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Artesian Resources Corporation Reports Second Quarter and Year-To-Date 2023 Results
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NEWARK, Del., Aug. 07, 2023 (GLOBE NEWSWIRE) -- Artesian Resources Corporation (Nasdaq: ARTNA), a leading provider of water and wastewater services, and related services, on the Delmarva Peninsula, today announced second quarter and year-to-date results for 2023.
Diluted net income per share decreased to $0.44 in the second quarter and to $0.84 year-to-date, compared to $0.53 and $1.01 in the comparative periods a year ago.
Increased revenue by $0.2 million in the second quarter and $0.5 million year-to-date.
Filed a request with the Delaware Public Service Commission on April 28th to implement increased water rates to support the on-going capital improvement program and increased costs of operations.
Invested $32.3 million year-to-date in water and wastewater infrastructure.
Raised $36.2 million in capital upon the sale of approximately 763,339 shares of the Company’s Class A Non-Voting Common Stock.
Common Stock Offering
During the second quarter of 2023, the Company completed a combined sale and partial exercise of the over-allotment option of a total of 763,339 shares of its Class A Non-Voting Common Stock, par value $1.00 per share, at a price to the public of $50.00 per share. The net proceeds to the Company from the offering, after deducting the underwriting discounts and commissions and other offering expenses, were approximately $36.2 million. The proceeds from both the initial offering and the over-allotment option were used to repay short-term borrowings, including borrowings incurred under Artesian’s lines of credit, incurred primarily to finance expenses associated with our construction program, including investment in utility plant and equipment, and to fund capital expenditures and other general corporate purposes.
“Maintaining a reliable water system that ensures high-quality water and service to our customers requires significant and continuous investment in our infrastructure,” said Dian C. Taylor, CEO. “It is our ability to attract investors and raise funds in the capital markets that enables us to cost-effectively provide assured supply of high-quality water to those we serve.”
Application to Increase Customer Rates
Artesian’s last comprehensive application for an increase in base rate charges was filed in April 2014. On April 28, 2023, Artesian filed a request with the Delaware Public Service Commission, or DEPSC, to implement new rates to meet a requested increase in revenue of 23.84%, or approximately $17.5 million, on an annualized basis. The actual effective increase is less than 23.84% since Artesian has been permitted to recover specific investments made in infrastructure through the assessment of a 7.50% Distribution System Improvement Charge (DSIC). Since the DSIC rate is set to zero when temporary rates are placed into effect, customers would experience an incremental increase of 16.34%, the net of the overall 23.84% increase less the DSIC rate of 7.50% currently in effect, if the requested increase is granted in full by the DEPSC. The new rates are designed to support Artesian’s ongoing capital improvement program and to cover increased costs of operations, including chemicals and electricity for water treatment, water quality testing, fuel, taxes, interest, labor and benefits. Since Artesian Water has DSIC surcharges in excess of the allowable temporary increase, imposing the temporary increase would require DSIC to be reset to zero. Accordingly, Artesian Water has elected not to request the initial temporary rate increase at this time. However, should the application not be resolved within the seven-month statutory timeframe, Artesian Water would be permitted, and plans, to place into effect on November 28, 2023 temporary rates of up to 15% of gross water sales on an annual basis. This would be subject to refund, until permanent rates are determined by the DEPSC.
“Artesian continues to make strategic capital investments to proactively replace aging infrastructure and install enhanced water treatment systems addressing emerging contaminants such as PFAS while also enhancing water supply for continued growth,” said Nicki R. Taylor, President of Artesian Water Company. “We have been working closely with the Delaware Public Service Commission on our rate application. If the application is not resolved within the statutory time frame, a temporary rate increase is planned to go in effect late in the fourth quarter. This will provide financial recovery of both significant investments in capital and increases in operating expenses that have allowed Artesian to continue providing reliable water service to our customers.”
Second Quarter Results
Net income was $4.4 million for the three months ended June 30, 2023, a $0.6 million, or 12.0%, decrease compared to net income recorded during the three months ended June 30, 2022. Diluted net income per share decreased to $0.44 compared to $0.53 for the same period in 2022.
Revenues totaled $25.3 million for the three months ended June 30, 2023, $0.2 million, or 1.0%, more than revenues for the three months ended June 30, 2022. Comprising this increase:
Water sales revenue increased $0.9 million, or 4.6%, primarily related to an increase in overall water consumption due to the brief warm, dry weather conditions experienced during the quarter and an increase in fixed-fee charges related to additional customers served.
Other utility operating revenue increased approximately $0.1 million, or 4.0%, primarily due to an increase in wastewater revenue associated with additional customers served.
Non-utility operating revenue decreased approximately $0.8 million, or 33.3%, primarily due to a decrease in contract service revenue related to a contract for the design and construction of wastewater infrastructure, slightly offset by an increase in Service Line Protection Plan, or SLP Plan, revenue.
Operating expenses, excluding depreciation and income taxes, increased $0.8 million, or 6.3%. Utility operating expense increases primarily are the result of increased payroll and employee benefits costs; repair, maintenance and chemical treatment costs associated with our water and wastewater systems; as well as administrative costs. These increases are partially offset by a decrease in purchased water under a new contract, effective January 2022, in which the minimum amount of water required to be purchased was reduced.
Non-utility operating expenses decreased $0.8 million primarily due to a decrease in costs associated with the wastewater infrastructure design and construction contract.
Depreciation and amortization expense increased $0.2 million, or 5.2%, primarily due to continued investment in utility plant providing supply, treatment, storage and distribution of water to customers and service to our wastewater customers.
Federal and state income tax expense decreased $0.1 million, or 7.7%, primarily due to lower pre-tax income, partially offset by a decrease in 2022 income tax expense related to stock options exercised in the second quarter of 2022.
Property and other taxes increased $0.1 million, or 5.2%, primarily due to an increase in utility plant subject to taxation. Property taxes are assessed on land, buildings and certain utility plant, which include the footage and size of pipe, hydrants and wells. In addition, payroll taxes increased, related to increased payroll related expenses.
Other income increased $0.3 million, primarily due to an increase in allowance for funds used during construction, or AFUDC, as a result of higher long-term construction activity subject to AFUDC.
Long-term debt interest increased $0.1 million, primarily related to an increase in long-term debt interest associated with the Series W First Mortgage Bond issued on April 29, 2022. Short-term debt interest increased $0.1 million, primarily related to higher interest rates.
Year-to-Date Results
Net income was $8.1 million, a $1.4 million, or 14.5%, decrease compared to net income recorded during the six months ended June 30, 2022. Diluted net income per share decreased to $0.84, compared to $1.01 for the same period in 2022.
Revenues totaled $47.7 million for the six months ended June 30, 2023, $0.5 million, or 1.2%, more than revenues for the six months ended June 30, 2022. Comprising this increase:
Water sales revenue increased $0.8 million, or 2.1%, primarily related to an increase in overall water consumption due to the brief warm, dry weather conditions experienced during the second quarter of 2023 and an increase in fixed-fee charges related to additional customers served.
Other utility operating revenue increased approximately $0.4 million, or 7.5%, primarily due to an increase in wastewater revenue associated with additional customers served.
Non-utility operating revenue decreased approximately $0.6 million, or 16.6%, primarily due to a decrease in contract service revenue related to a contract for the design and construction of wastewater infrastructure, partially offset by an increase in SLP Plan revenue.
Operating expenses, excluding depreciation and income taxes, increased $1.8 million, or 6.9%. Utility operating expenses increased $2.3 million, or 11.3%, primarily the result of increased payroll and employee benefits costs; repair, maintenance and chemical treatment costs associated with our water and wastewater system; as well as administrative costs. These increases are partially offset by a decrease in purchased water under a new contract, effective January 2022, in which the minimum amount of water required to be purchased was reduced.
Non-utility operating expenses decreased $0.6 million primarily due to a decrease in costs associated with the wastewater infrastructure design and construction contract.
Depreciation and amortization expense increased $0.3 million, or 4.9%, primarily due to continued investment in utility plant providing supply, treatment, storage and distribution of water to customers and service to our wastewater customers.
Federal and state income tax expense decreased $0.2 million, or 7.6%, primarily due to lower pre-tax income in 2023 compared to 2022, partially offset by a decrease in 2022 income tax expense related to stock options exercised in the first six months of 2022.
Other income increased $0.7 million, primarily due to a $0.5 million increase in AFUDC, as a result of higher long-term construction activity subject to AFUDC. Miscellaneous income increased $0.2 million primarily related to an increase in the annual patronage refund from CoBank, ACB. The primary refund calculation for both 2023 and 2022 was based on the average loan balance outstanding.
Long-term debt interest increased $0.4 million, primarily related to an increase in long-term debt interest associated with the Series W First Mortgage Bond issued on April 29, 2022. Short-term debt interest increased $0.3 million, primarily related to higher interest rates.
Capital Expenditures
As part of Artesian’s ongoing effort to ensure high-quality reliable service to customers, $32.3 million was invested in water and wastewater infrastructure projects the first six months of 2023 compared to $29.6 million for the same period in 2022. These investments include the rehabilitation program for transmission and distribution facilities by replacing aging or deteriorating mains, installation of new main, enhancing or improving existing treatment facilities, construction of new water storage tanks, and replacing aging wells and pumping equipment to better serve our customers.
About Artesian Resources 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 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, 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.
