<PAGE>
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, 2000
or
TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the transaction 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 31, 2000, 1,619,168 shares and 391,824 shares of Class A
Non-Voting Common Stock and Class B Common Stock, respectively, were
outstanding.
<PAGE>
ARTESIAN RESOURCES CORPORATION
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Part I - Financial Information: Page(s)
<S> <C> <C>
Item 1 - Financial Statements
Consolidated Balance Sheet -
September 30, 2000 and December 31, 1999 3-4
Consolidated Statement of Income for
the quarters ended September 30, 2000 and 1999 5
Consolidated Statement of Income for
the nine months ended September 30, 2000 and 1999 6
Consolidated Statement of Retained Earnings
for the nine months ended September 30, 2000 and 1999 7
Consolidated Statement of Cash Flows for the
nine months ended September 30, 2000 and 1999 7-8
Notes to the Consolidated Financial Statements 8-12
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-15
Item 3 - Quantitative and Qualitative Disclosures about
Market Risk 15
Part II - Other Information:
Item 1 - Legal Proceedings 15
Item 2 - Changes in Securities 15
Item 3 - Defaults Upon Senior Securities 15
Item 4 - Submission of Matters to a Vote of Security Holders 15
Item 5 - Other Information 15
Item 6 - Exhibits and Reports on Form 8-K 16-17
Signatures 18
</TABLE>
<PAGE>
Part I - Financial Information
Item I - Financial Statements
ARTESIAN RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
Unaudited
September 30, 2000 December 31, 1999
------------------ -----------------
<S> <C> <C>
ASSETS
Utility plant, at original cost
less accumulated depreciation $ 130,532 $ 122,481
--------- ---------
Current assets
Cash and cash equivalents 544 122
Accounts receivable, net 1,126 2,335
Unbilled operating revenues 2,099 2,007
Materials and supplies-at cost
on FIFO basis 628 710
Deferred income taxes 77 ---
Prepaid property taxes 844 548
Prepaid expenses and other 609 306
--------- ---------
5,927 6,028
--------- ---------
Other assets
Non-utility property (less accumulated
depreciation 2000-$163;1999-$159) 270 273
Investments 29 --
Other deferred assets 965 1,092
--------- ---------
1,264 1,365
Regulatory assets, net 2,351 2,608
--------- ---------
$ 140,074 $ 132,482
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity
Common stock 2,011 1,998
Additional paid-in capital 24,425 24,153
Retained earnings 6,098 5,933
Preferred stock 272 272
--------- ---------
Total stockholders' equity 32,806 32,356
--------- ---------
Preferred stock-mandatorily redeemable,
net of current portion 300 400
Long-term debt, net of current portion 33,688 34,529
--------- ---------
66,794 67,285
--------- ---------
Current liabilities
Notes payable 14,812 7,617
Current portion of long-term debt 1,122 1,136
Current portion of mandatorily
redeemable preferred stock 100 100
Accounts payable 2,316 3,958
Overdraft payable 2,329 581
State and federal taxes 140 665
Interest accrued 332 655
Customer deposits 420 388
Reserve for temporary rate increase --- 720
Other 947 719
--------- ---------
22,518 16,539
--------- ---------
Deferred credits and other liabilities
Net advances for construction 18,846 18,749
Postretirement benefit obligation 1,475 1,538
Deferred investment tax credits 942 964
Deferred income taxes 3,879 2,776
--------- ---------
25,142 24,027
--------- ---------
Net contributions in aid of construction 25,620 24,631
--------- ---------
$ 140,074 $ 132,482
========= =========
</TABLE>
See notes to the consolidated financial statements.
<PAGE>
ARTESIAN RESOURCES CORPORATION
CONSOLIDATED STATEMENT OF INCOME
Unaudited
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
For the Quarter
Ended September 30,
2000 1999
---------- ----------
<S> <C> <C>
OPERATING REVENUES
Water sales $ 6,913 $ 7,265
Other utility operating revenue 98 100
Non utility revenue 11 9
---------- ----------
7,022 7,374
---------- ----------
OPERATING EXPENSES
Utility operating expenses 3,825 3,589
Related party expenses 45 45
Non-utility operating expenses 10 6
Depreciation and amortization 729 624
State and federal income taxes 363 761
Property and other taxes 406 413
---------- ----------
5,378 5,438
---------- ----------
OPERATING INCOME 1,644 1,936
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION 58 26
OTHER INCOME (EXPENSE), NET 10 13
---------- ----------
INCOME BEFORE INTEREST CHARGES 1,712 1,975
---------- ----------
INTEREST CHARGES 1,076 832
---------- ----------
NET INCOME 636 1,143
DIVIDENDS ON PREFERRED STOCK 14 17
---------- ----------
NET INCOME APPLICABLE TO COMMON STOCK $ 622 $ 1,126
========== ==========
INCOME PER COMMON SHARE:
Basic $ .31 $ .56
========== ==========
Diluted $ .30 $ .55
========== ==========
CASH DIVIDEND PER COMMON SHARE $ .275 $ .27
========== ==========
AVERAGE COMMON SHARES OUTSTANDING
Basic 2,009,116 1,994,478
========== ==========
Diluted 2,045,165 2,031,007
========== ==========
</TABLE>
<PAGE>
ARTESIAN RESOURCES CORPORATION
CONSOLIDATED STATEMENT OF INCOME
Unaudited
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
2000 1999
---------- ----------
<S> <C> <C>
OPERATING REVENUES
Water sales $ 20,261 $ 19,808
Other utility operating revenue 317 285
Non utility revenue 32 14
---------- ----------
20,610 20,107
---------- ----------
OPERATING EXPENSES
Utility operating expenses 11,409 11,021
Related party expenses 135 159
Non-utility operating expenses 31 25
Depreciation and amortization 2,015 1,789
State and federal income taxes 1,209 1,475
Property and other taxes 1,210 1,207
---------- ----------
16,009 15,676
---------- ----------
OPERATING INCOME 4,601 4,431
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION 209 106
OTHER INCOME (EXPENSE), NET 29 39
---------- ----------
INCOME BEFORE INTEREST CHARGES 4,839 4,576
---------- ----------
INTEREST CHARGES 2,945 2,362
---------- ----------
NET INCOME 1,894 2,214
DIVIDENDS ON PREFERRED STOCK 46 71
---------- ----------
NET INCOME APPLICABLE TO COMMON STOCK 1,848 $ 2,143
========== ==========
INCOME PER COMMON SHARE:
Basic $ .92 $ 1.10
========== ==========
Diluted $ .90 $ 1.08
========== ==========
CASH DIVIDEND PER COMMON SHARE $ .82 $ .79
========== ==========
AVERAGE COMMON SHARES OUTSTANDING
Basic 2,005,345 1,948,306
========== ==========
Diluted 2,043,537 1,981,962
========== ==========
</TABLE>
<PAGE>
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
Unaudited
(In thousands)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
2000 1999
------- -------
<S> <C> <C>
Balance, beginning of period $ 5,933 $ 7,785
Net income 1,894 2,214
------- -------
7,827 9,999
Less: Dividends 1,689 1,634
Common stock-Repurchase 40 2,787
------- -------
Balance, end of period $ 6,098 $ 5,578
======= =======
</TABLE>
See notes to the consolidated financial statements.
<PAGE>
ARTESIAN RESOURCES CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
(In thousands)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
2000 1999
--------- ---------
<S> <C> <C>
NET INCOME $ 1,894 $ 2,214
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,884 1,697
Deferred income taxes, net 1,004 537
Allowance for funds used during construction (209) (106)
Changes in Assets and Liabilities:
Accounts receivable 1,209 (630)
Unbilled operating revenue (92) (318)
Materials and supplies 82 (6)
Accrued state and federal income taxes (525) 770
Prepaid property taxes (296) (324)
Prepaid expenses and other (303) 62
Other deferred assets 127 54
Regulatory assets 257 294
Postretirement benefit obligation (63) (65)
Accounts payable (1,642) (566)
Interest accrued (323) (34)
Customer deposits and other, net (460) 285
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,544 3,864
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (net of AFUDC) (10,155) (11,496)
Proceeds from sale of assets 24 6
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (10,131) (11,490)
--------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Net borrowings (repayments) under line of
credit agreement 7,195 (252)
Overdraft payable 1,748 (501)
Net advances and contributions in aid of construction 1,466 2,694
Net proceeds from stock transactions 244 7,887
Dividends (1,689) (1,617)
Repayment of long-term debt (834) (278)
Principal payments under capital lease obligations (21) (42)
Retirement of preferred stock (100) (100)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 8,009 7,791
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 422 165
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 122 114
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 544 $ 279
========= =========
Supplemental Disclosures of Cash Flow Information:
Interest paid $ 3,201 $ 2,371
========= =========
Income taxes paid $ 750 $ 156
========= =========
</TABLE>
See notes to the consolidated financial statements.
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL
The unaudited consolidated 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 prescribed 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, 1999, included in
the Company's Annual Report on Form 10-K. The accompanying consolidated
financial statements have not been audited by independent accountants in
accordance with generally accepted auditing standards, but have been reviewed by
independent accountants, and, 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 interim
periods may not be indicative of the results that may be expected for the entire
year.
NOTE 2 - REGULATORY ASSETS
Certain expenses, which are recoverable through rates, without a return on
investment, 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
a period of 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, 2000 December 31, 1999
------------------ -----------------
(in thousands)
Postretirement benefit obligation $ 1,475 $ 1,538
Deferred income taxes recoverable
in future rates 665 680
Expense of rate proceedings 211 390
------- -------
$ 2,351 $ 2,608
======= =======
NOTE 3 - DEBT
On May 4, 1999, Artesian repurchased 126,353 shares of Class B Common Stock and
24,165 shares of Class A Non-Voting Common Stock from Ellis D. and Helena C.
Taylor in exchange for a promissory note (the "Note") in the principal amount of
$4,450,000 representing the purchase price of the stock, with a discounted
present value of $4,307,000. The Note is payable quarterly, on a calendar basis,
over a four year period and in sixteen equal principal installments of $278,125
commencing on June 30, 1999. The outstanding balance on the Note bears interest
in an amount computed based on the quarterly dividend the Taylors would have
received on the Stock transferred to Artesian but not yet paid for by Artesian.
In addition, the principal installment is adjusted on a quarterly basis to
reflect increases in the book value per common share of the Company as reported
in its most recent quarterly financial statement distributed to stockholders
prior to the quarterly payment. Such amounts, if any, represent contingent
purchase price of the stock and will be charged to retained earnings. At
September 30, 2000, Artesian had $2,781,250 outstanding under this promissory
note.
NOTE 4 - NON-UTILITY OPERATING EXPENSES
Artesian Wastewater Management, Inc. (Artesian Wastewater), a wholly-owned
subsidiary of the Company, began operating a small wastewater treatment spray
irrigation facility owned by a municipality in Southern New Castle County
Delaware in 1999. Artesian Wastewater receives a lump sum fee and additional
revenue related to additional work to maintain operations at the facility. The
expenses associated with the provision of this service are categorized as
non-utility operating expenses, because the cost of wastewater service is not
regulated by the PSC in Delaware.
<PAGE>
NOTE 5 - RELATED PARTY TRANSACTIONS
The office building and shop complex utilized by Artesian Water are leased at an
average annual rental of $180,000 from a partnership, White Clay Realty, in
which Dian Taylor, an officer and director of Artesian Resources, is a partner.
The lease expires in December, 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 leased certain parcels of land for water production wells from
Glendale Enterprises Limited, a company wholly-owned by Ellis D. Taylor, the
father of William Taylor, a director, at an annual rental of $44,000. Renewal of
the lease has been automatic from year to year unless 60 days' written notice is
given by either party before the end of the year's lease. Artesian Water
received notice that Glendale Enterprises Limited desires to discontinue the
lease for the well sites, accordingly, the company is negotiating the purchase
of the rights. Artesian Water received a claim from an unrelated third party
with regard to ownership of the land and the related lease payments made since
1986, which the Company intends to vigorously contest. However, if the claim is
upheld, subject to the amount and timing of potential recoveries by Artesian
against Glendale Enterprises, if any, such amounts could be material to the
Statement of Income.
Expenses associated with related party transactions are as follows:
For the Quarter For the Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
---- ---- ---- ----
(in thousands) (in thousands)
White Clay Realty $ 45 $ 45 $135 $136
Glendale Enterprises $ -- $ -- $ -- $ 22
---- ---- ---- ----
$ 45 $ 45 $135 $158
==== ==== ==== ====
NOTE 6 - 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 and potentially dilutive effect of
employee stock options. The following table summarizes the shares used in
computing basic and diluted net income per share:
<TABLE>
<CAPTION>
For the For the Nine
Quarter Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
---- ---- ---- ----
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Average common shares outstanding during
the period for Basic computation 2,009 1,994 2,005 1,948
Dilutive effect of employee stock options 36 37 39 34
----- ----- ----- -----
Average common shares outstanding during
the period for Diluted computation 2,045 2,031 2,044 1,982
===== ===== ===== =====
</TABLE>
Equity per common share was $16.18 and $15.85 at September 30, 2000 and 1999,
respectively. These amounts were computed by dividing common stockholders'
equity, excluding preferred stock, by the number of shares of common stock
outstanding on September 30, 2000 and 1999, respectively.
<PAGE>
NOTE 7 - IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, FASB issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which
established accounting and reporting standards for derivative instruments and
hedging activities. In June 1999, FASB issued Statement of Financial Accounting
Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities
- Deferral of the Effective Date of FASB Statement No. 133," moving the
effective date for this standard from fiscal years beginning after June 15,
1999, to fiscal years beginning after June 15, 2000. In June 2000, FASB issued
Statement of Financial Accounting Standards No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities," which addresses and
amends SFAS No. 133 for a limited number of issues causing implementation
difficulties for entities applying SFAS No. 133. We plan to adopt SFAS No. 133
incorporating SFAS No. 138 amendments effective January 1, 2001. Our adoption of
this statement will not have a material impact on our financial condition or
results of operations.
NOTE 8 - RATE PROCEEDINGS
On April 30, 1999, Artesian Water filed a petition with the Delaware Public
Service Commission (DPSC) to implement new rates to meet a requested increase in
revenue of approximately 10.35%, or $2.7 million on an annualized basis. On
September 30, 1999, Artesian Water filed a supplemental rate request which
reduced the Company's increase from $2.7 million to approximately $2.5 million.
Artesian Water was permitted to collect a temporary increase not in excess of
$2.5 million on an annualized basis, under bond, until the level of permanent
rates were decided by the Delaware Public Service Commission. The temporary
rates became effective on July 1, 1999. Of the amount billed, $1,528,000 was
deferred, pending the final outcome of the rate proceeding. On August 29, 2000,
the PSC issued a order approving a settlement between the interested parties
that resulted in an increase in annualized revenues of approximately $1.3
million. The company has refunded approximately $1,355,000 of the total amount
reserved of $1,528,000, with the remainder recognized in revenue in the third
quarter. In addition, Artesian recognized approximately $65,000 of interest
expense on the amounts refunded. The difference between the amount deferred and
refunded of approximately $173,000 was recognized in revenues and represents
amounts collected and deferred beginning July 1, 1999, the effective date of
temporary rates.
On September 1, 2000, Artesian Water filed a letter of intent to file for a rate
change with the DPSC. As per regulation, Artesian cannot file the request for a
change in rates prior to 60 days from the date of the letter of intent.
<PAGE>
ITEM 2
ARTESIAN RESOURCES CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE PERIOD ENDED
SEPTEMBER 30,2000
RESULTS OF OPERATIONS
Overview
Artesian Water, our principal subsidiary, is the oldest and largest regulated
public water utility in the State of Delaware and has been providing water
within the state since 1905. We distribute and sell water to residential,
commercial, industrial, governmental, municipal and utility customers throughout
Delaware. As of September 30, 2000, we had approximately 65,000 metered
customers and served a population of approximately 200,000, representing
approximately 27% of Delaware's total population. We believe that we have a
reputation for providing water and service of superior quality to our customers.
The Delaware Public Service Commission regulates Artesian Water's rates charged
for water service, the sale and issuance of securities, mergers and other
matters. We 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. Increases in customers
served by Artesian Water also contribute to increases in our operating revenues,
although such increases have been offset slightly by reductions in customers'
individual usage. Our business is also subject to seasonal fluctuations and the
effects of weather.
<PAGE>
Operating Revenues
------------------
We realized 98.4% of our total revenue in the third quarter of 2000 from the
sale of water. Total operating revenue decreased $352,000, or 4.8%, for the
quarter ended September 30, 2000, compared to the third quarter of 1999. The
decrease in revenue for the quarter was due to the frequency of rainfall events
during the period which significantly reduced customer outdoor water usage.
Total operating revenue increased $503,000 or 2.5% for the nine months ended
September 30, 2000, compared to the nine months ended September 30, 1999. The
increase in operating revenues for the nine months ended September 30, 2000 was
attributable to the temporary rate increase placed into effect July 1, 1999, and
an increase in customer base, and was offset by the impact of wet/cool weather.
Operating Expenses
------------------
Operating and maintenance expenses increased $240,000 for the quarter ended
September 30, 2000, from the quarter ended September 30, 1999. Operating and
maintenance expenses increased $370,000 for the nine months ended September 30,
2000 over the nine months ended September 30, 1999. The increase in operation
and maintenance expenses in both the quarter and nine months ended September 30,
2000, is primarily due to increases in payroll and benefits due to additional
employees and wage increases. The ratio of operating and maintenance expense to
total revenue was 56.2% for the nine months ended September 30, 2000, as
compared to 55.7% for the same period in 1999.
Depreciation and amortization expense increased $105,000 or 16.8% for the
quarter ended September 30, 2000, and increased $226,000, or 12.6%, for the nine
months ended September 30, 2000, compared to the comparable period of 1999, due
to capital additions.
Income tax expense decreased $398,000, or 52.3% for the quarter ended September
30, 2000, and decreased $266,000, or 18%, for the nine months ended September
30, 2000, due to decreased profitability.
Interest Charges
----------------
Interest charges increased $244,000, or 29.3%, for the third quarter of 2000,
compared to the third quarter of 1999, and increased $583,000, or 24.7%, for the
nine months ended September 30, 2000, versus the nine months ended September 30,
1999, due to higher average borrowings on the lines of credit incurred to
finance investment in utility plant and interest on temporary rate refunds made
in September 2000. In addition, the repayment of nine months ended September
2000 reflects a greater amount than the comparable 1999 period of the interest
on the note payable for the repurchase of stock that occurred in the second
quarter of 1999. Year end results will be negatively impacted as a result of
increased interest expense expected to continue through the fourth quarter.
<PAGE>
Net Income
----------
For the quarter ended September 30, 2000, Artesian Resources recorded net income
of $622,000 which represents a $504,000, or a 44.8%, decrease as compared to net
income of $1,126,000 for the quarter ended September 30, 1999. For the nine
months ended September 30, 2000, Artesian Resources recorded net income of
$1,848,000 which represents a $295,000, or a 13.8% decrease as compared to net
income of $2,143,000 for the nine months ended September 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity for the first nine months of 2000 were $7.2
million provided by borrowings on our line of credit. Cash flow from operating
activities was reduced to $2.5 million in the first nine months of 2000 from
$3.9 million for the first nine months of the prior year primarily by large
payments on Accounts Payable due to contractors working on our system expansion
in Southern Delaware and to an estimated income tax payment of $750,000.
We rely on our sources of liquidity for investments in our utility plant and
systems and to meet our various payment obligations. We currently estimate that
our aggregate investments in our utility plant and systems for the fourth
quarter of 2000 will be approximately $5.8 million. These investments will be
financed by our operations and short-term borrowings under our revolving credit
agreements. Our total obligations related to dividend and sinking fund payments
on preferred stock, interest payments on indebtedness, rental payments and water
service interconnection agreements for the fourth quarter of 2000 are
anticipated to be approximately $1.9 million and will be financed with cashflow
from our operating activities.
Developer advances and contributions in aid of construction are used for the
installation of mains and hydrants in new developments. In addition to the $5.8
million referred to above, $2.1 million of capital expenditures is expected to
be financed by developers during the fourth quarter of 2000.
At September 30, 2000, we had a working capital deficit of $16.6 million mainly
due to borrowings on our lines of credit incurred to finance investment in
utility plant.
At September 30, 2000, Artesian Water had lines of credit with three separate
financial institutions totaling $35.0 million to meet its short term cash
requirements. These revolving credit facilities are unsecured. As of September
30, 2000, we had $20.2 million of available funds under these lines. The
interest rate for borrowings under each of these lines is the London Interbank
Offering Rate plus 1.0% or, at our discretion, the bank's federal funds rate
plus 1.0%. All the facilities are reviewed annually by each bank for renewal.
On April 13, 1999, Artesian Resources issued 325,000 shares of Class A
Non-Voting Common Stock at $25.00 per share in an underwritten public offering,
and the net proceeds of approximately $7.5 million were used to reduce Artesian
Water's borrowing on the lines of credit incurred to finance investment in
utility plant.
Artesian is investing approximately $1 million by year end in a carbon treatment
facility at its Llangollen well field in response to the recent detection of
Bis(2-chloroethyl)ether (BCEE)an organic solvent used in the production of
pesticides and pigments. Artesian will keep the well field out of service until
the plant is in place. Artesian will meet customer water demand using other
sources of supply in its water system.
<PAGE>
CAUTIONARY STATEMENT
In addition to historical facts or statements of current condition, this press
release contains forward-looking statements that involve risks and
uncertainties. These risks and uncertainties could cause Artesian's actual
results to differ materially from the presently anticipated results and
expectations expressed in these forward-looking statements. These uncertainties
include, but are not limited to timing and the results of rate proceedings
before the Delaware Public Service Commission, the level of capital expenditures
for plant investment in 2000, the weather conditions in Delaware during the
balance of 2000, material changes in demand from larger customers, availability
of labor, and other economic, business, competitive and/or regulatory factors
affecting Artesian's businesses generally. Given these risks and uncertainties,
actual results could differ materially from these forward-looking statements and
they may prove not to be correct. Furthermore, Artesian does not intend (and is
not obligated) to update publicly any forward-looking statements. This
discussion is permitted by the Private Securities Litigation Reform Act of 1995.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
On April 30, 1999, Artesian Water filed a petition with the PSC to implement new
rates to meet an increased revenue requirement of approximately 10.35%, or $2.7
million on an annualized basis. On September 30, 1999, Artesian Water filed a
supplemental rate request which reduced the Company's increase from $2.7 million
to approximately $2.5 million. Artesian Water was permitted to collect a
temporary increase not in excess of $2.5 million on an annualized basis, under
bond, until permanent rates were approved by the PSC. Such temporary rates were
placed in effect by Artesian on July 1, 1999. Artesian received a decision on
this rate proceeding from the PSC on August 29, 2000, which approved a
settlement between the interested parties for an increase of approximately $1.3
million in annual revenues.
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 MATTERS TO A 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,
2000.
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INDEX TO EXHIBITS
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Exhibit Number Description
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<S> <C> <C>
3 Articles of Incorporation and By-Law
(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.
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.
10 Material Contracts
(10.1) Amended and Restated Artesian Resources Corporation 1992
Non-Qualified Stock Option Plan, as amended, filed with the
Artesian Resources Corporation From 10-K for the year ended
December 31, 1998.
(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) 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.
(10.4) 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.
(10.5) Share Repurchase Agreement dated April 28, 1999, and
related Promissary Note dated May 4, 1999.
27 Financial Data Schedule, filed herewith.
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<PAGE>
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
11/10/00 ------------------------------------------------------
Dian C. Taylor
President, CEO, and Chair of the Board
Artesian Resources Corporation and Subsidiaries
11/10/00 ------------------------------------------------------
David B. Spacht
Vice President, Chief Financial Officer, and Treasurer
Artesian Resources Corporation and Subsidiaries
Form 10Q
September 2000
