Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2022 | Nov. 02, 2022 | |
Entity Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2022 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q3 | |
Document Transition Report | false | |
Entity File Number | 000-18516 | |
Entity Registrant Name | ARTESIAN RESOURCES CORPORATION | |
Entity Central Index Key | 0000863110 | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 51-0002090 | |
Entity Address, Address Line One | 664 Churchmans Road | |
Entity Address, City or Town | Newark | |
Entity Address, State or Province | DE | |
Entity Address, Postal Zip Code | 19702 | |
City Area Code | 302 | |
Local Phone Number | 453 – 6900 | |
Title of 12(b) Security | Common Stock | |
Trading Symbol | ARTNA | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Class A Stock [Member] | ||
Entity Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 8,609,535 | |
Class B Stock [Member] | ||
Entity Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 881,452 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
ASSETS | ||
Utility plant, at original cost (less accumulated depreciation - 2022 - $169,474; 2021 - $159,385) | $ 655,960 | $ 590,431 |
Current assets | ||
Cash and cash equivalents | 108 | 92 |
Accounts receivable (less allowance for doubtful accounts - 2022 - $486; 2021 - $429) | 11,720 | 8,367 |
Income tax receivable | 833 | 2,234 |
Unbilled operating revenues | 1,992 | 1,080 |
Materials and supplies | 2,505 | 1,933 |
Prepaid property taxes | 3,021 | 2,306 |
Prepaid expenses and other | 2,724 | 2,652 |
Total current assets | 22,903 | 18,664 |
Other assets | ||
Non-utility property (less accumulated depreciation - 2022- $973; 2021 - $919) | 3,756 | 3,751 |
Other deferred assets | 10,548 | 5,097 |
Goodwill | 2,983 | 0 |
Operating lease right of use assets | 444 | 451 |
Total other assets | 17,731 | 9,299 |
Regulatory assets, net | 6,210 | 6,321 |
Total Assets | 702,804 | 624,715 |
Stockholders' equity | ||
Common stock | 9,491 | 9,414 |
Preferred stock | 0 | 0 |
Additional paid-in capital | 106,779 | 104,989 |
Retained earnings | 71,603 | 63,607 |
Total stockholders' equity | 187,873 | 178,010 |
Long-term debt, net of current portion | 174,035 | 143,259 |
Total stockholders' equity and long term debt | 361,908 | 321,269 |
Current liabilities | ||
Lines of credit | 9,400 | 26,703 |
Current portion of long-term debt | 2,023 | 1,591 |
Accounts payable | 9,083 | 10,206 |
Accrued expenses | 4,140 | 4,038 |
Overdraft payable | 129 | 30 |
Accrued interest | 1,362 | 917 |
Income taxes payable | 1,096 | 0 |
Customer and other deposits | 2,478 | 2,273 |
Other | 3,165 | 1,448 |
Total current liabilities | 32,876 | 47,206 |
Commitments and contingencies (Note 11) | ||
Deferred credits and other liabilities | ||
Net advances for construction | 3,963 | 4,295 |
Operating lease liabilities | 439 | 440 |
Regulatory liabilities | 31,550 | 21,260 |
Deferred investment tax credits | 443 | 456 |
Deferred income taxes | 54,894 | 53,133 |
Total deferred credits and other liabilities | 91,289 | 79,584 |
Net contributions in aid of construction | 216,731 | 176,656 |
Total Liabilities and Stockholders' Equity | $ 702,804 | $ 624,715 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
ASSETS | ||
Utility Plant, accumulated depreciation | $ 169,474 | $ 159,385 |
Current assets | ||
Accounts receivable, allowance for doubtful accounts | 486 | 429 |
Other assets | ||
Non-utility Property, accumulated depreciation | $ 973 | $ 919 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Operating revenues | ||||
Total Operating Revenues | $ 26,582 | $ 24,919 | $ 73,780 | $ 68,032 |
Operating expenses | ||||
Utility operating expenses | 10,428 | 10,889 | 30,994 | 30,055 |
Non-utility operating expenses | 1,570 | 979 | 4,418 | 2,756 |
Depreciation and amortization | 3,210 | 2,969 | 9,350 | 8,958 |
State and federal income taxes | 1,834 | 1,784 | 4,978 | 4,677 |
Property and other taxes | 1,458 | 1,400 | 4,371 | 4,160 |
Total Operating Expenses | 18,500 | 18,021 | 54,111 | 50,606 |
Operating income | 8,082 | 6,898 | 19,669 | 17,426 |
Other income, net | ||||
Allowance for funds used during construction (AFUDC) | 393 | 112 | 898 | 727 |
Miscellaneous (expense) income | (101) | (44) | 1,311 | 1,299 |
Income before interest charges | 8,374 | 6,966 | 21,878 | 19,452 |
Interest charges | 2,230 | 1,910 | 6,205 | 5,685 |
Net income applicable to common stock | $ 6,144 | $ 5,056 | $ 15,673 | $ 13,767 |
Income per common share: | ||||
Basic (in dollars per share) | $ 0.65 | $ 0.54 | $ 1.66 | $ 1.47 |
Diluted (in dollars per share) | $ 0.65 | $ 0.54 | $ 1.65 | $ 1.46 |
Weighted average common shares outstanding: | ||||
Basic (in shares) | 9,477 | 9,404 | 9,451 | 9,389 |
Diluted (in shares) | 9,492 | 9,432 | 9,473 | 9,421 |
Cash dividends per share of common stock (in dollars per share) | $ 0.2729 | $ 0.261 | $ 0.8133 | $ 0.7791 |
Water Sales [Member] | ||||
Operating revenues | ||||
Total Operating Revenues | $ 21,702 | $ 21,279 | $ 59,567 | $ 59,187 |
Other Utility Operating Revenue [Member] | ||||
Operating revenues | ||||
Total Operating Revenues | 2,841 | 2,177 | 8,281 | 4,566 |
Non-Utility Operating Revenue [Member] | ||||
Operating revenues | ||||
Total Operating Revenues | $ 2,039 | $ 1,463 | $ 5,932 | $ 4,279 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income | $ 15,673 | $ 13,767 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 9,350 | 8,958 |
Deferred income taxes, net | 1,582 | (2,426) |
Stock compensation | 162 | 142 |
AFUDC, equity portion | (612) | (491) |
Changes in assets and liabilities, net of acquisitions: | ||
Accounts receivable, net of allowance for doubtful accounts | (3,402) | 570 |
Income tax receivable | 1,401 | 569 |
Unbilled operating revenues | (547) | (493) |
Materials and supplies | (572) | (131) |
Income tax payable | 1,096 | 1,660 |
Prepaid property taxes | (138) | (1,303) |
Prepaid expenses and other | (62) | (213) |
Other deferred assets | (5,477) | (393) |
Regulatory assets | 280 | 14 |
Regulatory liabilities | 9,651 | (426) |
Accounts payable | (4,086) | (826) |
Accrued expenses | (791) | (178) |
Accrued interest | 445 | 422 |
Deposits and other | 1,097 | 459 |
NET CASH PROVIDED BY OPERATING ACTIVITIES | 25,050 | 19,681 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Capital expenditures (net of AFUDC, equity portion) | (36,660) | (30,373) |
Investment in acquisitions, net of cash acquired | (6,341) | 0 |
Proceeds from sale of assets | 49 | 88 |
NET CASH USED IN INVESTING ACTIVITIES | (42,952) | (30,285) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Net (repayments) borrowings under lines of credit agreements | (17,303) | 794 |
Increase in overdraft payable | 99 | 328 |
Net advances and contributions in aid of construction | 11,576 | 13,946 |
Net proceeds from issuance of common stock | 1,705 | 1,133 |
Issuance of long-term debt | 30,828 | 3,753 |
Dividends paid | (7,677) | (7,310) |
Deferred debt issuance cost | (120) | (19) |
Principal repayments of long-term debt | (1,190) | (1,439) |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 17,918 | 11,186 |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 16 | 582 |
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 92 | 28 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | 108 | 610 |
Non-cash Investing and Financing Activity: | ||
Utility plant received as construction advances and contributions | 4,407 | 2,799 |
Dividends declared but not paid | 0 | 2,516 |
Change in amounts included in accounts payable and accrued payables related to capital expenditures | 1,574 | (670) |
Supplemental Cash Flow Information: | ||
Interest paid | 5,760 | 5,263 |
Income taxes paid | 1,431 | 5,179 |
Preliminary purchase price of allocation of investment in acquisitions: | ||
Utility plant | 34,234 | 0 |
Cash | 280 | 0 |
Goodwill | 2,983 | 0 |
Other assets | 1,033 | 0 |
Total assets | 38,530 | 0 |
Less: | ||
Liabilities | 3,852 | 0 |
Future contractual obligation payable to seller | 1,569 | 0 |
CIAC | 26,488 | 0 |
Cash paid for acquisitions | 6,621 | 0 |
Cash received from acquisitions | 280 | 0 |
Net cash paid for acquisitions | $ 6,341 | $ 0 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands | Common Stock [Member] Common Shares Class A Non-Voting [Member] | Common Stock [Member] Common Shares Class B Voting [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Total | |||
Balance at Dec. 31, 2020 | $ 8,475 | $ 882 | $ 103,463 | $ 56,606 | $ 169,426 | |||
Balance (in shares) at Dec. 31, 2020 | 8,475 | [1],[2],[3] | 882 | [4] | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income | $ 0 | $ 0 | 0 | 4,206 | 4,206 | |||
Cash dividends declared | ||||||||
Common stock | 0 | 0 | 0 | (2,406) | (2,406) | |||
Issuance of common stock | ||||||||
Dividend reinvestment plan | $ 3 | $ 0 | 95 | 0 | 98 | |||
Dividend reinvestment plan (in shares) | 3 | [1],[2],[3] | 0 | [4] | ||||
Employee stock options and awards | [3] | $ 22 | $ 0 | 438 | 0 | 460 | ||
Employee stock options and awards (in shares) | [3] | 22 | [1],[2] | 0 | [4] | |||
Employee Retirement Plan | [1] | $ 2 | $ 0 | 84 | 0 | 86 | ||
Employee Retirement Plan (in shares) | [1] | 2 | [2],[3] | 0 | [4] | |||
Balance at Mar. 31, 2021 | $ 8,502 | $ 882 | 104,080 | 58,406 | 171,870 | |||
Balance (in shares) at Mar. 31, 2021 | 8,502 | [1],[2],[3] | 882 | [4] | ||||
Balance at Dec. 31, 2020 | $ 8,475 | $ 882 | 103,463 | 56,606 | 169,426 | |||
Balance (in shares) at Dec. 31, 2020 | 8,475 | [1],[2],[3] | 882 | [4] | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income | 13,767 | |||||||
Balance at Sep. 30, 2021 | $ 8,524 | $ 882 | 104,689 | 60,547 | 174,642 | |||
Balance (in shares) at Sep. 30, 2021 | 8,524 | [1],[2],[3] | 882 | [4] | ||||
Balance at Mar. 31, 2021 | $ 8,502 | $ 882 | 104,080 | 58,406 | 171,870 | |||
Balance (in shares) at Mar. 31, 2021 | 8,502 | [1],[2],[3] | 882 | [4] | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income | $ 0 | $ 0 | 0 | 4,505 | 4,505 | |||
Cash dividends declared | ||||||||
Common stock | 0 | 0 | 0 | (4,904) | (4,904) | |||
Issuance of common stock | ||||||||
Dividend reinvestment plan | $ 2 | $ 0 | 103 | 0 | 105 | |||
Dividend reinvestment plan (in shares) | 2 | [1],[2],[3] | 0 | [4] | ||||
Employee stock options and awards | [3] | $ 11 | $ 0 | 165 | 0 | 176 | ||
Employee stock options and awards (in shares) | [3] | 11 | [1],[2] | 0 | [4] | |||
Employee Retirement Plan | [1] | $ 3 | $ 0 | 105 | 0 | 108 | ||
Employee Retirement Plan (in shares) | [1] | 3 | [2],[3] | 0 | [4] | |||
Balance at Jun. 30, 2021 | $ 8,518 | $ 882 | 104,453 | 58,007 | 171,860 | |||
Balance (in shares) at Jun. 30, 2021 | 8,518 | [1],[2],[3] | 882 | [4] | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income | $ 0 | $ 0 | 0 | 5,056 | 5,056 | |||
Cash dividends declared | ||||||||
Common stock | 0 | 0 | 0 | (2,516) | (2,516) | |||
Issuance of common stock | ||||||||
Dividend reinvestment plan | $ 3 | $ 0 | 94 | 0 | 97 | |||
Dividend reinvestment plan (in shares) | 3 | [1],[2],[3] | 0 | [4] | ||||
Employee stock options and awards | [3] | $ 1 | $ 0 | 49 | 0 | 50 | ||
Employee stock options and awards (in shares) | [3] | 1 | [1],[2] | 0 | [4] | |||
Employee Retirement Plan | [1] | $ 2 | $ 0 | 93 | 0 | 95 | ||
Employee Retirement Plan (in shares) | [1] | 2 | [2],[3] | 0 | [4] | |||
Balance at Sep. 30, 2021 | $ 8,524 | $ 882 | 104,689 | 60,547 | 174,642 | |||
Balance (in shares) at Sep. 30, 2021 | 8,524 | [1],[2],[3] | 882 | [4] | ||||
Balance at Dec. 31, 2021 | $ 8,532 | $ 882 | 104,989 | 63,607 | 178,010 | |||
Balance (in shares) at Dec. 31, 2021 | 8,532 | [1],[2],[3] | 882 | [4] | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income | $ 0 | $ 0 | 0 | 4,483 | 4,483 | |||
Cash dividends declared | ||||||||
Common stock | 0 | 0 | 0 | (2,518) | (2,518) | |||
Issuance of common stock | ||||||||
Dividend reinvestment plan | $ 2 | $ 0 | 87 | 0 | 89 | |||
Dividend reinvestment plan (in shares) | 2 | [1],[2],[3] | 0 | [4] | ||||
Employee stock options and awards | [3] | $ 22 | $ 0 | 475 | 0 | 497 | ||
Employee stock options and awards (in shares) | [3] | 22 | [1],[2] | 0 | [4] | |||
Employee Retirement Plan | [1] | $ 0 | $ 0 | 0 | 0 | 0 | ||
Employee Retirement Plan (in shares) | [1] | 0 | [2],[3] | 0 | [4] | |||
Balance at Mar. 31, 2022 | $ 8,556 | $ 882 | 105,551 | 65,572 | 180,561 | |||
Balance (in shares) at Mar. 31, 2022 | 8,556 | [1],[2],[3] | 882 | [4] | ||||
Balance at Dec. 31, 2021 | $ 8,532 | $ 882 | 104,989 | 63,607 | 178,010 | |||
Balance (in shares) at Dec. 31, 2021 | 8,532 | [1],[2],[3] | 882 | [4] | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income | 15,673 | |||||||
Balance at Sep. 30, 2022 | $ 8,609 | $ 882 | 106,779 | 71,603 | 187,873 | |||
Balance (in shares) at Sep. 30, 2022 | 8,609 | [1],[2],[3] | 882 | [4] | ||||
Balance at Mar. 31, 2022 | $ 8,556 | $ 882 | 105,551 | 65,572 | 180,561 | |||
Balance (in shares) at Mar. 31, 2022 | 8,556 | [1],[2],[3] | 882 | [4] | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income | $ 0 | $ 0 | 0 | 5,046 | 5,046 | |||
Cash dividends declared | ||||||||
Common stock | 0 | 0 | 0 | (5,159) | (5,159) | |||
Issuance of common stock | ||||||||
Dividend reinvestment plan | $ 2 | $ 0 | 97 | 0 | 99 | |||
Dividend reinvestment plan (in shares) | 2 | [1],[2],[3] | 0 | [4] | ||||
Employee stock options and awards | [3] | $ 19 | $ 0 | 336 | 0 | 355 | ||
Employee stock options and awards (in shares) | [3] | 19 | [1],[2] | 0 | [4] | |||
Employee Retirement Plan | [1] | $ 0 | $ 0 | 0 | 0 | 0 | ||
Employee Retirement Plan (in shares) | [1] | 0 | [2],[3] | 0 | [4] | |||
Balance at Jun. 30, 2022 | $ 8,577 | $ 882 | 105,984 | 65,459 | 180,902 | |||
Balance (in shares) at Jun. 30, 2022 | 8,577 | [1],[2],[3] | 882 | [4] | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income | $ 0 | $ 0 | 0 | 6,144 | 6,144 | |||
Cash dividends declared | ||||||||
Common stock | 0 | 0 | 0 | 0 | 0 | |||
Issuance of common stock | ||||||||
Dividend reinvestment plan | $ 2 | $ 0 | 88 | 0 | 90 | |||
Dividend reinvestment plan (in shares) | 2 | [1],[2],[3] | 0 | [4] | ||||
Employee stock options and awards | [3] | $ 30 | $ 0 | 707 | 0 | 737 | ||
Employee stock options and awards (in shares) | [3] | 30 | [1],[2] | 0 | [4] | |||
Employee Retirement Plan | [1] | $ 0 | $ 0 | 0 | 0 | 0 | ||
Employee Retirement Plan (in shares) | [1] | 0 | [2],[3] | 0 | [4] | |||
Balance at Sep. 30, 2022 | $ 8,609 | $ 882 | $ 106,779 | $ 71,603 | $ 187,873 | |||
Balance (in shares) at Sep. 30, 2022 | 8,609 | [1],[2],[3] | 882 | [4] | ||||
[1] Artesian Resources Corporation registered 200,000 shares of Class A Common Stock, subsequently adjusted for stock splits, available for purchase through the Company’s 401(k) retirement plan. At September 30, 2022 and September 30, 2021, Class A Common Stock had 15,000,000 shares authorized. For the same periods, shares issued, inclusive of treasury shares, were 8,638,474 and 8,553,070, respectively. Under the Equity Compensation Plan, effective December 9, 2015, or the 2015 Plan, Artesian Resources Corporation authorized up to 331,500 shares of Class A Common Stock for issuance of grants in the form of stock options, stock units, dividend equivalents and other stock-based awards, subject to adjustment in certain circumstances as discussed in the 2015 Plan. Includes stock compensation expense for September 30, 2022, and September 30, 2021, see Note 6-Stock Compensation Plans. At September 30, 2022 and September 30, 2021, Class B Common Stock had 1,040,000 shares authorized and 881,452 shares issued. |
CONSOLIDATED STATEMENTS OF CH_2
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 09, 2015 |
Common Shares Class A Non-Voting [Member] | |||
Common stock, par value (in dollars per share) | $ 1 | ||
Common stock, shares authorized (in shares) | 15,000,000 | ||
Common Stock Shares Issued (in shares) | 8,609,497 | 8,524,093 | |
Common Shares Class B Voting [Member] | |||
Common stock, par value (in dollars per share) | $ 1 | ||
Common stock, shares authorized (in shares) | 1,040,000 | ||
Common Stock Shares Issued (in shares) | 881,452 | 881,452 | |
Common Stock [Member] | Common Shares Class A Non-Voting [Member] | |||
Common stock, par value (in dollars per share) | $ 1 | $ 1 | |
Common stock, shares authorized (in shares) | 15,000,000 | 15,000,000 | |
Common Stock Shares Issued (in shares) | 8,638,474 | 8,553,070 | |
Shares available for purchase through retirement plans (in shares) | 200,000 | ||
Shares authorized for issuance of grants under equity compensation plan (in shares) | 331,500 | ||
Common Stock [Member] | Common Shares Class B Voting [Member] | |||
Common stock, par value (in dollars per share) | $ 1 | $ 1 | |
Common stock, shares authorized (in shares) | 1,040,000 | 1,040,000 | |
Common Stock Shares Issued (in shares) | 881,452 | 881,452 |
GENERAL
GENERAL | 9 Months Ended |
Sep. 30, 2022 | |
GENERAL [Abstract] | |
GENERAL | NOTE 1 Artesian Resources Corporation, or Artesian Resources, includes income from the earnings of all of our wholly owned subsidiaries. The terms "we", "our", "Artesian" and the "Company" as used herein refer to Artesian Resources and its subsidiaries. DELAWARE REGULATED SUBSIDIARIES Artesian Water Company, Inc., or Artesian Water, our principal subsidiary, distributes and sells water to residential, commercial, industrial, governmental, municipal and utility customers throughout the State of Delaware. In addition, Artesian Water provides services to other water utilities, including operations and billing functions, and has contract operation agreements with private, municipal and state water providers. Artesian Water also provides water for public and private fire protection to customers in our service territories. On May 26, 2022, Artesian Water completed its purchase of substantially all of the water operating assets from the Town of Clayton, or Clayton, a Delaware municipality located in Kent County, Delaware, including Clayton’s exclusive franchise territory and the right to provide water service to Clayton’s existing customers, or the Clayton Water System. The total purchase price was $5.0 million, less the current payoff amount of secured debt or debt associated with the Clayton Water System. Artesian Wastewater Management, Inc., or Artesian Wastewater, began providing wastewater services in Sussex County, Delaware in July 2005. Artesian Wastewater is a regulated entity that owns wastewater collection and treatment infrastructure and provides wastewater services to customers in Delaware as a regulated public wastewater service company. In January 2022, Artesian Wastewater acquired Tidewater Environmental Services, Inc. Artesian Wastewater operates as the parent holding company of Tidewater Environmental Services, Inc. dba Artesian Wastewater, or TESI. TESI was incorporated in 2004 and is a regulated entity that owns wastewater collection and treatment infrastructure and provides wastewater services to customers in Sussex County, Delaware as a regulated public wastewater service company. Artesian Wastewater purchased all of the stock of TESI from Middlesex Water Company, or Middlesex, for $ million in cash and other consideration, including forgiveness of a $ million note due from Middlesex. This acquisition more than doubled the number of wastewater customers served by Artesian’s Delaware wastewater subsidiaries in Sussex County, Delaware and included all residents within the Town of Milton. MARYLAND REGULATED SUBSIDIARIES Artesian Water Maryland, Inc., or Artesian Water Maryland, began operations in August 2007. Artesian Water Maryland distributes and sells water to residential, commercial, industrial and municipal customers in Cecil County, Maryland. Artesian Wastewater Maryland, Inc., or Artesian Wastewater Maryland, was incorporated on June 3, 2008 and is able to provide regulated wastewater services to customers in the State of Maryland. PENNSYLVANIA REGULATED SUBSIDIARY Artesian Water Pennsylvania, Inc., or Artesian Water Pennsylvania, began operations in 2002. It provides water service to a residential community in Chester County, Pennsylvania. OTHER SUBSIDIARIES Our three other subsidiaries, none of which are regulated, are Artesian Utility Development, Inc., or Artesian Utility, Artesian Development Corporation, or Artesian Development, and Artesian Storm Water Services, Inc., or Artesian Storm Water. Artesian Utility was formed in 1996 and designs and builds water and wastewater infrastructure and provides contract water and wastewater operation services on the Delmarva Peninsula to private, municipal and governmental institutions. Artesian Utility also evaluates land parcels, provides recommendations to developers on the size of water or wastewater facilities and the type of technology that should be used for treatment at such facilities, and operates water and wastewater facilities in Delaware for municipal and governmental agencies. Artesian Utility also contracts with developers and government agencies for design and construction of wastewater infrastructure throughout the Delmarva Peninsula. In addition, as further discussed below, Artesian Utility operates the Water Service Line Protection Plan, or WSLP Plan, the Sewer Service Line Protection Plan, or SSLP Plan, and the Internal Service Line Protection Plan, or ISLP Plan (collectively, SLP Plans). Artesian Utility currently operates wastewater treatment facilities for the town of Middletown, in southern New Castle County, Delaware, or Middletown, under a 20-year contract that expires in July 2039. Artesian Utility also offers three protection plans to customers, the WSLP Plan, the SSLP Plan and the ISLP Plan. The The SSLP Plan covers all parts, material and labor required to repair or replace participating customers' leaking or clogged sewer lines up to an annual limit. Artesian Development is a real estate holding company that owns properties, including land approved for office buildings, a water treatment plant and wastewater facility, as well as property for current operations, including an office facility in Sussex County, Delaware. The facility consists of approximately 10,000 square feet of office space along with nearly 10,000 square feet of warehouse space. Artesian Storm Water, incorporated in 2017, was formed to provide design, installation, maintenance and repair services related to existing or proposed storm water management systems in Delaware and the surrounding areas. The ability to offer storm water services will complement the primary water and wastewater services that we provide. Artesian Storm Water is not actively seeking new opportunities. |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |
BASIS OF PRESENTATION | NOTE 2 Basis of Presentation The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC, for Form 10-Q. Certain information and note disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. Accordingly, these condensed consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes in the Company's annual report on Form 10-K for fiscal year 2021 as filed with the SEC on March 11, 2022. The condensed consolidated financial statements include the accounts of Artesian Resources Corporation and its wholly owned subsidiaries, including its principal operating company, Artesian Water. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments (unless otherwise noted) necessary to present fairly the Company's balance sheet position as of September 30, 2022, the results of its operations for the three and -month periods ended and , its cash flows for the -month periods ended and and the changes in stockholders’ equity for the three and -month periods ended and . The December 31, 2021 Condensed Consolidated Balance Sheet was derived from the Company’s December 31, 2021 audited consolidated financial statements, but does not include all disclosures and notes normally provided in annual financial statements. The results of operations for the interim periods presented are not necessarily indicative of the results for the full year or for future periods. Use of Estimates The condensed consolidated financial statements were prepared in conformity with generally accepted accounting principles in the U.S., which require management to make certain estimates and assumptions regarding the reported amounts of assets and liabilities including unbilled revenues, credit losses and reserves for bad debt, regulatory asset recovery, lease agreements and contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from management's estimates. All additions to utility plant are recorded at cost. Business combinations pursuant to ASC Topic 805 may result in a purchase price allocation and the acquired assets are required to be evaluated by the applicable regulatory agency. Artesian Wastewater acquired TESI in January 2022 and Artesian Water purchased substantially all of the water operating assets from the Town of Clayton in May 2022. As of September 30, 2022, the fair value determination for TESI is finalized, with the exception of deferred income taxes, which is still preliminary but expected to be complete by December 31, 2022. The fair value for deferred income taxes affects both goodwill and deferred income taxes. As of September 30, 2022, The town of Clayton transaction is preliminary. Management’s preliminary determination of fair value of the tangible assets acquired using the cost method requires management to make significant estimates and assumptions related to economic lives of the assets, replacement costs, and physical characteristics of the tangible assets acquired. A third-party valuation specialist is assisting with the valuation of the assets acquired. The purchase price allocation for the Town of Clayton is expected to be finalized once the valuation of assets acquired has been completed, no later than one year after the acquisition date. Reclassification Certain accounts in the prior year financial statements have been reclassified for comparative purposes to conform with the presentation in the current year financial statements. These reclassifications had no effect on net income or stockholders' equity. |
REVENUE RECOGNITION
REVENUE RECOGNITION | 9 Months Ended |
Sep. 30, 2022 | |
REVENUE RECOGNITION [Abstract] | |
REVENUE RECOGNITION | NOTE 3 – REVENUE RECOGNITION Background Artesian’s operating revenues are primarily attributable to contract services based upon tariff rates approved by the Delaware Public Service Commission, or DEPSC, the Maryland Public Service Commission, or MDPSC, and the Pennsylvania Public Utility Commission, or PAPUC. Tariff contract service revenues consist of water consumption, industrial wastewater services, fixed fees for water and wastewater services including customer and fire protection fees, service charges and Distribution System Improvement Charges, or DSIC, billed to customers at rates outlined in our tariffs that represent stand-alone selling prices. Our non-tariff contract revenues consist of Service Line Protection Plan, or SLP Plan, fees, water and wastewater contract operations, design and installation contract services, and wastewater inspection fees. Other operating revenue primarily consists of developer guarantee contributions for wastewater and rental income for antenna agreements, which are not considered in the scope of Accounting Standards Codification 606, Revenue from Contracts with Customers. Tariff Contract Revenues Artesian generates revenue from the sale of water to customers in Delaware, Cecil County, Maryland, and Southern Chester County, Pennsylvania once a customer requests service in our territory. We recognize water consumption revenue at tariff rates on a cycle basis for the volume of water transferred to customers based upon meter readings for actual gallons of water consumed as well as unbilled amounts for estimated usage from the date of the last meter reading to the end of the accounting period. As actual usage amounts are known based on recurring meter readings, adjustments are made to the unbilled estimates in the next billing cycle based on the actual results. Estimates are made on an individual customer basis, based on one of three methods: the previous year’s consumption in the same period, the previous billing period’s consumption, or averaging. While actual usage for individual customers may differ materially from the estimate based on management judgments described above, we believe the overall total estimate of consumption and revenue for the fiscal period will not differ materially from actual billed consumption. The majority of our water customers are billed for water consumed on a monthly basis, while the remaining customers are billed on a quarterly basis. As a result, we record unbilled operating revenue (contract asset) for any estimated usage through the end of the accounting period that will be billed in the next monthly or quarterly billing cycle. Artesian generates revenue from industrial wastewater services provided to a customer in Sussex County, Delaware. We recognize industrial wastewater service revenue at a contract rate on a monthly basis for the volume of wastewater transferred to Artesian’s wastewater facilities based upon meter readings for actual gallons of wastewater transferred. These services are invoiced at the end of every month based on the actual meter readings for that month, and therefore there is no contract asset or liability associated with this revenue. The contract also provides for a minimum required volume of wastewater flow to our facility. At each year end, any shortfall of the actual volume from the required minimum volume is billed to the industrial customer and recorded as revenue. Additionally, if during the course of the year it is probable that the actual volume will not meet the minimum required volume, estimated revenue amounts would be recorded for the pro rata minimum volume, constrained for potential flow capacity that could occur in the remainder of the year. Pursuant to a settlement agreement, the minimum required volume was prorated on a seven month basis beginning June 1, 2021 and ending December 31, 2021. Artesian generates revenue from metered wastewater services provided to customers in Sussex County, Delaware. We recognize metered wastewater services at tariff rates on a cycle basis for the volume of wastewater transferred to Artesian’s wastewater facilities based upon meter readings for actual gallons of water transferred, as well as unbilled amounts for estimated volume from the date of the last meter reading to the end of the accounting period. As actual volume amounts are known based on recurring meter readings, adjustments are made to the unbilled estimates in the next billing cycle based on the actual results. Estimates are made on an individual customer basis, based on one of three methods: the previous year’s volume in the same period, the previous billing period’s volume, or averaging. While actual usage for individual customers may differ materially from the estimate based on management judgments described above, we believe the overall total estimate of volume and revenue for the fiscal period will not differ materially from actual billed consumption. The majority of these wastewater customers are billed for the volume of water transferred on a quarterly basis. As a result, we record unbilled operating revenue (contract asset) for any estimated volume through the end of the accounting period that will be billed in the next monthly cycle. Artesian generates fixed-fee revenue for water and wastewater services provided to customers once a customer requests service in our territory. Our wastewater territory is located in Sussex County, Delaware. We recognize revenue from these services on a ratable basis over time as the customer simultaneously receives and consumes all the benefits of the Company remaining ready to provide them water and wastewater service. These contract services are billed either in advance or arrears at tariff rates on a monthly, quarterly or semi-annual basis. For contract services billed in arrears, we record unbilled operating revenue (contract asset) for any services through the end of the accounting period that will be billed in the next monthly or quarterly cycle. For contract services billed in advance, we record deferred revenue (contract liability) and accounts receivable for any amounts for which we have a right to invoice but for which services have not been provided. This deferred revenue is netted with unbilled operating revenue on the Condensed Consolidated Balance Sheet. Artesian generates service charges primarily from non-payment fees, such as water shut-off and reconnection fees and finance charges. These fees are billed and recognized as revenue at the point in time when our tariffs indicate the Company has the right to payment such as days past due have been reached or shut-offs and reconnections have been performed. There is no contract asset or liability associated with these fees. Artesian generates revenue from DSIC, which are surcharges applied to water customer tariff rates in Delaware related to specific types of water distribution system improvements. This rate is calculated on a semi-annual basis based on an approved projected revenue requirement over the following six-month period. This rate is adjusted up or down at the next DSIC filing to account for any differences between actual earned revenue and the projected revenue requirement. Since DSIC revenue is a surcharge applied to tariff rates, we recognize DSIC revenue based on the same guidelines as noted above depending on whether the surcharge was applied to consumption revenue or fixed-fee revenue. Accounts receivable related to tariff contract revenues are typically due within 25 days of invoicing. An allowance for doubtful accounts is calculated as a percentage of total associated revenues based upon historical trends and adjusted for current conditions. We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related allowance for doubtful accounts and associated bad debt expense has not been significant. However, due to the COVID-19 pandemic causing hardships for many utility customers, the Company experienced longer receivable cycles throughout 2020 and into 2021 and made an adjustment to increase the reserve for bad debt by $0.5 million in 2020. In June 2021 we made an adjustment to reduce the reserve by $0.3 million. We will continue to monitor factors that affect the reserve for bad debt. Non-tariff Contract Revenues Artesian generates SLP Plan revenue once a customer requests service to cover all parts, materials and labor required to repair or replace leaking water service lines, leaking or clogged sewer lines, or water and wastewater lines within the customer’s residence, up to an annual limit. We recognize revenue from these services on a ratable basis over time as the customer simultaneously receives and consumes all the benefits of having service line protection services. These contract services are billed in advance on a monthly or quarterly basis. As a result, we record deferred revenue (contract liability) and accounts receivable for any amounts for which we have a right to invoice but for which services have not been provided. Accounts receivable from SLP Plan customers are typically due within 25 days of invoicing. An allowance for doubtful accounts is calculated as a percentage of total SLP Plan contract revenue. We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related allowance for doubtful accounts and associated bad debt expense has not been significant. Artesian generates contract operation revenue from water and wastewater operation services provided to customers. We recognize revenue from these operation contracts, which consist primarily of monthly operation and maintenance services, over time as customers receive and consume the benefits of such services performed. The majority of these services are invoiced in advance at the beginning of every month and are typically due within 30 days, and therefore there is no contract asset or liability associated with most of these revenues. We have one operation contract that was paid in advance resulting in a contract liability for services that have not yet been provided. An allowance for doubtful accounts is provided based on a periodic analysis of individual account balances, including an evaluation of days outstanding, payment history, recent payment trends, and our assessment of our customers’ creditworthiness. The related allowance for doubtful accounts and associated bad debt expense has not been significant. Artesian generates design and installation revenue for services related to the design and construction of wastewater infrastructure for a state agency under contract. We recognize revenue from these services over time as services are performed using the percentage-of-completion method based on an input method of incurred costs (cost-to-cost). These services are invoiced at the end of every month based on incurred costs to date. As of September 30, 2022, there is no associated contract asset or liability. There is no allowance for doubtful accounts or bad debt expense associated with this revenue. Artesian generates inspection fee revenue for inspection services related to onsite wastewater collection systems installed by developers of new communities. These fees are paid by developers in advance when a service is requested for a new phase of a development. Inspection fee revenue is recognized on a per lot basis once the inspection of the infrastructure that serves each lot is completed. As a result, we record deferred revenue (contract liability) for any amounts related to infrastructure not yet inspected. There are no accounts receivable, allowance for doubtful accounts or bad debt expense associated with inspection fee contracts. Sales Tax The majority of Artesian’s revenues are earned within the State of Delaware, where there is no sales tax. Revenues earned in the State of Maryland and the Commonwealth of Pennsylvania are related primarily to the sale of water by a public water utility and are exempt from sales tax. Therefore, no sales tax is collected on revenues . Disaggregated Revenues The following table shows the Company’s revenues disaggregated by service type; all revenues are generated within a similar geographical location: (in thousands) Three months ended September 30, 2022 Three months ended September 30, 2021 Nine months ended September 30, 2022 Nine months ended September 30, 2021 Tariff Revenue Consumption charges $ 13,927 $ 13,595 $ 36,676 $ 36,672 Fixed fees 7,924 7,112 23,452 20,983 Service charges 156 130 449 450 DSIC 1,406 1,387 3,870 3,876 Metered wastewater services 193 — 462 — Industrial wastewater services 467 497 1,295 118 Total Tariff Revenue $ 24,073 $ 22,721 $ 66,204 $ 62,099 Non-Tariff Revenue Service line protection plans $ 1,224 $ 1,181 $ 3,662 $ 3,411 Contract operations 238 210 691 658 Design and installation 621 139 1,723 351 Inspection fees 127 108 234 244 Total Non-Tariff Revenue $ 2,210 $ 1,638 $ 6,310 $ 4,664 Other Operating Revenue $ 299 $ 560 $ 1,266 $ 1,269 Total Operating Revenue $ 26,582 $ 24,919 $ 73,780 $ 68,032 Contract Assets and Contract Liabilities Our contract assets and liabilities consist of the following: (in thousands) September 30, 2022 December 31, 2021 Contract Assets – $ 3,009 $ 2,144 Deferred Revenue Deferred Revenue – Tariff $ 1,196 $ 1,227 Deferred Revenue – Non-Tariff 399 287 Total Deferred Revenue $ 1,595 $ 1,514 For the nine months ended September 30, 2022, the Company recognized revenue of $1.2 million from amounts that were included in Deferred Revenue – Tariff at the beginning of the year and revenue of $0.3 million from amounts that were included in Deferred Revenue – Non- Tariff at the beginning of the year. The changes in Contract Assets and Deferred Revenue are primarily due to normal timing differences between our performance and customer payments. Remaining Performance Obligations As of September 30, 2022 and December 31, 2021, Deferred Revenue – Tariff is recorded net of contract assets within Unbilled operating revenues and represents our remaining performance obligations for our fixed fee water and wastewater services, all of which are expected to be satisfied and associated revenue recognized in the next three months. As of September 30, 2022 and December 31, 2021, Deferred Revenue – Non-Tariff is recorded within Other current liabilities and represents our remaining performance obligations for our SLP Plan services, wastewater inspections and one operation contract, which are expected to be satisfied and associated revenue recognized within the next three months, one year and seven years for the SLP Plan revenue, inspection fee revenue and contract operations revenue, respectively. |
ACCOUNTS RECEIVABLE
ACCOUNTS RECEIVABLE | 9 Months Ended |
Sep. 30, 2022 | |
ACCOUNTS RECEIVABLE [Abstract] | |
ACCOUNTS RECEIVABLE | NOTE 4 – ACCOUNTS RECEIVABLE Accounts receivable are recorded at the invoiced amounts. As set forth in a settlement agreement, Artesian Water will receive reimbursements from the Delaware Sand and Gravel Remedial Trust, or Trust, for Artesian Water’s past capital and operating costs, totaling approximately $10.0 million, related to the treatment costs associated with the release of contaminants from the Delaware Sand & Gravel Landfill Superfund Site, or Site, in groundwater that Artesian Water uses for public potable water supply. Approximately $2.5 million was paid in August 2022. The remaining $7.5 million is due in three equal installments no later than August of each year from 2023 through 2025. An allowance for doubtful accounts is calculated as a percentage of total associated revenues based upon historical trends and adjusted for current conditions. We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related allowance for doubtful accounts and associated bad debt expense has not been significant. The following table summarizes the changes in the Company’s accounts receivable balance: September 30, December 31, In thousands 2022 2021 Customer accounts receivable – water $ 7,110 $ 5,986 Customer accounts receivable – wastewater 470 1,326 Settlement agreement receivable 7,510 — Miscellaneous accounts receivable 329 202 Developer receivable 1,778 1,282 17,197 8,796 Less: Long-term portion of settlement agreement receivable (included in other deferred assets) 4,991 — Less allowance for doubtful accounts 486 429 Net accounts receivable $ 11,720 $ 8,367 |
LEASES
LEASES | 9 Months Ended |
Sep. 30, 2022 | |
LEASES [Abstract] | |
LEASES | NOTE 5 – LEASES The Company leases land and office equipment under operating leases from non-related parties. Our leases have remaining lease terms of 20 years to 74 years, some of which include options to automatically extend the leases for up to 66 years. Payments made under operating leases are recognized in the consolidated statement of operations on a straight-line basis over the period of the lease. The annual lease payments for the land operating leases increase each year either by the most recent increase in the Consumer Price Index or by 3%, as applicable based on the lease agreements. Periodically, the annual lease payment for one operating land lease is determined based on the fair market value of the applicable parcel of land. None of the operating leases contain contingent rent provisions. The commencement date of all the operating leases is the earlier of the date we become legally obligated to make rent payments or the date we may exercise control over the use of the land or equipment. The Company currently does not have any financing leases and does not have any lessor leases that require disclosure. Management made certain assumptions related to the separation of lease and nonlease components and to the discount rate used when calculating the right of use asset and liability amounts for the operating leases. As our leases do not provide an implicit rate, we use our incremental borrowing rates for long term and short term agreements and apply the rates accordingly based on the term of the lease agreements to determine the present value of lease payments. Rent expense for all operating leases except those with terms of 12 months or less comprises: (in thousands) Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Minimum rentals $ 21 $ 24 $ 30 $ 38 Contingent rentals — — — — $ 21 $ 24 $ 30 $ 38 Supplemental cash flow information related to leases is as follows: (in thousands) Nine Months Ended Nine Months Ended September 30, 2022 September 30, 2021 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 30 $ 38 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 444 $ 444 Supplemental balance sheet information related to leases is as follows: (in thousands, except lease term and discount rate) September 30, 2022 December 31, 2021 Operating Leases: Operating lease right-of-use assets $ 444 $ 451 Other current liabilities $ 2 6 Operating lease liabilities 439 440 Total operating lease liabilities $ 441 $ 446 Weighted Average Remaining Lease Term Operating leases 61 years 61 Weighted Average Discount Rate Operating leases 5.0 % 5.0 % Maturities of operating lease liabilities that have initial or remaining non-cancelable lease terms in excess of one year as of September 30, 2022 are as follows: (in thousands) Operating Leases Year 2023 $ 24 2024 24 2025 24 2026 24 2027 25 Thereafter 1,328 Total undiscounted lease payments $ 1,449 Less effects of discounting (1,008 ) Total lease liabilities recognized $ 441 As of September 30, 2022, we have not entered into operating or finance leases that will commence at a future date. |
STOCK COMPENSATION PLANS
STOCK COMPENSATION PLANS | 9 Months Ended |
Sep. 30, 2022 | |
STOCK COMPENSATION PLANS [Abstract] | |
STOCK COMPENSATION PLANS | NOTE 6 – STOCK COMPENSATION PLANS On December 9, 2015, the Company's stockholders approved the 2015 Equity Compensation Plan, or the 2015 Plan. The 2015 Plan provides that grants may be in any of the following forms: incentive stock options, nonqualified stock options, stock units, stock awards, dividend equivalents and other stock-based awards. The 2015 Plan is administered and interpreted by the Compensation Committee, or the Committee, of the Board of Directors of the Company, or the Board. The Committee has the authority to determine the individuals to whom grants will be made under the 2015 Plan, the type, size and terms of the grants, the time when grants will be made and the duration of any applicable exercise or restriction period (subject to the limitations of the 2015 Plan), and deal with any other matters arising under the 2015 Plan. The Committee presently consists of three directors, each of whom is a non-employee director of the Company. All of the employees of the Company and its subsidiaries and non-employee directors of the Company are eligible for grants under the 2015 Plan. Compensation expense, for the three and nine months ended September 30, 2022 of approximately $57,000 and $162,000, respectively, was recorded for restricted stock awards issued in May 2021 and May 2022. Compensation expense, for the three and nine months ended September 30, 2021 of approximately $51,000 and $142,000, respectively, was recorded for restricted stock awards issued in May 2020 and May 2021. Costs were determined based on the fair value on the dates of the awards and those costs were charged to income over the service periods associated with the awards. There was no stock compensation cost capitalized as part of an asset. On May 3, 2022, 5,000 shares of Class A Common Stock, or Class A Stock, were granted as restricted stock awards. The fair value per share was $45.58, the closing price of the Class A Stock as recorded on the Nasdaq Global Select Market on May 3, 2022. Prior to their release date, these restricted stock awards may be subject to forfeiture in the event of the recipient’s termination of service. On May 4, 2021, 5,000 shares of Class A Common Stock, or Class A Stock, were granted as restricted stock awards. The fair value per share was $40.11, the closing price of the Class A Stock as recorded on the Nasdaq Global Select Market on May 4, 2021. Prior to their release date, these restricted stock awards may be subject to forfeiture in the event of the recipient’s termination of service. The following summary reflects changes in the shares of Class A Stock underlying options and restricted stock awards for the nine months ended September 30, 2022: 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 FairValue Plan options/restricted stock awards Outstanding at January 1, 2022 83,000 $ 21.65 $ 2,048 5,000 $ 40.11 Granted — — — 5,000 45.58 Exercised/vested and released (66,104 ) 21.65 1,894 (5,000 ) 40.11 Expired/cancelled — — — — — Outstanding at September 30, 2022 16,896 $ 21.86 1.602 $ 444 5,000 $ 45.58 Exercisable/vested at September 30, 2022 16,896 $ 21.86 1.602 $ 444 — — The total intrinsic value of options exercised during the nine months ended September 30, 2022 was approximately $1,894,000. There were no unvested option shares outstanding under the 2015 Plan during the nine months ended September 30, 2022. As of September 30, 2022, there were no unrecognized expenses related to non-vested option shares granted under the 2015 Plan. As of September 30, 2022, there was $134,000 total unrecognized expenses related to non-vested awards of restricted shares awarded under the 2015 Plan. The cost will be recognized over 0.59 years, the remaining vesting period for the restricted stock awards. |
OTHER DEFERRED ASSETS
OTHER DEFERRED ASSETS | 9 Months Ended |
Sep. 30, 2022 | |
OTHER DEFERRED ASSETS [Abstract] | |
OTHER DEFERRED ASSETS | NOTE 7 – OTHER DEFERRED ASSETS The investment in CoBank, which is a cooperative bank, is related to certain outstanding First Mortgage Bonds and is a required investment in the bank based on the underlying long-term debt agreements. The settlement agreement receivable is related to the long-term portion of reimbursements due in years 2024 and 2025 as further discussed in Note 4-Accounts Receivable. In thousands September 30, 2022 December 31, 2021 Investment in CoBank $5,351 $4,850 Settlement agreement receivable-long term 4,991 — Other deferred assets 206 247 $10,548 $5,097 N OTE 8 - REGULATORY ASSETS The FASB ASC Topic 980 stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency. Certain expenses are recoverable through rates charged to our customers, without a return on investment, and are deferred and amortized during future periods using various methods as permitted by the DEPSC, MDPSC, and PAPUC. The deferred income taxes will be amortized over future years as the tax effects of temporary differences that previously flowed through to our customers are reversed. Debt related costs include debt issuance costs and other debt related expense. The DEPSC has approved deferred regulatory accounting treatment for issuance costs associated with Artesian Water’s First Mortgage bonds. Debt issuance costs and other debt related expenses are reviewed during Artesian Water’s rate applications as part of its cost of capital calculations. Regulatory expenses amortized on a straight-line basis are noted below: 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 Regulatory assets, net of amortization, comprise: (in thousands) September 30, 2022 December 31, 2021 Deferred income taxes $ 470 $ 355 Deferred contract costs and other 243 288 Debt related costs 4,757 4,902 Goodwill 268 273 Deferred acquisition and franchise costs 472 503 $ 6,210 $ 6,321 NOTE 9 FASB ASC Topic 980 stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency. Certain obligations are deferred and/or amortized as determined by the DEPSC, MDPSC, and PAPUC. Regulatory liabilities represent excess recovery of cost or other items that have been deferred because it is probable such amounts will be returned to customers through future regulated rates. Utility plant retirement cost obligation consists of estimated costs related to the potential removal and replacement of facilities and equipment on the Company’s water and wastewater properties. Effective January 1, 2012, as authorized by the DEPSC, when depreciable units of utility plant are retired, any cost associated with retirement, less any salvage value or proceeds received, is charged to a regulated retirement liability. Each year the liability is increased by an annual amount authorized by the DEPSC. Deferred settlement refunds consist of reimbursements from the Delaware Sand and Gravel Remedial Trust for Artesian Water’s past capital and operating costs, totaling approximately $10.0 million, related to the treatment costs associated with the release of contaminants from the Delaware Sand & Gravel Landfill Superfund Site in groundwater that Artesian Water uses for public potable water supply, pursuant to the Settlement Agreement. Approximately $2.5 million was paid in August 2022. The remaining $7.5 million is due in three equal installments no later than August of each year from 2023 through 2025. Artesian Water received approval from the DEPSC in October 2022 to refund to its customers these reimbursements for past capital and operating costs. The refund for the reimbursements will be applied to current and future customer bills in annual installments, with the first refund occurring in October 2022, and future customer refunds occurring no later than August of each year from 2023 through 2025. The amount of the credit will be calculated by dividing the amount of the reimbursement by the number of eligible customers. Artesian Water will record 2022 and future recovery of capital expenditures as Contributions in Aid of Construction and will record expense recovery as an offset to operations and maintenance expense, with the intention that those recoveries will then be available for inclusion and consideration in any future rate applications. For a full discussion of the Settlement Agreement, refer to Part II – Other Information – Item 1 – Legal Proceedings. Pursuant to the enactment of the Tax Cuts and Jobs Act, or TCJA, on December 22, 2017, the Company adjusted its existing deferred income tax balances to reflect the decrease in the corporate income tax rate from 34% to 21% (see Note 11) resulting in a decrease in the net deferred income tax liability of $24.3 million, of which $22.8 million was reclassified to a regulatory liability related to Artesian Water and Artesian Water Maryland. The regulatory liability amount is subject to certain Internal Revenue Service normalization rules that require the benefits to customers be spread over the remaining useful life of the underlying assets giving rise to the associated deferred income taxes. On January 31, 2019, the DEPSC approved the amortization of the regulatory liability amount of $22.2 million over a period of 49.5 years beginning February 1, 2018, subject to audit at a later date. In May 2022, the Company received a rate order from the DEPSC instructing the Company to continue amortizing the liability over a period of 49.5 years, subject to review in the Company’s next base rate filing. The MDPSC has not issued a final order on the regulatory liability amount of $0.6 million regarding the effects of the TCJA on Maryland customers. Regulatory liabilities comprise: (in thousands) September 30, 2022 December 31, 2021 Utility plant retirement cost obligation $ 156 $ 149 Deferred settlement refunds 10,042 — Deferred income taxes (related to TCJA) 21,352 21,111 $ 31,550 $ 21,260 NOTE 10 Basic net income per share is based on the weighted average number of common shares outstanding. Diluted net income per share is based on the weighted average number of common shares outstanding, the potentially dilutive effect of employee stock options and restricted stock awards. The following table summarizes the shares used in computing basic and diluted net income per share: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2022 2021 2022 2021 (in thousands) Weighted average common shares outstanding during the period for Basic computation 9,477 9,404 9,451 9,389 Dilutive effect of employee stock options and awards 15 28 22 32 Weighted average common shares outstanding during the period for Diluted computation 9,492 9,432 9,473 9,421 For the three and nine months ended September 30, 2022 and 2021, no shares of restricted stock awards were excluded from the calculations of diluted net income per share. The Company has 15,000,000 authorized shares of Class A Stock and 1,040,000 authorized shares of Class B Common Stock, or Class B Stock. As of September 30, 2022, 8,609,497 shares of Class A Stock and 881,452 shares of Class B Stock were issued and outstanding. As of September 30, 2021 , $ per Equity per common share was $ and $ at and , respectively. These amounts were computed by dividing common stockholders' equity by the number of shares of common stock outstanding on and , respectively. N OTE 11 - REGULATO Our water and wastewater utilities generate operating revenue from customers based on rates that are established by state public service commissions through a rate-setting process that may include public hearings, evidentiary hearings and the submission of evidence and testimony in support of the Company's requested level of rates. We are subject to regulation by the following state regulatory commissions: • The DEPSC, regulates both Artesian Water and Artesian Wastewater. • The MDPSC, regulates both Artesian Water Maryland and Artesian Wastewater Maryland. • The PAPUC, regulates Artesian Water Pennsylvania. Our water and wastewater utility operations are also subject to regulation under the federal Safe Drinking Water Act of 1974, or Safe Drinking Water Act, the Clean Water Act of 1972, or the Clean Water Act, and related state laws, and under federal and state regulations issued under these laws. These laws and regulations establish criteria and standards for drinking water and for wastewater discharges. Capital expenditures and operating costs required as a result of water quality standards and environmental requirements have been traditionally recognized by state regulatory commissions as appropriate for inclusion in establishing rates. Water and Wastewater Rates Our regulated utilities periodically seek rate increases to cover the cost of increased operating expenses, increased financing expenses due to additional investments in utility plant and other costs of doing business. In Delaware, utilities are permitted by law to place rates into effect, under bond, on a temporary basis pending completion of a rate increase proceeding. The first temporary increase may be up to the lesser of $ Other Proceedings Delaware law permits water utilities to put into effect, on a semi-annual basis, increases related to specific types of distribution system improvements through a DSIC. This charge may be implemented by water utilities between general rate increase applications that normally recognize changes in a water utility's overall financial position. The DSIC approval process is less costly when compared to the approval process for general rate increase requests. The DSIC rate applied between base rate filings is capped at 7.50% of the amount billed to customers under otherwise applicable rates and charges, and the DSIC rate increase applied cannot exceed 5.0% within an y 12-month period. The following table summarizes (1) Artesian Water’s applications with the DEPSC to collect DSIC rates and (2) the rates upon which eligible plant improvements are based: Application Date 11/20/20 DEPSC Approval Date 12/14/20 Effective Date 01/01/21 Cumulative DSIC Rate 7.50% Net Eligible Plant Improvements – Cumulative Dollars (in millions) $43.1 Eligible Plant Improvements – Installed Beginning Date 10/01/2014 Eligible Plant Improvements – Installed Ending Date 04/30/2019 The rate reflects the eligible plant improvements installed through April 30, 2019. The January 1, 2021 rate currently remains in effect and is subject to periodic audit by the DEPSC. For the three and nine months ended September 30, 2022, we earned approximately $1.4 million and $3.9 million in DSIC revenue, respectively. For the three and nine months ended September 30, 2021, we earned approximately $1.4 million and $3.9 million in DSIC revenue, respectively. NOTE 12 – INCOME TAXES Deferred income taxes are provided in accordance with FASB ASC Topic 740 on all differences between the tax basis of assets and liabilities and the amounts at which they are carried in the consolidated financial statements based on the enacted tax rates expected to be in effect when such temporary differences are expected to reverse. The Company’s rate regulated utilities recognize regulatory liabilities, to the extent considered in ratemaking, for deferred taxes provided in excess of the current statutory tax rate and regulatory assets for deferred taxes provided at rates less than the current statutory rate. Such tax-related regulatory assets and liabilities are reported at the revenue requirement level and amortized to income as the related temporary differences reverse, generally over the lives of the related properties. Under FASB ASC Topic 740, an uncertain tax position represents our expected treatment of a tax position taken, or planned to be taken in the future, that has not been reflected in measuring income tax expense for financial reporting purposes. The Company establishes reserves for uncertain tax positions based upon management's judgment as to the sustainability of these positions. These accounting estimates related to the uncertain tax position reserve require judgments to be made as to the sustainability of each uncertain tax position based on its technical merits. The Company believes its tax positions comply with applicable law and that it has adequately recorded reserves as required. However, to the extent the final tax outcome of these matters is different than the estimates recorded, the Company would then adjust its tax reserves or unrecognized tax benefits in the period that this information becomes known. The Company has elected to recognize accrued interest (net of related tax benefits) and penalties related to uncertain tax positions as a component of its income tax expense. During the third quarter, the Company has reversed approximately $ in penalties and interest for the nine months ended leaving a balance. The Company remains subject to examination by federal and state authorities for the tax years 2019 through 2021 . Investment tax credits were deferred through 1986 and are recognized as a reduction of deferred income tax expense over the estimated economic useful lives of the related assets. N OTE 13 – FAIR VALUE OF FINANC The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value. Current Assets and Liabilities For those current assets and liabilities that are considered financial instruments, the carrying amounts approximate fair value because of the short maturity of those instruments. All of Artesian Resources’ outstanding lo ng-term debt as of and In thousands September 30, 2022 December 31, 2021 Carrying amount $ 176,058 $ 144,850 Estimated fair value $ 153,174 $ 163,182 The fair value of Advances for Construction cannot be reasonably estimated due to the inability to estimate accurately the timing and amounts of future refunds expected to be paid over the life of the contracts. Refund payments are based on the water sales to new customers in the particular development constructed. The fair value of Advances for Construction would be less than the carrying amount because these financial instruments are non-interest bearing. NOTE 14 – RELATED PARTY TRANSACTIONS Mr. Michael Houghton currently serves as a director. During 2021, Mr. Houghton was a Partner in the law firm of Morris, Nichols, Arsht & Tunnell LLP, or MNAT, in Wilmington, Delaware. Mr. Houghton retired from MNAT as a Partner, effective January 1, 2022, however, Mr. Houghton continues to perform legal services for MNAT as an independent contractor and non-partner. In the normal course of business, the Company utilized the services of MNAT in 2021 for various regulatory, real estate and public policy matters. Approximately $89,000 and $160,000 was paid to MNAT during the three and nine months ended September 30, 2021, respectively, for legal services and director related services. As set forth in the Charter of the Audit Committee of the Board, the Audit Committee is responsible for reviewing and, if appropriate, approving all related party transactions between us and any officer, any director, any person known to be the beneficial owner of more than 5% of any class of the Company's voting securities or any other related person that would potentially require disclosure. In its review and approval of the related party transactions with MNAT, the Audit Committee considered the nature of the related person's interest in the transactions; the satisfactory performance of work contracted with the related party prior to the election of Mr. Houghton as a director; and the material terms of the transactions, including, without limitation, the amount and type of transactions, the importance of the transactions to the related person, the importance of the transactions to the Company and whether the transactions would impair the judgment of a director or officer to act in the best interest of the Company. The Audit Committee approves only those related person transactions that are in, or are consistent with, the best interests of the Company and its stockholders. NOTE 15 – BUSINESS COMBINATIONS As part of the Company’s growth strategy, on January 14, 2022 Artesian Wastewater completed its agreement to acquire TESI, which provides regulated wastewater services in Delaware. Artesian Wastewater purchased all of the stock of TESI from Middlesex Water Company for $6.4 million in cash and other consideration, including forgiveness of a $2.1 million note due from Middlesex, consisting of $3.1 million paid at closing. This acquisition more than doubled the number of wastewater customers served by Artesian in Sussex County, Delaware. The TESI acquisition was approved by the DEPSC on October 27, 2021, subject to the DEPSC determining the appropriate ratemaking treatment of the acquisition price and the assets acquired in Artesian Wastewater’s next base rate case. The Company reflected revenue of $0.8 million and $2.2 million for the three and nine months ended September 30, 2022, respectively, in its condensed consolidated statement of operations related to the acquisition. The pro forma revenue for the three and nine months ended September 30, 2022 is estimated to be approximately $0.8 million and $2.2 million, respectively. The Company anticipates the pro forma effects of revenue for the three and nine months ended September 30, 2021 to be approximately the same given there has not been any changes in the rates. The pro forma information is not necessarily indicative of the Company’s future results. Any pro forma effects of earnings is not practicable, as we continue to integrate TESI operations and adjust the operating cost structure as it relates to operating expenses reflective of synergies of the combined operations, and therefore would not present an accurate comparison. The table below sets forth the purchase price allocation of this acquisition as of September 30, 2022. The fair value determination is now finalized, with the exception of deferred income taxes, which is still preliminary but expected to be complete by December 31, 2022. The fair value for deferred income taxes affects both goodwill and deferred income taxes, which is included in the liability amount below. (In thousands) TESI Utility plant $ 25,354 Cash 280 Goodwill 2,983 Other assets 1,033 Total assets 29,650 Less: Liabilities and contributions in aid of construction (CIAC) Liabilities 3,852 CIAC 22,676 Net cash purchase price $ 3,122 Additionally, as part of the Company’s growth strategy, on May 26, 2022, Artesian Water completed its purchase of substantially all of the water system operating assets from the Town of Clayton, or Clayton, a Delaware municipality located in Kent County, Delaware, including Clayton’s exclusive franchise territory and the right to provide water service to Clayton’s existing customers, or the Clayton Water System. The total purchase price was $ million, less the current payoff amount of secured debt or debt associated with the Clayton Water System. At closing, Artesian Water paid approximately $ million of the total purchase price. The remaining $ million is payable in equal annual installments on the anniversary date of the closing date. Each annual installment is payable with interest at an annual rate of . The acquisition was accounted for as a business combination under ASC Topic 805. This transfer of Clayton’s exclusive franchise territory was approved by the DEPSC on April 20, 2022. The DEPSC will determine the appropriate ratemaking treatment of the acquisition price and the assets acquired in Artesian Water’s next base rate case. The pro forma effects of the business acquired are not material to the Company’s financial position or results of operations based on estimated annual revenue of approximately $ million related to customers acquired. NOTE 16 – Artesian Water, Artesian Water Maryland and Artesian Water Pennsylvania provide water utility service to customers within their established service territory in all three counties of Delaware and in portions of Maryland and Pennsylvania, pursuant to rates filed with and approved by the DEPSC, the MDPSC and the PAPUC. As of September 30, 2022, Artesian Water was serving approximately 94,400 customers, Artesian Water Maryland was serving approximately 2,600 customers and Artesian Water Pennsylvania was serving approximately 40 customers. Artesian Wastewater and TESI provide wastewater utility service to customers within their established service territory in Sussex County, Delaware pursuant to rates filed with and approved by the DEPSC. The number of wastewater customers served more than doubled following the acquisition of TESI in January 2022. As of September 30, 2022, Artesian Wastewater combined with TESI were serving approximately 7,400 customers, including one large industrial customer. NOTE 17 IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS There was no new guidance issued by the FASB during the nine months ended September 30, 2022 that is applicable to the Company. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAUTION REGARDING FORWARD-LOOKING STATEMENTS Statements in this Quarterly Report on Form 10-Q Quarterly Report on Form 10-Q. RESULTS OF OPERATIONS FOR THE PERIOD ENDED SEPTEMBER 30, 2022 OVERVIEW Our profitability is primarily attributable to the sale of water. Gross water sales composed 80.7% of total operating revenues for the nine months ended September 30, 2022. Our profitability is also attributed to the various contract operations, water, sewer and internal SLP Plans, wastewater services and other services we provide. Water sales are subject to seasonal fluctuations, particularly during summer when water demand may vary with rainfall and temperature. In the event temperatures during the typically warmer months are cooler than expected, or rainfall is greater than expected, the demand for water may decrease and our revenues may be adversely affected. We believe the effects of weather are short term and do not materially affect the execution of our strategic initiatives. Our wastewater services, contract operations, SLP Plans and other services provide a revenue stream that is not affected by changes in weather patterns. While water sales are our primary source of revenues, we continue to seek growth opportunities to provide wastewater services in Delaware and the surrounding areas. We also continue to explore and develop relationships with developers and municipalities in order to increase revenues from contract water and wastewater operations, wastewater management services, and design, construction and engineering services. We plan to continue developing and expanding our contract operations and other services in a manner that complements our growth in water service to new customers. Our anticipated growth in these areas is subject to changes in residential and commercial construction, which may be affected by interest rates, inflation and general housing and economic market conditions. We anticipate continued growth in our non-regulated division due to our water, sewer, and internal SLP Plans. COVID-19 Pandemic As of September 30, 2022, the Company’s financial results and business operations have not been materially adversely affected by the coronavirus, or COVID-19, outbreak, which was declared a pandemic in March 2020. However, we have experienced delays in procuring some materials and supplies. While we have been successful in managing these delays, there is no assurance that our future financial results or business operations will not be negatively affected. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. Management is actively monitoring the situation and impacts on its operations, suppliers, industry, and workforce. Inflation We are affected by inflation, most notably by the continually increasing costs required to maintain, improve and expand our service capability. The cumulative effect of inflation results in significantly higher facility replacement costs which must be recovered from future cash flows. Our ability to recover increases in investments in facilities is dependent upon future rate increases, which are subject to approval by the applicable regulatory authority. We can provide no assurances that any future rate increase request will be approved, and if approved, we cannot guarantee that any rate increase will be granted in a timely manner and/or will be sufficient in amount to cover costs for which we initially sought the rate increase. The impact of inflation could adversely affect our results of operations, financial position or cash flows. Materials and Supplies We are highly dependent on the availability of essential materials and parts from our suppliers for expansion, construction and maintenance of our services. The majority of the materials required for our water and wastewater utility business are typically under contract at fixed prices, however, supply chain issues associated with the COVID-19 pandemic resulted in price increases and delays in procuring certain materials and equipment. We have been successful in minimizing these delays and cost increases with thorough planning and pre-ordering, however there is no assurance that our future financial results or business operations will not be negatively affected. Water Division Artesian Water, Artesian Water Maryland and Artesian Water Pennsylvania provide water service to residential, commercial, industrial, governmental, municipal and utility customers. Increases in the number of customers contribute to increases, or help to offset any intermittent decreases, in our operating revenue. As of September 30, 2022, the number of metered water customers in Delaware increased approximately 3.4% compared to September 30, 2021. increased approximately 1.8% compared to September 30, 2021 Wastewater Division Artesian Wastewater owns wastewater collection and treatment infrastructure and began providing regulated wastewater services to customers in Delaware in July 2005. Artesian Wastewater Maryland was incorporated on June 3, 2008 and is able to provide regulated wastewater services to customers in Maryland. Our residential and commercial wastewater customers are billed a flat monthly fee, which contributes to providing a revenue stream unaffected by weather. The number of Artesian’s Delaware wastewater customers more than doubled compared to September 30, 2021, following the acquisition of Tidewater Environmental Services, Inc., or TESI This acquisition agreement is discussed further in the “Strategic Direction” section below. Non-Regulated Division Artesian Utility provides contract water and wastewater operation services to private, municipal and governmental institutions. SLP Plan customers are billed a flat monthly or quarterly rate, which contributes to providing a revenue stream unaffected by weather. There has been consistent customer growth over the years. As of September 30, 2022, the eligible customers enrolled in the WSLP Plan, the SSLP Plan and the ISLP Plan increased 3.8%, 1.4% and 13.5%, respectively, compared to September 30, 2021. The non-utility customers enrolled in one of our three protections plans increased 2.6%. Strategic Direction Our strategy is to increase customer growth, revenues, earnings and dividends by expanding our water, wastewater and SLP Plan services across the Delmarva Peninsula. We remain focused on providing superior service to our customers and continuously seek ways to improve our efficiency and performance. Our strategy has included a focus on building strategic partnerships with county governments, municipalities and developers. By providing water and wastewater services, we believe we are positioned as the primary resource for developers and communities throughout the Delmarva Peninsula seeking to fill both needs simultaneously. We believe we have a proven ability to acquire and integrate high growth, reputable entities, through which we have captured additional service territories that will serve as a base for future revenue. We believe this experience presents a strong platform for further expansion and that our success to date also produces positive relationships and credibility with regulators, municipalities, developers and customers in both existing and prospective service areas. In our regulated water division, our strategy is to focus on a wide spectrum of activities, which include strategic acquisitions of existing systems, expanding certificated service area, identifying new and dependable sources of supply, developing the wells, treatment plants and delivery systems to supply water to customers and educating customers on the wise use of water. Our strategy includes focused efforts to expand through strategic acquisitions and in new regions added to our Delaware service territory over the last 10 years. We plan to expand our regulated water service area in the Cecil County designated growth corridor and to expand our business through the design, construction, operation, management and acquisition of additional water systems. The expansion of our exclusive franchise areas elsewhere in Maryland and the award of contracts will similarly enhance our operations within the state. Our ability to develop partnerships with various county governments, municipalities and developers has provided a number of opportunities. In the last four years, we completed seven acquisitions including asset purchase agreements with municipal and developer/homeowner association operated systems. We believe that Delaware's generally lower cost of living in the region, availability of development sites in relatively close proximity to the Atlantic Ocean in Sussex County, and attractive financing rates for construction and mortgages have resulted, and will continue to result, in increases to our customer base. Delaware’s lower property and income tax rate make it an attractive region for new home development and retirement communities. Substantial portions of Delaware currently are not served by a public water system, which could also assist in an increase to our customer base as systems are added. On May 26, 2022, Artesian Water completed its purchase of substantially all of the water operating assets from the Town of Clayton, or Clayton, a Delaware municipality located in Kent County, Delaware, including Clayton’s exclusive franchise territory and the right to provide water service to Clayton’s existing customers, or the Clayton Water System. The total purchase price was $5.0 million, less the current payoff amount of secured debt or debt associated with the Clayton Water System. This transfer of Clayton’s exclusive franchise territory was approved by the DEPSC on April 20, 2022. In our regulated wastewater division, we foresee significant growth opportunities and will continue to seek strategic partnerships and relationships with developers and governmental agencies to complement existing agreements for the provision of wastewater service on the Delmarva Peninsula. Artesian Wastewater plans to utilize our larger regional wastewater facilities to expand service areas to new customers while transitioning our smaller treatment facilities into regional pump stations in order to gain additional efficiencies in the treatment and disposal of wastewater. We believe this will reduce operational costs at the smaller treatment facilities in the future because they will be converted from treatment and disposal plants to pump stations to assist with transitioning the flow of wastewater from one regional facility to another. In addition, since closing the transaction with TESI noted below, Artesian’s Delaware wastewater subsidiaries are the sole regional regulated wastewater utilities in Delaware, which we believe will enable us to increase efficiencies in the treatment and disposal of wastewater and provide additional opportunities to expand our wastewater operations. On January 14, 2022, Artesian Wastewater acquired TESI, a wholly-owned subsidiary of Mi |
REGULATORY ASSETS
REGULATORY ASSETS | 9 Months Ended |
Sep. 30, 2022 | |
REGULATORY ASSETS [Abstract] | |
REGULATORY ASSETS | N OTE 8 - REGULATORY ASSETS The FASB ASC Topic 980 stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency. Certain expenses are recoverable through rates charged to our customers, without a return on investment, and are deferred and amortized during future periods using various methods as permitted by the DEPSC, MDPSC, and PAPUC. The deferred income taxes will be amortized over future years as the tax effects of temporary differences that previously flowed through to our customers are reversed. Debt related costs include debt issuance costs and other debt related expense. The DEPSC has approved deferred regulatory accounting treatment for issuance costs associated with Artesian Water’s First Mortgage bonds. Debt issuance costs and other debt related expenses are reviewed during Artesian Water’s rate applications as part of its cost of capital calculations. Regulatory expenses amortized on a straight-line basis are noted below: 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 Regulatory assets, net of amortization, comprise: (in thousands) September 30, 2022 December 31, 2021 Deferred income taxes $ 470 $ 355 Deferred contract costs and other 243 288 Debt related costs 4,757 4,902 Goodwill 268 273 Deferred acquisition and franchise costs 472 503 $ 6,210 $ 6,321 |
REGULATORY LIABILITIES
REGULATORY LIABILITIES | 9 Months Ended |
Sep. 30, 2022 | |
REGULATORY LIABILITIES [Abstract] | |
REGULATORY LIABILITIES | NOTE 9 FASB ASC Topic 980 stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency. Certain obligations are deferred and/or amortized as determined by the DEPSC, MDPSC, and PAPUC. Regulatory liabilities represent excess recovery of cost or other items that have been deferred because it is probable such amounts will be returned to customers through future regulated rates. Utility plant retirement cost obligation consists of estimated costs related to the potential removal and replacement of facilities and equipment on the Company’s water and wastewater properties. Effective January 1, 2012, as authorized by the DEPSC, when depreciable units of utility plant are retired, any cost associated with retirement, less any salvage value or proceeds received, is charged to a regulated retirement liability. Each year the liability is increased by an annual amount authorized by the DEPSC. Deferred settlement refunds consist of reimbursements from the Delaware Sand and Gravel Remedial Trust for Artesian Water’s past capital and operating costs, totaling approximately $10.0 million, related to the treatment costs associated with the release of contaminants from the Delaware Sand & Gravel Landfill Superfund Site in groundwater that Artesian Water uses for public potable water supply, pursuant to the Settlement Agreement. Approximately $2.5 million was paid in August 2022. The remaining $7.5 million is due in three equal installments no later than August of each year from 2023 through 2025. Artesian Water received approval from the DEPSC in October 2022 to refund to its customers these reimbursements for past capital and operating costs. The refund for the reimbursements will be applied to current and future customer bills in annual installments, with the first refund occurring in October 2022, and future customer refunds occurring no later than August of each year from 2023 through 2025. The amount of the credit will be calculated by dividing the amount of the reimbursement by the number of eligible customers. Artesian Water will record 2022 and future recovery of capital expenditures as Contributions in Aid of Construction and will record expense recovery as an offset to operations and maintenance expense, with the intention that those recoveries will then be available for inclusion and consideration in any future rate applications. For a full discussion of the Settlement Agreement, refer to Part II – Other Information – Item 1 – Legal Proceedings. Pursuant to the enactment of the Tax Cuts and Jobs Act, or TCJA, on December 22, 2017, the Company adjusted its existing deferred income tax balances to reflect the decrease in the corporate income tax rate from 34% to 21% (see Note 11) resulting in a decrease in the net deferred income tax liability of $24.3 million, of which $22.8 million was reclassified to a regulatory liability related to Artesian Water and Artesian Water Maryland. The regulatory liability amount is subject to certain Internal Revenue Service normalization rules that require the benefits to customers be spread over the remaining useful life of the underlying assets giving rise to the associated deferred income taxes. On January 31, 2019, the DEPSC approved the amortization of the regulatory liability amount of $22.2 million over a period of 49.5 years beginning February 1, 2018, subject to audit at a later date. In May 2022, the Company received a rate order from the DEPSC instructing the Company to continue amortizing the liability over a period of 49.5 years, subject to review in the Company’s next base rate filing. The MDPSC has not issued a final order on the regulatory liability amount of $0.6 million regarding the effects of the TCJA on Maryland customers. Regulatory liabilities comprise: (in thousands) September 30, 2022 December 31, 2021 Utility plant retirement cost obligation $ 156 $ 149 Deferred settlement refunds 10,042 — Deferred income taxes (related to TCJA) 21,352 21,111 $ 31,550 $ 21,260 |
NET INCOME PER COMMON SHARE AND
NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE | 9 Months Ended |
Sep. 30, 2022 | |
NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE [Abstract] | |
NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE | NOTE 10 Basic net income per share is based on the weighted average number of common shares outstanding. Diluted net income per share is based on the weighted average number of common shares outstanding, the potentially dilutive effect of employee stock options and restricted stock awards. The following table summarizes the shares used in computing basic and diluted net income per share: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2022 2021 2022 2021 (in thousands) Weighted average common shares outstanding during the period for Basic computation 9,477 9,404 9,451 9,389 Dilutive effect of employee stock options and awards 15 28 22 32 Weighted average common shares outstanding during the period for Diluted computation 9,492 9,432 9,473 9,421 For the three and nine months ended September 30, 2022 and 2021, no shares of restricted stock awards were excluded from the calculations of diluted net income per share. The Company has 15,000,000 authorized shares of Class A Stock and 1,040,000 authorized shares of Class B Common Stock, or Class B Stock. As of September 30, 2022, 8,609,497 shares of Class A Stock and 881,452 shares of Class B Stock were issued and outstanding. As of September 30, 2021 , $ per Equity per common share was $ and $ at and , respectively. These amounts were computed by dividing common stockholders' equity by the number of shares of common stock outstanding on and , respectively. |
REGULATORY PROCEEDINGS
REGULATORY PROCEEDINGS | 9 Months Ended |
Sep. 30, 2022 | |
REGULATORY PROCEEDINGS [Abstract] | |
REGULATORY PROCEEDINGS | N OTE 11 - REGULATO Our water and wastewater utilities generate operating revenue from customers based on rates that are established by state public service commissions through a rate-setting process that may include public hearings, evidentiary hearings and the submission of evidence and testimony in support of the Company's requested level of rates. We are subject to regulation by the following state regulatory commissions: • The DEPSC, regulates both Artesian Water and Artesian Wastewater. • The MDPSC, regulates both Artesian Water Maryland and Artesian Wastewater Maryland. • The PAPUC, regulates Artesian Water Pennsylvania. Our water and wastewater utility operations are also subject to regulation under the federal Safe Drinking Water Act of 1974, or Safe Drinking Water Act, the Clean Water Act of 1972, or the Clean Water Act, and related state laws, and under federal and state regulations issued under these laws. These laws and regulations establish criteria and standards for drinking water and for wastewater discharges. Capital expenditures and operating costs required as a result of water quality standards and environmental requirements have been traditionally recognized by state regulatory commissions as appropriate for inclusion in establishing rates. Water and Wastewater Rates Our regulated utilities periodically seek rate increases to cover the cost of increased operating expenses, increased financing expenses due to additional investments in utility plant and other costs of doing business. In Delaware, utilities are permitted by law to place rates into effect, under bond, on a temporary basis pending completion of a rate increase proceeding. The first temporary increase may be up to the lesser of $ Other Proceedings Delaware law permits water utilities to put into effect, on a semi-annual basis, increases related to specific types of distribution system improvements through a DSIC. This charge may be implemented by water utilities between general rate increase applications that normally recognize changes in a water utility's overall financial position. The DSIC approval process is less costly when compared to the approval process for general rate increase requests. The DSIC rate applied between base rate filings is capped at 7.50% of the amount billed to customers under otherwise applicable rates and charges, and the DSIC rate increase applied cannot exceed 5.0% within an y 12-month period. The following table summarizes (1) Artesian Water’s applications with the DEPSC to collect DSIC rates and (2) the rates upon which eligible plant improvements are based: Application Date 11/20/20 DEPSC Approval Date 12/14/20 Effective Date 01/01/21 Cumulative DSIC Rate 7.50% Net Eligible Plant Improvements – Cumulative Dollars (in millions) $43.1 Eligible Plant Improvements – Installed Beginning Date 10/01/2014 Eligible Plant Improvements – Installed Ending Date 04/30/2019 The rate reflects the eligible plant improvements installed through April 30, 2019. The January 1, 2021 rate currently remains in effect and is subject to periodic audit by the DEPSC. For the three and nine months ended September 30, 2022, we earned approximately $1.4 million and $3.9 million in DSIC revenue, respectively. For the three and nine months ended September 30, 2021, we earned approximately $1.4 million and $3.9 million in DSIC revenue, respectively. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2022 | |
INCOME TAXES [Abstract] | |
INCOME TAXES | NOTE 12 – INCOME TAXES Deferred income taxes are provided in accordance with FASB ASC Topic 740 on all differences between the tax basis of assets and liabilities and the amounts at which they are carried in the consolidated financial statements based on the enacted tax rates expected to be in effect when such temporary differences are expected to reverse. The Company’s rate regulated utilities recognize regulatory liabilities, to the extent considered in ratemaking, for deferred taxes provided in excess of the current statutory tax rate and regulatory assets for deferred taxes provided at rates less than the current statutory rate. Such tax-related regulatory assets and liabilities are reported at the revenue requirement level and amortized to income as the related temporary differences reverse, generally over the lives of the related properties. Under FASB ASC Topic 740, an uncertain tax position represents our expected treatment of a tax position taken, or planned to be taken in the future, that has not been reflected in measuring income tax expense for financial reporting purposes. The Company establishes reserves for uncertain tax positions based upon management's judgment as to the sustainability of these positions. These accounting estimates related to the uncertain tax position reserve require judgments to be made as to the sustainability of each uncertain tax position based on its technical merits. The Company believes its tax positions comply with applicable law and that it has adequately recorded reserves as required. However, to the extent the final tax outcome of these matters is different than the estimates recorded, the Company would then adjust its tax reserves or unrecognized tax benefits in the period that this information becomes known. The Company has elected to recognize accrued interest (net of related tax benefits) and penalties related to uncertain tax positions as a component of its income tax expense. During the third quarter, the Company has reversed approximately $ in penalties and interest for the nine months ended leaving a balance. The Company remains subject to examination by federal and state authorities for the tax years 2019 through 2021 . Investment tax credits were deferred through 1986 and are recognized as a reduction of deferred income tax expense over the estimated economic useful lives of the related assets. |
FAIR VALUE OF FINANCIAL INSTRUM
FAIR VALUE OF FINANCIAL INSTRUMENTS | 9 Months Ended |
Sep. 30, 2022 | |
FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract] | |
FAIR VALUE OF FINANCIAL INSTRUMENTS | N OTE 13 – FAIR VALUE OF FINANC The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value. Current Assets and Liabilities For those current assets and liabilities that are considered financial instruments, the carrying amounts approximate fair value because of the short maturity of those instruments. All of Artesian Resources’ outstanding lo ng-term debt as of and In thousands September 30, 2022 December 31, 2021 Carrying amount $ 176,058 $ 144,850 Estimated fair value $ 153,174 $ 163,182 The fair value of Advances for Construction cannot be reasonably estimated due to the inability to estimate accurately the timing and amounts of future refunds expected to be paid over the life of the contracts. Refund payments are based on the water sales to new customers in the particular development constructed. The fair value of Advances for Construction would be less than the carrying amount because these financial instruments are non-interest bearing. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2022 | |
RELATED PARTY TRANSACTIONS [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 14 – RELATED PARTY TRANSACTIONS Mr. Michael Houghton currently serves as a director. During 2021, Mr. Houghton was a Partner in the law firm of Morris, Nichols, Arsht & Tunnell LLP, or MNAT, in Wilmington, Delaware. Mr. Houghton retired from MNAT as a Partner, effective January 1, 2022, however, Mr. Houghton continues to perform legal services for MNAT as an independent contractor and non-partner. In the normal course of business, the Company utilized the services of MNAT in 2021 for various regulatory, real estate and public policy matters. Approximately $89,000 and $160,000 was paid to MNAT during the three and nine months ended September 30, 2021, respectively, for legal services and director related services. As set forth in the Charter of the Audit Committee of the Board, the Audit Committee is responsible for reviewing and, if appropriate, approving all related party transactions between us and any officer, any director, any person known to be the beneficial owner of more than 5% of any class of the Company's voting securities or any other related person that would potentially require disclosure. In its review and approval of the related party transactions with MNAT, the Audit Committee considered the nature of the related person's interest in the transactions; the satisfactory performance of work contracted with the related party prior to the election of Mr. Houghton as a director; and the material terms of the transactions, including, without limitation, the amount and type of transactions, the importance of the transactions to the related person, the importance of the transactions to the Company and whether the transactions would impair the judgment of a director or officer to act in the best interest of the Company. The Audit Committee approves only those related person transactions that are in, or are consistent with, the best interests of the Company and its stockholders. |
BUSINESS COMBINATIONS
BUSINESS COMBINATIONS | 9 Months Ended |
Sep. 30, 2022 | |
BUSINESS COMBINATIONS [Abstract] | |
BUSINESS COMBINATIONS | NOTE 15 – BUSINESS COMBINATIONS As part of the Company’s growth strategy, on January 14, 2022 Artesian Wastewater completed its agreement to acquire TESI, which provides regulated wastewater services in Delaware. Artesian Wastewater purchased all of the stock of TESI from Middlesex Water Company for $6.4 million in cash and other consideration, including forgiveness of a $2.1 million note due from Middlesex, consisting of $3.1 million paid at closing. This acquisition more than doubled the number of wastewater customers served by Artesian in Sussex County, Delaware. The TESI acquisition was approved by the DEPSC on October 27, 2021, subject to the DEPSC determining the appropriate ratemaking treatment of the acquisition price and the assets acquired in Artesian Wastewater’s next base rate case. The Company reflected revenue of $0.8 million and $2.2 million for the three and nine months ended September 30, 2022, respectively, in its condensed consolidated statement of operations related to the acquisition. The pro forma revenue for the three and nine months ended September 30, 2022 is estimated to be approximately $0.8 million and $2.2 million, respectively. The Company anticipates the pro forma effects of revenue for the three and nine months ended September 30, 2021 to be approximately the same given there has not been any changes in the rates. The pro forma information is not necessarily indicative of the Company’s future results. Any pro forma effects of earnings is not practicable, as we continue to integrate TESI operations and adjust the operating cost structure as it relates to operating expenses reflective of synergies of the combined operations, and therefore would not present an accurate comparison. The table below sets forth the purchase price allocation of this acquisition as of September 30, 2022. The fair value determination is now finalized, with the exception of deferred income taxes, which is still preliminary but expected to be complete by December 31, 2022. The fair value for deferred income taxes affects both goodwill and deferred income taxes, which is included in the liability amount below. (In thousands) TESI Utility plant $ 25,354 Cash 280 Goodwill 2,983 Other assets 1,033 Total assets 29,650 Less: Liabilities and contributions in aid of construction (CIAC) Liabilities 3,852 CIAC 22,676 Net cash purchase price $ 3,122 Additionally, as part of the Company’s growth strategy, on May 26, 2022, Artesian Water completed its purchase of substantially all of the water system operating assets from the Town of Clayton, or Clayton, a Delaware municipality located in Kent County, Delaware, including Clayton’s exclusive franchise territory and the right to provide water service to Clayton’s existing customers, or the Clayton Water System. The total purchase price was $ million, less the current payoff amount of secured debt or debt associated with the Clayton Water System. At closing, Artesian Water paid approximately $ million of the total purchase price. The remaining $ million is payable in equal annual installments on the anniversary date of the closing date. Each annual installment is payable with interest at an annual rate of . The acquisition was accounted for as a business combination under ASC Topic 805. This transfer of Clayton’s exclusive franchise territory was approved by the DEPSC on April 20, 2022. The DEPSC will determine the appropriate ratemaking treatment of the acquisition price and the assets acquired in Artesian Water’s next base rate case. The pro forma effects of the business acquired are not material to the Company’s financial position or results of operations based on estimated annual revenue of approximately $ million related to customers acquired. |
GEOGRAPHIC CONCENTRATION OF CUS
GEOGRAPHIC CONCENTRATION OF CUSTOMERS | 9 Months Ended |
Sep. 30, 2022 | |
GEOGRAPHIC CONCENTRATION OF CUSTOMERS [Abstract] | |
GEOGRAPHIC CONCENTRATION OF CUSTOMERS | NOTE 16 – Artesian Water, Artesian Water Maryland and Artesian Water Pennsylvania provide water utility service to customers within their established service territory in all three counties of Delaware and in portions of Maryland and Pennsylvania, pursuant to rates filed with and approved by the DEPSC, the MDPSC and the PAPUC. As of September 30, 2022, Artesian Water was serving approximately 94,400 customers, Artesian Water Maryland was serving approximately 2,600 customers and Artesian Water Pennsylvania was serving approximately 40 customers. Artesian Wastewater and TESI provide wastewater utility service to customers within their established service territory in Sussex County, Delaware pursuant to rates filed with and approved by the DEPSC. The number of wastewater customers served more than doubled following the acquisition of TESI in January 2022. As of September 30, 2022, Artesian Wastewater combined with TESI were serving approximately 7,400 customers, including one large industrial customer. |
IMPACT OF RECENT ACCOUNTING PRO
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS | 9 Months Ended |
Sep. 30, 2022 | |
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS [Abstract] | |
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS | NOTE 17 IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS There was no new guidance issued by the FASB during the nine months ended September 30, 2022 that is applicable to the Company. |
REVENUE RECOGNITION (Tables)
REVENUE RECOGNITION (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
REVENUE RECOGNITION [Abstract] | |
Disaggregation of Revenues | The following table shows the Company’s revenues disaggregated by service type; all revenues are generated within a similar geographical location: (in thousands) Three months ended September 30, 2022 Three months ended September 30, 2021 Nine months ended September 30, 2022 Nine months ended September 30, 2021 Tariff Revenue Consumption charges $ 13,927 $ 13,595 $ 36,676 $ 36,672 Fixed fees 7,924 7,112 23,452 20,983 Service charges 156 130 449 450 DSIC 1,406 1,387 3,870 3,876 Metered wastewater services 193 — 462 — Industrial wastewater services 467 497 1,295 118 Total Tariff Revenue $ 24,073 $ 22,721 $ 66,204 $ 62,099 Non-Tariff Revenue Service line protection plans $ 1,224 $ 1,181 $ 3,662 $ 3,411 Contract operations 238 210 691 658 Design and installation 621 139 1,723 351 Inspection fees 127 108 234 244 Total Non-Tariff Revenue $ 2,210 $ 1,638 $ 6,310 $ 4,664 Other Operating Revenue $ 299 $ 560 $ 1,266 $ 1,269 Total Operating Revenue $ 26,582 $ 24,919 $ 73,780 $ 68,032 |
Contract Assets and Contract Liabilities | Our contract assets and liabilities consist of the following: (in thousands) September 30, 2022 December 31, 2021 Contract Assets – $ 3,009 $ 2,144 Deferred Revenue Deferred Revenue – Tariff $ 1,196 $ 1,227 Deferred Revenue – Non-Tariff 399 287 Total Deferred Revenue $ 1,595 $ 1,514 |
ACCOUNTS RECEIVABLE (Tables)
ACCOUNTS RECEIVABLE (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
ACCOUNTS RECEIVABLE [Abstract] | |
Changes in Accounts Receivable | The following table summarizes the changes in the Company’s accounts receivable balance: September 30, December 31, In thousands 2022 2021 Customer accounts receivable – water $ 7,110 $ 5,986 Customer accounts receivable – wastewater 470 1,326 Settlement agreement receivable 7,510 — Miscellaneous accounts receivable 329 202 Developer receivable 1,778 1,282 17,197 8,796 Less: Long-term portion of settlement agreement receivable (included in other deferred assets) 4,991 — Less allowance for doubtful accounts 486 429 Net accounts receivable $ 11,720 $ 8,367 |
LEASES (Tables)
LEASES (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
LEASES [Abstract] | |
Rent Expense for All Operating Leases Except Those with Terms of 12 Months or Less | Rent expense for all operating leases except those with terms of 12 months or less comprises: (in thousands) Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Minimum rentals $ 21 $ 24 $ 30 $ 38 Contingent rentals — — — — $ 21 $ 24 $ 30 $ 38 |
Supplemental Cash Flow Information Related to Leases | Supplemental cash flow information related to leases is as follows: (in thousands) Nine Months Ended Nine Months Ended September 30, 2022 September 30, 2021 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 30 $ 38 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 444 $ 444 |
Supplemental Balance Sheet Information Related to Leases | Supplemental balance sheet information related to leases is as follows: (in thousands, except lease term and discount rate) September 30, 2022 December 31, 2021 Operating Leases: Operating lease right-of-use assets $ 444 $ 451 Other current liabilities $ 2 6 Operating lease liabilities 439 440 Total operating lease liabilities $ 441 $ 446 Weighted Average Remaining Lease Term Operating leases 61 years 61 Weighted Average Discount Rate Operating leases 5.0 % 5.0 % |
Maturities of Operating Lease Liabilities | Maturities of operating lease liabilities that have initial or remaining non-cancelable lease terms in excess of one year as of September 30, 2022 are as follows: (in thousands) Operating Leases Year 2023 $ 24 2024 24 2025 24 2026 24 2027 25 Thereafter 1,328 Total undiscounted lease payments $ 1,449 Less effects of discounting (1,008 ) Total lease liabilities recognized $ 441 |
STOCK COMPENSATION PLANS (Table
STOCK COMPENSATION PLANS (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
STOCK COMPENSATION PLANS [Abstract] | |
Changes in Shares of Class A Common Stock Underlying Options and Restricted Stock Awards | The following summary reflects changes in the shares of Class A Stock underlying options and restricted stock awards for the nine months ended September 30, 2022: 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 FairValue Plan options/restricted stock awards Outstanding at January 1, 2022 83,000 $ 21.65 $ 2,048 5,000 $ 40.11 Granted — — — 5,000 45.58 Exercised/vested and released (66,104 ) 21.65 1,894 (5,000 ) 40.11 Expired/cancelled — — — — — Outstanding at September 30, 2022 16,896 $ 21.86 1.602 $ 444 5,000 $ 45.58 Exercisable/vested at September 30, 2022 16,896 $ 21.86 1.602 $ 444 — — |
OTHER DEFERRED ASSETS (Tables)
OTHER DEFERRED ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
OTHER DEFERRED ASSETS [Abstract] | |
Other Deferred Assets | The investment in CoBank, which is a cooperative bank, is related to certain outstanding First Mortgage Bonds and is a required investment in the bank based on the underlying long-term debt agreements. The settlement agreement receivable is related to the long-term portion of reimbursements due in years 2024 and 2025 as further discussed in Note 4-Accounts Receivable. In thousands September 30, 2022 December 31, 2021 Investment in CoBank $5,351 $4,850 Settlement agreement receivable-long term 4,991 — Other deferred assets 206 247 $10,548 $5,097 N OTE 8 - REGULATORY ASSETS The FASB ASC Topic 980 stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency. Certain expenses are recoverable through rates charged to our customers, without a return on investment, and are deferred and amortized during future periods using various methods as permitted by the DEPSC, MDPSC, and PAPUC. The deferred income taxes will be amortized over future years as the tax effects of temporary differences that previously flowed through to our customers are reversed. Debt related costs include debt issuance costs and other debt related expense. The DEPSC has approved deferred regulatory accounting treatment for issuance costs associated with Artesian Water’s First Mortgage bonds. Debt issuance costs and other debt related expenses are reviewed during Artesian Water’s rate applications as part of its cost of capital calculations. Regulatory expenses amortized on a straight-line basis are noted below: 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 Regulatory assets, net of amortization, comprise: (in thousands) September 30, 2022 December 31, 2021 Deferred income taxes $ 470 $ 355 Deferred contract costs and other 243 288 Debt related costs 4,757 4,902 Goodwill 268 273 Deferred acquisition and franchise costs 472 503 $ 6,210 $ 6,321 NOTE 9 FASB ASC Topic 980 stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency. Certain obligations are deferred and/or amortized as determined by the DEPSC, MDPSC, and PAPUC. Regulatory liabilities represent excess recovery of cost or other items that have been deferred because it is probable such amounts will be returned to customers through future regulated rates. Utility plant retirement cost obligation consists of estimated costs related to the potential removal and replacement of facilities and equipment on the Company’s water and wastewater properties. Effective January 1, 2012, as authorized by the DEPSC, when depreciable units of utility plant are retired, any cost associated with retirement, less any salvage value or proceeds received, is charged to a regulated retirement liability. Each year the liability is increased by an annual amount authorized by the DEPSC. Deferred settlement refunds consist of reimbursements from the Delaware Sand and Gravel Remedial Trust for Artesian Water’s past capital and operating costs, totaling approximately $10.0 million, related to the treatment costs associated with the release of contaminants from the Delaware Sand & Gravel Landfill Superfund Site in groundwater that Artesian Water uses for public potable water supply, pursuant to the Settlement Agreement. Approximately $2.5 million was paid in August 2022. The remaining $7.5 million is due in three equal installments no later than August of each year from 2023 through 2025. Artesian Water received approval from the DEPSC in October 2022 to refund to its customers these reimbursements for past capital and operating costs. The refund for the reimbursements will be applied to current and future customer bills in annual installments, with the first refund occurring in October 2022, and future customer refunds occurring no later than August of each year from 2023 through 2025. The amount of the credit will be calculated by dividing the amount of the reimbursement by the number of eligible customers. Artesian Water will record 2022 and future recovery of capital expenditures as Contributions in Aid of Construction and will record expense recovery as an offset to operations and maintenance expense, with the intention that those recoveries will then be available for inclusion and consideration in any future rate applications. For a full discussion of the Settlement Agreement, refer to Part II – Other Information – Item 1 – Legal Proceedings. Pursuant to the enactment of the Tax Cuts and Jobs Act, or TCJA, on December 22, 2017, the Company adjusted its existing deferred income tax balances to reflect the decrease in the corporate income tax rate from 34% to 21% (see Note 11) resulting in a decrease in the net deferred income tax liability of $24.3 million, of which $22.8 million was reclassified to a regulatory liability related to Artesian Water and Artesian Water Maryland. The regulatory liability amount is subject to certain Internal Revenue Service normalization rules that require the benefits to customers be spread over the remaining useful life of the underlying assets giving rise to the associated deferred income taxes. On January 31, 2019, the DEPSC approved the amortization of the regulatory liability amount of $22.2 million over a period of 49.5 years beginning February 1, 2018, subject to audit at a later date. In May 2022, the Company received a rate order from the DEPSC instructing the Company to continue amortizing the liability over a period of 49.5 years, subject to review in the Company’s next base rate filing. The MDPSC has not issued a final order on the regulatory liability amount of $0.6 million regarding the effects of the TCJA on Maryland customers. Regulatory liabilities comprise: (in thousands) September 30, 2022 December 31, 2021 Utility plant retirement cost obligation $ 156 $ 149 Deferred settlement refunds 10,042 — Deferred income taxes (related to TCJA) 21,352 21,111 $ 31,550 $ 21,260 NOTE 10 Basic net income per share is based on the weighted average number of common shares outstanding. Diluted net income per share is based on the weighted average number of common shares outstanding, the potentially dilutive effect of employee stock options and restricted stock awards. The following table summarizes the shares used in computing basic and diluted net income per share: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2022 2021 2022 2021 (in thousands) Weighted average common shares outstanding during the period for Basic computation 9,477 9,404 9,451 9,389 Dilutive effect of employee stock options and awards 15 28 22 32 Weighted average common shares outstanding during the period for Diluted computation 9,492 9,432 9,473 9,421 For the three and nine months ended September 30, 2022 and 2021, no shares of restricted stock awards were excluded from the calculations of diluted net income per share. The Company has 15,000,000 authorized shares of Class A Stock and 1,040,000 authorized shares of Class B Common Stock, or Class B Stock. As of September 30, 2022, 8,609,497 shares of Class A Stock and 881,452 shares of Class B Stock were issued and outstanding. As of September 30, 2021 , $ per Equity per common share was $ and $ at and , respectively. These amounts were computed by dividing common stockholders' equity by the number of shares of common stock outstanding on and , respectively. N OTE 11 - REGULATO Our water and wastewater utilities generate operating revenue from customers based on rates that are established by state public service commissions through a rate-setting process that may include public hearings, evidentiary hearings and the submission of evidence and testimony in support of the Company's requested level of rates. We are subject to regulation by the following state regulatory commissions: • The DEPSC, regulates both Artesian Water and Artesian Wastewater. • The MDPSC, regulates both Artesian Water Maryland and Artesian Wastewater Maryland. • The PAPUC, regulates Artesian Water Pennsylvania. Our water and wastewater utility operations are also subject to regulation under the federal Safe Drinking Water Act of 1974, or Safe Drinking Water Act, the Clean Water Act of 1972, or the Clean Water Act, and related state laws, and under federal and state regulations issued under these laws. These laws and regulations establish criteria and standards for drinking water and for wastewater discharges. Capital expenditures and operating costs required as a result of water quality standards and environmental requirements have been traditionally recognized by state regulatory commissions as appropriate for inclusion in establishing rates. Water and Wastewater Rates Our regulated utilities periodically seek rate increases to cover the cost of increased operating expenses, increased financing expenses due to additional investments in utility plant and other costs of doing business. In Delaware, utilities are permitted by law to place rates into effect, under bond, on a temporary basis pending completion of a rate increase proceeding. The first temporary increase may be up to the lesser of $ Other Proceedings Delaware law permits water utilities to put into effect, on a semi-annual basis, increases related to specific types of distribution system improvements through a DSIC. This charge may be implemented by water utilities between general rate increase applications that normally recognize changes in a water utility's overall financial position. The DSIC approval process is less costly when compared to the approval process for general rate increase requests. The DSIC rate applied between base rate filings is capped at 7.50% of the amount billed to customers under otherwise applicable rates and charges, and the DSIC rate increase applied cannot exceed 5.0% within an y 12-month period. The following table summarizes (1) Artesian Water’s applications with the DEPSC to collect DSIC rates and (2) the rates upon which eligible plant improvements are based: Application Date 11/20/20 DEPSC Approval Date 12/14/20 Effective Date 01/01/21 Cumulative DSIC Rate 7.50% Net Eligible Plant Improvements – Cumulative Dollars (in millions) $43.1 Eligible Plant Improvements – Installed Beginning Date 10/01/2014 Eligible Plant Improvements – Installed Ending Date 04/30/2019 The rate reflects the eligible plant improvements installed through April 30, 2019. The January 1, 2021 rate currently remains in effect and is subject to periodic audit by the DEPSC. For the three and nine months ended September 30, 2022, we earned approximately $1.4 million and $3.9 million in DSIC revenue, respectively. For the three and nine months ended September 30, 2021, we earned approximately $1.4 million and $3.9 million in DSIC revenue, respectively. NOTE 12 – INCOME TAXES Deferred income taxes are provided in accordance with FASB ASC Topic 740 on all differences between the tax basis of assets and liabilities and the amounts at which they are carried in the consolidated financial statements based on the enacted tax rates expected to be in effect when such temporary differences are expected to reverse. The Company’s rate regulated utilities recognize regulatory liabilities, to the extent considered in ratemaking, for deferred taxes provided in excess of the current statutory tax rate and regulatory assets for deferred taxes provided at rates less than the current statutory rate. Such tax-related regulatory assets and liabilities are reported at the revenue requirement level and amortized to income as the related temporary differences reverse, generally over the lives of the related properties. Under FASB ASC Topic 740, an uncertain tax position represents our expected treatment of a tax position taken, or planned to be taken in the future, that has not been reflected in measuring income tax expense for financial reporting purposes. The Company establishes reserves for uncertain tax positions based upon management's judgment as to the sustainability of these positions. These accounting estimates related to the uncertain tax position reserve require judgments to be made as to the sustainability of each uncertain tax position based on its technical merits. The Company believes its tax positions comply with applicable law and that it has adequately recorded reserves as required. However, to the extent the final tax outcome of these matters is different than the estimates recorded, the Company would then adjust its tax reserves or unrecognized tax benefits in the period that this information becomes known. The Company has elected to recognize accrued interest (net of related tax benefits) and penalties related to uncertain tax positions as a component of its income tax expense. During the third quarter, the Company has reversed approximately $ in penalties and interest for the nine months ended leaving a balance. The Company remains subject to examination by federal and state authorities for the tax years 2019 through 2021 . Investment tax credits were deferred through 1986 and are recognized as a reduction of deferred income tax expense over the estimated economic useful lives of the related assets. N OTE 13 – FAIR VALUE OF FINANC The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value. Current Assets and Liabilities For those current assets and liabilities that are considered financial instruments, the carrying amounts approximate fair value because of the short maturity of those instruments. All of Artesian Resources’ outstanding lo ng-term debt as of and In thousands September 30, 2022 December 31, 2021 Carrying amount $ 176,058 $ 144,850 Estimated fair value $ 153,174 $ 163,182 The fair value of Advances for Construction cannot be reasonably estimated due to the inability to estimate accurately the timing and amounts of future refunds expected to be paid over the life of the contracts. Refund payments are based on the water sales to new customers in the particular development constructed. The fair value of Advances for Construction would be less than the carrying amount because these financial instruments are non-interest bearing. NOTE 14 – RELATED PARTY TRANSACTIONS Mr. Michael Houghton currently serves as a director. During 2021, Mr. Houghton was a Partner in the law firm of Morris, Nichols, Arsht & Tunnell LLP, or MNAT, in Wilmington, Delaware. Mr. Houghton retired from MNAT as a Partner, effective January 1, 2022, however, Mr. Houghton continues to perform legal services for MNAT as an independent contractor and non-partner. In the normal course of business, the Company utilized the services of MNAT in 2021 for various regulatory, real estate and public policy matters. Approximately $89,000 and $160,000 was paid to MNAT during the three and nine months ended September 30, 2021, respectively, for legal services and director related services. As set forth in the Charter of the Audit Committee of the Board, the Audit Committee is responsible for reviewing and, if appropriate, approving all related party transactions between us and any officer, any director, any person known to be the beneficial owner of more than 5% of any class of the Company's voting securities or any other related person that would potentially require disclosure. In its review and approval of the related party transactions with MNAT, the Audit Committee considered the nature of the related person's interest in the transactions; the satisfactory performance of work contracted with the related party prior to the election of Mr. Houghton as a director; and the material terms of the transactions, including, without limitation, the amount and type of transactions, the importance of the transactions to the related person, the importance of the transactions to the Company and whether the transactions would impair the judgment of a director or officer to act in the best interest of the Company. The Audit Committee approves only those related person transactions that are in, or are consistent with, the best interests of the Company and its stockholders. NOTE 15 – BUSINESS COMBINATIONS As part of the Company’s growth strategy, on January 14, 2022 Artesian Wastewater completed its agreement to acquire TESI, which provides regulated wastewater services in Delaware. Artesian Wastewater purchased all of the stock of TESI from Middlesex Water Company for $6.4 million in cash and other consideration, including forgiveness of a $2.1 million note due from Middlesex, consisting of $3.1 million paid at closing. This acquisition more than doubled the number of wastewater customers served by Artesian in Sussex County, Delaware. The TESI acquisition was approved by the DEPSC on October 27, 2021, subject to the DEPSC determining the appropriate ratemaking treatment of the acquisition price and the assets acquired in Artesian Wastewater’s next base rate case. The Company reflected revenue of $0.8 million and $2.2 million for the three and nine months ended September 30, 2022, respectively, in its condensed consolidated statement of operations related to the acquisition. The pro forma revenue for the three and nine months ended September 30, 2022 is estimated to be approximately $0.8 million and $2.2 million, respectively. The Company anticipates the pro forma effects of revenue for the three and nine months ended September 30, 2021 to be approximately the same given there has not been any changes in the rates. The pro forma information is not necessarily indicative of the Company’s future results. Any pro forma effects of earnings is not practicable, as we continue to integrate TESI operations and adjust the operating cost structure as it relates to operating expenses reflective of synergies of the combined operations, and therefore would not present an accurate comparison. The table below sets forth the purchase price allocation of this acquisition as of September 30, 2022. The fair value determination is now finalized, with the exception of deferred income taxes, which is still preliminary but expected to be complete by December 31, 2022. The fair value for deferred income taxes affects both goodwill and deferred income taxes, which is included in the liability amount below. (In thousands) TESI Utility plant $ 25,354 Cash 280 Goodwill 2,983 Other assets 1,033 Total assets 29,650 Less: Liabilities and contributions in aid of construction (CIAC) Liabilities 3,852 CIAC 22,676 Net cash purchase price $ 3,122 Additionally, as part of the Company’s growth strategy, on May 26, 2022, Artesian Water completed its purchase of substantially all of the water system operating assets from the Town of Clayton, or Clayton, a Delaware municipality located in Kent County, Delaware, including Clayton’s exclusive franchise territory and the right to provide water service to Clayton’s existing customers, or the Clayton Water System. The total purchase price was $ million, less the current payoff amount of secured debt or debt associated with the Clayton Water System. At closing, Artesian Water paid approximately $ million of the total purchase price. The remaining $ million is payable in equal annual installments on the anniversary date of the closing date. Each annual installment is payable with interest at an annual rate of . The acquisition was accounted for as a business combination under ASC Topic 805. This transfer of Clayton’s exclusive franchise territory was approved by the DEPSC on April 20, 2022. The DEPSC will determine the appropriate ratemaking treatment of the acquisition price and the assets acquired in Artesian Water’s next base rate case. The pro forma effects of the business acquired are not material to the Company’s financial position or results of operations based on estimated annual revenue of approximately $ million related to customers acquired. NOTE 16 – Artesian Water, Artesian Water Maryland and Artesian Water Pennsylvania provide water utility service to customers within their established service territory in all three counties of Delaware and in portions of Maryland and Pennsylvania, pursuant to rates filed with and approved by the DEPSC, the MDPSC and the PAPUC. As of September 30, 2022, Artesian Water was serving approximately 94,400 customers, Artesian Water Maryland was serving approximately 2,600 customers and Artesian Water Pennsylvania was serving approximately 40 customers. Artesian Wastewater and TESI provide wastewater utility service to customers within their established service territory in Sussex County, Delaware pursuant to rates filed with and approved by the DEPSC. The number of wastewater customers served more than doubled following the acquisition of TESI in January 2022. As of September 30, 2022, Artesian Wastewater combined with TESI were serving approximately 7,400 customers, including one large industrial customer. NOTE 17 IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS There was no new guidance issued by the FASB during the nine months ended September 30, 2022 that is applicable to the Company. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAUTION REGARDING FORWARD-LOOKING STATEMENTS Statements in this Quarterly Report on Form 10-Q Quarterly Report on Form 10-Q. RESULTS OF OPERATIONS FOR THE PERIOD ENDED SEPTEMBER 30, 2022 OVERVIEW Our profitability is primarily attributable to the sale of water. Gross water sales composed 80.7% of total operating revenues for the nine months ended September 30, 2022. Our profitability is also attributed to the various contract operations, water, sewer and internal SLP Plans, wastewater services and other services we provide. Water sales are subject to seasonal fluctuations, particularly during summer when water demand may vary with rainfall and temperature. In the event temperatures during the typically warmer months are cooler than expected, or rainfall is greater than expected, the demand for water may decrease and our revenues may be adversely affected. We believe the effects of weather are short term and do not materially affect the execution of our strategic initiatives. Our wastewater services, contract operations, SLP Plans and other services provide a revenue stream that is not affected by changes in weather patterns. While water sales are our primary source of revenues, we continue to seek growth opportunities to provide wastewater services in Delaware and the surrounding areas. We also continue to explore and develop relationships with developers and municipalities in order to increase revenues from contract water and wastewater operations, wastewater management services, and design, construction and engineering services. We plan to continue developing and expanding our contract operations and other services in a manner that complements our growth in water service to new customers. Our anticipated growth in these areas is subject to changes in residential and commercial construction, which may be affected by interest rates, inflation and general housing and economic market conditions. We anticipate continued growth in our non-regulated division due to our water, sewer, and internal SLP Plans. COVID-19 Pandemic As of September 30, 2022, the Company’s financial results and business operations have not been materially adversely affected by the coronavirus, or COVID-19, outbreak, which was declared a pandemic in March 2020. However, we have experienced delays in procuring some materials and supplies. While we have been successful in managing these delays, there is no assurance that our future financial results or business operations will not be negatively affected. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. Management is actively monitoring the situation and impacts on its operations, suppliers, industry, and workforce. Inflation We are affected by inflation, most notably by the continually increasing costs required to maintain, improve and expand our service capability. The cumulative effect of inflation results in significantly higher facility replacement costs which must be recovered from future cash flows. Our ability to recover increases in investments in facilities is dependent upon future rate increases, which are subject to approval by the applicable regulatory authority. We can provide no assurances that any future rate increase request will be approved, and if approved, we cannot guarantee that any rate increase will be granted in a timely manner and/or will be sufficient in amount to cover costs for which we initially sought the rate increase. The impact of inflation could adversely affect our results of operations, financial position or cash flows. Materials and Supplies We are highly dependent on the availability of essential materials and parts from our suppliers for expansion, construction and maintenance of our services. The majority of the materials required for our water and wastewater utility business are typically under contract at fixed prices, however, supply chain issues associated with the COVID-19 pandemic resulted in price increases and delays in procuring certain materials and equipment. We have been successful in minimizing these delays and cost increases with thorough planning and pre-ordering, however there is no assurance that our future financial results or business operations will not be negatively affected. Water Division Artesian Water, Artesian Water Maryland and Artesian Water Pennsylvania provide water service to residential, commercial, industrial, governmental, municipal and utility customers. Increases in the number of customers contribute to increases, or help to offset any intermittent decreases, in our operating revenue. As of September 30, 2022, the number of metered water customers in Delaware increased approximately 3.4% compared to September 30, 2021. increased approximately 1.8% compared to September 30, 2021 Wastewater Division Artesian Wastewater owns wastewater collection and treatment infrastructure and began providing regulated wastewater services to customers in Delaware in July 2005. Artesian Wastewater Maryland was incorporated on June 3, 2008 and is able to provide regulated wastewater services to customers in Maryland. Our residential and commercial wastewater customers are billed a flat monthly fee, which contributes to providing a revenue stream unaffected by weather. The number of Artesian’s Delaware wastewater customers more than doubled compared to September 30, 2021, following the acquisition of Tidewater Environmental Services, Inc., or TESI This acquisition agreement is discussed further in the “Strategic Direction” section below. Non-Regulated Division Artesian Utility provides contract water and wastewater operation services to private, municipal and governmental institutions. SLP Plan customers are billed a flat monthly or quarterly rate, which contributes to providing a revenue stream unaffected by weather. There has been consistent customer growth over the years. As of September 30, 2022, the eligible customers enrolled in the WSLP Plan, the SSLP Plan and the ISLP Plan increased 3.8%, 1.4% and 13.5%, respectively, compared to September 30, 2021. The non-utility customers enrolled in one of our three protections plans increased 2.6%. Strategic Direction Our strategy is to increase customer growth, revenues, earnings and dividends by expanding our water, wastewater and SLP Plan services across the Delmarva Peninsula. We remain focused on providing superior service to our customers and continuously seek ways to improve our efficiency and performance. Our strategy has included a focus on building strategic partnerships with county governments, municipalities and developers. By providing water and wastewater services, we believe we are positioned as the primary resource for developers and communities throughout the Delmarva Peninsula seeking to fill both needs simultaneously. We believe we have a proven ability to acquire and integrate high growth, reputable entities, through which we have captured additional service territories that will serve as a base for future revenue. We believe this experience presents a strong platform for further expansion and that our success to date also produces positive relationships and credibility with regulators, municipalities, developers and customers in both existing and prospective service areas. In our regulated water division, our strategy is to focus on a wide spectrum of activities, which include strategic acquisitions of existing systems, expanding certificated service area, identifying new and dependable sources of supply, developing the wells, treatment plants and delivery systems to supply water to customers and educating customers on the wise use of water. Our strategy includes focused efforts to expand through strategic acquisitions and in new regions added to our Delaware service territory over the last 10 years. We plan to expand our regulated water service area in the Cecil County designated growth corridor and to expand our business through the design, construction, operation, management and acquisition of additional water systems. The expansion of our exclusive franchise areas elsewhere in Maryland and the award of contracts will similarly enhance our operations within the state. Our ability to develop partnerships with various county governments, municipalities and developers has provided a number of opportunities. In the last four years, we completed seven acquisitions including asset purchase agreements with municipal and developer/homeowner association operated systems. We believe that Delaware's generally lower cost of living in the region, availability of development sites in relatively close proximity to the Atlantic Ocean in Sussex County, and attractive financing rates for construction and mortgages have resulted, and will continue to result, in increases to our customer base. Delaware’s lower property and income tax rate make it an attractive region for new home development and retirement communities. Substantial portions of Delaware currently are not served by a public water system, which could also assist in an increase to our customer base as systems are added. On May 26, 2022, Artesian Water completed its purchase of substantially all of the water operating assets from the Town of Clayton, or Clayton, a Delaware municipality located in Kent County, Delaware, including Clayton’s exclusive franchise territory and the right to provide water service to Clayton’s existing customers, or the Clayton Water System. The total purchase price was $5.0 million, less the current payoff amount of secured debt or debt associated with the Clayton Water System. This transfer of Clayton’s exclusive franchise territory was approved by the DEPSC on April 20, 2022. In our regulated wastewater division, we foresee significant growth opportunities and will continue to seek strategic partnerships and relationships with developers and governmental agencies to complement existing agreements for the provision of wastewater service on the Delmarva Peninsula. Artesian Wastewater plans to utilize our larger regional wastewater facilities to expand service areas to new customers while transitioning our smaller treatment facilities into regional pump stations in order to gain additional efficiencies in the treatment and disposal of wastewater. We believe this will reduce operational costs at the smaller treatment facilities in the future because they will be converted from treatment and disposal plants to pump stations to assist with transitioning the flow of wastewater from one regional facility to another. In addition, since closing the transaction with TESI noted below, Artesian’s Delaware wastewater subsidiaries are the sole regional regulated wastewater utilities in Delaware, which we believe will enable us to increase efficiencies in the treatment and disposal of wastewater and provide additional opportunities to expand our wastewater operations. On January 14, 2022, Artesian Wastewater acquired TESI, a wholly-owned subsidiary of Middlesex Water Company, or Middl |
REGULATORY ASSETS (Tables)
REGULATORY ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
REGULATORY ASSETS [Abstract] | |
Amortization Period of Other Regulatory Expense | Regulatory expenses amortized on a straight-line basis are noted below: 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 |
Regulatory Assets, Net of Amortization, Comprise | Regulatory assets, net of amortization, comprise: (in thousands) September 30, 2022 December 31, 2021 Deferred income taxes $ 470 $ 355 Deferred contract costs and other 243 288 Debt related costs 4,757 4,902 Goodwill 268 273 Deferred acquisition and franchise costs 472 503 $ 6,210 $ 6,321 |
REGULATORY LIABILITIES (Tables)
REGULATORY LIABILITIES (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
REGULATORY LIABILITIES [Abstract] | |
Regulatory Liabilities | Regulatory liabilities comprise: (in thousands) September 30, 2022 December 31, 2021 Utility plant retirement cost obligation $ 156 $ 149 Deferred settlement refunds 10,042 — Deferred income taxes (related to TCJA) 21,352 21,111 $ 31,550 $ 21,260 |
NET INCOME PER COMMON SHARE A_2
NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE [Abstract] | |
Shares Used in Computing Basic and Diluted Net Income Per Share | The following table summarizes the shares used in computing basic and diluted net income per share: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2022 2021 2022 2021 (in thousands) Weighted average common shares outstanding during the period for Basic computation 9,477 9,404 9,451 9,389 Dilutive effect of employee stock options and awards 15 28 22 32 Weighted average common shares outstanding during the period for Diluted computation 9,492 9,432 9,473 9,421 |
REGULATORY PROCEEDINGS (Tables)
REGULATORY PROCEEDINGS (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
REGULATORY PROCEEDINGS [Abstract] | |
Eligible Plant Improvements | The following table summarizes (1) Artesian Water’s applications with the DEPSC to collect DSIC rates and (2) the rates upon which eligible plant improvements are based: Application Date 11/20/20 DEPSC Approval Date 12/14/20 Effective Date 01/01/21 Cumulative DSIC Rate 7.50% Net Eligible Plant Improvements – Cumulative Dollars (in millions) $43.1 Eligible Plant Improvements – Installed Beginning Date 10/01/2014 Eligible Plant Improvements – Installed Ending Date 04/30/2019 |
FAIR VALUE OF FINANCIAL INSTR_2
FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract] | |
Carrying Amount and Fair Value of Long-Term Debt | All of Artesian Resources’ outstanding lo ng-term debt as of and In thousands September 30, 2022 December 31, 2021 Carrying amount $ 176,058 $ 144,850 Estimated fair value $ 153,174 $ 163,182 |
BUSINESS COMBINATIONS (Tables)
BUSINESS COMBINATIONS (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
BUSINESS COMBINATIONS [Abstract] | |
Preliminary Purchase Price Allocation | The fair value determination is now finalized, with the exception of deferred income taxes, which is still preliminary but expected to be complete by December 31, 2022. The fair value for deferred income taxes affects both goodwill and deferred income taxes, which is included in the liability amount below. (In thousands) TESI Utility plant $ 25,354 Cash 280 Goodwill 2,983 Other assets 1,033 Total assets 29,650 Less: Liabilities and contributions in aid of construction (CIAC) Liabilities 3,852 CIAC 22,676 Net cash purchase price $ 3,122 |
GENERAL (Details)
GENERAL (Details) $ in Thousands, gal / d in Millions | 3 Months Ended | 9 Months Ended | |||
Jan. 14, 2022 USD ($) | Sep. 30, 2022 USD ($) Facility Plan | Sep. 30, 2022 USD ($) gal / d Squarefeet Subsidiary | Sep. 30, 2021 USD ($) | May 26, 2022 USD ($) | |
Business Operations [Abstract] | |||||
Consideration transferred | $ 6,341 | $ 0 | |||
Number of subsidiaries not regulated | Subsidiary | 3 | ||||
Artesian Development purchased area of office space (in square feet) | Squarefeet | 10,000 | ||||
Artesian Development purchased area of warehouse space (in square feet) | Squarefeet | 10,000 | ||||
Tidewater Environmental Services Inc [Member] | |||||
Business Operations [Abstract] | |||||
Purchase price | $ 3,122 | $ 3,122 | |||
Consideration transferred | $ 6,400 | ||||
Note forgiven | $ 2,100 | ||||
Clayton [Member] | |||||
Business Operations [Abstract] | |||||
Purchase price | $ 5,000 | ||||
Artesian Utility [Member] | |||||
Business Operations [Abstract] | |||||
Initial contract period of operating wastewater treatment facilities in Middletown | 20 years | ||||
Number of wastewater treatment systems facility operations in Middletown | Facility | 3 | ||||
Capacity of wastewater treatment facilities | gal / d | 3.8 | ||||
Number of protection plans offered to customers | Plan | 3 |
REVENUE RECOGNITION, Disaggrega
REVENUE RECOGNITION, Disaggregated Revenues (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | Jun. 30, 2021 | |
REVENUE RECOGNITION [Abstract] | ||||||
Minimum number of days for accounts receivable from tariff contract customers | 25 days | |||||
Adjustment in reserve for bad debt | $ 500 | $ (300) | ||||
Minimum number of days due for accounts receivable from SLP Plan customer | 25 days | |||||
Minimum number of days customers services invoiced in advance | 30 days | |||||
Disaggregation of Revenue [Abstract] | ||||||
Other Operating Revenue not in scope of ASC 606 | $ 299 | $ 560 | $ 1,266 | $ 1,269 | ||
Total Operating Revenues | 26,582 | 24,919 | 73,780 | 68,032 | ||
Tariff Revenue [Member] | ||||||
Disaggregation of Revenue [Abstract] | ||||||
Total Operating Revenues | 24,073 | 22,721 | 66,204 | 62,099 | ||
Tariff Revenue [Member] | Consumption Charges [Member] | ||||||
Disaggregation of Revenue [Abstract] | ||||||
Total Operating Revenues | 13,927 | 13,595 | 36,676 | 36,672 | ||
Tariff Revenue [Member] | Fixed Fees [Member] | ||||||
Disaggregation of Revenue [Abstract] | ||||||
Total Operating Revenues | 7,924 | 7,112 | 23,452 | 20,983 | ||
Tariff Revenue [Member] | Service Charges [Member] | ||||||
Disaggregation of Revenue [Abstract] | ||||||
Total Operating Revenues | 156 | 130 | 449 | 450 | ||
Tariff Revenue [Member] | DSIC [Member] | ||||||
Disaggregation of Revenue [Abstract] | ||||||
Total Operating Revenues | 1,406 | 1,387 | 3,870 | 3,876 | ||
Tariff Revenue [Member] | Metered Wastewater Services [Member] | ||||||
Disaggregation of Revenue [Abstract] | ||||||
Total Operating Revenues | 193 | 0 | 462 | 0 | ||
Tariff Revenue [Member] | Industrial Wastewater Services [Member] | ||||||
Disaggregation of Revenue [Abstract] | ||||||
Total Operating Revenues | 467 | 497 | 1,295 | 118 | ||
Non-Tariff Revenue [Member] | ||||||
Disaggregation of Revenue [Abstract] | ||||||
Total Operating Revenues | 2,210 | 1,638 | 6,310 | 4,664 | ||
Non-Tariff Revenue [Member] | Service Line Protection Plans [Member] | ||||||
Disaggregation of Revenue [Abstract] | ||||||
Total Operating Revenues | 1,224 | 1,181 | 3,662 | 3,411 | ||
Non-Tariff Revenue [Member] | Contract Operations [Member] | ||||||
Disaggregation of Revenue [Abstract] | ||||||
Total Operating Revenues | 238 | 210 | 691 | 658 | ||
Non-Tariff Revenue [Member] | Design and Installation [Member] | ||||||
Disaggregation of Revenue [Abstract] | ||||||
Total Operating Revenues | 621 | 139 | 1,723 | 351 | ||
Non-Tariff Revenue [Member] | Inspection Fees [Member] | ||||||
Disaggregation of Revenue [Abstract] | ||||||
Total Operating Revenues | $ 127 | $ 108 | $ 234 | $ 244 |
REVENUE RECOGNITION, Contract A
REVENUE RECOGNITION, Contract Assets and Contract Liabilities (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2022 | Dec. 31, 2021 | |
Contract with Customer, Asset and Liability [Abstract] | ||
Total Deferred Revenue | $ 1,595 | $ 1,514 |
Tariff Revenue [Member] | ||
Contract with Customer, Asset and Liability [Abstract] | ||
Contract Assets | 3,009 | 2,144 |
Total Deferred Revenue | 1,196 | 1,227 |
Tariff Deferred Revenue | 1,200 | |
Non-Tariff Revenue [Member] | ||
Contract with Customer, Asset and Liability [Abstract] | ||
Total Deferred Revenue | 399 | $ 287 |
Tariff Deferred Revenue | $ 300 |
ACCOUNTS RECEIVABLE (Details)
ACCOUNTS RECEIVABLE (Details) $ in Thousands | 1 Months Ended | 9 Months Ended | |
Aug. 31, 2022 USD ($) | Sep. 30, 2022 USD ($) Installment | Dec. 31, 2021 USD ($) | |
Accounts Receivable [Abstract] | |||
Litigation settlement amount | $ 10,000 | ||
Litigation settlement amount received | $ 2,500 | ||
Litigation settlement, remaining amount | $ 7,500 | ||
Number of installments | Installment | 3 | ||
Changes in Accounts Receivable [Abstract] | |||
Gross accounts receivable | $ 17,197 | $ 8,796 | |
Less: Long-term portion of settlement agreement receivable (included in other deferred assets) | 4,991 | 0 | |
Less allowance for doubtful accounts | 486 | 429 | |
Net accounts receivable | 11,720 | 8,367 | |
Customer Accounts Receivable - Water [Member] | |||
Changes in Accounts Receivable [Abstract] | |||
Gross accounts receivable | 7,110 | 5,986 | |
Customer Accounts Receivable - Wastewater [Member] | |||
Changes in Accounts Receivable [Abstract] | |||
Gross accounts receivable | 470 | 1,326 | |
Settlement Agreement Receivable [Member] | |||
Changes in Accounts Receivable [Abstract] | |||
Gross accounts receivable | 7,510 | 0 | |
Miscellaneous Accounts Receivable [Member] | |||
Changes in Accounts Receivable [Abstract] | |||
Gross accounts receivable | 329 | 202 | |
Developer Receivable [Member] | |||
Changes in Accounts Receivable [Abstract] | |||
Gross accounts receivable | $ 1,778 | $ 1,282 |
LEASES (Details)
LEASES (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Operating Lease, Description [Abstract] | |||||
Percentage of increase in annual lease payments | 3% | ||||
Rent Expense [Abstract] | |||||
Minimum rentals | $ 21 | $ 24 | $ 30 | $ 38 | |
Contingent rentals | 0 | 0 | 0 | 0 | |
Rent expenses | 21 | $ 24 | 30 | 38 | |
Cash paid for amounts included in the measurement of lease liabilities [Abstract] | |||||
Operating cash flows from operating leases | 30 | 38 | |||
Right-of-use assets obtained in exchange for lease obligations [Abstract] | |||||
Operating leases | 444 | $ 444 | |||
Operating leases [Abstract] | |||||
Operating lease right-of-use assets | 444 | 444 | $ 451 | ||
Operating lease, liability [Abstract] | |||||
Other current liabilities | 2 | 2 | 6 | ||
Operating lease liabilities | 439 | 439 | 440 | ||
Total operating lease liabilities | $ 441 | $ 441 | $ 446 | ||
Weighted Average Remaining Lease Term [Abstract] | |||||
Operating leases | 61 years | 61 years | 61 years | ||
Weighted Average Discount Rate [Abstract] | |||||
Operating leases | 5% | 5% | 5% | ||
Maturities of Operating Lease Liabilities [Abstract] | |||||
2023 | $ 24 | $ 24 | |||
2024 | 24 | 24 | |||
2025 | 24 | 24 | |||
2026 | 24 | 24 | |||
2027 | 25 | 25 | |||
Thereafter | 1,328 | 1,328 | |||
Total undiscounted lease payments | 1,449 | 1,449 | |||
Less effects of discounting | (1,008) | (1,008) | |||
Total lease liabilities recognized | $ 441 | $ 441 | $ 446 | ||
Minimum [Member] | |||||
Operating Lease, Description [Abstract] | |||||
Remaining lease term | 20 years | 20 years | |||
Maximum [Member] | |||||
Operating Lease, Description [Abstract] | |||||
Remaining lease term | 74 years | 74 years | |||
Option to extend lease term | 66 years | 66 years |
STOCK COMPENSATION PLANS (Detai
STOCK COMPENSATION PLANS (Details) | 3 Months Ended | 9 Months Ended | ||||
May 03, 2022 $ / shares shares | May 04, 2021 $ / shares shares | Sep. 30, 2022 USD ($) $ / shares shares | Sep. 30, 2021 USD ($) | Sep. 30, 2022 USD ($) Director $ / shares shares | Sep. 30, 2021 USD ($) | |
Stock Compensation Plans [Abstract] | ||||||
Compensation expense | $ 162,000 | $ 142,000 | ||||
Number of directors in committee | Director | 3 | |||||
Total intrinsic value of options exercised | $ 1,894,000 | |||||
Shares of Class A Non-Voting Common Stock under option [Abstract] | ||||||
Exercised/vested and released, aggregate intrinsic value | $ 1,894,000 | |||||
Class A Stock [Member] | Stock Options [Member] | ||||||
Stock Compensation Plans [Abstract] | ||||||
Total intrinsic value of options exercised | $ 1,894,000 | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||||||
Outstanding at beginning of period, option shares (in shares) | shares | 83,000 | |||||
Granted, option shares (in shares) | shares | 0 | |||||
Exercised/vested and released, option shares (in shares) | shares | (66,104) | |||||
Expired/cancelled, option shares (in shares) | shares | 0 | |||||
Outstanding at end of period, option shares (in shares) | shares | 16,896 | 16,896 | ||||
Exercisable/vested at end of period, option share (in shares) | shares | 16,896 | 16,896 | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract] | ||||||
Outstanding at beginning of period, weighted average exercise price (in dollars per shares) | $ / shares | $ 21.65 | |||||
Granted, weighted average exercise price (in dollars per share) | $ / shares | 0 | |||||
Exercised/vested and released, weighted average exercise price (in dollars per shares) | $ / shares | 21.65 | |||||
Expired/cancelled, weighted average exercise price (in dollars per share) | $ / shares | 0 | |||||
Outstanding at end of period, weighted average exercise price (in dollars per shares) | $ / shares | $ 21.86 | 21.86 | ||||
Options exercisable at year end (in dollars per shares) | $ / shares | $ 21.86 | $ 21.86 | ||||
Shares of Class A Non-Voting Common Stock under option [Abstract] | ||||||
Outstanding at end of period, weighted average remaining life | 1 year 7 months 6 days | |||||
Exercisable/vested at end of period, weighted average remaining life | 1 year 7 months 6 days | |||||
Outstanding at beginning of period, aggregate intrinsic value | $ 2,048,000 | |||||
Granted, aggregate intrinsic value | 0 | |||||
Exercised/vested and released, aggregate intrinsic value | 1,894,000 | |||||
Expired/cancelled, aggregate intrinsic value | 0 | |||||
Outstanding at end of period, aggregate intrinsic value | $ 444,000 | 444,000 | ||||
Exercisable/vested at end of period, aggregate intrinsic value | 444,000 | 444,000 | ||||
Class A Stock [Member] | Stock Options [Member] | 2015 Equity Compensation Plan [Member] | ||||||
Stock Compensation Plans [Abstract] | ||||||
Unrecognized expense related to non-vested option shares | 0 | 0 | ||||
Class A Stock [Member] | Restricted Stock [Member] | ||||||
Stock Compensation Plans [Abstract] | ||||||
Compensation expense | $ 57,000 | $ 51,000 | $ 162,000 | $ 142,000 | ||
Fair value per share (in dollars per share) | $ / shares | $ 45.58 | $ 40.11 | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||||||
Granted, option shares (in shares) | shares | 5,000 | 5,000 | ||||
Shares [Roll Forward] | ||||||
Outstanding at beginning of year (in shares) | shares | 5,000 | |||||
Granted (in shares) | shares | 5,000 | |||||
Exercised/vested and released, restricted stock awards (in shares) | shares | (5,000) | |||||
Cancelled (in shares) | shares | 0 | |||||
Unvested Outstanding at end of year (in shares) | shares | 5,000 | 5,000 | ||||
Weighted Average Grant Date Fair Value [Abstract] | ||||||
Outstanding at beginning of year (in dollars per shares) | $ / shares | $ 40.11 | |||||
Granted, weighted average grant date fair value (in dollars per share) | $ / shares | 45.58 | |||||
Vested and released, weighted average grant date fair value (in dollars per shares) | $ / shares | 40.11 | |||||
Cancelled, weighted average grant date fair value (in dollars per share) | $ / shares | 0 | |||||
Unvested Outstanding at end of year (in dollars per shares) | $ / shares | $ 45.58 | $ 45.58 | ||||
Class A Stock [Member] | Restricted Stock [Member] | 2015 Equity Compensation Plan [Member] | ||||||
Stock Compensation Plans [Abstract] | ||||||
Unrecognized expense related to non-vested option shares | $ 134,000 | $ 134,000 | ||||
Period over which unvested options cost will recognized | 7 months 2 days |
OTHER DEFERRED ASSETS (Details)
OTHER DEFERRED ASSETS (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Other Deferred Assets [Abstract] | ||
Investment in CoBank | $ 5,351 | $ 4,850 |
Settlement agreement receivable-long-terrm | 4,991 | 0 |
Other deferred assets | 206 | 247 |
Other deferred assets | $ 10,548 | $ 5,097 |
REGULATORY ASSETS (Details)
REGULATORY ASSETS (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2022 | Dec. 31, 2021 | |
Amortization period of other regulatory expense [Abstract] | |||
Deferred contract costs and other | 5 years | ||
Rate case studies | 5 years | ||
Goodwill | 50 years | ||
Deferred acquisition costs | 20 years | ||
Franchise costs | 80 years | ||
Regulatory assets net of amortization, comprise [Abstract] | |||
Regulatory assets, net | $ 6,210 | $ 6,210 | $ 6,321 |
Maximum [Member] | |||
Amortization period of other regulatory expense [Abstract] | |||
Debt related cost | 30 years | ||
Minimum [Member] | |||
Amortization period of other regulatory expense [Abstract] | |||
Debt related cost | 15 years | ||
Delaware [Member] | |||
Amortization period of other regulatory expense [Abstract] | |||
Regulatory rate proceedings | 2 years 6 months | ||
Maryland [Member] | |||
Amortization period of other regulatory expense [Abstract] | |||
Regulatory rate proceedings | 5 years | ||
Deferred Income Taxes [Member] | |||
Regulatory assets net of amortization, comprise [Abstract] | |||
Regulatory assets, net | $ 470 | $ 470 | 355 |
Deferred Contract Costs and Other [Member] | |||
Regulatory assets net of amortization, comprise [Abstract] | |||
Regulatory assets, net | 243 | 243 | 288 |
Debt Related Costs [Member] | |||
Regulatory assets net of amortization, comprise [Abstract] | |||
Regulatory assets, net | 4,757 | 4,757 | 4,902 |
Goodwill [Member] | |||
Regulatory assets net of amortization, comprise [Abstract] | |||
Regulatory assets, net | 268 | 268 | 273 |
Deferred Acquisition and Franchise Costs [Member] | |||
Regulatory assets net of amortization, comprise [Abstract] | |||
Regulatory assets, net | $ 472 | $ 472 | $ 503 |
REGULATORY LIABILITIES (Details
REGULATORY LIABILITIES (Details) $ in Thousands | 1 Months Ended | 9 Months Ended | 12 Months Ended | |||
Aug. 31, 2022 USD ($) | Sep. 30, 2022 USD ($) Installment | Dec. 31, 2020 USD ($) | Dec. 31, 2021 USD ($) | Jan. 31, 2019 USD ($) | Dec. 31, 2017 USD ($) | |
REGULATORY LIABILITIES [Abstract] | ||||||
Litigation settlement amount | $ 10,000 | |||||
Litigation settlement amount received | $ 2,500 | |||||
Litigation settlement, remaining amount | $ 7,500 | |||||
Number of installments | Installment | 3 | |||||
Federal corporate tax rate | 21% | 34% | ||||
Decrease in the net deferred income tax liability | $ 24,300 | |||||
Regulatory Liabilities [Abstract] | ||||||
Regulatory liabilities | $ 31,550 | $ 22,800 | $ 21,260 | |||
DEPSC [Member] | ||||||
Regulatory Liabilities [Abstract] | ||||||
Regulatory liabilities | $ 22,200 | |||||
Regulatory liabilities, amortization period | 49 years 6 months | |||||
MDPSC [Member] | ||||||
Regulatory Liabilities [Abstract] | ||||||
Regulatory liabilities | $ 600 | |||||
Utility Plant Retirement Cost Obligation [Member] | ||||||
Regulatory Liabilities [Abstract] | ||||||
Regulatory liabilities | 156 | 149 | ||||
Deferred Settlement Refunds [Member] | ||||||
Regulatory Liabilities [Abstract] | ||||||
Regulatory liabilities | 10,042 | 0 | ||||
Deferred Income Taxes [Member] | ||||||
Regulatory Liabilities [Abstract] | ||||||
Regulatory liabilities | $ 21,352 | $ 21,111 |
NET INCOME PER COMMON SHARE A_3
NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE (Details) - $ / shares | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Shares used in computing basic and diluted net income per share [Abstract] | |||||
Weighted average common shares outstanding during the period for Basic computation (in shares) | 9,477,000 | 9,404,000 | 9,451,000 | 9,389,000 | |
Dilutive effect of employee stock options and awards (in shares) | 15,000 | 28,000 | 22,000 | 32,000 | |
Weighted average common shares outstanding during the period for Diluted computation (in shares) | 9,492,000 | 9,432,000 | 9,473,000 | 9,421,000 | |
Earnings Per Share [Abstract] | |||||
Equity per common share (in dollars per share) | $ 0.65 | $ 0.54 | $ 1.66 | $ 1.47 | |
Class A Stock [Member] | |||||
Common Stock [Abstract] | |||||
Common stock, shares authorized (in shares) | 15,000,000 | 15,000,000 | |||
Common stock, shares issued (in shares) | 8,609,497 | 8,524,093 | 8,609,497 | 8,524,093 | |
Common stock, shares outstanding (in shares) | 8,609,497 | 8,524,093 | 8,609,497 | 8,524,093 | |
Common stock, par value (in dollars per share) | $ 1 | $ 1 | |||
Earnings Per Share [Abstract] | |||||
Equity per common share (in dollars per share) | $ 19.88 | $ 18.94 | |||
Class B Stock [Member] | |||||
Common Stock [Abstract] | |||||
Common stock, shares authorized (in shares) | 1,040,000 | 1,040,000 | |||
Common stock, shares issued (in shares) | 881,452 | 881,452 | 881,452 | 881,452 | |
Common stock, shares outstanding (in shares) | 881,452 | 881,452 | 881,452 | 881,452 | |
Common stock, par value (in dollars per share) | $ 1 | $ 1 | |||
Restricted Stock [Member] | |||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Abstract] | |||||
Shares excluded from calculations of diluted net income per share (in shares) | 0 | 0 | 0 | 0 |
REGULATORY PROCEEDINGS (Details
REGULATORY PROCEEDINGS (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Nov. 20, 2020 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Other Proceedings [Abstract] | |||||
Cumulative DSIC Rate | 7.50% | ||||
Net Eligible Plant Improvements - Cumulative Dollars | $ 43.1 | ||||
Delaware [Member] | |||||
Rate Proceedings [Abstract] | |||||
Percentage of gross water sales | 15% | ||||
Period to complete rate case by law | 7 months | ||||
Delaware [Member] | Maximum [Member] | |||||
Rate Proceedings [Abstract] | |||||
Temporary annual rate increase subject to 15% gross water sales limitation | $ 2.5 | ||||
Percentage of rate relief allowed should a rate case not complete | 15% | ||||
Other Proceedings [Abstract] | |||||
Distribution System Improvement Charge rate increase applied between base rate filings | 7.50% | ||||
Distribution System Improvement Charge rate increase within a 12-month period | 5% | ||||
Artesian Water [Member] | |||||
Other Proceedings [Abstract] | |||||
Revenue earned in DSIC rate increases | $ 1.4 | $ 1.4 | $ 3.9 | $ 3.9 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2022 | Dec. 31, 2021 | Sep. 30, 2022 | |
Income Taxes [Abstract] | |||
Reversal of reserve related to uncertain tax positions | $ 212,000 | $ 26,000 | |
Reversal of penalties and interest | $ (10,000) | $ (10,000) | |
Income tax penalties and interest accrued for unrecognized tax position | $ 0 | ||
State Authorities [Member] | |||
Income Taxes [Abstract] | |||
Tax year open to examination | 2019 2020 2021 | ||
Federal Authorities [Member] | |||
Income Taxes [Abstract] | |||
Tax year open to examination | 2019 2020 2021 |
FAIR VALUE OF FINANCIAL INSTR_3
FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Carrying Amount [Member] | ||
Long-term Financial Liabilities [Abstract] | ||
Long-term debt | $ 176,058 | $ 144,850 |
Estimated Fair Value [Member] | ||
Long-term Financial Liabilities [Abstract] | ||
Long-term debt | $ 153,174 | $ 163,182 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |
Jun. 30, 2021 | Sep. 30, 2021 | Sep. 30, 2022 | |
Related Party Transactions [Abstract] | |||
Stock ownership required to be disclosed, minimum | 5% | ||
Morris Nichols Arsht & Tunnell LLP [Member] | |||
Related Party Transactions [Abstract] | |||
Amount paid for legal services | $ 89,000 | $ 160,000 |
BUSINESS COMBINATIONS (Details)
BUSINESS COMBINATIONS (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | |||||
May 26, 2022 USD ($) Installment | Jan. 14, 2022 USD ($) | Sep. 30, 2022 USD ($) | Sep. 30, 2021 USD ($) | Sep. 30, 2022 USD ($) | Sep. 30, 2021 USD ($) | Dec. 31, 2021 USD ($) | |
Business Combinations [Abstract] | |||||||
Consideration transferred | $ 6,341 | $ 0 | |||||
Amount of purchase price paid | 6,621 | 0 | |||||
Revenue from acquisition | $ 26,582 | $ 24,919 | 73,780 | 68,032 | |||
Remaining purchase price | 1,569 | 0 | 1,569 | 0 | |||
Preliminary purchase price allocation [Abstract] | |||||||
Utility plant | 34,234 | 0 | 34,234 | 0 | |||
Cash | 280 | 0 | 280 | 0 | |||
Goodwill | 2,983 | 0 | 2,983 | 0 | $ 0 | ||
Other assets | 1,033 | 0 | 1,033 | 0 | |||
Total assets | 38,530 | 0 | 38,530 | 0 | |||
Less: Liabilities and contributions in aid of construction (CIAC) [Abstract] | |||||||
Liabilities | 3,852 | 0 | 3,852 | 0 | |||
CIAC | 26,488 | $ 0 | 26,488 | $ 0 | |||
Utility Plant [Member] | |||||||
Less: Liabilities and contributions in aid of construction (CIAC) [Abstract] | |||||||
CIAC | $ 3,800 | ||||||
Net cash paid for acquisitions | 8,900 | ||||||
Tidewater Environmental Services Inc [Member] | |||||||
Business Combinations [Abstract] | |||||||
Consideration transferred | $ 6,400 | ||||||
Note forgiven | 2,100 | ||||||
Amount of purchase price paid | $ 3,100 | ||||||
Revenue from acquisition | 800 | 2,200 | |||||
Pro forma revenue | 800 | 2,200 | |||||
Preliminary purchase price allocation [Abstract] | |||||||
Utility plant | 25,354 | 25,354 | |||||
Cash | 280 | 280 | |||||
Goodwill | 2,983 | 2,983 | |||||
Other assets | 1,033 | 1,033 | |||||
Total assets | 29,650 | 29,650 | |||||
Less: Liabilities and contributions in aid of construction (CIAC) [Abstract] | |||||||
Liabilities | 3,852 | 3,852 | |||||
CIAC | 22,676 | 22,676 | |||||
Net cash paid for acquisitions | $ 3,122 | 3,122 | |||||
Clayton [Member] | |||||||
Business Combinations [Abstract] | |||||||
Amount of purchase price paid | 3,400 | ||||||
Remaining purchase price | $ 1,600 | ||||||
Number of installments | Installment | 5 | ||||||
Interest rate | 2% | ||||||
Estimated annual revenue from customers acquired | $ 500 | ||||||
Less: Liabilities and contributions in aid of construction (CIAC) [Abstract] | |||||||
Net cash paid for acquisitions | $ 5,000 |
GEOGRAPHIC CONCENTRATION OF C_2
GEOGRAPHIC CONCENTRATION OF CUSTOMERS (Details) | 9 Months Ended |
Sep. 30, 2022 County Customer | |
Concentration Risks [Abstract] | |
Number of counties in which water utility service provided | County | 3 |
Large Industrial Customer [Member] | |
Concentration Risks [Abstract] | |
Number of customers | 1 |
Artesian Water [Member] | |
Concentration Risks [Abstract] | |
Number of customers | 94,400 |
Artesian Water Maryland [Member] | |
Concentration Risks [Abstract] | |
Number of customers | 2,600 |
Artesian Water Pennsylvania [Member] | |
Concentration Risks [Abstract] | |
Number of customers | 40 |
Artesian Wastewater [Member] | |
Concentration Risks [Abstract] | |
Number of customers | 7,400 |