UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
or
_ 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 0-18516
ARTESIAN RESOURCES CORPORATION
(exact name of registrant as specified in its charter)
State or other jurisdiction of incorporation or organization: Delaware
I.R.S. Employer Identification Number: 51-0002090
Address of principal executive offices: 664 Churchmans Road, Newark, Delaware
Zip Code: 19702
Registrant's telephone number, including area code: (302) 453-6900
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. X Yes No
As of October 20, 1998, 1,289,198 shares and 511,210 shares of Class A
Non-Voting Common Stock and Class B Common Stock, respectively, were
outstanding.
ARTESIAN RESOURCES CORPORATION
INDEX TO FORM 10-Q
Part I - Financial Information: Page(s)
Item 1 - Financial Statements
Consolidated Balance Sheet -
September 30, 1998 and December 31, 1997 3
Consolidated Statement of Income for
the quarters ended September 30, 1998 and 1997 4
Consolidated Statement of Income for
the nine months ended September 30, 1998 and 1997 5
Consolidated Statement of Retained Earnings for
the nine months ended September 30, 1998 and 1997 5
Consolidated Statement of Cash Flows for the
nine months ended September 30, 1998 and 1997 6
Notes to the Consolidated Financial Statements 7-10
Item 2 - Management's Discussion and Analysis of
Results of Operations and Financial Condition 10-11
Item 3 - Quantitative and Qualitative Disclosures
About Market Risk 12
Part II - Other Information:
Item 1 - Legal Proceedings 12
Item 2 - Changes in Securities 12
Item 3 - Defaults Upon Senior Securities 12
Item 4 - Submission of Matter to Vote of
Securities Holders 12
Item 5 - Other Information 12
Item 6 - Exhibits and Reports on Form 8-K 13-16
Signatures 17
Part I - Financial Information
Item I - Financial Statements
ARTESIAN RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands) Unaudited
September 30, December 31,
1998 1997
ASSETS
Utility plant, at orig. cost less
accumulated depreciation $108,463 $ 97,694
CURRENT ASSETS
Cash and cash equivalents 248 146
Accounts receivable 2,108 2,131
Unbilled operating revenue 2,176 1,869
Materials and supplies - FIFO 583 610
Prepaid property taxes 793 519
Prepaid expenses and other 349 388
State and federal income taxes --- 135
6,257 5,798
OTHER ASSETS
Non-utility property (less accumulated
depreciation 1998-$150,;1997-$144) 282 349
Other deferred assets 1,128 1,208
1,410 1,557
REGULATORY ASSETS 2,785 2,818
$118,915 $107,867
LIABILITIES AND STOCKHOLDERS' EQUITY
Common stock $ 1,800 $ 1,780
Additional paid-in capital 18,008 17,648
Retained earnings 7,613 6,887
Preferred stock 272 272
Total stockholders' equity 27,693 26,587
Preferred stock-mandatorily
redeemable 500 600
Long-term debt, net of current
portion 32,063 32,103
60,256 59,290
CURRENT LIABILITIES
Notes payable 8,984 1,164
Current portion of long-term debt 46 46
Current portion of mandatorily redeemable
preferred stock 100 112
Accounts payable 3,287 2,616
Overdraft payable 596 510
State and federal income taxes 653 ---
Deferred income taxes 84 189
Interest accrued 250 880
Customer deposits 382 370
Dividends payable 20 ---
Other 630 360
15,032 6,247
DEFERRED CREDITS AND OTHER LIABILITIES
Net advances for construction 18,502 17,880
Postretirement benefit obligation 1,658 1,704
Deferred investment tax credits 1,003 1,029
Deferred income taxes 499 176
21,662 20,789
NET CONTRIBUTIONS IN AID OF CONSTRUCTION 21,965 21,541
$118,915 $107,867
See notes to the consolidated financial statements.
ARTESIAN RESOURCES CORPORATION
CONSOLIDATED STATEMENT OF INCOME
Unaudited
(In thousands, except share and per share amounts)
For the Quarter
Ended September 30,
1998 1997
OPERATING REVENUES
Water sales $6,632 $5,780
Other utility operating revenue 90 84
6,722 5,864
OPERATING EXPENSES
Utility operating expenses 3,721 3,225
Non-utility operating expenses (Note 3) --- 12
Related party expenses (Note 4) 57 62
Depreciation and amortization 553 599
State and federal income taxes 494 400
Property and other taxes 370 343
5,195 4,641
OPERATING INCOME 1,527 1,223
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION 31 24
OTHER INCOME 15 4
INCOME BEFORE INTEREST CHARGES 1,573 1,251
INTEREST CHARGES
Long-term debt 682 274
Short-term debt 129 377
Amortization of debt expense 8 7
Other 6 7
825 665
NET INCOME 748 586
DIVIDENDS ON PREFERRED STOCK 20 22
NET INCOME APPLICABLE
TO COMMON STOCK $ 728 $ 564
INCOME PER COMMON SHARE:
Basic $ 0.40 $ 0.32
Diluted $ 0.40 $ 0.32
CASH DIVIDEND PER COMMON SHARE $ 0.255 $ 0.23
AVERAGE COMMON SHARES OUTSTANDING:
Basic 1,798,781 1,762,127
Diluted 1,819,195 1,775,487
See notes to the consolidated financial statements.
ARTESIAN RESOURCES CORPORATION
CONSOLIDATED STATEMENT OF INCOME
Unaudited
(In thousands, except share and per share amounts)
For the Nine Months
Ended September 30,
1998 1997
OPERATING REVENUES
Water sales $ 18,747 $ 16,145
Other utility operating revenue 267 248
19,014 16,393
OPERATING EXPENSES
Utility operating expenses 10,494 9,348
Non-utility operating expenses (Note 3) --- 12
Related party expenses (Note 4) 170 185
Depreciation and amortization 1,632 1,826
State and federal income taxes 1,387 849
Property and other taxes 1,116 1,077
14,799 13,297
OPERATING INCOME 4,215 3,096
ALLOWANCE FOR FUNDS USED
DURING CONSTRUCTION 149 112
OTHER INCOME AND (EXPENSE) 39 (26)
INCOME BEFORE INTEREST CHARGES 4,403 3,182
INTEREST CHARGES
Long-term debt 2,027 1,444
Short-term debt 238 383
Amortization of debt expense 23 16
Other 26 23
2,314 1,866
NET INCOME 2,089 1,316
DIVIDENDS ON PREFERRED STOCK 62 70
NET INCOME APPLICABLE
TO COMMON STOCK $ 2,027 $ 1,246
INCOME PER COMMON SHARE:
Basic $ 1.13 $ 0.71
Diluted $ 1.12 $ 0.70
CASH DIVIDEND PER COMMON SHARE $ 0.715 $ 0.69
AVERAGE COMMON SHARES OUTSTANDING
Basic 1,795,150 1,759,082
Diluted 1,812,765 1,771,694
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
Unaudited
(In thousands)
For the Nine Months
Ended September 30,
1998 1997
BALANCE, beginning of period $ 6,887 $ 6,614
NET INCOME 2,089 1,316
8,976 7,930
DIVIDENDS 1,363 1,303
BALANCE, end of period $ 7,613 $ 6,627
See notes to the consolidated financial statements.
ARTESIAN RESOURCES CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
(In thousands) For the Nine Months
Ended September 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME $ 2,089 $ 1,316
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,516 1,711
Allowance for funds used during
construction (149) (113)
CHANGES IN ASSETS AND LIABILITIES:
Accounts receivable 23 (338)
Unbilled operating revenue (307) 32
Materials and supplies 27 (46)
State and federal income taxes payable 788 (80)
Prepaid property taxes (274) (288)
Prepaid expenses and other 39 (105)
Deferred income taxes, net 192 788
Other deferred assets 80 (77)
Regulatory assets 33 (184)
Postretirement benefit obligation (46) (5)
Accounts payable 671 (1,629)
Interest accrued (630) 149
Customer deposits and other, net 282 354
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,334 1,485
CASH FLOWS USED IN INVESTING ACTIVITIES
Capital expenditures (net of AFUDC) (12,375) (6,763)
Proceeds from sale of assets 14 162
NET CASH USED IN INVESTING ACTIVITIES (12,361) (6,601)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) under
line of credit agreement 7,820 (9,058)
Proceeds from issuance of mortgage bonds --- 15,000
Overdraft payable 86 106
Net advances and contributions
in aid of construction 1,338 875
Proceeds from common stock dividends
reinvested and stock options exercised 380 272
Dividends (1,343) (1,281)
Principal payments under capital
lease obligations (40) (204)
Retirement of preferred stock (112) (113)
NET CASH PROVIDED BY FINANCING ACTIVITIES 8,129 5,597
NET INCREASE IN CASH AND CASH EQUIVALENTS 102 481
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 146 148
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 248 $ 629
Supplemental Disclosures of Cash Flow Information:
Interest paid $ 1,663 $ 1,701
Income taxes paid $ 480 $ 272
Supplemental Schedule of Non-Cash Investing
and Financing Activities:
Capital lease obligations incurred $ --- $ 67
See notes to the consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL
The unaudited financial statements of Artesian Resources Corporation and
its wholly-owned subsidiaries (the Company or Artesian Resources),
including its principal operating company, Artesian Water Company, Inc.
(Artesian Water), presented herein have been prepared in accordance with the
instructions to Form 10-Q and do not include all of the information and note
disclosures required by generally accepted accounting principles. These
statements should be read in conjunction with the consolidated financial
statements and notes thereto for the year ended December 31, 1997 included in
the Company's Annual Report on Form 10-K. The accompanying consolidated
financial statements have not been examined by independent accountants in
accordance with generally accepted auditing standards, but in the opinion of
management such consolidated financial statements include all adjustments,
consisting only of normal recurring adjustments, necessary to fairly
summarize the Company's financial position and results of operations. The
results of operations for the quarter and nine months ended September 30,
1998 may not be indicative of the results that may be expected for the year
ending December 31, 1998.
NOTE 2 - REGULATORY ASSETS
Certain expenses, which are recoverable through rates as permitted by the
State of Delaware Public Service Commission (PSC), are deferred and
amortized during future periods using various methods. Expenses related to
rate proceedings are amortized on a straight-line basis over two years. The
post retirement benefit obligation, which is being amortized over twenty
years, is adjusted for the difference between the net periodic post retirement
benefit costs and the cash payments. The deferred income taxes will be
amortized over future years as the tax effects of temporary differences
previously flowed through to the customer reverse. Regulatory assets, net of
amortization, comprise:
September 30, 1998 December 31, 1997
(,000) (,000)
Postretirement benefit obligation $1,658 $1,704
Deferred income taxes recoverable
in future rates 699 710
Expense of rate proceedings 428 404
$2,785 $2,818
NOTE 3 - NON-UTILITY OPERATIONS
Artesian Wastewater Management, Inc. (Artesian Wastewater) plans to
provide wastewater treatment services in Delaware. On March 12, 1997
Artesian Wastewater became a one-third owner in AquaStructure Delaware,
L.L.C. which intends to develop and market various proposals to provide
wastewater treatment services. No operations have occurred under Artesian
Wastewater for the nine months ended September 30, 1998. For the quarter
and nine months ended September 30, 1997, Artesian Wastewater incurred
$12,000 in start-up expenses.
NOTE 4 - RELATED PARTY TRANSACTIONS
The office building and shop complex utilized by Artesian Water are
leased at an annual rental of $184,000 from a partnership, White Clay Realty,
in which certain of Artesian Resources' officers and directors are partners.
The lease expires in 2002, with provisions for renewals for two five year
periods thereafter. Management believes that the payments made to White Clay
Realty for the lease of its office building and shop complex are comparable
to what Artesian Water would have to pay to unaffiliated parties for similar
facilities.
Artesian Water leases certain parcels of land for water production wells
from Glendale Enterprises Limited, a company wholly-owned by Ellis D. Taylor,
a shareholder of greater than five percent and Chairman Emeritus, at an
annual rental of $44,000. Renewal of the lease is automatic from year to
year unless 60 days written notice is given by either party before the end
of the year's lease. The annual rental is adjusted each year by the consumer
price index as of June 30 of the preceding year. Artesian Water has the
right to terminate this lease by giving 60 days written notice should the
water supply be exhausted or other conditions beyond the control of Artesian
Water materially and adversely affect its interest in the lease.
Expenses associated with related party transactions are as follows:
For the Quarter Ended For the Nine Months
September 30, Ended September 30,
(,000) (,000)
1998 1997 1998 1997
White Clay Realty $ 46 $ 51 $ 138 $153
Glendale Enterprises 11 11 32 32
$ 57 $ 62 $ 170 $185
NOTE 5 - DEBT
As of September 30, 1998 Artesian Water has available unsecured lines of
credit, with no financial covenant restrictions, totaling $35.0 million
which are renewable annually at the banks' discretion. Borrowings under the
lines of credit bear interest based on the London Interbank Offering Rate
(LIBOR) plus 1.0% for 30, 60, 90, or 180 days, or the bank's Federal Funds
Rate plus 1.0%, at the option of Artesian Water.
NOTE 6 - RATE PROCEEDINGS
On April 20, 1998, Artesian Water entered into a proposed settlement
agreement of rate case Docket 97-340 with the Division of the Public Advocate
and the PSC staff which allowed Artesian Water to increase customer rates
from a temporary increase of 11.35% implemented December 3, 1997 to an
increase of approximately 13.2%, or $2.975 million annualized, effective
May 12, 1998. The settlement agreement was approved by the Hearing Examiner
in the rate case and the PSC on May 5, 1998 and May 12, 1998, respectively,
subject to an audit by the PSC of the June 30, 1998 utility plant balances.
The proposed annualized revenue increase of $2.975 million under the rate
case settlement agreement was based on a projected utility plant in service
level of $124.2 million as of June 30, 1998. The Company successfully
achieved the required utility plant in service level as confirmed by a post-
rate case PSC audit, and effective October 27, 1998 the PSC closed rate case
Docket 97-340.
NOTE 7 - NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE
In December 1997, the Company adopted SFAS No. 128, "Earnings per Share"
which prescribes two methods for calculating net income per common share:
"Basic" and "Diluted" methods. These calculations differ from those used in
prior periods and as a result all prior period earnings per share data have
been restated to reflect the adoption of SFAS No. 128.
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 and the potentially
dilutive effect of employee stock options. The adoption of this statement
had no effect on the results of operations, financial conditions, or
long-term liquidity of the Company. The following table summarizes the
shares used in computing basic and diluted net income per share:
For the Quarter For the Nine Months
Ended September 30, Ended September 30
1998 1997 1998 1997
Average common shares
outstanding during the period
for Basic computation 1,798,781 1,762,127 1,795,150 1,759,082
Dilutive effect of
employee stock options 20,414 13,360 17,615 12,612
Average common shares
outstanding during the period
for Diluted computation 1,819,195 1,775,487 1,812,765 1,771,694
Equity per common share was $15.23 and $14.60 at September 30, 1998 and
1997, respectively. These amounts were computed by dividing common
stockholders' equity, excluding preferred stock, by the number of shares of
common stock outstanding at September 30, 1998 and 1997, respectively.
NOTE 8 - IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" (SFAS 130). SFAS 130 requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements. The
Company has adopted this Statement effective January 1, 1998, and has no
components of comprehensive income to report.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures About Segments of an Enterprise and Related Information"
("SFAS 131"). This Statement established standards for reporting information
about operating segments in interim financial reports issued to shareholders.
It also establishes standards for related disclosure about products and
services, geographic areas and major customers. The Company has adopted this
Statement effective January 1, 1998.
In February 1998, the FASB issued Statement of Financial Accounting
Standard No. 132 "Employers Disclosure about Pension and Other Postretirement
Benefits" ("SFAS 132"), which revises employers' annual disclosures about
pensions and other postretirement benefit plans, and does not change the
measurement or recognition of those plans. The Company plans to adopt this
Statement in connection with the preparation of the December 31, 1998
consolidated financial statement and the adoption of these statements will
not have a material impact on the Company's financial condition or results of
operation.
In June 1998, the FASB issued Statements of Financial Accounting Standard
No. 133 "Accounting for Derivative Instruments and Hedging Activities" which
establishes accounting and reporting standards for derivative instruments and
hedging activities. The Company plans to adopt this statement effective
January 1, 2000 and the adoption of this statement will not have a material
impact on the Company's financial condition or results of operations.
ITEM 2
ARTESIAN RESOURCES CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE QUARTER ENDED
SEPTEMBER 30, 1998
RESULTS OF OPERATIONS
For the quarter ended September 30, 1998, Artesian Resources recorded
net income of $748,000 which represents a $162,000, or a 27.6%, increase
as compared to earnings of $586,000 for the quarter ended September 30, 1997.
For the nine months ended September 30, 1998, Artesian Resources recorded net
income of $2,089,000 which represents a $773,000, or 58.7%, increase as
compared to net income of $1,316,000 for the nine months ended September 30,
1997. The increase is attributable to Artesian Water's increases in rates
charged to customers and the continuation of cost control programs which
decreased the ratio of operating and maintenance expenses to total revenue,
as well as a 2.6% growth in customers served. Water sales revenue increased
$852,000, or 14.7%, and $2,602,000, or 16.1%, respectively, for the quarter
and nine months ended September 30, 1998 as compared to the same period in
1997 due to rate increases to customers of approximately 1.13%, 11.35% and
1.85% which were placed in effect May 1, 1997, December 3, 1997 and May 12,
1998, respectively. The operating and maintenance expense to total revenue
ratio was 56.1% for the nine months ended September 30, 1998 as compared to
58.2% for the same period in 1997.
Payroll expense increased $54,000 and $324,000 for the quarter and nine
months ended September 30, 1998 as compared to the same periods in 1997 due
to the addition of several new positions as well as pay increases. Rate case
amortization expense increased $66,000 and $217,000 for the quarter and nine
months ended September 30, 1998 as compared to the same periods in 1997 due
to the use of a two year amortization period for the deferred rate case costs
associated with Docket 97-66 and Docket 97-340 as required under the rate
case settlement agreement. The estimated total cost of these two dockets is
higher than the total cost of Docket 94-164 which was amortized over the
three years ended December 31, 1997. Purchased water expense increased
$177,000 and $30,000 for the quarter and nine months ended September 30, 1998
as compared to the same period in 1997 primarily due to the timing of
purchases from the City of Wilmington to meet contractual mandatory minimum
purchase obligations.
Income taxes increased $94,000 and $538,000 for the quarter and nine
months ended September 30, 1998 as compared to the same period in 1997 due
to the increased profitability of the Company.
Interest expense and debt amortization expense increased by $160,000 and
$448,000 for the quarter and nine months ended September 30, 1998 as compared
with the same period in 1997 due to a higher average debt outstanding of
$37.2 million at a slightly lower interest rate for 1998 as compared to
$29.4 million in average debt outstanding for 1997. The increase in the
average debt outstanding is attributable to the issuance of Artesian Water's
$10 million Series M and $5 million Series N Mortgage Bonds in June and
September of 1997, respectively, and to increased borrowings on the lines of
credit.
LIQUIDITY AND CAPITAL RESOURCES
The primary sources of liquidity for the nine months ended September 30,
1998 is $7.8 million borrowed on Artesian Water's lines of credit and $4.3
million provided by cash flow from operations. At September 30, 1998,
Artesian Resources had a working capital deficit of $8.8 million primarily
attributable to borrowings on the lines of credit and to an increase in
accounts payable associated with the volume of construction projects
currently in progress. Artesian Resources anticipates it will complete long
term financing arrangements in 1999 or 2000 to eliminate the working capital
deficit.
On September 22, 1998, Artesian Water increased its available unsecured
lines of credit, with no financial covenant restrictions, to a total of $35.0
million with a borrowing rate equal to the London Interbank Offering Rate
plus 1.0% or the bank's Federal Funds Rate plus 1.0%. As of October 26, 1998
$8.7 million was drawn on the lines of credit.
YEAR 2000 COMPLIANCE
Management has completed an assessment of all of its information
technology (IT) and non-IT systems and a company wide program continues to
test and correct all critical systems to ensure Year 2000 Compliance.
Artesian Resources has implemented a comprehensive and integrated plan to
verify compliance across its systems as a consistent component of the
Company's objective of providing its customers reliable service without
interruption.
Artesian Resources has dedicated the financial, technical, and
management resources required to achieve expected Year 2000 Compliance.
Artesian Resources has identified the critical systems for company operations
and expects to be compliant by June 30, 1999. Furthermore, in 1998, Artesian
Resources adopted management practices which require that any new systems or
system upgrades be Year 2000 Compliant prior to their purchase and
implementation.
In 1998, Artesian Resources has undertaken a comprehensive program to
assess its providers of critical services. The purpose is to identify and
minimize Artesian Resources' exposure to Year 2000 risks that are not under
its direct control. Contingency plans are currently being developed and are
anticipated to be in place by June 30, 1999. Contingency plans include, but
are not limited to, the installation of back-up generators in case of power
loss; increasing inventory levels in late 1999 for crucial materials and
supplies some of which are gasoline, diesel fuel and water treatment
chemicals; as well as identifying alternate providers in case the primary
providers cannot meet delivery requirements.
Artesian Resources is completing its Year 2000 compliance program in the
normal course of business and does not anticipate a material impact on the
Company's business, results of operations, liquidity, or capital resources.
As a result of the Company's overall corporate automation plan developed in
1994, Artesian Resources has capitalized $360,000 during the nine months
ended September 30, 1998 on new computer software and hardware, some of which
replaced software and hardware which was not Year 2000 compliant. The
Company anticipates that an additional $140,000 will be capitalized during
the fourth quarter of 1998 for similar expenditures.
CAUTIONARY STATEMENT
Statements in this Report on Form 10-Q which express the "belief,"
"anticipation" or "expectation," as well as other statements which are not
historical fact, are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 and involve risks and
uncertainties that could cause actual results to differ materially from
those projected. Certain factors such as competitive market pressures,
material changes in demand from larger customers, changes in weather,
availability of labor, failure of critical suppliers to meet Year 2000
Compliance, changes in government policies and changes in economic
conditions could cause results to differ materially from those in the
forward-looking statements.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The proposed annualized revenue increase of $2.975 million under the rate
case settlement agreement was based on a projected utility plant in service
level of $124.2 million as of June 30, 1998, subject to audit by the PSC.
The Company successfully achieved the required utility plant in service level
as confirmed by a post-rate case PSC audit, and effective October 27, 1998,
the PSC closed rate case Docket 97-340.
There are no other material legal proceedings pending at this date.
ITEM 2 - CHANGES IN SECURITIES
Not applicable.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4 - SUBMISSION OF MATERS TO VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5 - OTHER INFORMATION
Not applicable.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed for the quarter ended
September 30, 1998.
INDEX TO EXHIBITS
Exhibit Number Description
3 Articles of Incorporation and By-Laws
(3.1) Restated Certificate of Incorporation of the Company effective
May 26, 1995 incorporated by reference to the exhibit filed
with Artesian Resources Corporation Form 10-Q for the quarter
ended June 30, 1995.
(3.2) Restated Certificate of Incorporation of the Company effective
April 26, 1994 including Certificate of Correction incorporated
by reference to the exhibit filed with the Artesian Resources
Corporation Form 10-Q for the quarter ended March 31, 1994.
(3.3) By-Laws of the Company effective April 27, 1993 incorporated by
reference to the exhibit filed with the Artesian Resources
Corporation Form 8-K filed April 27, 1993.
4 Instruments Defining the Rights of Security Holders, Including Indentures
(4.1) Thirteenth and Fourteenth Indentures dated as of June 17, 1997
between Artesian Water Company, Inc., subsidiary of Artesian
Resources Corporation, and Wilmington Trust Company, as Trustee.
Incorporated by reference to the exhibits filed with Artesian
Resources Corporation Form 10-Q for the quarter ended June 30,
1997.
(4.2) Twelfth Supplemental Indenture dated as of December 5, 1995
between Artesian Water Company, Inc. subsidiary of Artesian
Resources Corporation, and Wilmington Trust Company, as Trustee.
Incorporated by reference to the exhibit filed with the Artesian
Resources Corporation Annual Report on Form 10-K for the year
ended December 31, 1995.
(4.3) Eleventh Supplemental Indenture dated as of February 16, 1993
between Artesian Water Company, Inc., subsidiary of Artesian
Resources Corporation, and Principal Mutual Life Insurance
Company. Incorporated by reference to the exhibit filed with
Artesian Resources Corporation Annual Report on Form 10-K for
the year ended December 31, 1992.
(4.4) Tenth Supplemental Indenture dated as of April 1, 1989 between
Artesian Water Company, Inc., subsidiary of Artesian Resources
Corporation, and Wilmington Trust Company, as Trustee.
Incorporated by reference to the exhibit filed with Artesian
Resources Corporation Registration Statement on Form 10 filed
April 30, 1990 and as amended by Form 8 filed on June 19, 1990.
(4.5) Other Supplemental Indentures with amounts authorized less than
ten percent of the total assets of the Company and its
subsidiaries on a consolidated basis will be furnished upon
request. Incorporated by reference to the exhibit filed with
Artesian Resources Corporation Registration Statement on Form
10 filed April 30, 1990 and as amended by Form 8 filed on
June 19, 1990.
10 Material Contracts
(10.1) Artesian Resources Corporation Non-Qualified Stock Option Plan
incorporated by reference to the exhibit filed with Artesian
Resources Corporation Registration Statement on Form 10 filed
April 30, 1990 and as amended by Form 8 filed on June 19, 1990.
(10.2) Lease dated as of March 1, 1972 between White Clay Realty
Company and Artesian Water Company, Inc. incorporated by
reference to the exhibit filed with Artesian Resources
Corporation Registration Statement on Form 10 filed April 30,
1990 and as amended by Form 8 filed on June 19, 1990.
(10.3) 1992 Artesian Resources Corporation Non-Qualified Stock Option
Plan incorporated by reference to the exhibit filed with the
Artesian Resources Annual Report on Form 10-K for the year
ended December 31, 1991.
(10.4) Artesian Resources Corporation Cash and Stock Bonus
Compensation Plan for Officers incorporated by reference to the
exhibit filed with the Artesian Resources Corporation Form
10-K for the year ended December 31, 1993.
(10.5) Artesian Resources Corporation Incentive Stock Option Plan
incorporated by reference to the exhibit filed with the
Artesian Resources Corporation Annual Report on Form 10-K for
the year ended December 31, 1995.
11 Computation of Earnings per Common Share
27 Financial Data Schedules
EXHIBIT 11 - COMPUTATION OF EARNINGS PER COMMON SHARE
For the Nine Months Ended
September 30,
1998 1997
Earnings
Income applicable to Common Stock $2,027,000 $1,246,000
Shares
Average common shares outstanding
during the period for
Basic computation 1,795,150 1,759,082
Dilutive effect of employee
stock options 17,615 12,612
Average common shares outstanding
during the period for
Diluted computation 1,812,765 1,771,694
Net income per Common Share
Basic $ 1.13 $ 0.71
Diluted $ 1.12 $ 0.70
EXHIBIT 27 - FINANCIAL DATA SCHEDULES
This schedule contains summary financial information extracted from the
consolidated balance sheets, consolidated statements of income and the
consolidated statement of cash flows the Company's September 30, 1998 Form
10-Q and is qualified in its entirety by reference to such financial
statements.
PERIOD TYPE 3-MOS 9-MOS
FISCAL YEAR END DEC-31-1998 DEC-31-1998
PERIOD END SEP-30-1998 SEP-30-1998
BOOK VALUE PER-BOOK PER-BOOK
TOTAL NET UTILITY PLANT 108,463,000 108,463,000
OTHER PROPERTY AND INVEST 282,000 282,000
TOTAL CURRENT ASSETS 6,257,000 6,257,000
TOTAL DEFERRED CHARGES 3,913,000 3,913,000
OTHER ASSETS 0 0
TOTAL ASSETS 118,915,000 118,915,000
COMMON 1,800,000 1,800,000
CAPITAL SURPLUS PAID IN 18,008,000 18,008,000
RETAINED EARNINGS 7,613,000 7,613,000
TOTAL COMMON STOCKHOLDERS EQ 27,421,000 27,421,000
PREFERRED MANDATORY 500,000 500,000
PREFERRED 272,000 272,000
LONG TERM DEBT NET 32,000,000 32,000,000
SHORT TERM NOTES 8,984,000 8,984,000
LONG TERM NOTES PAYABLE 0 0
COMMERCIAL PAPER OBLIGATIONS 0 0
LONG TERM DEBT CURRENT PORT 0 0
PREFERRED STOCK CURRENT 100,000 100,000
CAPITAL LEASE OBLIGATIONS 63,000 63,000
LEASES CURRENT 46,000 46,000
OTHER ITEMS CAPITAL AND LIAB 49,529,000 49,529,000
TOT CAPITALIZATION AND LIAB 118,915,000 118,915,000
GROSS OPERATING REVENUE 6,722,000 19,014,000
INCOME TAX EXPENSE 494,000 1,387,000
OTHER OPERATING EXPENSES 4,701,000 13,412,000
TOTAL OPERATING EXPENSES 5,195,000 14,799,000
OPERATING INCOME 1,527,000 4,215,000
OTHER INCOME NET 46,000 188,000
INCOME BEFORE INTEREST EXPEN 1,573,000 4,403,000
TOTAL INTEREST EXPENSE 825,000 2,314,000
NET INCOME 748,000 2,089,000
PREFERRED STOCK DIVIDENDS 20,000 62,000
EARNINGS AVAILABLE FOR COMM 728,000 2,027,000
COMMON STOCK DIVIDENDS 436,000 1,301,000
TOTAL ANNUAL INTEREST ON ALL BONDS 2,677,000 2,677,000
CASH FLOW OPERATIONS 320,000 4,279,000
EPS PRIMARY 0.40 1.13
EPS DILUTED 0.40 1.12
This schedule contains summary financial information extracted from the
consolidated balance sheets, consolidated statements of income and the
consolidated statement of cash flows the Company's September 30, 1997 Form
10-Q, restated as required under SFAS 128, and is qualified in its entirety
by reference to such financial statements.
PERIOD TYPE 3-MOS 9-MOS
FISCAL YEAR END DEC-31-1997 DEC-31-1997
PERIOD END SEP-30-1997 SEP-30-1997
BOOK VALUE PER-BOOK PER-BOOK
TOTAL NET UTILITY PLANT 94,080,000 94,080,000
OTHER PROPERTY AND INVEST 349,000 349,000
TOTAL CURRENT ASSETS 6,391,000 6,391,000
TOTAL DEFERRED CHARGES 4,643,000 4,643,000
OTHER ASSETS 0 0
TOTAL ASSETS 105,463,000 105,463,000
COMMON 1,765,000 1,765,000
CAPITAL SURPLUS PAID IN 17,381,000 17,381,000
RETAINED EARNINGS 6,627,000 6,627,000
TOTAL COMMON STOCKHOLDERS EQ 25,773,000 25,773,000
PREFERRED MANDATORY 599,500 599,500
PREFERRED 272,000 272,000
LONG TERM DEBT NET 32,000,000 32,000,000
SHORT TERM NOTES 0 0
LONG TERM NOTES PAYABLE 0 0
COMMERCIAL PAPER OBLIGATIONS 0 0
LONG TERM DEBT CURRENT PORT 0 0
PREFERRED STOCK CURRENT 112,500 112,500
CAPITAL LEASE OBLIGATIONS 133,000 133,000
LEASES CURRENT 100,000 100,000
OTHER ITEMS CAPITAL AND LIAB 46,473,000 46,473,000
TOT CAPITALIZATION AND LIAB 105,463,000 105,463,000
GROSS OPERATING REVENUE 5,864,000 16,393,000
INCOME TAX EXPENSE 400,000 849,000
OTHER OPERATING EXPENSES 4,241,000 12,448,000
TOTAL OPERATING EXPENSES 4,641,000 13,297,000
OPERATING INCOME 1,223,000 3,096,000
OTHER INCOME NET 28,000 86,000
INCOME BEFORE INTEREST EXPEN 1,251,000 3,182,000
TOTAL INTEREST EXPENSE 665,000 1,866,000
NET INCOME 586,000 1,316,000
PREFERRED STOCK DIVIDENDS 22,000 70,000
EARNINGS AVAILABLE FOR COMM 564,000 1,246,000
COMMON STOCK DIVIDENDS 404,000 1,211,000
TOTAL ANNUAL INTEREST ON ALL BONDS 2,677,000 2,677,000
CASH FLOW OPERATIONS 506,000 1,507,000
EPS PRIMARY 0.32 0.71
EPS DILUTED 0.32 0.70
SIGNATURES
Pursuant to the requirements 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.
ARTESIAN RESOURCES CORPORATION
10/28/98 /s/ Dian C. Taylor
Dian C. Taylor
President, CEO, and Chair of the Board
Artesian Resources Corporation and Subsidiaries
10/28/98 /s/ David B. Spacht
David B. Spacht
Vice President, Chief Financial Officer, and
Treasurer
Artesian Resources Corporation and Subsidiaries
