Artesian Resources Corp 10-K for FY2022

Artesian Resources Corp (ARTNA)

10-K 2023-03-10 For: 2022-12-31

Added on April 06, 2026

About this 10-K

Artesian Resources Corp filed this 10-K on March 10, 2023, covering the fiscal year ended December 31, 2022 (FY2022).

Headline figures

Fiscal year ended December 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $98.9M; up 8.8% from $90.86M a year earlier
Net income: $18M; up 7.0% from net income of $16.83M a year earlier
Diluted EPS: $1.90; up 6.1% from $1.79 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	ARTNA	The Nasdaq Stock Market

Large Accelerated Filer □	Accelerated Filer □	Non-Accelerated Filer ☑	Smaller Reporting Company ☑
Emerging Growth Company ☐

FORWARD LOOKING STATEMENTS

PART I
Item 1. – Business
Item 1A. – Risk Factors
Item 1B. – Unresolved Staff Comments
Item 2. – Properties
Item 3. – Legal Proceedings
Item 4. – Mine Safety Disclosures
PART II
Item 5. – Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. – [Reserved]
Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. – Quantitative and Qualitative Disclosure About Market Risk
Item 8. – Financial Statements and Supplementary Data
Item 9. – Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. – Controls and Procedures
Item 9B. – Other Information Item 9C. – Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10. – Directors, Executive Officers and Corporate Governance
Item 11. – Executive Compensation
Item 12. – Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. – Certain Relationships and Related Transactions, and Director Independence
Item 14. – Principal Accountant Fees and Services
PART IV
Item 15. – Exhibits and Financial Statement Schedules Item 16. – Form 10-K Summary

SIGNATURES

Exhibit 21-Subsidiaries of the Company
Exhibit 23.1-Consent of BDO USA, LLP
Exhibit 31.1-Certification of Chief Executive Officer
Exhibit 31.2-Certification of Chief Financial Officer
Exhibit 32-Certification of Chief Executive Officer and Chief Financial Officer

Utility plant comprises:
In thousands
	Estimated Useful Life (In Years)		December 31, 2022
Utility plant at original cost
Utility plant in service-Water
Intangible plant		---	$	140
Source of supply plant		45-85		25,223
Pumping and water treatment plant		8-62		116,915
Transmission and distribution plant
Mains		81		338,368
Services		39		56,396
Storage tanks		76		34,567
Meters		26		29,720
Hydrants		60		17,751
General plant		5-31		65,632

Utility plant in service-Wastewater
Intangible plant		---		117
Treatment and disposal plant		21-81		66,420
Collection mains and lift stations		81		49,189
General plant		5-31		1,845

Property held for future use		---		4,489
Construction work in progress		---		34,213
				840,985
Less – accumulated depreciation				172,954
			$	668,031

	Stock Price
	High		Low
2022
First Quarter	$	50.88	$	43.02
Second Quarter	$	50.00	$	44.08
Third Quarter	$	60.36	$	47.96
Fourth Quarter	$	59.98	$	45.44

2021
First Quarter	$	42.70	$	36.68
Second Quarter	$	42.10	$	35.90
Third Quarter	$	40.44	$	36.55
Fourth Quarter	$	47.99	$	37.60

			INDEXED RETURNS
	Base Period		Years Ending December 31
Company Name / Index	2017		2018		2019		2020		2021		2022
Artesian Resources Corporation		100		92.81		101.77		104.28		133.71		172.88
S&P 500 Index		100		95.62		125.72		148.85		191.58		156.88
Peer Group		100		100.28		135.27		156.00		193.40		165.56

Percentage of Operating Revenues
	2022			2021			2020
Water Sales
Residential		48.7	%		53.0	%		53.8	%
Commercial		17.6			19.4			19.5
Industrial		0.1			0.1			0.1
Government and Other		12.8			13.2			13.4
Other utility operating revenues		11.6			7.9			7.4
Non-utility operating revenues		9.2			6.4			5.8
Total		100.0	%		100.0	%		100.0	%

Percentage of Operating and Maintenance Expenses
	2022			2021			2020
Payroll and Associated Expenses		48.1	%		49.9	%		51.0	%
Administrative		13.2			12.3			14.1
Purchased Water		3.6			9.5			9.9
Repair and Maintenance		11.1			10.2			8.3
Purchased Power		5.7			5.4			5.5
Water Treatment		4.8			4.0			3.7
Non-utility Operating		13.5			8.7			7.5
Total		100.0	%		100.0	%		100.0	%

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)	$	7,924	$	15,773	$	15,659	$	237,358	$	276,714
State revolving fund loans (principal and interest)		937		1,699		1,463		6,364		10,463
Promissory note (principal and interest)		961		1,921		1,924		10,613		15,419
Asset purchase contractual obligation (principal and interest)		345		672		647		---		1,664
Lines of credit		20,174		---		---		---		20,174
Operating leases		25		51		52		1,406		1,534
Operating agreements		60		79		84		782		1,005
Unconditional purchase obligations		809		1,568		770		---		3,147
Tank painting contractual obligation		626		939		---		---		1,565
Total contractual cash obligations	$	31,861	$	22,702	$	20,599	$	256,523	$	331,685

	For the Year Ended
ASSETS	December 31, 2022		December 31, 2021
Utility plant, at original cost less accumulated depreciation	$	668,031	$	590,431
Current assets
Cash and cash equivalents		1,309		92
Accounts receivable (less allowance for doubtful accounts 2022 - $416; 2021-$429)		13,511		8,367
Income tax receivable		1,632		2,234
Unbilled operating revenues		1,586		1,080
Materials and supplies		4,702		1,933
Prepaid property taxes		2,186		2,306
Prepaid expenses and other		2,878		2,652
Total current assets		27,804		18,664
Other assets
Non-utility property (less accumulated depreciation 2022-$990; 2021-$919)		3,740		3,751
Other deferred assets		10,536		5,097
Goodwill		1,939		—
Operating lease right of use assets		467		451
Total other assets		16,682		9,299
Regulatory assets, net		7,274		6,321
Total Assets	$	719,791	$	624,715

LIABILITIES AND STOCKHOLDERS’ EQUITY
Stockholders’ equity
Common stock	$	9,503	$	9,414
Preferred stock		—		—
Additional paid-in capital		107,142		104,989
Retained earnings		71,286		63,607
Total stockholders’ equity		187,931		178,010
Long-term debt, net of current portion		175,619		143,259
		363,550		321,269
Current liabilities
Lines of credit		20,174		26,703
Current portion of long-term debt		2,003		1,591
Accounts payable		10,929		10,206
Accrued expenses		4,246		4,038
Overdraft payable		43		30
Accrued interest		989		917
Income taxes payable		6		—
Customer and other deposits		2,489		2,273
Other		3,190		1,448
Total current liabilities	$	44,069	$	47,206

Commitments and contingencies (Note 11)		—		—

Deferred credits and other liabilities
Net advances for construction	$	3,686	$	4,295
Operating lease liabilities		466		440
Regulatory liabilities		28,721		21,260
Deferred investment tax credits		439		456
Deferred income taxes		54,552		53,133
Total deferred credits and other liabilities	$	87,864	$	79,584

Net contributions in aid of construction		224,308		176,656
Total Liabilities and Stockholders’ Equity	$	719,791	$	624,715

	For the Year Ended December 31,
	2022		2021		2020

Operating revenues
Water sales	$	78,318	$	77,821	$	76,476
Other utility operating revenue		11,506		7,195		6,525
Non-utility operating revenue		9,073		5,843		5,140
Total Operating Revenues		98,897		90,859		88,141

Operating expenses
Utility operating expenses		43,772		41,414		40,338
Non-utility operating expenses		6,850		3,942		3,277
Depreciation and amortization		12,620		11,885		11,143
Taxes
State and federal income tax expense (benefit)
Current		4,285		3,360		8,073
Deferred		1,593		2,377		(2,389	)
Property and other taxes		5,871		5,587		5,404
Total Operating Expenses		74,991		68,565		65,846

Operating income		23,906		22,294		22,295

Other income, net
Allowance for funds used during construction (AFUDC)		1,329		823		1,170
Miscellaneous		1,265		1,302		971
		2,594		2,125		2,141

Income before interest charges		26,500		24,419		24,436

Interest charges		8,502		7,592		7,619

Net income applicable to common stock	$	17,998	$	16,827	$	16,817

Income per common share:
Basic	$	1.90	$	1.79	$	1.80
Diluted	$	1.90	$	1.79	$	1.79

Weighted average common shares outstanding:
Basic		9,462		9,394		9,327
Diluted		9,481		9,426		9,369

Cash dividends per share of common stock	$	1.09	$	1.05	$	1.01

	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		—		—		—		—		—		16,817			16,817
Cash dividends declared
Common stock		—		—		—		—		—		(9,376	)		(9,376	)
Issuance of common stock
Dividend reinvestment plan		11		—		11		—		377		—			388
Employee stock options and awards(4)		42		—		42		—		832		—			874
Employee Retirement Plan(3)		12		—		12		—		443		—			455
Balance as of December 31, 2020		8,475		882	$	8,475	$	882	$	103,463	$	56,606		$	169,426

Net income		—		—		—		—		—		16,827			16,827
Cash dividends declared
Common stock		—		—		—		—		—		(9,826	)		(9,826	)
Issuance of common stock
Dividend reinvestment plan		10		—		10		—		382		—			392
Employee stock options and awards(4)		38		—		38		—		790		—			828
Employee Retirement Plan(3)		9		—		9		—		354		—			363
Balance as of December 31, 2021		8,532		882	$	8,532	$	882	$	104,989	$	63,607		$	178,010

Net income		—		—		—		—		—		17,998			17,998
Cash dividends declared
Common stock		—		—		—		—		—		(10,319	)		(10,319	)
Issuance of common stock
Dividend reinvestment plan		7		—		7		—		366		—			373
Employee stock options and awards(4)		82		—		82		—		1,787		—			1,869
Employee Retirement Plan(3)		—		—		—		—		—		—			—
Balance as of December 31, 2022		8,621		882	$	8,621	$	882	$	107,142	$	71,286		$	187,931

Utility plant comprises:
In thousands
			December 31,
	Estimated Useful Life (In Years)		2022		2021
Utility plant at original cost
Utility plant in service-Water
Intangible plant		—	$	140	$	140
Source of supply plant		45-85		25,223		25,045
Pumping and water treatment plant		8-62		116,915		109,087
Transmission and distribution plant
Mains		81		338,368		320,767
Services		39		56,396		53,210
Storage tanks		76		34,567		29,972
Meters		26		29,720		28,778
Hydrants		60		17,751		16,789
General plant		5-31		65,632		62,604

Utility plant in service-Wastewater
Intangible plant		—		117		116
Treatment and disposal plant		21-81		66,420		43,725
Collection mains & lift stations		81		49,189		33,901
General plant		5-31		1,845		1,665

Property held for future use		—		4,489		5,536
Construction work in progress		—		34,213		18,481
				840,985		749,816
Less – accumulated depreciation				172,954		159,385
			$	668,031	$	590,431

Expense	Years Amortized
Deferred contract costs and other	5
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)
Deferred costs affiliated interest agreement	20
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

(in thousands)	December 31, 2022		December 31, 2021

Deferred income taxes	$	465	$	355
Deferred contract costs and other		227		288
Debt related costs		4,682		4,902
Goodwill		266		273
Deferred costs affiliated interest agreement		1,114		—
Deferred acquisition and franchise costs		520		503
	$	7,274	$	6,321

Regulatory liabilities comprise:
	(in thousands)
	December 31, 2022		December 31, 2021

Utility plant retirement cost obligation	$	—	$	149
Deferred settlement refunds		7,487		—
Deferred income taxes (related to TCJA)		21,234		21,111

	$	28,721	$	21,260

Non-Tariff Revenue
Service line protection plans	$	5,020	$	4,594	$	4,381
Contract operations		931		884		840
Design and installation		3,315		562		88
Inspection fees		326		341		266
Total Non-Tariff Revenue	$	9,592	$	6,381		5,575

Other Operating Revenue	$	1,881	$	2,230		1,516

Total Operating Revenue	$	98,897	$	90,859	$	88,141

	For the Twelve Months Ended December 31,
(in thousands)
	2022		2021

Minimum rentals	$	32	$	45
Contingent rentals		—		—
	$	32	$	45

	Twelve Months Ended		Twelve Months Ended
	December 31,		December 31,
		2022			2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	32		$	45
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	467		$	451

(in thousands, except lease term and discount rate)
	December 31, 2022			December 31, 2021

Operating Leases:
Operating lease right-of-use assets	$	467		$	451

Other current liabilities	$	2		$	6
Operating lease liabilities		466			440
Total operating lease liabilities	$	468		$	446


Weighted Average Remaining Lease Term
Operating leases	61 years			61 years
Weighted Average Discount Rate
Operating leases		5.0	%		5.0	%

	(in thousands)
	Operating Leases
Year
2023	$	25
2024		26
2025		26
2026		26
2027		26
Thereafter		1,406
Total undiscounted lease payments	$	1,535
Less effects of discounting		(1,067	)
Total lease liabilities recognized		468

Components of Income Tax Expense
In thousands	For the Year Ended December 31,
State income taxes	2022		2021		2020
Current	$	1,373	$	1,216	$	2,348
Deferred		663		776		(279	)
Total state income tax expense	$	2,036	$	1,992	$	2,069

	For the Year Ended December 31,
Federal income taxes	2022		2021		2020
Current	$	2,912	$	2,144	$	5,725
Deferred		930		1,601		(2,110	)
Total federal income tax expense	$	3,842	$	3,745	$	3,615

Reconciliation of effective tax rate:
	For the Year Ended December 31,
In thousands	2022			2022			2021			2021			2020			2020
	Amount			Percent			Amount			Percent			Amount			Percent
Reconciliation of effective tax rate
Income before federal and state income taxes	$	23,876			100.0	%	$	22,564			100.0	%	$	22,501			100.0	%

Amount computed at statutory rate		5,014			21.0	%		4,738			21.0	%		4,725			21.0	%
Reconciling items
State income tax-net of federal tax benefit		1,696			7.1	%		1,600			7.1	%		1,704			7.6	%
Regulatory liability adjustment		(450	)		(1.9	)%		(451	)		(2.0	)%		(451	)		(2.0	)%
Other		(382	)		(1.6	)%		(150	)		(0.7	)%		(294	)		(1.3	)%
Total income tax expense and effective rate	$	5,878			24.6	%	$	5,737			25.4	%	$	5,684			25.3	%

	For the Year Ended December 31,
In thousands	2022			2021

Deferred tax assets related to:
Federal and state operating loss carry-forwards	$	922		$	629
Less: valuation allowance		(600	)		(493	)
Bad debt allowance		116			240
Stock options		47			148
Other		28			75
Total deferred tax assets	$	513		$	599

Deferred tax liabilities related to:
Property plant and equipment basis differences	$	(52,565	)	$	(48,536	)
Bond retirement costs		(1,058	)		(1,210	)
Property taxes		(609	)		(481	)
Other		(833	)		(685	)
Total deferred tax liabilities	$	(55,065	)	$	(50,912	)

Net deferred tax liability	$	(54,552	)	$	(50,313	)

Schedule of Valuation Allowance
	Balance at Beginning of Period			Additions Charged to Costs and Expenses			Deductions		Balance at End of Period
In thousands

Classification
For the Year Ended December 31, 2022 Valuation allowance for deferred tax assets		$	546		$	54		—		$	600
For the Year Ended December 31, 2021 Valuation allowance for deferred tax assets		$	493		$	53		—		$	546
For the Year Ended December 31, 2020 Valuation allowance for deferred tax assets		$	335		$	158		—		$	493

	For the years ended December 31,
In thousands	2022			2021
Balance at beginning of year	$	202		$	209
Additions based on tax positions related to the current year		146			—
Additions based on tax positions related to prior years		10			19
Reductions for tax positions of prior years		—			—
Lapses in statutes of limitations		(212	)		(26	)
Balance at end of year	$	146		$	202

	2022 Shares	2022 Weighted Average Exercise Price		2021 Shares		2021 Weighted Average Exercise Price		2020 Shares		2020 Weighted Average Exercise Price
Plan options
Outstanding at beginning of year	83,000	$	21.65		116,347	$	20.90		153,250	$	20.40
Granted	—		—		—		—		—		—
Exercised	(76,250)		21.63		(33,347)		19.04		(36,903)		18.83
Expired	—		—		—		—		—		—
Outstanding at end of year	6,750	$	21.86		83,000	$	21.65		116,347	$	20.90

Options exercisable at year end	6,750	$	21.86		83,000	$	21.65		116,347	$	20.90

Options Outstanding and Exercisable
Range of Exercise Price		Shares Outstanding at December 31, 2022	Weighted Average Remaining Life	Weighted Average Exercise Price		Aggregate Intrinsic Value
$	21.86	6,750	1.35 Years	$	21.86	$	248,000

	2022 Shares			2022 Weighted Average Grant Date Fair Value		2021 Shares			2021 Weighted Average Grant Date Fair Value		2020 Shares			2020 Weighted Average Exercise Price
Plan RSA’s
Outstanding at beginning of year		5,000		$	40.11		5,000		$	35.01		5,000		$	36.11
Granted		5,000			45.58		5,000			40.11		5,000			35.01
Vested/Released		(5,000	)		40.11		(5,000	)		35.01		(5,000	)		36.11
Cancelled		—			—		—			—		—			—
Unvested Outstanding at end of year		5,000		$	45.58		5,000		$	40.11		5,000		$	35.01

Application Date	11/15/2019	5/29/2020	11/20/2020
DEPSC Approval Date	12/12/2019	6/17/2020	12/14/2020
Effective Date	01/01/2020	07/1/2020	01/1/2021
Cumulative DSIC Rate	7.50%	7.50%	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

	For the Year
	Ended December 31,
		2022		2021		2020
	(in thousands)

Weighted average common shares outstanding during the period for Basic computation		$	9,462	$	9,394	$	9,327
Dilutive effect of employee stock options			19		32		42
Weighted average common shares outstanding during the period for Diluted computation		$	9,481	$	9,426	$	9,369

(In thousands)
		TESI
	Utility plant	$	25,354
	Cash		280
	Goodwill		1,939
	Other assets		1,033
	Total assets		28,606
	Less: Liabilities and contributions in aid of construction (CIAC)
	Liabilities		2,808
	CIAC		22,676
	Net cash purchase price	$	3,122

In thousands
	Years Ended December 31,
	2022			2021			2020
Revenues:
Regulated Utility	$	89,818		$	85,016		$	83,001
Other (non-utility)		9,248			5,996			5,327
Inter-segment elimination		(169	)		(153	)		(187	)
Consolidated Revenues	$	98,897		$	90,859		$	88,141

Operating Income:
Regulated Utility	$	22,580		$	21,103		$	21,148
Other (non-utility)		1,326			1,191			1,147
Consolidated Operating Income	$	23,906		$	22,294		$	22,295

Income Taxes:
Regulated Utility	$	5,091		$	5,146		$	5,093
Other (non-utility)		787			591			591
Consolidated Income Taxes	$	5,878		$	5,737		$	5,684

Assets:
Regulated Utility	$	713,113		$	618,751
Other (non-utility)		6,678			5,964
Consolidated Assets	$	719,791		$	624,715