SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995 Commission file
number 0-690
THE YORK WATER COMPANY
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1242500
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
130 EAST MARKET STREET, YORK, PENNSYLVANIA 17405
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (717) 845-3601
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $10 PER SHARE
(Title of Class)
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 X NO
The aggregate market value of the Common Stock, par value $10 per
share, held by nonaffiliates of the registrant (based on the bid
price of such stock) on March 5, 1996 was $43,978,737.
As of March 5, 1996 there were 637,373 shares of Common Stock,
par value $10 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1995 Annual Report to Shareholders are
incorporated by reference into Part II.
Portions of the Proxy Statement for the Company's 1996 Annual
Meeting of Shareholders are incorporated by reference into Part
III.
PART I
ITEM 1. BUSINESS.
(a) General development of business.
The Company is a corporation duly organized under the laws of the
Commonwealth of Pennsylvania in 1816.
(b) Financial information about industry segments.
The Company operates in only one segment, the impounding,
purification and distribution of water.
(c) Narrative description of business.
The business of the Company is to impound, purify and distribute
water. The Company operates entirely within its franchised
territory located in York County, Pennsylvania. The Company is
regulated by the Pennsylvania Public Utility Commission (PPUC).
Water service is supplied through the Company's own distribution
system to the City of York, the Boroughs of North York, East
Prospect, West York, Manchester, Mount Wolf, Jacobus, Loganville,
Yorkana, New Salem, Hallam, Seven Valleys, Spring Grove, and
portions of the Townships of Manchester, East Manchester, West
Manchester, Springettsbury, Spring Garden, Springfield, York,
North Codorus, Hellam, Windsor, Lower Windsor and Jackson. The
Company obtains its water supply from the south branch and east
branch of the Codorus Creek which drains an area of approximately
117 square miles. The Company's present average daily
consumption is 19,380,000 gallons, and its present safe daily
yield is 29,900,000 gallons.
The Company's service territory has an estimated population of
140,000. Industry of the area served is diversified,
manufacturing such items as fixtures and furniture, electrical
machinery, food products, paper, ordnance, textile products, air
conditioning, barbells, etc. In the area served by the Company
under the supervision of the PPUC there are no competitors.
The Company's business does not require large amounts of working
capital and is not dependent upon any single customer or a very
few customers. Operating revenue is derived from the following
sources and in the following percentages: residential, 58%;
commercial and industrial, 34%; other, 8%. The Company presently
has 90 employees.
During the last five years ended in 1995, the Company has
maintained an increasing growth in number of customers and
distribution facilities as shown by the following chart:
1995 1994 1993
Average daily
consumption
(gallons
per day) 19,380,000 19,660,000 19,380,000
Miles of mains
at year end 622 597 580
Distribution
mains
installed (ft.) 84,515 91,087 58,414
Number of
customers 44,879 43,830 42,844
Population served 140,000 136,000 134,000
1992 1991
Average daily
consumption
(gallons
per day) 18,453,000 19,420,000
Miles of mains
at year end 570 562
Distribution
mains
installed (ft.) 41,771 58,611
Number of
customers 42,198 41,650
Population served 133,000 132,000
During 1995, the per capita volume of water sold did not
significantly change compared to 1994. The Company does not
anticipate any change in the level of water usage which would
have a material impact on future results of operations.
ITEM 2. PROPERTIES.
The accounting and executive offices of the Company are located
in a two story brick and masonry building, containing
approximately 14,480 square feet of floor space, at 130 East
Market Street, York, Pennsylvania.
The Company has two impounding dams located in York and
Springfield Townships adjoining the Borough of Jacobus to the
south. The lower dam is constructed of compacted earth with a
concrete core wall and is 660 feet long and 50 feet high and
creates a reservoir covering approximately 220 acres containing
about 1,150,000,000 gallons of water. About 800 acres
surrounding the reservoir are planted with more than 1,200,000
evergreen trees to protect the area both from pollution and also
from soil erosion which might otherwise fill the reservoir with
silt. The upper dam is constructed of compacted earth and is
1,000 feet long and 50 feet high and creates a reservoir covering
approximately 290 acres containing about 1,600,000,000 gallons of
water. About 600 acres surrounding the reservoir are planted
with grass to protect the area both from pollution and also from
soil erosion which might otherwise fill the reservoir with silt.
The Company's main pumping station is located in Spring Garden
Township on the south branch of the Codorus Creek about 1,500
feet upstream from its confluence with the west branch of the
Codorus Creek and about four miles downstream from the Company's
lower impounding dam. The pumping station presently houses
pumping equipment consisting of three electrically driven
centrifugal pumps and two diesel-engine driven centrifugal pumps
with a combined pumping capacity of 75,000,000 gallons per day.
From here, raw water is pumped approximately two miles to the
filtration plant through pipes located on a right-of-way owned by
the Company.
The Company's filtration plant is located in Spring Garden
Township about one-half mile south of the City of York. Water at
this plant is filtered through 12 dual media filters having a
stated capacity of 31,000,000 gallons per day and being capable
of filtering 46,500,000 gallons per day for short periods if
necessary. Since the average daily consumption in 1995 was
19,380,000 gallons, it can readily be seen that the present
pumping and filtering facilities are adequate to meet the present
demands.
Clear water reservoirs of the Company which are located in Spring
Garden Township adjacent to the filtration plant are capable of
storing up to 32,000,000 gallons of water, and there are
standpipes located throughout the Company's service area capable
of storing another 15,140,000 gallons of clear water.
The Company's distribution center and material and supplies
warehouse are located at 1801 Mt. Rose Avenue, Springettsbury
Township. There are two one-story concrete block buildings
having 26,680 square feet of area.
The distribution system of the Company has approximately 622
miles of main water lines.
All of the Company's properties listed above are held in fee by
the Company. There are no encumbrances.
In addition, the Company has entered into a "Joint Use and Park
Management Agreement" dated December 29, 1976, and executed by
The York Water Company and the County of York, Pennsylvania,
whereby the Company has licensed to the County of York for fifty
(50) years for county park purposes for the benefit of the
general public in York County the Company's present reservoir
lands and waters referred to in the Agreement as approximately
1,175 acres including two lakes, all in Springfield and York
Townships, York County, Pennsylvania.
York County has in return agreed thereby not to erect a dam
upstream on the east branch of the Codorus Creek and to waive
flood damages to the County's Spring Valley Tract of park lands
if, as planned, the Company builds a third dam around the year
2020. The Company and its customers are thereby assured of a
future reservoir site at reasonable expense.
ITEM 3. LEGAL PROCEEDINGS.
There are no material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of the security holders during
the fourth quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS.
The information set forth under the caption "Security Market and
Dividends" of the 1995 Annual Report to Shareholders is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information set forth under the caption "Highlights of Our
180th Year" of the 1995 Annual Report to Shareholders is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The information set forth under the caption "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" of the 1995 Annual Report to Shareholders is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following financial statements set forth in the 1995 Annual
Report to Shareholders are incorporated herein by reference:
Balance Sheets as of December 31, 1995 and 1994 Page 5
Statements of Income for Years Ended
December 31, 1995, 1994 and 1993 Page 6
Statements of Shareholders' Investment for
Years Ended December 31, 1995, 1994 and 1993 Page 6
Statements of Cash Flows for Years Ended
December 31, 1995, 1994 and 1993 Page 7
Notes to Financial Statements Page 8
Independent Auditors' Report Page 12
Except for the above financial data and the information specified
under Items 5, 6 and 7 of this report, the 1995 Annual Report to
Shareholders is not deemed to be filed as part of this report.
Selected quarterly financial data are not presented because the
Company does not meet the tests set forth in Item 302 (a)(5) of
Regulation S-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
There were no changes in or disagreements with accountants on
accounting and financial disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information set forth under the caption "Election of
Directors" of the Proxy Statement issued pursuant to Regulation
14A for the Company's 1996 Annual Meeting of Shareholders to be
held May 6, 1996 is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information set forth under the caption "Compensation of
Directors and Executive Officers" of the Proxy Statement issued
pursuant to Regulation 14A for the Company's 1996 Annual Meeting
of Shareholders to be held May 6, 1996 is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information set forth under the caption "Voting Securities
and Principal Holders Thereof" of the Proxy Statement issued
pursuant to Regulation 14A for the Company's 1996 Annual Meeting
of Shareholders to be held May 6, 1996 is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information set forth under the caption "Compensation
Committee Interlocks and Insider Participation" of the Proxy
Statement issued pursuant to Regulation 14A for the Company's
1996 Annual Meeting of Shareholders to be held May 6, 1996 is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a) Certain documents filed as a part of the Form 10-K.
The financial statements set forth under Item 8 of this Form
10-K.
Schedule Schedule Page
Number Description Number
II Valuation and Qualifying Accounts 7
The report of the Company's independent auditors with respect to
the financial statement schedule appears on page 6.
All other financial statements and schedules not listed have been
omitted since the required information is included in the
financial statements or the notes thereto, or is not applicable
or required.
The exhibits are set forth in the Index to Exhibits shown on
pages 9, 10 and 11.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the last quarter of
the period covered by this report.
INDEPENDENT AUDITORS' REPORT ON
FINANCIAL STATEMENT SCHEDULES
To the Shareholders and Board of Directors of
The York Water Company:
Under date of February 23, 1996, we reported on the balance
sheets of The York Water Company as of December 31, 1995 and
1994, and the related statements of income, shareholders'
investment, and cash flows for each of the years in the three-
year period ended December 31, 1995, as contained in the 1995
annual report to shareholders. Those financial statements and
our report thereon are incorporated by reference in this annual
report on Form 10-K for the year 1995. In connection with our
audits of the aforementioned financial statements, we also have
audited the related financial statement schedule as listed in
Item 14(a). This financial statement schedule is the
responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered
in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
KPMG Peat Marwick LLP
Harrisburg, Pennsylvania
February 23, 1996
<TABLE>
<CAPTION>
THE YORK WATER COMPANY
SCHEDULE II VALUATION AND QUA LIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DEC EMBER 31, 1995
Additions Charged to
<S> <C> <C> <C> <C> <C>
Balance at Balance
Beginning Costs and Other at End
Description of Year Expenses Accounts Deductions of Year
FOR THE YEAR ENDED DECEMBER 31, 1995:
Reserve for uncollectible accounts $90,000 $67,319 $ - $67,319 $90,000
FOR THE YEAR ENDED DECEMBER 31, 1994:
Reserve for uncollectible accounts $90,000 $61,154 $ - $61,154 $90,000
FOR THE YEAR ENDED DECEMBER 31, 1993:
Reserve for uncollectible accounts $58,000 $96,781 $ - $64,781 $90,000
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
THE YORK WATER COMPANY
(Registrant)
Dated: By: /s/ William T. Morris
William T. Morris
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ William T. Morris By: /s/ Jeffrey S. Osman
William T. Morris Jeffrey S. Osman
(Principal Executive and (Principal Accounting Officer)
Financial Officer and Director)
Dated: Dated:
Directors: Date
By: /s/ Irvin S. Naylor
Irvin S. Naylor
(Chairman)
By: /s/ Horace Keesey III
Horace Keesey III
By: /s/ Chloe Eichelberger
Chloe Eichelberger
By: /s/ Paul W. Ware
Paul W. Ware
By: /s/ John L. Finlayson
John L. Finlayson
By: /s/ Josephine S. Appell
Josephine S. Appell
By:
Frank Motter
By: /s/ George Hay Kain, III
George Hay Kain, III
By:
Michael W. Gang
Page Number of
Exhibit Exhibit Incorporation
Number Description By Reference
3<PAGE>
Articles of Incorporation Incorporated herein
by reference.
Filed previously
with the Securities
and Exchange
Commission as an
exhibit to the
Company's Form S-3
dated July 7, 1994.
<PAGE>
3.1 By-Laws Incorporated herein
by reference.
Filed previously
with the Securities
and Exchange
Commission as an
exhibit to the
Company's 1991 Form
10-K.<PAGE>
4.1<PAGE>
Optional Dividend
Reinvestment Plan<PAGE>
Incorporated herein
by reference.
Filed previously
with the Securities
and Exchange
Commission as the
Company's Form S-3
dated November 20,
1982.<PAGE>
4.4 1986 Public Offering of
Common Stock<PAGE>
Incorporated herein
by reference.
Filed previously
with the Securities
and Exchange
Commission as the
Company's Form S-2
dated October 28,
1986.<PAGE>
4.5<PAGE>
Employees' Stock Purchase
Plan Dated November 28, 1988<PAGE>
Incorporated herein
by reference.
Filed previously
with the Securities
and Exchange
Commission as an
exhibit to the
Company's
Registration
Statement Form S-9
dated December
1988.<PAGE>
4.6<PAGE>
Note Agreement Relative to
the $6,000,000 10.17% Senior
Notes, Series A and
$5,000,000 9.60% Senior
Notes, Series B dated January
2, 1989<PAGE>
Incorporated herein
by reference.
Filed previously
with the Securities
and Exchange
Commission as an
exhibit to the
Company's 1989 Form
10-K.<PAGE>
4.8<PAGE>
Note Agreement Relative to
the $6,500,000 10.05% Senior
Notes, Series C dated August
15, 1990<PAGE>
Incorporated herein
by reference.
Filed previously
with the Securities
and Exchange
Commission as an
exhibit to the
Company's 1990 Form
10-K.<PAGE>
4.10<PAGE>
1992 Public Offering of
Common Stock<PAGE>
Incorporated herein
by reference.
Filed previously
with the Securities
and Exchange
Commission as the
Company's Form S-3
dated April 15,
1992.<PAGE>
4.11<PAGE>
Note Agreement Relative to
the $7,500,000 8.43% Senior
Notes, Series D dated
December 15, 1992<PAGE>
Incorporated herein
by reference.
Filed previously
with the Securities
and Exchange
Commission as an
exhibit to the
Company's 1992 Form
10-K.<PAGE>
4.12<PAGE>
Fourth Supplemental
Acquisition, Financing and
Sale Agreement Relative to
the $2,700,000 4.75% Water
Facilities Revenue Refunding
Bonds dated February 1, 1994<PAGE>
Incorporated herein
by reference.
Filed previously
with the Securities
and Exchange
commission as an
exhibit to the
Company's Quarterly
Report Form 10-Q
for the quarter
ended June 30,
1994.
<PAGE>
4.13 Fifth Supplemental
Acquisition, Financing and
Sale Agreement Relative to
the $4,300,000 5% Water
Facilities Revenue Refunding
Bonds dated October 1, 1995<PAGE>
Incorporated herein
by reference.
Filed previously
with the Securities
and Exchange
Commission as an
exhibit to the
Company's Quarterly
Report Form 10-Q
for the quarter
ended September 30,
1995.<PAGE>
10.1<PAGE>
Articles of Agreement Between
The York Water Company and
Springettsbury Township
Relative to Extension of
Water Mains dated April 17,
1985<PAGE>
Incorporated herein
by reference.
Filed previously
with the Securities
and Exchange
Commission as an
exhibit to the
Company's 1989 Form
10-K.<PAGE>
10.2<PAGE>
Articles of Agreement Between
The York Water Company and
Windsor Township Relative to
Extension of Water Mains
dated February 9, 1989<PAGE>
Incorporated herein
by reference.
Filed previously
with the Securities
and Exchange
Commission as an
exhibit to the
Company's 1989 Form
10-K.<PAGE>
10.3<PAGE>
Articles of Agreement Between
The York Water Company and
Windsor Township, Yorkana
Borough, Modern Trash Removal
of York, Inc. and Lower
Windsor Township Relative to
Extension of Water Mains
dated July 18, 1989<PAGE>
Incorporated herein
by reference.
Filed previously
with the Securities
and Exchange
Commission as an
exhibit to the
Company's 1989 Form
10-K.<PAGE>
10.4<PAGE>
Articles of Agreement Between
The York Water Company and
North Codorus Township
Relative to Extension of
Water Mains dated September
20, 1989<PAGE>
Incorporated herein
by reference.
Filed previously
with the Securities
and Exchange
Commission as an
exhibit to the
Company's 1990 Form
10-K.<PAGE>
10.5<PAGE>
Articles of Agreement Between
The York Water Company and
York Township Relative to
Extension of Water Mains
dated December 29, 1989<PAGE>
Incorporated herein
by reference.
Filed previously
with the Securities
and Exchange
Commission as an
exhibit to the
Company's 1990 Form
10-K.<PAGE>
11<PAGE>
Common Shares Used in
Computing Earnings Per Share<PAGE>
Page 28<PAGE>
13<PAGE>
1994 Annual Report to
Shareholders<PAGE>
Page 29<PAGE>
23<PAGE>
Consent of Independent
Auditors<PAGE>
Page 30<PAGE>
28.1<PAGE>
Undertakings Incorporated by
Reference into Registration
Statement Form S-8 Dated
December, 1988<PAGE>
Page 31<PAGE>
EXHIBIT 3
THE YORK WATER COMPANY
ARTICLES OF INCORPORATION
The Articles of Incorporation of the Company have been filed
previously with the Securities and Exchange Commission as an
exhibit to the Company's Form S-3 dated July 7, 1994 and are
hereby incorporated by reference.
EXHIBIT 3.1
THE YORK WATER COMPANY
BY-LAWS
The By-Laws of the Company have been filed previously with the
Securities and Exchange Commission on form 10-K, dated March 27,
1992 and are hereby incorporated by reference.
EXHIBIT 4.1
THE YORK WATER COMPANY
OPTIONAL DIVIDEND REINVESTMENT PLAN
The Optional Dividend Reinvestment Plan which became effective in
December 1982 has been filed previously with the Securities and
Exchange Commission on Form S-3, Registration Statement Under the
Securities Act of 1933, dated November 20, 1982 and is hereby
incorporated by reference.
EXHIBIT 4.4
THE YORK WATER COMPANY
1986 PUBLIC OFFERING OF COMMON STOCK
The 1986 Public Offering of Common Stock has been filed
previously with the Securities and Exchange Commission as the
Company's Form S-2 dated October 28, 1986 and is hereby
incorporated by reference.
EXHIBIT 4.5
THE YORK WATER COMPANY
EMPLOYEES' STOCK PURCHASE PLAN
The Employees' Stock Purchase plan dated November 28, 1988 has
been filed previously with the Securities and Exchange Commission
as an exhibit to the Company's Registration Statement Form S-8
dated December, 1988 and is hereby incorporated by reference.
EXHIBIT 4.6
THE YORK WATER COMPANY
SENIOR NOTES, SERIES A AND SERIES B NOTE AGREEMENT
The Note Agreement relative to the $6,000,000 10.17% Senior
Notes, Series A and $5,000,000 9.60% Senior Notes, Series B dated
January 2, 1989 has been filed previously with the Securities and
Exchange Commission on Form 10-K dated March 26, 1990, and is
hereby incorporated by reference.
EXHIBIT 4.8
THE YORK WATER COMPANY
SENIOR NOTES, SERIES C NOTE AGREEMENT
The Note Agreement relative to the $6,500,000 10.05% Senior
Notes, Series C dated August 15, 1990 has been filed previously
with the Securities and Exchange Commission on Form 10-K, dated
March 25, 1991 and is hereby incorporated by reference.
EXHIBIT 4.10
THE YORK WATER COMPANY
1992 PUBLIC OFFERING OF COMMON STOCK
The 1992 Public Offering of Common Stock has been filed
previously with the Securities and Exchange Commission as the
Company's Form S-3 dated April 15, 1992 and is hereby
incorporated by reference.
EXHIBIT 4.11
THE YORK WATER COMPANY
SENIOR NOTES, SERIES D NOTE AGREEMENT
The Note agreement relative to the $7,500,000 8.43% Senior Notes,
Series D dated December 18, 1992 has been filed previously with
the Securities and Exchange Commission on Form 10-K, dated March
29, 1993 and is hereby incorporated by reference.
EXHIBIT 4.12
THE YORK WATER COMPANY
4.75% WATER FACILITIES REVENUE REFUNDING BONDS AGREEMENT
The Fourth Supplemental Acquisition, Financing and Sale Agreement
relative to the $2,700,000 4.75% Water Facilities Revenue
Refunding Bonds dated February 1, 1994 has been filed previously
with the Securities and Exchange Commission on Form 10-Q, dated
July 27, 1994, and is hereby incorporated by reference.
EXHIBIT 10.1
THE YORK WATER COMPANY
SPRINGETTSBURY TOWNSHIP ARTICLES OF AGREEMENT
The Articles of Agreement between The York Water Company and
Springettsbury Township relative to extension of water mains
dated April 17, 1985 has been filed previously with the
Securities and Exchange Commission on form 10-K, dated March 26,
1990 and is hereby incorporated by reference.
EXHIBIT 10.2
THE YORK WATER COMPANY
WINDSOR TOWNSHIP ARTICLES OF AGREEMENT
The Articles of Agreement between The York Water Company and
Windsor Township relative to extension of water mains dated
February 9, 1989 has been filed previously with the Securities
and Exchange Commission on Form 10-K dated March 26, 1990 and is
hereby incorporated by reference.
EXHIBIT 10.3
THE YORK WATER COMPANY
WINDSOR TOWNSHIP, YORKANA BOROUGH, MODERN TRASH REMOVAL, INC.
AND LOWER WINDSOR TOWNSHIP ARTICLES OF AGREEMENT
The Articles of Agreement between The York Water Company and
Windsor Township, Yorkana Borough, Modern Trash Removal, Inc. and
Lower Windsor Township relative to extension of water mains dated
July 18, 1989 has been filed previously with the Securities and
Exchange Commission on Form 10-K dated March 26, 1990 and is
hereby incorporated by reference.
EXHIBIT 10.4
THE YORK WATER COMPANY
NORTH CODORUS TOWNSHIP ARTICLES OF AGREEMENT
The Articles of Agreement between The York Water company and
North Codorus Township relative to extension of water mains dated
September 20, 1989 has been filed previously with the Securities
and Exchange Commission on Form 10-K, dated March 25, 1991 and is
hereby incorporated by reference.
EXHIBIT 10.5
THE YORK WATER COMPANY
YORK TOWNSHIP ARTICLES OF AGREEMENT
The Articles of Agreement between The York Water Company and York
Township relative to extension of water mains dated December 29,
1989 has been filed previously with the Securities and Exchange
Commission on Form 10-K, dated March 25, 1991 and is hereby
incorporated by reference.
EXHIBIT 11
THE YORK WATER COMPANY
COMMON SHARES USED IN
COMPUTING EARNINGS
PER SHARE
1995 1994 1993 1992 1991
Common shares
outstanding,
beginning of
the year 629,684 621,817 613,889 551,243 543,968
Weighted average
shares issued in
connection with 1992
stock subscription - - - 29,774 -
Weighted average
shares issued in
connection with the
Employee Stock
Purchase Plan 430 406 398 399 537
Weighted average
shares issued in
connection with the
Optional Dividend
Reinvestment Plan 2,481 2,620 2,617 2,526 2,766
632,595 624,843 616,904 583,942 547,271
EXHIBIT 13
THE YORK WATER COMPANY
1995 ANNUAL REPORT TO SHAREHOLDERS
The York Water Company's 1995 Annual Report to Shareholders is
attached hereto.
The York Water Company
Highlights of Our 180th Year
<TABLE>
<CAPTION>
Summary of Operations For The Year 1995 1994 1993
<S> <C> <C> <C>
Water operating revenue $15,449,296 $14,755,707 $14,201,756
Operating expenses 9,119,832 8,881,499 8,591,315
Income taxes 1,419,907 1,055,448 1,285,799
Operating income 4,909,557 4,818,760 4,324,642
Interest expense 2,738,846 2,720,535 3,045,872
Gain on sale of land - 215,417 842,002
Other income, net 141,536 131,036 430,111
Net income 2,312,247 2,444,678 2,550,883
Per Share of Common Stock
Book value $34.16 $33.75 $33.12
Net income 3.66 3.91 4.13
Dividends <F1> 3.60 3.60 3.60
Number of shares outstanding
at year-end 637,374 629,684 621,817
Utility Plant
Original cost $88,710,279 $83,642,650 $77,241,368
Construction expenditures 5,256,959 6,629,903 6,040,584
Other
Total assets $90,459,706 $86,967,330 $84,738,162
Long-term debt 32,000,000 32,000,000 32,000,000
Summary of Operations For The Year 1992 1991
<S> <C> <C>
Water operating revenue 13,216,692 13,021,354
Operating expenses 7,932,765 7,723,259
Income taxes 765,278 931,408
Operating income 4,518,649 4,366,687
Interest income 2,609,708 2,619,323
Gain on sale of land - -
Other income, net 259,177 279,004
Net income 2,168,118 2,026,368
Per Share of Common Stock
Book value $32.31 $30.29
Net income 3.71 3.70
Dividends <F1> 3.68 3.68
Number of shares outstanding
at year-end 613,889 551,243
Utility Plant
Original cost $71,624,043 $69,108,568
Construction expenditures 2,777,903 3,568,214
Other
Total assets $80,330,004 $69,613,666
Long-term debt 34,966,327 29,531,111
</TABLE>
<F1> Cash dividends per share reflect dividends declared on shares
outstanding at each dividend date.
For Management's Discussion and Analysis of Financial Condition and
Results of Operations, Please Refer to Page 3.<PAGE>
To Our Shareholders:
It was a pleasure to meet so many of you on December 5, 1995 when
we celebrated: the Company's 180th anniversary; the issuance of
the 500th consecutive dividend; and the restoration of our
magnificent main office ceiling. For those who were unable to
attend the celebration, we have bound a copy of the brochure
describing the ceiling into this annual report.
Although we haven't done as well as we would have liked with
respect to our net income and resultant earnings, 1995 was
another active year for your Company.
Operating revenue for 1995 increased 4.7% over those in 1994.
This increase was primarily the result of a 3.7% increase in
rates approved by the Pennsylvania Public Utility Commission
effective September 23, 1994. Unfortunately, the addition of over
1000 customers was not reflected by a corresponding increase in
the company's total consumption. Industrial-Commercial 1995
consumption was down 4.5% over that recorded in 1994; in fact,
the Company's top 25 customers recorded a 6.9% drop. This drop is
attributable in part to the Company's conservation educational
efforts, more recycling by industry and a cut back in the area's
industrial diversity.
The flatness in our operating revenues and the increase in all
expenses resulted in the decrease in the Company's net income.
These factors are now being evaluated with respect to the
possibility of applying for a modest rate increase.
The Company's 1995 major activities included: a new 1.0 million
gallon standpipe for the Loganville re-pump system; the
acquisition of the Nashville and East Prospect Borough
distribution systems; the negotiation and approval by the PAPUC
and PADEP of an agreement to sell bulk water to Glen Rock
Borough; the installation of a caustic feed system to improve
water quality; and the restoration of our main office ceiling.
To take advantage of the lower interest rates, we issued 5%
$4,300,000 Industrial Revenue Refunding Bonds due 2010. The 5%
bonds were used to redeem the outstanding 6.25% bonds that were
issued in 1991. This action resulted in an annual interest
savings of approximately $54,000.
The Company's dividend reinvestment and employee stock purchase
plans continue to be attractive to the Company's shareholders and
employees. In 1995 a total of 7691 shares were purchased which
raised $484,796 in additional capital.
The Company's 1996 planned activities include: the acquisition of
the Jefferson Borough water distribution system; the finalization
of the Glen Rock bulk water project; a rate increase request
filing; and, the acquisition of funds to retire the company's
short term debt and to finance the Company's 1996-97
construction.
Under the Company's mandatory Director's retirement policy,
Robert E. Skold has retired from the Board of Directors after 20
years of service. Mr. Skold served the Board in various
capacities and was the Company's Secretary-Treasurer at his
retirement. Mr. Skold was not only an active participant in
Company matters, but was also an excellent source of advice and
counsel to me personally. Fortunately, we will not lose his
valued counsel since the Board of Directors saw fit to elect him
Director Emeritus.
As a result of Mr. Skold's retirement, the Board of Directors
reorganized the Company and elevated the previously designated
Managers to Vice Presidents and elected Jeffrey S. Osman to
Secretary-Treasurer as well as Vice-President-Finance.
Additionally, Lois L. Shultz was elected Assistant Secretary-
Treasurer and Horace Keesey III was elected Vice-Chairman.
In closing, on behalf of the Board of Directors, I would like to
extend my appreciation to our dedicated, hardworking employees
who consistently go above and beyond the call of duty to bring
"that good York water" into the homes and businesses of our
customers with high levels of quality and service. It is their
efforts that give our Company a well-earned reputation for
excellence throughout the communities we serve.
Respectfully submitted,
William T. Morris, P.E.
President and Chief Executive Officer
<PAGE>
The York Water Company
Description of Business
The business of The York Water Company is to impound, purify
and distribute water. The Company operates entirely within its
franchised territory located in York County, Pennsylvania, and
is subject to regulation by the Pennsylvania Public Utility
Commission (PPUC). Water service is supplied through the
Company's own distribution system to the City of York, the
Boroughs of North York, West York, Manchester, Mount Wolf, New
Salem, Hallam, Jacobus, Loganville, Yorkana, Seven Valleys, East
Prospect, Spring Grove and portions of the Townships of
Manchester, East Manchester, West Manchester, North Codorus,
Springettsbury, Spring Garden, Springfield, York, Hellam,
Windsor, Lower Windsor and Jackson. The Company's service
territory has an estimated population of 140,000. Industry of the
area served is diversified, manufacturing such items as fixtures
and furniture, electrical machinery, food products, paper,
ordnance, textile products, air conditioning, barbells, etc. The
Company's present average daily consumption is 19,380,000
gallons, and its present safe daily yield is 29,900,000 gallons.
In the area served by the Company under the supervision of the
PPUC there are no competitors. During the five years ended in
1995, the Company has maintained an increasing growth in number
of customers and distribution facilities as shown by the
following chart:
<TABLE>
<CAPTION> 1995 1994 1993 1992 1991
<S>
Average daily <C> <C> <C> <C> <C>
consumption (gallons
per day) 19,380,000 19,660,000 19,380,000 18,453,000 19,420,000
Miles of mains at
year-end 622 597 580 570 562
Distribution mains
installed (ft.) 84,515 91,087 58,414 41,771 58,611
Number of customers 44,879 43,830 42,844 42,198 41,650
Population served 140,000 136,000 134,000 133,000 132,000
</TABLE>
Operating revenue in 1995 is derived from the following sources
and in the following percentages: Residential 58%; commercial
and industrial, 34%; other, 8%.
Security Market and Dividends
Securities of The York Water Company are traded over-the-counter.
Quarterly price ranges and cash dividends per share for the last
two years follow:
<TABLE>
<CAPTION> 1995 1994
HIGH LOW DIVIDEND<F1> HIGH LOW DIVIDEND<F1>
<S> <C> <C> <C> <C> <C> <C>
1st Quarter $64.5 $63 $.90 $58 $58 $.90
2nd Quarter 64.5 64.25 .90 59.5 58 .90
3rd Quarter 65.25 64.25 .90 61 59.5 .90
4th Quarter 67.5 64.25 .90 63 61 .90
</TABLE>
<F1> Cash dividends per share reflect dividends declared on
shares outstanding at each dividend date.
(Refer to Note 4 to the Financial Statements for a description of
the restriction on the declaration and payment of cash
dividends.)
Prices are bid prices quoted from local newspapers.
Shareholders of record as of December 31, 1995 were 1,217.
THE COMPANY WILL PROVIDE TO SHAREHOLDERS OF RECORD, AND/OR
BENEFICIAL OWNERS, UPON WRITTEN REQUEST, WITHOUT CHARGE, A COPY
OF FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR 1995.
Requests Should Be Made To:
LOIS L. SHULTZ - ASSISTANT SECRETARY
THE YORK WATER COMPANY
BOX 15089, YORK, PA 17405<PAGE>
The York Water Company
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
1995 Compared with 1994
Water operating revenues for 1995 increased $693,589 or 4.7%
over 1994. The increase resulted primarily from an increase in
rates of 3.7% approved by the Pennsylvania Public Utility
Commission (PPUC) effective September 23, 1994.
Operating expenses, exclusive of depreciation and taxes, for
1995 increased $126,231 or 1.9%. The expense increase was
generally due to increases in maintenance of utility plant.
Depreciation expense for 1995 increased $78,575 or 5.5% over
1994 as a result of increased plant investment.
Federal and state income taxes for 1995 increased $364,459 or
34.5% when compared to 1994 principally as a result of an
increase in taxable income and an increase in deferred income tax
expense resulting from a reduction in deferred tax assets by
recognizing a 2% decline in the state income tax rate.
Interest on long-term debt for 1995 decreased $43,166 or 1.5%.
The decrease was related to the issuance of $2,700,000 4.75%
Revenue Refunding Bonds to replace a like amount of bonds with an
interest rate of 7.0% during the first quarter of 1994 and the
issuance of $4,300,000 5% Revenue Refunding Bonds to replace a
like amount of bonds with an interest rate of 6.25% during the
fourth quarter of 1995.
Interest on short-term debt for 1995 increased $153,498 when
compared to 1994. The increase is due primarily to an increase
in short-term debt outstanding during 1995. The average short-
term debt outstanding in 1995 and 1994 was $2,312,964 and
$312,304, respectively. The increase in short-term debt was used
to fund construction expenditures.
Allowance for funds used during construction for 1995 increased
$92,021 or 68.5% when compared to 1994. The increase was due to
an increase in the Company's plant investment under construction
during 1995.
1994 Compared with 1993
Water operating revenues for 1994 increased $553,951 or 3.9%
over 1993. The increase resulted primarily from an increase in
rates of 3.7% approved by the PPUC effective September 23, 1994
and an increase in the volume of water sold as a result of adding
986 customers during 1994.
Operating expenses, exclusive of depreciation and taxes, for
1994 increased $136,734 or 2.1%. The expense increase was
generally due to increases in power purchased relating to the
volume of water sold and increased repairs of utility plant.
Depreciation expense for 1994 increased $156,220 or 12.3% over
1993 as a result of increased plant investment.
Federal and state income taxes for 1994 decreased $230,351 or
17.9% when compared to 1993 principally as a result of a decrease
in nonoperating income, as discussed below. The reduction of
nonoperating income increased the relative benefit of permanent
differences and resulted in a decrease in the effective tax rate
in 1994 from 33.5% to 30.2%.
Interest on long-term debt for 1994 decreased $283,854 or 9.1%.
The decrease was related to the repayment of long-term debt in
December 1993 and the issuance of $2,700,000 4.75% Revenue
Refunding Bonds to replace a like amount of bonds with an
interest rate of 7.0% during the first quarter of 1994.
Interest on short-term debt for 1994 increased $19,327 when
compared to 1993. The increase is due primarily to an increase
in short-term debt outstanding during 1994. The average short-
term debt outstanding in 1994 and 1993 was $312,304 and $46,518,
respectively.
Allowance for funds used during construction for 1994 increased
$60,810 or 82.8% when compared to 1993. The increase was due to
an increase in the Company's plant investment under construction
during 1994.
During 1994, the Company had a gain on sale of one parcel of
land of $215,417 ($125,128 after tax).
Other income, net for 1994 decreased $299,075 when compared to
1993. The decrease is primarily the result of a decrease in
interest income on a lower average balance of temporary
investments during 1994. Temporary investments as of December
31, 1993 represented amounts remaining from the Company's
issuance of Senior Notes in December 1992. During 1994, the
remainder of these proceeds was used to fund capital improvement
projects. There were no temporary investments as of December 31,
1994.
Rate Developments
Within the last several years the Company has filed written
applications for rate increases with the PPUC and has been
granted rate relief as a result of such requests. The most
recent formal rate request was filed by the Company on April 29,
1994, seeking a 6.7% increase in annual revenues. Effective
September 23, 1994, the PPUC authorized an increase in rates
designed to produce approximately $550,000 in additional annual
operating revenues, an increase of 3.7%.
Liquidity and Capital Resources
During 1995, the per capita volume of water sold did not
significantly change compared to 1994. The Company does not
anticipate any change in the level of water usage which would
have a material impact on future results of operations.
During 1995, the Company had $5,256,959 of construction
expenditures. The Company financed such expenditures through
internally generated funds, customers' advances, short-term
borrowings, and proceeds from the issuance of common stock under
its dividend reinvestment plan (stock issued in lieu of cash
dividends) and employee stock purchase plan.
The Company anticipates construction expenditures for 1996 and
1997 of approximately $5,457,000 and $3,662,000, respectively.
The Company plans to finance such expenditures with a common
stock subscription, internally generated funds, customers'
advances, short-term borrowings, and proceeds from the issuance
of common stock under its dividend reinvestment plan (stock
issued in lieu of cash dividends) and employee stock purchase
plan.
The Company anticipates that it will submit an application in
the future with the PPUC proposing increases in rates to provide
a fair rate of return on the capital expenditures associated with
its 1996 and 1997 construction projects.
During 1995, net cash used in investing and financing activities
exceeded net cash provided by operating activities. The Company
anticipates that during 1996 net cash used in investing and
financing activities will again exceed net cash provided by
operating activities. Borrowings against the Company's lines of
credit, proceeds from the issuance of common stock under its
dividend reinvestment plan (stock issued in lieu of cash
dividends) and employee stock purchase plan, a common stock
subscription and customers' advances are used to satisfy the need
for additional cash.
As of December 31, 1995, current liabilities exceeded current
assets by $3,986,903. As of December 31, 1994, current
liabilities exceeded current assets by $2,143,806. Generally,
the Company finances a portion of its construction expenditures
with borrowings against its lines of credit until such borrowings
reach an amount which would justify issuing long-term debt.
Accordingly, current liabilities frequently exceed current assets
on the Company's balance sheets. Short-term borrowings from
lines of credit as of December 31, 1995 and 1994 were $4,164,000
and $1,302,000, respectively. The Company maintains lines of
credit aggregating $11,000,000. Loans granted under these lines
of credit bear interest based on the prime or LIBOR rates. The
Company is not required to maintain compensating balances on its
lines of credit.
During 1995, the Company's dividend payout ratios relative to
net income and cash provided by operating activities were 98.4%
and 75.9%, respectively. The Company believes that these payout
ratios are appropriate.
Shareholders' investment as a percent of total capitalization
was 40.5% as of December 31, 1995 compared with 39.9% as of
December 31, 1994. This increase was the result of an increase
in the amount of shareholder equity.
The Company, like all other businesses, is affected by
inflation, most notably by the continually increasing costs
incurred to maintain and expand its service capacity. The
cumulative effect of inflation results in significantly higher
facility replacement costs which must be recovered from future
cash flows. The ability of the Company to recover this increased
investment in facilities is dependent upon future revenue
increases, which are subject to approval by the PPUC.
Impact of Recent Accounting Pronouncements
The adoption of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-lived Assets and for Long-lived Assets
to be Disposed Of," and No. 123, "Accounting for Stock-Based
Compensation," during fiscal 1996 are not expected to have a
material effect on the Company's financial position.
Balance Sheets
December 31
Assets 1995 1994
UTILITY PLANT, at original cost. . . .$88,710,279 $83,642,650
Less-Reserve for depreciation. . . . . 11,890,730 10,535,512
76,819,549 73,107,138
OTHER PHYSICAL PROPERTY:
Less-Reserve for depreciation of
55,291in 1995 and $50,312 in 1994. . . 426,180 430,162
CURRENT ASSETS:
Receivables, less reserves of
$90,000 in 1995 and in 1994 . . . . . 2,443,129 2,211,288
Recoverable income taxes . . . . . . . 96,123 -
Materials and supplies, at cost . . . 299,637 298,356
Prepaid expenses . . . . . . . . . . . 115,392 111,278
Deferred income taxes (Note 3) . . . . 61,377 64,877
3,015,658 2,685,799
OTHER LONG-TERM ASSETS:
Prepaid pension cost (Note 6). . . . . 1,530,238 1,402,946
Deferred debt expense. . . . . . . . . 495,594 445,713
Deferred rate case expense . . . . . . 42,499 139,864
Notes receivable (Note 7). . . . . . . 1,046,118 1,155,753
Deferred regulatory assets (Note 3). . 6,302,127 6,885,508
Other. . . . . . . . . . . . . . . . . 781,743 714,447
10,198,319 10,744,231
$90,459,706 $86,967,330
Capitalization and Liabilities
CAPITALIZATION:
Common stock, par value $10 per share,
authorized 1,000,000 shares,
outstanding 637,374 shares in 1995
and 629,684 shares in 1994 (Note 5) .$ 6,373,743 $ 6,296,836
Capital surplus. . . . . . . . . . . . 13,554,042 13,146,153
Earnings retained in the business. . . 1,843,982 1,808,925
21,771,767 21,251,914
Long-term debt (Note 4). . . . . . . . 32,000,000 32,000,000
53,771,767 53,251,914
CURRENT LIABILITIES:
Short-term borrowings (Note 4) . . . . 4,164,000 1,302,000
Accounts payable.. . . . . . . . . . . 342,610 891,034
Dividends payable. . . . . . . . . . . 468,053 464,295
Accrued taxes. . . . . . . . . . . . . 34,833 331,847
Advance water revenues . . . . . . . . 183,398 169,110
Accrued interest . . . . . . . . . . . 697,261 680,240
Other accrued expenses . . . . . . . . 1,112,406 991,079
7,002,561 4,829,605
DEFERRED CREDITS:
Customers' advances for construction
(Note 7). . . . . . . . . . . . . . . 15,913,616 15,037,501
Contributions in aid of construction . 4,576,923 4,375,345
Deferred income taxes (Note 3) . . . . 7,753,441 7,969,029
Deferred regulatory liabilities
(Note 3). . . . . . . . . . . . . . . 1,441,398 1,503,936
29,685,378 28,885,811
$90,459,706 $86,967,330
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>Statements of Income Year Ended December 31
<S> 1995 1994 1993
WATER OPERATING REVENUES: <C> <C> <C>
Residential $ 8,895,601 $ 8,271,510 $ 8,080,582
Commercial and industrial 5,292,109 5,313,765 4,990,704
Other 1,261,586 1,170,432 1,130,470
15,449,296 14,755,707 14,201,756
OPERATING EXPENSES:
Operation and maintenance. 3,467,540 3,277,641 3,069,746
Administrative and general 3,187,771 3,251,439 3,322,600
6,655,311 6,529,080 6,392,346
Depreciation 1,509,918 1,431,343 1,275,123
Taxes other than income taxes 954,603 921,076 923,846
Federal and state inc taxes (Note 3) 1,419,907 1,055,448 1,285,799
10,539,739 9,936,947 9,877,114
Operating income 4,909,557 4,818,760 4,324,642
INTEREST EXPENSE AND OTHER INCOME:
Interest on long-term debt (Note 4) 2,789,721 2,832,887 3,116,741
Interest on short-term debt (Note 4) 175,424 21,926 2,599
Allowance for funds used during const (226,299) (134,278) (73,468)
Gain on sale of land - (215,417) (842,002)
Other income, net (141,536) (131,036) (430,111)
2,597,310 2,374,082 1,773,759
Net income $ 2,312,247 $ 2,444,678 $ 2,550,883
Earnings per share (Note 5) $3.66 $3.91 $4.13
Statements of Shareholders' Investment
Earnings
Retained
Common Capital In The
Stock Surplus Business
Balance, January 1, 1993 $6,138,888 $12,409,884 $1,283,326
Net income - - 2,550,883
Cash dividends ($3.60 per share) - - (2,220,683)
Issuance of common stock under dividend
reinvestment plan 68,573 307,548 -
Issuance of common stock under employee
stock purchase plan 10,710 48,311 -
Balance, December 31, 1993 6,218,171 12,765,743 1,613,526
Net income - - 2,444,678
Cash dividends ($3.60 per share) - - (2,249,279)
Issuance of common stock under dividend
reinvestment plan 67,965 328,644 -
Issuance of common stock under employee
stock purchase plan 10,700 51,766 -
Balance, December 31, 1994 6,296,836 13,146,153 1,808,925
Net income - - 2,312,247
Cash dividends ($3.60 per share) - - (2,277,190)
Issuance of common stock under dividend
reinvestment plan 64,927 344,255 -
Issuance of common stock under employee
stock purchase plan 11,980 63,634
Balance, December 31, 1995 $6,373,743 $13,554,042 $1,843,982
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of Cash Flows
Year Ended December 31
<S> 1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES: <C> <C> <C>
Net income $ 2,312,247 $ 2,444,678 $ 2,550,883
Adjustments to reconcile net income to
net cash provided by oper activities
Gain on sale of land - (215,417) (842,002)
Depreciation . . . . . . . . . . . . . . 1,509,918 1,431,343 1,275,123
Provision for losses on accts receivable 67,319 61,154 96,781
Increase (decrease) in deferred inc taxes
(including regulatory assets and liab) 308,755 8,171 (139,897)
Changes in assets and liabilities:
Increase in accounts receivable. . . . (299,160) (113,019) (114,653)
Increase in recoverable income taxes . (96,123) - -
Increase in materials and supplies . . (1,281) (38,220) (11,342)
Increase in prepaid expenses and prepaid
pension costs . . . . . . . . . . . . (131,406) (116,466) (59,234)
(Decrease) increase in accounts payable,
accrued expenses and
other liabilities . . . . . . . . . . (409,051) 384,364 518,860
(Decrease) increase in accrued interest
and taxes . . . . . . . . . . . . . . (279,993) 34,818 264,195
Decrease (increase) in other assets. . 18,800 (127,204) 134,256
Net Cash Provided by Oper Activities . 3,000,025 3,754,202 3,672,970
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of temporary investments. . - (10,111) (5,313,296)
Maturities of temporary investments. . . - 2,007,935 12,363,267
Proceeds from the sale of land . . . . . - 249,000 977,000
Costs incurred related to the sale of land - (33,583) (134,998)
Construction expenditures. . . . . . . . (5,256,959) (6,629,903) (6,040,584)
Customers' advances for construction and
contributions in aid of construction. . 1,077,693 1,436,122 923,534
Net Cash (Used in) Provided by
Investing Activities . . . . . . . . . (4,179,266) (2,980,540) 2,774,923
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line-of-credit
agreements. . . . . . . . . . . . . . . 2,862,000 850,000 452,000
Repayment of long-term debt. . . . . . . - - (5,069,266)
Issuance of common stock under dividend
reinvestment plan . . . . . . . . . . . 409,182 396,609 376,121
Issuance of common stock under employee
stock purchase plan . . . . . . . . . . 75,614 62,466 59,021
Dividends paid . . . . . . . . . . . . . (2,277,190) (2,249,279) (2,220,683)
Decrease (increase) in notes receivable. 109,635 123,908 (2,452)
Net Cash (Used in) Provided by
Financing Activities . . . . . . . . . 1,179,241 (816,296) (6,405,259)
Net (decrease) increase in cash and cash
equivalents . . . . . . . . . . . . . . - (42,634) 42,634
Cash and cash equivalents at beginning
of year - 42,634 -
Cash and cash equivalents at end of year $ - $ - $ 42,634
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest, net of amounts capitalized . $2,552,529 $2,662,806 $2,984,232
Income taxes . . . . . . . . . . . . . 1,488,488 979,366 1,246,498
Supplemental disclosure of non-cash investing
and financing activities:
In 1994, the Company offset notes receivable
in the amount of $1,395,776 against the
related advances for construction. See Note 7.
The accompanying notes are an intregal part of these statements.
</TABLE>
<PAGE>
Notes to Financial Statements
l. Accounting Policies
The business of The York Water Company is to impound, purify
and distribute water. The Company operates entirely within its
franchised territory located in York County, Pennsylvania, and is
subject to regulation by the PPUC.
The following summarizes the significant accounting policies
employed by The York Water Company.
Depreciation, Amortization, Maintenance and Repairs-
The straight-line remaining life method is used to compute
depreciation on utility plant. The effective rate of
depreciation was 2.42% in 1995, 2.45% in 1994 and 2.26% in 1993
on average utility plant, net of customers' advances and
contributions. Larger depreciation provisions are deducted for
tax purposes.
Annual provisions for depreciation of transportation and
mechanical equipment included in utility plant are computed on a
straight-line basis over the estimated service lives. Such
provisions are charged to clearing accounts and apportioned
therefrom to operating expenses and other accounts in accordance
with the Uniform System of Accounts as prescribed by the PPUC.
The Company charges to maintenance expense the cost of
repairs and replacements and renewals of less than units of
property. Maintenance of transportation equipment is charged to
clearing accounts and apportioned therefrom in a manner similar
to depreciation. The cost of replacements, renewals and
betterments of units of property is capitalized to the utility
plant accounts.
Upon normal retirement of depreciable property, the estimated
or actual cost of the asset is credited to the utility plant
account, and such amounts, together with the cost of removal less
salvage, is charged to the reserve for depreciation. Gains or
losses from abnormal retirements are reflected in income
currently.
Deferred Charges-
Deferred debt expense is amortized on a straight-line basis
over the term of the related debt.
Deferred rate case expense is amortized over twenty months as
specified by the PPUC for rate-making purposes.
Revenues-
Revenues include amounts billed to customers on a cycle basis
and unbilled amounts based on estimated usage from the latest
meter reading to the end of the accounting period.
Customers' Advances for Construction-
Advances are received from customers for construction of
utility plant and are refundable as operating revenues are earned
and any notes receivable have been paid after the completion of
construction (see also Note 7). After all refunds to which the
customer is entitled are made, any remaining balance is
transferred to contributions in aid of construction.
Contributions in Aid of Construction-
Contributions in aid of construction include direct
contributions and the portion of customers' advances for
construction which become nonrefundable. Transfers to other
accounts may not be made without approval of the PPUC.
Income Taxes-
Effective January 1, 1993, the Company adopted the provisions
of Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes (SFAS No. 109). Under the asset and
liability method of SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. Under SFAS No. 109, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
The adoption of SFAS No. 109 did not result in a cumulative
effect adjustment to the statement of income for the twelve
months ended December 31, 1993. Certain adjustments to deferred
income taxes are offset by recording regulatory assets and
liabilities. These regulatory assets and liabilities will be
settled through the regulatory process. Adjustments recorded as
a result of SFAS No. 109 do not affect cash. Accordingly, these
adjustments have no impact on the Company's statements of cash
flows.
Amounts equivalent to investment tax credits claimed for tax
purposes are deferred in the accounts and are being amortized to
income generally over the life of the related property.
Allowance for Funds Used During Construction-
Allowance for funds used during construction (AFUDC)
represents the cost of funds used for construction purposes
during the period of construction. These costs are reflected as
non-cash income during the construction period and as an addition
to the cost of plant constructed.
Statements of Cash Flows-
For the purposes of the statements of cash flows, the Company
considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents except
for those instruments earmarked to fund construction expenditures
or repay long-term debt.
Use of Estimates in the Preparation of Financial Statements-
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
2. Rate Increases
The Company has increased rates as approved by the PPUC in
September 1994 (3.7%).<PAGE>
Notes to Financial Statements (Continued)
3. Income Taxes
The provisions for income taxes consist of:
1995 1994 1993
Federal current $ 805,004 $ 780,009 $ 861,171
State current 254,807 267,268 338,302
Federal deferred 279,490 359,714 206,169
State deferred117,915 (314,477) (83,792)
Federal investment tax
credit, net of current
utilization........... (37,309) (37,066) (36,051)
Total income
taxes................. $1,419,907 $1,055,448 $1,285,799
A reconciliation of the statutory Federal tax provision (34%) to
the total provision follows:
1995 1994 1993
Statutory Federal
tax provision $1,268,932 $1,190,043 $1,304,472
Reversal of
taxes related to
rate cases........... 33,104 (3,484) 72,931
Tax-exempt
interest............. (27,674) (18,043) (68,328)
Effect of
depreciation
flowed through (58,448) (43,405) (94,507)
Effect of cost of
removal flowed
through.............. (24,163) (41,052) (18,361)
Amortization of
investment tax
credit............... (38,108) (38,090) (38,060)
State income
taxes, net of
Federal benefit. 245,997 (31,158) 167,977
Other, net........... 20,267 40,637 (40,325)
Total income
taxes................ $1,419,907 $1,055,448 $1,285,799
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities as of December 31, 1995 and 1994 are summarized in
the following table:
1995 1994
Deferred tax assets:
Allowance for doubtful accounts $ 61,377 $ 64,877
Deferred compensation 411,476 388,397
Customers' advances
and contributions 4,654,942 4,390,037
Alternative minimum tax
credit carryforward 474,809 227,311
Other - 196,157
Total gross deferred tax assets 5,602,604 5,266,779
Less valuation allowance - -
Total deferred tax assets 5,602,604 5,266,779
Deferred tax liabilities:
Accelerated depreciation 10,340,217 10,083,721
Investment tax credit 451,673 406,865
Depreciation on customers'
advance assets 760,234 627,269
Pension income 815,255 1,372,812
Cost of removal 317,769 284,658
Tank painting 276,997 292,790
Other 332,523 102,816
Total deferred tax liabilities 13,294,668 13,170,931
Net deferred tax liability $7,692,064 $7,904,152
Reflected on balance sheets as:
Current deferred asset $ 61,377 $ 64,877
Noncurrent deferred liability (7,753,441) (7,969,029)
Net deferred tax liability $(7,692,064)$(7,904,152)
No valuation allowance is required for deferred tax assets as
of December 31, 1995 and 1994. In assessing the realizability of
deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary
differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future
taxable income, and tax planning strategies in making this
assessment. Based upon the level of historical taxable income
and the current regulatory environment, management believes it is
more likely than not the Company will realize the benefits of
these deductible differences.
As discussed in Note 1, the Company adopted SFAS No. 109
effective January 1, 1993. In accordance with generally accepted
accounting principles for regulated industries, the Company has
recorded offsetting deferred regulatory assets and liabilities
for the effects of the adoption of SFAS No. 109. Consequently,
the adoption of SFAS No. 109 did not result in a cumulative
effect adjustment to the statement of income for the year ended
December 31, 1993.
During 1994, the Company recorded a gain on sale of land of
$215,417. Federal and state income taxes relative to the gain
amounted to $90,289.
During 1993, the Company recorded a gain on sale of land of
$842,002. Federal and state income taxes relative to the gain
amounted to $354,356.
<PAGE>
4. Borrowings
Long-term debt as of December 31, 1995 and 1994 is summarized
in the following table:
1995 1994
10.17% Senior Notes,
Series A, due 2019.............. $ 6,000,000 $ 6,000,000
6.25% Industrial Development
Authority Revenue Refunding
Bonds, Series 1991, due 2000.... - 4,300,000
9.60% Senior Notes,
Series B, due 2019......... 5,000,000 5,000,000
10.05% Senior Notes,
Series C, due 2020......... 6,500,000 6,500,000
8.43% Senior Notes,
Series D, due 2022........ 7,500,000 7,500,000
4.75% Industrial Development
Authority Revenue Refunding
Bonds, Series 1994, due 2009.... 2,700,000 2,700,000
5% Industrial Development
Authority Revenue Refunding
Bonds, Series 1995 due 2010..... 4,300,000 -
$32,000,000 $32,000,000
In October 1995, the Company issued $4,300,000 of 5%
Industrial Development Authority Revenue Refunding Bonds, Series
1995, due 2010. Proceeds of these Bonds were used to redeem the
outstanding amount of 6.25% Industrial Development Authority
Revenue Refunding Bonds. These Bonds have mandatory tender dates
of June 1, 2000 and June 1, 2005.
In March 1994, the Company issued $2,700,000 of 4.75%
Industrial Development Authority Revenue Refunding Bonds, Series
1994, due 2009. Proceeds of these Bonds were used to redeem the
outstanding amount of 7% Industrial Development Authority Revenue
Refunding Bonds, Series 1989. These bonds have mandatory tender
dates of May 15, 1999 and May 15, 2004.
The Company maintains lines of credit aggregating $11,000,000.
Loans granted under these lines as of December 31, 1995 bear
interest based on the prime or LIBOR rate. Short-term borrowings
amounted to $4,164,000 as of December 31, 1995 and $1,302,000 as
of December 31, 1994. The weighted average interest rate on
short-term borrowings outstanding as of December 31, 1995 and
1994 is 7.58% and 7.33%, respectively. The Company is not
required to maintain compensating balances on its lines of
credit.
Long-term debt maturing in the next five years is as follows:
1999 $2,700,000
2000 4,300,000
The terms of the debenture agreements limit in some cases the
Company's ability to prepay its borrowings and include certain
restrictions with respect to declaration and payment of cash
dividends and acquisition of the Company's stock. Under the
terms of the most restrictive agreements, cumulative payments for
dividends and acquisition of stock since December 31, 1982 may
not exceed $1,500,000 plus net income since that date. As of
December 31, 1995, none of the earnings retained in the business
are restricted under these provisions.
5. Common Stock and Earnings Per Share
Earnings per share are based upon the weighted average number
of shares outstanding of 632,595 in 1995; 624,823 in 1994; and
616,904 in 1993.
Under the employee stock purchase plan, all full-time
employees who have been employed at least six consecutive months
may purchase shares of the Company's common stock through payroll
deductions limited to 10% of gross compensation. The purchase
price is 95% of the fair market value (as defined). Ten thousand
shares of common stock have been authorized to be offered under
the plan, of which 7,749 shares have been issued as of December
31, 1995.
Under the optional dividend reinvestment plan, holders of the
Company's stock may purchase additional shares subject to an
annual maximum of $1,500. The purchase price is 95% of the fair
market value (as defined). One hundred and twenty thousand
shares of common stock have been authorized to be offered under
the plan, of which 71,180 shares have been issued as of December
31, 1995. During 1994, the Company's Board of Directors approved
an increase in the number of authorized shares of common stock
offered under the plan.
6. Employee Benefit Plans
The Company maintains two defined benefit pension plans
covering substantially all of its employees. The benefits are
based upon years of service times the sum of $14.50 for the Union
represented employees and $15.50 for the general and
administrative employees plus 1.5% of final average monthly
earnings in excess of $400. The Company's funding policy is to
contribute annually the maximum amount permitted by the Employee
Retirement Income Security Act of 1974.
The following table sets forth the plans' funded status and
amounts recognized in the Company's balance sheets as of December
31, 1995 and 1994. The measurement of assets and obligations of
the plans is as of December 31, 1995 and 1994.
1995 1994
Actuarial present value
of benefit obligations:
Accumulated benefit
obligation, including
vested benefits of
$5,908,800 in 1995 and
$5,463,400 in 1994........ $(6,220,600) $(5,542,300)
Projected benefit
obligation for service
rendered to date $(7,558,300) $(6,739,400)
Plan assets at fair value,
primarily common trust
stock and bond funds....... 10,293,050 9,055,906
Plan assets in excess of
projected benefit
obligation........................ 2,734,750 2,316,506
Unrecognized net loss from
past experience different
from that assumed............ 67,821 564,773
Unrecognized net transition
asset as of December
31, 1995 and 1994
being recognized
over 15 years..................... (1,272,333) (1,478,333)
Prepaid pension cost as of
of December 31, 1995 and
1994.............................. $ 1,530,238 $ 1,402,946
Net pension income for 1995, 1994 and 1993 included the following
components:
1995 1994 1993
Service cost-benefits
earned during the
period $215,700 $ 283,100 $ 276,600
Interest cost on
projected benefit
obligation 469,119 444,317 412,012
Actual return on plan
assets (1,459,203) 156,727 (684,780)
Net amortization and
deferral 647,092 (997,522) (114,853)
Net periodic pension
income $(127,292) $(113,378) $(111,021)
The weighted average discount rate used in determining the
actuarial present value of the projected benefit obligation was
6.5% in 1995 and 7% in 1994. The rate of increase in future
compensation levels was 4%. The expected long-term rate of
return on assets was 7%.
Beginning in 1994, the Company adopted a savings plan pursuant
to the provisions of section 401(k) of the Internal Revenue Code.
This savings plan covers general and administrative employees.
The plan provides for elective employee contributions of up to
15% of compensation and Company matching contributions of 50% of
the participant's contribution, up to a maximum annual Company
contribution of $500. Contributions to the plan amounted to
$22,125 in 1995 and $14,062 in 1994.
7. Notes Receivable
The Company has entered into agreements with municipalities to
extend water service into newly-formed water districts. The
Company loaned funds to the municipalities to cover the costs
related to the projects. The municipalities concurrently
advanced these funds to the Company in the form of customers'
advances for construction. The municipalities are required to
charge application fees and water revenue surcharges (fees) to
customers connected to the system which are remitted to the
Company. The principal and the related customer advance are
reduced periodically as operating revenues are earned by the
Company from customers connected to the system and refunds of
advances are made. There is no due date for the notes nor
expiration date for the advances.
In 1994, the Company offset notes receivable in the amount of
$1,395,776 against the related advances for construction based on
its determination that the principal recoverable from noteholders
was less than the recorded amount, and the fact that advances are
not fully refundable to the extent that payments are not received
on the notes.
The Company has recorded interest income of $61,322 in 1995,
$32,628 in 1994 and $172,804 in 1993 on these notes.
Included in the accompanying balance sheets at December 31, 1995
and 1994 were the following amounts related to these projects.
1995 1994
Notes receivable, including
interest $ 823,969 $ 942,624
Customers' advances for
construction 2,486,522 2,499,099
8. Capital Commitments
The estimated funds needed for the Company's construction
program for 1996 are $5,457,000. The Company plans to finance
such expenditures with internally generated funds, customers'
advances, short-term borrowings and proceeds from the issuance of
common stock under its dividend reinvestment plan (stock issued
in lieu of cash dividends) and employee stock purchase plan.
9. Commitments and Contingent Liabilities
The Company purchases meter interface units under a
noncancellable purchase agreement expiring October 31, 1997.
Payments relating to this purchase amounted to $53,400 in 1995,
$45,187 in 1994 and $19,034 in 1993. Such payments will amount
to $46,341 in 1996 and $19,053 in 1997.
The Company is involved in certain legal and administrative
proceedings before various courts and governmental agencies
concerning rates and other matters. The Company expects that the
ultimate disposition of these proceedings will not have a
material effect on the Company's financial position or results of
operations.
10. Fair Value of Financial Instruments
The estimated fair value of financial instruments has been
determined based on available market information and appropriate
valuation methodologies. However, considerable judgment is
necessarily required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that the
Company might realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies may
have a material effect on the estimated fair value.
The carrying amount of current assets and liabilities that are
considered financial instruments approximates their fair value as
of the dates presented. The Company's long-term debt, with a
carrying value of $32,000,000 at December 31, 1995, had an
estimated fair value of approximately $35,000.00.
The Company's customers' advances for construction and notes
receivable have carrying values at December 31, 1995 of
$15,913,616 and $1,046,118, respectively. The relative fair
values of these amounts cannot be accurately estimated since
future payment streams are dependent upon several factors,
including new customer connections, customer consumption levels
and future rate increases.
Independent Auditors' Report
To the Shareholders and Board of Directors of The York Water
Company:
We have audited the accompanying balance sheets of The York
Water Company as of December 31, 1995 and 1994 and the related
statements of income, shareholders' investment, and cash flows
for each of the years in the three-year period ended December 31,
1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of The York Water Company at December 31, 1995 and 1994 and the
results of its operations and its cash flows for each of the
years in the three-year period ended December 31, 1995, in
conformity with generally accepted accounting principles.
As discussed in notes 1 and 3 to the financial statements, the
Company changed its method of accounting for income taxes in 1993
to adopt the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes.
KPMG PEAT MARWICK LLP
Harrisburg, PA
February 23, 1996
Directors, Officers and Key Employees
Irvin S. Naylor<F1>
Chairman of the Board
Vice Chairman of Board
Cor-Box, Incorporated
William T. Morris, P.E.<F1>
President and
Chief Executive Officer
The York Water Company
Horace Keesey III<F1>
Vice Chairman of the Board
Consultant
Josephine S. Appell<F1>
Chairman of the Board
York Blue Print Company, Inc.
Frank Motter<F1>
President
Motter Printing Press Co.
Chloe Eichelberger
President/Chief Executive
Officer
Chloe Eichelberger Textiles,
Inc.
George Hay Kain, III<F2>
Attorney at Law
Paul W. Ware<F2>
Chairman
Penn Fuel Gas, Inc.
John L. Finlayson
Vice President-Finance and
Administration
Susquehanna Pfaltzgraff Co.
Michael W. Gang
Partner
Morgan, Lewis & Bockius LLP
Director Emeritus
William H. Kain
Robert E. Skold
<F1>Members of the
Executive Committee
<F2>Alternate Members of
the Executive Committee
Staff
William T. Morris, P.E.
President and
Chief Executive Officer
Jeffrey S. Osman
Vice President-Finance
Secretary-Treasurer
Duane R. Close
Vice President-Operations
Jeffrey R. Hines, P.E.
Vice President-Engineering
Albert J. Shultz
Vice President-Human
Resources
Lois L. Shultz
Customer Service Manager
Assistant Secretary/
Assistant Treasurer
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of
The York Water Company:
We consent to incorporation by reference in the registration
statements No. 2-80547 on Form S-3 (Optional Dividend
Reinvestment Plan) and No. 33-26180 on Form S-8 (Employees' Stock
Purchase Plan) of The York Water Company of our reports dated
February 23, 1996, relating to the balance sheets of The York
Water Company as of December 31, 1995 and 1994, and the related
statements of income, shareholders' investment, and cash flows
for each of the years in the three-year period ended December 31,
1995, and related schedule which report appears in the December 31,
1995 annual report to shareholders on Form 10-K of The York Water
Company and is incorporated herein by reference.
KPMG Peat Marwick LLP
Harrisburg, Pennsylvania
February 23, 1996
EXHIBIT 28.1
THE YORK WATER COMPANY
UNDERTAKINGS INCORPORATED BY REFERENCE INTO REGISTRATION
STATEMENT FORM S-8 DATED DECEMBER, 1988
The undertaking set forth below is filed for purposes of
incorporation by reference into Part II of the registration
statements on Form S-8, File No. 33.
Item 9. Undertakings.
(a) The undersigned registrant hereby undertakes:
Insofar as indemnification for liabilities
rising under the Securities Act of 1933 (the
Securities Act") may be permitted to
directors, officers or persons controlling the registrant
pursuant to the provisions described in this registration
statement, or otherwise, The York Water Company (the "Company")
has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable. In the event that
a claim for indemnification against such liabilities, (other than
the payment by the Company of expenses incurred or paid by a
director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection
with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
<TABLE> <S> <C>
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<NAME> YORK WATER COMPANY
<S> <C>
<PERIOD-TYPE> YEAR
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<PERIOD-END> DEC-31-1995
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