What changed in this filing

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Item 1A. Risk Factors

2024-03-01 compared with 2023-02-24 · 148 added, 121 removed, 173 unchanged (61% of the section changed)

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Governmental drought restrictions may result in decreased customer demand for water services and can adversely affect our revenue and

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 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

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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 regulatory

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 regulatory

Negative impacts to our profitability and/or our reputation may occur even if we are not responsible for the contamination

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against us could have a material adverse impact on our financial condition, results of operations and cash flows.

The necessity for ongoing physical and technological security has resulted,

and may continue to result, in increased operating costs.

Because of physical and technological threats to the

health and security of the United States of America, we employ procedures to review and modify security measures.

We provide ongoing training

and communications to our employees about threats to our water supply, our assets and related systems and our employees’ personal

The necessity for ongoing physical and technological security has

resulted, and may continue to result, in increased operating costs.

Because of physical and technological threats

to the health and security of the United States of America, we employ procedures to review and modify security measures.

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 in efforts to protect against such risks.

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Regulatory Risks

Our revenue and earnings depend on the rates we

charge our customers.

We cannot raise utility rates in our regulated businesses without petitioning 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 without degrading service quality.

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 petitioning

the NJBPU and navigating a lengthy administrative process.

Similarly, the DEPSC regulates our public utility companies in Delaware.

cannot provide assurance as to 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.

Our revenue and earnings depend on the rates

we charge our customers.

We cannot raise utility rates in our regulated businesses without petitioning the appropriate Public Utility

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 without degrading service quality.

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

petitioning the NJBPU and navigating a lengthy administrative process.

Similarly, the DEPSC regulates our public utility companies in

We cannot provide assurance as to when we will request approval for any such matter, nor can we predict whether these Public

Utility Commissions will approve, deny or reduce the amount of such requests.

Certain costs are not completely within our control.

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are also similar NJDEP regulations for our New Jersey water systems.

The NJDEP and DEDPH a monitor our activities and review the results

The NJDEP and DEDPH monitor our activities and review the results

of water quality tests we perform for adherence to applicable regulations.

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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.

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.

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

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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.

spend approximately $266 million for capital projects through 2025.

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.

to spend approximately $226 million for capital projects through 2026.

We must obtain prior approval from our economic regulators to sell

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our ability to upgrade or replace utility system assets.

We face competition from other utilities and service

providers which might hinder our growth opportunities and mitigate our future profitability.

We face competition from other utilities and

service providers which might hinder our growth opportunities and mitigate our future profitability.

We face risks of competition from other utilities

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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 2028, 2030 and 2032, 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 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.

USA-PA and USA operate and maintain water and

wastewater systems for three New Jersey municipalities under 10-year contracts expiring in 2028, 2030 and 2032, 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

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 as 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

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Any pending or future acquisitions we decide to undertake will involve

The acquisition and/or operation of water and wastewater

systems is an element of our growth strategy.

This strategy depends on identifying suitable opportunities that meet our risk/reward profile

and reaching mutually agreeable terms with acquisition candidates or contract parties.

Further, acquisitions may result in dilution in

the value of our equity securities, incurrence of debt and contingent liabilities and fluctuations in financial results.

The acquisition and/or operation of water and

wastewater systems is an element of our growth strategy.

This strategy depends on identifying suitable opportunities that meet our risk/reward

profile and reaching mutually agreeable terms with acquisition candidates or contract parties.

Further, acquisitions may result in dilution

in the value of our equity securities, incurrence of debt and contingent liabilities and fluctuations in financial results.

the assets, operations, contracts or companies we acquire may not achieve the revenues and profitability projected.

Our ability to achieve organic customer growth in our market area is

dependent on the residential building market.

Our ability to achieve organic customer growth in our market area

is dependent on the residential building market.

New housing starts and home sale closings 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 operations as a result of anticipated construction, sale and close of new housing units.

starts decline, or do not increase as we have projected, or home sales closing cycle times increase as a result of economic conditions

or otherwise, the timing and extent of our organic revenue growth may not meet our expectations, our deferred project costs may not produce

revenue-generating projects in the timeframes anticipated and our financial results could be negatively impacted.

There can be no assurance we will continue to pay dividends in the future

or, if dividends are paid, that they will be in amounts similar to past dividends.

We have paid dividends on our common stock each year

since 1912 and have increased the amount of dividends paid each year since 1973.

We expect our revenues to increase from customer

growth for our regulated water operations as a result of anticipated construction, sale and close of new housing units.

If housing starts

decline, or do not increase as we have projected, or home sales closing cycle times increase as a result of economic conditions or otherwise,

the timing and extent of our organic revenue growth may not meet our expectations, our deferred project costs may not produce revenue-generating

projects in the timeframes anticipated and our financial results could be negatively impacted.

There can be no assurance we will continue to pay dividends in the

future or, if dividends are paid, that they will be in amounts similar to past dividends.

We have paid dividends on our common stock each

year since 1912 and have increased the amount of dividends paid each year since 1973.

Our earnings, financial condition, capital requirements,

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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.

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.

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

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which could affect demand for our water service and our revenues.

Demand for our water during the warmer months is generally

greater than during colder 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.

Demand for our water during the warmer months

is generally greater than during colder 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

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and results of operations could be negatively impacted until completion of a subsequent base rate filing.

The current concentration of our business in central

New Jersey and in Delaware makes us susceptible to adverse developments in local regulatory, economic, demographic, competitive and weather

Our Middlesex System provides water services to customers

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.

provide water 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.

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.

The current concentration of our business in

central New Jersey and in Delaware makes us susceptible to adverse developments in local regulatory, economic, demographic, competitive

and weather conditions.

Our Middlesex System provides water services to

customers 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 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.

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

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not in the best interest of the common shareholders.

We identified material weaknesses in our internal

controls which, if not remediated appropriately or timely, could result

in loss of investor confidence and adversely impact our stock price.

Internal controls related to the operation

of technology systems are critical to maintaining adequate internal control over financial reporting.

During the fourth quarter of

2023, management identified a material weakness in internal control related to ineffective information technology general controls

(ITGCs) in the areas of user access and change management over certain information technology (IT) systems that support the

Company’s financial reporting processes.

Certain of those controls were found to be deficient because of a lack of

sufficient IT control processes designed to prevent or detect unauthorized changes in applications and data in selected IT

environments.

In December 2023, management implemented various auditing and monitoring solutions that provide greater transparency

into changes made within our IT systems.

These control solutions are supported by a timely review process that focuses on the proper

authorization and approval of IT system changes.

Due to the timing of implementing the solutions, the controls implemented did not

operate over a sufficient time period to adequately test and validate the remediation and reassess other ITGCs, which may require

further remediation actions.

In addition, there were ineffective controls related to income tax

accounting for a non-routine transaction, which management has identified as a material weakness in internal controls over financial reporting.

Therefore, management concluded that our internal control over financial

reporting was not effective as of December 31, 2023.

Until remediation measures are completed, fully tested and determined effective,

we will not be able to conclude that the material weaknesses have been remediated.

If we are unable to determine that our remediation

measures are effective or otherwise remediate the material weaknesses, or are otherwise unable to maintain effective internal control

over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately,

and to prepare financial statements within required time periods, could be adversely affected, which could subject us to litigation or

investigations requiring management resources and payment of legal and other expenses, negatively affecting investor confidence in our

financial statements and adversely impacting our stock price.

General Risks

We rely on our information technology systems to help manage our operations.

We rely on our information technology systems to help manage our

Our information technology systems require periodic

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in our business operations and have an adverse effect on our business operations.

Our information technology systems may be subject to physical and cyber

Our information technology systems may be subject to physical and

cyber attacks.

We rely on our computer, information and communications

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standards for drinking water, litigation and reputational damage.

The COVID-19 pandemic and the attempt to contain it may harm our business,

results of operations, financial condition and liquidity.

In January 2023, 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 with an announced

end to the declared health emergency on May 11, 2023.

While the Company’s operations and capital construction program have not been

materially disrupted to date from the pandemic, the impact on economic conditions nationally and the areas the Company operates continues

to be uncertain and could affect the Company’s results of operations, financial condition and liquidity in the future.

We depend significantly on the technical and management

services of our team, and the departure of any of certain persons could cause our operating results to temporarily be short of our expectations.

We depend significantly on the technical and

management services of our team, and the departure of any of certain persons could cause our operating results to temporarily be short

of our expectations.

Our success depends significantly on the continued

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and retain qualified personnel in key roles, our operating results could be negatively impacted.

UNRESOLVED STAFF COMMENTS.

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 1A. Risk Factors