10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

⌧QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

OR

□TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from  _____  to  _____

Commission file number 000-18516

ARTESIAN RESOURCES CORPORATION

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(Exact name of registrant as specified in its charter)

Delaware	51-0002090
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(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

664 Churchmans Road, Newark, Delaware 19702

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Address of principal executive offices

(302) 453 – 6900

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Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol (s)	Name of each exchange on which registered
Common Stock	ARTNA	The Nasdaq Stock Market

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.

☑ Yes □ No

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☑ Yes □ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and “emerging growth company” in Rule 12(b)-2 of the Exchange Act.

Large Accelerated Filer □ Accelerated Filer ☑ Non-Accelerated Filer □ Smaller Reporting Company □ Emerging Growth Company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act ).

□ Yes ☑ No

As of May 5, 2020, 8,429,009 shares of Class A Non-Voting Common Stock and 881,442 shares of Class B Common Stock were outstanding.

TABLE OF CONTENTS

ARTESIAN RESOURCES CORPORATION

FORM 10-Q

Part I	-	Financial Information:
Item 1	-	Financial Statements	Page(s)
		Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019 (unaudited)	3
		Condensed Consolidated Statements of Operations for the three  months ended March 31, 2020 and 2019 (unaudited)	4
		Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019 (unaudited)	5 - 6
		Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months period ended March 31, 2020 and 2019 (unaudited)	7
		Notes to the Condensed Consolidated Financial Statements	8 - 20
Item 2	-	Management's Discussion and Analysis of Financial Condition and Results of Operations	21 - 27
Item 3	-	Quantitative and Qualitative Disclosures about Market Risk	28
Item 4	-	Controls and Procedures	28
Part II	-	Other Information	28
Item 1	-	Legal Proceedings	28
Item 1A	-	Risk Factors	28 - 29
Item 2	-	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3		Defaults Upon Senior Securities	29
Item 4		Mine Safety Disclosures	29
Item 5		Other Information	29
Item 6	-	Exhibits	30
Signatures

2

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

ARTESIAN RESOURCES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

(In thousands)

ASSETS	March 31, 2020		December 31, 2019
Utility plant, at original cost (less accumulated depreciation 2020 - $ 139,121; and 2019 - $136,588)	$	537,190	$	530,721
Current assets
Cash and cash equivalents		330		596
Accounts receivable (less allowance for doubtful accounts 2020 - $280; 2019 - $264)		6,734		6,913
Income tax receivable		-		19
Unbilled operating revenues		1,290		1,211
Materials and supplies		1,322		1,264
Prepaid property taxes		976		1,954
Prepaid expenses and other		2,027		2,250
Total current assets		12,679		14,207
Other assets
Non-utility property (less accumulated depreciation - 2020 - $809; 2019 - $790)		3,793		3,812
Other deferred assets		4,666		4,257
Operating lease right of use assets		474		480
Total other assets		8,933		8,549
Regulatory assets, net		6,785		6,891
Total Assets	$	565,587	$	560,368
LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity
Common stock	$	9,302	$	9,292
Preferred stock		—		—
Additional paid-in capital		102,132		101,811
Retained earnings		50,920		49,165
Total stockholders' equity		162,354		160,268
Long-term debt, net of current portion		143,563		144,156
		305,917		304,424
Current liabilities
Lines of credit		8,638		7,500
Current portion of long-term debt		1,789		1,706
Accounts payable		6,597		8,176
Accrued expenses		2,708		3,113
Overdraft payable		28		15
Accrued interest		1,497		830
Income taxes payable		2,740		343
Customer and other deposits		1,970		1,970
Other		1,956		1,946
Total current liabilities		27,923		25,599
Commitments and contingencies		—		—
Deferred credits and other liabilities
Net advances for construction		5,302		5,421
Operating lease liabilities		445		450
Regulatory liabilities		22,104		22,246
Deferred investment tax credits		486		490
Deferred income taxes		50,953		52,259
Total deferred credits and other liabilities		79,290		80,866
Net contributions in aid of construction		152,457		149,479
Total Liabilities and Stockholders’ Equity	$	565,587	$	560,368

See notes to the condensed consolidated financial statements.

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ARTESIAN RESOURCES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

(In thousands, except per share amounts)

	For the Three Months Ended March 31,
	2020		2019
Operating revenues
Water sales	$	17,392	$	16,934
Other utility operating revenue		1,253		1,120
Non-utility operating revenue		1,256		1,332
Total Operating Revenues		19,901		19,386
Operating expenses
Utility operating expenses		9,235		9,121
Non-utility operating expenses		728		767
Depreciation and amortization		2,752		2,715
State and federal income taxes		1,359		1,180
Property and other taxes		1,365		1,319
Total Operating Expenses		15,439		15,102
Operating income		4,462		4,284
Other income, net
Allowance for funds used during construction (AFUDC)		423		226
Miscellaneous income		1,088		800
Income before interest charges		5,973		5,310
Interest charges		1,899		1,720
Net income applicable to common stock	$	4,074	$	3,590
Income per common share:
Basic	$	0.44	$	0.39
Diluted	$	0.44	$	0.39
Weighted average common shares outstanding:
Basic		9,297		9,258
Diluted		9,343		9,314
Cash dividends per share of common stock	$	0.2496	$	0.2423

See notes to the condensed consolidated financial statements.

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ARTESIAN RESOURCES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

(In thousands)

	For the Three Months Ended March 31,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	4,074		$	3,590
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,752			2,715
Deferred income taxes, net		(1,310	)		(768	)
Stock compensation		45			47
AFUDC, equity portion		(281	)		(145	)
Changes in assets and liabilities:
Accounts receivable, net of allowance for doubtful accounts		179			1,184
Income tax receivable		19			763
Unbilled operating revenues		(79	)		(69	)
Materials and supplies		(58	)		(105	)
Prepaid property taxes		978			941
Prepaid expenses and other		223			142
Other deferred assets		(418	)		(361	)
Regulatory assets		92			95
Regulatory liabilities		(178	)		(114	)
Income tax payable		2,397			1,292
Accounts payable		(1,579	)		(3,324	)
Accrued expenses		(405	)		525
Accrued interest		667			565
Revenue reserved for refund		–			474
Customer deposits and other		11			174
NET CASH PROVIDED BY OPERATING ACTIVITIES		7,129			7,621
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (net of AFUDC, equity portion)		(9,212	)		(9,078	)
Proceeds from sale of assets		30			14
NET CASH USED IN INVESTING ACTIVITIES		(9,182	)		(9,064	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under lines of credit agreements		1,138			2,669
Increase in overdraft payable		13			252
Net advances and contributions in aid of construction		3,179			748
Net proceeds from issuance of common stock		286			395
Dividends paid		(2,319	)		(2,241	)
Principal repayments of long-term debt		(510	)		(408	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		1,787			1,415
NET DECREASE IN CASH AND CASH EQUIVALENTS		(266	)		(28	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		596			293
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	330		$	265
Non-cash Investing and Financing Activity:
Utility plant received as construction advances and contributions	$	320		$	152
Supplemental Disclosures of Cash Flow Information:
Interest paid	$	1,232		$	1,155
Income taxes paid	$	360		$	–

See notes to the condensed consolidated financial statements.

5

ARTESIAN RESOURCES CORPORATION

 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Unaudited

(In thousands)

	Common Shares Outstanding Class A Non-Voting (1) (3) (4)		Common Shares Outstanding Class B Voting (2)		$1 Par Value Class A Non-Voting		$1 Par Value Class B Voting		Additional Paid-in Capital		Retained Earnings			Total
Balance as of December 31, 2018		8,368		882	$	8,368	$	882	$	100,639	$	43,362		$	153,251
Net income		–		–		–		–		–		3,590			3,590
Cash dividends declared
Common stock		–		–		–		–		–		(2,241	)		(2,241	)
Issuance of common stock
Dividend reinvestment plan		2		–		2		–		85		–			87
Employee stock options and awards(4)		14		–		14		–		263		–			277
Employee Retirement Plan(3)		2		–		2		–		76		–			78
Balance as of March 31, 2019		8,386		882		8,386		882		101,063		44,711			155,042

	Common Shares Outstanding Class A Non-Voting (1) (3) (4)		Common Shares Outstanding Class B Voting (2)		$1 Par Value Class A Non-Voting		$1 Par Value Class B Voting		Additional Paid-in Capital		Retained Earnings			Total
Balance as of December 31, 2019	$	8,410	$	882	$	8,410	$	882	$	101,811	$	49,165		$	160,268
Net income		–		–		–		–		–		4,074			4,074
Cash dividends declared
Common stock		–		–		–		–		–		(2,319	)		(2,319	)
Issuance of common stock
Dividend reinvestment plan		3		–		3		–		105		–			108
Employee stock options and awards(4)		5		–		5		–		129		–			134
Employee Retirement Plan(3)		2		–		2		–		87		–			89
Balance as of March 31, 2020	$	8,420	$	882	$	8,420	$	882	$	102,132	$	50,920		$	162,354

(1) At March 31, 2020, and March 31, 2019, Class A Common Stock had 15,000,000 shares authorized.  For the same periods, shares issued, inclusive of treasury shares, were 8,449,292 and 8,415,799, respectively.

(2) At March 31, 2020, and March 31, 2019, Class B Common Stock had 1,040,000 shares authorized and 881,452 shares issued.

(3) Artesian Resources Corporation registered 500,000 shares of Class A Common Stock available for purchase through the Artesian Retirement Plan and the Artesian Supplemental Retirement Plan.

(4) Under the Equity Compensation Plan, effective December 9, 2015, Artesian Resources Corporation authorized up to 331,500 shares of Class A Common Stock for issuance of grants in forms of stock options, stock units, dividend equivalents and other stock-based awards, subject to adjustment in certain circumstances as discussed in the Plan. Includes stock compensation expense for March 31, 2020 and March 31, 2019, see Note 1-Stock Compensation Plans.

See notes to the condensed consolidated financial statements.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – GENERAL

Artesian Resources Corporation, or Artesian Resources, includes income from the earnings of our eight wholly owned subsidiaries. The terms "we", "our", "Artesian" and the "Company" as used herein refer to Artesian Resources and its subsidiaries.

DELAWARE REGULATED SUBSIDIARIES

Artesian Water Company, Inc., or Artesian Water, our principal subsidiary, is the oldest and largest public water utility in the State of Delaware and has been providing water service within the state since 1905.  Artesian Water distributes and sells water to residential, commercial, industrial, governmental, municipal and utility customers throughout the State of Delaware.  In addition, Artesian Water provides services to other water utilities, including operations and billing functions, and has contract operation agreements with private and municipal water providers.  Artesian Water also provides water for public and private fire protection to customers in our service territories.

Artesian Wastewater Management, Inc., or Artesian Wastewater, is a regulated entity that owns wastewater collection and treatment infrastructure and provides wastewater services to customers in Delaware as a regulated public wastewater service company.  Artesian Wastewater owns and operates four wastewater treatment facilities, which are permitted to treat approximately 500,000 gallons per day.  Artesian Wastewater and Sussex County, a political subdivision of Delaware, provide reciprocal services to address the periodic need of each for additional wastewater treatment and disposal capacity in certain service areas within Sussex County. There are numerous locations in Sussex County where Artesian Wastewater’s and Sussex County’s facilities are capable of being connected or integrated to allow for the movement and disposal of wastewater generated by one or the other’s system in a manner that most efficiently and cost effectively manages wastewater transmission, treatment and disposal.  Artesian Wastewater received an operations permit in March 2020 for a disposal facility that includes a 90 million gallon storage lagoon and spray irrigation to agricultural land.  This facility will be used to provide treated process wastewater disposal services for an industrial customer at a rate of approximately 1.5 million gallons per day. We expect to be operating this facility in the second quarter of 2020.

MARYLAND REGULATED SUBSIDIARIES

Artesian Water Maryland, Inc., or Artesian Water Maryland, began operations in August 2007. Artesian Water Maryland distributes and sells water to residential, commercial, industrial and municipal customers in Cecil County, Maryland.

Artesian Wastewater Maryland, Inc., or Artesian Wastewater Maryland, was incorporated on June 3, 2008 and is able to provide regulated wastewater services to customers in the State of Maryland.  It is currently not providing these services in Maryland.

PENNSYLVANIA REGULATED SUBSIDIARY

Artesian Water Pennsylvania, Inc., or Artesian Water Pennsylvania, began operations in 2002.  It provides water service to a residential community in Chester County, Pennsylvania.

OTHER SUBSIDIARIES

Our three other subsidiaries, none of which are regulated, are Artesian Utility Development, Inc., or Artesian Utility, Artesian Development Corporation, or Artesian Development, and Artesian Storm Water Services, Inc., or Artesian Storm Water.

Artesian Utility was formed in 1996 and designs and builds water and wastewater infrastructure and provides contract water and wastewater operation services on the Delmarva Peninsula to private, municipal and governmental institutions.  Artesian Utility also evaluates land parcels, provides recommendations to developers on the size of water or wastewater facilities and the type of technology that should be used for treatment at such facilities, and operates water and wastewater facilities in Delaware for municipal and governmental organizations.  Artesian Utility also contracts with developers for design and construction of wastewater facilities within the Delmarva Peninsula, using a number of different technologies for treatment of wastewater at each facility.  In addition, as further discussed below, Artesian Utility operates the Water Service Line Protection Plan, or WSLP Plan, the Sewer Service Line Protection Plan, or SSLP Plan, and the Internal Service Line Protection Plan, or ISLP Plan.

7

Artesian Utility currently operates wastewater treatment facilities for the town of Middletown, in southern New Castle County, Delaware, or Middletown, under a 20-year contract that expires in July 2039.  The company has been operating these facilities, which currently include two wastewater treatment stations with a combined capacity of up to approximately 2.8 million gallons per day, or mgd, and the related wastewater disposal facilities, since 1998.  The wastewater treatment facilities in Middletown provide reclaimed wastewater for use in spray irrigation on public and agricultural lands in the area.

Artesian Utility also offers three protection plans to customers, the WSLP Plan, the SSLP Plan, and the ISLP Plan. The WSLP Plan covers all parts, material and labor required to repair or replace participating customers' leaking water service lines up to an annual limit. The SSLP Plan covers all parts, material and labor required to repair or replace participating customers' leaking or clogged sewer lines up to an annual limit.  The ISLP Plan enhances available coverage to include water and wastewater lines within customers' residences.

Artesian Development is a real estate holding company that owns properties, including land approved for office buildings, a water treatment plant and wastewater facility, as well as property for current operations, including an office facility in Sussex County, Delaware.  The facility consists of approximately 10,000 square feet of office space along with nearly 10,000 square feet of warehouse space.

Artesian Storm Water, incorporated on January 17, 2017, was formed to provide design, installation, maintenance and repair services related to existing or proposed storm water management systems in Delaware and the surrounding areas.  The ability to offer storm water services will complement the primary water and wastewater services that we provide.

NOTE 2 – BASIS OF PRESENTATION

Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC, for Form 10-Q.  Certain information and note disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.  Accordingly, these condensed consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes in the Company's annual report on Form 10-K for fiscal year 2019 as filed with the SEC on March 13, 2020.

The condensed consolidated financial statements include the accounts of Artesian Resources Corporation and its wholly owned subsidiaries, including its principal operating company, Artesian Water.  In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments (unless otherwise noted) necessary to present fairly the Company's balance sheet position as of March 31, 2020, the results of its operations for the three month periods ended March 31, 2020 and March 31, 2019, its cash flows for the three month periods ended March 31, 2020 and March 31, 2019 and the changes in stockholders’ equity for the three  month periods ended March 31, 2020 and March 31, 2019.  The December 31, 2019 Condensed Consolidated Balance Sheet was derived from the Company’s December 31, 2019 audited consolidated financial statements, but does not include all disclosures and notes normally provided in annual financial statements.

The results of operations for the interim periods presented are not necessarily indicative of the results for the full year or for future periods.

Management makes certain estimates and assumptions regarding each lease agreement, renewal and amendment, including, but not limited to, discount rates and probable term, which can impact the escalations in payment that are taken into consideration when calculating the straight line basis. The amount of rent expense and income reported could vary if different estimates and assumptions are used.  Management also makes certain estimates and assumptions regarding the fair value of the leased property at lease commencement and the separation of lease and nonlease components.

Reclassification

Certain accounts in the prior year financial statements have been reclassified for comparative purposes to conform with the presentation in the current year financial statements.  These reclassifications had no effect on net income or stockholders' equity.

8

NOTE 3 – REVENUE RECOGNITION

Background

Artesian’s operating revenues are primarily attributable to contract services based upon tariff rates approved by the Delaware Public Service Commission, or DEPSC, the Maryland Public Service Commission, or MDPSC, and the Pennsylvania Public Utility Commission, or PAPUC.  Tariff contract service revenues consist of water consumption, industrial wastewater services, fixed fees for water and wastewater services including customer and fire protection fees, service charges and Distribution System Improvement Charges, or DSIC, billed to customers at rates outlined in our tariffs that represent stand-alone selling prices.  Our non-tariff contract revenues consist of Service Line Protection Plan, or SLP Plan, fees, water and wastewater contract operations and wastewater inspection fees.  Other operating revenue primarily consists of developer guarantee contributions for wastewater and rental income for antenna contracts.

Tariff Contract Revenues

Artesian generates revenue from the sale of water to customers in Delaware, Cecil County, Maryland, and Southern Chester County, Pennsylvania once a customer requests service in our territory.  We recognize water consumption revenue at tariff rates on a cycle basis for the volume of water transferred to customers based upon meter readings for actual gallons of water consumed as well as unbilled amounts for estimated usage from the date of the last meter reading to the end of the accounting period.  As actual usage amounts are known based on recurring meter readings, adjustments are made to the unbilled estimates in the next billing cycle based on the actual results.  Estimates are made on an individual customer basis, based on one of three methods: the previous year’s consumption in the same period, the previous billing period’s consumption, or averaging. While actual usage for individual customers may differ materially from the estimate based on management judgements described above, we believe the overall total estimate of consumption and revenue for the fiscal period will not differ materially from actual billed consumption.  The majority of our water customers are billed for water consumed on a monthly basis, while the remaining customers are billed on a quarterly basis.  As a result, we record unbilled operating revenue (contract asset) for any estimated usage through the end of the accounting period that will be billed in the next monthly or quarterly billing cycle.

Artesian generates revenue from industrial wastewater services provided to a customer in Sussex County, Delaware.  We recognize industrial wastewater service revenue at a contract rate on a monthly basis for the volume of wastewater transferred to Artesian’s wastewater facilities based upon meter readings for actual gallons of wastewater transferred.  These services are invoiced at the end of every month based on the actual meter readings for that month, and therefore there is no contract asset or liability associated with this revenue.

Artesian generates fixed fee revenue for water and wastewater services provided to customers once a customer requests service in our territory.  Our wastewater territory is located in Sussex County, Delaware.  We recognize revenue from these services on a ratable basis over time as the customer simultaneously receives and consumes all the benefits of the Company remaining ready to provide them water and wastewater service.  These contract services are billed in advance at tariff rates on a monthly, quarterly or semi-annual basis.  As a result, we record deferred revenue (contract liability) and accounts receivable for any amounts for which we have a right to invoice but for which services have not been provided.  This deferred revenue is netted with unbilled operating revenue on the Condensed Consolidated Balance Sheet.

Artesian generates service charges primarily from non-payment fees, such as water shut off and reconnection fees and finance charges.  These fees are billed and recognized as revenue at the point in time when our tariffs indicate the Company has the right to payment such as days past due have been reached or shut-offs and reconnections have been performed.  There is no contract asset or liability associated with these fees.

Artesian generates revenue from DSIC, which are surcharges applied to water customer tariff rates in Delaware related to specific types of water distribution system improvements.  This rate is calculated on a semi-annual basis based on an approved projected revenue requirement over the following six-month period.  This rate is adjusted up or down at the next DSIC filing to account for any differences between actual earned revenue and the projected revenue requirement.  Since DSIC revenue is a surcharge applied to tariff rates, we recognize DSIC revenue based on the same guidelines as noted above depending on whether the surcharge was applied to consumption revenue or fixed fee revenue.

9

The DEPSC required Delaware utilities to determine the impact that the Tax Cuts and Jobs Act, or TCJA, had on its customers and potential rate relief due to customers.  The reduction in corporate income tax expense resulting from the TCJA was passed through to customers in the form of reduced tariff rates as approved by the DEPSC on January 31, 2019.  Approximately $3.8 million was refunded to customers during the second quarter of 2019.  This amount was previously held in reserve (refund liability) and was not reflected in income.

Accounts receivable related to tariff contract revenues are typically due within 25 days of invoicing.  An allowance for doubtful accounts is calculated as a percentage of total associated revenues based upon historical trends and adjusted for current conditions.  We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related allowance for doubtful accounts and associated bad debt expense has not been significant.  However, due to the coronavirus, or COVID-19, pandemic causing hardships for many utility customers, state government agencies issued executive orders requiring utility companies to take a number of steps to support their customers and communities, including prohibiting service disconnections for non-payment and prohibiting late fees.  The Company anticipates a longer receivable cycle and the need for increased reserves for bad debt compared to 2019.  The MDPSC issued an order authorizing utilities deferred regulatory treatment for incremental costs related to COVID-19, which includes increased bad debt expense.  The Company anticipates the DEPSC will issue a similar order.  Management is monitoring the situation and as of March 31, 2020, no significant adjustment has been made.

Non-tariff Contract Revenues

Artesian generates SLP Plan revenue once a customer requests service to cover all parts, materials and labor required to repair or replace leaking water service lines, leaking or clogged sewer lines, or water and wastewater lines within the customers’ residences, up to an annual limit.  We recognize revenue from these services on a ratable basis over time as the customer simultaneously receives and consumes all the benefits of having service line protection services.  These contract services are billed in advance on a monthly or quarterly basis.  As a result, we record deferred revenue (contract liability) and accounts receivable for any amounts for which we have a right to invoice but for which services have not been provided.  Accounts receivable from SLP Plan customers are typically due within 25 days of invoicing.  An allowance for doubtful accounts is calculated as a percentage of total SLP Plan contract revenue.  We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related allowance for doubtful accounts and associated bad debt expense has not been significant.

Artesian generates contract operation revenue from water and wastewater operation services provided to customers.  We recognize revenue from these operation contracts, which consist primarily of monthly operation and maintenance services over time as customers receive and consume the benefits of such services performed. These services are invoiced in advance at the beginning of every month and are typically due within 30 days, and therefore there is no contract asset or liability associated with these revenues.  An allowance for doubtful accounts is provided based on a periodic analysis of individual account balances, including an evaluation of days outstanding, payment history, recent payment trends, and our assessment of our customers’ creditworthiness.  The related allowance for doubtful accounts and associated bad debt expense has not been significant.

Artesian generates inspection fee revenue for inspection services related to onsite wastewater collection systems installed by developers of new communities.  These fees are paid by developers in advance when a service is requested for a new phase of a development.  Inspection fee revenue is recognized on a per lot basis once the inspection of the infrastructure that serves each lot is completed.  As a result, we record deferred revenue (contract liability) for any amounts related to infrastructure not yet inspected.  There are no accounts receivable, allowance for doubtful accounts or bad debt expense associated with inspection fee contracts.

Sales Tax

The majority of Artesian’s revenues are earned within the State of Delaware, where there is no sales tax.  Revenues earned in the State of Maryland and the Commonwealth of Pennsylvania are related primarily to the sale of water by a public water utility and are exempt from sales tax.  Therefore, no sales tax is collected on revenues.

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Disaggregated Revenues

The following table shows the Company’s revenues disaggregated by service type; all revenues are generated within a similar geographical location:

(in thousands)	Three months ended March 31, 2020		Three months ended March 31, 2019
Tariff Revenue
Consumption charges	$	10,160	$	10,393
Fixed fees		6,737		6,648
Service charges		147		177
DSIC		1,152		888
Industrial wastewater services		8		–
Revenue reserved for refund –           TCJA impact		–		(422	)
Total Tariff Revenue	$	18,204	$	17,684
Non-Tariff Revenue
Service line protection plans	$	1,088	$	1,050
Contract operations		216		328
Inspection fees		102		23
Total Non-Tariff Revenue	$	1,406	$	1,401
Other Operating Revenue      not in scope of ASC 606	$	291	$	301
Total Operating Revenue	$	19,901	$	19,386

Contract Assets and Contract Liabilities

Our contract assets and liabilities consist of the following:

(in thousands)	March 31, 2020		December 31, 2019
Contract Assets – Tariff	$	2,146	$	2,146
Deferred Revenue
Deferred Revenue – Tariff	$	979	$	1,050
Deferred Revenue – Non-Tariff		221		251
Total Deferred Revenue	$	1,200	$	1,301

For the three months ended March 31, 2020, the Company recognized revenue of $1.0 million from amounts that were included in Deferred Revenue – Tariff at the beginning of the year and revenue of $0.2 million from amounts that were included in Deferred Revenue – Non- Tariff at the beginning of the year.

The increases (decreases) of Accounts Receivable, Contract Assets and Deferred Revenue were primarily due to normal timing differences between our performance and customer payments.

Remaining Performance Obligations

As of March 31, 2020 and December 31, 2019, Deferred Revenue – Tariff is recorded net of contract assets within Unbilled operating revenues and represents our remaining performance obligations for our fixed fee water and wastewater services, all of which are expected to be satisfied and associated revenue recognized in the next three months.

As of March 31, 2020 and December 31, 2019, Deferred Revenue – Non-Tariff is recorded within Other current liabilities and represents our remaining performance obligations for our SLP Plan services and wastewater inspections, which are expected to be satisfied and associated revenue recognized within the next three months and one year for the SLP Plan revenue and inspection fee revenue, respectively.

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NOTE 4 – LEASES

The Company leases land and office equipment under operating leases from non-related parties.  Our leases have remaining lease terms of 2 years to 77 years, some of which include options to automatically extend the leases for up to 66 years.  Payments made under operating leases are recognized in the condensed consolidated statement of operations on a straight-line basis over the period of the lease.  The annual lease payments for the land operating leases increase each year either by the most recent increase in the Consumer Price Index or by 3%, as applicable based on the lease agreements.  Periodically, the annual lease payment for one operating land lease is determined based on the fair market value of the applicable parcel of land.  None of the operating leases contain contingent rent provisions.  The commencement date of all the operating leases is the earlier of the date we become legally obligated to make rent payments or the date we may exercise control over the use of the land or equipment.  The Company currently does not have any financing leases and does not have any lessor leases that require disclosure.

Management made certain assumptions related to the separation of lease and nonlease components and to the discount rate used when calculating the right of use asset and liability amounts for the operating leases.  As our leases do not provide an implicit rate, we use our incremental borrowing rates for long term and short term agreements and apply the rates accordingly based on the term of the lease agreements to determine the present value of lease payments.

Rent expense for all operating leases except those with terms of 12 months or less comprises:

	(in thousands)
	Three Months Ended			Three Months Ended
	March 31, 2020			March 31, 2019
Minimum rentals		$	7		$	2
Contingent rentals			–			–
		$	7		$	2

Supplemental cash flow information related to leases is as follows:

	(in thousands)
	Three Months Ended			Three Months Ended
	March 31, 2020			March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		$	7	$	2
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		$	474	$	499

Supplemental balance sheet information related to leases is as follows:

	(in thousands, except lease term and discount rate)
	March 31, 2020			December 31, 2019
Operating Leases:
Operating lease right-of-use assets	$	474		$	480
Other current liabilities	$	20			19
Operating lease liabilities		445			450
Total operating lease liabilities	$	465		$	469
Weighted Average Remaining Lease Term
Operating leases	58 years			58 years
Weighted Average Discount Rate
Operating leases		5.0	%		5.0	%

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Maturities of operating lease liabilities that have initial or remaining non-cancelable lease terms in excess of one year as of March 31, 2020 are as follows:

	(in thousands)
	Operating Leases
Year
2020	$	42
2021		42
2022		23
2023		23
2024		23
Thereafter		1,319
Total undiscounted lease payments	$	1,472
Less effects of discounting		(1,007	)
Total lease liabilities recognized	$	465

  As of March 31, 2020, we have not entered into operating or finance leases that will commence at a future date.

NOTE 5 – STOCK COMPENSATION PLANS

On December 9, 2015, the Company's stockholders approved the 2015 Equity Compensation Plan, or the 2015 Plan, which replaced the 2005 Equity Compensation Plan that expired on May 24, 2015. The 2015 Plan provides that grants may be in any of the following forms: incentive stock options, nonqualified stock options, stock units, stock awards, dividend equivalents and other stock-based awards. The 2015 Plan is administered and interpreted by the Compensation Committee, or the Committee, of the Board of Directors of the Company, or the Board. The Committee has the authority to determine the individuals to whom grants will be made under the 2015 Plan, the type, size and terms of the grants, the time when grants will be made and the duration of any applicable exercise or restriction period (subject to the limitations of the 2015 Plan), and deal with any other matters arising under the 2015 Plan. The Committee presently consists of three directors, each of whom is a non-employee director of the Company. All of the employees of the Company and its subsidiaries and non-employee directors of the Company are eligible for grants under the 2015 Plan. 

Compensation expense of $45,000 related to the May 2019 issue of restricted stock awards, was recorded for the three months ended March 31, 2020. Compensation expense of $47,000 was also recorded for the three months ended March 31, 2019 for restricted stock awards issued in May 2018. Costs were determined based on the fair value on the dates of the awards and those costs were charged to income over the service periods associated with the awards.

There was no stock compensation cost capitalized as part of an asset.

On May 8, 2019, 5,000 shares of Class A Common Stock, or Class A Stock, were granted as restricted stock awards.  The fair value per share was $36.11, the closing price of the Class A Stock as recorded on the Nasdaq Global Select Market on May 8, 2019. Prior to their release date, these restricted stock awards may be subject to forfeiture in the event of the recipient’s termination of service.

The following summary reflects changes in the shares of Class A Stock underlying options and restricted stock awards for the three months ended March 31, 2020:

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	Options									Restricted Awards
	Option Shares			Weighted Average Exercise Price		Weighted Average Remaining Life (Yrs.)		Aggregate Intrinsic Value (in thousands)		Outstanding Restricted Stock Awards		Weighted Average Grant Date Fair Value
Plan options/restricted stock awards
Outstanding at January 1, 2020		153,250		$	20.40			$	2,575		5,000	$	36.11
Granted		–			–				–		–		–
Exercised/vested and released		(4,750	)		18.61				70		–		–
Expired/cancelled		–			–				–		–		–
Outstanding at March 31, 2020		148,500		$	20.46		2.384	$	2,512		5,000	$	36.11
Exercisable/vested at March 31, 2020		148,500		$	20.46		2.384	$	2,512		–		–

The total intrinsic value of options exercised during the three months ended March 31, 2020 was approximately $70,000.

There were no unvested option shares outstanding under the 2015 Plan during the three months ended March 31, 2020.

As of March 31, 2020, there were no unrecognized expenses related to non-vested option shares granted under the 2015 Plan.  

As of March 31, 2020, there was $18,000 total unrecognized expenses related to non-vested awards of restricted shares awarded under the 2015 Plan.  The cost will be recognized over 0.10 years, the remaining vesting period for the restricted stock awards.

NOTE 6 - REGULATORY ASSETS

The FASB, ASC Topic 980 stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency. Certain expenses are recoverable through rates charged to our customers, without a return on investment, and are deferred and amortized during future periods using various methods as permitted by the DEPSC, MDPSC, and PAPUC.

The postretirement benefit obligation is the recognition of an offsetting regulatory liability as it relates to the accrual of the expected cost of providing postretirement health care and life insurance benefits to retired employees.  Artesian Water contributed approximately $5,700 to its postretirement benefit plan in the first three months of 2020. These contributions consist of insurance premium payments for medical, dental and life insurance benefits made on behalf of the Company's eligible retired employees.

The deferred income taxes will be amortized over future years as the tax effects of temporary differences that previously flowed through to our customers are reversed.

Debt related costs include debt issuance costs and other debt related expense. The DEPSC has allowed rate recovery on issuance costs associated with the Series V First Mortgage bond in December 2019 that paid down outstanding lines of credit and a loan payable to Artesian Resources.  These amounts are recovered over the term of the new long-term debt issued.  For the Series V First Mortgage bond, cash was paid for the issuance costs and $30 million of cash was received from the proceeds of the bonds.

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Regulatory expenses amortized on a straight-line basis are noted below:

Expense	Years Amortized
Rate case studies	5
Delaware rate proceedings	2.5
Maryland rate proceedings	5
Debt related costs	15 to 30 (based on term of related debt)
Goodwill (resulting from acquisition of Mountain Hill Water Company in 2008)	50
Deferred acquisition costs (resulting from purchase of water assets in Cecil County, Maryland in 2011 and Port Deposit, Maryland in 2010)	20
Franchise Costs (resulting from purchase of water assets in Cecil County, Maryland in 2011)	80

Regulatory assets, net of amortization, comprise:
	(in thousands)
	March 31, 2020		December 31, 2019
Postretirement benefit obligation	$	51	$	51
Deferred income taxes		382		386
Expense of rate case studies		25		27
Debt related costs		5,468		5,556
Goodwill		286		288
Deferred acquisition and franchise costs		573		583
	$	6,785	$	6,891

NOTE 7 – REGULATORY LIABILITIES

The FASB, ASC Topic 980 stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency.  Certain obligations are deferred and/or amortized as determined by the DEPSC, the MDPSC, and the PAPUC.  Regulatory liabilities represent excess recovery of cost or other items that have been deferred because it is probable such amounts will be returned to customers through future regulated rates.

Utility plant retirement cost obligation consists of estimated costs related to the potential removal and replacement of facilities and equipment on the Company’s water and wastewater properties.  Effective January 1, 2012, as authorized by the DEPSC, when depreciable units of utility plant are retired, any cost associated with retirement, less any salvage value or proceeds received, is charged to a regulated retirement liability.  Each year the liability is increased by an annual amount authorized by the DEPSC.    

Pursuant to the enactment of the TCJA, on December 22, 2017, the Company adjusted its existing deferred income tax balances to reflect the decrease in the corporate income tax rate from 34% to 21% (see Note 10).  This resulted in a decrease in the net deferred income tax liability of approximately $24.3 million, of which $22.8 million was reclassed to a regulatory liability.  The regulatory liability amount is subject to certain Internal Revenue Service normalization rules that require the benefits to customers be spread over the remaining useful life of the underlying assets giving rise to the associated deferred income taxes.  On January 31, 2019, the DEPSC approved the amortization of the regulatory liability amount of $22.2 million over a period of 49.5 years beginning February 1, 2018, subject to audit at a later date.  The MDPSC has not issued a final order on the regulatory liability amount of $0.6 million regarding the effects of the TCJA on Maryland customers.

Regulatory liabilities comprise:
	(in thousands)
	March 31, 2020			December 31, 2019
Utility plant retirement cost obligation		$	216		$	247
Deferred income taxes (related to TCJA)			21,888			21,999
		$	22,104		$	22,246

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NOTE 8 - 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, the potentially dilutive effect of employee stock options and restricted stock awards.

The following table summarizes the shares used in computing basic and diluted net income per share:

	For the Three Months Ended March 31,
	2020		2019
	(in thousands)
Weighted average common shares outstanding during the period for Basic computation		9,297		9,258
Dilutive effect of employee stock options and awards		46		56
Weighted average common shares outstanding during the period for Diluted computation		9,343		9,314

For the three months ended March 31, 2020, 6,050 shares of restricted stock awards were excluded from the calculations of diluted net income per share. For the three months ended March 31, 2019, no shares of restricted stock awards were excluded from the calculations of diluted net income per share.  Due to unrecognized compensation costs, the hypothetical repurchase of shares exceeded the number of restricted shares expected to vest during the period, creating an anti-dilutive effect. For the three months ended March 31, 2020 and March 31, 2019, no shares of stock options were excluded from the calculations of diluted net income per share, as the calculated proceeds from the options’ exercise were lower than the average market price of the Company’s common stock during the period.

The Company has 15,000,000 authorized shares of Class A Stock and 1,040,000 authorized shares of Class B Common Stock, or Class B Stock. As of March 31, 2020, 8,420,315 shares of Class A Stock and 881,452 shares of Class B Stock were issued and outstanding. As of March 31, 2019, 8,386,822 shares of Class A Stock and 881,452 shares of Class B Stock were issued and outstanding. The par value for both classes is $1.00 per share. During the three months ended March 31, 2020 and March 31, 2019, the Company issued 10,069 and 17,794 shares of Class A Stock, respectively.

Equity per common share was $17.46 and $17.28 at March 31, 2020 and December 31, 2019, respectively. These amounts were computed by dividing common stockholders' equity by the number of shares of common stock outstanding on March 31, 2020 and December 31, 2019, respectively.

NOTE 9 - REGULATORY PROCEEDINGS

Our water and wastewater utilities generate operating revenue from customers based on rates that are established by state Public Service Commissions through a rate setting process that may include public hearings, evidentiary hearings and the submission of evidence and testimony in support of the requested level of rates by the Company.

We are subject to regulation by the following state regulatory commissions:

· The DEPSC, regulates both Artesian Water and Artesian Wastewater.

· The MDPSC, regulates both Artesian Water Maryland and Artesian Wastewater Maryland.

· The PAPUC, regulates Artesian Water Pennsylvania.

Rate Proceedings

Our regulated utilities 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.  In Delaware, utilities are permitted by law to place rates into effect, under bond, on a temporary basis pending completion of a rate increase proceeding. The first temporary increase may be up to the lesser of $2.5 million on an annual basis or 15% of gross water sales.  Should the rate case not be completed within seven months, by law, the utility may put the entire requested rate relief, up to 15% of gross water sales, in effect under bond until a final resolution is ordered and placed into effect.  If any such rates are found to be in excess of rates the DEPSC finds to be appropriate, the utility must refund customers the portion found to be in excess with interest.  The timing of our rate increase requests is therefore dependent upon the estimated cost of the administrative process in relation to the investments and expenses that we hope to recover through the rate increase.  We can provide no assurances that rate increase requests will be approved by applicable regulatory agencies and, if approved, we cannot guarantee that these rate increases will be granted in a timely or sufficient manner to cover the investments and expenses for which we initially sought the rate increase.

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The DEPSC required Delaware utilities to determine the impact that the TCJA had on their customers and potential rate relief due to customers.  The reduction in corporate income tax expense resulting from the TCJA was passed through to customers in the form of reduced tariff rates as approved by the DEPSC on January 31, 2019.  Approximately $3.8 million was refunded to customers during the second quarter of 2019.  This amount was previously held in reserve and was not reflected in income..

Other Proceedings

Delaware law permits water utilities to put into effect, on a semi-annual basis, increases related to specific types of distribution system improvements through a DSIC. This charge may be implemented by water utilities between general rate increase applications that normally recognize changes in a water utility's overall financial position. The DSIC approval process is less costly when compared to the approval process for general rate increase requests. The DSIC rate applied between base rate filings is capped at  7.50% of the amount billed to customers under otherwise applicable rates and charges, and the DSIC rate increase applied cannot exceed 5.0% within any 12-month period.

The following table summarizes (1) Artesian Water’s applications with the DEPSC to collect DSIC rates and (2) the rates upon which eligible plant improvements are based:

Application Date	11/28/2018	05/29/2019	11/15/2019
DEPSC Approval Date	12/20/2018	06/18/2019	12/12/2019
Effective Date	01/01/2019	07/01/2019	01/1/2020
Cumulative DSIC Rate	5.55%	7.41%	7.50%
Net Eligible Plant Improvements – Cumulative Dollars (in millions)	$30.4	$ 43.1	$ 43.1
Eligible Plant Improvements – Installed Beginning Date	10/01/2014	10/01/2014	10/01/2014
Eligible Plant Improvements – Installed Ending Date	10/31/2018	04/30/2019	04/30/2019

The DSIC rate effective January 1, 2020 replaces the DSIC rate effective July 1, 2019.  The rate reflects the eligible plant improvements installed through April 30, 2019.  The DSIC rates effective January 1, 2019, July 1, 2019, and January 1, 2020 are still subject to audit at a later date by the DEPSC.  For the three months ended March 31, 2020 and March 31, 2019, we earned approximately $1.2 million and $0.9 million in DSIC revenue, respectively.

NOTE 10 – INCOME TAXES

Deferred income taxes are provided in accordance with FASB ASC Topic 740 on all differences between the tax basis of assets and liabilities and the amounts at which they are carried in the consolidated financial statements based on the enacted tax rates expected to be in effect when such temporary differences are expected to reverse. The Company’s rate regulated utilities recognize regulatory liabilities, to the extent considered in ratemaking, for deferred taxes provided in excess of the current statutory tax rate and regulatory assets for deferred taxes provided at rates less than the current statutory rate.  Such tax-related regulatory assets and liabilities are reported at the revenue requirement level and amortized to income as the related temporary differences reverse, generally over the lives of the related properties.

Under FASB ASC Topic 740, an uncertain tax position represents our expected treatment of a tax position taken, or planned to be taken in the future, that has not been reflected in measuring income tax expense for financial reporting purposes.  The Company establishes reserves for uncertain tax positions based upon management's judgment as to the sustainability of these positions. These accounting estimates related to the uncertain tax position reserve require judgments to be made as to the sustainability of each uncertain tax position based on its technical merits. The Company believes its tax positions comply with applicable law and that it has adequately recorded reserves as required. However, to the extent the final tax outcome of these matters is different than the estimates recorded, the Company would then adjust its tax reserves or unrecognized tax benefits in the period that this information becomes known.  The Company has elected to recognize accrued interest (net of related tax benefits) and penalties related to uncertain tax positions as a component of its income tax expense.  The Company has accrued approximately $5,000 in penalties and interest for the three months ended March 31, 2020. The Company remains subject to examination by federal and state authorities for the tax years 2016 through 2019.

The Tax Reform Act of 1986 mandated that Advances and CIAC received subsequent to December 31, 1986, generally are taxable income.  The 1996 Tax Act provided an exclusion from taxable income for CIAC and Advances received after June 12, 1996 except for certain contributions for large services that are not included in rate base for rate-making purposes.  On December 22, 2017, the TCJA repealed the 1996 exclusion from gross income effective on the enactment date.

Investment tax credits were deferred through 1986 and are recognized as a reduction of deferred income tax expense over the estimated economic useful lives of the related assets.

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NOTE 11 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value.

Current Assets and Liabilities

For those current assets and liabilities that are considered financial instruments, the carrying amounts approximate fair value because of the short maturity of those instruments.

Long-term Financial Liabilities

All of Artesian Resources’ outstanding long-term debt as of March 31, 2020 and December 31, 2019was fixed-rate.  The fair value of the Company’s long-term debt is determined by discounting its future cash flows using current market interest rates on similar instruments with comparable maturities consistent with FASB ASC 825.  Under the fair value hierarchy, the fair value of the long-term debt in the table below is classified as Level 2 measurements.  Level 2 is valued using observable inputs other than quoted prices.  The fair values for long-term debt differ from the carrying values primarily due to interest rates that differ from the current market interest rates.  The carrying amount and fair value of Artesian Resources' long-term debt (including current portion) are shown below:

In thousands
	March 31, 2020			December 31, 2019
Carrying amount		$	145,352		$	145,862
Estimated fair value		$	164,083		$	157,710

The fair value of Advances for Construction cannot be reasonably estimated due to the inability to estimate accurately the timing and amounts of future refunds expected to be paid over the life of the contracts.  Refund payments are based on the water sales to new customers in the particular development constructed.  The fair value of Advances for Construction would be less than the carrying amount because these financial instruments are non-interest bearing.

NOTE 12 – RELATED PARTY TRANSACTIONS

Mr. Michael Houghton currently serves as a director through the remainder of the three year term class that expires at the Annual Meeting of the Class B Stock shareholders to be held in 2021 and until his respective successor shall be elected and qualified.  Mr. Houghton is a Partner in the law firm of Morris Nichols Arsht & Tunnell, or MNAT, in Wilmington, Delaware.  In the normal course of business, the Company utilizes the services of MNAT for various regulatory, real estate and public policy matters.  Approximately $119,000 and $40,000 was paid to MNAT during the three months ended March 31, 2020, and March 31, 2019, respectively, for legal and director related services.  As of March 31, 2020, the Company had a $19,000 accounts payable balance due to MNAT.

As set forth in the Charter of the Audit Committee of the Board, the Audit Committee is responsible for reviewing and, if appropriate, approving all related party transactions between us and any officer, any director, any person known to be the beneficial owner of more than 5% of any class of the Company's voting securities or any other related person that would potentially require disclosure.  In its review and approval of the related party transactions with MNAT, the Audit Committee considered the nature of the related person's interest in the transactions; the satisfactory performance of work contracted with the related party prior to the director election of Mr. Houghton; and the material terms of the transactions, including, without limitation, the amount and type of transactions, the importance of the transactions to the related person, the importance of the transactions to the Company and whether the transactions would impair the judgment of a director or officer to act in the best interest of the Company.  The Audit Committee approves only those related person transactions that are in, or are consistent with, the best interests of the Company and its stockholders.

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NOTE 13 - IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

In June 2016, the FASB issued new guidance on the measurement of credit losses on financial instruments, to provide financial statement users with more information about expected credit losses on financial instruments. The guidance revises the incurred loss impairment methodology to reflect current expected credit losses and requires consideration of a broader range of information to estimate credit losses.  The new standard is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. For the Company, this standard is primarily applicable to accounts receivable balances.  The company’s credit losses on accounts receivable is minimal since we mitigate our exposure by discontinuing services in the event of non-payment, however, due to the COVID-19 pandemic causing hardships for many utility customers, state government agencies issued executive orders requiring utility companies to take a number of steps to support their customers and communities, including prohibiting service disconnections for non-payment and prohibiting late fees.  The Company anticipates a longer receivable cycle and the need for increased reserves for bad debt compared to 2019.  The MDPSC issued an order authorizing utilities deferred regulatory treatment for incremental costs related to COVID-19, which includes increased bad debt expense.  The Company anticipates the DEPSC will issue a similar order.  Management is monitoring the situation and as of March 31, 2020, no significant adjustment has been made.

NOTE 14 - SUBSEQUENT EVENTS

In March 2020, the World Health Organization classified the COVID-19 outbreak as a pandemic. Subsequently on March 13, 2020, the President of the United States declared the COVID-19 outbreak a national emergency. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. Management is actively monitoring the situation and impacts on its operations, suppliers, industry, and workforce. The Company is following social distancing and remote work directives, however prolonged workforce disruptions may negatively impact performance of services or require use of emergency personnel.  The Company maintains essential utility services,  however a longer receivables cycle, need for increased reserves for bad debt, along with changes in revenue mix between commercial and residential are possible as a result of broader economic impacts of the COVID-19 outbreak.  Given the changing nature of the COVID-19 outbreak and the responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations.

On March 27, 2020, the United States Government enacted the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, which provides economic relief and stimulus to support the national economy during the COVID-19 epidemic.  This package included support for individuals, large corporations, small business, and health care entities, among other affected groups.  While the Company, and the utility industry broadly, were not direct beneficiaries of the stimulus, the Company continues to review the provisions of the CARES Act and assess the potential impact on the Company’s operations.

On April 28, 2020, Artesian Water entered into three financing agreements, or the Financing Agreements, with the Delaware Drinking Water State Revolving Fund, acting by and through the Delaware Department of Health & Social Services, Division of Public Health, a public agency of the state of Delaware, or the Department.  Under the Financing Agreements, the Department has agreed to advance to Artesian Water up to approximately $1.7 million, $1.0 million and $1.3 million, collectively, the Loans, to finance all or a portion of the costs to replace specific water transmission mains in service areas located in New Castle County, Delaware, collectively, the Projects.  In accordance with the Financing Agreements, Artesian Water will from time to time request funds under the Loans as it incurs costs in connection with the Projects.  The Company shall pay to the Department, on the principal amount drawn down and outstanding from the date drawn, interest at a rate of 0.6% per annum and an administrative fee at a rate of 0.6% per annum.

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ITEM 2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 specific and overall impacts of the COVID-19 global pandemic on our financial condition and results of operations, 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 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, our expectation of the timing of decisions by regulatory authorities, 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 Form10-K for the year ended December 31, 2019, and this Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, 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.  Additionally, many of these risks and uncertainties are currently elevated by and may or will continue to be elevated by the COVID-19 pandemic.  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, 2020

OVERVIEW

Our profitability is primarily attributable to the sale of water. Gross water sales composed 87.4% of total operating revenues for the three months ended March 31, 2020.  Our profitability is also attributed to the various contract operations, water, sewer and internal SLP Plans and other services we provide.  Water sales are subject to seasonal fluctuations, particularly during summer when water demand may vary with rainfall and temperature.  In the event temperatures during the typically warmer months are cooler than expected, or rainfall is greater than expected, the demand for water may decrease and our revenues may be adversely affected.  We believe the effects of weather are short term and do not materially affect the execution of our strategic initiatives. Our contract operations and other services provide a revenue stream that is not affected by changes in weather patterns.

While water sales are our primary source of revenues, we continue to seek growth opportunities to provide wastewater services in Delaware and the surrounding areas. We also continue to explore and develop relationships with developers and municipalities in order to increase revenues from contract water and wastewater operations, wastewater management services, and design, construction and engineering services. We plan to continue developing and expanding our contract operations and other services in a manner that complements our growth in water service to new customers. Our anticipated growth in these areas is subject to changes in residential and commercial construction, which may be affected by interest rates, inflation and general housing and economic market conditions.  We anticipate continued growth in our non-regulated division due to our water, sewer, and internal SLP Plans.

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COVID-19 Pandemic

The emergence of the coronavirus, or COVID-19, around the world, presents risks to the Company, not all of which the Company is able to fully evaluate or even to foresee at the current time.  While the COVID-19 pandemic did not materially adversely affect the Company’s financial results and business operations for the three months ended March 31, 2020, economic and health conditions in the United States and across most of the globe have changed rapidly since the end of the period.

The COVID-19 pandemic may affect the Company’s operations in future quarters.  The Company maintains essential utility services and is following social distancing and remote work directives, however prolonged workforce disruptions may negatively impact performance of services or require use of emergency personnel.  Due to the COVID-19 pandemic causing hardships for many utility customers, state government agencies issued executive orders requiring utility companies to take a number of steps to support their customers and communities, including prohibiting service disconnections for non-payment and prohibiting late fees.  As a result, the Company anticipates a longer receivable cycle, the need for increased reserves for bad debt, along with changes in revenue mix between commercial and residential.  The MDPSC issued an order authorizing utilities deferred regulatory treatment for incremental costs related to COVID-19.  The Company anticipates the DEPSC will issue a similar order.

Due to the above circumstances and as described generally in this Form 10-Q, the Company’s results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the full fiscal year.  Management cannot predict the full impact of the COVID-19 pandemic on the Company’s results of operations.  The ultimate extent of the effects of the COVID-19 pandemic on the Company is highly uncertain and will depend on future developments, and such effects could exist for an extended period of time even after the pandemic might end.

Water Division

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, 2020, we had approximately 88,000 metered water customers in Delaware, an increase of approximately 1,900 compared to March 31, 2019.  The number of metered water customers in Maryland totaled approximately 2,490 as of March 31, 2020, an increase of approximately 60 compared to March 31, 2019.  The number of metered water customers in Pennsylvania remained consistent compared to March 31, 2019. For the three months ended March 31, 2020, approximately 1.8 billion gallons of water were distributed in our Delaware systems and approximately 23.4 million gallons of water were distributed in our Maryland systems.

Wastewater Division

Artesian Wastewater owns wastewater collection and treatment infrastructure and began providing regulated wastewater services to customers in Delaware in July 2005.   Artesian Wastewater Maryland was incorporated on June 3, 2008 and is able to provide regulated wastewater services to customers in the State of Maryland.  It is not currently providing these services in Maryland.  Our residential and commercial wastewater customers are billed a flat monthly fee, which contributes to providing a revenue stream unaffected by weather.  The number of Delaware wastewater customers totaled approximately 2,550 as of March 31, 2020, an increase of approximately 350, or 15.9%, compared to March 31, 2019.  In addition, Artesian Wastewater entered into wastewater services agreements with Allen Harim Foods, LLC, or Allen Harim, a large industrial customer.  The wastewater services agreements with Allen Harim are discussed further in the “Strategic Direction” section below.

Non-Regulated Division

Artesian Utility provides contract water and wastewater operation services to private, municipal and governmental institutions.  Artesian Utility also offers three protection plans to customers, the WSLP Plan, the SSLP Plan, and the ISLP Plan.  SLP Plan customers are billed a flat monthly or quarterly rate, which contributes to providing a revenue stream unaffected by weather.  There has been consistent customer growth over the years.  As of March 31, 2020, approximately 20,500, or 24.3%, of our eligible water customers enrolled in the WSLP Plan, approximately 16,000, or 19.0%, of our eligible customers enrolled in the SSLP Plan, and approximately 7,200, or 8.6%, of our eligible customers enrolled in the ISLP Plan.  Approximately 1,890 non-utility customers enrolled in one of our three protection plans.

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Strategic Direction

Our strategy is to increase customer growth, revenues, earnings and dividends by expanding our water, wastewater and SLP Plan services across the Delmarva Peninsula.  We remain focused on providing superior service to our customers and continuously seek ways to improve our efficiency and performance.  By providing water and wastewater services, we believe we are positioned as the primary resource for developers and communities throughout the Delmarva Peninsula seeking to fill both needs simultaneously.  We believe we have a proven ability to acquire and integrate high growth, reputable entities, through which we have captured additional service territories that will serve as a base for future revenue.  We believe this experience presents a strong platform for further expansion and that our success to date also produces positive relationships and credibility with regulators, municipalities, developers and customers in both existing and prospective service areas.

In our regulated water division, our strategy is to focus on a wide spectrum of activities, which include identifying new and dependable sources of supply, developing the wells, treatment plants and delivery systems to supply water to customers and educating customers on the wise use of water.  Our strategy includes focused efforts to expand in new regions added to our Delaware service territory over the last 10 years.  We plan to expand our regulated water service area in the Cecil County designated growth corridor and to expand our business through the design, construction, operation, management and acquisition of additional water systems.  The expansion of our exclusive franchise areas elsewhere in Maryland and the award of contracts will similarly enhance our operations within the state.

On October 1, 2019, Artesian Water purchased utility assets from High Point Associates, L.P. and connected these assets to our public water system to serve the residents of High Point Park located in Kent County, Delaware consisting of approximately 400 customers.

On February 27, 2020, Artesian Water signed an agreement to purchase from the Town of Frankford, a Delaware municipality, or Frankford, substantially all of the operating assets of Frankford’s water system, including the right to provide water service to Frankford’s existing customers.  Frankford transferred to Artesian Water all of Frankford’s right, title and interest in and to all of the plant and equipment, associated real property, contracts and permits possessed by Frankford at closing related to the water system.  This transaction closed on April 2, 2020.  The total purchase price was $3.6 million.  At closing, approximately $0.4 million of the purchase price was used to pay off Frankford’s indebtedness specifically related to the water system.  The existing water system subject to the agreement serves approximately 360 customers.

We believe that Delaware's generally lower cost of living in the region, availability of development sites in relatively close proximity to the Atlantic Ocean in Sussex County, and attractive financing rates for construction and mortgages have resulted, and will continue to result, in increases to our customer base.  Delaware’s lower property and income tax rate make it an attractive region for new home development and retirement communities.  Substantial portions of Delaware currently are not served by a public water system, which could also assist in an increase to our customer base as systems are added.

In our regulated wastewater division, we foresee significant growth opportunities and will continue to seek strategic partnerships and relationships with developers and governmental agencies to complement existing agreements for the provision of wastewater service on the Delmarva Peninsula. Artesian Wastewater plans to utilize our larger regional wastewater facilities to expand service areas to new customers while transitioning our smaller treatment facilities into regional pump stations in order to gain additional efficiencies in the treatment and disposal of wastewater. We believe this will reduce operational costs at the smaller treatment facilities in the future because they will be converted from treatment and disposal plants to pump stations to assist with transitioning the flow of wastewater from one regional facility to another.

On September 27, 2016, Artesian Wastewater entered into a wastewater services agreement with Allen Harim for Artesian Wastewater to provide treatment and disposal services for sanitary wastewater discharged from Allen Harim’s properties located in Sussex County, Delaware upon completion of a pipeline to transfer the sanitary wastewater.  The pipeline was completed in the second quarter of 2017.   The transfer of sanitary wastewater began in the second quarter of 2019.  On January 27, 2017, Artesian Wastewater entered into a second wastewater agreement with Allen Harim for Artesian Wastewater to provide disposal services for approximately 1.5 mgd of treated industrial process wastewater upon completion of an approximately eight mile pipeline that will transfer the wastewater from Allen Harim’s properties to a 90 million gallon storage lagoon at Artesian’s Sussex Regional Recharge Facility.  We will use the reclaimed wastewater for spray irrigation on agricultural land in the area.  We received an operations permit in March 2020.  We expect to be operating this facility in the second quarter of 2020.

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The general need for increased capital investment in our water and wastewater systems is due to a combination of population growth, more protective water quality standards and aging infrastructure.  Our capital investment plan for the next three years includes projects for water treatment plant improvements and additions in both Delaware and Maryland and wastewater treatment plant improvements and expansion in Delaware.  Capital improvements are planned and budgeted to meet anticipated changes in regulations and needs for increased capacity related to projected growth.  The DEPSC and MDPSC have generally recognized the operating and capital costs associated with these improvements in setting water and wastewater rates for current customers and capacity charges for new customers.

In our non-regulated division, we continue pursuing opportunities to expand our contract operations.  Through Artesian Utility, we will seek to expand our contract design, engineering and construction services of water and wastewater facilities for developers, municipalities and other utilities.  We also anticipate continued growth due to our water, sewer and internal SLP Plans.  Artesian Development owns two nine-acre parcels of land, located in Sussex County, Delaware, which will allow for construction of a water treatment facility and wastewater treatment facility.  Artesian Storm Water was formed to expand contract work related to the design, installation, maintenance and repair services associated with existing or proposed storm water management systems in Delaware and the surrounding areas.

Inflation

We are affected by inflation, most notably by the continually increasing costs required to maintain, improve and expand our service capability.  The cumulative effect of inflation results in significantly higher facility costs compared to investments made 20 to 40 years ago, which must be recovered from future cash flows.

Results of Operations – Analysis of the Three Months Ended March 31, 2020 Compared to the Three Months Ended March 31, 2019.

Operating Revenues

Revenues totaled $19.9 million for the three months ended March 31, 2020, $0.5 million, or 2.7%, more than revenues for the three months ended March 31, 2019. Water sales revenue increased $0.5 million, or 2.7%, for the three months ended March 31, 2020 from the corresponding period in 2019, primarily due to an increase in DSIC revenue and consumption revenue.  The DSIC rate effective January 1, 2019 was 5.55%.  The DSIC rate effective January 1, 2020 was 7.50%.  We realized 87.4% of our total operating revenue for both the three months ended March 31, 2020 and March 31, 2019, respectively, from the sale of water.

Other utility operating revenue increased approximately $0.1 million, or 11.9%, for the three months ended March 31, 2020 compared to the three months ended March 31, 2019.  The increase is primarily due to an increase in wastewater revenue from customer growth and an increase in inspection fee revenue related to new development.

Non-utility operating revenue decreased approximately $0.1 million, or 5.7%, for the three months ended March 31, 2020 compared to the three months ended March 31, 2019.  The decrease is primarily due to a decrease in contract service revenue.

Operating Expenses

Operating expenses, excluding depreciation and income taxes, increased $0.1 million, or 1.1%, for the three months ended March 31, 2020, compared to the same period in 2019.  The components of the change in operating expenses primarily include an increase in utility operating expenses of $0.1 million.

Utility operating expenses increased $0.1 million, or 1.2%, for the three months ended March 31, 2020 compared to the three months ended March 31, 2019, primarily due to an increase in payroll and employee benefit costs, related to an increase in overall wages and an increase in employee benefits costs.  This increase is partially offset by a decrease in repair and maintenance costs, related to a decrease in the painting of elevated water storage tanks under contract.

The ratio of operating expense, excluding depreciation and income taxes, to total revenue was 56.9% for the three months ended March 31, 2020, compared to 57.8% for the three months ended March 31, 2019.

Federal and state income tax expense increased $0.2 million, or 15.2%, primarily due to increased pre-tax book income in 2020 compared to 2019.

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Other Income, Net

Other income increased $0.5 million, primarily due to an increase in miscellaneous income of $0.3 million, related to an increase in the annual patronage refund from CoBank, ACB.  The refund is calculated based on 0.8% of the average loan balance outstanding.  In addition, in 2020 CoBank, ACB, issued a one-time additional patronage distribution based on 0.1% of the average loan balance outstanding.  Allowance for funds used during construction, or AFUDC, increased $0.2 million, as a result of higher long-term construction activity subject to AFUDC for the three months ended March 31, 2020 compared to the same period in 2019.

Interest Charges

Interest expense increased $0.2 million, primarily due to an increase in long-term debt interest related to the Series V First Mortgage Bond issued on December 17, 2019.  This increase is partially offset by a decrease in short-term debt interest, primarily related to lower short-term borrowing levels in 2020.

Net Income

Our net income applicable to common stock increased $0.5 million.  Operating revenues increased $0.5 million and other income, net increased $0.5 million, while operating expenses increased $0.3 million and interest expense increased $0.2 million.

LIQUIDITY AND CAPITAL RESOURCES

Overview

Our primary sources of liquidity for the three months ended March 31, 2020 were $7.1 million of cash provided by operating activities, $3.2 million in net contributions and advances from developers, $1.1 million from lines of credit borrowings and $0.3 million in net proceeds from the issuance of common stock.  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.

Investment in Plant and Systems

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 2020 were $9.2 million compared to $9.1 million during the same period in 2019.  During the first three months of 2020, we invested approximately $2.0 million for our rehabilitation program for transmission and distribution facilities by replacing aging or deteriorating mains and for new transmission and distribution facilities.  We invested $1.9 million to enhance or improve existing treatment facilities and replace aging wells and pumping equipment to better serve our customers.  We invested $0.7 million for equipment purchases, computer hardware and software upgrades and transportation equipment.  Developers financed $1.1 million for the installation of water mains and hydrants in 2020 compared to $0.8 million in 2019.  We invested $0.5 million to upgrade and automate our meter reading equipment.  We invested approximately $1.7 million in mandatory utility plant expenditures due to governmental highway projects, which required the relocation of water service mains in addition to facility improvements and upgrades. An additional $1.3 million was invested in wastewater projects in Delaware.

We depend on the availability of capital for expansion, construction and maintenance.  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, including short-term borrowings under our revolving credit agreements discussed below. We expect to fund our activities for the next twelve months using our available cash balances, bank credit lines, projected cash generated from operations, state revolving fund loans and potential capital market financing if necessary.  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.

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Lines of Credit and Long Term Debt

At March 31, 2020, 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, 2020, there was $38.9 million of available funds under this line of credit.  The interest rate for borrowings under this line is the London Interbank Offered Rate, or LIBOR, plus 1.00%.  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 23, 2020 or any date on which Citizens demands payment. The Company expects to renew this line of credit.

At March 31, 2020, 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, 2020, there was $12.5 million of available funds under this line of credit.  The interest rate for borrowings under this line allows the Company to select either LIBOR plus 1.50% or a weekly variable rate established by CoBank; the Company has historically used the weekly variable interest rate.  The term of this line of credit expires on July 20, 2020. Artesian Water expects to renew this line of credit.

Line of Credit Commitments	Commitment Due by Period
In thousands	Less than 1 Year			1-3 Years			4-5 Years			Over 5 Years
Lines of Credit		$	8,638		$	--		$	--		$	--

Contractual Obligations	Payments Due by Period
In thousands	Less than 1 Year		1-3 Years		4-5 Years		After 5 Years		Total
First mortgage bonds (principal and interest)	$	6,650	$	13,218	$	13,115	$	194,734	$	227,717
State revolving fund loans (principal and interest)		1,002		838		674		4,042		6,556
Promissory note (principal and interest)		960		1,921		1,921		13,257		18,059
Operating leases		42		65		46		1,319		1,472
Operating agreements		72		88		77		896		1,133
Unconditional purchase obligations		3,881		2,995		52		---		6,928
Total contractual cash obligations	$	12,607	$	19,125	$	15,885	$	214,248	$	261,865

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. In addition, we are required to abide by certain financial covenants and ratios.  As of March 31, 2020, 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.  One first mortgage bond is subject to redemption in a principal amount equal to $150,000 plus interest per calendar quarter.  The state revolving fund loan obligation has an amortizing mortgage payment payable over a 20-year period.  The promissory note obligation has an amortizing payment payable over a 20-year period.  The first mortgage bonds, the state revolving fund loans and the promissory note have certain financial covenant provisions, the violation of which could result in default and require the obligation to be immediately repaid, including all interest.  We have not experienced conditions that would result in our default under these agreements.

On December 17, 2019, Artesian Water entered into a Bond Purchase Agreement relating to the issue and sale by Artesian Water to CoBank of a $30 million principal amount First Mortgage Bond, Series V, or the Series V Bond, due October 31, 2049, or the Maturity Date.  The Series V Bond was issued pursuant to Artesian Water’s Indenture of Mortgage dated as of July 1, 1961, as amended and supplemented by supplemental indentures, including the Twenty-Fourth Supplemental Indenture dated as of December 17, 2019 from Artesian Water to Wilmington Trust Company, as Trustee.  The Indenture is a first mortgage lien against substantially all of Artesian Water’s utility plant.  The proceeds from the sale of the Bond were used to pay down outstanding lines of credit of the Company and a loan payable to Artesian Resources.  The DEPSC approved the issuance of the Series V Bond on November 14, 2019.

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The Series V Bond carries an annual interest rate of 4.42% through but excluding the Maturity Date. Interest is payable on January 30th, April 30th, July 30th and October 30th in each year and on the Maturity Date, beginning January 30, 2020 until Artesian Water’s obligation with respect to the payment of principal, premium (if any) and interest shall be discharged.  Overdue payments shall bear interest as provided in the Twenty-Fourth Supplemental Indenture.  The term of the Series V Bond also includes certain limitations on Artesian Water’s indebtedness.

On April 28, 2020, Artesian Water entered into three financing agreements, or the Financing Agreements, with the Delaware Drinking Water State Revolving Fund, acting by and through the Delaware Department of Health & Social Services, Division of Public Health, a public agency of the state of Delaware, or the Department.  Under the Financing Agreements, the Department has agreed to advance to Artesian Water up to approximately $1.7 million, $1.0 million and $1.3 million, collectively, the Loans, to finance all or a portion of the costs to replace specific water transmission mains in service areas located in New Castle County, Delaware, collectively, the Projects.  In accordance with the Financing Agreements, Artesian Water will from time to time request funds under the Loans as it incurs costs in connection with the Projects.  The Company shall pay to the Department, on the principal amount drawn down and outstanding from the date drawn, interest at a rate of 0.6% per annum and an administrative fee at the rate of 0.6% per annum.

In order to control purchased power costs, in August 2018 Artesian Water entered into an electric supply contract with MidAmerican. The fixed rate for MidAmerican was lowered 10.8% starting in September 2018.  The previous contract term was in effect since October 2015.  The current fixed price contract is effective from September 2018 through May 2022. In August 2018, Artesian Water Maryland entered into an electric supply agreement with Constellation NewEnergy.  The fixed rate for Constellation NewEnergy was lowered 4.9% starting in May 2019.  The previous contract term was in effect since December 2015.  The current fixed price contract is effective from May 2019 through May 2022.

Payments for unconditional purchase obligations reflect minimum water purchase obligations based on rates that are subject to change under our interconnection agreement with the Chester Water Authority, which expires December 31, 2021 and minimum water purchase obligations based on a contract rate under our interconnection agreement with the Town of North East, which expires June 26, 2024.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, including any arrangements with any structured finance, special purpose or variable interest entities.

Critical Accounting Assumptions, Estimates and Policies; Recent Accounting Pronouncements

This discussion and analysis of our financial condition and results of operations is based on the accounting policies used and disclosed in our 2019 consolidated financial statements and accompanying notes that were prepared in accordance with accounting principles generally accepted in the United States of America and included as part of our annual report on Form 10-K for the year ended December 31, 2019.  The preparation of those financial statements required management to make assumptions and estimates that affected the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements as well as the reported amounts of revenues and expenses during the reporting periods.  Actual amounts or results could differ from those based on such assumptions and estimates.

Our critical accounting policies are described in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our annual report on Form 10-K for the year ended December 31, 2019.  There have been no changes in our critical accounting policies.  Our significant accounting policies are described in our notes to the 2019 consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2019.

Information concerning our implementation and the impact of recent accounting pronouncements issued by the FASB is included in the notes to our 2019 consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2019 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 2020 that had a material impact on our financial condition, liquidity or results of operations.

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ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is subject to the risk of fluctuating interest rates in the normal course of business.  Our policy is to manage interest rates through the use of fixed rate long-term debt and, to a lesser extent, short-term debt.  The Company's exposure to interest rate risk related to existing fixed rate, long-term debt is due to the term of the majority of our First Mortgage Bonds and the term of the promissory note, which have final maturity dates ranging from 2028 to 2038, and interest rates ranging from 4.24% to 5.96%, which exposes the Company to interest rate risk as interest rates may drop below the existing fixed rate of the long-term debt prior to such debt’s maturity.  In addition, the Company has interest rate exposure on $60 million of variable rate lines of credit with two banks, under which the interim bank loans payable at March 31, 2020 were approximately $8.6 million.  An increase in interest rates will result in an increase in the cost of borrowing on this variable rate line.  We are also exposed to market risk associated with changes in commodity prices.  Our risks associated with price increases in chemicals, electricity and other commodities are mitigated by our ability to recover our costs through rate increases to our customers.  We have also sought to mitigate future significant electric price increases by signing multi-year supply contracts at fixed prices.

ITEM 4 – CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were designed to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (1) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (2) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.  In addition, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective to achieve the foregoing objectives.

(b) Change in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

Periodically, we are involved in other proceedings or litigation arising in the ordinary course of business.  We do not believe that the ultimate resolution of these matters will materially affect our business, financial position or results of operations.  However, we cannot ensure that we will prevail in any litigation and, regardless of the outcome, may incur significant litigation expense and may have significant diversion of management attention.

ITEM 1A – RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2019, which could materially affect our business, financial condition or future results. There have been no material changes to the risk factors described in such Annual Report on Form 10-K, except as follows:

Our business, results of operations, financial condition, cash flows and stock price may be adversely affected by pandemics, epidemics or other public health emergencies, such as the recent outbreak of the coronavirus, or COVID-19.

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Our business, results of operations, financial condition, cash flows and stock price may be adversely affected by pandemics, epidemics or other public health emergencies, such as the recent outbreak of COVID-19.  In March 2020, the World Health Organization characterized COVID-19 as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency.  The outbreak has resulted in governments around the world implementing increasingly stringent measures to help control the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business curtailments, school closures, and other measures.

We are considered an essential utility service company, as defined by the U.S. Department of Homeland Security.  Although we have continued to operate our business to date consistent with federal guidelines and state and local orders, the outbreak of COVID-19 and any preventive or protective actions taken by governmental authorities may have an adverse effect on our operations.  The extent to which COVID-19 may adversely impact our business depends on future developments, which are highly uncertain and unpredictable, depending upon the severity and duration of the outbreak and the effectiveness of actions taken to contain or mitigate its effects.  Any resulting financial impact cannot be estimated reasonably at this time, but results of operations, financial condition and cash flows could be adversely impacted.  State government agencies issued executive orders requiring utility companies to take a number of steps to support their customers and communities, including prohibiting service disconnections for non-payment and prohibiting late fees.  As a result, the Company anticipates a longer receivable cycle, the need for increased reserves for bad debt, along with changes in revenue mix between commercial and residential.  Additionally, concerns over the economic impact of COVID-19 have caused extreme volatility in financial and other capital markets, which has and may continue to adversely impact our stock price.  To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in our 2019 Annual Report on Form 10-K, such as those relating to our financial performance.

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4 – MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 – OTHER INFORMATION

Not applicable.

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ITEM 6 - EXHIBITS

Exhibit No.	Description
10.1	Asset Purchase Agreement, dated February 27, 2020 by and among Artesian Water Company, Inc., a Delaware corporation, and the Town of Frankford, a Delaware municipality.  Incorporated by reference to Exhibit 10.1 filed with Company’s Form 8-K filed on March 4, 2020.
10.2	Financing Agreement, dated as of April 28, 2020, between Artesian Water Company, Inc. and Delaware Drinking Water State Revolving Fund, acting by and through the Delaware Department of Health & Social Services, Division of Public Health.  Incorporated by reference to Exhibit 10.1 filed with the Company’s Form 8-K filed on April 30, 2020.
10.3	General Obligation Note (New Castle County Water Main Transmission Replacements Projects), Series 2020A-SRF, dated as of April 28, 2020, issued by Artesian Water Company, Inc. in favor of Delaware Drinking Water State Revolving Fund, acting by and through the Delaware Department of Health & Social Services, Division of Public Health.  Incorporated by reference to Exhibit 10.2 filed with the Company’s Form 8-K filed on April 30, 2020.
10.4	Financing Agreement, dated as of April 28, 2020, between Artesian Water Company, Inc. and Delaware Drinking Water State Revolving Fund, acting by and through the Delaware Department of Health & Social Services, Division of Public Health.  Incorporated by reference to Exhibit 10.3 filed with the Company’s Form 8-K filed on April 30, 2020.
10.5	General Obligation Note (New Castle County Water Main Transmission Replacements Projects), Series 2020B-SRF, dated as of April 28, 2020, issued by Artesian Water Company, Inc. in favor of Delaware Drinking Water State Revolving Fund, acting by and through the Delaware Department of Health & Social Services, Division of Public Health.  Incorporated by reference to Exhibit 10.4 filed with the Company’s Form 8-K filed on April 30, 2020.
10.6	Financing Agreement, dated as of April 28, 2020, between Artesian Water Company, Inc. and Delaware Drinking Water State Revolving Fund, acting by and through the Delaware Department of Health & Social Services, Division of Public Health.  Incorporated by reference to Exhibit 10.5 filed with the Company’s Form 8-K filed on April 30, 2020.
10.7	General Obligation Note (New Castle County Water Main Transmission Replacements Projects), Series 2020C-SRF, dated as of April 28, 2020, issued by Artesian Water Company, Inc. in favor of Delaware Drinking Water State Revolving Fund, acting by and through the Delaware Department of Health & Social Services, Division of Public Health.  Incorporated by reference to Exhibit 10.6 filed with the Company’s Form 8-K filed on April 30, 2020.
31.1	Certification of Chief Executive Officer of the Registrant required by Rule 13a–14(a) under the Securities Exchange Act of 1934, as amended.*
31.2	Certification of Chief Financial Officer of the Registrant required by Rule 13a–14(a) under the Securities Exchange Act of 1934, as amended.*
32	Certification of Chief Executive Officer and Chief Financial Officer required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. Section 1350).**
101	The following financial statements from Artesian Resources Corporation's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 formatted in eXtensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statements of Cash Flows; and (iv) the Notes to the Condensed Consolidated Financial Statements.*

*   Filed herewith

** Furnished herewith

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EX-31.1

Exhibit 31.1
Certification of Chief Executive Officer of Artesian Resources Corporation required by Rule 13a – 14 (a) under the Securities Act of 1934, as amended
I, Dian C. Taylor, certify that:
1.	I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2020 of Artesian Resources Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)		Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)		Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date:  May 7, 2020			/s/ DIAN C. TAYLOR
			Dian C. Taylor
			Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2
Certification of Chief Financial Officer of Artesian Resources Corporation required by Rule 13a – 14 (a) under the Securities Act of 1934, as amended
I, David B. Spacht, certify that:
1.	I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2020 of Artesian Resources Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)		Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)		Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date:  May 7, 2020			/s/ DAVID B. SPACHT
			David B. Spacht
			Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32

Exhibit 32
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350
I, Dian C. Taylor, Chief Executive Officer, and David B. Spacht, Chief Financial Officer, of Artesian Resources Corporation, a Delaware corporation (the "Company"), hereby certify, pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on our knowledge:
(1)	The Company's Quarterly Report on Form 10-Q for the period ended March 31, 2020 (the " Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 USC Section 78m(a) or Section 78o(d)), as amended; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition of the Company at the end of the period covered by the Report and results of operations of the Company for the period covered by the Report.
Date:  May 7, 2020

CHIEF EXECUTIVE OFFICER:	CHIEF FINANCIAL OFFICER:
/s/ DIAN C. TAYLOR	/s/ DAVID B. SPACHT
Dian C. Taylor	David B. Spacht
These certifications accompany the Report to which they relate, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.

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SUBSEQUENT EVENTS (Details) - Subsequent Event [Member] - Artesian Water [Member] $ in Millions	Apr. 28, 2020 USD ($) Agreement
Subsequent Event [Abstract]
Number of financing agreements | Agreement	3
Interest rate percentage	0.60%
Administrative fee percentage	0.60%
Finance Agreement One [Member]
Subsequent Event [Abstract]
Financial agreement amount	$ 1.7
Finance Agreement Two [Member]
Subsequent Event [Abstract]
Financial agreement amount	1.0
Finance Agreement Three [Member]
Subsequent Event [Abstract]
Financial agreement amount	$ 1.3

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REVENUE RECOGNITION (Tables)

3 Months Ended

Mar. 31, 2020

REVENUE RECOGNITION [Abstract]

Disaggregation of Revenues

Table of Contents

Disaggregated Revenues

The following table shows the Company’s revenues disaggregated by service type; all revenues are generated within a similar geographical location:

(in thousands)	Three months ended March 31, 2020		Three months ended March 31, 2019
Tariff Revenue
Consumption charges	$	10,160	$	10,393
Fixed fees		6,737		6,648
Service charges		147		177
DSIC		1,152		888
Industrial wastewater services		8		–
Revenue reserved for refund –           TCJA impact		–		(422	)
Total Tariff Revenue	$	18,204	$	17,684
Non-Tariff Revenue
Service line protection plans	$	1,088	$	1,050
Contract operations		216		328
Inspection fees		102		23
Total Non-Tariff Revenue	$	1,406	$	1,401
Other Operating Revenue      not in scope of ASC 606	$	291	$	301
Total Operating Revenue	$	19,901	$	19,386

Contract Assets and Contract Liabilities

Our contract assets and liabilities consist of the following:

(in thousands)	March 31, 2020		December 31, 2019
Contract Assets – Tariff	$	2,146	$	2,146
Deferred Revenue
Deferred Revenue – Tariff	$	979	$	1,050
Deferred Revenue – Non-Tariff		221		251
Total Deferred Revenue	$	1,200	$	1,301

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REGULATORY LIABILITIES (Tables)

3 Months Ended

Mar. 31, 2020

REGULATORY LIABILITIES [Abstract]

Regulatory Liabilities

Regulatory liabilities comprise:
	(in thousands)
	March 31, 2020			December 31, 2019
Utility plant retirement cost obligation		$	216		$	247
Deferred income taxes (related to TCJA)			21,888			21,999
		$	22,104		$	22,246

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REGULATORY LIABILITIES (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2018	Dec. 31, 2019	Jan. 31, 2019
REGULATORY LIABILITIES [Abstract]
Contributions to postretirement benefit plan	$ 5,700
Federal corporate tax rate	21.00%	34.00%
Decrease in the net deferred income tax liability	$ 24,300,000
Regulatory Liabilities [Abstract]
Regulatory liabilities	$ 22,104,000	$ 22,800,000	$ 22,246,000
DEPSC [Member]
Regulatory Liabilities [Abstract]
Regulatory liabilities				$ 22,200,000
Regulatory liabilities, amortization period	49 years 6 months
MDPSC [Member]
Regulatory Liabilities [Abstract]
Regulatory liabilities	$ 600,000
Utility Plant Retirement Cost Obligation [Member]
Regulatory Liabilities [Abstract]
Regulatory liabilities	216,000		247,000
Deferred Income Taxes [Member]
Regulatory Liabilities [Abstract]
Regulatory liabilities	$ 21,888,000		$ 21,999,000

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REVENUE RECOGNITION, Contract Assets and Contract Liabilities (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Contract with Customer, Asset and Liability [Abstract]
Total Deferred Revenue	$ 1,200	$ 1,301
Tariff Revenue [Member]
Contract with Customer, Asset and Liability [Abstract]
Contract Assets	2,146	2,146
Total Deferred Revenue	979	1,050
Tariff Deferred Revenue	1,000
Non-Tariff Revenue [Member]
Contract with Customer, Asset and Liability [Abstract]
Total Deferred Revenue	221	$ 251
Tariff Deferred Revenue	$ 200

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REVENUE RECOGNITION

3 Months Ended

Mar. 31, 2020

REVENUE RECOGNITION [Abstract]

REVENUE RECOGNITION

Table of Contents

NOTE 3 – REVENUE RECOGNITION

Background

Artesian’s operating revenues are primarily attributable to contract services based upon tariff rates approved by the Delaware Public Service Commission, or DEPSC, the Maryland Public Service Commission, or MDPSC, and the Pennsylvania Public Utility Commission, or PAPUC.  Tariff contract service revenues consist of water consumption, industrial wastewater services, fixed fees for water and wastewater services including customer and fire protection fees, service charges and Distribution System Improvement Charges, or DSIC, billed to customers at rates outlined in our tariffs that represent stand-alone selling prices.  Our non-tariff contract revenues consist of Service Line Protection Plan, or SLP Plan, fees, water and wastewater contract operations and wastewater inspection fees.  Other operating revenue primarily consists of developer guarantee contributions for wastewater and rental income for antenna contracts.

Tariff Contract Revenues

Artesian generates revenue from the sale of water to customers in Delaware, Cecil County, Maryland, and Southern Chester County, Pennsylvania once a customer requests service in our territory.  We recognize water consumption revenue at tariff rates on a cycle basis for the volume of water transferred to customers based upon meter readings for actual gallons of water consumed as well as unbilled amounts for estimated usage from the date of the last meter reading to the end of the accounting period.  As actual usage amounts are known based on recurring meter readings, adjustments are made to the unbilled estimates in the next billing cycle based on the actual results.  Estimates are made on an individual customer basis, based on one of three methods: the previous year’s consumption in the same period, the previous billing period’s consumption, or averaging. While actual usage for individual customers may differ materially from the estimate based on management judgements described above, we believe the overall total estimate of consumption and revenue for the fiscal period will not differ materially from actual billed consumption.  The majority of our water customers are billed for water consumed on a monthly basis, while the remaining customers are billed on a quarterly basis.  As a result, we record unbilled operating revenue (contract asset) for any estimated usage through the end of the accounting period that will be billed in the next monthly or quarterly billing cycle.

Artesian generates revenue from industrial wastewater services provided to a customer in Sussex County, Delaware.  We recognize industrial wastewater service revenue at a contract rate on a monthly basis for the volume of wastewater transferred to Artesian’s wastewater facilities based upon meter readings for actual gallons of wastewater transferred.  These services are invoiced at the end of every month based on the actual meter readings for that month, and therefore there is no contract asset or liability associated with this revenue.

Artesian generates fixed fee revenue for water and wastewater services provided to customers once a customer requests service in our territory.  Our wastewater territory is located in Sussex County, Delaware.  We recognize revenue from these services on a ratable basis over time as the customer simultaneously receives and consumes all the benefits of the Company remaining ready to provide them water and wastewater service.  These contract services are billed in advance at tariff rates on a monthly, quarterly or semi-annual basis.  As a result, we record deferred revenue (contract liability) and accounts receivable for any amounts for which we have a right to invoice but for which services have not been provided.  This deferred revenue is netted with unbilled operating revenue on the Condensed Consolidated Balance Sheet.

Artesian generates service charges primarily from non-payment fees, such as water shut off and reconnection fees and finance charges.  These fees are billed and recognized as revenue at the point in time when our tariffs indicate the Company has the right to payment such as days past due have been reached or shut-offs and reconnections have been performed.  There is no contract asset or liability associated with these fees.

Artesian generates revenue from DSIC, which are surcharges applied to water customer tariff rates in Delaware related to specific types of water distribution system improvements.  This rate is calculated on a semi-annual basis based on an approved projected revenue requirement over the following six-month period.  This rate is adjusted up or down at the next DSIC filing to account for any differences between actual earned revenue and the projected revenue requirement.  Since DSIC revenue is a surcharge applied to tariff rates, we recognize DSIC revenue based on the same guidelines as noted above depending on whether the surcharge was applied to consumption revenue or fixed fee revenue.

Table of Contents

The DEPSC required Delaware utilities to determine the impact that the Tax Cuts and Jobs Act, or TCJA, had on its customers and potential rate relief due to customers.  The reduction in corporate income tax expense resulting from the TCJA was passed through to customers in the form of reduced tariff rates as approved by the DEPSC on January 31, 2019.  Approximately $3.8 million was refunded to customers during the second quarter of 2019.  This amount was previously held in reserve (refund liability) and was not reflected in income.

Accounts receivable related to tariff contract revenues are typically due within 25 days of invoicing.  An allowance for doubtful accounts is calculated as a percentage of total associated revenues based upon historical trends and adjusted for current conditions.  We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related allowance for doubtful accounts and associated bad debt expense has not been significant.  However, due to the coronavirus, or COVID-19, pandemic causing hardships for many utility customers, state government agencies issued executive orders requiring utility companies to take a number of steps to support their customers and communities, including prohibiting service disconnections for non-payment and prohibiting late fees.  The Company anticipates a longer receivable cycle and the need for increased reserves for bad debt compared to 2019.  The MDPSC issued an order authorizing utilities deferred regulatory treatment for incremental costs related to COVID-19, which includes increased bad debt expense.  The Company anticipates the DEPSC will issue a similar order.  Management is monitoring the situation and as of March 31, 2020, no significant adjustment has been made.

Non-tariff Contract Revenues

Artesian generates SLP Plan revenue once a customer requests service to cover all parts, materials and labor required to repair or replace leaking water service lines, leaking or clogged sewer lines, or water and wastewater lines within the customers’ residences, up to an annual limit.  We recognize revenue from these services on a ratable basis over time as the customer simultaneously receives and consumes all the benefits of having service line protection services.  These contract services are billed in advance on a monthly or quarterly basis.  As a result, we record deferred revenue (contract liability) and accounts receivable for any amounts for which we have a right to invoice but for which services have not been provided.  Accounts receivable from SLP Plan customers are typically due within 25 days of invoicing.  An allowance for doubtful accounts is calculated as a percentage of total SLP Plan contract revenue.  We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related allowance for doubtful accounts and associated bad debt expense has not been significant.

Artesian generates contract operation revenue from water and wastewater operation services provided to customers.  We recognize revenue from these operation contracts, which consist primarily of monthly operation and maintenance services over time as customers receive and consume the benefits of such services performed. These services are invoiced in advance at the beginning of every month and are typically due within 30 days, and therefore there is no contract asset or liability associated with these revenues.  An allowance for doubtful accounts is provided based on a periodic analysis of individual account balances, including an evaluation of days outstanding, payment history, recent payment trends, and our assessment of our customers’ creditworthiness.  The related allowance for doubtful accounts and associated bad debt expense has not been significant.

Artesian generates inspection fee revenue for inspection services related to onsite wastewater collection systems installed by developers of new communities.  These fees are paid by developers in advance when a service is requested for a new phase of a development.  Inspection fee revenue is recognized on a per lot basis once the inspection of the infrastructure that serves each lot is completed.  As a result, we record deferred revenue (contract liability) for any amounts related to infrastructure not yet inspected.  There are no accounts receivable, allowance for doubtful accounts or bad debt expense associated with inspection fee contracts.

Sales Tax

The majority of Artesian’s revenues are earned within the State of Delaware, where there is no sales tax.  Revenues earned in the State of Maryland and the Commonwealth of Pennsylvania are related primarily to the sale of water by a public water utility and are exempt from sales tax.  Therefore, no sales tax is collected on revenues.

Table of Contents

Disaggregated Revenues

The following table shows the Company’s revenues disaggregated by service type; all revenues are generated within a similar geographical location:

(in thousands)	Three months ended March 31, 2020		Three months ended March 31, 2019
Tariff Revenue
Consumption charges	$	10,160	$	10,393
Fixed fees		6,737		6,648
Service charges		147		177
DSIC		1,152		888
Industrial wastewater services		8		–
Revenue reserved for refund –           TCJA impact		–		(422	)
Total Tariff Revenue	$	18,204	$	17,684
Non-Tariff Revenue
Service line protection plans	$	1,088	$	1,050
Contract operations		216		328
Inspection fees		102		23
Total Non-Tariff Revenue	$	1,406	$	1,401
Other Operating Revenue      not in scope of ASC 606	$	291	$	301
Total Operating Revenue	$	19,901	$	19,386

Contract Assets and Contract Liabilities

Our contract assets and liabilities consist of the following:

(in thousands)	March 31, 2020		December 31, 2019
Contract Assets – Tariff	$	2,146	$	2,146
Deferred Revenue
Deferred Revenue – Tariff	$	979	$	1,050
Deferred Revenue – Non-Tariff		221		251
Total Deferred Revenue	$	1,200	$	1,301

For the three months ended March 31, 2020, the Company recognized revenue of $1.0 million from amounts that were included in Deferred Revenue – Tariff at the beginning of the year and revenue of $0.2 million from amounts that were included in Deferred Revenue – Non- Tariff at the beginning of the year.

The increases (decreases) of Accounts Receivable, Contract Assets and Deferred Revenue were primarily due to normal timing differences between our performance and customer payments.

Remaining Performance Obligations

As of March 31, 2020 and December 31, 2019, Deferred Revenue – Tariff is recorded net of contract assets within Unbilled operating revenues and represents our remaining performance obligations for our fixed fee water and wastewater services, all of which are expected to be satisfied and associated revenue recognized in the next three months.

As of March 31, 2020 and December 31, 2019, Deferred Revenue – Non-Tariff is recorded within Other current liabilities and represents our remaining performance obligations for our SLP Plan services and wastewater inspections, which are expected to be satisfied and associated revenue recognized within the next three months and one year for the SLP Plan revenue and inspection fee revenue, respectively.

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands		Common Stock [Member] Common Shares Class A Non-Voting [Member]		Common Stock [Member] Common Shares Class B Voting [Member]		Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Balance at Dec. 31, 2018		$ 8,368		$ 882		$ 100,639	$ 43,362	$ 153,251
Balance (in shares) at Dec. 31, 2018		8,368	[1],[2],[3]	882	[4]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income		$ 0		$ 0		0	3,590	3,590
Cash dividends declared
Common stock		0		0		0	(2,241)	(2,241)
Issuance of common stock
Dividend reinvestment plan		$ 2		$ 0		85	0	87
Dividend reinvestment plan (in shares)		2	[1],[2],[3]	0	[4]
Employee stock options and awards	[3]	$ 14		$ 0		263	0	277
Employee stock options and awards (in shares)	[3]	14	[1],[2]	0	[4]
Employee Retirement Plan	[1]	$ 2		$ 0		76	0	78
Employee Retirement Plan (in shares)	[1]	2	[2],[3]	0	[4]
Balance at Mar. 31, 2019		$ 8,386		$ 882		101,063	44,711	155,042
Balance (in shares) at Mar. 31, 2019		8,386	[1],[2],[3]	882	[4]
Balance at Dec. 31, 2019		$ 8,410		$ 882		101,811	49,165	160,268
Balance (in shares) at Dec. 31, 2019		8,410	[1],[2],[3]	882	[4]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income		$ 0		$ 0		0	4,074	4,074
Cash dividends declared
Common stock		0		0		0	(2,319)	(2,319)
Issuance of common stock
Dividend reinvestment plan		$ 3		$ 0		105	0	108
Dividend reinvestment plan (in shares)		3	[1],[2],[3]	0	[4]
Employee stock options and awards	[3]	$ 5		$ 0		129	0	134
Employee stock options and awards (in shares)	[3]	5	[1],[2]	0	[4]
Employee Retirement Plan	[1]	$ 2		$ 0		87	0	89
Employee Retirement Plan (in shares)	[1]	2	[2],[3]	0	[4]
Balance at Mar. 31, 2020		$ 8,420		$ 882		$ 102,132	$ 50,920	$ 162,354
Balance (in shares) at Mar. 31, 2020		8,420	[1],[2],[3]	882	[4]

[1] Artesian Resources Corporation registered 500,000 shares of Class A Common Stock available for purchase through the Artesian Retirement Plan and the Artesian Supplemental Retirement Plan.

[2] At March 31, 2020 and March 31, 2019, Class A Common Stock had 15,000,000 shares authorized. For the same periods, shares issued, inclusive of treasury shares, were 8,432,220 and 8,393,208, respectively.

[3] Under the Equity Compensation Plan, effective December 9, 2015, Artesian Resources Corporation authorized up to 331,500 shares of Class A Common Stock for issuance of grants in forms of stock options, stock units, dividend equivalents and other stock-based awards, subject to adjustment in certain circumstances as discussed in the Plan. Includes stock compensation expense for March 31, 2020 and March 31, 2019, see Note 5-Stock Compensation Plans.

[4] At March 31, 2020 and March 31, 2019, Class B Common Stock had 1,040,000 shares authorized and 881,452 shares issued.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
ASSETS
Utility plant, at original cost (less accumulated depreciation - 2020 - $139,121; 2019 - $136,588)	$ 537,190	$ 530,721
Current assets
Cash and cash equivalents	330	596
Accounts receivable (less allowance for doubtful accounts - 2020 - $280; 2019 - $264)	6,734	6,913
Income tax receivable	0	19
Unbilled operating revenues	1,290	1,211
Materials and supplies	1,322	1,264
Prepaid property taxes	976	1,954
Prepaid expenses and other	2,027	2,250
Total current assets	12,679	14,207
Other assets
Non-utility property (less accumulated depreciation - 2020 - $809; 2019 - $790)	3,793	3,812
Other deferred assets	4,666	4,257
Operating lease right of use asset	474	480
Total other assets	8,933	8,549
Regulatory assets, net	6,785	6,891
Total Assets	565,587	560,368
Stockholders' equity
Common stock	9,302	9,292
Preferred stock	0	0
Additional paid-in capital	102,132	101,811
Retained earnings	50,920	49,165
Total stockholders' equity	162,354	160,268
Long-term debt, net of current portion	143,563	144,156
Total stockholders' equity and long term debt	305,917	304,424
Current liabilities
Lines of credit	8,638	7,500
Current portion of long-term debt	1,789	1,706
Accounts payable	6,597	8,176
Accrued expenses	2,708	3,113
Overdraft payable	28	15
Accrued interest	1,497	830
Income taxes payable	2,740	343
Customer and other deposits	1,970	1,970
Other	1,956	1,946
Total current liabilities	27,923	25,599
Commitments and contingencies (Note 12)
Deferred credits and other liabilities
Net advances for construction	5,302	5,421
Operating lease liabilities	445	450
Regulatory liabilities	22,104	22,246
Deferred investment tax credits	486	490
Deferred income taxes	50,953	52,259
Total deferred credits and other liabilities	79,290	80,866
Net contributions in aid of construction	152,457	149,479
Total Liabilities and Stockholders' Equity	$ 565,587	$ 560,368

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REGULATORY LIABILITIES

3 Months Ended

Mar. 31, 2020

REGULATORY LIABILITIES [Abstract]

REGULATORY LIABILITIES

NOTE 7 – REGULATORY LIABILITIES

The FASB, ASC Topic 980 stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency.  Certain obligations are deferred and/or amortized as determined by the DEPSC, the MDPSC, and the PAPUC.  Regulatory liabilities represent excess recovery of cost or other items that have been deferred because it is probable such amounts will be returned to customers through future regulated rates.

Utility plant retirement cost obligation consists of estimated costs related to the potential removal and replacement of facilities and equipment on the Company’s water and wastewater properties.  Effective January 1, 2012, as authorized by the DEPSC, when depreciable units of utility plant are retired, any cost associated with retirement, less any salvage value or proceeds received, is charged to a regulated retirement liability.  Each year the liability is increased by an annual amount authorized by the DEPSC.    

Pursuant to the enactment of the TCJA, on December 22, 2017, the Company adjusted its existing deferred income tax balances to reflect the decrease in the corporate income tax rate from 34% to 21% (see Note 10).  This resulted in a decrease in the net deferred income tax liability of approximately $24.3 million, of which $22.8 million was reclassed to a regulatory liability.  The regulatory liability amount is subject to certain Internal Revenue Service normalization rules that require the benefits to customers be spread over the remaining useful life of the underlying assets giving rise to the associated deferred income taxes.  On January 31, 2019, the DEPSC approved the amortization of the regulatory liability amount of $22.2 million over a period of 49.5 years beginning February 1, 2018, subject to audit at a later date.  The MDPSC has not issued a final order on the regulatory liability amount of $0.6 million regarding the effects of the TCJA on Maryland customers.

Regulatory liabilities comprise:
	(in thousands)
	March 31, 2020			December 31, 2019
Utility plant retirement cost obligation		$	216		$	247
Deferred income taxes (related to TCJA)			21,888			21,999
		$	22,104		$	22,246

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FAIR VALUE OF FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2020

FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract]

FAIR VALUE OF FINANCIAL INSTRUMENTS

Table of Contents

NOTE 11 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value.

Current Assets and Liabilities

For those current assets and liabilities that are considered financial instruments, the carrying amounts approximate fair value because of the short maturity of those instruments.

Long-term Financial Liabilities

All of Artesian Resources’ outstanding long-term debt as of March 31, 2020 and December 31, 2019was fixed-rate.  The fair value of the Company’s long-term debt is determined by discounting its future cash flows using current market interest rates on similar instruments with comparable maturities consistent with FASB ASC 825.  Under the fair value hierarchy, the fair value of the long-term debt in the table below is classified as Level 2 measurements.  Level 2 is valued using observable inputs other than quoted prices.  The fair values for long-term debt differ from the carrying values primarily due to interest rates that differ from the current market interest rates.  The carrying amount and fair value of Artesian Resources' long-term debt (including current portion) are shown below:

In thousands
	March 31, 2020			December 31, 2019
Carrying amount		$	145,352		$	145,862
Estimated fair value		$	164,083		$	157,710

The fair value of Advances for Construction cannot be reasonably estimated due to the inability to estimate accurately the timing and amounts of future refunds expected to be paid over the life of the contracts.  Refund payments are based on the water sales to new customers in the particular development constructed.  The fair value of Advances for Construction would be less than the carrying amount because these financial instruments are non-interest bearing.

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REGULATORY ASSETS (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Regulatory Assets [Abstract]
Contributions to postretirement benefit plan	$ 5,700
Cash received for bond issuance		$ 30,000,000
Amortization period of other regulatory expense [Abstract]
Rate case studies	5 years
Goodwill	50 years
Deferred acquisition costs	20 years
Franchise costs	80 years
Regulatory assets net of amortization, comprise [Abstract]
Regulatory assets, net	$ 6,785,000	6,891,000
Maximum [Member]
Amortization period of other regulatory expense [Abstract]
Debt related cost	30 years
Minimum [Member]
Amortization period of other regulatory expense [Abstract]
Debt related cost	15 years
Delaware [Member]
Amortization period of other regulatory expense [Abstract]
Regulatory rate proceedings	2 years 6 months
Maryland [Member]
Amortization period of other regulatory expense [Abstract]
Regulatory rate proceedings	5 years
Postretirement Benefit Obligation [Member]
Regulatory assets net of amortization, comprise [Abstract]
Regulatory assets, net	$ 51,000	51,000
Deferred Income Taxes [Member]
Regulatory assets net of amortization, comprise [Abstract]
Regulatory assets, net	382,000	386,000
Debt Related Costs [Member]
Regulatory assets net of amortization, comprise [Abstract]
Regulatory assets, net	25,000	27,000
Expense of Rate and Regulatory Proceedings [Member]
Regulatory assets net of amortization, comprise [Abstract]
Regulatory assets, net	5,468,000	5,556,000
Goodwill [Member]
Regulatory assets net of amortization, comprise [Abstract]
Regulatory assets, net	286,000	288,000
Deferred Acquisition and Franchise Costs [Member]
Regulatory assets net of amortization, comprise [Abstract]
Regulatory assets, net	$ 573,000	$ 583,000

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REVENUE RECOGNITION, Disaggregated Revenues (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Jun. 30, 2019
REVENUE RECOGNITION [Abstract]
Refund to customers through reduced tariff rates			$ (3,800)
Minimum number of days for accounts receivable from tariff contract customers	25 days
Minimum number of days due for accounts receivable from SLP Plan customer	25 days
Minimum number of days customers services invoiced in advance	30 days
Disaggregation of Revenue [Abstract]
Other Operating Revenue not in scope of ASC 606	$ 291	$ 301
Total Operating Revenues	19,901	19,386
Tariff Revenue [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	18,204	17,684
Tariff Revenue [Member] | Consumption Charges [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	10,160	10,393
Tariff Revenue [Member] | Fixed Fees [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	6,737	6,648
Tariff Revenue [Member] | Service Charges [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	147	177
Tariff Revenue [Member] | DSIC [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	1,152	888
Tariff Revenue [Member] | Industrial Wastewater Services [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	8	0
Tariff Revenue [Member] | Revenue Reserved for Refund - TCJA Impact [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	0	(422)
Non-Tariff Revenue [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	1,406	1,401
Non-Tariff Revenue [Member] | Service Line Protection Plans [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	1,088	1,050
Non-Tariff Revenue [Member] | Contract Operations [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	216	328
Non-Tariff Revenue [Member] | Inspection Fees [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	$ 102	$ 23

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RELATED PARTY TRANSACTIONS

3 Months Ended

Mar. 31, 2020

RELATED PARTY TRANSACTIONS [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 12 – RELATED PARTY TRANSACTIONS

Mr. Michael Houghton currently serves as a director through the remainder of the three year term class that expires at the Annual Meeting of the Class B Stock shareholders to be held in 2021 and until his respective successor shall be elected and qualified.  Mr. Houghton is a Partner in the law firm of Morris Nichols Arsht & Tunnell, or MNAT, in Wilmington, Delaware.  In the normal course of business, the Company utilizes the services of MNAT for various regulatory, real estate and public policy matters.  Approximately $119,000 and $40,000 was paid to MNAT during the three months ended March 31, 2020, and March 31, 2019, respectively, for legal and director related services.  As of March 31, 2020, the Company had a $19,000 accounts payable balance due to MNAT.

As set forth in the Charter of the Audit Committee of the Board, the Audit Committee is responsible for reviewing and, if appropriate, approving all related party transactions between us and any officer, any director, any person known to be the beneficial owner of more than 5% of any class of the Company's voting securities or any other related person that would potentially require disclosure.  In its review and approval of the related party transactions with MNAT, the Audit Committee considered the nature of the related person's interest in the transactions; the satisfactory performance of work contracted with the related party prior to the director election of Mr. Houghton; and the material terms of the transactions, including, without limitation, the amount and type of transactions, the importance of the transactions to the related person, the importance of the transactions to the Company and whether the transactions would impair the judgment of a director or officer to act in the best interest of the Company.  The Audit Committee approves only those related person transactions that are in, or are consistent with, the best interests of the Company and its stockholders.

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares	Mar. 31, 2020	Mar. 31, 2019	Dec. 09, 2015
Common Shares Class A Non-Voting [Member]
Common stock, par value (in dollars per share)	$ 1.00
Common stock, shares authorized (in shares)	15,000,000
Common Shares Class B Voting [Member]
Common stock, par value (in dollars per share)	$ 1.00
Common stock, shares authorized (in shares)	1,040,000
Common Stock [Member] | Common Shares Class A Non-Voting [Member]
Common stock, par value (in dollars per share)	$ 1	$ 1
Common stock, shares authorized (in shares)	15,000,000	15,000,000
Common Stock Shares Issued (in shares)	8,449,292	8,415,799
Shares available for purchase through retirement plans (in shares)	500,000
Shares authorized for issuance of grants under equity compensation plan (in shares)			331,500
Common Stock [Member] | Common Shares Class B Voting [Member]
Common stock, par value (in dollars per share)	$ 1	$ 1
Common stock, shares authorized (in shares)	1,040,000	1,040,000
Common Stock Shares Issued (in shares)	881,452	881,452

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LEASES

3 Months Ended

Mar. 31, 2020

LEASES [Abstract]

LEASES

Table of Contents

NOTE 4 – LEASES

The Company leases land and office equipment under operating leases from non-related parties.  Our leases have remaining lease terms of 2 years to 77 years, some of which include options to automatically extend the leases for up to 66 years.  Payments made under operating leases are recognized in the condensed consolidated statement of operations on a straight-line basis over the period of the lease.  The annual lease payments for the land operating leases increase each year either by the most recent increase in the Consumer Price Index or by 3%, as applicable based on the lease agreements.  Periodically, the annual lease payment for one operating land lease is determined based on the fair market value of the applicable parcel of land.  None of the operating leases contain contingent rent provisions.  The commencement date of all the operating leases is the earlier of the date we become legally obligated to make rent payments or the date we may exercise control over the use of the land or equipment.  The Company currently does not have any financing leases and does not have any lessor leases that require disclosure.

Management made certain assumptions related to the separation of lease and nonlease components and to the discount rate used when calculating the right of use asset and liability amounts for the operating leases.  As our leases do not provide an implicit rate, we use our incremental borrowing rates for long term and short term agreements and apply the rates accordingly based on the term of the lease agreements to determine the present value of lease payments.

Rent expense for all operating leases except those with terms of 12 months or less comprises:

	(in thousands)
	Three Months Ended			Three Months Ended
	March 31, 2020			March 31, 2019
Minimum rentals		$	7		$	2
Contingent rentals			–			–
		$	7		$	2

Supplemental cash flow information related to leases is as follows:

	(in thousands)
	Three Months Ended			Three Months Ended
	March 31, 2020			March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		$	7	$	2
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		$	474	$	499

Supplemental balance sheet information related to leases is as follows:

	(in thousands, except lease term and discount rate)
	March 31, 2020			December 31, 2019
Operating Leases:
Operating lease right-of-use assets	$	474		$	480
Other current liabilities	$	20			19
Operating lease liabilities		445			450
Total operating lease liabilities	$	465		$	469
Weighted Average Remaining Lease Term
Operating leases	58 years			58 years
Weighted Average Discount Rate
Operating leases		5.0	%		5.0	%

Table of Contents

Maturities of operating lease liabilities that have initial or remaining non-cancelable lease terms in excess of one year as of March 31, 2020 are as follows:

	(in thousands)
	Operating Leases
Year
2020	$	42
2021		42
2022		23
2023		23
2024		23
Thereafter		1,319
Total undiscounted lease payments	$	1,472
Less effects of discounting		(1,007	)
Total lease liabilities recognized	$	465

  As of March 31, 2020, we have not entered into operating or finance leases that will commence at a future date.

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NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE

3 Months Ended

Mar. 31, 2020

NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE [Abstract]

NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE

Table of Contents

NOTE 8 - 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, the potentially dilutive effect of employee stock options and restricted stock awards.

The following table summarizes the shares used in computing basic and diluted net income per share:

	For the Three Months Ended March 31,
	2020		2019
	(in thousands)
Weighted average common shares outstanding during the period for Basic computation		9,297		9,258
Dilutive effect of employee stock options and awards		46		56
Weighted average common shares outstanding during the period for Diluted computation		9,343		9,314

For the three months ended March 31, 2020, 6,050 shares of restricted stock awards were excluded from the calculations of diluted net income per share. For the three months ended March 31, 2019, no shares of restricted stock awards were excluded from the calculations of diluted net income per share.  Due to unrecognized compensation costs, the hypothetical repurchase of shares exceeded the number of restricted shares expected to vest during the period, creating an anti-dilutive effect. For the three months ended March 31, 2020 and March 31, 2019, no shares of stock options were excluded from the calculations of diluted net income per share, as the calculated proceeds from the options’ exercise were lower than the average market price of the Company’s common stock during the period.

The Company has 15,000,000 authorized shares of Class A Stock and 1,040,000 authorized shares of Class B Common Stock, or Class B Stock. As of March 31, 2020, 8,420,315 shares of Class A Stock and 881,452 shares of Class B Stock were issued and outstanding. As of March 31, 2019, 8,386,822 shares of Class A Stock and 881,452 shares of Class B Stock were issued and outstanding. The par value for both classes is $1.00 per share. During the three months ended March 31, 2020 and March 31, 2019, the Company issued 10,069 and 17,794 shares of Class A Stock, respectively.

Equity per common share was $17.46 and $17.28 at March 31, 2020 and December 31, 2019, respectively. These amounts were computed by dividing common stockholders' equity by the number of shares of common stock outstanding on March 31, 2020 and December 31, 2019, respectively.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
ASSETS
Utility Plant, accumulated depreciation	$ 139,121	$ 136,588
Current assets
Accounts receivable, allowance for doubtful accounts	280	264
Other assets
Non-utility Property, accumulated depreciation	$ 809	$ 790

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RELATED PARTY TRANSACTIONS (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Related Party Transactions [Abstract]
Stock ownership required to be disclosed, minimum	5.00%
Michael Houghton [Member]
Related Party Transactions [Abstract]
Term of director	3 years
Morris Nichols Arsht & Tunnell [Member]
Related Party Transactions [Abstract]
Amount paid for legal services	$ 119,000	$ 40,000
Accounts payable balance	$ 19,000

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LEASES (Tables)

3 Months Ended

Mar. 31, 2020

LEASES [Abstract]

Rent Expense for All Operating Leases Except Those with Terms of 12 Months or Less

Rent expense for all operating leases except those with terms of 12 months or less comprises:

	(in thousands)
	Three Months Ended			Three Months Ended
	March 31, 2020			March 31, 2019
Minimum rentals		$	7		$	2
Contingent rentals			–			–
		$	7		$	2

Supplemental Cash Flow Information Related to Leases

Supplemental cash flow information related to leases is as follows:

	(in thousands)
	Three Months Ended			Three Months Ended
	March 31, 2020			March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		$	7	$	2
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		$	474	$	499

Supplemental Balance Sheet Information Related to Leases

Supplemental balance sheet information related to leases is as follows:

	(in thousands, except lease term and discount rate)
	March 31, 2020			December 31, 2019
Operating Leases:
Operating lease right-of-use assets	$	474		$	480
Other current liabilities	$	20			19
Operating lease liabilities		445			450
Total operating lease liabilities	$	465		$	469
Weighted Average Remaining Lease Term
Operating leases	58 years			58 years
Weighted Average Discount Rate
Operating leases		5.0	%		5.0	%

Maturities of Operating Lease Liabilities

Table of Contents

Maturities of operating lease liabilities that have initial or remaining non-cancelable lease terms in excess of one year as of March 31, 2020 are as follows:

	(in thousands)
	Operating Leases
Year
2020	$	42
2021		42
2022		23
2023		23
2024		23
Thereafter		1,319
Total undiscounted lease payments	$	1,472
Less effects of discounting		(1,007	)
Total lease liabilities recognized	$	465

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NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE (Tables)

3 Months Ended

Mar. 31, 2020

NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE [Abstract]

Shares Used in Computing Basic and Diluted Net Income Per Share

The following table summarizes the shares used in computing basic and diluted net income per share:

	For the Three Months Ended March 31,
	2020		2019
	(in thousands)
Weighted average common shares outstanding during the period for Basic computation		9,297		9,258
Dilutive effect of employee stock options and awards		46		56
Weighted average common shares outstanding during the period for Diluted computation		9,343		9,314

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BASIS OF PRESENTATION AND IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

3 Months Ended

Mar. 31, 2020

BASIS OF PRESENTATION AND IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS [Abstract]

BASIS OF PRESENTATION AND IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

NOTE 2 – BASIS OF PRESENTATION

Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC, for Form 10-Q.  Certain information and note disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.  Accordingly, these condensed consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes in the Company's annual report on Form 10-K for fiscal year 2019 as filed with the SEC on March 13, 2020.

The condensed consolidated financial statements include the accounts of Artesian Resources Corporation and its wholly owned subsidiaries, including its principal operating company, Artesian Water.  In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments (unless otherwise noted) necessary to present fairly the Company's balance sheet position as of March 31, 2020, the results of its operations for the three month periods ended March 31, 2020 and March 31, 2019, its cash flows for the three month periods ended March 31, 2020 and March 31, 2019 and the changes in stockholders’ equity for the three  month periods ended March 31, 2020 and March 31, 2019.  The December 31, 2019 Condensed Consolidated Balance Sheet was derived from the Company’s December 31, 2019 audited consolidated financial statements, but does not include all disclosures and notes normally provided in annual financial statements.

The results of operations for the interim periods presented are not necessarily indicative of the results for the full year or for future periods.

Management makes certain estimates and assumptions regarding each lease agreement, renewal and amendment, including, but not limited to, discount rates and probable term, which can impact the escalations in payment that are taken into consideration when calculating the straight line basis. The amount of rent expense and income reported could vary if different estimates and assumptions are used.  Management also makes certain estimates and assumptions regarding the fair value of the leased property at lease commencement and the separation of lease and nonlease components.

Reclassification

Certain accounts in the prior year financial statements have been reclassified for comparative purposes to conform with the presentation in the current year financial statements.  These reclassifications had no effect on net income or stockholders' equity.

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REGULATORY ASSETS

3 Months Ended

Mar. 31, 2020

REGULATORY ASSETS [Abstract]

REGULATORY ASSETS

NOTE 6 - REGULATORY ASSETS

The FASB, ASC Topic 980 stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency. Certain expenses are recoverable through rates charged to our customers, without a return on investment, and are deferred and amortized during future periods using various methods as permitted by the DEPSC, MDPSC, and PAPUC.

The postretirement benefit obligation is the recognition of an offsetting regulatory liability as it relates to the accrual of the expected cost of providing postretirement health care and life insurance benefits to retired employees.  Artesian Water contributed approximately $5,700 to its postretirement benefit plan in the first three months of 2020. These contributions consist of insurance premium payments for medical, dental and life insurance benefits made on behalf of the Company's eligible retired employees.

The deferred income taxes will be amortized over future years as the tax effects of temporary differences that previously flowed through to our customers are reversed.

Debt related costs include debt issuance costs and other debt related expense. The DEPSC has allowed rate recovery on issuance costs associated with the Series V First Mortgage bond in December 2019 that paid down outstanding lines of credit and a loan payable to Artesian Resources.  These amounts are recovered over the term of the new long-term debt issued.  For the Series V First Mortgage bond, cash was paid for the issuance costs and $30 million of cash was received from the proceeds of the bonds.

Table of Contents

Regulatory expenses amortized on a straight-line basis are noted below:

Expense	Years Amortized
Rate case studies	5
Delaware rate proceedings	2.5
Maryland rate proceedings	5
Debt related costs	15 to 30 (based on term of related debt)
Goodwill (resulting from acquisition of Mountain Hill Water Company in 2008)	50
Deferred acquisition costs (resulting from purchase of water assets in Cecil County, Maryland in 2011 and Port Deposit, Maryland in 2010)	20
Franchise Costs (resulting from purchase of water assets in Cecil County, Maryland in 2011)	80

Regulatory assets, net of amortization, comprise:
	(in thousands)
	March 31, 2020		December 31, 2019
Postretirement benefit obligation	$	51	$	51
Deferred income taxes		382		386
Expense of rate case studies		25		27
Debt related costs		5,468		5,556
Goodwill		286		288
Deferred acquisition and franchise costs		573		583
	$	6,785	$	6,891

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 4,074	$ 3,590
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,752	2,715
Deferred income taxes, net	(1,310)	(768)
Stock compensation	45	47
AFUDC, equity portion	(281)	(145)
Changes in assets and liabilities:
Accounts receivable, net of allowance for doubtful accounts	179	1,184
Income tax receivable	19	763
Unbilled operating revenues	(79)	(69)
Materials and supplies	(58)	(105)
Prepaid property taxes	978	941
Prepaid expenses and other	223	142
Other deferred assets	(418)	(361)
Regulatory assets	92	95
Regulatory liabilities	(178)	(114)
Income tax payable	2,397	1,292
Accounts payable	(1,579)	(3,324)
Accrued expenses	(405)	525
Accrued interest	667	565
Revenue reserved for refund	0	474
Customer deposits and other	11	174
NET CASH PROVIDED BY OPERATING ACTIVITIES	7,129	7,621
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (net of AFUDC, equity portion)	(9,212)	(9,078)
Proceeds from sale of assets	30	14
NET CASH USED IN INVESTING ACTIVITIES	(9,182)	(9,064)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under lines of credit agreements	1,138	2,669
Increase in overdraft payable	13	252
Net advances and contributions in aid of construction	3,179	748
Net proceeds from issuance of common stock	286	395
Dividends paid	(2,319)	(2,241)
Principal repayments of long-term debt	(510)	(408)
NET CASH PROVIDED BY FINANCING ACTIVITIES	1,787	1,415
NET DECREASE IN CASH AND CASH EQUIVALENTS	(266)	(28)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	596	293
CASH AND CASH EQUIVALENTS AT END OF PERIOD	330	265
Non-cash Investing and Financing Activity:
Utility plant received as construction advances and contributions	320	152
Supplemental Disclosures of Cash Flow Information:
Interest paid	1,232	1,155
Income taxes paid	$ 360	$ 0

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Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2020	May 05, 2020
Entity Information [Line Items]
Entity Registrant Name	ARTESIAN RESOURCES CORP
Entity Central Index Key	0000863110
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Shell Company	false
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1
Entity Address, State or Province	DE
Class A Stock [Member]
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		8,429,009
Class B Stock [Member]
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		881,442

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INCOME TAXES

3 Months Ended

Mar. 31, 2020

INCOME TAXES [Abstract]

INCOME TAXES

NOTE 10 – INCOME TAXES

Deferred income taxes are provided in accordance with FASB ASC Topic 740 on all differences between the tax basis of assets and liabilities and the amounts at which they are carried in the consolidated financial statements based on the enacted tax rates expected to be in effect when such temporary differences are expected to reverse. The Company’s rate regulated utilities recognize regulatory liabilities, to the extent considered in ratemaking, for deferred taxes provided in excess of the current statutory tax rate and regulatory assets for deferred taxes provided at rates less than the current statutory rate.  Such tax-related regulatory assets and liabilities are reported at the revenue requirement level and amortized to income as the related temporary differences reverse, generally over the lives of the related properties.

Under FASB ASC Topic 740, an uncertain tax position represents our expected treatment of a tax position taken, or planned to be taken in the future, that has not been reflected in measuring income tax expense for financial reporting purposes.  The Company establishes reserves for uncertain tax positions based upon management's judgment as to the sustainability of these positions. These accounting estimates related to the uncertain tax position reserve require judgments to be made as to the sustainability of each uncertain tax position based on its technical merits. The Company believes its tax positions comply with applicable law and that it has adequately recorded reserves as required. However, to the extent the final tax outcome of these matters is different than the estimates recorded, the Company would then adjust its tax reserves or unrecognized tax benefits in the period that this information becomes known.  The Company has elected to recognize accrued interest (net of related tax benefits) and penalties related to uncertain tax positions as a component of its income tax expense.  The Company has accrued approximately $5,000 in penalties and interest for the three months ended March 31, 2020. The Company remains subject to examination by federal and state authorities for the tax years 2016 through 2019.

The Tax Reform Act of 1986 mandated that Advances and CIAC received subsequent to December 31, 1986, generally are taxable income.  The 1996 Tax Act provided an exclusion from taxable income for CIAC and Advances received after June 12, 1996 except for certain contributions for large services that are not included in rate base for rate-making purposes.  On December 22, 2017, the TCJA repealed the 1996 exclusion from gross income effective on the enactment date.

Investment tax credits were deferred through 1986 and are recognized as a reduction of deferred income tax expense over the estimated economic useful lives of the related assets.

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NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE (Details) - $ / shares	3 Months Ended		12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Shares used in computing basic and diluted net income per share [Abstract]
Weighted average common shares outstanding during the period for Basic computation (in shares)	9,297,000	9,258,000
Dilutive effect of employee stock options and awards (in shares)	46,000	56,000
Weighted average common shares outstanding during the period for Diluted computation (in shares)	9,343,000	9,314,000
Class A Stock [Member]
Common Stock [Abstract]
Common stock, shares authorized (in shares)	15,000,000
Common stock, shares issued (in shares)	8,420,315	8,386,822
Common stock, shares outstanding (in shares)	8,420,315	8,386,822
Common stock, par value (in dollars per share)	$ 1.00
Common stock, shares issued during period (in shares)	10,069	17,794
Earnings Per Share [Abstract]
Equity per common share (in dollars per share)	$ 17.46		$ 17.28
Class B Stock [Member]
Common Stock [Abstract]
Common stock, shares authorized (in shares)	1,040,000
Common stock, shares issued (in shares)	881,452	881,452
Common stock, shares outstanding (in shares)	881,452	881,452
Common stock, par value (in dollars per share)	$ 1.00
Stock Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Abstract]
Shares excluded from calculations of diluted net income per share (in shares)	0	0
Restricted Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Abstract]
Shares excluded from calculations of diluted net income per share (in shares)	6,050	0

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LEASES (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Operating Lease, Description [Abstract]
Percentage of increase in annual lease payments	3.00%
Rent Expense [Abstract]
Minimum rentals	$ 7	$ 2
Contingent rentals	0	0
Rent expenses	7	2
Cash paid for amounts included in the measurement of lease liabilities [Abstract]
Operating cash flows from operating leases	7	2
Right-of-use assets obtained in exchange for lease obligations [Abstract]
Operating leases	474	$ 499
Operating leases [Abstract]
Operating lease right-of-use assets	474		$ 480
Other current liabilities	20		19
Operating lease liabilities	445		450
Total operating lease liabilities	$ 465		$ 469
Weighted Average Remaining Lease Term [Abstract]
Operating leases	58 years		58 years
Weighted Average Discount Rate [Abstract]
Operating leases	5.00%		5.00%
Maturities of Operating Lease Liabilities [Abstract]
2020	$ 42
2021	42
2022	23
2023	23
2024	23
Thereafter	1,319
Total undiscounted lease payments	1,472
Less effects of discounting	(1,007)
Total lease liabilities recognized	$ 465		$ 469
Minimum [Member]
Operating Lease, Description [Abstract]
Remaining lease term	2 years
Maximum [Member]
Operating Lease, Description [Abstract]
Remaining lease term	77 years
Option to extend lease term	66 years

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GENERAL (Details) gal in Millions	3 Months Ended
	Mar. 31, 2020 gal / d Subsidiary Facility WaterSystem gal Plan Squarefeet
Business Operations [Abstract]
Number of wholly owned subsidiaries | Subsidiary	8
Number of subsidiaries not regulated | Subsidiary	3
Artesian Development purchased area of office space (in square feet) | Squarefeet	10,000
Artesian Development purchased area of warehouse space (in square feet) | Squarefeet	10,000
Artesian Wastewater [Member]
Business Operations [Abstract]
Number of wastewater treatment facilities owned and operated | Facility	4
Capacity of wastewater treatment facilities	500,000
Number of other's system efficiently and cost effectively manages wastewater transmission, treatment and disposal | WaterSystem	1
Disposal facility and spray irrigation to agricultural land | gal	90
Maximum supply amount of water per day	1,500,000
Artesian Utility [Member]
Business Operations [Abstract]
Capacity of wastewater treatment facilities	2,800,000
Initial contract period of operating wastewater treatment facilities in Middletown	20 years
Number of wastewater treatment station facility operations in Middletown | Facility	2
Number of protection plans offered to customers | Plan	3

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INCOME TAXES (Details)	3 Months Ended
	Mar. 31, 2020 USD ($)
Income Taxes [Abstract]
Income tax penalties and interest accrued for unrecognized tax position	$ 5,000
State Authorities [Member]
Income Taxes [Abstract]
Tax year open to examination	2016 2017 2018 2019
Federal Authorities [Member]
Income Taxes [Abstract]
Tax year open to examination	2016 2017 2018 2019

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SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2020

SUBSEQUENT EVENTS [Abstract]

SUBSEQUENT EVENTS

NOTE 14 - SUBSEQUENT EVENTS

In March 2020, the World Health Organization classified the COVID-19 outbreak as a pandemic. Subsequently on March 13, 2020, the President of the United States declared the COVID-19 outbreak a national emergency. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. Management is actively monitoring the situation and impacts on its operations, suppliers, industry, and workforce. The Company is following social distancing and remote work directives, however prolonged workforce disruptions may negatively impact performance of services or require use of emergency personnel.  The Company maintains essential utility services,  however a longer receivables cycle, need for increased reserves for bad debt, along with changes in revenue mix between commercial and residential are possible as a result of broader economic impacts of the COVID-19 outbreak.  Given the changing nature of the COVID-19 outbreak and the responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations.

On March 27, 2020, the United States Government enacted the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, which provides economic relief and stimulus to support the national economy during the COVID-19 epidemic.  This package included support for individuals, large corporations, small business, and health care entities, among other affected groups.  While the Company, and the utility industry broadly, were not direct beneficiaries of the stimulus, the Company continues to review the provisions of the CARES Act and assess the potential impact on the Company’s operations.

On April 28, 2020, Artesian Water entered into three financing agreements, or the Financing Agreements, with the Delaware Drinking Water State Revolving Fund, acting by and through the Delaware Department of Health & Social Services, Division of Public Health, a public agency of the state of Delaware, or the Department.  Under the Financing Agreements, the Department has agreed to advance to Artesian Water up to approximately $1.7 million, $1.0 million and $1.3 million, collectively, the Loans, to finance all or a portion of the costs to replace specific water transmission mains in service areas located in New Castle County, Delaware, collectively, the Projects.  In accordance with the Financing Agreements, Artesian Water will from time to time request funds under the Loans as it incurs costs in connection with the Projects.  The Company shall pay to the Department, on the principal amount drawn down and outstanding from the date drawn, interest at a rate of 0.6% per annum and an administrative fee at a rate of 0.6% per annum.

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REGULATORY ASSETS (Tables)

3 Months Ended

Mar. 31, 2020

REGULATORY ASSETS [Abstract]

Amortization Period of Other Regulatory Expense

Table of Contents

Regulatory expenses amortized on a straight-line basis are noted below:

Expense	Years Amortized
Rate case studies	5
Delaware rate proceedings	2.5
Maryland rate proceedings	5
Debt related costs	15 to 30 (based on term of related debt)
Goodwill (resulting from acquisition of Mountain Hill Water Company in 2008)	50
Deferred acquisition costs (resulting from purchase of water assets in Cecil County, Maryland in 2011 and Port Deposit, Maryland in 2010)	20
Franchise Costs (resulting from purchase of water assets in Cecil County, Maryland in 2011)	80

Regulatory Assets, Net of Amortization, Comprise

Regulatory assets, net of amortization, comprise:
	(in thousands)
	March 31, 2020		December 31, 2019
Postretirement benefit obligation	$	51	$	51
Deferred income taxes		382		386
Expense of rate case studies		25		27
Debt related costs		5,468		5,556
Goodwill		286		288
Deferred acquisition and franchise costs		573		583
	$	6,785	$	6,891

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2020

FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract]

Carrying Amount and Fair Value of Long-Term Debt

All of Artesian Resources’ outstanding long-term debt as of March 31, 2020 and December 31, 2019was fixed-rate.  The fair value of the Company’s long-term debt is determined by discounting its future cash flows using current market interest rates on similar instruments with comparable maturities consistent with FASB ASC 825.  Under the fair value hierarchy, the fair value of the long-term debt in the table below is classified as Level 2 measurements.  Level 2 is valued using observable inputs other than quoted prices.  The fair values for long-term debt differ from the carrying values primarily due to interest rates that differ from the current market interest rates.  The carrying amount and fair value of Artesian Resources' long-term debt (including current portion) are shown below:

In thousands
	March 31, 2020			December 31, 2019
Carrying amount		$	145,352		$	145,862
Estimated fair value		$	164,083		$	157,710

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Carrying Amount [Member]
Long-term Financial Liabilities [Abstract]
Long-term debt	$ 145,352	$ 145,862
Estimated Fair Value [Member]
Long-term Financial Liabilities [Abstract]
Long-term debt	$ 164,083	$ 157,710

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REGULATORY PROCEEDINGS (Tables)

3 Months Ended

Mar. 31, 2020

REGULATORY PROCEEDINGS [Abstract]

Eligible Plant Improvements

The following table summarizes (1) Artesian Water’s applications with the DEPSC to collect DSIC rates and (2) the rates upon which eligible plant improvements are based:

Application Date	11/28/2018	05/29/2019	11/15/2019
DEPSC Approval Date	12/20/2018	06/18/2019	12/12/2019
Effective Date	01/01/2019	07/01/2019	01/1/2020
Cumulative DSIC Rate	5.55%	7.41%	7.50%
Net Eligible Plant Improvements – Cumulative Dollars (in millions)	$30.4	$ 43.1	$ 43.1
Eligible Plant Improvements – Installed Beginning Date	10/01/2014	10/01/2014	10/01/2014
Eligible Plant Improvements – Installed Ending Date	10/31/2018	04/30/2019	04/30/2019

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IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

3 Months Ended

Mar. 31, 2020

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS [Abstract]

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

Table of Contents

NOTE 13 - IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

In June 2016, the FASB issued new guidance on the measurement of credit losses on financial instruments, to provide financial statement users with more information about expected credit losses on financial instruments. The guidance revises the incurred loss impairment methodology to reflect current expected credit losses and requires consideration of a broader range of information to estimate credit losses.  The new standard is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. For the Company, this standard is primarily applicable to accounts receivable balances.  The company’s credit losses on accounts receivable is minimal since we mitigate our exposure by discontinuing services in the event of non-payment, however, due to the COVID-19 pandemic causing hardships for many utility customers, state government agencies issued executive orders requiring utility companies to take a number of steps to support their customers and communities, including prohibiting service disconnections for non-payment and prohibiting late fees.  The Company anticipates a longer receivable cycle and the need for increased reserves for bad debt compared to 2019.  The MDPSC issued an order authorizing utilities deferred regulatory treatment for incremental costs related to COVID-19, which includes increased bad debt expense.  The Company anticipates the DEPSC will issue a similar order.  Management is monitoring the situation and as of March 31, 2020, no significant adjustment has been made.

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STOCK COMPENSATION PLANS (Tables)

3 Months Ended

Mar. 31, 2020

STOCK COMPENSATION PLANS [Abstract]

Changes in Shares of Class A Common Stock Underlying Options and Restricted Stock Awards

	Options									Restricted Awards
	Option Shares			Weighted Average Exercise Price		Weighted Average Remaining Life (Yrs.)		Aggregate Intrinsic Value (in thousands)		Outstanding Restricted Stock Awards		Weighted Average Grant Date Fair Value
Plan options/restricted stock awards
Outstanding at January 1, 2020		153,250		$	20.40			$	2,575		5,000	$	36.11
Granted		–			–				–		–		–
Exercised/vested and released		(4,750	)		18.61				70		–		–
Expired/cancelled		–			–				–		–		–
Outstanding at March 31, 2020		148,500		$	20.46		2.384	$	2,512		5,000	$	36.11
Exercisable/vested at March 31, 2020		148,500		$	20.46		2.384	$	2,512		–		–

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Operating revenues
Total Tariff Revenue	$ 19,901	$ 19,386
Operating expenses
Utility operating expenses	9,235	9,121
Non-utility operating expenses	728	767
Depreciation and amortization	2,752	2,715
State and federal income taxes	1,359	1,180
Property and other taxes	1,365	1,319
Total Operating Expenses	15,439	15,102
Operating income	4,462	4,284
Other income, net
Allowance for funds used during construction (AFUDC)	423	226
Miscellaneous income	1,088	800
Income before interest charges	5,973	5,310
Interest charges	1,899	1,720
Net income applicable to common stock	$ 4,074	$ 3,590
Income per common share:
Basic (in dollars per share)	$ 0.44	$ 0.39
Diluted (in dollars per share)	$ 0.44	$ 0.39
Weighted average common shares outstanding:
Basic (in shares)	9,297	9,258
Diluted (in shares)	9,343	9,314
Cash dividends per share of common stock (in dollars per share)	$ 0.2496	$ 0.2423
Water Sales [Member]
Operating revenues
Total Tariff Revenue	$ 17,392	$ 16,934
Other Utility Operating Revenue [Member]
Operating revenues
Total Tariff Revenue	1,253	1,120
Non-Utility Operating Revenue [Member]
Operating revenues
Total Tariff Revenue	$ 1,256	$ 1,332

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STOCK COMPENSATION PLANS

3 Months Ended

Mar. 31, 2020

STOCK COMPENSATION PLANS [Abstract]

STOCK COMPENSATION PLANS

NOTE 5 – STOCK COMPENSATION PLANS

On December 9, 2015, the Company's stockholders approved the 2015 Equity Compensation Plan, or the 2015 Plan, which replaced the 2005 Equity Compensation Plan that expired on May 24, 2015. The 2015 Plan provides that grants may be in any of the following forms: incentive stock options, nonqualified stock options, stock units, stock awards, dividend equivalents and other stock-based awards. The 2015 Plan is administered and interpreted by the Compensation Committee, or the Committee, of the Board of Directors of the Company, or the Board. The Committee has the authority to determine the individuals to whom grants will be made under the 2015 Plan, the type, size and terms of the grants, the time when grants will be made and the duration of any applicable exercise or restriction period (subject to the limitations of the 2015 Plan), and deal with any other matters arising under the 2015 Plan. The Committee presently consists of three directors, each of whom is a non-employee director of the Company. All of the employees of the Company and its subsidiaries and non-employee directors of the Company are eligible for grants under the 2015 Plan. 

Compensation expense of $45,000 related to the May 2019 issue of restricted stock awards, was recorded for the three months ended March 31, 2020. Compensation expense of $47,000 was also recorded for the three months ended March 31, 2019 for restricted stock awards issued in May 2018. Costs were determined based on the fair value on the dates of the awards and those costs were charged to income over the service periods associated with the awards.

There was no stock compensation cost capitalized as part of an asset.

On May 8, 2019, 5,000 shares of Class A Common Stock, or Class A Stock, were granted as restricted stock awards.  The fair value per share was $36.11, the closing price of the Class A Stock as recorded on the Nasdaq Global Select Market on May 8, 2019. Prior to their release date, these restricted stock awards may be subject to forfeiture in the event of the recipient’s termination of service.

The following summary reflects changes in the shares of Class A Stock underlying options and restricted stock awards for the three months ended March 31, 2020:

	Options									Restricted Awards
	Option Shares			Weighted Average Exercise Price		Weighted Average Remaining Life (Yrs.)		Aggregate Intrinsic Value (in thousands)		Outstanding Restricted Stock Awards		Weighted Average Grant Date Fair Value
Plan options/restricted stock awards
Outstanding at January 1, 2020		153,250		$	20.40			$	2,575		5,000	$	36.11
Granted		–			–				–		–		–
Exercised/vested and released		(4,750	)		18.61				70		–		–
Expired/cancelled		–			–				–		–		–
Outstanding at March 31, 2020		148,500		$	20.46		2.384	$	2,512		5,000	$	36.11
Exercisable/vested at March 31, 2020		148,500		$	20.46		2.384	$	2,512		–		–

The total intrinsic value of options exercised during the three months ended March 31, 2020 was approximately $70,000.

There were no unvested option shares outstanding under the 2015 Plan during the three months ended March 31, 2020.

As of March 31, 2020, there were no unrecognized expenses related to non-vested option shares granted under the 2015 Plan.  

As of March 31, 2020, there was $18,000 total unrecognized expenses related to non-vested awards of restricted shares awarded under the 2015 Plan.  The cost will be recognized over 0.10 years, the remaining vesting period for the restricted stock awards.

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REGULATORY PROCEEDINGS

3 Months Ended

Mar. 31, 2020

REGULATORY PROCEEDINGS [Abstract]

REGULATORY PROCEEDINGS

NOTE 9 - REGULATORY PROCEEDINGS

Our water and wastewater utilities generate operating revenue from customers based on rates that are established by state Public Service Commissions through a rate setting process that may include public hearings, evidentiary hearings and the submission of evidence and testimony in support of the requested level of rates by the Company.

We are subject to regulation by the following state regulatory commissions:

· The DEPSC, regulates both Artesian Water and Artesian Wastewater.

· The MDPSC, regulates both Artesian Water Maryland and Artesian Wastewater Maryland.

· The PAPUC, regulates Artesian Water Pennsylvania.

Rate Proceedings

Our regulated utilities 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.  In Delaware, utilities are permitted by law to place rates into effect, under bond, on a temporary basis pending completion of a rate increase proceeding. The first temporary increase may be up to the lesser of $2.5 million on an annual basis or 15% of gross water sales.  Should the rate case not be completed within seven months, by law, the utility may put the entire requested rate relief, up to 15% of gross water sales, in effect under bond until a final resolution is ordered and placed into effect.  If any such rates are found to be in excess of rates the DEPSC finds to be appropriate, the utility must refund customers the portion found to be in excess with interest.  The timing of our rate increase requests is therefore dependent upon the estimated cost of the administrative process in relation to the investments and expenses that we hope to recover through the rate increase.  We can provide no assurances that rate increase requests will be approved by applicable regulatory agencies and, if approved, we cannot guarantee that these rate increases will be granted in a timely or sufficient manner to cover the investments and expenses for which we initially sought the rate increase.

Table of Contents

The DEPSC required Delaware utilities to determine the impact that the TCJA had on their customers and potential rate relief due to customers.  The reduction in corporate income tax expense resulting from the TCJA was passed through to customers in the form of reduced tariff rates as approved by the DEPSC on January 31, 2019.  Approximately $3.8 million was refunded to customers during the second quarter of 2019.  This amount was previously held in reserve and was not reflected in income..

Other Proceedings

Delaware law permits water utilities to put into effect, on a semi-annual basis, increases related to specific types of distribution system improvements through a DSIC. This charge may be implemented by water utilities between general rate increase applications that normally recognize changes in a water utility's overall financial position. The DSIC approval process is less costly when compared to the approval process for general rate increase requests. The DSIC rate applied between base rate filings is capped at  7.50% of the amount billed to customers under otherwise applicable rates and charges, and the DSIC rate increase applied cannot exceed 5.0% within any 12-month period.

The following table summarizes (1) Artesian Water’s applications with the DEPSC to collect DSIC rates and (2) the rates upon which eligible plant improvements are based:

Application Date	11/28/2018	05/29/2019	11/15/2019
DEPSC Approval Date	12/20/2018	06/18/2019	12/12/2019
Effective Date	01/01/2019	07/01/2019	01/1/2020
Cumulative DSIC Rate	5.55%	7.41%	7.50%
Net Eligible Plant Improvements – Cumulative Dollars (in millions)	$30.4	$ 43.1	$ 43.1
Eligible Plant Improvements – Installed Beginning Date	10/01/2014	10/01/2014	10/01/2014
Eligible Plant Improvements – Installed Ending Date	10/31/2018	04/30/2019	04/30/2019

The DSIC rate effective January 1, 2020 replaces the DSIC rate effective July 1, 2019.  The rate reflects the eligible plant improvements installed through April 30, 2019.  The DSIC rates effective January 1, 2019, July 1, 2019, and January 1, 2020 are still subject to audit at a later date by the DEPSC.  For the three months ended March 31, 2020 and March 31, 2019, we earned approximately $1.2 million and $0.9 million in DSIC revenue, respectively.

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GENERAL

3 Months Ended

Mar. 31, 2020

GENERAL [Abstract]

GENERAL

NOTE 1 – GENERAL

Artesian Resources Corporation, or Artesian Resources, includes income from the earnings of our eight wholly owned subsidiaries. The terms "we", "our", "Artesian" and the "Company" as used herein refer to Artesian Resources and its subsidiaries.

DELAWARE REGULATED SUBSIDIARIES

Artesian Water Company, Inc., or Artesian Water, our principal subsidiary, is the oldest and largest public water utility in the State of Delaware and has been providing water service within the state since 1905.  Artesian Water distributes and sells water to residential, commercial, industrial, governmental, municipal and utility customers throughout the State of Delaware.  In addition, Artesian Water provides services to other water utilities, including operations and billing functions, and has contract operation agreements with private and municipal water providers.  Artesian Water also provides water for public and private fire protection to customers in our service territories.

Artesian Wastewater Management, Inc., or Artesian Wastewater, is a regulated entity that owns wastewater collection and treatment infrastructure and provides wastewater services to customers in Delaware as a regulated public wastewater service company.  Artesian Wastewater owns and operates four wastewater treatment facilities, which are permitted to treat approximately 500,000 gallons per day.  Artesian Wastewater and Sussex County, a political subdivision of Delaware, provide reciprocal services to address the periodic need of each for additional wastewater treatment and disposal capacity in certain service areas within Sussex County. There are numerous locations in Sussex County where Artesian Wastewater’s and Sussex County’s facilities are capable of being connected or integrated to allow for the movement and disposal of wastewater generated by one or the other’s system in a manner that most efficiently and cost effectively manages wastewater transmission, treatment and disposal.  Artesian Wastewater received an operations permit in March 2020 for a disposal facility that includes a 90 million gallon storage lagoon and spray irrigation to agricultural land.  This facility will be used to provide treated process wastewater disposal services for an industrial customer at a rate of approximately 1.5 million gallons per day. We expect to be operating this facility in the second quarter of 2020.

MARYLAND REGULATED SUBSIDIARIES

Artesian Water Maryland, Inc., or Artesian Water Maryland, began operations in August 2007. Artesian Water Maryland distributes and sells water to residential, commercial, industrial and municipal customers in Cecil County, Maryland.

Artesian Wastewater Maryland, Inc., or Artesian Wastewater Maryland, was incorporated on June 3, 2008 and is able to provide regulated wastewater services to customers in the State of Maryland.  It is currently not providing these services in Maryland.

PENNSYLVANIA REGULATED SUBSIDIARY

Artesian Water Pennsylvania, Inc., or Artesian Water Pennsylvania, began operations in 2002.  It provides water service to a residential community in Chester County, Pennsylvania.

OTHER SUBSIDIARIES

Our three other subsidiaries, none of which are regulated, are Artesian Utility Development, Inc., or Artesian Utility, Artesian Development Corporation, or Artesian Development, and Artesian Storm Water Services, Inc., or Artesian Storm Water.

Artesian Utility was formed in 1996 and designs and builds water and wastewater infrastructure and provides contract water and wastewater operation services on the Delmarva Peninsula to private, municipal and governmental institutions.  Artesian Utility also evaluates land parcels, provides recommendations to developers on the size of water or wastewater facilities and the type of technology that should be used for treatment at such facilities, and operates water and wastewater facilities in Delaware for municipal and governmental organizations.  Artesian Utility also contracts with developers for design and construction of wastewater facilities within the Delmarva Peninsula, using a number of different technologies for treatment of wastewater at each facility.  In addition, as further discussed below, Artesian Utility operates the Water Service Line Protection Plan, or WSLP Plan, the Sewer Service Line Protection Plan, or SSLP Plan, and the Internal Service Line Protection Plan, or ISLP Plan.

Table of Contents

Artesian Utility currently operates wastewater treatment facilities for the town of Middletown, in southern New Castle County, Delaware, or Middletown, under a 20-year contract that expires in July 2039.  The company has been operating these facilities, which currently include two wastewater treatment stations with a combined capacity of up to approximately 2.8 million gallons per day, or mgd, and the related wastewater disposal facilities, since 1998.  The wastewater treatment facilities in Middletown provide reclaimed wastewater for use in spray irrigation on public and agricultural lands in the area.

Artesian Utility also offers three protection plans to customers, the WSLP Plan, the SSLP Plan, and the ISLP Plan. The WSLP Plan covers all parts, material and labor required to repair or replace participating customers' leaking water service lines up to an annual limit. The SSLP Plan covers all parts, material and labor required to repair or replace participating customers' leaking or clogged sewer lines up to an annual limit.  The ISLP Plan enhances available coverage to include water and wastewater lines within customers' residences.

Artesian Development is a real estate holding company that owns properties, including land approved for office buildings, a water treatment plant and wastewater facility, as well as property for current operations, including an office facility in Sussex County, Delaware.  The facility consists of approximately 10,000 square feet of office space along with nearly 10,000 square feet of warehouse space.

Artesian Storm Water, incorporated on January 17, 2017, was formed to provide design, installation, maintenance and repair services related to existing or proposed storm water management systems in Delaware and the surrounding areas.  The ability to offer storm water services will complement the primary water and wastewater services that we provide.

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STOCK COMPENSATION PLANS (Details)		3 Months Ended
	May 08, 2019 $ / shares shares	Mar. 31, 2020 USD ($) Director $ / shares shares	Mar. 31, 2019 USD ($)
Stock Compensation Plans [Abstract]
Compensation expense		$ 45,000	$ 47,000
Number of directors in committee | Director		3
Total intrinsic value of options exercised		$ 70,000
Shares of Class A Non-Voting Common Stock under option [Abstract]
Exercised/vested and released, aggregate intrinsic value		70,000
Class A Stock [Member] | Stock Options [Member]
Stock Compensation Plans [Abstract]
Total intrinsic value of options exercised		$ 70,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Outstanding at beginning of period, option shares (in shares) | shares		153,250
Granted, option shares (in shares) | shares		0
Exercised/vested and released, option shares (in shares) | shares		(4,750)
Expired/cancelled, option shares (in shares) | shares		0
Outstanding at end of period, option shares (in shares) | shares		148,500
Exercisable/vested at end of period, option share (in shares) | shares		148,500
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract]
Outstanding at beginning of period, weighted average exercise price (in dollars per shares) | $ / shares		$ 20.40
Granted, weighted average exercise price (in dollars per share) | $ / shares		0
Exercised/vested and released, weighted average exercise price (in dollars per shares) | $ / shares		18.61
Expired/cancelled, weighted average exercise price (in dollars per share) | $ / shares		0
Outstanding at end of period, weighted average exercise price (in dollars per shares) | $ / shares		20.46
Options exercisable at year end (in dollars per shares) | $ / shares		$ 20.46
Shares of Class A Non-Voting Common Stock under option [Abstract]
Outstanding at end of period, weighted average remaining life		2 years 4 months 18 days
Exercisable/vested at end of period, weighted average remaining life		2 years 4 months 18 days
Outstanding at beginning of period, aggregate intrinsic value		$ 2,575,000
Granted, aggregate intrinsic value		0
Exercised/vested and released, aggregate intrinsic value		70,000
Expired/cancelled, aggregate intrinsic value		0
Outstanding at end of period, aggregate intrinsic value		2,512,000
Exercisable/vested at end of period, aggregate intrinsic value		2,512,000
Class A Stock [Member] | Stock Options [Member] | 2015 Equity Compensation Plan [Member]
Stock Compensation Plans [Abstract]
Unrecognized expense related to non-vested option shares		0
Class A Stock [Member] | Restricted Stock [Member]
Stock Compensation Plans [Abstract]
Compensation expense		$ 45,000	$ 47,000
Fair value per share (in dollars per share) | $ / shares	$ 36.11
Shares [Roll Forward]
Outstanding at beginning of year (in shares) | shares		5,000
Granted (in shares) | shares	5,000	0
Exercised/vested and released, restricted stock awards (in shares) | shares		0
Cancelled (in shares) | shares		0
Unvested Outstanding at end of year (in shares) | shares		5,000
Weighted Average Grant Date Fair Value [Abstract]
Outstanding at beginning of year (in dollars per shares) | $ / shares		$ 36.11
Granted, weighted average grant date fair value (in dollars per share) | $ / shares		0
Vested and released, weighted average grant date fair value (in dollars per shares) | $ / shares		0
Cancelled, weighted average grant date fair value (in dollars per share) | $ / shares		0
Unvested Outstanding at end of year (in dollars per shares) | $ / shares		$ 36.11
Class A Stock [Member] | Restricted Stock [Member] | 2015 Equity Compensation Plan [Member]
Stock Compensation Plans [Abstract]
Unrecognized expense related to non-vested option shares		$ 18,000
Period over which unvested options cost will recognized		1 month 6 days

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BASIS OF PRESENTATION AND IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS [Abstract]
Operating Lease, Right-of-Use Asset	$ 474	$ 480
Operating Lease, Liability	$ 465	$ 469

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REGULATORY PROCEEDINGS (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended	12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Jun. 30, 2019	Dec. 31, 2019	Dec. 31, 2018
Other Proceedings [Abstract]
Cumulative DSIC Rate			7.41%	7.50%	5.55%
Net Eligible Plant Improvements - Cumulative Dollars			$ 43.1	$ 43.1	$ 30.4
Delaware [Member]
Rate Proceedings [Abstract]
Percentage of gross water sales	15.00%
Period to complete rate case by law	7 months
Revenue returned to customers as a result of TCJA	$ 3.8
Delaware [Member] | Maximum [Member]
Rate Proceedings [Abstract]
Temporary annual rate increase subject to 15% gross water sales limitation	$ 2.5
Percentage of rate relief allowed should a rate case not complete	15.00%
Other Proceedings [Abstract]
Distribution System Improvement Charge rate increase applied between base rate filings	7.50%
Distribution System Improvement Charge rate increase within a 12-month period	5.00%
Artesian Water [Member]
Other Proceedings [Abstract]
Revenue earned in DSIC rate increases	$ 1.2	$ 0.9