
$
2.0
-
$
2.0
60.0
66.0
12.0
138.0
60.0
68.0
12.0
140.0
$
$
$
Line of Credit
Renewal Date
Uncommitted January 28, 2021
January 31, 2022
Committed
Committed November 30, 2023
Bank of America
PNC Bank
CoBank
The Company's Bank of America line of credit was renewed on January 28, 2021 and reduced to $30.0 million,
reducing the Company's total available lines of credit to $110.0 million. The Bank of America line of credit is
renewed on an annual basis.
The maturity dates for the Notes Payable as of December 31, 2020 are in January 2021 and are extendable at the
discretion of the Company.
The interest rates for borrowings under the lines of credit are set using the London InterBank Offered Rate (LIBOR)
and adding a credit spread, which varies by financial institution. There is no requirement for a compensating balance
under any of the established lines of credit.
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.
The Company raised approximately $1.2 million under the Investment Plan during 2020. 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 2019, the Company raised approximately $12.7 million primarily
through a limited duration six-month share purchase discount feature of the Investment Plan. The 0.2 million share
purchase limit was reached and the discount offer ceased prior to the original ending date.
The Company issues common 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) as a
component of Director compensation. For the years ended December 31, 2020, 2019 and 2018, 4,074, 3,521 and
4,004 shares, respectively, of Middlesex common stock were granted and issued to the Company’s outside directors
under the Outside Director Stock Compensation Plan and 52,569 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.
55
Preferred Stock
At December 31, 2020 and 2019, there were 120,000 shares of preferred stock authorized and less than 31,000
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 were converted
into the Company’s common stock.
Long-term Debt
Subject to regulatory approval, the Company periodically issues long-term debt to fund its investments in utility
plant. 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 term of the long-term loans currently 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 the New Jersey SRF program as follows:
1) In April 2018, the NJBPU approved Middlesex’s request to participate in the NJIB loan program to fund
the construction of a 4.5 mile large-diameter transmission pipeline from the Carl J. Olsen water treatment
plant in Edison, New Jersey and interconnect with our distribution system. Middlesex closed on a $43.5
million NJIB interest-free construction loan in August 2018. Through December 31, 2020, Middlesex has
drawn a total of $41.9 million and expects to draw any remaining funding requests on this construction loan
in the first quarter of 2021.
2) 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 unlined water distribution mains in
the Middlesex system. Middlesex closed on an $8.7 million NJIB construction loan in September 2018 and
completed withdrawal of 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 2021 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 balances
to investor-owned water utilities. These changes affect SRF projects for which the construction loan closes after
56
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 currently does not include participating in the NJIB SRF program.
In May 2020, Middlesex received approval from the NJBPU to borrow up to $100 million, in one or more private
placement transactions through December 31, 2023 to help fund Middlesex’s multi-year capital construction
program. In November 2020, Middlesex closed on a $40.0 million private placement loan with a payment maturity
date of November 2050 and an interest rate of 2.90% by issuing First Mortgage Bonds (FMBs) designated as Series
2020A. Proceeds from this loan were used to reduce the Company’s existing short-term borrowings under its lines
of credit and to fund the 2020 capital 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 FMBs 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 a 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, are held in escrow by a bond trustee and are drawn down by requisition for the qualifying
projects. Through December 31, 2020, Middlesex has drawn a total of $55.1 million and currently expects to draw
the remaining $5.7 million of proceeds, currently included in Restricted Cash, through the second quarter of 2021.
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 and completed withdrawal of the proceeds in April 2020.
FMB Series RR, SS, 2019A, 2019B and 2020A are term bonds with single maturity dates subsequent to 2025. The
aggregate annual principal repayment obligations for all long-term debt over the next five years are shown below:
Year
2021
2022
2023
2024
2025
(Millions of Dollars)
Annual Maturities
$ 7.3
$ 6.7
$ 16.1
$ 6.0
$ 5.6
The weighted average interest rate on all long-term debt at December 31, 2020 and 2019 was 3.02% and 3.17%,
respectively. Except for the FMB Series 2020A ($40.0 million) and Amortizing Secured Notes ($30.6 million), all
of the Company’s outstanding long-term debt has been issued through the NJEDA ($109.1 million), the NJIB SRF
program ($89.1 million) and the Delaware SRF program ($8.4 million).
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.
57
Earnings Per Share
The following table presents the calculation of basic and diluted earnings per share (EPS) for the years ended December
31, 2020, 2019 and 2018. 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).
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
(In Thousands, Except Per Share Amounts)
2019
2018
2020
Income Shares
Income Shares
Income Shares
$38,425
17,459
$33,888
16,685
$32,452
16,384
(120)
(132)
(144)
$38,305
$2.19
17,459
$33,756
$2.02
16,685
$32,308
$1.97
16,384
$38,305
67
17,459
115
- -
$33,756
67
12
16,685
115
29
$32,308
67
24
16,384
115
41
$38,372
$2.18
17,574
$33,835
$2.01
16,829
$32,399
$1.96
16,540
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:
(Thousands of Dollars)
At December 31,
2020
Carrying
Amount
$147,667
Fair
Value
$159,195
2019
Carrying
Amount
$151,361
Fair
Value
$160,772
Bonds
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”, “Construction Loans” and “Series 2020A” on the Consolidated
Statements of Capital Stock and Long-Term Debt. The carrying amount of these instruments was $129.6 million
and $83.0 million at December 31, 2020 and 2019, respectively. Customer advances for construction have carrying
amounts of $23.4 million and $23.9 million at December 31, 2020 and 2019, 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.
58
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, 2020 and 2019 was $101.7 million and $87.6 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 2020 and 2019.
(Thousands of Dollars)
Pension Plan
Other Benefits Plan
December 31,
2020
2019
2020
2019
Change in Projected Benefit Obligation:
Beginning Balance
Service Cost
Interest Cost
Actuarial (Gain) Loss
Benefits Paid
Ending Balance
$ 100,891 $ 83,927 $ 55,166 $ 48,474
2,434 2,171 993 839
3,099 3,426 1,699 1,984
12,585 14,188 (4,279) 4,671
(3,148) (2,821) (803) (802)
$ 115,861 $ 100,891 $ 52,776 $ 55,166
59
Pension Plan
Other Benefits Plan
December 31,
2020
2019
2020
2019
Change in Fair Value of Plan Assets:
Beginning Balance
Actual Return on Plan Assets
Employer Contributions
Benefits Paid
Ending Balance
$ 80,380 $ 66,771 $ 40,613 $ 34,622
8,289 12,753 3,988 5,192
3,400 3,677 1,094 1,601
(3,148) (2,821) (803) (802)
$ 88,921 $ 80,380 $ 44,892 $ 40,613
Funded Status
$ (26,940) $ (20,511) $ (7,884) $ (14,553)
Amounts Recognized in the Consolidated
Balance Sheets consist of :
Current Liability
Noncurrent Liability
Net Liability Recognized
(Thousands of Dollars)
Pension Plan
Other Benefits Plan
December 31,
2020
2019
2020
2019
$ 398 $ 393 $ - $ -
26,542 20,118 7,884 14,553
$ 26,940 $ 20,511 $ 7,884 $ 14,553
(Thousands of Dollars)
Pension Plan
Other Benefits Plan
Years Ended December 31,
2020
2019
2018
2020
2019
2018
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*
$ 2,434 $ 2,171 $ 2,426 $ 993 $ 839 $ 1,135
3,099 3,426 3,061 1,699 1,984 1,898
(5,635) (4,694) (4,871) (2,853) (2,451) (2,550)
2,059 1,618 1,658 1,352 1,319 1,787
- - - - - (1,607)
$ 1,957 $ 2,521 $ 2,274 $ 1,191 $ 1,691 $ 663
*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 2021 are as
follows:
Actuarial Loss
(Thousands of Dollars)
Pension
Plan
$2,868
Other
Benefits
Plan
$527
60
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, 2020, 2019 and 2018, respectively, are as
follows:
Pension Plan
2019
2020
2018
Other Benefits Plan
2020
2019
2018
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%
7.00%
7.00%
7.00%
7.00%
2.37%
3.12%
3.12%
4.15%
4.15%
3.53%
2.37%
3.12%
3.12%
4.15%
4.15%
3.53%
3.00%
3.00%
3.00%
3.00%
3.00%
3.00%
3.00%
3.00%
3.00%
3.00%
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 MP2020
for the 2020 valuation).
For the 2020 valuation, costs and obligations for our Other Benefits Plan assumed a 7.5% annual rate of increase
in the per capita cost of covered healthcare benefits in 2021 with the annual rate of increase declining 0.5% per year
for 2022-2027, resulting in an annual rate of increase in the per capita cost of covered healthcare benefits of 4.5%
by year 2027.
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
$ 561
$ 8,845
Decrease
$ (431)
$ (6,941)
The following benefit payments, which reflect expected future service, are expected to be paid:
(Thousands of Dollars)
Year
Pension Plan
2021 $ 3,373
2022 3,537
2023 3,819
2024 4,715
2025 5,137
2026-2030 26,787
Other Benefits Plan
$ 1,245
1,489
1,585
1,664
1,755
9,671
$ 47,368 $ 17,409
Totals
61
Benefit Plans Assets
The allocation of plan assets at December 31, 2020 and 2019 by asset category is as follows:
Pension Plan
2019 Target
Other Benefits Plan
2019
Target
2020
Asset Category
Equity Securities
Debt Securities
Cash
Real Estate/Commodities
Total
2020
60.6% 61.5%
37.5% 36.5%
0.5%
1.5%
100.0% 100.0%
1.2%
0.7%
55%
38%
2%
5%
62.3%
31.0%
6.7%
0.0%
60.0%
33.0%
7.0%
0.0%
100.0% 100.0%
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 $1.4 million (1.6% of total Pension Plan
assets) and $1.2 million (1.6% of total Pension Plan assets) as of December 31, 2020 and 2019, 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
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.
62
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, 2020
Level 2
$
-
-
-
$
-
Level 3
$
-
-
-
$
-
(Thousands of Dollars)
As of December 31, 2019
Level 2
-
$
-
-
$
-
Level 3
-
$
-
-
$
-
Total
$
76,026
1,086
11,809
88,921
$
Total
$
69,565
397
10,418
80,380
$
Level 1
$
76,026
1,086
11,809
88,921
$
Level 1
$
69,565
397
10,418
80,380
$
The following tables present Middlesex’s Other Benefits Plan assets measured and recorded at fair value within
the fair value hierarchy:
Mutual Funds
Money Market Funds
Agency/US/State/Municipal Debt
Total Investments
Mutual Funds
Money Market Funds
Agency/US/State/Municipal Debt
Total Investments
Benefit Plans Contributions
(Thousands of Dollars)
As of December 31, 2020
Level 2
$
-
-
13,788
13,788
$
Level 3
$
-
-
-
$
-
(Thousands of Dollars)
As of December 31, 2019
Level 2
-
$
-
13,393
13,393
$
Level 3
-
$
-
-
$
-
Total
$
27,408
3,696
13,788
44,892
$
Total
$
24,361
2,859
13,393
40,613
$
Level 1
$
27,408
3,696
-
31,104
$
Level 1
$
24,361
2,859
-
27,220
$
For the Pension Plan, Middlesex made total cash contributions of $3.4 million in 2020 and expects to make
approximately $3.4 million of cash contributions in 2021.
For the Other Benefits Plan, Middlesex made total cash contributions of $1.1 million in 2020 and expects to make
approximately $0.8 million of cash contributions in 2021.
63
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, $0.7 million and
$0.6 million for the years ended December 31, 2020, 2019 and 2018, respectively.
For those employees hired after March 31, 2007, who are not eligible to participate in the Pension Plan, and who
are still actively employed on December 31, 2020, the Company will fund a discretionary contribution of $0.7
million which represents 5.0% of eligible 2020 compensation . For the years ended December 31, 2019 and 2018,
the Company made discretionary contributions of $0.7 million and $0.6 million, respectively, for qualifying
employees.
Stock-Based Compensation
The Company maintains a long-term incentive compensation plan where awards are made in the form of restricted
common stock for certain management employees (the 2018 Restricted Stock Plan). Shares of restricted stock
issued in connection with the 2018 Restricted Stock Plan are subject to forfeiture by the employee in the event of
termination of employment for any reason within five years of the award other than as a result of retirement at
normal retirement age, death, disability or change in control. The maximum number of shares authorized for grant
under the 2018 Restricted Stock Plan is 300,000 shares, of which approximately 89% 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 the expected vesting period.
The following table presents awarded but not yet vested share information for the 2018 Restricted Stock Plan:
Balance, January 1, 2018
Granted
Vested
Forfeited
Amortization of Compensation Expense
Balance, December 31, 2018
Granted
Vested
Forfeited
Amortization of Compensation Expense
Balance, December 31, 2019
Granted
Vested
Amortization of Compensation Expense
Balance, December 31, 2020
Shares
(thousands)
132
22
(27)
(2)
-
125
18
(28)
(18)
-
97
16
(27)
-
86
Unearned
Compensation
(thousands)
$1,785
827
-
(18)
(956)
$1,638
975
-
-
(907)
$1,706
982
-
(851)
$1,837
Weighted
Average
Grant Price
$36.53
$55.99
$60.12
The fair value of vested restricted shares was $1.7 million as of both December 31, 2020 and 2019, respectively.
64
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.
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
(Thousands of Dollars)
Years Ended December 31,
2020
2019
2018
$ 129,851
12,545
(804)
$ 141,592
$ 123,078
12,177
(657)
$ 134,598
$ 121,901
16,778
(602)
$ 138,077
$ 34,043
3,377
$ 37,420
$ 31,805
3,715
$ 35,520
$ 34,127
3,015
$ 37,142
$ 18,264
208
$ 18,472
$ 16,481
235
$ 16,716
$ 14,846
191
$ 15,037
$ 4,605
130
(356)
$ 4,379
$ 7,780
70
(357)
$ 7,493
$ 3,018
(253)
(273)
$ 2,492
$ 3,284
119
(411)
$ 2,992
$ 7,456
81
(273)
$ 7,264
$ 7,060
109
(411)
$ 6,758
$ (5,139)
1,020
$ (4,119)
$ (4,317)
1,177
$ (3,140)
$ (54)
978
$ 924
$ 35,951
2,474
$ 38,425
$ 105,091
528
$ 105,619
$ 31,602
2,286
$ 33,888
$ 30,405
2,047
$ 32,452
$ 88,858
267
$ 89,125
$ 71,493
601
$ 72,094
65
Assets:
Regulated
Non – Regulated
Inter-segment Elimination
Consolidated Assets
(Thousands of Dollars)
As of
December 31, 2020
As of
December 31, 2019
$998,932
8,289
(30,751)
$976,470
$910,081
9,686
(9,889)
$909,878
Note 9 - Quarterly Data - Unaudited
Financial information for each quarter of 2020 and 2019 is as follows:
2020
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
$ 31,769 $ 35,277 $ 39,920 $ 34,626 $ 141,592
6,527 9,385 13,177 8,331 37,420
7,668 9,713 12,737 8,307 38,425
$ 0.44 $ 0.55 $ 0.73 $ 0.47 $ 2.19
$ 0.44 $ 0.55 $ 0.72 $ 0.47 $ 2.18
$ 0.2563 $ 0.2563 $ 0.2563 $ 0.2725 $ 1.0414
$69.89/$59.61
$69.92/$48.79
$76.08.$61.81
$72.41/$53.70
2019
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
$ 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
$66.10/$55.30
$60.48/$51.02
$67.69/$58.75
$63.68/$52.51
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.
66
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, 2020. 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, 2020. 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, 2020, 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, 2020 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 25, 2021
ITEM 9B. OTHER INFORMATION.
None.
67
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 2021 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 2021 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 2021 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 2021 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 2021 Annual Meeting of Stockholders and is incorporated herein by reference.
68
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, 2020 and 2019.
Consolidated Statements of Income for each of the three years in the period ended
December 31, 2020.
Consolidated Statements of Cash Flows for each of the three years in the period ended
December 31, 2020.
Consolidated Statements of Capital Stock and Long-term Debt as of December 31, 2020 and 2019.
Consolidated Statements of Common Stockholders’ Equity for each of the three years in the period
ended December 31, 2020.
Notes to Consolidated Financial Statements.
2.
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.
3. Exhibits
See Exhibit listing immediately following the signature page.
ITEM 16. FORM 10-K SUMMARY.
None.
69
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 25, 2021
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 25, 2021.
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:
/s/ Joshua Bershad, M.D.
Joshua Bershad, M.D.
Director
By:
/s/ James F. Cosgrove Jr.
James F. Cosgrove Jr.
Director
By:
/s/ Kim C. Hanemann
Kim C. Hanemann
Director
/s/ Steven M. Klein
By:
Steven M. Klein
Director
By:
Amy B. Mansue
/s/ Amy B. Mansue
Director
By:
Ann L. Noble
/s/ Ann L. Noble
Director
By:
/s/ Walter G. Reinhard
Walter G. Reinhard
Director
____________________________
70
70
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 to the Restated Certificate of 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.
Certificate of Amendment to the Restated Certificate of 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.
Certificate of Amendment to the Restated Certificate of 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 to the Restated Certificate of 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 to the Restated Certificate of 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 to the Restated Certificate of 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.
71
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.
72
EXHIBIT INDEX
Exhibit No.
(t)10.10
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.
(t)10.11(b)
(t)10.12(a)
(t)10.11(a) 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.
(t)10.12(b)
(t)10.12(d)
(t)10.12(e)
(t)10.12(f)
(t)10.12(c) 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.
Change in Control Termination Agreement, dated as of July 1,
2019, between the Company and G. Christian Andreasen, filed
as Exhibit 10.12(f) of the Company’s Annual Report on Form
10-K for the year ended December 31, 2019.
Change in Control Termination Agreement, dated as of July 1,
2019, between the Company and Robert K. Fullagar, filed as
Exhibit 10.12(g) of the Company’s Annual Report on Form 10-
K for the year ended December 31, 2019.
Change in Control Termination Agreement, dated as of July 1,
2019, between the Company and Georgia M. Simpson, filed as
Exhibit 10.12(h) of the Company’s Annual Report on Form 10-
K for the year ended December 31, 2019.
Transmission Agreement, dated October 16, 1992, between the
Company and the Township of East Brunswick.
(t)10.12(h)
(t)10.12(g)
10.13
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333-156269
33-54922
10.23
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Exhibit No.
10.13(a)
10.14
10.15
10.16
10.17
10.18
10.19
10.20
EXHIBIT INDEX
Document Description
Amendment, dated November 28, 2016, to Transmission
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.
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-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,
between
the Company and Wachovia Bank, National
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.
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.
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333-233649
Exhibit No.
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29(a)
EXHIBIT INDEX
Document Description
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.
Amended and Restated Line of Credit Note, dated October 22,
the Company, Pinelands Wastewater
2019, between
Company, Tidewater Environmental Services, Inc., Tidewater
Utilities, Inc., Utility Service Affiliates (Perth Amboy) Inc.,
Utility Service Affiliates
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.
Inc.
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Exhibit No.
10.29(b)
*10.30 (1)
10.31
10.32
10.33
10.34
10.35
10.36
10.37
EXHIBIT INDEX
Document Description
Renewal of Expiration Date of Amended and Restated Line of
Credit Note 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(b)
of the Company’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2020.
Uncommitted Line of Credit, dated January 28, 2021, 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.
Fourth Amendment to Promissory Note and Supplement,
dated as of August 19, 2020, 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
September 30, 2020.
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.
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Exhibit
No.
Exhibit No.
10.38
10.39
10.40
10.41
10.42
10.43
10.44
10.45
10.46
10.47
EXHIBIT INDEX
Document Description
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.
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.
Middlesex Water Company Note Relating To:
The
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.
*10.48 (1)
*21 (1)
*23.1 (1)
*31 (1)
*31.1 (1)
*32 (1)
*32.1 (1)
101.INS*
101.SCH*
101.CAL*
Document Description
Loan Agreement, dated November 16, 2020, between New York
Life Insurance Company and the Company.
Middlesex Water Company Subsidiaries.
Consent of Independent Registered Public Accounting Firm,
Baker Tilly US, 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
(1) These documents were included in the 2020 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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Company Headquarters
Middlesex Water Company
485C Route 1 South, Suite 400
Iselin, NJ 08830
Telephone: 732-634-1500
MiddlesexWater.com
Transfer 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
Shareholder 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 US, LLP
1570 Fruitville Pike, Suite 400
Lancaster, PA 17601
Telephone: 717-740-4863
Investor Relations
Shareholders, analysts and others seeking information about Middlesex Water Company
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 directly 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.
2021 Dividend Schedule*
Payment Dates
Record Dates
Common
February 12
May 14
August 13
March 1
June 1
September 1
November 16
December 1
Preferred
January 15
February 1
April 15
July 15
May 3
August 2
October 15
November 1
*Subject to approval by Board of Directors.
Board of Directors
Dennis W. Doll
Chairman of the Board,
President & Chief Executive Officer
Middlesex Water Company
Joshua Bershad, M.D. (1)
Executive Vice President
Physician Services of RWJBarnabas Health
Chief Medical Officer
Rutgers Athletics
James F. Cosgrove Jr., P.E. (2, 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)
President & Chief Executive Officer
Inspira Health
Ann L. Noble (3, 4, 5)
Financial Consultant
Walter G. Reinhard, Esq. (3, 4, 5)
(Retired) Former Partner
Norris McLaughlin, P.A.
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