Capitalization

3 Months Ended

Mar. 31, 2014

Capitalization

Capitalization

Note 3 – Capitalization

Common Stock

During the three months ended March 31, 2014 and 2013, there were 18,919 common shares (approximately $0.4 million) and 20,991 common shares (approximately $0.4 million), respectively, issued under the Company’s Amended and Restated Dividend Reinvestment and Common Stock Purchase Plan.

Long-term Debt

In January 2014, the NJBPU approved Middlesex’s request to borrow up to $4.5 million through the New Jersey Environmental Infrastructure Trust under the New Jersey State Revolving Fund (SRF) loan program. Middlesex expects to close on this borrowing in May 2014.  Proceeds will be used for the Middlesex 2014 RENEW Program, which is our ongoing initiative to clean and cement all unlined mains in the Middlesex system.

In February 2014, 257 shares ($28 thousand) of the Company’s no par $7.00 Series Cumulative and Convertible Preferred Stock was converted into 3,084 shares of common stock.

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 the Company’s long-term debt relating to First Mortgage and SRF Bonds (Bonds) 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 the Bonds in the table below are classified as Level 2 measurements. The carrying amount and fair value of the Company’s bonds were as follows:

	March 31, 2014				December 31, 2013
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
First Mortgage Bonds	$	87,148	$	81,653	$	87,471	$	79,733
SRF Bonds	$	619	$	621	$	625	$	628

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” and “State Revolving Trust Note” on the Condensed Consolidated Statements of Capital Stock and Long-Term Debt). The carrying amount of these instruments was $44.6 million at March 31, 2014 and $45.0 million at December 31, 2013. Customer advances for construction have carrying amounts of $21.9 million and $21.8 million, respectively, at March 31, 2014 and December 31, 2013. 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.