Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, non-accelerated filer, smaller reporting company and emerging growth company in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

The number of shares outstanding of each of the registrant's classes of common stock, as of October 31, ~~2017:~~2019: Common Stock, No Par Value: ~~16,346,036~~16,669,540 shares outstanding.

INDEX


PART I.	FINANCIAL INFORMATION	PAGE

Item 1.	Financial Statements (Unaudited):

	Condensed Consolidated Statements of Income	1

	Condensed Consolidated Balance Sheets	2

	Condensed Consolidated Statements of Cash Flows	3

	Condensed Consolidated Statements of Capital Stock and Long-Term Debt	4

	Condensed Consolidated Statements of Common Stockholders’ Equity	5

	Notes to Unaudited Condensed Consolidated Financial Statements	56

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1417

Item 3.	Quantitative and Qualitative Disclosures of Market Risk	2226

Item 4.	Controls and Procedures	2327

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	2328

Item 1A.	Risk Factors	2328

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2328

Item 3.	Defaults upon Senior Securities	2328

Item 4.	Mine Safety Disclosures	2328

Item 5.	Other Information	2328

Item 6.	Exhibits	2428

SIGNATURES		2529

Index

MIDDLESEX WATER COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

~~(In~~(In thousands except per share amounts)

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016

Operating Revenues $ 36,174 $ 37,794 $ 99,319 $ 101,098

Operating Expenses:
Operations and Maintenance 16,178 16,599 48,563 48,215
Depreciation 3,587 3,243 10,280 9,561
Other Taxes 3,603 3,796 10,327 10,537

Total Operating Expenses 23,368 23,638 69,170 68,313

Operating Income 12,806 14,156 30,149 32,785

Other Income (Expense):
Allowance for Funds Used During Construction 174 207 473 387
Other Income 43 400 69 449

Total Other Income, net 217 607 542 836

Interest Charges 1,493 1,427 3,965 3,841

Income before Income Taxes 11,530 13,336 26,726 29,780

Income Taxes 3,888 4,523 9,263 10,258

Net Income 7,642 8,813 17,463 19,522

Preferred Stock Dividend Requirements 36 36 108 108

Earnings Applicable to Common Stock $ 7,606 $ 8,777 $ 17,355 $ 19,414

Earnings per share of Common Stock:
Basic $ 0.47 $ 0.54 $ 1.06 $ 1.19
Diluted $ 0.46 $ 0.54 $ 1.06 $ 1.19

Average Number of
Common Shares Outstanding :
Basic 16,340 16,284 16,324 16,262
Diluted 16,496 16,440 16,480 16,418

Cash Dividends Paid per Common Share $ 0.2113 $ 0.1988 $ 0.6338 $ 0.5963

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018

Operating Revenues	$	37,769		$	38,713		$	101,859		$	104,809

Operating Expenses:
Operations and Maintenance		17,669			18,114			50,569			52,773
Depreciation		4,246			3,792			12,415			11,137
Other Taxes		3,871			3,889			10,913			10,910

Total Operating Expenses		25,786			25,795			73,897			74,820

Operating Income		11,983			12,918			27,962			29,989

Other Income (Expense):
Allowance for Funds Used During Construction		871			424			2,030			805
Other Income (Expense), net		(4	)		409			(142	)		1,277

Total Other Income, net		867			833			1,888			2,082

Interest Charges		1,996			1,723			4,984			4,929

Income before Income Taxes		10,854			12,028			24,866			27,142

Income Taxes		(265	)		(262	)		(952	)		1,683

Net Income		11,119			12,290			25,818			25,459

Preferred Stock Dividend Requirements		30			36			102			108

Earnings Applicable to Common Stock	$	11,089		$	12,254		$	25,716		$	25,351

Earnings per share of Common Stock:
Basic	$	0.67		$	0.75		$	1.56		$	1.55
Diluted	$	0.66		$	0.74		$	1.55		$	1.54

Average Number of
Common Shares Outstanding:
Basic		16,610			16,394			16,520			16,379
Diluted		16,757			16,550			16,673			16,535

~~See Notes to Condensed Consolidated Financial Statements.~~

Index

MIDDLESEX WATER COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

			September 30,		December 31,				September 30,		December 31,
ASSETS			2017		2016				2019		2018
UTILITY PLANT:		Water Production	$	149,881	$	146,914		Water Production	$	157,970	$	156,423
		Transmission and Distribution		449,323		430,880		Transmission and Distribution		536,367		512,202
		General		67,774		63,514		General		80,635		74,371
		Construction Work in Progress		21,752		12,196		Construction Work in Progress		69,651		32,878
		TOTAL		688,730		653,504		TOTAL		844,623		775,874
		Less Accumulated Depreciation		143,269		135,728		Less Accumulated Depreciation		166,873		157,387
		UTILITY PLANT - NET		545,461		517,776		UTILITY PLANT - NET		677,750		618,487

CURRENT ASSETS:		Cash and Cash Equivalents		2,701		3,879		Cash and Cash Equivalents		3,151		3,705
		Accounts Receivable, net		11,730		10,129		Accounts Receivable, net		13,407		11,762
		Unbilled Revenues		8,628		6,590		Unbilled Revenues		9,417		7,293
		Materials and Supplies (at average cost)		4,441		4,094		Materials and Supplies (at average cost)		5,159		5,411
		Prepayments		2,588		2,024		Prepayments		3,577		2,644
		TOTAL CURRENT ASSETS		30,088		26,716		TOTAL CURRENT ASSETS		34,711		30,815

DEFERRED CHARGES								Operating Lease Right of Use Asset		6,133		—
AND OTHER ASSETS:		Preliminary Survey and Investigation Charges		3,832		2,365		Preliminary Survey and Investigation Charges		2,252		5,254
		Regulatory Assets		60,430		60,894
		Operations Contracts, Developer and Other Receivables		789		1,139
		Restricted Cash		439		439		Regulatory Assets		100,320		99,236
		Non-utility Assets - Net		9,276		9,131		Restricted Cash		53,927		1,956
		Federal Income Tax Receivable		1,408		1,408		Non-utility Assets - Net		10,306		9,989
		Other		196		293		Other		1,954		2,093
		TOTAL DEFERRED CHARGES AND OTHER ASSETS		76,370		75,669		TOTAL DEFERRED CHARGES AND OTHER ASSETS		174,892		118,528
		TOTAL ASSETS	$	651,919	$	620,161		TOTAL ASSETS	$	887,353	$	767,830

CAPITALIZATION AND LIABILITIES	CAPITALIZATION AND LIABILITIES						CAPITALIZATION AND LIABILITIES
CAPITALIZATION:		Common Stock, No Par Value	$	154,626	$	153,045		Common Stock, No Par Value	$	170,562	$	157,354
		Retained Earnings		72,403		65,392		Retained Earnings		105,233		91,433
		TOTAL COMMON EQUITY		227,029		218,437		TOTAL COMMON EQUITY		275,795		248,787
		Preferred Stock		2,433		2,436		Preferred Stock		2,084		2,433
		Long-term Debt		135,806		134,538		Long-term Debt		228,272		152,851
		TOTAL CAPITALIZATION		365,268		355,411		TOTAL CAPITALIZATION		506,151		404,071

CURRENT		Current Portion of Long-term Debt		6,547		6,159		Current Portion of Long-term Debt		7,161		7,343
LIABILITIES:		Notes Payable		24,500		12,000		Notes Payable		58,500		48,500
		Accounts Payable		12,113		12,343		Accounts Payable		20,178		19,325
		Accrued Taxes		11,881		12,385		Accrued Taxes		12,132		14,230
		Accrued Interest		391		1,084		Accrued Interest		799		1,289
		Unearned Revenues and Advanced Service Fees		962		923		Unearned Revenues and Advanced Service Fees		1,048		1,036
		Other		2,618		2,162		Other		3,657		2,640
		TOTAL CURRENT LIABILITIES		59,012		47,056		TOTAL CURRENT LIABILITIES		103,475		94,363

COMMITMENTS AND CONTINGENT LIABILITIES (Note 7)	COMMITMENTS AND CONTINGENT LIABILITIES (Note 7)						COMMITMENTS AND CONTINGENT LIABILITIES (Note 7)

DEFERRED CREDITS		Customer Advances for Construction		21,307		20,846		Customer Advances for Construction		22,682		22,572
AND OTHER LIABILITIES:		Accumulated Deferred Investment Tax Credits		694		753		Operating Lease Obligation		5,908		—
		Accumulated Deferred Income Taxes		80,250		72,072		Accumulated Deferred Income Taxes		50,947		47,270
		Employee Benefit Plans		33,544		36,139		Employee Benefit Plans		27,826		30,661
		Regulatory Liability - Cost of Utility Plant Removal		11,889		11,337		Regulatory Liabilities		72,000		79,112
		Other		1,348		1,443		Other		2,567		2,730
		TOTAL DEFERRED CREDITS AND OTHER LIABILITIES		149,032		142,590		TOTAL DEFERRED CREDITS AND OTHER LIABILITIES		181,930		182,345

CONTRIBUTIONS IN AID OF CONSTRUCTION	CONTRIBUTIONS IN AID OF CONSTRUCTION			78,607		75,104	CONTRIBUTIONS IN AID OF CONSTRUCTION			95,797		87,051
		TOTAL CAPITALIZATION AND LIABILITIES	$	651,919	$	620,161		TOTAL CAPITALIZATION AND LIABILITIES	$	887,353	$	767,830

See Notes to Condensed ~~Consolidated~~Consolidate Financial Statements.

Index

MIDDLESEX WATER COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Nine Months Ended Septmber 30,						Nine Months Ended September 30,
	2017			2016			2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	17,463		$	19,522		$	25,818		$	25,459
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization		10,677			10,052			12,858			11,743
Provision for Deferred Income Taxes and Investment Tax Credits		8,394			5,382
Provision for Deferred Income Taxes								(8,379	)		(5,975	)
Equity Portion of Allowance for Funds Used During Construction (AFUDC)		(323	)		(261	)		(1,330	)		(538	)
Cash Surrender Value of Life Insurance		(161	)		(89	)		(187	)		(119	)
Stock Compensation Expense		673			649			409			757
Changes in Assets and Liabilities:
Accounts Receivable		(1,601	)		(3,213	)		(1,645	)		(2,759	)
Unbilled Revenues		(2,038	)		(2,285	)		(2,124	)		(2,098	)
Materials and Supplies		(347	)		(1,799	)		252			(1,515	)
Prepayments		(564	)		(778	)		(933	)		(1,111	)
Accounts Payable		(230	)		3,806			853			5,606
Accrued Taxes		(504	)		1,506			(2,098	)		3,400
Accrued Interest		(693	)		(703	)		(490	)		(545	)
Employee Benefit Plans		(1,362	)		(1,169	)		(640	)		(1,426	)
Unearned Revenue & Advanced Service Fees		39			24			12			85
Other Assets and Liabilities		(774	)		16			972			1,899

NET CASH PROVIDED BY OPERATING ACTIVITIES		28,649			30,660			23,348			32,863
CASH FLOWS FROM INVESTING ACTIVITIES:
Utility Plant Expenditures, Including AFUDC of $150 in 2017, $126 in 2016		(35,170	)		(34,146	)
Utility Plant Expenditures, Including AFUDC of $700 in 2019 and $267 in 2018								(61,220	)		(49,518	)

NET CASH USED IN INVESTING ACTIVITIES		(35,170	)		(34,146	)		(61,220	)		(49,518	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of Long-term Debt		(5,163	)		(4,917	)		(6,315	)		(6,013	)
Proceeds from Issuance of Long-term Debt		6,968			3,903			82,446			9,265
Net Short-term Bank Borrowings		12,500			10,600			10,000			20,500
Deferred Debt Issuance Expense		(144	)		(158	)		(754	)		(862	)
Common Stock Issuance Expense								(22	)		—
Proceeds from Issuance of Common Stock		908			1,159			12,449			864
Payment of Common Dividends		(10,344	)		(9,695	)		(11,893	)		(10,993	)
Payment of Preferred Dividends		(108	)		(108	)		(102	)		(108	)
Construction Advances and Contributions-Net		726			686			3,480			3,140

NET CASH PROVIDED BY FINANCING ACTIVITIES		5,343			1,470			89,289			15,793
NET CHANGES IN CASH AND CASH EQUIVALENTS		(1,178	)		(2,016	)		51,417			(862	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		3,879			3,469
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	2,701		$	1,453
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD								5,661			6,397
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD							$	57,078		$	5,535


SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY:
Utility Plant received as Construction Advances and Contributions	$	3,238		$	1,217		$	5,375		$	3,028
Long-term Debt Deobligation	$	—		$	476		$	130		$	—

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash Paid During the Year for:
Interest	$	4,775		$	4,658		$	5,929		$	5,090
Interest Capitalized	$	150		$	126		$	700		$	267
Income Taxes	$	1,462		$	4,011		$	6,752		$	3,191

See Notes to Condensed Consolidated Financial Statements.

Index

MIDDLESEX WATER COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CAPITAL STOCK

AND LONG-TERM DEBT

(Unaudited)

(In ~~thousands)~~thousands

		September 30,			December 31,			September 30,			December 31,
		2017			2016			2019			2018
Common Stock, No Par Value	Common Stock, No Par Value
Shares Authorized -	40,000
Shares Outstanding -	2017 - 16,345; 2016 - 16,296	$	154,626		$	153,045
Shares Authorized - 40,000
Shares Outstanding - 2019 - 16,670; 2018 - 16,403								$	170,562		$	157,354

Retained Earnings	Retained Earnings		72,403			65,392			105,233			91,433
TOTAL COMMON EQUITY	TOTAL COMMON EQUITY	$	227,029		$	218,437		$	275,795		$	248,787

Cumulative Preferred Stock, No Par Value:	Cumulative Preferred Stock, No Par Value:
Shares Authorized - 126
Shares Outstanding - 24
Shares Authorized - 2019 - 123; 2018 - 126
Shares Outstanding - 2019 - 20; 2018 - 23
Convertible:	Convertible:
Shares Outstanding, $7.00 Series - 10	Shares Outstanding, $7.00 Series - 10	$	1,005		$	1,007			1,005			1,005
Shares Outstanding, $8.00 Series - 3			349			349
Shares Outstanding, $8.00 Series - 2019 - 0; 2018 - 3									—			349
Nonredeemable:	Nonredeemable:
Shares Outstanding, $7.00 Series - 1	Shares Outstanding, $7.00 Series - 1		79			80			79			79
Shares Outstanding, $4.75 Series - 10	Shares Outstanding, $4.75 Series - 10		1,000			1,000			1,000			1,000
TOTAL PREFERRED STOCK	TOTAL PREFERRED STOCK	$	2,433		$	2,436		$	2,084		$	2,433

Long-term Debt:	Long-term Debt:
8.05%, Amortizing Secured Note, due December 20, 2021	8.05%, Amortizing Secured Note, due December 20, 2021	$	1,241		$	1,415		$	715		$	924
6.25%, Amortizing Secured Note, due May 19, 2028	6.25%, Amortizing Secured Note, due May 19, 2028		4,480			4,795			3,640			3,955
6.44%, Amortizing Secured Note, due August 25, 2030	6.44%, Amortizing Secured Note, due August 25, 2030		3,617			3,827			3,057			3,267
6.46%, Amortizing Secured Note, due September 19, 2031	6.46%, Amortizing Secured Note, due September 19, 2031		3,897			4,107			3,337			3,547
4.22%, State Revolving Trust Note, due December 31, 2022	4.22%, State Revolving Trust Note, due December 31, 2022		304			329			202			228
3.60%, State Revolving Trust Note, due May 1, 2025	3.60%, State Revolving Trust Note, due May 1, 2025		1,958			2,062			1,519			1,632
3.30% State Revolving Trust Note, due March 1, 2026	3.30% State Revolving Trust Note, due March 1, 2026		392			431			309			351
3.49%, State Revolving Trust Note, due January 25, 2027	3.49%, State Revolving Trust Note, due January 25, 2027		427			465			349			389
4.03%, State Revolving Trust Note, due December 1, 2026	4.03%, State Revolving Trust Note, due December 1, 2026		578			603			474			501
4.00% to 5.00%, State Revolving Trust Bond, due August 1, 2021	4.00% to 5.00%, State Revolving Trust Bond, due August 1, 2021		162			213			60			111
0.00%, State Revolving Fund Bond, due August 1, 2021	0.00%, State Revolving Fund Bond, due August 1, 2021		128			166			50			88
3.64%, State Revolving Trust Note, due July 1, 2028	3.64%, State Revolving Trust Note, due July 1, 2028		266			276			225			235
3.64%, State Revolving Trust Note, due January 1, 2028	3.64%, State Revolving Trust Note, due January 1, 2028		87			91			73			77
3.45%, State Revolving Trust Note, due August 1, 2031	3.45%, State Revolving Trust Note, due August 1, 2031		962			1,015			851			907
6.59%, Amortizing Secured Note, due April 20, 2029	6.59%, Amortizing Secured Note, due April 20, 2029		4,040			4,302			3,343			3,604
7.05%, Amortizing Secured Note, due January 20, 2030	7.05%, Amortizing Secured Note, due January 20, 2030		3,083			3,271			2,583			2,771
5.69%, Amortizing Secured Note, due January 20, 2030	5.69%, Amortizing Secured Note, due January 20, 2030		6,325			6,709			5,299			5,684
4.45%, Amortizing Secured Note, due April 20, 2040	4.45%, Amortizing Secured Note, due April 20, 2040		9,937			10,267			9,057			9,387
4.47%, Amortizing Secured Note, due April 20, 2040	4.47%, Amortizing Secured Note, due April 20, 2040		3,687			3,809			3,361			3,483
3.75%, State Revolving Trust Note, due July 1, 2031	3.75%, State Revolving Trust Note, due July 1, 2031		2,134			2,191			1,892			1,954
2.00%, State Revolving Trust Note, due February 1, 2036	2.00%, State Revolving Trust Note, due February 1, 2036		1,115			1,115			1,013			1,064
3.75%, State Revolving Trust Note, due November 30, 2030	3.75%, State Revolving Trust Note, due November 30, 2030		1,123			1,154			990			1,024
0.00% Construction Loans	0.00% Construction Loans		14,439			7,470			38,171			16,509
First Mortgage Bonds:	First Mortgage Bonds:
0.00%, Series X, due August 1, 2018			55			107
4.25% to 4.63%, Series Y, due August 1, 2018			61			122
0.00%, Series Z, due August 1, 2019	0.00%, Series Z, due August 1, 2019		224			336			—			113
5.25% to 5.75%, Series AA, due August 1, 2019	5.25% to 5.75%, Series AA, due August 1, 2019		300			440			—			155
0.00%, Series BB, due August 1, 2021	0.00%, Series BB, due August 1, 2021		482			603			241			362
4.00% to 5.00%, Series CC, due August 1, 2021	4.00% to 5.00%, Series CC, due August 1, 2021		636			779			331			489
0.00%, Series EE, due August 1, 2023	0.00%, Series EE, due August 1, 2023		2,296			2,713			1,455			1,876
3.00% to 5.50%, Series FF, due August 1, 2024	3.00% to 5.50%, Series FF, due August 1, 2024		3,495			3,690			2,440			2,980
0.00%, Series GG, due August 1, 2026	0.00%, Series GG, due August 1, 2026		813			903			633			723
4.00% to 5.00%, Series HH, due August 1, 2026	4.00% to 5.00%, Series HH, due August 1, 2026		880			960			710			795
0.00%, Series II, due August 1, 2024	0.00%, Series II, due August 1, 2024		610			700			429			520
3.40% to 5.00%, Series JJ, due August 1, 2027	3.40% to 5.00%, Series JJ, due August 1, 2027		750			824			588			671
0.00%, Series KK, due August 1, 2028	0.00%, Series KK, due August 1, 2028		988			1,078			807			898
5.00% to 5.50%, Series LL, due August 1, 2028	5.00% to 5.50%, Series LL, due August 1, 2028		1,095			1,175			928			1,010
0.00%, Series MM, due August 1, 2030	0.00%, Series MM, due August 1, 2030		1,237			1,337			1,037			1,137
3.00% to 4.375%, Series NN, due August 1, 2030	3.00% to 4.375%, Series NN, due August 1, 2030		1,505			1,590			1,190			1,415
0.00%, Series OO, due August 1, 2031	0.00%, Series OO, due August 1, 2031		2,107			2,258			1,806			1,956
2.00% to 5.00%, Series PP, due August 1, 2031	2.00% to 5.00%, Series PP, due August 1, 2031		740			780			660			700
5.00%, Series QQ, due October 1, 2023	5.00%, Series QQ, due October 1, 2023		9,915			9,915			9,915			9,915
3.80%, Series RR, due October 1, 2038	3.80%, Series RR, due October 1, 2038		22,500			22,500			22,500			22,500
4.25%, Series SS, due October 1, 2047	4.25%, Series SS, due October 1, 2047		23,000			23,000			23,000			23,000
0.00%, Series TT, due August 1, 2032	0.00%, Series TT, due August 1, 2032		2,258			2,408			1,957			2,107
3.00% to 3.25%, Series UU, due August 1, 2032	3.00% to 3.25%, Series UU, due August 1, 2032		845			890			755			800
0.00%, Series VV, due August 1, 2033	0.00%, Series VV, due August 1, 2033		2,290			2,433			2,003			2,147
3.00% to 5.00%, Series WW, due August 1, 2033	3.00% to 5.00%, Series WW, due August 1, 2033		830			865			755			795
0.00%, Series XX, due August 1, 2047									10,627			11,006
3.00% to 5.00%, Series YY, due August 1, 2047									3,785			3,860
0.00%, Series 2018A, due August 1, 2047									6,678			6,917
3.00%-5.00%, Series 2018B, due August 1, 2047									2,320			2,365
4.00%, Series 2019A, due August 1, 2059									32,500			—
5.00%, Series 2019B, due August 1, 2059									21,200			—
SUBTOTAL LONG-TERM DEBT	SUBTOTAL LONG-TERM DEBT		144,294			142,489			231,820			162,904
Add: Premium on Issuance of Long-term Debt	Add: Premium on Issuance of Long-term Debt		1,335			1,495			8,164			1,259
Less: Unamortized Debt Expense	Less: Unamortized Debt Expense		(3,276	)		(3,287	)		(4,551	)		(3,969	)
Less: Current Portion of Long-term Debt	Less: Current Portion of Long-term Debt		(6,547	)		(6,159	)		(7,161	)		(7,343	)
TOTAL LONG-TERM DEBT	TOTAL LONG-TERM DEBT	$	135,806		$	134,538		$	228,272		$	152,851

See Notes to Condensed Consolidated Financial Statements.

Index

MIDDLESEX WATER COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY

(Unaudited)

(In thousands)

	Common			Common
	Stock			Stock			Retained
	Shares			Amount			Earnings			Total

For the Three Months Ended September 30, 2018
Balance at July 1, 2018		16,392			156,251			79,826		$	236,077
Net Income		—			—			12,290			12,290
Dividend Reinvestment & Common Stock Purchase Plan		8			266			—			266
Restricted Stock Award, Net - Employees		—			242			—			242
Shares Forfeited		(2	)		(18	)		—			(18	)
Cash Dividends on Common Stock ($0.2238 per share)		—			—			(3,667	)		(3,667	)
Cash Dividends on Preferred Stock		—			—			(36	)		(36	)
Balance at September 30, 2018		16,398		$	156,741		$	88,413		$	245,154

For the Nine Months Ended September 30, 2018
Balance at January 1, 2018		16,352		$	155,120		$	74,055		$	229,175
Net Income		—			—			25,459			25,459
Dividend Reinvestment & Common Stock Purchase Plan		21			864			—			864
Restricted Stock Award, Net - Employees		23			628			—			628
Stock Award - Board Of Directors		4			147			—			147
Shares Forfeited		(2	)		(18	)		—			(18	)
Cash Dividends on Common Stock ($0.6713 per share)		—			—			(10,993	)		(10,993	)
Cash Dividends on Preferred Stock		—			—			(108	)		(108	)
Balance at September 30, 2018		16,398		$	156,741		$	88,413		$	245,154

For the Three Months Ended September 30, 2019
Balance at July 1, 2019		16,554		$	165,138		$	98,146		$	263,284
Net Income		—			—			11,119			11,119
Dividend Reinvestment & Common Stock Purchase Plan		92			5,368			—			5,368
Restricted Stock Award, Net - Employees		1			172			—			172
Shares Forefeited		(18	)		(466	)		—			(466	)
Conversion of $8.00 Convertible Preferred Stock		41			350			—			350
Cash Dividends on Common Stock ($0.2400 per share)		—			—			(3,987	)		(3,987	)
Cash Dividends on Preferred Stock		—			—			(30	)		(30	)
Common Stock Expenses		—			—			(15	)		(15	)
Balance at September 30, 2019		16,670		$	170,562		$	105,233		$	275,795

For the Nine Months Ended September 30, 2019
Balance at January 1, 2019		16,403		$	157,354		$	91,433		$	248,787
Net Income		—			—			25,818			25,818
Dividend Reinvestment & Common Stock Purchase Plan		222			12,449			—			12,449
Restricted Stock Award, Net - Employees		18			679			—			679
Stock Award - Board Of Directors		4			196			—			196
Shares Forefeited		(18	)		(466	)		—			(466	)
Conversion of $8.00 Convertible Preferred Stock		41			350			—			350
Cash Dividends on Common Stock ($0.7200 per share)		—			—			(11,893	)		(11,893	)
Cash Dividends on Preferred Stock		—			—			(102	)		(102	)
Common Stock Expenses		—			—			(23	)		(23	)
Balance at September 30, 2019		16,670		$	170,562		$	105,233		$	275,795

See Notes to Condensed Consolidated Financial Statements.

Index

MIDDLESEX WATER COMPANY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Basis of Presentation and Recent Developments

Middlesex Water Company (Middlesex or the Company) is the parent company and sole shareholder of Tidewater Utilities, Inc. (Tidewater), Tidewater Environmental Services, Inc. (TESI), Pinelands Water Company (Pinelands Water) and Pinelands Wastewater Company (Pinelands Wastewater) (collectively, Pinelands), Utility Service Affiliates, Inc. (USA), Utility Service Affiliates (Perth Amboy) Inc. (USA-PA), and Twin Lakes Utilities, Inc. (Twin Lakes). Southern Shores Water Company, LLC (Southern Shores) and White Marsh Environmental Systems, Inc. (White Marsh) are wholly-owned subsidiaries of Tidewater. The financial statements for Middlesex and its wholly-owned subsidiaries (the Company) are reported on a consolidated basis. All significant intercompany accounts and transactions have been eliminated.

The consolidated notes within the ~~2016~~2018 Annual Report on Form 10-K ~~(the 2016~~(2018 Form 10-K) are applicable to these financial statements and, in the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary (including normal recurring accruals) to present fairly the financial position as of September 30, ~~2017,~~2019 and the results of operations and cash flows for the three month and nine month periods ended September 30, ~~2017~~2019 and ~~2016 and cash flows for the nine month periods ended September 30, 2017 and 2016.~~2018. Information included in the Condensed Consolidated Balance Sheet as of December 31, ~~2016,~~2018, has been derived from the Company’s audited financial statements for the year ended December 31, ~~2016~~2018 included in the ~~2016~~2018 Form 10-K.

Recent Developments

Tidewater to Acquire Water Systems - On October 8, 2019, the Delaware Public Service Commission (DEPSC) approved Tidewater’s request to purchase the water utility assets of J.H. Wilkerson and Son, Inc. and transfer the Certificate of Public Convenience and Necessity in order for Tidewater to serve the approximate 1,000 customers currently connected to eight community water systems located mostly in eastern Sussex County, Delaware. The DEPSC also authorized Tidewater to maintain the existing rates that these customers currently pay. The transaction is expected to close in the fourth quarter of 2019.

Recently Adopted Accounting Guidance

~~Inventory~~Leases - ~~- In July 2015,~~On January 1, 2019, the Company adopted Financial Accounting Standards Board (FASB) issued guidance on simplifying the measurement of inventory. The new guidance replaces the current lower of cost or market test with a lower of cost or net realizable value test when cost is determined on a first-in, first-out or average cost basis. The guidance was effective January 1, 2017 and did not have a material impact on the Company’s financial statements.

~~Accounting for Share-Based Payments -~~In March 2016, the FASB issued guidance which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The guidance was effective January 1, 2017 and did not have a material impact on the Company’s financial statements.

~~Revenue Recognition~~ - In May 2014, the FASB issued guidance related to revenue from contracts with customers. The update replaces most of the existing guidance with a single set of principles for recognizing revenue from contracts with customers. The FASB has deferred the effective date of these new revenue recognition standards by one year to January 1, 2018, at which time the Company will adopt this guidance using the modified retrospective method. The Company continues to assess the impact this standard will have on our financial statements by analyzing our inventory of contracts with customers, which consist primarily of regulated tariff-based sales and non-regulated operation and maintenance contracts for water and wastewater systems. Based on the Company’s on-going interpretation and analysis of this guidance, this update is not expected to have an impact on the Company’s regulated tariff-based sales and the impact on the Company’s non-regulated operation and maintenance contracts, if any, is not expected to be material. The Company’s non-regulated segment contributed approximately 12% and 6% of total revenues and net income, respectively, for the nine months ended September 30, 2017 and approximately 11% and 2% of total revenues and net income, respectively, for the year ended December 31, 2016. The Company’s assessment of this guidance is not final and subject to change pending the Company’s completion of its review of the guidance, including any new authoritative and interpretive guidance.

~~Index~~

~~Recognition and Measurement of Financial Assets and Financial Liabilities~~- In January 2016, the FASB issued guidance which (i) requires all investments in equity securities, including other ownership interests such as partnerships, unincorporated joint ventures and limited liability companies, to be carried at fair value through net income, (ii) requires an incremental recognition and disclosure requirement related to the presentation of fair value changes of financial liabilities for which the fair value option has been elected, (iii) amends several disclosure requirements, including the methods and significant assumptions used to estimate fair value or a description of the changes in the methods and assumptions used to estimate fair value, and (iv) requires disclosure of the fair value of financial assets and liabilities measured at amortized cost at the amount that would be received to sell the asset or paid to transfer the liability. The guidance is effective for fiscal years beginning after December 15, 2017 with early adoption permitted. The guidance is required to be applied retrospectively with a cumulative effect adjustment to retained earnings for initial application of the guidance at the date of adoption (modified retrospective method). The Company is currently assessing the impact of this standard on its consolidated financial statements and footnote disclosures, but does not expect that the adoption of this guidance to have a material impact on the Company’s financial statements.

~~Leases -~~~~In February 2016, the FASB issued guidance~~ related to leases which ~~will require~~required lessees to recognize a lease liability ~~(a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis)~~and a right-of-use asset (an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term). The guidance is effective for fiscal years beginning after December 15, 2018 with early adoption permitted.asset. The Company ~~is currently assessing~~elected the ~~impact~~optional transition method of ~~this~~adoption option to apply the requirements of the standard ~~on its consolidated financial statements~~in the period of adoption with no restatement of prior periods. The Company utilized the package of transition practical expedients provided by the new guidance, including carrying forward prior conclusions related to contracts that contain leases and ~~footnote disclosures, but, based on~~lease classification. The Company also utilized the ~~Company’s current leasing activity, does not expect that~~transition practical expedient permitting entities to forgo the evaluation of existing land easement arrangements to determine if they contain a lease. Land easement arrangements, or modifications to existing arrangements, entered into after adoption of this guidance will need to ~~have~~be evaluated to determine if they meet the definition of a ~~material impact on the Company’s financial statements.~~

~~Statement of Cash Flows -~~In August 2016, the FASB issued guidance which amends the previous guidance on the classification of certain cash receipts and payments in the statement of cash flows. The primary purpose of this guidance is to reduce the diversity in practice that has resulted from the lack of consistent principles on this topic. The guidance is effective January 1, 2018 with early adoption permitted.lease. The adoption of this guidance ~~is not expected to have~~resulted in the recording of a ~~material impact~~$6.7 million right-of-use asset, a $7.1 million lease liability and a $0.4 million regulatory asset on the Company’s ~~financial statements.~~

~~Restricted Cash -~~~~In November 2016, the FASB issued guidance related to the classification and presentation~~consolidated balance sheet as of restricted cash in the statement of cash flows, which requires entities to a) include restricted cash balances in its cash and cash-equivalent balances in the statement of cash flows and b) include a reconciliation of cash and cash-equivalents per the statement of financial position as compared to the statement of cash flows. Changes in restricted cash and restricted cash equivalents that result from transfers between cash, cash equivalents, and restricted cash and restricted cash equivalents will not be presented as cash flow activities in the statement of cash flows. In addition, an entity with a material balance of amounts described as restricted cash and restricted cash equivalents must disclose information about the nature of the restrictions. The guidance is effective January 1, ~~2018 with early adoption permitted. The adoption of this guidance is not expected to have a material impact on the Company’s financial statements.~~2019. For further discussion, see “Leases” inNote 7 – Commitments and Contingent Liabilities.

~~Employee Benefit Plans-Net Periodic Benefit Cost –~~In March 2017, the FASB issued guidance which requires entities to (1) disaggregate the current-service-cost component from the other components of net benefit cost and present it with other current compensation costs for related employees in the income statement and (2) present the other components elsewhere in the income statement and outside of income from operations if that subtotal is presented. In addition, the ASU requires entities to disclose the income statement lines that contain the other components if they are not presented on appropriately described separate lines. The guidance is effective January 1, 2018. The Company is currently assessing the impact of this standard on its consolidated financial statements and footnote disclosures, but does not expect that the adoption of this guidance to have a material impact on the Company’s financial statements.

~~Index~~

There are no other new adopted or proposed accounting guidance that the Company is aware of that could have a material impact on the Company’s financial statements.

Index

Note 2–Rate and Regulatory Matters

Middlesex –~~On October 10, 2017, Middlesex filed a petition with~~In December 2018, the New Jersey Board of Public Utilities (NJBPU) seeking permission to increase base water rates by approximately $15.3 million per year. The request was necessitated by capital infrastructure investments Middlesex has made, or has committed to make, to drinking water infrastructure since the last filing in New Jersey in 2015 as well as increased operations and maintenance costs. We cannot predict when and whether the NJBPU will ultimately approve, deny, or reduce the amount of the request. Under New Jersey statute, the NJPBU must render a decision within nine months of filing a petition.

~~On October 20, 2017, the NJBPU~~ approved Middlesex’s petition to ~~reset~~establish its Purchased Water Adjustment Clause (PWAC) tariff rate to recover additional annual costs of ~~$1.2~~less than $0.1 million, primarily for the purchase of ~~untreated~~treated water from a non-affiliated water utility regulated by the ~~New Jersey Water Supply Authority.~~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 ~~reset~~ PWAC tariff rate became effective on ~~November~~January 1, ~~2017.~~2019.

Tidewater -Effective July 1, ~~2017,~~2019, Tidewater reset its ~~Delaware Public Service Commission-approved~~DEPSC approved Distribution System Improvement Charge ~~(DSIC)~~ rate, which is expected to generate ~~$0.4~~revenues of approximately $0.5 million annually.

In February 2019, Tidewater received approval from the DEPSC to reduce its rates, effective March 1, 2019, to reflect the lower corporate income tax rate enacted by theTax Cuts and Jobs Act of 2017 (Tax Act), resulting in an overall rate decrease of 3.35%, or $1.0 million of revenues, on an annual ~~revenues. A DSIC is~~basis. The DEPSC also approved a ~~rate-mechanism that allows water utilities~~one-time credit of $0.7 million to ~~recover investments of,~~customers’ accounts related to the lower corporate income tax rate.

Pinelands -On October 25, 2019, Pinelands Water and ~~generate a return on, qualifying capital improvements to~~Pinelands Wastewater concluded their ~~water distribution system made between~~ base rate ~~proceedings.~~case matters when the NJBPU approved a $0.5 million increase in annual base rates, effective November 4, 2019. In March 2019, Pinelands Water and Pinelands Wastewater had filed petitions with the NJBPU seeking permission to increase base rates by approximately $0.7 million per year. The requests were necessitated by capital infrastructure investments both companies had made, and increased operations and maintenance costs.

Twin Lakes -In July 2019, Twin Lakes filed a petition with the Pennsylvania Public Utilities Commission (PAPUC) seeking permission to increase base rates by approximately $0.2 million per year. This request was necessitated by capital infrastructure investments Twin Lakes has made and increased operations and maintenance costs. We cannot predict whether the PAPUC will ultimately approve, deny, or reduce the amount of the request. A decision by the PAPUC is not expected before the first quarter of 2020.

Note 3 – Capitalization

Common Stock

-During the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, there were ~~24,154~~221,558 common shares ($12.4 million) and 21,001 common shares (approximately $0.9 ~~million) and 35,350 common shares (approximately $1.2~~ million), respectively, issued under the Middlesex Water Company Investment Plan (Investment Plan). On January 2, 2019, the Company began offering shares of its common stock for purchase at a 5% discount to participants in the Investment Plan. In August 2019, the 200,000 share purchase limit established for the 5% discount program was reached and the program was concluded.

~~Long-term Debt~~In September 2019, the Company determined it had inadvertently sold shares of its common stock through the Investment Plan from August 1, 2018 through September 3, 2019 (Eligible Period) after the registration statement covering sales through the Investment Plan had expired and therefore was no longer effective. Under applicable federal securities laws, participants in the Investment Plan who purchased shares of common stock have a right to rescind their Eligible Period purchases and require the Company to repurchase these shares for an amount equal to the price paid by the participant, less any dividends paid on the purchased shares, plus interest.

In ~~January 2017,~~October 2019, the Company’s Board of Directors approved a plan to voluntarily offer a right of rescission (Rescission Offer) to Investment Plan participants who purchased shares of the Company’s common stock during the Eligible Period. During the Eligible Period, Investment Plan participants purchased 232,643 shares at an average price of $55.79 per share.

On October 11, 2019, the Company filed a supplement to the Investment Plan prospectus (Prospectus Supplement) with the United States Securities and Exchange Commission registering both the Rescission Offer and the 232,643 shares sold during the Eligible Period and notifying eligible Investment Plan participants of the specific details of the Rescission Offer. Investment Plan participants have thirty (30) days from the notification date to decide to accept or reject the Rescission Offer. Based on the current market price of the Company’s common stock, the Company does not expect that the exercise of any applicable rescission rights under the Rescission Offer by participants will have a material impact on its results of operations, financial condition or liquidity.

Index

For the nine months ended September 30, 2019, 3,000 shares (approximately $0.3 million) of the Company’s no par $8.00 Series Cumulative and Convertible Preferred Stock were converted into 41,142 shares of common stock.

In May 2019, Middlesex received approval from the NJBPU to issue and sell up to 1,500,000 shares of its common stock in one or more transactions through December 31, 2022. Sales of additional shares of common stock are part of the Company’s comprehensive financing plan to fund its multi-year utility plant infrastructure investment program. As described below in “Long-term Debt”, the NJBPU approved ~~Middlesex’s request~~the New Jersey Economic Development Authority (NJEDA) debt funding component of the financing plan.

Long-term Debt -Subject to ~~borrow up~~regulatory approval, the Company periodically issues long-term debt to ~~$37.0 million~~fund its investments in utility plant and other assets. To the extent possible, the Company finances qualifying capital projects under State Revolving Fund (SRF) loan programs in New Jersey and Delaware. These government programs provide financing at interest rates that are typically below rates available in the broader financial markets. A portion of the borrowings under the New Jersey ~~State Revolving Fund (SRF) program to fund~~SRF is interest-free. Under the construction of a large-diameter transmission pipeline from the Carl J. Olsen water treatment plant and interconnect with our distribution system. Middlesex currently expects to close on the SRF construction loan in the first quarter of 2018 with funding requisitions occurring primarily throughout 2018 and 2019.

Middlesex closed on a $9.5 million NJBPU approved SRF construction loan in August 2017. The proceeds will be used to fund the RENEW 2017 project. RENEW is an ongoing program to eliminate all unlined water distribution mains in the Middlesex system. Funding requisitions are expected to occur primarily throughout the remainder of 2017.

Middlesex closed on a $2.3 million NJBPU approved SRF construction loan in May 2017. The proceeds will be used to fund the upgrade of a booster station at one of its well fields. Funding requisitions are expected to occur through early 2018.

~~In November 2017, Middlesex is scheduled to close out three of its active~~ New Jersey SRF program, borrowers first enter into a construction ~~loans (booster station upgrade, RENEW 2015 and RENEW 2016 projects) by issuing first mortgage bonds designated as Series XX (approximately $11.1 million) and Series YY (approximately $3.7 million).~~loan agreement with the New Jersey Infrastructure Bank (NJIB) at a below market interest rate. The current interest rate on construction loan borrowings is zero percent (0%). When construction on the ~~Series XX bond~~qualifying project is substantially complete, NJIB will ~~be zero and~~coordinate the conversion of the construction loan into a long-term securitized loan with a portion of the principal balance having a stated interest rate onof zero percent (0%) and a portion of the ~~Series YY bond will be determined~~principal balance at a market interest rate at the time of closing using the credit rating of the State of New Jersey. The current term of the long-term loans offered through the NJIB is up to thirty years. The current portion of the principal balance having a stated interest rate of zero percent (0%) is 75% with the remaining portion of 25% having a market based interest rate.

The NJIB generally schedules its long-term debt financings in May and November. Middlesex currently has two projects that are in the construction loan phase of New Jersey SRF program:

In April 2018, the NJBPU approved Middlesex’s request to participate in the NJIB loan program to fund the construction of a large-diameter transmission pipeline from the CJO water treatment plant and interconnect with our distribution system. Middlesex closed on a $43.5 million NJIB interest-free construction loan in August 2018. Through September 30, 2019, Middlesex has drawn a total of $30.2 million and expects to draw down the remaining proceeds through the first quarter of 2020.

In March 2018, the NJBPU approved Middlesex’s request to participate in the NJIB loan program to fund the 2018 RENEW Program, which is an ongoing initiative to eliminate all unlined water distribution mains in the Middlesex system. Middlesex closed on an $8.7 million NJIB construction loan in September 2018. Through September 30, 2019, Middlesex has drawn a total of $8.0 million and drew the remaining proceeds in October 2019.

The Company expects that the large-diameter transmission pipeline and the 2018 RENEW construction loans will be included in the NJIB May 2020 long-term debt financing program.

In May 2018, Middlesex repaid its RENEW 2017 interest-free construction loan by issuing to the NJIB first mortgage bonds in the amount of $9.5 million designated as Series 2018A ($7.1 million) and Series 2018B ($2.4 million). The interest rate on the Series 2018A bond is zero and the interest rate on the Series 2018B bond ranges between 3.0% and 5.0%. The final maturity date for both bonds ~~will be~~is August 1, ~~2047.~~2047, with scheduled debt service payments over the life of the loans.

Index

In 2019, the NJIB de-obligated principal payments of $0.1 million on Series NN of the Company’s First Mortgage Bonds.

In order to help ensure adherence to its comprehensive financing plan, Middlesex received approval from the NJBPU in February 2019 to issue and sell up to $140 million of First Mortgage Bonds (FMB) through the NJEDA in one or more transactions through December 31, 2022. Because the interest paid to the bondholders is exempt from federal and New Jersey income taxes, the interest rate on debt issued through the NJEDA is generally lower than otherwise achievable in the traditional taxable corporate bond market. However, the interest received by the bondholder is subject to the Alternative Minimum Tax.

In August 2019, Middlesex priced and closed on a NJEDA debt financing transaction of $53.7 million by issuing FMBs designated as Series 2019A ($32.5 million at coupon interest rate of 4.0%) and Series 2019B ($21.2 million at coupon interest rate of 5.0%). The proceeds, including an issuance premium of $7.1 million, are being used to finance several projects under the Water For Tomorrow capital program initiated by the Company to upgrade and replace aging water utility infrastructure. The total proceeds of $60.8 million, initially recorded as Restricted Cash on the balance sheet, is held in escrow by a bond trustee and are drawn down by requisition for the qualifying projects. Through September 30, 2019, Middlesex has drawn a total of $7.6 million and currently expects to draw the remaining $53.2 million of proceeds, currently included in Restricted Cash, through the third quarter of 2021.

In March 2018, the DEPSC approved Tidewater’s request to borrow up to $0.9 million under the Delaware SRF program to fund the replacement of an entire water distribution system of a small Delaware community. Tidewater closed on the SRF loan in May 2018. In April 2019, Tidewater received approval from the DEPSC to increase the borrowing to $1.7 million based on revised project cost estimates. Tidewater closed on the additional SRF loan in October 2019 and immediately began drawing on the combined loan amount with expected draws continuing through the first quarter of 2020.

Fair Value of Financial Instruments

-The following methods and assumptions were used by the Company in estimating its fair value disclosure for financial instruments for which it is practicable to estimate that value. The carrying amounts reflected in the condensed consolidated balance sheets for cash and cash equivalents, trade receivables, accounts payable and notes payable approximate their respective fair values due to the short-term maturities of these instruments. The fair value of ~~First Mortgage~~FMB and ~~SRF~~State Revolving Fund Bonds (collectively, the Bonds) issued by Middlesex is based on quoted market prices for similar issues. Under the fair value hierarchy, the fair value of cash and cash equivalents is classified as a Level 1 measurement and the fair value of notes payable and the Bonds in the table below are classified as Level 2 measurements. The carrying amount and fair value of the Bonds were as follows:

(In Thousands)
September 30, 2017 December 31, 2016
Carrying Fair Carrying Fair
Amount Value Amount Value
Bonds $ 80,203 $ 82,573 $ 82,786 $ 84,821

	September 30, 2019		December 31, 2018
	Carrying	Fair	Carrying	Fair
	Amount	Value	Amount	Value
Bonds	$151,361	$154,355	$101,411	$102,789

For other long-term debt for which there was no quoted market price and there is not an active trading market, it was not practicable to estimate their fair value (for details, including carrying value, interest rate and due date on these series of long-term debt, please refer to those series noted as “Amortizing Secured Note”, “State Revolving Trust Note” and “Construction Loans” on the Condensed Consolidated Statements of Capital Stock and Long-Term Debt). The carrying amount of these instruments was ~~$64.1~~$80.5 million and ~~$59.7~~$61.5 million at September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively. Customer advances for construction have carrying amounts of ~~$21.3~~$22.7 million and ~~$20.8~~$22.6 million at September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively. Their relative fair values cannot be accurately estimated since future refund payments depend on several variables, including new customer connections, customer consumption levels and future rate increases.

Index

Note 4 – Earnings Per Share

Basic earnings per share (EPS) are computed on the basis of the weighted average number of shares outstanding during the period presented. Diluted EPS assumes the conversion of both the Convertible Preferred Stock $7.00 Series and the Convertible Preferred Stock $8.00 Series.

	(In Thousands Except per Share Amounts)										(In Thousands Except per Share Amounts)
	Three Months Ended September 30,										Three Months Ended September 30,
	2017					2016					2019					2018
Basic:	Income			Shares		Income			Shares		Income			Shares		Income			Shares
Net Income	$	7,642			16,340	$	8,813			16,284	$	11,119			16,610	$	12,290			16,394
Preferred Dividend		(36	)				(36	)				(30	)				(36	)
Earnings Applicable to Common Stock	$	7,606			16,340	$	8,777			16,284	$	11,089			16,610	$	12,254			16,394

Basic EPS	$	0.47				$	0.54				$	0.67				$	0.75

Diluted:
Earnings Applicable to Common Stock	$	7,606			16,340	$	8,777			16,284	$	11,089			16,610	$	12,254			16,394
$7.00 Series Preferred Dividend		17			115		17			115		17			115		17			115
$8.00 Series Preferred Dividend		6			41		6			41		—			32		6			41
Adjusted Earnings Applicable to Common Stock	$	7,629			16,496	$	8,800			16,440	$	11,106			16,757	$	12,277			16,550

Diluted EPS	$	0.46				$	0.54				$	0.66				$	0.74

~~Index~~

	(In Thousands Except per Share Amounts)										(In Thousands Except per Share Amounts)
	Nine Months Ended September 30,										Nine Months Ended September 30,
	2017					2016					2019					2018
Basic:	Income			Shares		Income			Shares		Income			Shares		Income			Shares
Net Income	$	17,463			16,324	$	19,522			16,262	$	25,818			16,520	$	25,459			16,379
Preferred Dividend		(108	)				(108	)				(102	)				(108	)
Earnings Applicable to Common Stock	$	17,355			16,324	$	19,414			16,262	$	25,716			16,520	$	25,351			16,379

Basic EPS	$	1.06				$	1.19				$	1.56				$	1.55

Diluted:
Earnings Applicable to Common Stock	$	17,355			16,324	$	19,414			16,262	$	25,716			16,520	$	25,351			16,379
$7.00 Series Preferred Dividend		50			115		50			115		50			115		50			115
$8.00 Series Preferred Dividend		18			41		18			41		12			38		18			41
Adjusted Earnings Applicable to Common Stock	$	17,423			16,480	$	19,482			16,418	$	25,778			16,673	$	25,419			16,535

Diluted EPS	$	1.06				$	1.19				$	1.55				$	1.54

Note 5 – Business Segment Data

The Company has identified two reportable segments. One is the regulated business of collecting, treating and distributing water on a retail and wholesale basis to residential, commercial, industrial and fire protection customers in parts of New Jersey, Delaware and Pennsylvania. This segment also includes regulated wastewater systems in New Jersey and Delaware. The Company is subject to regulations as to its rates, services and other matters by New Jersey, Delaware and Pennsylvania with respect to utility services within these states. The other segment is primarily comprised of non-regulated contract services for the operation and maintenance of municipal and private water and wastewater systems in New Jersey and Delaware. Inter-segment transactions relating to operational costs are treated as pass-through expenses. Finance charges on inter-segment loan activities are based on interest rates that are below what would normally be charged by a third party lender.

910

Index

	(In Thousands)												(In Thousands)
	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
Operations by Segments:	2017			2016			2017			2016			2019			2018			2019			2018
Revenues:
Regulated	$	32,252		$	33,989		$	88,023		$	89,797		$	35,000		$	34,628		$	93,342		$	93,002
Non – Regulated		4,142			3,949			11,755			11,685			3,020			4,304			9,032			12,286
Inter-segment Elimination		(220	)		(144	)		(459	)		(384	)		(251	)		(219	)		(515	)		(479	)
Consolidated Revenues	$	36,174		$	37,794		$	99,319		$	101,098		$	37,769		$	38,713		$	101,859		$	104,809

Operating Income:
Regulated	$	12,098		$	13,516		$	28,195		$	30,940		$	11,001		$	12,214		$	24,937		$	27,827
Non – Regulated		708			640			1,954			1,845			982			704			3,025			2,162
Consolidated Operating Income	$	12,806		$	14,156		$	30,149		$	32,785		$	11,983		$	12,918		$	27,962		$	29,989

Net Income:
Regulated	$	7,232		$	8,154		$	16,341		$	18,226		$	10,409		$	11,770		$	23,700		$	23,904
Non – Regulated		410			659			1,122			1,296			710			520			2,118			1,555
Consolidated Net Income	$	7,642		$	8,813		$	17,463		$	19,522		$	11,119		$	12,290		$	25,818		$	25,459

Capital Expenditures:
Regulated	$	13,998		$	14,011		$	35,157		$	33,961		$	25,437		$	21,141		$	60,998		$	49,469
Non – Regulated		7			24			13			185			85			—			222			49
Total Capital Expenditures	$	14,005		$	14,035		$	35,170		$	34,146		$	25,522		$	21,141		$	61,220		$	49,518


	As of			As of			As of			As of
	September 30,			December 31,			September 30,			December 31,
	2017			2016			2019			2018
Assets:
Regulated	$	654,248		$	619,915		$	886,280		$	764,749
Non – Regulated		6,772			6,245			9,593			8,994
Inter-segment Elimination		(9,101	)		(5,999	)		(8,520	)		(5,913	)
Consolidated Assets	$	651,919		$	620,161		$	887,353		$	767,830

Note 6 – Short-term Borrowings

As of September 30, ~~2017,~~2019, the Company ~~has established~~retained lines of credit aggregating ~~$92.0~~$120.0 million, an increase of ~~$32.0~~$20.0 million ~~since~~from June 30, ~~2017.~~2019. In October 2019, the Company increased its lines of credit to $140.0 million. At September 30, ~~2017,~~2019, the outstanding borrowings under these credit lines were ~~$24.5~~$58.5 million at a weighted average interest rate of ~~2.28%~~3.06%.

Index

The weighted average daily amounts of borrowings outstanding under the Company’s credit lines and the weighted average interest rates on those amounts were as follows:

~~Index~~

	(In Thousands)
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Average Daily Amounts Outstanding	$	58,259	$	43,402	$	56,881	$	34,332
Weighted Average Interest Rates		3.26%		3.24%		3.45%		3.09%

(In Thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Average Daily Amounts Outstanding $ 21,055 $ 11,734 $ 16,447 $ 6,177
Weighted Average Interest Rates 2.28% 1.54% 2.07% 1.52%

The maturity dates for the ~~$24.5~~$58.5 million outstanding as of September 30, ~~2017~~2019 are ~~all~~ in October ~~2017 and November 2017~~2019 through December 2019 and are extendable at the discretion of the Company.

Interest rates for short-term borrowings under the lines of credit are below the prime rate with no requirement for compensating balances.

Note 7 – Commitments and Contingent Liabilities

Water Supply

- Middlesex has an agreement with the New Jersey Water Supply Authority (NJWSA) for the purchase of untreated water through November 30, 2023, which provides for an average purchase of 27.0 million gallons a day (mgd). Pricing is set annually by the NJWSA through a public rate making process. The agreement has provisions for additional pricing in the event Middlesex overdrafts or exceeds certain monthly and annual thresholds.

Middlesex also has an agreement with a non-affiliated regulated water utility for the purchase of treated water. This agreement, which expires February 27, 2021, provides for the minimum purchase of 3.0 mgd of treated water with provisions for additional purchases.

Tidewater contracts with the City of Dover, Delaware to purchase 15.0 million gallons of treated water annually.

Purchased water costs are shown below:

	(In Thousands)								(In Thousands)
	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
	2017		2016		2017		2016		2019		2018		2019		2018

Treated	$	791	$	804	$	2,365	$	2,360	$	818	$	836	$	2,415	$	2,427
Untreated		673		675		1,905		1,911		878		948		2,521		2,728
Total Costs	$	1,464	$	1,479	$	4,270	$	4,271	$	1,696	$	1,784	$	4,936	$	5,155

Guarantees~~Contract Operations -~~USA-PA operates the City of Perth Amboy, New Jersey’s (Perth Amboy) water and wastewater systems under a 20-year agreement, which expires in December 2018. In connection with the agreement with Perth Amboy, USA-PA entered into a concurrent subcontract with a wastewater operating company for the operation and maintenance of the Perth Amboy wastewater collection system. The subcontract provides for the sharing of certain fixed and variable fees and operating expenses.

~~Guarantees~~ -As part of an agreement with the County of Monmouth, New Jersey (County), Middlesex serves as guarantor of the performance of Applied Water Management, Inc. (AWM), an unaffiliated wastewater ~~treatment~~ contractor, to operate a County-owned leachate pretreatment facility at the Monmouth County Reclamation Center in Tinton Falls, New Jersey. The performance guaranty is effective through 2028 unless another guarantor, acceptable to the County, replaces Middlesex before such date. Under agreements with AWM and Natural Systems Utilities, LLC (NSU), the parent company of AWM, Middlesex earns a fee for providing the performance guaranty. In addition, Middlesex may provide operational support to the facility, as needed, and AWM and NSU, serving as guarantor to Middlesex with respect to the performance of AWM, ~~agree to indemnify~~have indemnified Middlesex against any claims that may arise under the Middlesex guaranty to the County.

~~Index~~

If ~~requested~~required to perform under the guaranty to the County and, if AWM and NSU, as guarantor to Middlesex, do not fulfill their obligations to indemnify Middlesex against any claims that may arise under the Middlesex guaranty to the County, Middlesex would be required to fulfill the remaining operational commitment of AWM. As of ~~both~~ September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the liability recognized in Other Non-Current Liabilities on the balance sheet for the guaranty is approximately ~~$0.1 million.~~

$1.4 million and $1.5 million, respectively.

~~Construction~~

Index

Leases-The Company determines if an arrangement is a lease at inception. Generally, a lease agreement exists if the Company determines that the arrangement gives the Company control over the use of an identified asset and obtains substantially all of the benefits from the identified asset.

The Company ~~expects~~has entered into an operating lease of office space for administrative purposes, expiring in 2030. The Company has not entered into any finance leases. The exercise of a lease renewal option for the Company’s administrative offices is solely at the discretion of the Company.

The right-of-use (ROU) asset recorded represents the Company’s right to use an underlying asset for the lease term and lease liability represents the Company’s obligation to make lease payments arising from the lease. Lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company’s operating lease does not provide an implicit discount rate and as such the Company used an estimated incremental borrowing rate (4.03%) based on the information available at commencement date in determining the present value of lease payments.

Given the impacts of accounting for regulated operations, and the resulting recognition of expense at the amounts recovered in customer rates, expenditures for operating leases are consistent with lease expense and was $0.2 million for each of the three months ended September 30, 2019 and 2018, respectively, and $0.5 million and $0.3 million for the nine months ended September 30, 2019 and 2018, respectively.

Information related to operating lease ROU assets and lease liabilities is as follows:

	(In Millions)
	September 30, 2019
ROU Asset at Lease Inception	$	7.3
Accumulated Amortization		(1.2	)
Current ROU Asset	$	6.1

The Company’s future minimum operating lease commitments as of September 30, 2019 are as follows:

	(In Millions)
	September 30, 2019
2019	$	0.2
2020		0.8
2021		0.8
2022		0.8
2023		0.8
Thereafter		5.2
Total Lease Payments	$	8.6
Imputed Interest		(2.0	)
Present Value of Lease Payments		6.6
Less Current Portion*		(0.7	)
Non-Current Lease Liability	$	5.9

*Included in Other Current Liabilities

Index

Construction - The Company has forecasted to spend approximately ~~$52~~$105 million for its construction program in ~~2017.~~2019. The ~~actual~~Company has entered into several contractual construction agreements that, in the aggregate, obligate it to expend an estimated $68 million in the future. The timing and amount of capital expenditures is dependent on project scheduling and refinement of engineering estimates for certain projects.

Litigation

- The Company is a defendant in lawsuits in the normal course of business. We believe the resolution of pending claims and legal proceedings will not have a material adverse effect on the Company’s consolidated financial statements.

Change in Control Agreements

- The Company has Change in Control Agreements with certain of its officers that provide compensation and benefits in the event of termination of employment in connection with a change in control of the Company.

Note 8 – Employee Benefit Plans

Pension Benefits

- The Company’s Pension Plan covers all active employees hired prior to April 1, 2007. Employees hired after March 31, 2007 are not eligible to participate in this plan, but do participate in a defined contribution plan that provides anfor a potential annual contribution in an amount that is at the discretion of the ~~Company, based upon a percentage of the participants’ compensation.~~Company. In order to be eligible for a contribution, the participant must be employed by the Company on December 31st of the year to which the contribution relates. For ~~each of~~ the three ~~month periods~~months ended September 30, ~~2017~~2019 and ~~2016,~~2018, the Company made Pension Plan cash contributions of ~~$1.0 million.~~$1.3 million and $1.1 million, respectively. For each of the nine ~~month periods~~months ended September 30, ~~2017~~2019 and ~~2016,~~2018, the Company made Pension Plan cash contributions of ~~$2.5 million.~~$2.3 million, respectively. The Company expects to make Pension Plan cash contributions of approximately ~~$0.8~~$1.3 million over the remainder of the current year. The Company also maintains an unfunded supplemental retirement benefit plan for certain active and retired Company officers and currently pays ~~$0.3~~$0.4 million in annual benefits to the retired participants.

Other Postretirement Benefits-

The Company’s retirement plan other than pensions (Other Benefits Plan) covers substantially all of its current retired employees. Employees hired after March 31, 2007 are not eligible to participate in this plan. Coverage includes healthcare and life insurance. For each of the three ~~month periods~~months ended September 30, ~~2017~~2019 and ~~2016,~~2018, the Company made Other Benefits Plan cash contributions of $0.2 ~~million.~~million, respectively. For ~~each of~~ the nine ~~month periods~~months ended September 30, ~~2017~~2019 and ~~2016,~~2018, the Company made Other Benefits Plan cash contributions of ~~$0.7 million.~~$0.6 million and $0.5 million, respectively. The Company expects to make Other Benefits Plan cash contributions of approximately ~~$0.9~~$0.8 million over the remainder of the current year.

~~Index~~

The following tables set forth information relating to the Company’s periodic costs for its employee retirement benefit plans:

	(In Thousands)												(In Thousands)
	Pension Benefits						Other Benefits						Pension Benefits						Other Benefits
	Three Months Ended September 30,												Three Months Ended September 30,
	2017			2016			2017			2016			2019			2018			2019			2018

Service Cost	$	600		$	577		$	272		$	275		$	543		$	607		$	210		$	284
Interest Cost		786			761			491			488			857			765			496			474
Expected Return on Assets		(1,122	)		(1,004	)		(601	)		(558	)		(1,173	)		(1,218	)		(613	)		(637	)
Amortization of Unrecognized Losses		391			357			445			443			404			415			330			447
Amortization of Unrecognized Prior Service Cost (Credit)		—			—			(432	)		(432	)		—			—			—			(402	)
Net Periodic Benefit Cost	$	655		$	691		$	175		$	216
Net Periodic Benefit Cost*													$	631		$	569		$	423		$	166

Index

(In Thousands)
Pension Benefits Other Benefits
Nine Months Ended September 30,
2019 2018 2019 2018

Service Cost $ 1,628 $ 1,820 $ 630 $ 851
Interest Cost 2,570 2,296 1,488 1,423
Expected Return on Assets (3,520 ) (3,653 ) (1,838 ) (1,912 )
Amortization of Unrecognized Losses 1,213 1,244 989 1,340
Amortization of Unrecognized Prior Service Cost (Credit) — — — (1,205 )
Net Periodic Benefit Cost* $ 1,891 $ 1,707 $ 1,269 $ 497
*Service cost is included in Operations and Maintenance expense on Consolidated Statements of Income; all other amounts are included in Other Income/Expense, net.
Note 9 – Revenue Recognition from Contracts with Customers
The Company’s revenues are primarily generated from regulated tariff-based sales of water and wastewater services and non-regulated operation and maintenance contracts for services on water and wastewater systems owned by others. Revenue from contracts with customers is recognized when control of a promised good or service is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.
The Company’s regulated revenue from contracts with customers is derived from tariff-based sales that result from the obligation to provide water and wastewater services to residential, industrial, commercial, fire-protection and wholesale customers. The Company’s residential customers are billed quarterly while most of the Company’s industrial, commercial, fire-protection and wholesale customers are billed monthly. Payments by customers are due between 15 and 30 days after the invoice date. The Company recognizes revenue as the water and wastewater services are delivered to customers and records unbilled revenues estimated from the last meter reading date to the end of the accounting period utilizing factors such as historical customer data, regional weather indicators and general economic conditions in its service territories. Unearned Revenues and Advance Service Fees include fixed service charge billings in advance of service provided to Tidewater customers and are recognized as service is provided.
Non-regulated service contract revenues consist of base service fees, as well as fees for additional billable services provided to customers, are billed monthly and are due within 30 days after the invoice date. The Company considers the amounts billed to represent the value of these services provided to customers. Certain of these contracts continue through 2022 and thus contain remaining performance obligations for which the Company expects to recognize revenue in the future. These contracts also contain termination provisions.
Substantially all operating revenues and accounts receivable are from contracts with customers. The Company records an allowance for doubtful accounts based on historical write-offs combined with an evaluation of current economic conditions within its service territories.
The Company’s contracts do not contain any significant financing components.
15
Index
The Company’s operating revenues are comprised of the following:
(In Thousands)
Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Regulated Tariff Sales
Residential $ 20,693 $ 19,788 $ 54,453 $ 53,303
Commercial 4,487 4,418 11,539 11,298
Industrial 2,723 2,868 7,242 7,869
Fire Protection 3,100 3,084 9,211 9,045
Wholesale 3,813 4,319 10,582 11,211
Non-Regulated Contract Operations 2,919 4,203 8,729 11,983
Total Revenue from Contracts with Customers $ 37,735 $ 38,680 $ 101,756 $ 104,709
Other Regulated Revenues 184 151 315 276
Other Non-Regulated Revenues 101 101 303 303
Inter-segment Elimination (251 ) (219 ) (515 ) (479 )
Total Revenue $ 37,769 $ 38,713 $ 101,859 $ 104,809

(In Thousands)
Pension Benefits Other Benefits
Nine Months Ended September 30,
2017 2016 2017 2016

Service Cost $ 1,799 $ 1,731 $ 817 $ 824
Interest Cost 2,357 2,284 1,473 1,464
Expected Return on Assets (3,367 ) (3,011 ) (1,804 ) (1,674 )
Amortization of Unrecognized Losses 1,174 1,070 1,336 1,330
Amortization of Unrecognized Prior Service Cost (Credit) — — (1,296 ) (1,296 )
Net Periodic Benefit Cost $ 1,963 $ 2,074 $ 526 $ 648
Note 910 – Income Taxes

As part of its 2014 Federal income tax return, the Company adopted the final Internal Revenue Service (IRS) tangible property regulations ~~pertaining to~~and changed its accounting method for the tax ~~deductibility~~treatment of ~~costs~~expenditures that ~~qualify~~qualified as ~~repairs on tangible property.~~deductible repairs. The adoption resulted in a net reduction of $17.6 million in taxes previously remitted to the IRS, for which the Company has already sought and received ~~refunds pertaining to~~the tax ~~years 2012 through 2014~~refunds. A reserve provision against refunded taxes of $2.3 million was recorded in ~~accordance with~~2015 at the time of filing its change in accounting method based on a possible challenge by the IRS ~~regulations. Subsequently, the~~during an audit examination. The Company’s 2014 federal income tax return was subsequently selected for examination by the IRS. ~~It is unknown at this time whether~~In 2018, the ~~results of this examination will result in any changes to the filed Federal~~Company increased its income tax reserve provision to $4.1 million. During the first quarter of 2019, the Company agreed to certain modifications of its accounting method for expenditures that qualify as deductible repairs and the IRS concluded its audit of the Company’s 2014 federal income tax return. The modifications also impacted the Company’s filed 2015, 2016 and 2017 federal income tax returns. In March 2019 and June 2019, the Company paid $0.8 million in income taxes and $0.1 million in interest, respectively, in connection with the conclusion and closing of the 2014 and 2015 tax return audits. As of September 30, 2019, the Company has reduced its income tax reserve provision and interest expense liability to $2.4 million and $0.1 million, respectively. In October 2019, the Company paid $1.9 million in income taxes in connection with the conclusion and closing of the 2016 and 2017 tax return audits.
1316
Index
Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements of Middlesex Water Company (Middlesex or the Company) included elsewhere herein and with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2018.
Forward-Looking Statements
Certain statements contained in this periodic report and in the documents incorporated by reference constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. The Company intends that these statements be covered by the safe harbors created under those laws.  They include, but are not limited to statements as to:

- expected financial condition, performance, prospects and earnings of the Company;
- strategic plans for growth;
- the amount and timing of rate increases and other regulatory matters, including the recovery of certain costs recorded as regulatory assets;
- the Company’s expected liquidity needs during the upcoming fiscal year and beyond and the sources and availability of funds to meet its liquidity needs;
- expected customer rates, consumption volumes, service fees, revenues, margins, expenses and operating results;
- financial projections;
- the expected amount of cash contributions to fund the Company’s retirement benefit plans, anticipated discount rates and rates of return on retirement benefit plan assets;
- the ability of the Company to pay dividends;
- the Company’s compliance with environmental laws and regulations and estimations of the materiality of any related costs;
- the safety and reliability of the Company’s equipment, facilities and operations;
- ~~the Company’s plans to renew municipal franchises and consents in the territories it serves;~~
- trends; and
- the availability and quality of our water supply.
These forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by the forward-looking statements. Important factors that could cause actual results to differ materially from anticipated results and outcomes include, but are not limited to:

- effects of general economic conditions;
- ~~increases in~~ competition for growth in non-franchised markets to be potentially served by the Company;
- ability of the Company to adequately control selected operating expenses which are necessary to maintain safe and proper utility services, and which may be beyond the Company’s control;
- availability of adequate supplies of water;
- ability to maintain compliance with all regulatory requirements with respect to water and wastewater treatment, distribution and collection;
- actions taken by government regulators, including decisions on rate increase requests;
- ability to meet new or modified water and wastewater quality standards;
- weather variations and other natural phenomena impacting utility operations;
- financial and operating risks associated with acquisitions and/or privatizations;
- acts of war or terrorism;
- changes in the pace of residential housing development;
- actions against the company that could be brought by third parties;
- availability and cost of capital resources; and
- other factors discussed elsewhere in this quarterly report.

17
Index
Many of these factors are beyond the Company’s ability to control or predict. Given these uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements, which only speak to the Company’s understanding as of the
14
~~Index~~
date of this report. The Company does not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of this report or, to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.

For an additional discussion of factors that may affect the Company’s business and results of operations, see Item 1A. - Risk Factors in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2018.

Overview

Middlesex Water Company (Middlesex) has operated as a water utility in New Jersey since 1897, in Delaware through our wholly-owned subsidiary, Tidewater Utilities, Inc. (Tidewater), since 1992 and in Pennsylvania through our wholly-owned subsidiary, Twin Lakes Utilities, Inc. (Twin Lakes), since 2009. We are in the business of collecting, treating and distributing water for domestic, commercial, municipal, industrial and fire protection purposes. We also operate two New Jersey municipal water and wastewater systems under contract and provide regulated wastewater services in New Jersey and Delaware through four of our other subsidiaries. We are regulated as to rates charged to customers for water and wastewater services, as to the quality of water service we provide and as to certain other matters in New Jersey, Delaware and Pennsylvania. 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 utilities.

Our 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 service under contract to municipalities in central New Jersey with a total population of approximately 219,000. Our Bayview subsidiary provides water services in Downe Township, New Jersey. 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 ~~residents~~customers in Southampton Township, New Jersey.

~~In partnership with our~~Our Delaware subsidiaries, Tidewater and Southern Shores Water Company, LLC (Southern Shores), provide water services to approximately 47,000 retail customers in New Castle, Kent and Sussex Counties, Delaware. Tidewater’s subsidiary, White Marsh, services approximately 4,000 customers in Delaware and Maryland through various operations and maintenance contracts.
Our Tidewater Environmental Services, Inc. (TESI) subsidiary provides wastewater services to approximately 3,600 residential retail customers in Sussex Counties, Delaware.
USA-PA ~~we operate~~operates the water ~~supply system~~ and wastewater ~~system~~systems for the City of Perth Amboy, New ~~Jersey.~~Jersey (Perth Amboy) under a 10-year operations and maintenance contract expiring in 2028. In addition to performing day-to day operations, USA-PA is also responsible for emergency responses and management of capital projects funded by Perth Amboy. USA-PA does not manage the billing, collections and customer service functions of Perth Amboy.

USA operates the Borough of Avalon, New Jersey’s (Avalon) water utility, sewer utility and storm water system under a ten-year operations and maintenance contract expiring in 2022. In addition to performing day to day operations, USA is responsible for billing, collections, customer service, emergency responses and management of capital projects funded by Avalon.
Under a marketing agreement with HomeServe USA (HomeServe), USA offers residential customers in New Jersey and Delaware a menu of water and wastewater related 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. ~~The agreement expires in 2021.~~ USA also provides unregulated water and wastewater services under contract with several New Jersey municipalities.

Our Delaware subsidiaries, Tidewater and Southern Shores Water Company, LLC, provide water services to approximately 44,000 retail customers in New Castle, Kent and Sussex Counties, Delaware. Tidewater’s subsidiary, White Marsh, services approximately 4,000 customers in Kent and Sussex Counties through various operations and maintenance contracts.18
Index
~~Our Tidewater Environmental Services, Inc. subsidiary provides wastewater services to approximately 3,500 residential retail customers in Sussex County, Delaware.~~
Our Pennsylvania subsidiary, Twin Lakes, provides water services to approximately 120 retail customers in the Township of Shohola, Pike County, Pennsylvania.

15
~~Index~~
The majority of our revenue is generated from retail and contract water services to customers in our service areas. We record water service revenue as such service is rendered and include estimates for amounts unbilled at the end of the period for services provided after the last billing cycle. Fixed service charges are billed in advance by our subsidiary, Tidewater, and are recognized in revenue as the service is provided.
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. These factors are evident in the discussions below which compare our results of operations with the prior period.
Recent Developments

Capital Construction Program -The Company’s multi-year capital construction program, ~~involves~~Water for Tomorrow, encompasses numerous projects designed to upgrade and replace utility infrastructure as well as enhance the integrity and reliability of ~~system~~ assets to better serve the current and future generations of water and wastewater customers. The Company plans to invest approximately ~~$106~~$105 million ~~through 2018~~in 2019 in connection with this plan for projects that include, but are not limited to;
· Construction of a 4.6 mile water transmission pipeline to provide critical resiliency and redundancy ~~capability~~ to the Company’s water transmission system in New Jersey;
· Replacement of ~~five~~four miles of water mains including service lines, valves, fire hydrants and meters in ~~the Borough of South Plainfield,~~Carteret, New Jersey;
· Enhanced treatment process at the Company’s largest water plant in Edison Township, New Jersey, to mitigate the formation of disinfection by-products that can develop during treatment;
· ~~Additional elevated storage tanks to supplement water supply during emergencies and peak usage periods;~~
· ~~Upgrades to water interconnections with neighboring utilities for greater resiliency and emergency response capability;~~
· Relocation of water meters from inside customers’ premises to exterior meter pits to allow quicker access by crews in emergencies, ~~enhanced~~to enhance customer safety and convenience and ~~reduced~~to reduce unmetered water; and
· Additional standby emergency power generation.

~~Middlesex-~~Pinelands’ Base Rate Increases Approved –On October ~~10, 2017, Middlesex filed a petition with~~25, 2019, Pinelands Water and Pinelands Wastewater concluded their base rate matters when the New Jersey Board of Public Utilities (NJBPU) approved a $0.5 million increase in annual base rates, effective November 4, 2019. In March 2019, Pinelands Water and Pinelands Wastewater had filed petitions with the NJBPU seeking permission to increase base ~~water~~ rates by approximately ~~$15.3~~$0.7 million per year. The requests were necessitated by capital infrastructure investments both companies had made and increased operations and maintenance costs.
Tidewater to Acquire Water Systems - On October 8, 2019, the Delaware Public Service Commission (DEPSC) approved Tidewater’s request to purchase the water utility assets of J.H. Wilkerson and Son, Inc. and transfer the Certificate of Public Convenience and Necessity in order for Tidewater to serve the approximate 1,000 customers currently connected to eight community water systems located mostly in eastern Sussex County, Delaware. The DEPSC also authorized Tidewater to maintain the existing rates that these customers currently pay. The transaction is expected to close in the fourth quarter of 2019.
Middlesex Issues $53.7 Million of First Mortgage Bonds -As part of the Company’s comprehensive financing plan to fund its Water for Tomorrow capital construction program, in August 2019, Middlesex priced and closed on a New Jersey Economic Development Authority debt financing transaction of $53.7 million by issuing First Mortgage Bonds designated as Series 2019A ($32.5 million at coupon interest rate of 4.0%) and Series 2019B ($21.2 million at coupon interest rate of 5.0%). The proceeds, including an issuance premium of $7.1 million, are being used to finance several projects, including certain of the projects noted above. Through September 30, 2019, Middlesex has drawn a total of $7.6 million from the proceeds and expects to draw the remaining $53.2 million through the third quarter of 2021.
Twin Lakes Files for Rate Increase -In July 2019, Twin Lakes filed a petition with the Pennsylvania Public Utilities Commission (PAPUC) seeking permission to increase base rates by approximately $0.2 million per year. This request was necessitated by capital infrastructure investments ~~Middlesex~~Twin Lakes has made ~~or has committed to make, to drinking water infrastructure since the last filing in New Jersey in 2015, as well as~~and increased operations and maintenance costs. We cannot predict ~~when and~~ whether the ~~NJBPU~~PAPUC will ultimately approve, deny, or reduce the amount of the request. ~~Under New Jersey statute,~~A decision by the ~~NJPBU must render a decision within nine months~~PAPUC is not expected before the first quarter of ~~filing a petition.~~2020.

~~On October 20, 2017,~~19
Index
Middlesex Receives Financing Approval -In May 2019, the NJBPU approved Middlesex’s petition with the NJBPU seeking approval to ~~reset~~issue and sell up to 1,500,000 shares of its ~~Purchased Water Adjustment Clause (PWAC) tariff rate~~common stock in one or more transactions through December 31, 2022. Sales of additional shares of common stock are also part of the Company’s comprehensive financing plan to recover additional annual costs of $1.2 million for the purchase of untreated water from the New Jersey Water Supply Authority. 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 reset PWAC tariff rate became effective on November 1, 2017.
~~Tidewater Distribution System Improvement Charge (DSIC) -~~~~Effective July 1, 2017, Tidewater reset~~fund its Delaware Public Service Commission-approved DSIC rate, which is expected to generate $0.4 million of annual revenues. A DSIC is a rate-mechanism that allows water utilities to recover investments of, and generate a return on, qualifying capital improvements to the water distribution system made between base rate proceedings.multi-year utility plant infrastructure investment plan.
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~~Index~~

Outlook

~~Favorable~~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). Revenues in the first quarter of 2019 were favorably impacted by Middlesex’s April 2018 base water rate increase. Weather patterns experienced in 2017 and 2018, which ~~impact outdoor~~resulted in lower customer demand for water, ~~use,~~have continued to occur in 2019 and ~~additional sales~~have impacted revenues and net income. Actuarially-determined non-service retirement benefit plan costs are expected to ~~neighboring municipal water utilities due~~increase in 2019. We continue to ~~emergency conditions experienced by those entities in 2015~~implement plans to further streamline operations and ~~2016,~~further reduce, and ~~which contributed to overall~~mitigate increases in, operating ~~revenues during those periods, have not reoccurred to-date in 2017.~~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 (see discussion of the Middlesex base water rate increase request above under “~~~~Recent Developments~~~~”). We continue to execute plans to further streamline operations and further reduce, and mitigate increases in, operating costs.~~requests.

Organic residential customer growth ~~for 2017, largely the result of new housing from developer activity in Delaware, is expected to be~~through September 2019 has been consistent with that experienced in recent years.

Our strategy for profitable growth is focused on ~~five~~the following key areas:

· Timely and adequate recovery of ~~prudent~~infrastructure investments ~~in utility plant required~~and other costs to maintain ~~appropriate utility services;~~
· ~~Operate municipal, commercial and industrial water and wastewater systems under contract;~~service quality;
· Prudent acquisitions of ~~investor-~~investor and municipally-owned water and wastewater utilities;
· ~~Invest in, and/or operate under contract, renewable energy~~Operation of municipal and industrial ~~and commercial treatment projects that are complementary to the provision of~~ water and wastewater ~~services and related competencies;~~systems on a contract basis; and
· Invest in ~~other~~projects, products ~~services~~ and ~~opportunities~~services that complement our core water and wastewater competencies.

Operating Results by Segment

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~~levels of service. Rates and ~~level~~levels of service in the Non-Regulated segment are subject to the terms of individually-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 ~~contractual~~ and regulatory requirements.

The segments in the tables included below consist of the following companies: Regulated-Middlesex, Tidewater, Pinelands, Southern Shores, TESI and Twin Lakes; Non-Regulated-USA, USA-PA, and White Marsh.

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Index

Results of Operations – Three Months Ended September 30, ~~2017~~2019

(In Thousands) (In Thousands)
Three Months Ended September 30, Three Months Ended September 30,
2017 2016 2019 2018
Regulated Non-
Regulated Total Regulated Non-
Regulated Total Regulated Non-
Regulated Total Regulated Non-
Regulated Total
Revenues $ 32,132 $ 4,042 $ 36,174 $ 33,946 $ 3,848 $ 37,794 $ 34,850 $ 2,919 $ 37,769 $ 34,510 $ 4,203 $ 38,713
Operations and maintenance expenses 12,980 3,198 16,178 13,527 3,072 16,599 15,859 1,810 17,669 14,764 3,350 18,114
Depreciation expense 3,540 47 3,587 3,194 49 3,243 4,182 64 4,246 3,745 47 3,792
Other taxes 3,513 90 3,603 3,709 87 3,796 3,808 63 3,871 3,787 102 3,889
Operating income 12,099 707 12,806 13,516 640 14,156 11,001 982 11,983 12,214 704 12,918

Other income, net 197 20 217 82 525 607 824 43 867 772 61 833
Interest expense 1,493 — 1,493 1,427 — 1,427 1,996 — 1,996 1,723 — 1,723
Income taxes 3,571 317 3,888 4,017 506 4,523 (580 ) 315 (265 ) (507 ) 245 (262 )
Net income $ 7,232 $ 410 $ 7,642 $ 8,154 $ 659 $ 8,813 $ 10,409 $ 710 $ 11,119 $ 11,770 $ 520 $ 12,290

Operating Revenues

Operating revenues for the three months ended September 30, ~~2017~~2019 decreased ~~$1.6~~$0.9 million from the same period in ~~2016 due~~2018. This decrease was related to the following factors:

· Middlesex System revenues decreased ~~$1.8~~$0.6 million due to ~~lower~~reduced water consumption across all classes of customers ~~largely~~ as a result of ~~weather patterns~~weather. A reduction in ~~the summer months in 2017 in addition to lower bulk~~ water ~~sales to neighboring municipal systems who experienced emergency conditions in the same period in 2016;~~consumption by wholesale contract customers accounted for $0.5 million of this decrease;
· Tidewater System revenues ~~remained consistent~~increased $0.9 million due to additional ~~residential~~ customers, somewhat offset byreduced base tariff rates. The reduction in base tariff rates, which was approved by the DEPSC, became effective March 1, 2019, and was prompted by the lower ~~water consumption, also largely~~corporate income tax rate enacted under theTax Cuts and Jobs Act of 2017 (Tax Act). There is a ~~result of weather patterns~~corresponding decrease in income tax expense;
· Non-regulated revenues decreased $1.3 million primarily due to changes resulting from USA-PA’s 10-year contract with Perth Amboy. Under the ~~summer months~~new contract effective January 1, 2019, USA-PA has direct management control for wastewater services, for which USA-PA is compensated. Under the prior contract, USA-PA utilized, and was compensated for, subcontracted wastewater services. This results in ~~2017;~~a related decrease in operations and maintenance expense; and
· All other revenue categories increased ~~$0.2~~$0.1 million.

Operation and Maintenance Expense

Operation and maintenance expenses for the three months ended September 30, ~~2017~~2019 decreased $0.4 million from the same period in ~~2016,~~2018, primarily related to the following factors:

· ~~Lower retirement plan~~Non-regulated operation and maintenance expenses ~~of $0.7~~decreased $1.5 million, primarily due ~~mostly~~ to ~~reimbursement of retiree healthcare insurance premiums;~~our new Perth Amboy operating contract, effective January 1, 2019, under which USA-PA no longer incurs sub-contractor fees for wastewater services. This results in a related decrease in operating revenues;
· ~~Lower water production costs of $0.2~~Retirement benefit plan expenses decreased $0.1 million ~~in our Middlesex System, primarily~~ due to ~~weather-driven decreased water consumption, partially offset by a rate increase by the municipal wastewater utility that receives the water treatment residuals in the Middlesex System;~~lower actuarially-determined postretirement benefit plan service expense;
· ~~Higher main break repair activity~~Labor costs in our ~~Middlesex System in 2017 as compared to 2016 resulted in additional costs of $0.3 million;~~
· ~~Higher labor costs of $0.1~~regulated subsidiaries increased $1.4 million ~~primarily~~ due to ~~higher~~increased headcount, increased average labor rates and ~~additional personnel required~~payments relative to ~~address increased regulatory requirements and other critical needs;~~certain retiring employees; and
· All other operation and maintenance expense categories ~~increased $0.1~~decreased $0.2 million.

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Depreciation

Depreciation expense for the three months ended September 30, ~~2017~~2019 increased ~~$0.3~~$0.5 million from the same period in ~~2016~~2018 due to a higher level of utility plant in service.

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~~Index~~
Other Taxes

Other taxes for the three months ended September 30, ~~2017 decreased $0.2 million from~~2019 remained consistent with the same period in ~~2016~~2018 primarily due to lower revenue related taxes on ~~decreased~~lower revenues in our Middlesex system ~~partially~~ offset by higher payroll taxes.

Other Income, net

Other Income, net for the three months ended September 30, ~~2017 decreased $0.4 million from~~2019 remained consistent with the same period in ~~2016,~~2018, primarily due ~~primarily~~ to ~~the 2016 recognition~~higher Allowance for Funds Used During Construction resulting from a higher level of capital construction projects in progress offset by ~~USA of previously deferred income associated with the 10-year marketing agreement with HomeServe.~~higher actuarially-determined postretirement benefit plan non-service expense.

Interest Charges

Interest charges for the three months ended September 30, ~~2017~~2019 increased ~~$0.1~~$0.3 million from the same period in ~~2016~~2018 due to higher average short-term and long-term debt ~~balances~~ outstanding ~~and higher average~~partially offset by lower interest ~~rates on short-term debt.~~related to Internal Revenue Service (IRS) examinations of the Company’s federal income tax returns.

Income Taxes

Income taxes for the three months ended September 30, ~~2017 decreased $0.6 million from~~2019 remained consistent with the same period in ~~2016,~~2018, primarily due to lower-pre-tax income and a decrease in Tidewater’s effective income tax rate in March 2019, reflecting the rate reduction approved by the DEPSCto reflect the lower ~~pre-tax~~corporate income tax rate resulting from implementation of theTax Act. The decrease in ~~2017 as compared to 2016.~~Tidewater’s effective tax rate has also resulted in a corresponding decrease in operating revenues.Offsetting the decreases above were lower tax deductible repair and maintenance expenses, which results in higher tax expense.

Net Income and Earnings Per Share

Net income for the three months ended September 30, ~~2017~~2019 decreased $1.2 million as compared with the same period in ~~2016.~~2018. Basic earnings per share were ~~$0.47~~$0.67 and ~~$0.54~~$0.75 for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. Diluted earnings per share were ~~$0.46~~$0.66 and ~~$0.54~~$0.74 for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively.
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Index

Results of Operations – Nine Months Ended September 30, ~~2017~~2019

(In Thousands) (In Thousands)
Nine Months Ended September 30, Nine Months Ended September 30,
2017 2016 2019 2018
Regulated Non-
Regulated Total Regulated Non-
Regulated Total Regulated Non-
Regulated Total Regulated Non-
Regulated Total
Revenues $ 87,866 $ 11,453 $ 99,319 $ 89,712 $ 11,386 $ 101,098 $ 93,130 $ 8,729 $ 101,859 $ 92,826 $ 11,983 $ 104,809
Operations and maintenance expenses 39,476 9,087 48,563 39,075 9,140 48,215 45,233 5,336 50,569 43,390 9,383 52,773
Depreciation expense 10,136 144 10,280 9,420 141 9,561 12,229 186 12,415 10,999 138 11,137
Other taxes 10,059 268 10,327 10,277 260 10,537 10,731 182 10,913 10,610 300 10,910
Operating income 28,195 1,954 30,149 30,940 1,845 32,785 24,937 3,025 27,962 27,827 2,162 29,989

Other income, net 492 50 542 317 519 836 1,835 53 1,888 1,985 97 2,082
Interest expense 3,965 — 3,965 3,841 — 3,841 4,984 — 4,984 4,929 — 4,929
Income taxes 8,381 882 9,263 9,190 1,068 10,258 (1,912 ) 960 (952 ) 979 704 1,683
Net income $ 16,341 $ 1,122 $ 17,463 $ 18,226 $ 1,296 $ 19,522 $ 23,700 $ 2,118 $ 25,818 $ 23,904 $ 1,555 $ 25,459
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~~Index~~
Operating Revenues

Operating revenues for the nine months ended September 30, ~~2017~~2019 decreased ~~$1.8~~$3.0 million from the same period in ~~2016.~~2018. This decrease was related to the following factors:

· Middlesex System revenues decreased ~~$2.8~~$0.7 million due to ~~lower~~the following:
o Reduced water consumption related to weather across all classes of customers, ~~largely as~~resulting in reduced revenues of $1.9 million; and
o Effective April 1, 2018, a ~~result~~NJBPU-approved base rate increase resulted in higher revenues of ~~weather patterns in the spring and summer months in 2017 in addition to lower bulk water sales to neighboring municipal systems who experienced emergency conditions in the same period in 2016;~~$1.2 million;
· Tidewater System revenues increased $0.9 million primarily due to additional ~~residential~~ customers, ~~offset~~which was mitigated byreduced base tariff rates. The reduction in base rates was approved by the DEPSC and became effective March 1, 2019, and was prompted by the lower ~~water consumption, also largely~~corporate income tax rate enacted under theTax Act. There is a ~~result of weather patterns~~corresponding decrease in income tax expense; and
· Non-regulated revenues decreased $3.3 million, primarily due to changes resulting from USA-PA’s new 10-year contract with Perth Amboy. Under the ~~spring~~new contract, effective January 1, 2019, USA-PA has direct management control for wastewater services, for which USA-PA is compensated. Under the prior contract, USA-PA utilized, and ~~summer months~~was compensated for, subcontracted wastewater services. This results in ~~2017;~~a related decrease in operations and maintenance expense; and
· All other operating revenue categories increased $0.1 million.

Operation and Maintenance Expense

Operation and maintenance expenses for the nine months ended September 30, ~~2017 increased $0.3~~2019 decreased $2.2 million from the same period in ~~2016,~~2018, primarily related to the following factors:

· ~~Higher labor costs of $0.6~~Operation and maintenance expenses in our non-regulated subsidiaries decreased $4.0 million, primarily due to ~~higher average labor rates and additional personnel required to address increased regulatory requirements and other critical needs;~~our new Perth Amboy operating contract, effective January 1, 2019, under which USA-PA no longer incurs sub-contractor fees for wastewater services. This results in a related decrease in operating revenues;
· ~~Higher water production costs of $0.5~~Retirement benefit plan expenses decreased $0.2 million ~~in our Middlesex System, primarily~~ due to ~~a rate increase by the municipal wastewater utility that receives the water treatment residuals in the Middlesex system and~~ lower ~~raw water quality;~~actuarially-determined postretirement benefit plan service expense;
· ~~Higher main break repair activity~~Labor costs in our ~~Middlesex System in 2017 as compared~~regulated subsidiaries increased $1.7 million due to ~~2016 resulted in higher~~increased headcount, increased average labor rates and payments relative to certain retiring employees;
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Index
· Rent costs increased $0.2 million due to the January 2019 commencement of ~~$0.5 million;~~our lease of new corporate administrative office space;
· ~~Lower retirement plan expenses of $0.8~~Health insurance costs increased $0.2 million due ~~mostly~~ to ~~reimbursement of retiree healthcare insurance premiums;~~increased premiums and headcount; and
· ~~Decreased liability insurance costs of $0.5 million, primarily due to prior policy year refunds;~~All other operation and maintenance expense categories decreased $0.1 million.

Depreciation

Depreciation expense for the nine months ended September 30, ~~2017~~2019 increased ~~$0.7~~$1.3 million from the same period in ~~2016~~2018 due to a higher level of utility plant in service.

Other Taxes

Other taxes for the nine months ended September 30, ~~2017 decreased $0.2 million from~~2019 remained consistent with the same period in ~~2016~~2018 primarily due to lower revenue related taxes on ~~decreased~~lower revenues in our Middlesex system offset by higher payroll taxes.

Other Income, net

Other Income, net for the nine months ended September 30, ~~2017~~2019 decreased ~~$0.3~~$0.2 million from the same period in ~~2016~~2018, primarily due tohigher actuarially-determined postretirement benefit plan non-service expense and the ~~2016 recognition~~sale of wastewater franchise rights by ~~USA~~our TESI subsidiary in the second quarter of ~~previously deferred income associated with the 10-year marketing agreement with HomeServe~~2018. This decrease was partially offset by higher ~~AFUDC,~~Allowance for Funds Used During Construction resulting from a higher level of capital construction projects in progress.

Interest Charges

Interest charges for the nine months ended September 30, ~~2017~~2019 increased $0.1 million from the same period in ~~2016~~2018 due to higher average short-term and long-term debt ~~balances~~ outstanding ~~and higher average~~in 2019 as compared to 2018 partially offset by lower interest ~~rates on short-term debt.~~associated with IRS examinations of the Company’s federal income tax returns.

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~~Index~~
Income Taxes

Income taxes for the nine months ended September ~~2017~~30, 2019 decreased ~~$1.0~~$2.6 million from the same period in ~~2016,~~2018, primarily due to lower pre-tax income and the regulatory accounting treatment of tax benefits associated with the adoption of the tangible property regulations, prescribed by the IRS, which was approved in ~~2017 as compared~~ Middlesex’s 2018 base rate case decision. In addition, Tidewater’s effective income tax rate was decreased in March 2019, reflecting the rate reduction approved by the DEPSCto ~~2016.~~reflect the lower corporate income tax rate resulting from implementation of theTax Act. This has resulted in a corresponding decrease in operating revenues.

Net Income and Earnings Per Share

Net income for the nine months ended September 30, ~~2017 decreased $2.1~~2019 increased $0.4 million as compared with the same period in ~~2016.~~2018. Basic ~~and diluted~~ earnings per share were ~~$1.06~~$1.56 and ~~$1.19~~$1.55 for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. Diluted earnings per share were $1.55 and $1.54 for the nine months ended September 30, 2019 and 2018, respectively.

Liquidity and Capital Resources

Operating Cash Flows

Cash flows from operations are largely based on four factors: weather, adequate and timely rate increases, effective cost management and growth. The effect of those factors on net income is discussed in “~~Results~~“Results of ~~Operations~~Operations.”

For the nine months ~~ended~~ September 30, ~~2017,~~2019, cash flows from operating activities decreased ~~$2.0~~$9.5 million to ~~$28.6 million.~~$23.3 million from the same period in 2018. The decrease in cash flows from operating activities primarily resulted from ~~lower water sales and~~the timing of ~~vendor~~ payments ~~offset by lower~~to vendors and increased income tax ~~payments and a decreased level of inventory purchases as compared to 2016. The $28.6 million of net cash flow from operations enabled the Company to fund approximately 41% of utility~~payments. Utility plant expenditures ~~internally~~ for the ~~period.~~period were primarily funded by financing activities.

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Index
Investing Cash Flows

For the nine months ended September 30, ~~2017,~~2019, cash flows used in investing activities increased ~~$1.0~~$11.7 million to ~~$35.2 million.~~$61.2 million from the same period in 2018. The increase in cash flows used in investing activities resulted from ~~higher~~increased utility plant ~~expenditures as compared to 2016.~~expenditures.

For further discussion on the Company’s future capital expenditures and expected funding sources, see “Capital Expenditures and Commitments” below.

Financing Cash Flows

For the nine months ended September 30, ~~2017,~~2019, cash flows from financing activities increased ~~$3.9~~$73.5 million to ~~$5.3~~$89.3 million ~~as compared to 2016.~~from the same period in 2018. The majority of the increase in cash flows ~~from~~provided by financing activities ~~resulted from an~~is due to the net increase in ~~short-term~~long-term and ~~long-term~~short-term debt funding ~~partially offset by~~and increased ~~common stock dividend payments and lower~~ proceeds from ~~sales~~the issuance of common stock under the Middlesex Water Company Investment Plan (the ~~Dividend~~ Investment Plan).
In September 2019, the Company determined it had inadvertently sold shares of its common stock through the Investment Plan from August 1, 2018 through September 3, 2019 (Eligible Period) after the registration statement covering sales through the Investment Plan had expired and therefore was no longer effective. In October 2019, the Company’s Board of Directors approved a plan to voluntarily offer a right of rescission (Rescission Offer) to Investment Plan participants who purchased shares of the Company’s common stock during the Eligible Period. During the Eligible Period, Investment Plan participants purchased 232,643 shares of Company common stock at an average price of $55.79 per share. The Rescission Offer ends in November 2019. Based on the current market price of the Company’s common stock, the Company does not expect that the exercise of any applicable rescission rights will have a material impact on its results of operations, financial condition or liquidity. For more information, see discussion under “Common Stock” inNote 3 – Capitalization.

Capital Expenditures and Commitments

To fund our capital program, we may use internally generated funds, short-term and long-term debt borrowings, proceeds from sales of common stock under the ~~Dividend~~ Investment Plan and proceeds from ~~sales~~new offerings to the public of our common stock. See below for a more detailed discussion regarding the funding of our capital program.

The capital investment program for ~~2017~~2019 is currently estimated to be approximately ~~$52~~$105 million. Through September 30, ~~2017,~~2019, we have expended ~~$35.2~~$61 million and expect to incur approximately ~~$17~~$44 million for capital projects for the remainder of ~~2017.~~2019.

We currently project that we ~~will~~may expend approximately ~~$163~~$220 million for capital projects in ~~2018~~2020 and ~~2019.~~2021. The actual amount and timing of capital expenditures is dependent on ~~further~~project scheduling and refinement of engineering estimates ~~related to the timing and cost of specific~~for certain capital projects.

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~~Index~~
To ~~fund~~pay for our capital program for the remainder of ~~2017,~~2019, we ~~intend to utilize:~~plan on utilizing:
· Internally generated funds;
· Proceeds from the ~~Dividend~~ Investment Plan;
· ~~Requisitions~~Proceeds from ~~active loans under~~ the New Jersey and Delaware State Revolving Fund (SRF) ~~program (approximately $6 million depending on actual construction schedule)~~. ~~The~~ SRF ~~program provides~~programs provide low cost financing for projects that meet certain water quality and system improvement ~~benchmarks;~~benchmarks (see discussion under “Long-term Debt” inNote 3 - Capitalization);
· Proceeds from the issuance of First Mortgage Bonds through the New Jersey Economic Development Authority (see discussion under “Middlesex Issues $53.7 Million of First Mortgage Bonds” inRecent Developments above);
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Index
· If necessary, proceeds from a common stock offering (see discussion under “Middlesex Receives Financing Approval” inRecent Developments above); and
· Short-term borrowings ~~as needed,~~ through ~~$92.0~~$140.0 million of ~~available~~active lines of credit with several financial institutions. As of September 30, ~~2017,~~2019, there remains ~~$67.5~~$81.5 million of available credit under these lines.

Recent Accounting Pronouncements – See Note 1 of the Notes to Unaudited Condensed Consolidated Financial Statements for a discussion of recent accounting ~~pronouncements.~~pronouncements and guidance.

Item 3. Quantitative and Qualitative Disclosures of Market Risk

We are exposed to market risk associated with changes in interest rates and commodity prices. The Company is subject to the risk of fluctuating interest rates in the normal course of business. Our policy is to manage interest rates through the use of fixed rate long-term debt and, to a lesser extent, short-term debt. The Company’s interest rate risk related to existing fixed rate, long-term debt is not material due to the term of the majority of our First Mortgage Bonds, which have final maturity dates ranging from ~~2018~~2021 to ~~2047.~~2059. Over the next twelve months, approximately ~~$6.5~~$7.2 million of the current portion of existing long-term debt instruments will mature. Applying a hypothetical ~~10%~~ change in the rate of interest charged by 10% on those borrowings, would not have a material effect on our earnings.

Our risks associated with commodity price increases for chemicals, electricity and other commodities are reduced through contractual arrangements and the ability to recover ~~market-based~~ price increases through ~~customers’~~ rates. Non-performance by these commodity suppliers could have a material adverse impact on our results of operations, financial position and cash flows.

We are exposed to credit risk for both our Regulated and Non-Regulated business segments. Our Regulated operations serve residential, commercial, industrial and municipal customers while our Non-Regulated operations engage in business activities with developers, government entities and other customers. Our primary credit risk is exposure to customer default on contractual obligations and the associated loss that may be incurred due to the non-payment of customer accounts receivable balances. Our credit risk is managed through established credit and collection policies which are in compliance with applicable regulatory requirements and involve monitoring of customer exposure and the use of credit risk mitigation measures such as letters of credit or prepayment arrangements. Our credit portfolio is diversified with no significant customer or industry concentrations. In addition, our Regulated businesses are generally able to recover all prudently incurred costs including uncollectible customer accounts receivable expenses and collection costs through rates.

The Company's retirement benefit plan assets are exposed to fluctuating market prices of debt and equity securities. Changes to the Company's retirement benefit plan ~~assets’ value~~asset values can impact the Company's retirement benefit plan expense, funded status and future minimum funding requirements. Our risk is ~~reduced through~~mitigated by our ability to recover retirement benefit plan costs through ~~rates.~~
rates for regulated utility services charged to our customers.
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Index

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As required by Rule 13a-15 under the Securities and Exchange Act of 1934 (the Exchange Act), an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures was conducted by the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer. Based upon that evaluation, the Company’s Chief Executive Officer and the Company’s Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective as of the end of the period covered by this Report. There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding disclosure.

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Index
PART II.  OTHER INFORMATION

Item 1. ~~Item 1.~~ Legal Proceedings

None.

Item 1A. ~~Item 1A.~~ 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, ~~2016.~~2018.

Item 2. ~~Item 2.~~ Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. ~~Item 3.~~ Defaults Upon Senior Securities

None.

Item 4. ~~Item 4.~~ Mine Safety Disclosures

Not applicable.

Item 5. ~~Item 5.~~ Other Information

None.

23
~~Index~~
Item 6. ~~Item 6.~~Exhibits
~~Exhibits~~

~~10.32(a)~~10.32 ~~Amendment To~~Amended and ~~Extension of the Expiration Date of the~~Restated Line of Credit ~~included in the Amended and Restated Loan Agreement~~Note between registrant, registrant’s subsidiaries and PNC Bank, N.A.
10.32(a)
~~10.33(a)~~
Amendment ~~To and Extension of the Expiration Date of~~to the Line of Credit included in ~~the~~ Amended and Restated ~~Loan Agreement~~Line of Credit Note between registrant, registrant’s subsidiaries and PNC Bank, ~~of America,~~ N.A., filed as Exhibit 10.32.
~~10.47~~ ~~Copy of Construction Loan Agreement (CFP 17-2) By and Between New Jersey Environmental Infrastructure Trust and Middlesex Water Company~~
31.1
Section 302 Certification by Dennis W. Doll pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.

31.2 Section 302 Certification by A. Bruce O’Connor pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.

32.1 Section 906 Certification by Dennis W. Doll pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.2 Section 906 Certification by A. Bruce O’Connor pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

101.INS XBRL Instance Document

101.SCH XBRL Schema Document

101.CAL XBRL Calculation Linkbase Document

101.LAB XBRL Labels Linkbase Document

101.PRE XBRL Presentation Linkbase Document

101.DEF XBRL Definition Linkbase Document

2428
Index

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

MIDDLESEX WATER COMPANY

By: /s/A. Bruce O’Connor
A. Bruce O’Connor
Senior Vice President, Treasurer and
Chief Financial Officer
(Principal Accounting Officer)

Date: November ~~2, 2017~~
1, 2019

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	MSEX	NASDAQ

(Mark One)
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	(In Thousands)
	September 30, 2017				December 31, 2016
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Bonds	$	80,203	$	82,573	$	82,786	$	84,821

	-	~~the Company’s plans to renew municipal franchises and consents in the territories it serves;~~
	-	trends; and

Item 6.	~~Item 6.~~Exhibits	~~Exhibits~~

~~10.32(a)~~10.32	~~Amendment To~~Amended and ~~Extension of the Expiration Date of the~~Restated Line of Credit ~~included in the Amended and Restated Loan Agreement~~Note between registrant, registrant’s subsidiaries and PNC Bank, N.A.
10.32(a)
~~10.33(a)~~	Amendment ~~To and Extension of the Expiration Date of~~to the Line of Credit included in ~~the~~ Amended and Restated ~~Loan Agreement~~Line of Credit Note between registrant, registrant’s subsidiaries and PNC Bank, ~~of America,~~ N.A., filed as Exhibit 10.32.

~~10.47~~	~~Copy of Construction Loan Agreement (CFP 17-2) By and Between New Jersey Environmental Infrastructure Trust and Middlesex Water Company~~

31.1	Section 302 Certification by Dennis W. Doll pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.

	MIDDLESEX WATER COMPANY

	By:	/s/A. Bruce O’Connor
		A. Bruce O’Connor
		Senior Vice President, Treasurer and
		Chief Financial Officer
		(Principal Accounting Officer)