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Restricted Cash — Bond Project Funds

This restricted cash balance consists of funds remaining from the issuance of the Series 2014,
2015, 2019 and 2020 tax-exempt bonds (the “Bonds”) in December of 2014, October of 2015,
April of 2019, and April and August of 2020, respectively. The proceeds from those bond
issuance transactions are maintained in separate restricted cash accounts, with Trustee
oversight, and are subject to withdrawal as a reimbursement of eligible capital project
expenditures for the years 2014 through 2019, as defined by the indenture and issuance
documents associated with each offering. The restricted cash accounts are also used as a
“conduit” for the transfer of money from operating cash to restricted cash, allowing the
Trustee to make the required payments to bondholders for principal and interest due semi-
annually.

As of December 31, 2019, the funds in these restricted cash accounts totaled approximately
$3.4 million. During 2020, approximately $3.4 million was withdrawn from the restricted cash
accounts to make the principal and interest payments for the Bonds, on January 1, July 1 and
October 1. In December 2020, approximately $215,000 was transferred into these restricted
cash accounts from the Company’s operating cash accounts, to provide the funds needed to
make the net principal and interest payments due on January 1, 2021 for the Bonds. As of
December 31, 2020, the funds in these restricted cash accounts totaled approximately
$237,000.

Concentration of Credit Risks

Financial instruments that subject the Company to credit risk consist primarily of cash
(including cash equivalents and restricted cash) and accounts receivable. Cash balances are
invested in financial institutions insured by the Federal Deposit Insurance Corporation
(“FDIC”). At December 31, 2020 and 2019, the Company had approximately $9,300,000 and
$9,600,000 in excess of FDIC insured limits, respectively. Our accounts receivable balances
primarily represent amounts due from the residential, commercial and industrial customers
of our regulated water utility operations, as well as receivables from our Service Corporation
customers.

Accounts Receivable — Billed, Net
Water utility accounts receivable (regulated) are recorded at invoiced amounts.

Non-regulated accounts receivable are recorded based on contracted prices when the
Company obtains an unconditional right to payment under the terms of the contract.

The allowance for doubtful accounts is our best estimate of the amount of probable credit
losses in our existing accounts receivable and is determined based on historical write-off
experience and the aging of account balances. We review the allowance for doubtful
accounts quarterly. Account balances are written off against the allowance when it is
probable the receivable will not be recovered.

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Accounts Receivable ~ Unbilled, Net

We read our customer meters on a monthly basis and record revenues based on meter
reading results. Information from the last meter reading date is used to estimate the value of
unbilled revenues through the end of the accounting period. Estimates of water utility
revenues for water delivered to customers but not yet billed are accrued at the end of each
accounting period. Actual results could differ from those estimates.

Inventory
Inventory is stated at the lower of cost or net realizable value, cost being determined using
the average cost method which approximates the first-in, first-out (FIFO) method.

Deferred Land Costs

Deferred land costs have been recorded in all reporting periods leading up to and including
2019 by Southwood, the Company’s real estate subsidiary. Southwood was passively engaged
in the management and maintenance of land holdings outside of any of the land holdings
held in ownership by the Company's utility subsidiaries. Included in deferred land costs is the
Company’s original basis in its undeveloped landholdings and any land improvement costs,
which are stated at the lower of cost or market. All costs associated with real estate and land
projects are capitalized and allocated to the project to which the costs relate. Administrative
labor and the related fringe benefit costs attributable to the acquisition, active development,
and construction of land parcels are capitalized as deferred land costs. No labor and benefits
were capitalized for the years ended December 31, 2020 and 2019.

As of the end of 2019, all of the land holdings previously owned by Southwood were
transferred to the Company, which now has assumed the passive management and
maintenance of those land holdings. On a going forward basis, Southwood will be
maintained as a “corporate shell” allowing for its usage in possible future land management
opportunities, should they occur.

Deferred Charges and Other Assets

Deferred charges include certain regulatory assets and other assets. Regulatory assets are
amortized over the periods they are recovered through NHPUC-authorized water rates. The
Company’s utility subsidiaries have recorded certain regulatory assets in cases where the
NHPUC has permitted, or is expected to permit, recovery of these costs over future periods.
Currently, the regulatory assets are being amortized over periods ranging from 2 to 25 years.

Unamortized Debt Issuance Costs

Unamortized debt issuance costs are amortized over the original term of the related bonds
and notes. The Company’s utility subsidiaries have recorded unamortized debt issuance costs
in cases where the NHPUC has permitted or is expected to permit recovery of these costs
over future periods. The debt issuance costs are being amortized over the original lives of the
associated debt.

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Contributions in Aid of Construction

Under construction contracts with real estate developers and others, the Company’s utility
subsidiaries may receive non-refundable advances for the cost of installing new water mains.
These advances are recorded as CIAC. The Company’s utility subsidiaries also record to plant
and CIAC the fair market value of developer installed mains and any excess of fair market
value over the cost of community water systems purchased from developers. CIAC are
amortized over the life of the related properties.

Paycheck Protection Program Loan

The Company accounts for its Paycheck Protection Program (PPP) loan in accordance with
the guidelines established by the Financial Accounting Standards Board (FASB) ASC 470, Debt.
The guidance requires the company to account for the proceeds from the PPP loan as debt
and apply interest considering the ten-month interest payment deferral allowed for the loan.
The loan and accrued interest may be forgivable after eight or twenty-four weeks if the loan
proceeds are used for eligible purposes. The Company has elected to report the PPP loan as
long-term debt. No income will be recognized from the extinguishment of the PPP debt
(whether as a result of forgiveness or otherwise) until the Company has been legally released
as the primary obligor of the loan.

Revenue Recognition ~ Regulated Entities

Standard charges for water utility services to customers are recorded as revenue, based upon
meter readings and contract service, as services are provided. The majority of the Company’s
water revenues are based on rates approved by the NHPUC. Estimates of unbilled service
revenues are recorded in the period the services are provided. Provision is made in the
consolidated financial statements for estimated uncollectible accounts.

Revenue Recognition — Non-Regulated Entities

The Company derives its non-regulated revenues primarily from water management services
which include contract operations and maintenance, and water testing and billing services to
municipalities and small, privately owned community water systems. Revenue is measured
based on consideration specified in contracts with customers. The Company recognizes
revenue when it satisfies performance obligations under the terms of the contract which
generally occurs with the transfer of control of the services to the customer. Revenues from
unplanned additional work are based upon time and materials incurred in connection with
activities not specifically identified in the contract, or for which work levels exceed contracted
amounts.

Revenues from real estate operations, other than undistributed earnings or losses from
equity method joint ventures, are recorded upon completion of a sale of real property. The
Company’s real estate holdings outside of the Company’s utility subsidiaries are comprised
primarily of undeveloped land.

The Company does not have any significant financing components as payment is received at
or shortly after the point of sale.

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Contract Combination

To determine the proper revenue recognition method for contracts, the Company evaluates
whether two or more contracts should be combined and accounted for as one single contract
and whether the combined or single contract should be accounted for as more than one
performance obligation. This evaluation requires significant judgment and the decision to
combine a group of contracts or separate a combined or single contract into multiple
performance obligations could change the amount of revenue and profit recorded in a given
period. Contracts are considered to have a single performance obligation if the promise to
transfer the individual goods or services is not separately identifiable from other promises in
the contracts, which is mainly because the Company provides a significant service of
integrating a complex set of tasks and components into a single project or capability.

For contracts with multiple performance obligations, the Company allocates the transaction
price to each performance obligation using management’s best estimate of the standalone
selling price of each distinct good or service in the contract. In cases where the Company does
not provide the distinct good or service on a standalone basis, the primary method used to
estimate standalone selling price is the expected cost plus a margin approach, under which
management forecasts the Company’s expected costs of satisfying a performance obligation
and then adds an appropriate margin for that distinct good or service.

Performance Obligations
For performance obligations related to operations, planned maintenance, and water testing

and billing services, control transfers to the customer over time as the services are provided.
These services are sold primarily to municipalities or small, privately owned community water
systems. The majority of the Company’s unplanned maintenance contracts are billed on a
time and materials basis and revenue is recognized over time as the services are performed.
The majority of the Company’s operations, planned maintenance, and water testing and
billing contracts are billed on a fixed price basis. For fixed price contracts, the Company
measures its progress towards complete satisfaction of the performance obligation using a
time-based measure. This method is used because management considers time elapsed to
be the best available measure of progress on contracts.

Contract Estimates and Modifications

Due to the nature of the work required to be performed on many of the Company’s
performance obligations, the estimation of total revenue and cost at completion is complex,
subject to many variables and requires significant judgment.

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As a significant change in one or more of these estimates could affect the profitability of the
Company’s contracts, management reviews and updates the Company's contract-related
estimates regularly through a Company-wide project review process in which management
reviews the progress and execution of the Company's performance obligations and the
estimate at completion. As part of this process, management reviews information including,
but not limited to, any outstanding key contract matters, progress towards completion and
the related program schedule, and the related changes in estimates of revenues and costs.
Management must make assumptions and estimates regarding labor productivity and
availability, the complexity of the work to be performed, the cost and availability of materials,
among other variables.

The Company recognizes adjustments in estimated profit on contracts under the cumulative
catch-up method. Under this method, the impact of the adjustment on profit recorded to
date is recognized in the period the adjustment is identified. Revenue and profit in future
periods of contract performance is recognized using the adjusted estimate. If at any time the
estimate of contract profitability indicates an anticipated loss on the contract, the Company
recognizes the total loss in the period it is identified.

Variable Consideration

Variable consideration is estimated at the most likely amount to which the Company is
expected to be entitled. Any variable consideration is included in the transaction price to the
extent it is probable that a significant reversal of cumulative revenue recognized will not
occur when the uncertainty associated with the variable consideration is resolved. Estimates
of variable consideration and the determination of whether to include estimated amounts in
the transaction price are based largely on assessments of legal enforceability, the Company’s
performance, and all information (historical, current, and forecasted) that is reasonably
available to management.

Variable consideration is allocated entirely to a performance obligation or to a distinct good
or service within a performance obligation if it relates specifically to efforts to satisfy the
performance obligation or transfer the distinct good or service, and the allocation depicts the
amount of consideration the Company expects to be entitled.

Significant Judgments
The Company recognizes contract revenue for financial reporting purposes over time.

Progress toward completion of the Company's contracts is measured using a time-based
criterion for each contract and requires significant judgment. This method is used because
management considers time-elapsed to be the best available measure of progress on
contracts.

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Contract Assets and Liabilities

Billing practices are governed by the contract terms of each project based upon achievement
of milestones or pre-agreed schedules. Billings do not necessarily correlate with revenue
recognized using a time-elapsed method of revenue recognition. Contract assets include
unbilled amounts typically resulting from revenue under long-term contracts when the time-
elapsed method of revenue recognition is utilized and revenue recognized exceeds the
amount billed to the customer, and right to payment is not unconditional. Contract liabilities
consist of deferred revenue.

Contract assets and liabilities are reported in a net position on a contract-by-contract basis at
the end of each reporting period. The Company classifies deferred revenue as current or
noncurrent based on the timing of when revenue is expected to be recognized. The current
portion of deferred revenue is included in current liabilities in the Balance Sheets.

Practical Expedients
The Company generally expenses pre-contract costs when incurred because the amortization

period would have been one year or less.

Income Taxes

Income taxes are recorded using the accrual method and the provision for federal and state
income taxes is based on income reported in the consolidated financial statements, adjusted
for items not recognized for income tax purposes. Provisions for deferred income taxes
are recognized for accelerated depreciation and other temporary differences. A valuation
allowance is provided to offset any net deferred tax assets if, based upon available evidence,
it is more likely than not that some or all of the deferred tax assets will not be realized.
Investment tax credits previously realized for income tax purposes are amortized for financial
statement purposes over the life of the property, giving rise to the credit.

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Adoption of New Accounting Standards

Effective January 1, 2020, the Company adopted Accounting Standards Update (ASU) 2018-
13, Fair Value Measurement (Topic 820), Disclosure Framework — Changes to the Disclosure
Requirements for Fair Value Measurement, which removes certain disclosure requirements
from FASB ASC 820 and modifies certain other disclosures. The Company has applied this
guidance retrospectively for certain disclosures and prospectively for other disclosures as
required by the standard. There was no prior year effect to the financial statements as a result
of this change.

New Accounting Standards to be Adopted in the Future

Leases

In February 2016, the FASB issued ASU 2016-02, Leases. The ASU requires all leases with lease
terms more than 12 months to be capitalized as a right of use asset and lease liability on the
balance sheet at the date of lease commencement. Leases will be classified as either finance
leases or operating leases. This distinction will be relevant for the pattern of expense
recognition in the income statement. This ASU will be effective for the Company for the year
ending December 31, 2022. The Company is currently in the process of evaluating the impact
of adoption of this ASU on the financial statements.

Credit Losses

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial
Instruments. The ASU requires a financial asset (including trade receivables) measured at
amortized cost basis to be presented at the net amount expected to be collected. Thus, the
income statement will reflect the measurement of credit losses for newly recognized financial
assets as well as the expected increases or decreases of expected credit losses that have
taken place during the period. This ASU will be effective for the Company for the year ending
December 31, 2023. The Company is currently in the process of evaluating the impact of
adoption of this ASU on the financial statements.

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2. Property, Plant and Equipment

The components of property, plant and equipment as of December 31, 2020 and 2019 were

as follows:
Useful Lives
(in thousands) 2020 2019 (in years)
Utility Property:
Land and land rights S 5,972 S 5,993 -
Source of supply 73,721 72,360 3-70
Pumping and purification 31,846 29,929 7 - 64
Transmission and distribution, including
services, meters and hydrants 194,244 188,069 15-91
General and other equipment 17,023 16,352 7-75
Intangible plant 790 790 20
Construction work in progress 792 1,225
Total utility property 324,388 314,718
Total non-utility property 5 S 5-10
Total property, plant and equipment 324,393 314,723
Less accumulated depreciation (81,924) (77,541)
Property, Plant and Equipment, net $ 242,469 S$ 237,182

The provision for depreciation is computed on the straight-line method over the estimated
useful lives of the assets, which range from 3 to 91 years. The weighted average composite
depreciation rate was 2.58% and 2.53% in 2020 and 2019, respectively.

3. Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash
reported within the consolidated balance sheets that sum to the total of the same such
amounts shown in the statements of cash flows.

(in thousands) 2020 2019
Cash and cash equivalents S 310 S$ 4,885
Restricted cash - RSF 8,611 1,963
Restricted cash - CIAC 274 -
Restricted cash - Bond Project Funds 237 3,426

Total cash, cash equivalents and restricted cash
shown in the consolidated statements of cash flows$ 9,432 $ 10,274

Amounts included in restricted cash represent those required to be set aside as outlined in
Note 1.

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4.

Accounts Receivable

Accounts receivable consisted of the following at December 31, 2020 and 2019:

(in thousands) 2020 2019
Accounts receivable - billed S 4365 S 3,091
Less allowance for doubtful accounts (68) (50)
Accounts receivable - billed, net S 4,297 S 3,041
Accounts receivable - unbitled S 4,473 S 2,575

Less allowance for doubtful accounts - -
Accounts receivable - unbilled, net S 4,473 S 2,575
Deferred Charges and Other Assets

Deferred charges and other assets as of December 31, 2020 and 2019 consisted of the
following:

Recovery
Period
(in thousands) 2020 2019 (in years)
Regulatory assets:
Source development charges S 1,004 S 801 5-25
Miscellaneous studies 998 790 2-25
Unrecovered pension and post-retirement
benefits expense 14,197 11,347 (1)
Total regulatory assets 16,199 12,938
Supplemental executive retirement plan asset 815 789
Total deferred charges and other assets S 17,014 S 13,727

We expect to recover these amounts consistent with the anticipated expense recognition of these assets.

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Post-Retirement Benefit Plans

Pension Plan and Other Post-Retirement Benefits

The Company has a non-contributory, defined benefit pension plan (the “DB Plan”) that
covers substantially all employees. The benefits are based on years of service and participant
compensation levels. The Company’s funding policy is to contribute annual amounts that
meet the requirements for funding under the U.S. Department of Labor’s Pension Protection
Act. Contributions are intended to provide not only for benefits attributed to service to date,
but also for those expected to be earned in the future.

Post-retirement medical benefits are provided for eligible retired employees through one of
two plans (collectively referred to as our “OPEB Plans”). For employees who retire on or after
the normal retirement age of 65, benefits are provided through a post-retirement plan (the
“Post-65 Plan”). For eligible non-union employees who retire prior to their normal retirement
age and who have met certain age and service requirements, benefits are provided through
a post-employment medical plan (the “Post-employment Plan”). Future benefits under the
Post-65 Plan increase annually based on the actual percentage of wage and salary increases
earned from the plan inception date to the normal retirement date. The benefits under the
Post-employment Plan allow for the continuity of medical benefits coverage at group rates
from the employee’s retirement date until the employee becomes eligible for Medicare,
which are fully funded by the retiree. The liability related to the Post-65 Plan will be funded
from the general assets of our Company.

Upon retirement, if a qualifying employee elects to receive medical benefits under our
Post-65 Plan, we pay up to a maximum monthly benefit of $373 based on years of service.

The following table sets forth information regarding our DB Plan and our OPEB Plans as of
December 31, 2020 and for the year then ended:

(in thousands) DB Plan OPEB Plans
Projected benefit obligations S 39,050 S 5,549
Employer contribution 1,491 11
Benefits paid, excluding expenses (1,964) (72)
Fair value of plan assets 23,626 639
Accumulated benefit obligation 35,020 -
Funded status (15,424) (4,910)
Net periodic benefit cost 1,688 345

Amount of the funded status recognized in the
Consolidated Balance Sheet consisted of:
Current liability - -

Non-current liability (15,424) (4,910)
Total § (15,424) $ (4,910)

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