SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1996 Commission File No. 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 17401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including Area Code 717-845-3601
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
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common stock, $10 par value 643,023 Shares outstanding
as of September 30, 1996<PAGE>
THE YORK WATER COMPANY
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet
(Unaudited)
As Of As of
Sept.30,1996 Dec. 31, 1995
UTILITY PLANT, at original cost $91,851,233 $88,710,279
Less-Reserve for depreciation 12,811,500 11,890,730
79,039,733 76,819,549
OTHER PHYSICAL PROPERTY:
Less-Reserve for depreciation of
$59,067 in 1996 and $55,291 in 1995 422,404 426,180
CURRENT ASSETS:
Special Cash Deposit-Stock
Subscription 4,981,942 -
Receivables, less allowances of
$90,000 in 1996 and 1995 2,431,087 2,443,129
Recoverable income taxes 65,539 96,123
Materials and supplies, at cost
(first-in, first-out) 293,291 299,637
Prepaid expenses 305,880 115,392
Deferred income taxes 61,377 61,377
8,139,116 3,015,658
OTHER LONG-TERM ASSETS:
Prepaid pension cost 1,642,774 1,530,238
Deferred debt expense 481,619 495,594
Deferred rate case expense 162,026 42,499
Notes receivable 935,026 1,046,118
Deferred regulatory assets 6,483,738 6,302,127
Other 859,866 781,743
10,565,049 10,198,319
$98,166,302 $90,459,706<PAGE>
THE YORK WATER COMPANY
Balance Sheet
(Unaudited)
As Of As Of
Sept.30,1996 Dec. 31, 1995
CAPITALIZATION
Common stock $ 6,430,225 $ 6,373,743
Capital surplus 13,824,574 13,554,042
Earnings retained in the business 1,919,764 1,843,982
22,174,563 21,771,767
LONG-TERM DEBT
5.00% Ind. Dev. Auth. Rev. Refund
Bonds, due 2010 4,300,000 4,300,000
10.05% Senior Notes, Series C,
due 2020 6,500,000 6,500,000
10.17% Senior Notes, Series A,
due 2019 6,000,000 6,000,000
9.6% Senior Notes, Series B,due 2019 5,000,000 5,000,000
8.43% Senior Notes,Series D,due 2022 7,500,000 7,500,000
4.75% Ind. Dev. Auth. Rev.
Refunding Bonds, due 2009 2,700,000 2,700,000
32,000,000 32,000,000
CURRENT LIABILITIES
Short-term borrowings 5,553,000 4,164,000
Accounts payable 370,430 342,610
Dividends payable 468,395 468,053
Accrued taxes 42,200 34,833
Advance water revenues 187,798 183,398
Accrued interest 499,071 697,261
Stock Subscription Rights Payable 4,981,942 -
Other accrued expenses 1,277,487 1,112,406
13,380,323 7,002,561
DEFERRED CREDITS
Customers' advances for construction16,351,095 15,913,616
Contributions in aid of construction 4,579,105 4,576,923
Deferred income taxes 8,239,818 7,753,441
Deferred regulatory liabilities 1,441,398 1,441,398
30,611,416 29,685,378
$98,166,302 $90,459,706<PAGE>
<TABLE> THE YORK WATER COMPANY
Statements of Income
<CAPTION> (Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
<S> 1996 1995 1996 1995
WATER OPERATING REVENUES <C> <C> <C> <C>
Residential $2,326,006 $2,390,649 $6,807,405 $6,674,332
Commercial and industrial 1,207,861 1,422,036 3,579,330 4,049,124
Other 387,572 319,490 1,081,399 941,040
3,921,439 4,132,175 11,468,134 11,664,496
OPERATING EXPENSES
Operation and maintenance 991,599 956,175 2,612,855 2,537,818
Administrative and general 840,635 800,972 2,353,199 2,473,302
1,832,234 1,757,147 4,966,054 5,011,120
Depreciation 342,613 377,479 1,027,840 1,132,438
Taxes other than income taxes 227,531 223,912 720,424 706,005
Federal and state income taxes 281,387 365,303 864,800 995,211
2,683,765 2,723,841 7,579,118 7,844,774
Operating Income 1,237,674 1,408,334 3,889,016 3,819,722
INTEREST EXPENSE AND
OTHER EXPENSE/(INCOME)
Interest on long-term debt 679,738 693,175 2,039,213 2,079,525
Interest on short-term debt 97,107 45,639 248,313 110,051
Allowance for funds used during
construction (28,960) (12,870) (87,000) (98,255)
Other income, net (47,665) (25,474) (113,215) (115,373)
700,220 700,470 2,087,311 1,975,948
Net Income $ 537,454 $ 707,864 $1,801,705 $1,843,774
Earnings Per Share $0.84 $1.12 $2.82 $2.92
Cash Dividends Per Share $0.90 $0.90 $2.70 $2.70
/TABLE
<PAGE>
<TABLE> THE YORK WATER COMPANY
Statements of Cash Flows
<CAPTION> (Unaudited) (Unaudited)
Nine Months Nine Months
Ended Ended
Sept.30, 1996 Sept.30, 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,801,705 $ 1,843,774
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation 1,027,840 1,132,438
Provision for losses on accounts receivable 56,250 67,500
Increase in deferred income taxes (including
regulatory assets and liabilities) 304,766 62,935
Changes in assets and liabilities:
Increase in accounts receivable (44,208) (398,155)
Decrease in recoverable income taxes 30,584 -
Decrease in materials and supplies 6,346 51,311
Increase in prepaid expenses (190,488) (76,396)
Increase (Decrease) in accounts payable,
accrued expenses and other liabilities 197,643 (428,072)
(Decrease) in accrued interest and taxes (190,823) (218,228)
(Increase) decrease in other assets (238,144) 213,707
Net cash provided by operating activities 2,761,471 2,250,814
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures (3,302,315) (3,851,209)
Customers' advances for construction and
contributions in aid of construction 439,661 934,156
Net cash (used in) provided by investing activities (2,862,654) (2,917,053)
<PAGE>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line-of-credit agreements 1,389,000 1,940,000
Issuance of common stock under dividend
reinvestment plan 269,023 305,824
Issuance of common stock under employee stock
purchase plan 57,991 53,865
Dividends paid (1,725,923) (1,705,285)
Decrease in notes receivable 111,092 71,835
Net cash used in financing activities 101,183 666,239
Net decrease in cash and cash equivalents - -
Cash and cash equivalents at beginning of period - -
Cash and cash equivalents at end of period $ - $ -
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest, net of amounts capitalized $2,412,750 $ 2,165,948
Income taxes 619,151 949,746
/TABLE
<PAGE>
THE YORK WATER COMPANY
Notes to Interim Financial Statements
1. Interim Financial Information
The interim financial statements are unaudited but, in the
opinion of management, reflect all adjustments necessary for a
fair presentation of results for such periods. These financial
statements should be read in conjunction with the financial
statements and notes thereto contained in the Company's Annual
Report to Shareholders for the year ended 1995.
2. Earnings Per Share
Earnings per share for the nine months ended September 30, 1996
and 1995 were based on weighted average shares outstanding of
640,206 and 631,127, respectively.
<PAGE>
THE YORK WATER COMPANY
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Three Months Ended September 30, 1996 Compared
with Three Months Ended September 30, 1995
Net income for the three months ended September 30, 1996 was
$537,454, a decrease of $170,410 compared to the three months ended
September 30, 1995.
Operating revenues for the three months ended September 30, 1996
decreased $210,736 (5.1%) compared to the three months ended
September 30, 1995. The decrease resulted from lower consumption
primarily in the commercial and industrial sectors during the third
quarter of 1996 compared to third quarter 1995.
Operation and maintenance expenses, exclusive of depreciation and
taxes, for the three months ended September 30, 1996 increased
$75,087 or 4.3%. Increases in workers compensation costs, legal
fees associated with union negotiations and pollution control, and
maintenance of mains, hydrants, and pumping equipment were the main
reasons for the increase. Reduced meter reading costs partially
offset the increase.
Depreciation expense for the three months ended September 30, 1996
decreased $34,866 or 9.2% compared to 1995 as a result of lower
rates. A re-evaluation of plant assets resulted in longer useful
lines, and therefore, lower depreciation rates.
Federal and state income taxes for the three months ended September
30, 1996 decreased $83,916 compared to the three months ended
September 30, 1995 principally as a result of a decline in taxable
net income.
Interest on long-term debt for the three months ended September 30,
1996 decreased $13,437 or 1.9% compared to the three months ended
September 30, 1995. The decrease was related to 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 the three months ended September
30, 1996 increased $51,468 when compared to the same period in
1995. The increase is due to higher short-term debt outstanding
during the three months ended September 30, 1996.
Nine Months Ended September 30, 1996 Compared
with Nine Months Ended September 30, 1995
Net income for the nine months ended September 30, 1996 was
$1,801,705, a decrease of $42,609 (2.3%) compared to the nine
months ended September 30, 1995.
Subscription Offering
On August 3, 1996, the Company offered to holders of its common
stock non-transferable subscription rights to purchase up to an
aggregate of 80,000 shares of common stock. All shareholders were
granted one subscription right for every 4 shares of common stock
held of record as of August 1, 1996. Each subscription right
entitled the holder to purchase one share at a purchase price of
$67.45 per share. On October 17, 1996, subscription rights to
purchase 79,981 shares were exercised.
Operating revenues for the nine months ended September 30, 1996
decreased $196,362 (1.7%) compared to the nine months ended
September 30, 1995. Increased consumption and new customers within
the residential sector caused an increase in revenue from the prior
year of approximately 2.0%. An 11.6% reduction in commercial and
industrial revenues, however, negated the increase.
Operations and maintenance expenses for the nine months ended
September 30, 1996 were $75,037 higher than the same period in 1995
due to increased power costs and higher maintenance expenditures
for mains and hydrants. Lower meter maintenance expenses partially
offset the unfavorable variances.
Administrative and general expenses for the nine months ended
September 30, 1996 decreased $120,103 (4.9%) compared to nine
months ended September 30, 1995. Reduced cable meter reading fees,
regulatory expense amortization, and a retroactive charge for
postretirement benefits in 1995 all contributed to the favorable
variance. Higher legal fees, workers compensation costs, and
shareholder relations fees partially offset the decrease.
Depreciation expense for the nine months ended September 30, 1996
decreased $104,598 (9.2%) compared to the nine months ended
September 30, 1995. A re-evaluation of plant assets resulted in
longer useful lines, and therefore, lower depreciation rates.
Federal and state income taxes for the first nine months of 1996
decreased $130,411 when compared to the same period in 1995
principally as a result of a decrease in taxable net income.
Interest on long-term debt for the nine months ended September 30,
1996 decreased $40,312 compared to the nine months ended September
30, 1995. The decrease was related to the issuance of $4,300,000
5% Revenue Refunding Bonds to replace a like amount of bonds at a
6.25% interest rate during the fourth quarter of 1995.
Interest on short-term debt for the nine months ended September 30,
1996 increased $138,262 when compared to the same period in 1995.
The increase is due primarily to an increase in short-term debt
outstanding during 1996 versus 1995.
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 May 9, 1996 seeking a
$1,534,393 increase in annual revenues. Effective September 5,
1996, the PPUC authorized an increase in rates designed to produce
approximately $960,000 in additional annual revenues, an increase
of 6.36%.
Liquidity and Capital Resources
During the first nine months of 1996, the per capita volume of
water sold declined compared to the first nine months of 1995. The
Company does not anticipate any further change in the level of
water usage which would have a material impact on future results of
operations.
During the nine months ended September 30, 1996, the Company had
$3,302,315 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 annual 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 has been granted an increase in rates by the PPUC to
provide a fair rate of return on the capital expenditures
associated with its 1996 construction projects.
During the first nine months of 1996, net cash used in investing
and financing activities exceeded net cash provided by operating
activities. The Company anticipates that during the remainder of
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 and employee
stock purchase plan, a common stock subscription and customers'
advances are used to satisfy the need for additional cash.
As of September 30, 1996, current liabilities exceeded current
assets by $5,241,207. As of December 31, 1995, current liabilities
exceeded current assets by $3,986,903. 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 permanent financing. Accordingly,
current liabilities frequently exceed current assets on the
Company's balance sheets. Short-term borrowings from lines of
credit as of September 30, 1996 were $5,553,000. The Company
maintains lines of credit aggregating $12,000,000. 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.
<PAGE>
THE YORK WATER COMPANY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of the
registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
THE YORK WATER COMPANY
/s/ William T. Morris
William T. Morris
Principal Executive
Officer
Date: November 15, 1996
/s/ Jeffrey S. Osman
Jeffrey S. Osman
Principal Financial and
Accounting Officer
Date: November 15, 1996
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000108985
<NAME> YORK WATER CO.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 79039733
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<LONG-TERM-DEBT-NET> 32000000
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</TABLE>
