What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-08 compared with 2025-05-09 · 312 added, 75 removed, 153 unchanged (72% of the section changed)

1 unchanged sentence

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

Statements in this Quarterly Report on Form 10-Q 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.

Statements regarding our goals, priorities, growth and expansion plans and expectation for our water and wastewater subsidiaries and non-regulated 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 on our operations and the execution of our strategic initiatives, our expectation of 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, 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, plans to increase our wastewater treatment operations, engineering services and other revenue streams less affected by weather, expected future contributions to our postretirement benefit plan, anticipated growth in our non-regulated division, the impact of recent acquisitions on our ability to expand and foster relationships, anticipated investments in certain of our facilities and systems and the sources of funding for such investments, and the sufficiency of internally generated funds and credit facilities to provide working capital and our liquidity needs 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.

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.

Certain factors as discussed under Item 1A - Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2024, and this Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, such as 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 could cause results to differ materially from those in the forward-looking statements.

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 a representation of the Company's views as of any date subsequent to the date of the filing of this Quarterly Report on Form 10-Q.

RESULTS OF OPERATIONS FOR THE PERIOD ENDED MARCH 31, 2025

in this Quarterly Report on Form 10-Q 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

Statements regarding our goals, priorities, growth and

expansion plans and expectation for our water and wastewater subsidiaries and

non-regulated 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 rate increase

request, the impact of weather on our operations and the execution of our

strategic initiatives, our expectation of 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, 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, plans to increase our

wastewater treatment operations, engineering services and other revenue streams

less affected by weather, expected future contributions to our postretirement

benefit plan, anticipated growth in our non-regulated division, the impact of

recent acquisitions on our ability to expand and foster relationships,

anticipated investments in certain of our facilities and systems and the

sources of funding for such investments, and the sufficiency of internally

generated funds and credit facilities to provide working capital and our

liquidity needs 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

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.

factors as discussed under Item 1A - Risk Factors, in our Annual Report on Form

10-K for the year ended December 31, 2024, and this Quarterly Report on Form

10-Q for the quarter ended June 30, 2025, such as changes in weather, changes

in our contractual obligations, changes in government policies, changes in tax laws,

including, without limitation, the One Big Beautiful Bill Act, the timing and

results of our rate requests, failure to receive regulatory approvals, changes

in economic and market conditions generally, and other matters could cause

results to differ materially from those in the forward-looking

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 a representation of the Company's

views as of any date subsequent to the date of the filing of this Quarterly Report on Form 10-Q.

RESULTS OF OPERATIONS FOR THE PERIOD ENDED JUNE 30, 2025

Our profitability is primarily attributable to the sale of water and wastewater services in our regulated utility business.

Our regulated utility segment comprised 92.7% of total operating revenues for the three months ended March 31, 2025 and 92.8% for the three months ended March 31, 2024.

Our regulated utility segment comprised 93.0% of total operating revenues for the six months ended June 30, 2025 and 93.4% for the six months ended June 30, 2024.

Water sales are subject to seasonal fluctuations, particularly during summer when water demand may vary with rainfall and temperature.

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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 March 31, 2025, the number of metered water customers in Delaware increased approximately 1.6% compared to March 31, 2024.

The number of metered water customers in Maryland increased approximately 2.2% compared to March 31, 2024.

The number of metered water customers in Pennsylvania remained consistent compared to March 31, 2024.

For the three months ended March 31, 2025, approximately 2.2 billion gallons of water were distributed in our Delaware systems and approximately 16.4 million gallons of water were distributed in our Maryland systems.

On April 4, 2025, Artesian Water filed a request with the DEPSC to implement new rates to meet a requested increase in revenue of 12.41%, or approximately $10.8 million, on an annualized basis.

The actual effective increase is less than 12.41% since Artesian Water has been permitted to recover specific investments made in infrastructure through the assessment of a 1.66% DSIC.

Since the DSIC rate is set to zero when temporary rates are placed into effect, customers would experience an incremental increase of 10.75%, the net of the overall 12.41% increase less the DSIC rate of 1.66% currently in effect, if the requested increase is granted in full by the DEPSC.

The new proposed rates are designed to support Artesian Water’s ongoing capital improvement program and to cover increased costs of operations, including chemicals and electricity for water treatment, water quality regulation compliance, taxes, labor and benefits.

In accordance with applicable Delaware law, Artesian Water is permitted to place into effect temporary rates of up to 15% of gross water sales, or $2.5 million, whichever is lower, on an annual basis, 60 days after the application is filed, subject to refund, until permanent rates are determined by the DEPSC.

Artesian Water has petitioned the DEPSC to implement such temporary rates effective June 3, 2025.

This is discussed further in Note 13 – Regulatory Proceedings.

Artesian Water,

Artesian Water Maryland and Artesian Water Pennsylvania provide water service

to residential, commercial, industrial, governmental, municipal and utility

Increases in the number of

customers contribute to increases, or help to offset any intermittent

decreases, in our operating revenue.

of June 30, 2025, the number of metered water customers in Delaware increased approximately

1.7% compared to June 30, 2024.

number of metered water customers in Maryland increased approximately 2.0% compared

to June 30, 2024.

The number of metered

water customers in Pennsylvania remained consistent compared to June 30, 2024.

For the six months ended June 30, 2025, approximately

4.6 billion gallons of water were distributed in our Delaware systems and

approximately 48.4 million gallons of water were distributed in our Maryland

On April 4, 2025, Artesian

Water filed a request with the DEPSC to implement new rates to meet a requested

increase in revenue of 12.41%, or approximately $10.8 million, on an annualized

The DEPSC approved and Artesian

Water implemented a temporary rate increase effective June 3, 2025, until

permanent rates are determined by the DEPSC.

This is discussed further in Note 13 –

Regulatory Proceedings.

Regulated Wastewater Subsidiaries

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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 March 31, 2025, the number of Delaware wastewater customers increased approximately 6.3% compared to March 31, 2024.

As of June 30, 2025, the number of Delaware wastewater customers increased approximately 6.2% compared to June 30, 2024.

Non-Utility Subsidiaries

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SLP Plan customers are billed a flat monthly or quarterly rate, which contributes to providing a revenue stream unaffected by weather.

Artesian Utility

implemented a rate increase effective December 1, 2024.

There has been consistent customer growth over the years.

As of March 31, 2025, the eligible customers enrolled in the WSLP Plan, the SSLP Plan and the ISLP Plan increased 4.2%, 3.3% and 2.2%, respectively, compared to March 31, 2024.

As of June 30, 2025, the eligible customers enrolled in the WSLP Plan, the SSLP Plan and the ISLP Plan increased 0.6%, collectively , compared to June 30, 2024.

Strategic Direction and Recent Developments

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Other Matters

and Trading Markets

previously disclosed, on July 1, 2025, the Board of Directors of the Company

appointed a third independent director to the Board, who was also appointed to

serve on the Audit Committee effective as of such date.

On July 2, 2025, the Nasdaq Stock Market LLC,

or Nasdaq, delivered to the Company a formal confirmation that the Company has

regained compliance with Nasdaq’s Majority Independent Board Requirement and

Audit Committee Composition Requirement, as a result of the appointment of the

independent director prior to the deadline established in the Nasdaq’s initial

notice to the Company on May 30, 2025.

Accordingly, Nasdaq has determined that the Company has regained

compliance with Nasdaq Marketplace Rule 5605(b)(1) and Nasdaq Marketplace Rule

5605(c)(2), and the matter is now closed.

Environmental, Health and Safety, and Water Quality Regulation

3 unchanged sentences

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.

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.

To allow drinking water systems more time to develop plans for

addressing PFAS where they are found and implement solutions, the EPA plans to

develop a rulemaking to provide additional time for compliance, including a

proposal to extend the compliance date to 2031.

The EPA plans to finalize this rule in the

Spring of 2026.

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.

13 unchanged sentences

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.

Results of Operations – Analysis of the Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024.

Results of Operations – Analysis of the Three Months Ended June 30, 2025 Compared to the Three Months Ended June 30, 2024.

Operating Revenues

Revenues totaled $25.9 million for the three months ended March 31, 2025, $1.3 million, or 5.5%, more than revenues for the three months ended March 31, 2024 .

Water sales revenue increased $0.9 million, or 4.3%, for the three months ended March 31, 2025 from the corresponding period in 2024, primarily due to an increase in overall water consumption, DSIC revenue and customer growth.

We realized 79.9% and 80.8% of our total operating revenue for the three months ended March 31, 2025 and March 31, 2024, respectively, from the sale of water.

Other utility operating revenue increased approximately $0.3 million, or 11.4%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Revenues totaled

$28.5 million for the three months ended June 30, 2025, $1.1 million, or 4.1%,

more than revenues for the three months ended June 30, 2024 .

Water sales revenue

increased $0.6 million, or 2.6%, for the three months ended June 30, 2025 from

the corresponding period in 2024, primarily the result of an

increase in DSIC revenue, a temporary rate increase of 1.22% of gross water

sales placed into effect on June 3, 2025, as permitted under Delaware law,

until permanent rates are determined by the DEPSC and customer growth.

Since the DSIC rate is set to zero when

temporary rates are placed into effect, the temporary rate increase of 2.88%, less

the DSIC rate of 1.66% that was previously in effect, resulted in a net change

We realized 80.9% and 82.1% of our total operating revenue for the three

months ended June 30, 2025 and June 30, 2024, respectively, from the sale of

Other utility operating revenue increased approximately $0.4 million, or 10.7%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.

This increase is primarily due to an increase in wastewater revenue associated with customer growth.

Non-utility operating revenue increased approximately $0.1 million, or 8.0%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

This increase is primarily due to an increase in Service Line Protection Plan revenue.

Non-utility operating

revenue increased approximately $0.2 million, or 12.3%, for the three months

ended June 30, 2025 compared to the three months ended June 30, 2024.

This increase is primarily due to an increase

in Service Line Protection Plan revenue, primarily the result of an increase in

rates that were placed into effect on December 1, 2024.

Operating Expenses

Operating expenses, excluding depreciation and income taxes, increased $0.5 million, or 3.1%, fo r the three months ended March 31, 2025, compared to the same period in 2024.

Utility operating expenses increased $0.4 million, or 3.1%, for the three months ended March 31, 2025 compared to the same period in 2024.

The increase in utility operating expenses consists of a $0.4 million increase in administrative costs and a $0.2 million increase in purchased power and purchased water costs.

The increase in utility operating expenses is offset by a $0.1 million decrease in each of supply and treatment costs and payroll and employee benefit costs.

The ratio of operating expense, excluding depreciation and income taxes, to total revenue was 58.5% for the three months ended March 31, 2025, compared to 59.8% fo r the three months ended March 31, 2024.

Depreciation and amortization expense decreased $0.1 million, or 3.1%, primarily due to a decrease in depreciation expense related to an increase in depreciation on utility plant funded by Contributions in Aid of Construction.

Federal and state income tax expense increased $0.2 million, or 10.1%, primarily due to higher pre-tax book income, partially offset by higher regulatory deferred income tax amortization in 2025 compared to 2024.

Operating expenses, excluding depreciation and income taxes, increased $0.3 million, or 1.8%, for the three months ended June 30, 2025, compared to the same period in 2024.

Utility operating expenses increased $0.3 million, or 2.7%, for the three

months ended June 30, 2025 compared to the same period in 2024.

The increase in utility operating expenses

consists of a $0.2 million increase in transmission, distribution and collection system costs and a $0.1 million increase in both purchased power and administrative

The increase in utility operating

expenses is partially offset by a $0.1 million decrease in payroll and employee

benefit costs.

Non-utility operating

expenses decreased $0.1 million, or 11.9%, for the three months ended June 30, 2025 compared to the same

period in 2024.

This decrease is primarily

due to a decrease in administrative costs and payroll and employee benefit

ratio of operating expense, excluding depreciation and income taxes, to total revenue

was 53.0% for the three months ended June 30, 2025, compared to 54.2% fo r the three

months ended June 30, 2024.

and state income tax expense increased $0.2 million, or 11.2%, primarily due to

higher pre-tax book income, partially offset by higher regulatory deferred

income tax amortization in 2025 compared to 2024.

and other taxes increased $0.1 million, or 5.2%, primarily due to an increase

in New Castle County, Delaware tax rates on utility plant and an increase in

utility plant subject to taxation.

Property taxes are assessed on land, buildings and certain utility

plant, which include the footage and size of pipe, hydrants and wells.

Other income increased $0.3 million, primarily due to an increase in allowance for funds used during construction, or AFUDC, as a result of higher long-term construction activity subject to AFUDC.

Our net income applicable to common stock increased $1.0 million, or 23.2%.

Total operating revenues increased $1.3 million and other income increased $0.2 million, offset by a $0.5 million increase in total operating expenses.

income applicable to common stock increased $1.0 million, or 18.1%.

Total operating revenues increased $1.1 million

and other income increased $0.3 million, offset by a $0.5 million increase in

total operating expenses.

Results of Operations – Analysis of the Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 2024.

Operating Revenues

Revenues totaled

$54.4 million for the six months ended June 30, 2025, $2.5 million, or 4.8%,

more than revenues for the six months ended June 30, 2024 .

revenue increased $1.4 million, or 3.4%, for the six months ended June 30, 2025

from the corresponding period in 2024, primarily the result of an increase in overall water

consumption, DSIC revenue, customer growth and a temporary rate increase of

1.22% of gross water sales placed into effect on June 3, 2025, as permitted

under Delaware law, until permanent rates are determined by the DEPSC.

Since the DSIC rate is set to zero when

temporary rates are placed into effect, the temporary rate increase of 2.88%, less

the DSIC rate of 1.66% that was previously in effect, resulted in a net change

We realized 80.4% and 81.5%

of our total operating revenue for the six months ended June 30, 2025 and June

30, 2024, respectively, from the sale of water.

utility operating revenue increased approximately $0.7 million, or 11.0%, for

the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

This increase is primarily due to an increase

in wastewater revenue associated with customer growth.

operating revenue increased approximately $0.3 million, or 10.1%, for the six

months ended June 30, 2025 compared to the six months ended June 30, 2024.

This increase is primarily due to an increase

in Service Line Protection Plan revenue, primarily the result of an increase in

rates that were placed into effect on December 1, 2024.

Operating Expenses

Operating expenses, excluding depreciation and income taxes, increased

$0.7 million, or 2.4%, fo r the six months ended June

30, 2025, compared to the same period in 2024.

Utility operating expenses increased $0.7 million, or 2.9%, for the six

months ended June 30, 2025 compared to the same period in 2024.

The increase in utility operating expenses

consists of a $0.5 million increase in administrative costs, a $0.3 million

increase in each of purchased power and transmission, distribution and collection system costs.

The increase in utility

operating expenses is partially offset by a $0.2 million decrease in each of payroll

and employee benefit costs and supply and treatment costs.

Non-utility operating

expenses decreased $0.1 million, or 5.7%, for

the six months ended June 30, 2025 compared to the same period in 2024.

This decrease is primarily due to a decrease

in payroll and employee benefit costs.

The ratio of operating expense, excluding depreciation and income taxes, to total revenue was 55.6% for the six months ended June 30, 2025, compared to 56.8% for the six months ended June 30, 2024.

and amortization expense decreased $0.1 million, or 1.7%, primarily due to a

decrease in depreciation expense related to an increase in depreciation on

utility plant funded by Contributions in Aid of Construction, or CIAC.

Artesian Water offsets depreciation recorded

on utility plant by depreciation on utility property funded by CIAC.

Federal and state income tax expense increased $0.4 million, or 10.7%, primarily due to higher pre-tax book income, partially offset by higher regulatory deferred income tax amortization in 2025 compared to 2024.

Property and other taxes increased $0.2 million, or 5.0%, primarily due

to an increase in New Castle County, Delaware tax rates on utility plant and an

increase in utility plant subject to taxation.

Property taxes are assessed on land, buildings and certain utility

plant, which include the footage and size of pipe, hydrants and wells.

increased $0.5 million, or 22.5%, primarily

as a result of higher long-term construction activity subject to AFUDC.

Our net income applicable

to common stock increased $2.0 million, or 20.4%.

Total operating revenues increased $2.5

million and other income increased $0.5 million, offset by a $1.0 million

increase in total operating expenses.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sourc es of liquidity for the three months ended March 31, 2025 were $11.0 million of cash provided by operating activities and $5.2 million in net contributions and advances from developers.

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.

primary sourc es of liquidity for the six

months ended June 30, 2025 were $18.9 million of cash provided by operating

activities and $11.9 million in net contributions and advances from

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.

Operating Activities

One of our primary sources of liquidity for the three months ended March 31, 2025 was $11.0 million provided by cash flow from operating activities, compared to $12.6 million for the three months ended March 31, 2024.

The decrease in cash flows from operating activities is primarily from lower material and supplies, income taxes receivable and accounts receivables, offset by higher net income, income taxes payable, accounts payable and accrued expenses.

Cash flow 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.

primary sources of liquidity for the six months ended June 30, 2025 was $18.9

million provided by cash flow from operating activities, compared to $19.5

million for the six months ended June 30, 2024.

The decrease in cash flows from operating activities is primarily from lower

material and supplies, accrued expenses and income taxes receivable, offset by

higher net income and accounts payable.

Cash flow 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.

We will continue to borrow on

available lines of credit in order to satisfy current liquidity needs.

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 investments is to continue to provide high quality reliable service to our growing service territory.

Capital expenditures during the first three months of 2025 were $10.4 million compared to $8.9 million during the same period in 2024.

During the first three months of 2025, these investments include renewals associated with the rehabilitation of aging infrastructure, installation of new mains, upgrading elevated storage tanks, 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 primary focus of our investments is to continue to

provide high quality reliable service to our growing service territory.

expenditures during the first six months of 2025 were $26.3 million compared to

$18.4 million during the same period in 2024.

During the first six months of 2025, these

investments include renewals associated with the rehabilitation of aging

infrastructure, installation of new mains, construction of a new wastewater

treatment plant, upgrading elevated storage tanks, upgrading and replacing our

meter reading equipment, and upgrading existing pumping stations to better

serve our customers.

Financing Activities

For the three months ended March 31, 2025, cash flows provided by financing activities were $2.0 million, compared to $2.7 million for the three months ended March 31, 2024.

Our primary source of liquidity from financing activities for the three months ended March 31, 2025 was $5.2 million in net contributions and advances from developers.

The cash flows provided by financing activities decreased due to decreased issuance of long-term debt and higher stock dividend payments.

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.

For the six months ended June

30, 2025, cash flows provided by financing activities were $6.5 million,

compared to $2.0 million for the six months ended June 30, 2024.

Our primary source of liquidity from

financing activities for the six months ended June 30, 2025 was $11.9 million

in net contributions and advances from developers and $2.0 million from line of

credit borrowings.

The cash flows

provided by financing activities increased due to an increase in net contributions and advances from

developers and an increase in borrowings from lines of credit .

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

We expect to fund our

activities for the next twelve months using our projected cash generated from

operations, bank credit lines, government grants 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.

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 March 31, 2025, 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 March 31, 2025, 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.

At June 30, 2025,

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 June 30, 2025, there was $38.0 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

Term SOFR cannot be less than

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 18, 2026 or any date on which Citizens demands payment.

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 18, 2026 or any date on which

Citizens demands payment.

The Company expects to renew this line of credit.

At March 31, 2025, 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 March 31, 2025, there was $20.0 million of available funds under this line of credit.

At June 30, 2025, 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 June 30, 2025, there was $20.0 million of available funds under this line of credit.

The interest rate for borrowings under this line are 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.

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Payments Due by Period

Less than 1 Year

After 5 Years

First mortgage bonds (principal and interest)

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Unconditional purchase obligations

Tank painting contractual obligation

Total contractual cash obligations

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 March 31, 2025, we were in compliance with these covenants.

As of June 30, 2025, 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.

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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.

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 was $2.2 million.

expenditure was fully paid to

Worldwide Industries Corporation as of April 2025.

In order to control purchased power costs and avoid fluctuations in electricity rates that happen due to the change of seasons, energy supply changes, or other outside factors, we utilize contracts with electric suppliers that provide a fixed rate.

22 unchanged sentences

Information concerning our implementation and the impact of recent accounting pronouncements issued by the FASB is included in the notes to our 2024 consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2024 and also in the notes to our unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q.

We did not adopt any accounting policy in the first three months of 2025 that had a material impact on our financial condition, liquidity or results of operations.

We did not adopt any accounting policy in the first six months of 2025 that had a material impact on our financial condition, liquidity or results of operations.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis