Artesian Resources Corporation Reports 2019 Year-End Earnings and Fourth Quarter Results

NEWARK, Del., March 11, 2020 (GLOBE NEWSWIRE) -- Artesian Resources Corporation ARTNA, a leading provider of water and wastewater services, and related services, on the Delmarva Peninsula, today announced earnings results for the fourth quarter and full year ended December 31, 2019. Net income increased 4.5% to $14.9 million for the year ended December 31, 2019, compared to $14.3 million for the year December 31, 2018. Diluted net income per common share increased 3.9% to $1.60 for the year ended December 31, 2019, compared to $1.54 for the same period in 2018.

Dian C. Taylor, President and CEO stated, "Artesian remained focused during 2019 on our ongoing strategy of growing our water and wastewater customer base and service area while investing in utility plant to provide the best possible service and quality water to our customers." We invested $40.7 million in 2019, following $49.1 million invested in 2018, in infrastructure projects including installation of transmission and distribution facilities, replacement of aging mains, rehabilitation of treatment facilities, new water treatment facilities and a storage tank, redevelopment of wells and pumping equipment and upgrades to computer, transportation and meter reading equipment as well as investments in wastewater facilities in Delaware. "Our continuing significant investments in utility plant allow us to ensure our current customers receive reliable service and high quality drinking water, meet the needs of our expanding and developing service areas and provide for our ability to sustain growth in earnings for the benefit of our shareholders," said Taylor.

Water sales revenue increased 3.9% to $73.6 million for the year ended December 31, 2019 from $70.8 million for the same period in 2018. The increase in water sales revenue is primarily due to an increase from customer growth, overall water consumption and in the Distribution System Improvement Charge ("DSIC").

Other utility operating revenue increased 10.3% to $4.9 million for the year ended December 31, 2019 from $4.5 million for the year ended December 31, 2018 primarily as a result of an increase in wastewater revenue from customer growth.

Operating expenses, excluding depreciation and income taxes, increased $1.5 million, or 3.3%, for the year ended December 31, 2019 compared to the year ended December 31, 2018. The majority of the increase is related to increases in overall payroll and benefit costs, water treatment costs and property taxes.

Depreciation and amortization expense increased $0.5 million, or 5.0%, for the year ended December 31, 2019 compared to the year ended December 31, 2018, 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 $0.2 million, or 3.8%, from $5.0 million in 2018 to $5.2 million in 2019, primarily due to higher pre-tax income for the year ended December 31, 2019, compared to the year ended December 31, 2018.

Other income increased $0.4 million, or 28.5%, primarily due to an increase in Allowance for Funds Used During Construction ("AFUDC") of $0.8 million as a result of higher long-term construction activity subject to AFUDC for the year ended December 31, 2019 compared to the same period in 2018. Miscellaneous income decreased $0.3 million for the year ended December 31, 2019, primarily due to a one-time additional patronage payment from CoBank, ACB in 2018 related predominately to savings generated from the Tax Cut and Jobs Act ("TCJA") as well as a decrease in the amount of the annual patronage refund paid by CoBank, ACB in 2019. The annual patronage refund rate was reduced in 2019 to 0.80% from 1.00% of the average line of credit and loan volume outstanding.

Interest expense increased $0.8 million for the year ended December 31, 2019, primarily due to long-term debt interest associated with the $7.5 million wastewater loan issued in August 2018 and the $4.5 million wastewater loan issued in December 2018. In addition, short-term debt interest increased due to an increase in the average amount borrowed under lines of credit.

Fourth Quarter Financial Results

Net income increased 5.2% to $3.1 million for the three months ended December 31, 2019 compared to $2.9 million for the same period in 2018. Diluted net income per common share increased 3.1% to $0.33 for the three months ended December 31, 2019 compared to $0.32 for the same period in 2018.

For the three months ended December 31, 2019, revenues were $21.0 million, an increase of 8.6% from the $19.3 million recorded for the same period in 2018. Water sales revenue increased 9.1% to $18.4 million for the three months ended December 31, 2019. The increase in water sales revenue is primarily due to an increase in customer growth, overall water consumption and DSIC.

Other utility operating revenue increased 18.3% to $1.4 million for the three months ended December 31, 2019 from $1.2 million for the same period in 2018 primarily as a result of an increase in wastewater revenue from customer growth.

Operating expenses, excluding income taxes and depreciation, increased by 5.3% to $12.6 million for the three months ended December 31, 2019 compared to $11.9 million for the same period in 2018. The increase in operating expenses is primarily the result of increased overall payroll and benefit costs.

AFUDC increased $0.1 million for the three months ended December 31, 2019 compared to the same period in 2018 as a result of higher long-term construction activity subject to AFUDC for the three months ended December 31, 2019 compared to the same period in 2018.

Federal and state income tax expense increased $0.9 million, from $0.3 million for the three months ended December 31, 2018 to $1.2 million for the three months ended December 31, 2019, primarily due to adjustments made in the fourth quarter of 2018 related to the implementation effect of the TCJA including one-time adjustments.

Other Highlights include:

• Expect to close on the acquisition of the water assets in the Town of Frankford in Sussex County, DE in the first quarter of 2020. Frankford's water system will become a part of Artesian's regional water system, connecting to the rapidly growing beach community, covering over 20 square miles of service territory.
• Acquired the water assets of the High Point community, adding approximately 400 customers in Sussex County and completed the installation of fire protection.
• Partnered with Sussex County to provide cost effective water service to hundreds of Ellendale residents in need of service.
• Expanded our water and wastewater service area franchise by 5 square miles.
• Commenced construction of a water treatment facility in southern New Castle County, Delaware capable of treating up to two million gallons per day, which can be expanded to treat up to three million gallons per day.
• Completed construction of a one million gallon elevated water storage tank in Sussex County, Delaware.
• Signed an interconnection and partnership agreement with the town of North East, Maryland to provide water supply to serve anticipated growth in Cecil County, Maryland.
• Constructed wastewater investments included completing a 90 million gallon storage lagoon for spray irrigation to dispose of treated wastewater from a new industrial customer, for which service is expected to begin in 2020.
• Continued to grow our wastewater business, increasing the number of customers served by 16% and adding the most customers in our 15 year history of providing wastewater services in Sussex County.

About Artesian Resources
Artesian Resources Corporation operates as a holding company of wholly-owned subsidiaries offering water and wastewater services, and related services, on the Delmarva Peninsula. Artesian Water Company, the principal subsidiary, is the oldest and largest regulated water utility on the Delmarva Peninsula and has been providing water service since 1905. Artesian supplies 8.3 billion gallons of water per year through 1,311 miles of main to over 300,000 people.

Forward-Looking Statements
This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding, among other things, our anticipated expansion of service in Sussex County, Delaware, including our expectations regarding the acquisition of water assets in the Town of Frankford and when it will become part of the regional system, our investment in infrastructure projects and wastewater facilities, continued growth in the number of customers and service area served, the timing of when new service will begin and our ability to continue to increase shareholder value. These statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-looking statements including: changes in weather, changes in our contractual obligations, changes in government policies, the timing and results of our rate requests, failure to receive regulatory approval, changes in economic and market conditions generally, and other matters discussed in our filings with the Securities and Exchange Commission. While the Company may elect to update forward-looking statements, we specifically disclaim any obligation to do so and you should not rely on any forward-looking statement as representation of the Company's views as of any date subsequent to the date of this release.

Contact:
Nicki Taylor
Investor Relations
(302) 453-6900
ntaylor@artesianwater.com