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Item 8. Financial Statements and Supplementary Data

2022-02-25 compared with 2021-02-25 · 164 added, 201 removed, 695 unchanged (34% of the section changed)

33 unchanged sentences

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:

Critical audit matters 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.

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/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

Philadelphia, PA

February 25, 2022

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CONSOLIDATED BALANCE SHEETS

(In thousands except per share amounts)

(In thousands)

UTILITY PLANT:

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Cash and Cash Equivalents

Accounts Receivable, net

Accounts Receivable, net of allowance for uncollectible accounts of $ 2,574 and $ 2,053 , respectively

Unbilled Revenues

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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

First Mortgage Bonds, 0.00 %- 5.50 %, due 2023-2059

Amortizing Secured Notes, 3.94 %- 7.05 %, due 2028-2046

State Revolving Trust Notes, 2.00 %- 4.22 %, due 2022-2038

State Revolving Fund Bond, 0.00 %, due 2021

Construction Loans, 0.00 %

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, due 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

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TOTAL LONG-TERM DEBT

See Notes to Consolidated Financial Statements.

See Notes to Condensed Consolidated Financial Statements.

MIDDLESEX WATER COMPANY

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(In thousands)

Balance at January 1, 2018

Balance at Balance at January 1, 2019

Dividend Reinvestment & Common Stock Purchase Plan

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Stock Award - Board Of Directors

Shares Forfeited

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

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Stock Award - Board of Directors

Shares Forefeited

Conversion of $ 8.00 Convertible Preferred Stock

Issuance of Common Stock

Cash Dividends on Common Stock ($ 1.041 per share)

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Cash Dividends on Preferred Stock

Common Stock Expenses

Balance at December 31, 2021

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(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.

(Tidewater), Pinelands Water Company (Pinelands Water) and Pinelands Wastewater Company (Pinelands Wastewater) (collectively, Pinelands), Utility Service Affiliates, Inc.

(USA), Utility Service Affiliates (Perth Amboy) Inc.

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(White Marsh) are wholly-owned subsidiaries of Tidewater.

On January 14, 2022, Middlesex closed on the sale of its entire interest in Tidewater Environmental Systems, Inc.

(TESI), which was its regulated Delaware wastewater utility business.

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.

1 unchanged sentence

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 rates charged to customers for water and wastewater services, the quality of services we provide and certain other matters are regulated in New Jersey and Delaware by the New Jersey Board of Public Utilities (NJBPU) and the Delaware Public Service Commission (DEPSC), respectively.

Our USA, USA-PA and White Marsh subsidiaries are not regulated utilities.

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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.

(c) System of Accounts - The Company’s regulated utilities maintain their accounts in accordance with the Uniform System of Accounts prescribed by the NJBPU and DEPSC.

(d) Regulatory Accounting - We maintain our books and records in accordance with accounting principles generally accepted in the United States of America.

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(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.

In addition, the Company maintains an unfunded supplemental plan for certain 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.

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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, 2021, 2020 and 2019.

These rates have been approved by the NJBPU, DEPSC or PAPUC:

These rates have been approved by the NJBPU or DEPSC:

Source of Supply

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(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.

These PS&I costs are recorded as deferred charges on the balance sheet as these costs are expected to be recovered through future rates charged to customers as the underlying project assets 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.

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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 accordance with regulatory requirements, CAC and CIAC are not depreciated.

In addition, these amounts reduce the investment base for purposes of setting rates.

(j) Allowance for Funds Used During Construction (AFUDC) - Middlesex and its regulated subsidiaries capitalize AFUDC, which represents the cost of financing projects during construction.

AFUDC is added to the construction costs of individual projects exceeding specific cost and construction period thresholds established for each company and then depreciated along with the rest of the utility plant’s costs over its estimated useful life.

AFUDC is added to the construction costs of individual projects exceeding specific cost and construction period thresholds established for each company and then depreciated with the utility plant direct costs over the underlying assets’

estimated useful life.

AFUDC is calculated using each company’s weighted cost of debt and equity as approved in their most recent respective regulatory rate order.

5 unchanged sentences

For the years ended December 31, 2021, 2020 and 2019, write-offs were $ 0.4 million, $ 0.5 million and $ 0.6 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 ).

During 2021 and 2020, the Company increased its allowance for doubtful accounts for expected increases in accounts receivable write-offs due to the financial impact of 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.

The Company’s regulated revenue results from tariff-based sales from the provision of water and wastewater services to residential, industrial, commercial, fire-protection and wholesale customers.

Residential customers are billed quarterly while most 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.

Revenue is recognized as the water and wastewater services are delivered to customers as well as from accrual of 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 the relevant service territories.

Unearned Revenues and Advance Service Fees include fixed service charge billings in advance to Tidewater customers 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.

3 unchanged sentences

These contracts also contain customary termination provisions.

Almost all of the amounts included in operating revenues and accounts receivable are from contracts with customers.

Substantially 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.

24 unchanged sentences

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 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.

(r) Recent Accounting Pronouncements - There are no 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 Pandemic - On January 16, 2022, the United States Secretary of Health and Human Services renewed the determination that a nationwide health emergency exists as a result of the COVID-19 Pandemic.

While the Company’s operations and capital construction program have not been materially disrupted to date from the pandemic, the COVID-19 impact on economic conditions nationally continues to be uncertain and could affect the Company’s results of operations, financial condition and liquidity in the future.

In New Jersey, the declared COVID-19 State of Emergency Order remains in effect through at least March 10, 2022.

In Delaware, the declared COVID-19 State of Emergency Order ended in July 2021.

The NJBPU and the DEPSC have approved the tracking of COVID-19 related incremental costs for potential recovery in customer rates in future rate proceedings.

Neither jurisdiction has established a timetable or definitive formal procedures for seeking cost recovery.

Since March 2020, the Company has increased its allowance for doubtful accounts for expected increases in accounts receivable write-offs due to the financial impact of COVID-19 on customers.

The Company has not deferred any COVID-19 related incremental costs.

We will continue to monitor the effects of COVID-19.

(t) Regulatory Notice of Non-Compliance –

In September 2021, the New Jersey Department of Environmental Protection (NJDEP) issued a Notice of Non-Compliance (Notice) to Middlesex based on self-reporting by Middlesex that the level of Perfluorooctanoic Acid (PFOA) in water treated at its Park Avenue Wellfield Treatment Plant in New Jersey exceeded a recently promulgated NJDEP standard effective in 2021.

Neither the NJDEP nor Middlesex has characterized this exceedance as an acute health emergency.

However, Middlesex was required to notify its affected customers and complied in November 2021.

Further, the Notice required the Company to take any action necessary to comply with the new standard by September 7, 2022.

The NJDEP standard for PFOA was developed based on a Health-based Maximum Contaminant Level (MCL) of 14 parts per trillion (ppt).

Although the United States Environmental Protection Agency (USEPA) has not yet implemented an enforceable regulation relative to PFOA, the water distributed from the Park Avenue Well Field Treatment Plant does meet the USEPA’s current health advisory level of 70 parts per trillion (ppt) and would meet the NJDEP’s pre-2021 standard guidance level of 40 ppt, which was not a regulation.

Construction of an enhanced treatment process at the Park Avenue Well Field Treatment Plant to comply with the NJDEP standard had already begun when the Notice was issued by the NJDEP.

Since completion is not expected until mid-2023, in December 2021, the Company implemented an interim solution to meet the Notice requirements.

The Park Avenue Well Field Treatment Plant was taken off-line and alternate sources of supply have been obtained.

The Company is in the process of implementing an acceleration of a portion of the Park Avenue Wellfield treatment upgrades in order to meet anticipated increases in the historical higher water demand periods during the summer months and is also intended to result in compliance with the requirements of the Notice.

In November 2021, the Company was served with two PFOA-related class action lawsuits seeking restitution for medical, water replacement and other claimed related costs.

These lawsuits are in the early stages of the legal process and their ultimate resolution cannot be predicted at this time.

The Company’s insurance provider has acknowledged coverage of potential liability resulting from these lawsuits.

In 2018, the Company identified the party believed to be the source of the PFAS in the wells supplying the Park Avenue Well Field Treatment Plant and filed a lawsuit against that entity seeking compensatory damages for the resulting damage to its properties and costs to remediate PFAS, punitive damages and attorney’s fees and costs.

The ultimate resolution of this matter cannot be predicted at this time.

In January 2022, the Company filed a petition with the NJBPU seeking to establish a regulatory asset and deferred accounting until its next base rate setting proceeding for all costs associated with the interim solution to comply with the Notice.

While the Company believes other administrative or monetary penalties are unlikely, the issuance of the Notice does not preclude the State of New Jersey or any of its agencies from initiating formal administrative and/or judicial enforcement action, including assessment of penalties of up to $25,000 per day per offense if the Company is not in compliance with the requirements of the Notice by September 7, 2022.

(u) Sale of Subsidiary –In August 2021, Middlesex entered into a definitive agreement with Artesian Wastewater Management, Inc.

to sell 100 % of the common stock of TESI for $ 6.4 million in cash and other consideration.

The DEPSC approved the transaction which closed on January 14, 2022.

The Company will continue to own and operate its regulated water utilities in Delaware as well as its non-regulated operations and maintenance contract business.

Note 2 - Rate and Regulatory 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.

Middlesex - In December 2021, Middlesex’s petition to the NJBPU seeking permission to increase its base water rates was concluded, based on a negotiated settlement, resulting in an expected increase in annual operating revenues of $ 27.7 million.

The approved tariff rates were designed to recover increased operating costs as well as a return on invested capital of $ 513.5 million, based on an authorized return on common equity of 9.6 %.

The increase is being implemented in two phases with $ 20.7 million of the increase effective January 1, 2022 and the remaining $ 7.0 million effective January 1, 2023.

As part of the negotiated settlement, the Purchased Water Adjustment Clause (PWAC), which is a rate mechanism that allows for recovery of increased purchased water costs between base rate case filings, was reset to zero.

In March 2021, the NJBPU approved Middlesex’s annual petition to reset its PWAC tariff rate to recover additional costs of $ 1.1 million for the purchase of treated water from a non-affiliated regulated water utility.

The new PWAC rate became effective April 4, 2021.

In March 2020, the NJBPU approved Middlesex’s annual 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 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.

Tidewater - Effective January 1, 2021, Tidewater increased its DEPSC-approved Distribution System Improvement Charge (DSIC) rate, which was 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.

In March 2021, Tidewater was notified by the DEPSC that it had determined Tidewater’s earned rate of return exceeded the rate of return authorized by the DEPSC.

Consequently, Tidewater reset its DSIC rate to zero effective April 1, 2021 and has refunded customers, with interest, primarily in the form of an account credit for DSIC revenue billed between April 1, 2020 and March 31, 2021.

Accordingly, in March 2021, Tidewater recorded a $ 0.8 million reserve, net of tax, for such refunds.

Tidewater applied the refund credits to individual customer accounts during the second quarter of 2021.

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.

Pinelands - Effective November 4, 2019, Pinelands received approval from the NJBPU to increase base rates by $ 0.5 million.

The increased revenues were necessitated by capital infrastructure investments and increased operations and maintenance costs.

Southern Shores - Effective January 1, the DEPSC approved the renewal of a multi-year agreement for water service to a 2,200 unit condominium community we serve in Sussex County, Delaware.

Under the agreement, current rates will remain in effect until December 31, 2024.

In the event there are 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 .

The 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.

Pursuant to the Pennsylvania Public Utility Code, Twin Lakes filed a petition requesting the Pennsylvania Public Utilities Commission (PAPUC) to order the acquisition of Twin Lakes by a capable public utility.

The PAPUC assigned an Administrative Law Judge (ALJ) to adjudicate the matter and submit a recommended decision (Recommended Decision) to the PAPUC.

As part of this legal proceeding the PAPUC also issued an Order in January 2021 appointing a large Pennsylvania based investor-owned water utility as the receiver (the Receiver Utility) of the Twin Lakes system until the petition is fully adjudicated by the PAPUC.

In November 2021, the PAPUC issued an Order affirming the ALJ’s Recommended Decision, ordering the Receiver Utility to acquire the Twin Lakes water system and for Middlesex to submit $ 1.7 million into an escrow account within 30 days.

Twin Lakes immediately filed a Petition For Review (PFR) with the Commonwealth Court of Pennsylvania (the Pennsylvania Court) seeking reversal and vacation of the escrow requirement on the grounds that it violates the Pennsylvania Public Utility Code as well as the United States Constitution.

In addition, Twin Lakes filed an emergency petition for stay of the PAPUC Order pending the Pennsylvania Court’s review of the merits arguments contained in Twin Lakes’

In December 2021, the Pennsylvania Court granted Twin Lakes’

emergency petition, pending its review.

A final decision by the Pennsylvania Court is not expected before June 2022.

The final adjudication of this matter cannot be predicted at this time.

The financial results, total assets and financial obligations of Twin Lakes are not material to Middlesex.

Regulatory Matters

13 unchanged sentences

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.

As of December 31, 2021 and 2020, the Company has recorded regulatory liabilities of $ 30.4 million and $ 31.0 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.

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Total Income Tax (Benefit) Expense

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.

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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.

As of December 31, 2021, the Company’s income tax reserve provision and interest expense liability are $ 0.5 million and $ 0.2 million, respectively.

The statutory review periods for federal income tax returns for the years prior to 2018 have been closed.

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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.

Our ongoing monitoring of this litigation has led to the conclusion that we do not anticipate the ultimate outcome will have a material impact on the Company’s results of operations or financial condition.

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 entered into an operating lease of office space for administrative purposes, expiring in 2030 .

The Company has not entered into any finance leases.

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Information related to operating lease ROU assets is as follows:

ROU Asset at Least Inception

(In Millions)

ROU Asset at Lease Inception

Accumulated Amortization

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The Company has entered into several contractual construction agreements that in total obligate it to expend an estimated $ 34 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 ).

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, supply chain issues and continued refinement of project scope and costs and could be impacted if the effects of new variants of COVID-19 pandemic arise and 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.

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In addition, the Company maintains business insurance coverage that may mitigate the effect of any current or future loss contingencies.

PFOA Matter - In November 2021, the Company was served with two PFOA-related class action lawsuits seeking restitution for medical, water replacement and other related costs and economic damages.

These lawsuits are in the early stages of the legal process and their ultimate resolution cannot be predicted at this time.

The Company’s insurance provider has acknowledged coverage of potential liability resulting from these lawsuits (for further discussion of this matter, see Note 1(t) Regulatory Notice of Non-Compliance ).

Change in Control Agreements –

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Weighted Average Interest Rate at Year-End

The Company maintained lines of credit aggregating $ 140.0 million at December 31, 2020 and 2019.

The Company maintained lines of credit aggregating $ 110.0 million and $ 140.0 million at December 31, 2021 and 2020, respectively.

As of December 31, 2021

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November 30, 2023

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 Company's Bank of America line of credit was renewed on January 27, 2022 and will increase to $ 60.0 million, increasing the Company's total available lines of credit to $ 140.0 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, 2021 are in January 2022 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.

The interest rates for borrowings under the lines of credit through December 31, 2021 were set using the London InterBank Offered Rate (LIBOR) and adding a credit spread, which varies by financial institution.

Beginning in January 2022, borrowing rates will be set using the Bloomberg Short-Term Bank Yield Index.

There is no requirement for a compensating balance under any of the established lines of credit.

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All the transactions discussed below related to the issuance of securities were approved by either the NJBPU or DEPSC, except where otherwise noted.

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 $ 3.8 million under the Investment Plan during 2021.

On September 1, 2021, the Company began offering shares of its common stock for purchase at a 3 % discount to participants in the Investment Plan.

The discount offering will continue until 200,000 shares are purchased at the discounted price or August 1, 2022, whichever event occurs first.

Through February 25, 2022, 44,323 shares have been purchased through the discounted offering.

The discount applies to all common stock purchases made under the Investment Plan, whether by optional cash payment or by dividend reinvestment.

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.

Currently, 0.3 million shares remain registered with the United States Securities and Exchange Commission 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.

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 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 .

The Company maintains a stock plan for its independent Directors as a component of outside members of the Board of Directors compensation.

For the years ended December 31, 2021, 2020 and 2019, 3,444 , 4,074 and 3,521 shares, respectively, of Middlesex common stock were granted and issued to the Company’s independent Directors under the plan.

The maximum number of shares authorized for grant under the plan is 100,000 , of which 49,125 shares remain available for future awards.

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.

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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.

To the extent possible and fiscally prudent, 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 typically below rates available in the broader financial markets.

A portion of the borrowings under the New Jersey SRF is interest-free.

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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:

Middlesex currently has two projects in the construction loan phase of the New Jersey SRF program:

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.

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 a $ 43.5 million NJIB construction loan in August 2018 and completed withdrawal of the proceeds in June 2021;

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 rehabilitate or replace 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.

The Company anticipates these two construction loans will be converted into long-term securitized loans by the NJIB by June 30, 2022.

The NJIB has changed 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.

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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 June 2021, Middlesex received approval from the NJBPU to redeem up to $ 45.5 million of outstanding first mortgage bonds (FMBs), specifically Series RR ($ 22.5 million) and Series SS ($ 23.0 million), and issue replacement FMBs at an overall lower cost of debt.

In November 2021, Middlesex closed on a $ 45.5 million, 2.90 % private placement of FMBs, designated as Series 2021B with a 2051 maturity date to effectuate the redemptions.

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 .

In connection with this approval:

In November 2021, Middlesex closed on a $ 19.5 million, 2.79 % private placement of FMBs with a 2041 maturity date designated as Series 2021A.

Proceeds were used to reduce the Company’s outstanding balances under its lines of credit.;

In November 2020, Middlesex closed on a $ 40.0 million, 2.90 % private placement of FMBs with a 2050 maturity date designated as Series 2020A.

Proceeds were used to reduce the Company’s outstanding balances under its lines of credit and for the Company’s 2020 capital program.

In November 2021, Tidewater received approval from the DEPSC to borrow up to $ 5.0 million under the Delaware SRF Program for construction of a one million gallon elevated storage tank.

Tidewater closed on the $5.0 million loan in December 2021 and began receiving disbursements in January 2022.

Borrowing under this loan is expected to continue through mid-2023.

The final maturity date on the loan is 2044 .

In March 2021, Tidewater entered into a loan agreement with CoBank, ACB, pursuant to which Tidewater borrowed $ 20.0 million in September 2021 at an interest rate of 3.94 % with a 2046 maturity date.

Proceeds from the loan were used to pay off its outstanding balances under its lines of credit.

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 New Jersey Economic Development Authority (NJEDA) in one or more transactions through December 31, 2022 .

Because the interest paid to the bondholders is exempt from federal and New Jersey income taxes, the interest rate on debt issued through the NJEDA is generally lower than otherwise achievable in the traditional taxable corporate bond market.

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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.

The proceeds, including an issuance premium of $ 7.1 million, were 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, were held in escrow by a bond trustee.

Funds were drawn down by requisition for the qualifying projects as costs were incurred with the final requisition made in February 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.

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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.

FMBs Series 2019A, 2019B, 2020A, 2021A and 2021B and the CoBank 2021 Amortizing Secured Note are term bonds with single maturity dates subsequent to 2026.

The aggregate annual principal repayment obligations for all long-term debt over the next five years are shown below:

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The weighted average interest rate on all long-term debt at December 31, 2021 and 2020 was 2.83 % and 3.02 %, 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).

Except for the FMB Series 2020 ($ 40.0 million), FMB Series 2021 ($ 65.0 million) and Amortizing Secured Notes ($ 47.6 million), all of the Company’s outstanding long-term debt has been issued through the NJEDA ($ 63.6 million), the NJIB SRF program ($ 87.4 million) and the Delaware SRF program ($ 7.5 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.

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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.

The fair value of FMBs 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.

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At December 31,

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”

It was not practicable to estimate their fair value on our outstanding long-term debt for which there is no quoted market price and there is not an active trading market.

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 titled “Amortizing Secured Notes”, “State Revolving Trust Notes”, “State Revolving Fund Bond”

and “Construction Loans”

on the Consolidated Statements of Capital Stock and Long-Term Debt.

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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.

Because the Company is subject to rate 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 .

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Ending Balance

( Thousands of Dollars)

Other Benefits Plan

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Funded Status

( Thousands of Dollars)

Other Benefits Plan

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Amortization of Net Actuarial Loss

Amortization of Prior Service Credit

Net Periodic Benefit Cost*

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Amounts that are expected to be amortized from Regulatory Assets into Net Periodic Benefit Cost in 2022 are as follows:

(Thousands of Dollars)

(Thousands of

Actuarial Loss

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benefit obligations and costs as of and for the years ended December 31, 2021, 2020 and 2019, respectively, are as follows:

Pension Plan Other Benefits Plan

Other Benefits Plan

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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.

Equity securities include Middlesex common stock in the amounts of $ 0 ( 0.0 % of total Pension Plan assets) and $ 1.4 million ( 1.6 % of total Pension Plan assets) as of December 31, 2021 and 2020, respectively.

Fair Value Measurements

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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.

The Company’s matching contribution was $ 0.7 million for each of the years ended December 31, 2021, 2020 and 2019.

Employees hired after March 31, 2007 are not eligible to participate in the Pension Plan and are generally eligible to participate in a discretionary profit sharing plan administered through the 401(k) plan.

In December each year, the Board of Directors may approve that a stated percentage of eligible compensation be contributed to the account of the employee participant in the first quarter of the following year.

For those employees still actively employed on December 31, 2021 or retired during the current year, the Company will fund a discretionary contribution of $ 0.8 million before April 1, 2022, which represents 5.0 % of eligible 2021 compensation.

For each of the years ended December 31, 2020 and 2019, the Company made qualifying discretionary contributions totaling $ 0.7 million.

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 –

The Company maintains a long-term incentive compensation plan for certain management employees where awards are made in the form of restricted common stock.

Shares of restricted stock issued under the 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 award under the plan is 300,000 shares, of which approximately 84% remain available for award.

The Company recognizes compensation expense at fair value for the 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:

The following table presents awarded but not yet vested share information for the plan:

Shares (thousands)

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Balance, December 31, 2021

The fair value of vested restricted shares was $ 1.7 million as of both December 31, 2020 and 2019, respectively.

Note 8 - Business Segment Data

The Company has identified two reportable segments.

One is the regulated business of collecting, treating and distributing water on a retail and wholesale basis to residential, commercial, industrial and fire protection customers in parts of New Jersey, Delaware and Pennsylvania.

This segment also includes regulated wastewater systems in New Jersey and Delaware.

The Company is subject to regulations as to its rates, services and other matters by the states of New Jersey, Delaware and Pennsylvania with respect to utility service within these states.

The Company is subject to regulations as to its rates, services and other matters by the states of New Jersey and Delaware 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.

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(Thousands of Dollars)

December 31, 2020

December 31, 2019

Inter-segment Elimination

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Financial information for each quarter of 2021 and 2020 is as follows:

(Thousands of Dollars, Except per Share Data)

Operating Revenues

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data