Artesian Resources (NASDAQ: ARTNA) lifts Q1 2026 revenue and income
Filing Impact
Filing Sentiment
Form Type
10-Q
Rhea-AI Filing Summary
Artesian Resources Corporation reported higher first‑quarter results for the period ended March 31, 2026. Total operating revenues rose to $27.8 million from $25.9 million a year earlier, driven mainly by higher water sales, fixed fees and industrial wastewater services.
Net income applicable to common stock increased to $5.9 million, compared with $5.4 million in the prior‑year quarter. Basic earnings per share were $0.58 versus $0.53, while cash from operating activities was $8.6 million. The company continued to invest heavily in utility plant, bringing total assets to $866.9 million and long‑term debt (including current portion) to $185.9 million.
Positive
- None.
Negative
- None.
Key Figures
Total Operating Revenues: $27.8 million
Net Income: $5.9 million
Basic EPS: $0.58 per share
+5 more
8 metrics
Total Operating Revenues
$27.8 million
For the three months ended March 31, 2026 (vs. $25.9M 2025)
Net Income
$5.9 million
Net income applicable to common stock, Q1 2026 (vs. $5.4M 2025)
Basic EPS
$0.58 per share
Three months ended March 31, 2026 (vs. $0.53 2025)
Net Cash From Operating Activities
$8.6 million
Cash flows from operating activities, Q1 2026 (vs. $11.0M 2025)
Capital Expenditures
$13.1 million
Capital expenditures net of AFUDC equity portion, Q1 2026
Total Assets
$866.9 million
Total assets as of March 31, 2026 (vs. $851.2M Dec. 31, 2025)
Long-Term Debt
$185.9 million
Carrying amount of long-term debt including current portion at March 31, 2026
Dividends Per Share
$0.3136 per share
Cash dividends per share of common stock in Q1 2026
Key Terms
Distribution System Improvement Charges, Allowance for funds used during construction, Contributions in Aid of Construction, Excess accumulated deferred income taxes, +2 more
6 terms
Distribution System Improvement Charges financial
"Artesian generates revenue from DSIC, which are surcharges applied to water customer tariff rates in Delaware related to specific types of water distribution system improvements."
Allowance for funds used during construction financial
"Allowance for funds used during construction (AFUDC) is a non-cash credit to income with a corresponding charge to utility plant that represents the cost of borrowed funds or a return on equity funds devoted to plant under construction."
Allowance for funds used during construction (AFUDC) is the accounting practice of adding the cost of borrowing money and using company funds while building long-term assets to the value of that asset instead of treating it as an immediate expense. For investors, AFUDC matters because it boosts reported profits and increases the company’s asset base today while deferring financing costs to future periods, similar to adding construction loan interest to the price of a house under renovation.
Contributions in Aid of Construction financial
"Artesian Water offsets depreciation recorded on utility plant by depreciation on utility property funded by Contributions in Aid of Construction, or CIAC, and Advances for Construction, or Advances."
Contributions in aid of construction are one-time payments from customers, developers, or governments that cover part of the cost to build infrastructure—such as power lines, pipelines, or roads—that a utility or infrastructure company would otherwise pay for. Think of it like neighbors chipping in to pave a shared driveway: it reduces the company’s upfront spending, can lower future rates or fees for other customers, and changes reported assets and cash flow, so investors watch it for its impact on capital needs and future earnings.
Excess accumulated deferred income taxes financial
"This remeasurement adjustment made to deferred income taxes was substantially offset by the recognition of a regulatory liability for excess accumulated deferred income taxes, or EADIT, and reflects the benefits customers will receive in future approved rates."
per- and polyfluoroalkyl substances technical
"Several of the water systems of Artesian Resources’ subsidiaries are claimants in four MDL class action settlements designed to resolve claims for per- and polyfluoroalkyl substances, or PFAS, contamination in Public Water Systems’ Drinking Water."
Per- and polyfluoroalkyl substances (PFAS) are a large group of man-made chemicals known for resisting water, grease and heat, used historically in products like nonstick cookware, firefighting foams and stain-resistant fabrics. They matter to investors because PFAS can persist in the environment and people, prompting strict regulations, cleanup costs, product liability and shifting consumer demand — like a hidden leak that can suddenly require expensive repairs and change a company’s future cash flow and reputation.
multi-district litigation regulatory
"The settlement receivable as of March 31, 2026 includes the short-term portion of multi-district litigation, MDL, reimbursements as further discussed in Note 15 - Legal Proceedings."
Earnings Snapshot
Operating Revenue: $27.8 million
Q1 2026
Operating Revenue
$27.8 million
Net Income
$5.9 million
Basic EPS
$0.58
Net Cash From Operating Activities
$8.6 million
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
For the quarterly period ended March 31, 2026
OR
For the transition period from _____ to _____
Commission File Number 000-18516
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(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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(Address of principal executive offices)
(302 ) 453 – 6900
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(Registrant's telephone number, including area code)
| | | |
| Securities registered pursuant to Section 12(b) of the Act: | ||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| | | The |
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.
| ☑ | | ☐ | No | |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
| ☑ | | ☐ | No | |
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," "smaller reporting company," and “emerging growth company” in Rule 12(b)-2 of the Exchange Act.
| Large Accelerated Filer ☐ | Accelerated Filer ☐ | | Smaller Reporting Company ☐ | Emerging Growth Company |
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 Exchange Act).
| | Yes | ☑ | No | |
As of May 6, 2026, 9,442,986 shares of Class A Non-Voting Common Stock and 881,452 shares of Class B Common Stock were outstanding.
Table of Contents
TABLE OF CONTENTS
ARTESIAN RESOURCES CORPORATION
FORM 10-Q
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Part I
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Financial Information:
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Item 1
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Financial Statements
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Page(s) | |
| Condensed Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025 (unaudited) | 3 | |||
| Condensed Consolidated Statements of Operations for the three months ended March 31, 2026 and 2025 (unaudited) | 4 | |||
| Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2026 and 2025 (unaudited) | 5 – 6 | |||
| Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three month periods ended March 31, 2026 and 2025 (unaudited) | 7 | |||
| Notes to Unaudited Condensed Consolidated Financial Statements | 8– 24 | |||
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Item 2
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- | Management's Discussion and Analysis of Financial Condition and Results of Operations | 25– 31 | |
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Item 3
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- | Quantitative and Qualitative Disclosures about Market Risk | 32 | |
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Item 4
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Controls and Procedures
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32 | |
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Part II
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Other Information
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33 | |
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Item 1
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Legal Proceedings
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33 | |
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Item 1A
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Risk Factors
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33 | |
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Item 2
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Unregistered Sales of Equity Securities and Use of Proceeds
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33 | |
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Item 3
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Defaults Upon Senior Securities
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33 | |
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Item 4
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Mine Safety Disclosures
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33 | |
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Item 5
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Other Information
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33 | |
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Item 6
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Exhibits
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34 | |
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Signatures
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2
Table of Contents
PART I – FINANCIAL INFORMATION
ITEM 1 – FINANCIAL STATEMENTS
ARTESIAN RESOURCES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
| ASSETS | March 31, 2026 | December 31, 2025 | ||||
| Utility plant, at original cost (less accumulated depreciation - 2026- $ | $ | $ | ||||
| Current assets | ||||||
| Cash and cash equivalents | ||||||
| Accounts and other receivables (less provision for expected credit loss 2026 - $ | ||||||
| Income tax receivable | ||||||
| Unbilled operating revenues | ||||||
| Materials and supplies | ||||||
| Prepaid property taxes | ||||||
| Prepaid expenses and other | ||||||
| Total current assets | ||||||
| Other assets | ||||||
| Non‑utility property (less accumulated depreciation - 2026 - $ | ||||||
| Other deferred assets | ||||||
| Goodwill | ||||||
| Operating lease right-of-use assets | ||||||
| Total other assets | ||||||
| Regulatory assets, net | ||||||
| Total Assets | $ | $ | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
| Stockholders' equity | ||||||
| Common stock | $ | $ | ||||
| Preferred stock | ||||||
| Additional paid-in capital | ||||||
| Retained earnings | ||||||
| Total stockholders' equity | ||||||
| Long-term debt, net of current portion | ||||||
| Current liabilities | ||||||
| Lines of credit | - | |||||
| Current portion of long-term debt | ||||||
| Accounts payable | ||||||
| Accrued expenses | ||||||
| Overdraft payable | ||||||
| Accrued interest | ||||||
| Income taxes payable | ||||||
| Customer and other deposits | ||||||
| Other | ||||||
| Total current liabilities | ||||||
| Commitments and contingencies | ||||||
| Deferred credits and other liabilities | ||||||
| Net advances for construction | ||||||
| Operating lease liabilities | ||||||
| Regulatory liabilities | ||||||
| Deferred investment tax credits | ||||||
| Deferred income taxes | ||||||
| Total deferred credits and other liabilities | ||||||
| Net contributions in aid of construction | ||||||
| Total Liabilities and Stockholders' Equity | $ | $ |
See notes to the condensed consolidated financial statements.
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Table of Contents
ARTESIAN RESOURCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
| For the Three Months Ended | ||||||
| March 31, | ||||||
| 2026 | 2025 | |||||
| Operating revenues | ||||||
| Water sales | $ | $ | ||||
| Other utility operating revenue | ||||||
| Non-utility operating revenue | ||||||
| Total Operating Revenues | ||||||
| Operating expenses | ||||||
| Utility operating expenses | ||||||
| Non-utility operating expenses | ||||||
| Depreciation and amortization | ||||||
| State and federal income taxes | ||||||
| Property and other taxes | ||||||
| Total Operating Expenses | ||||||
| Operating income | ||||||
| Other income | ||||||
| Allowance for funds used during construction (AFUDC) | ||||||
| Miscellaneous income | ||||||
| Income before interest charges | ||||||
| Interest charges | ||||||
| Net income applicable to common stock | $ | $ | ||||
| Net income per common share: | ||||||
| Basic | $ | $ | ||||
| Diluted | $ | $ | ||||
| Weighted average common shares outstanding: | ||||||
| Basic | ||||||
| Diluted | ||||||
| Cash dividends per share of common stock | $ | $ | ||||
See notes to the condensed consolidated financial statements.
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ARTESIAN RESOURCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| For the Three Months Ended | ||||||
| March 31, | ||||||
| 2026 | 2025 | |||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||
| Net income | $ | $ | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Depreciation and amortization | ||||||
| Amortization of debt expense | ||||||
| Amortization of deferred income tax regulatory liability | ( | ) | ( | ) | ||
| Provision for expected credit loss | ||||||
| Deferred income taxes, net | ( | ) | ||||
| Stock compensation | ||||||
| AFUDC, equity portion | ( | ) | ( | ) | ||
| Changes in assets and liabilities, net of acquisitions: | ||||||
| Accounts and other receivables | ( | ) | ||||
| Income tax receivable | ||||||
| Unbilled operating revenues | ||||||
| Materials and supplies | ( | ) | ||||
| Income tax payable | ||||||
| Prepaid property taxes | ||||||
| Prepaid expenses and other | ||||||
| Other deferred assets | ( | ) | ( | ) | ||
| Regulatory assets | ( | ) | ||||
| Regulatory liabilities | ( | ) | ||||
| Accounts payable | ( | ) | ( | ) | ||
| Accrued expenses | ( | ) | ||||
| Accrued interest | ||||||
| Customer deposits and other, net | ||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||
| Capital expenditures (net of AFUDC, equity portion) | ( | ) | ( | ) | ||
| Proceeds from sale of assets | ||||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||
| Repayments under lines of credit agreements | ( | ) | ( | ) | ||
| Borrowings under lines of credit agreements | ||||||
| Deferred debt issuance costs | ( | ) | ||||
| (Decrease) increase in overdraft payable | ( | ) | ||||
| Proceeds from contributions in aid of construction and advances | ||||||
| Payouts for contributions in aid of construction and advances | ( | ) | ( | ) | ||
| Net proceeds from issuance of common stock | ||||||
| Issuance of long–term debt | ||||||
| Dividends paid | ( | ) | ( | ) | ||
| Principal repayments of long-term debt | ( | ) | ( | ) | ||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | $ | $ | ||||
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ARTESIAN RESOURCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED
(Unaudited)
(In thousands)
| For the Three Months Ended | ||||||
| March 31, | ||||||
| 2026 | 2025 | |||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS | $ | $ | ||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | $ | ||||
Supplemental Disclosures of Cash Flow Information: |
| For the Three Months Ended | ||||||
| March 31, | ||||||
| 2026 | 2025 | |||||
| Non-cash Investing and Financing Activity: | ||||||
| Utility plant received as construction advances and contributions in aid of construction | $ | $ | ||||
| Contractual amounts of contributions in aid of construction due from developers included in accounts receivable and due from class action settlement funds included in other deferred assets (See Note 15 – Legal Proceedings) | $ | $ | ||||
| Change in amounts included in accounts payable, accrued payables and other related to capital expenditures | $ | ( | ) | $ | ( | ) |
| Supplemental Disclosures of Cash Flow Information: | ||||||
| Interest paid | $ | $ | ||||
| Income taxes paid | $ | $ | ||||
| Income taxes refunded | $ | $ | ||||
See notes to the condensed consolidated financial statements.
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Table of Contents
ARTESIAN RESOURCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
(In thousands)
| Common Shares Outstanding | Common Shares Outstanding | $ | $1 Par Value | ||||||||||||||||||
| Class A Non-Voting (1) (3) (4) | Class B Voting (2) | Class A Non-Voting | Class B Voting | Additional Paid-in Capital | Retained Earnings | Total | |||||||||||||||
| Balance as of December 31, 2024 | $ | $ | $ | $ | $ | ||||||||||||||||
| Net income | - | - | |||||||||||||||||||
| Cash dividends declared | |||||||||||||||||||||
| Common stock | - | - | ( | ) | ( | ) | |||||||||||||||
| Issuance of common stock | |||||||||||||||||||||
| Dividend reinvestment plan | |||||||||||||||||||||
| Employee stock options and awards(4) | |||||||||||||||||||||
| Employee Retirement Plan(3) | |||||||||||||||||||||
| Balance as of March 31, 2025 | $ | $ | $ | $ | $ |
| Common Shares Outstanding | Common Shares Outstanding | $1 Par Value | $1 Par Value | ||||||||||||||||||
| Class A Non-Voting (1) (3) (4) | Class B Voting (2) | Class A Non-Voting | Class B Voting | Additional Paid-in Capital | Retained Earnings | Total | |||||||||||||||
| Balance as of December 31, 2025 | $ | $ | $ | $ | $ | ||||||||||||||||
| Net income | - | - | |||||||||||||||||||
| Cash dividends declared | - | ||||||||||||||||||||
| Common stock | - | - | - | ( | ) | ( | ) | ||||||||||||||
| Issuance of common stock | |||||||||||||||||||||
| Dividend reinvestment plan | |||||||||||||||||||||
| Employee stock options and awards(4) | |||||||||||||||||||||
| Employee Retirement Plan(3) | |||||||||||||||||||||
| Balance as of March 31, 2026 | $ | $ | $ | $ | $ |
(1)
(2)
(3)
(4)
See notes to the condensed consolidated financial statements.
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Table of Contents
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – GENERAL
Artesian Resources Corporation, or Artesian Resources, includes income from the earnings of all our wholly-owned subsidiaries. The terms "we", "our", "Artesian" and the "Company" as used herein refer to Artesian Resources and its subsidiaries.
DELAWARE REGULATED UTILITY SUBSIDIARIES
Artesian Water Company, Inc., or Artesian Water, our principal subsidiary,
distributes and sells water to residential, commercial, industrial, governmental, municipal and utility customers throughout the State of Delaware. In addition, Artesian Water provides services to other water utilities, including operations, and has contract operation agreements with private, municipal and state water providers. Artesian Water also provides water for public and private fire protection to customers in our service territories.
Artesian Wastewater Management, Inc., or Artesian Wastewater, operates as the parent holding company of Tidewater Environmental Services, Inc. dba Artesian Wastewater, or TESI. Artesian Wastewater and TESI are regulated entities that own wastewater collection and treatment infrastructure and provide wastewater services to customers in Sussex County, Delaware as regulated public wastewater service companies.
MARYLAND REGULATED UTILITY SUBSIDIARIES
Artesian Water Maryland, Inc., or Artesian Water Maryland, distributes and sells water to residential, commercial, industrial and municipal customers in Cecil County, Maryland.
Artesian Wastewater Maryland, Inc., or Artesian Wastewater Maryland, is authorized and able to provide regulated wastewater services to customers in the State of Maryland. It is currently not providing these services.
PENNSYLVANIA REGULATED UTILITY SUBSIDIARY
Artesian Water Pennsylvania, Inc., or Artesian Water Pennsylvania, provides water service to a residential community in Chester County, Pennsylvania.
OTHER NON-UTILITY SUBSIDIARIES
We have two other subsidiaries, neither of which are regulated. They are Artesian Utility Development, Inc., or Artesian Utility, and Artesian Development Corporation, or Artesian Development.
Artesian Utility designs
and builds water and wastewater infrastructure and provides contract water and
wastewater operation services on the Delmarva Peninsula to private, municipal
and governmental institutions. Artesian
Utility also evaluates land parcels, provides recommendations to developers on
the size of water or wastewater facilities and the type of technology that
should be used for treatment at such facilities and operates water and
wastewater facilities in Delaware for municipal and governmental agencies. Artesian Utility also contracts with
developers and government agencies for design and construction of wastewater
infrastructure throughout the Delmarva Peninsula.
Artesian Utility currently operates wastewater treatment facilities for the Town of Middletown, in southern New Castle County, Delaware, or Middletown, under a 20 -year contract that expires in July 2039. Artesian Utility currently operates three wastewater treatment systems with a combined capacity of up to approximately 3.8 mgd. The wastewater treatment facilities in Middletown provide reclaimed wastewater for use in spray irrigation on public and agricultural lands in the area.
Artesian Utility also
offers the following protection plans to customers, the Water Service Line
Protection Plan, or WSLP Plan, and the Sewer Service Line Protection Plan, or
SSLP Plan (collectively, SLP Plan or SLP Plans). The WSLP Plan covers all parts, material and
labor required to repair or replace participating customers' leaking water
service lines up to an annual limit. The
SSLP Plan covers all parts, material and labor required to repair or replace
participating customers' leaking or clogged sewer lines up to an annual
limit. The Company also maintains the
Internal Service Line Protection Plan, or ISLP Plan, in which the Company
discontinued enrolling new customers effective January 2026. For customers that were previously enrolled,
the ISLP Plan enhances available coverage to include water and wastewater lines
within customers' residences up to an annual limit.
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Artesian Development is a real estate holding company that owns properties, including land approved for office buildings, a water treatment plant and wastewater facility, as well as property for current operations, including an office facility in Sussex County, Delaware.
NOTE 2 – BASIS OF PRESENTATION
Basis of Presentation
The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC, for Form 10-Q. Certain information and note disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information provided not misleading. Accordingly, these unaudited condensed consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes thereto in the Company's annual report on Form 10-K for fiscal year 2025 as filed with the SEC on March 16, 2026.
The unaudited condensed consolidated financial statements include the accounts of Artesian Resources Corporation and its wholly-owned subsidiaries, including its principal operating company, Artesian Water. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments (unless otherwise noted) necessary to present fairly the Company's balance sheet position as of March 31, 2026, the results of its operations for the three-month periods ended March 31, 2026 and March 31, 2025, its cash flows for the three-month periods ended March 31, 2026 and March 31, 2025 and the changes in stockholders’ equity for the three month-periods ended March 31, 2026 and March 31, 2025. The December 31, 2025 Condensed Consolidated Balance Sheet was derived from the Company’s December 31, 2025 audited consolidated financial statements but does not include all disclosures and notes normally provided in annual financial statements.
The results of operations for the interim periods presented are not necessarily indicative of the results for the full year or for future periods.
Regulated Utility Accounting
The accounting records of
Artesian Water, Artesian Wastewater, and TESI are maintained in accordance with
the uniform system of accounts as prescribed by the Delaware Public Service
Commission, or the DEPSC. The accounting
records of Artesian Water Maryland and Artesian Wastewater Maryland are
maintained in accordance with the uniform system of accounts as prescribed by
the Maryland Public Service Commission, or the MDPSC. The accounting records of Artesian Water
Pennsylvania are maintained in accordance with the uniform system of accounts
as prescribed by the Pennsylvania Public Utility Commission, or the PAPUC. All these subsidiaries follow the provisions
of Accounting Standards Codification, or ASC, 980, Regulated Operations, which
provides guidance for companies in regulated industries. These regulated
subsidiaries account for the majority of our operating revenue. See Note 16 – Business Segment Information to our Unaudited Condensed Consolidated Financial Statements for a full description of our segment information.
Use
of Estimates in the Preparation of Unaudited Condensed Consolidated Financial Statements
The unaudited condensed consolidated financial statements were prepared in conformity with generally accepted accounting principles in the U.S., which require management to make certain estimates and assumptions that could impact the Company’s financial condition, results of operations and cash flows. Actual results could differ from management's estimates. Management makes certain estimates and assumptions regarding unbilled revenues, reserve for revenues associated
with temporary rates expected to be refunded, accounting for income taxes, credit losses and reserves for bad debt, lease agreements, goodwill and contingent assets and liabilities.
Utility Plant
All additions to utility
plant are recorded at cost. Business
combinations pursuant to ASC 805, Business Combinations, may result in a
purchase price allocation and the acquired assets are required to be evaluated
by the applicable regulatory agency. Cost includes direct labor, materials, AFUDC
(see description below) and indirect charges for such capitalized items as
transportation, supervision, pension, medical, and other fringe benefits
related to employees engaged in construction activities. When depreciable
units of utility plant are retired, the historical costs of plant retired is
charged to accumulated depreciation. Any
cost associated with retirement, less any salvage value or proceeds received,
is charged to the regulated retirement liability. Maintenance,
repairs, and replacement of minor items of utility plant are charged to expense
as incurred.
Allowance for Funds Used
during Construction, or AFUDC, is a non-cash credit to income with a
corresponding charge to utility plant that represents the cost of borrowed funds
or a return on equity funds devoted to plant under construction.
9
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Depreciation and Amortization
For financial reporting purposes, depreciation is recorded using the straight-line method at rates based on estimated economic useful lives, which range from 5 to 85 years. Composite depreciation rates for water utility plant were 1.91 % and 1.91 % for March 31, 2026 and December 31, 2025, respectively. Artesian Water offsets depreciation recorded on utility plant by depreciation on utility property funded by Contributions in Aid of Construction, or CIAC, and Advances for Construction, or Advances. This reduction in depreciation expense is also netted against outstanding CIAC and Advances on the Condensed Consolidated Balance Sheet. Regulatory assets are amortized using the straight-line method over future periods, which range from 5 to 80 years.
NOTE 3 – REVENUE RECOGNITION
Background
Artesian’s operating revenues are primarily derived from contract services based upon regulated tariff rates approved by the DEPSC, the MDPSC, and the PAPUC. Regulated tariff contract service revenues consist of water consumption, industrial wastewater services, fixed fees for water and wastewater services including customer and fire protection fees, service charges and Distribution System Improvement Charges, or DSIC, billed to customers at rates outlined in our tariffs that represent standalone selling prices. Our non-tariff contract revenues, which are primarily non-utility revenues, are derived from SLP Plan fees, water and wastewater contract operations, design and installation contract services, and wastewater inspection fees. Other regulated operating revenue is primarily derived from developer guarantee contributions for wastewater and rental income for antenna agreements, which are not considered in the scope of ASC 606, Revenue from Contracts with Customers.
Tariff Contract Revenues
Artesian generates revenue from the sale of water to customers in Delaware, Cecil County, Maryland, and Southern Chester County, Pennsylvania once a customer requests service in our territory. We recognize water consumption revenue at tariff rates on a cycle basis for the volume of water transferred to customers based upon meter readings for actual gallons of water consumed as well as unbilled amounts for estimated usage from the date of the last meter reading to the end of the accounting period. As actual usage amounts are known based on recurring meter readings, adjustments are made to the unbilled estimates in the next billing cycle based on the actual results. Estimates are made on an individual customer basis, based on one of three methods: the previous year’s consumption in the same period, the previous billing period’s consumption, or averaging. While actual usage for individual customers may differ from the estimate based on management judgments described above, we believe the overall total estimate of consumption and revenue for the fiscal period will not differ materially from actual billed consumption. The majority of our water customers are billed for water consumed on a monthly basis, while the remaining customers are billed on a quarterly basis. As a result, we record unbilled operating revenue (contract asset) for any estimated usage through the end of the accounting period that will be billed in the next monthly or quarterly billing cycle.
Artesian generates revenue from industrial wastewater services provided to a customer in Sussex County, Delaware. We recognize industrial wastewater service revenue at a contract rate on a monthly basis for the volume of wastewater transferred to Artesian’s wastewater facilities based upon meter readings for actual gallons of wastewater transferred. These services are invoiced at the end of every month based on the actual meter readings for that month, and therefore there is no contract asset or liability associated with this revenue. The contract also provides for a minimum required volume of wastewater flow to our facility. At each year end, any shortfall of the actual volume from the required minimum volume is billed to the industrial customer and recorded as revenue. Additionally, if during the course of the year it is probable that the actual volume will not meet the minimum required volume, estimated revenue amounts would be recorded for the pro rata minimum volume, constrained for potential flow capacity that could occur in the remainder of the year. Any estimated revenue amounts are recorded as unbilled operating revenue (contract asset) through the end of the accounting period and will be billed at each year end for any shortfall of the actual volume from the required minimal volume.
Artesian generates revenue from metered wastewater services provided to customers in Sussex County, Delaware. We recognize metered wastewater services at tariff rates on a cycle basis for the volume of wastewater transferred to Artesian’s wastewater facilities based upon meter readings for actual gallons of water transferred, as well as unbilled amounts for estimated volume from the date of the last meter reading to the end of the accounting period. As actual volume amounts are known based on recurring meter readings, adjustments are made to the unbilled estimates in the next billing cycle based on the actual results. Estimates are made on an individual customer basis, based on one of three methods: the previous year’s volume in the same period, the previous billing period’s volume, or averaging. We believe the overall total estimate of volume and revenue for the fiscal period will not differ materially from actual billed consumption. The majority of these wastewater customers are billed for the volume of wastewater transferred on a quarterly basis. As a result, we record unbilled operating revenue (contract asset) for any estimated volume through the end of the accounting period that will be billed in the next quarterly cycle.
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Artesian generates fixed-fee revenue for water and wastewater services provided to customers once a customer requests service in our territory. We recognize revenue from these services on a ratable basis over time as the customer simultaneously receives and consumes all the benefits of the Company remaining ready to provide them water and wastewater service. These contract services are billed either in advance or arrears at tariff rates on a monthly, quarterly or semi-annual basis. For contract services billed in arrears, we record unbilled operating revenue (contract asset) for any services through the end of the accounting period that will be billed in the next monthly or quarterly cycle. For contract services billed in advance, we record deferred revenue (contract liability) and accounts receivable for any amounts for which we have a right to invoice but for which services have not been provided. This deferred revenue is netted against unbilled operating revenue on the Condensed Consolidated Balance Sheet.
Artesian generates service charges primarily from non-payment fees, such as water shut-off and reconnection fees and finance charges. These fees are billed and recognized as revenue at the point in time when our tariff indicates the Company has the right to payment such as days past due have been reached or shut-offs and reconnections have been performed. There is no contract asset or liability associated with these fees.
Artesian generates revenue from DSIC, which are surcharges applied to water customer tariff rates in Delaware related to specific types of water distribution system improvements. This rate is calculated on a semi-annual basis based on an approved projected revenue requirement over the following six-month period. This rate is adjusted up or down at the next DSIC filing to account for any differences between actual earned revenue and the projected revenue requirement. Since DSIC revenue is a surcharge applied to tariff rates, we recognize DSIC revenue based on the same guidelines as noted above depending on whether the surcharge was applied to consumption revenue or fixed-fee revenue.
Artesian generates revenue
from interim temporary rates. In
Delaware, utilities are permitted by law to place rates into effect, under
bond, on a temporary basis, pending resolution of an application for a base
rate increase by the DEPSC. Temporary
rate revenue is calculated as a percentage increase on tariff rates. We recognize this revenue based on the same
guidelines as noted above depending on whether the additional rate was applied
to consumption revenue or fixed-fee revenue.
Until final rates are determined by the DEPSC, if it is probable that a
refund of revenue associated with temporary rates will occur, a reserve would
be recorded reducing revenue from temporary rates. The DEPSC approved and Artesian Water
implemented temporary rate increases effective June 3, 2025 and November 6,
2025. As of March 31, 2026, approximately $1.0 million of
the revenue from the November 6, 2025 temporary rate increase was recorded as a
reserve for refund and is included in other current
liabilities in the Condensed Consolidated Balance Sheets. Temporary rates that
were previously effective as of November 28, 2023 were replaced with final
rates approved by the DEPSC effective June 12, 2024, with no reserve or
reduction to previously recorded revenue.
Accounts receivable related to tariff contract revenues are typically due within 25 days of invoicing. A provision for expected credit loss is calculated as a percentage of total associated revenues based upon historical trends and adjusted for current conditions. We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related provision for expected credit loss and associated bad debt expense has not been significant.
Non-tariff Contract Revenues
Artesian generates SLP Plan revenue once a customer requests service to cover all parts, materials and labor required to repair or replace leaking water service lines, leaking or clogged sewer lines, or water and wastewater lines within the customer’s residence, up to an annual limit. We recognize revenue from these services on a ratable basis over time as the customer simultaneously receives and consumes all the benefits of having service line protection services. These contract services are billed in advance on a monthly or quarterly basis. As a result, we record deferred revenue (contract liability) and accounts receivable for any amounts for which we have a right to invoice but for which services have not been provided. Accounts receivable from SLP Plan customers are typically due within 25 days of invoicing. A provision for expected credit loss is calculated as a percentage of total SLP Plan contract revenue. We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related provision for expected credit loss and associated bad debt expense has not been significant.
Artesian generates contract operation revenue from water and wastewater operation services provided to customers. We recognize revenue from these operation contracts, which consist primarily of monthly operation and maintenance services, over time as customers receive and consume the benefits of such services performed. The majority of these services are invoiced in advance at the beginning of every month and are typically due within 30 days, and therefore there is no contract asset or liability associated with most of these revenues. We have one operation contract that was paid in advance resulting in a contract liability for services that have not yet been provided. A provision for expected credit loss is provided based on a periodic analysis of individual account balances, including an evaluation of days outstanding, payment history, recent payment trends, and our assessment of our customers’ creditworthiness. The related provision for expected credit loss and associated bad debt expense has not been significant.
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Artesian generates design and installation revenue for services related to the design and construction of wastewater infrastructure for a state agency under contract. We recognize revenue from these services over time as services are performed using the percentage-of-completion method based on an input method of incurred costs (cost-to-cost). These services are invoiced at the end of every month based on incurred costs to date. As of December 31, 2025, there is no associated contract asset or liability. There is no provision for expected credit loss or bad debt expense associated with this revenue.
Artesian generates inspection fee revenue for inspection services related to onsite wastewater collection systems installed by developers of new communities. These fees are paid by developers in advance when a service is requested for a new phase of a development. Inspection fee revenue is recognized on a per lot basis once the inspection of the infrastructure that serves each lot is completed. As a result, we record deferred revenue (contract liability) for any amounts related to infrastructure not yet inspected. There are no accounts receivable, provision for expected credit loss or bad debt expense associated with inspection fee contracts.
Sales Tax
The majority of Artesian’s revenues are earned within the State of Delaware, where there is no sales tax. Revenues earned in the State of Maryland and the Commonwealth of Pennsylvania are related primarily to the sale of water by a public water utility and are exempt from sales tax. Therefore, no sales tax is collected on revenues.
Disaggregated Revenues
The following table shows the Company’s revenues disaggregated by service type; all revenues are generated within a similar geographical location:
| For the Three Months | ||||||
| Ended March 31, | ||||||
| (in thousands) | 2026 | 2025 | ||||
| Tariff Revenue | ||||||
| Consumption charges | $ | $ | ||||
| Fixed fees | ||||||
| Service charges | ||||||
| DSIC | ||||||
| Metered wastewater services | ||||||
| Industrial wastewater services | ||||||
| Total Tariff Revenue | $ | $ | ||||
| Non-Tariff Revenue | ||||||
| Service line protection plans | $ | $ | ||||
| Contract operations | ||||||
| Design and installation | ||||||
| Inspection fees | ||||||
| Total Non-Tariff Revenue | $ | $ | ||||
| Other Operating Revenue | $ | $ | ||||
| Total Operating Revenue | $ | $ | ||||
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Contract Assets and Contract Liabilities
Our contract assets and liabilities consist of the following:
| (in thousands) | March 31, 2026 | December 31, 2025 | ||||
| Contract Assets – Tariff | $ | $ | ||||
| Deferred Revenue | ||||||
| Deferred Revenue – Tariff | $ | $ | ||||
| Deferred Revenue – Non-Tariff | ||||||
| Total Deferred Revenue | $ | $ |
For the three months ended March 31, 2026, the Company recognized revenue of $1.6 million from amounts that were included in Deferred Revenue – Tariff at the beginning of the year and revenue of $0.4 million from amounts that were included in Deferred Revenue – Non-Tariff at the beginning of the year.
The changes in Contract Assets and Deferred Revenue are primarily due to normal timing differences between our performance and customer payments.
Remaining Performance Obligations
As of March 31, 2026 and December 31, 2025, Deferred Revenue – Tariff is recorded
partially within Unbilled operating revenues net against contract assets
representing our remaining performance obligations for our fixed fee water
services and partially within Other current liabilities representing our
remaining performance obligations for our fixed fee wastewater services, all of
which are expected to be satisfied and associated revenue recognized in the
next three months .
As of March 31, 2026 and December 31, 2025, Deferred Revenue – Non-Tariff is recorded within Other current liabilities and represents our remaining performance obligations for our SLP Plan services, contract water operation services and wastewater inspections, which are expected to be satisfied and associated revenue recognized within the next three months , approximately four years and one year , respectively.
NOTE 4 – ACCOUNTS RECEIVABLE
Accounts receivable are
recorded at the invoiced amounts. As set
forth in a settlement agreement, Artesian Water received reimbursements from
the Delaware Sand and Gravel Remedial Trust, or Trust, for Artesian Water’s past capital and operating costs, totaling
approximately $10.0 million, related to the treatment costs associated with the
release of contaminants from the Delaware Sand & Gravel Landfill Superfund
Site, or Site, in groundwater that Artesian Water uses for public potable water
supply. The full amount of $10.0 million
has been paid to us, in four installments of approximately $2.5
A provision for expected credit loss is calculated as a percentage of total associated revenues based upon historical trends and adjusted for current and reasonable projections based upon expected economic conditions. We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related provision for expected credit loss and associated bad debt expense has not been significant. The following table summarizes the changes in the Company’s accounts receivable balance. The reduction in the water
customer accounts receivable balance as of December 31, 2025 is the result of a
one-time bill credit that was applied to Artesian Water’s customer bills in
December 2025 related to MDL settlement funds received as further discussed in
Note 15 – Legal Proceedings.
| (in thousands) | March 31, 2026 | December 31, 2025 | December 31, 2024 | ||||||
| Customer accounts receivable – water | $ | $ | $ | ||||||
| Customer accounts receivable – wastewater | |||||||||
| Customer accounts receivable – SLP Plan | |||||||||
| Settlement receivable – short term | |||||||||
| Developer receivable | |||||||||
| Miscellaneous accounts receivable | |||||||||
| Less: provision for expected credit loss | |||||||||
| Net accounts receivable | $ | $ | $ |
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NOTE 5 – LEASES
The Company leases land and office equipment under operating leases from non-related parties. Our leases have remaining lease terms of 2 years to 71 years, one of which includes options to automatically extend the leases for up to 66 years and is included as part of the lease liability and right-of-use assets as we expect to exercise the options. Payments made under operating leases are recognized in the condensed consolidated statement of operations on a straight-line basis over the period of the lease. The annual lease payment for the land operating lease increases each year by the most recent increase in the Consumer Price Index and includes a provision to periodically adjust the annual lease payment based on the fair market value of the parcel of land. None of the operating leases contain contingent rent provisions. The commencement date of all the operating leases is the earlier of the date we become legally obligated to make rent payments or the date we may exercise control over the use of the land or equipment. The Company currently does not have any financing leases and does not have any lessor leases that require disclosure.
Management made certain assumptions related to the separation of lease and nonlease components and to the discount rate used when calculating the right-of-use asset and liability amounts for the operating leases. As our leases do not provide an implicit rate, we use our incremental borrowing rates for long-term and short-term agreements and apply the rates accordingly based on the term of the lease agreements to determine the present value of lease payments.
Rent expense for all operating leases, except those with terms of 12 months or less, comprises:
(in thousands)
| Three Months Ended | Three Months Ended | |||||
| March 31, 2026 | March 31, 2025 | |||||
| Minimum rentals | $ | $ | ||||
| Contingent rentals | ||||||
| $ | $ |
Supplemental cash flow information related to leases is as follows:
(in thousands)
| Three months ended | Three months ended | |||||
| March 31, 2026 | March 31, 2025 | |||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||
| Operating cash flows from operating leases | $ | $ | ||||
| Right-of-use assets obtained in exchange for lease obligations: | ||||||
| Operating leases | $ | $ |
Supplemental balance sheet information related to leases is as follows:
(in thousands, except lease term and discount rate)
| March 31, 2026 | December 31, 2025 | ||||||
| Operating Leases: | |||||||
| Operating lease right-of-use assets | $ | $ | |||||
| Other current liabilities | $ | $ | |||||
| Operating lease liabilities | |||||||
| Total operating lease liabilities | $ | $ | |||||
| Weighted Average Remaining Lease Term | |||||||
| Operating leases | |||||||
| Weighted Average Discount Rate | |||||||
| Operating leases | % | % |
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Maturities of operating lease liabilities that have initial or remaining non-cancelable lease terms in excess of one year as of March 31, 2026 are as follows:
| (in thousands) | |||
| Operating Leases | |||
| Year | |||
| 2026 | $ | ||
| 2027 | |||
| 2028 | |||
| 2029 | |||
| 2030 | |||
| Thereafter | |||
| Total undiscounted lease payments | $ | ||
| Less effects of discounting | ( | ) | |
| Total lease liabilities recognized | $ |
As of March 31, 2026, we have not entered into operating or finance leases that will commence at a future date.
NOTE 6 – FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value.
Current Assets and Liabilities
For those current assets and liabilities that are considered financial instruments, the carrying amounts approximate fair value because of the short maturity of those instruments. Under the fair value hierarchy, the fair value of such financial instruments is classified as Level 1.
Other Deferred Assets
The other
deferred assets associated with the MDL class action settlement reimbursements,
as further discussed in Note 15 – Legal Proceedings, has a carrying amount of
$2.6
Long-term Financial Liabilities
As of March 31, 2026 and December 31, 2025, all of the Company’s outstanding long-term debt interest rates were a fixed rate. The fair value of the Company’s long-term debt is determined by discounting their future cash flows using current market interest rates on similar instruments with comparable maturities consistent with ASC 825, Financial Instruments. Under the fair value hierarchy, the fair value of the long-term debt in the table below is classified as Level 2 measurements. Level 2 is valued using observable inputs other than quoted prices. The fair values for long-term debt differ from the carrying values primarily due to interest rates that differ from the current market interest rates. The carrying amount and fair value of Artesian Resources' long-term debt (including current portion) are shown below:
(in thousands)
| March 31, 2026 | December 31, 2025 | |||||
| Carrying amount | $ | $ | ||||
| Estimated fair value |
The fair value of Advances for Construction cannot be reasonably estimated due to the inability to estimate accurately the timing and amounts of future refunds expected to be paid over the life of the contracts. Refund payments are based on the water sales to new customers in the particular development constructed. The fair value of Advances for Construction would be less than the carrying amount because these financial instruments are non-interest bearing.
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NOTE 7 – INCOME TAXES
Deferred income taxes are
provided in accordance with ASC 740, Income Taxes, on all differences between the
tax basis of assets and liabilities and the amounts at which they are carried
in the unaudited condensed consolidated financial statements based on the enacted tax rates expected
to be in effect when such temporary differences are expected to reverse. The Company’s rate regulated subsidiaries recognize regulatory liabilities, to the extent considered in ratemaking, for deferred taxes provided in excess of the current statutory tax rate and regulatory assets for deferred taxes provided at rates less than the current statutory rate. Such tax-related regulatory assets and liabilities are reported at the revenue requirement level and amortized to income as the related temporary differences reverse, generally over the lives of the related properties.
Under ASC 740, Income Taxes, an uncertain tax position represents our expected treatment of a tax position
taken, or planned to be taken in the future, that has not been reflected in
measuring income tax expense for financial reporting purposes. The Company establishes reserves for
uncertain tax positions based upon management's judgment as to the
sustainability of these positions. These accounting estimates related to the
uncertain tax position reserve require judgments to be made as to the
sustainability of each uncertain tax position based on its technical merits.
The Company believes its tax positions comply with applicable law and that it
has adequately recorded reserves as required. However, to the extent the final
tax outcome of these matters is different than the estimates recorded, the
Company would then adjust its tax reserves or unrecognized tax benefits in the
period that this information becomes known.
The Company has elected to recognize accrued interest (net of related
tax benefits) and penalties related to uncertain tax positions as a component
of its income tax expense. For the full year 2025, the Company accrued approximately $22 thousand in penalties and interest related to positions taken on the 2022 and 2024 corporate income tax return. For the three months ended March 31, 2026, the Company has accrued approximately $6 thousand in penalties and interest related to positions taken on the 2022 and 2024 corporate income tax return. The Company remains subject to examination by federal and state authorities for the tax years .
Investment tax credits were deferred through 1986 and are recognized as a reduction of deferred income tax expense over the estimated economic useful lives of the related assets.
On July 4, 2025, the One
Big Beautiful Bill Act, or OBBBA, was signed into law, which includes several
changes to U.S. tax and related laws, including the temporary and permanent
extension of expiring provisions of the Tax Cuts and Jobs Act of 2017, or TCJA. The Company has evaluated the impact that the
OBBBA may have on its consolidated financial condition and results of
operations and determined there is no material impact on our business,
financial position or results of operations.
NOTE 8 – STOCK COMPENSATION PLANS
On October 30, 2025, the
Company’s stockholders approved the 2025 Equity Compensation Plan, or the 2025
Plan, that replaced the 2015 Equity Compensation Plan, or the 2015 Plan. The 2025 Plan provides for the issuance of
263,932 shares of Class A Non-Voting Stock.
Outstanding grants under the 2015 Plan shall continue in effect
according to their terms, consistent with the 2015 Plan. No further grants will be made under the 2015
Plan after the approval date of the 2025 Plan.
The 2025 Plan provides that grants may be in any of the following forms:
incentive stock options, nonqualified stock options, stock units, stock awards,
dividend equivalents and other stock-based awards. The 2025 Plan is
administered and interpreted by the Compensation Committee of the Board of
Directors, or the Committee. The
Committee has the authority to determine the individuals to whom grants will be
made under the 2025 Plan, determine the type, size and terms of the grants,
determine the time when grants will be made and the duration of any applicable
exercise or restriction period (subject to the limitations of the 2025 Plan)
and deal with any other matters arising under the 2025 Plan. All of the employees of the Company and its
subsidiaries are eligible for grants under the 2025 Plan. Non-employee
directors of the Company are also eligible to receive grants under the 2025
Plan.
On September 16, 2025,
5,000 shares of Class A Non-Voting Stock were granted as restricted stock awards. The fair value per share was $32.08 , the
closing price of the Class A Non-Voting Stock as recorded on the Nasdaq Global Select
Market on September 16, 2025. These restricted stock awards will be fully
vested and released one year after the grant date and, prior to their vesting
date, are subject to forfeiture in the event of the recipient’s termination of
service.
On July 1, 2025, 1,000 shares of Class A Non-Voting Stock were granted as a restricted stock award. The fair value per share was $33.96 , the closing price of the Class A Non-Voting Stock as recorded on the Nasdaq Global Select Market on July 1, 2025. This restricted stock award will be fully vested and released May 6, 2026 and, prior to its vesting date, is subject to forfeiture in the event of the recipient’s termination of service.
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On May 5, 2025, 4,000 shares
of Class A Non-Voting Stock were granted as
restricted stock awards. The fair value
per share was $34.27 , the closing price of the Class A Non-Voting Stock as recorded on the
Nasdaq Global Select Market on May 5, 2025.
These restricted stock awards will be fully
vested and released one year after the grant date and, prior to their vesting
date, are subject to forfeiture in the event of the recipient’s termination of
service.
On April 11, 2025, 1,000 shares of Class A Non-Voting Stock were granted as a restricted stock award. The fair value per share was $33.51 , the closing price of the Class A Non-Voting Stock as recorded on the Nasdaq Global Select Market on April 11, 2025. This restricted stock award will be fully vested and released one year after the grant date and, prior to its vesting date, is subject to forfeiture in the event of the recipient’s termination of service.
Compensation expense of approximately
$92 thousand, related to the April, May, July and September 2025 issue of
restricted stock awards, was recorded for the three months ended March 31, 2026. Compensation expense of approximately $46
thousand, related to the May 2024 issue of restricted stock awards, was
recorded for the three months ended March 31, 2025. Costs were determined based on the fair value
on the dates of the awards and those costs were charged to income over the
service periods associated with the awards.
There was no stock compensation cost capitalized as part of an asset.
There were no options exercised during the three months ended March 31, 2026.
There were no unvested option shares outstanding under the 2025 Plan during the three months ended March 31, 2026.
As of March 31, 2026, there were no unrecognized expenses related to non-vested option shares granted under the 2025 Plan.
As of March 31, 2026, there was approximately $91 thousand total unrecognized expenses related to non-vested awards of restricted shares awarded under the 2025 Plan. The cost will be recognized over 0.26 years, the remaining vesting period for the restricted stock awards.
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NOTE 9 - GEOGRAPHIC CONCENTRATION OF CUSTOMERS
Artesian Water, Artesian Water Maryland and Artesian Water Pennsylvania provide regulated water utility service to customers within their established service territory in all three counties of Delaware and in portions of Maryland and Pennsylvania, pursuant to rates filed with and approved by the DEPSC, the MDPSC and the PAPUC. As of March 31, 2026, Artesian Water was serving approximately 99,500 customers, Artesian Water Maryland was serving approximately 2,700 customers and Artesian Water Pennsylvania was serving approximately 40 customers.
Artesian Wastewater and TESI provide regulated wastewater utility service to customers within their established service territory in Sussex County, Delaware pursuant to rates filed with and approved by the DEPSC. As of March 31, 2026, Artesian Wastewater and TESI were serving approximately 9,300 customers combined, including one large industrial customer.
NOTE 10 – OTHER DEFERRED ASSETS
The investment in CoBank,
ACB, or CoBank, which is a cooperative bank, is related to certain outstanding
First Mortgage Bonds and is a required investment in the bank based on the
underlying long-term debt agreements. The
settlement agreement receivable is related to the long-term portion of MDL class action settlement reimbursements, as
further discussed in Note 15 - Legal Proceedings, and is recorded at amortized
cost, with the difference between the carrying amount and the amortized cost
recognized as CIAC.
| (in thousands) | March 31, 2026 | December 31, 2025 | ||||
| Investment in CoBank | $ | $ | ||||
| Settlement receivable-long term | ||||||
| Other deferred assets | ||||||
| $ | $ |
NOTE 11 - REGULATORY ASSETS
ASC 980, Regulated Operations, stipulates generally accepted accounting principles for companies whose rates
are established or subject to approvals by a third-party regulatory
agency. Certain expenses are recoverable
through rates charged to our customers, without a return on investment, and are
deferred and amortized during future periods using various methods as permitted
by the DEPSC, MDPSC, and PAPUC.
The deferred income taxes will be amortized over future years as the tax effects of temporary differences that previously flowed through to our customers are reversed.
Debt related costs include debt issuance costs and other debt related expense. The DEPSC has approved deferred regulatory accounting treatment for issuance costs associated with Artesian Water’s First Mortgage bonds. Debt issuance costs and other debt related expenses are reviewed during Artesian Water’s rate applications as part of its cost of capital calculations.
Affiliated interest agreement deferred costs relate to the regulatory and administrative costs resulting from efforts necessary to secure water allocations in Artesian Water Pennsylvania’s territory for the provision of service to the surrounding area and interconnection to Artesian Water Pennsylvania’s affiliate regulated water utility Artesian Water. These costs were specifically included for cost recovery pursuant to an Affiliated Interest Agreement between Artesian Water and Artesian Water Pennsylvania and were approved for recovery by the PAPUC. Amortization of these deferred costs began in the fourth quarter of 2023.
Deferred acquisition
adjustments represent the excess payment for purchases of utility plant from
Delaware municipalities over the determined original cost net of
depreciation. Deferred acquisition costs
represent the closing cost associated with the acquisitions. Costs are being amortized over the periods
noted in the table below and recovered in customer rates as approved by the
DEPSC. Amortization of these deferred
costs began in the third quarter of 2024.
Unrecovered reserve for
depreciation is the result of the implementation of a change in depreciation
methods for certain general plant assets that are being amortized over five
years and recovered in customer rates as approved by the DEPSC. Amortization of these deferred costs began in
the third quarter of 2024.
Regulatory
expenses amortized on a straight-line basis are noted below:
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|
Expense
|
Years Amortized
|
|
Deferred contract costs and other
|
|
|
Rate case studies
|
|
|
Delaware rate proceedings
|
|
|
Debt related costs
|
(based on term of related debt) |
|
Deferred costs affiliated interest agreement
|
|
|
Goodwill (Mountain Hill Water Company acquisition in 2008)
|
|
|
Deferred acquisition and franchise costs - Maryland
|
|
|
Deferred acquisition costs – Delaware
|
|
|
Deferred acquisition adjustments - Delaware
|
|
|
Unrecovered reserve for depreciation (general plant assets)
|
|
Regulatory assets, net of amortization, comprise:
| (in thousands) | ||||||
| March 31, 2026 | December 31, 2025 | |||||
| Deferred contract costs and other | $ | $ | ||||
| Rate case studies | ||||||
| Delaware rate proceedings | ||||||
| Deferred income taxes | ||||||
| Debt related costs | ||||||
| Deferred costs affiliated interest agreement | ||||||
| Goodwill | ||||||
| Deferred acquisition and franchise costs - Maryland | ||||||
| Deferred acquisition costs – Delaware | ||||||
| Deferred acquisition adjustments – Delaware | ||||||
| Unrecovered reserve for depreciation | ||||||
| $ | $ | |||||
NOTE 12 – REGULATORY LIABILITIES
ASC 980, Regulated Operations, stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency. Certain obligations are deferred and/or amortized as determined by the DEPSC, MDPSC, and PAPUC. Regulatory liabilities represent excess recovery of cost or other items that have been deferred because it is probable such amounts will be returned to customers through future regulated rates.
Utility plant retirement cost obligation consists of estimated costs related to the potential removal and replacement of facilities and equipment on the Company’s water and wastewater properties. As authorized by the DEPSC, when depreciable units of utility plant are retired, any cost associated with retirement, less any salvage value or proceeds received, is charged to a regulated retirement liability. The annual amortization currently authorized by the DEPSC could be adjusted in future rate applications.
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Deferred income taxes
primarily represent tax benefits that will be returned to regulated utility customers
through an approved rate making process, as described below. These tax benefits resulted from the TCJA. The TCJA required the Company to remeasure its
deferred income tax balances to reflect the reduction in the corporate income
tax rate from 34 % to 21 %. This remeasurement adjustment made to deferred income
taxes was substantially offset by the recognition of a regulatory liability for
excess accumulated deferred income taxes, or EADIT, and reflects the benefits
customers will receive in future approved rates. Pursuant to a DEPSC rate order, Artesian
Water is amortizing $24.7 million of the EADIT balance. The DEPSC has not issued a final order on the
TCJA regulatory liability amount of $0.6 million for wastewater customers, and
the MDPSC has not issued a final order on the TCJA regulatory liability amount
of $0.6 million for Maryland customers.
Regulatory liabilities comprise:
| (in thousands) | ||||||
| March 31, 2026 | December 31, 2025 | |||||
| Utility plant retirement cost obligation | $ | $ | ||||
| Deferred income taxes (related to TCJA) | ||||||
| $ | $ |
NOTE 13 - REGULATORY PROCEEDINGS
Our water and wastewater utilities generate operating revenue from customers based on rates that are established by state public service commissions through a rate-setting process that may include public hearings, evidentiary hearings and the submission of evidence and testimony in support of the Company’s requested level of rates.
We are subject to regulation by the following state regulatory commissions:
·
The DEPSC, regulates Artesian Water, Artesian Wastewater, and TESI.
·
The MDPSC, regulates Artesian Water Maryland and Artesian Wastewater Maryland.
·
The PAPUC, regulates Artesian Water Pennsylvania.
Our water and wastewater utility operations are also subject to regulation under the federal Safe Drinking Water Act of 1974, or Safe Drinking Water Act, the Clean Water Act of 1972, or the Clean Water Act, and related state laws, and under federal and state regulations issued under these laws. These laws and regulations establish criteria and standards for drinking water and for wastewater discharges. Capital expenditures and operating costs required as a result of water quality standards and environmental requirements have been traditionally recognized by state regulatory commissions as appropriate for inclusion in establishing rates.
Water and Wastewater Rates
Our regulated subsidiaries periodically seek rate increases to cover the cost of increased operating expenses, increased financing expenses due to additional investments in utility plant and other costs of doing business. In Delaware, utilities are permitted by law to place rates into effect, under bond, on a temporary basis pending completion of a rate increase proceeding. Any DSIC rate in effect will be reset to zero upon implementation of a temporary increase in base rates charged to customers. The first temporary increase may be up to the lesser of $2.5 million on an annual basis or 15 % of gross water sales. Should the rate case not be completed within seven months , by law, the utility may put the entire requested rate relief, up to 15 % of gross water sales, in effect under bond until a final resolution is ordered and placed into effect. If any such rates are found to be in excess of rates the DEPSC finds to be appropriate, the utility must refund customers the portion found to be in excess with interest. The timing of our rate increase requests is therefore dependent upon the estimated cost of the administrative process in relation to the investments and expenses that we hope to recover through the rate increase. We can provide no assurances that rate increase requests will be approved by applicable regulatory agencies and, if approved, we cannot guarantee that these rate increases will be granted in a timely or sufficient manner to cover the investments and expenses for which we initially sought the rate increase.
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On April 4, 2025, Artesian
Water filed a request with the DEPSC to implement new rates to meet a requested
increase in revenue of 12.41 %, or approximately $10.8 million, on an annualized
basis. Supplemental and rebuttal
filings were subsequently filed, reducing the
requested increase to 10.2 %, or approximately $9.0 million, on an annualized
basis. The actual effective increase would be less than 10.2 % if the requested
increase is granted in full by the DEPSC since Artesian Water has been
permitted to recover specific investments made in infrastructure through the
assessment of a 1.66 % DSIC rate, which rate is set to zero once temporary rates
are placed into effect. Temporary rates
were placed into effect as noted below. The new proposed rates are designed to
support Artesian Water’s ongoing capital improvement program and to cover
increased costs of operations, including chemicals and electricity for water
treatment, water quality regulation compliance, taxes, labor and benefits. In accordance with applicable Delaware law,
the DEPSC approved and Artesian Water implemented the first temporary rate
increase effective June 3, 2025 of approximately $2.5 million in additional
annual revenue, or 2.88 %, subject to refund, and reduced the DSIC previously in
effect from approximately 1.66 % to zero , for a temporary rate increase of net
1.22 %. Also, as permitted by law, on
November 6, 2025 Artesian Water placed into effect a second step of temporary rates
designed to generate an increase in annual operating revenue of approximately
6.82 %, or $5.8 million, on an annualized basis, until permanent rates are
determined by the DEPSC. As of March 31, 2026, approximately
$1.0 million of the revenue from the second step of temporary rates was recorded
as a reserve for refund and is included in Other current
liabilities in the Condensed Consolidated Balance Sheets.
Other Proceedings
Delaware law permits water utilities to put into effect, on a semi-annual basis, increases related to specific types of distribution system improvements through a DSIC. This charge may be implemented by water utilities between general rate increase applications that normally recognize changes in a water utility's overall financial position. The DSIC approval process is less costly when compared to the approval process for general rate increase requests. The DSIC rate applied between base rate filings is capped at 7.50 % of the amount billed to customers under otherwise applicable rates and charges, and the DSIC rate increase applied cannot exceed 5.0 % within any 12-month period.
The following table summarizes (1) Artesian Water’s applications with the DEPSC to collect DSIC rates and (2) rate upon which each eligible plant improvement was based:
| Application Date | 11/22/2024 | |||||
| DEPSC Approval Date | 12/18/2024 | |||||
| Effective Date | 01/01/2025 | |||||
| Cumulative DSIC Rate | ||||||
| Net Eligible Plant Improvements – Cumulative Dollars (in millions) | $ | |||||
| Eligible Plant Improvements – Installed Beginning Date | 11/01/2023 | |||||
| Eligible Plant Improvements – Installed Ending Date | 10/31/2024 |
Effective January 1, 2025,
Artesian Water was permitted to recover specific investments made in
infrastructure through the assessment of a 1.66 % DSIC. The January 1, 2025 DSIC rate is still subject
to audit by the DEPSC. The January 1,
2025 DSIC rate was reset to zero when the temporary base rate increase was
placed into effect on June 3, 2025. For the three months ended March 31, 2026, we
did no t report any earnings in DSIC revenue. For the three months ended March
31, 2025, we earned approximately $0.3 million in DSIC revenue.
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NOTE 14 - NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE
Basic net income per share is based on the weighted average number of common shares outstanding. Diluted net income per share is based on the weighted average number of common shares outstanding, the potentially dilutive effect of employee stock options and restricted stock awards.
The following table summarizes the shares used in computing basic and diluted net income per share:
| For the Three Months Ended | |||||||
| March 31, | |||||||
| 2026 | 2025 | ||||||
| (in thousands) | |||||||
| Weighted average common shares outstanding during the period for basic computation | |||||||
| Dilutive effect of employee stock options and awards | |||||||
| Weighted average common shares outstanding during the period for diluted computation | |||||||
For
the three months ended March 31, 2026, no shares of restricted stock awards
were excluded from the calculations of diluted net income per share. For the three months
ended March 31, 2025, no stock options were excluded from the calculations of
diluted net income per share.
The Company has 15,000,000 authorized shares of Class A Non-Voting Stock and 1,040,000 authorized shares of Class B Voting Stock. As of March 31, 2026, 9,436,952 881,452 9,421,542 881,452 1.00
Equity per common share was $24.50 and $24.24 at March 31, 2026 and December 31, 2025, respectively. These amounts were computed by dividing common stockholders' equity by the number of weighted average shares of common stock outstanding on March 31, 2026 and December 31, 2025, respectively.
NOTE 15 - LEGAL PROCEEDINGS
Periodically, we are involved in other proceedings or litigation arising in the ordinary course of business. We do not believe that the ultimate resolution of these matters will materially affect our business, financial position or results of operations. However, we cannot ensure that we will prevail in any litigation and, regardless of the outcome, may incur significant litigation expense and may have significant diversion of management attention.
Several of the water
systems of Artesian Resources’ subsidiaries are claimants in four MDL class action settlements designed to resolve
claims for per- and polyfluoroalkyl substances, or PFAS, contamination in
Public Water Systems’ Drinking Water, as those terms are defined in the
respective Agreements (the “Settlements”), which are with four groups of
settling defendants on behalf of: (1) the 3M Company (“3M”); (2) E.I. Du Pont
de Nemours and Company (n/k/a Eidp, Inc.), DuPont de Nemours Inc., The Chemours
Company, The Chemours Company FC, LLC, and Corteva, Inc. (collectively,
“DuPont”); (3) Tyco Fire Products LP and Chemguard, Inc. (collectively, “the
Tyco Defendants”); and (4) BASF Corporation (“BASF”). Claims Forms have been submitted on behalf of
Artesian Resources’ eligible systems in each of the Settlements. In October 2025, the Company received its
first payment from 3M in the amount of $2.3 million, and its second payment of
$5.2 million in November 2025, with an anticipated additional net settlement of
approximately $5.1 million to be paid over eight years . In December 2025, the
Company received the full DuPont settlement award payment of approximately $1.3
million. In April 2026, the Company received
approximately $1.3 million in settlement payments from the Tyco defendants and approximately
$0.5 million in settlement payments from BASF. The settlement
proceeds are intended to reimburse the Company for past and future capital
investments or operations and maintenance expenses related to PFAS water
contamination to its water systems. The
DEPSC approved the return of $7.2 million received from 3M to Artesian Water’s
customers through a one-time bill credit, which was applied to customers’ bills
in December 2025. The DEPSC also
approved the regulatory treatment of the settlement amounts for DuPont, the
Tyco Defendants and BASF and the remaining settlement amounts for 3M to be
recorded as CIAC.
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On September 15, 2025, Artesian Water was served as a
third-party defendant in a third-party complaint filed by Metra Industries,
Inc., in the Superior Court of the State of Delaware. The litigation arises
from a contractual dispute related to a water main renewal project and asserts a claim against us in the total amount of
$3.4 million consisting mainly of $2.7 million in unabsorbed office overhead, $0.1 million in end-of-job direct costs and $0.6 million in change
orders. While we plan to defend the
claim vigorously, it is possible that we could
incur a loss; however, any loss is not estimable at this time.
NOTE 16 - BUSINESS SEGMENT INFORMATION
The Company’s operating segments are comprised of its businesses which generate revenues and incur expenses, for which separate operational financial information is available and is regularly evaluated by management for the purpose of making operating decisions, assessing performance, and allocating resources. The Company operates its businesses primarily through one reportable segment, the Regulated Utility segment. The Regulated Utility segment is the largest component of the Company’s business and includes an aggregation of our five regulated utility subsidiaries that are in the business of providing regulated water and wastewater services on the Delmarva Peninsula. Our regulated water utility services include treating, distributing, and selling water to residential, commercial, industrial, governmental, municipal and utility customers throughout the State of Delaware and in Cecil County, Maryland and to a residential community in Chester County, Pennsylvania. Our regulated wastewater utility services include the treatment and disposal of wastewater for customers in Sussex County, Delaware. The Company is subject to regulations as to its rates, services, and other matters by the states of Delaware, Maryland and Pennsylvania with respect to utility service within these states.
The Chief Operating Decision Maker, or CODM, is the Executive Committee led by the Chief Executive Officer and includes the Chief Financial Officer. The CODM uses operating income as its measure of profit to assess the performance of each segment. This profit measure excludes the financing component and allows management to focus on controllable expenses, to allocate resources during the annual budgeting process and to monitor budget versus actual results on a monthly basis.
The accounting policies of the operating segments are the same as those described in Note 3 – Revenue Recognition. The measurement of depreciation, interest, and capital expenditures are predominately related to our Regulated Utility segment. These amounts in our non-utility business are negligible and account for approximately less than 1% of consolidated amounts as of March 31, 2026 and March 31, 2025.
In thousands
| Three Months Ended March 31, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Regulated Utility | Total | Regulated Utility | Total | |||||||||||
| Regulated Utility Revenues | $ | $ | $ | $ | ||||||||||
| Reconciliation of revenue | ||||||||||||||
| Other revenues | (a) | (a) | ||||||||||||
| Inter-segment elimination | ( | ) | ( | ) | ||||||||||
| Consolidated revenues | $ | $ | ||||||||||||
| Less: (b) | ||||||||||||||
| Payroll and Benefits (c) | ||||||||||||||
| Supply and Delivery (d) | ||||||||||||||
| Administrative (e) | ||||||||||||||
| Depreciation and Amortization | ||||||||||||||
| Income Taxes | ||||||||||||||
| Property and other taxes | ||||||||||||||
| Regulated Utility Operating Income | $ | $ | $ | $ | ||||||||||
| Reconciliation of operating income | ||||||||||||||
| Other profit | (a) | (a) | ||||||||||||
| Consolidated operating income | $ | $ | ||||||||||||
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In thousands
| Regulated Utility | Total | Regulated Utility | Total | |||||||||||
| Assets | ||||||||||||||
| Regulated Utility Assets | $ | $ | $ | 846,820 | $ | |||||||||
| Reconciliation of assets | ||||||||||||||
| Other assets | ||||||||||||||
| Consolidated assets | $ | $ |
(a) Other revenues and other profit:
– Revenue and profit from segments below the quantitative thresholds are attributable to four non-utility businesses of the Company
– These businesses are primarily comprised of: Service Line Protection Plan services for water, sewer and internal plumbing; design, construction and engineering services; contract services for the operation and maintenance of water and wastewater systems in Delaware and Maryland; and leased space to the Regulated Utility Segment
– These non-utility businesses do not individually or in the aggregate meet the quantitative thresholds for determining reportable segments
– Certain corporate costs have been allocated from the regulated utility segment to the non-utility businesses and are included in the other profit amounts shown
(b) Significant expense categories:
– The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM
– Inter-segment expenses related to leased space provided by one non-utility business, calculated on the lower of cost or market method, are included in the amounts shown
(c) Payroll and benefits:
– This category does not include amounts capitalized on the Condensed Consolidated Balance Sheet
(d) Supply and Delivery:
– This category includes purchased power, purchased water, chemicals, infrastructure maintenance and repair costs, and wastewater disposal fees
(e) Administration expense:
– This category includes computer systems maintenance and subscription fees, audit and legal fees, insurance, customer billing, and other general and administrative expenses
NOTE 17 - IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In November 2024, FASB
issued amended guidance which requires disaggregated disclosure of income
statement expenses for public business entities. The guidance does not change
the expense captions an entity presents on the face of the income statement; rather,
it requires disaggregation of certain expense captions into specified
categories in disclosures within the footnotes to the financial
statements. The standard is effective
for fiscal years beginning after December 15, 2026, and interim periods within fiscal
years beginning after December 15, 2027.
Early adoption is permitted.
In September 2025, the FASB
issued guidance that amends the existing standard to remove all references to
prescriptive and sequential software development project stages. Under this guidance, eligible software development
costs will begin capitalization when management has authorized and committed to
funding the software project, and it is probable that the project will be
completed and the software will be used to perform the function intended. In evaluating whether it is probable the
project will be completed, management is required to consider whether there is
significant uncertainty associated with the development activities of the
software. This guidance is effective for
all annual periods beginning after December 15, 2027, and for interim periods
within those annual reporting periods, with early adoption permitted. The guidance may be applied on a prospective
basis, a modified basis for in-process projects, or a retrospective basis. We are currently evaluating the impact of
this guidance to determine the impact on the consolidated financial statements
and related disclosures.
In December 2025, the FASB
issued guidance to enhance, clarify, and streamline interim disclosure
requirements, emphasizing events and material changes that have occurred since
the most recent annual reporting period.
The amendments are effective for the Company for interim reporting
periods within annual reporting periods beginning after December 15, 2027, with
early adoption permitted. The Company is
required to apply the amendments in its interim reporting starting with the
first quarter of fiscal year 2028. The
guidance may be adopted prospectively or retrospectively. The Company is currently evaluating the
impact of this new guidance, which may alter the structure of our interim
financial statement disclosures.
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ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
Statements
in this Quarterly Report on Form 10-Q that express our "belief," "anticipation" or
"expectation," as well as other statements that are not historical
fact, are forward-looking statements within the meaning of Section 27A of the
Securities Act, Section 21E of the Securities Exchange Act of 1934, as amended,
or the Exchange Act and the Private Securities Litigation Reform Act of
1995. Statements regarding our goals, priorities, growth and
expansion plans and expectation for our water and wastewater subsidiaries and
non-regulated subsidiaries, customer base growth opportunities in Delaware and
Cecil County, Maryland, our belief regarding the timing and results of our rate
requests, our belief regarding our capacity to provide water services for the
foreseeable future to our customers, our belief relating to our compliance and
the cost to achieve compliance with relevant governmental regulations, including
per- and polyfluoroalkyl substances (“PFAS”) regulations, our
belief concerning class action settlements designed to resolve claims for PFAS
contamination and any related outcome, and the Lead and
Copper Rule Improvements, our expectation of the timing of decisions by
regulatory authorities, our belief regarding the success of any rate increase
request, the impact of weather on our operations and the execution of our
strategic initiatives, our expectation of the timing for construction on new
projects, our expectation relating to the adoption of recent accounting
pronouncements, contract operations opportunities, legal proceedings, our
properties, deferred tax assets, adequacy of our available sources of
financing, the expected recovery of expenses related to our long-term debt, our
expectation to be in compliance with financial covenants in our debt
instruments, our ability to refinance our debt as it comes due, our ability to
adjust our debt level, interest rate, maturity schedule and structure, the
timing and terms of renewals of our lines of credit, plans to increase our
wastewater treatment operations, engineering services and other revenue streams
less affected by weather, expected future contributions to our postretirement
benefit plan, anticipated growth in our non-regulated division, the impact of
recent acquisitions on our ability to expand and foster relationships,
anticipated investments in certain of our facilities and systems and the
sources of funding for such investments, and the sufficiency of internally
generated funds and credit facilities to provide working capital and our
liquidity needs are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties
that could cause actual results to differ materially from those
projected. Words such as "expects",
"anticipates", "intends", "plans",
"believes", "seeks", "estimates",
"projects", "forecasts", "may",
"should", variations of such words and similar expressions are
intended to identify such forward-looking statements. Certain
factors as discussed under Item 1A - Risk Factors, in our Annual Report on Form
10-K for the year ended December 31, 2025, and this Quarterly Report on Form
10-Q for the quarter ended March 31, 2026, such as changes in weather, changes
in our contractual obligations, changes in government policies, changes in tax laws,
including, without limitation, the One Big Beautiful Bill Act, the timing and
results of our rate requests, failure to receive regulatory approvals, changes
in economic and market conditions generally, and other matters could cause
results to differ materially from those in the forward-looking
statements. While the Company may elect to update forward-looking
statements, we specifically disclaim any obligation to do so and you should not
rely on any forward-looking statement as a representation of the Company's
views as of any date subsequent to the date of the filing of this Quarterly Report on Form 10-Q.
RESULTS OF OPERATIONS FOR THE PERIOD ENDED MARCH 31, 2026
OVERVIEW
Our profitability is primarily attributable to the sale of water and wastewater services in our regulated utility business. Our regulated utility segment comprised 92.5% of total operating revenues for the three months ended March 31, 2026 and 92.7% for the three months ended March 31, 2025. Water sales are subject to seasonal fluctuations, particularly during summer when water demand may vary with rainfall and temperature. In the event temperatures during the typically warmer months are cooler than expected or rainfall is greater than expected, the demand for water may decrease and our revenues may be adversely affected. We believe these effects of weather are short term and do not materially affect the execution of our strategic initiatives. Our wastewater services provide a revenue stream that is not affected by these changes in weather patterns. We continue to seek growth opportunities to provide wastewater services in Delaware and the surrounding areas.
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Our profitability is also
attributed to other non-utility business, such as various contract operations,
water, sewer and internal SLP Plans and other services we provide. Our contract operations, SLP Plans and other
services also provide a revenue stream that is not affected by changes in
weather patterns. We also continue to
explore and develop relationships with developers and municipalities in order
to increase revenues from contract water and wastewater operations, wastewater
management services, and design, construction and engineering services. We plan to continue developing and expanding
our contract operations and other services in a manner that complements our
growth in water service to new customers.
Our anticipated growth in these areas is subject to changes in
residential and commercial construction, which may be affected by interest
rates, inflation and general housing and economic market conditions. We anticipate continued growth in our
non-utility subsidiaries due to our water and sewer SLP Plans.
Inflation
We are affected by inflation, most notably by the continually increasing costs required to maintain, improve and expand our service capability. The cumulative effect of inflation results in significantly higher facility replacement costs as well as increased operating costs, which must be recovered from future cash flows. Our ability to recover increases in investments in facilities and operating costs is dependent upon future rate increases, which are subject to approval by the applicable regulatory authority. We can provide no assurances that any future rate increase request will be approved, and if approved, we cannot guarantee that any rate increase will be granted in a timely manner and/or will be sufficient in amount to cover costs for which we initially sought the rate increase. The impact of inflation could adversely affect our results of operations, financial position or cash flows.
Regulated Water Subsidiaries
Artesian Water,
Artesian Water Maryland and Artesian Water Pennsylvania provide water service
to residential, commercial, industrial, governmental, municipal and utility
customers. Increases in the number of
customers contribute to increases, or help to offset any intermittent
decreases, in our operating revenue. As
of March 31, 2026, the number of metered water customers in Delaware increased approximately
1.8% compared to March 31, 2025. The
number of metered water customers in Maryland increased approximately 1.5%
compared to March 31, 2025. The number
of metered water customers in Pennsylvania remained consistent compared to March
31, 2025. For the three months ended March
31, 2026, approximately 2.0 billion gallons of water were distributed in our
Delaware systems and approximately 109.6 million gallons of water were
distributed in our Maryland systems.
On April 4, 2025, Artesian
Water filed a request with the DEPSC to implement new rates to meet a requested
increase in revenue of 12.41%, or approximately $10.8 million, on an annualized
basis. Supplemental and rebuttal
filings were subsequently filed, reducing the requested increase to 10.2%, or approximately
$9.0 million, on an annualized basis. The
DEPSC approved and Artesian Water implemented temporary rate increases
effective June 3, 2025 and November 6, 2025, until permanent rates are
determined by the DEPSC. This is
discussed further in Note 13 – Regulatory Proceedings.
Regulated Wastewater Subsidiaries
Artesian Wastewater and
TESI own wastewater collection and treatment infrastructure and provide
regulated wastewater services to customers in Sussex County, Delaware. Artesian Wastewater Maryland is able to
provide regulated wastewater services to customers in Maryland. It is not currently providing these services
in Maryland. The majority of our
residential and commercial wastewater customers are billed a flat monthly fee,
and our large industrial wastewater customer is billed monthly based on
wastewater flow, which contributes to providing a revenue stream unaffected by
weather. As of March 31, 2026, the
number of Delaware wastewater customers increased approximately 6.4%
compared to March 31, 2025.
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Non-Utility Subsidiaries
Artesian Utility
provides contract water and wastewater operation services to private,
municipal, and governmental institutions.
Artesian Utility also offers protection plans to customers: the WSLP
Plan and the SSLP Plan. SLP Plan
customers are billed a flat monthly or quarterly rate, which contributes to
providing a revenue stream unaffected by weather. There has been consistent customer growth
over the years. As of March 31, 2026,
the eligible customers enrolled in the WSLP Plan, the SSLP Plan and the ISLP
Plan increased 5.4%, 7.3% and 0.7%, respectively, compared to March 31, 2025. The Company also
maintains the ISLP Plan, in which the Company discontinued enrolling new
customers effective January 2026.
Strategic Direction and Recent Developments
Our strategy is to increase customer growth, revenues, earnings and dividends by expanding our water, wastewater and SLP Plan services across the Delmarva Peninsula. We remain focused on providing superior service to our customers and continuously seek ways to improve our efficiency and performance. Our strategy has included a focus on building strategic partnerships with county governments, municipalities and developers. By providing water and wastewater services, we believe we are positioned as the primary resource for developers and communities throughout the Delmarva Peninsula seeking to fill both needs simultaneously. We believe we have a proven ability to acquire and integrate high growth, reputable entities, through which we have captured additional service territories that will serve as a base for future revenue. We believe this experience presents a strong platform for further expansion and that our success to date also produces positive relationships and credibility with regulators, municipalities, developers and customers in both existing and prospective service areas.
In our regulated water subsidiaries, our strategy is to focus on a wide spectrum of activities, which include strategic acquisitions of existing systems, expanding certificated service area, identifying new and dependable sources of supply, developing the wells, treatment plants and delivery systems to supply water to customers and educating customers on the wise use of water. Our strategy includes focused efforts to expand through strategic acquisitions and in new regions added to our Delaware service territory over the last 10 years. We plan to expand our regulated water service area in the Cecil County designated growth corridor and to expand our business through the design, construction, operation, management and acquisition of additional water systems. The expansion of our exclusive franchise areas elsewhere in Maryland and the award of contracts will similarly enhance our operations within the state.
Our ability to develop partnerships with various county governments, municipalities and developers has provided a number of opportunities. In recent years, we have completed several acquisitions including asset purchase agreements with municipal and developer/homeowner association operated systems.
We believe that Delaware's generally lower cost of living in the region and availability of development sites in relatively close proximity to the Atlantic Ocean in Sussex County have resulted, and will continue to result, in increases to our customer base. Delaware’s lower property and income tax rate make it an attractive region for new home development and retirement communities. Substantial portions of Delaware currently are not served by a public water system, which could also assist in an increase to our customer base as systems are added.
In our regulated wastewater subsidiaries, we foresee significant growth opportunities and will continue to seek strategic partnerships and relationships with developers and governmental agencies to complement existing agreements for the provision of wastewater service on the Delmarva Peninsula. There are numerous locations in Sussex County where Artesian Wastewater’s and Sussex County’s facilities are connected or integrated to allow for the movement and disposal of wastewater generated by one or the other’s system in a manner that most efficiently and cost effectively manages wastewater transmission, treatment and disposal. In addition, Artesian Wastewater plans to utilize our larger regional wastewater facilities to expand service areas to new customers while transitioning our smaller treatment facilities into regional pump stations in order to gain additional efficiencies in the treatment and disposal of wastewater. We believe this will reduce operational costs at the smaller treatment facilities in the future because they will be converted from treatment and disposal plants to pump stations to assist with transitioning the flow of wastewater from one regional facility to another. In addition,
Artesian’s Delaware wastewater subsidiaries are the sole regional regulated
wastewater utilities in Delaware, which we believe will enable us to continue
to increase efficiencies in the treatment and disposal of wastewater and expand
our wastewater operations.
In April 2024,
Artesian Wastewater received a permit from the Delaware Department of Natural
Resources and Environmental Control, or DNREC, for construction of a 625,000
gallon per day regional wastewater treatment facility, including a primary
receiving headworks at its Sussex Regional Recharge Facility, or SRRF. Under its previous permit, SRRF provided
solely land disposal services for a single commercial processing and treatment
plant. Under its new permit, SRRF will
continue providing those disposal services alongside the new treatment plant.
The new treatment facility will provide service for Artesian Wastewater’s
regional system comprised primarily of residential and small commercial
customers. The construction will also
include the primary receiving facility for untreated effluent, sized to allow
for the expansion of the regional treatment system planned for the site. The new treatment facility will utilize the
existing disposal infrastructure and was completed in the first quarter of
2026. In February 2026, Artesian
Wastewater received a permit from DNREC for construction of an
additional 1,250,000 gallon per day regional wastewater treatment facility.
The general need for increased capital investment in our water and wastewater systems is due to a combination of population growth, more protective water quality standards, aging infrastructure and acquisitions. Our planned and budgeted capital improvements over the next three years include projects for water infrastructure improvements and expansion in both Delaware and Maryland and wastewater infrastructure improvements and expansion in Delaware. The DEPSC and MDPSC have generally recognized the operating and capital costs associated with these improvements in setting water and wastewater rates for current customers and capacity charges for new customers.
In our non-utility
subsidiaries, we continue pursuing opportunities to expand our contract
operations. Through Artesian Utility, we
will seek to expand our contract design, engineering and construction services
of water and wastewater facilities for developers, municipalities and other
utilities. We also anticipate continued
growth due to our water and sewer SLP Plans.
Artesian Development owns two nine-acre parcels of land, located in
Sussex County, Delaware, which allows for construction of a water treatment
facility and wastewater treatment facility.
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Other Matters
Environmental, Health and Safety, and Water Quality Regulation
As required by the Safe
Drinking Water Act, the U.S. Environmental Protection Agency, or EPA,
establishes maximum contaminant levels, or MCLs, for various substances found
in drinking water to ensure that the water is safe for human consumption. On April 10,
2024, the EPA established MCLs for certain per- and polyfluoroalkyl substances,
or PFAS, in drinking water. Under these
regulations, water utilities will be required to complete initial monitoring
for PFAS by 2027 and to conduct ongoing compliance monitoring. At the national level, water utilities also
will be required to meet the new MCLs by April 2029 and to notify the public of
any violations of the MCLs as of and after that date. Delaware water utilities are required to
notify the public of any violations of the MCLs beginning January 15,
2026. To allow drinking water systems
more time to develop plans for addressing PFAS where they are found and
implement solutions, the EPA plans to develop a rulemaking to provide
additional time for compliance, including a proposal to extend the compliance
date to 2031. The EPA plans to finalize
this rule in the Spring of 2026. The
Company has installed treatment for PFAS at several wellfields to date and
plans to continue to install treatment at additional locations as necessary in
future years. The capital investment and
operating costs for treatment of PFAS are anticipated to be recoverable in
water rates charged to customers as approved by the applicable public service
commission. The Company is participating
in the multi-district litigation class action settlements with certain manufacturers
of PFAS seeking reimbursement of costs incurred and that will continue to be incurred. See Note 15 – Legal Proceedings.
The Lead and Copper Rule, or LCR, is a federal regulation that limits the concentration of lead and copper allowed in public drinking water at the consumer's tap, in addition to limiting the permissible amount of pipe corrosion occurring due to the water itself. The LCR limits the levels of lead and copper in water by improving water treatment, testing for lead and copper at customer taps, and eliminating the water supply as a significant source of lead and copper. The EPA published a revised LCR in 2021, or LCR Revisions, to provide greater and more effective protection of public health by reducing exposure to lead and copper in drinking water. Implementation of the revised rule is intended to better identify high levels of lead, improve the reliability of lead tap sampling results, strengthen corrosion control treatment requirements, expand consumer awareness and improve risk communication. In addition, implementation of the revised rule is anticipated to accelerate lead service line replacements by closing existing regulatory loopholes, propelling early action, and strengthening replacement requirements. We filed all required Lead Service Line Inventories by the October 16, 2024 deadline and are fully compliant with the LCR Revisions.
On October 8, 2024, the EPA announced the new final regulations requiring the removal of lead water lines. The EPA’s rule, known as the Lead and Copper Rule Improvements, or LCRI, requires all public water systems to remove lead service lines within 10 years, among other changes to regulations in the EPA’s LCR. The service lines connect a home’s plumbing system to a public water system’s main water line. The LCRI specifies that the water provider will cover the cost for replacements of the customer’s service line up to the first fitting inside the structure being served. Capital investment and operating costs incurred by water utilities for customer-side pipe replacements are typically recoverable in water rates charged to customers as approved by the applicable public service commission.
Results of Operations – Analysis of the Three Months Ended March 31, 2026 Compared to the Three Months Ended March 31, 2025.
Operating Revenues
Revenues totaled $27.8
million for the three months ended March 31, 2026, $1.9 million, or 7.3%, more
than revenues for the three months ended March 31, 2025.
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Water sales revenue
increased $1.5 million, or 7.3%, for the three months ended March 31, 2026 from
the corresponding period in 2025, primarily the result of two temporary rate
increases as permitted under Delaware law, until permanent rates are determined
by the DEPSC, as well as an increase in the number of customers served. The first temporary rate increase of 2.88%
was placed into effect on June 3, 2025 at which time the DSIC rate of 1.66% was
set to zero. The second temporary rate
increase of 6.82% was placed into effect on November 6, 2025, of which a portion has
been reserved for refund and is not reflected in income. We realized 79.9% and 79.9% of our total
operating revenue for the three months ended March 31, 2026 and March 31, 2025,
respectively, from the sale of water.
Other utility operating
revenue increased approximately $0.2 million, or 6.2%, for the three months
ended March 31, 2026 compared to the three months ended March 31, 2025. This increase is primarily
due to an increase in revenue related to industrial wastewater services and an
increase in wastewater revenue associated with additional residential and
commercial customers.
Non-utility operating
revenue increased approximately $0.2 million, or 9.5%, for the three months
ended March 31, 2026 compared to the three months ended March 31, 2025. This increase is primarily due to an increase in SLP Plan revenue, primarily the result
of an increase in the number of customers participating in the SLP Plans and an increase in fees that
were placed into effect on January 1, 2026.
Operating Expenses
Operating
expenses, excluding depreciation and income taxes, increased $0.9 million, or 5.7%, for the three
months ended March 31, 2026, compared to the same period in 2025.
Utility operating expenses increased $0.8 million, or 6.7%, for the three
months ended March 31, 2026 compared to the same period in 2025. The increase in utility operating expenses
consists of a $0.6 million increase in payroll and employee benefit costs, a
$0.2 million increase in supply and treatment costs, and a $0.1 million
increase in transmission,
distribution and collection system costs. The increase in utility operating expenses is
partially offset by a $0.1 million decrease in administrative costs.
The
ratio of operating expenses, excluding depreciation and income taxes, to total revenue
was 57.6% for the three months ended March 31, 2026, compared to 58.5% for the three
months ended March 31, 2025.
Federal
and state income tax expense increased $0.2 million, or 11.2%, primarily due to
higher pre-tax book income.
Other Income
Other income decreased $0.2 million, primarily due to a decrease
in patronage refunds on the Company’s lines of credit and loan volume and a
decrease in allowance for funds used during construction, or AFUDC, as a result
of lower long-term construction activity subject to AFUDC.
Net Income
Our net income applicable
to common stock increased $0.5 million, or 9.2%. Total operating revenues increased $1.9 million,
offset by a $1.2 million increase in total operating expenses, and a decrease
of $0.2 million in other income.
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LIQUIDITY AND CAPITAL RESOURCES
Overview
Our
primary sources of liquidity for the three
months ended March 31, 2026 were $8.6 million of cash provided by operating
activities, $10.0 million from the
issuance of long-term debt, and
$8.1 million in net contributions and advances from developers. We depend on the
availability of capital for expansion, construction and maintenance. We rely on our sources of liquidity for
investments in our utility plant and to meet our various payment obligations.
Operating Activities
One of our primary sources
of liquidity for the three months ended March 31, 2026 was $8.6 million
provided by cash flow from operating activities, compared to $11.0 million for
the three months ended March 31, 2025.
The decrease in cash flows from operating activities is primarily from lower
accounts receivable and accounts payable, partially offset by higher materials
and supplies, customer deposits and other, net income, deferred income taxes, and
accrued expenses. Cash flow from operating activities is primarily provided by our utility
operations and is impacted by the timeliness and adequacy of rate increases and
changes in water consumption as a result of year-to-year variations in weather
conditions, particularly during the summer.
A significant part of our ability to maintain and meet our financial
objectives is to ensure that our investments in utility plant and equipment are
recovered in the rates charged to customers.
As such, from time to time, we file rate increase requests to recover
increases in operating expenses and investments in utility plant and
equipment. See Note 13 – Regulatory
Proceedings. We will continue to borrow on available lines of credit in order
to satisfy current liquidity needs. In addition, the Company has a long history of paying
regular quarterly dividends as approved by our Board of Directors using net
cash from operating activities.
Investment Activities
The primary focus of our investments is to continue to provide high
quality reliable service to our growing service territory. Capital
expenditures during the first three months of 2026 were $13.1 million compared
to $10.4 million during the same period in 2025. During the first three months of 2026, these
investments include installation of new mains, services and hydrants, renewals
associated with the rehabilitation of aging infrastructure, upgrading and
replacing our meter reading equipment, installation of wastewater force mains,
upgrading existing pumping and treatment stations, including PFAS treatment
upgrades, and construction of new wastewater treatment plants, to better serve
our customers.
Financing Activities
For the three months ended March
31, 2026, cash flows provided by financing activities were $8.7 million,
compared to $2.0 million for the three months ended March 31, 2025. Our primary sources of liquidity from
financing activities for the three months ended March 31, 2026 were $10.0 million
from the issuance of long-term debt and $8.1 million in net contributions and
advances from developers. The cash flows
provided by financing activities increased due to higher issuance of long-term
debt and an increase in net contributions
and advances from developers, partially offset by an increase in repayments of
lines of credit and a decrease in overdraft payables. We have
several sources of liquidity to finance our investment in utility plant and
other fixed assets. We estimate that
future investments will be financed by our operations and external
sources. We expect to fund our
activities for the next twelve months using our projected cash generated from
operations, bank credit lines, contributions from developers and settlement
funds, government grants and capital market financing as needed to provide
sufficient working capital to maintain normal operations, to meet our financing
requirements and to expand through strategic acquisitions. We believe that our cash on hand and future
cash generated from the foregoing activities will provide adequate resources to
fund our short-term and long-term capital, operating and financing needs.
However, there is no assurance that we will be able to secure funding on terms
acceptable to us, or at all. Our cash
flows from operations are primarily derived from water sales revenues and may
be materially affected by changes in water sales due to weather and the timing
and extent of increases in rates approved by state public service commissions.
Material Cash Requirements
Lines of Credit and Long-Term Debt
At March 31, 2026,
Artesian Resources had a $40 million line of credit with Citizens Bank, or
Citizens, which is available to all subsidiaries of Artesian Resources. As of March 31, 2026, there was $40 million
of available funds under this line of credit.
The interest rate is a one-month Daily Secured Overnight Financing Rate,
or SOFR, plus 10 basis points, or Term SOFR, plus an applicable margin of
1.10%. Term SOFR cannot be less than
0.00%. This is a demand line of credit
and therefore the financial institution may demand payment for any outstanding
amounts at any time. The term of this
line of credit expires on the earlier of May 17, 2027, or any date on which
Citizens demands payment. The Company expects to renew this line of credit.
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At March 31, 2026,
Artesian Water had a $20 million line of credit with CoBank, ACB, or CoBank,
that allowed for the financing of operations for Artesian Water, with up to $10
million of this line available for the operations of Artesian Water
Maryland. As of March 31, 2026, there
was $20 million of available funds under this line of credit. In April 2026, the agreement for this line of
credit was amended to allow for the financing of operations by Artesian Water,
Artesian Water Maryland, and Artesian Wastewater Management, Inc., individually
or collectively, subject to the $20-million limit. The interest rate for borrowings under this
line is either a daily SOFR rate plus 1.45% option or a term SOFR rate plus
1.45% option that is locked in for either one or three months. The term of this line of credit expires on
October 31, 2026. Artesian Water expects
to renew this line of credit.
The Company’s material cash requirements include the following lines of credit commitments and contractual obligations:
|
Material Cash Requirements
|
Payments Due by Period | |||||||||||||||||||
|
In thousands
|
Less than 1 Year | 1-3 Years | 4-5 Years | After 5 Years | Total | |||||||||||||||
|
First mortgage bonds (principal and interest)
|
$ | 7,816 | $ | 39,045 | $ | 12,422 | $ | 185,891 | $ | 245,174 | ||||||||||
|
State revolving fund loans (principal and interest)
|
1,065 | 2,130 | 2,130 | 8,200 | 13,525 | |||||||||||||||
|
Promissory notes (principal and interest)
|
1,871 | 3,685 | 3,685 | 20,626 | 29,867 | |||||||||||||||
|
Asset purchase contractual obligation (principal and interest)
|
326 | 320 | - | - | 646 | |||||||||||||||
|
Lines of credit
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- | - | - | - | - | |||||||||||||||
|
Operating leases
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29 | 50 | 42 | 1,337 | 1,458 | |||||||||||||||
|
Operating agreements
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38 | 15 | - | - | 53 | |||||||||||||||
|
Unconditional purchase obligations
|
812 | 114 | 114 | 184 | 1,224 | |||||||||||||||
| Tank painting contractual obligation | 849 | 1,061 | - | - | 1,910 |
|||||||||||||||
|
Total contractual cash obligations
|
$ | 12,806 | $ | 46,420 | $ | 18,393 | $ | 216,238 | $ | 293,857 | ||||||||||
Artesian’s long-term debt agreements and revolving lines of credit contain customary affirmative and negative covenants that are binding on us (which are in some cases subject to certain exceptions), including, but not limited to, restrictions on our ability to make certain loans and investments, guarantee certain obligations, enter into, or undertake, certain mergers, consolidations or acquisitions, transfer certain assets or change our business. As of March 31, 2026, we were in compliance with these covenants.
Long-term debt obligations reflect the maturities of certain series of our first mortgage bonds, which we intend to refinance when due if not refinanced earlier. One first mortgage bond is subject to redemption in a principal amount equal to $150,000 plus interest per calendar quarter. The state revolving fund loan obligation and promissory note obligation have an amortizing mortgage payment payable over a 20-year period. The first mortgage bonds, the state revolving fund loan and the promissory notes have certain financial covenant provisions, the violation of which could result in default and require the obligation to be immediately repaid, including all interest. We have not experienced conditions that would result in our default under these agreements.
On March 13, 2026, Artesian
Water Maryland and CoBank entered into a Master Loan Agreement, or the MLA, and
supplement to the MLA, in which CoBank will make a single loan to Artesian
Water Maryland in a principal amount not to exceed $10 million. Artesian Water Maryland agrees to pay
interest on the unpaid principal balance of the loans at 6.14% per annum. Interest shall be calculated and paid
quarterly in arrears on the thirtieth (30th) day of each of March, June,
September and December. Artesian Water Maryland
agrees to repay the loan in eighty consecutive quarterly installments, each due
on the thirtieth (30th) day of each March, June, September, and December, with
the first installment due on June 30, 2026, and the last installment due on
March 13, 2046. The amount of each
installment shall be the same principal amount that would be required to be
repaid if the loan was scheduled to be repaid in level installments of
principal and interest and such schedule was calculated utilizing 6.14% as the
rate accruing on the loan; provided, however, that the last installment of the
loan shall be in an amount equal to the then unpaid principal balance of the
loan. Closing on the debt financing was
approved by the Maryland Public Service Commission on March 2, 2026.
The asset purchase
contractual obligation is related to the purchase of substantially all of the
water operating assets from the Town of Clayton in May 2022, by Artesian
Water. The total purchase price was $5.0
million. At closing, Artesian Water paid
approximately $3.4 million. The balance
is payable in five equal annual installments on the anniversary date of the
closing date. Each annual installment is
payable with interest at an annual rate of 2.0%.
Payments for unconditional purchase obligations reflect minimum water purchase obligations based on rates that are subject to change under an interconnection agreement with the Chester Water Authority. The agreement is effective from January 1, 2022 through December 31, 2026, includes automatic five-year renewal terms, unless terminated by either party, and has a “take or pay” clause which currently requires us to purchase a minimum of 0.5 million gallons of water per day. In addition, payments for unconditional purchase obligations reflect minimum water purchase obligations based on a contract rate under our interconnection agreement with the Town of North East, which expires June 26, 2029. The agreement includes a remaining automatic five-year renewal term, unless terminated by either party.
In August 2025, Artesian
Water entered into a new, three-year agreement with Worldwide Industries
Corporation, effective September 1, 2025, to paint elevated water storage
tanks. Pursuant to the agreement, the
expected total expenditure for the three years is $2.5 million.
In order to control
purchased power costs and avoid fluctuations in electricity rates that happen
due to the change of seasons, energy supply changes, or other outside factors,
we utilize contracts with electric suppliers that provide a fixed rate. In April 2025, Artesian entered into an
electric supply contract with Constellation NewEnergy, Inc. that is effective
from May 2025 to May 2029 for Delaware operations. The supply rate was increased approximately
25% starting in May 2025. In April 2025,
Artesian Water Maryland entered into an electric supply agreement with WGL
Energy that is effective from November 2025 through November 2029 for Maryland
operations. The fixed rate was increased
5.5% starting in November 2025. These
fixed rate electric supply contracts are for normal purchases and are not
derivative instruments.
Critical Accounting Estimates; Recent Accounting Pronouncements
This discussion and analysis of our financial condition and results of operations is based on the accounting policies used and disclosed in our 2025 consolidated financial statements and accompanying notes that were prepared in accordance with accounting principles generally accepted in the United States of America and included as part of our annual report on Form 10-K for the year ended December 31, 2025. The preparation of those financial statements required management to make assumptions and estimates that affected the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements as well as the reported amounts of revenues and expenses during the reporting periods. Actual amounts or results could differ from those based on such assumptions and estimates.
Management has reviewed our
financial policies and determined that there are no critical accounting
estimates requiring disclosure, as further described in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our annual report on Form 10-K for the year ended December 31, 2025. There have been no changes in our critical accounting estimates. Our significant accounting policies are described in our notes to the 2025 consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2025.
Information concerning our implementation and the impact of recent accounting pronouncements issued by the FASB is included in the notes to our 2025 consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2025 and also in the notes to our unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q. We did not adopt any accounting policy in the first three months of 2026 that had a material impact on our financial condition, liquidity or results of operations.
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ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 exposure to interest
rate risk related to existing fixed rate, long-term debt is due to the term of
the majority of our First Mortgage Bonds and the term of the promissory note,
which have final maturity dates ranging from 2028 to 2049, and interest rates
ranging from 4.24% to 6.14%, which exposes the Company to interest rate risk as
interest rates may drop below the existing fixed rate of the long-term debt
prior to such debt’s maturity. In
addition, the Company has interest rate exposure on $60 million of variable
rate lines of credit with two banks. As
of March 31, 2026, there were no outstanding amounts on the lines of
credit. Increases in variable interest
rates result in an increase in the cost of borrowing on these variable rate
lines of credit. We are also exposed to
market risk associated with changes in commodity prices. Our risks associated with price increases in
chemicals, electricity and other commodities are mitigated by our ability to
recover our costs through rate increases to our customers. We have also sought to mitigate future
significant electric price increases by signing multi-year supply contracts at
fixed prices.
ITEM 4 – CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based upon this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective in providing reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In addition, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective to achieve the foregoing objectives. A control system cannot provide absolute assurance, however, that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
(b) Change in Internal Control over Financial Reporting
No change in our internal control over financial reporting occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1 – LEGAL PROCEEDINGS
Periodically, we are involved in other proceedings or litigation arising in the ordinary course of business. We do not believe that the ultimate resolution of these matters will materially affect our business, financial position or results of operations. However, we cannot ensure that we will prevail in any litigation and, regardless of the outcome, may incur significant litigation expense and may have significant diversion of management attention. For a full discussion of our current legal proceedings or litigation arising in the ordinary course of business, refer to Note 15 – Legal Proceedings.
ITEM 1A – RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2025, which could materially affect our business, financial condition or future results. There have been no material changes to the risk factors described in such Annual Report on Form 10-K.
ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 – DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 – MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5 – OTHER INFORMATION
(a)
None.
(b) None.
(c) None of the Company’s directors or officers adopted terminated
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Table of Contents
ITEM 6 - EXHIBITS
| Exhibit No. | Description | |
| 4.1 | Master Loan Agreement, dated as of March 13, 2026, by and between Artesian Water Maryland, Inc. and CoBank, ACB. Incorporated by reference to Exhibit 4.26 filed with the Company’s Form 10-K filed on March 16, 2026. | |
| 4.2 | Guarantee of Payment, dated as of March 13, 2026, by and between Artesian Resources Corporation and CoBank, ACB. Incorporated by reference to Exhibit 4.27 filed with the Company’s Form 10-K filed on March 16, 2026. | |
| 31.1 |
Certification of Chief Executive Officer of the Registrant required by Rule 13a–14(a) under the Securities Exchange Act of 1934, as amended. *
|
|
| 31.2 |
Certification of Chief Financial Officer of the Registrant required by Rule 13a–14(a) under the Securities Exchange Act of 1934, as amended. *
|
|
| 32 |
Certification of Chief Executive Officer and Chief Financial Officer required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. Section 1350). **
|
|
| 101.BAL |
Inline XBRL Condensed Consolidated Balance Sheets (unaudited)* |
|
101.OPS |
Inline XBRL Condensed Consolidated Statements of Operations (unaudited)* |
|
| 101.CSH | Inline XBRL Condensed Consolidated Statements of Cash Flows (unaudited)* | |
| 101.NTS | Inline XBRL Notes to the Condensed Consolidated Financial Statements (unaudited)* | |
| 104 |
|
|
* Filed herewith
** Furnished herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ARTESIAN RESOURCES CORPORATION
|
Date: May 8, 2026
|
By:
|
/s/ NICHOLLE R. TAYLOR
|
|
|
|
|
Nicholle R. Taylor
Chair of the Board of Directors, President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
|
|
|
Date: May 8, 2026
|
By:
|
/s/ DAVID B. SPACHT
|
|
|
|
|
David B. Spacht
Chief Financial Officer (Principal Financial Officer)
|
|
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FAQ
How did Artesian Resources (ARTNA) perform financially in Q1 2026?
Artesian Resources posted higher Q1 2026 results, with operating revenues of $27.8 million versus $25.9 million a year earlier and net income of $5.9 million versus $5.4 million. Earnings per share rose to $0.58 basic and $0.57 diluted, reflecting modest profit growth.
What were Artesian Resources (ARTNA) operating revenues by major source in Q1 2026?
Total operating revenues reached $27.8 million in Q1 2026, including $22.2 million from water sales, $3.6 million from other utility operating revenue, and $2.0 million from non‑utility revenue. Tariff revenue was $25.2 million and non‑tariff revenue from service line plans and other services was $2.2 million.
What was Artesian Resources (ARTNA) cash flow from operations in Q1 2026?
Net cash provided by operating activities was $8.6 million for the three months ended March 31, 2026, compared with $11.0 million in the prior‑year period. The change primarily reflects movements in working capital items such as accounts receivable, payables, and taxes.
How much did Artesian Resources (ARTNA) invest in capital expenditures in Q1 2026?
Capital expenditures totaled $13.1 million net of AFUDC during Q1 2026, compared with $10.4 million a year earlier. These investments primarily expanded and upgraded utility plant, contributing to total utility plant at original cost of $812.3 million as of March 31, 2026.
What is Artesian Resources (ARTNA) current debt profile as of March 31, 2026?
Long-term debt, including current portion, was $185.9 million at March 31, 2026, compared with a fair value estimate of $164.7 million. The company also had no outstanding balance on its lines of credit, after net repayments and new long‑term borrowing during the quarter.
What dividend did Artesian Resources (ARTNA) pay in Q1 2026?
The company paid cash dividends of $0.3136 per share of common stock in Q1 2026, up from $0.3014 per share a year earlier. Total dividends paid during the quarter were $3.2 million, funded alongside continued capital investment and new long‑term borrowing.