Artesian Resources Corp 10-K for FY2021

Artesian Resources Corp (ARTNA)

10-K 2022-03-11 For: 2021-12-31

Added on April 06, 2026

About this 10-K

Artesian Resources Corp filed this 10-K on March 11, 2022, covering the fiscal year ended December 31, 2021 (FY2021).

Headline figures

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

Revenue: $90.86M; up 3.1% from $88.14M a year earlier
Net income: $16.83M; up 0.1% from net income of $16.82M a year earlier
Diluted EPS: $1.79; unchanged 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 Disclosures
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, 2021
Utility plant at original cost
Utility plant in service-Water
Intangible plant		---	$	140
Source of supply plant		45-85		25,045
Pumping and water treatment plant		8-62		109,087
Transmission and distribution plant
Mains		81		320,767
Services		39		53,210
Storage tanks		76		29,972
Meters		26		28,778
Hydrants		60		16,789
General plant		5-31		62,604

Utility plant in service-Wastewater
Intangible plant		---		116
Treatment and disposal plant		21-81		43,725
Collection mains and lift stations		81		33,901
General plant		5-31		1,665

Property held for future use		---		5,536
Construction work in progress		---		18,481
				749,816
Less – accumulated depreciation				159,385
			$	590,431

			INDEXED RETURNS
	Base Period		Years Ending December 31
Company Name / Index	2016		2017		2018		2019		2020		2021
Artesian Resources Corporation		100		123.91		115.00		126.11		129.22		165.68
S&P 500 Index		100		121.83		116.49		153.17		181.35		233.41
Peer Group		100		128.23		128.58		173.45		200.03		247.99

Percentage of Operating Revenues
	2021			2020			2019
Water Sales
Residential		53.0	%		53.8	%		52.8	%
Commercial		19.4			19.5			21.0
Industrial		0.1			0.1			0.1
Government and Other		13.2			13.4			14.1
Other utility operating revenues		7.9			7.4			5.9
Non-utility operating revenues		6.4			5.8			6.1
Total		100.0	%		100.0	%		100.0	%

Percentage of Operating and Maintenance Expenses
	2021			2020			2019
Payroll and Associated Expenses		49.9	%		51.0	%		50.1	%
Administrative		12.3			14.1			13.6
Purchased Water		9.5			9.9			9.9
Repair and Maintenance		10.2			8.3			9.3
Purchased Power		5.4			5.5			5.5
Water Treatment		4.0			3.7			3.8
Non-utility Operating		8.7			7.5			7.8

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)	$	6,623	$	13,169	$	13,056	$	188,219	$	221,067
State revolving fund loans (principal and interest)		820		1,535		1,122		4,336		7,813
Lines of credit		26,703		---		---		---		26,703
Promissory note (principal and interest)		961		1,921		1,923		11,576		16,381
Operating leases		29		48		49		1,335		1,461
Operating agreements		63		77		81		825		1,046
Unconditional purchase obligations		1,518		1,489		1,403		---		4,410
Tank painting contractual obligation		392		588		---		---		980
Total contractual cash obligations	$	37,109	$	18,827	$	17,634	$	206,291	$	279,861

ASSETS	December 31, 2021		December 31, 2020
Utility plant, at original cost less accumulated depreciation	$	590,431	$	559,561
Current assets
Cash and cash equivalents		92		28
Accounts receivable (less allowance for doubtful accounts 2021 - $429; 2020-$862)		8,863		10,162
Income tax receivable		2,234		629
Unbilled operating revenues		1,080		1,166
Materials and supplies		1,933		1,535
Prepaid property taxes		2,306		1,891
Prepaid expenses and other		2,652		2,208
Total current assets		19,160		17,619
Other assets
Non-utility property (less accumulated depreciation 2021-$919; 2020-$865)		3,751		3,796
Other deferred assets		5,097		5,309
Operating lease right of use assets		451		460
Total other assets		9,299		9,565
Regulatory assets, net		6,321		6,473
Total Assets	$	625,211	$	593,218

LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity
Common stock	$	9,414	$	9,357
Preferred stock		—		—
Additional paid-in capital		104,989		103,463
Retained earnings		63,607		56,606
Total stockholders' equity		178,010		169,426
Long-term debt, net of current portion		143,259		142,333
		321,269		311,759
Current liabilities
Lines of credit		26,703		26,813
Current portion of long-term debt		1,591		1,757
Accounts payable		10,206		6,341
Accrued expenses		4,534		3,414
Overdraft payable		30		105
Accrued interest		917		930
Income taxes payable		—		237
Customer and other deposits		2,273		2,060
Other		1,448		2,067
Total current liabilities	$	47,702	$	43,724

Commitments and contingencies (Note 11)

Deferred credits and other liabilities
Net advances for construction	$	4,295	$	4,578
Operating lease liabilities		440		432
Regulatory liabilities		21,260		21,681
Deferred investment tax credits		456		473
Deferred income taxes		53,133		50,313
Total deferred credits and other liabilities	$	79,584	$	77,477

Net contributions in aid of construction		176,656		160,258
Total Liabilities and Stockholders' Equity	$	625,211	$	593,218

	For the Year Ended December 31,
	2021		2020			2019

Operating revenues
Water sales	$	77,821	$	76,476		$	73,609
Other utility operating revenue		7,195		6,525			4,916
Non-utility operating revenue		5,843		5,140			5,070
Total Operating Revenues		90,859		88,141			83,595

Operating expenses
Utility operating expenses		41,414		40,338			39,189
Non-utility operating expenses		3,942		3,277			3,315
Depreciation and amortization		11,885		11,143			10,803
Taxes
State and federal income tax expense (benefit)
Current		3,360		8,073			8,420
Deferred		2,377		(2,389	)		(3,239	)
Property and other taxes		5,587		5,404			5,182
Total Operating Expenses		68,565		65,846			63,670

Operating income		22,294		22,295			19,925

Other income, net
Allowance for funds used during construction (AFUDC)		823		1,170			1,410
Miscellaneous		1,302		971			614
		2,125		2,141			2,024

Income before interest charges		24,419		24,436			21,949

Interest charges		7,592		7,619			7,024

Net income applicable to common stock	$	16,827	$	16,817		$	14,925

Income per common share:
Basic	$	1.79	$	1.80		$	1.61
Diluted	$	1.79	$	1.79		$	1.60

Weighted average common shares outstanding:
Basic		9,394		9,327			9,277
Diluted		9,426		9,369			9,326

Cash dividends per share of common stock	$	1.05	$	1.01		$	0.98

	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, 2018		8,368		882	$	8,368	$	882	$	100,639	$	43,362		$	153,251

Net income		—		—		—		—		—		14,925			14,925
Cash dividends declared
Common stock		—		—		—		—		—		(9,122	)		(9,122	)
Issuance of common stock
Dividend reinvestment plan		11		—		11		—		389		—			400
Employee stock options and awards(4)		21		—		21		—		426		—			447
Employee Retirement Plan(3)		10		—		10		—		357		—			367
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

Utility plant comprises:
In thousands
			December 31,
	Estimated Useful Life (In Years)		2021		2020
Utility plant at original cost
Utility plant in service-Water
Intangible plant		—	$	140	$	140
Source of supply plant		45-85		25,045		23,940
Pumping and water treatment plant		8-62		109,087		100,317
Transmission and distribution plant
Mains		81		320,767		293,643
Services		39		53,210		49,937
Storage tanks		76		29,972		29,946
Meters		26		28,778		27,994
Hydrants		60		16,789		15,895
General plant		5-31		62,604		62,379

Utility plant in service-Wastewater
Intangible plant		—		116		116
Treatment and disposal plant		21-81		43,725		41,860
Collection mains & lift stations		81		33,901		32,133
General plant		5-31		1,665		1,545

Property held for future use		—		5,536		5,711
Construction work in progress		—		18,481		21,474
				749,816		707,030
Less – accumulated depreciation				159,385		147,469
			$	590,431	$	559,561

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)
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, 2021		December 31, 2020

Deferred income taxes	$	355	$	370
Deferred contract costs and other		288		46
Debt related costs		4,902		5,233
Goodwill		273		281
Deferred acquisition and franchise costs		503		543
	$	6,321	$	6,473

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

Utility plant retirement cost obligation	$	149	$	126
Deferred income taxes (related to TCJA)		21,111		21,555

	$	21,260	$	21,681

Non-Tariff Revenue
Service line protection plans	$	4,594	$	4,381	$	4,177
Contract operations		884		840		1,122
Design and installation		562		88		—
Inspection fees		341		266		246
Total Non-Tariff Revenue	$	6,381	$	5,575		5,545

Other Operating Revenue	$	2,230	$	1,516		1,413

Total Operating Revenue	$	90,859	$	88,141	$	83,595

	For the Twelve Months Ended December 31,
(in thousands)
	2020		2019

Minimum rentals	$	45	$	44
Contingent rentals		—		—
	$	45	$	44

	Twelve Months Ended		Twelve Months Ended
	December 31,		December 31,
		2020			2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	45		$	44
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	451		$	460

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

Operating Leases:
Operating lease right-of-use assets	$	451		$	460

Other current liabilities	$	6		$	20
Operating lease liabilities		440			432
Total operating lease liabilities	$	446		$	452


Weighted Average Remaining Lease Term
Operating leases	61 years			59 years
Weighted Average Discount Rate
Operating leases		5.0	%		5.0	%

	(in thousands)
	Operating Leases
Year
2022	$	29
2023		24
2024		24
2025		24
2026		25
Thereafter		1,334
Total undiscounted lease payments	$	1,460
Less effects of discounting		(1,014	)
Total lease liabilities recognized		446

Components of Income Tax Expense
In thousands	For the Year Ended December 31,
State income taxes	2021		2020			2019
Current	$	1,216	$	2,348		$	2,405
Deferred		776		(279	)		(610	)
Total state income tax expense	$	1,992	$	2,069		$	1,795

	For the Year Ended December 31,
Federal income taxes	2021		2020			2019
Current	$	2,144	$	5,725		$	6,015
Deferred		1,601		(2,110	)		(2,629	)
Total federal income tax expense	$	3,745	$	3,615		$	3,386

Reconciliation of effective tax rate:
	For the Year Ended December 31,
In thousands	2021			2021			2020			2020			2019			2019
	Amount			Percent			Amount			Percent			Amount			Percent
Reconciliation of effective tax rate
Income before federal and state income taxes	$	22,564			100.0	%	$	22,501			100.0	%	$	20,106			100.0	%

Amount computed at statutory rate		4,738			21.0	%		4,725			21.0	%		4,222			21.0	%
Reconciling items
State income tax-net of federal tax benefit		1,600			7.1	%		1,704			7.6	%		1,414			7.0	%
Regulatory liability adjustment		(451	)		(2.0	)%		(451	)		(2.0	)%		(451	)		(2.2	)%
Other		(150	)		(0.7	)%		(294	)		(1.3	)%		(4	)		0.0	%
Total income tax expense and effective rate	$	5,737			25.4	%	$	5,684			25.3	%	$	5,181			25.8	%

	For the Year Ended December 31,
In thousands	2021			2020

Deferred tax assets related to:
Federal and state operating loss carry-forwards	$	793		$	629
Less: valuation allowance		(546	)		(493	)
Bad debt allowance		120			240
Stock options		122			148
Other		(10	)		75
Total deferred tax assets	$	479		$	599

Deferred tax liabilities related to:
Property plant and equipment basis differences	$	(51,102	)	$	(48,536	)
Bond retirement costs		(1,134	)		(1,210	)
Property taxes		(593	)		(481	)
Other		(783	)		(685	)
Total deferred tax liabilities	$	(53,612	)	$	(50,912	)

Net deferred tax liability	$	(53,133	)	$	(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, 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 Year Ended December 31, 2019 Valuation allowance for deferred tax assets		$	396		$	41		(102	)		$	335

	For the years ended December 31,
In thousands	2021			2020
Balance at beginning of year	$	209		$	271
Additions based on tax positions related to the current year		—			—
Additions based on tax positions related to prior years		19			21
Reductions for tax positions of prior years		—			(83	)
Lapses in statutes of limitations		(26	)		—
Balance at end of year	$	202		$	209

	2021 Shares	2021 Weighted Average Exercise Price		2020 Shares		2020 Weighted Average Exercise Price		2019 Shares		2019 Weighted Average Exercise Price
Plan options
Outstanding at beginning of year	116,347	$	20.90		153,250	$	20.40		168,750	$	20.11
Granted	—		—		—		—		—		—
Exercised	(33,347)		19.04		(36,903)		18.83		(15,500)		17.15
Expired	—		—		—		—		—		—
Outstanding at end of year	83,000	$	21.65		116,347	$	20.90		153,250	$	20.40

Options exercisable at year end	83,000	$	21.65		116,347	$	20.90		153,250	$	20.40

Options Outstanding and Exercisable
Range of Exercise Price		Shares Outstanding at December 31, 2021	Weighted Average Remaining Life	Weighted Average Exercise Price		Aggregate Intrinsic Value
$	19.01 - 20.46	15,500	0.35 Years	$	19.01	$	423,460
$	20.47 - 22.66	67,500	1.85 Years	$	22.26	$	1,624,725

	2021 Shares			2021 Weighted Average Grant Date Fair Value		2020 Shares			2020 Weighted Average Grant Date Fair Value		2019 Shares			2019 Weighted Average Exercise Price
Plan RSA’s
Outstanding at beginning of year		5,000		$	35.01		5,000		$	36.11		5,000		$	38.51
Granted		5,000			40.11		5,000			35.01		5,000			36.11
Vested/Released		(5,000	)		35.01		(5,000	)		36.11		(5,000	)		38.51
Cancelled		—			—		—			—		—			—
Unvested Outstanding at end of year		5,000		$	40.11		5,000		$	35.01		5,000		$	36.11

Application Date	11/28/2018	05/29/2019	11/15/2019	5/29/2020	11/20/2020
DEPSC Approval Date	12/20/2018	06/18/2019	12/12/2019	6/17/2020	12/14/2020
Effective Date	01/01/2019	07/01/2019	01/01/2020	07/1/2020	01/1/2021
Cumulative DSIC Rate	5.55%	7.41%	7.50%	7.50%	7.50%
Net Eligible Plant Improvements – Cumulative Dollars (in millions)	30.4	43.1	43.1	43.1	43.1
Eligible Plant Improvements – Installed Beginning Date	10/01/2014	10/01/2014	10/01/2014	10/01/2014	10/01/2014
Eligible Plant Improvements – Installed Ending Date	10/31/2018	04/30/2019	04/30/2019	04/30/2019	04/30/2019

	For the Year
	Ended December 31,
		2021		2020		2019
	(in thousands)

Weighted average common shares outstanding during the period for Basic computation		$	9,394	$	9,327	$	9,277
Dilutive effect of employee stock options			32		42		49
Weighted average common shares outstanding during the period for Diluted computation		$	9,426	$	9,369	$	9,326

(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

CHIEF EXECUTIVE OFFICER:		CHIEF FINANCIAL OFFICER:

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

Name	Age	Position

Dian C. Taylor	76	Biography: Director since 1991 - Chair of the Board since July 1993, and Chief Executive Officer of Artesian Resources Corporation and its subsidiaries since September 1992. Ms. Taylor has been employed by the Company since August 1991. She was formerly a consultant to the Small Business Development Center at the University of Delaware from February 1991 to August 1991 and Owner and President of Achievement Resources Inc. from 1977 to 1991. Achievement Resources, Inc. specialized in strategic planning, marketing, entrepreneurial and human resources development consulting. Ms. Taylor was a marketing director for SMI, Inc. from 1982 to 1985. Ms. Taylor is the aunt of John R. Eisenbrey, Jr. and Nicholle R. Taylor. She serves on the Executive and Strategic Planning, Budget and Finance Committees. Qualifications: Ms. Dian Taylor has over 25 years of experience as Chief Executive Officer and President of the Company, during which the Company has continuously expanded its service area. Ms. Taylor has extensive knowledge of the complex issues facing smaller companies and prior strategic planning expertise. Ms. Taylor has served as President of the National Association of Water Companies, a trade organization of the investor-owned water utility industry. Ms. Taylor also has served on the Delaware Economic and Financial Advisory Council, on the Board of Governors of the Delaware State Chamber of Commerce, on the Executive Committee of the Delaware Business Round Table, the American Heart Association, the Committee of 100 and the Delaware Council on Economic Education, as a Regional Advisory Board Member for Citizens Bank, a Trustee of the Delaware Grand Opera and the Christiana Care Hospital and as a Commissioner for the Delaware River and Bay Authority. The Board views Ms. Taylor’s experience with various aspects of the utility industry and her demonstrated leadership roles in business and community activities as important qualifications, skills and experiences for the Board of Directors’ conclusion that Ms. Taylor should serve as a director of the Company.