Artesian Resources(ARTNA) - 2025 Q2 - Quarterly Report

Part I - Financial Information Item 1 - Financial Statements The unaudited condensed consolidated financial statements present the company's financial position, results of operations, and cash flows for the periods ended June 30, 2025 Condensed Consolidated Balance Sheets Total assets and stockholders' equity increased from December 2024 to June 2025, driven by growth in utility plant and retained earnings | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------------------------------------------------------- | :----------------------------- | :------------------------------- | | Assets | | | | Utility plant, at original cost (net) | $770,488 | $747,186 | | Total current assets | $22,299 | $24,528 | | Total Assets | $819,296 | $798,623 | | Liabilities and Stockholders' Equity | | | | Total stockholders' equity | $244,905 | $239,189 | | Long-term debt, net of current portion | $175,138 | $176,509 | | Total current liabilities | $25,569 | $25,593 | | Total Liabilities and Stockholders' Equity | $819,296 | $798,623 | - Total Assets increased by $20.673 million from December 31, 2024, to June 30, 2025, primarily due to an increase in utility plant[9] - Total Stockholders' Equity increased by $5.716 million, mainly from an increase in retained earnings[9] Condensed Consolidated Statements of Operations Operating revenues and net income increased for the three and six months ended June 30, 2025, driven by higher utility sales | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Total Operating Revenues | $28,549 | $27,416 | $54,435 | $51,960 | | Operating income | $7,855 | $7,198 | $13,400 | $11,917 | | Net income applicable to common stock | $6,290 | $5,325 | $11,725 | $9,736 | | Basic Income per common share | $0.61 | $0.52 | $1.14 | $0.95 | | Diluted Income per common share | $0.61 | $0.52 | $1.14 | $0.95 | | Cash dividends per share | $0.3074 | $0.2955 | $0.6088 | $0.5852 | - Total Operating Revenues increased by 4.1% for the three months and 4.8% for the six months ended June 30, 2025, compared to the prior year[12] - Net income applicable to common stock increased by 18.1% for the three months and 20.4% for the six months ended June 30, 2025, year-over-year[12] Condensed Consolidated Statements of Cash Flows Operating cash flow slightly decreased while investing outflows and financing inflows both increased significantly | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash provided by operating activities | $18,895 | $19,459 | | Net cash used in investing activities | $(26,171) | $(17,760) | | Net cash provided by financing activities | $6,478 | $2,047 | | Net (decrease) increase in cash and cash equivalents | $(798) | $3,746 | | Cash and cash equivalents at end of period | $349 | $6,251 | - Capital expenditures (net of AFUDC, equity portion) increased to $26.259 million for the six months ended June 30, 2025, from $18.372 million in the prior year[14] - Net cash provided by financing activities increased by $4.431 million, primarily due to increased contributions in aid of construction and advances, and borrowings under lines of credit[14] Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity grew due to net income and stock issuances, partially offset by cash dividends declared | Metric | Balance as of December 31, 2024 (in thousands) | Balance as of June 30, 2025 (in thousands) | | :-------------------------- | :------------------------------------------- | :----------------------------------------- | | Total stockholders' equity | $239,189 | $244,905 | | Net income (six months) | N/A | $11,725 | | Cash dividends declared (six months) | N/A | $(6,273) | | Issuance of common stock (six months) | N/A | $172 | - Total stockholders' equity increased by $5.716 million from December 31, 2024, to June 30, 2025[18] - Equity per common share was $23.77 at June 30, 2025, up from $23.24 at December 31, 2024[117] Notes to the Condensed Consolidated Financial Statements These notes provide essential context on accounting policies, revenue, financial instruments, and segment information for the financial statements NOTE 1 – GENERAL The company comprises regulated utility and non-utility subsidiaries operating in Delaware, Maryland, and Pennsylvania - Artesian Resources Corporation includes income from all wholly-owned subsidiaries[21] - - Delaware Regulated Utility Subsidiaries: Artesian Water Company, Inc (water distribution, sales, and services), Artesian Wastewater Management, Inc and Tidewater Environmental Services, Inc (wastewater collection and treatment)[22][23][24](index=24&type=chunk] - Maryland Regulated Utility Subsidiaries: Artesian Water Maryland, Inc (water distribution and sales), Artesian Wastewater Maryland, Inc (authorized for wastewater services but not currently providing them)[25][26](index=26&type=chunk] - Pennsylvania Regulated Utility Subsidiary: Artesian Water Pennsylvania, Inc (water service)[27](index=27&type=chunk] - Other Non-Utility Subsidiaries: Artesian Utility Development, Inc (water/wastewater infrastructure design/build, contract operations, SLP Plans), Artesian Development Corporation (real estate holding)[28][29][31] NOTE 2 – BASIS OF PRESENTATION The unaudited financial statements are prepared under SEC rules for Form 10-Q and include all wholly-owned subsidiaries - Unaudited condensed consolidated financial statements are prepared under SEC Form 10-Q rules, condensing certain information and disclosures[32] - Regulated utility subsidiaries (Artesian Water, Artesian Wastewater, TESI, Artesian Water Pennsylvania, Artesian Water Maryland, Artesian Wastewater Maryland) maintain accounting records per uniform systems prescribed by respective state public service commissions (DEPSC, PAPUC, MDPSC) and follow ASC 980, Regulated Operations[35] - Management makes estimates and assumptions for unbilled revenues, income taxes, credit losses, lease agreements, goodwill, and contingent assets/liabilities[36] - Depreciation is recorded using the straight-line method over estimated useful lives (5 to 85 years), with composite depreciation rates for water utility plant at 1.93% for June 30, 2025, and December 31, 2024[38] NOTE 3 – REVENUE RECOGNITION Operating revenues are primarily derived from regulated tariff rates for utility services and non-tariff contracts for other services - Operating revenues are primarily from regulated tariff rates approved by DEPSC, MDPSC, and PAPUC, including water consumption, industrial wastewater, fixed fees, service charges, and Distribution System Improvement Charges (DSIC)[39] - Non-tariff contract revenues include Service Line Protection Plan (SLP Plan) fees, water and wastewater contract operations, design and installation services, and wastewater inspection fees[39] | Revenue Type | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------ | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Total Tariff Revenue | $25,915 | $25,185 | $49,301 | $47,555 | | Total Non-Tariff Revenue | $2,010 | $1,803 | $4,069 | $3,630 | | Other Operating Revenue | $624 | $428 | $1,065 | $775 | | Total Operating Revenue | $28,549 | $27,416 | $54,435 | $51,960 | | Contract Item | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------- | | Contract Assets – Tariff | $3,892 | $3,030 | | Deferred Revenue – Tariff | $1,462 | $1,385 | | Deferred Revenue – Non-Tariff | $765 | $714 | | Total Deferred Revenue | $2,227 | $2,099 | NOTE 4 – ACCOUNTS RECEIVABLE Accounts receivable are recorded at invoiced amounts, net of an allowance for expected credit losses - Artesian Water receives reimbursements from the Delaware Sand and Gravel Remedial Trust for past and ongoing capital and operating costs related to contaminant treatment, with the full $10.0 million paid in four installments, the last in July 2025[61] | Account Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :------------------------------- | | Customer accounts receivable – water | $7,517 | $6,824 | | Settlement agreement receivable – short term | $2,507 | $2,523 | | Developer receivable | $60 | $837 | | Less: provision for expected credit loss | $396 | $343 | | Net accounts receivable | $11,002 | $11,339 | NOTE 5 – LEASES The company leases land and office equipment under operating leases with terms ranging from 3 to 72 years - The company leases land and office equipment under operating leases with remaining terms of 3 to 72 years, some including options to automatically extend for up to 66 years[63] | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------ | :------------ | :---------------- | | Operating lease right-of-use assets | $410 | $414 | | Total operating lease liabilities | $409 | $412 | | Weighted Average Remaining Lease Term | 68 years | 68 years | | Weighted Average Discount Rate | 5.0% | 5.0% | | Year | Operating Leases (in thousands) | | :--- | :------------------------------ | | 2025 | $28 | | 2026 | $28 | | 2027 | $27 | | 2028 | $20 | | 2029 | $20 | | Thereafter | $1,319 | | Total undiscounted lease payments | $1,442 | | Less effects of discounting | $(1,033) | | Total lease liabilities recognized | $409 | NOTE 6 – FAIR VALUE OF FINANCIAL INSTRUMENTS Current assets and liabilities approximate fair value, while the fair value of fixed-rate long-term debt is lower than its carrying amount - Current assets and liabilities' carrying amounts approximate fair value due to short maturity (Level 1 classification)[68] - All outstanding long-term debt has fixed interest rates as of June 30, 2025, and December 31, 2024[69] | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :---------------- | :----------------------------- | :------------------------------- | | Carrying amount | $177,351 | $178,676 | | Estimated fair value | $154,431 | $154,795 | - The fair value of Advances for Construction cannot be reasonably estimated due to the inability to accurately estimate the timing and amounts of future refunds[69] NOTE 7 – INCOME TAXES Deferred income taxes are recognized for temporary differences, with regulatory assets or liabilities created for rate-regulated subsidiaries - Deferred income taxes are provided on all differences between tax basis and financial statement amounts, with rate-regulated subsidiaries recognizing regulatory liabilities or assets[71] - The company accrued approximately $10 thousand in penalties and interest for the six months ended June 30, 2025, related to positions taken on the 2022 corporate income tax return[72] - The company is evaluating the impact of the One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, but anticipates minimal impact on its consolidated financial condition and results of operations[74] NOTE 8 – STOCK COMPENSATION PLANS The 2015 Equity Compensation Plan allows for various stock-based awards, with restricted stock grants vesting after one year - The 2015 Equity Compensation Plan authorizes grants of incentive stock options, nonqualified stock options, stock units, stock awards, dividend equivalents, and other stock-based awards[75] - - April 11, 2025: 1,000 shares of Class A Stock granted as restricted stock award at $33.51 per share, vesting one year after grant date[76](index=76&type=chunk] - May 5, 2025: 4,000 shares of Class A Stock granted as restricted stock awards at $34.27 per share, vesting one year after grant date[77](index=77&type=chunk] - July 1, 2025: 1,000 shares of Class A Stock granted as restricted stock award at $33.96 per share, vesting May 6, 2026[78](index=78&type=chunk] | Metric | Three Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | | :-------------------------------- | :-------------------------------------------- | :------------------------------------------- | | Compensation expense (2025) | $47 | $92 | | Compensation expense (2024) | $57 | $125 | - As of June 30, 2025, there was approximately $142 thousand in total unrecognized expenses related to non-vested restricted share awards, to be recognized over 0.84 years[85] NOTE 9 - GEOGRAPHIC CONCENTRATION OF CUSTOMERS The company's regulated utility services are concentrated in Delaware, Maryland, and Pennsylvania - - Artesian Water (Delaware): ~98,200 customers (June 30, 2025)[86](index=86&type=chunk] - Artesian Water Maryland: ~2,700 customers (June 30, 2025)[86](index=86&type=chunk] - Artesian Water Pennsylvania: ~40 customers (June 30, 2025)[86](index=86&type=chunk] - Artesian Wastewater and TESI served approximately 8,800 wastewater customers combined in Sussex County, Delaware, as of June 30, 2025, including one large industrial customer[88] NOTE 10 – OTHER DEFERRED ASSETS Other deferred assets primarily consist of a required investment in CoBank, ACB, linked to outstanding mortgage bonds | Asset | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------ | :----------------------------- | :------------------------------- | | Investment in CoBank | $6,889 | $6,425 | | Other deferred assets | $97 | $100 | | Total | $6,986 | $6,525 | - The investment in CoBank, ACB, is a required investment based on underlying long-term debt agreements[89] NOTE 11 - REGULATORY ASSETS Regulatory assets represent deferred expenses that are recoverable from customers through future rates - Regulatory assets are expenses recoverable through customer rates, deferred and amortized over future periods as permitted by DEPSC, MDPSC, and PAPUC[91] - - Deferred acquisition adjustments ($3.7 million reclassified from net utility plant, $0.1 million from CIAC) are amortized over 36-62 years and recovered in customer rates effective June 12, 2024[95](index=95&type=chunk] - Unrecovered reserve for depreciation ($4.3 million) from a change in depreciation methods is amortized over five years and recovered in customer rates effective June 12, 2024[96](index=96&type=chunk] | Regulatory Asset | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :------------------------------- | | Debt related costs | $3,793 | $3,969 | | Deferred acquisition adjustments – Delaware | $3,324 | $3,359 | | Unrecovered reserve for depreciation | $3,436 | $3,866 | | Total Regulatory assets, net | $13,593 | $14,428 | NOTE 12 – REGULATORY LIABILITIES Regulatory liabilities represent items to be returned to customers through future regulated rates - Regulatory liabilities represent excess recovery of costs or other items deferred for return to customers through future regulated rates, as determined by DEPSC, MDPSC, and PAPUC[98] - Deferred settlement refunds of $10.0 million from the Delaware Sand and Gravel Remedial Trust are being refunded to customers in annual installments, with the final refund by August 2025[100] - Deferred income taxes related to the TCJA resulted in a $22.8 million regulatory liability for Artesian Water and Artesian Water Maryland, with $22.2 million amortized over 49.5 years and $4.0 million over six years (effective June 12, 2024)[101] | Regulatory Liability | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Utility plant retirement cost obligation | $325 | $279 | | Deferred settlement refunds | $2,496 | $2,496 | | Deferred income taxes (related to TCJA) | $26,843 | $27,492 | | Total Regulatory liabilities | $29,664 | $30,267 | NOTE 13 - REGULATORY PROCEEDINGS The company's utility operations are subject to rate regulation by state commissions and federal environmental laws - - Regulated by: DEPSC (Delaware), MDPSC (Maryland), PAPUC (Pennsylvania)[105] - Subject to: Federal Safe Drinking Water Act, Clean Water Act, and related state laws[106] - Artesian Water filed a request on April 4, 2025, for a 12.41% ($10.8 million annualized) revenue increase, with a temporary rate increase of 2.88% (net 1.22% after DSIC reset) effective June 3, 2025[110] - DSIC rates allow for semi-annual increases for distribution system improvements, capped at 7.50% of billed amounts and 5.0% within any 12-month period[111] | DSIC Application | 05/30/2024 | 11/22/2024 | | :------------------------------------ | :--------- | :--------- | | DEPSC Approval Date | 06/12/2024 | 12/18/2024 | | Effective Date | 07/01/2024 | 01/01/2025 | | Cumulative DSIC Rate | 0.34% | 1.66% | | Net Eligible Plant Improvements (in millions) | $2.0 | $11.7 | - DSIC revenue for the three and six months ended June 30, 2025, was approximately $0.2 million and $0.5 million, respectively, with no DSIC revenue reported for the same periods in 2024[112] NOTE 14 - NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE This note details the calculation of basic and diluted net income per common share and reports equity per common share | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :---------------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Weighted average common shares outstanding (basic) | 10,308 | 10,293 | 10,305 | 10,290 | | Dilutive effect of employee stock options and awards | 2 | 2 | 3 | 3 | | Weighted average common shares outstanding (diluted) | 10,310 | 10,295 | 10,308 | 10,293 | - Equity per common share was $23.77 at June 30, 2025, compared to $23.24 at December 31, 2024[117] NOTE 15 - LEGAL PROCEEDINGS The company is a claimant in four multi-district litigation class action settlements related to PFAS contamination - The company is involved in ordinary course legal proceedings, not expected to materially affect business, financial position, or results of operations[118] - Artesian Resources' subsidiaries are claimants in four multi-district litigation (MDL) class action settlements for PFAS contamination with 3M, DuPont, Tyco Fire Products LP/Chemguard, Inc, and BASF Corporation[119] - The amount of recovery by Artesian Resources' subsidiaries from the PFAS settlements is uncertain[119] NOTE 16 - BUSINESS SEGMENT INFORMATION The company operates primarily through a single reportable segment, the Regulated Utility segment - The company operates primarily through one reportable segment: the Regulated Utility segment, which aggregates five regulated utility subsidiaries providing water and wastewater services on the Delmarva Peninsula[120] - The Chief Operating Decision Maker (CODM) is the Executive Committee, led by the CEO, and uses operating income to assess segment performance[122] | Metric | Three Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | | :-------------------------- | :-------------------------------------------- | :------------------------------------------- | | Regulated Utility Revenues | $26,723 | $50,768 | | Other revenues (non-utility) | $1,891 | $3,795 | | Consolidated revenues | $28,549 | $54,435 | | Regulated Utility Operating Income | $7,301 | $12,362 | | Other profit (non-utility) | $554 | $1,038 | | Consolidated operating income | $7,855 | $13,400 | - Non-utility businesses, including Service Line Protection Plans, design/construction services, and contract operations, do not individually or in aggregate meet quantitative thresholds for reportable segments[124] NOTE 17 - IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS Recently issued accounting guidance is not expected to materially impact the company's financial results or cash flows - FASB amended guidance on Income Taxes (effective FY2025) requires disaggregated income tax disclosures but is not expected to impact the company's results of operations or cash flows[125] - FASB amended guidance on disaggregated income statement expenses (effective FY2027) will require additional footnote disclosures but does not change income statement captions[126] - No accounting policy adopted in the first six months of 2025 had a material impact on financial condition, liquidity, or results of operations[194] Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Revenues and net income increased due to customer growth and rate increases, with continued investment in infrastructure Overview Profitability is driven by regulated utility services, which constitute over 93% of total operating revenues - Regulated utility segment comprised 93.0% of total operating revenues for the six months ended June 30, 2025[129] - Water sales are subject to seasonal fluctuations, while wastewater and non-utility services (contract operations, SLP Plans) provide weather-unaffected revenue streams[129][131][135][136] - - Delaware metered water customers increased ~1.7% YoY[133] - Maryland metered water customers increased ~2.0% YoY[135](index=135&type=chunk] - Delaware wastewater customers increased ~6.2% YoY[135](index=135&type=chunk] - SLP Plan eligible customers increased ~0.6% YoY (collectively)[136] - Artesian Water implemented a temporary rate increase effective June 3, 2025, following a request for a 12.41% revenue increase[134] - Artesian Wastewater received a permit in April 2024 for a 625,000 gallon per day regional wastewater treatment facility at its Sussex Regional Recharge Facility (SRRF), expected to be completed in 2025[142] Other Matters The company regained Nasdaq compliance and is actively addressing new EPA regulations for PFAS and lead service lines - On July 2, 2025, Nasdaq confirmed the company regained compliance with its Majority Independent Board Requirement and Audit Committee Composition Requirement[146] - EPA established MCLs for PFAS in drinking water on April 10, 2024, requiring initial monitoring by 2027 and compliance by April 2029; the company plans further treatment installations with costs anticipated to be recoverable in water rates[147] - The EPA's Lead and Copper Rule Improvements (LCRI), announced October 8, 2024, require public water systems to remove lead service lines within 10 years; costs for replacements are anticipated to be recoverable in water rates[148][149] Results of Operations – Analysis of the Three Months Ended June 30, 2025 Compared to the Three Months Ended June 30, 2024 Operating revenues increased 4.1% and net income grew 18.1%, driven by higher water sales and non-utility revenue | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :-------------------- | :--------- | | Total Operating Revenues | $28,549 | $27,416 | $1,133 | 4.1% | | Water sales revenue | $23,083 | $22,501 | $582 | 2.6% | | Other utility operating revenue | $3,639 | $3,288 | $351 | 10.7% | | Non-utility operating revenue | $1,827 | $1,627 | $200 | 12.3% | | Total Operating Expenses | $20,694 | $20,218 | $476 | 2.4% | | Operating income | $7,855 | $7,198 | $657 | 9.1% | | Net income applicable to common stock | $6,290 | $5,325 | $965 | 18.1% | - Water sales revenue increased due to DSIC revenue, a temporary rate increase (net 1.22%), and customer growth[152] - Other income increased by $0.3 million, primarily due to higher Allowance for Funds Used During Construction (AFUDC) from increased long-term construction activity[160] Results of Operations – Analysis of the Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 2024 Operating revenues increased 4.8% and net income grew 20.4%, driven by broad-based revenue growth and higher AFUDC | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :------------------------------------ | :------------------------------------------- | :------------------------------------------- | :-------------------- | :--------- | | Total Operating Revenues | $54,435 | $51,960 | $2,475 | 4.8% | | Water sales revenue | $43,771 | $42,326 | $1,445 | 3.4% | | Other utility operating revenue | $6,997 | $6,303 | $694 | 11.0% | | Non-utility operating revenue | $3,667 | $3,331 | $336 | 10.1% | | Total Operating Expenses | $41,035 | $40,043 | $992 | 2.5% | | Operating income | $13,400 | $11,917 | $1,483 | 12.4% | | Net income applicable to common stock | $11,725 | $9,736 | $1,989 | 20.4% | - Utility operating expenses increased by $0.7 million (2.9%), primarily due to higher administrative costs, purchased power, and transmission/distribution costs, partially offset by lower payroll/benefits and supply/treatment costs[169] - Other income increased by $0.5 million (22.5%) due to higher long-term construction activity subject to AFUDC[175] LIQUIDITY AND CAPITAL RESOURCES Liquidity is sourced from operations and developer contributions, funding a significant increase in capital expenditures - Primary liquidity sources for the six months ended June 30, 2025, were $18.9 million from operating activities and $11.9 million in net contributions and advances from developers[177] - Cash provided by operating activities decreased to $18.9 million for the six months ended June 30, 2025, from $19.5 million in the prior year, mainly due to lower materials and supplies, accrued expenses, and income taxes receivable, partially offset by higher net income[179] - Capital expenditures increased to $26.3 million for the first six months of 2025, from $18.4 million in 2024, focusing on infrastructure rehabilitation, new mains, a new wastewater treatment plant, and system upgrades[180] - Cash flows provided by financing activities increased to $6.5 million for the six months ended June 30, 2025, from $2.0 million in 2024, driven by $11.9 million in net contributions and advances from developers and $2.0 million from line of credit borrowings[181] - - Citizens Bank line of credit: $40 million, $38.0 million available as of June 30, 2025, interest at Term SOFR + 1.10%, expires May 18, 2026[182](index=182&type=chunk] - CoBank, ACB line of credit: $20 million, $20.0 million available as of June 30, 2025, interest at daily SOFR + 1.45% or term SOFR + 1.45%, expires October 31, 2025[183](index=183&type=chunk] | Material Cash Requirements | Less than 1 Year (in thousands) | 1-3 Years (in thousands) | 4-5 Years (in thousands) | After 5 Years (in thousands) | Total (in thousands) | | :---------------------------------------- | :------------------------------ | :----------------------- | :----------------------- | :--------------------------- | :------------------- | | First mortgage bonds (principal and interest) | $7,843 | $40,610 | $12,476 | $192,089 | $253,018 | | State revolving fund loans (principal and interest) | $1,065 | $2,130 | $2,130 | $9,129 | $14,454 | | Promissory note (principal and interest) | $962 | $1,923 | $1,926 | $8,207 | $13,018 | | Lines of credit | $1,986 | - | - | - | $1,986 | | Total contractual cash obligations | $13,191 | $45,625 | $16,686 | $210,971 | $286,473 | - The company was in compliance with all affirmative and negative covenants in its long-term debt agreements and revolving lines of credit as of June 30, 2025[185] Critical Accounting Estimates; Recent Accounting Pronouncements There were no changes to critical accounting estimates, and recent accounting pronouncements are not expected to have a material impact - No changes in critical accounting estimates since the 2024 annual report on Form 10-K[193] - No accounting policy adopted in the first six months of 2025 had a material impact on financial condition, liquidity, or results of operations[194] - Recent FASB guidance on Income Taxes (effective FY2025) and disaggregated income statement expenses (effective FY2027) will require additional disclosures but are not expected to materially impact financial condition or results of operations[125][126][194] Item 3 - Quantitative and Qualitative Disclosures about Market Risk The company is exposed to interest rate and commodity price risks, which are mitigated by regulatory recovery mechanisms and fixed-price contracts - The company is subject to interest rate risk from fixed-rate long-term debt (maturing 2028-2049, rates 4.24%-5.96%) and $60 million in variable-rate lines of credit (approximately $2.0 million outstanding at June 30, 2025)[195] - Commodity price risk (chemicals, electricity) is mitigated by the ability to recover costs through customer rate increases and by signing multi-year fixed-price electric supply contracts[195] Item 4 - Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal controls - Disclosure controls and procedures were evaluated as effective as of June 30, 2025, providing reasonable assurance that material information is recorded, processed, summarized, and reported timely[196] - No change in internal control over financial reporting occurred during the most recent fiscal quarter that materially affected, or is reasonably likely to materially affect, internal control over financial reporting[198] Part II - Other Information Item 1 - Legal Proceedings The company is involved in routine legal proceedings not expected to materially impact its business or financial results - The company is involved in ordinary course legal proceedings, not believed to materially affect business, financial position, or results of operations[199] - For a full discussion of current legal proceedings, refer to Note 15 – Legal Proceedings[199] Item 1A - Risk Factors There have been no material changes to the risk factors previously disclosed in the company's 2024 Annual Report - No material changes to the risk factors described in the Annual Report on Form 10-K for the year ended December 31, 2024[200] Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report during the period - None[201] Item 3 - Defaults Upon Senior Securities There were no defaults upon senior securities during the period - None[202] Item 4 - Mine Safety Disclosures This item is not applicable to the company - Not applicable[203] Item 5 - Other Information An Executive Vice President announced his retirement, and no insider trading plans were adopted or terminated during the quarter - Joseph A. DiNunzio, Executive Vice President and Secretary, will retire on January 9, 2026, and is expected to remain in a consulting capacity[204] - No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended June 30, 2025[205] Item 6 - Exhibits This section lists all exhibits filed with the Form 10-Q, including officer certifications and XBRL financial statements - - Exhibit 31.1: Certification of Chief Executive Officer[206] - Exhibit 31.2: Certification of Chief Financial Officer[206] - Exhibit 32: Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350[206](index=206&type=chunk] - Exhibits 101.BAL, 101.OPS, 101.CSH, 101.NTS: Inline XBRL Condensed Consolidated Balance Sheets, Statements of Operations, Statements of Cash Flows, and Notes to the Condensed Consolidated Financial Statements[206] - Exhibit 104: Inline XBRL cover page[206] Signatures Signatures The report was duly signed on August 8, 2025, by the CEO and CFO - Report signed on August 8, 2025, by Nicholle R. Taylor (CEO) and David B. Spacht (CFO)[209] Certifications Certification of Chief Executive Officer The CEO certified the report's accuracy, fair presentation of financial results, and effectiveness of internal controls - CEO Nicholle R. Taylor certified the report's accuracy, fair presentation of financial condition and results, and effectiveness of disclosure controls and internal control over financial reporting[211] Certification of Chief Financial Officer The CFO certified the report's accuracy, fair presentation of financial results, and effectiveness of internal controls - CFO David B. Spacht certified the report's accuracy, fair presentation of financial condition and results, and effectiveness of disclosure controls and internal control over financial reporting[213] Certification pursuant to 18 U.S.C. Section 1350 The CEO and CFO jointly certified that the report fully complies with SEC requirements and fairly presents the company's financial condition - CEO Nicholle R. Taylor and CFO David B. Spacht jointly certified that the Form 10-Q fully complies with Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and fairly presents the company's financial condition and results of operations[214][215]