ARTESIAN RESOURCES CORPARTNA

ARTESIAN RESOURCES CORP Fair Value Disclosure

10-KFiled Mar 16, 20262 min read
NOTE 4 – 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.  Under the fair value hierarchy, the fair value of such financial instruments is classified as Level 1.
 
Other Deferred Assets
 
As of December 31, 2025, the other deferred assets associated with the MDL class action settlement reimbursements, as further discussed in Note 15 – Legal Proceedings, has a carrying amount of $2.6 million, which approximates fair value, and was recorded at amortized cost using an estimated market discount rate.  The fair value of this non-current receivable is classified as Level 3.
 
Long-term Financial Liabilities
 
As of December 31, 2025 and December 31, 2024, all of the Company’s outstanding long-term debt interest rates were a fixed rate.  The fair value of the Company’s long-term debt is determined by discounting their future cash flows using current market interest rates on similar instruments with comparable maturities consistent with ASC 825, Financial Instruments.  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 thousandsDecember 31,
  2025   2024 
Carrying amount$176,408  $178,676 
Estimated fair value 156,980   154,795 
 
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.

Historical Timeline

Fiscal YearFiled
2025Mar 16, 2026Showing above
2024Mar 26, 2025
2023Mar 18, 2024
2022Mar 10, 2023
2021Mar 11, 2022
2020Mar 12, 2021
2019Mar 13, 2020
2018Mar 15, 2019
2017Mar 15, 2018
2016Mar 10, 2017
2015Mar 11, 2016

About Fair Value Disclosures

Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.

Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.

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