SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File
For the Fiscal Year ended December 31, 1994 No. 0-422
----------------- -----
MIDDLESEX WATER COMPANY
(Exact name of registrant as specified in its charter)
New Jersey 22-1114430
---------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 Ronson Road, Iselin, New Jersey 08830-3020
------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
(908) 634-1500
--------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each Class on which registered
------------------- ---------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No par Value
--------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES __X__ . NO _________ .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant at March 10, 1995 was $67,763,499 based on the closing market price
of $16.75 per share.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 10, 1995
----- -----------------------------
Common Stock, No par Value 4,045,582
-------------------------- ---------
Documents Incorporated by Reference
-----------------------------------
Annual Report to shareholders for fiscal year ended December 31, 1994,
pages 10 through 21. Parts II and IV.
<PAGE>
PART I
Item 1. Business
General
The Company has operated as a water utility in New Jersey since its
organization in 1897 and is in the business of collecting, treating and
distributing water for domestic, commercial, industrial and fire protection
purposes in the State and, since 1992, in the State of Delaware through its
acquisition of Tidewater Utilities, Inc. (Tidewater), as a wholly-owned
subsidiary. The Company's system is completely metered, including contract
sales, except for fire hydrant service. The rates charged by the Company for
water services must be approved by regulatory authorities.
In October 1994, the Company signed a contract to purchase the
assets of a 2,200 customer water utility and a 2,200 customer wastewater utility
in Burlington County, New Jersey. The newly acquired systems will be called
Pinelands Water Company and Pinelands Sewer Company. Approval is required by the
BPU before the Company assumes ownership, which is expected by March 31, 1995.
White Marsh Environmental Systems, Inc. (White Marsh), a wholly-owned subsidiary
of Tidewater, was formed for the purpose of pursuing nonwater utility activities
in Delaware.
Retail Sales
The Company provides water services to retail customers primarily
in eastern Middlesex County, New Jersey. Water services are now furnished to
approximately 53,000 retail customers located in an area of approximately 55
square miles of New Jersey in Woodbridge Township, the Boroughs of Metuchen and
Carteret, portions of Edison Township and the Borough of South Plainfield in
Middlesex County and, to a minor extent, a portion of the Township of Clark in
Union County. The retail customers include a mix of residential customers, large
industrial concerns and commercial and light industrial facilities. These retail
customers are located in generally well developed areas of central New Jersey.
Tidewater provides water services to over 5,000 retail customers
for domestic, commercial and fire protection purposes in over 75 community water
systems located in Kent, Sussex and New Castle Counties in Delaware.
Contract Sales
The Company also provides water on a wholesale basis in New Jersey
to the Township of Edison (Edison), the Borough of Highland Park (Highland
Park), Old Bridge Municipal Utilities Authority (Old Bridge), the Borough of
Sayreville (Sayreville) and the Marlboro Township Municipal Utilities Authority
(Marlboro). Under special contract, the Company also provides water treatment
and pumping services to the Township of East Brunswick (East Brunswick). East
Brunswick, Old Bridge, Sayreville and Marlboro are within an area designated as
the South River Basin Study Area.
- 1 -
<PAGE>
The South River Basin Study Area refers to parts of southern
Middlesex and northern Monmouth Counties addressed by a 1980's study conducted
by the New Jersey Department of Environmental Protection (DEP). According to
that study, ninety-five percent of the area's water supply was derived from
groundwater sources that were being overpumped at that time and projected growth
of the region would further over stress these groundwater resources. These
conditions prompted the DEP to create Water Supply Critical Area No. 1 (Critical
Area) covering portions of Middlesex, Monmouth and Ocean Counties and to
promulgate mandatory reductions in groundwater withdrawals within the Critical
Area. During the same mid-1980's time period, East Brunswick entered into a
special contract with the Company and in 1986 began receiving water treatment
and pumping services under that contract.
In 1986, as part of the State's South River Basin Feasibility
Study, the Company outlined to the DEP and other interested parties a plan to
construct facilities to ensure potable water supplies into this area through the
year 2020. In connection with this project, the Company entered into long-term
water supply agreements with Old Bridge, Marlboro and Sayreville, and DEP
approved these agreements.
As an interim measure to address the immediate needs of this
region, an agreement was reached between the Company and the City of Perth Amboy
for the lease of a large diameter pipeline which extends from the northern shore
of the Raritan River to central Old Bridge. This pipeline was rehabilitated,
isolated from the Perth Amboy system and connected to the Company's system, and
now provides a supply of the Company's water to substantial portions of the
Critical Area (Old Bridge, Sayreville and Marlboro).
The South River Basin Transmission Main was scheduled to be
constructed in three stages, designated Sections C, B, and A, to meet the
increasing demands of the customers in the Critical Area. Section C, which was
connected to Marlboro in 1991, comprises a 6.5 mile main extending the Company's
system from the southern end of the Perth Amboy line to Marlboro Township in
Monmouth County. The Company completed construction of Section B, a 5 mile
extension northwest through Old Bridge to East Brunswick, that was operational
in 1993. In 1993, an interconnecting pipeline was constructed by East Brunswick
thereby providing for an alternative means of transporting water from the Carl
J. Olsen Water Treatment Plant (CJO Plant) to the South River Basin customers.
The Company currently anticipates that Section A will be constructed later this
decade, when demands in the region grow, and will directly connect Sections B
and C to the Company's CJO Plant in Edison.
Financial Information
The Company's consolidated operating revenues and operating income
relating to the operating water utilities are as follows:
<TABLE>
<CAPTION>
(000's)
Years Ended December 31,
------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Operating Revenues $36,122 $35,479 $30,861
====== ====== ======
Operating Income $ 8,565 $ 8,225 $ 7,248
====== ====== ======
</TABLE>
- 2 -
<PAGE>
Operating revenues were derived from the following sources:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Residential 39.6% 39.6% 38.0%
Commercial 11.9 11.8 11.7
Industrial 18.3 18.3 19.6
Fire Protection 12.1 12.2 12.7
Contract Sales 17.5 17.6 17.7
Miscellaneous 0.6 0.5 0.3
---- ---- ----
TOTAL 100.0% 100.0% 100.0%
====== ====== ======
</TABLE>
Water Supplies and Contracts
The Company's water utility plant consists of source of supply,
pumping, water treatment, transmission, distribution and general facilities
located in New Jersey and Delaware. The New Jersey and Delaware water supply
systems are physically separate and are not interconnected.
The Company obtains water from both surface and groundwater
sources. In 1994, surface sources of water provided approximately 63% of the
Company's water supply, groundwater from wells provided approximately 32% and
the balance of 5% was purchased from Elizabethtown Water Company
(Elizabethtown), a nonaffiliated water utility. The Company's distribution
storage facilities are used to supply water at times of peak demand and for
outages and emergencies.
The principal source of surface supply in New Jersey is the
Delaware and Raritan Canal (D&R Canal), owned by the State of New Jersey and
operated as a water resource by the New Jersey Water Supply Authority (NJWSA).
The Company has contracts with the NJWSA to divert a maximum of 20 million
gallons per day (mgd) of untreated water from the D&R Canal as augmented by the
Round Valley/Spruce Run Reservoir System. In addition, the Company has a
one-year agreement for an additional 5 mgd renewed through April 30, 1995. The
Company also has an agreement with Elizabethtown, effective through December 31,
1995, which provides for the minimum purchase of 2 mgd of treated water with
provisions for additional purchases.
Water is also derived from groundwater sources equipped with
electric motor-driven deep-well turbine type pumps. The Company has 32 wells in
New Jersey, which provide a pumpage capacity of approximately 23 mgd. These
include the wells of the Park Avenue and Sprague Avenue Well Fields (with a
pumpage capacity of over 12 mgd) which during 1993 were refurbished and
retrofitted to insure compliance with water quality standards. See "Regulation -
Water Quality and Environmental Regulations."
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<PAGE>
The Company's New Jersey groundwater sources are:
<TABLE>
<CAPTION>
1994 Max. Day
Pumpage
No. of (millions of Capacity
Wells gallons) (mgd) Location
------ ------------- -------- --------
<S> <C> <C> <C> <C>
Park Avenue 15 11.1 11.1 South Plainfield
Tingley Lane North 4 3.1 3.1 Edison
Tingley Lane South 5 2.6 2.6 Edison
Spring Lake 4 1.8 1.8 South Plainfield
Sprague Avenue #1 1 1.4 1.4 South Plainfield
Sprague Avenue #2 1 1.3 1.3 South Plainfield
Maple Avenue 1 1.3 1.3 South Plainfield
Thermal Well 1 0.2 0.2 Edison
--
32
</TABLE> ==
Water supply to Delaware customers is derived from Tidewater's 72
wells, which provided overall system delivery of 283 mg during 1994. Tidewater
does not have a central treatment facility. Several of the water systems in
Sussex County have an interconnected transmission system. Construction has begun
on a project to link several water systems in New Castle County. Tidewater
currently has applications before the Delaware regulatory authorities for the
approval of additional wells. Treatment is by chlorination and, in some cases,
pH correction and filtration.
In the opinion of management, the Company has adequate sources of
water supply and other facilities to meet current and anticipated future service
requirements in New Jersey, and each of the Tidewater community water systems
has adequate sources of water supply and other facilities to meet current and
anticipated future service requirements within that water system area.
Competition
The business of the Company is substantially free from direct
competition with other public utilities, municipalities and other public
agencies. Although Tidewater has been granted an exclusive franchise for each of
its existing community water systems, its ability to expand service areas can be
affected by the award by the Delaware Department of Natural Resources and
Environmental Control (DNREC) of franchises to other regulated water purveyors.
Regulation
The Company is subject to regulation as to its rates, services and
other matters by the States of New Jersey and Delaware with respect to utility
service within those states and with respect to environmental and water quality
matters. The Company is also subject to regulation as to environmental and water
quality matters by the United States Environmental Protection Agency (EPA).
-4-
<PAGE>
Regulation of Rates and Services
The Company is subject to regulation by the New Jersey Board of
Public Utilities (BPU), and Tidewater is similarly subject to regulation by the
Delaware Public Service Commission (PSC), which regulatory authorities have
jurisdiction with respect to rates, service, accounting procedures, the issuance
of securities and other matters of utility companies operating within the States
of New Jersey and Delaware, respectively. The Company and Tidewater, for
ratemaking purposes, account separately for operations in New Jersey and in
Delaware so as to facilitate independent ratemaking by the BPU for New Jersey
operations and the PSC for Delaware operations.
Water Quality and Environmental Regulations
Both the EPA and the DEP regulate the Company's operation in New
Jersey with respect to water supply, treatment and distribution systems and the
quality of the water, as do the EPA and the DNREC with respect to operations in
Delaware.
Federal, Delaware and New Jersey regulations adopted over the past
five years relating to water quality require expanded types of testing by the
Company to insure that its water meets State and Federal water quality
requirements. In addition, the environmental regulatory agencies are reviewing
current regulations governing the limits of certain organic compounds found in
the water as by-products of treatment. The Company, as with many other water
companies, participates in industry-related research to identify the various
types of technology that might reduce the level of organic, inorganic and
synthetic compounds found in the water. The cost to water companies of complying
with the proposed water quality standards depends in part on the limits set in
the regulation and on the method selected to implement such reduction; however,
the cost to the Company of complying with proposed regulations promulgated in
light of some of the standards being discussed might, depending upon the
treatment process selected, be as high as $10 million, based upon current
estimates. The Company has already begun studies to evaluate alternative
treatment processes for upgrading its treatment plant. The regular testing by
the Company of the water it supplies shows that the Company is in compliance
with existing Federal, New Jersey and Delaware water quality requirements.
As required by the Federal Safe Drinking Water Act (FSDWA), the EPA
has established maximum contaminant levels (MCLs) for various substances found
in drinking water. As authorized by similar state legislation, the DEP has set
MCLs for certain substances which are more restrictive than the MCLs set by the
EPA. In certain cases, the EPA and the DEP have also mandated that certain
treatment procedures be followed in addition to satisfying MCLs established for
specific contaminants. The DEP and the DNREC have assumed primacy for enforcing
the FSDWA in New Jersey and Delaware, respectively, and, in that capacity,
monitor the activities of the Company and review the results of water quality
tests performed by the Company for adherence to applicable regulations.
Other regulations applicable to water utilities generally,
including the Company, include the Lead and Copper Rule (LCR), the MCLs
established for various volatile organic compounds (VOCs), the Federal Surface
Water Treatment Rule, and the Total Coliform Rule.
-5-
<PAGE>
The LCR requires the Company to test on a sample basis the quantity
of lead and copper in drinking water at the customer's tap and, if certain
contaminant levels (Action Levels) are exceeded, to notify customers, initiate a
public information campaign advising customers how to minimize exposure to lead
and copper, add corrosion inhibitors to water to minimize leaching of lead from
piping, faucets and soldered joints into water consumed at the tap, and
implement applicable source water treatment requirements. Tests taken within the
Company's system yielded results well below the Action Levels.
VOCs, including primarily petro-chemicals, may percolate into
groundwater aquifers from surface sources. The Company has found VOCs in excess
of the applicable MCLs in certain of its wells and has constructed air stripping
facilities which remove such contaminants from the water by venting them into
the atmosphere. In 1990 the air stripping facility was complete at the Spring
Lake Well Field. Construction of a similar facility was completed in 1993 and is
operational to treat water from the Park Avenue and Sprague Avenue Well Fields,
along with a 2 mg storage reservoir. To the extent that contamination in excess
of applicable MCLs occurs at wells lacking air stripping and related facilities,
the Company will consider building such facilities if feasible and cost
effective. VOCs have not been identified in the Delaware wells.
Federal and State regulations and controls concerning water
quality, pollution and the effluent from treatment facilities are still in the
process of being developed, and it is not possible to predict the scope or
enforceability of regulations or standards which may be established in the
future, or the cost and effect of existing and potential regulations and
legislation upon any of the existing and proposed facilities and operations of
the Company. Further, recent and possible future developments with respect to
the identification and measurement of various elements in water supplies and
concern with respect to the impact of one or more of such elements on public
health may in the future require the Company to replace or modify all or
portions of their various water supplies, to develop replacement supplies and/or
to implement new treatment techniques. In addition, the Company anticipates that
threatened and actual contamination of water sources may become an increasing
problem in the future. The Company has expended and may in the future be
required to expend substantial amounts to prevent or remove said contamination
or to develop alternative water supplies. Any such developments may increase
operating costs and capital requirements. Since the rate regulation methodology
of both the BPU and the PSC permits a utility to recover through rates prudently
incurred expenses and investments in plant, based upon past BPU and PSC
practice, the Company expects that all such expenditures and costs should
ultimately be recoverable through rates for water service.
Employees
As of December 31, 1994, the Company had a total of 134 employees
in New Jersey, and Tidewater had a total of 17 employees in Delaware. None of
these employees is represented by a union. Management considers its relations
with its employees to be satisfactory. Wages and benefits are reviewed annually
and are considered competitive within the industry.
Item 2. Properties
The Company's water utility plant consists of source of supply,
pumping, water treatment, transmission and distribution and general facilities.
-6-
<PAGE>
The Company's principal source of supply is the D&R Canal owned by
the State of New Jersey and operated as a water resource by the NJWSA.
Water is withdrawn from the D&R Canal at New Brunswick and
processed for distribution by the Company. Its facilities consist of an intake
and pumping station located on State-owned land bordering the Canal, a water
treatment plant in Edison Township (CJO Plant) on property owned by the Company,
4,901 feet of 54-inch reinforced concrete water main connecting the CJO Plant
and the intake and pumping station, 23,168 feet of 48-inch reinforced concrete
transmission main connecting the water treatment plant to the Company's
distribution pipe network, and related storage, pumping, control, laboratory and
other facilities. The CJO Plant was placed into service in 1969.
The design capacity of the intake and pumping station in New
Brunswick, New Jersey and the raw water main is 80 mgd. The four electric
motor-driven vertical turbine pumps presently installed have an aggregate design
capacity of 65 mgd. The station is designed to permit its pumping capacity to be
increased to 80 mgd by the installation of additional pumping units without
structural changes. The station has an emergency power supply provided by a
diesel-driven generator which, in the event of a power failure, will
automatically become the power source to provide uninterrupted water service.
The CJO Plant includes chemical storage and chemical feed
equipment, dual-rapid mixing basins, four reinforced concrete mechanical
flocculation compartments, four underground reinforced concrete settling basins,
eight rapid filters containing gravel, sand and anthracite for water treatment
and a steel wash-water tank. The nominal design capacity of the CJO Plant is 30
mgd (45 mgd maximum capacity). Provision has been made to increase the nominal
design capacity to 60 mgd (90 mgd maximum capacity) by the future construction
of additional treatment facilities. The Company is currently studying treatment
technologies prior to making a decision on the expansion of this facility.
The main pumping station at the CJO Plant has a design capacity of
90 mgd. The four electric motor-driven vertical turbine pumps presently
installed have an aggregate capacity of 65 mgd. The station is constructed so
that an additional pumping unit can be installed without structural change.
In addition to the main pumping station at the CJO Plant, there is
a l5 mgd auxiliary pumping station located in a separate building. It has a
dedicated substation and emergency power supply provided by a diesel-driven
generator. It pumps from the l0 mg reservoir directly into the distribution
system.
The Company also owns property and other facilities located at the
Robinson's Branch of the Rahway River. The storage facilities, consisting of an
impounding reservoir, have been classified as nonutility plant. They are located
in Clark Township, near the north central part of the territory served. The
reservoir has a capacity of 232 mg and a tributary drainage area of
approximately 25 square miles. There are no treatment facilities at this site.
-7-
<PAGE>
The Company owns the properties on which its 32 wells are located.
The Company owns its two-building headquarters complex at 1500 Ronson Road,
Iselin, New Jersey, consisting of a 27,000 square foot, two-story office
building and a 16,500 square foot maintenance facility. The Company's Delaware
operations are managed from Tidewater's leased offices in Wilmington, Delaware.
Tidewater expects to move into new leased offices during the second quarter of
1995. This property, which is owned by White Marsh, is a 1,600 square foot
single story building located in Odessa, Delaware.
The Company's storage facilities consist of a 10 mg reservoir at
the CJO Plant, 5 mg and 2 mg reservoirs in Edison (Grandview), 5 mg reservoir in
Carteret (Eborn) and 2 mg reservoir at the Park Avenue Well Field.
Item 3. Legal Proceedings
A local entity and its owner have filed a negligence claim against
the Company, for which the Company is insured, with a claim for punitive damages
which may not be insured. Their action alleges financial losses arising out of
improper water pressure and service. Without taking a position on the negligence
claim, the Company does not believe that the claim for punitive damages will
prevail. While the outcome of this case is not presently determinable,
management believes that the final resolution will not have a significant effect
on the Company's financial position or results of operations or cash flows. The
Company had been named along with an officer in litigation where the plaintiff
asserted that the Company's officer, acting in the course of his employment,
defamed the plaintiff. A tentative settlement on this matter has been reached.
Once finalized, the settlement will have no impact on the Company's financial
position or results of operations or cash flows.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Price Range of Common Stock
The following table shows the range of closing prices for the
Common Stock on the NASDAQ Stock Market for the calendar quarter indicated.
<TABLE>
<CAPTION>
1994 High Low Dividend
---- ---- --- --------
<S> <C> <C> <C>
First Quarter $21.25 $19.25 $0.26 1/4
Second Quarter 20.00 16.00 0.26 1/4
Third Quarter 18.25 15.75 0.26 1/4
Fourth Quarter 18.50 16.25 0.27
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
1993 High Low Dividend
---- ---- --- --------
<S> <C> <C> <C>
First Quarter $17.75 $16.75 $0.25
Second Quarter 18.00 16.75 0.25
Third Quarter 22.00 20.75 0.25
Fourth Quarter 19.75 17.00 0.26 1/4
</TABLE>
Approximate Number of Equity Security Holders As of December 31, 1994
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
-------------- --------------
<S> <C>
Common Stock, No par Value 2,244
Cumulative Preferred Stock, No par Value:
$7 Series 33
$4.75 Series 1
Cumulative Convertible Preferred Stock, No par Value:
$7 Series 4
</TABLE>
Dividends
The Company has paid dividends on its Common Stock each year since
1912. Although it is the present intention of the Board of Directors of the
Company to continue to pay regular quarterly cash dividends on its Common Stock,
the payment of future dividends is contingent upon the future earnings of the
Company, its financial condition and other factors deemed relevant by the Board
of Directors at its discretion.
The Common Stock of the Company is traded on the NASDAQ Stock
Market under the symbol MSEX.
Item 6. Selected Financial Data
This information is incorporated herein by reference to the
attached Exhibit 13, 1994 Annual Report to Shareholders, Page 21.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
This information is incorporated herein by reference to the
attached Exhibit 13, 1994 Annual Report to Shareholders, Pages 10 and 11.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements and Independent Auditors'
Report are incorporated herein by reference to the attached Exhibit 13, 1994
Annual Report to Shareholders, Pages 12 through 20. The supplementary data is
included as indicated under Part IV, Item 14.
-9-
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The following information is provided with respect to each Director
and Executive Officer of the Company.
<TABLE>
<CAPTION>
Director Term
Name Age Since Expires Position
---- --- -------- ------- --------
<S> <C> <C> <C> <C>
Walter J. Brady 53 N/A N/A Vice President-Administration
Ernest C. Gere 62 1988 5/97 Senior Vice President & Chief Financial
Officer
John P. Molnar 78 1975 12/31/94 Director
Stephen H. Mundy 61 1977 5/95 Director
Philip H. Reardon 58 1991 5/97 Director
Marion F. Reynolds 55 N/A N/A Vice President, Secretary and Treasurer
Richard A. Russo 49 12/1/94 5/95 Vice President-Operations
Carolina M. Schneider 76 1982 5/95 Director
William E. Scott 75 1978 5/96 Director
Jeffries Shein 54 1990 5/96 Director
Dennis G. Sullivan 53 N/A N/A Vice President and General Counsel,
Assistant Secretary-Assistant Treasurer
J. Richard Tompkins 56 1981 5/96 Chairman of the Board and President
Joseph S. Yewaisis 55 1989 5/97 Director
</TABLE>
Walter J. Brady, who joined the Company in 1962, was elected Assistant
Secretary-Assistant Treasurer in 1979, Assistant Vice President in 1982, Vice
President-Human Resources in 1987, and Vice President-Administration in 1989. He
had served in the capacity of Manager of Accounting from 1977 to 1985. He is a
Director of White Marsh Environmental Systems, Inc., Pinelands Water Company and
Pinelands Sewer Company.
Ernest C. Gere who had been Vice President & Controller of the Company since
1978 was promoted to Senior Vice President & Controller in 1986 and is
responsible for rate cases, cash management, financings, and pension benefit
plans. He was employed by the Company from 1964 to 1970 and from 1976 to
present. On January 1, 1992 he assumed the designated title of Senior Vice
President & Chief Financial Officer. He is Treasurer and Director of Tidewater
Utilities, Inc., Vice President and Director of Pinelands Water Company and
Pinelands Sewer Company.
-10-
<PAGE>
John P. Molnar had been President of Molnar Electrical Contractors, Woodbridge,
New Jersey for over five years. A portion of that business was sold to Hatzel &
Buehler, electrical contractors. He was a consultant for Hatzel & Buehler and
retired in 1982. He is a Director Emeritus of First Savings Bank/SLA of Perth
Amboy, New Jersey. He was designated Director Emeritus of Middlesex Water
Company as of January 1, 1995.
Stephen H. Mundy has been Vice President of A. Stanley Mundy Inc., public
utility contractors, Virginia Beach, Virginia, since 1985 and was a Partner of
A. Stanley Mundy & Co.
Philip H. Reardon has been President and Chief Executive Officer of Essex County
Gas Company, Amesbury, Massachusetts since December 1992, and prior to that date
was President and Chief Executive Officer of New Jersey Natural Gas Company,
Wall, New Jersey since 1987. He is a Director of Essex County Gas Company and
New England Gas Association.
Marion F. Reynolds who had been Secretary-Treasurer since 1987 was elected Vice
President, Secretary and Treasurer in 1993. Prior to her election she had been
employed by Public Service Electric and Gas Company, Newark, New Jersey since
1958, and was elected Assistant Corporate Secretary in 1976. She is Secretary of
Tidewater Utilities, Inc., and Secretary/Treasurer of Pinelands Water Company
and Pinelands Sewer Company.
Richard A. Russo was elected in 1989 as Vice President-Operations with overall
responsibility for engineering, water production, water treatment, and
distribution maintenance. He was formerly employed by Trenton Water Works as
General Superintendent and Chief Engineer since 1979. He is President and
Director of Tidewater Utilities, Inc., White Marsh Environmental Systems, Inc.,
Pinelands Water Company and Pinelands Sewer Company. He is also a Director of
New Jersey M.A.T.T.E.R.S (Municipalities Acting Together Toward Economic
Recovery Solution).
Carolina M. Schneider, until her retirement in 1987, was Secretary-Treasurer of
the Company since 1948.
William E. Scott, until his retirement in 1985, was Senior Executive Vice
President of Public Service Electric and Gas Company (PSE&G), Newark, New Jersey
since 1984 and had been Executive Vice President-Finance of PSE&G for over five
years. He is a Director of Premier Benefit Management, Inc., and a Trustee of
Delta Dental Plan of New Jersey, Inc.
Jeffries Shein is a Partner in the firm of Jacobson, Goldfarb & Tanzman
Associates, a large industrial and commercial brokerage firm in New Jersey. He
is a Director of First Savings Bank/SLA of Perth Amboy, New Jersey.
Dennis G. Sullivan was hired in 1984 as Corporate Attorney, responsible for
general corporate internal legal matters. He was elected Assistant
Secretary-Assistant Treasurer in 1988 and Vice President and General Counsel in
1990. He was employed in a private law practice from 1981 to 1984 as a staff
attorney. He is Assistant Secretary and Assistant Treasurer and a Director of
Tidewater Utilities, Inc., Vice President, Secretary and Director of White Marsh
Environmental Systems, Inc., and a Director of Pinelands Water Company and
Pinelands Sewer Company.
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<PAGE>
J. Richard Tompkins was elected President of the Company in 1981 and was elected
Chairman of the Board in 1990. In 1979 he was employed by Associated Utility
Services, an independent utility consulting firm in New Jersey, as Vice
President. From 1962 to 1979 he was employed by Buck, Seifert & Jost,
Incorporated, consulting engineers in New Jersey and was appointed Vice
President in 1973. He is Chairman and Director of Tidewater Utilities, Inc.,
White Marsh Environmental Systems, Inc., Pinelands Water Company and Pinelands
Sewer Company. He is also a Director of Raritan Bay Healthcare Foundation.
Joseph S. Yewaisis is Chairman of the Board and President of First Savings
Bank/SLA of Perth Amboy, New Jersey and a Director. He is also a Director of
Americas' Community Bankers, Financial Institutions Retirement Fund and Raritan
Bay Healthcare Foundation.
Identification of Certain Significant Employees
1. A. Bruce O'Connor, age 36, was hired in 1990 as Assistant
Controller and is responsible for tax and accounting matters. He was employed by
Deloitte & Touche, a certified public accounting firm, from 1984 to 1990. In
1992, he was promoted to the position of Controller. He is also Controller of
Tidewater Utilities, Inc. and Treasurer of White Marsh Environmental Systems,
Inc.
2. Donald G. McCabe, age 59, was promoted to Director of
Distribution in 1988. He is responsible for supervising maintenance of the
Company's distribution system. He has been employed by the Company for 42 years
in various positions and had been Manager of Distribution from 1977 to 1988.
3. Richard M. Risoldi, age 38, was hired in 1989 as Director of
Production and is responsible for operation and maintenance of water production
facilities. He was formerly employed by Trenton Water Works as Chief of Water
Quality since 1986, and prior to that, held various positions with the North
Jersey District Water Supply Commission and Trenton Water Works for over five
years. He is also Vice President of Pinelands Water Company and Pinelands Sewer
Company.
Item 11. Executive Compensation
There is shown below information concerning the annual and
long-term compensation for services in all capacities to the Company for the
years 1994, 1993 and 1992 of those officers whose total annual salary amounted
to $100,000 or more.
-12-
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Restricted All
Name and Other Annual Stock Other Annual
Principal Position Year Salary Compensation Awards Compensation
------------------ ---- ------ ------------ ------ ------------
(1) (2) (3)
$ $ $ $
<S> <C> <C> <C> <C> <C>
J. Richard Tompkins 1994 208,350 7,491 22,855 7,280
Chairman of the Board 1993 190,150 6,771 18,075 6,720
and President 1992 175,787 5,464 33,375 6,141
Ernest C. Gere 1994 128,323 7,073 13,060 4,480
Senior Vice President & 1993 119,350 6,042 9,038 4,235
Chief Financial Officer 1992 115,325 6,113 7,265 4,025
Richard A. Russo 1994 121,504 3,236 13,060 4,249
Vice President- 1993 110,350 2,676 12,653 3,850
Operations 1992 97,131 2,362 13,350 3,317
Walter J. Brady 1994 107,350 2,881 9,795 3,745
Vice President- 1993 101,350 2,828 9,038 3,535
Administration 1992 97,557 2,775 7,265 3,325
</TABLE>
(1) Includes Auto Allowance and Group Life Insurance for all officers and
Directors Fees for Messrs. Tompkins, Gere and Russo.
(2) The number and value of Restricted Stock held in escrow as of December 31,
1994 were as follows: Mr. Tompkins - 9,000/$131,980; Mr. Gere -
4,100/$59;413, Mr. Russo - 4,500/$66,688; and Mr. Brady - 3,900/$56,148.
Generally, the restrictions lapse on these awards five years from the date
of grant. The restrictions also lapse in the event of a change in control
of the Company. All dividends on these shares are paid to the awardees.
(3) Employer contribution to the Company's Savings and Investment Plan.
COMPENSATION PURSUANT TO PENSION PLANS*
Annual Benefit based on Compensation and Years of Service
<TABLE>
<CAPTION>
Average Years of Service
Annual ------------------------------------------------------------------------------
Compensation 15 20 25 30 35 45
------------ -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
$ 80,000 $20,402 $27,202 $34,003 $40,803 $47,604 $ 57,604
$ 90,000 $23,252 $31,002 $38,753 $46,503 $54,254 $ 65,504
$100,000 $26,102 $34,802 $43,503 $52,203 $60,904 $ 73,404
$125,000 $33,227 $44,302 $55,378 $66,453 $77,529 $ 93,154
$150,000 $40,352 $53,802 $67,253 $80,703 $94,154 $112,904
</TABLE>
* Annual Compensation Capped at $150,000.
-13-
<PAGE>
All employees who receive pay for 1,000 hours during the year are
included in the Plan. Under the noncontributory trusteed defined benefit plan
current service costs are funded annually. The Company's annual contribution is
determined on an actuarial basis. Benefits are measured from the member's entry
date and accrue to normal retirement date or date of early retirement. Benefits
are calculated, at normal retirement, at 1.25% of pay up to the Executive's
benefit integration level, plus 1.9% of such excess pay, multiplied by service
to normal retirement date, capped at 35 years of such excess pay, multiplied by
service to normal retirement date of age 65. Average pay is the highest annual
average of total pay during any 5 consecutive years within the 10 calendar-year
period prior to normal retirement date. The benefit integration level is based
on the 1994 Summary Compensation Table. The benefit amounts are not subject to
any deduction for Social Security benefits or other offset amounts.
During the year 1994, the Company made a contribution to the
Pension Plan in the amount of $275,000. The range of the permissible Plan
contribution was $253,000 to $287,000. Remuneration covered under the Pension
Plan includes base wages only and not Directors' fees.
The estimated credited years of service based on normal retirement
at age 65 includes 22 years, 21 years, 20 years and 44 years for Messrs.
Tompkins, Gere, Russo and Brady, respectively.
Supplemental Executive Retirement Plan - All executive officers are
eligible to participate in the Deferred Compensation Plan known as the
Supplemental Executive Retirement Plan at the direction of the Board of
Directors.
A participant who retires on his normal retirement date is entitled
to an annual retirement benefit equal to 75% of his compensation reduced by his
primary Social Security benefit and further reduced by any benefit payable from
the Qualified Pension Plan. In certain cases further reductions are made for
benefits from other employment.
Vesting provisions start at 50% for 5 years of service and
increases 10% for each year of service for a maximum of 100% vesting at 10 years
of service. Annual retirement benefits are payable for 15 years either to the
participant or his beneficiary.
Retirement benefits may be in the form of single life annuity,
joint and 50% survivors annuity, joint and 100% survivors annuity, single life
annuity with a 10-year certain period and single life annuity with a 15-year
certain period paid on an actuarial equivalent basis.
The Company is not obligated to set aside or earmark any monies or
other assets specifically for the purpose of funding the Plan. The benefits are
in the form of an unfunded obligation of the Company. The Company has elected to
purchase Corporate-owned life insurance as a means of satisfying its obligation
under this Plan. The Company reserves the right to terminate any plan of life
insurance at any time, however, a participant is entitled to any benefits he
would have been entitled to under the Plan provisions. For the year 1994 the
Company paid life insurance premiums totaling $98,796, for Messrs. Tompkins,
Gere, Russo and Brady, which provides a preretirement net death benefit of 1-1/2
times base salary at date of death.
-14-
<PAGE>
Savings and Investment Plan - The Company matches 100% of that
portion of the contribution which does not exceed 1% of basic pay plus an
additional 50% of that portion from 2% to 6% of basic pay. Distributions under
the Plan are made upon normal retirement, total and permanent disability or
death and are subject to certain vesting provisions as to Company contributions.
Compensation of Directors
A director who is not an officer of the Company or its subsidiary
is paid an annual retainer of $5,400 and a fee of $500 for attendance at Board
of Directors (Board) meetings, a fee of $250 for attendance at special meetings
of the Board, and a fee of $150 for attendance at special Board committee
meetings by means of communications facilities, and a fee of $300 for each
committee meeting attended. Committee chairmen receive an additional $200 for
each committee meeting chaired. Directors who are officers of the Company are
paid a fee of $250 for each meeting of the Board attended.
Compensation Committee Interlocks and Insider Participation
During 1994, the members of the Executive Development and Compensation
Committee were William E. Scott, Stephen H. Mundy, Carolina M. Schneider and
Jeffries Shein. During 1994, no member of the Executive Development and
Compensation Committee was an officer or employee of the Company or its
subsidiary. Ms. Carolina M. Schneider is a former officer of the Company. Mr.
Stephen H. Mundy has a financial interest in a construction company that was
awarded a contract in the amount of $0.6 million in 1994.
Report of the Executive Development and Compensation Committee
The compensation program for executive officers of the Company is
administered by the Executive Development and Compensation Committee of the
Board of Directors. The 1994 Committee was composed of four independent
directors: Carolina M. Schneider, William E. Scott, Stephen H. Mundy and
Jeffries Shein. The Committee is responsible for setting and administering the
policies which govern annual compensation and Restricted Stock awards. Policies
and plans developed by the Committee are approved by the full Board of
Directors.
The Committee's compensation policies and plans applicable to the
executive officers seek to enhance the profitability of the Company and
shareholder value, as well as control costs and maintain reasonable rates for
the customers. The Committee's practices reflect policies that compensation
should (1) attract and retain well-qualified executives, (2) support short- and
long-term goals and objectives of the Company, (3) reward individuals for
outstanding contributions to the Company's success, (4) be meaningfully related
to the value created for shareholders, and (5) relate to maintenance of good
customer relations and reasonable rates.
The Committee meets with Mr. Tompkins to evaluate the performance
of the other executive officers and meets in the absence of Mr. Tompkins to
evaluate his performance. The Committee reports on all executive evaluations to
the full Board of Directors.
-15-
<PAGE>
Base salary levels are reviewed annually using compensation data
produced by an outside compensation expert for similar positions and comparable
companies. Base salaries for satisfactory performance are targeted at the median
of the competitive market. Individual performance of the executive is determined
and taken into account when setting salaries against the competitive market
data. The Committee reviews, as well, the individual's efforts on cost control
and his or her contributions to the results of the year. The Committee also
reviews the Company's financial results compared with prior years and compared
with other companies. It compares salaries with both water and general industry
salaries.
The factors and criteria upon which Mr. Tompkins' compensation was
based generally include those discussed with respect to all the executive
officers. Specifically, however, his salary is based on his overall performance
and that of the Company. His salary was set at a rate which was approximately
the median of the utility market and below that of the general industry. In
addition, in evaluating the performance of the CEO, the Committee has taken
particular note of management's success with respect to the growth of the
Company.
The Company maintains a restricted stock plan for the purpose of
attracting and retaining certain key executives of the Company who have
contributed, or are likely to contribute, significantly to the long-term
performance and growth of the Company. This plan is designed to enhance
financial performance, customer service and corporate efficiency through a
performance-based stock award. Annual stock awards are based upon several
factors including the participant's ability to contribute to the overall success
of the Company.
The level of awards and the value of the performance are reviewed
annually by the Committee. The Committee submits reports on all executive
evaluations and restricted stock awards to the full Board of Directors for
approval.
1995 Executive Development and
Compensation Committee
William E. Scott, Chairman
Stephen H. Mundy
Jeffries Shein
-16-
<PAGE>
Performance Graph
Set forth below is a line graph comparing the yearly change in the
cumulative total return (which includes reinvestment of dividends) of a $100
investment for the Company's Common Stock, the NASDAQ and a peer group of
investor-owned water utilities for the period of five years commencing December
31, 1989. The peer group includes Aquarion Company, California Water Service
Company, Connecticut Water Service, Inc., Consumers Water Company, E'town
Corporation, IWC Resources Corporation, Philadelphia Suburban Corporation, SJW
Corporation, Southern California Water Company, United Water Resources and the
Company.
<TABLE>
<CAPTION>
12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Middlesex $100 $ 96 $125 $164 $217 $176
NASDAQ 100 85 136 159 181 177
Peer Group 100 93 121 136 155 144
</TABLE>
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners
and Management
The following table sets forth information made known to the
Company as of December 31, 1994 of any person or group to be a beneficial owner
of more than five percent of the Company's Common Stock.
<TABLE>
<CAPTION>
Number of Shares
Beneficially Owned
and Nature of Percent
Name and Address Beneficial Ownership (1) of Class
---------------- ------------------------ --------
<S> <C> <C>
Verona Construction Company 292,800 7.26
Suite 1705
1201 Market Street
Wilmington, Delaware 19801
</TABLE>
(1) Beneficial owner has sole power to vote and dispose of shares.
The following information pertains to the Common Stock of the
Company beneficially owned, directly or indirectly, by all Directors and
Officers of the Company as a group, as of December 31, 1994.
<TABLE>
<CAPTION>
Common Stock
----------------------
Number Percent
of of
Shares Class
------- -------
<S> <C> <C>
Walter J. Brady 6,403 .15
Ernest C. Gere 7,364 .18
John P. Molnar 4,820 .12
Stephen H. Mundy 30,137 .75
Philip H. Reardon 3,299 .08
Marion F. Reynolds 6,537 .16
Richard A. Russo 6,424 .16
Carolina M. Schneider 7,108 .18
William E. Scott 4,743 .12
Jeffries Shein 48,639 1.21
Dennis G. Sullivan 5,613 .13
J. Richard Tompkins 14,087 .35
Joseph S. Yewaisis 1,431 .04
----- ---
Totals 146,605 3.63
======= ====
</TABLE>
No Preferred Stock is beneficially owned, directly or indirectly by any Officer
or Director.
Item 13. Certain Relationships and Related Transactions
During 1994, 1993 and 1992, the Company had transactions with a
construction company in which a Director has a financial interest. Major
construction transactions were awarded on the basis of negotiated bids approved
by the Board of Directors (with the interested
-18-
<PAGE>
Director abstaining) and amounted to $0.6 million, $0.6 million and $0.3 million
for the years 1994, 1993 and 1992, respectively. These amounts included less
than $0.1 million due the construction company at December 31, 1994, 1993 and
1992.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements
The following information is incorporated herein by reference to the attached
Exhibit 13, 1994 Annual Report to Shareholders, pages 10 through 21:
Management's Discussion and Analysis, Pages 10-11
Consolidated Balance Sheets at December 31, 1994 and 1993, Pages 12-13
Consolidated Statements of Income for each of the three years in the period
ended December 31, 1994, Page 14
Consolidated Statements of Capital Stock and Long-term Debt at December 31, 1994
and 1993, Page 15
Consolidated Statements of Cash Flows for each of the three years in the period
ended December 31, 1994, Page 16
Consolidated Statements of Retained Earnings for each of the three years in the
period ended December 31, 1994, Page 17
Notes to Consolidated Financial Statements, Pages 17-20
Independent Auditors' Report, Page 20
(a) 2. Financial Statement Schedules
All Schedules are omitted because of the absence of the conditions under which
they are required or because the required information is shown in the financial
statements or notes thereto.
(a) 3. Exhibits
See Exhibit listing on Pages 21-23.
(b) Reports on Form 8-K
October 21, 1994. Item 5 - Other Events
-19-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities and Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Chairman of the Board and
President and Director /J. Richard Tompkins/ 3/23/95
------------------------- -------
J. Richard Tompkins Date
Senior Vice President & Chief
Financial Officer and Director /Ernest C. Gere/ 3/23/95
-------------------------- -------
Ernest C. Gere Date
Vice President-Operations and
Director /Richard A. Russo/ 3/23/95
---------------------------- -------
Richard A. Russo Date
Director /Stephen H. Mundy/ 3/23/95
---------------------------- -------
Stephen H. Mundy Date
Director /Phillip H. Reardon/ 3/23/95
---------------------------- -------
Phillip H. Reardon Date
Director /Carolina M. Schneider/ 3/23/95
---------------------------- -------
Carolina M. Schneider Date
Director /William E. Scott/ 3/23/95
---------------------------- -------
William E. Scott Date
Director /Jeffries Shein/ 3/23/95
---------------------------- -------
Jeffries Shein Date
Director /Joseph S. Yewaisis/ 3/23/95
---------------------------- -------
Joseph S. Yewaisis Date
-20-
<PAGE>
EXHIBIT INDEX
Exhibits designated with an asterisk (*) are filed herewith. The exhibits not so
designated have heretofore been filed with the Commission and are incorporated
herein by reference to the documents indicated in the previous filing columns
following the description of such exhibits.
<TABLE>
<CAPTION>
Previous Filing's
Exhibit Registration Exhibit
No. Document Description No. No.
------- -------------------- ------------ -------
<S> <C> <C> <C>
3.1 Certificate of Incorporation of the Company,
as amended, filed as Exhibit 3.1 of 1993
Form 10-K.
3.2 Bylaws of the Company, as amended. 33-54922 3.2
4.1 Form of Common Stock Certificate. 2-55058 2(a)
4.2 Registration Statement, Form S-3, under
Securities Act of 1933 filed February 3,
1987 relating to the Dividend Reinvestment
and Common Stock Purchase Plan. 33-11717
4.3 Post Effective Amendments No. 3 and No. 4,
Form S-3, under Securities Act of 1933 filed
May 28, 1993 relating to the Dividend Reinvestment
and Common Stock Purchase Plan. 33-11717
10.1 Agreement, dated December 4, 1990, between
the Company and Elizabethtown Water Company. 33-54922 10.1
10.2 Copy of Mortgage, dated April 1, 1927, between the Company and
Union County Trust Company, as Trustee, as supplemented by
Supplemental Indentures, dated as of October 1, 1939, April 1,
1946, April 1, 1949, February 1, 1955 and December 1, 1959. 2-15795 4(a)-4(f)
10.3 Copy of Supplemental Indenture, dated as
of January 15, 1963, between the Company
and Union County Trust Company, as Trustee. 2-21470 4(b)
10.4 Copy of Supplemental Indentures, dated as of July 1, 1964, June 1,
1965, February 1, 1968, December 1, 1968, December 1, 1970,
December 1, 1972 and June 15, 1991, between the Company and 10.4 - 10.9
Union County Trust Company, as Trustee 33-54922 and 10.16
</TABLE>
-21-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Previous Filing's
Exhibit Registration Exhibit
No. Document Description No. No.
------- -------------------- ------------ -------
<S> <C> <C> <C>
10.5 Copy of Supplemental Indenture, dated as of
April 1, 1979, between the Company and United
Counties Trust Company, as successor Trustee. 2-64770 5.9
10.6 Copy of Supplemental Indenture, dated as of
April 1, 1983, between the Company and United
Counties Trust Company, as successor Trustee. 2-94106 10.12
10.7 Copy of Supplemental Indenture, dated as of
August 15, 1988, between the Company and United
Counties Trust Company, as Trustee. 33-31476 4.3
10.8 Copy of Trust Indenture, dated as of June 15,
1991, between the New Jersey Economic Development
Authority and Midlantic National Bank, as Trustee. 33-54922 10.17
10.9 Copy of Supply Agreement, dated as of November
17, 1986, between the Company and the Old Bridge
Municipal Utilities Authority. 33-31476 10.12
10.10 Copy of Supply Agreement, dated as of July 14,
1987, between the Company and the Marlboro
Township Municipal Utilities Authority, as amended. 33-31476 10.13
10.11 Copy of Supply Agreement, dated as of February 11, 1988, with
modifications dated February 25, 1992 and April 20, 1994 between
the Company and the Borough of Sayreville filed as Exhibit No.
10.11 of 1994 First Quarter Form 10-Q.
10.12 Copy of Water Purchase Contract and Supple-
mental Agreement, dated as of May 12, 1993,
between the Company and the New Jersey
Water Supply Authority filed as Exhibit No. 10.12 of
1993 Form 10-K.
10.13 Copy of Treating and Pumping Agreement, dated
April 9, 1984, between the Company and the
Township of East Brunswick. 33-31476 10.17
10.14 Copy of Supply Agreement, dated June 4, 1990,
between the Company and Edison Township. 33-54922 10.24
</TABLE>
-22-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Previous Filing's
Exhibit Registration Exhibit
No. Document Description No. No.
------- -------------------- ------------ -------
<S> <C> <C> <C>
10.15 Copy of Supply Agreement, dated as of December 5,
1991, between the Company and the Borough of
Highland Park. 33-54922 10.25
10.16 Copy of Pipeline Lease Agreement, dated as of
January 9, 1987, between the Company and the
City of Perth Amboy. 33-31476 10.20
10.17 Copy of Supplemental Executive Retirement
Plan, effective January 1, 1984, as amended. 33-31476 10.21
10.18 Copy of 1989 Restricted Stock Plan, filed as Appendix A to the
Company's Definitive Proxy Statement, dated April 19, 1989, and
filed April 5, 1989. 33-31476 10.22
10.19 Amendment to Supplemental Executive Retirement
Plan, dated May 23, 1990, filed as Exhibit No. 10.23
of 1991 Form 10-K.
10.20 Copy of Transmission Agreement, dated October 16,
1992, between the Company and the Township of
East Brunswick. 33-54922 10.23
10.21 Copy of Agreement and Plan of Merger, dated
January 7, 1992, between the Company, Midwater
Utilities, Inc. and Tidewater Utilities, Inc. 33-54922 10.29
10.22 Copy of Supplemental Indentures, dated March 1, 1993 (Series P-1),
September 1, 1993 (Series S & T) and January 1, 1994 (Series U &
V), between the Company and United Counties Trust Company, as
Trustee, filed as Exhibit No. 10.22 of 1993 Form 10-K.
10.23 Copy of Trust Indentures, dated September 1, 1993 (Series S & T)
and January 1, 1994 (Series V), between the New Jersey Economic
Development Authority and First Fidelity Bank (Series S & T), as
Trustee, and Midlantic National Bank (Series V), as Trustee, filed
as Exhibit No. 10.23 of 1993 Form 10-K.
*13 Annual Report to Shareholders for the year
ended December 31, 1994: pages 10 through 21.
*23 Independent Auditors' Consent.
*27 Financial Data Schedule
</TABLE>
-23-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Construction Program - The Company's expenditures on property, plant and
equipment during 1994 totaled $6.0 million and consisted of the following: $3.0
million for routine capital additions, which include transmission and
distribution mains, hydrants, service lines, meters, and general equipment; $1.3
million for Park Avenue Well Field improvements; and $1.7 million for water
systems development in Delaware. These expenditures were financed by some
utilization of the December 31, 1993 cash balance, internally-generated funds
from operations, Series R Bond proceeds, and the sale of common stock through
the Dividend Reinvestment Plan.
During 1995, 1996 and 1997, the Company has projected capital expenditures of
$6.1 million, $8.3 million and $13.2 million, respectively. For 1995, $5.0
million is for routine capital expenditures; $0.5 million for the South River
Basin regional supply; $0.2 million for treatment of well supplies; and $0.4
million for miscellaneous items. For 1996 and 1997 combined, $9.7 million is for
routine capital expenditures; $10.0 million for treatment plant modifications
and improvements; $0.5 million for Section A pipeline; $0.9 million for
Robinson's Branch Reservoir; and $0.4 million for miscellaneous items.
Sources of Capital - To finance the 1995 Capital Program, the Company will
utilize internally-generated cash and cash balances on hand at December 31,
1994. The 1996 and 1997 Capital Programs, although not firm at this time, will
require some form of external financing.
RESULTS OF OPERATIONS
1994 COMPARED TO 1993
Operating revenues increased $0.6 million or 1.7% over the previous year. Of
that amount, $1.0 million is due to the 1993 rate increase, and $0.4 million is
due to a decrease in consumption for all classes of customers.
Operations and maintenance expenses increased by $0.2 million or 1.3% over 1993.
The principal components of the increase were for administrative and general
expenses and purchased water.
Depreciation increased $0.3 million or 11.5% due to a higher depreciation base
and a higher depreciation rate of 2.17% granted as part of the 1993 rate
increase. Taxes, other than income taxes, increased $0.1 million or 2.3% due
largely to higher revenue-related taxes. Federal income taxes decreased $0.3
million due to lower taxable income. Other income decreased $0.3 million due to
lower earnings on investments, less funds available for investments and no
Allowance for Funds Used During Construction (AFUDC). The decrease in preferred
stock dividends reflects the redemption of the $8.25 and $6.00 Redeemable Series
and partial redemption of the $7.00 Nonredeemable Series.
Net income remained stable despite the less than 2% increase in revenues. This
was accomplished by continued monitoring of operating expenses, lower taxes and
interest charges and higher earnings from Tidewater operations.
RESULTS OF OPERATIONS
1993 COMPARED TO 1992
Operating revenues increased $4.6 million or 15% over the previous year. Of that
amount, $1.9 million is due to the 1993 rate increase, $1.6 million is due to
consumption increase and $1.1 million is due to the inclusion of Tidewater
Utilities, Inc. (Tidewater) revenues for a full 12 months. Operating results for
1992 included revenue from Tidewater subsequent to the acquisition date of
October 20, 1992.
Operations and maintenance expenses increased by $1.9 million or 12.9% over
1992. The principal components of the increase were for purchased water, $0.2
million; power and pumping expenses, $0.4 million; transmission and distribution
expenses, $0.2 million; and administrative and general expenses, $0.4 million.
The balance of $0.7 million is due to the inclusion of Tidewater expenses for
the full year.
Depreciation increased $0.4 million or 21% due to a higher depreciation base and
a higher depreciation rate of 2.17% granted as part of the 1993 rate increase.
Taxes, other than income taxes, increased $0.6 million or 13% due largely to
higher revenue-related taxes. Federal income taxes increased $0.7 million due to
higher taxable income. Other income decreased $0.2 million or 44% due to lower
rates on investments and less funds available for investments. Interest charges
decreased $0.2 million or 8% due largely to a decrease in the overall interest
rate as a result of mortgage bond redemptions. The increase of $0.1 million in
preferred stock dividends reflects a full year's declaration of dividends on the
$7.00 Convertible Series.
--------------------------------------------------------------------------------
10
<PAGE>
Net income increased $1.0 million reflecting higher revenues over increased
expenses and taxes due to the 1993 rate increase, continued monitoring of
operating expenses, favorable weather, lower interest charges and Tidewater
earnings.
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes, effective January 1, 1993. The primary effect on
the Company, which is on the presentation of its financial position, was to
increase the net deferred income tax liability by $4.9 million. An offsetting
regulatory asset of the same amount was recorded since management believes that
it is probable the increase in the deferred income tax liability will be
recovered in future rates. The adoption of this statement did not have an effect
on the Consolidated Statements of Income. (See Note 3 to Consolidated Financial
Statements.)
The Company also adopted SFAS No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions, on January 1, 1993. This statement requires
accrual of costs associated with postretirement health care and life insurance
benefits for all employees, including retirees. These costs are currently
allowed in rates on a pay-as-you-go basis. The Company's adoption of this
standard increased annual expenses by $0.6 million, which is being deferred and
includes the amortization, over 20 years, of a transition obligation of $4.7
million. The Company will file for rate relief for these costs during its next
base rate case filing. All costs recorded in accordance with SFAS No. 106 that
are prudently incurred are expected to be afforded regulatory recognition. (See
Note 4 to Consolidated Financial Statements.)
OUTLOOK FOR 1995
Revenues and expenses are projected to produce only small increases based on
some growth and inflationary projections under 5%. Except for the filing of a
Purchased Water Adjustment Clause (PWAC), no increase in revenues is projected
from rate filings. Cash balances and internally-generated funds will be used to
finance the 1995 Capital Program. Therefore, no new borrowings or financings are
expected in 1995, which will keep interest expense level. Health care costs in
1994 have declined and are not expected to increase significantly during 1995.
Results of operations from Tidewater are expected to have a positive effect on
earnings in 1995.
REPORT OF MANAGEMENT
The consolidated financial statements and other financial information included
in this annual report have been prepared by and are the responsibility of
Management. The statements have been prepared in conformity with generally
accepted accounting principles considered appropriate under the circumstances
and include amounts based on necessary judgment and estimates deemed
appropriate.
The Company maintains a system of internal accounting controls designed to
provide reasonable assurance that assets are protected from improper use and
loss and to provide reliable financial information.
The consolidated financial statements of the Company have been audited by its
independent auditors, Deloitte & Touche LLP, and their report is included
herein.
The Board of Directors, through its Audit Committee consisting solely of outside
Directors, is responsible for overseeing and reviewing the Company's financial
reporting and accounting practices. The Audit Committee meets periodically with
the independent auditors to review the scope of their work and discuss any
changes and developments that may impact the Company.
<TABLE>
<S> <C>
J. RICHARD TOMPKINS ERNEST C. GERE
J. Richard Tompkins Ernest C. Gere
Chairman of the Board and President Senior Vice President & Chief Financial Officer
</TABLE>
February 13, 1995
--------------------------------------------------------------------------------
11
<PAGE>
MIDDLESEX WATER COMPANY
CONSOLIDATED BALANCE SHEETS
Assets
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1994 1993
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
UTILITY PLANT Water Production $ 25,612,023 $ 23,637,834
(NOTE 5): Transmission and Distribution 93,334,300 90,472,850
General 11,202,947 10,860,783
Construction Work in Progress 262,249 97,580
----------------------------------------------------------------------------------------------------
TOTAL 130,411,519 125,069,047
Less Accumulated Depreciation 21,668,506 19,676,595
----------------------------------------------------------------------------------------------------
UTILITY PLANT - NET 108,743,013 105,392,452
----------------------------------------------------------------------------------------------------
NONUTILITY PROPERTY - NET 400,209 154,096
---------------------------------------------------------------------------------------------------------------------------------
CURRENT ASSETS: Cash and Cash Equivalents 3,854,186 1,146,245
Marketable Securities 933,298 --
Temporary Cash Investments - Restricted (Note 6) 289,552 2,923,205
Accounts Receivable 4,236,800 3,542,507
Unbilled Revenues 2,143,795 2,246,615
Materials and Supplies (at average cost) 991,116 967,007
Prepayments 503,808 434,312
----------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 12,952,555 11,259,891
----------------------------------------------------------------------------------------------------
DEFERRED Unamortized Debt Expense 3,082,420 2,033,472
CHARGES: Preliminary Survey and Investigation Charges 653,328 665,147
Regulatory Assets (Notes 3 and 4) 5,818,530 5,508,876
Rate Case Expenses -- 92,381
Other (Note 2) 762,703 569,908
----------------------------------------------------------------------------------------------------
TOTAL DEFERRED CHARGES 10,316,981 8,869,784
----------------------------------------------------------------------------------------------------
TOTAL $ 132,412,758 $ 125,676,223
----------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
</TABLE>
--------------------------------------------------------------------------------
12
<PAGE>
Capitalization and Liabilities
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1994 1993
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CAPITALIZATION Common Stock $ 27,151,673 $ 26,223,214
(SEE ACCOMPANYING Retained Earnings 17,699,422 16,615,466
STATEMENTS AND ----------------------------------------------------------------------------------------------------
NOTE 9): TOTAL COMMON EQUITY 44,851,095 42,838,680
----------------------------------------------------------------------------------------------------
Cumulative Preferred Stock 2,790,105 3,951,500
Long-term Debt 49,500,000 24,500,000
----------------------------------------------------------------------------------------------------
TOTAL CAPITALIZATION 97,141,200 71,290,180
---------------------------------------------------------------------------------------------------------------------------------
CURRENT Current Portion of Long-term Debt -- 12,500,000
LIABILITIES: Sinking Fund Payments -- 66,000
Accounts Payable 1,616,945 1,472,022
Notes Payable (Note 6) -- 9,000,000
Customer Deposits 308,174 284,731
Taxes Accrued 4,444,372 4,366,922
Interest Accrued 1,134,223 942,495
Other 877,283 727,741
----------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 8,380,997 29,359,911
---------------------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 5)
---------------------------------------------------------------------------------------------------------------------------------
DEFERRED Customer Advances for Construction 9,199,363 8,701,738
CREDITS: Accumulated Deferred Investment Tax Credits (Note 3) 2,452,096 2,523,776
Accumulated Deferred Federal Income Taxes (Note 3) 9,767,241 9,078,687
Other 1,312,961 943,610
----------------------------------------------------------------------------------------------------
TOTAL DEFERRED CREDITS 22,731,661 21,247,811
----------------------------------------------------------------------------------------------------
CONTRIBUTIONS IN AID OF CONSTRUCTION 4,158,900 3,778,321
----------------------------------------------------------------------------------------------------
TOTAL $ 132,412,758 $ 125,676,223
----------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
</TABLE>
--------------------------------------------------------------------------------
13
<PAGE>
MIDDLESEX WATER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1994 1993 1992
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES (NOTE 2) $ 36,122,475 $35,478,810 $30,860,626
--------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Operations:
Water Purchased (Note 5) 2,769,265 2,749,514 2,545,164
Other 12,478,859 12,373,656 10,746,472
Maintenance 1,549,970 1,460,476 1,389,191
Depreciation 2,649,657 2,375,910 1,960,731
Taxes, other than Income Taxes 5,343,563 5,222,320 4,620,455
Federal Income Taxes (Note 3) 2,766,361 3,072,303 2,350,715
--------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 27,557,675 27,254,179 23,612,728
--------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 8,564,800 8,224,631 7,247,898
--------------------------------------------------------------------------------------------------------------------------
OTHER INCOME/(EXPENSE):
Allowance for Funds Used During
Construction - Equity -- 166,724 125,212
Other - Net (25,731) 102,748 356,583
--------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME/(EXPENSE) (25,731) 269,472 481,795
--------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INTEREST CHARGES 8,539,069 8,494,103 7,729,693
--------------------------------------------------------------------------------------------------------------------------
INTEREST CHARGES:
Interest on Long-term Debt 2,882,731 2,772,227 3,250,291
Allowance for Funds Used During
Construction - Debt -- (108,398) (81,409)
Amortization of Debt Expense 118,657 144,043 56,403
Other Interest Expense 42,309 206,605 42,205
--------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST CHARGES 3,043,697 3,014,477 3,267,490
--------------------------------------------------------------------------------------------------------------------------
NET INCOME 5,495,372 5,479,626 4,462,203
--------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCK DIVIDEND REQUIREMENTS 188,357 255,722 185,935
--------------------------------------------------------------------------------------------------------------------------
EARNINGS APPLICABLE TO COMMON STOCK $ 5,307,015 $ 5,223,904 $ 4,276,268
--------------------------------------------------------------------------------------------------------------------------
EARNINGS AND DIVIDENDS PER SHARE OF COMMON STOCK:
--------------------------------------------------------------------------------------------------------------------------
Earnings $ 1.33 $ 1.33 $ 1.20
Dividends Paid $ 1.053/4 $ 1.011/4 $ 0.97
Average Number of Shares Outstanding 4,003,393 3,924,363 3,568,499
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
--------------------------------------------------------------------------------
14
<PAGE>
MIDDLESEX WATER COMPANY
CONSOLIDATED STATEMENTS OF CAPITAL STOCK
AND LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1994 1993
----------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, No Par Value (Notes 4 and 9)
Shares Authorized - 6,000,000
Shares Outstanding - 1994 - 4,030,834 $ 27,412,913
1993 - 3,979,387 $ 26,486,569
Restricted Stock Plan (261,240) (263,355)
----------------------------------------------------------------------------------------------
TOTAL COMMON STOCK $ 27,151,673 $ 26,223,214
----------------------------------------------------------------------------------------------
Cumulative Preference Stock, No Par Value
Shares Authorized - 100,000
Shares Outstanding - None
Cumulative Preferred Stock, No Par Value (Note 9)
Shares Authorized - 70,656
Convertible:
Shares Outstanding, $7.00 Series - 14,901 $ 1,564,605 $ 1,543,500
Nonredeemable:
Shares Outstanding, $7.00 Series - 1994 - 2,255 225,500
1993 - 2,500 250,000
Shares Outstanding, $4.75 Series - 10,000 1,000,000 1,000,000
Redeemable:
Shares Outstanding, $6.00 Series - 1994 - None --
1993 - 7,500 750,000
Shares Outstanding, $8.25 Series - 1994 - None --
1993 - 4,080 408,000
----------------------------------------------------------------------------------------------
TOTAL CUMULATIVE PREFERRED STOCK $ 2,790,105 $ 3,951,500
----------------------------------------------------------------------------------------------
Long-term Debt (Note 9):
First Mortgage Bonds:
6.75%, Series K, due February 1, 1996 $ -- $ 2,500,000
8.00%, Series Q, due August 1, 2018 -- 10,000,000
7.25%, Series R, due July 1, 2021 6,000,000 6,000,000
5.20%, Series S, due October 1, 2022 12,000,000 12,000,000
5.25%, Series T, due October 1, 2023 6,500,000 6,500,000
6.40%, Series U, due February 1, 2009 15,000,000 --
5.25%, Series V, due February 1, 2029 10,000,000 --
----------------------------------------------------------------------------------------------
SUBTOTAL LONG-TERM DEBT 49,500,000 37,000,000
----------------------------------------------------------------------------------------------
Less: Current Portion of Long-term Debt -- 12,500,000
----------------------------------------------------------------------------------------------
TOTAL LONG-TERM DEBT $ 49,500,000 $ 24,500,000
----------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
--------------------------------------------------------------------------------
15
<PAGE>
MIDDLESEX WATER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1994 1993 1992
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 5,495,372 $ 5,479,626 $ 4,462,203
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation 2,649,657 2,375,910 1,960,731
Amortization of Deferred Charges 383,750 483,878 242,843
Provision for Deferred Income Taxes 639,381 5,882 800,867
Amortization of Investment Tax Credit (71,680) (69,919) (66,394)
Allowance for Funds Used During Construction -- (275,122) (206,621)
Changes in Current Assets and Liabilities:
Accounts Receivable (694,293) (691,296) 363,572
Materials and Supplies (24,109) (49,290) 90,406
Accounts Payable 144,923 (609,161) 612,752
Accrued Income Taxes 77,450 610,448 (482,462)
Accrued Interest 191,728 (190,808) 106,200
Unbilled Revenues 102,820 (254,393) (104,109)
Other - Net (53,483) 209,890 (2,515)
----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,841,516 7,025,645 7,777,473
----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Utility Plant Expenditures* (5,979,113) (6,910,274) (10,970,329)
Preliminary Survey & Investigation Charges 11,819 (103,664) 586,301
Marketable Securities (933,298) -- --
Cash From Acquisition of Subsidiary -- -- 115,550
Other - Net (345,778) (374,369) 43,341
----------------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (7,246,370) (7,388,307) (10,225,137)
----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of Long-term Debt (12,500,000) (24,050,000) (2,800,000)
Proceeds from Issuance of Long-term Debt 25,000,000 18,500,000 --
Temporary Cash Investments - Restricted 2,633,653 896,173 667,969
Proceeds from Issuance of Common Stock (Net) 928,459 1,610,266 6,207,970
Deferred Bond Issuance Expenses (1,167,605) (1,009,839) --
Common Stock Issuance Expenses -- (30,934) (96,189)
Payment of Preferred Dividends (180,006) (287,461) (155,788)
Payment of Common Dividends (4,231,410) (3,971,830) (3,446,474)
Customer Advances - Net 878,204 1,205,394 472,777
Redemption of Preferred Stock (1,248,500) (66,000) (66,000)
Short-term Bank Borrowings (Repayments) (9,000,000) 7,950,000 1,050,000
----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,112,795 745,769 1,834,265
----------------------------------------------------------------------------------------------------------------------------------
NET CHANGES IN CASH AND CASH EQUIVALENTS 2,707,941 383,107 (613,399)
----------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,146,245 763,138 1,376,537
----------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 3,854,186 $ 1,146,245 $ 763,138
----------------------------------------------------------------------------------------------------------------------------------
*Excludes Allowance for Funds Used During Construction.
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash Paid During the Year for:
Interest (net of amounts capitalized) $ 2,722,327 $ 2,874,586 $ 2,991,325
Income Taxes $ 2,453,936 $ 3,028,767 $ 2,132,530
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
--------------------------------------------------------------------------------
16
<PAGE>
MIDDLESEX WATER COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1994 1993 1992
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR $ 16,615,466 $ 15,426,065 $ 14,662,313
NET INCOME 5,495,372 5,479,626 4,462,203
----------------------------------------------------------------------------------------------------------------------------
TOTAL 22,110,838 20,905,691 19,124,516
----------------------------------------------------------------------------------------------------------------------------
CASH DIVIDENDS:
Cumulative Preferred Stock 180,006 287,461 155,788
Common Stock 4,231,410 3,971,830 3,446,474
COMMON STOCK EXPENSES -- 30,934 96,189
----------------------------------------------------------------------------------------------------------------------------
TOTAL DEDUCTIONS 4,411,416 4,290,225 3,698,451
----------------------------------------------------------------------------------------------------------------------------
BALANCE AT END OF YEAR $ 17,699,422 $ 16,615,466 $ 15,426,065
----------------------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
</TABLE>
________________________________________________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization - Middlesex Water Company (Middlesex or the Company) is the
parent company of Tidewater Utilities, Inc. (Tidewater). White Marsh
Environmental Systems, Inc., a corporation formed during the second quarter of
1994, is a wholly-owned subsidiary of Tidewater. The financial statements for
Middlesex and its wholly-owned subsidiaries are reported on a consolidated
basis. All intercompany accounts and transactions have been eliminated.
(b) System of Accounts - Middlesex and Tidewater maintain their accounts in
accordance with the Uniform System of Accounts prescribed by the Board of Public
Utilities of the State of New Jersey (BPU) and the Public Service Commission of
Delaware (PSC), respectively.
(c) Utility Plant - Utility Plant is stated at original cost as defined for
regulatory purposes. Property accounts are charged with the cost of betterments
and major replacements of property. Cost includes direct material, labor and
indirect charges for pension benefits and payroll taxes. Middlesex capitalizes
an Allowance for Funds Used During Construction on individual projects in excess
of $0.2 million at a rate of 9%. Depreciation is computed by Middlesex on a
straight-line basis at a composite annual rate of 2.17%, which increased from
2.01% on May 1, 1993, in accordance with the rate decision as determined by the
BPU. The Accumulated Provision for Depreciation is charged with the cost of
property retired, together with removal costs less salvage. The cost of labor,
materials, supervision and other expenses incurred in making repairs and minor
replacements and in maintaining the properties is charged to the appropriate
expense accounts.
(d) Marketable Securities - Short-term investments in U.S. Treasury Bills not
otherwise reported as cash equivalents are recorded at cost, which approximates
market value.
(e) Accounts Receivable - Provision for allowance for doubtful accounts at
December 31, 1994, 1993 and 1992 and the corresponding expense and deduction for
those years is each less than $0.1 million.
(f) Revenues - Revenues are recorded as service is rendered and include
estimates for amounts unbilled at the end of the period for water used
subsequent to the last billing cycle.
(g) Deferred Charges - Unamortized Debt Expense is amortized over the lives of
the related issues. As authorized by the BPU, main cleaning and lining costs are
being amortized over a 14-year period; depreciation study, the alternate
treatment pilot study and acquisition costs over 36 months and rate case
expenses over 18 months.
(h) Income Taxes - The Company adopted SFAS No. 109, Accounting for Income
Taxes, on a prospective basis effective January 1, 1993. (See Note 3.) Middlesex
and Tidewater file a consolidated Federal income tax return and income taxes are
allocated based on the separate return method. Investment tax credits have been
deferred and are being amortized over the estimated useful life of the related
property.
(i) Statements of Cash Flows - For purposes of reporting cash flows, the Company
considers all highly liquid investments with original maturity dates of three
months or less to be cash equivalents. Cash and cash equivalents represent bank
balances, commercial paper, money market funds, and U.S. Treasury Bills maturing
in less than 90 days.
(j) Certain prior year amounts have been reclassified to conform to the current
year reporting.
NOTE 2 - RATES AND REVENUES
On April 30, 1993 the BPU approved a stipulation agreed to by the parties to the
Company's rate case which was filed in September 1992. The stipulation allowed
for an overall rate increase of 9.33% or $2.8 million, which was implemented on
May 1, 1993, based upon several elements, including an 11.5% return on equity,
an increased depreciation rate of 2.17% and the addition of two significant
construction projects to Utility Plant in the amount of $13.4 million.
On June 23, 1994, the Company received approval from the BPU to implement a
Purchased Water Adjustment Clause (PWAC). A PWAC is a regulatory vehicle that
allows New Jersey water utilities to pass along to, or credit, customers'
changes in the cost of purchasing water, without the need for filing a full base
rate case. This was the first PWAC petition filed by the Company under the
regulations adopted during 1991. The PWAC will afford the Company the
opportunity to recover approximately $0.1 million of increased costs. In
addition, on February 2, 1995, the Company filed a petition with the BPU seeking
recovery of increased purchased water costs of an additional $0.1 million.
Included in Deferred Charges-Other is $0.2 million of deferred costs at December
31, 1994 which Middlesex is recovering through rates over periods ranging from
1.3 to 14 years. The BPU has excluded these costs from rate base and, therefore,
Middlesex is not earning a return on these costs during the recovery period.
--------------------------------------------------------------------------------
17
<PAGE>
NOTE 3 - INCOME TAXES
Federal income tax expense differs from the amount computed by applying the
statutory rate on book income subject to tax for the following reasons:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(THOUSANDS OF DOLLARS)
-------------------------------
1994 1993 1992
----------------------------------------------------------------------
<S> <C> <C> <C>
Net Income $ 5,495 $ 5,480 $ 4,462
Federal Income Tax Expense (as below) 2,766 3,072 2,351
----------------------------------------------------------------------
Book Income Subject to Tax $ 8,261 $ 8,552 $ 6,813
----------------------------------------------------------------------
Income Tax at Statutory Rate of 34% $ 2,809 $ 2,908 $ 2,316
Tax Effect of:
Allowance for Funds Used During
Construction -- (94) (70)
Other (43) 258 105
----------------------------------------------------------------------
Total Federal Income Tax Expense $ 2,766 $ 3,072 $ 2,351
----------------------------------------------------------------------
</TABLE>
Federal income tax expense is comprised of the following:
<TABLE>
<S> <C> <C> <C>
Federal Income Tax - Current $ 2,219 $ 3,124 $ 1,587
Deferred Taxes (as below) 619 17 830
Investment Tax Credit (72) (69) (66)
----------------------------------------------------------------------
Total Federal Income Tax Expense $ 2,766 $ 3,072 $ 2,351
----------------------------------------------------------------------
</TABLE>
The provisions for deferred Federal income tax result from the following timing
differences:
<TABLE>
<S> <C> <C> <C>
Customer Advances $ (123) $ (217) $ (161)
Accelerated Depreciation 617 730 682
Revenue Taxes (403) (400) 406
Bond Redemptions 477 -- --
Other 51 (96) (97)
----------------------------------------------------------------------
Deferred Federal Income Tax Expense $ 619 $ 17 $ 830
----------------------------------------------------------------------
</TABLE>
The statutory review period for income tax returns for the years prior to 1991
have been closed.
The Company adopted SFAS No. 109, Accounting for Income Taxes, effective January
1, 1993. Adoption of this statement requires that deferred income taxes be set
up for all temporary differences regardless of the regulatory ratemaking
treatment. However, if it is probable that these additional taxes will be passed
on to ratepayers, an offsetting regulatory asset or liability is to be recorded
by the Company. Management believes that it is probable that the consolidated
deferred income tax liability of approximately $4.9 million resulting from the
adoption of SFAS No. 109 will be recovered in future rates and, therefore, a
regulatory asset has been set up to offset the increased liability. The adoption
of SFAS No. 109 does not have an effect on the Consolidated Statements of
Income.
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial purposes
and the amounts used for income tax purposes. The Company's net deferred tax
liability as of December 31, 1994 was $9.8 million. This amount is comprised of
a deferred tax liability related to accelerated depreciation and differences
between book and tax basis of property totaling $13.6 million, offset by $3.7
million of prepaid taxes pertaining to customer advances for construction and
other deferred tax assets of $0.1 million.
NOTE 4 - EMPLOYEE BENEFIT PLANS
The Company has a noncontributory defined benefit pension plan which covers
substantially all employees with more than 1,000 hours of service. The Company
makes annual contributions to the plan consistent with the funding requirements
of Federal laws and regulations.
Pension expense for 1994, 1993 and 1992 was $218,000, $240,000 and $193,000,
respectively.
Plan assets consist primarily of corporate equities, cash equivalents, and stock
and bond funds. The following table sets forth the plan's funded status and
amounts recognized in the Company's balance sheets.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(THOUSANDS OF DOLLARS)
--------------------------
1994 1993
----------------------------------------------------------------
<S> <C> <C>
Actuarial present value of plan
benefits:
Vested benefits $ (7,021) $ (6,729)
Nonvested benefits (43) (22)
Impact of estimated future
compensation charges (2,479) (2,315)
----------------------------------------------------------------
Projected plan benefits (9,543) (9,066)
Plan assets at fair value 9,443 9,959
----------------------------------------------------------------
Plan assets in excess of projected
plan benefits (100) 893
Unrecognized net obligation 100 114
Unrecognized net gain (77) (1,141)
----------------------------------------------------------------
Accrued pension cost recognized in
the balance sheet $ (77) $ (134)
----------------------------------------------------------------
</TABLE>
Net pension cost includes the following components:
<TABLE>
<S> <C> <C>
Service cost benefits earned
during the period $ 309 $ 295
Interest cost on projected
benefit obligation 698 665
Return on plan assets (788) (728)
Net amortization and deferral (1) 8
----------------------------------------------------------------
Net pension cost $ 218 $ 240
----------------------------------------------------------------
</TABLE>
The assumptions used in determining the actuarial present value of the projected
obligation at December 31, 1994 and December 31, 1993 were a discount rate of
8.0% and a compensation increase of 5.5%. The expected long-term rate of return
on plan assets used in determining net periodic cost was 8.0%.
Effective January 1, 1993, the Company adopted SFAS No. 106, Employers'
Accounting for Postretirement Benefits Other Than Pensions. SFAS No. 106
requires employers to accrue the estimated cost of retiree benefit payments
during the years the employee provides services.
The Company previously expensed the cost of these benefits, which are
principally health care, as premiums were incurred. SFAS No. 106 allows
recognition of the cumulative effect of the liability in the year of the
adoption or the amortization of the obligation over a period of up to twenty
years. Middlesex elected to recognize this obligation of $4.7 million over a
period of twenty years.
Middlesex provides certain health care and life insurance benefits for
substantially all of its retired employees. In 1994, 1993 and 1992, the Company
recognized $176,000, $168,000 and $245,000, respectively, as an expense for
postretirement health care and life insurance benefits. The plan's funded status
is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(THOUSANDS OF DOLLARS)
-----------------------------
1994 1993
--------------------------------------------------------------------
<S> <C> <C>
Retirees $ 1,461 $ 1,516
Fully eligible plan participants 582 505
Other active plan participants 815 708
--------------------------------------------------------------------
Accumulated postretirement benefit
obligation 2,858 2,729
--------------------------------------------------------------------
Plan assets at fair value -- --
Unrecognized net gain 2,242 2,346
Unrecognized prior service cost -- --
Unrecognized transition obligation (4,232) (4,467)
--------------------------------------------------------------------
Accrued postretirement benefit
obligation $ 868 $ 608
--------------------------------------------------------------------
</TABLE>
Net postretirement benefit cost consisted of the following components:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(THOUSANDS OF DOLLARS)
-----------------------------
1994 1993
--------------------------------------------------------------------
<S> <C> <C>
Service cost - benefits earned
during the year $ 87 $ 165
Interest cost on accumulated
postretirement benefit obligation 218 376
Amortization of net gain (104) --
Amortization of transition
obligation 235 235
Regulatory deferral (260) (608)
--------------------------------------------------------------------
Net postretirement benefit cost $ 176 $ 168
--------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
18
<PAGE>
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation for 1994 was 9% decreasing linearly each
successive year until it reaches 5% in 1998, after which it remains constant. A
one-percentage-point increase in the assumed health care cost trend rate would
increase the accumulated postretirement benefit obligation by 15% and the 1994
net postretirement benefit cost by approximately 11%. The assumed discount rate
used in determining the accumulated postretirement benefit obligation was 8%.
Middlesex sought rate relief for the increased costs in the 1993 stipulated rate
case. The stipulation, approved by the BPU, provided that the costs 'will
continue to be included in Petitioner's cost of service for ratemaking purposes
and recoverable in rates on a pay-as-you-go basis; and the costs prudently
incurred and booked in accordance with SFAS No. 106 will be recoverable in
future rates; and Middlesex will account for the difference between the accrued
costs as determined under SFAS No. 106 and the level of pay-as-you-go costs
built into rates as a regulatory asset pursuant to SFAS No. 71, Accounting for
the Effects of Certain Types of Regulation.' SFAS No. 71 allows regulated
entities to defer costs that are normally expensed, where it is probable by the
actions of the regulator, that recovery in future rates is allowable. The
regulatory asset at December 31, 1994, and 1993 was $0.9 million and $0.6
million, respectively.
The stipulation also provided that 'the issue of cash versus accrual accounting
should be revisited, and, to the extent that it is determined that proper
ratemaking policy or regulations or policy statements issued by the Financial
Accounting Standards Board or the Securities and Exchange Commission require a
change to accrual accounting for ratemaking purposes, the accumulated regulatory
asset will be recoverable in rates over an appropriate amortization period.'
The Company maintains a restricted stock plan, under which 33,800 shares of the
Company's common stock are held in escrow by the Company for key employees. Such
stock is subject to an agreement requiring forfeiture by the employee in the
event of termination of employment within five years of the grant other than as
a result of retirement, death or disability.
The maximum number of shares authorized for grant under this plan is 60,000
shares. Compensation expense is determined by the market value of the stock on
the date of the award and is being amortized over a five-year period. The
expense for 1994, 1993 and 1992 was not considered material.
NOTE 5 - COMMITMENTS AND CONTINGENT LIABILITIES
In October 1994, the Company signed a contract to purchase the assets of a 2,200
customer water utility and a 2,200 customer wastewater utility in Burlington
County, New Jersey. The newly acquired systems will be called Pinelands Water
Company and Pinelands Sewer Company. Approval is required by the BPU before the
Company assumes ownership, which is expected by March 31, 1995. The purchase
price of $2.4 million will be satisfied with a cash payment of $1.2 million,
upon BPU approval, and a five-year note payable for the balance. These systems
will not have a material impact on the Company's revenues and will require
substantial rate increases to attain profitability.
The Company has agreements with both the Elizabethtown Water Company and the New
Jersey Water Supply Authority (NJWSA) for the purchase of water. The agreement
with Elizabethtown, which expires December 31, 1995, provides for the minimum
purchase of 2 million gallons daily (mgd) of treated water with provisions for
additional purchases. The 1994, 1993 and 1992 costs under this agreement were
$1.0 million, $0.9 million and $0.8 million, respectively.
The NJWSA agreement, which expires November 1, 2013, provides for the minimum
purchase of 20 mgd of untreated water from the Delaware and Raritan Canal. In
addition, the Company has a supplemental one-year agreement for an additional 5
mgd renewed through April 30, 1995. This agreement is renewable on an annual
basis. The total annual cost for 1994, 1993 and 1992 was $1.8 million, $1.9
million and $1.7 million, respectively.
The Company plans to spend approximately $6.1 million in 1995 on its
construction program. Substantially all of the utility plant of the Company is
subject to the lien of its mortgage which also includes certain restrictions as
to cash dividend payments and other distributions on common stock.
A local entity and its owner have filed a negligence claim against the Company,
for which the Company is insured, with a claim for punitive damages which may
not be insured. Their action alleges financial losses arising out of improper
water pressure and service. Without taking a position on the negligence claim,
the Company does not believe that the claim for punitive damages will prevail.
The Company has been named along with an officer in litigation where the
plaintiff asserts that the Company's officer, acting in the course of his
employment, defamed the plaintiff. The Company believes that its liability
insurance is sufficient to respond to the claim and notes that the carrier is
providing a defense. That liability insurance would not provide coverage were it
determined that the Company or its officer acted with knowledge that statements
made about plaintiff were false. While the outcome of these cases is not
presently determinable, management believes that the final resolution will not
have a significant effect on the Company's financial position or results of
operations or cash flows.
NOTE 6 - LINES OF CREDIT, NOTES PAYABLE AND RESTRICTED CASH
<TABLE>
<CAPTION>
(THOUSANDS OF DOLLARS)
-------------------------------
1994 1993 1992
---------------------------------------------------------------------
<S> <C> <C> <C>
Established Lines of Credit $ 15,500 $ 20,000 $ 15,000
Amounts Outstanding at December 31 -- 9,000 1,050
Maximum Amount Outstanding 11,000 9,000 6,000
Average Outstanding Balance 1,769 5,435 858
Weighted Average Interest Rate 3.4% 3.5% 4.4%
</TABLE>
Short-term borrowings are generally below the prime rate with some requirements
for compensating balances not exceeding 3% of the line.
Temporary cash investments of $0.3 million at the end of 1994 represented the
balance of New Jersey Economic Development Authority (NJEDA) Bond Proceeds held
in trust and its use is restricted to specific expenditures.
NOTE 7 - RELATED PARTY TRANSACTIONS
During 1994, 1993 and 1992, the Company had transactions with a construction
company in which a Director has a financial interest. Major construction
transactions were awarded on the basis of negotiated bids approved by the Board
of Directors (with the interested Director abstaining) and amounted to $0.6
million, $0.6 million and $0.3 million for the years 1994, 1993 and 1992,
respectively. These amounts included less than $0.1 million due the construction
company at December 31, 1994, 1993 and 1992.
NOTE 8 - QUARTERLY OPERATING RESULTS - UNAUDITED
Quarterly operating results for 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER YEAR
------------------------------------------------------------
1994 (THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Revenues $ 8,569 $ 9,196 $ 9,457 $ 8,900 $ 36,122
Operating Income 1,950 2,238 2,451 1,926 8,565
Net Income 1,208 1,520 1,617 1,150 5,495
Earnings per Common
Share $ 0.29 $ 0.37 $ 0.39 $ 0.28 $ 1.33
1993
-------------------------------------------------------------------------------------
Operating Revenues $ 7,769 $ 8,778 $ 10,175 $ 8,757 $ 35,479
Operating Income 1,636 2,040 2,646 1,903 8,225
Net Income 1,105 1,404 1,876 1,095 5,480
Earnings per Common
Share $ 0.27 $ 0.34 $ 0.46 $ 0.26 $ 1.33
</TABLE>
The information above, in the opinion of the Company, includes all adjustments
consisting only of normal recurring accruals necessary for a fair presentation
of such amounts. The business of the Company is subject to seasonal fluctuation
with the peak period usually occurring during the summer months.
NOTE 9 - CAPITALIZATION
All the transactions discussed in Note 9 related to the issuance or redemption
of securities were approved by the BPU, except where noted.
--------------------------------------------------------------------------------
19
<PAGE>
Common Stock
The Company sold 300,000 shares of no par common stock in December 1992 at a
price of $17.25 per share. The net proceeds of $4.9 million were used to reduce
short-term bank borrowings.
In May 1993, the number of shares available for issue and sale under the
Company's Dividend Reinvestment and Common Stock Purchase Plan (DRP) was
increased by 500,000 to a total of 900,000 shares. The cumulative number of
shares issued under the DRP at December 31, 1994 is 531,278.
During 1994, 1993 and 1992, 51,447 shares ($0.9 million), 88,416 shares ($1.6
million), and 88,409 shares ($1.3 million) of common stock were issued under DRP
and the restricted stock plan, respectively.
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.
Long-term Debt
On March 1, 1993, the Company redeemed the $2.5 million, 10.50%, Series P First
Mortgage Bonds, originally due March 1, 2003, and the redemption was funded by
issuing Series P-1 First Mortgage Bonds due December 1, 1993.
On September 29, 1993, the Company issued $18.5 million of First Mortgage Bonds.
Proceeds of the $12 million, designated as Series S, with a maturity date of
October 1, 2022, and an interest rate of 5.20%, were used to redeem the Series O
First Mortgage Bonds ($9.5 million) and the Series P-1 First Mortgage Bonds
($2.5 million). Proceeds of the $6.5 million, designated as Series T, with a
maturity date of October 1, 2023, and an interest rate of 5.25% were used to
fund certain capital projects, including portions of Section B of the South
River Basin Transmission Main and the Park Avenue Well Field Treatment
Facilities.
On February 1, 1994, the Company redeemed the $10 million, 8%, Series Q First
Mortgage Bonds, originally due August 1, 2018. This redemption was funded by
issuing $10 million, 5.25%, Series V First Mortgage Bonds due February 1, 2029.
Series O, P and Q were originally issued in cooperation with the NJEDA. The
subsequent redemption of these bonds was also accomplished through the NJEDA.
The interest on the Series S, T and V is tax-exempt for Federal and New Jersey
income tax purposes. However, the interest on Series T and V is subject to
Alternative Minimum Tax.
On February 2, 1994, the Company issued $15 million of taxable First Mortgage
Bonds designated as Series U with a maturity date of February 1, 2009 and a
coupon rate of 6.40%. In anticipation of this bond issue, the Company redeemed
Series J ($2.5 million), Series L ($2.0 million) and Series N ($1.5 million) on
December 1, 1993; Series I ($4.8 million) on December 31, 1993; and Series K
($2.5 million) on February 1, 1994. The balance of the proceeds from Series U
was used to reimburse the Company for previously incurred financing costs.
Preferred Stock
If four or more quarterly dividends are in arrears, the preferred shareholders,
as a class, are entitled to elect two members to the Board of Directors in
addition to Directors elected by holders of the common stock.
In 1992, the Company issued 17,000 shares of no par $7.00 Cumulative and
Convertible preferred stock (convertible) for the acquisition of Tidewater. The
conversion feature, which is effective five years from the date of issue, allows
the security holders to exchange one convertible preferred share for six shares
of the Company's common stock. In addition, the Company may redeem up to 10% of
the outstanding convertible stock in any calendar year at a price equal to the
fair market value of six shares of the Company's common stock for each share of
convertible stock redeemed. As a result of the settlement of certain
pre-acquisition tax liabilities, 2,099 shares were returned to and retired by
the Company.
On February 1, 1994, the Company redeemed and retired all the outstanding
preferred shares of the $6.00 Series (7,800 shares) and $8.25 Series (4,440
shares) at the stated redemption price of $101 per share, for $1.2 million.
Both the $4.75 Series and the $7.00 Series are redeemable at the option of the
Company, and in November an offer to purchase the $7.00 Series at the stated
redemption price of $100 per share was extended to all holders of this stock.
The Company has redeemed and retired 245 shares of the $7.00 Series as of
December 31, 1994. Since there is no premium associated with the redemption,
approval from the BPU was not required.
________________________________________________________________________________
Independent Auditors' Report
MIDDLESEX WATER COMPANY:
[ LOGO ]
We have audited the accompanying consolidated balance sheets and consolidated
statements of capital stock and long-term debt of Middlesex Water Company and
its subsidiaries as of December 31, 1994 and 1993 and the related consolidated
statements of income, retained earnings and of cash flows for each of the three
years in the period ended December 31, 1994. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Middlesex Water Company and its
subsidiaries at December 31, 1994 and 1993 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1994 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Parsippany, New Jersey
February 13, 1995
--------------------------------------------------------------------------------
20
<PAGE>
CONSOLIDATED SELECTED FINANCIAL DATA
(Thousands of Dollars Except per Share Data)
<TABLE>
<CAPTION>
1994 1993 1992 (1) 1991 1990 1989 1984
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES $ 36,122 $ 35,479 $ 30,861 $ 29,853 $ 26,417 $ 23,499 $ 19,100
------------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Operations and Maintenance 16,798 16,584 14,681 13,454 13,185 11,544 8,487
Depreciation 2,650 2,376 1,961 1,834 1,592 1,398 945
Taxes, other than Income Taxes 5,343 5,222 4,620 5,132 4,201 3,827 2,863
Income Taxes 2,766 3,072 2,351 2,377 1,426 1,415 1,927
------------------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSE 27,557 27,254 23,613 22,797 20,404 18,184 14,222
------------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 8,565 8,225 7,248 7,056 6,013 5,315 4,878
OTHER INCOME/(EXPENSE) - NET (26) 269 481 205 282 670 124
------------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE
INTEREST CHARGES 8,539 8,494 7,729 7,261 6,295 5,985 5,002
------------------------------------------------------------------------------------------------------------------------------------
INTEREST CHARGES 3,044 3,014 3,267 3,156 2,828 2,998 2,151
------------------------------------------------------------------------------------------------------------------------------------
NET INCOME 5,495 5,480 4,462 4,105 3,467 2,987 2,851
PREFERRED STOCK DIVIDEND REQUIREMENTS 188 256 186 161 166 171 194
------------------------------------------------------------------------------------------------------------------------------------
EARNINGS APPLICABLE TO COMMON
STOCK $ 5,307 $ 5,224 $ 4,276 $ 3,944 $ 3,301 $ 2,816 $ 2,657
------------------------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE OF COMMON STOCK $ 1.33 $ 1.33 $ 1.20 $ 1.14 $ 0.96 $ 0.91 $ 1.02
Average Number of Shares
Outstading for the Year 4,003,393 3,924,363 3,568,499 3,477,406 3,439,042 3,089,968 2,609,012
Dividends Declared and Paid $ 1.053/4 $ 1.011/4 $ 0.97 $ 0.941/2 $ 0.921/2 $ 0.893/4 $ 0.711/4
Total Assets $ 132,413 $ 125,676 $ 113,843 $ 100,014 $ 93,093 $ 92,058 $ 70,118
Redeemable Preferred Stock -- $ 1,158 $ 1,224 $ 1,290 $ 1,356 $ 1,422 $ 1,752
Long-term Debt $ 49,500 $ 37,000 $ 42,550 $ 45,350 $ 39,350 $ 39,350 $ 30,610
</TABLE>
STATISTICAL SUMMARY
<TABLE>
<CAPTION>
1994 1993 1992 (1) 1991 1990 1989 1984
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES (Thousands of Dollars):
-------------------------------------------------------------------------------------------------------------------------------
Residential $ 14,306 $ 14,042 $ 11,733 $ 11,624 $ 10,533 $ 9,890 $ 9,007
Commercial 4,282 4,170 3,616 3,549 3,287 2,968 2,288
Industrial 6,598 6,481 6,044 5,768 5,349 4,829 4,711
Fire Protection 4,352 4,312 3,905 3,772 3,512 3,166 2,671
Contract Sales 6,322 6,232 5,477 5,098 3,635 2,622 192
Other 262 242 86 42 101 24 231
-------------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES $ 36,122 $ 35,479 $ 30,861 $ 29,853 $ 26,417 $ 23,499 $ 19,100
CAPITALIZATION RATIOS:
Long-term Debt 51% 50% 49% 56% 53% 53% 54%
Preferred Stock 3 4 5 3 4 4 5
Common Stock Equity 46 46 46 41 43 43 41
-------------------------------------------------------------------------------------------------------------------------------
TOTAL RATIOS 100% 100% 100% 100% 100% 100% 100%
BOOK VALUE OF COMMON STOCK $ 11.13 $ 10.77 $ 10.29 $ 9.44 $ 9.25 $ 9.21 $ 7.89
Meters in Service 58,371 57,318 56,340 52,356 52,167 51,931 49,240
Population Served (Retail) 233,000 229,000 225,000 209,000 209,000 208,000 197,000
Miles of Main (2) 663 661 655 654 647 644 622
Fire Hydrants (2) 4,092 4,072 4,046 4,024 4,011 3,986 3,744
Pumpage (million gallons) 16,794 16,789 15,174 14,572 13,390 12,688 9,207
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes Tidewater Utilities, Inc. as of October 20, 1992.
(2) Excludes Tidewater Utilities, Inc.
--------------------------------------------------------------------------------
21
EXHIBIT 23
Independent Auditors' Consent
We consent to the incorporation by reference in Registration Statement No.
33-11717 of Middlesex Water Company on Form S-3 of our report dated February
13, 1995 incorporated by reference in this Annual Report on
Form 10-K of Middlesex Water Company and its subsidiaries for the year ended
December 31, 1994
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
March 28, 1995
<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000066004
<NAME> MIDDLESEX WATER COMPANY
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 108,743,013
<OTHER-PROPERTY-AND-INVEST> 400,209
<TOTAL-CURRENT-ASSETS> 12,952,555
<TOTAL-DEFERRED-CHARGES> 10,316,981
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 132,412,758
<COMMON> 27,151,673
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 17,699,422
<TOTAL-COMMON-STOCKHOLDERS-EQ> 44,851,095
0
2,790,105
<LONG-TERM-DEBT-NET> 49,500,000
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 35,271,558
<TOT-CAPITALIZATION-AND-LIAB> 132,412,758
<GROSS-OPERATING-REVENUE> 36,122,475
<INCOME-TAX-EXPENSE> 2,766,361
<OTHER-OPERATING-EXPENSES> 24,791,314
<TOTAL-OPERATING-EXPENSES> 27,557,675
<OPERATING-INCOME-LOSS> 8,564,800
<OTHER-INCOME-NET> (25,731)
<INCOME-BEFORE-INTEREST-EXPEN> 8,539,069
<TOTAL-INTEREST-EXPENSE> 3,043,697
<NET-INCOME> 5,495,372
188,357
<EARNINGS-AVAILABLE-FOR-COMM> 5,307,015
<COMMON-STOCK-DIVIDENDS> 4,231,410
<TOTAL-INTEREST-ON-BONDS> 2,885,250
<CASH-FLOW-OPERATIONS> 8,841,516
<EPS-PRIMARY> 1.33
<EPS-DILUTED> 1.33
</TABLE>
