Artesian Resources Corporation Reports Second Quarter and Year-To-Date 2023 Results
08/07/2023 - 04:56 PM
NEWARK, Del., Aug. 07, 2023 (GLOBE NEWSWIRE) -- Artesian Resources Corporation (Nasdaq: ARTNA), a leading provider of water and wastewater services, and related services, on the Delmarva Peninsula, today announced second quarter and year-to-date results for 2023.
Diluted net income per share decreased to $0.44 in the second quarter and to $0.84 year-to-date, compared to $0.53 and $1.01 in the comparative periods a year ago. Increased revenue by $0.2 million in the second quarter and $0.5 million year-to-date. Filed a request with the Delaware Public Service Commission on April 28 th to implement increased water rates to support the on-going capital improvement program and increased costs of operations. Invested $32.3 million year-to-date in water and wastewater infrastructure. Raised $36.2 million in capital upon the sale of approximately 763,339 shares of the Company’s Class A Non-Voting Common Stock. Common Stock Offering
During the second quarter of 2023, the Company completed a combined sale and partial exercise of the over-allotment option of a total of 763,339 shares of its Class A Non-Voting Common Stock, par value $1.00 per share, at a price to the public of $50.00 per share. The net proceeds to the Company from the offering, after deducting the underwriting discounts and commissions and other offering expenses, were approximately $36.2 million . The proceeds from both the initial offering and the over-allotment option were used to repay short-term borrowings, including borrowings incurred under Artesian’s lines of credit, incurred primarily to finance expenses associated with our construction program, including investment in utility plant and equipment, and to fund capital expenditures and other general corporate purposes.
“Maintaining a reliable water system that ensures high-quality water and service to our customers requires significant and continuous investment in our infrastructure,” said Dian C. Taylor, CEO. “It is our ability to attract investors and raise funds in the capital markets that enables us to cost-effectively provide assured supply of high-quality water to those we serve.”
Application to Increase Customer Rates
Artesian’s last comprehensive application for an increase in base rate charges was filed in April 2014. On April 28, 2023, Artesian filed a request with the Delaware Public Service Commission, or DEPSC, to implement new rates to meet a requested increase in revenue of 23.84% , or approximately $17.5 million , on an annualized basis. The actual effective increase is less than 23.84% since Artesian has been permitted to recover specific investments made in infrastructure through the assessment of a 7.50% Distribution System Improvement Charge (DSIC). Since the DSIC rate is set to zero when temporary rates are placed into effect, customers would experience an incremental increase of 16.34% , the net of the overall 23.84% increase less the DSIC rate of 7.50% currently in effect, if the requested increase is granted in full by the DEPSC. The new rates are designed to support Artesian’s ongoing capital improvement program and to cover increased costs of operations, including chemicals and electricity for water treatment, water quality testing, fuel, taxes, interest, labor and benefits. Since Artesian Water has DSIC surcharges in excess of the allowable temporary increase, imposing the temporary increase would require DSIC to be reset to zero. Accordingly, Artesian Water has elected not to request the initial temporary rate increase at this time. However, should the application not be resolved within the seven-month statutory timeframe, Artesian Water would be permitted, and plans, to place into effect on November 28, 2023 temporary rates of up to 15% of gross water sales on an annual basis. This would be subject to refund, until permanent rates are determined by the DEPSC.
“Artesian continues to make strategic capital investments to proactively replace aging infrastructure and install enhanced water treatment systems addressing emerging contaminants such as PFAS while also enhancing water supply for continued growth,” said Nicki R. Taylor, President of Artesian Water Company. “We have been working closely with the Delaware Public Service Commission on our rate application. If the application is not resolved within the statutory time frame, a temporary rate increase is planned to go in effect late in the fourth quarter. This will provide financial recovery of both significant investments in capital and increases in operating expenses that have allowed Artesian to continue providing reliable water service to our customers.”
Second Quarter Results
Net income was $4.4 million for the three months ended June 30, 2023, a $0.6 million , or 12.0% , decrease compared to net income recorded during the three months ended June 30, 2022. Diluted net income per share decreased to $0.44 compared to $0.53 for the same period in 2022.
Revenues totaled $25.3 million for the three months ended June 30, 2023, $0.2 million , or 1.0% , more than revenues for the three months ended June 30, 2022. Comprising this increase:
Water sales revenue increased $0.9 million , or 4.6% , primarily related to an increase in overall water consumption due to the brief warm, dry weather conditions experienced during the quarter and an increase in fixed-fee charges related to additional customers served.
Other utility operating revenue increased approximately $0.1 million , or 4.0% , primarily due to an increase in wastewater revenue associated with additional customers served.
Non-utility operating revenue decreased approximately $0.8 million , or 33.3% , primarily due to a decrease in contract service revenue related to a contract for the design and construction of wastewater infrastructure, slightly offset by an increase in Service Line Protection Plan, or SLP Plan, revenue.
Operating expenses, excluding depreciation and income taxes, increased $0.8 million , or 6.3% . Utility operating expense increases primarily are the result of increased payroll and employee benefits costs; repair, maintenance and chemical treatment costs associated with our water and wastewater systems; as well as administrative costs. 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 $0.8 million primarily due to a decrease in costs associated with the wastewater infrastructure design and construction contract.
Depreciation and amortization expense increased $0.2 million , or 5.2% , 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 decreased $0.1 million , or 7.7% , primarily due to lower pre-tax income, partially offset by a decrease in 2022 income tax expense related to stock options exercised in the second quarter of 2022.
Property and other taxes increased $0.1 million , or 5.2% , primarily due to an increase in utility plant subject to taxation. Property taxes are assessed on land, buildings and certain utility plant, which include the footage and size of pipe, hydrants and wells. In addition, payroll taxes increased, related to increased payroll related expenses.
Other income increased $0.3 million , primarily due to an increase in allowance for funds used during construction, or AFUDC, as a result of higher long-term construction activity subject to AFUDC.
Long-term debt interest increased $0.1 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.
Year-to-Date Results
Net income was $8.1 million , a $1.4 million , or 14.5% , decrease compared to net income recorded during the six months ended June 30, 2022. Diluted net income per share decreased to $0.84 , compared to $1.01 for the same period in 2022.
Revenues totaled $47.7 million for the six months ended June 30, 2023, $0.5 million , or 1.2% , more than revenues for the six months ended June 30, 2022. Comprising this increase:
Water sales revenue increased $0.8 million , or 2.1% , primarily related to an increase in overall water consumption due to the brief warm, dry weather conditions experienced during the second quarter of 2023 and an increase in fixed-fee charges related to additional customers served.
Other utility operating revenue increased approximately $0.4 million , or 7.5% , primarily due to an increase in wastewater revenue associated with additional customers served.
Non-utility operating revenue decreased approximately $0.6 million , or 16.6% , primarily due to a decrease in contract service revenue related to a contract for the design and construction of wastewater infrastructure, partially offset by an increase in SLP Plan revenue.
Operating expenses, excluding depreciation and income taxes, increased $1.8 million , or 6.9% . Utility operating expenses increased $2.3 million , or 11.3% , primarily the result of increased payroll and employee benefits costs; repair, maintenance and chemical treatment costs associated with our water and wastewater system; as well as administrative costs. 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 $0.6 million primarily due to a decrease in costs associated with the wastewater infrastructure design and construction contract.
Depreciation and amortization expense increased $0.3 million , or 4.9% , 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 decreased $0.2 million , or 7.6% , primarily due to lower pre-tax income in 2023 compared to 2022, partially offset by a decrease in 2022 income tax expense related to stock options exercised in the first six months of 2022.
Other income increased $0.7 million , primarily due to a $0.5 million increase in AFUDC, as a result of higher long-term construction activity subject to AFUDC. Miscellaneous income increased $0.2 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 $0.4 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 $0.3 million , primarily related to higher interest rates.
Capital Expenditures
As part of Artesian’s ongoing effort to ensure high-quality reliable service to customers, $32.3 million was invested in water and wastewater infrastructure projects the first six months of 2023 compared to $29.6 million for the same period in 2022. These investments include the rehabilitation program for transmission and distribution facilities by replacing aging or deteriorating mains, installation of new main, enhancing or improving existing treatment facilities, construction of new water storage tanks, and replacing aging wells and pumping equipment to better serve our customers.
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 Six months ended June 30, June 30, 2023 2022 2023 2022 Operating Revenues Water sales $ 20,636 $ 19,722 $ 38,652 $ 37,865 Other utility operating revenue 3,032 2,914 5,848 5,440 Non-utility operating revenue 1,583 2,375 3,246 3,893 25,251 25,011 47,746 47,198 Operating Expenses Utility operating expenses 11,626 10,070 22,899 20,566 Non-utility operating expenses 1,122 1,905 2,206 2,847 Depreciation and amortization 3,215 3,055 6,439 6,140 State and federal income taxes 1,593 1,725 2,906 3,144 Property and other taxes 1,487 1,413 3,027 2,914 19,043 18,168 37,477 35,611 Operating Income 6,208 6,843 10,269 11,587 Allowance for funds used during construction 588 324 1,046 505 Miscellaneous (12 ) (33 ) 1,591 1,412 Income Before Interest Charges 6,784 7,134 12,906 13,504 Interest Charges 2,341 2,088 4,758 3,975 Net Income $ 4,443 $ 5,046 $ 8,148 $ 9,529 Weighted Average Common Shares Outstanding - Basic 9,998 9,452 9,752 9,438 Net Income per Common Share - Basic $ 0.44 $ 0.53 $ 0.84 $ 1.01 Weighted Average Common Shares Outstanding - Diluted 10,002 9,470 9,757 9,464 Net Income per Common Share - Diluted $ 0.44 $ 0.53 $ 0.84 $ 1.01 Artesian Resources Corporation Condensed Consolidated Balance Sheet (In thousands) (Unaudited) June 30, December 31, 2023 2022 Assets Utility Plant, at original cost less accumulated depreciation $ 695,526 $ 668,031 Current Assets 30,115 27,804 Regulatory and Other Assets 24,482 23,956 $ 750,123 $ 719,791 Capitalization and Liabilities Stockholders' Equity $ 227,273 $ 187,931 Long Term Debt, Net of Current Portion 175,597 175,619 Current Liabilities 24,751 44,069 Advances for Construction 3,489 3,686 Contributions in Aid of Construction 234,344 224,308 Other Liabilities 84,669 84,178 $ 750,123 $ 719,791
