MSEX 10-K & 10-Q changes, risk factors and insider trading
Middlesex Water Co. (also MSEXP) · Nasdaq · Water Supply · CIK 66004 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Disruptions in our supply chain related to goods, such as pipe, chemicals, power and other fuel, equipment, water and other raw materials could adversely impact our operations, financial position, and cash flows.”
Largest changes
The Company must comply with various environmental laws and regulations promulgated by the USEPA, NJDEP and other governmental agencies, including the Toxic Catastrophe Prevention Act, the Spill Prevention, Control, and Countermeasure Rule and the Discharge Prevention Program of the New Jersey Spill Compensation and Control Act. If we fail to comply with environmental or other laws and regulations to which our business is subject, we could besee in full comparisonfinedsubject to fines, penalties orsubject toother sanctions, as well as damage to our reputation, as a result of governmental proceedings and private litigation, which could adversely impact our business or results of operations.
“Disruptions in our supply chain related to goods, such as pipe, chemicals, power and other fuel, equipment, water and other raw materials could adversely impact our operations, financial position, and cash flows.”see in full comparison
“Our ability to serve our customers and operate our business in compliance with regulatory requirements is dependent upon purchasing or securing necessary goods from our suppliers and vendors. These items include but are not limited to chemicals, pipe, valves, hydrants, fittings, equipment (including personal protective equipment), water, and power and other fuel. …”see in full comparison
“Supply chain disruptions may cause us to be unable to purchase or otherwise obtain needed goods at a reasonable price or at all, and may significantly increase the price of goods we may obtain from suppliers and vendors. This, in turn, may adversely impact our operations and our ability to serve our customers in compliance with regulatory requirements, as well as our associated results of operations, cash flows and financial condition. …”see in full comparison
“The acquisition and/or operation of additional water and wastewater systems is an element of our growth strategy. This strategy depends on identifying suitable opportunities that meet our risk and reward profile and reaching mutually agreeable terms with acquisition candidates or contract parties. …”see in full comparison
“Certain costs are not completely within our control. The failure to obtain any rate increase would limit our ability to increase our revenues and, unless we are able to reduce costs without degrading service quality, would result in reduced earnings. Even if the rates approved are sufficient, we face the risk that we will not achieve the rates of return on equity permitted by the applicable Public Utility Commission. …”see in full comparison
Full comparison: every changed paragraph (13)
Our ability to meet current and future water demands of our customers depends on the availability of an adequate supply of water. Unexpected conditions may interfere with our water supply sources. Drought and overuse of underground aquifers may limit the availability of ground and/or surface water. Freezing weather may also contribute to water transmission and distribution interruptions caused by water main breakage. Any interruption in our water supply could cause a reduction in our revenue and profitability. These factors may adversely affect our ability to supply water in sufficient quantities to our customers. Governmental drought restrictions, heightened levels of rainfall and temperatures during the typically warmer months that are cooler than normal may result in decreased customer demand for water services and can adversely affect our revenue and earnings.
Increased climate variability may cause increased
precipitation and flooding, increased frequency and severity of storms and droughts and other weather events, any of which may result
in degradation of water quality, decreases in available water supply, changes in water usage patterns and disruptions in service. Because
of the uncertainty of weather volatility related to climate variability, we cannot predict its potential impact on our financial condition,
results of operations, cash flows and liquidity. Reductions of or delays in weather forecasting could adversely affect our ability to plan and respond to such events, which may exacerbate the impact of such an event. Although some or all potential expenditures and costs with respect to our regulated
businesses could be recovered through rates we charge to our customers, there can be no assurance that the NJBPU or the DEPSC would authorize
recovery of such costs, in whole or in part.part, in a timely manner or at all.
Disruptions in our supply chain related to goods, such as pipe, chemicals, power and other fuel, equipment, water and other raw materials could adversely impact our operations, financial position, and cash flows.
Our ability to serve our customers and operate our business in compliance with regulatory requirements is dependent upon purchasing or securing necessary goods from our suppliers and vendors. These items include but are not limited to chemicals, pipe, valves, hydrants, fittings, equipment (including personal protective equipment), water, and power and other fuel. Examples of supply chain disruptions include reduced quantities of goods available in the marketplace, delays in manufacturing or shipping goods, labor shortages at our suppliers or vendors, natural or other disasters and operational impacts to some of our suppliers or vendors. Disruptions in our supply chain related to goods have occurred and we anticipate may continue to occur in the future.
Supply chain disruptions may cause us to be unable to purchase or otherwise obtain needed goods at a reasonable price or at all, and may significantly increase the price of goods we may obtain from suppliers and vendors. This, in turn, may adversely impact our operations and our ability to serve our customers in compliance with regulatory requirements, as well as our associated results of operations, cash flows and financial condition. While we attempt to plan for and have contingencies in place to address supply chain disruptions, our mitigation efforts may not be successful or may have further negative impacts on us.
The NJBPU regulates our public utility companies in New Jersey with respect to rates and charges for service, classification of accounts, awards of new service territory, acquisitions, financings and other matters. That means, for example, that we cannot raise the utility rates we charge to our customers in New Jersey without first petitioning the NJBPU for approval and navigating a lengthy administrative process. Similarly, the DEPSC regulates our public utility companies in Delaware. We cannot provide assurance as to when we will request approval for any such matter, nor can we predict whether these Public Utility Commissions will approve, deny or reduce the amount of such requests.
Certain costs are not completely within our control. The failure to obtain any rate increase would limit our ability to increase our revenues and, unless we are able to reduce costs without degrading service quality, would result in reduced earnings. Even if the rates approved are sufficient, we face the risk that we will not achieve the rates of return on equity permitted by the applicable Public Utility Commission. This could occur if certain conditions exist, including, but not limited to, (i) water usage is less than the level anticipated in establishing rates, (ii) customers increase their conservation efforts, (iii) we experience unusual or emergent situations, events or conditions, (iv) a decrease in customers that causes a decrease in operating revenue, or (v) our investments or expenses prove to be higher than the levels estimated in establishing rates.
Certain costs are not completely within our control.
The failure to obtain any rate increase would prevent us from increasing our revenues and, unless we are able to reduce costs without
degrading service quality, would result in reduced earnings.
The Company must comply with various environmental
laws and regulations promulgated by the USEPA, NJDEP and other governmental agencies, including the Toxic Catastrophe Prevention Act,
the Spill Prevention, Control, and Countermeasure Rule and the Discharge Prevention Program of the New Jersey Spill Compensation and Control
Act. If we fail to comply with environmental or other laws and regulations to which our business is subject, we could be finedsubject to fines, penalties or subject
to other sanctions, as well as damage to our reputation, as a result of governmental proceedings and private litigation, which could adversely impact our business or results of operations.
We depend upon our ability to raise money in the capital markets
to finance some of the costs of complying with laws and regulations, including environmental laws and regulations orand to pay for some of
the costs of improvements to or the expansion of our utility system assets. OurNeither we nor our regulated utility companies cannotcan issue debt or equity
securities without prior regulatory approval.
The acquisition and/or operation of additional water and wastewater systems is an element of our growth strategy. This strategy depends on identifying suitable opportunities that meet our risk and reward profile and reaching mutually agreeable terms with acquisition candidates or contract parties. In addition, many acquisitions or operational arrangements involving regulated water and wastewater systems are subject to approval by one or more governmental or regulatory authorities, which may include Public Utility Commissions or similar bodies with jurisdiction over rates, service territories, ownership changes, or operating authority. There can be no assurance that such approvals will be obtained on acceptable terms, in a timely manner, or at all, and regulatory authorities may impose conditions, limitations, or requirements that increase costs, restrict operations, delay integration, or reduce the anticipated benefits of a transaction.
The acquisition and/or operation of additional
water and wastewater systems is an element of our growth strategy. This strategy depends on identifying suitable opportunities that meet
our risk and reward profile and reaching mutually agreeable terms with acquisition candidates or contract parties. Acquisitions may result
in dilution in the value of our equity securities, incurrence of debt and contingent liabilities and fluctuations in financial results.
In addition, identifying suitable opportunities, negotiating terms, and integrating operations may require management attention without
any assurance of achieving a projected outcome. Even if an acquisition is successfully consummated, or we enter into an agreement to operate
additional water or wastewater systems, the assets, operations, contracts or companies we acquire may not achieve the projected revenues
and profitability.
Subsection 10A of the New Jersey Business Corporation
Act, known as the New Jersey Shareholders Protection Act, applies to us. The Shareholders Protection Act deters merger proposals, tender
offers or other attempts to effect changes in control that are not approved by our Board of Directors. In addition, we have a classified
Board of Directors, which means only a portion of the Director population is elected each year. A classified Board can make it more difficult
for an acquirer to gain control of the Company by voting its candidates onto the Board of Directors and may also deter merger proposals
and tender offers. OurThe Board of Directors also has the ability,authority, subject toupon obtaining NJBPU approval, to issue preferred stock in one or more series ofwith preferred
stock having suchthe number of shares, designation, preferences, voting rights, designation, limitations and other rights asdetermined theat Boardtheir of Directors may
fix.discretion. This could be used by the Board of Directors to discourage, delay or prevent an acquisition the Board of Directors determines is
not in the best interest of the common shareholders.
Management's Discussion & Analysis (MD&A)
New heading “Rates and Regulatory Matters”
New heading “Perfluoroalkyl Substances (PFAS) Multi-District Litigation Settlement”
Removed heading “Management Update”
Removed heading “Results of Operations for 2023 as Compared to 2022”
Removed heading “Operating Revenues”
Removed heading “Operation and Maintenance Expense”
Removed heading “Gain on Sale of Subsidiary”
Removed heading “Other Income, net”
Removed heading “Interest Charges”
Largest changes
“Middlesex - The approval by the NJBPU in February 2024 of the negotiated settlement of the Middlesex 2023 base rate case is expected to increase annual operating revenues by $15.4 million, effective March 1, 2024. The approved tariff rates were designed to recover increased operating costs as well as a return on invested capital of $563.1 million, based on an authorized return on common equity of 9.6%. …”see in full comparison
“Perfluoroalkyl Substances (PFAS) Multi-District Litigation Settlement”see in full comparison
“Several of the Company’s utility subsidiaries are parties to a multi-district litigation (MDL) lawsuit against manufacturers of certain PFAS for damages, contribution and reimbursement of costs incurred and continuing to be incurred to address the presence of such PFAS in public water supply systems owned and operated by these utility subsidiaries and throughout their service areas. Settlements with several defendants in the MDL have received final approval by the MDL court. …”see in full comparison
“In September 2024, Tidewater closed on a $2.2 million Delaware SRF loan with a 0.0% interest rate with an expected maturity date in 2044. This loan is for costs associated with Tidewater’s obligation, as required by federal law and Delaware regulations, to identify and inventory lead service lines throughout Tidewater’s service area. Tidewater has drawn down $1.7 million as of December 31, 2024.”see in full comparison
“In September 2024, Tidewater closed on a $2.2 million Delaware SRF loan with a 0.0% interest rate with an expected maturity date in 2044. This loan is for costs associated with Tidewater’s obligation, as required by federal law and Delaware regulations, to identify and inventory lead service lines throughout Tidewater’s service area. Tidewater has drawn down $1.8 million as of December 31, 2025.”see in full comparison
Full comparison: every changed paragraph (129)
The following discussion should be read in conjunction with the consolidated financial statements and related notes. For discussion of the year ended December 31, 2024 compared to December 31, 2023, refer to Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in the December 31, 2024 Annual report on Form 10-K, filed on February 28, 2025.
The following discussion should be read in conjunction
with the consolidated financial statements and related notes.
Middlesex Water Company (Middlesex or the Company)
has operated as a water utility in New Jersey since 1897 and in Delaware through our wholly-owned subsidiary, Tidewater Utilities, Inc.
(Tidewater), since 1992. We are in the business of providing an essential water utility service for domestic, commercial, municipal, industrial
and fire protection purposes. We operate water and wastewater systems under contract for governmental entities and private entities primarily
in New Jersey and DelawareDelaware. andWe also provide regulated wastewater services in New Jersey. We are regulated by state public utility commissions
as to rates charged to customers for water and wastewater services, as to the quality of water and wastewater servicesservice we provide and
as to certain other matters in the states in which our regulated subsidiaries operate. Only our Utility Service Affiliates, Inc. (USA),
Utility Service Affiliates (Perth Amboy), Inc. (USA-PA) and White Marsh Environmental Services, Inc. (White Marsh) subsidiaries are not
regulated public utilities as related to rates and services quality. All municipal or commercial entities whose utility operations are
managed by these entitiesentities, however, are subject to environmental regulation at the federal and state levels.
Our principal New Jersey water utility system
(the Middlesex System) provides water services to approximately 61,000 retail customers, primarily in central New Jersey. The Middlesex
System also provides water sales under contract to municipalities in central New Jersey with a total population of over 0.2 million. Our
other New Jersey subsidiaries, Pinelands Water Company (Pinelands Water) and Pinelands Wastewater Company (Pinelands Wastewater) (collectively,
Pinelands), provide water and wastewater services to approximately 2,500 customers in Southampton Township, New Jersey.
Our Delaware subsidiaries, Tidewater and Southern
Shores Water Company, LLC (Southern Shores),LLC, provide water services to approximately 61,00065,000 retail customers in New Castle, Kent and Sussex
Counties, Delaware. Tidewater’s subsidiary, White Marsh, services approximately 4,3003,700 customershouseholds in Kent and Sussex Counties through
various operations and maintenance contracts.
USA operates the Borough
of Avalon, New Jersey’s (Avalon) water utility, sewer utility and storm water system under a 10-yearten-year operations and maintenance
contract expiring in 2032. USA also operates the Borough of Highland Park, New Jersey’s (Highland Park) water and wastewater
systems under a 10-year operations and maintenance contract expiring in 2030. In addition to performing day-to-day service operations,
USA is responsible for emergency response and management of capital projects funded by Avalon and Highland Park.
Under a marketing agreement with HomeServe USA Corp. (HomeServe) expiring in 2031, USA offers residential customers in New Jersey and Delaware water and wastewater related services and home maintenance programs. HomeServe is a leading national provider of such home maintenance service programs. USA receives a service fee for the billing, cash collection and other administrative matters associated with HomeServe’s service contracts. USA also provides unregulated water and wastewater services under contract with several New Jersey municipalities.
Rates and Regulatory Matters
Middlesex - In February 2026, the New Jersey Board of Public Utilities (NJBPU) approved:
•$14.5 million of base rate increases for Middlesex and Pinelands, effective February 23, 2026;
•A Resiliency and Environmental System Improvement Charge (RESIC) Foundational Filing, which allows for the recovery of certain costs of future Middlesex and Pinelands investments related to compliance with requirements to address existing and emerging chemical elements or compounds, installation of new plant or equipment or replacement of existing plant or equipment to further maintain, enhance, or improve resiliency, health, safety or environmental protection; and
•A Distribution System Improvement System Charge (DSIC) Foundational Filing, which allows for the recovery of future Middlesex and Pinelands Water investments in qualifying capital improvements to their water distribution system.
In January 2026, the NJBPU approved the merger of Pinelands into Middlesex through a corporate reorganization.
Tidewater - In July 2025, the Delaware Public Service Commission (DEPSC) approved a $5.5 million base rate increase for Tidewater, effective July 3, 2025.
Management Update
Upon the retirements of President and Chief Executive
Officer Dennis W. Doll, and Senior Vice President, Treasurer and Chief Financial Officer A. Bruce O’Connor, the Company
named Nadine Leslie its new President and Chief Executive Officer effective March 1, 2024 and Mohammed G. Zerhouni its
new Senior Vice President, Treasurer and Chief Financial Officer effective June 24, 2024. Ms. Leslie was also appointed to
the Board of Directors effective March 1, 2024.
In December 2024, the Company named Gregory Sorensen
its new Vice President and Chief Operating Officer. His responsibilities include water and wastewater operations, capital program planning
and delivery, safety and security, sustainability, and growth initiatives.
In April 2025 and January 2026, Tidewater Acquisitioncompleted the acquisitions of the Waterwater Utility
Assetsutility assets of the Town of Ocean View, Delaware and Pinewood Acres, LLC, respectively, as authorized by the DEPSC.
For additional information, see Note 2, Rates and Regulatory Matters
Perfluoroalkyl Substances (PFAS) Multi-District Litigation Settlement
Several of the Company’s utility subsidiaries are parties to a multi-district litigation (MDL) lawsuit against manufacturers of certain PFAS for damages, contribution and reimbursement of costs incurred and continuing to be incurred to address the presence of such PFAS in public water supply systems owned and operated by these utility subsidiaries and throughout their service areas. Settlements with several defendants in the MDL have received final approval by the MDL court. The Company timely submitted to the MDL court its Phase One claim forms under settlement agreements with defendants 3M Company, DuPont de Nemours, Inc., Tyco Fire Products LP and BASF Corporation. In 2025, the Company received settlement payments from 3M Company that will ultimately be refunded to customers. The Company anticipates receiving additional settlement payments in 2026 from the defendants named above.
In February 2025, Tidewater and the Town of Ocean
View, Delaware’s (Ocean View) joint application for Tidewater’s purchase of all of the rights, title, and interest in the
water utility assets of Ocean View for $4.6 million was approved by the Delaware Public Service Commission (DEPSC). Ocean View serves
approximately 900 customers in Sussex County, Delaware. Tidewater currently provides water service to most residents of Ocean View other
that the 900 customers currently served by Ocean View. Closing on this purchase is expected by April 2025.
United States Environmental Protection Agency
(USEPA) Issues Final Perfluoroalkyl (PFAS) Regulations
In April 2024, the USEPA finalized drinking water
regulations for PFAS, establishing maximum contaminant levels (MCLs) for three PFAS compounds (Regulated PFAS) that are lower than the
current New Jersey Department of Environmental Protection MCLs adhered to by the Company. Under the new USEPA regulations effective April
2024, water systems must monitor for Regulated PFAS and have three years to complete initial monitoring (by April 2027), followed by ongoing
compliance monitoring. Water systems must also provide the public with information on the levels of Regulated PFAS in their drinking water
beginning in 2027. Water systems have five years (by April 2029) to implement treatment solutions that reduce Regulated PFAS if monitoring shows
that drinking water levels exceed these MCLs. The USEPA has announced its plans to issue a proposed rule extending the compliance date to 2031.
Beginning in April 2029,2029 and absent an extension by the USEPA, water systems that have
Regulated PFAS in drinking water which exceeds one or more of these MCLs must take action to reduce levels of these PFAS compounds in
their drinking water and must provide notification to the public of the violation.
In anticipation of these new USEPA standards,
in 2023, the Company began implementing its strategy to meet these lower MCLs for Regulated PFAS and is currently performingdesigning preliminary
engineeringand studiesimplementing tothe ensure thatmost effective PFAS treatment approaches are implemented.approach.
The Company’s multi-year
capital construction program encompasses numerous projects designed to upgrade and replace utility infrastructure as well as enhance the
integrity and reliability of assets to better serve the current and future generations of water and wastewater customers. The Company
plans to invest approximately $93$126 million in 20252026 in connection with this plan for projects that include, but are not limited to:
•Upgrade of the Carl J. Olson Surface Water Treatment Plant (CJO Plant) to integrate PFAS removal from source water and CJO Plant finished water pump electrical distribution system improvements in our Middlesex System;
•Construction of new water treatment facilities, distribution system improvements and PFAS treatment facilities in Delaware; and
•Various water main replacements and improvements.
•Invest in our utility infrastructure to build system resiliency and meet compliance requirements;
•Timely and adequate recovery of infrastructure investments and other costs to maintain and continually improve service quality;
•Selective acquisitions of investor and municipally-owned water and wastewater utilities; and
•Operation of municipal and industrial water and wastewater systems on a contract basis which meet our risk profile.
Rates
Middlesex - The approval by the NJBPU in
February 2024 of the negotiated settlement of the Middlesex 2023 base rate case is expected to increase annual operating revenues by $15.4
million, effective March 1, 2024. The approved tariff rates were designed to recover increased operating costs as well as a return on
invested capital of $563.1 million, based on an authorized return on common equity of 9.6%. Middlesex has made capital infrastructure
investments to ensure prudent upgrade and replacement of its utility assets to support continued regulatory compliance, resilience and
overall quality of service. In August 2023, Middlesex and 3M Company (3M) executed a settlement agreement (Settlement Agreement) to resolve
a lawsuit Middlesex previously initiated claiming 3M introduced Perfluoroalkyl Substances (PFAS) into the Company’s water supply
for its Park Avenue Wellfield Treatment Plant (Park Avenue Plant). The rate case settlement provided that the net proceeds from
the 3M Settlement Agreement were to be used to mitigate the increase in customer rates and reimburse Middlesex for previously incurred
costs for the construction of the Park Avenue Plant PFAS treatment upgrades, including depreciation and carrying costs. This resulted
in the reclassification of $48.3 million from Regulatory Liabilities to Contributions in Aid of Construction from the December 31, 2023
balance sheet. In 2024, the Company also recognized the recovery of $0.9 million for depreciation and $4.1 million for carrying costs
associated with the Park Avenue Plant PFAS treatment upgrades, as well as the recovery of $2.6 million of previously incurred operating
treatment costs while the Park Avenue Plant PFAS treatment upgrades were in process.
The Middlesex Lead Service Line Replacement (LSLR)
Plan, which was approved by the NJBPU in January 2024, has commenced and Middlesex is currently recovering $1.2 million of costs for replacing
customer-owned lead service lines incurred through June 2024, which are being recovered between September 2024 and February 2025. Costs
of $0.6 million for replacing customer-owned lead service lines incurred between July 2024 through December 2024 will be recovered beginning
in March 2025 through August 2025. The LSLR surcharge is required to be reset every six months over the life of the LSLR Plan. Cost recovery
for replacing Company-owned lead service lines are recoverable through traditional rate making in connection with general rate case filings.
In October 2023, the NJBPU approved Middlesex’s
petition for a Distribution System Improvement Charge (DSIC) Foundation Filing, which is a prerequisite to implementing a DSIC rate that
allows water utilities to recover investments in, and generate a return on, qualifying capital improvements to their water distribution
system made between base rate proceedings. Middlesex is authorized to recover DSIC revenues up to five percent (5%) of total revenues
established in Middlesex’s 2021 base rate proceeding, or approximately $5.5 million. Semi-annually, beginning in April 2024, the
Company must file for a change in its DSIC rate seeking recovery for DSIC-eligible investments made during the period. DSIC rates remain
in effect until Middlesex’s next base rate case increase subsequent to the March 1, 2024 increase. Under the terms of the Foundational
Filing, the Company is required to file a base rate petition before November 2026.
In May 2024, the NJBPU approved a DSIC rate, effective
May 26, 2024, that is expected to result in $0.5 million of annual revenue. In November 2024, the NJBPU approved a DSIC rate, effective
November 26, 2024, that is expected to result in an additional $0.6 million of annual revenue. Middlesex expects to file for an additional
DSIC rate increase in April 2025.
In February 2025, the NJBPU approved Middlesex’s
petition to reset its Purchased Water Adjustment Clause (PWAC) tariff rate to recover additional annual costs of $0.5 million, primarily
for the purchase of treated water from a non-affiliated water utility regulated by the NJBPU. A PWAC is a rate mechanism that allows for
the recovery of increased purchased water costs between base rate case filings. The PWAC is reset to zero once those increased costs are
included in base rates. The new PWAC rate will be effective March 1, 2025.
Tidewater - In September 2024, the DEPSC
approved Tidewater’s petition to recover up to $2.1 million of costs associated with Tidewater’s obligation to identify and
inventory lead service lines throughout Tidewater’s service area, as required by federal law and Delaware regulations. Recovery
of these costs began February 1, 2025 and is expected to continue through January 2028. Through December 31, 2024, Tidewater has spent
$1.8 million, which is included in Regulatory Assets.
In August 2024, Tidewater filed an application
with the DEPSC to increase its general rates for water service. In the application, Tidewater seeks an overall increase in annual operating
revenue of $10.3 million or 25.66% over current revenue. The request for rate increases will allow Tidewater to recover prudently incurred
investments made in the last ten years to support continued regulatory compliance, enhanced water quality, service reliability, security
and resiliency of the water utility infrastructure assets. Effective October 30, 2024, Tidewater received approval of the DEPSC to suspend
its DSIC rate and implement an interim rate increase, which is expected to result in approximately $2.5 million of annual revenues, subject
to refund pending the outcome of the rate case application.
Southern Shores - Southern Shores
provides water service to a 2,200 unit condominium community in Sussex County, Delaware under a DEPSC-approved agreement expiring December
31, 2029. Under the agreement, rates are increased when there are unanticipated capital expenditures or regulatory related changes
in operating expenses exceed certain thresholds. In 2024, capital expenditures did exceed the established threshold. In addition, rates
are increased annually by the lesser of the regional Consumer Price Index or 3%. Effective January 1, 2025, Southern Shores rates were
increased $0.1 million or 6.51%.
Our ability to increase operating income and net
income is based significantly on four factors: weather, adequate and timely rate relief, effective cost management and customer growth
(which are evident in comparison discussions in the Results of Operations section below). Weather patterns which can result in
lower customer demand for water may occur in 2025. As operating costs are anticipated to increase in 2025 in a variety of categories,
we continue to implement plans to further streamline operations and further reduce and mitigate increases in operating costs. Changes
in customer water usage habits, as well as increases in capital expenditures and operating costs, are significant factors in determining
the timing and extent of rate increase requests.
Our investments in system infrastructure continue
to grow significantly and our operating costs are anticipated to increase in 2025 and 2026 in a variety of categories. These factors,
among others, may require a base rate increase request by Middlesex in mid 2025.
Overall, organic residential customer growth continues
in our Tidewater system (approximately 3.5% in 2024).
The Company has projected to spend approximately
$387 $506 million for the 2025-20272026-2028 capital investment program, including approximately $105$255 million for upgrading our Carl J. Olson Surface
Water Treatment Plant (CJO Plant) to integrate PFAS removal from source water, $34 million on the RENEW Program, which is our ongoing
initiative to replace water mains in the Middlesex System, $15$17 million for replacement of a transmission main in Metuchen in our Middlesex
System, $8 million for booster station generator replacement and electrical improvements. $9 million for construction of the Bethany Bay new water treatment facility in the Tidewater System and $12$13 million for elevated storage tanks in our Tidewater System.
The Company utilizes semi-annual DSIC and RESIC filings between general rate case filings to timely recover costs for qualified capital investments related to its utility systems as well as compliance with requirements to address existing and emerging chemical elements or compounds, installation of new plant or equipment or replacement of existing plant or equipment to further maintain and enhance resiliency, health, safety or environmental protection investments.
Organic residential customer growth continues in our Tidewater system (approximately 3.0% in 2025) through expansion of our franchise area.
The Company continues to seek "tuck-in" acquisition opportunities for small water systems near our current service areas that are easily integrated into our Company, such as the recent acquisitions of the water utility assets of the Town of Ocean View and Pinewood Acres, LLC in Delaware.
Our ability to increase earnings is based primarily on four factors: weather, adequate and timely rate relief, effective cost management and customer growth (which are evident in comparison discussions in the Results of Operations section below). Weather patterns which can result in lower customer demand for water may occur in 2026. Changes in customer water usage habits, as well as increases in capital expenditures and operating costs, are significant factors in determining the timing and extent of base rate increase requests.
The Company has two operating segments, Regulated
and Non-Regulated. Our Regulated segment contributed approximately 94% and 93% of total revenues for the years ended December 31, 2024, 20232025 and
2022, 2024, respectively, and approximately 94%, 92% and 93%94% of net income for each of the years ended December 31, 2024, 20232025 and 2022,2024, respectively.
The discussion of the Company’s results of operations is on a consolidated basis and includes significant factors by subsidiary.
The segments in the tables included below are comprised of the following companies: Regulated- Middlesex, Tidewater, Pinelands and Southern
Shores; Non-Regulated- USA, USA-PA, and White Marsh.
Operating revenues for the year ended December
31, 20242025 increased $25.6$2.8 million from the same period in 20232024 due primarily to the following factors:
•Middlesex System revenues increased by $1.5 million due to the increase in base rates effective March 1, 2024 and the increase in DSIC partially offset by lower consumption driven by unfavorable weather;
•Tidewater System revenues increased by $1.6 million due to the increase in base rates effective July 3, 2025 and customer growth partially offset by lower consumption driven by unfavorable weather;
•Pinelands System revenues increased $0.2 million due to the full year impact of base rate increases;
•Non-regulated revenues decreased $0.6 million, primarily due to lower supplemental contract services; and
•All other operating revenue categories increased $0.1 million.
Operation and maintenance expenses for the year
ended December 31, 20242025 increaseddecreased $9.2$1.1 million from the same period in 20232024 due to increasedhigher capitalizable costs and lower legal, financial and regulatory matter costs,
partially offset by increased production costs from weather-driven lower water quality, increased weather-driven main break repair costs, higher labor costscost due to annual wage increases,and anemployee enhancedheadcount increases and the one-time recovery in 2024 of previous water treatment processoperating costs at Middlesex’s Park Avenue Plant,Plant andin higher
energyconnection costswith dueMiddlesex’s to2023 increasedrate watercase demand.order.
Depreciation expense for the year ended December 31, 2025 increased $2.7 million from the same period in 2024 due to higher average utility plant in service and the one-time recovery in 2024 of previous depreciation costs related to the PFAS treatment upgrades at Middlesex’s Park Avenue Plant in connection with Middlesex’s 2023 rate case order.
What changed in the latest 10-Q
Risk Factors
The information about risk factors does not differ materially from those set forth in Part I, Item 1A. of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Results of Operations – Six months ended June 30, 2026”
New heading “Operating Revenues”
New heading “Operations and Maintenance Expense”
New heading “Other Income, net”
New heading “Interest Charges”
Largest changes
“In June 2026, Tidewater entered into a term loan agreement with CoBank, ACB and borrowed $25.0 million at an interest rate of 6.72%. The loan matures in 2048. Proceeds from the loan were used to repay Tidewater’s outstanding short-term borrowings and other general corporate purposes.”see in full comparison
Full comparison: every changed paragraph (50)
-changes in federal and state regulations;
Our principal New Jersey water utility systemsystem, (the Middlesex System)Middlesex, provides water services to approximately 61,000 retail customers, primarilycustomers in central New Jersey.Jersey, The Middlesex Systemand also provides water sales under contract to municipalities in central New Jersey with a total population of over 0.2 million. Prior to April 1, 2026, Pinelands Water Company (Pinelands Water) and Pinelands Wastewater Company (Pinelands Wastewater) (collectively, Pinelands) provided water and wastewater services to approximately 2,500 customers in Southampton Township, New Jersey. Effective April 1, 2026, Pinelands was merged into Middlesex and those customers are now served by Middlesex.Middlesex (Middlesex and the Pinelands are collectively referred to as the "Middlesex System").
USA-PA operates the water and wastewater systems for the City of Perth Amboy, New Jersey (Perth Amboy) under a 10-year operations and maintenance contract expiring in 2028. In addition to performing day-to dayday-to-day operations, USA-PA is also responsible for emergency response and management of capital projects funded by Perth Amboy.
The settlement payments received by the Company will ultimately be refunded to customers. AsThrough ofJune March 31,30, 2026, the Company received $6.0$8.1 million and anticipates receiving additional settlement payments during the remainder of 2026 from the defendants named above.
•A Distribution System Improvement System Charge (DSIC) Foundational Filing, which allows for the recovery of future Middlesex and Pinelands Water investments in qualifying capital improvements to their water distribution system.
Tidewater - In June 2026, the Delaware Public Service Commission (DEPSC) approved Tidewater’s DSIC rate, effective July 1, 2026. Tidewater is expected to recover approximately $0.6 million of semi-annual revenues from July 2026 to December 2026.
Tidewater - In January 2026, Tidewater completed the acquisitionsacquisition of the water utility assets of Pinewood Acres, LLC, as authorized by the Delaware Public Service Commission (DEPSC).DEPSC.
United States Environmental Protection Agency (USEPA) Issues PFAS Regulations - In April 2024, the USEPA finalized drinking water regulations for PFAS, establishing maximum contaminant levels (MCLs) for three PFAS compounds (Regulated PFAS) that are lower than the current New Jersey Department of Environmental Protection MCLs adhered to by the Company. Under the new USEPA regulations, effective April 2024, water systems must monitor for Regulated PFAS and have three years to complete initial monitoring (by April 2027), followed by ongoing compliance monitoring. Water systems must also provide the public with information on the levels of Regulated PFAS in their drinking water beginning in 2027. Water systems have five years (by April 2029) to implement solutions that reduce Regulated PFAS if monitoring shows that drinking water levels exceed these MCLs. The USEPA has announced its plans to issue a proposed rule extendingallowing utilities to extend the compliance date to 2031.
The discussion of the Company’s operating results is on a consolidated basis and includes significant factors by subsidiary. The Company has two operating segments, Regulated and Non-Regulated. The operations of the Regulated segment are subject to regulations promulgated by state public utility commissions as to rates and level of service. Rates and level of service in the Non-Regulated segment are subject to the terms of individually-negotiatedindividually negotiated and executed contracts with municipal, industrial and other clients. Both segments are subject to federal and state environmental, water and wastewater quality and other associated legal and regulatory requirements.
The segments in the tables included below are comprised of the following companies: Regulated - Middlesex, Tidewater, Pinelands (through March 31, 2026, when Pinelands was merged into Middlesex - see Note 2 – Rates and Regulatory Matters, Middlesex Rate Matters for more details) and Southern Shores; Non-Regulated - USA, USA-PA, and White Marsh.
Results of Operations – Three Monthsmonths Endedended MarchJune 31,30, 2026
Operating revenues for the three months ended MarchJune 31,30, 2026 increased $4.4$7.0 million from the same period in 2025 due to the following factors:
•Middlesex System revenues increased $3.4$5.3 million due to increased wholesale customer demand, customer consumption and base rate increases effective February 23, 2026 (see Note 2, Rates and Regulatory Matters); and
•Tidewater System revenues increased $0.8$1.7 million due to customer growth, increased customer consumptionconsumption, customer growth and rate increases (see Note 2, Rates and Regulatory Matters);.
•Non-regulated revenues increased $0.1 million, primarily due to higher supplemental contract services; and
•All other operating revenue categories increased $0.1 million.
Operations and Maintenance Expense for the three months ended MarchJune 31,30, 2026 increased $1.9$2.3 million from the same period in 2025 due to increased variable production costs from higher production and higher labor costprimarily due to wageincreases in the allowance for credit loss reserve and employee headcountrelated increases,costs, partially offset by higher capitalizable costs.
Depreciation expense for the three months ended MarchJune 31,30, 2026 increased $0.5$0.1 million from the same period in 2025 due to higher average utility plant in service.
Other Taxes for the three months ended MarchJune 31,30, 2026 increased $0.5$0.3 million from the same period in 2025 primarily due to higher gross receipts taxes on higher revenues in our Middlesex system.System.
Other Income, net for the three months ended MarchJune 31,30, 2026 increased $0.2$0.5 million from the same period in 2025 due to higher Allowance for Funds Used During Construction from increased capital expenditures.
Interest Charges for the three months ended MarchJune 31,30, 2026 increased $0.5$0.4 million from the same period in 2025 primarily due to higher average debt outstanding.
Income Taxes for the three months ended June 30, 2026 increased by $0.4 million from the same period in 2025, primarily due to higher pre-tax income partially offset by lower effective tax rate from the flow-through benefit of increased estimated annual deductions on repair expenditures on tangible property in the Middlesex System. Income tax benefits from the deduction of repair expenditures on tangible property in the Middlesex System are recognized immediately as a reduction to income tax expense in accordance with a previously issued NJBPU order.
Results of Operations – Six months ended June 30, 2026
Operating Revenues
IncomeOperating Taxesrevenues for the threesix months ended MarchJune 31,30, 2026 increased by $0.1$11.4 million from the same period in 2025, primarily2025 due to higherthe pre-taxfollowing income.factors:
•Middlesex revenues increased $8.8 million due to increased wholesale demand, customer consumption and base rate increases effective February 23, 2026 (see Note 2, Rates and Regulatory Matters);
•Tidewater revenues increased $2.5 million due to increased customer consumption, customer growth, and rate increases (see Note 2, Rates and Regulatory Matters); and
•Non-regulated revenues increased $0.1 million, primarily due to higher supplemental contract services.
Operations and Maintenance Expense
Operations and Maintenance Expense for the six months ended June 30, 2026 increased $4.2 million from the same period in 2025 primarily due to increases in allowance for credit loss reserve, employee related costs and variable production costs, partially offset by higher capitalizable costs.
Depreciation
Depreciation expense for the six months ended June 30, 2026 increased $0.6 million from the same period in 2025 due to higher average utility plant in service.
Other Taxes
Other Taxes for the six months ended June 30, 2026 increased $0.8 million from the same period in 2025 due to higher gross receipts taxes on higher revenue in our Middlesex System.
Other Income, net
Other Income, net for the six months June 30, 2026 increased $0.7 million from the same period in 2025 due to higher Allowance for Funds Used During Construction from increased capital expenditures.
Interest Charges
Interest Charges for the six months ended June 30, 2026 increased $0.9 million from the same period in 2025 due to higher average debt outstanding.
Income Taxes
Income Taxes for the six months ended June 30, 2026 increased by $0.5 million from the same period in 2025, primarily due to higher pre-tax income partially offset by lower effective tax rate from the flow-through benefit of increased estimated annual deductions on repair expenditures on tangible property in the Middlesex System. Income tax benefits from the deduction of repair expenditures on tangible property in the Middlesex System are recognized immediately as a reduction to income tax expense in accordance with a previously issued NJBPU order.
For the threesix months ended MarchJune 31,30, 2026, cash flows from operating activities decreased $2.1$4.0 million to $11.7$28.1 million. The decrease in cash flows from operating activities primarily resulted from higher vendor and income tax payments offset by the impact of Middlesex’s and Tidewater's approved base rate increaseincreases effective February 23, 2026 and Tidewater's base rate increase effective July 3,2025, 2025.respectively.
For the threesix months ended MarchJune 31,30, 2026, cash flows used in investing activities increaseddecreased $1.7$1.6 million to $20.6$53.6 million due to lower acquisition spending on water systems offset by increased utility plant expenditures in 2026.expenditures.
For the threesix months ended MarchJune 31,30, 2026, cash flows from financing activities increased $4.6$1.3 million to $8.2$24.5 million. The increase in cash flows provided by financing activities is due to higher long-term and short-term debt borrowings and the proceeds from the issuance of common stock under Middlesex’s At-the-Market (ATM) equity offering program (for further information on Middlesex’s ATM equity offering program, see below under Capital Expenditures and Commitments) partially offset by increased redemption of long-term-debt.long-term-debt and lower short-term debt borrowings.
In June 2026, Middlesex closed on a $17.8 million SRF construction loan. The proceeds will be used to fund the replacement of lead service lines under Middlesex's Lead Service Line Replacement Plan. Funding requisitions are expected to occur through December 2027.
In June 2026, Tidewater entered into a term loan agreement with CoBank, ACB and borrowed $25.0 million at an interest rate of 6.72%. The loan matures in 2048. Proceeds from the loan were used to repay Tidewater’s outstanding short-term borrowings and other general corporate purposes.
In September 2024, Tidewater closed on a $2.2 million Delaware SRF loan with a 0.0% interest rate with maturity dates in 2044. This loan is for costs associated with Tidewater’s obligation, as required by federal law and Delaware regulations, to identify and inventory lead service lines throughout Tidewater’s service area. Tidewater has drawn down $1.8 million as of MarchJune 31,30, 2026 and expects that the requisitions will continue through 2026.
In May 2024, Tidewater closed on four Delaware SRF loans totaling $5.6 million, all at interest rates of 2.0% with maturity dates in 2044. These loans are for the construction, relocation, improvement, and/or interconnection of transmission mains and construction of a water treatment facility. In December 2025, Tidewater closed on an additional $1.0 million, 2.0% SRF loan with a maturity date of 2045 related to these projects. Tidewater has drawn down $2.1 million on these loans as of MarchJune 31,30, 2026. Each project has its own construction timetable with the last spending set to occur in 2027.
In December 2025, Southern Shores closed on a $0.4 million Delaware SRF loan with a 0.0% interest rate with a maturity date in 2045. This loan is for costs associated with Southern Shore’s obligation, as required by federal law and Delaware regulations, to identify and inventory lead service lines in its service area. Southern Shores has drawn down $0.2 million on these loans as of MarchJune 31,30, 2026 and does not anticipate any further draws.
In April 2026, Tidewater filed a petition with the DEPSC seeking approval to issue up to $25 million of long-term debt through CoBank, ACB. Proceeds will be used to reduce Tidewater's Notes Payable and finance Tidewater's on-going capital program.
In May 2025, Middlesex entered into an ATM Equity Offering Sales Agreement (Equity Sales Agreement) with BofA Securities, Inc., Robert W. Baird & Co. Incorporated, and Janney Montgomery Scott (Janney), pursuant to which Middlesex may offer and sell shares of its common stock, no par value per share, from time to time in “at-the-market” offerings, having an aggregate gross sales price of up to $110.0 million. As ofIn February 20, 2026, the Equity Sales Agreement was amended, replacing Janney with Huntington Securities, Inc. as a sales agent. The Company intends to use the net proceeds from these sales, after deducting commissions and offering expenses, to fund our capital expenditures, to purchase and maintain plant equipment, as well as for other general corporate purposes. For the three and six months ended MarchJune 31,30, 2026, Middlesex issued and sold a total of 49,305215,722 and 265,027 shares of common stock,stock respectively, at a weighted average price of $54.82$53.31 and $53.59 per share,share respectively, and received $2.7$11.3 million and $14.0 million in net proceeds,proceeds respectively, under the Equity Sales Agreement. As of MarchJune 31,30, 2026, the Company hashad $77.3$65.8 million of aggregate gross sales remaining under the Equity Sales Agreement.
MSEX insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 1 filing (1 insider, 1 trade date, 615 shares, about $35.4K). Net open-market shares: -615 (purchases minus sales); net value about -$35.4K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-08-11 | Bershad Joshua |
Other | 6,900 | — | — |
| 2026-08-07 | Ginegaw Lorrie Beth |
Open-market sale | 615 | $57.61 | $35.4K |
Well-known investors holding MSEX (13F)
None of the 59 investors we track reported a position in their latest 13F.