Artesian Resources Corporation Reports Third Quarter and Year-To-Date 2023 Results

NEWARK, Del., Nov. 06, 2023 (GLOBE NEWSWIRE) — Artesian Resources Corporation (Nasdaq: ARTNA), a leading provider of water and wastewater services, and related services, on the Delmarva Peninsula, today announced third quarter and year-to-date results for 2023.

Third Quarter Results

Revenues totaled $26.6 million for both the three months ended September 30, 2023 and September 30, 2022 respectively.

   Other utility operating revenue increased approximately $0.4 million, or 13.9%, primarily due to an increase in wastewater revenue associated
   with additional customers served and the timing of industrial wastewater revenue.

   Water sales revenue decreased $0.1 million, or 0.3%, primarily related to a decrease in overall water consumption related to above average
   precipitation experienced during the summer months of 2023, partially offset by an increase in fixed fee charges related to additional
   customers served.

   Non-utility operating revenue decreased approximately $0.3 million, or 16.9%, primarily due to a decrease in contract service revenue
   related to a contract for the design and construction of wastewater infrastructure now nearing completion, partially offset by an increase
   in Service Line Protection Plan, or SLP Plan, revenue.

Operating expenses, excluding depreciation and income taxes, increased $0.8 million, or 5.6%. Utility operating expenses increased $1.2 million, or 11.1%, primarily the result of increased payroll and employee benefits costs; repair, maintenance and chemical treatment costs associated with our water and wastewater systems; as well as costs related to increases in computer system maintenance and subscription fees, and consulting fees.

Non-utility operating expenses decreased $0.5 million, or 28.5%, primarily due to a decrease in costs associated with a wastewater infrastructure design and construction contract.

Depreciation and amortization expense increased $0.2 million, or 7.3%, primarily due to continued investment in utility plant providing supply, treatment, storage and distribution of water to customers and service to our wastewater customers.

Federal and state income tax expense increased $0.4 million, or 22.7%, primarily due to adjustments related to the application of Delaware state net operating loss valuation allowances, partially offset by lower pre-tax income in 2023 compared to 2022 and a decrease in 2022 income tax expense related to stock options exercised in the third quarter of 2022, with no similar activity in 2023.

Other income increased $0.3 million, primarily due to an increase in allowance for funds used during construction, or AFUDC, as a result of higher long-term construction activity subject to AFUDC.

Net income was $5.1 million for the three months ended September 30, 2023, a $1.1 million, or 17.5%, decrease compared to net income recorded during the three months ended September 30, 2022. Diluted net income per share decreased to $0.49 compared to $0.65 for the same period in 2022.

Year-to-Date Results

Revenues totaled $74.3 million for the nine months ended September 30, 2023, $0.5 million, or 0.7%, more than revenues for the nine months ended September 30, 2022. Comprising this increase:

   Other utility operating revenue increased approximately $0.8 million, or 9.7%, primarily due to an increase in wastewater revenue associated
   with additional customers served and the timing of industrial wastewater revenue.

   Water sales revenue increased $0.7 million, or 1.2%, primarily related to an increase in overall water consumption and an increase in fixed
   fee charges related to new customers. This increase is partially offset by a one-time refund issued to customers within the Town of Frankford
   for a rate change retroactive to February 2022, as approved by the DEPSC in the first quarter of 2023, in accordance with the agreement for
   the purchase of Frankford’s water assets.

   Non-utility operating revenue decreased approximately $1.0 million, or 16.7%, primarily due to a decrease in contract service revenue
   related to a contract for the design and construction of wastewater infrastructure now nearing completion, partially offset by an increase
   in SLP Plan revenue.

Operating expenses, excluding depreciation and income taxes, increased $2.6 million, or 6.4%. Utility operating expenses increased $3.5 million, or 11.3%, primarily the result of increased payroll and employee benefits costs; repair, maintenance, operating and chemical treatment costs associated with our water and wastewater system; as well as costs related to increases in computer system maintenance and subscription fees, consulting fees, legal fees, a one-time adjustment related to an acquisition in 2022, and customer billing costs. These increases are partially offset by a decrease in purchased water under a new contract, effective January 2022, in which the minimum amount of water required to be purchased was reduced.

Non-utility operating expenses decreased $1.1 million, or 24.7%, primarily due to a decrease in costs associated with a wastewater infrastructure design and construction contract.

Property and other taxes increased $0.2 million, or 3.6%, primarily due to an increase in utility plant subject to taxation and an increase in payroll taxes, related to increased payroll related expenses. Property taxes are assessed on land, buildings and certain utility plant, which include the footage and size of pipe, hydrants and wells.

Depreciation and amortization expense increased $0.5 million, or 5.7%, primarily due to continued investment in utility plant providing supply, treatment, storage and distribution of water to customers and service to our wastewater customers.

Federal and state income tax expense increased $0.2 million, or 3.6%, primarily due to adjustments related to the application of Delaware state net operating loss valuation allowances, partially offset by lower pre-tax income in 2023 compared to 2022 and a decrease in 2022 income tax expense related to stock options exercised in the first nine months of 2022, with no similar activity in 2023.

Other income increased $1.0 million, primarily due to a $0.8 million increase in AFUDC, as a result of higher long-term construction activity subject to AFUDC. Miscellaneous income increased $0.2 million primarily related to an increase in the annual patronage refund from CoBank, ACB. The primary refund calculation for both 2023 and 2022 was based on the average loan balance outstanding.

Long-term debt interest increased $0.4 million, primarily related to an increase in long-term debt interest associated with the Series W First Mortgage Bond issued on April 29, 2022. Short-term debt interest increased $0.3 million, primarily related to higher interest rates.

Net income was $13.2 million, a $2.5 million, or 15.7%, decrease compared to net income recorded during the nine months ended September 30, 2022. Diluted net income per share decreased to $1.33, compared to $1.65 for the same period in 2022.

“This past quarter’s results show a decrease in water sales, due to unusually wet weather conditions and continued increases in expenses caused by inflationary pressures,” said Nicholle Taylor, President of Artesian Water Company. “We continue to progress as anticipated with our application for an increase in water rates and the initial temporary increase will go into effect in the fourth quarter.”

Application to Increase Customer Rates

On April 28, 2023, Artesian Water filed a request with the Delaware Public Service Commission, or DEPSC, to implement new rates to meet a requested increase in revenue of 23.84%, or approximately $17.5 million, on an annualized basis. The actual effective increase is less than 23.84% since Artesian Water has been permitted to recover specific investments made in infrastructure through the assessment of a 7.50% Distribution System Improvement Charge, or DSIC. Since the DSIC rate is set to zero when temporary rates are placed into effect, customers would experience an incremental increase of 16.34%, the net of the overall 23.84% increase less the DSIC rate of 7.50% currently in effect, if the requested increase is granted in full by the DEPSC. The new rates are designed to support Artesian Water’s ongoing capital improvement program and to cover increased costs of operations, including chemicals and electricity for water treatment, water quality testing, fuel, taxes, interest, labor and benefits.

In accordance with applicable Delaware law, Artesian Water is permitted to implement a temporary base rate increase of 15% of gross water sales on an annual basis, or $2.5 million, whichever is lower, 60 days after the application is filed. Since Artesian Water had DSIC surcharges in excess of the allowable temporary increase and imposing the temporary increase would require DSIC to be reset to zero, Artesian Water elected not to request the initial temporary rate increase. However, since the application is not expected to be resolved within the seven-month statutory timeframe, Artesian Water filed an interim rates application on October 12, 2023 to place into effect on November 28, 2023 a temporary base rate increase, subject to refund, of 15% of gross water sales on an annual basis and reduce the 7.5% DSIC rate to zero until permanent rates are determined by the DEPSC. Artesian Water’s last comprehensive application for an increase in base rate charges was filed in April 2014.

Capital Expenditures

As part of Artesian’s ongoing effort to ensure high-quality reliable service to customers, $48.8 million was invested in water and wastewater infrastructure projects during the first nine months of 2023 compared to $36.7 million for the same period in 2022. These investments include the rehabilitation program for transmission and distribution facilities by replacing aging or deteriorating water mains, installation of new main, construction of water treatment facilities, enhancing or improving existing water treatment facilities, including enhancements to treat potential per- and polyfluoroalkyl substances, or PFAS, construction of new water storage tanks, replacing aging wells and pumping equipment, and enhancing or improving existing wastewater treatment and disposal facilities, to better serve our water and wastewater customers.

“We maintain our commitment of providing reliable water service for our customers through a proactive approach to capital investments,” said Dian C. Taylor, CEO. “Our significant investments not only replace aging infrastructure, reducing the potential of costly failures and outages, but also include new infrastructure to meet our growing customer demands. Additionally, Artesian has been progressing with investments in proactive PFAS treatment to maintain water quality standards prior to the United States Environmental Protection Agency’s more stringent regulations expected early next year.”

About Artesian Resources
Artesian Resources Corporation operates as a holding company of wholly-owned subsidiaries offering water and wastewater services, and a number of other related core business services, on the Delmarva Peninsula. Artesian Water Company, the principal subsidiary, is the oldest and largest regulated water utility on the Delmarva Peninsula and has been providing water service since 1905. Artesian Water Company supplies 8.7 billion gallons of water per year through 1,442 miles of main to over a third of Delawareans.

Forward-Looking Statements
This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding, among other things, recovery of investments in water utility plant and increased operating costs in rates charged to customers as presented in our current filing before the Delaware Public Service Commission, expectations regarding the cost and timing of planned infrastructure investments, the impact of weather on our operations, our growth strategy, our expectations regarding infrastructure investments, and continued growth in our business and the number of customers served. These statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-looking statements including: changes in weather, changes in our contractual obligations, changes in government policies, the timing and results of our rate requests, failure to receive regulatory approval, changes in economic and market conditions generally and other matters discussed in our filings with the Securities and Exchange Commission. 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 representation of the Company’s views as of any date subsequent to the date of this release.

Contact:
Nicki Taylor
Investor Relations
(302) 453-6900
ntaylor@artesianwater.com