Artesian Resources Corporation Reports First Quarter 2023 Results
NEWARK, Del., May 09, 2023 (GLOBE NEWSWIRE) -- Artesian Resources Corporation (Nasdaq: ARTNA), a leading provider of water and wastewater services, and a number of other related business services, on the Delmarva Peninsula, today announced that revenues for the first quarter of 2023 were $22.5 million, a $0.3 million, or 1.4% increase, compared to revenues recorded during the same period of 2022. Our net income applicable to common stock decreased $0.8 million, or 17.4%. Diluted net income per share decreased 17.0% to $0.39 for the three months ended March 31, 2023 compared to $0.47 for the first quarter of 2022.
“Revenues of our principal water utility business are typically at base levels in the first quarter of the year, with peak water consumption occurring during the warmer summer months. Earnings in the first quarter this year were significantly impacted by continuing inflationary pressures, increased depreciation expense, increased short-term interest rates, and certain non-recurring expenses. On April 28, 2023, for the first time in nine years, we filed a request for an increase in base rates for our Delaware water customers. The rate filing seeks recovery of the significant necessary investments made in utility plant since our last filing in 2014, as well as recognition of increased operating costs,” said Nicki Taylor, President of Artesian Water Company, Inc. (“Artesian Water”), the principal subsidiary of Artesian Resources Corporation.
Application for Increase in Customer Rates
On April 28, 2023, Artesian Water filed a request with the Delaware Public Service Commission to implement new rates to meet a requested increase in revenue of 23.84%, or approximately $17.5 million, on an annualized basis. The new rates support Artesian Water’s ongoing robust capital improvement program and would recognize increased costs of operations, including those associated with treatment chemicals, electricity, water quality testing, fuel, labor and employee benefits. The rate application recognizes additional capital financing invested in utility plant and our reduced weighted cost of debt since our last comprehensive application for an increase in base rate charges filed in 2014.
In accordance with applicable Delaware law, Artesian Water is permitted to implement temporary rates at certain times during the regulatory review process. Should the application not be resolved within seven months, Artesian Water is permitted to place into effect temporary rates of up to 15% of gross annual water sales, subject to refund, until permanent rates are determined by the PSC.
First Quarter Results
Operating revenues increased $0.3 million, or 1.4%, for the three months ended March 31, 2023 compared to the same period a year ago.
Other utility operating revenue increased approximately $0.3 million, or 11.6%, primarily due to an increase in wastewater revenue associated with the addition of new customers.
Non-utility operating revenue increased approximately $0.1 million, or 9.4%, primarily due to an increase in Service Line Protection Plan revenue.
Water sales revenue decreased $0.1 million, or 0.7%, primarily related to a one-time customer refund to our customers within the Town of Frankford. In accordance with the agreement for the purchase of Frankford’s water assets, rates paid by customers of the acquired system were reset to conform with Artesian Water’s state-wide tariff. The PSC approved the change in the first quarter of 2023, with it retroactively effective to February 2022, resulting in a $0.1 million reduction in Artesian Water’s revenue in the first quarter of 2023.
Operating expenses, excluding depreciation and income taxes, increased $0.9 million, or 7.4%.
Utility operating expenses increased $0.8 million, or 7.4%. The majority of the utility operating expense increases are related to payroll and benefits costs, repair and maintenance costs, water treatment costs and purchased power costs. Approximately $0.2 million of the increase reflected a one-time adjustment made in the first quarter of 2022 associated with the acquisition of Tidewater Environmental Services, Inc., a regulated wastewater utility.
The utility operating expense increases were partially offset by a decrease in purchased water expense of $0.5 million, primarily the result of a new contract, in which the minimum amount of water required to be purchased was reduced by 83.3% in July 2022.
Non-utility operating expenses increased $0.1 million primarily due to an increase in plumbing services related to Service Line Protection Plan repairs.
Depreciation and amortization expense increased $0.1 million, or 4.5%, 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 7.5%, 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 quarter of 2022.
Other income increased $0.4 million, primarily due to a $0.3 million increase in allowance for funds used during construction, or AFUDC, as a result of higher long-term construction activity subject to AFUDC for the three months ended March 31, 2023 compared to the same period in 2022. Miscellaneous income increased $0.1 million related to an increase in the annual patronage refund as a result of increased average debt balances with CoBank, ACB.
Long-term debt interest increased $0.3 million, primarily related to an increase in long-term debt interest associated with a first mortgage bond issued in April 2022. Short-term debt interest increased $0.2 million, primarily related to higher interest rates. The average short-term interest rate for the three months ended March 31, 2023 was 5.71% compared to 1.48% for the same period in 2022.
Capital Expenditures
As part of Artesian’s ongoing effort to ensure high-quality reliable service to customers, $16.8 million was invested in the first three months of 2023 in water and wastewater infrastructure projects. 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.
“Since Artesian’s last comprehensive rate filing nine years ago, we will have invested over $285 million in water infrastructure. This includes critical investments in water treatment for the removal of PFAS, which we began well before the U.S. EPA’s recent proposal setting a drinking water standard for such substances, as well as our renewal of over 45 miles of water main. These are just two examples of the types of ongoing investments we continue to make to ensure high-quality, reliable water and service to our customers as a leader in the water industry,” said Dian C. Taylor, Chair, President and CEO.
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 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, our growth strategy, our expectations regarding the timing and results of our rate requests, expectations regarding infrastructure investments, strategic initiatives and the continued growth in our business, seasonal patterns of revenue, implementation of temporary rates, 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, including inflationary pressures, 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
Artesian Resources Corporation | ||||||
Condensed Consolidated Statement of Operations | ||||||
(In thousands, except per share amounts) | ||||||
(Unaudited) | ||||||
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| Three months ended |
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| March 31, |
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| 2023 |
| 2022 |
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Operating Revenues |
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Water sales | $ | 18,016 |
| $ | 18,143 |
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Other utility operating revenue |
| 2,817 |
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| 2,525 |
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Non-utility revenue |
| 1,662 |
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| 1,519 |
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| 22,495 |
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| 22,187 |
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Operating Expenses |
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Utility operating expenses |
| 11,272 |
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| 10,495 |
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Non-utility operating expenses |
| 1,085 |
|
| 943 |
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Depreciation and amortization |
| 3,224 |
|
| 3,085 |
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State and federal income taxes |
| 1,313 |
|
| 1,419 |
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Property and other taxes |
| 1,541 |
|
| 1,502 |
|
|
| 18,435 |
|
| 17,444 |
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Operating Income |
| 4,060 |
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| 4,743 |
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Allowance for funds used during construction |
| 459 |
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| 181 |
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Miscellaneous |
| 1,603 |
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| 1,446 |
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Income Before Interest Charges |
| 6,122 |
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| 6,370 |
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Interest Charges |
| 2,417 |
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| 1,887 |
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Net Income | $ | 3,705 |
| $ | 4,483 |
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Weighted Average Common Shares Outstanding - Basic |
| 9,504 |
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| 9,423 |
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Net Income per Common Share - Basic | $ | 0.39 |
| $ | 0.48 |
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Weighted Average Common Shares Outstanding - Diluted |
| 9,510 |
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| 9,455 |
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Net Income per Common Share - Diluted | $ | 0.39 |
| $ | 0.47 |
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Artesian Resources Corporation | ||||||
Condensed Consolidated Balance Sheet | ||||||
(In thousands) | ||||||
(Unaudited) | ||||||
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| March 31, |
| December 31, |
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| 2023 |
| 2022 |
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Assets |
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Utility Plant, at original cost less |
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accumulated depreciation | $ | 679,714 |
| $ | 668,031 |
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Current Assets |
| 21,609 |
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| 27,804 |
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Regulatory and Other Assets |
| 24,463 |
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| 23,956 |
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| $ | 725,786 |
| $ | 719,791 |
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Capitalization and Liabilities |
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Stockholders' Equity | $ | 189,139 |
| $ | 187,931 |
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Long Term Debt, Net of Current Portion |
| 176,263 |
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| 175,619 |
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Current Liabilities |
| 43,540 |
|
| 44,069 |
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Advances for Construction |
| 3,633 |
|
| 3,686 |
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Contributions in Aid of Construction |
| 229,159 |
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| 224,308 |
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Other Liabilities |
| 84,052 |
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| 84,178 |
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| $ | 725,786 |
| $ | 719,791 |
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