For the year ended December 31, (in millions except per share amounts)
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
Operating
Revenue
$ 108.00
$ 98.86
$ 98.90
$ 90.86
$ 88.14
$ 83.60
$ 80.41
$ 82.24
$ 79.09
$ 77.02
Operating
Expenses
81.80
76.42
75.00
68.57
65.85
63.67
61.46
62.64
60.27
59.44
Operating
Income
26.15
22.45
23.91
22.29
22.30
19.93
18.96
19.60
18.82
17.58
Net Income
20.40
16.70
18.00
16.83
16.82
14.93
14.28
13.98
12.95
11.31
Net Income Per Common
Share - Diluted
1.98
1.67
1.90
1.79
1.79
1.60
1.54
1.51
1.41
1.26
Cash Dividend
Per Common Share
1.18
1.14
1.09
1.05
1.01
0.98
0.95
0.93
0.90
0.87
Rate Base
$398.29
$399.60
$357.00
$331.60
$315.71
$267.55
$258.56
$249.00
$240.39
$233.46
F I N A N C I A L
H I G H L I G H T S
1 0 Y E A R S U M M A R Y
T A B L E
O F
C O N T E N T S
2
Financial Highlights
Page
2
Company Overview
Page
3
Water Service Facts
Page
4
Letter to Our Shareholders
Page
4
Dian C. Taylor
Page
7
Meadowview Tank Raising
Page
8
Sussex Regional Recharge
Facility Construction
Page
8
Christina River
Watershed Cleanup
Page
9
Nicki Taylor Honored
Page
9
Lead and Cooper Rule
Page
9
Officers & Directors
Page 10
Investor Information
Page 11
Subsidiaries
Page 12
Financial Data
10-K
The genesis of Artesian Water Company
dates to 1905, when Aaron K. Taylor
began to supply a new housing develop-
ment in New Castle County, Delaware,
with water that ran directly into homes.
From small beginnings as a local water
company, Artesian has grown into a
flourishing total water resource manage-
ment company. It is now the largest
regulated publicly traded water utility on
the Delmarva Peninsula.
Having expanded our territory since 1905,
we now provide water and wastewater
solutions to the entire state of Delaware
and water solutions to nearby Cecil
County, Maryland and Pennsylvania.
We engage in a wide variety of endeavors
from identifying new sources of supply
and developing wells, treatment plants
and delivery systems, to planning, building
and managing responsible wastewater
collection, treatment and disposal systems.
In addition, we serve our customers
and communities through our employeesʼ
involvement with many charities and civic
organizations throughout our service area.
We are dedicated to our mission of
providing our customers with the very
best service possible.
C O M P A N Y
O V E R V I E W
For more information or to
learn more about Artesian
Resources Corporation,
visit us on line:
artesianresources.com
3
T O
O U R
S H A R E H O L D E R S
As reported earlier this year, our Board of
Directors appointed me to serve as Chair,
CEO and President of the Company, and
Dian Taylor retired as CEO and President.
She remains active as a member of the
Board of Directors. I am deeply honored,
and am committed to continuing the Com-
panyʼs success in serving our customers
and shareholders.
The Company has grown and flourished
by increasing the number of both its water
and its wastewater customers served;
delivering a reliable supply of high-quality
water to its customers, and by taking an
environmentally sound approach to
wastewater treatment and disposal.
In the 120 years since the
founding of our company, we
have consistently focused
on growth, resilient utility
services for our customers
and a fair rate of return to
our Shareholders.
W a t e r
S e r v i c e
F a c t s
Population served ..... approximately 301,000
Metered customers .......................100,100
Annual water produced ...
9.5 billion gallons
Miles of main ................................... 1,491
Active wells ........................................
220
Treatment facilities ..............................
71
Storage capacity ..........
178 million gallons
Average cost per day
for residential water service .........
$1.79
4
Nicholle R. Taylor
Chair, President
and CEO
2015
2016
2017
2018
2019
2020
$18.00
$11.31
$12.95
$13.98
$14.28
$14.93
$16.82
2021
$16.83
Net Income (in millions)
2022
2023
$16.70
$20.39
2024
I am pleased to report strong financial
results for 2024 and two dividend increases
totaling 4.0% for the year. That increase
maintains our record of consistent dividend
growth for our shareholders.
Our net income in 2024 increased $3.7
million, or 22.1%, from 2023. This improve-
ment resulted from an increase in total
operating revenues of $9.1 million, or 9.2%,
while controlling operating expenses. We
recorded $108.0 million in total operating
revenues for 2024, with water sales rev-
enues increasing $8.0 million, or 10.1%,
to $88.1 million. Our wastewater utility
operations also continued to show positive
growth during 2024, with revenue increasing
$0.9 million, or 7.7%, by year-end.
In April of 2023, Artesian filed for a water
rate increase with the Delaware Public
Service Commission. We were able to settle
the rate case with the Commission, obtain-
ing a $11.2 million, or 15.2%, annual rev-
enue increase. The approved rates allowed
us to recover significant investments in utility
plant, such as for treatment for per- and
polyfluoroalkyl substances (PFAS) and to
replace aging water mains. Additionally,
these rates addressed increased costs of
power and chemicals for water treatment
and higher costs of fuel, taxes, labor
and benefits.
2022
2015
2016
2017
2018
2019
2020
$98.90
$77.02
$79.09
$83.60
$88.14
$80.41
$82.24
$90.86
2021
Operating Revenue (in millions)
2023
$98.86
$107.95
2024
2015
2016
2017
2018
2019
2020
$0.89
$0.91
$0.94
$0.97
$1.00
$1.03
$1.07
2021
$1.11
2022
2023
$1.16
$1.21
2024
Annualized Dividend Per Common Share
(at December 31)
5
2022
2023
2015
2016
2017
2018
2019
2020
$5.01
$5.63
$3.37
$3.60
$4.18
$4.38
$3.99
$3.86
2021
$4.59
Service Line Protection Plan Revenue
(in millions)
$5.82
2024
Last December, we gave notice of our
intent to file a new Delaware water rate
case. Since our last filing, we have added
three additional PFAS treatment facilities
for continued and future compliance with
the upcoming EPA regulations. This
rate case will also address the continued
increasing costs for electricity, water-
quality-treatment filter media and general
continued inflationary pressures.
In 2024, we completed six water main
replacement projects to further improve
distribution resiliency. In addition, we began
a major project to relocate and improve a
2-mile-long pipeline. The impetus for this
was a road upgrade by the Delaware De-
partment of Transportation along heavily
traveled U.S. 40 in New Castle County.
Since this corridor contains a significant
amount of older water pipe in a variety of
sizes, the road improvement project offered
an excellent opportunity to replace aging
mains with new, more reliable pipelines and
to make needed hydraulic improvements.
By proactively relocating and upgrading
the pipelines, we can enhance system per-
formance, improve reliability and reduce or
eliminate costly restoration efforts, all while
supporting critical state infrastructure
improvements in the region.
2015
2016
2017
2018
2019
2020
$1.26
$1.41
$1.51
$1.54
$1.60
$1.79
2021
$1.79
Earnings Per Common Share
2022
$1.90
2023
$1.67
$1.98
2024
$899.45
$510.36
$535.19
$667.31
$707.03
$624.79
$577.45
2022
2023
2015
2016
2017
2018
2019
2020
2021
$749.82
Utility Plant at Cost (in millions)
$840.98
(at December 31)
$939.44
2024
6
To detect leaks earlier and thus reduce lost
water, Artesian has implemented a new
leak detection program. We are utilizing
sensors that incorporate acoustic technol-
ogy and real-time data analytics to monitor
the flow of water to help locate leaks before
they inevitably become more severe and
costly to repair. Leak detection is an
ongoing challenge for water utilities, as
undetected leaks can lead to significant
water loss, higher operational costs and
damage to infrastructure.
Looking ahead, I am confident that our
highly experienced management team and
dedicated employees will deliver positive
results as we continue to grow. Our cus-
tomers have come to expect superior
service, which we strive to achieve every
day, and our shareholders deserve a fair
rate of return on their investment. These
objectives will remain at the forefront of
what we do every day.
On behalf of our Board of Directors,
I would like to express our sincere appreci-
ation for your investment and confidence
in our company.
Nicki Taylor
Chair, President and CEO
7
Dian C. Taylor
Former Chair,
President
and CEO
Dian C. Taylor
has retired after 33
years at the helm of
Artesian Resources
Corporation and
subsidiaries.
The Company was founded in 1905 by her
great-grandfather in northern New Castle
County, Delaware. During Dianʼs tenure,
Artesian became a statewide water and waste-
water utility which then extended its territory
into nearby Cecil County, Maryland.
Her many accomplishments over the years
include more than doubling the number of
people served and expanding service from
only serving customers in northern New Castle
County to across the entire State of Delaware
and into Cecil County. Water sales revenue
significantly increased over the same period
from $16.5 million in 1991 to $88.1 million
in 2024.
Seeing the rapid expansion of development
in Sussex County, Dian saw an opportunity to
branch out from the water business and offer
wastewater services to customers in that area
of the state. This became a reality in 2005,
and since that time Artesian has become a
leading provider of wastewater service
in Sussex County.
Under Dianʼs leadership, Artesian has grown
into a total water resource management
company, providing water and wastewater
solutions throughout the Delmarva Peninsula.
It was through her vision and foresight that
Artesian flourished and is now widely known
as a company that provides superior service to
its customers, respects the environment and is
highly regarded in the water utility business.
Meadowview Tank Raising
Artesian raised the Meadowview
water tank 30 feet, increasing its
storage volume. The tank is located
in Cecil County, Maryland. Its new
storage volume capacity approximates
Artesianʼs internal goal for resiliency,
having storage equal to one day of
water demand on the system it serves.
Raising the tank strengthens our ability
to meet fire-related flow and other
emergency demands. It also enables
us to maintain desired system pres-
sures in anticipation of continued
growth in the service area. We plan to
finish repainting the tank in time for it
to return to service by early summer.
Sussex Regional Recharge
Facility Construction
Our Sussex Regional Recharge Facility,
near Milton, Delaware, received its construc-
tion permit from the Delaware Department
of Natural Resources and Environmental
Control in April 2024. This permit allowed
Artesian to begin building the main facility
that will receive and treat up to 625,000
gallons per day of wastewater prior to dis-
posal. Construction began this past summer,
and the treatment plant, headworks and
equalization lagoon should be completed by
the third quarter of 2025. The treated
effluent will be discharged to the existing
90-million-gallon lagoon from which it will
be pumped for disposal on multiple fields
through spray irrigation equipment
that Artesian owns and operates.
Once the facility is completed, this will
bring additional treatment capacity and
economies of scale to meet the growing
demand for wastewater treatment in
Sussex County, Delaware.
8
Christina River
Watershed Cleanup
Part of Artesianʼs mission has always been
preserving the environment. As a founding
member of the Annual Christina River Water-
shed Cleanup, we have taken great pride in
having our employees join other volunteers for
this yearly environmental initiative. Since the
cleanup began in 1992, participants have
removed over 400 tons of man-made debris
from the Christina River, White Clay Creek,
Red Clay Creek and various other tributaries.
Our commitment to protecting the environ-
ment is fundamental and ongoing.
Lead and Copper Rule
The Lead and Copper Rule (LCR),
a regulation issued by the U.S. Environ-
mental Protection Agency (EPA) in 1991,
requires water systems to control the lev-
els of lead and copper in drinking water.
The LCR is a cornerstone of public health
protection. In October 2024, the EPA
updated the regulation, issuing the new
Lead and Copper Rule Revisions (LCRR).
Thanks to the hard work of our employ-
ees, the Company has successfully com-
pleted the LCRR-required initial inventory
that tracks the materials in our service
lines for all of our customers. We have
also successfully reduced the number of
service lines requiring further investiga-
tion, proactively ruling out the potential
presence of lead on the customer side of
the service, to below 10%. Reaching this
level is an extraordinary achievement.
Nicki Taylor
Honored by
the National
Association
of Water
Companies
The National Association of Water
Companies celebrates Womenʼs History
Month each year by honoring those
women in the water utility business who
have made an impact on the industry.
The Association bestowed this honor
on Nicki Taylor in March 2024.
9
Nicholle R. Taylor
President & Chief Executive Officer
Artesian Resources Corporation
David B. Spacht
Chief Financial Officer
Artesian Resources Corporation & Subsidiaries
President, Artesian Wastewater Management, Inc.
Joseph A. DiNunzio, CPA, CGMA
Executive Vice President and
Corporate Secretary
Artesian Resources Corporation & Subsidiaries
President, Artesian Water Maryland, Inc.
Jennifer L. Finch, CPA
Corporate Treasurer and
Senior Vice President of Finance
Artesian Resources Corporation & Subsidiaries
Courtney A. Emerson, Esq.
General Counsel and Assistant Secretary
Artesian Resources Corporation & Subsidiaries
Pierre A. Anderson
Chief Information Officer and
Senior Vice President
Artesian Resources Corporation & Subsidiaries
John M. Thaeder
Senior Vice President
Artesian Resources Corporation & Subsidiaries
Raymond T. Kelly, CPA
Vice President of Information Technology
Artesian Resources Corporation & Subsidiaries
Daniel W. Konstanski, P.E., BCEE
Vice President of Engineering
Artesian Resources Corporation & Subsidiaries
Nicholle R. Taylor
Chair of the Board, President &
Chief Executive Officer
Artesian Resources Corporation
Dian C. Taylor
Former President & Chief Executive Officer
Artesian Resources Corporation
Kenneth R. Biederman, Ph.D.
Professor (Ret.), Department of Finance
Lerner College of Business and Economics,
University of Delaware
John R. Eisenbrey, Jr.
Owner & President
Bear Industries, Inc.
Michael Houghton, Esq.
Retired Partner
Morris, Nichols, Arsht & Tunnell LLP
O F F I C E R S
D I R E C T O R S
10
Kenneth R. Biederman
Director
Dr. Kenneth R. Biederman will
retire from the Board of Directors
of Artesian Resources Corporation
following the Annual Shareholdersʼ
meeting on May 6, 2025.
Dr. Biederman has been a Director of the Corporation
since 1991. He served on the Boardʼs Audit, Budget and
Finance, Governance and Nominating, and Compensa-
tion Committees. His past experiences serving as
Treasurer of the State of New Jersey and Dean of the
Alfred Lerner College of Business and Economics at the
University of Delaware made him a valuable asset in
assisting the Corporation with its fiscal responsibilities.
His business acumen served the Board well.
The Management Team would like to extend their gratitude
to Dr. Biederman for his service to Artesian Resources
Corporation and wish him well in his retirement.
Shareholder Inquiries
Shareholder inquiries regarding Class A
Non-Voting Common Stock and Class B
Common Stock accounts, including transfer
requirements, lost certificates and dividend
payments, should be directed to:
Computershare Investor Services
P.O. Box 43078
Providence, RI 02940-3078
800.368.5948
Private Couriers/Registered Mail:
Computershare Investor Services
150 Royall Street, Suite 101
Canton, MA 02021
computershare.com/investor
Shareholder inquiries and requests for
investment materials, should be directed to:
Laura Slayman
Executive Assistant Investor Relations
Artesian Resources Corporation
P.O. Box 15004
Wilmington, DE 19850
302.453.6900
800.332.5114
lslayman@artesianwater.com
Dividend Reinvestment
and Stock Purchase Plan
The holders of record of the Companyʼs
Class A Non-Voting Common Stock are
eligible to participate in the Dividend
Reinvestment Plan. The plan provides for
the direct purchase of Class A Non-Voting
Common Stock through reinvestment of
dividends and/or optional cash payments.
To obtain a copy of the plan prospectus,
contact either Computershare or
Artesian directly.
Projected 2025 Dividend Dates
(Subject to the approval of the Artesian Resources
Corporation Board of Directors)
Quarter
Record Date
Payment Date
1st
February 7, 2025
February 21, 2025
2nd
May 16, 2025
May 27, 2025
3rd
August 15, 2025
August 25, 2025
4th
November 14, 2025
November 24, 2025
CAUTIONARY NOTE ON
FORWARD-LOOKING STATEMENTS
All statements other than historical facts
are forward-looking and actual results may
differ materially from those projected,
anticipated or implied. Please refer to
“Item 1A-Risk Factors” of the Company's
Annual Report on Form 10-K for the
year ended December 31, 2024, for a
description of the substantial risks and
uncertainties related to the forward looking
statements included in this Annual Report.
Past performance of Artesian’s Common
Stock is not predictive of future returns.
I N V E S T O R
I N F O R M A T I O N
11
Artesian Resources Corporation operates as the holding company of our wholly-owned subsidiaries.
Artesian Water Company, Inc. is our principal subsidiary. It is the oldest and largest
regulated public utility on the Delmarva Peninsula and has been providing water service since
1905. Artesian distributes and sells water to residential, commercial, industrial,governmental
and utility customers throughout Delaware. It also provides private and municipal utilities with
billing services and operational management services.
Artesian Wastewater Management, Inc. is a regulated public utility that owns and operates waste-
water facilities and provides public wastewater services to customers in Sussex County, Delaware.
Tidewater Environmental Services, Inc. d/b/a/ Artesian Wastewater, a subsidiary of
Artesian Wastewater Management, Inc., is a regulated utility that owns and operates wastewater
facilities and provides public wastewater services to customers in Sussex County, Delaware.
Artesian Water Maryland, Inc. is a regulated public utility providing services to customers
in Cecil County, Maryland. Artesian Water Maryland is an important part of our strategy to be the
preeminent provider of public water utility services on the Delmarva Peninsula.
Artesian Water Pennsylvania, Inc. is a regulated public utility providing services to customers
in southeastern Pennsylvania.
Artesian Utility Development, Inc. is a non-regulated operating company that designs and builds
water and wastewater infrastructure and provides contract water and wastewater services on the
Delmarva Peninsula. In addition, Artesian Utility offers three protection plans; the Water Service Line
Protection Plan, the Sewer Service Line Protection Plan and the Internal Service Line Protection Plan.
Artesian Development Corporation is the non-regulated real estate holding company
of Artesian Resources.
ARTESIAN RESOURCES CORPORATION & SUBSIDIARIES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
The fOR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 000-18516
ARTESIAN RESOURCES CORPORATION
--------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
51-0002090
--------------------------------------------------------------------
-------------------------------------------------
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
664 Churchmans Road, Newark, Delaware 19702
------------------------------------------------------------------
Address of principal executive offices
(302) 453 – 6900
-----------------------------------------------------------
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol (s)
Name of each exchange on which registered
Common Stock
ARTNA
The Nasdaq Stock Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
☑Yes
☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files).
☑Yes
☐ No
1
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting
company," and “emerging growth company” in Rule 12(b)-2 of the Exchange Act.
Large Accelerated Filer ☐
Accelerated Filer ☐
Non-Accelerated Filer ☑
Smaller Reporting Company ☑
Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial report under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
The aggregate market value of the Class A Non-Voting Common Stock and Class B Common Stock held by non-affiliates of the
registrant at June 30, 2024 was $318,891,604 and $9,072,662, respectively. The aggregate market value of Class A Non-Voting
Common Stock was computed by reference to the closing price of such class as reported on the Nasdaq Global Select Market on June
30, 2024, which trade date was June 30, 2024. The aggregate market value of Class B Common Stock was computed by reference to
the last reported trade of such class as reported on the OTC Bulletin Board as of June 30, 2024, which trade date was June 26, 2024.
As of March 21, 2025, 9,421,542 shares of Class A Non-Voting Common Stock and 881,452 shares of Class B Common Stock were
outstanding.
2
ARTESIAN RESOURCES CORPORATION
TABLE OF CONTENTS
FORWARD LOOKING STATEMENTS
PART I
Item 1. – Business
Item 1A. – Risk Factors
Item 1B. – Unresolved Staff Comments
Item 1C. - Cybersecurity
Item 2. – Properties
Item 3. – Legal Proceedings
Item 4. – Mine Safety Disclosures
PART II
Item 5. – Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Item 6. – [Reserved]
Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. – Quantitative and Qualitative Disclosure About Market Risk
Item 8. – Financial Statements and Supplementary Data
Item 9. – Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. – Controls and Procedures
Item 9B. – Other Information
Item 9C - Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10. – Directors, Executive Officers and Corporate Governance
Item 11. – Executive Compensation
Item 12. – Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. – Certain Relationships and Related Transactions, and Director Independence
Item 14. – Principal Accountant Fees and Services
PART IV
Item 15. – Exhibits and Financial Statement Schedules
Item 16. – Form 10-K Summary
Signatures
3
FORWARD-LOOKING STATEMENTS
Statements in this Annual Report on Form 10-K that express our "belief," "anticipation" or "expectation," as well as other statements that are
not historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Securities
Exchange Act of 1934, as amended, or the Exchange Act and the Private Securities Litigation Reform Act of 1995 and involve risks and
uncertainties that could cause actual results to differ materially from those projected. Words such as "expects", "anticipates", "intends", "plans",
"believes", "seeks", "estimates", "projects", "forecasts", "may", "should", variations of such words and similar expressions are intended to
identify such forward-looking statements. They include, but are not limited to, the statements below:
−
general economic, employment and business conditions, including with respect to the potential impact of inflation, tariffs, trade
wars and/or recession;
−
material costs and availability;
−
consumer and producer price inflation;
−
the impact of recent acquisitions on our ability to expand and foster relationships;
−
strategic plans for goals, priorities, growth and expansion;
−
expectations for our water and wastewater subsidiaries and non-utility subsidiaries;
−
customer base growth opportunities in Delaware and Cecil County, Maryland;
−
our belief regarding the timing and results of our rate requests;
−
our belief regarding our capacity to provide water services for the foreseeable future to our customers;
−
our belief relating to our compliance and the cost to achieve compliance with relevant governmental regulations, including per- and
polyfluoroalkyl substances (“PFAS”) regulations and the Lead and Copper Rule Improvements;
−
our expectation of the timing of decisions by regulatory authorities;
−
our belief regarding the success of any future rate increase request;
−
the impact of weather and climate change on our operations;
−
the execution of our strategic initiatives;
−
regulatory delays or uncertainty;
−
our expectation regarding the timing for construction on new projects;
−
our expectation relating to the adoption of recent accounting pronouncements;
−
contract operations opportunities;
−
legal proceedings;
−
our properties;
−
deferred tax assets;
−
the adequacy of our available sources of financing;
−
the expected recovery of expenses related to our long-term debt;
−
our expectation to be in compliance with financial covenants in our debt instruments;
−
our ability to refinance our debt as it comes due;
−
our ability to adjust our debt level, interest rate, maturity schedule and structure;
−
the timing and terms of renewals of our lines of credit;
−
changes in interest rates;
−
plans to increase our wastewater treatment operations, engineering services and other revenue streams less affected by weather;
−
anticipated growth in our non-utility subsidiaries;
−
anticipated investments in certain of our facilities and systems and the sources of funding for such investments;
−
sufficiency of internally generated funds and credit facilities to provide working capital and our liquidity needs; and
−
the specific and overall impacts of global pandemics on our financial condition and results of operations.
Certain factors, as discussed under Item 1A - Risk Factors, that could cause results to differ materially from those in the forward-looking
statements include, but are not limited to:
−
changes in weather and climate;
−
changes in our contractual obligations;
−
ability to sufficiently control certain operating expenses which are necessary to provide public utility services;
−
changes in government policies;
−
costs and timely availability of materials and supplies for essential infrastructure projects and operations;
−
the timing and results of our rate requests;
−
delays in or failure to receive regulatory approvals;
−
government or regulatory shutdowns or defunding;
−
cyber-attacks;
−
changes in economic and market conditions generally;
−
effectiveness of internal control over financial reporting;
−
unexpected events, restrictions and policies related to a public health crisis; and
−
other matters discussed elsewhere in this Annual Report on Form 10-K.
While the Company may elect to update forward-looking statements, we specifically disclaim any obligation to do so, except as may be required
under applicable securities laws, and you should not rely on any forward-looking statement as a representation of the Company’s views as of
any date subsequent to the date of the filing of this Annual Report on Form 10-K.
4
PART I
ITEM 1. BUSINESS
General Information
Artesian Resources Corporation, or Artesian Resources, is a Delaware corporation incorporated in 1927, that is the holding company of
seven wholly-owned subsidiaries offering water, wastewater and other services in Delaware, Maryland and Pennsylvania. The
Company’s principal executive offices are located at 664 Churchmans Road, Newark, Delaware 19702. Our principal subsidiary,
Artesian Water Company, Inc., is the oldest and largest investor-owned public water utility on the Delmarva Peninsula and has been
providing superior water service since 1905. We distribute and sell water, including water for public and private fire protection, to
residential, commercial, industrial, municipal and utility customers in the states of Delaware, Maryland and Pennsylvania. We provide
wastewater services to customers in Delaware. In addition, we provide contract water and wastewater operations, and water, sewer and
internal Service Line Protection Plans. Our Class A Non-Voting Common Stock is listed on the Nasdaq Global Select Market and trades
under the symbol “ARTNA.” Our Class B Common Stock trades on the Nasdaq’s OTC Bulletin Board under the symbol “ARTNB.”
Artesian Resources is the holding company of five regulated public utilities: Artesian Water Company, Inc., or Artesian Water, Artesian
Water Pennsylvania, Inc., or Artesian Water Pennsylvania, Artesian Water Maryland, Inc., or Artesian Water Maryland, Artesian
Wastewater Maryland, Inc., or Artesian Wastewater Maryland, and Artesian Wastewater Management, Inc., or Artesian Wastewater,
along with its wholly-owned subsidiary Tidewater Environmental Services, Inc. dba Artesian Wastewater, or TESI; and two non-utility
subsidiaries: Artesian Utility Development, Inc., or Artesian Utility, and Artesian Development Corporation, or Artesian Development.
The terms “we,” “our,” “Artesian,” and the “Company” as used herein refer to Artesian Resources and its subsidiaries. The business
activity conducted by each of our subsidiaries is discussed below under separate headings.
Our Market
Our current market area is the Delmarva Peninsula. Our largest service area is in the State of Delaware. Substantial portions of
Delaware, particularly outside of northern New Castle County, are not served by a public water or wastewater system and represent
potential opportunities for Artesian Water and Artesian Wastewater to obtain new exclusive franchised service areas. We continue to
focus resources on developing and serving existing service territories and obtaining new territories throughout Delaware.
We hold Certificates of Public Convenience and Necessity, or CPCNs, for approximately 310 square miles of exclusive water service
territory, most of which is in Delaware with some territory being in Maryland and Pennsylvania. Our largest connected regional water
system, consisting of approximately 145 square miles and 80,100 metered customers, is located in northern New Castle County and
portions of southern New Castle County, Delaware. We hold CPCNs for approximately 61 square miles of wastewater service territory
located in Sussex County, Delaware. A significant portion of our exclusive service territory is in Sussex County, Delaware and remains
undeveloped, and if and when development occurs and there is population growth in these areas, we anticipate we will increase our
customer base by providing water and/or wastewater service to the newly developed areas and new customers.
Subsidiaries
Artesian Water
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 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. Artesian Water produced approximately 81.6% of our 2024
consolidated operating revenues. In May 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. This purchase agreement is discussed
further in the “Strategic Direction and Recent Developments” section.
We derive about 92% of our self-supplied groundwater from wells that pump groundwater from aquifers and other formations located
in the Atlantic Coastal Plain. The remaining 8% of our groundwater supply comes from wells in the Piedmont Province. We use a
variety of treatment methods, including aeration, pH adjustment, chlorination, fluoridation, ultra violet oxidation, arsenic removal,
nitrate removal, radium removal, iron removal, and carbon adsorption to meet federal, state and local water quality
standards. Additionally, a corrosion inhibitor is added to our self-supplied groundwater and to supply from interconnections. We have
62 different water treatment facilities in our Delaware systems. All water supplies that we purchase from neighboring utilities are
potable.
5
To supplement our groundwater supply, we purchase treated surface water through interconnections only in the northern service area of
our New Castle County, Delaware system. The treated surface water is blended with our groundwater supply for distribution to our
customers. Nearly 95% of the overall 9.4 billion gallons of water we distributed in all of our Delaware systems during 2024 came from
our groundwater wells, while the remaining 5% came from interconnections with other utilities and municipalities. In Delaware in
2024, we pumped an average of 24.9 million gallons per day, or mgd, from our groundwater wells and obtained an average of
approximately 0.9 mgd from interconnections. Our peak water supply capacity currently is approximately 57.7 mgd. We believe that
we have in place sufficient capacity to provide water service for the foreseeable future to all existing and new customers in all of our
service territories.
Most of our New Castle County, Delaware water system is interconnected. In the remainder of the State of Delaware, we have several
satellite systems that have not yet been connected by transmission and distribution facilities. We intend to join these systems into larger
integrated regional systems through the construction of a transmission and distribution network as development continues and our
expansion efforts provide us with contiguous exclusive service territories.
In Delaware, we have 24 interconnections with three neighboring water utilities and seven municipalities that provide us with the ability
to purchase or sell water. An interconnection agreement with Chester Water Authority, which is effective from January 1, 2022 through
December 31, 2026, includes automatic five-year renewal terms, unless terminated by either party, and has a “take or pay” clause which
currently requires us to purchase a minimum of 0.5 million gallons of water per day. Artesian’s capital investments in self-sufficiency
of water supply facilitated a reduction in the minimum amount of water required to be purchased under the current contract compared
to previous contracted requirements.
As of December 31, 2024, we were serving customers through approximately 1,491 miles of transmission and distribution mains. Mains
range in diameter from two inches to twenty-four inches, and most of the mains are made of ductile iron or cast iron.
We have 36 storage tanks in Delaware, most of which are elevated, providing total system storage of approximately 45.0 million gallons.
We have developed and are using an Aquifer Storage and Recovery, or ASR, system in New Castle County, Delaware. Our ASR system
provides approximately 130.0 million gallons of storage capacity, which can be withdrawn at an average rate of approximately 1.0 mgd.
At some locations, we rely on hydro-pneumatic tanks to maintain adequate system pressures. Where possible, we combine our smaller
satellite systems with systems having elevated storage facilities.
Artesian Water Maryland
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 Water Maryland owns and operates 10 public
water systems.
The majority of the 0.1 billion gallons of water we distributed in all of our Maryland systems during 2024 came from our groundwater
wells, while a portion came from treated surface water. We have ten separate water treatment facilities in our Maryland systems. We
have one surface water treatment facility located in Cecil County, Maryland, with the current ability to treat up to 1.0 mgd from an
intake in the Susquehanna River that is permitted a withdrawal of a maximum of 5.0 mgd and a daily average of 3.5 mgd. Our total
peak water supply capacity in Cecil County, Maryland currently is approximately 2.0 mgd. We have 9 storage tanks capable of storing
approximately 2.5 million gallons. We believe that we have in place sufficient capacity to provide water service for the foreseeable
future to all existing and new customers in all of our service territories.
In Maryland, we have one interconnection with the Artesian Water system in Delaware, one interconnection with a neighboring utility,
and four interconnections with municipalities. These interconnections are capable of providing over 3.0 mgd of water to our Maryland
systems.
Artesian Water Pennsylvania
Artesian Water Pennsylvania began operations in 2002. It provides water service to a residential community in Chester County,
Pennsylvania.
Artesian Wastewater
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.
6
Artesian Wastewater owns and operates four wastewater treatment facilities, which, combined, are permitted to treat and/or dispose of
approximately 2.3 mgd. Artesian Wastewater and Sussex County, a political subdivision of Delaware, provide reciprocal services to
address the need of each for additional wastewater treatment and disposal capacity in certain service areas within Sussex
County. Artesian Wastewater also owns and operates a disposal facility that includes a 90-million-gallon storage lagoon and spray
irrigation to agricultural land. This facility provides treated process wastewater disposal services for an industrial customer at a rate up
to 1.5 mgd.
TESI
Artesian Wastewater operates as the parent holding company of 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,
including all residents within the Town of Milton, as a regulated public wastewater service company.
TESI owns and operates five wastewater treatment facilities, which, combined, are permitted to treat and/or dispose of approximately
35.2 mgd.
Artesian Wastewater Maryland
Artesian Wastewater Maryland was incorporated on June 3, 2008 and is authorized and able to provide regulated wastewater services
to customers in the State of Maryland. It is currently not providing these services.
Artesian Utility
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.
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 currently operates three wastewater
treatment systems with a combined capacity of up to approximately 3.8 mgd. The wastewater treatment facilities in Middletown provide
reclaimed wastewater for use in spray irrigation on public and agricultural lands in the area.
Artesian Utility also offers three protection plans to customers, 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 Plan or SLP Plans).
The WSLP Plan covers all parts, material and labor required to repair or replace participating customers' leaking water service lines up
to an annual limit. 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. The ISLP Plan enhances available coverage to include water and wastewater lines within
customers' residences up to an annual limit.
Artesian Development
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 office facility consists of approximately 10,000 square feet of office space along with nearly 7,000 square feet of
warehouse space.
Government Regulations
Overview
The Company is subject to federal, state and local laws and regulations in all of the jurisdictions in which it operates.
These regulations include state commission orders, environmental protection, securities and exchange activities, including financial
reporting and internal controls processes, data protection and privacy, tax compliance, health and safety, labor and employment practices,
and other general business activities.
7
State Regulatory Commission Matters
Our water and wastewater utility operations are subject to regulation by their respective state regulatory commissions, which have broad
administrative power and authority to regulate rates charged for service, determine franchise areas and conditions of service, approve
acquisitions, authorize the issuance of securities and the incurrence of indebtedness, and other matters. The profitability of our utility
operations is influenced, to a great extent, by the timeliness and adequacy of regulatory relief we are granted by the respective regulatory
commissions or authorities in the states in which we operate. See Notes to Consolidated Financial Statements – Note 13 – Regulatory
Proceedings for a full description of recent regulatory proceedings.
Service Territory Expansion
In Delaware, a CPCN grants a water or wastewater company the exclusive right to serve all existing and new customers within a
designated area. The Delaware Public Service Commission, or DEPSC, has the authority to issue and revoke these CPCNs. In this
Form 10-K, we may refer to CPCNs as "franchises" or "service territories."
For a water company, the DEPSC may grant a CPCN under circumstances where there has been a determination that the water in the
proposed service area does not meet the regulations governing drinking water standards of the Delaware Division of Public Health, or
DPH, for human consumption or where the supply is insufficient to meet the projected demand. For a wastewater company, the DEPSC
has jurisdiction over non-governmental wastewater utilities having fifty or more customers in the aggregate. A CPCN for water and
wastewater utilities shall be granted by the DEPSC to applicants in possession of one of the following:
− a signed service agreement with the developer of a proposed subdivision or development, which subdivision or development
has been duly approved by the respective county government;
− a petition requesting such service signed by a majority of the landowners of the proposed territory to be served; or
− a duly certified copy of a resolution from the governing body of a county or municipality requesting the applicant to provide
service to the proposed territory to be served.
A water or wastewater utility that has a CPCN must obtain the approval of the DEPSC to abandon a service territory. Once a CPCN is
granted to a water or wastewater utility, it may not be suspended or terminated unless the DEPSC determines in accordance with its
rules and regulations that good cause exists for any such suspension or termination. Although we have been granted an exclusive
franchise for each of our existing water and wastewater systems in Delaware, our ability to expand service areas can be affected by the
DEPSC awarding franchises to other regulated water or wastewater utilities with whom we compete for such franchises.
In Maryland, the Company must obtain approval from the appropriate local government authority for the ability to serve a particular
area and also ensure that the acquired area is in the county’s master water and sewer plan. The authority to exercise a franchise must
then be obtained from the Maryland Public Service Commission, or MDPSC. Utilities that seek to develop a franchise by constructing
new facilities must obtain appropriate approvals from the Maryland Department of the Environment, or MDE, the local government and
the MDPSC. The utility must also obtain approval for soil and erosion plans and easement agreements from appropriate parties.
Environmental Regulation
The United States Environmental Protection Agency, or the EPA, the Delaware Department of Natural Resources and Environmental
Control, or DNREC, and DPH, regulate the water quality of our treatment and distribution systems in Delaware, as do the EPA and the
MDE, with respect to our operations in Maryland. The Chester Water Authority, which supplies water to Artesian Water through an
interconnection in northern New Castle County, and Artesian Water Pennsylvania, which also supplies water to Artesian Water, are
regulated by the Pennsylvania Department of Environmental Protection, or PADEP, as well as the EPA. We believe that we are in
material compliance with all current federal, state and local water quality standards, including regulations under the federal Safe
Drinking Water Act. However, if new water quality regulations are too costly, or if we fail to comply with such regulations, it could
have a material adverse effect on our financial condition, results of operations and planned capital investments.
The water industry is capital intensive, with one of the highest levels of capital investment in plant and equipment per dollar of revenue
among all utilities. Increasingly stringent drinking water regulations adopted to meet the requirements of the Safe Drinking Water Act
have required the water industry to invest in more advanced treatment systems and processes, which require a heightened level of
expertise. We have made significant enhancements to existing facilities to effectively treat and remove compounds as required by
government agencies, such as ultra violet oxidation treatment, ceramic membrane filtration and carbon filtration. We are currently in
full compliance with the requirements of the Safe Drinking Water Act. Even though our water utility was founded in 1905, the majority
of our investment in infrastructure occurred in the last 40 years.
8
As required by the Safe Drinking Water Act, the EPA establishes maximum contaminant levels, or MCLs, for various substances found
in drinking water to ensure that the water is safe for human consumption. On April 10, 2024, the EPA established MCLs for certain
per- and polyfluoroalkyl substances, or PFAS, in drinking water. Under these regulations, water utilities will be required to complete
initial monitoring for PFAS by 2027 and to conduct ongoing compliance monitoring. Water utilities also will be required to meet the
new MCLs by April 2029 and to notify the public of any violations of the MCLs as of and after that date. The Company has installed
treatment for PFAS at several wellfields to date and has included installation of treatment at additional locations in 2025 in its capital
budget, with any remaining necessary treatment planned to be installed before 2029. The capital investment and operating costs for
treatment of PFAS are anticipated to be recoverable in water rates charged to customers as approved by the applicable public service
commission. The Company is participating in the multi-district litigation class action settlements with certain manufacturers of PFAS
seeking reimbursement of costs incurred and that will continue to be incurred. See Note 16 – Legal Proceedings.
The Lead and Copper Rule, or LCR, is a federal regulation that limits the concentration of lead and copper allowed in public drinking
water at the consumer's tap, in addition to limiting the permissible amount of pipe corrosion occurring due to the water itself. The LCR
limits the levels of lead and copper in water by improving water treatment, testing for lead and copper at customer taps, and eliminating
the water supply as a significant source of lead and copper. The EPA published a revised LCR in 2021, or LCR Revisions, to provide
greater and more effective protection of public health by reducing exposure to lead and copper in drinking water. Implementation of
the revised rule is intended to better identify high levels of lead, improve the reliability of lead tap sampling results, strengthen corrosion
control treatment requirements, expand consumer awareness and improve risk communication. In addition, implementation of the
revised rule is anticipated to accelerate lead service line replacements by closing existing regulatory loopholes, propelling early action,
and strengthening replacement requirements. We filed all required Lead Service Line Inventories by the October 16, 2024 deadline and
are fully compliant with the LCR Revisions.
On October 8, 2024, the EPA announced the new final regulations requiring the removal of lead water lines. The EPA’s rule, known as
the Lead and Copper Rule Improvements, or LCRI, requires all public water systems to remove lead service lines within 10 years,
among other changes to regulations in the EPA’s LCR. The service lines connect a home’s plumbing system to a public water system’s
main water line. The LCRI specifies that the water provider will cover the cost for replacements of the customer’s service line up to the
first fitting inside the structure being served. Capital investment and operating costs incurred by water utilities for customer-side pipe
replacements are typically recoverable in water rates charged to customers as approved by the applicable public service commission.
The DPH has set maximum contaminant levels for certain substances that are more restrictive than the maximum contaminant levels set
by the EPA. The DPH is the EPA's agent for enforcing the Safe Drinking Water Act in Delaware and, in that capacity, monitors the
activities of Artesian Water and reviews the results of water quality tests performed by Artesian Water for adherence to applicable
regulations. Artesian Water is also subject to other laws regulating substances and contaminants in water, including rules for volatile
organic compounds and the Total Coliform Rule.
A normal by-product of our iron removal treatment facilities is a solid consisting of the iron removed from untreated groundwater plus
residue from chemicals used in the treatment process. The solids produced at our facilities are either disposed directly into approved
wastewater facilities or removed from our facilities by a licensed third-party vendor. A normal by-product of our carbon adsorption
filtration process is exhausted carbon media, which is disposed of by the contractor providing the media replacement. Management
believes that the costs of compliance with existing federal, state and local laws and regulations regulating the discharge of materials into
the environment, or otherwise relating to the protection of the environment, has had no material adverse effect upon the business and
affairs of the Company, but there is no assurance that such compliance costs will continue to not have a material effect in the future.
Under Delaware state laws and regulations, we are required to file applications with DNREC for water allocation permits for each of
our operating wells pumping greater than 50,000 gallons per day. For any wells in the Delaware River Basin, we must also file allocation
permits with the Delaware River Basin Commission, or DRBC. We have 144 operating and 62 observation and monitoring wells in our
Delaware systems. At December 31, 2024, we had allocation permits for 116 wells and had 25 wells that did not require a permit.
Our access to aquifers within our service territory is not exclusive. Water allocation permits control the amount of water that can be
drawn from water resources and are granted with specific restrictions on water level draw down limits, annual, monthly and daily
pumpage limits, and well field allocation pumpage limits. We are also subject to water allocation regulations that control the amount
of water that we can draw from water sources. As a result, if new or more restrictive water allocation regulations are imposed, they
could have an adverse effect on our ability to supply the demands of our customers, and in turn, our water supply revenues and results
of operations. Our ability to supply the demands of our customers historically has not been affected by private usage of the aquifers by
landowners or the limits imposed by the State of Delaware. Because of the extensive regulatory requirements relating to the withdrawal
of any significant amounts of water from the aquifers, we believe that third-party usage of the aquifers within our service territory will
not interfere with our ability to meet the present and future demands of our customers.
The MDE ensures that water quality and quantity at all public water systems in Maryland meet the needs of the public and are in
compliance with federal and state regulations. The MDE also ensures that public drinking water systems provide safe and adequate
water to all current and future users in Maryland and that appropriate usage, planning, and conservation policies are implemented for
9
Maryland’s water resources. The MDE oversees the development of Source Water Assessments for water supplies and issues water
appropriation permits for public drinking water systems. In order to appropriate water for municipal, commercial, industrial or other
non-domestic uses, a Water Appropriation Permit must be obtained. Issuance of the permit involves evaluating the needs of the user
and the potential impact of the withdrawal on neighboring users and the water source in order to maximize beneficial use of the
water. Permits for large appropriations often involve conducting pump tests to measure adequacy of an aquifer and safe yield of a well,
or reviewing stream flow records to determine the adequacy of a surface water source. Regulations require all new community water
systems to have sufficient technical, managerial and financial capacity to provide safe drinking water to their consumers prior to being
issued a construction permit. Also, capacity management guidance contains capacity limiting factors that can include source capacity,
treatment capacity and appropriation permit quantity. The quantity of water withdrawn from the Port Deposit surface water intake is
allocated by the Susquehanna River Basin Commission, or SRBC, and the MDE. We have 14 operating wells and one surface water in-
take in our Maryland systems.
The PADEP administers and oversees departmental programs involving surface and groundwater quantity and quality planning and
water conservation in Pennsylvania. The office also coordinates policies, procedures, and regulations which influence public water
supply withdrawals and quality. The DRBC administers and oversees programs involving water quality protection, water supply
allocation, water conservation initiatives and watershed planning, regulatory review and permitting, and drought management in
Pennsylvania. We have one operating well in Pennsylvania within the DRBC’s jurisdiction. This well is treated by a water treatment
plant located in Delaware.
The Clean Water Act has established the foundation for wastewater discharge control in the United States. The Clean Water Act
established a control program for ensuring that communities have clean water by regulating the release of contaminants into
waterways. Permits that limit the amounts of pollutants discharged are required for all wastewater dischargers under the National
Pollutant Discharge Elimination System, or the NPDES, permit program. In accordance with the NPDES permit program, the
implementing states set maximum discharge limits for wastewater effluents and overflows from wastewater collection systems.
Discharges that exceed the limits specified under the NPDES permit program can lead to the imposition of penalties. The Clean Water
Act also requires that wastewater treatment plant discharges meet a minimum of secondary treatment. The secondary treatment process
can remove 90% to 99% of the organic matter in wastewater. Our removal efficiency is generally 96% to 98%.
Under Delaware state laws and regulations, we are required to hold a permit from DNREC for the construction, operation, maintenance
or repair of any on-site wastewater treatment and disposal systems with daily design flow rates of 2,500 gallons or greater. A
classification on the facility is performed in accordance with Regulations Licensing Operators of Wastewater Facilities. The class of
operator required for the facility is determined by the Board of Certification for Licensed Wastewater Operations in accordance with
Regulations Licensing Operators of Wastewater Facilities. We work to ensure that we operate environmentally friendly wastewater
systems that meet federal, state and local laws.
In March 2024, the SEC passed rule changes that will require registrants to provide certain climate-related information in their
registration statements and annual reports. The new rules enhance and standardize climate-related disclosures in an effort to provide
investors with more consistent, comparable and reliable information about the impact of climate-related risks on registrants. The rules
require disclosure of greenhouse gas (GHG) emissions in annual reports and registration statements. Additionally, all registrants would
be required to provide numerous climate-related disclosures within their financial statements and elsewhere in their filings. The new
rules apply to companies on a phased-in basis, with the first compliance deadline for large accelerated filers required for fiscal year 2025
annual reports filed in 2026. The next compliance deadline for accelerated filers is required for fiscal year 2026 annual reports filed in
2027. Also in March 2024, the U.S. Fifth Circuit Court of Appeals granted a temporary stay of the rules pending judicial review, in
response to a petition arguing, among other things, that the rules would cause irreparable harm and exceed the SEC's authority. The
Company is currently evaluating the impact of the rule changes.
Additional General Information
Seasonality
Substantially all of our water customers are metered, which allows us to measure and bill for our customers’ water consumption.
Demand for water during the warmer months is generally greater than during cooler months primarily due to additional customer
requirements for water in connection with cooling systems, swimming pools, irrigation systems and other outside water use. Throughout
the year, and particularly during typically warmer months, demand for water will vary with temperature and rainfall. In the event that
temperatures during the typically warmer months are cooler than expected, or there is more rainfall than expected, the demand for water
may decrease and our revenues may be adversely affected.
10
Competition
Our business in our franchised service areas is substantially free from direct competition with other public utilities, municipalities and
other entities. However, our ability to provide additional water and wastewater services is subject to competition from other public
utilities, municipalities and other entities. Even though our regulated subsidiaries have been granted an exclusive franchise for each of
our existing community water and wastewater systems, our ability to expand service areas can be affected by the DEPSC, the MDPSC
or the Pennsylvania Public Utility Commission, or PAPUC, awarding franchises to other regulated water or wastewater utilities with
whom we compete for such franchises.
Suppliers and Independent Contractors
We are dependent upon the ability of our suppliers and independent contractors to meet performance specifications, quality standards
and delivery schedules at our anticipated costs. While we maintain an extensive qualification and performance review system to control
risk associated with such reliance on third parties, failure of suppliers or independent contractors to meet commitments could adversely
affect construction and maintenance schedules. We are also dependent on the availability of electricity and purchased water at affordable
prices. Our electric costs and purchased water costs are at a fixed price under contract.
Employees and Human Capital Resources
As of December 31, 2024, we operated with 245 full-time and 4 part-time employees. Of these employees, 55 were officers and
managers; 122 were employed as operations personnel, including engineers, technicians, draftsman, maintenance and repair persons,
meter readers and utility personnel; and 36 were employed in accounting, budgeting, information systems, human resources, customer
relations and public relations. The remaining 36 employees were administrative personnel.
The Company has no collective bargaining agreements with any of its employees, and its work force is not union organized or union
represented. We believe that our relations with our employees are good. Through ongoing employee development, competitive
compensation and benefits, and a focus on health, safety and employee wellbeing, we strive to help our employees in all aspects of their
lives.
We believe the Company’s success depends on its ability to attract, develop and retain key personnel. We provide our employees with
resources that contribute to their professional development, including technical training and performance reviews. A core principle of
our company is to promote from within and offer advancement opportunities at all levels of employment, which helps us retain talented
employees. We believe our management team has the experience, talent and dedication necessary to effectively execute our business
goals and growth strategy. We recognize that the skills, experience, diversity, industry knowledge and dedication of our employees
significantly benefit our operations and performance.
We set pay ranges based on market data. When considering compensation, we consider factors such as an employee’s role, experience,
and his or her performance. We regularly review our compensation practices, both in terms of our overall workforce and individual
employees, to ensure our compensation is fair and equitable.
Health and safety in the workplace for our employees is one of the Company’s core values. Hazards in the workplace are proactively
identified and actions are taken to maintain workplace safety. We sponsor a wellness program designed to enhance physical, financial,
and mental wellbeing for all our employees. Throughout the year, we encourage healthy behaviors through regular communications,
educational sessions and other incentives.
We use outside consultants and independent contractors on an as needed basis for various services. We rely on our independent
contractors to manage their respective employee relations so that the services they are contractually obligated to perform for us satisfy
our requirements. Management believes that through our own employees, coupled with the services provided by our independent
contractors and outside consultants, we have sufficient human capital to continue to operate our business successfully.
Available Information
We are a Delaware corporation with our principal executive offices located at 664 Churchmans Road, Newark, Delaware, 19702. Our
telephone number is (302) 453-6900 and our website address is www.artesianwater.com. We make available free of charge through our
website our Code of Ethics, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K and all
amendments to those reports, our Corporate Governance Guidelines, and our Board Committee Charters as soon as reasonably
practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission, or the SEC. We
include our website address in this Annual Report on Form 10-K only as an inactive textual reference and do not intend it to be an active
link to our website. Information contained on our website shall not be deemed incorporated into, or to be a part of, this report.
11
ITEM 1A. RISK FACTORS
We are exposed to a variety of risks and uncertainties. Most are general risks and uncertainties applicable to all water and wastewater
utility companies. We describe below some of the specific known risk factors that could negatively affect our business, financial
condition or results of operations. If one or more of these risks or uncertainties occur, actual results may vary materially from our
projections.
Risks Related to Our Operations
We are dependent upon the ability of our suppliers and independent contractors to meet performance specifications, quality standards
and delivery schedules at our anticipated costs.
While we maintain an extensive qualification and performance review system to control risk associated with such reliance on third
parties, failure of suppliers or independent contractors to meet commitments could adversely affect construction and maintenance
schedules and our results of operations and financial condition. We have been affected and could continue to be further affected, by
supplier delays and increased costs, due to the impacts of inflation, tariffs, recession, and/or other macroeconomic factors, which are
outside of our control and could affect our results of operations. We are also dependent on the availability of electricity and purchased
water at affordable prices. While our electricity costs and purchased water costs are at fixed prices under contracts, after the expiration
of these contracts, we may be required to pay higher electricity costs and purchased water costs.
We are subject to risks associated with the collection, treatment and disposal of wastewater.
Wastewater collection, treatment and disposal involve various unique risks. If collection or treatment systems fail, overflow, or do not
operate properly, untreated wastewater or other contaminants could spill onto nearby properties or into nearby streams and rivers,
causing damage to persons or property, injury to wildlife and economic damages, which may not be recoverable in fees. This risk is
most acute during periods of substantial rainfall or flooding, which are common causes of sewer overflow and system failure. Liabilities
resulting from such damages and injuries could materially and adversely affect our business, results of operations and financial
condition. We also require pre-treatment by various industrial customers prior to receiving their wastewater for further treatment and
disposal. If those pre-treatment systems operated by others fail, or do not operate properly, they can impact our downstream facilities’
ability to meet their permit limitations. If we fail to meet our permit limitations, we could be fined or otherwise sanctioned by regulators
and our operations could be curtailed or shut down.
Aging infrastructure may lead to service disruptions, property damage and increased capital expenditures and operation and
management costs, all of which could negatively impact our financial results.
We have risks associated with aging infrastructure, including water and sewer mains, pumping stations and water and wastewater
treatment facilities. Additionally, the nature of information available on buried and newly acquired assets may be limited, which may
challenge our ability to conduct efficient asset management and maintenance practices. Assets that have aged beyond their expected
useful lives may experience a higher rate of failure. Failure of aging infrastructure could result in increased capital expenditures and
operation and management costs. In addition, failure of aging infrastructure may result in property damage, and in safety, environmental
and public health impacts. To the extent that any increased costs or expenditures are not fully recovered in rates, our results of operations,
liquidity and cash flows could be negatively impacted.
Potential terrorist attacks, sabotage, or accidental damage by outside parties may disrupt our operations and adversely affect our business,
operating results and financial condition.
We are subject to disruption of our water and wastewater systems, including as a result of vandalism, terrorism, sabotage and/or
accidental damage by outside parties, any of which could cause an interruption in or contamination of water supply, and a reduction in
water quality. We have security measures in place at our facilities to reduce the possibility of occurrences of sabotage, vandalism, or
terrorism and to secure our water and wastewater systems. These security measures address water collection, pre-treatment, treatment,
distribution, storage, wastewater disposal, electronic or automated systems, and the use, handling, delivery, and storage of all chemicals.
We also have programs in place to ensure employee awareness of potential threats. We have and will continue to bear any increase in
costs, most of which have been recoverable under state regulatory policies, for security precautions to protect our facilities, operations
and supplies. While the costs of increases in security, including capital expenditures, may be significant, we expect these costs to
continue to be recoverable in water and wastewater rates. Despite our security measures, we may not be in a position to control the
outcome of terrorist events, sabotage or other attacks on our water systems, should they occur.
Our water and wastewater systems are also subject to accidental damage from work being completed by outside parties not under the
supervision or control of the Company. Construction activities in the vicinities of our pipelines and other infrastructure can lead to
damage which results in inadvertent discharge onto nearby properties, or into nearby streams and rivers, causing damage to persons or
property, injury to wildlife and economic damages. We could also incur repair and remediation costs, which may not be reimbursed or
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recoverable in water and wastewater rates.
We depend on the availability of capital for expansion, construction and maintenance. Weaknesses in capital and credit markets or
increased interest rates may limit our access to capital.
Our ability to continue our expansion efforts and fund our utility construction and maintenance program depends on the availability of
adequate capital. There is no guarantee that we will be able to obtain sufficient capital in the future on favorable terms and conditions
for expansion, construction and maintenance, as general macroeconomic conditions impacting the capital markets, including interest
rates, are beyond our control. In the event our lines of credit are not extended or we are unable to refinance our first mortgage bonds
when due and the borrowings are called for payment, we will have to seek alternative financing sources, although there can be no
assurance that these alternative financing sources will be available on terms acceptable to us. In the event we are unable to obtain
sufficient capital, our expansion efforts could be curtailed, which may affect our growth and may affect our future results of operations.
We may be adversely affected by the implementation of new regulations, the reinterpretation or recission of existing regulations, or
regulatory uncertainty. Changes in local, state or federal policy or administrative priorities could adversely affect our business.
As a regulated utility, we are subject to regulation at the federal, state and local level. We have made significant capital expenditures to
adhere to regulations imposed by such authorities and expect to continue to make capital expenditures in the future to adhere to such
regulations. Changes in local, state or federal administrative policy or priorities could affect the possible interpretation of existing
regulations or such authorities may impose new rules and regulatory requirements. New administrations could also eliminate proposed
rules and reverse final policies of prior administrations, which could lead to conflict between federal and state regulations and regulatory
uncertainty, which could cause us to reevaluate our strategic priorities and capital expenditures or otherwise impact our business
operations. The impact of any regulatory requirement changes are unpredictable, and could materially and adversely affect our business,
financial position and results of operations.
We may be adversely affected by global climate change or by regulatory, legal or market responses to such change.
The issue of climate variability is receiving increasing attention nationally and worldwide. Climate change is an intrinsically complex
global phenomenon with inherent residual risks across its physical and regulatory dimensions that cannot be mitigated given their wide-
ranging, interdependent and largely unpredictable potential scope, nature, timing or duration. Some climate researchers believe that
there will be worsening of weather volatility in the future associated with climate variability, which presents several potential challenges
to water and wastewater utilities. Severe weather, climate variability patterns and natural or other events may cause weather volatility
in the future and may impact water usage and related revenue, or may require additional expenditures, all of which may not be fully
recoverable in rates or otherwise.
We may experience substantial negative impacts to our business if an unexpectedly severe weather event or natural disaster damages
our facilities and/or operations or those of our suppliers or independent contractors in our service areas, or from the unintended
consequences of regulatory changes that directly or indirectly impose substantial restrictions on our activities or adaptation requirements.
Potential climate variability challenges include the following: increased frequency and duration of droughts, increased precipitation and
flooding, increased frequency and severity of storms and other weather events, potential degradation of water quality, unexpected
changes in temperature, increases in ocean levels, disruptions in water or wastewater services to our customers, decreases in available
water supply, extreme changes in water usage patterns, increases in expenditures to repair any damages, increases in costs to reduce
risks associated with significant weather events or natural disasters, and increases in costs to improve the reliability of our water and
wastewater systems and facilities. Due to the uncertainty of weather volatility related to climate variability, we cannot predict its
potential impact on our financial condition, results of operations, cash flows and liquidity. Although some or all potential expenditures
and costs with respect to our regulated businesses could be recovered through rates we charge to our customers, there can be no assurance
that the applicable regulatory authority would authorize recovery of such costs, in whole or in part, for any of these impacts.
Furthermore, federal, state and local authorities and legislative bodies have issued, implemented or proposed regulations, penalties,
standards and/or guidance intended to restrict, moderate or promote activities consistent with resource conservation, Greenhouse Gas,
or GHG, emission reduction, environmental protection or other climate-related objectives. Compliance with those directed at or
otherwise affecting our business or our suppliers’ (or their suppliers’) operations, or services, could lead to increased environmental
compliance expenditures, increased energy and raw materials costs and new and/or additional investment in designs and technologies.
We continually assess our compliance status and management of environmental matters to ensure our operations are in compliance with
all applicable environmental laws and regulations. It is reasonably possible that costs incurred related to the various physical and
regulatory risks from climate change may affect our future results of operations, financial condition, cash flows or liquidity. While we
have health and safety protocols in place, we can provide no assurance that we or our suppliers or independent contractors can
successfully operate in areas experiencing a significant weather event or natural disaster, and we or they may be more significantly
impacted and take longer, and incur higher costs, to resume operations in an affected location, depending on the nature of the event or
other circumstances. Although some or all potential expenditures and costs with respect to our regulated businesses could be recovered
through rates we charge to our customers, there can be no assurance that the applicable regulatory authority would authorize recovery
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of such costs, in whole or in part, for any of these impacts.
Though we have not as of the date of this report identified or experienced any particular material impact, whether singular or in
combination, to our consolidated financial statements from climate change or the associated regulatory, physical, and other risks
discussed above, we cannot provide any assurance that we have or can successfully prepare for, or are or will be able to reduce or
manage any of them to the extent they may arise. In addition, the SEC has previously issued extensive climate-related disclosure rules.
Although these rules are currently stayed, if adopted in the future, such rules would likely result in increased compliance costs and
capital expenditures.
Risks Related to Governmental Laws and Regulations
We rely on governmental approvals in the States of Delaware and Maryland and the Commonwealth of Pennsylvania, as well as
approvals from the Delaware River Basin Commission and Susquehanna River Basin Commission for applicable water allocation, water
appropriation and water capacity permits. In addition, we rely on governmental approvals in the State of Delaware for applicable
wastewater collection, treatment and disposal permits for the operation of our wastewater facilities.
Our water and wastewater services are governed by various federal and state governmental agencies. Pursuant to these regulations, we
are required to obtain various permits for any additional systems and current systems to assist in our operations. If any of those permit
approvals are not received timely or at all, we may risk the loss of economic opportunity and our ability to create additional systems for
the effective operation of our water business in Delaware, Maryland and Pennsylvania or our wastewater business in Delaware. We can
provide no assurances that we will receive all necessary permits to add systems or continue to operate facilities of our water or wastewater
business.
Our operating revenue is primarily from water sales. The rates that we charge our customers are subject to the regulations of the public
service commissions in the states in which we operate. If a public service commission disapproves or is unable to timely approve our
requests for rate increases or approves rate increases that are inadequate to cover our investments, deferred regulatory assets or increased
costs, our profitability may suffer.
We file rate increase requests, from time to time, to recover our investments in utility plant, deferred regulatory assets and expenses, see
Notes to Consolidated Financial Statements - Note 13 – Regulatory Proceedings. Once a rate increase petition is filed with a public
service commission, the ensuing administrative and hearing process may be lengthy and costly. We can provide no assurances that any
future rate increase request will be approved by the DEPSC, MDPSC or PAPUC, and if approved, we cannot guarantee that these rate
increases will be granted in a timely manner and/or will be sufficient in amount to cover the investments, deferred regulatory assets and
expenses for which we initially sought the rate increase. To the extent we are able to pass through such costs to customers and a state
public service commission subsequently determines that such costs should not have been paid by customers, we may be required to
refund such costs, with interest, to customers. Any such costs not recovered through rates, or any such refund, could adversely affect
our results of operations, financial position or cash flows.
Our water and wastewater operations are subject to extensive federal and state laws and regulations. In addition, our operating costs
and capital expenditures could be significantly increased if new or stricter regulatory standards are imposed by federal or state
environmental agencies.
We are subject to various federal, state, and local laws and regulations relating to environmental protection, including the discharge,
treatment, storage, disposal and remediation of hazardous substances and wastes. Our water and wastewater services are governed by
various federal and state environmental protection and health and safety laws and regulations, including, among others, the federal Safe
Drinking Water Act, the Clean Water Act, the LCR and other federal and state laws. These federal and state regulations are issued by
the EPA and state environmental regulatory agencies. Pursuant to these laws and regulations, we are required to obtain various water
allocation permits and environmental permits for our operations. The water allocation permits control the amount of water that can be
drawn from water resources. New or stricter water allocation regulations can adversely affect our ability to meet the demands of our
customers. While we have budgeted for future capital and operating expenditures to maintain compliance with these laws and our
permits, it is possible that new or stricter standards would be imposed that will raise our operating costs and capital expenditures. Thus,
we can provide no assurances that our costs of complying with, or discharging liability under, current and future environmental and
health and safety laws will not adversely affect our business, results of operations or financial condition.
Risks Related to Our Financial Statements and Operating Results
Our business is subject to seasonal fluctuations, which could affect demand for our water service and our revenues.
Demand for water during warmer months is generally greater than during cooler months primarily due to additional customer
requirements in irrigation systems, swimming pools, cooling systems and other outside water use. In the event that temperatures during
typically warmer months are cooler than normal, or rainfall is more than normal, the demand for our water may decrease and adversely
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affect our revenues.
Drought conditions and government-imposed water use restrictions may impact our ability to serve our current and future customers,
and may impact our customers’ use of our water, which may adversely affect our financial condition and results of operations.
We believe that we have in place sufficient capacity to provide water service for the foreseeable future to all existing and new customers
in all of our service territories. However, severe drought conditions could interfere with our sources of water supply and could adversely
affect our ability to supply water in sufficient quantities to our existing and future customers. This may adversely affect our revenues
and earnings. Moreover, governmental restrictions on water usage during drought conditions may result in a decreased demand for
water, which may adversely affect our revenue and earnings.
General economic conditions may materially and adversely affect our financial condition and results of operations.
The effects of adverse U.S. economic conditions may lead to a number of impacts on our business that may materially and adversely
affect our financial condition and results of operations. Such impacts may include a reduction in discretionary and recreational water
use by our residential water customers, particularly during the summer months; a decline in usage by industrial and commercial
customers as a result of decreased business activity and commerce in our customers’ businesses; an increased incidence of customers’
inability to pay their bills, bankruptcy or delay in paying their bills which may lead to higher bad debt expense and reduced cash flow;
and a lower natural customer growth rate may result as compared to what had been experienced before due to a decline in new housing
starts or a decline in the number of active customers due to housing vacancies or abandonments.
We could be adversely impacted by macroeconomic factors outside of our control, including but not limited to inflation, interest rates,
tariffs, trade wars and/or recession.
We have been affected and could continue to be affected by increased costs for items such as, among others, materials for capital
expenditures, fuel, and treatment chemicals, due to the impacts of inflation. If inflation increases significantly, as a result of increased
interest rates, tariffs, trade wars, or otherwise, we may seek to increase our rates charged to customers. We can provide no assurances
that any future rate increase request will be approved by the applicable regulatory authority, 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 such inflationary pressure could adversely affect our results of operations, financial position or cash flows.
We may be required to record impairments of goodwill, or otherwise change the fair value of certain assets, in the future that could have
a material adverse effect on our financial condition and results of operations.
The Company records goodwill when the purchase price of a business combination exceeds the estimated fair value of net identified
tangible and intangible assets acquired as of the date of an acquisition. The Company’s goodwill is associated with the January 2022
acquisition of Tidewater Environmental Services, Inc. Goodwill is not amortized, but is evaluated for impairment at least annually, or
more frequently, if impairment indicators are present that would more likely than not reduce the fair value of a reporting unit below its
carrying amount. We may be required to recognize in the future an impairment of goodwill due to market conditions, or other factors
related to our performance or the performance of an acquired business, or other circumstances that may impact the fair value of assets
acquired. Recognition of impairments of goodwill and changes in fair value of certain of our assets would result in a charge to income
in the period in which the impairment or change occurred, which may negatively affect our financial condition, results of operations and
total capitalization.
Risks Related to Our Business Strategy
We face competition from other water and wastewater utilities for the acquisition of new exclusive service territories.
We face competition from other water and wastewater utilities as we pursue the right to exclusively serve new territories in Delaware
and Maryland. We address this competition by entering into agreements with landowners, developers or municipalities and, under
current law, then applying to the DEPSC or the MDPSC for a CPCN. If we are unable to enter into agreements with landowners,
developers or municipalities and secure CPCNs for the right to exclusively serve new territories in Delaware or Maryland, our ability to
expand may be significantly impeded.
Any future acquisitions we undertake or other actions to further grow our water and wastewater business may involve risks.
An element of our growth strategy is the acquisition and integration of water and wastewater systems in order to broaden our current
service areas and move into new ones. It is our intent, when practical, to integrate any organizations we acquire with our existing
operations. The negotiation of potential acquisitions as well as the integration of acquired organizations could require us to incur
significant costs and cause diversion of our management’s time and resources. We may not be successful in the future in identifying
organizations that meet our acquisition criteria. The failure to identify such organizations may limit the rate of our growth. In addition,
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future acquisitions or expansion of our service areas by us could result in:
−
Dilutive issuance of our equity securities;
−
Incurrence of debt and contingent liabilities;
−
Difficulties in integrating the operations and personnel of the acquired organization;
−
Diversion of our management’s attention from ongoing business concerns;
−
Failure to have effective internal control over financial reporting;
−
Overload of human capital resources; and
−
Other acquisition-related expense.
Some or all of these items could have a material adverse effect on our business and our ability to finance our business and comply with
regulatory requirements. The organizations we acquire in the future may not achieve sales and profitability that would justify our
investment.
We also may experience risks relating to the challenges and costs of closing a transaction and the risk that an announced transaction
may not close. Completion of certain acquisition transactions are conditioned upon, among other things, the receipt of approvals,
including from certain state public utilities commissions. The timeliness and outcome of those state public utilities commissions could
hinder future acquisitions and any failure to complete a pending transaction would prevent us from realizing the anticipated benefits.
We would also remain liable for significant transaction costs, including legal and accounting fees, whether or not the transaction is
completed.
Risks Related to Legal Uncertainty
Contamination of our water supply or wastewater operational malfunctions may result in disruption in our services and could lead to
litigation that may adversely affect our business, operating results and financial condition.
Our water supplies are subject to contamination from naturally-occurring compounds as well as pollution resulting from man-made
sources. Even though we monitor the quality of our water on an ongoing basis, any possible contamination could interrupt the use of
our water supply until we are able to substitute it from an uncontaminated water source. Additionally, treating the contaminated water
source could involve significant costs and could adversely affect our business. We could also be held liable for consequences arising
out of human or environmental exposure to hazardous substances, if found, in our water supply. If wastewater collection or treatment
systems fail, overflow, or do not operate properly, untreated wastewater or other contaminants could spill onto nearby properties or into
nearby streams and rivers, causing damage to persons or property, injury to wildlife and economic damages for which we could be held
liable. Any such occurrence could adversely affect our business, results of operations and financial condition.
We are subject to various laws and regulations that could expose us to governmental investigations or actions by other third parties.
We are subject to various federal and state laws and regulations, including environmental laws and regulations, violations of which can
involve civil or criminal sanctions.
Our Company from time to time could be parties to or our operations targets of, lawsuits, claims, investigations and proceedings,
including system failure, injury, contract, environmental, health and safety and employment matters, which are handled and defended
in the ordinary course of business. The results of any future litigation or settlement of such lawsuits and claims are inherently
unpredictable, but such outcomes could also materially and adversely affect our business, financial position and results of operations.
Risk Related to Cybersecurity and Technology
We are dependent on the continuous and reliable operation of our information technology systems that require potentially costly
maintenance, and could become subject to cyberattacks disrupting our operations.
We rely on our information technology systems to manage operation of our business. Specifically, our business relies on various
technology systems, including but not limited to those associated with customer information, financial reporting, asset and inventory
management, facility operations and monitoring , human resources and accounts receivable. Such systems require periodic
modifications, upgrades or replacement that subject us to inherent costs and risks, including substantial capital expenditures, additional
administration and operating expenses, and other risks and costs of delays in transitioning to new systems or of integrating new systems
into our current systems. Our computer and communications systems and operations could be damaged or interrupted by natural
disasters, power loss, telecommunications failures, human error or acts of war or terrorism, sabotage, theft or similar events or
disruptions. A loss of these systems or major problems with the operation of these systems could affect our operations and have a
material adverse effect on our business and results of operations.
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Cyberattacks on utility companies have been increasing in recent years, with recent reports that at least one U.S. water utility has
experienced widespread outages as a result of such an attack. To date, there have been no risks identified from cybersecurity threats or
previous cybersecurity incidents that have materially affected or are reasonably likely to materially affect the company. Despite our
efforts, a cyberattack, if it occurred, could cause water or wastewater system operational complications, disrupt service to our customers,
compromise important data or systems or result in an unintended release of customer or other confidential information. Possible impacts
associated with a cyberattack could also include remediation costs related to lost, stolen, or compromised data, repairs to information
technology and data processing systems, increased cyber security protection costs, adverse effects on our compliance with regulatory
and environmental laws and regulations, including standards for water and wastewater utility providers, and litigation. We feel we have
adequate cybersecurity insurance coverage to mitigate the cost of any such cyberattack; however, a possible cyberattack could affect
our operations and have a material adverse effect on our business and results of operations. We have implemented, and will continue
to internally monitor and manage, business processes to support our cybersecurity program. For additional information concerning the
Company’s cybersecurity program, see Item 1C - Cybersecurity.
Risk Associated with Managing our Business, Including Employees and Our Reputation
Turnover in our management team could have an adverse impact on our business or the financial market’s perception of our ability to
continue to grow.
Our success depends significantly on the continued contribution of our management team both individually and collectively. The loss
of the services of any member of our management team or the inability to hire and retain experienced management personnel could
harm our operating results. In addition, turnover in our management team could adversely affect the financial market’s perception of
our ability to continue to grow.
We depend on our ability to attract and retain qualified, skilled employees and independent contractors.
We depend on our ability to attract and retain qualified talent, including full-time and part-time employees, managers, management
team, and independent contractors. If we are unable to attract and retain such individuals, we may be unable to maintain our ability to
meet performance targets, customer demands and expectations or successfully expand and grow our business. Changes in the job market
may increase labor costs and could adversely affect our business, results of operations, cash flows and financial condition.
Employee and independent contractor misconduct could harm us by subjecting us to legal liability and reputational harm.
There is a risk that our employees or independent contractors engage in misconduct that adversely affects our business. Misconduct
could subject us to regulatory investigations, legal liabilities or penalties and we could suffer harm to our reputation, financial position,
and the trading price of our common stock. We also face the risk that our employees engage in work place misconduct, despite our
implementation of policies and training to prevent and detect misconduct. Such misconduct could negatively harm our reputation or
impair our ability to attract and retain qualified, skilled employees. If our employees engage in misconduct, our business could be
materially adversely affected.
Risks Related to Our Common Stock
There can be no assurance that we will continue to pay dividends in the future or, if dividends are paid, that they will be in amounts
similar to past dividends.
Dividends on our common stock will only be paid if and when declared by our Board of Directors. Our earnings, financial condition,
capital requirements, applicable regulations and other factors, including the timeliness and adequacy of rate increases, will determine
both our ability to pay dividends on common stock and the amount of the dividends declared by our Board of Directors. There can be
no assurance that we will continue to pay dividends in the future or, if dividends are paid, that they will be in amounts similar to past
dividends.
Holders of Class A Non-Voting Common Stock have no voting rights. As a result, holders of Class A Non-Voting Common Stock will
not have any ability to influence stockholder decisions and the principal holders of Class B Common Stock have significant control over
the outcome of most fundamental corporate matters.
We have two classes of common stock, Class A Non-Voting Common Stock and Class B Common Stock. Under our Restated Certificate
of Incorporation, the right to vote for the election of directors and other stockholder matters is exercised exclusively by the holders of
Class B Common Stock. The holders of our Class A Non-Voting Common Stock do not have voting rights on any matters that are
submitted to a vote of stockholders, including with respect to the election of directors and other matters voted upon by stockholders,
except as required by the Delaware General Corporation Law. As a result, the principal stockholders of Class B Common Stock have
significant control over the outcome of most fundamental corporate matters. There are no agreements among the holders of Class B
17
Common Stock or with the Company that restrict the transfer of shares of Class B Common Stock which could result in significant
ownership of shares of Class B Common Stock being held by others who are not currently principal holders.
The price of our common stock may be volatile and may be affected by market conditions beyond our control.
The trading price of our common stock may fluctuate in the future based on a variety of factors, many of which are beyond our control
and unrelated to our financial results. Factors that could cause fluctuations in the trading price of our common stock include but are not
limited to volatility of the general stock market or the utility stock index, regulatory developments, general economic conditions and
trends, actual or anticipated changes or fluctuations in our results of operations, actual or anticipated changes in the expectations of
investors or securities analysts, actual or anticipated developments in our competitors’ businesses or the competitive landscape generally,
litigation involving us or our industry, major catastrophic events or sales of large blocks of our stock. Furthermore, we believe that
stockholders invest in public utility stocks in part because they seek reliable dividend payments. If there is an oversupply of stock of
public utilities in the market relative to demand by such investors, the trading price of our common stock may decrease. Additionally,
if interest rates rise above the dividend yield offered by our common stock, demand for our stock and its trading price may also decrease.
Risk Related to Pandemics
Our business, results of operations, financial condition, cash flows and stock price may be adversely affected by pandemics, epidemics
or other public health emergencies.
Our business, results of operations, financial condition, cash flows and stock price may be adversely affected by pandemics, epidemics
or other public health emergencies. We are considered an essential utility service company, as defined by the U.S. Department of
Homeland Security. We believe we will continue to operate our business consistent with any federal guidelines or state and local orders,
however, the outbreak of pandemics, epidemics or other public health emergencies and any preventive or protective actions taken by
governmental authorities may have an adverse effect on our operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
There have been an increasing number of cyberattacks on companies around the world, which have caused operational failures,
compromised sensitive corporate or customer data, and/or resulted in significant financial damages. These attacks have occurred over
the internet, through malware, viruses or attachments to e-mails, or through inside actors with access to systems within the organization.
In addition, there have been reports of other water utility companies being subjected to such attacks, resulting in widespread operational
outages.
Risk Management and Strategy
We have implemented security measures and will continue to devote resources to address security vulnerabilities in an effort to prevent
cyberattacks. All employees receive cybersecurity training and other education regarding their use of computers, information
technology, and sensitive data. We utilize third parties to support our information technology, or IT, resources, including disaster
recovery intended to safeguard our ability to access and use our IT resources during a disaster or cyber incident. Our business continuity
plans are evaluated against evolving security and service level standards, which includes evaluating those cybersecurity threats
associated with our use of key third party service providers.
Our cybersecurity management process consists of utilizing a combination of employee education, preventative controls, detective
controls, and periodic third-party cybersecurity testing. We have installed and utilize enterprise scale technology to support an
appropriate cybersecurity posture including: endpoint detection and response, firewalls, security information and event management,
email security, multifactor authentication, and vulnerability management. We receive cybersecurity related alerts from our membership
in a number of industry groups. These alerts are evaluated and in the event an alert requires action within our environment, such actions
are taken promptly. Our process and cybersecurity posture are refined based on the results of periodic third party cybersecurity
assessments. We engage with the Cybersecurity and Infrastructure Security Agency through their cyber hygiene service offerings.
Cybersecurity is addressed in IT’s reports to the Corporate Automation Steering Committee, which consists of all Officers and the
Director of Customer Service, as well as in IT’s reports to the Board of Directors. Should a cyber event occur, depending on the severity
of an event, our cyber incident reporting process includes informing, as early as practicable, our senior corporate management.
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Governance
The Audit Committee of the Board of Directors, as overseen by the full Board of Directors, is responsible for oversight of cybersecurity
risk. Our IT executives report on our cybersecurity practices and risks at each meeting of the Audit Committee of our Board of Directors.
In addition, our IT executives provide periodic updates on cybersecurity risks to our management at regularly held executive committee
meetings. Should any cybersecurity threat or incident be detected, our IT executives would timely report such threat or incident to the
management executive committee and provide regular communications and updates to the executive committee throughout the incident
and any subsequent investigation, in order that the impact, materiality, and reporting requirements of such incident are appropriately
identified and assessed for further necessary or appropriate action to be taken. Any incident identified by the management executive
committee as having a material impact would be promptly escalated to all members of the Board of Directors. Should there be an
incident which does not rise to the level of being material, such incident would, at minimum, be included in the subsequent IT reports
to both the management executive committee and the Board of Directors.
We believe we are appropriately staffed to support a healthy cybersecurity posture. All IT personnel have a combination of professional
experience, education, and/or certifications for their area of responsibility. For IT leadership, our Chief Information Officer earned a
Masters of Business Administration and also a Master of Science degree in Information Systems & Technology Management. Our Vice
President of Information Technology earned a Bachelor of Science in Computer Science and Business and a Bachelor of Science in
Business and Economics. The Vice President of Information Technology is also a Certified Public Accountant, a Certified Information
Systems Auditor, and a Chartered Global Management Accountant. Our Director of Cybersecurity earned an Associates Degree in
Computer Network Engineering and is a Certified Information Systems Security Professional.
To date, there have been no risks identified from cybersecurity threats or previous cybersecurity incidents that have materially affected
or are reasonably likely to materially affect the company. However, despite all of the above aforementioned efforts, a cyberattack, if it
occurred, could cause water or wastewater system operational problems, disrupt service to our customers, compromise important data
or systems or result in an unintended release of customer or other confidential information. See “Item 1A. Risk Factors—Risks Related
to Cybersecurity and Technology” for additional discussion of cybersecurity risks impacting our Company.
ITEM 2. PROPERTIES
Our corporate headquarters are located at 664 Churchmans Road, Newark, Delaware and are owned by Artesian Water.
The Company owns approximately six acres of land in New Castle County, Delaware zoned for office development and two nine-acre
parcels of land in Sussex County, Delaware for water and wastewater treatment facilities and an elevated water storage. The Company
also owns an office facility located in Sussex County, Delaware. The facility consists of approximately 10,000 square feet of office
space along with approximately 10,000 square feet of warehouse space.
The Company owns land, rights-of-way, easements, transmission and distribution mains, collection mains, pump facilities, treatment
plants, lift stations, treatment/disposal facilities, storage tanks, meters, vehicles and related equipment and facilities. The following table
indicates our utility plant as of December 31, 2024.
Utility plant comprises:
In thousands
Estimated
Useful Life
(In Years)
Effective
June 12, 2024
December 31,
2024
Utility plant at original cost
Utility plant in service-Water
Intangible plant
--- $
140
Source of supply plant
45-85
30,320
Pumping and water treatment plant
15-64
130,226
Transmission and distribution plant
Mains
73-81
390,741
Services
39-58
63,613
Storage tanks
70-76
39,760
Meters
16-26
30,223
Hydrants
60-68
20,158
General plant
5-81
59,634
Utility plant in service-Wastewater
19
Intangible plant
---
116
Treatment and disposal plant
20-81
71,332
Collection mains and lift stations
70-81
57,084
General plant
5-31
2,632
Property held for future use
---
3,742
Construction work in progress
---
39,718
939,439
Less – accumulated depreciation
192,253
$
747,186
Substantially all of Artesian Water's utility plant, except the utility plant in the town of Townsend, Delaware, is pledged as security for
our First Mortgage Bonds. As of December 31, 2024, no other water utility plant has been pledged as security for loans. Two parcels
of land held by Artesian Wastewater are pledged as security for a loan.
We believe that our properties are generally maintained in good condition and in accordance with current standards of good water and
wastewater industry practice. We believe that all of our existing facilities adequately meet current necessary production capacities and
current levels of utilization.
ITEM 3. LEGAL PROCEEDINGS
For a discussion of our legal proceedings, refer to Notes to Consolidated Financial Statements – Note 16 – Legal Proceedings.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Market Information for the Company’s Common Equity
Artesian Resources' Class A Non-Voting Common Stock, or Class A Non-Voting Stock, is listed on the Nasdaq Global Select Market
and trades under the symbol "ARTNA." On March 20, 2025, the last closing sale price as reported by the Nasdaq Global Select Market
was $31.36 per share. As of March 20, 2025 there were 480 holders of record of the Class A Non-Voting Stock. The stockholders of
Class A Non-Voting Stock are entitled to receive dividends when they are declared by the Board of Directors. The Company has a long
history of paying regular quarterly dividends as approved by our Board of Directors using net cash from operating activities. See the
Consolidated Financial Statements for additional information regarding the Company’s dividend history.
The intraday high and low Nasdaq Global Select Market prices on the Class A Non-Voting Stock for each quarter during the past two
years were:
Stock Price
High
Low
2024
First Quarter
$
41.73
$
33.84
Second Quarter
$
41.29
$
33.34
Third Quarter
$
41.29
$
34.96
Fourth Quarter
$
37.35
$
30.99
2023
First Quarter
$
63.00
$
51.30
Second Quarter
$
58.41
$
46.37
Third Quarter
$
49.73
$
41.26
Fourth Quarter
$
44.78
$
38.76
20
Our Class B Common Stock, or Class B Stock, is quoted on the OTC Bulletin Board under the symbol "ARTNB." There has been a
limited and sporadic public trading market for the Class B Stock. As of March 20, 2025, the last reported trade of the Class B Stock on
the OTC Bulletin Board was at a price of $31.61 per share on March 19, 2025. As of March 20, 2025, there were 134 holders of record
of the Class B Stock. Shares of Class B Stock are paid the same dividend as the shares of the Class A Non-Voting Stock.
Recent Sales of Unregistered Securities
During the year ended December 31, 2024, we did not issue any unregistered shares of our Class A Non-Voting Stock or Class B Stock.
The following graph compares the percentage change in cumulative shareholder return on the Company’s Class A Non-Voting Stock
with the Standard & Poor’s 500 Stock Index and a Peer Group of water utility companies. The graph covers the period from December
2019 (assuming a $100 investment on December 31, 2019, and the reinvestment of any dividends) through December 2024:
INDEXED RETURNS
Base Period
Years Ending December 31
Company Name / Index
2019
2020
2021
2022
2023
2024
Artesian Resources Corporation
100
102.47
131.39
169.87
122.94
96.87
S&P 500 Index
100
118.40
152.39
124.79
157.69
197.02
Peer Group
100
115.32
142.97
122.40
105.25
100.73
The Peer Group includes American States Water Company, American Water Works Company, Inc., Essential Utilities, Inc., California
Water Service Group, Middlesex Water Company, SJW Group and York Water Company.
$50
$100
$150
$200
$250
2019
2020
2021
2022
2023
2024
Comparison of Cumulative Five Year Total Return
Artesian Resources Corporation
S&P 500 Index
Peer Group
21
ITEM 6. RESERVED
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
Our profitability is primarily attributable to the sale of water and wastewater services in our regulated utility business. Our regulated
utility segment comprised 93.5% of total operating revenues for the year ended December 31, 2024 and 93.1% for the year ended
December 31, 2023. 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 these effects of weather are
short term and do not materially affect the execution of our strategic initiatives. Our wastewater services provide a revenue stream that
is not affected by these changes in weather patterns. We continue to seek growth opportunities to provide wastewater services in
Delaware and the surrounding areas.
Our profitability is also attributed to other non-utility business, such as various contract operations, water, sewer and internal SLP Plans
and other services we provide. Our contract operations, SLP Plans and other services also provide a revenue stream that is not affected
by changes in weather patterns. 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-utility subsidiaries due to our water, sewer, and internal SLP Plans.
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 as well as increased operating
costs, which must be recovered from future cash flows. Our ability to recover increases in investments in facilities and operating costs
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.
Regulated Water Subsidiaries
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 December 31, 2024, the number of metered water customers in Delaware
increased approximately 1.6% compared to December 31, 2023. The number of metered water customers in Maryland increased
approximately 2.3% compared to December 31, 2023. The number of metered water customers in Pennsylvania remained consistent
compared to December 31, 2023. For the year ended December 31, 2024, approximately 9.4 billion gallons of water were distributed
in our Delaware systems and approximately 106.7 million gallons of water were distributed in our Maryland systems.
Regulated Wastewater Subsidiaries
Artesian Wastewater and TESI own wastewater collection and treatment infrastructure and provide regulated wastewater services to
customers in Sussex County, Delaware. Artesian Wastewater Maryland is able to provide regulated wastewater services to customers
in Maryland. It is not currently providing these services in Maryland. The majority of our residential and commercial wastewater
customers are billed a flat monthly fee, and our large industrial wastewater customer is billed monthly based on wastewater flow, which
contributes to providing a revenue stream unaffected by weather. As of December 31, 2024, the number of Delaware wastewater
customers increased approximately 6.5% compared to December 31, 2023.
Non-Utility Subsidiaries
Artesian Utility provides contract water and wastewater operation services to private, municipal, and governmental institutions. Artesian
Utility also offers three protection plans to customers: the WSLP Plan, the SSLP Plan, and the ISLP Plan. 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 December 31, 2024, the eligible customers enrolled in the WSLP Plan, the SSLP Plan and the
ISLP Plan increased 3.1%, 4.0% and 2.2%, respectively, compared to December 31, 2023.
22
Strategic Direction and Recent Developments
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 subsidiaries, 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 recent years, we have completed several 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 and availability of development sites in relatively close proximity
to the Atlantic Ocean in Sussex County 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.
In our regulated wastewater subsidiaries, 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. There are numerous locations in Sussex County where Artesian Wastewater’s and Sussex County’s facilities
are connected or integrated to allow for the movement and disposal of wastewater generated by one or the other’s system in a manner
that most efficiently and cost effectively manages wastewater transmission, treatment and disposal. In addition, 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,
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.
In April 2024, Artesian Wastewater received a permit from the Delaware Department of Natural Resources and Environmental Control
for construction of a 625,000 gallon per day regional wastewater treatment facility, including a primary receiving headworks at its
Sussex Regional Recharge Facility, or SRRF. Under its previous permit, SRRF provided solely land disposal services for a single
commercial processing and treatment plant. Under its new permit, SRRF will continue providing those disposal services alongside the
new treatment plant. The new treatment facility will provide service for Artesian Wastewater’s regional system comprised primarily of
residential and small commercial customers. The construction will also include the primary receiving facility for untreated effluent,
sized to allow for the expansion of the regional treatment system planned for the site. The new treatment facility will utilize the existing
disposal infrastructure and is expected to be completed by the third quarter of 2025.
The general need for increased capital investment in our water and wastewater systems is due to a combination of population growth,
more protective water quality standards, aging infrastructure and acquisitions. Our planned and budgeted capital improvements over
the next three years include projects for water infrastructure improvements and expansion in both Delaware and Maryland and
wastewater infrastructure improvements and expansion in Delaware. The DEPSC and MDPSC have generally recognized the operating
and capital costs associated with these improvements in setting water and wastewater rates for current customers and capacity charges
for new customers.
23
In our non-utility subsidiaries, we continue pursuing opportunities to expand our contract operations. Through Artesian Utility, we will
seek to expand our contract design, engineering and construction services of water and wastewater facilities for developers,
municipalities and other utilities. We also anticipate continued growth due to our water, sewer and internal SLP Plans. Artesian
Development owns two nine-acre parcels of land, located in Sussex County, Delaware, which allows for construction of a water
treatment facility and wastewater treatment facility.
CRITICAL ACCOUNTING ESTIMATES
Critical accounting estimates are those we believe are most important to portraying the financial condition and results of operations and
also require significant estimates, assumptions or other judgments by management. Note 1 (Summary of Significant Accounting
Policies) to the Consolidated Financial Statements describes the significant accounting policies and methods used in the preparation of
the consolidated financial statements. The following provides an overview of the accounting policies that are particularly important to
the results of operations and financial condition of the Company. Changes in the estimates, assumptions or other judgments included
within these accounting policies could result in a significant change to the financial statements in any quarterly or annual period. We
consider the following policies to be the most critical in understanding the judgment that is involved in preparing our Consolidated
Financial Statements. Senior management has discussed the selection and development of our critical accounting estimates with the
Audit Committee of the Board of Directors.
Revenues
We record water service revenue, including amounts billed to customers, on a cycle basis and unbilled amounts based upon estimated
usage from the date of the last meter reading to the end of the accounting period. As actual usage amounts are received, 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, using 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 from the estimate, we believe the overall total estimate of
consumption and revenue for the fiscal period will not differ materially from actual billed consumption.
Deferred 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 subsidiaries 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.
Results of Operations
2024 Compared to 2023
Operating Revenues
Revenues totaled $108.0 million for the year ended December 31, 2024, an increase of $9.1 million, or 9.2%, over the revenues for the
year ended December 31, 2023.
Water sales revenue increased $8.0 million, or 10.1%, for the year ended December 31, 2024 from the corresponding period in 2023,
primarily as a result of a temporary rate increase of 14.6% of gross water sales placed into effect on November 28, 2023, as permitted
under Delaware law. These temporary rates were replaced with the final approved rates pursuant to a DEPSC order that authorized a
total increase of approximately 15.2%, which went into effect on June 12, 2024. The increase in both temporary rates and final approved
customer base rates was partially offset by the Company’s DSIC rate of 7.50% resetting to zero upon implementation of the temporary
rate increase. In addition, there was an increase in overall water consumption due to drier weather experienced during the year ended
December 31, 2024 compared to the same period in 2023 and an increase in the number of customers served. We realized 81.6% and
81.0% of our total operating revenue for the years ended December 31, 2024 and December 31, 2023, respectively, from the sale of
water.
Other utility operating revenue increased approximately $0.9 million, or 7.7%, for the year ended December 31, 2024 compared to the
year ended December 31, 2023. This increase is primarily due to an increase in wastewater revenue associated with an increase in the
number of customers served.
24
Non-utility operating revenue increased approximately $0.1 million, or 1.7%, for the year ended December 31, 2024 compared to the
same period in 2023, primarily due to an increase in SLP Plan revenue, partially offset by a decrease in contract service revenue related
to a contract for the design and construction of wastewater infrastructure that was mostly completed in prior years.
Percentage of Operating Revenues
2024
2023
2022
Water Sales
Residential
50.1%
50.1%%
48.7%
Commercial
18.0
17.9
17.6
Government and Other
13.5
13.0
12.9
Other utility operating revenues
12.1
12.3
11.6
Non-utility operating revenues
6.3
6.7
9.2
Total
100.0%
100.0%
100.0%
Residential
Residential water service revenues in 2024 amounted to $53.9 million, an increase of $4.4 million, or 8.8%, above the $49.6 million
recorded in 2023, primarily due to a rate increase placed into effect on November 28, 2023 and an increase in overall water consumption.
The volume of water sold to residential customers increased to 4,522 million gallons in 2024 compared to 4,340 million gallons in 2023,
a 4.2% increase. The number of residential customers served increased by approximately 1,500, or 1.7%, in 2024.
Commercial
Water service revenues from commercial customers in 2024 amounted to $19.4 million, an increase of $1.8 million, or 10.1%, above
the $17.6 million in 2023, primarily due to a rate increase placed into effect on November 28, 2023. The volume of water sold to
commercial customers increased to 2,277 million gallons in 2024 compared to 2,231 million gallons sold in 2023, an increase of 2.1%.
Government and Other
Government and other water service revenues in 2024 amounted to $14.7 million, an increase of $1.9 million, or 14.8%, above the $12.8
million in 2023, primarily due to a rate increase placed into effect on November 28, 2023 and an increase in overall water consumption.
The volume of water sold to government and other customers increased to 1,320 million gallons in 2024 compared to 1,260 million
gallons in 2023, an increase of 4.8%.
Other Utility Operating Revenue
Other utility operating revenue, derived from regulated wastewater services, contract operations, antenna leases on water tanks,
finance/service charges, wastewater customer service revenues and industrial wastewater service revenues, increased 7.7%, to $13.1
million in 2024, from $12.2 million in 2023. This increase is primarily due to an increase in wastewater revenue associated with an
increase in the number of customers served.
Non-Utility Operating Revenue
Non-utility operating revenue, derived from non-regulated water and wastewater operations, increased by 1.7%, to $6.7 million in 2024
from $6.6 million in 2023. This increase is primarily due to an increase in SLP Plan revenue, partially offset by a decrease in contract
service revenue related to a contract for the design and construction of wastewater infrastructure that was mostly completed in prior
years.
Operating Expenses
Operating expenses, excluding depreciation and income taxes, increased $4.1 million, or 7.3%, for the year ended December 31, 2024
compared to the year ended December 31, 2023.
Utility operating expenses increased $3.6 million, or 7.8%. The increase in utility operating expenses consists of a $1.1 million increase
in supply and treatment costs, a $0.9 million increase in payroll and employee benefits costs, a $0.5 million increase in each of
transmission, distribution and collection system costs and administrative costs, a $0.3 million increase in purchased power costs and a
$0.2 million increase in purchased water costs.
25
Non-utility operating expenses increased $0.3 million, or 7.1%, primarily due to an increase in plumbing repair costs associated with
the SLP Plans and an increase in payroll and employee benefits costs.
Property and other taxes increased $0.2 million, or 3.6%, primarily due to an increase in New Castle County, Delaware tax rates on
utility plant, an increase in utility plant subject to taxation and an increase in payroll taxes. Property taxes are assessed on land, buildings
and certain utility plant, which include the footage and size of pipe, hydrants and wells.
Percentage of Operating and Maintenance Expenses
2024
2023
2022
Payroll and Associated Expenses
47.7%
49.5%
47.5%
Administrative
16.7
16.9
15.3
Supply and Treatment
13.3
11.9
10.8
Purchased Power
5.8
5.7
5.2
Transmission, Distribution and Collection
5.1
4.6
4.1
Purchased Water
2.8
2.7
3.6
Non-utility Operating
8.6
8.7
13.5
Total
100.0%
100.0%
100.0%
The ratio of operating expense, excluding depreciation and income taxes, to total revenue was 56.4% for the year ended December 31,
2024, compared to 57.4% for the year ended December 31, 2023.
Depreciation and amortization expense increased $0.3 million, or 2.2%, primarily due to continued investment in utility plant providing
supply, treatment, storage and distribution of water to customers and service to our wastewater customers.
Federal and state income tax expense increased $1.0 million, or 15.2%, primarily due to higher pre-tax income, lower state net operating
loss valuation allowance, and higher regulatory deferred income tax amortization in 2024 compared to 2023.
Other Income
Other income decreased $0.4 million, primarily due to a decrease in allowance for funds used during construction, or AFUDC, as a
result of lower long-term construction activity subject to AFUDC for the twelve months ended December 31, 2024 compared to the
same period in 2023.
Interest Charges
Interest charges decreased $0.4 million, primarily due to a decrease in short-term debt interest related to lower borrowing levels on the
Company’s lines of credit.
Net Income
Our net income applicable to common stock increased $3.7 million, or 22.1%. Total revenue increased $9.1 million and interest charges
decreased $0.4 million, offset by a $5.4 million increase in total operating expenses and $0.4 million decrease in other income.
Part I, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2023 Annual
Report on Form 10-K includes a comparative discussion of the years ended December 31, 2023 and 2022 and is incorporated
herein by reference.
Liquidity and Capital Resources
Overview
The Company’s primary sources of liquidity for the year ended December 31, 2024 were $36.8 million of cash provided by operating
activities and $20.4 million in net contributions and advances from developers. Funds from these liquidity sources were used to invest
$45.9 million in capital expenditures and to pay dividends of approximately $12.2 million. We depend on the availability of capital for
expansion, construction and maintenance. We rely on our sources of liquidity for investments in our utility plant and to meet our various
payment obligations.
26
We expect that our net investments in utility plant in 2025 will be approximately $46.4 million. Our total obligations related to interest
and principal payments on indebtedness, rental payments, elevated storage tank agreements and water service interconnection
agreements for 2025 are anticipated to be approximately $11.6 million.
Operating Activities
One of our primary sources of liquidity for the year ended December 31, 2024 was $36.8 million provided by cash flow from operating
activities, compared to $31.9 million for the year ended December 31, 2023. The increase in cash flows from operating activities is
primarily due to changes in net income, materials and supplies, and income tax receivable. Cash flows from operating activities is
primarily provided by our utility operations and is impacted by the timeliness and adequacy of rate increases and changes in water
consumption as a result of year-to-year variations in weather conditions, particularly during the summer. A significant part of our ability
to maintain and meet our financial objectives is to ensure that our investments in utility plant and equipment are recovered in the rates
charged to customers. As such, from time to time, we file rate increase requests to recover increases in operating expenses and
investments in utility plant and equipment. See Note 13 – Regulatory Proceedings. We will continue to borrow on available lines of
credit in order to satisfy current liquidity needs. In addition, the Company has a long history of paying regular quarterly dividends as
approved by our Board of Directors using net cash from operating activities.
Investment Activities
The primary focus of our investment in 2024 was to continue to provide high quality, reliable service to our growing service
territory. Capital expenditures during 2024 were $45.9 million compared to $62.2 million invested during the same period in
2023. During 2024, these investments include relocation of facilities as a result of government mandates, renewals associated with the
rehabilitation of aging infrastructure, installation of new mains, upgrading elevated storage tanks, purchase of new transportation
equipment, upgrading and replacing our meter reading equipment, construction of a new wastewater treatment plant and upgrading
existing pumping stations to better serve our customers.
The following chart summarizes our investment in plant and systems over the past three fiscal years.
In thousands
2024
2023
2022
Source of supply, treatment and pumping
$
4,796 $
18,339 $
9,100
Transmission and distribution
31,683
37,175
30,808
General plant
2,251
4,553
3,856
Wastewater facilities
8,346
3,353
5,613
Allowance for Funds Used During Construction, AFUDC, equity portion
(1,134)
(1,243)
(894)
Total
$
45,942 $
62,177 $
48,483
Of the $62.6 million gross investment expected in 2025 approximately $16.2 million will be for extending transmission and distribution
facilities to address service needs in growth areas of our service territory. Approximately $14.1 million will be invested in upgraded
PFAS treatment equipment, new and rebuild water treatment facilities, equipment and wells throughout Delaware and Maryland.
Approximately $9.1 million will be invested in renewals associated with the rehabilitation of aging infrastructure. Approximately $7.5
million will be invested in general plant, which includes vehicles and other heavy duty operations related equipment, replacement
computer hardware and software, equipment upgrades, new corporate automation, station security upgrades, radio communication
upgrades and building renovations. Approximately $5.8 million will be invested in the ongoing construction of a regional wastewater
treatment plant along with improvements to existing wastewater treatment plants and wastewater pumping stations. Approximately
$4.0 million will be invested in the relocation of facilities because of government mandates. Approximately $2.7 million will be invested
to upgrade elevated storage tanks. Approximately $2.7 million will be invested in the construction of force mains used for the
transmission of wastewater to plants. Additionally, we will refund $0.5 million to customers, real estate developers and builders related
to previous advances for construction they provided to Artesian for distribution facilities on their properties.
Our projected capital expenditures and other investments are subject to periodic review, and revision to reflect changes in economic
conditions and other factors. The Company's investment for 2025 is expected to be offset by contributions in aid of construction of
$16.2 million for a net investment of $46.4 million in 2025. The Company believes the net investment in utility plant will continue to
be recovered through rates charged to customers.
Financing Activities
For the year ended December 31, 2024, cash flows provided by financing activities were $7.1 million, compared to $31.4 million for
the year ended December 31, 2023. Our primary source of liquidity from financing activities was $20.4 million in net contributions and
advances from developers and $0.8 million from the issuance of long-term debt. Cash flows provided by financing activities decreased
27
due to the net proceeds from the issuance of Class A Non-Voting Stock in May 2023 and June 2023 as well as decreased contributions
in aid of construction and borrowings on lines of credit. We have several sources of liquidity to finance our investment in utility plant
and other fixed assets. We estimate that future investments will be financed by our operations and external sources. We expect to fund
our activities for the next twelve months using our projected cash generated from operations, bank credit lines, and capital market
financing as needed to provide sufficient working capital to maintain normal operations, to meet our financing requirements and to
expand through strategic acquisitions. We believe that our cash on hand and future cash generated from the foregoing activities will
provide adequate resources to fund our short-term and long-term capital, operating and financing needs. However, there is no assurance
that we will be able to secure funding on terms acceptable to us, or at all. Our cash flows from operations are primarily derived from
water sales revenues and may be materially affected by changes in water sales due to weather and the timing and extent of increases in
rates approved by state public service commissions.
Material Cash Requirements
Lines of Credit and Long-Term Debt
At December 31, 2024, Artesian Resources had a $40 million line of credit with Citizens Bank, or Citizens, which is available to all
subsidiaries of Artesian Resources. As of December 31, 2024, there was $40.0 million of available funds under this line of credit. The
interest rate is a one-month Daily Secured Overnight Financing Rate, or SOFR, plus 10 basis points, or Term SOFR, plus an applicable
margin of 0.85%, which was increased to 1.10% effective August 3, 2023. Term SOFR cannot be less than 0.00%. This is a demand
line of credit and therefore the financial institution may demand payment for any outstanding amounts at any time. The term of this line
of credit expires on the earlier of May 19, 2025 or any date on which Citizens demands payment. The Company expects to renew this
line of credit.
At December 31, 2024, Artesian Water had a $20 million line of credit with CoBank, ACB, or CoBank, that allows for the financing of
operations for Artesian Water, with up to $10 million of this line available for the operations of Artesian Water Maryland. As of
December 31, 2024, there was $20.0 million of available funds under this line of credit. The interest rate for borrowings under this line
is either a daily SOFR rate plus 1.45% option or a term SOFR rate plus 1.45% option that is locked in for either one or three months.
The term of this line of credit expires on October 31, 2025. Artesian Water expects to renew this line of credit.
The Company’s material cash requirements include the following lines of credit commitments and contractual obligations:
Material Cash Requirements
Payments Due by Period
In thousands
Less than
1 Year
1-3
Years
4-5
Years
After 5
Years
Total
First mortgage bonds (principal and interest)
$
7,870
$
15,659 $
39,045 $
198,313 $
260,887
State revolving fund loans (principal and interest)
1,144
2,130
2,130
9,662
15,066
Promissory note (principal and interest)
962
1,924
1,925
8,689
13,500
Asset purchase contractual obligation (principal
and interest)
333
647
---
---
980
Lines of credit
---
---
---
---
---
Operating leases
28
56
42
1,321
1,447
Operating agreements
38
31
4
---
73
Unconditional purchase obligations
928
1,000
114
260
2,302
Tank painting contractual obligation
313
---
---
---
313
Total contractual cash obligations
$
11,616
$
21,447 $
43,260
$
218,245 $
294,568
Artesian’s long-term debt agreements and revolving lines of credit contain customary affirmative and negative covenants that are binding
on us (which are in some cases subject to certain exceptions), including, but not limited to, restrictions on our ability to make certain
loans and investments, guarantee certain obligations, enter into, or undertake, certain mergers, consolidations or acquisitions, transfer
certain assets or change our business. As of December 31, 2024, we were in compliance with these covenants.
Long-term debt obligations reflect the maturities of certain series of our first mortgage bonds, which we intend to refinance when due
if not refinanced earlier. One first mortgage bond is subject to redemption in a principal amount equal to $150,000 plus interest per
calendar quarter. The state revolving fund loan obligation and promissory note obligation have an amortizing mortgage payment payable
over a 20-year period. The first mortgage bonds, the state revolving fund loan and the promissory note have certain financial covenant
provisions, the violation of which could result in default and require the obligation to be immediately repaid, including all interest. We
have not experienced conditions that would result in our default under these agreements.
The asset purchase contractual obligation is related to the purchase of substantially all of the water operating assets from the Town of
Clayton in May 2022, by Artesian Water. The total purchase price was $5.0 million. At closing, Artesian Water paid approximately
28
$3.4 million. The balance is payable in five equal annual installments on the anniversary date of the closing date. Each annual
installment is payable with interest at an annual rate of 2.0%.
As previously disclosed, on December 9, 2022, Artesian Water Company entered into a Financing Agreement, or the Financing
Agreement, with the Delaware Drinking Water State Revolving Fund, or the Fund, acting by and through the Delaware Department of
Health & Social Services, Division of Public Health, a public agency of the state of Delaware, or the Department. Under the Financing
Agreement, the Department agreed to advance to or to reimburse Artesian Water up to $901,170 from the Fund to finance all or a portion
of the costs to replace a specific water transmission main in a service area located in New Castle County, Delaware. In October 2024,
Artesian Water provided notice to the Department confirming that no funds will be requested for reimbursement under this Financing
Agreement.
In order to control purchased power cost, in February 2021, Artesian Water entered into an electric supply contract with MidAmerican
that is effective from May 2021 to May 2025. The fixed rate was lowered 5.6% starting in May 2021. In February 2022, Artesian Water
Maryland entered into an electric supply agreement with Constellation NewEnergy, Inc., effective from May 2022 through November
2025. In January 2022, following the acquisition of Tidewater Environmental Services, Inc. dba Artesian Wastewater, or TESI, assumed
an electric supply contract with WGL Energy that was effective through December 2024. In November 2024, TESI entered into a short-
term electric supply contract with WGL Energy effective December 2024 through May 2025. The fixed rate was increased 44.4%
starting in December 2024. These fixed rate electric supply contracts are for normal purchases and are not derivative instruments.
Payments for unconditional purchase obligations reflect minimum water purchase obligations based on rates that are subject to change
under an interconnection agreement with the Chester Water Authority. The agreement is effective from January 1, 2022 through
December 31, 2026, includes automatic five-year renewal terms, unless terminated by either party, and has a “take or pay” clause which
currently requires us to purchase a minimum of 0.5 million gallons of water per day. In addition, payments for unconditional purchase
obligations reflect minimum water purchase obligations based on a contract rate under our interconnection agreement with the Town of
North East, which expires June 26, 2029. The agreement includes a remaining automatic five-year renewal term, unless terminated by
either party.
In April 2021, Artesian Water entered into a 3-year agreement with Worldwide Industries Corporation effective July 1, 2021 to paint
elevated water storage tanks. Pursuant to the agreement, the total expenditure for the three years was $1.2 million. In September 2022,
this agreement was amended to paint an additional elevated water storage tank and to extend the term of the agreement for an additional
year. Pursuant to the amended agreement, the total expenditure for the four years is $2.2 million.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
See Note 18 (Impact of Recent Accounting Pronouncements) to our Consolidated Financial Statements for a full description of the
impact of recent accounting pronouncements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company’s business operations give rise to market risk exposure due to changes in interest rates and commodity prices. To manage
such risks effectively, the Chief Financial Officer, with support from the Executive Officers, Audit Committee and Board of Directors,
evaluates strategies to mitigate these risks by limiting variable rate exposure and by monitoring the effects of market changes in interest
rates. The Company’s financial risk management evaluations are designed to protect against risk arising from extreme adverse market
movements on our key exposures.
The Company is subject to the risk of fluctuating interest rates in the normal course of business. Our policy is to manage interest rates
through the use of fixed rate long-term debt and, to a lesser extent, short-term debt. The Company's exposure to interest rate risk related
to existing fixed rate, long-term debt is due to the term of the majority of our First Mortgage Bonds and the term of the promissory note,
which have final maturity dates ranging from 2028 to 2049, and interest rates ranging from 4.24% to 5.96%, which exposes the Company
to interest rate risk as interest rates may drop below the existing fixed rate of the long-term debt prior to such debt’s maturity. In addition,
the Company has interest rate exposure on $60 million of variable rate lines of credit with two banks. As of December 31, 2024, there
were no outstanding balances on the lines of credit. Increases in variable interest rates result in an increase in the cost of borrowing on
these variable rate lines of credit. We are also exposed to market risk associated with changes in commodity prices. Our risks associated
with price increases in chemicals, electricity and other commodities are mitigated by our ability to recover our costs through rate
increases to our customers. We have also sought to mitigate future significant electric price increases by signing multi-year supply
contracts at fixed prices.
29
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEETS
In thousands
ASSETS
December 31,
2024
December 31,
2023
Utility plant, at original cost less accumulated depreciation
$
747,186 $
714,284
Current assets
Cash and cash equivalents
1,147
2,505
Accounts and other receivables (less provision for expected credit loss 2024 - $343; 2023 - $328)
11,339
12,830
Income tax receivable
624
1,799
Unbilled operating revenues
1,861
1,934
Materials and supplies
4,278
5,983
Prepaid property taxes
2,188
2,269
Prepaid expenses and other
3,091
3,297
Total current assets
24,528
30,617
Other assets
Non-utility property (less accumulated depreciation 2024 - $1,116; 2023 - $1,052)
3,603
3,693
Other deferred assets
6,525
8,504
Goodwill
1,939
1,939
Operating lease right of use assets
414
506
Total other assets
12,481
14,642
Regulatory assets, net
14,428
7,289
Total Assets
$
798,623 $
766,832
LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity
Common stock
$
10,300 $
10,285
Preferred stock
—
—
Additional paid-in capital
143,920
143,369
Retained earnings
84,969
76,743
Total stockholders' equity
239,189
230,397
Long-term debt, net of current portion
176,509
178,307
415,698
408,704
Current liabilities
Lines of credit
---
---
Current portion of long-term debt
2,167
2,235
Accounts payable
11,228
9,697
Accrued expenses
5,336
3,519
Overdraft payable
31
9
Accrued interest
930
2,275
Income taxes payable
500
2
Customer and other deposits
3,347
2,983
Other
2,054
1,694
Total current liabilities
$
25,593 $
22,414
Commitments and contingencies (Note 11)
Deferred credits and other liabilities
Net advances for construction
$
1,582 $
2,797
Operating lease liabilities
404
503
Regulatory liabilities
30,267
25,676
Deferred investment tax credits
409
423
Deferred income taxes
52,265
58,381
Total deferred credits and other liabilities
$
84,927 $
87,780
Net contributions in aid of construction
272,405
247,934
Total Liabilities and Stockholders’ Equity
$
798,623 $
766,832
The notes are an integral part of the consolidated financial statements.
30
CONSOLIDATED STATEMENTS OF OPERATIONS
In thousands, except per share amounts
For the Year Ended December 31,
2024
2023
2022
Operating revenues
Water sales
$
88,079 $
80,033 $
78,318
Other utility operating revenue
13,129
12,195
11,506
Non-utility operating revenue
6,744
6,633
9,073
Total Operating Revenues
107,952
98,861
98,897
Operating expenses
Utility operating expenses
49,796
46,205
43,772
Non-utility operating expenses
4,743
4,428
6,850
Depreciation and amortization
13,629
13,335
12,620
Taxes
State and federal income tax expense
Current
6,737
2,962
4,285
Deferred
578
3,386
1,593
Property and other taxes
6,318
6,099
5,871
Total Operating Expenses
81,801
76,415
74,991
Operating income
26,151
22,446
23,906
Other income, net
Allowance for funds used during construction (AFUDC)
1,643
2,002
1,329
Miscellaneous
1,379
1,407
1,265
3,022
3,409
2,594
Income before interest charges
29,173
25,855
26,500
Interest charges
8,779
9,156
8,502
Net income applicable to common stock
$
20,394 $
16,699 $
17,998
Net income per common share:
Basic
$
1.98 $
1.67 $
1.90
Diluted
$
1.98 $
1.67 $
1.90
Weighted average common shares outstanding:
Basic
10,294
10,018
9,462
Diluted
10,296
10,022
9,481
Cash dividends per share of common stock
$
1.18 $
1.14 $
1.09
The notes are an integral part of the consolidated financial statements.
31
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands
For the Year Ended December 31,
2024
2023
2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
$
20,394 $
16,699 $
17,998
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization
13,629
13,335
12,620
Amortization of debt expense
353
355
354
Amortization of deferred income tax regulatory liability
(916)
(444)
(444)
Provision for bad debt expense
233
92
68
Deferred income taxes, net
1,480
3,813
2,282
Stock compensation expense
219
254
152
AFUDC, equity portion
(1,135)
(1,243)
(894)
Changes in assets and liabilities, net of acquisitions:
Accounts and other receivables
(257)
807
(3,847)
Income tax receivable
1,175
(167)
602
Unbilled operating revenues
73
(348)
(141)
Materials and supplies
1,705
(1,281)
(2,769)
Income taxes payable
498
(4)
6
Prepaid property taxes
81
(83)
697
Prepaid expenses and other
206
(419)
(216)
Other deferred assets
1,945
1,998
(5,473)
Regulatory assets
(206)
(497)
(37)
Regulatory liabilities
(2,800)
(2,724)
7,243
Accounts payable
305
284
(3,989)
Accrued expenses
552
614
(564)
Accrued interest
(1,345)
1,286
72
Customer deposits and other, net
634
(476)
545
NET CASH PROVIDED BY OPERATING ACTIVITIES
36,823
31,851
24,265
CASH FLOWS USED IN INVESTING ACTIVITIES
Capital expenditures (net of AFUDC, equity portion)
(45,942)
(62,177)
(48,483)
Investment in acquisitions, net of cash acquired
—
—
(6,341)
Proceeds from sale of assets
623
99
65
NET CASH USED IN INVESTING ACTIVITIES
(45,319)
(62,078)
(54,759)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments under lines of credit agreements
—
(23,477)
(41,038)
Borrowings under lines of credit agreements
—
3,303
34,509
Increase(decrease) in overdraft payable
22
(34)
13
Proceeds from contributions in aid of construction and advances
23,983
24,747
17,494
Payouts for contributions in aid of construction and advances
(3,547)
(2,228)
(1,063)
Net proceeds from issuance of common stock
347
37,073
2,090
Equity issuance cost
—
(317)
—
Issuance of long-term debt
758
5,608
31,803
Dividends paid
(12,168)
(11,242)
(10,319)
Debt issuance costs
—
—
(135)
Principal repayments of long-term debt
(2,257)
(2,010)
(1,643)
NET CASH PROVIDED BY FINANCING ACTIVITIES
7,138
31,423
31,711
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
(1,358)
1,196
1,217
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
2,505
1,309
92
CASH AND CASH EQUIVALENTS AT END OF YEAR
$
1,147 $
2,505 $
1,309
32
CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED
In thousands
For the Year Ended December 31,
2024
2023
2022
Non-cash Investing and Financing Activity:
Utility plant received as construction advances and contributions in aid of construction
$
8,718 $
3,492 $
8,416
Contractual amounts of contributions in aid of construction due from developers included in
accounts receivable
$
641 $
1,695 $
726
Contractual amounts of contributions in aid of construction received from developers
previously included in accounts receivable
$
1,790 $
799 $
356
Change in amounts included in accounts payable and accrued payables related to capital
expenditures
$
2,577 $
(3,384) $
3,182
Supplemental Cash Flow Information:
Interest paid
$
9,771 $
7,515 $
8,430
Income taxes paid
$
5,732 $
3,590 $
3,482
Income taxes refunded
$
701
---
---
The notes are an integral part of the consolidated financial statements.
33
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
In thousands
Common
Shares
Outstanding
Class A
Non-Voting
(1) (3) (4)
Common
Shares
Outstanding
Class B
Voting (2)
$1 Par Value
Class A
Non-Voting
$1 Par Value
Class B
Voting
Additional
Paid-in
Capital
Retained
Earnings
Total
Balance as of December 31,
2021
8,532
881
$8,532
$881
$104,989
$63,607 $178,009
Net income
—
—
—
—
—
17,998
17,998
Cash dividends declared
Common stock
—
—
—
—
—
(10,319)
(10,319)
Issuance of common stock
Dividend reinvestment plan
7
—
7
—
366
—
373
Employee stock options and
awards(4)
82
—
82
—
1,787
—
1,869
Employee Retirement Plan(3)
—
—
—
—
—
—
—
Balance as of December 31,
2022
8,621
881
$8,621
$881
$107,142
$71,286 $187,930
Net income
—
—
—
—
—
16,699
16,699
Cash dividends declared
Common stock
—
—
—
—
—
(11,242)
(11,242)
Issuance of common stock
Public offering, net of costs
763
763
35,464
36,227
Dividend reinvestment plan
8
—
8
—
373
—
381
Employee stock options and
awards(4)
12
—
12
—
390
—
402
Employee Retirement Plan(3)
—
—
—
—
—
—
—
Balance as of December 31,
2023
9,404
881
$9,404
$881
$143,369
$76,743 $230,397
Net income
—
—
—
—
—
20,394
20,394
Cash dividends declared
Common stock
—
—
—
—
—
(12,168)
(12,168)
Issuance of common stock
Dividend reinvestment plan
10
—
10
—
337
—
347
Employee stock options and
awards(4)
5
—
5
—
214
—
219
Employee Retirement Plan(3)
—
—
—
—
—
—
—
Balance as of December 31,
2024
9,419
881
$9,419
$881
$143,920
$84,969 $239,189
(1)
At December 31, 2024, 2023, and 2022, Class A Stock had 15,000,000 shares authorized. For the same periods, shares issued,
inclusive of treasury shares, were 9,447,848, 9,433,288 and 8,650,392, respectively.
(2)
At December 31, 2024, 2023, and 2022, Class B Stock had 1,040,000 shares authorized and 881,452 shares issued.
(3)
Artesian Resources Corporation registered 200,000 shares of Class A Stock, subsequently adjusted for stock splits, available
for purchase through the Company’s 401(k) retirement plan.
(4)
Under the Equity Compensation Plan, effective December 9, 2015, Artesian Resources Corporation authorized up to 331,500
shares of Class A Stock for issuance of grants in forms of stock options, stock units, dividend equivalents and other stock-based
awards, subject to adjustment in certain circumstances as discussed in the Plan. Includes stock compensation expense for the
years ended December 31, 2024, 2023, and 2022. See Notes to Consolidated Financial Statements - Note 9 - Stock
Compensation Plans.
The notes are an integral part of the consolidated financial statements.
34
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The audited consolidated financial statements are presented in accordance with the requirements of Form 10-K and accounting principles
generally accepted in the United States and consequently include all the disclosures required in the consolidated financial statements
included in the Company's Annual Report on Form 10-K. The accompanying consolidated financial statements include the accounts of
Artesian Resources Corporation and its subsidiaries and all intercompany balances and transactions between subsidiaries have been
eliminated.
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.
Regulated Utility Accounting
The accounting records of Artesian Water Company, Inc., or Artesian Water, Artesian Wastewater Management, Inc., or Artesian
Wastewater, and, effective January 14, 2022, Tidewater Environmental Services, Inc. dba Artesian Wastewater, or TESI, are maintained
in accordance with the uniform system of accounts as prescribed by the Delaware Public Service Commission, or the DEPSC. The
accounting records of Artesian Water Pennsylvania, Inc., or Artesian Water Pennsylvania, are maintained in accordance with the uniform
system of accounts as prescribed by the Pennsylvania Public Utility Commission, or the PAPUC. The accounting records of Artesian
Water Maryland, Inc., or Artesian Water Maryland, and Artesian Wastewater Maryland, Inc., or Artesian Wastewater Maryland, are
maintained in accordance with the uniform system of accounts as prescribed by the Maryland Public Service Commission, or the
MDPSC. All these subsidiaries follow the provisions of Financial Accounting Standards Board, or FASB, ASC Topic 980, which
provides guidance for companies in regulated industries. These regulated subsidiaries account for the majority of our operating revenue.
See Note 17 (Business Segment Information) to our Consolidated Financial Statements for a full description of our segment information.
Use of Estimates in the Preparation of Consolidated Financial Statements
The 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 that could impact the Company’s financial condition, results of
operations and cash flows. Actual results could differ from management's estimates. Management makes certain estimates and
assumptions regarding unbilled revenues, accounting for income taxes, credit losses and reserves for bad debt, lease agreements,
goodwill and contingent assets and liabilities.
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.
On December 31, 2022, the fair value determinations for TESI and the water operating assets acquired from the Town of Clayton were
finalized.
Utility Plant
Utility plant is stated at original cost. Cost includes direct labor, materials, AFUDC (see description below) and indirect charges for
such capitalized items as transportation, supervision, pension, medical, and other fringe benefits related to employees engaged in
construction activities. When depreciable units of utility plant are retired, the historical costs of plant retired is charged to accumulated
depreciation. Any cost associated with retirement, less any salvage value or proceeds received, is charged to the regulated retirement
liability. Maintenance, repairs, and replacement of minor items of utility plant are charged to expense as incurred.
35
Allowance for Funds Used during Construction, or AFUDC, is a non-cash credit to income with a corresponding charge to utility plant
that represents the cost of borrowed funds or a return on equity funds devoted to plant under construction. Presented in the table below
is AFUDC for the years ended December 31:
In thousands
2024
2023
2022
AFUDC - Debt
$
509
$
759
$
435
AFUDC - Equity
$
1,135
$
1,243
$
894
Utility plant comprises:
In thousands
Estimated
Useful Life
(In Years)
Estimated
Useful Life
(In Years)
Effective
June 12, 2024
December 31,
2024
December 31,
2023
Utility plant at original cost
Utility plant in service-Water
Intangible plant
— $
140
—
$
140
Source of supply plant
45-85
30,320
45-85
29,960
Pumping and water treatment plant
15-64
130,226
8-62
130,337
Transmission and distribution plant
Mains
73-81
390,741
81
370,977
Services
39-58
63,613
39
60,818
Storage tanks
70-76
39,760
76
40,933
Meters
16-26
30,223
26
30,318
Hydrants
60-68
20,158
60
18,980
General plant
5-81
59,634
5-31
67,317
Utility plant in service-Wastewater
Intangible plant
—
116
—
116
Treatment and disposal plant
20-81
71,332
20-81
67,789
Collection mains and lift stations
70-81
57,084
70-81
51,539
General plant
5-31
2,632
5-31
2,478
Property held for future use
—
3,742
—
4,028
Construction work in progress
—
39,718
—
23,724
939,439
899,454
Less – accumulated depreciation
192,253
185,170
$
747,186
$
714,284
Depreciation and Amortization
For financial reporting purposes, depreciation is recorded using the straight-line method at rates based on estimated economic useful
lives, which range from 5 to 85 years. Composite depreciation rates for water utility plant were 1.93%, 2.13% and 2.16% for 2024,
2023 and 2022, respectively. In a rate order issued by the DEPSC, the Company was directed, effective June 12, 2024, to begin using
revised depreciation rates for utility plant in Artesian Water, which are based on the estimated useful life years noted in the table above.
Artesian Water offsets depreciation recorded on utility plant by depreciation on utility property funded by Contributions in Aid of
Construction, or CIAC, and Advances for Construction, or Advances. This reduction in depreciation expense is also netted against
outstanding CIAC and Advances on the Consolidated Balance Sheet. Certain other deferred assets are amortized using the straight-line
method over applicable lives, which range from 20 to 24 years.
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
36
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.
Affiliated interest agreement deferred costs relate to the regulatory and administrative costs resulting from efforts necessary to secure
water allocations in Artesian Water Pennsylvania’s territory for the provision of service to the surrounding area and interconnection to
Artesian Water Pennsylvania’s affiliate regulated water utility Artesian Water. These costs were specifically included for cost recovery
pursuant to an Affiliated Interest Agreement between Artesian Water and Artesian Water Pennsylvania and were approved for recovery
by the PAPUC and were reclassified from deferred costs to a regulatory asset in 2022. Amortization of these deferred costs began in
the fourth quarter of 2023.
Deferred acquisition adjustments represent the excess payment for purchases of utility plant from Delaware municipalities over the
determined original cost net of depreciation. Deferred acquisition costs represent the closing cost associated with the acquisitions. Costs
of $3.7 million were reclassified from net utility plant and $0.1 million were reclassified from contributions in aid of construction, which
are being amortized over the periods noted in the table below and recovered in customer rates effective June 12, 2024 as part of the
DEPSC approved settlement agreement for the Artesian Water rate application filed on April 28, 2023.
Unrecovered reserve for depreciation of $4.3 million is the result of the implementation of a change in depreciation methods for certain
general plant assets that are being amortized over five years and recovered in customer rates effective June 12, 2024 as part of the
DEPSC approved settlement agreement for the Artesian Water rate application filed on April 28, 2023. Amortization of these deferred
costs began in the third quarter of 2024.
Regulatory expenses amortized on a straight-line basis are noted below:
Regulatory assets, net of amortization, comprise:
(in thousands)
December 31, 2024
December 31, 2023
Deferred contract costs and other
$
161
$
209
Rate case studies
141
166
Delaware rate proceedings
474
355
Deferred income taxes
423
444
Debt related costs
3,969
4,322
Deferred costs affiliated interest agreement
1,054
1,110
Goodwill
251
258
Deferred acquisition and franchise costs – Maryland
499
425
Deferred acquisition costs – Delaware
231
---
Deferred acquisition adjustments – Delaware
3,359
---
Unrecovered reserve for depreciation
3,866
---
$
14,428
$
7,289
Expense
Years Amortized
Deferred contract costs and other
5
Rate case studies
5
Delaware rate proceedings
3
Debt related costs
15 to 30
(based on term of related debt)
Deferred costs affiliated interest agreement
20
Goodwill (Mountain Hill Water Company acquisition in 2008)
50
Deferred acquisition and franchise costs - Maryland
20 – 80
Deferred acquisition costs – Delaware
20
Deferred acquisition adjustments - Delaware
36 – 62
Unrecovered reserve for depreciation (general plant assets)
5
37
Impairment or Disposal of Long-Lived Assets
Our long-lived assets consist primarily of utility plant in service and regulatory assets. A review of our long-lived assets is performed
in accordance with the requirements of FASB ASC Topic 360. In addition, the regulatory assets are reviewed for the continued
application of FASB ASC Topic 980. The review determines whether there have been changes in circumstances or events that have
occurred requiring adjustments to the carrying value of these assets. FASB ASC Topic 980 stipulates that adjustments to the carrying
value of these assets would be made in instances where the inclusion in the rate-making process is unlikely. For the years ended
December 31, 2024, 2023 and 2022, there was no impairment or regulatory disallowance identified in our review.
Goodwill
The Company records goodwill when the purchase price of a business combination exceeds the estimated fair value of net identified
tangible and intangible assets acquired. At December 31, 2024 and December 31, 2023, the Company had approximately $1.9 million
of goodwill, respectively. The $1.9 million of goodwill arose from the January 2022 acquisition of Tidewater Environmental Services,
Inc. Artesian Wastewater operates as the parent holding company of Tidewater Environmental Services, Inc. dba Artesian Wastewater,
or TESI, and is a subsidiary of our Regulated Utility segment. In accordance with the accounting guidance for testing goodwill for
impairment, the Company performs an annual assessment. In 2023 and 2024, the Company used the optional qualitative assessment,
"step zero”, to identify and evaluate relevant events and circumstances to conclude whether it is more likely than not that the fair value
of its reporting unit is less than its carrying amount, including goodwill. Relevant events and circumstances assessed included
macroeconomic conditions, industry and market conditions, cost factors, financial performance, management and overall strategy. After
evaluating and weighing these relevant events and circumstances, it was concluded that there was no impairment of goodwill and it was
not necessary to perform quantitative testing.
Other Deferred Assets
The investment in CoBank, ACB, or 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 as further discussed in Note 1 – Accounts Receivable.
Other deferred assets at December 31, net of amortization, comprise:
In thousands
2024
2023
Investment in CoBank
$
6,425
$
5,882
Settlement agreement receivable-long term
---
2,496
Other deferred assets
100
126
$
6,525 $
8,504
Advances for Construction
Cash advances to reimburse Artesian Water for its costs to construct water mains, services and hydrants are contributed to Artesian
Water by real estate developers and builders in order to extend water service to their properties. The value of these contributions is
recorded as Advances for Construction. Artesian Water makes refunds on these advances over a specific period of time based on
operating revenues generated by the specific plant or as new customers are connected to the mains. After all refunds are made within
the contract period, any remaining balance is transferred to CIAC.
Contributions in Aid of Construction
CIAC includes the non-refundable portion of advances for construction and direct contributions of water mains, services and hydrants,
and wastewater treatment facilities and collection systems, or cash to reimburse our water and wastewater subsidiaries for costs to
construct water mains, services and hydrants, and wastewater treatment and disposal plants. Effective with the Tax Cuts and Jobs Act,
or TCJA, in 2017 CIAC was taxable and the DEPSC, MDPSC and PAPUC allowed the Company to collect additional CIAC to pay the
associated tax. In 2021, legislation was enacted to amend the TCJA, which now exempts CIAC from income taxes for regulated water
and wastewater utilities, effective for all of 2021 and forward.
For the year ended December 31, 2023, Artesian Water received approximately $3.8 million in grant funding from the State of Delaware,
Delaware Department of Health and Social Services, Division of Public Health, or DPH, pursuant to grant agreements. For the year
ended December 31, 2024, Artesian Water did not receive grant funding. The grants received in 2023 were used by Artesian Water to
38
cover the costs associated with certain construction projects. The grant funds received under the grant agreements were recorded in
accordance with the requirements under FASB ASC Topic 980, in Net contributions in aid of construction in the Consolidated Balance
Sheets. Pursuant to the grant agreements, Artesian Water is no longer eligible to receive grant funds under these grants.
Regulatory Liabilities
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. 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.
The annual amortization currently authorized by the DEPSC could be adjusted in future rate applications.
Deferred settlement refunds consist of 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, pursuant to the Settlement Agreement. Three installments for approximately $2.5 million each were paid in
August 2022, July 2023 and July 2024. The final $2.5 million installment payment is due no later than July 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 is applied to current and future customer bills in annual installments. The first three refunds occurred
in October 2022, August 2023 and August 2024. The final customer refund will occur no later than August 2025. The amount of the
credit will be calculated by dividing the amount of the reimbursement by the number of eligible customers. Beginning in 2022, Artesian
Water began recording recovery of capital expenditures as Contributions in Aid of Construction and began recording expense recovery
as an offset to operations and maintenance expense, with the intention that those recoveries will be available for inclusion and
consideration in any future rate applications.
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 7 – Income Taxes) 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 Artesian Water to amortize 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, Artesian
Water received a rate order from the DEPSC instructing Artesian Water to continue amortizing the liability over a period of 49.5 years,
subject to review in Artesian Water’s next base rate filing. On June 12, 2024, the DEPSC approved a settlement agreement for the
Artesian Water rate application, filed on April 28, 2023, that required two changes to the deferred income tax regulatory liability effective
June 12, 2024. A $7.6 million gross-up adjustment was recorded to reflect the benefit customers would receive from the implementation
of new base rates and $4.0 million of the regulatory liability, which represents costs not subject to IRS normalization rules, is now
required to be amortized over a six-year period rather than 49.5 years. 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.
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 subsidiaries 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
39
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. For the full year 2023, the Company accrued approximately $12,000 in penalties and interest related to positions
taken on the 2022 corporate income tax return. For the full year 2024, the Company has accrued approximately $17,000 in penalties and
interest related to positions taken on the 2022 corporate income tax return. The Company remains subject to examination by federal
and state authorities for the tax years 2021 through 2024.
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.
Stock Compensation Plans
See Note 9 (Stock Compensation Plans) to our Consolidated Financial Statements for a full description of our stock compensation plans.
Revenue Recognition and Unbilled Revenues
See Note 2 (Revenue Recognition) to our Consolidated Financial Statements for a full description of our revenue recognition.
Leases
The Company has agreements for land easements and office equipment under operating leases. Management makes certain estimates
and assumptions regarding each lease agreement, renewal and amendment, including, but not limited to, discount rates and probable
term, which can impact the escalations in payment that are taken into consideration when calculating the straight-line basis. The amount
of rent expense and income reported could vary if different estimates and assumptions are used. Management also makes certain
estimates and assumptions regarding the fair value of the leased property at lease commencement and the separation of lease and
nonlease components. See Note 3 (Leases) to our Consolidated Financial Statements for a full description of our leases.
Accounts Receivable
Accounts receivable are recorded at the invoiced amounts. As set forth in a settlement agreement, Artesian Water will receive
reimbursements from the 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 Site in groundwater that Artesian Water uses for public potable
water supply. Three installments for approximately $2.5 million each were paid in August 2022, July 2023 and July 2024. The final
$2.5 million installment payment is due no later than July 2025. In addition, the Trust shall reimburse Artesian Water for documented
reasonable and necessary capital and operating costs after July 1, 2021 that Artesian Water incurs to treat contaminants of concern and
of emerging concern.
A provision for expected credit loss is calculated as a percentage of total associated revenues based upon historical trends and adjusted
for current and reasonable projections based upon expected economic conditions. We mitigate our exposure to credit losses by
discontinuing services in the event of non-payment; accordingly, the related provision for expected credit loss and associated bad debt
expense has not been significant. The provision for expected credit loss was $0.3 million and $0.3 million at December 31, 2024 and
December 31, 2023, respectively. The corresponding expense for the years ended December 31, 2024 and 2023 was $0.2 million and
$0.1 million, respectively, reported in Operating expenses – Utility and Non-utility operating expenses on the Company’s Consolidated
Statements of Operations. The following table summarizes the changes in the Company’s accounts receivable balance:
December 31,
In thousands
2024
2023
2022
Customer accounts receivable – water
$
6,824
$
6,573
$
5,981
Customer accounts receivable – wastewater
928
869
767
Customer accounts receivable – SLP Plan
470
409
384
Settlement agreement receivable – short term
2,523
2,747
2,532
Developer receivable
837
2,089
1,151
Miscellaneous accounts receivable
100
471
3,112
11,682
13,158
13,927
Less provision for expected credit loss
343
328
416
Net accounts receivable
$
11,339
$
12,830
$
13,511
40
The activities in the provision for expected credit loss are as follows:
December 31,
In thousands
2024
2023
Beginning balance
$
328 $
416
Provision adjustments
204
92
Recoveries
29
48
Write off of uncollectible accounts
(218)
(228)
Ending balance
$
343 $
328
Cash and Cash Equivalents
For purposes of the Consolidated Statement of Cash Flows, Artesian Resources considers all temporary cash investments with an original
maturity of three months or less to be cash equivalents. The Company utilizes its bank's zero balance account disbursement service to
reduce the use of their lines of credit by funding checks as they are presented to the bank for payment rather than at issuance. If the
checks currently outstanding, but not yet funded, exceed the cash balance on our books, the net liability is recorded as a current liability
on the Consolidated Balance Sheet in the Overdraft Payable account.
Inventories
Inventories consist of materials and supplies related to water and wastewater utility plant. These materials and supplies are used for
new construction and repairs and are recorded at the purchase cost. Usage costs are determined by the first-in, first-out method. The
Company adjusts inventory value based on historical usage and forecasted demand.
NOTE 2 – REVENUE RECOGNITION
Background
Artesian’s operating revenues are primarily derived from contract services based upon regulated tariff rates approved by the DEPSC,
the MDPSC, and the PAPUC. Regulated 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, which are primarily non-utility revenues, are derived from SLP Plan fees, water and wastewater contract
operations, design and installation contract services, and wastewater inspection fees. Other regulated operating revenue are derived
from 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
41
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. Any estimated revenue amounts are recorded as unbilled operating revenue (contract asset) through the end of the accounting
period and will be billed at each year end for any shortfall of the actual volume from the required minimal volume.
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 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 quarterly cycle.
Artesian generates fixed-fee revenue for water and wastewater services provided to customers once a customer requests service in our
territory. 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 against unbilled operating revenue on the 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.
Artesian generates revenue from interim temporary rates. In Delaware, utilities are permitted by law to place rates into effect, under
bond, on a temporary basis, pending resolution of an application for a base rate increase by the DEPSC. Temporary rate revenue is
calculated as a percentage increase on tariff rates. We recognize this revenue based on the same guidelines as noted above depending
on whether the additional rate was applied to consumption revenue or fixed-fee revenue. Until final rates are determined by the DEPSC,
if it is probable that a refund of revenue associated with temporary rates will occur, a reserve would be recorded reducing revenue from
temporary rates. Temporary rates that were previously effective as of November 28, 2023 were replaced with final rates effective June
12, 2024, with no reserve or reduction to previously recorded revenue, as approved by the DEPSC.
Accounts receivable related to tariff contract revenues are typically due within 25 days of invoicing. A provision for expected credit
loss 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 provision for
expected credit loss and associated bad debt expense has not been significant.
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. A provision for expected credit loss is calculated as a percentage of total SLP Plan contract revenue. We mitigate
42
our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related provision for expected
credit loss 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. A provision for expected credit loss 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 provision for expected credit loss 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 December 31, 2024, there is no associated contract asset or liability. There is no provision for
expected credit loss 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, provision for expected credit loss 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:
For the Year
Ended December 31,
(in thousands)
2024
2023
2022
Tariff Revenue
Consumption charges
$
58,477
$
49,051
$
47,809
Fixed fees
36,825
33,074
31,431
Service charges
735
682
597
DSIC
136
4,727
5,085
Metered wastewater services
809
602
649
Industrial wastewater services
1,859
1,851
1,853
Total Tariff Revenue
$
98,841
$
89,987
$
87,424
Non-Tariff Revenue
Service line protection plans
$
5,825
$
5,632
$
5,020
Contract operations
1,047
1,046
931
Design and installation
62
181
3,315
Inspection fees
410
424
326
Total Non-Tariff Revenue
$
7,344
$
7,283
$
9,592
Other Operating Revenue
$
1,767
$
1,591
$
1,881
Total Operating Revenue
$
107,952
$
98,861
$
98,897
43
Contract Assets and Contract Liabilities
Our contract assets and liabilities consist of the following:
(in thousands)
December 31,
2024
December
31, 2023
December 31,
2022
Contract Assets - Tariff
$
3,030
$
3,043
$
2,618
Deferred Revenue
Deferred Revenue – Tariff
$
1,385
$
1,300
$
1,231
Deferred Revenue – Non-Tariff
714
539
438
Total Deferred Revenue
$
2,099
$
1,839
$
1,669
For the year ended December 31, 2024, the Company recognized revenue of $1.3 million from amounts that were included in Deferred
Revenue – Tariff at the beginning of the year and revenue of $0.4 million from amounts that were included in Deferred Revenue – Non-
Tariff at the beginning of the year. For the year ended December 31, 2023, 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 December 31, 2024 and December 31, 2023, 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 December 31, 2024 and December 31, 2023, Deferred Revenue – Non-Tariff is recorded within Other current liabilities and
represents our remaining performance obligations for our SLP Plan services, contract water operation services and wastewater
inspections, which are expected to be satisfied and associated revenue recognized within the next three months, approximately five years
and one year, respectively.
NOTE 3 – LEASES
The Company leases land and office equipment under operating leases from non-related parties. Our leases have remaining lease terms
of 3 years to 72 years, some of which include options to automatically extend the leases for up to 66 years and are included as part of
the lease liability and right of use assets as we expect to exercise the options. One of the leases for land was terminated in its entirety
effective October 10, 2024. The remaining lease liability and right-of-use asset for the terminated lease was removed in the fourth
quarter of 2024. Any difference between the carrying amounts of the right-of-use asset and the lease liability will be recorded in the
income statement as a gain or loss. 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.
In October 1997, Artesian Water entered into a 33-year operating lease for a parcel of land with improvements located in South Bethany,
a municipality in Sussex County, Delaware. The annual lease payments increase each year by the most recent increase in the Consumer
Price Index for Urban Workers, CPI-U, as published by the U.S. Department of Labor, Bureau of Labor Statistics. At each eleventh
year of the lease term, the annual lease payment shall be determined based on the fair market value of the parcel of land. Rental payments
44
for 2024, 2023 and 2022 were $20,000, $19,000, and $19,000, respectively. The future minimum rental payment as disclosed in the
following table is calculated using CPI-U from August 2024 as well as the adjustment for an appraisal conducted in 2019 to determine
the fair market value of the parcel of land.
In March 2023, Artesian Water entered into a 5-year operating lease for office equipment. The quarterly lease payments under the lease
agreement remain fixed throughout the term of the lease. The previous lease for office equipment expired in March 2022. Payments
pursuant to the lease agreements for 2024, 2023 and 2022 were $8,000, $6,000 and $5,000, respectively.
Rent expense for all operating leases except those with terms of 12 months or less comprises:
For the Twelve Months
Ended December 31,
(in thousands)
2024
2023
Minimum rentals
$
35
$
34
Contingent rentals
---
---
$
35
$
34
Supplemental cash flow information related to leases is as follows:
(in thousands)
Twelve Months Ended
December 31, 2024
Twelve Months Ended
December 31, 2023
Cash paid for amounts included in the measurement of lease
liabilities:
Operating cash flows from operating leases
$
35
$
34
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
$
414
$
506
Supplemental balance sheet information related to leases is as follows:
(in thousands, except lease term and discount rate)
December 31, 2024
December 31, 2023
Operating Leases:
Operating lease right-of-use assets
$
414
$
506
Other current liabilities
$
8
9
Operating lease liabilities
404
503
Total operating lease liabilities
$
412
$
512
Weighted Average Remaining Lease Term
Operating leases
68 years
58 years
Weighted Average Discount Rate
Operating leases
5.0%
5.0%
45
Maturities of operating lease liabilities that have initial or remaining non-cancelable lease terms in excess of one year as of December
31, 2024 are as follows:
(in thousands)
Operating Leases
Year
2025
$
28
2026
28
2027
28
2028
22
2029
20
Thereafter
1,321
Total undiscounted lease payments
$
1,447
Less effects of discounting
(1,035)
Total lease liabilities recognized
412
As of December 31, 2024, we have not entered into finance leases that will commence at a future date.
NOTE 4 – FAIR VALUE OF FINANCIAL INSTRUMENTS
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. Under the fair value hierarchy, the fair value of such financial instruments is classified as a
Level 1.
Long-term Financial Liabilities
As of December 31, 2024 and December 31, 2023, all of the Company’s outstanding long-term debt interest rates were a fixed rate. The
fair value of the Company’s long-term debt is determined by discounting their future cash flows using current market interest rates on
similar instruments with comparable maturities consistent with FASB ASC 825. Under the fair value hierarchy, the fair value of the
long-term debt in the table below is classified as Level 2 measurements. Level 2 is valued using observable inputs other than quoted
prices. The fair values for long-term debt differ from the carrying values primarily due to interest rates that differ from the current
market interest rates. The carrying amount and fair value of Artesian Resources' long-term debt (including current portion) are shown
below:
In thousands
December 31,
2024
2023
Carrying amount
$
178,676 $
180,542
Estimated fair value
154,795
162,720
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 5 – 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 subsidiaries 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
46
reported at the revenue requirement level and amortized to income as the related temporary differences reverse, generally over the lives
of the related properties.
As of December 31, 2024, the Company has separate company state net operating loss carry-forwards aggregating approximately $16.5
million. Most of these net operating loss carry-forwards will not expire, with a negligible amount expiring in 2025. The Company has
recorded a valuation allowance to reflect the estimated amount of deferred tax assets that may not be realized in the future. The valuation
allowance increased to approximately $1,084,000 in 2024 from approximately $906,000 in 2023. Management believes that it is more
likely than not that the Company will realize the benefit of these deferred tax assets, net of the valuation allowance.
Components of Income Tax Expense
In thousands
For the Year Ended December 31,
Federal income taxes
2024
2023
2022
Current
$
4,733 $
1,946 $
2,912
Deferred
(104)
1,968
930
Total federal income tax expense
$
4, 629 $
3,914 $
3,842
For the Year Ended December 31,
State income taxes
2024
2023
2022
Current
$
2,004 $
1,016 $
1,373
Deferred
682
1,418
663
Total state income tax expense
$
2,686 $
2,434 $
2,036
Reconciliation of effective tax rate:
For the Year Ended December 31,
In thousands
2024
2024
2023
2023
2022
2022
Amount
Percent
Amount
Percent
Amount
Percent
Reconciliation of effective tax rate
Income before federal and state income
taxes
$
27,709
100.0% $
23,047
100.0% $
23,876
100.0%
Amount computed at statutory rate
5,819
21.0%
4,840
21.0%
5,014
21.0%
Reconciling items
State income tax-net of federal tax benefit
2,094
7.6%
1,918
8.3%
1,696
7.1%
Regulatory liability adjustment
(719)
(2.6)%
(449)
(1.9)%
(450)
(1.9)%
Other
121
.4%
39
.2%
(382)
(1.6)%
Total income tax expense and effective rate $
7,315
26.4% $
6,348
27.6% $
5,878
24.6%
Deferred income taxes at December 31, 2024 and 2023 were comprised of the following:
For the Year Ended
December 31,
In thousands
2024
2023
Deferred tax assets related to:
State operating loss carry-forwards
$
1,086 $
1,037
Bad debt allowance
96
92
Stock options
31
47
Tax effect of regulatory liabilities
7,408
—
Other
183
48
Total deferred tax assets
$
8,804 $
1,224
Less: valuation allowance
(1,084)
(906)
Total deferred tax assets net of valuation allowance
$
7,720 $
318
47
Deferred tax liabilities related to:
Property plant and equipment basis differences
$
(57,296) $
(56,012)
Bond retirement costs
(907)
(982)
Property taxes
(610)
(624)
Other
(1,172)
(1,081)
Total deferred tax liabilities
$
(59,985) $
(58,699)
Net deferred tax liability
$
(52,265) $
(58,381)
Schedule of Valuation Allowance
Balance at
Beginning of
Period
Additions
Charged to
Costs and
Expenses
Deductions
Balance at
End of Period
In thousands
Classification
For the Year Ended December 31, 2024 Valuation allowance for
deferred tax assets
$
906
$
190
$
12
$
1,084
For the Year Ended December 31, 2023 Valuation allowance for
deferred tax assets
$
600
$
312
$
6
$
906
For the Year Ended December 31, 2022 Valuation allowance for
deferred tax assets
$
546
$
54
$
---
$
600
Under FASB ASC Topic 740, the Company establishes reserves for uncertain tax positions based upon management’s judgment as to
the sustainability of these positions. The Company reserved a liability related to the difference in the tax depreciation utilizing the half-
year convention rather than the mid-quarter convention for 2022 and 2024.
The following table provides the changes in the Company's
uncertain tax position:
For the years ended December 31,
In thousands
2024
2023
Balance at beginning of year
$
158
$
146
Additions based on tax positions related to the current year
46
—
Additions based on tax positions related to prior years
17
12
Reductions for tax positions of prior years
—
—
Lapses in statutes of limitations
—
—
Balance at end of year
$
221
$
158
NOTE 6 – PREFERRED STOCK
As of December 31, 2024 and 2023, Artesian Resources had no preferred stock outstanding. Artesian Resources has 100,000 shares of
$1.00 par value Series Preferred stock authorized but unissued.
NOTE 7 – COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL
The Class A Non-Voting Common Stock, or Class A Non-Voting Stock, of Artesian Resources trades on the Nasdaq Global Select
Market under the symbol ARTNA. The Class B Common Stock, or Class B Stock, of Artesian Resources trades on the Nasdaq's OTC
Bulletin Board under the symbol ARTNB. The rights of the holders of the Class A Non-Voting Stock and the Class B Stock are identical,
except with respect to voting.
48
Under Artesian Resources' dividend reinvestment plan, which allows for reinvestment of cash dividends and optional cash payments,
stockholders were issued approximately 10,000, 8,000 and 7,000 shares at fair market value for the investment of $347,000, $381,000,
and $373,000 of their monies in the years 2024, 2023, and 2022, respectively.
NOTE 8 – DEBT
At December 31, 2024, Artesian Resources had a $40 million line of credit with Citizens Bank, or Citizens, which is available to all
subsidiaries of Artesian Resources. As of December 31, 2024, there was $40.0 million of available funds under this line of credit. The
interest rate is a one-month Daily Secured Overnight Financing Rate, or SOFR, plus 10 basis points, or Term SOFR, plus an applicable
margin of 0.85%, which was increased to 1.10% effective August 3, 2023. Term SOFR cannot be less than 0.00%. This is a demand
line of credit and therefore the financial institution may demand payment for any outstanding amounts at any time. The term of this line
of credit expires on the earlier of May 19, 2025 or any date on which Citizens demands payment. The Company expects to renew this
line of credit.
At December 31, 2024, Artesian Water had a $20 million line of credit with CoBank, ACB, or CoBank, that allows for the financing of
operations for Artesian Water, with up to $10 million of this line available for the operations of Artesian Water Maryland. As of
December 31, 2024, there was $20.0 million of available funds under this line of credit. The interest rate for borrowings under this line
is either a daily SOFR rate plus 1.45% option or a term SOFR rate plus 1.45% option that is locked in for either one or three months.
The term of this line of credit expires on October 31, 2025. Artesian Water expects to renew this line of credit.
CoBank may make an annual patronage refund based on the average line of credit and loan volume outstanding in the prior year. The
$20 million line of credit, the First Mortgage Bonds and the promissory note are with CoBank. Patronage refunds earned by Artesian
in 2024 and 2023 were $1.6 million and $1.6 million, respectively.
The weighted average interest rate on the lines of credit discussed above paid by the Company was 6.47% for the year ended December
31, 2024. These lines of credit, as well as the long-term debt obligations shown below, require us to abide by certain financial covenants
and ratios. As of December 31, 2024, we were in compliance with these financial covenants.
Long-term debt consists of:
December 31,
In thousands
2024
2023
First mortgage bonds
Series R, 5.96%, due December 31, 2028
$
25,000
$
25,000
Series S, 4.45%, due December 31, 2033
5,400
6,000
Series T, 4.24%, due December 20, 2036
40,000
40,000
Series U, 4.71%, due January 31, 2038
25,000
25,000
Series V, 4.42%, due October 31, 2049
30,000
30,000
Series W, 4.43%, due April 30, 2047
30,000
30,000
155,400
156,000
State revolving fund loans
3.64%, due May 1, 2025
77
228
3.41%, due February 1, 2031
1,246
1,415
3.40%, due July 1, 2032
1,296
1,445
1.187%, due November 1, 2041
559
588
1.187%, due November 1, 2041
655
690
1.187%, due November 1, 2041
1,021
1,075
2.00%, due February 1, 2043
793
828
2.00%, due February 1, 2043
1,095
1,143
2.00%, due June 1, 2043
960
1,002
2.00%, due June 1, 2043
978
1,022
2.00%, due February 1, 2044
3,086
2,696
2.00%, due January 1, 2043
978
1,000
12,744
13,132
Notes Payable
49
Promissory Note, 5.12%, due December 30, 2028
$
9,590
$
10,155
Asset Purchase, 2.00%, due May 26, 2027
942
1,255
10,532
11,410
Sub-total
178,676
180,542
Less: current maturities (principal amount)
2,167
2,235
Total long-term debt
$
176,509
$
178,307
Payments of principal amounts due during the next five years and thereafter:
In thousands
2025
2026
2027
2028
2029
Thereafter
First Mortgage bonds
$
600 $
600 $
600 $
25,600 $
600 $
127,400
State revolving fund loans
773
816
836
857
878
8,584
Asset Purchase-Contractual Obligation
314
314
314
---
---
---
Promissory note
480
505
532
559
590
6,924
Total payments
$
2,167 $
2,235 $
2,282 $
27,016 $
2,068 $
142,908
Substantially all of Artesian Water's utility plant is pledged as security for our First Mortgage Bonds. As of December 31, 2024, no
other water utility plant has been pledged as security for loans. Two parcels of land in Artesian Wastewater are pledged as security for
the promissory note.
NOTE 9 – STOCK COMPENSATION PLANS
On December 9, 2015, the Company’s stockholders approved the 2015 Equity Compensation Plan, or the 2015 Plan, that replaced the
2005 Equity Compensation Plan, or the 2005 Plan, which expired on May 24, 2015. 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 of the Board of Directors, or the
Committee. The Committee has the authority to determine the individuals to whom grants will be made under the 2015 Plan, determine
the type, size and terms of the grants, determine 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 are eligible for grants under the 2015 Plan. Non-employee directors of the Company are also eligible to
receive grants under the 2015 Plan. The Company accounts for stock options issued after January 1, 2006 under FASB ASC Topic 718.
Compensation expenses for restricted stock awards were $219,000, $254,000 and $152,000 in 2024, 2023 and 2022, respectively. 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. As of December 31, 2024, there was $63,000 of unrecognized expense related to non-vested awards of
restricted shares granted under the 2015 Plan.
There was no stock compensation cost capitalized as part of an asset.
The following summary reflects changes in the shares of Class A Non-Voting Stock under option:
2024
Shares
2024
Weighted
Average
Exercise
Price
2023
Shares
2023
Weighted
Average
Exercise
Price
2022
Shares
2022
Weighted
Average
Exercise
Price
Plan options
Outstanding at beginning of year
0 $
00.00
6,750 $
21.86
83,000 $
21.65
Granted
—
—
—
—
—
—
Exercised
0
00.00
(6,750)
21.86
(76,250)
21.63
Expired
—
—
—
—
—
—
Outstanding at end of year
--- $
---
--- $
---
6,750 $
21.86
Options exercisable at year end
--- $
---
--- $
---
6,750 $
21.86
50
The total intrinsic value of options exercised during 2024, 2023 and 2022 were $0, $137,000 and $2,226,000, respectively. During 2024,
we received $0 in cash from the exercise of options, with a $0 tax benefit realized for those options.
The following table summarizes information about employee and director stock options outstanding and exercisable at December 31,
2024:
Options Outstanding and Exercisable
Range of Exercise
Price
Shares Outstanding at
December 31, 2024
Weighted Average
Remaining Life
Weighted Average
Exercise Price
Aggregate Intrinsic
Value
$
$00.00
0
0 Years $
00.00 $
0
As of December 31, 2024, there were no outstanding option shares.
The following summary reflects changes in the shares of Class A Stock underlying options and restricted stock awards (RSA):
Restricted Awards
Outstanding
Restricted
Stock Awards
Weighted
Average Grant
Date Fair Value
Restricted stock awards
Outstanding at January 1, 2024
5,000
$54.88
Granted
5,000
$37.07
Exercised/vested and released
(5,000)
$54.88
Expired/cancelled
---
---
Outstanding at December 31, 2024
5,000
$37.07
Exercisable/vested at December 31, 2024
---
$---
Stock Options
No options were granted in 2024, 2023 or 2022.
Shares of Class A Non-Voting Stock have been reserved for future issuance under the 2015 Plan.
Stock Awards
On May 6, 2024, 5,000 shares of Class A Non-Voting Common Stock, or Class A Stock, were granted as restricted stock awards. The
fair value per share was $37.07, the closing price of the Class A Stock as recorded on the Nasdaq Global Select Market on May 6, 2024.
These restricted stock awards will be fully vested and released one year after the grant date and, prior to their vesting date, are subject
to forfeiture in the event of the recipient’s termination of service.
On May 9, 2023, 5,000 shares of Class A Non-Voting Common Stock, or Class A Non-Voting Stock, were granted as restricted stock
awards. The fair value per share was $54.88, the closing price of the Class A Non-Voting Stock as recorded on the Nasdaq Global
Select Market on May 9, 2023. These restricted stock awards were fully vested and released one year after the grant date.
On May 3, 2022, 5,000 shares of Class A Non-Voting Stock, were granted as restricted stock awards. The fair value per share was
$45.58, the closing price of the Class A Non-Voting Stock as recorded on the Nasdaq Global Select Market on May 3, 2022. These
shares were fully vested and released one year after the grant date.
As of December 31, 2024, there was $63,000 of total unrecognized expense related to non-vested awards of restricted shares awarded
under the 2015 Plan. The cost will be recognized over 0.34 years, the remaining vesting period for the restricted stock awards.
The total intrinsic value of awards released during 2024 was approximately $197,400.
51
NOTE 10 – EMPLOYEE BENEFIT PLANS
401(k) Plan
Artesian Resources has a defined contribution 401(k) Salary Reduction Plan, or the 401(k) Plan, which covers substantially all
employees. Under the terms of the 401(k) Plan, Artesian Resources contributed 2% of eligible salaries and wages and matched employee
contributions up to 6% of gross pay at a rate of 50%. The 401(k) Plan also provides additional retirement benefits to full-time employees
hired prior to April 26, 1994, allowing them to save for future retiree medical costs that will be paid by employees by providing additional
cash resources to those employees upon a termination of employment or retirement to meet the cost of future medical expenses. These
eligible employees receive an additional contribution of 6% of eligible salaries and wages. The 401(k) Plan expenses, which include
Company contributions and administrative fees, for the years 2024, 2023 and 2022, were approximately $1.2 million, $1.4 million and
$1.3 million, respectively.
NOTE 11 – COMMITMENTS AND CONTINGENCIES
Leases
The Company’s leases are disclosed in Note 3 – Leases.
Easements
During 2003, Artesian Water Pennsylvania entered into a 40-year easement agreement to acquire an easement to access, operate,
maintain, repair, improve, replace and connect Artesian’s water system to a well, including a parcel of land around the well.
Management made certain estimates and assumptions regarding the separation of lease and non-lease components related to this
easement agreement. It was determined that the majority of this easement agreement contained non-lease components. In October
2024, this easement agreement was terminated in its entirety. Easement payments, including both lease and non-lease components, for
2024, 2023 and 2022 were $34,000, $45,000 and $43,000, respectively.
Artesian Wastewater entered into a perpetual agreement for the use of approximately 460 acres of land in Sussex County, Delaware for
wastewater disposal. Beginning November 2016, Artesian Wastewater was required to pay a minimum of $40,000 per year for the use
of this land. Once operations began in 2021, the monthly fee is based on the volume of wastewater disposed on the properties charged
at a rate per one thousand gallons of wastewater, providing for a minimum monthly payment. Payments for 2024, 2023 and 2022 were
$119,000, $126,000, $113,000, respectively. The agreement can be terminated by giving 180-day notice prior to the termination date.
The future minimum annual payment related to this easement agreement for the years subsequent to 2024 is $22,000.
Interconnections
Artesian Water has one water service interconnection agreement with a neighboring utility, Chester Water Authority. The agreement is
effective from January 1, 2022 through December 31, 2026, includes automatic five-year renewal terms, unless terminated by either
party, and has a “take or pay” clause which currently requires us to purchase a minimum of 0.5 million gallons of water per day. Rates
charged under this agreement are subject to change with notice.
Artesian Water Maryland has one interconnection agreement with the Town of North East that has a “take or pay” clause requiring us
to purchase a minimum of 35,000 gallons of water per day. The agreement extends through June 2029. The agreement includes one
remaining automatic five-year renewal term, unless terminated by either party.
The minimum annual purchase commitments for all interconnection agreements for 2025 through 2029, calculated at the noticed rates,
are as follows:
In thousands
2025
$
928
2026
943
2027
57
2028
57
2029
57
$
2,042
Expenses for purchased water were $1.5 million, $1.3 million and $1.8 million for 2024, 2023 and 2022, respectively.
52
Other Commitments
In April 2021, Artesian Water entered into a 3-year agreement with Worldwide Industries Corporation effective July 1, 2021 to paint
elevated water storage tanks. Pursuant to the agreement, the total expenditure for the three years was $1.2 million. In September 2022,
this agreement was amended to paint an additional elevated water storage tank and to extend the term of the agreement for an additional
year. Pursuant to the amended agreement, the total expenditure for the four years is $2.2 million. Tank painting expense for 2024, 2023
and 2022 was $735,000, $689,000, and $531,000, respectively.
Budgeted mandatory utility plant expenditures, due to planned governmental highway projects, which require the relocation of
Artesian Water's water service mains, expected to be incurred in 2025 through 2027 are as follows:
In thousands
2025
$
4,050
2026
13,715
2027
2,400
$
20,165
The exact timing and extent of these relocation projects is controlled primarily by the Delaware Department of Transportation.
NOTE 12 - GEOGRAPHIC CONCENTRATION OF CUSTOMERS
Artesian Water, Artesian Water Maryland and Artesian Water Pennsylvania provide regulated 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 December 31, 2024, Artesian Water was serving approximately
97,400 customers, Artesian Water Maryland was serving approximately 2,700 customers and Artesian Water Pennsylvania was serving
approximately 40 customers.
Artesian Wastewater and TESI provide regulated wastewater utility service to customers within their established service territory in
Sussex County, Delaware pursuant to rates filed with and approved by the DEPSC. As of December 31, 2024, Artesian Wastewater
and TESI were serving approximately 8,600 customers combined, including one large industrial customer.
NOTE 13 – REGULATORY PROCEEDINGS
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 Artesian Water, Artesian Wastewater, and TESI.
·
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 subsidiaries 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. Any DSIC rate in effect will
be reset to zero upon implementation of a temporary increase in base rates charged to customers. The first temporary increase may be
up to the lesser of $2.5 million on an annual basis or 15% of gross water sales. Should the rate case not be completed within seven
months, by law, the utility may put the entire requested rate relief, up to 15% of gross water sales, in effect under bond until a final
resolution is ordered and placed into effect. If any such rates are found to be in excess of rates the DEPSC finds to be appropriate, the
53
utility must refund customers the portion found to be in excess with interest. The timing of our rate increase requests is therefore
dependent upon the estimated cost of the administrative process in relation to the investments and expenses that we hope to recover
through the rate increase. We can provide no assurances that rate increase requests will be approved by applicable regulatory agencies
and, if approved, we cannot guarantee that these rate increases will be granted in a timely or sufficient manner to cover the investments
and expenses for which we initially sought the rate increase.
Artesian Water filed an initial request with the DEPSC on April 28, 2023, further supplemented with a request filed on November 30,
2023, to implement new rates to meet a requested increase in revenue of approximately $16.7 million, on an annualized basis, or 22.7%.
The DEPSC approved and Artesian Water implemented a temporary rate increase effective November 28, 2023 of approximately $10.8
million, on an annualized basis, or 14.6%, subject to refund, and reduced the DSIC previously in effect from approximately 7.5% to
zero. On May 22, 2024, Artesian Water, the Staff of the DEPSC, and the Division of the Public Advocate, or DPA, (collectively, the
Parties) entered into an agreement, or Settlement Agreement, to settle Artesian Water’s April 2023 application to implement new rates.
On June 12, 2024, a DEPSC order was issued approving the settlement agreement entered into on May 22, 2024 between the Parties.
The Settlement Agreement authorizes a total increase in the revenue requirement of $11.2 million, on an annualized basis, or
approximately 15.2%, with a rate effective date of June 12, 2024, which encompasses a 9.5% return on common equity and an overall
rate of return on rate base of 6.75%. Temporary rates that were in effect since November 28, 2023 were replaced with the final approved
rates from the Settlement Agreement. Revised depreciation rates for utility plant and revised amortization rates for certain regulatory
assets and liabilities were also approved effective June 12, 2024.
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
any 12-month period.
The following table summarizes (1) Artesian Water’s last two applications with the DEPSC to collect DSIC rates and (2) the rate upon
which eligible plant improvements was based:
Application Date
11/20/2020
05/30/2024
11/22/2024
DEPSC Approval Date
12/14/2020
06/12/2024
12/18/2024
Effective Date
01/01/2021
07/01/2024
01/01/2025
Cumulative DSIC Rate
7.50%
0.34%
1.66%
Net Eligible Plant Improvements –
Cumulative Dollars (in millions)
$43.1
$2.0
$11.7
Eligible Plant Improvements –
Installed Beginning Date
10/01/2014
11/01/2023
11/01/2023
Eligible Plant Improvements –
Installed Ending Date
04/30/2019
04/30/2024
10/31/2024
On December 18, 2024, the DEPSC approved Artesian Water’s application to implement a DSIC rate of 1.66%, effective January 1,
2025. Effective July 1, 2024, Artesian Water was permitted to recover specific investments made in infrastructure through the
assessment of a 0.34% DSIC. The January 1, 2025 and July 1, 2024 DSIC are subject to periodic audit by the DEPSC. Effective January
1, 2021, Artesian Water was permitted to recover specific investments made in infrastructure through the assessment of a 7.50% DSIC.
The January 1, 2021 DSIC rate was reset to zero when the temporary base rate increase was placed into effect on November 28, 2023.
For the years ended December 31, 2024, December 31, 2023 and December 31, 2022, we earned approximately $0.1 million, $4.7
million and $5.1 million in DSIC revenue, respectively.
NOTE 14 – NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE
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:
54
For the Year
Ended December 31,
2024
2023
2022
(in thousands)
Weighted average common shares outstanding during the period for basic computation
10,294
10,018
9,462
Dilutive effect of employee stock options
2
4
19
Weighted average common shares outstanding during the period for diluted computation
10,296
10,022
9,481
For the years ended 2024, 2023 and 2022, no shares of restricted stock awards were excluded from the calculations of diluted net income
per share. For the years ended 2024, 2023 and 2022, no stock options were excluded from the calculations of diluted net income per
share.
The Company has 15,000,000 authorized shares of Class A Non-Voting Stock, and 1,040,000 authorized shares of Class B Stock. As
of December 31, 2024, 9,418,871 shares of Class A Non-Voting Stock and 881,452 shares of Class B Stock were issued and
outstanding. As of December 31, 2023, 9,404,311 shares of Class A Non-Voting Stock and 881,452 shares of Class B Stock were
issued and outstanding. As of December 31, 2022, 8,621,415 shares of Class A Non-Voting Stock and 881,452 shares of Class B Stock
were issued and outstanding. The par value for both classes is $1.00 per share.
Equity per common share was $23.24, $23.00, and $19.86 at December 31, 2024, December 31, 2023, and December 31, 2022,
respectively. These amounts were computed by dividing common stockholders' equity by the number of weighted average shares of
common stock outstanding on December 31, 2024, December 31, 2023, and December 31, 2022, respectively.
NOTE 15 – COMMON STOCK OFFERING
On May 23, 2023, the Company completed the sale of 695,650 shares of its Class A Stock, par value $1.00 per share, at a price to the
public of $50 per share. The net proceeds to the Company from the offering, after deducting the underwriting discounts and commissions
and other offering costs, were approximately $33.0 million. The Company also granted the underwriter a 30-day option to purchase up
to an additional 104,348 shares of Class A Stock at the public offering price, less the underwriting discount. On June 16, 2023, the
underwriter exercised its over-allotment option to purchase 67,689 shares of Class A Stock at the public offering price. The net proceeds
to the Company resulting from the exercise of the over-allotment option, after deducting the underwriting discounts and commissions
and other offering costs, were approximately $3.2 million. All of the shares of Class A Stock sold in the offering were offered by the
Company.
The proceeds from both the initial offering and the over-allotment option were used to repay short-term borrowings, including
borrowings incurred under our lines of credit with Citizens Bank and CoBank, incurred primarily to finance capital expenditures,
including investment in utility plant and equipment, and other general corporate purposes.
NOTE 16 - LEGAL PROCEEDINGS
Periodically, we are involved in other proceedings or litigation arising in the ordinary course of business. We do not believe that the
ultimate resolution of these matters will materially affect our business, financial position or results of operations. However, we cannot
ensure that we will prevail in any litigation and, regardless of the outcome, may incur significant litigation expense and may have
significant diversion of management attention.
Several of the water systems of Artesian Resources’ subsidiaries are claimants in two multi-district litigation, or MDL, class action
settlements designed to resolve claims for per- and polyfluoroalkyl substances, or PFAS, contamination in Public Water Systems’
Drinking Water, as those terms are defined in the respective Agreements (the “Settlements”), which are with two groups of settling
defendants on behalf of: (1) the 3M company (“3M”); and (2) E.I. Du Pont de Nemours and Company (n/k/a Eidp, Inc.), DuPont de
Nemours Inc., The Chemours Company, The Chemours Company FC, LLC, and Corteva, Inc. (collectively, “DuPont”). Phase One
Public Water System Settlement Claims Forms have been submitted on behalf of Artesian Resources’ eligible systems in each of the
Settlements. The amount of any recovery, if any, by Artesian Resources’ subsidiaries is uncertain.
Several of the water systems of Artesian Resources’ subsidiaries are eligible claimants in the MDL class action settlement designed to
resolve claims for PFAS contamination in Public Water Systems’ Drinking Water, as those terms are defined in the settlement agreement
of settling defendants Tyco Fire Products LP and Chemguard, Inc. (the “Tyco Settlement”). The deadline for eligible claimants to
submit requests for exclusion from the settlement was September 23, 2024; Artesian Resources’ subsidiaries have elected to remain in
the settlement class. The amount of any recovery, if any, by Artesian Resources’ subsidiaries is uncertain.
55
Several of the water systems of Artesian Resources’ subsidiaries may be eligible claimants in the MDL class action settlement designed
to resolve claims for PFAS contamination in Public Water Systems’ Drinking Water, as those terms are defined in the settlement
agreement of settling defendant BASF Corporation (the “BASF Settlement”). The deadline for eligible claimants to submit requests for
exclusion from the settlement was October 15, 2024; Artesian Resources’ subsidiaries have elected to remain in the settlement class.
The amount of any recovery, if any, by Artesian Resources’ subsidiaries is uncertain.
NOTE 17 - BUSINESS SEGMENT INFORMATION
The Company’s operating segments are comprised of its businesses which generate revenues and incur expenses, for which separate
operational financial information is available and is regularly evaluated by management for the purpose of making operating decisions,
assessing performance, and allocating resources. The Company operates its businesses primarily through one reportable segment, the
Regulated Utility segment. The Regulated Utility segment is the largest component of the Company’s business and includes an
aggregation of our five regulated utility subsidiaries that are in the business of providing regulated water and wastewater services on the
Delmarva Peninsula. Our regulated water utility services include treating, distributing, and selling water to residential, commercial,
industrial, governmental, municipal and utility customers throughout the State of Delaware and in Cecil County, Maryland and to a
residential community in Chester County, Pennsylvania. Our regulated wastewater utility services include the treatment and disposal
of wastewater for customers in Sussex County, Delaware. The Company is subject to regulations as to its rates, services, and other
matters by the states of Delaware, Maryland and Pennsylvania with respect to utility service within these states.
The Chief Operating Decision Maker, or CODM, is the Executive Committee led by the Chief Executive Officer and includes the
Chief Financial Officer. The CODM uses operating income as its measure of profit to assess the performance of each segment. This
profit measure excludes the financing component and allows management to focus on controllable expenses, to allocate resources
during the annual budgeting process and to monitor budget versus actual results on a monthly basis.
The accounting policies of the operating segments are the same as those described in Note 2 – Basis of Presentation. The measurement
of depreciation, interest, and capital expenditures are predominately related to our Regulated Utility segment. These amounts in our
non-utility business are negligible and account for approximately less than 1% of consolidated amounts as of December 31, 2024,
December 31, 2023 and December 31, 2022.
In thousands
Years Ended December 31,
2024
2023
2022
Regulated
Utility
Total
Regulated
Utility
Total
Regulated
Utility
Total
Regulated Utility Revenues
$
101,210
$
101,210
$
92,228
$
92,228
$
89,818
$
89,818
Reconciliation of revenue
Other revenues
7,014
(a)
6,877
(a)
9,248
(a)
Inter-segment elimination
(272)
(244)
(169)
Consolidated revenues
107,952
98,861
98,897
Less: (b)
Payroll and Benefits (c)
25,975
25,031
24,018
Supply and Delivery (d)
14,704
12,595
11,936
Administrative (e)
9,389
8,823
7,987
Depreciation and Amortization
13,578
13,281
12,563
Income Taxes
6,552
5,216
5,091
Property and other taxes
6,255
6,036
5,812
Regulated Utility Operating
Income
$
24,757
24,757
$
21,246
21,246
$
22,411
22,411
Reconciliation of operating income
Other profit
1,394
(a)
1,200
(a)
1,495
(a)
Consolidated operating income
$
26,151
$
22,446
$
23,906
December 31, 2024
December 31, 2023
Regulated
Utility
Total
Regulated
Utility
Total
Assets
Regulated Utility Assets
$ 793,118
$ 793,118
$
760,339
$ 760,339
56
Reconciliation of assets
Other assets
5,505
6,493
Consolidated assets
$ 798,623
$ 766,832
(a) Other revenues and other profit:
– Revenue and profit from segments below the quantitative thresholds are attributable to four non-utility businesses of the
Company
– These businesses are primarily comprised of: Service Line Protection Plan services for water, sewer and internal plumbing;
design, construction and engineering services; contract services for the operation and maintenance of water and wastewater
systems in Delaware and Maryland; and leased space to the Regulated Utility Segment
– These non-utility businesses do not individually or in the aggregate meet the quantitative thresholds for determining reportable
segments
– Certain corporate costs have been allocated from the regulated utility segment to the non-utility businesses and are included in
the other profit amounts shown
(b) Significant expense categories:
– The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM
– Inter-segment expenses related to leased space provided by one non-utility business, calculated on the lower of cost or market
method, are included in the amounts shown
(c) Payroll and benefits:
– This category does not include amounts capitalized on the Consolidated Balance Sheet
(d) Supply and Delivery:
– This category includes purchased power, purchased water, chemicals, infrastructure maintenance and repair costs, and
wastewater disposal fees
(e) Administration expense:
– This category includes computer systems maintenance and subscription fees, audit and legal fees, insurance, customer billing,
and other general and administrative expenses
NOTE 18 - IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In November 2023, the FASB issued amended guidance for improvements to reportable segment disclosures. The amendments in this
update require the Company to disclose significant segment expenses that are regularly provided to the chief operating decision makers,
or CODMs, and are included within each reported measure of segment operating results. The standard also requires the Company to
disclose the total amount of any other items included in segment operating results which were not deemed to be significant expenses for
separate disclosure, along with a qualitative description of the composition of these other items. In addition, the standard also requires
disclosure of the CODM’s, title and position, as well as detail on how the CODM uses the reported measure of segment operating results
to evaluate segment performance and allocate resources. The standard also aligns interim segment reporting disclosure requirements
with annual segment reporting disclosure requirements. The Company adopted this standard effective with our December 31, 2024 year
end reporting, and the standard will be effective for interim reporting periods in fiscal years beginning after December 15, 2024. The
standard required retrospective application to all prior periods presented. The standard required additional disclosures related to the
Company’s reportable segments, and did not have an impact on the Company’s results of operations or cash flows due to the adoption
of this guidance.
In December 2023, FASB issued amended guidance on Income Taxes: Improvements to Income Tax. The amendments require the
Company to provide further disaggregated income tax disclosures for specific categories on the effective tax rate reconciliation, as well
as additional information about federal, state/local and foreign income taxes. The standard also requires the Company to annually
disclose its income taxes paid (net of refunds received), disaggregated by jurisdiction. The standard is effective for fiscal years beginning
after December 15, 2024, with early adoption permitted. The standard is to be applied on a prospective basis, although optional
retrospective application is permitted. While the standard will require additional disclosures related to the Company’s income taxes,
management does not expect the adoption of this guidance to have an impact on the Company’s results of operations or cash flows.
In November 2024, FASB issued amended guidance which requires disaggregated disclosure of income statement expenses for public
business entities. The guidance does not change the expense captions an entity presents on the face of the income statement; rather, it
requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial
statements. The standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years
beginning after December 15, 2027. Early adoption is permitted.
57
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Artesian Resources Corporation
Newark, Delaware
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Artesian Resources Corporation (the “Company”) as of December
31, 2024 and 2023, the related consolidated statements of operations, cash flows, and changes in stockholders’ equity for each of the
three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the
Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the
purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we
express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements
that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are
material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a
whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on
the accounts or disclosures to which it relates.
Revenue recognition – Water Sales
As indicated in Note 2 to the consolidated financial statements, water sales revenue consists of tariff contract revenues from the sale of
water, fixed fees for water services, and Distribution System Improvement Charges, or DSIC, billed to customers at rates outlined in the
Company's tariffs. The Company recognizes revenues from the sale of water, and fixed fees for water services over time as water is
consumed and as the customers simultaneously receive and consume the benefits of the Company remaining ready to provide them
water services, respectively. DSIC revenue is a surcharge applied to tariff rates, and the Company recognizes DSIC revenue depending
on whether the surcharge was applied to water consumption revenue or fixed-fee revenue. As indicated in the consolidated statements
of operations, the Company recorded $88 million of water sales revenue for the year ended December 31, 2024.
We identified the recognition of water sales as a critical audit matter due to the large volume of customers and transactions which
involved an increased extent of auditor effort in performing audit procedures and evaluating audit evidence related to the Company’s
water sales revenue recognition.
58
The primary procedures we performed to address this critical audit matter included:
• Testing the design and operating effectiveness of certain relevant internal controls related to the Company’s recognition of
water sales revenue.
• Testing a sample of revenue transactions by obtaining and inspecting source documents such as invoices, cash receipts,
approved tariff rates and recalculating the revenue recognized.
• Testing a sample of revenue transactions to verify that the customer’s property is located within the Company’s approved
service territory.
• Performing analytical procedures to reconcile cash received from customers to revenue recognized.
/s/ BDO USA, P.C.
We have served as the Company's auditor since 2005.
Wilmington, Delaware
March 26, 2025
59
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES
None.
ITEM 9A. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of
the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of
the end of the period covered by this report. Based upon this evaluation, the Chief Executive Officer and the Chief Financial Officer
concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective in providing
reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is
(1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated
and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosure. In addition, the Chief Executive Officer and the Chief Financial Officer concluded that our
disclosure controls and procedures as of the end of the period covered by this report were effective to achieve the foregoing objectives. A
control system cannot provide absolute assurance, however, that the objectives of the control system are met and no evaluation of
controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
(b) Management’s Annual Report on Internal Control Over Financial Reporting
The Management of Artesian Resources Corporation is responsible for establishing and maintaining adequate internal control over its
financial reporting. Artesian Resources Corporation’s internal control over financial reporting is a process designed under the
supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of the Company’s consolidated financial statements for external reporting purposes
in accordance with U.S. generally accepted accounting principles.
Artesian Resources Corporation’s Management assessed the effectiveness of the Company’s internal control over financial reporting as
of December 31, 2024 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in “Internal Control Integrated Framework (2013).” Based on this assessment, Management determined that at December 31,
2024, the Corporation’s internal control over financial reporting was effective.
(c) Change in Internal Control over Financial Reporting
No change in the Company’s internal control over financial reporting occurred during the fiscal quarter ended December 31, 2024 that
has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Date: March 26, 2025
CHIEF EXECUTIVE OFFICER:
CHIEF FINANCIAL OFFICER:
/s/ NICHOLLE R. TAYLOR
/s/ DAVID B. SPACHT
Nicholle R. Taylor
David B. Spacht
ITEM 9B. OTHER INFORMATION
Insider Adoption or Termination of Trading Arrangements:
During the fiscal quarter ended December 31, 2024, none of our directors or officers informed us of the adoption or termination of a
“Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Regulation S-K, Item 408.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
60
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Name
Age
Position
Nicholle R. Taylor
57
Biography: Chair of the Board of Directors of the Company, or the Board, commencing
February 2025 and a director since 2007. Ms. Taylor has served as President and Chief
Executive Officer since February 2025. Ms. Taylor previously served as Interim
President and Chief Executive Officer between January 3, 2025 and February 2025 and
served as Senior Vice President of the Company from May 9, 2012 until her appointment
as the Company’s President and Chief Executive Officer. She has also served as
President of Artesian Water Company since August 16, 2021. Previously Ms. Taylor
served as Chief Operating Officer of Artesian Water Company from August 2019 to
August 2021. She was Vice President of the Company from May 2004 to May
2012. Ms. Taylor has been employed by the Company since 1991 and has held various
management level and operational positions within the Company. She serves on the
Budget and Finance Committee. Ms. Taylor is the niece of Dian C. Taylor and the cousin
of John R. Eisenbrey, Jr.
Qualifications: Ms. Nicholle Taylor has over thirty years of experience with the
Company in a variety of field, office, and managerial positions. The Board has
determined that the range of her experience across various company functions gives her
a clear perception of how the Company operates, thus enhancing the Board’s ability to
know the Company’s current capabilities and limitations, and qualifies her to serve as a
director. Ms. Taylor serves on the Board of Directors of the National Association of
Water Companies, a trade organization of the investor-owned water utility industry. Ms.
Taylor also currently serves on the Board of Directors of the Committee of 100, which
is a business organization that promotes responsible economic development in the state
of Delaware. In 2019, Ms. Taylor was appointed to the Board of Directors of the
Delaware Nature Society, a non- profit organization dedicated to connecting people with
the natural world to improve the environment through education, advocacy, and
conservation.
Kenneth R. Biederman
Ph. D.
81
Biography: Director since 1991 - Currently retired and former Professor of Finance at
the Lerner College of Business and Economics of the University of Delaware, from May
1996 to May 2011. Interim Dean of the College of Business and Economics of the
University of Delaware from February 1999 to June 2000. Dean of the College of
Business and Economics of the University of Delaware from 1990 to 1996. Former
Director of the Mid-Atlantic Farm Credit Association from 2006 to 2010. Director of
Chase Manhattan Bank USA from 1993 to 1996. Formerly a financial and banking
consultant from 1989 to 1990 and President of Gibraltar Bank from 1987 to 1989.
Previously Chief Executive Officer and Chairman of the Board of West Chester Savings
Bank; Economist and former Treasurer of the State of New Jersey and Staff Economist
for the United States Senate Budget Committee. He serves on the Executive; Audit;
Budget and Finance; Governance and Nominating; and Compensation Committees. As
previously disclosed pursuant to a Current Report on Form 8-K filed with the SEC on
February 7, 2025, Mr. Biederman has advised the Company that he will resign from the
Board following the conclusion of the annual meeting of stockholders on May 6, 2025.
Qualifications: Dr. Biederman’s experience as a former State Treasurer of New Jersey
and the former Dean of the Lerner College of Business and Economics at the University
of Delaware gives him a substantial amount of business, economic and financial
reporting knowledge.
John R. Eisenbrey, Jr.
69
Biography: Director since 1993 – Small Business Executive. For more than 40 years,
Owner and President of Bear Industries, Inc., a contracting firm providing building fire
61
sprinkler protection installations for businesses throughout the Delmarva Peninsula. Mr.
Eisenbrey served on the Board of Trustees of St. Andrews School between 2021 and
2024. Mr. Eisenbrey is the nephew of Dian C. Taylor and the cousin of Nicholle R.
Taylor. He serves on the Audit; Budget and Finance; Governance and Nominating; and
Compensation Committees.
Qualifications: The Board has determined that Mr. Eisenbrey’s hands-on experience as
a business owner in one of our primary geographic regions qualifies him to be a member
of the Board. For more than 40 years, Mr. Eisenbrey has been the Owner and President
of a privately held contracting firm providing fire sprinkler protection installations for
businesses throughout the Delmarva Peninsula. Mr. Eisenbrey is a past President of the
Delaware Contractors Association. Mr. Eisenbrey’s operating business background
provides experience with operational, technical, and regulatory matters also applicable
to our water business.
Michael Houghton,
Esq.
68
Biography: Director appointed September 2018 – Mr. Houghton retired as of January
1, 2022 as Partner from the law firm of Morris Nichols Arsht & Tunnell in Wilmington,
Delaware, and continued as special counsel to the firm until September 30, 2023. He
was admitted to practice law in Delaware in 1982, before the U.S. District Court for the
District of Delaware in 1983 and before the U.S. Court of Appeals for the Third Circuit
in 1985. He served a clerkship with the Delaware Court of Chancery in 1982-1983. Mr.
Houghton’s legal expertise involves the representation of governmental entities, such as
the Delaware River & Bay Authority. He has also represented banks, trust companies,
insurance companies and public utilities in commercial transactions and before
regulatory authorities and state, county, and local governments and in legislative and
public policy matters before Delaware government. Mr. Houghton has also advised
numerous entities, including Fortune 500 companies, on unclaimed property issues and
has represented numerous companies in connection with unclaimed property audits and
voluntary disclosure matters. He has been selected for inclusion in The Best Lawyers
in America from 2009-2023. Mr. Houghton is a member of the Board of Governors of
the Delaware State Chamber of Commerce and the Boards of the Delaware Public Policy
Institute and the Rockefeller Trust Company of Delaware. He is a past member of the
Pete du Pont Freedom Foundation, the Board of the Delaware Bar Foundation, a Trustee
of the Uniform Law Foundation, a Past President of the Delaware State Bar Association
and a Past President the National Conference of Commissioners on Uniform State Laws.
He was appointed in 2017 by Delaware Governor John Carney to serve as Chair of the
Delaware Economic and Financial Advisory Council and in 2023 to the Delaware
Marijuana Appeals Commission and the Delaware Environmental Appeals Board and
in December 2024 to the Delaware River and Bay Authority. Mr. Houghton serves on
the Audit; Budget and Finance; Compensation; and Governance and Nominating
Committees.
Qualifications: Mr. Houghton’s legal and regulatory experience and extensive
involvement in Delaware legislative and public policy matters are attributes that provide
valuable insight and benefit as the Company continues its growth in Delaware. The
Board has determined that Mr. Houghton’s more than 40 years of experience makes him
well qualified to serve on the Board.
Dian C. Taylor
79
Biography: Director since 1991 – Chair of the Board from July 1993 to February 2025.
Ms. Taylor served as Chief Executive Officer of the Company from September 1992 to
January 2025 when she commenced a leave of absence. Her employment with the
Company began in August 1991 and ended in February 2025. Prior to joining the
Company, Ms. Taylor had extensive marketing and small business ownership
experience. She was formerly a consultant to the Small Business Development Center
at the University of Delaware from February 1991 to August 1991 and Owner and
President of Achievement Resources Inc. from 1977 to 1991. Achievement Resources,
Inc. specialized in strategic planning, marketing, entrepreneurial and human resources
development consulting. Ms. Taylor was a marketing director for SMI, Inc. from 1982
62
to 1985. Ms. Taylor is the aunt of John R. Eisenbrey, Jr. and Nicholle R. Taylor. She
serves on the Budget and Finance Committee.
Qualifications: Ms. Dian Taylor experience as President and Chief Executive Officer
of the Company for over 30 years gives her extensive knowledge regarding the
Company and the complex issues facing smaller companies. Ms. Taylor has served as
President of the National Association of Water Companies, a trade organization of the
investor-owned water utility industry. Ms. Taylor also has served as a Commissioner for
the Delaware River and Bay Authority, on the Delaware Economic and Financial
Advisory Council, as a Regional Advisory Board Member for Citizens Bank, on the
Board of Governors of the Delaware State Chamber of Commerce, on the Executive
Committee of the Delaware Business Round Table, American Heart Association,
Committee of 100 and the Delaware Council on Economic Education, and as a Trustee
of the Delaware Grand Opera and the Christiana Care Hospital. The Board views Ms.
Taylor’s experience with various aspects of the utility industry and her demonstrated
leadership roles in business and community activities as important qualifications, skills,
and experiences for the Board’s conclusion that Ms. Taylor should serve as a director of
the Company.
Pierre A. Anderson
46
Chief Information Officer and Senior Vice President of the Company since May 19,
2021. Mr. Anderson previously served as Vice President of Information Technologies
of the Company from May 2012 to May 2021, Director of Information Technologies
from April 2008 to May 2012, and Manager of Information Technologies from
December 2006 to April 2008. Prior to joining the Company, Mr. Anderson was
employed by the Christina School District as Manager, Project & Support Services.
From 2000 to 2005, while with MBNA (now Bank of America), he served in several
information technology roles. He received his Bachelors of Science degree in Computer
Science from Delaware State University and both an MBA and Masters of Science in
Information Systems & Technology Management from the University of Delaware’s
Lerner College of Business & Economics.
Mr. Anderson serves on the Boards of Easterseals of Delaware & Maryland’s Eastern
Shore (Vice Chair), Delaware State Chamber of Commerce, University of Delaware’s
Lerner College Alumni, Bancroft Construction Company, and the Delaware Economic
& Forecasting Advisory Council (DEFAC).
Joseph A. DiNunzio,
CPA, CGMA
62
Executive Vice President and Secretary of the Company since May 2007 and President
of Artesian Water Maryland, Inc. since May 2017. Mr. DiNunzio previously served as
Senior Vice President and Secretary since March 2000 and as Vice President and
Secretary since January 1995. He served as Secretary of the Company from July 1992
to January 1995. Prior to joining Artesian in 1989, Mr. DiNunzio was employed by
PriceWaterhouseCoopers LLP. He earned a B.S. in Commerce, with concentration in
accounting, from the McIntire School of Commerce at the University of Virginia.
Mr. DiNunzio is Past Chairman of the Board of the Cecil County Chamber of Commerce
and served on the Board of the Cecil Business Leaders from June 2013 to January 2023.
He is Past Chairman of the Delaware Chapter of the National Association of Water
Companies. Mr. DiNunzio is a member of the Cecil County Maryland Economic
Development Commission, the Delaware Source Water Assessment and Protection
Program’s Citizens and Technical Advisory Committee, the American Institute of
Certified Public Accountants, the Pennsylvania Institute of Certified Public
Accountants, and was a member of the 2003 Delaware Legislative Drinking Water Task
Force.
Courtney A. Emerson,
Esq.
41
General Counsel of the Company since August 2021 and Assistant Secretary of the
Company since November 2022. Prior to joining Artesian in 2021, Ms. Emerson
practiced law at Fox Rothschild LLP. She previously served as an emergency manager
for the State of Delaware for nearly a decade and was an educator at a multinational
bank. She earned her J.D. from the Delaware Law School of Widener University and
her B.S. in Political Science from the University of Delaware.
63
Ms. Emerson has served as Vice Chair of the Environmental Section of the Delaware
State Bar Association, as Vice Chair of the American Bar Association’s Disaster Legal
Services Team, and as Vice President of the University of Delaware Alumni Lawyers
Society. She is a member of the General Counsel Section of the National Association
of Water Companies, the Environmental Section of the Delaware State Chamber of
Commerce, the American Bar Association, and the Committee of 100.
Jennifer L. Finch,
CPA
56
Senior Vice President of Finance & Corporate Treasurer of the Company since
November 2020. Prior to that, Ms. Finch was the Assistant Treasurer and Vice President
of Finance. Ms. Finch is responsible for the oversight of all aspects of accounting and
tax‐related matters, corporate financing, and serves as the principal accounting officer.
Prior to joining Artesian in 2008, Ms. Finch held various accounting positions for
Handler Corporation, a homebuilder and developer located in Wilmington, Delaware,
where she worked for 14 years. She also worked four years for a local certified public
accounting firm and has more than 30 years of accounting, auditing, and tax experience.
Ms. Finch is a member of the American Institute of Certified Public Accountants and
the Delaware Society of Certified Public Accountants.
Raymond T. Kelly,
CPA, CISA
40
Vice President of Information Technology for the Company since November 4, 2022.
Mr. Kelly joined Artesian in 2013 as Manager of Business Applications and was
promoted to the Director of Information Technology in 2016. Prior to joining Artesian
he served as a Manager for PricewaterhouseCoopers, where he progressively advanced
from an Associate; leading information technology audits, financial audits of publicly
traded institutions, and utility meter to cash system engagements. During his time at
Artesian, Mr. Kelly, who is responsible for all Information Technology functions, has
directly led and overseen all enhancements to the technology portfolio including;
enterprise applications, infrastructure, business process automation, analytics, and
cybersecurity.
Mr. Kelly earned both a Bachelor of Science in Computer Science and Business and a
Bachelor of Science in Business and Economics from Lehigh University. He is a
Certified Public Accountant, a Certified Information Systems Auditor, and a Chartered
Global Management Accountant. He serves on the Program Committee of the Boys &
Girls Club of Delaware and is a member of the American Institute of Certified Public
Accountants.
Daniel W. Konstanski
40
Mr. Konstanski is a Board Certified, Professional Engineer with 20 years of experience
in the water and wastewater industry. He joined the Company in March of 2014 as a
Senior Engineer, was appointed Manager of Engineering in 2019 and was named Vice
President of Engineering in October of 2022. Mr. Konstanski is responsible for
managing and overseeing the Engineering Department’s operation and staff as well as
directly managing capital projects. His team includes engineers, project managers and
subject matter experts who shepherd, analyze, and manage Artesian’s extensive water
and wastewater assets including treatment, pipeline hydraulics, system modeling,
pumped networks, and regulatory matters. During his time at Artesian Mr. Konstanski
has managed the permitting, design and construction of multiple new water and
wastewater treatment plants as well as renovations of numerous existing facilities,
overseen the development of state-of-the-art digital models for both the water and
wastewater systems, led efforts to increase self-sufficiency by hundreds of millions of
gallons per year and provided input on Artesian’s purchase of multiple additional water
and wastewater systems.
Mr. Konstanski earned his Bachelor of Science in Civil Engineering from Michigan
Technological University and his Board Certification from the American Academy of
Environmental Engineers. He has been a Licensed Professional Engineer since 2010.
Mr. Konstanski is a member of the American Water Works Association and the Water
Environment Federation.
David B. Spacht
65
Chief Financial Officer of the Company since January 1995 and President of Artesian
Wastewater Management, Inc. since August 2019. Mr. Spacht joined the Company in
64
1980 and has held various executive and management level positions. Mr. Spacht has
worked closely with the Public Service Commission for over 40 years on developing
rates and regulations in Delaware. He has also worked closely with the Maryland Public
Service Commission developing rates and regulations as a result of filing for
acquisitions. He was selected by the National Association of Regulatory Utility
Commissioners Subcommittee on Education as an instructor for their semi-annual
course on rate making.
Mr. Spacht is a member of several national and local organizations, including the
National Association of Water Companies, having served on their Finance Committee
for 32 years, and most recently in 2015 joining the Rate and Regulatory Committee; the
American Water Works Association; the National Association of Regulatory Utility
Commissioners; the International Organization of Management Accountants; and
Special Olympics Delaware.
John M. Thaeder
66
Senior Vice President of Operations. Mr. Thaeder has served as an officer since
February 1998. He currently serves as an officer of the Company. Prior to joining the
company, Mr. Thaeder was with Hydro Group, Inc. from 1996 to 1998 as Southeastern
District Manager of Sales and Operations from Maryland to Florida. During 1995 and
1996, he was Sales Manager of the Northeast Division with sales responsibilities from
Maine to Florida. Previously, he served as District Manager of the Layne Well and
Pump Division of Hydro Group.
Corporate Governance
The executive officers are elected or approved by our Board, or the Board of our appropriate subsidiary, to serve until his or her successor
is appointed or shall have been qualified or until earlier death, resignation or removal.
In accordance with the provisions of the Company's By-laws, the Board is divided into three classes. Members of each class serve for
three years and one class is elected each year to serve a term until his or her successor shall have been elected and qualified or until
earlier resignation or removal. Nicholle R. Taylor has been nominated for election to the Board at the Annual Meeting of stockholders
to be held May 6, 2025, to serve for a term lasting until the annual meeting of stockholders to be held in 2028, or until her earlier
resignation or removal.
The Board, which met six times in 2024, has established four standing committees: the Audit Committee, the Compensation Committee,
the Budget and Finance Committee, and the Governance and Nominating Committee. Information with respect to the Audit,
Compensation and Governance and Nominating Committees is set forth below. In addition, the charter for each of the four standing
committees of the Board is available on our website, www.artesianwater.com.
Dian C. Taylor, the Company's Chief Executive Officer throughout 2024, also served as Chair of the Board throughout 2024. In February
2025, Nicholle R. Taylor was appointed to serve as both Chief Executive Officer and Chair of the Board. The Board, after considering
the size of the Company and the composition of the Board, determined that the combined structure was appropriate. The Board
determined that having one person serving as Chair of the Board and Chief Executive Officer ensured a unified leadership of the Board
and management and provided potential efficiency in the execution of the strategies and visions of the Board and management. The
Board believed that Ms. Taylor's experience and operational knowledge of the business enabled her to effectively perform both roles.
Given the limited number of Board members and the practice of open communication with the entire Board, the Company does not have
a lead independent director. The Board meets as often as needed and at least twice a year in executive session without any management
or non-independent directors present. The Board believes this is an appropriate structure for the Company which provides the
appropriate independent oversight. In addition, the Audit Committee and the Compensation Committee regularly consult with the
Company's General Counsel to review the various types of risks that affect the Company and to consult on strategies to anticipate such
risks. The Board believes this structure has been effective. The Board meets with management on a regular basis to review operational
reports, financial updates, strategic development and other matters. Frequent meetings help to promote and ensure open communication
with the management team. All Board members are engaged and remain actively involved in their oversight roles. The Board is
responsible for oversight of the Company's risk management process. The senior management team is responsible for identifying risks,
managing risks and reporting and communicating risks back to the Board.
65
Communications with Directors
Any stockholder wishing to communicate with a director may do so by contacting the Company’s Secretary, which will pass to the
director written, e-mail or phone communications. The Board has authorized the Secretary to screen frivolous or unlawful
communications or commercial advertisements. You may reach the Secretary at Artesian Resources Corporation, 664 Churchmans
Road, Newark, DE 19702.
Director Compensation
In May 2024, each independent director received an annual retainer fee of $95,000, to be paid quarterly. Dian C. Taylor and Nicholle
R. Taylor received annual retainer fees of $67,000, to be paid quarterly. Directors do not receive any additional meeting fees.
In 2024, our directors, other than Dian C. Taylor and Nicholle R. Taylor, whose fees as director are included in the Summary
Compensation Table, received the following compensation:
Director Compensation Table
Name
Fees Earned or
Paid in
Cash
($)
Stock
Awards
($)(1)
All other Compensation
($)
Total
($)
Kenneth R. Biederman
95,000
37,070
--- 132,070
John R. Eisenbrey, Jr.
95,000
37,070
--- 132,070
Michael Houghton
95,000
37,070
--- 132,070
(1) On May 6, 2024, each director, received a restricted stock award of 1,000 shares of Class A Non-Voting Stock. The fair market
value per share was $37.07, the closing price of the Class A Non-Voting Stock as recorded on the Nasdaq Global Select Market
on May 6, 2024. Subject to continued service, the restricted shares vest one year from the date of grant. There were no
outstanding option shares outstanding for Independent Directors at December 31, 2024. The number of restricted shares
outstanding at December 31, 2024 for each director is:
Option Shares Outstanding
at December 31, 2024
Restricted Shares Outstanding
at December 31, 2024
Kenneth R. Biederman
---
1,000
John R. Eisenbrey, Jr.
---
1,000
Michael Houghton
---
1,000
Compensation Committee Interlocks and Insider Participation
During the year ended December 31, 2024, the members of our Compensation Committee were Kenneth R. Biederman, John R.
Eisenbrey, Jr. and Michael Houghton. None of our executive officers serves as a director or as a member of the compensation committee,
or any other committee serving an equivalent function, of any entity that has one or more of its executive officers serving as members
of our Compensation Committee or as a director of our Board. No member of our Compensation Committee has ever been our employee.
Independence
In 2024, the Board of Directors determined that Messrs. Biederman, Eisenbrey and Houghton, a majority of the Board, met the
independence requirements prescribed by the listing standards of the Nasdaq Global Select Market.
Audit Committee
The Audit Committee reviews the procedures and policies relating to the internal accounting procedures and controls of the Company
and provides general oversight with respect to the accounting principles employed in the Company's financial reporting. As part of its
activities, the Audit Committee meets with representatives of the Company's management and independent accountants. The Audit
Committee has considered the extent and scope of non-audit services provided to the Company by its outside accountants and has
determined that such services are compatible with maintaining the independence of the outside accountants. The Audit Committee
appoints and retains the Company's independent accountants. The Audit Committee consists of Kenneth R. Biederman, John R.
Eisenbrey, Jr. and Michael Houghton, three independent directors. The Board has also determined that each member of the Audit
66
Committee meets the independence requirements prescribed by the listing standards of the Nasdaq Global Select Market and the rules
and regulations of the SEC. The Board has further determined that Mr. Biederman, a member of the Audit Committee, is an "audit
committee financial expert" as such term is defined in Item 407(d)(5)(ii) of Regulation S-K promulgated by the SEC. During 2024, the
Audit Committee met six times.
Compensation Committee
The Compensation Committee reviews the compensation and benefits provided to key management employees, officers and directors
and makes recommendations as appropriate to the Board. The Compensation Committee also determines whether and what amounts
should be granted under the 2015 Equity Compensation Plan, or the 2015 Plan, and may make recommendations for amendments to the
2015 Plan. The Compensation Committee is comprised of Kenneth R. Biederman, John R. Eisenbrey, Jr. and Michael Houghton, three
independent directors. The Board of Directors has also determined that each member of the Compensation Committee meets the
independence requirements prescribed by the listing standards of the Nasdaq Global Select Market and the rules and regulations of the
SEC. During 2024, the Compensation Committee met five times.
Consideration of Director Candidates
The Governance and Nominating Committee is comprised of Kenneth R. Biederman, John R. Eisenbrey, Jr. and Michael Houghton,
three independent directors. As part of the formalized nominating procedures, the committee makes recommendations for director
nominations to the full Board. Director candidates nominated by stockholders are considered in the same manner, provided the
nominations are submitted to the Secretary and copied to the Chairman of the committee on a timely basis and in accordance with the
Company's By-laws. Nominations for the election of a director for the 2025 Annual Stockholders' Meeting was approved by the
Governance and Nominating Committee on February 7, 2025. On February 4, 2025, Mr. Biederman informed the Board he will resign
from the Board and his committee positions at the conclusion of the annual meeting of stockholders on May 6, 2025. In connection
with such notice, the Governance and Nominating Committee has commenced a search for a new director.
The Governance and Nominating Committee has determined that no one single criterion should be given more weight than any other
criteria when it considers the qualifications of a potential nominee to the Board. Instead, it believes that it should consider the total
"skills set" of an individual. In evaluating an individual's skills set, the Governance and Nominating Committee considers a variety of
factors, including, but not limited to, the potential nominee's background and education, his or her general business experience, and
whether or not he or she has any experience in positions with a high degree of responsibility. In addition, although the Governance and
Nominating Committee does not have a policy with regard to the consideration of diversity in identifying director nominees, its charter
includes in the Governance and Nominating Committee's duties and responsibilities that it seek members from diverse backgrounds so
that the Board consists of members with a broad spectrum of experience and expertise.
Code of Ethics
The Company has adopted a code of ethics applicable to its chief executive officer, chief financial officer, controller or principal
accounting officer, and any person who performs a similar function, which is a "code of ethics" as defined by applicable rules of the
SEC. This code is publicly available on the Company's website at www.artesianwater.com. If the Company makes any amendments to
this code other than technical, administrative, or other non-substantive amendments, or grants any waivers, including implicit waivers,
from a provision of this code to the Company's chief executive officer, chief financial officer, controller or principal accounting officer,
and any person who performs a similar function, the Company will disclose the nature of the amendment or waiver, its effective date
and to whom it applies on its website. The information on the website listed above is not and should not be considered part of this
Annual Report on Form 10-K. It is intended to be an inactive textual reference only and is not incorporated by reference herein.
Insider Trading Arrangements and Policy
We are committed to promoting high standards of ethical business conduct and compliance with applicable laws, rules and regulations.
As part of this commitment, we have adopted our Insider Trading Policy governing the purchase, sale, and/or other dispositions of our
securities by our directors, officers, employees, consultants and other non-directors or non-employees alike, that we believe is reasonably
designed to promote compliance with insider trading laws, rules and regulations, and the exchange listing standards applicable to us. A
copy of our Insider Trading Policy is filed as Exhibit 19.1 to this Annual Report on Form 10-K.
67
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
This discussion describes the Company's compensation program for its named executive officers listed in the Summary Compensation
Table that immediately follows this discussion. The named executive officers for 2024 are: Dian C. Taylor, former President and Chief
Executive Officer who left the Company in February 2025 but remains a member of the Board; David B. Spacht, Chief Financial Officer;
Joseph A. DiNunzio, Executive Vice President & Secretary; Nicholle R. Taylor, current President, Chief Executive Officer and Board
Chair since February 2025 and former Senior Vice President and Jennifer L. Finch, Corporate Treasurer and Senior Vice President of
Finance.
Objectives of the Company’s Compensation Program
The Compensation Committee believes that the compensation for the Company’s executives should serve to attract, motivate and retain
seasoned and talented executives responsible for successfully guiding and implementing the Company's strategy. Our strategy is to
increase our customer base, revenues, earnings and dividends by expanding our services across the Delmarva Peninsula, thereby
providing our stockholders with a long-term, satisfactory return on their investment.
To implement our strategy, it is critical that our executives remain focused on:
• ensuring superior customer service;
• continuously improving our efficiency and performance;
• managing risk appropriately;
• expanding our franchised service territory and customer base at a consistent and sustainable rate - including by acquisitions -
where growth is strong and demand is increasing;
• identifying and developing dependable sources of supply;
• constructing and maintaining reliable treatment facilities and water delivery and wastewater collection systems;
• developing and continuing positive relationships with regulators, municipalities, developers and customers in both existing and
prospective service areas; and
• developing a skilled and motivated work force that is adaptive to change.
To accomplish our strategy, our compensation program's objectives are to:
• provide compensation levels that are competitive with those provided by other companies with which we may compete for
executive talent;
• motivate and reward contributions and performance aligned with the Company's objectives;
• attract and retain qualified, seasoned executives; and
• ensure the Company maintains a pay-for-performance executive compensation program.
The compensation program rewards overall qualitative contributions and performance of each individual towards the Company's
strategy. In reviewing the Company's overall compensation program in the context of the risks identified in the Company's risk
management processes, the Compensation Committee does not believe that the risks the Company faces are correlated with the
Company's compensation programs. Therefore, the Compensation Committee believes that there is an appropriate level of risk in the
Company’s compensation program design and does not believe that its approach to the design and administration of its incentive
programs needs to change in order to mitigate compensation risk.
Elements of the Company’s Compensation Program
The elements of the Company’s compensation program include:
• Base Salary
• Cash Bonus Award
• Equity Compensation as may be awarded under the 2015 Equity Compensation Plan
• Employee Benefits
The Company's executive compensation program does not provide for:
• Severance or post-termination agreements
• Post-retirement benefits
• Defined benefit pension benefits or any supplemental executive retirement plan benefits
• Non-qualified deferred compensation
68
• Change-in-Control agreements
Compensation Process
The Compensation Committee relies on various factors in determining executive compensation, including the overall financial
performance of the Company, combined with an executive officer's individual performance, progress in meeting strategic corporate
objectives, and changes in responsibilities, as well as the consideration of elements of compensation not provided for by the Company
in comparison to its peers. The Compensation Committee generally exercises broad discretion in setting the compensation of the Chief
Executive Officer and other executives and primarily considers the performance of the management team as a group, the Chief Executive
Officer's assessment of other executives' performance and compensation recommendations with respect to the other executive officers
as part of its process.
The Compensation Committee engaged Pearl Meyer & Partners as a compensation consultant during the years 2022 and 2023 to provide
it with independent advice on executive compensation matters. The following peer group was utilized: American States Water
Company; Chesapeake Utilities Corporation; Consolidated Water Company Ltd.; Fluence Corporation Limited; Global Water
Resources, Inc.; Middlesex Water Company; RGC Resources Incorporated; SJW Group; The York Water Company; urban-gro,
Incorporated; Williams Industrial Services Group; American Water Works Company, Inc.; California Water Service Group; and
Essential Utilities, Inc.
Base Salary
Base salaries for Company executives are set at levels considered appropriate to attract and retain seasoned and talented personnel. In
2024, the Compensation Committee did not increase the base salary of Dian C. Taylor . In 2024, the Compensation Committee increased
the base salary of the Chief Financial Officer by 5.7% and other named executive officers by 3%.
The Compensation Committee determines actual base salaries for each executive other than the Chief Executive Officer based upon:
• recommendations provided by the Chief Executive Officer;
• internal equity with other executives and Company personnel;
• individual executive performance; and
• individual contributions to the Company's strategic objectives.
The Compensation Committee considers the same factors in determining the base salary of the Chief Executive Officer, without any
recommendation by the Chief Executive Officer. The Chief Executive Officer was not present during deliberations on her compensation.
Cash Bonus and Equity Compensation Awards
Annually, the Compensation Committee determines whether any Cash Bonus and/or Equity Compensation Awards should be granted
to any of the executives. The Cash Bonus and Equity Compensation Awards are intended to reward executives for their contributions
towards meeting the Company's strategic objectives. Cash Bonus and Equity Compensation Awards are entirely discretionary and are
based upon a qualitative assessment conducted by the Compensation Committee in the case of the Chief Executive Officer and by the
Compensation Committee and the Chief Executive Officer in the case of other executives. Recognizing both the executive team's and
each individual named executive officer’s contributions toward meeting the Company's strategic objectives, based on Dian C. Taylor’s
recommendation, in 2024 cash bonuses were awarded to the named executive officers, other than Dian C. Taylor.
Other Compensation
Both Dian C. Taylor and Nicholle R. Taylor received compensation for their services as Directors, which compensation was equivalent
to that provided to all other directors for Stock Awards and less for retainers. See "Director Compensation."
The Company’s named executive officers receive a limited number of other benefits as part of a competitive compensation package,
which constitutes in the aggregate only a small percentage of their total compensation. As discussed below, these benefits include:
•
a Company contribution under our 401(k) Plan;
•
participation in our group health plans, which is generally available to all employees, as well as reimbursements for eligible
medical expenses not otherwise covered by the Company's medical insurance plan under the Officer's Medical Reimbursement
Plan; and
•
for Dian C. Taylor, our former Chief Executive Officer, secretarial and driving services, personal use of a Company-owned
vehicle, membership fees, home security and certain personal credit card expenses, which, in accordance with Treas. Reg. §
162-2(c)(5) and -2(h)(2)(A)(i), the Company is required to treat as taxable wages to Dian C. Taylor.
69
Our executive officers do not receive tax reimbursement for imputed income derived from any of these benefits.
All amounts are included in the "All Other Compensation" column in the Summary Compensation Table and the accompanying
footnotes to the table.
The Role of Management in the Executive Compensation Process
Our Director of Human Resources typically assists the Compensation Committee by preparing and providing information showing:
• current executive compensation levels;
• executive compensation recommendations made by the Chief Executive Officer;
• salary grade minimum, midpoint and maximums for each executive, based on information provided by the Company's
compensation consultant retained in 2023, adjusted annually; and
• actual base salary, cash bonus and equity compensation for each of the prior three years for each executive.
Our Chief Executive Officer meets with the Compensation Committee and provides input regarding the contributions of each executive
towards the Company's strategic objectives and each executive's overall performance that formed the basis for her recommendations to
the Compensation Committee. The final decisions regarding compensation for each executive are made by the Compensation
Committee. Please refer to Compensation Committee Interlocks and Insider Participation section for more information.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management and, based on
the review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis
be included in the Company's Annual Report on Form 10-K.
The Compensation Committee,
John R. Eisenbrey, Jr, Chairman
Kenneth R. Biederman
Michael Houghton
CEO Pay Ratio
The 2024 compensation disclosure ratio of the median annual total compensation of all Company employees to the annual total
compensation of Dian C. Taylor, the Company’s former Chief Executive Officer is as follows:
2024 Total Compensation
Median employee total annual compensation
$100,343
Annual total compensation of Dian C. Taylor, our Chief Executive Officer as of
the year ended December 31, 2024
$881,718
Ratio of CEO to median employee compensation
9:1
For simplicity, we identified the median employee by examining the base annual salary for all individuals, excluding our CEO, who
were employed by us on October 31, 2023. We included all employees, whether employed on a full-time, part-time, or seasonal basis.
We believe that the use of base annual salary compensation, excluding overtime, is a consistently applied compensation measure because
we do not widely distribute annual equity awards to employees and believe that it provides a reasonable estimate of the pay ratio
calculated in a manner consistent with Item 402(u) of Regulation S-K. After identifying the median employee by examining base annual
salary excluding overtime, we calculated annual total compensation, including overtime, for such employee using the same methodology
we use for our named executive officers set forth in the 2024 Summary Compensation Table.
70
Summary Compensation Table:
Name and Principal Position
Year
Salary ($) Bonus ($)
Stock
Awards
($)(1)
All Other
Compensation
($)(2),(3),(4)
Total ($)
Dian C. Taylor, Chair, Former President
2024
648,877
-0-
39,480
193,361
881,718
and Chief Executive Officer (5)
2023
635,787
-0-
54,520
159,227
849,534
2022
611,330
175,000
46,620
198,376
1,031,326
David B. Spacht, Chief Financial
2024
451,401
75,000
N/A
38,216
564,617
Officer
2023
426,366
-0-
N/A
37,444
463,810
2022
409,973
100,000
N/A
39,583
549,556
Joseph A. DiNunzio, Executive Vice
2024
472,434
78,500
N/A
40,411
591,345
President & Secretary
2023
462,371
-0-
N/A
38,594
500,965
2022
444,589
150,000
N/A
35,725
630,314
Nicholle R. Taylor, Former Senior
2024
419,334
100,000
39,480
112,637
671,451
Vice President (5)
2023
410,397
-0-
54,520
106,427
571,344
2022
394,608
150,000
46,620
100,511
691,739
Jennifer L. Finch, Senior Vice
2024
386,618
75,000
N/A
17,510
479,128
President & Treasurer
2023
378,382
1,500
N/A
18,159
398,041
2022
363,832
100,000
N/A
20,819
484,651
(1) On May 6, 2024, Dian Taylor and Nicholle Taylor each received a restricted stock award of 1,000 shares of Class A Non-Voting
Stock in their capacities as directors of the Company. The award was valued at the fair market value on the date of the award (last
reported sale price on the date of award) of $37.07 per share. Subject to continued service the restricted shares vest one year from
the date of grant. On May 9, 2023, Dian Taylor and Nicholle Taylor each received a restricted stock award of 1,000 shares of Class
A Non-Voting Stock. The award was valued at the fair market value on the date of the award of $54.88 per share. The restricted
shares vested one year after the date of grant. On May 3, 2022, Dian Taylor and Nicholle Taylor each received a restricted stock
award of 1,000 shares of Class A Non-Voting Stock. The award was valued at the fair market value on the date of the award of
$45.58 per share. The restricted shares vested one year after the date of grant.
(2) Under the Company’s defined contribution 401(k) Plan, the Company contributes two percent of an eligible employee's gross
earnings. The Company also matches 50 percent of the first six percent of the employee's gross earnings that the employee
contributes to the 401(k) Plan. In addition, all employees hired before April 26, 1994 and under the age of 60 at that date are eligible
for additional contributions to the 401(k) Plan. Employees over the age of 60 at that date receive Company paid medical, dental
and life insurance benefits upon retirement. The Company will not provide the additional 401(k) or medical, dental and life
insurance benefits to any other current or future employees. In 2024, Company contributions to the 401(k) Plan under terms
available to all other employees based upon their years of service and plan eligibility were made in the amounts of:
Dian C. Taylor
$
37,950
David B. Spacht
$
37,950
Joseph A. DiNunzio
$
37,950
Nicholle R. Taylor
$
37,950
Jennifer L. Finch
$
17,250
(3) Included in the "All Other Compensation" column in the table above are amounts received by Dian C. Taylor and Nicholle R.
Taylor as compensation for annual Board retainers in 2024 totaling $67,000 each. Also included in 2024 are amounts received by
Dian C. Taylor for each of the following: $8,095 for security provided at her personal residence, $14,744 for secretarial and driving
services, $22,363 for country club dues, $4,610 for personal use of a company-owned vehicle, and $11,331 for certain expenses on
a credit card. Also included in the "All Other Compensation" column in the table above are $9,190 and $7,920 in 2023 and 2022,
respectively, for secretarial and driving services, and $11,751 and $18,031 in 2023 and 2022, respectively, for certain expenses on
a credit card. All other amounts for 2022 and 2023 remain as previously disclosed.
(4) Executive officers are reimbursed for eligible medical expenses not otherwise covered by the Company's medical insurance plan
under the Officer's Medical Reimbursement Plan. Amounts reimbursed are included in the "All Other Compensation" column in
71
the table above. Dian C. Taylor received reimbursements of $27,268 in 2024.
(5) In February 2025, the Board appointed Nicholle R. Taylor as the Company’s Chair of the Board, President and Chief Executive
Officer. Dian C. Taylor remains a member of the Board but is no longer serving as the Company’s President and Chief Executive
Officer.
Grants of Plan-Based Awards Table
Name
Grant Date
Vest Date
All Other
Stock Awards:
Number of
Shares of
Stock or Units
(#)
All Other Option
Awards: Number
of Securities
Underlying
Options (#)
Exercise or
Base Price
of Option
Awards
($/share)
Grant Date Fair
Value of Stock
&
Option Awards
($)
Dian C. Taylor
5/06/2024
5/06/2025
1,000
-
-
37,070
Nicholle R. Taylor
5/06/2024
5/06/2025
1,000
-
-
37,070
On May 6, 2024, Dian C. Taylor and Nicholle R. Taylor each received a restricted stock award of 1,000 shares of Class A Non-Voting
Stock, as noted in the table above. The awards were valued at the fair market value on the date of the award (last reported sale price on
the date of award) of $37.07 per share. The restricted stock awards vest one year from the date of grant.
Outstanding Equity Awards at Fiscal Year-End Table
Option Awards
Name
Number of
Securities
Underlying
Unexercised
Options(#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
Option Exercise
Price($)
Option
Expiration
Date
Nicholle R. Taylor
-0-
---
-0-
-0-
Option Exercises and Stock Vested Table
Option Awards
Stock Awards
Name
Number of
Shares Acquired
on Exercise (#)
Value
Realized on
Exercise ($)
Number of
Shares Acquired
on Vesting (#)
Value
Realized on
Vesting ($)
Dian C. Taylor
-0-
-0-
1,000
39,480
Nicholle R. Taylor
-0-
-0-
1,000
39,480
Policies and Practices Related to the Grant of Certain Equity Awards Close in Time to the Release of Material Nonpublic
Information
In response to Item 402(x)(1) of Regulation S-K, the Company does not currently grant new awards of stock options, stock appreciation
rights, or similar option-like instruments. Accordingly, the Company has no specific policy or practice on the timing of awards of such
options in relation to the disclosure of material nonpublic information by the Company. In the event the Company determines to grant
new awards of such options, the Board will evaluate the appropriate steps to take in relation to the foregoing.
72
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the beneficial ownership of the equity securities of the Company, as of March 20, 2025 for each director,
each named executive officer, each beneficial owner of more than five percent (5%) of the outstanding shares of the Company's voting
securities and all directors and executive officers as a group, based in each case on information furnished to the Company. Unless
otherwise indicated, the address of each beneficial owner of voting securities listed below is c/o 664 Churchmans Road, Newark,
Delaware 19702.
Class A Non-Voting Common
Stock(1)
Class B Common Stock(1)
Shares
Percent(2)
Shares
Percent(2)
Dian C. Taylor (3)
150,919
1.6
159,509
18.1
Kenneth R. Biederman (3)
24,875
*
---
---
John R. Eisenbrey, Jr. (3)(4)(5)
55,751
*
45,707
5.2
Nicholle R. Taylor (3)(6)
28,388
*
281,719
32.0
Michael Houghton
3,000
*
---
---
Joseph A. DiNunzio
19,379
*
203
*
David B. Spacht
4,354
*
189
*
Jennifer L. Finch
1,925
*
---
---
Louisa Taylor Welcher
219 Laurel Avenue
Newark, DE 19711
92,771
1.0
135,862
15.4
Directors and Executive Officers as a Group (13
Individuals)(3)
317,566
3.4
488,677
55.4
* less than 1%
(1)
The nature of ownership consists of sole voting and investment power unless otherwise indicated. The amount also includes all
shares issuable to such person or group upon the exercise of options or vesting of restricted shares held by such person or group
to the extent such options are exercisable or restricted shares vest within 60 days after March 12, 2024.
(2)
The percentage of the total number of shares of the class outstanding is shown where that percentage is one percent or greater.
Percentages for each person are based on the aggregate number of shares of the applicable class outstanding as of March 12,
2024, and all shares issuable to such person upon the exercise of options or vesting of restricted shares held by such person to the
extent such options are exercisable or restricted shares vest within 60 days of that date.
(3)
Includes vesting of restricted shares and options to purchase shares of the Company’s Class A Non-Voting Stock, as follows: Ms.
D. Taylor (1,000 shares); Mr. Biederman (1,000 shares); Mr. Eisenbrey, Jr. (1,000 shares); Ms. N. Taylor (1,000 shares); Mr.
Houghton (1,000 shares).
(4)
89,123 shares were pledged by Mr. Eisenbrey, Jr. as collateral for a loan.
73
(5)
Includes 780 shares of the Class B Stock owned by a trust, of which Mr. Eisenbrey, Jr. is a trustee and has a beneficial ownership
interest, and 1,555 shares of the Class B Stock held in custodial accounts for Mr. Eisenbrey, Jr.’s daughters.
(6)
Includes 744 shares of the Class A Non-Voting Stock and 45 shares of the Class B Stock held in custodial accounts for Ms. N.
Taylor’s daughter and 290 shares of Class A Non-Voting Stock held by her spouse.
The following table shows all persons who are known by the Company, as of March 20, 2025, to be the beneficial owner of more than
five percent (5%) of the outstanding shares of the Company's Class A Non-Voting Stock, and who do not otherwise own Class B Stock.
Class A Non-Voting Common
Stock
Shares
Percent
BlackRock, Inc. (1)
50 Hudson Yards
New York, NY 10001
919,462
9.8
The Vanguard Group (2)
100 Vanguard Blvd.
530,947
5.7
Malvern, PA 19355
T. Rowe Price Investment Management, Inc. (3)
101 E. Pratt Street
Baltimore, MD 21201
884,334
9.4
(1)
Pursuant to a Schedule 13G/A filed by BlackRock, Inc., or BlackRock, with the SEC on February 5, 2025, BlackRock is the
beneficial owner of 919,462 shares of Class A Non-Voting Stock, and, to the extent it has voting rights under Delaware law,
BlackRock has reported having sole voting power with respect to 919,046 shares and shared voting power with respect to 0
shares, as well as sole dispositive power with respect to 919,462 shares and shared dispositive power with respect to 0 shares.
(2)
Pursuant to a Schedule 13G filed by The Vanguard Group, or Vanguard, with the SEC on February 13, 2024, Vanguard is the
beneficial owner of 530,947 shares of Class A Non-Voting Stock, and, to the extent it has voting rights under Delaware law,
Vanguard has reported having sole voting power with respect to 0 shares and shared voting power with respect to 13,696 shares,
as well as sole dispositive power with respect to 508,599 shares and shared dispositive power with respect to 22,438 shares.
(3)
Pursuant to a Schedule 13G/A filed by T. Rowe Price Investment Management, Inc., or T. Rowe Price, with the SEC on November
11, 2024, T. Rowe Price is the beneficial owner of 884,334 shares of Class A Non-Voting Stock, and, to the extent it has voting
rights under Delaware law, T. Rowe Price has reported having sole voting power with respect to 878,473 shares and shared voting
power with respect to 0 shares, as well as sole dispositive power with respect to 884,334 shares and shared dispositive power
with respect to 0 shares.
Securities Authorized for Issuance under Equity Compensation Plans
74
Equity Compensation Plan Information
The following table provides information on the shares of our Class A Non-Voting Stock that may be issued upon exercise of outstanding
stock options and vesting of awards as of December 31, 2024 under the Company’s stockholder approved stock plans.
Equity Compensation Plan Information
Plan category
Number of
securities to
be issued
upon
exercise of
outstanding
options (a)
Weighted-
average
exercise
price of
outstanding
options
Number of
securities
remaining
available for
future
issuance
under equity
compensation
plans
(excluding
securities
reflected in
column (a))
Equity compensation plans approved by security holders
5,000
$-0-
279,932
Total
5,000
$-0-
279,932
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
We have three directors who are considered independent under the Nasdaq listing standards: Kenneth R. Biederman, John R. Eisenbrey,
Jr., and Michael Houghton.
Review and Approval of Transactions with Related Persons
As set forth in the Company’s Audit Committee Charter, the Audit Committee is responsible for reviewing and, if appropriate, approving
all related-party transactions between us and any officer, 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. We expect that any
transactions in which related persons have a direct or indirect interest will be presented to the Audit Committee for review and approval.
While neither the Audit Committee nor the Board have adopted a written policy regarding related-party transactions, the Audit
Committee considers such information as it deems important to determine whether the transaction is on reasonable and competitive
terms and is fair to the Company. In addition, the Audit Committee makes inquiries to our management and our auditors when reviewing
such transactions.
Related person transactions include any transaction in which (1) the Company is a participant, (2) any related person has a direct or
indirect material interest and (3) the amount involved exceeds the lesser of $120,000 or one percent of the average of the Company’s
total assets at year-end for the last two completed fiscal years, but excludes certain type of transactions where the related person is
deemed not to have a material interest. A related person means: (a) any person who is, or at any time since the beginning of the
Company’s last fiscal year was, a director, an executive officer or a director nominee; (b) any person known to be the beneficial owner
of more than 5% of any class of the Company’s voting securities; (c) any immediate family member of a person identified in items (a)
or (b) above, meaning such person’s spouse, parent, stepparent, child, stepchild, sibling, mother- or father-in-law, son- or daughter-in-
law, brother- or sister-in-law or any other individual (other than a tenant or employee) who shares the person’s household; or (d) any
entity that employs any person identified in (a), (b) or (c) or in which any person identified in (a), (b) or (c) directly or indirectly owns
or otherwise has a material interest.
In its review and approval or ratification of related person transactions (including its determination as to whether the related person
has a material interest in a transaction), the Audit Committee will consider, among other factors:
−
the nature of the related person’s interest in the transaction;
−
the material terms of the transaction, including, without limitation, the amount and type of transaction;
−
the importance of the transaction to the related person;
−
the importance of the transaction to the Company;
−
whether the transaction would impair the judgment of a director or executive officer to act in the best interest of the
Company; and
75
−
any other matters the Audit Committee deems important or appropriate.
The Audit Committee intends to approve only those related person transactions that are in, or are not inconsistent with, the best
interests of the Company and its stockholders.
Related Party Transactions
There were not any related party transactions during the years ended December 31, 2024 and December 31, 2023.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Fees Billed by Independent Registered Public Accounting Firm
The following table sets forth the aggregate contract fees billed to the Company for the fiscal year 2024 and 2023 by the independent
registered public accounting firm, BDO USA, P.C.
(In thousands)
2024
2023
Audit Fees
$
470
$
527
Audit-Related Fees
38
40
Tax Fees
---
---
All Other Fees
---
---
Total Fees
$
508
$
567
Audit Fees: consist primarily of fees for the audits of our financial statements included in our Annual Report on Form 10-K; the reviews
of the financial statements included in our Quarterly Reports on Form 10-Q; and fees billed for assurance, services related to registration
statements and other documents issued in connection with securities and related services that are reasonably related to the performance
of the audit or review of our consolidated financial statements. In 2023 the independent registered public accounting firm provided
services related to the Company’s Form S-3 Registration Statement.
Audit-Related Fees: consist of fees for services related to the audit of the Company’s 401(k) Plan.
Tax Fees: consist of fees for professional services for tax compliance, tax advice and tax planning. These services include assistance
regarding federal and state tax compliance, return preparation and tax audits. The independent registered public accounting firm did not
provide any tax services to the Company in 2024 and 2023.
All Other Fees: consist of fees for services other than described above. The independent registered public accounting firm did not
provide any other services to the Company in 2024 and 2023.
Pursuant to our policy, the Audit Committee pre-approves audit and tax services for the year as well as non-audit services to be provided
by the independent registered public accounting firm. Any changes in the amounts quoted are also subject to pre-approval by the
committee. Any audit related fees and tax fees paid are pre-approved by the committee.
The Audit Committee of the Company’s Board of Directors has considered whether BDO’s provision of the services described above
for the fiscal year ended December 31, 2024 is compatible with maintaining its independence.
76
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this report:
Page(s)*
(1)
Financial Statements:
Reports of Independent Registered Public Accountants (BDO USA, P.C.; Wilmington, DE;
PCAOB ID# 243)
57 - 58
Consolidated Balance Sheets at December 31, 2024 and 2023
29
Consolidated Statements of Operations for the three years ended December 31, 2024
30
Consolidated Statements of Cash Flows for the three years ended December 31, 2024
31 - 32
Consolidated Statements of Changes in Stockholders’ Equity for the three years ended
December 31, 2024
33
Notes to Consolidated Financial Statements
34 – 56
(2)
Exhibits: see the exhibit list below
77 - 82
* Page number shown refers to page number in this Annual Report on Form 10-K
ITEM 16. FORM 10-K SUMMARY
Information with respect to this item is not required and has been omitted at our option.
77
ARTESIAN RESOURCES CORPORATION
FORM 10-K ANNUAL REPORT
YEAR ENDED DECEMBER 31, 2024
EXHIBIT LIST
Exhibit
Number Description
3.1 Amended and Restated By-laws of Artesian Resources Corporation incorporated by reference to Exhibit 3.1 filed with
the Company’s Form 10-Q filed on November 8, 2024.
3.2 Restated Certificate of Incorporation of the Company effective April 28, 2004 incorporated by reference to Exhibit 3.1
filed with the Company’s Form 10-Q filed on May 3, 2004 for the quarterly period ended March 31, 2004.
4.1 First Amendment to Second Amended and Restated Revolving Credit Agreement between Artesian Water Company, Inc.
and CoBank, ACB dated October 25, 2022. Incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report
on Form 10-Q filed on November 4, 2022 for the quarter ended September 30, 2022.
4.2 Twenty-Fifth Supplemental Indenture dated as of April 29, 2022, between Artesian Water Company, Inc. and Wilmington
Trust Company, as trustee. Incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q
filed on May 5, 2022 for the quarter ended March 31, 2022.
4.3 Bond Purchase Agreement, dated April 29, 2022, by and between Artesian Water Company, Inc., and CoBank, ACB.
Incorporated by reference to Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q filed on May 5, 2022 for the
quarter ended March 31, 2022.
4.4 Twenty-Fourth Supplemental Indenture dated as of December 17, 2019, between Artesian Water Company, Inc.,
subsidiary of the Company, and Wilmington Trust Company, as Trustee. Incorporated by reference to Exhibit 4.1 filed
with the Company's Form 8-K filed on December 19, 2019.
4.5 Bond Purchase Agreement, dated December 17, 2019 by and between Artesian Water Company, Inc., subsidiary of the
Company, and the Wilmington Trust Company, as Trustee. Incorporated by reference to Exhibit 4.2 filed with the
Company’s Form 8-K filed on December 17, 2019.
4.6 Twenty-Third Supplemental Indenture dated as of January 31, 2018, between Artesian Water Company, Inc., subsidiary
of the Company, and Wilmington Trust Company, as Trustee. Incorporated by reference to Exhibit 4.1 filed with the
Company's Form 8-K filed on February 2, 2018.
4.7 Bond Purchase Agreement, dated January 31, 2018 by and between Artesian Water Company, Inc., subsidiary of the
Company, and CoBank, ACB. Incorporated by reference to Exhibit 4.2 filed with the Company’s Form 8-K filed on
February 2, 2018.
4.8 Twenty-Second Supplemental Indenture dated as of January 18, 2017, between Artesian Water Company, Inc., subsidiary
of the Company, and Wilmington Trust Company, as Trustee. Incorporated by reference to Exhibit 4.1 filed with the
Company's Form 8-K filed on January 20, 2017.
4.9 Bond Purchase Agreement, dated January 18, 2017 by and between Artesian Water Company, Inc., subsidiary of the
Company, and CoBank, ACB. Incorporated by reference to Exhibit 4.2 filed with the Company’s Form 8-K filed on
January 20, 2017.
4.10 First Amendment to Indenture of Mortgage and to the Sixteenth, Eighteenth and Twentieth Supplemental Indentures
dated as of January 18, 2017, between Artesian Water Company, Inc., subsidiary of the Company, and Wilmington Trust
Company, as Trustee. Incorporated by reference to Exhibit 4.3 filed with the Company’s Form 10-K for the year ended
December 31, 2017 filed on March 15, 2018.
4.11 Letter Agreement, dated as of September 15, 2015, by and between Artesian Water Company, Inc. and CoBank ACB.
Incorporated by reference to Exhibit 4.1 filed with the Company’s Form 8-K filed on September 18, 2015.
4.12 Twenty-First Supplemental Indenture dated as of November 20, 2009, between Artesian Water Company, Inc., subsidiary
of the Company, and Wilmington Trust Company, as Trustee. Incorporated by reference to Exhibit 4.4 filed with the
78
Company’s Form 10-K for the year ended December 31, 2017.
4.13 Twentieth Supplemental Indenture dated as of December 1, 2008, between Artesian Water Company, Inc., subsidiary of
the Company, and Wilmington Trust Company, as Trustee. Incorporated by reference to Exhibit 4.1 filed with the
Company’s Form 8-K filed on December 4, 2008.
4.14 First Amendment to Bond Purchase Agreement, dated as of January 18, 2017 by and between Artesian Water Company,
Inc., subsidiary of the Company, and CoBank, ACB. Incorporated by reference to Exhibit 4.13 filed with the Company’s
Annual Report on Form 10-K for the year ended December 31, 2017 filed on March 15, 2018.
4.15 Bond Purchase Agreement, dated December 1, 2008 by and between Artesian Water Company, Inc., subsidiary of the
Company, and CoBank, ACB. Incorporated by reference to Exhibit 4.2 filed with the Company’s Form 8-K filed on
December 4, 2008.
4.16 Eighteenth Supplemental Indenture dated as of August 1, 2005, between Artesian Water Company, Inc., subsidiary of the
Company, and Wilmington Trust Company, as Trustee. Incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 filed on August 9, 2005.
4.17 Sixteenth Supplemental Indenture dated as of January 31, 2003 between Artesian Water Company, Inc., subsidiary of the
Company, and the Wilmington Trust Company, as Trustee. Incorporated by reference to Exhibit 4.2 filed with the
Company’s Annual Report on Form 10-K for the year ended December 31, 2003 filed on March 10, 2004.
4.18
Indenture of Mortgage dated July 1, 1961, between Artesian Water Company, Inc., subsidiary of the Company, and the
Wilmington Trust Company, as Trustee. Incorporated by reference to Exhibit 4.10 filed with the Company’s Annual
Report on Form 10-K for the year ended December 31, 2017 filed on March 15, 2018.
4.19 Second Amendment to Master Loan Agreement, dated as of November 13, 2019, by and between Artesian Wastewater
Management, Inc. and CoBank, ACB. Incorporated by reference to Exhibit 4.16 filed with the Company’s Annual
Report on Form 10-K for the year ended December 31, 2019 filed on March 13, 2020.
4.20 First Amendment to Master Loan Agreement, dated as of January 10, 2019, by and between Artesian Wastewater
Management, Inc. and CoBank, ACB. Incorporated by reference to Exhibit 4.17 filed with the Company’s Annual
Report on Form 10-K for the year ended December 31, 2019 filed on March 13, 2020.
4.21 Guarantee of Payment, dated as of August 8, 2018, by and between Artesian Resources Corporation and CoBank, ACB.
Incorporated by reference to Exhibit 4.3 filed with the Company’s Form 10-Q filed on August 9, 2018.
4.22 Master Loan Agreement, dated as of August 8, 2018, by and between Artesian Wastewater Management, Inc. and
CoBank, ACB. Incorporated by reference to Exhibit 4.2 filed with the Company’s Form 10-Q filed on August 9, 2018.
4.23 Artesian Resources Corporation 2015 Equity Compensation Plan. Incorporated by reference to Exhibit 4.1 filed with the
Company’s Registration Statement on Form S-8 filed December 16, 2015.
4.24 Interest Rate Lock Agreement, dated as of October 8, 2019, by and between Artesian Water Company, Inc. and CoBank,
ACB, Incorporated by reference to Exhibit 4.1 filed with the Company’s Form 8-K filed on October 11, 2019.
4.25
Description of the Company’s Securities. Incorporated by reference to Exhibit 4.22 filed with the Company’s Annual
Report on Form 10-K for the year ended December 31, 2019 filed on March 13, 2020.
4.26
Interest Rate Lock Agreement, dated as of February 7, 2022, by and between Artesian Water Company, Inc. and CoBank,
ACB. Incorporated by reference to Exhibit 4.1 filed with the Company’s Form 8-K filed on February 10, 2022.
10.1
Amended and Restated Demand Line of Credit Agreement between Artesian Resources Corporation, and Citizens Bank,
N.A. dated July August 3, 2023. Incorporated by reference to Exhibit 10.1 filed with the Company’s Form 10-Q filed on
November 7, 2023.
10.2
Financing Agreement, Loan No. 22000032, dated as of December 9, 2022, between Artesian Water Company, Inc. and
Delaware Drinking Water State Revolving Fund, acting by and through the Delaware Department of Health & Social
Services, Division of Public Health., incorporated by reference to Exhibit 10.3 filed with the Company’s Form 8-K filed
on December 12, 2022.
79
10.3
General Obligation Note (New Castle County Water Main Transmission Replacements Projects), Series 2022E-DWSRF,
dated as of December 9, 2022, issued by Artesian Water Company, Inc. in favor of Delaware Drinking Water State
Revolving Fund, acting by and through the Delaware Department of Health & Social Services, Division of Public Health.,
incorporated by reference to Exhibit 10.4 filed with the Company’s Form 8-K filed on December 12, 2022.
10.4
Financing Agreement, Loan No. 22000031, dated as of December 9, 2022, between Artesian Water Company, Inc. and
Delaware Drinking Water State Revolving Fund, acting by and through the Delaware Department of Health & Social
Services, Division of Public Health., incorporated by reference to Exhibit 10.5 filed with the Company’s Form 8-K filed
on December 12, 2022.
10.5
General Obligation Note (New Castle County Water Main Transmission Replacements Projects), Series 2022F-DWSRF,
dated as of December 9, 2022, issued by Artesian Water Company, Inc. in favor of Delaware Drinking Water State
Revolving Fund, acting by and through the Delaware Department of Health & Social Services, Division of Public Health.,
incorporated by reference to Exhibit 10.6 filed with the Company’s Form 8-K filed on December 12, 2022.
10.6
Financing Agreement, Loan No. 22000030, dated as of August 12, 2022, between Artesian Water Company, Inc. and
Delaware Drinking Water State Revolving Fund, acting by and through the Delaware Department of Health & Social
Services, Division of Public Health., incorporated by reference to Exhibit 10.1 filed with the Company’s Form 8-K filed
on August 15, 2022.
10.7
General Obligation Note (New Castle County Water Main Transmission Replacements Projects), Series 2022A-DWSRF,
dated as of August 12, 2022, issued by Artesian Water Company, Inc. in favor of Delaware Drinking Water State
Revolving Fund, acting by and through the Delaware Department of Health & Social Services, Division of Public Health.,
incorporated by reference to Exhibit 10.2 filed with the Company’s Form 8-K filed on August 15, 2022.
10.8
Financing Agreement, Loan No. 22000029, dated as of August 12, 2022, between Artesian Water Company, Inc. and
Delaware Drinking Water State Revolving Fund, acting by and through the Delaware Department of Health & Social
Services, Division of Public Health., incorporated by reference to Exhibit 10.3 filed with the Company’s Form 8-K filed
on August 15, 2022.
10.9
General Obligation Note (New Castle County Water Main Transmission Replacements Projects), Series 2022B-DWSRF,
dated as of August 12, 2022, issued by Artesian Water Company, Inc. in favor of Delaware Drinking Water State
Revolving Fund, acting by and through the Delaware Department of Health & Social Services, Division of Public Health.,
incorporated by reference to Exhibit 10.4 filed with the Company’s Form 8-K filed on August 15, 2022.
10.10 Financing Agreement, Loan No. 22000028, dated as of August 12, 2022, between Artesian Water Company, Inc. and
Delaware Drinking Water State Revolving Fund, acting by and through the Delaware Department of Health & Social
Services, Division of Public Health., incorporated by reference to Exhibit 10.5 filed with the Company’s Form 8-K filed
on August 15, 2022.
10.11 General Obligation Note (New Castle County Water Main Transmission Replacements Projects), Series 2022C-DWSRF,
dated as of August 12, 2022, issued by Artesian Water Company, Inc. in favor of Delaware Drinking Water State
Revolving Fund, acting by and through the Delaware Department of Health & Social Services, Division of Public Health.,
incorporated by reference to Exhibit 10.6 filed with the Company’s Form 8-K filed on August 15, 2022.
10.12 Settlement Agreement upon which The Chemours Company FC, LLC, Hercules, LLC, Waste Management of Delaware,
Inc., SC Holdings, Inc., Cytec Industries, Inc., Zeneca Inc., and Bayer CropScience Inc., collectively the Percentage
Settlors, and the Delaware Sand and Gravel Remedial Trust, on one hand, and Artesian Water Company, Inc., on the
other hand, have agreed to resolve certain of Artesian Water’s claims and issues relating to releases of contaminants from
the Delaware Sand & Gravel Landfill Superfund Site, incorporated by reference to Exhibit 10.2 filed with the Company’s
Quarterly Report on Form 10-Q filed on August 5, 2022.
10.13 Amendment to Asset Purchase Agreement, dated May 11, 2022, by and among Artesian Water Company, Inc., a Delaware
corporation, and the Town of Clayton, a Delaware municipality, incorporated by reference to Exhibit 10.1 filed with the
Company’s Form 10-Q filed on August 5, 2022.
10.14 Stock Purchase Agreement, dated August 27, 2021, by and among Artesian Wastewater Management, Inc., a Delaware
corporation, and Middlesex Water Company, a New Jersey corporation. Incorporated by reference to Exhibit 10.1 filed
with the Company’s Form 10-Q filed on November 5, 2021.
80
10.15 Asset Purchase Agreement, dated February 16, 2022, by and among Artesian Water Company, Inc. a Delaware
corporation, and the Town of Clayton, a Delaware municipality. Incorporated by reference to Exhibit 10.2 filed with the
Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed on March 11, 2022.
10.16 Asset Purchase Agreement, dated June 11, 2020 by and among Artesian Water Company, Inc., a Delaware corporation,
and the City of Delaware City, a Delaware municipality. Incorporated by reference to Exhibit 10.1 filed with Company’s
Form 8-K filed on June 16, 2020.
10.17 Asset Purchase Agreement, dated February 27, 2020 by and among Artesian Water Company, Inc., a Delaware
corporation, and the Town of Frankford, a Delaware municipality. Incorporated by reference to Exhibit 10.1 filed with
Company’s Form 8-K filed on March 4, 2020.
10.18 Financing Agreement, dated as of April 28, 2020, between Artesian Water Company, Inc. and Delaware Drinking Water
State Revolving Fund, acting by and through the Delaware Department of Health & Social Services, Division of Public
Health. Incorporated by reference to Exhibit 10.1 filed with the Company’s Form 8-K filed on April 30, 2020.
10.19 General Obligation Note (New Castle County Water Main Transmission Replacements Projects), Series 2020A-SRF,
dated as of April 28, 2020, issued by Artesian Water Company, Inc. in favor of Delaware Drinking Water State Revolving
Fund, acting by and through the Delaware Department of Health & Social Services, Division of Public Health.
Incorporated by reference to Exhibit 10.2 filed with the Company’s Form 8-K filed on April 30, 2020.
10.20 Financing Agreement, dated as of April 28, 2020, between Artesian Water Company, Inc. and Delaware Drinking Water
State Revolving Fund, acting by and through the Delaware Department of Health & Social Services, Division of Public
Health. Incorporated by reference to Exhibit 10.3 filed with the Company’s Form 8-K filed on April 30, 2020.
10.21 General Obligation Note (New Castle County Water Main Transmission Replacements Projects), Series 2020B-SRF,
dated as of April 28, 2020, issued by Artesian Water Company, Inc. in favor of Delaware Drinking Water State Revolving
Fund, acting by and through the Delaware Department of Health & Social Services, Division of Public Health.
Incorporated by reference to Exhibit 10.4 filed with the Company’s Form 8-K filed on April 30, 2020.
10.22 Financing Agreement, dated as of April 28, 2020, between Artesian Water Company, Inc. and Delaware Drinking Water
State Revolving Fund, acting by and through the Delaware Department of Health & Social Services, Division of Public
Health. Incorporated by reference to Exhibit 10.5 filed with the Company’s Form 8-K filed on April 30, 2020.
10.23 General Obligation Note (New Castle County Water Main Transmission Replacements Projects), Series 2020C-SRF,
dated as of April 28, 2020, issued by Artesian Water Company, Inc. in favor of Delaware Drinking Water State Revolving
Fund, acting by and through the Delaware Department of Health & Social Services, Division of Public Health.
Incorporated by reference to Exhibit 10.6 filed with the Company’s Form 8-K filed on April 30, 2020.
10.24 General Obligation Note (New Castle County Water Main Transmission Replacements Projects), Series 2011-SRF, dated
as of July 15, 2011, issued by Artesian Water Company, Inc. in favor of Delaware Drinking Water State Revolving Fund,
acting by and through the Delaware Department of Health & Social Services, Division of Public Health. Incorporated by
reference to Exhibit 10.2 filed with the Company’s Form 8-K filed on July 19, 2011.
10.25 Financing Agreement, dated as of July 15, 2011, between Artesian Water Company, Inc. and Delaware Drinking Water
State Revolving Fund, acting by and through the Delaware Department of Health & Social Services, Division of Public
Health. Incorporated by reference to Exhibit 10.1 filed with the Company’s Form 8-K filed on July 19, 2011.
10.26 Financing Agreement and General Obligation Note dated February 12, 2010 between Artesian Water Company, Inc.
and Delaware Drinking Water State Revolving Fund Delaware Department of Health and Social Services, Division of
Public Health. Incorporated by reference to Exhibit 10.1 filed with the Company’s Form 8-K filed on February 17,
2010.
10.27 Second Amended and Restated Revolving Credit Agreement between Artesian Water Company, Inc. and CoBank, ACB
dated September 20, 2019. Incorporated by reference to Exhibit 4.2 filed with the Company’s Form 10-Q filed on
November 8, 2019.
10.28 Demand Line of Credit Agreement dated January 19, 2010 between Artesian Resources Corporation and each of its
subsidiaries and Citizens Bank of Pennsylvania, as amended or modified from time to time. Incorporated by reference
to Exhibit 10.2 filed with the Company’s Form 8-K filed on January 25, 2010.
81
10.29 Amendment to Agreement for Purchase of Water Assets of the Town of Port Deposit and for the provision of Potable
Water Services, dated November 1, 2010 by and among Artesian Water Maryland, Inc., a Delaware Corporation, Artesian
Resources Corporation, a Delaware Corporation and the Mayor and Town Council of Port Deposit, Maryland, a body
corporate and politic organized under the laws of the State of Maryland. Incorporated by reference to Exhibit 10.2 filed
with the Company’s Form 8-K filed on November 4, 2010.
10.30 Water Asset Purchase Agreement, dated December 1, 2009 by and among Artesian Water Maryland, Inc., a Delaware
Corporation, Artesian Resources Corporation, a Delaware Corporation and the Mayor and Town Council of Port Deposit,
Maryland, a body corporate and politic organized under the laws of the State of Maryland. Incorporated by reference to
Exhibit 10.1 filed with the Company’s Form 8-K filed on December 2, 2009.
10.31 Limited Liability Interest Purchase Agreement, dated May 5, 2008, by and among Artesian Maryland, Inc., a Delaware
corporation, Mountain Hill Water Company, LLC, a Maryland limited liability company, Sunrise Holdings, L.P., a
Pennsylvania limited partnership and Artesian Resources Corporation, a Delaware corporation. Incorporated by
reference to Exhibit 10.1 filed with the Company’s Form 8-K filed on May 9, 2008.
10.32 Artesian Resources Corporation 2005 Equity Compensation Plan. Incorporated by reference to Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 filed on August 9, 2005. ***
10.33 Amended and Restated Artesian Resources Corporation 1992 Non-Qualified Stock Option Plan, as amended.
Incorporated by reference to Exhibit 10.4 filed with the Company’s Form 10-Q for the quarterly period ended June 30,
2003 filed on July 31, 2003.***
10.34 Artesian Resources Corporation Incentive Stock Option Plan. Incorporated by reference to Exhibit 10(e) filed with the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.***
10.35 Officer's Medical Reimbursement Plan dated May 27, 1992. Incorporated by reference to Exhibit 10.6 filed with the
Company’s Annual Report on Form 10-K/A for the year ended December 31, 2001.***
10.36 Agreement and Mutual Release, dated as of March 16, 2025, by and between Dian C. Taylor and Artesian Resources
Corporation.*
19.1
Insider Trading Policy, dated March 25, 2025.*
21
Subsidiaries of the Company as of December 31, 2024. *
23.1 Consent of BDO USA, P.C. *
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
32
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. **
97
Artesian Resources Corporation Clawback Policy, effective as of August 7, 2023. Incorporated by reference to Exhibit
97 filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.*
101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL
tags are embedded within the Inline XBRL document). *
101.SCH Inline XBRL Taxonomy Extension Schema Document. *
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. *
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. *
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. *
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. *
82
104
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). *
*
Filed herewith.
**
Furnished herewith.
***
Compensation plan or arrangement required to be filed or incorporated as an exhibit.
83
SIGNATURES
ARTESIAN RESOURCES CORPORATION
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Date March 26, 2025
By: /s/ DAVID B. SPACHT
David B. Spacht
Chief Financial Officer (Principal Financial
Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ NICHOLLE R. TAYLOR
Chair of the Board of Directors, President
Nicholle R. Taylor
and Chief Executive Officer (Principal
Executive Officer)
March 26, 2025
/s/ DAVID B. SPACHT
Chief Financial Officer (Principal Financial
David B. Spacht
Officer)
March 26, 2025
/s/ JENNIFER L. FINCH
Corporate Treasurer and Senior Vice
Jennifer L. Finch
President of Finance (Principal Accounting
Officer)
March 26, 2025
/s/ KENNETH R. BIEDERMAN
Kenneth R. Biederman
Director
March 26, 2025
/s/ JOHN R. EISENBREY, JR.
John R. Eisenbrey, Jr.
Director
March 26, 2025
/s/ MICHAEL HOUGHTON
Michael Houghton
Director
March 26, 2025
/s/ DIAN C. TAYLOR
Dian C. Taylor
Director
March 26, 2025
84
EXHIBIT 21
ARTESIAN RESOURCES CORPORATION AND SUBSIDIARY COMPANIES
Subsidiaries of Registrant
The following list includes the Registrant and all of its subsidiaries. All subsidiaries of the Registrant appearing in the following table
are included in the consolidated financial statements of the Registrant and its subsidiaries.
Name of Company
State of
Incorporation
Artesian Resources Corporation
Delaware
Artesian Water Company, Inc.
Delaware
Artesian Water Pennsylvania, Inc.
Pennsylvania
Artesian Water Maryland, Inc.
Delaware
Artesian Development Corporation
Delaware
Artesian Wastewater Management, Inc.
Delaware
Tidewater Environmental Services, Inc. dba Artesian Wastewater
Delaware
Artesian Wastewater Maryland, Inc.
Delaware
Artesian Utility Development, Inc.
Delaware
85
EXHIBIT 23.1
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-88531 and 333-266821)
and Form S-8 (No. 333-05255, 333-31209, 333-78043, 333-126910 and 333-208582) of Artesian Resources Corporation (the
Company) of our report dated March 26, 2025, relating to the consolidated financial statements, which appear in the Annual
Report to Shareholders, which appears in this annual report on Form 10-K.
/s/ BDO USA, P.C.
Wilmington, Delaware
March 26, 2025
86
EXHIBIT 31.1
Certification of Chief Executive Officer of Artesian Resources Corporation, required
by Rule 13a – 14(a) as adopted under the Securities and Exchange Act of 1934
I, Nicholle R. Taylor, certify that:
1. I have reviewed this Annual Report on Form 10-K for the period ended December 31, 2024 of Artesian Resources Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and
report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: March 26, 2025
/s/ NICHOLLE R. TAYLOR
Nicholle R. Taylor
Chief Executive Officer (Principal Executive Officer)
87
EXHIBIT 31.2
Certification of Chief Financial Officer of Artesian Resources Corporation, required
by Rule 13a – 14(a) as adopted under the Securities and Exchange Act of 1934
I, David B. Spacht, certify that:
1. I have reviewed this Annual Report on Form 10-K for the period ended December 31, 2024 of Artesian Resources Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and
report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: March 26, 2025
/s/ David B. Spacht
David B. Spacht
Chief Financial Officer (Principal Financial Officer)
88
EXHIBIT 32
Certification of Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350
I, Nicholle R. Taylor, Chief Executive Officer, and David B. Spacht, Chief Financial Officer, of Artesian Resources Corporation, a
Delaware corporation (the "Company"), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that, based on our knowledge:
1. The Company's Annual Report on Form 10-K for the period ended December 31, 2024 (the " Report") fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 USC Section 78m(a) or Section 78o(d)), as
amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition of the Company at the
end of the period covered by the Report and results of operations of the Company for the period covered by the Report.
Date: March 26, 2025
Chief Executive Officer:
Chief Financial Officer:
/s/ NICHOLLE R. TAYLOR
/s/ David B. Spacht
Nicholle R. Taylor
David B. Spacht
These certifications accompany the Report to which they relate, are not deemed filed with the Securities and Exchange Commission
and are not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended (whether made before or after the date of the Report), irrespective of any general incorporation
language contained in such filing.