Artesian Resources Corp 10-Q for FY2021 Q1

Artesian Resources Corp (ARTNA)

10-Q 2021-05-06 For: 2021-03-31

Added on April 06, 2026

About this 10-Q

Artesian Resources Corp filed this 10-Q on May 6, 2021, covering the quarter ended March 31, 2021 (FY2021 Q1).

Headline figures

Quarter ended March 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $20.74M; up 4.2% from $19.9M a year earlier
Net income: $4.21M; up 3.2% from net income of $4.07M a year earlier
Diluted EPS: $0.45; up 2.3% from $0.44 a year earlier

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Delaware	51-0002090
--------------------------------------------------------------------	-------------------------------------------------
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol (s)	Name of each exchange on which registered
Common Stock Par Value	ARTNA	The Nasdaq Stock Market

Part I	-	Financial Information:

Item 1	-	Financial Statements	Page(s)

		Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 (unaudited)	3

		Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020 (unaudited)	4

		Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (unaudited)	5 - 6

		Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months period ended March 31, 2021 and 2020 (unaudited)	7

		Notes to the Condensed Consolidated Financial Statements	8 - 21

Item 2	-	Management's Discussion and Analysis of Financial Condition and Results of Operations	22 - 28

Item 3	-	Quantitative and Qualitative Disclosures about Market Risk	29

Item 4	-	Controls and Procedures	29

Part II	-	Other Information	29

Item 1	-	Legal Proceedings	29

Item 1A	-	Risk Factors	29

Item 2	-	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3		Defaults Upon Senior Securities	30

Item 4		Mine Safety Disclosures	30

Item 5		Other Information	30

Item 6	-	Exhibits	31

Signatures

ASSETS	March 31, 2021		December 31, 2020
Utility plant, at original cost (less accumulated depreciation 2021 - $ 150,838; and 2020 - $147,469)	$	567,395	$	559,561
Current assets
Cash and cash equivalents		249		28
Accounts receivable (less allowance for doubtful accounts 2021 - $865; 2020 - $862)		8,815		10,162
Income tax receivable		6		629
Unbilled operating revenues		1,151		1,166
Materials and supplies		1,400		1,535
Prepaid property taxes		1,022		1,891
Prepaid expenses and other		1,954		2,208
Total current assets		14,597		17,619
Other assets
Non-utility property (less accumulated depreciation - 2021 - $884; 2020 - $865)		3,777		3,796
Other deferred assets		5,763		5,309
Operating lease right of use assets		455		460
Total other assets		9,995		9,565
Regulatory assets, net		6,368		6,473
Total Assets	$	598,355	$	593,218

LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity
Common stock	$	9,384	$	9,357
Preferred stock		—		—
Additional paid-in capital		104,080		103,463
Retained earnings		58,406		56,606
Total stockholders' equity		171,870		169,426
Long-term debt, net of current portion		141,886		142,333
		313,756		311,759
Current liabilities
Lines of credit		22,716		26,813
Current portion of long-term debt		1,677		1,757
Accounts payable		5,971		6,341
Accrued expenses		6,867		4,283
Overdraft payable		27		105
Accrued interest		1,325		930
Income taxes payable		2,064		28
Customer and other deposits		2,126		2,064
Other		1,406		1,403
Total current liabilities		44,179		43,724

Commitments and contingencies

Deferred credits and other liabilities
Net advances for construction		4,485		4,578
Operating lease liabilities		427		432
Regulatory liabilities		21,569		21,681
Deferred investment tax credits		469		473
Deferred income taxes		49,081		50,313
Total deferred credits and other liabilities		76,031		77,477

Net contributions in aid of construction		164,389		160,258
Total Liabilities and Stockholders’ Equity	$	598,355	$	593,218

	For the Three Months Ended March 31,

	2021		2020
Operating revenues
Water sales	$	17,830	$	17,392
Other utility operating revenue		1,467		1,253
Non-utility operating revenue		1,439		1,256
Total Operating Revenues		20,736		19,901

Operating expenses
Utility operating expenses		9,596		9,235
Non-utility operating expenses		915		728
Depreciation and amortization		3,012		2,752
State and federal income taxes		1,351		1,359
Property and other taxes		1,420		1,365
Total Operating Expenses		16,294		15,439

Operating income		4,442		4,462

Other income, net
Allowance for funds used during construction (AFUDC)		244		423
Miscellaneous income		1,402		1,088

Income before interest charges		6,088		5,973

Interest charges		1,882		1,899

Net income applicable to common stock	$	4,206	$	4,074

Income per common share:
Basic	$	0.45	$	0.44
Diluted	$	0.45	$	0.44

Weighted average common shares outstanding:
Basic		9,368		9,297
Diluted		9,407		9,343

Cash dividends per share of common stock	$	0.2571	$	0.2496

	For the Three Months Ended March 31,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	4,206		$	4,074
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,012			2,752
Deferred income taxes, net		(1,236	)		(1,310	)
Stock compensation		43			45
AFUDC, equity portion		(164	)		(281	)

Changes in assets and liabilities:
Accounts receivable, net of allowance for doubtful accounts		1,347			179
Income tax receivable		623			19
Unbilled operating revenues		15			(79	)
Materials and supplies		135			(58	)
Prepaid property taxes		869			978
Prepaid expenses and other		254			223
Other deferred assets		(463	)		(418	)
Regulatory assets		91			92
Regulatory liabilities		(125	)		(178	)
Income tax payable		2,036			2,204
Accounts payable		(370	)		(1,579	)
Accrued expenses		2,584			(260	)
Accrued interest		395			667
Deposits and other		64			59
NET CASH PROVIDED BY OPERATING ACTIVITIES		13,316			7,129

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (net of AFUDC, equity portion)		(9,346	)		(9,212	)
Proceeds from sale of assets		7			30
NET CASH USED IN INVESTING ACTIVITIES		(9,339	)		(9,182	)

CASH FLOWS FROM FINANCING ACTIVITIES
Net (repayments) borrowings under lines of credit agreements		(4,097	)		1,138
(Decrease) increase in overdraft payable		(78	)		13
Net advances and contributions in aid of construction		2,751			3,179
Net proceeds from issuance of common stock		601			286
Dividends paid		(2,406	)		(2,319	)
Principal repayments of long-term debt		(527	)		(510	)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(3,756	)		1,787

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		221			(266	)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		28			596

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	249		$	330

Non-cash Investing and Financing Activity:
Utility plant received as construction advances and contributions	$	1,991		$	320
Dividends declared but not paid		—			—

Supplemental Disclosures of Cash Flow Information:
Interest paid	$	1,487		$	1,232
Income taxes paid	$	30		$	360

	Common Shares Outstanding Class A Non-Voting (1) (3) (4)		Common Shares Outstanding Class B Voting (2)		$1 Par Value Class A Non-Voting		$1 Par Value Class B Voting		Additional Paid-in Capital		Retained Earnings			Total

Balance as of December 31, 2019		8,410		882	$	8,410	$	882	$	101,811	$	49,165		$	160,268
Net income		—		—		—		—		—		4,074			4,074
Cash dividends declared
Common stock		—		—		—		—		—		(2,319	)		(2,319	)
Issuance of common stock
Dividend reinvestment plan		3		—		3		—		105		—			108
Employee stock options and awards(4)		5		—		5		—		129		—			134
Employee Retirement Plan(3)		2		—		2		—		87		—			89
Balance as of March 31, 2020		8,420		882		8,420		882		102,132		50,920			162,354

	For the Three Months Ended March 31,
(in thousands)	2021		2020
Tariff Revenue
Consumption charges	$	10,418	$	10,160
Fixed fees		6,999		6,737
Service charges		201		147
DSIC		1,172		1,152
Industrial wastewater services	$	6	$	8
Total Tariff Revenue	$	18,796	$	18,204
Non-Tariff Revenue
Service line protection plans	$	1,096	$	1,088
Contract operations		230		216
Design and installation		151		—
Inspection fees		84		102
Total Non-Tariff Revenue	$	1,561	$	1,406
Other Operating Revenue not in scope of ASC 606	$	379	$	291
Total Operating Revenue	$	20,736	$	19,901

	(in thousands)
	Three Months Ended			Three Months Ended
	March 31, 2021			March 31, 2020

Minimum rentals		$	7		$	7
Contingent rentals			—			—

		$	7		$	7

	(in thousands, except lease term and discount rate)
	March 31, 2021			December 31, 2020

Operating Leases:
Operating lease right-of-use assets	$	455		$	460

Other current liabilities	$	20			20
Operating lease liabilities		427			432
Total operating lease liabilities	$	447		$	452


Weighted Average Remaining Lease Term
Operating leases	59 years			59 years
Weighted Average Discount Rate
Operating leases		3.6	%		5.0	%

	(in thousands)
	Operating Leases
Year
2021	$	42
2022		23
2023		23
2024		23
2025		24
Thereafter		1,304
Total undiscounted lease payments	$	1,439
Less effects of discounting		(992	)
Total lease liabilities recognized	$	447

	Options									Restricted Awards
	Option Shares			Weighted Average Exercise Price		Weighted Average Remaining Life (Yrs.)		Aggregate Intrinsic Value (in thousands)		Outstanding Restricted Stock Awards		Weighted Average Grant Date Fair Value
Plan options/restricted stock awards
Outstanding at January 1, 2021		116,347		$	2,090			$	1,882		5,000	$	35
Granted		—			—				—		—		—
Exercised/vested and released		(21,885	)		19				484		—		—
Expired/cancelled		—			—				—		—		—
Outstanding at March 31, 2021		94,462		$	21		2	$	1,704		5,000	$	35

Exercisable/vested at March 31, 2021		94,462		$	21		2	$	1,704		—		—

In thousands	March 31, 2021		December 31, 2020

Investment in CoBank	$	4,850	$	4,374
Goodwill		623		623
Other		290		312
	$	5,763	$	5,309

Expense	Years Amortized
Rate case studies	5
Delaware rate proceedings	2.5
Maryland rate proceedings	5
Debt related costs	15 to 30 (based on term of related debt)
Goodwill (resulting from acquisition of Mountain Hill Water Company in 2008)	50
Deferred acquisition costs (resulting from purchase of water assets in Cecil County, Maryland in 2011 and Port Deposit, Maryland in 2010)	20
Franchise Costs (resulting from purchase of water assets in Cecil County, Maryland in 2011)	80

Regulatory assets, net of amortization, comprise:
	(in thousands)
	March 31, 2021		December 31, 2020

Deferred income taxes	$	367	$	370
Expense of rate case studies and other		44		46
Debt related costs		5,145		5,233
Goodwill		279		281
Deferred acquisition and franchise costs		533		543
	$	6,368	$	6,473

Application Date	11/15/2019	05/29/2020	11/20/2020
DEPSC Approval Date	12/12/2019	06/17/2020	12/14/2020
Effective Date	01/01/2020	07/01/2020	01/01/2021
Cumulative DSIC Rate	7.50%	7.41%	7.50%
Net Eligible Plant Improvements – Cumulative Dollars (in millions)	$43.1	$43.1	$43.1
Eligible Plant Improvements – Installed Beginning Date	10/01/2014	10/01/2014	10/01/2014
Eligible Plant Improvements – Installed Ending Date	04/30/2019	04/30/2019	04/30/2019

In thousands
	March 31, 2021		December 31, 2020
Carrying amount	$	143,563	$	144,090
Estimated fair value	$	161,162	$	171,374

Line of Credit Commitments	Commitment Due by Period
In thousands	Less than 1 Year			1-3 Years			4-5 Years			Over 5 Years
Lines of Credit		$	22,716		$	--		$	--		$	--

Contractual Obligations	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)	$	6,623	$	13,169	$	13,056	$	188,219	$	221,067
State revolving fund loans (principal and interest)		838		1,296		1,061		2,359		5,554
Promissory note (principal and interest)		960		1,920		1,923		12,296		17,099
Operating leases		42		46		47		1,304		1,439
Operating agreements		73		75		80		856		1,084
Unconditional purchase obligations		2,938		114		14		---		3,066
Tank painting contractual obligation		207		830		138		---		1,175
Total contractual cash obligations	$	11,681	$	17,450	$	16,319	$	205,034	$	250,484

Regulatory liabilities comprise:
	(in thousands)
	March 31, 2021		December 31, 2020

Utility plant retirement cost obligation	$	125	$	126
Deferred income taxes (related to TCJA)		21,444		21,555
	$	21,569	$	21,681

(In thousands)
Utility plant
Source of supply plant	$	201
Pumping and water treatment plant		1,455
Transmission and distribution plant		3,462
Other deferred assets
Goodwill		623
Purchase Price	$	5,741

Exhibit No.	Description

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	The cover page from Artesian Resources Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021, formatted in Inline iXBRL (contained in exhibit 101).*

Date: May 6, 2021	By:	/s/ DIAN C. TAYLOR
		Dian C. Taylor (Principal Executive Officer)

Date: May 6, 2021	By:	/s/ DAVID B. SPACHT
		David B. Spacht (Principal Financial Officer)

Exhibit 31.1
Certification of Chief Executive Officer of Artesian Resources Corporation required by Rule 13a – 14 (a) under the Securities Act of 1934, as amended

I, Dian C. Taylor, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2021 of Artesian Resources Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)		Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)		Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Date: May 6, 2021			/s/ DIAN C. TAYLOR
			Dian C. Taylor
			Chief Executive Officer (Principal Executive Officer)

Exhibit 31.2

Certification of Chief Financial Officer of Artesian Resources Corporation required by Rule 13a – 14 (a) under the Securities Act of 1934, as amended

I, David B. Spacht, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2021 of Artesian Resources Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)		Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)		Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Date: May 6, 2021			/s/ DAVID B. SPACHT
			David B. Spacht
			Chief Financial Officer (Principal Financial and Accounting Officer)

Exhibit 32


Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350


I, Dian C. Taylor, Chief Executive Officer, and David B. Spacht, Chief Financial Officer, of Artesian Resources Corporation, a Delaware corporation (the "Company"), hereby certify, pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on our knowledge:

(1)	The Company's Quarterly Report on Form 10-Q for the period ended March 31, 2021 (the " Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 USC Section 78m(a) or Section 78o(d)), as amended; and

(2)	The information contained in the Report fairly presents, in all material respects, the financial condition of the Company at the end of the period covered by the Report and results of operations of the Company for the period covered by the Report.




Date: May 6, 2021

CHIEF EXECUTIVE OFFICER:		CHIEF FINANCIAL OFFICER:


/s/ DIAN C. TAYLOR		/s/ DAVID B. SPACHT
Dian C. Taylor		David B. Spacht



These certifications accompany the Report to which they relate, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.