PROSPECTUS
[LOGO]
MIDDLESEX WATER COMPANY
450,000 SHARES COMMON STOCK (WITHOUT PAR VALUE)
Our Common Stock is quoted on the Nasdaq National Market under the symbol,
"MSEX." On December 14, 1998, the last reported sale price of the Common Stock
on Nasdaq was $24.625 per share. See "COMMON STOCK PRICE RANGE AND DIVIDENDS."
BEFORE INVESTING IN THE COMMON STOCK, YOU SHOULD REVIEW
THE SECTION OF THIS PROSPECTUS CALLED "RISK FACTORS"
WHICH BEGINS ON PAGE 6.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC AND COMMISSIONS(1) THE COMPANY(2)
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Per Share ........ $24.625 $1.01 $23.615
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Total(3) ......... $11,081,250 $454,500 $10,626,750
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(1) We have agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting expenses of the offering payable by us estimated at
$135,000.
(3) We have granted to the Underwriters an option, exercisable within 30 days
after the date of this Prospectus, to purchase up to 67,000 additional
shares of Common Stock upon the same terms and conditions as the shares
offered hereby to cover over-allotments, if any. If the Underwriters
exercise such option in full, the total Price to Public, Underwriting
Discounts and Commissions, and Proceeds to the Company will be increased to
$12,731,125, $522,170 and $12,208,955, respectively. See "Underwriting."
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The Underwriters are offering the shares of Common Stock subject to prior sale
and their acceptance of the shares from us. Our sale of the shares of Common
Stock to the Underwriters is subject to a number of conditions. The Underwriters
expect to deliver the shares of Common Stock to purchasers at the offices of
Edward D. Jones & Co., L.P. in St. Louis, Missouri, on or about December 21,
1998.
EDWARD D. JONES & CO., L.P. JANNEY MONTGOMERY SCOTT INC.
The date of this Prospectus is December 15, 1998
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TABLE OF CONTENTS
PAGE
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PROSPECTUS SUMMARY..........................................................4
THE OFFERING................................................................5
RISK FACTORS................................................................7
FORWARD LOOKING STATEMENTS .................................................9
USE OF PROCEEDS.............................................................9
THE PROJECT.................................................................9
THE COMPANY................................................................10
SELECTED CONSOLIDATED FINANCIAL INFORMATION................................16
MANAGEMENT'S DISCUSSION AND ANALYSIS.......................................18
COMMON STOCK PRICE RANGE AND DIVIDENDS.....................................22
DESCRIPTION OF COMMON STOCK................................................23
DIVIDEND REINVESTMENT PLAN.................................................24
UNDERWRITING...............................................................25
LEGAL MATTERS..............................................................26
EXPERTS....................................................................26
WHERE YOU CAN FIND MORE INFORMATION........................................26
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................26
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION OF A PENALTY BID.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP MEMBERS
MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON NASDAQ
IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."
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PROSPECTUS SUMMARY
This Prospectus Summary calls your attention to selected information in
this document, but may not contain all the information that is important to you.
Unless otherwise indicated we have assumed, in presenting information about
outstanding shares of common stock, including per share information, that the
Underwriters' over-allotment option will not be exercised. To understand the
offering fully and for a more complete description of the offering you should
read this entire document carefully, including especially the "Risk Factors"
section, as well as the documents we have referred you to. See "Incorporation of
Certain Documents by Reference."
OUR COMPANY
Middlesex Water Company ("Middlesex Water") has operated as a regulated
water utility in central New Jersey since 1897. Since 1992, Middlesex Water has
acquired water systems in other parts of New Jersey and in Delaware, and today
has five operating subsidiaries, one of which has two subsidiaries of its own.
We will refer to Middlesex Water and its subsidiaries as the "Company" in this
Prospectus.
Our primary business is treating, and distributing water on a retail basis
to residential, commercial, industrial and fire protection customers in parts of
New Jersey and Delaware. We also provide water and treatment services on a
wholesale basis under contract to five municipalities and two municipal
utilities authorities. Under a contract with the City of South Amboy, New
Jersey, we operate and maintain that City's 2,600 customer water system. As of
September 30, 1998, we served approximately 67,200 retail customers and seven
contract customers. We also operate a wastewater system serving 2,200 retail
customers and, under contract, a municipal wastewater system in New Jersey.
We are regulated as to rates charged to customers for water and wastewater
services, as to the quality of water we provide and as to certain other matters.
Our revenues and income are significantly affected by the timing and amounts of
rate increases approved by regulatory authorities. See "RISK FACTORS--Our
Business is Subject to Rate Regulation" and "THE COMPANY--Regulation."
OUR STRATEGY
To support our existing and expanding operations, we strive to maintain and
strengthen our position as a reliable supplier of quality water in all of our
systems. We will continue to seek new service areas and to consider acquisitions
of other water and wastewater systems. In addition, we will try to contract with
municipalities to operate and manage their water systems. We also plan to
continue to increase our customer base in New Jersey and Delaware. We may also
seek to acquire companies in water- and wastewater-related businesses that are
not regulated utilities.
MAINTAIN AND STRENGTHEN OUR POSITION AS A PROVIDER OF QUALITY WATER. We
believe that we meet or exceed all primary regulatory requirements for water
quality. We also believe that we have adequate supplies to provide water in
sufficient quantities to meet our customers' current requirements in all of our
service areas. In order to maintain and improve our ability to provide quality
water in sufficient quantities, we regularly upgrade our facilities. We are
currently upgrading and expanding our Carl J. Olsen Water Treatment Plant (which
we will refer to as the "CJO Plant") in Edison, New Jersey in order to meet more
stringent regulatory requirements anticipated for water quality and to increase
our capacity to meet peak-day demands for water in the utility system serviced
by the CJO Plant. We will refer to the upgrading and expansion of the CJO Plant
as the "Project". See "THE PROJECT." We will also continue to improve our
central New Jersey distribution system by cleaning and cement lining unlined
pipe.
INCREASE CONTRACT SERVICES. We operate and maintain the 2,600 customer
water system of the City of South Amboy, New Jersey under a 1995 contract with
that city which is renewable at five year intervals. On December 1, 1998, we
signed a contract to acquire, subject to final ordinance adoption and regulatory
approval, a franchise from the City to provide water service and to install
water system facilities in South Amboy. On December 8, 1998 we signed a contract
with the City of Perth Amboy, New Jersey, to operate and maintain its 8,200
customer water and wastewater systems. We expect to enter into a subcontract
with an experienced sewer contractor for the operation and maintenance of the
wastewater system once bond financings related to the Perth Amboy contract are
completed. We are also currently negotiating with a third New Jersey
municipality to enter into a multi-year treating and pumping contract. Because
we believe contracts with municipalities provide another way for us to expand
our service
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territories and increase the number of customers we serve, we continue to seek
opportunities to enter into contracts with additional municipalities to operate
their water systems.
INCREASE CUSTOMER BASE. Since 1992, we have increased our retail customer
base in Delaware from approximately 3,000 to approximately 11,000 today through
acquisitions and customer growth. We have also acquired a 2,200 customer water
utility and a 2,200 customer wastewater utility in Burlington County, New
Jersey. We will continue to seek opportunities to increase our customer base by
acquiring additional service areas, water utilities and other water- or
wastewater-related companies in New Jersey and Delaware. There is significant
economic development and population growth near several of our Delaware service
areas.
OUR ADDRESS AND TELEPHONE NUMBER
Our executive offices are located at 1500 Ronson Road, Iselin, New Jersey
08830-3020 and our telephone number is (732) 634-1500.
THE OFFERING
Common Stock, no par value 450,000 Shares
Common Stock to be outstanding 4,818,847 Shares
after the offering
Nasdaq symbol MSEX
Common Stock 52-week price range $18-$25.75
(through December 14, 1998)
Annualized dividend rate (1) $1.18 per Share.
Use of proceeds We will use most of the net
proceeds of this offering to
fund part of the cost of the
upgrade and expansion of our
CJO Plant in Edison, New
Jersey. See "THE PROJECT." We
will use the remaining net
proceeds of this offering for
other capital expenditures to
upgrade our utility systems.
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(1) The annualized dividend rate gives effect to the increase announced October
22, 1998, in our quarterly dividend to $0.295 per share, paid on December
1, 1998, to shareholders of record November 16, 1998. We also have a
Dividend Reinvestment and Common Stock Purchase Plan. See "DESCRIPTION OF
COMMON STOCK" and "DIVIDEND REINVESTMENT PLAN."
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SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except share and per share data)
This summary of financial information as of, and for the years ended,
December 31, 1995, 1996 and 1997 was taken from and should be read along with
the additional financial statements contained in our most recent Annual Report
on Form 10-K. Information as of, and for the periods ended, September 30, 1997
and 1998 was taken from financial statements that have not been audited but
which, we believe, fairly present our financial position and results of
operations for those periods and should be read along with our most recently
filed Quarterly Reports on Form 10-Q. See "WHERE YOU CAN FIND MORE INFORMATION."
<TABLE>
<CAPTION>
CONSOLIDATED INCOME STATEMENT DATA:
Nine Months Ended Year Ended
September 30, December 31,
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1998 1997 1997 1996 1995
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<S> <C> <C> <C> <C> <C>
Operating Revenues $ 32,434 $ 30,241 $ 40,294 $ 38,025 $ 37,847
Operating Expenses 25,241 23,544 31,526 29,802 29,184
Net Income 5,185 4,487 5,861 5,168 5,704
Earnings Applicable
to Common Stock 4,946 4,341 5,635 5,009 5,545
Earnings per Share of Common Stock:
Basic $1.14 $1.03 $1.33 $1.20 $1.36
Diluted 1.13 1.02 1.33 1.20 1.36
Dividends Paid
per Share $.855 $.84 $1.125 $1.105 $1.085
Average Number of Shares
Outstanding
Basic 4,326,337 4,226,241 4,235,082 4,169,334 4,078,890
Diluted 4,552,763 4,346,792 4,382,345 4,258,740 4,168,296
<CAPTION>
CONSOLIDATED BALANCE SHEET DATA:
As of September 30, As of December 31,
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1998 1997 1997 1996 1995
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<S> <C> <C> <C> <C> <C>
Total Assets $191,415 $156,706 $159,761 $148,660 $144,822
Utility Plant - Net 152,045 130,853 135,071 121,245 117,933
Common Equity 54,330 50,839 51,226 49,216 47,644
Convertible Preferred Stock 3,894 3,896 3,894 1,565 1,565
Nonredeemable Preferred Stock 1,102 1,102 1,102 1,102 1,102
Long-term Debt 75,884 52,929 52,918 52,961 52,960
(excluding current portion)
</TABLE>
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RISK FACTORS
We have described for you below some risks involved in investing in the
Common Stock offered under this Prospectus. A word of caution: the list is not a
complete list of every risk. You should carefully consider each of the following
factors and all of the information both in this Prospectus and in the other
documents we have filed with the Securities and Exchange Commission which are
incorporated in this Prospectus by reference.
OUR BUSINESS IS SUBJECT TO RATE REGULATION. The New Jersey Board of Public
Utilities, which we call the "BPU" in this Prospectus, regulates all of our
public utility companies in New Jersey. The BPU regulates these utilities with
respect to rates and charges for service, classification of accounts, awards of
new service territory, acquisitions and other matters. That means, for example,
that we cannot raise the rates we charge to our customers without first filing a
petition with the BPU and going through a lengthy administrative and hearing
process. In much the same way, the Delaware Public Service Commission, which we
call the "PSC" in this Prospectus, regulates our public utility companies in
Delaware. We cannot give assurances of when we or our subsidiaries will request
approval for any such matter, nor can we predict whether the BPU or PSC will
approve, deny or reduce the amount of any such requests. See" THE COMPANY --
Regulation -- Regulation of Rates and Services."
WE ARE SUBJECT TO ENVIRONMENTAL AND OTHER GOVERNMENTAL LAWS AND REGULATION.
The U.S. Government, New Jersey, Delaware and local agencies regulate many
aspects of our business. Among the most important of these are our water
diversion rights, our water quality and other environmental matters. We believe
that all of our systems are currently in compliance in all important respects
with these regulations. We cannot predict, however, whether we will be able to
continue to comply with these laws and regulations as they may change in the
future. If we fail to comply with government regulations, it could have a
material adverse effect on our financial condition and our ability to earn
income, which we refer to in this Prospectus as "results of operations."
Federal, state and local governments also regulate the quality of water we
supply to our customers, as well as our water supply, treatment and distribution
systems. We believe that all of our systems are currently in compliance in all
important respects with the primary water quality regulations. Government
agencies continually review these regulations and may propose new, more
restrictive requirements in the future. These may include stricter limitations
on the permissible levels of certain chemicals and compounds in the water. We do
not know what the costs may be to meet stricter limits, if adopted as new laws
or regulations. Those costs could be very high and may adversely affect our
financial condition and results of operations. See "RISK FACTORS -- Our Business
Is Subject To Rate Regulation" and "THE COMPANY -- Regulation -- Water Quality
and Environmental Regulations."
The BPU requires that we conduct management audits on a periodic basis. We
either have completed or are in the process of completing changes recommended by
the BPU in response to our most recent management audit. We do not believe any
of the recommended changes will materially or adversely affect us or our
operations. There can be no assurance, however, that future audits will not
result in changes which materially and adversely affect our financial condition
and results of operations.
WE HAVE LONG-TERM CONTRACTUAL OBLIGATIONS FOR WATER AND WASTEWATER SYSTEM
OPERATION AND MAINTENANCE. We and certain of our subsidiaries have, or are
negotiating to enter into, multi-year contracts to operate and maintain water
systems and wastewater systems. See "THE COMPANY -- Strategy -- Increase
Contract Services." None of these contracts protect us or our subsidiaries
against incurring costs in excess of payments we will receive. While we do not
currently anticipate any cost overruns, there can be no assurance that we will
not experience losses under these contracts. In addition, these contracts may
involve leased municipal employees, which unlike our own employees, are members
of unions who have collective bargaining agreements with their municipal
employers. Any losses or labor difficulties under these contracts may have a
material adverse effect on our financial condition and results of operations.
WE REQUIRE FINANCING FOR EXPANSION AND CONSTRUCTION. We need money to
continue our expansion efforts and to fund our construction program. With the
proceeds from this offering and funds already received from bond issuances, as
well as existing lines of credit from banks, we believe we have sufficient funds
to support planned capital expenditures through 2000. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS-- Liquidity and Capital Resources." We may find in the
future that sufficient capital is not available, or that the cost of capital is
too high for future expansion and construction. Any failure to obtain adequate
capital to finance our expansion and construction programs could have a material
adverse effect on our financial condition and results of operations.
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WE ARE DEPENDENT UPON OUR WATER SUPPLY. Our ability to meet the existing
and future water demands of our customers is dependent upon an adequate supply
of water. Unexpected conditions may interfere with our sources of water supply.
Drought and overuse of underground acquifers may limit the availability of
ground water as a source of water supply. These factors might adversely affect
our ability to supply water in sufficient quantity to our customers in
Burlington County, New Jersey and in Delaware. Any interruption in our water
supply could have a material adverse effect on our financial condition and
results of operations. See "THE COMPANY -- Water Supplies and Contracts."
WE HAVE COMPETITION FROM OTHER UTILITIES AND PRIVATIZATION. We face the
risks of competition from other utilities authorized by federal, state or local
agencies. Once a utility regulator grants a service territory to a utility, that
utility is usually the only one permitted to service that territory. Although a
new territory offers some protection against competitors, the pursuit of
additional service territories is competitive, especially in Delaware. Competing
utilities may challenge any future application by the Company for new service
territories. Third parties may also seek to expand their water service by taking
over and/or entering into long-term agreements to operate municipal systems.
Those developments, which we call privatization, might adversely affect the
Company and its long-term contracts to supply water on a wholesale basis to
municipalities. See "THE COMPANY -- Competition" and "--Regulation."
WE ARE SUBJECT TO YEAR 2000 SYSTEM RISK. Software used in many computer
systems and computerized control devices was designed to record only the last
two digits of each year. This software, some of which we own, may not function
properly as of January 1, 2000 because it interprets the new year as 1900. We
have evaluated our own computer systems, to make certain that those systems will
work properly when 1999 becomes 2000. We have also requested certification of
Year 2000 compliance from the vendor of the new Supervisory Control And Data
Acquisition system (which we refer to as "SCADA" in this Prospectus), as well as
the principal vendors of data processing serving our financial reporting,
payroll, billing, customer information and shareholder record systems. The
vendors have certified that their systems have been tested and will work
properly. We believe we may reasonably rely on those certifications. We also
expect to spend up to $10,000 to bring other operating systems, including our
network of desktop personal computers, into Year 2000 compliance. Nonetheless,
we may not have identified every computerized control device of ours which may
be affected by the Year 2000. Even if identified, we may not be able to
reprogram or replace those devices before January 1, 2000. More importantly, we
cannot assess the impact on us of failures of computer systems and control
devices used by others. We are especially concerned about third parties who
provide significant services and materials to process, treat and distribute
water and to process, treat and dispose of wastewater, and about the possible
failure of electric power and telecommunications or the inability to obtain
diesel fuel for the Company's stand-by generators. The occurrence of any such
Year 2000-related problem could have a material adverse effect on our financial
condition and results of operations.
WE HAVE RESTRICTIONS ON DIVIDENDS. Our Restated Certificate of
Incorporation and our Indenture of Mortgage dated as of April 1, 1927, as
supplemented since then, which we call the "Mortgage" in this Prospectus, impose
conditions on our ability to pay dividends. We have paid dividends on our Common
Stock each year since 1912 and have increased the amount of dividends paid each
year since 1973. Our earnings, financial condition, capital requirements,
applicable regulations and other factors, including the timeliness and adequacy
of rate increases, will determine both our ability to pay dividends on Common
Stock and the amount of those dividends. There can be no assurance that we will
continue to pay dividends in the future or, if dividends are paid, that they
will be in amounts similar to past dividends. See "DESCRIPTION OF COMMON STOCK"
and "PRICE RANGE OF COMMON STOCK AND DIVIDENDS."
WE ARE SUBJECT TO ANTI-TAKEOVER MEASURES. Subsection 10A of the New Jersey
Business Corporation Act, known as the Shareholder Protection Act, applies to
us. The Shareholder Protection Act deters merger proposals, tender offers or
other attempts to effect changes in control of the Company that are not
negotiated and approved by our Board of Directors. In addition, we have a
classified Board of Directors, which means only one third of the Directors are
elected each year. A classified Board can make it harder for an acquirer to gain
control by voting its candidates onto the Board of Directors and may also deter
merger proposals and tender offers. Our Board of Directors also has the ability,
subject to obtaining BPU approval, to issue one or more series of preferred
stock having such number of shares, designation, preferences, voting rights,
limitations and other rights as the Board of Directors may fix. This could be
used to discourage, delay or prevent an acquisition. See "DESCRIPTION OF COMMON
STOCK."
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FORWARD LOOKING STATEMENTS
We discuss certain matters in this document which are not historical facts,
but which are "forward looking statements." We intend these "forward looking
statements" to qualify for safe harbors from liability established by the
Private Securities Litigation Reform Act of 1995. These "forward looking
statements" include, but are not limited to, future plans, objectives,
expectations and events concerning various matters such as capital expenditures,
earnings, litigation, growth potential, and rate and other regulatory matters.
The "forward looking statements" in this Prospectus reflect what we currently
anticipate will happen in each case. What actually happens could differ
materially from what we currently anticipate will happen. We are not promising
to make any public announcement when we think "forward looking statements" in
this document are no longer accurate, whether as a result of new
information, what actually happens in the future or for any other reason.
USE OF PROCEEDS
The net proceeds from the sale of the 450,000 shares of Common Stock
offered by this Prospectus, after deducting the Underwriters' discount and
estimated offering expenses, are estimated to be $10,491,750 ($12,073,955 if the
Underwriters' over-allotment option is exercised in full). The Company expects
to use approximately $7,100,000 of the net proceeds to fund a portion of the $38
million estimated cost of the Project. The balance of the net proceeds,
approximately $3,391,750, will be used for other capital expenditures to upgrade
our utility systems. The remaining costs of the Project have been financed by
(i) the proceeds of the issuance in March 1998, of the Company's $23 million,
5.35% Series W Mortgage Bond issued in March, 1998 and (ii) $7.9 million from
operations of the Company.
THE PROJECT
The Project is a construction project consisting of the upgrade, expansion
and addition of facilities at the CJO Plant, the Company's principal water
treatment facility, and related water intake station for our utility system in
central New Jersey. The Project includes the installation of new flash mixers
and new chemical storage and feed facilities. The existing conventional
sedimentation basins are being replaced by high rate upflow clarifiers that are
intended to remove turbidity more effectively . The chlorine application point
is being relocated from preclarification to postclarification. The existing
sedimentation basins are to be used as chlorine contact basins. Four additional
filters are being added to the CJO Plant, a new laboratory is being constructed,
and a computerized SCADA system is being added to monitor and control the CJO
Plant and our water supply and distribution system in central New Jersey.
Upgrades are also being made to the heating, ventilating, air conditioning and
the electrical system at the CJO Plant and to the pumping equipment at our raw
water pump station.
The Project will upgrade the CJO Plant to meet the new and anticipated
regulatory changes concerning water quality, as well as increase capacity to
meet peak day demands. The firm capacity of the CJO Plant is being increased
from about 30 million gallons per day, or "mgd" as we call it in this
Prospectus, to 45 mgd (we define firm capacity as the capacity when the largest
unit is out of service).
The Project also involves changes to the raw water pump station which
delivers water from the Delaware & Raritan Canal, which we call the "D&R Canal"
in this Prospectus, to the CJO Plant, a distance of about one mile. The station
capacity is being increased by replacing one existing pump with a larger pump.
The firm capacity of the raw water pump station is being increased from about 35
mgd to 45 mgd. Functional completion of the Project (by which we mean the
ability to produce water) is scheduled for June, 1999, with final completion set
for October, 1999.
The total cost of the Project, including design, engineering and
capitalized interest, will be approximately $38 million. Of this amount, we have
already expended $7.9 million through March 31, 1998 from operations of our
central New Jersey system. In March, 1998, we issued our 5.35% Series W Mortgage
Bonds which provided an additional $23 million. The remainder of the cost of the
Project will be funded through the sale of Common Stock offered under this
Prospectus.
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THE COMPANY
OVERVIEW
Middlesex Water Company was incorporated as a water utility company in 1897
and operates water utility systems in central and southern New Jersey and in
Delaware as well as a wastewater utility in southern New Jersey. The water
utility system in central New Jersey, which we call in this Prospectus the
"Middlesex System," produced 90% of the Company's 1997 Revenue. The Middlesex
System treats, stores and distributes water for residential, commercial,
industrial and fire prevention purposes.
Our Middlesex System provides water services to approximately 54,000 retail
customers, primarily in eastern Middlesex County, New Jersey and provides water
on a wholesale basis under contract to the Township of Edison, the Boroughs of
Highland Park and Sayreville, the City of South Amboy and both the Old Bridge
and the Marlboro Township Municipal Utilities Authorities. Under a special
contract, the Middlesex System also provides water treatment and pumping
services to the Township of East Brunswick.
The Middlesex System's retail customers are located in an area of
approximately 55 square miles in Woodbridge Township, the Boroughs of Metuchen
and Carteret, portions of Edison Township and the Borough of South Plainfield in
Middlesex County and 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. The
contract customers of the Middlesex System comprise an area of approximately 141
square miles with a population of approximately 267,000. Contract sales to
Edison, Sayreville, Old Bridge and Marlboro are supplemental to the existing
water systems of these customers. The State of New Jersey in the mid-1980's
approved plans to increase available surface water supply to these and other
municipalities in the South River Basin area of the State through contracts with
water suppliers outside the South River Basin. The State saw this as a way to
reduce the use of ground water and depletion of acquifers. Our long-term
contracts to pump treated surface water to East Brunswick, Marlboro, Old Bridge,
Sayreville and South Amboy are consistent with the State approved plan.
We have five wholly-owned subsidiaries:
o Tidewater Utilities, Inc. ("Tidewater"), together with Tidewater's
wholly-owned subsidiary, Public Water Supply Company, Inc. ("Public"),
provide water services to 11,000 retail customers for residential,
commercial and fire protection purposes in over 100 separate community
water systems in Kent, Sussex and New Castle Counties, Delaware. We
refer to our Delaware operations as the "Tidewater Systems" in this
Prospectus. The Tidewater Systems produced approximately 7% of our
total revenues in 1997. Tidewater has another wholly-owned subsidiary,
White Marsh Environmental Systems, Inc., which owns the office
building that Tidewater uses as its business office.
o Pinelands Water Company services 2,200 residential customers in
Burlington County, New Jersey. We refer to this water utility as the
"Pinelands System" in this Prospectus. The Pinelands System produced
approximately 0.6% of our total revenues in 1997.
o Pinelands Wastewater Company services approximately 2,200 primarily
residential retail customers and, under contract, one municipal
wastewater system in Burlington County, New Jersey with about 200
residential customers. We refer to this wastewater utility as the
"Pinelands Wastewater System" in this Prospectus. The Pinelands
Wastewater System produced approximately 1.4% of our total revenues in
1997.
o Utility Service Affiliates, Inc. along with Middlesex Water Company
entered into a five-year contract with the City of South Amboy, New
Jersey to operate and maintain the city's 2,600 customer water system
in May 1995. The contract is renewable for up to three additional
five-year periods. We refer to this subsidiary as "USA" in this
Prospectus. USA produced approximately 1% of our total revenues in
1997. Middlesex Water Company has signed a contract for the
acquisition, subject to final ordinance adoption and BPU approval, of
a franchise to provide water service and to install water system
facilities in South Amboy. If the franchise is acquired, after
adoption of the final ordinance and obtaining BPU approval, USA and
Middlesex Water Company will continue to operate and maintain the
facilities owned by the City.
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o Utility Service Affiliates (Perth Amboy) Inc., which we refer to as
"USA (PA)" in this Prospectus, along with Middlesex Water Company,
signed an agreement on December 8, 1998 with the City of Perth
Amboy and the Middlesex County Improvement Authority. Under that
agreement, USA (PA) will operate and maintain the city's water system
and the wastewater system for 20 years beginning on an interim basis
on January 1, 1997 pending completion of certain bond financings. If
those bond financings are not completed by March 31, 1999, the
agreement with Perth Amboy will be rescinded. USA (PA) will be paid a
fixed fee and a variable fee based on increased system billings. Fixed
fee payments to USA (PA) in the agreement rise from $6.4 million in
the first year to $9.7 by year 20. The agreement also will require USA
(PA) to lease from the City all of the City's employees who currently
work on the City's water system or wastewater system. In connection
with the agreement, the Middlesex County Improvement Authority is
going to issue up to $69.5 million in three series of bonds with the
completion of those bond financings expected in late January, 1999.
One of those series of bonds, in principal amount up to $27.5 million,
is to be guaranteed by the Company. The other series of bonds are to
be guaranteed by the City. The Company will also guarantee the
performance of our subsidiary, USA (PA). USA (PA) expects to enter
into a subcontract with a sewer contracting firm for the operation and
maintenance of the City wastewater system once those bond financings
are completed. City employees who now work on the City's wastewater
system would be subleased by the subcontractor from USA (PA). Of the
$6.4 million fixed fee payable to USA (PA) in the first year of the
agreement, $3 million would be payable to the subcontractor. The
variable fee payable by USA (PA) to the subcontractor would be based
on a portion of the increased billings attributable to the wastewater
system. We hope to conclude all aspects of the transactions by January
1999.
STRATEGY
To support our existing and expanding operations, we strive to maintain and
strengthen our position as a reliable supplier of quality water in all of our
systems. We will continue to seek new services and to consider acquisitions of
other water and wastewater systems. In addition, we will try to contract with
additional municipalities to operate and manage their water systems and, in some
cases, their wastewater systems. We also plan to continue to increase our
customer base in New Jersey and Delaware. We may also seek to acquire companies
in water- and wastewater-related businesses that are not regulated utilities.
MAINTAIN AND STRENGTHEN OUR POSITION AS A PROVIDER OF QUALITY WATER. We
believe that we meet or exceed all primary regulatory requirements for water
quality. We also believe that we have adequate supplies to provide water in
sufficient quantities to meet our customers' current requirements in all of our
service areas. In order to maintain and improve our ability to provide quality
water in sufficient quantities, we regularly upgrade our facilities. We are
currently upgrading and expanding our CJO Plant in Edison, New Jersey in order
to meet more stringent regulatory requirements anticipated for water quality and
to increase our capacity to meet peak-day demands for water in the utility
system serviced by the CJO Plant. See "THE PROJECT." We also continue to improve
our central New Jersey distribution system by cleaning and cement lining unlined
pipe.
INCREASE CONTRACT SERVICES. We operate and maintain the 2,600 customer
water system of the City of South Amboy, New Jersey under a 1995 contract with
that city which is renewable at five year intervals. On December 1, 1998 we
signed a contract to acquire, subject to final ordinance adoption and BPU
approval, a franchise from the City to provide water service and to install
water system facilities in South Amboy. On December 8, 1998, we signed a
contract with the City of Perth Amboy, New Jersey, to operate and maintain its
8,200 customers water and wastewater systems. We expect to enter into a
subcontract with an experienced sewer contractor for the operation and
maintenance of the wastewater system once bond financings related to the Perth
Amboy contract are completed. We are also currently negotiating with a third New
Jersey municipality to enter into a multi-year treating and pumping contract.
Because we believe contracts with municipalities provide another way for us to
expand our service territories and increase the number of customers we serve, we
continue to seek opportunities to enter into contracts with additional
municipalities to operate their water systems.
INCREASE CUSTOMER BASE. Since 1992, we have increased our retail customer
base in Delaware from approximately 3,000 to approximately 11,000 today through
acquisitions and customer growth. We have also acquired 2,200 customer water
utility and a 2,200 customer wastewater utility in Burlington, County, New
Jersey. We will continue to seek opportunities to increase our customer base by
acquiring additional service areas, water utilities and other water- or
wastewater-related companies in New Jersey and Delaware. There is significant
economic development and population growth near several of our Delaware service
areas.
11
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF STATISTICAL INFORMATION
(CONSOLIDATED OPERATIONS)
YEAR ENDED
DECEMBER 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
REVENUES
Residential $ 16,291 $ 15,091 $ 15,202 $ 14,306 $ 14,042
Commercial 4,576 4,347 4,393 4,282 4,170
Industrial 6,631 6,621 6,669 6,598 6,481
Fire Protection 4,662 4,637 4,543 4,352 4,312
Contract Sales 7,380 6,778 6,658 6,322 6,232
Other 754 551 382 262 242
======== ======== ======== ======== ========
Total $ 40,294 $ 38,025 $ 37,847 $ 36,122 $ 35,479
<CAPTION>
AS OF
DECEMBER 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Meters in Service 67,673 63,775 61,332 58,371 57,318
Population Served 271,000 255,000 245,000 233,000 229,000
(Retail)
Miles of Main 1,149 1,067 1,035 972 947
Fire Hydrants 4,850 4,750 4,690 4,558 4,503
Pumpage 17,476 16,791 17,380 16,794 16,789
(million gallons)
</TABLE>
WATER SUPPLIES AND CONTRACTS
Our water utility plant consists of sources of supply, pumping, water
treatment, transmission, distribution and general facilities located in New
Jersey and Delaware. Our New Jersey and Delaware water supply systems are
physically separate and are not interconnected. In addition, in New Jersey, the
Pinelands System is not interconnected with the Middlesex System. In the opinion
of management, we have adequate sources of water supply to meet the current and
anticipated future service requirements of our present customers in New Jersey
and Delaware.
MIDDLESEX SYSTEM:
Our Middlesex System obtains water from both surface sources and from wells
which we call groundwater sources. In 1997, surface sources of water provided
approximately 64% of the Middlesex System's water supply, groundwater from wells
provided approximately 29% and the balance of 7% was purchased from
Elizabethtown Water Company ("Elizabethtown"), a nonaffiliated water utility.
Middlesex System's distribution storage facilities are used to supply water to
its customers at times of peak demand, outages and emergencies.
The principal source of surface supply for the Middlesex System is the D& R
Canal, owned by the State of New Jersey and operated as a water resource by the
New Jersey Water Supply Authority ("NJWSA"). Under a multistate compact, the
NJWSA is entitled to divert water from the Delaware River into the D&R Canal.
This supply, together with water in the Round Valley and Spruce Run Reservoir
System, provide a safe yield of 225 mgd which supplies our Middlesex System and
other large water purveyors contractually regulated by the NJWSA. We have
contracts with the NJWSA to divert a maximum of 20 mgd of untreated water from
the D&R Canal. In addition, we have a one year agreement for an additional 5
mgd, renewed through April 30, 1999. We also have an agreement with
Elizabethtown, effective through December 31, 2005, which provides for the
minimum purchase of 3 mgd of treated water with provisions for additional
purchases. We have also purchased additional water from Elizabethtown on an
emergent basis when construction activity briefly closed the D&R Canal.
Our Middlesex System also derives water from groundwater sources equipped
with electric motor driven deepwell turbine type pumps. The Middlesex System has
32 wells, which provide an aggregate pump capacity of approximately 27 mgd.
TIDEWATER SYSTEMS:
Water supply to Delaware customers is derived from the Tidewater Systems'
115 wells which provided overall system delivery of 512 million gallons during
1997. The Tidewater Systems do not have a central treatment facility.
12
<PAGE>
Several of its water systems in Sussex County and New Castle County, Delaware
have interconnected transmission systems. Treatment is by chlorination and, in
some cases, pH correction and filtration.
PINELANDS SYSTEM:
The Pinelands System obtains its water supply from four wells drilled into
the Mt. Laurel aquifer. The wells are equipped with three electric motor driven
deep well turbine pumps and one is equipped with a electric motor driven
submersible pump. Disinfection is done at individual well sites. The wells have
an aggregate pump capacity of 2.2 mgd.
PINELANDS WASTEWATER SYSTEM:
The Pinelands Wastewater System discharges into the South Branch of the
Rancocas Creek through a tertiary treatment plant that provides clarification,
sedimentation, filtration and disinfection. The total capacity of the plant is
0.5 mgd. Current average flow is 0.3 mgd. Pinelands has a current valid
discharge permit issued by the New Jersey Department of Environmental Protection
("DEP").
PROPERTIES
The water utility properties of our systems consist of source of supply,
pumping, water treatment, transmission and distribution and general facilities.
MIDDLESEX SYSTEM:
The Middlesex System's principal source of surface 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, New Jersey through
our intake and pumping station located on State owned land bordering the Canal.
It is transported through our 54 inch supply main for treatment and distribution
at the CJO Plant. See "THE PROJECT." Facilities at the CJO Plant consist of
source of supply, pumping, water treatment, transmission, storage, laboratory
and general facilities. We monitor water quality at the CJO Plant, at each well
field and throughout the distribution system to determine that federal and state
water quality standards are met. See "THE PROJECT" and "Regulation -Water
Quality and Environmental Regulations."
The design capacity of the intake and pumping station in New Brunswick, New
Jersey, 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. The design capacity of our raw water
supply main is 55 mgd. We also have a 58,600 foot transmission main, a long term
lease agreement with the City of Perth Amboy for the use of a 38,800 foot
transmission main, and a long term, nonexclusive "wheeling agreement" with the
East Brunswick system, all used to transport water to several of our contract
customers.
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
washwater tank. The firm design capacity of the CJO Plant is now 30 mgd (45 mgd
maximum capacity). 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.
In addition to the main pumping station at the CJO Plant, there is a 15 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 10 million gallon distribution storage reservoir directly into
the distribution system. We refer to a million gallons as "mg" in this
Prospectus.
We have a RENEW Program in the Middlesex System to clean and line with
cement previously unlined mains. There are approximately 170 miles of unlined
mains in the 670 mile Middlesex System. In 1999, we will clean and line
approximately nine miles of unlined mains.
Middlesex System's storage facilities consist of a 10 mg reservoir at the
CJO Plant, 5 mg and 2 mg reservoirs in Edison, a 5 mg reservoir in Carteret and
a 2 mg reservoir at the Park Avenue Well Field.
13
<PAGE>
We own the properties in New Jersey on which Middlesex System's 32 wells
are located. We also own our headquarters complex at 1500 Ronson Road, Iselin,
New Jersey, consisting of a 27,000 square foot, two story office building and an
adjacent 16,500 square foot maintenance facility.
TIDEWATER SYSTEMS:
The Tidewater Systems' storage facilities include 21 ground level storage
tanks with the following capacities: eleven 30,000 gallon tanks, five 25,000
gallon tanks, three 120,000 gallon tanks, one 135,000 gallon tank, one 82,000
gallon tank and one elevated storage tank with a capacity of 250,000 gallons.
Our Delaware operations are managed from Tidewater's leased offices in
Odessa, Delaware and from Public's leased offices in Millsboro, Delaware.
Tidewater's office property, which is owned by its wholly-owned subsidiary,
White Marsh Environmental Systems, Inc., consists of a 2,400 square foot
building situated on a one (1) acre lot.
PINELANDS SYSTEM:
Pinelands Water Company owns well site properties which are located in
Southampton Township, New Jersey. Pinelands Water storage facility is a 1.2 mg
standpipe.
PINELANDS WASTEWATER SYSTEM
Pinelands Wastewater Company owns a 12 acre site on which its 0.5 mgd
capacity tertiary treatment plant is located.
LEGAL PROCEEDINGS
A Woodbridge, New Jersey motel in our service area originally filed claims
against us in 1990, in the Superior Court, Burlington County, New Jersey
alleging financial losses due to improper water pressure and service and also
seeking punitive damages. Subsequently in 1994, and again in 1997, the motel
suffered outbreaks of legionella, resulting in the 1997, shut-down of the motel
by the New Jersey Department of Health. The motel amended its claims to assert
that we provided water containing the legionella bacteria. The motel is in
bankruptcy. A bank creditor of the motel has joined in the motel's claim against
us in an effort to recover some $3.5 million still owing to the bank. Although
we believe that the motel's claims are not supportable and have expert witness
testimony to that effect, the motel also has an expert who will testify that we
do have responsibility. Claims resulting from the death of a motel guest from
legionella in 1997 have been brought against the motel and the motel in turn has
claimed against us. We have substantial insurance coverage, which we believe
will be sufficient for all claims in this matter other than for punitive
damages. We do not believe the motel's claims for punitive damages will prevail.
While the outcome of this case remains uncertain, we believe that the final
resolution will not have a significant effect on our financial condition or
results of operation.
A 1995 fire at a warehouse in our service territory resulted in multiple
party claims brought both in the Superior Court for Middlesex County, New
Jersey, as well as, with the financial collapse of the principal tenant, in the
Federal Bankruptcy Court. The claims in the State court action are for
unspecified amounts but include claims against us for insufficient water
pressure and supply. The Bankruptcy Court has stayed all claims against the
tenant except, to the extent the tenant is insured, claims brought by us arising
from claims made against us by other tenants and the landlord. Under New Jersey
case law, we will not have financial responsibility to parties to the extent
they receive payments under their own insurance policies. We do not know either
the total amount of claims against us or how much of that amount will be covered
by the parties' own insurance policies. Our counsel in the litigation advises
that the case is unlikely to be resolved rapidly. We believe we have substantial
defenses to the claims against us, although we do not have insurance coverage
for them.
EMPLOYEES
As of September 30, 1998, we had a total of 140 employees in New Jersey,
and a total of 28 employees in Delaware. No employees are 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.
COMPETITION
Our business in our franchised service areas is substantially free from
direct competition with other public utilities, municipalities and other
entities. However, our ability to provide some contract water supply and
wastewater
14
<PAGE>
services and operations and maintenance services is subject to competition from
other public utilities, municipalities and other entities. Although Tidewater
has been granted an exclusive franchise for each of its existing community water
systems, its ability to expand service areas has been affected by the Delaware
Department of Natural Resources and Environmental Control awarding franchises to
other regulated water purveyors, including franchises granted to service
community water systems around and in between the Tidewater Systems service
areas.
REGULATION
We are subject to regulation as to our 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. We are
also subject to environmental and water quality regulation by the United States
Environmental Protection Agency ("EPA"). In addition, our issuances of
securities, including the Common Stock offered under this Prospectus, is subject
to the prior approval of the BPU.
REGULATION OF RATES AND SERVICES
New Jersey operations are subject to regulation by the BPU. Similarly, our
Delaware operations are subject to regulation by the PSC. These regulatory
authorities have jurisdiction with respect to rates, service, accounting
procedures, the issuance of securities and other matters.
In determining our rates, the BPU and the PSC consider the income,
expenses, rate base of property used and useful in providing service to the
public and a fair rate of return on that property. Rate determinations by the
BPU do not guarantee particular rates of return to the Company for our New
Jersey operations nor do rate determinations by the PSC guarantee particular
rates of return for our Delaware operations. Thus, we may not achieve the rates
of return allowed by the BPU or the PSC.
We filed a petition with the BPU on September 17, 1998 for a 21.9% rate
increase to include the $38 million costs of the Project in our rate base and to
recover certain other of our costs which have increased. The Company anticipates
that a BPU determination with respect to this petition may not be made until the
summer of 1999. There can be no assurance that the rate increase will be granted
or, if granted, that it will be in the amount we requested.
We anticipate that we may file with the PSC during 1999 for a rate increase
for the Tidewater Systems, which may also include a request to combine Tidewater
and Public into a single entity.
WATER QUALITY AND ENVIRONMENTAL REGULATIONS
Both the EPA and the DEP regulate our operations in New Jersey with respect
to water supply, treatment and distribution systems and the quality of the
water, as do the EPA, the DNREC, and the Delaware Department of Health 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, environmental regulatory agencies are reviewing current regulations
governing the limits of certain organic compounds found in the water as
byproducts of treatment. The Company believes the CJO Plant upgrade and
expansion will allow the Company to be in a stronger position to meet any such
future regulations with regard to its Middlesex System. Regular testing of our
water demonstrates that we are in compliance with existing Federal, New Jersey
and Delaware primary water quality standards.
As more fully discussed in the Company's most recent Annual Report on Form
10-K, the Company is subject to regulations of the EPA as to maximum contaminant
levels under the Federal Safe Drinking Water Act. There are also similar state
regulations by the DEP in New Jersey.
The DEP and the Delaware Department of Health 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 the
Company include the Lead and Copper Rule, the maximum contaminant levels
established for various volatile organic compounds, the Federal Surface Water
Treatment Rule, and the Total Coliform Rule. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE" and "WHERE YOU CAN FIND MORE INFORMATION."
15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except share and per share data)
This selected financial information as of, and for the years ended,
December 31, 1993, 1994, 1995, 1996 and 1997, was taken from and should be read
along with the financial statements contained in our most recent Annual Report
on Form 10-K. Information as of, and for the periods ended, September 30 1997
and 1998 is taken from financial statements that have not been audited but
which, we believe, fairly present our financial position and results of
operations for those periods and should be read along with our most recently
filed Quarterly Report on Form 10-Q. See "WHERE YOU CAN FIND MORE INFORMATION."
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
------------------ ------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME
STATEMENT DATA:
Operating Revenues $32,434 $30,241 $40,294 $38,025 $37,847 $36,122 $35,479
Operating Expenses 25,241 23,544 31,526 29,802 29,184 27,670 27,423
Net Income 5,185 4,487 5,861 5,168 5,704 5,495 5,480
Earnings Applicable 4,946 4,341 5,635 5,009 5,545 5,307 5,224
to Common Stock
Earnings per Share
of Common Stock :
Basic $1.14 $1.03 $1.33 $1.20 $1.36 1.33 1.33
Diluted 1.13 1.02 1.33 1.20 1.36 1.33 1.33
Dividends Paid per Share $.855 $.84 $1.125 $1.105 $1.085 $1.0575 $1.0125
of Common Stock :
Average Number of
Shares Outstanding
Basic 4,326,337 4,226,241 4,235,082 4,169,334 4,078,890 4,003,393 3,924,363
Diluted 4,552,763 4,346,792 4,382,345 4,258,740 4,168,296 4,092,799 4,013,769
<CAPTION>
As of September 30, As of December 31,
------------------ -----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Total Assets $191,415 $156,706 $159,761 $148,660 $144,822 $132,413 $125,676
Utility Plant - Net 152,045 130,853 135,071 121,245 117,933 108,743 105,392
Common Equity 54,330 50,839 51,226 49,216 47,644 44,851 42,839
Convertible Preferred 3,894 3,896 3,894 1,565 1,565 1,565 1,544
Stock
Nonredeemable
Preferred Stock 1,102 1,102 1,102 1,102 1,102 1,226 1,250
Long-term Debt (excluding 75,884 52,929 52,918 52,961 52,960 49,500 37,000
current portion)
</TABLE>
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis should be read in conjuction with the
financial statements contained in our most recent Annual Report on Form 10-K and
our most recently filed Quarterly Report on Form 10-Q. See "WHERE YOU CAN FIND
MORE INFORMATION."
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1998
Operating Revenues for the nine months ended September 30, 1998, were $2.2
million higher than last year. Rate increases resulted in additional revenues of
$1.2 million. The Middlesex System received regulatory approval from the BPU to
implement a 4.4% rate increase in January, 1998. The Pinelands Water and
Wastewater Companies also increased their rates in January, 1998. This increase
represented the second part of a three part rate increase previously approved by
the BPU. The third increase is scheduled for January 1999.
A subsidiary acquisition added $0.6 million to revenues. The acquisition of
Public by our wholly-owned subsidiary, Tidewater was completed on July 31, 1997.
As a result, the nine months of consolidated revenue for 1997 only include two
months of revenue from Public.
Customer growth contributed $0.4 million to revenues. The customer base of
Tidewater grew by 820 accounts over the twelve month period ended September 30,
1998. This translates to an annual growth rate in customers of 11.6% and is
consistent with the increase of 13.0% in amounts billed for water services to
the customers of Tidewater.
Operating Expenses rose $1.7 million or 7.2% for the nine months ended
September 30, 1998. Some of the reasons for this increase are briefly discussed
here. The Middlesex System changed the composition of the water sources it used
to supply its customers. During 1998, less water was withdrawn from its well
fields and more was purchased from the NJWSA and Elizabethtown. This resulted in
higher purchased water costs and higher chemicals expense of $0.2 million.
Electric power costs for the Middlesex System were higher by about $0.2 million
over last year due primarily to a large credit we received in the 1997 period
from our power provider. Costs associated with the recognition of post
retirement benefits under mandated accounting standards pushed operating
expenses up by $0.3 million. Public's expenses are now included in our
consolidated expenses. Its expenses amounted to $0.3 million for the nine months
ended September 30, 1998.
On a consolidated basis, almost $9.5 million of newly constructed utility
plant or utility plant acquired through acquisition was placed in service since
September 30, 1997. This resulted in higher depreciation expense in the first
nine months of 1998 of $0.2 million or 8% over that period last year.
Taxes other than income taxes includes the taxes that the State of New
Jersey charges regulated water and wastewater utilities based upon gross
receipts from operations in New Jersey. These taxes are called Gross Receipts
and Franchise Taxes. In general, for every dollar of revenue collected from our
New Jersey customers approximately 13.5% is remitted to the State of New Jersey.
As described above, about $1.2 million of additional revenues were recorded by
our New Jersey companies which, in turn, increased the tax expense by just under
$0.2 million.
Other income increased $0.7 million in the first nine months of 1998 over
last year. One of the components of the increase is higher earnings on the
unexpended proceeds from the 5.35% Series W Mortgage Bond issued in March, 1998.
As of September 30, 1998, $11.3 million of the $23.0 million received from the
Series W offering remains in a CJO Plant Construction account maintained by a
trustee. We submit payment requisitions to the trustee for qualified CJO Plant
expenditures. It is our expectation that the balance of the proceeds will be
exhausted by February, 1999. Another piece of the increase pertains to interest
capitalized on the CJO Plant work in process expenditures. Public utilities
refer to this as Allowance for Funds Used During Construction ("AFUDC"). In
general, AFUDC is recorded as a cost of the project until the utility plant is
ready to provide service to customers. The effect is to reduce expenses
currently for the Company and depreciate the capitalized interest along with the
rest of the CJO Plant costs over its estimated useful life.
Interest charges rose $0.5 million which represents our obligation to pay
interest on the 5.35% Series W Mortgage Bond issued in March 1998.
Net Income for the nine months ended September 30, 1998 increased $0.7
million or 15.6% over the comparable 1997 period based upon the discussion
above. The increase in the preferred stock dividend requirement is attributable
17
<PAGE>
to the issuance of preferred stock in July, 1997, to complete the acquisition of
Public. Through September, 1998, nine months worth of the dividend requirements
were recorded while for the same period in 1997 only two months were recorded.
Basic and Diluted Earnings per Share both increased by $0.11 over last
year. There is a $0.01 per share difference between Basic and Diluted Earnings
per Share. This difference is due to the two series of convertible preferred
stock that we have issued. See "-- Accounting Standards."
RESULTS OF OPERATIONS
1997 COMPARED TO 1996
Operating Revenues increased by $2.3 million to $40.3 million due to
favorable weather conditions in New Jersey and Delaware, continued growth in
Tidewater's customer base of 12%, rate increases implemented by the Pinelands
Companies, increased contract revenues from USA and the inclusion of Public's
operating results since August 1997.
Offsetting effects to net income were higher operations and maintenance
expenses of $0.8 million or 4.1%, which reflected increased purchased water of
$0.3 million transmission and distribution expenses of $0.3 million;
administrative and general expenses of $0.3 million and the inclusion of
operating expenses for Public of $0.2 million. These increases were offset by
reductions in purchased power and water treatment expenses of $0.3 million.
Depreciation expense increased 4.8% due to a higher level of depreciable
plant in service. Taxes, other than income taxes increased $0.2 million and were
related primarily to revenue-related taxes. A higher level of taxable income
resulted in a $0.6 million increase in federal taxes.
As a result, Net Income increased 13.4% to $5.9 million in 1997 compared
with $5.2 million in the prior year.
RESULTS OF OPERATIONS
1996 COMPARED TO 1995
Operating Revenues in 1996 were $0.2 million higher than in 1995.
Consumption was lower in all major classes of customers. These decreases were
offset by additional fixed service charges as a result of an increased customer
base in Delaware of 12.5% and the inclusion of revenues from the Pinelands
Companies and USA for a full year in 1996.
Operations and maintenance expenses were $0.9 million or 4.8% higher in
1996 over 1995 due principally to increases in purchased water of $0.3 million;
water treatment of $0.3 million; pumping expenses of $0.2 million; and customer
accounts and administrative and general expenses of $0.3 million; offset by a
decrease in transmission and distribution expenses of $0.2 million.
Depreciation increased $0.1 million or 4.1% due to a higher depreciation
base. Federal income taxes decreased $0.5 million due to lower taxable income.
Interest expenses increased $0.2 million or 5.3% as a result of the long-term
borrowings by Tidewater.
As a result, Net Income decreased $0.5 million or 9.4%.
LIQUIDITY AND CAPITAL RESOURCES
The table below presents the estimated capital expenditures, in millions
for all our companies for 1998, 1999 and 2000:
1998 1999 2000
---- ---- ----
(in millions)
CJO Plant $16.0 $17.0 $ -
Delaware Systems 3.2 2.0 0.7
RENEW Program 2.1 2.2 2.2
Scheduled upgrades to
existing systems 3.0 4.7 3.6
----- ----- -----
Total $24.3 $25.9 $6.5
----- ----- ----
18
<PAGE>
Our plan to finance these projects is underway. Proceeds from the $23.0
million Series W First Mortgage Bonds and the anticipated common stock offering
will be used to finance the CJO Plant expenditures in 1998 and 1999. Our
Middlesex System will receive $2.2 million from New Jersey Environmental
Infrastructure Trust to cover the cost of the 1999 RENEW Program, which is our
program to clean and line with cement approximately nine miles of unlined mains
in the Middlesex System. There is a total of approximately 170 miles of unlined
mains in the 670 mile Middlesex System. We expect to apply for similar funds in
1999 for the year 2000 RENEW Program. The financing of our Delaware
subsidiaries, capital program will be a combination of a capital contribution
from the Company and long-term debt financing from either a financial
institution or the Company. The debt financing decision will be based upon the
terms of financing available to our Delaware subsidiaries. We expect to be able
to cover the costs of scheduled upgrades to the existing systems with the cash
flow generated from our utility operations through the year 2000. For the nine
months ended September 30, 1998 our consolidated group has expended $18.8
million for capital projects, including $12.2 million for the Project.
As of September 30, 1998, the Company had six series of First Mortgage
Bonds outstanding in the aggregate principal amount of $72.5 million. Two
additional series of First Mortgage Bonds in the principal amount of $2.2
million were issued on November 5, 1998, in connection with the 1999 Renew
Program. The First Mortgage Bonds have been issued under and secured by a First
Mortgage Bond Indenture and supplements thereto which constitute a direct first
mortgage lien upon substantially all of the property of the Company. Tidewater
borrowed funds under a $3.5 million 8.05% Amortizing Secured Note due December
20, 2021. Approximately $3.4 million was outstanding under that note as of
September 30, 1998.
From time to time it may be necessary to utilize all or part of the $28.0
million in total lines of credit we have available with three commercial banks
for working capital purposes or provide interim funds until long-term financing
is arranged. At September 30, 1998, we had $4.5 million of loans outstanding
against those lines of credit.
REGULATORY MATTERS
On September 17, 1998, Middlesex filed a petition with the BPU for a base
rate increase of $7.9 million or 21.9%. Approximately 75% of the increase is
necessary to recover the investment in the upgrade and expansion of the CJO
Plant serving our central New Jersey water system. The purpose of the Project is
to meet the new and anticipated regulatory standards concerning water quality,
as well as to increase the plant's production capacity. A decision by the BPU is
expected in the summer of 1999.
On January 29, 1998, the BPU acted upon our November 1996 petition and
approved an increase in our rates for the Middlesex System by 4.4% or $1.5
million. Under the rate increase, the allowed return on equity is 11.0% with an
overall rate of return of 8.56%. The increase included the recovery of
postretirement costs other than pension expenses which are mandated by the
Company's compliance with Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions." The
prior increase in base rates granted by the BPU was $2.8 million, or 9.33%, in
April 1993.
In January 1997, the BPU approved a stipulation agreed to by the parties to
the Pinelands Water and Wastewater Companies' rate cases which were filed in
February 1996. The stipulations allow for a combined rate increase which will
result in $0.4 million additional revenues. The new rates are being phased in
over a three-year period to minimize the impact on customers. Phases one and two
were implemented in January 1997 and 1998, respectively.
ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No.128, "Earnings Per Share." This
statement supersedes Accounting Principles Bulletin Opinion No. 15, "Earnings
Per Share," and simplifies the reporting and computing of earnings per share
("EPS"). SFAS No. 128 requires dual presentation of basic and diluted earnings
per share on the face of the income statement and requires a reconciliation of
the basic EPS computation to the diluted EPS computation. At December 31, 1997,
the Company adopted SFAS No. 128.
SFAS No. 130, "Reporting Comprehensive Income," establishes standards for
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements. At September 30,
19
<PAGE>
1998, the Company did not have any items of comprehensive income that would
affect the current reporting of the Company's financial position, results of
operations or cash flows.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," requires that public enterprises report certain information about
operating segments in complete sets of financial statements. Disclosure is not
required for interim financial statements in the initial year of its
application. The Company is evaluating the requirements of SFAS No. 131. Because
the statement relates solely to disclosure provisions, it will not have any
effect on the Company's financial position, results of operations or cash flows.
SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits," revises and standardizes disclosure requirements for
pension and other postretirement benefit plans but does not change the
measurement or recognition of those plans. This statement is required to be
adopted for the fiscal year ending December 31, 1998.
YEAR 2000
Software used in many computer systems and computerized control devices was
designed to record only the last two digits of each year. This software, some of
which we own, may not function properly as of January 1, 2000 because it
interprets the new year as 1900. We have tested our own computer systems, to
make certain that those systems will work properly when 1999 becomes 2000. We
have also requested certification of Year 2000 compliance from the vendor of the
new SCADA, as well as the principal vendors of data processing serving our
financial reporting, payroll, billing, customer information and shareholder
record systems. The vendors have certified that their systems have been tested
and will work properly. We believe we may reasonably rely on those
certifications. We also expect to spend up to $10,000 to bring certain other
operating systems, including our network of desktop personal computers, into
Year 2000 compliance. Nonetheless, we may not have identified every computerized
control device of ours which may be affected by Year 2000. Even if identified,
we may not be able to reprogram or replace those devices before January 1, 2000.
More importantly, we cannot assess the impact on us of failures of computer
systems and control devices used by others. We are especially concerned about
third parties who provide significant services and materials to process, treat
and distribute water and to process, treat and dispose of wastewater, and about
the possible failure of electric power and telecommunications or the inability
to obtain diesel fuel for the Company's stand-by generators. The occurrence of
any such Year 2000-related problem could have a material adverse effect on our
financial condition and results of operations.
20
<PAGE>
COMMON STOCK PRICE RANGE AND DIVIDENDS
Cash dividends on our Common Stock have been paid each year since 1912, and
the annual dividend has increased for 25 consecutive years. On October 22, 1998,
the Board of Directors declared a quarterly cash dividend of $0.295 per share
paid on December 1, 1998 to shareholders of record on November 16,1998.
The Board of Directors' policy has been to pay cash dividends on the Common
Stock on a quarterly basis. Future cash dividends will be dependent upon our
earnings, financial condition, capital demands and other factors, and will be
determined in accordance with policies established by the Board of Directors.
See "Description of Common Stock" for certain restrictions upon the payment of
cash dividends.
Our Common Stock is listed on the Nasdaq National Market and trades under
the symbol "MSEX." On October 22, 1998, we had 2,271 common shareholders of
record.
The following table sets forth the range of sales prices of the Common
Stock, as reported by the Nasdaq National Market and dividends paid thereon for
the periods indicated.
<TABLE>
<CAPTION>
SALES PRICE
-------------------------
HIGH LOW QUARTERLY CASH DIVIDENDS
---- --- ------------------------
<S> <C> <C> <C> <C>
1998:
Fourth Quarter (through $25 3/4 $21 1/4 $0.295
December 14, 1998)
Third Quarter 22 20 1/8 0.285
Second Quarter 21 1/4 19 1/4 0.285
First Quarter 22 1/2 19 7/8 0.285
------
$1.150
======
1997:
Fourth Quarter $22 1/2 $18 $0.285
Third Quarter 19 1/4 16 3/8 0.28
Second Quarter 17 7/8 16 3/8 0.28
First Quarter 18 17 0.28
------
$1.125
======
1996:
Fourth Quarter $18 1/4 $16 3/4 $0.28
Third Quarter 18 16 0.275
Second Quarter 17 1/2 15 1/2 0.275
First Quarter 19 1/4 17 1/4 0.275
------
$1.105
======
</TABLE>
The book value per share of the Common Stock at September 30, 1998 was
$12.20 per share. For a recent closing sale price of the Common Stock, as
reported on the Nasdaq National Market, see the cover page of this Prospectus.
21
<PAGE>
DESCRIPTION OF COMMON STOCK
Our authorized capital stock consists of 10,000,000 shares of Common Stock,
without par value, 149,980 shares (as of October 30, 1998) of Cumulative
Preferred Stock, without par value, and 100,000 shares of Cumulative Preference
Stock, without par value. As of October 30, 1998, there were 4,368,847 shares of
Common Stock outstanding, four series of Cumulative Preferred Stock representing
a total of 45,898 shares outstanding and no shares of the Cumulative Preference
Stock outstanding. The issuance of the Common Stock offered hereby is subject to
approval by the BPU. See "THE COMPANY --Regulation."
The transfer agent for the Common Stock is Registrar and Transfer Company.
Our outstanding Common Stock is traded on the over-the-counter market on the
Nasdaq National Market System.
Certain New Jersey state laws and provisions in our Restated Certificate of
Incorporation may deter or prevent a change in control of us and/or a change in
management, even if desired by a majority of the shareholders. See "--Voting
Rights" and "--Restriction on Acquisitions."
The following is a brief summary of certain information relating to our
Common Stock. This summary does not purport to be complete and is intended to
outline such information in general terms only.
DIVIDEND RIGHTS
Our Restated Certificate of Incorporation provides that whenever full
dividends have been paid on the Preferred Stock and the Preference Stock
outstanding for all past quarterly periods, the Board of Directors may declare
and pay dividends on the Common Stock out of legally available funds.
LIMITATIONS ON PAYMENT OF DIVIDENDS
Under the terms of the Fourth Supplement to the Company's First Mortgage
Bond Indenture, unless the holders of not less than 75% in principal amount of
all first mortgage bonds consent in writing, the Company may not make a payment
as a dividend or other distribution on capital stock issued by the Company or
for the redemption or acquisition of capital stock issued by the Company, if the
aggregate of all such payments made and to be made by the Company, including the
proposed payment, during the period from October 1, 1948 to the date of the
proposed payment would exceed the aggregate of (a) the consolidated net earnings
of the Company for the period, and (b) the proceeds of the sale received by the
Company for all capital stock issued by it subsequent to September 30, 1948;
provided, that a dividend paid or to be paid in capital stock shall not be
included in the aggregate of such payments.
In addition, under the Thirteenth Supplement to the Company's First
Mortgage Bond Indenture, the Company may not declare or pay any dividends on its
Common Stock (except dividends in shares of its Common Stock) or make any
distribution (except in shares of its Common Stock) or purchase or otherwise
acquire any shares of its Common Stock for value if the aggregate amount of such
dividends, distributions, purchases and acquisitions paid or made subsequent to
December 31, 1972 exceeds the sum of the aggregate of the consolidated net
income of the Company (as defined in the Thirteenth Supplemental Indenture)
available for dividends on its Common Stock accumulated subsequent to December
31, 1971, plus $l.0 million.
As of the date of this Prospectus, the payment of dividends by the Company
has not been affected by these limitations.
VOTING RIGHTS
Every holder of the Common Stock is entitled to one vote for each share
held of record. The Company's Restated Certificate of Incorporation and By-laws
provide for a Board of Directors divided into three classes of directors serving
staggered three-year terms. A classified board has the effect of increasing the
time required to effect a change in control of the Board of Directors. The
Company's By-laws provide that nominations for directors must be (i) made in
writing, (ii) received by the Secretary of the Company not less than 21 days
prior to the date fixed for the meeting of stockholders and (iii) accompanied by
the written consent of the nominee to serve as a director. In addition, the
Restated Certificate of Incorporation provides that the By-laws may only be
amended by stockholders if the holders of two-thirds or more of the issued and
outstanding shares of Common Stock vote for the amendment. The Company's
Restated Certificate of Incorporation also provides that stockholders may take
action only at an annual or special meeting upon prior notice and pursuant to a
vote.
22
<PAGE>
No holder of Preferred Stock or Preference Stock (none of which Preference
Stock has been issued) has any right to vote for the election of directors or,
except as otherwise required by law, for any other purpose; provided, however,
that if and whenever dividends on the outstanding Preferred Stock are in arrears
in an amount equal to at least four quarterly dividends, the holders of the
outstanding Preferred Stock of all series, voting as a class, are entitled,
until all dividends in arrears are paid, to elect two members to the Board of
Directors, which two members shall be in addition to the directors elected by
the holders of the Common Stock. Whenever dividends on the outstanding
Preference Stock are in arrears in an amount equal to at least four quarterly
dividends, the holders of the outstanding Preference Stock of all series, voting
as a class, are entitled, until all dividends in arrears are paid, to elect two
members to the Board of Directors, which two members shall be in addition to the
members elected by the holders of the Common Stock and by the holders of the
Preferred Stock. In addition, unless certain tests set forth in the Company's
charter are met, the consent of the holders of a majority of the outstanding
shares of Preferred Stock of all series, voting as a class, is required for
issuance or sale of any additional series of Preferred Stock or any class of
stock ranking prior to or on a parity with the Preferred Stock as to dividends
or distributions. The consent of the holders of two-thirds in interest of the
outstanding Preferred Stock of all series, voting as a class, is required to
create or authorize any stock ranking prior to the Preference Stock as to
dividends or in liquidation, or to create or authorize any obligation or
security convertible into shares of any such stock, except that such consent is
not required with respect to any increase in the number of shares of Preferred
Stock which the Company is authorized to issue or with respect to the creation
and establishment of any series of the Company's Preferred Stock.
LIQUIDATION RIGHTS
Holders of Common Stock are entitled to share on a pro-rata basis, subject
to the rights of holders of the Company's First Mortgage Bonds, Preferred Stock
or Preference Stock, in the assets of the Company legally available for
distribution to shareholders in the event of the Company's liquidation,
dissolution or winding up.
RESTRICTION ON ACQUISITIONS
As a New Jersey corporation with its headquarters and principal operations
in the state the Company, is a "resident domestic corporation" as defined in New
Jersey's Shareholder Protection Act (the "Act"). The Act bars any "business
combination" as defined in that Act, (generally, a merger or other acquisition
transaction) with any person or affiliate of a person who owns 10% or more of
the outstanding voting stock of a resident domestic corporation for a period of
five years after such person first owns 10% or more of such stock, unless the
"business combination" both is approved by the board of directors of the
resident domestic corporation prior to the time that person acquires 10% or more
of the resident domestic corporation's voting stock and meets certain other
statutory criteria.
DIVIDEND REINVESTMENT PLAN
The Company has a Dividend Reinvestment and Common Stock Purchase Plan
("DRIP") under which participating shareholders may have cash dividends on all
or a portion of their shares of Common Stock or Cumulative Preferred Stock
automatically reinvested in newly issued shares of Common Stock and may invest
at the same time up to an additional $25,000 per quarter in newly issued shares
of Common Stock. Under the DRIP, the Company may permit the purchase of shares
of Common Stock at 95% of market value for specified periods as announced by the
Company from time to time. The Company last authorized the purchase of shares of
Common Stock at 95% of market value during the period January 1, to June 1,
1998. As currently in effect, any purchase of shares under the DRIP is at full
market value. No commission or service charge is paid by participants in
connection with any of their purchases under the DRIP.
23
<PAGE>
UNDERWRITING
Subject to the terms and conditions of an Underwriting Agreement among the
Company and Edward D. Jones & Co., L.P. and Janney Montgomery Scott Inc. (the
"Underwriters"), the Underwriters have severally agreed to purchase from the
Company the aggregate number of shares of the Company's Common Stock set forth
opposite their respective names below.
NUMBER
UNDERWRITER OF SHARES
----------- ---------
Edward D. Jones & Co., L.P....................... 270,000
Janney Mortgomery Scott Inc. .................... 180,000
-------
Total................................ 450,000
=======
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the Common Stock are subject to
the approval of certain legal matters by counsel and to certain other
conditions. The Underwriters are obligated to take and pay for all of the shares
of the Common Stock offered hereby if any are taken (other than shares of Common
Stock covered by the over-allotment option described below).
The Underwriters have advised the Company that they propose to offer the
Common Stock being purchased by them directly to the public at the initial
public offering price set forth on the cover page of this Prospectus and in part
to certain securities dealers which are members of the National Association of
Securities Dealers, at such prices less a concession which shall not exceed
$0.10 per share of Common Stock. After the initial public offering, the public
offering price and concessions may be changed by the Underwriters.
The offering of the Common Stock is made for delivery when, as and if
accepted by the Underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offer without notice. The Underwriters
reserve the right to reject any order for the purchase of Common Stock in whole
or in part.
The Company has granted to the Underwriters an option for 30 days to
purchase (at the Common Stock Public Price less the Underwriting Discounts and
Commissions shown on the cover page of this Prospectus) up to 67,000 additional
shares of Common Stock. The Underwriter may exercise such option only to cover
over-allotments of shares of Common Stock made in connection with the sale of
the shares offered hereby.
In connection with this offering and in compliance with applicable law, the
Underwriters may over-allot (i.e., sell more Common Stock than is set forth on
the cover page of this Prospectus) and may effect transactions which stabilize,
maintain or otherwise affect the market price of the Common Stock at levels
above those which might otherwise prevail in the open market. Such transactions
may include placing bids for the Common Stock or effecting purchases of the
Common Stock for the purpose of pegging, fixing or maintaining the price of the
Common Stock or for the purpose of reducing a short position created in
connection with the Offering. A short position may be covered by exercise of the
over-allotment option described above in lieu of or in addition to open market
purchases. The Underwriters are not required to engage in any of these
activities and any such activities, if commenced, may be discontinued at any
time.
Neither the Company nor the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor the Underwriters makes any representation that the Underwriters
will engage in such transactions or that such transactions, once commenced, will
not be discontinued without notice.
The Company and its directors and executive officers have agreed to enter
into lock-up agreements pursuant to which they will agree that, subject to
certain customary exceptions, they will not, without the prior written consent
of Edward D. Jones & Co., L.P., for a period of 60 days from and after the date
of this Prospectus, sell, offer to sell, contract to sell, or otherwise dispose
of, directly or indirectly, any shares of Common Stock of the Company or any
securities convertible into, or exercisable or exchangeable for, Common Stock of
the Company (other than shares issuable pursuant to a plan for employees in
effect on the date of this Prospectus).
The Company has agreed to indemnify the Underwriters and persons who
control the Underwriters against certain liabilities that may be incurred in
connection with the offering contemplated hereby, including liabilities under
the Securities Act of 1933, as amended, or to contribute to payments the
Underwriters may be required to make in respect thereof.
24
<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the validity of the Common Stock
offered hereby will be passed upon for the Company by Norris, McLaughlin &
Marcus, P.A., Somerville, New Jersey. Certain legal matters will be passed upon
for the Underwriters by Armstrong, Teasdale, Schlafly & Davis, St. Louis,
Missouri.
EXPERTS
The financial statements incorporated in this Prospectus by reference from
the Company's Annual Report on Form 10-K for the year ended December 31, 1997
have been audited by Deloitte & Touche, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements, and other
information with the Securities and Exchange Commission (the "Commission"). You
may read and copy any of the reports and other information we file at the
Commission's public reference facilities located in Washington at Judiciary
Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, in New York
located at 7 World Trade Center, Suite 1300, New York, New York 10048, and in
Chicago located at Northwest Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. You may call the SEC at 1-800-SEC-0330 for further
information about the public reference rooms. Copies of such material can also
be obtained from the Public Reference Section of the commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Our SEC filings are
also available to the public over the Internet at the Commission's web site
which is located at the following address: http://www.sec.gov.
This Prospectus is a part of a registration statement on Form S-3 (which,
together with all exhibits filed along with it, will be referred to as the
"Registration Statement") which we filed with the Commission to register the
securities we are offering. Certain information and details which may be
important to specific investment decisions may be found in other parts of the
Registration Statement, including its exhibits, but are left out of this
Prospectus in accordance with the rules and regulations of the Commission. To
see more detail, you may wish to review the Registration Statement and its
exhibits. Copies of the Registration Statement and its exhibits are on file at
the offices of the Commission and may be obtained upon payment of the prescribed
fee or may be examined without charge at the public reference facilities of the
Commission described above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission's rules allow us to "incorporate by reference" the
information we file with the Commission, which means we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is an important part of this Prospectus. We
incorporate by reference the documents listed below, which already have been
filed with the Commission, and certain information we may file in the future
will automatically update and take the place of information already filed. The
following documents are incorporated by reference as of the date each was filed:
(a) the Company's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1998, June 30, 1998 and September 30, 1998; (b) the Company's Annual Report
on Form 10-K for the year ended December 31, 1997; and (c) the Company's Current
Report on Form 8-K filed on September 11, 1998.
In addition to the documents already filed, all reports and other documents
which we file in the future with the Commission pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934, before this stock
offering ends, shall also be incorporated by reference in this Prospectus.
You may request a copy of any of these filings. Such requests should be
directed to: Ms. Marion F. Reynolds, Vice President, Secretary and Treasurer,
Middlesex Water Company, 1500 Ronson Road, Iselin, New Jersey 08830, phone no.
(732) 634-1500. You will not be charged for these copies unless you request
exhibits, for which we will charge you a minimal fee. However, you will not be
charged for exhibits in any case where the exhibit you request is specifically
incorporated by reference into another document which is incorporated by this
Prospectus.
25
<PAGE>
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS WHICH ARE NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING OF SHARES OF COMMON STOCK COVERED IN
THIS PROSPECTUS. IF GIVEN OR MADE, SUCH REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY MIDDLESEX WATER COMPANY OR ANY OF THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, ANY SHARES OF COMMON STOCK OFFERED HEREBY IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
450,000 Shares
MIDDLESEX WATER COMPANY
COMMON STOCK
------------
PROSPECTUS
------------
EDWARD D. JONES & CO., L.P.
JANNEY MONTGOMERY
SCOTT INC.
December 15, 1998
- --------------------------------------------------------------------------------
