Artesian Resources Corporation Reports 2023 Year-End Earnings and Fourth Quarter Results
Artesian Resources Corporation (ARTNA) reported a decrease in net income for the year 2023 compared to 2022. Revenues remained stable at $98.9 million. Operating expenses increased slightly, with utility expenses rising due to employee benefits and payroll costs. The company invested $62.2 million in water and wastewater infrastructure projects in 2023 to improve service quality and meet growth demands.
Positive
Stable revenues of $98.9 million for both 2022 and 2023.
Increase in water sales revenue by $1.7 million due to rate increase and water consumption.
Operating expenses increased slightly, with utility expenses rising by 5.6%.
Investment of $62.2 million in water and wastewater infrastructure projects in 2023.
Negative
Net income decreased by $1.3 million, or 7.2%, for the year 2023 compared to 2022.
Non-utility operating revenue decreased by $2.4 million, or 26.9%.
Short-term debt interest increased by $0.1 million.
An examination of Artesian Resources Corporation's financial results reveals a mixed performance. The year-end net income decline by 7.2% alongside a decrease in diluted net income per share from $1.90 to $1.67 indicates a contraction in profitability. However, this must be contextualized within industry performance and broader economic conditions. The steady revenue, maintained at $98.9 million, suggests operational stability, but the unchanged revenue juxtaposed with rising operating expenses could signal margin compression. The increase in water sales revenue and customer base growth are positive indicators, reflecting the company's ability to expand its market share and benefit from rate increases. However, the decrease in non-utility operating revenue and the rise in operating expenses highlight challenges in cost management and the potential impact of project completion on revenue streams.
Investors should note the increase in property and other taxes, which may affect future net income. The rise in depreciation and amortization expense is a natural consequence of the company's substantial capital investments in infrastructure. These investments are critical for long-term growth but can pressure short-term earnings. The increase in federal and state income tax expense, despite lower pre-tax income, warrants attention as it affects net income. Furthermore, the increase in long-term and short-term debt interest expenses reflects the company's financing strategy amidst a potentially rising interest rate environment, which could impact future interest payments and financial flexibility.
Artesian Resources Corporation's strategic focus on capital improvements, as evidenced by the $62.2 million investment in water and wastewater infrastructure, positions the company in a favorable light in terms of service quality and reliability. This proactive approach, particularly the investment in PFAS treatment ahead of anticipated EPA regulations, demonstrates foresight and may provide a competitive advantage. The ability to anticipate regulatory changes and prepare accordingly is a strong indicator of management's strategic planning capabilities.
The temporary rate increase and the pending rate case with the DEPSC are critical factors for future revenue projections. The outcome of the rate case will significantly influence the company's revenue stream and investment recovery. Stakeholders should monitor the DEPSC's decision closely as it will have implications for the company's financial health and stock performance. Additionally, the company's ability to grow its customer base in its franchise area suggests potential for market expansion, which could drive future revenue growth.
The performance of Artesian Resources Corporation must be analyzed against the backdrop of macroeconomic conditions. The company's increased expenses in payroll and benefits, as well as supply and treatment costs, reflect broader inflationary pressures that many industries are facing. The ability to pass on these costs to consumers through rate increases is a positive sign of pricing power, which is crucial in inflationary times. However, the reliance on regulatory approval for rate increases introduces an element of uncertainty into the company's revenue forecasts.
Furthermore, the company's investment in infrastructure, while necessary for long-term sustainability and compliance with anticipated regulations, must be balanced against the cost of capital. The increased interest expenses due to higher debt levels could become more burdensome if interest rates continue to rise. This scenario would have implications for the company's capital structure and cost of financing future projects. The current economic environment, characterized by uncertainty around interest rates and regulatory changes, poses both challenges and opportunities for Artesian Resources Corporation.
03/13/2024 - 04:45 PM
NEWARK, Del., March 13, 2024 (GLOBE NEWSWIRE) -- Artesian Resources Corporation (Nasdaq: ARTNA), a leading provider of water and wastewater services, and related services, on the Delmarva Peninsula, today announced earnings results for the fourth quarter and year ended December 31, 2023.
Year End Results
Net income was $16.7 million , a $1.3 million , or 7.2% , decrease compared to net income recorded during the twelve months ended December 31, 2022. Diluted net income per share decreased to $1.67 , compared to $1.90 for the same period in 2022.
Revenues totaled $98.9 million for both the year ended December 31, 2023 and December 31, 2022, respectively:
Water sales revenue increased $1.7 million , or 2.2% , primarily related to a temporary net rate increase of 7.50% of gross water sales placed into effect on November 28, 2023, as permitted under Delaware law, until permanent rates are determined by the Delaware Public Service Commission, or DEPSC, and an increase in overall water consumption. In addition, fixed fee revenue increased as a result of additional customers.
Other utility operating revenue increased approximately $0.7 million , or 6.0% . This increase is primarily due to an increase in wastewater revenue associated with customer growth and an increase in fee revenue related to inspection, service and finance charges.
Non-utility operating revenue decreased approximately $2.4 million , or 26.9% . This decrease is primarily due to a decrease in contract service revenue related to a contract for the design and construction of wastewater infrastructure now nearing completion, partially offset by an increase in Service Line Protection Plan, or SLP Plan, revenue.
Operating expenses, excluding depreciation and amortization and income taxes, increased $0.2 million , or 0.4% .
Utility operating expenses increased $2.4 million , or 5.6% , primarily the result of increases in employee benefits and payroll costs, computer system maintenance costs, and supply and treatment costs for our water and wastewater systems. These increases are partially offset by a decrease in purchased water under a new contract, effective January 2022, in which the minimum amount of water required to be purchased was reduced.
Non-utility operating expenses decreased $2.4 million , or 35.4% , primarily due to a decrease in costs associated with a wastewater infrastructure design and construction contract.
Property and other taxes increased $0.2 million , or 3.9% , primarily due to an increase in utility plant subject to taxation and an increase in payroll taxes, related to increased payroll related expenses. Property taxes are assessed on land, buildings and certain utility plant, which include the footage and size of pipe, hydrants and wells.
Depreciation and amortization expense increased $0.7 million , or 5.7% , primarily due to continued investment in utility plant providing supply, treatment, storage and distribution of water to customers and service to our wastewater customers.
Federal and state income tax expense increased $0.5 million , or 8.0% , primarily due to adjustments related to the application of state net operating loss valuation allowances and stock options exercised in 2022, partially offset by lower pre-tax income in 2023 compared to 2022.
Other income increased $0.8 million , primarily due to a $0.7 million increase in allowance for funds used during construction, or AFUDC, as a result of higher long-term construction activity subject to AFUDC. Miscellaneous income increased $0.1 million primarily related to an increase in the annual patronage refund from CoBank, ACB. The primary refund calculation for both 2023 and 2022 was based on the average loan balance outstanding.
Long-term debt interest increased $0.5 million , primarily related to an increase in long-term debt interest associated with the Series W First Mortgage Bond issued on April 29, 2022. Short-term debt interest increased $0.1 million , primarily related to higher interest rates.
“In April 2023 we filed a request for an increase in water rates in our Delaware operations. We requested a $16.7 million increase in annual revenue, which is necessary to recover increased operating costs and significant investments made to ensure water quality and resiliency, including upgrades of our treatment equipment and facilities, new elevated water storage, replacement of aging water mains, and investments in information technology. We began charging temporary rates on November 28, 2023, as permitted by the Delaware Public Service Commission, while the full request is under examination. We are now beginning to see recovery of some of these investments and increased expenses,” said Dian C. Taylor, CEO.
Fourth Quarter Results
Net income was $3.5 million for the three months ended December 31, 2023, a $1.2 million , or 49.7% , increase compared to net income recorded during the three months ended December 31, 2022. Diluted net income per share increased to $0.34 compared to $0.24 for the same period in 2022.
Revenues totaled $24.5 million , a decrease of $0.6 million , or 2.3% , compared to revenues recorded for the same period in 2022.
Water sales revenue increased $1.0 million , or 5.3% , primarily related to a temporary net rate increase of 7.50% of gross water sales placed into effect on November 28, 2023, as permitted under Delaware law, until permanent rates are determined by the DEPSC, and an increase in overall water consumption. In addition, fixed fee revenue increased as a result of additional customers.
Other utility operating revenue decreased approximately $0.1 million , or 3.5% , primarily due to decreased operating subsidies from developers and the timing of industrial wastewater revenue, partially offset by an increase in wastewater revenue associated with additional customers served.
Non-utility operating revenue decreased approximately $1.5 million , or 46.1% , primarily due to a decrease in contract service revenue related to a contract for the design and construction of wastewater infrastructure now nearing completion, partially offset by an increase in SLP Plan revenue.
Operating expenses, excluding depreciation and amortization and income taxes, decreased $2.3 million , or 13.9% .
Utility operating expenses decreased $1.1 million , or 8.3% , primarily the result of an overall decrease in payroll and employee benefits costs and water treatment costs.
Non-utility operating expenses decreased $1.3 million , or 54.8% , primarily due to a decrease in costs associated with a wastewater infrastructure design and construction contract.
Property and other taxes increased $0.1 million , or 4.6% , primarily due to an increase in utility plant subject to taxation and an increase in payroll taxes, related to increased payroll related expenses. Property taxes are assessed on land, buildings and certain utility plant, which include the footage and size of pipe, hydrants and wells.
Depreciation and amortization expense increased $0.2 million , or 5.6% , primarily due to continued investment in utility plant providing supply, treatment, storage and distribution of water customers and service to our wastewater customers.
Federal and state income tax expense increased $0.3 million , or 32.4% , primarily due to higher pre-tax income in 2023 compared to 2022.
Other income decreased $0.2 million , primarily due to a $0.1 million decrease in AFUDC, as a result of lower long-term construction activity subject to AFUDC.
Capital Expenditures
As part of Artesian’s ongoing effort to ensure high-quality reliable service to customers, $62.2 million was invested in water and wastewater infrastructure projects during 2023 compared to $48.5 million for the same period in 2022. We invested in our rehabilitation program for transmission and distribution facilities by replacing aging or deteriorating mains, installation of new mains, enhancing or improving existing treatment facilities, construction of new water storage tanks, and replacing aging wells and pumping equipment to better serve our customers. We also continue to invest in wastewater treatment and distribution facilities.
“In 2023 we invested over $62 million in capital improvements. These investments in utility plant not only ensure that we provide high quality and reliable water and wastewater services to our customers, but allow us to meet growth demands in our expanding franchise area. Additionally, we continue to make investments proactively to treat for PFAS in drinking water in anticipation of the EPA’s release of a more stringent regulation, staying ahead of the upcoming equipment supply needs of other utilities,” said Nicki Taylor, President of Artesian Water Company.
About Artesian Resources
Forward Looking Statements
Contact: ntaylor@artesianwater.com
Artesian Resources Corporation Condensed Consolidated Statement of Operations (In thousands, except per share amounts) (Unaudited) Three months ended Twelve months ended December 31, December 31, 2023 2022 2023 2022 Operating Revenues Water sales $ 19,739 $ 18,751 $ 80,033 $ 78,318 Other utility operating revenue 3,112 3,226 12,195 11,506 Non-utility operating revenue 1,694 3,140 6,633 9,073 24,545 25,117 98,861 98,897 Operating Expenses Utility operating expenses 11,717 12,778 46,205 43,772 Non-utility operating expenses 1,099 2,432 4,428 6,850 Depreciation and amortization 3,453 3,270 13,335 12,620 State and federal income taxes 1,192 900 6,348 5,878 Property and other taxes 1,570 1,499 6,099 5,871 19,031 20,879 76,415 74,991 Operating Income 5,514 4,238 22,446 23,906 Allowance for funds used during construction 309 431 2,002 1,329 Miscellaneous (148 ) (47 ) 1,407 1,265 Income Before Interest Charges 5,675 4,622 25,855 26,500 Interest Charges 2,195 2,297 9,156 8,502 Net Income $ 3,480 $ 2,325 $ 16,699 $ 17,998 Weighted Average Common Shares Outstanding - Basic 10,281 9,497 10,018 9,462 Net Income per Common Share - Basic $ 0.34 $ 0.24 $ 1.67 $ 1.90 Weighted Average Common Shares Outstanding - Diluted 10,284 9,505 10,022 9,481 Net Income per Common Share - Diluted $ 0.34 $ 0.24 $ 1.67 $ 1.90 Artesian Resources Corporation Condensed Consolidated Balance Sheets (In thousands) (Unaudited) December 31, December 31, 2023 2022 Assets Utility Plant, at original cost less accumulated depreciation $ 714,284 $ 668,031 Current Assets 30,617 27,804 Regulatory and Other Assets 21,931 23,956 $ 766,832 $ 719,791 Capitalization and Liabilities Stockholders' Equity $ 230,397 $ 187,930 Long Term Debt, Net of Current Portion 178,307 175,619 Current Liabilities 22,414 44,070 Net Advances for Construction 2,797 3,686 Contributions in Aid of Construction 247,934 224,308 Other Liabilities 84,983 84,178 $ 766,832 $ 719,791
What was Artesian Resources Corporation's net income for the year 2023?
Artesian Resources Corporation reported a net income of $16.7 million for the year 2023, which was a decrease of $1.3 million compared to the previous year.
How much did the water sales revenue increase by in 2023?
Water sales revenue increased by $1.7 million in 2023 primarily due to a temporary rate increase of 7.50% and an increase in overall water consumption.
How much did Artesian invest in water and wastewater infrastructure projects in 2023?
Artesian invested $62.2 million in water and wastewater infrastructure projects in 2023 to improve service quality and meet growth demands.
What caused the increase in utility operating expenses in 2023?
Utility operating expenses increased by 5.6% in 2023 due to rises in employee benefits, payroll costs, and water treatment expenses.
What was the total revenue for Artesian Resources Corporation in the fourth quarter of 2023?
The total revenue for Artesian Resources Corporation in the fourth quarter of 2023 was $24.5 million, a decrease of $0.6 million compared to the same period in 2022.
