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 June 30, 1997 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, No par value 2,915,547 Shares outstanding
as of June 30, 1997
<PAGE>
THE YORK WATER COMPANY
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
(Unaudited)
As Of As of
June 30,1997 Dec. 31, 1996
UTILITY PLANT, at original cost $94,697,153 $93,492,775
Less-Reserve for depreciation 13,778,346 13,158,637
80,918,807 80,334,138
OTHER PHYSICAL PROPERTY:
Less-Reserve for depreciation of
$62,740 in 1997 and $60,326 in 1996 496,624 421,145
CURRENT ASSETS:
Cash and Cash Equivalents 19,591 694,491
Receivables, less reserves of $90,000
in 1997 and in 1996 2,562,357 2,523,510
Recoverable income taxes - 159,203
Materials and supplies, at cost 315,452 302,821
Prepaid expenses 274,311 221,402
Deferred income taxes 61,377 61,377
3,233,088 3,962,804
OTHER LONG-TERM ASSETS:
Prepaid pension cost 1,755,310 1,680,286
Deferred debt expense 457,106 474,049
Deferred rate case expense 99,847 142,385
Notes receivable 940,527 990,448
Deferred regulatory assets 7,834,938 7,827,988
Other 981,140 903,191
12,068,868 12,018,347
$96,717,387 $96,736,434
<PAGE>
THE YORK WATER COMPANY
Balance Sheets
(Unaudited)
As Of As Of
June 30,1997 Dec. 31, 1996
CAPITALIZATION
Common stock, no par value,
authorized 6,000,000 shares in
1997 and 4,800,000 shares in
1996, outstanding 2,915,547
shares in 1997 and 2,900,524
shares in 1996 $26,055,424 $25,775,639
Earnings retained in the business 2,472,319 2,227,118
28,527,743 28,002,757
LONG-TERM DEBT
5.0% 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 - 1,237,000
Accounts payable 295,376 376,469
Dividends payable 533,018 531,977
Accrued taxes 330,083 117,668
Advance water revenues 181,679 164,256
Accrued interest 675,761 675,761
Other accrued expenses 373,170 391,483
2,389,087 3,494,614
DEFERRED CREDITS
Customers' advances for construction16,117,757 15,471,245
Contributions in aid of construction 5,606,920 5,606,358
Deferred income taxes 9,587,808 9,744,675
Deferred regulatory liabilities 1,528,582 1,528,582
Deferred employee benefits 959,490 888,203
33,800,557 33,239,063
$96,717,387 $96,736,434
<PAGE>
<TABLE> THE YORK WATER COMPANY
Statements of Income
<CAPTION> (Unaudited) (Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
<S> 1997 1996 1997 1996
WATER OPERATING REVENUES <C> <C> <C> <C>
Residential $2,457,077 $2,278,826 $4,808,675 $4,481,399
Commercial and
industrial 1,278,722 1,220,073 2,531,590 2,371,469
Other 424,306 373,397 826,716 693,827
4,160,105 3,872,296 8,166,981 7,546,695
OPERATING EXPENSES
Operation and
maintenance 972,281 837,233 1,768,291 1,621,256
Administrative and
general 822,707 742,924 1,524,991 1,512,564
1,794,988 1,580,157 3,293,282 3,133,820
Depreciation 388,085 281,627 776,169 685,227
Taxes other than
income taxes 252,580 234,888 515,877 492,893
Federal and state
income taxes 317,755 312,945 719,851 583,413
2,753,408 2,409,617 5,305,179 4,895,353
Operating Income 1,406,697 1,462,679 2,861,802 2,651,342
INTEREST EXPENSE AND
OTHER EXPENSE/(INCOME)
Interest on long-term
debt 679,737 679,737 1,359,475 1,359,475
Interest on short-
term debt 9,161 75,831 25,512 151,206
Allowance for funds
used during
construction (6,277) (22,926) (9,502) (58,040)
Other income, net (62,029) (16,540) (65,987) (65,550)
620,592 716,102 1,309,498 1,387,091
Net Income $ 786,105 $ 746,577 $1,552,304 $1,264,251
Earnings Per Share $.27 $.29 $.53 $.49
Cash Dividends Per Share $.23 $.23 $.45 $.45
</TABLE>
<PAGE>
<TABLE> THE YORK WATER COMPANY
Statements of Cash Flows
<CAPTION> (Unaudited) (Unaudited)
Six Months Six Months
Ended Ended
June 30, 1997 June 30, 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,552,304 $1,264,251
Adjustments to reconcile net
income to net cash provided by
operating activities
Depreciation 776,169 685,227
Provision for losses on accounts
receivable 45,000 45,000
(Decrease) increase in deferred
income taxes (including regulatory
assets and liabilities) (163,817) 282,494
Changes in assets and liabilities:
Increase in accounts receivable (83,847) (45,918)
Decrease (increase) in recoverable
income taxes 159,203 (47,465)
(Increase) decrease in materials
and supplies (12,631) 28,473
Increase in prepaid expenses and
prepaid pension costs (127,933) (214,453)
(Decrease) increase in accounts
payable, accrued expenses, other
liabilities and deferred employee
benefits (9,655) 136,723
Increase (decrease) in accrued
interest and taxes 212,415 (15,913)
Decrease (increase) in other
assets 14,851 (154,531)
Net cash provided by operating
activities 2,362,059 1,963,888
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures (1,469,636) (2,011,361)
Customers' advances for
construction and contributions
in aid of construction 647,074 156,610
Net cash used in investing
activities (822,562) (1,854,751)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under
line-of-credit agreements (1,237,000) 720,000
Issuance of common stock under
dividend reinvestment plan 240,462 201,762
Issuance of common stock under
employee stock purchase plan 39,323 38,704
Dividends paid (1,307,103) (1,148,932)
Decrease in notes receivable 49,921 79,329
Net cash used in financing
activities (2,214,397) (109,137)
Net decrease in cash and cash
equivalents (674,900) -
Cash and cash equivalents at
beginning of period 694,491 -
Cash and cash equivalents at end
of period $ 19,591 $ -
Supplemental disclosures of cash
flow information:
Cash paid during the year for:
Interest, net of amounts
capitalized $1,378,194 $1,479,499
Income taxes 546,217 449,837
</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
1996.
2. Earnings Per Share
Earnings per share for the six months ended June 30, 1997
and 1996 were based on weighted average shares outstanding
of 2,910,164 and 2,558,912, respectively.
3. On May 5, 1997, the Company's shareholders approved
amendments to the existing Articles of Incorporation. The
approved amendments (i) increased the authorized capital
stock of the Company from 1,200,000 shares of common stock,
par value $10.00 to 6,500,000 shares. (6,000,000 shares of
common stock, without par value, and 500,000 shares of
Series Preferred Stock, without par value); (ii) eliminate
the concept of par value of the capital stock; and (iii)
delete certain provisions relating to dividends and shares
in distribution and common stock in order to allow for the
possible future issuance of Series Preferred Stock.
4. On May 5, 1997, the Company's Board of Directors declared a
four-for-one stock split for shareholders of record on June
2, 1997, in conjunction with the increase in authorized
shares. The stock was distributed on June 10, 1997.
Shareholders of record received three additional shares of
common stock for each share owned. The transaction had no
effect on total stockholders' equity. All per share amounts
in this report have been restated to reflect the effect of
the stock split.
<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 June 30, 1997 Compared
with Three Months Ended June 30, 1996
Water operating revenues for the three months ended June 30, 1997
increased $287,809 or 7.4% compared to the three months ended
June 30, 1996. The increase resulted primarily from an increase
in rates of 6.0% approved by the Pennsylvania Public Utility
Commission (PPUC) effective September 5, 1996. Consumption was
up in the residential, commercial and public sectors, while
industrial consumption declined.
Operating expenses, exclusive of depreciation and taxes, for the
three months ended June 30, 1997 increased $214,831 or 13.6%.
Increases in maintenance and repairs which include parking lot
maintenance, maintenance of mains, services and hydrants,
technical support for the mapping system, and increased electric
expense contributed to the increase. A decline in meter
maintenance partially offset the increase.
In the administrative and general area, additional legal fees
associated with the stock split and the amendments to the
dividend reinvestment and employee stock purchase plans were
incurred. The Company portion of 401k expenses also rose in 1997
due to the participation of union employees and a higher Company
match, as a result of a plan amendment, for general and
administrative employees. Expenses for 1996 were abnormally low
due to a one-time credit for general liability and workers
compensation insurance. These increases were partially offset by
lower collection and office supply expenses.
Depreciation expense for the three months ended June 30, 1997
increased $106,458 or 37.8% compared to 1996 as a result of
increased depreciable plant.
Interest on short-term debt for the three months ended June 30,
1997 declined $66,670 when compared to the same period in 1996.
The decline was due to a decrease in the average short-term debt
outstanding from approximately $4,300,000 in 1996 to
approximately $448,000 in 1997.
Six Months Ended June 30, 1997 Compared
with Six Months Ended June 30, 1996
Net income for the six months ended June 30, 1997 was $1,552,304,
an increase of $288,053 (22.8%) compared to the six months ended
June 30, 1996.
Water operating revenues for the six months ended June 30, 1997
increased $620,286 (8.2%) compared to the six months ended June
30, 1996. The increase resulted primarily from an increase in
rates of 6.0% approved by the PPUC effective September 5, 1996.
Consumption was up in both the residential and public sectors,
despite an overall decline.
Operating expenses, exclusive of depreciation and taxes, for the
six months ended June 30, 1997 increased $159,462 or 5.1%.
Increases in electric, maintenance of mains, services and
hydrants, maintenance of structures (parking lot), and
maintenance of filter plant equipment were the primary causes for
the increase.
In addition, legal fees associated with the stock split were
incurred and the Company portion of 401k expenses was higher in
1997 due to the participation of union employees, and a higher
Company match, as a result of a plan amendment, for general and
administrative employees. Expenses for 1996 were abnormally low
due to a one-time credit for general liability and workers
compensation insurance.
The unfavorable variances were partially offset by lower pumping
equipment maintenance, meter reading expenses and office supply
expenses.
Depreciation expense for the six months ended June 30, 1997
increased $90,942 or 13.2% compared to 1996 as a result of
increased depreciable plant.
Federal and state income taxes for the six months ended June 30,
1997 increased $136,438 or 23.4% compared to the six months ended
June 30, 1996 principally as a result of an increase in taxable
net income.
Interest on short-term debt for the six months ended June 30,
1997 declined $125,694 when compared to the same period in 1996.
The decline was due to a decrease in the average short-term debt
outstanding from approximately $4,300,000 in 1996 to
approximately $690,000 in 1997.
Allowance for funds used during construction was $48,538 lower
during the six months ended June 30, 1997 when compared to the
six months ended June 30, 1996. In 1996, interest was
capitalized on two large main extensions, as well as the
Loganville standpipe, the basin covers, Glen Rock Borough, and
the new downtown office building. No such large projects
occurred during the first six months of 1997.
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 approximately 6.0%.
Liquidity and Capital Resources
During the first half of 1997, the per capita volume of water
sold did not significantly change compared to the first half of
1996. 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 the six months ended June 30, 1997, the Company incurred
$1,469,636 of construction expenditures. The Company financed
such expenditures primarily 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.
During the first half of 1997, net cash used in investing and
financing activities exceeded net cash provided by operating
activities. The Company anticipates that during the remainder of
1997 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, and customers' advances are used to satisfy the
need for additional cash.
As of June 30, 1997, current assets exceeded current liabilities
by $844,001. As of June 30, 1997, there were no short-term
borrowings from lines of credit. The Company maintains lines of
credit aggregating $15,000,000. Loans granted under these lines
of credit bear interest based on the prime or Libor rates plus
basis points, as defined. The Company is not required to
maintain compensating balances on its lines of credit.
On May 5, 1997, the Company's shareholders approved amendments to
the existing Articles of Incorporation. The approved amendments
(i) increased the authorized capital stock of the Company from
1,200,000 shares of common stock, par value $10.00 to 6,500,000
shares. (6,000,000 shares of common stock, without par value, and
500,000 shares of Series Preferred Stock, without par value);
(ii) eliminate the concept of par value of the capital stock; and
(iii) delete certain provisions relating to dividends and shares
in distribution and common stock in order to allow for the
possible future issuance of Series Preferred Stock.
On May 5, 1997, the Company's Board of Directors declared a four-
for-one stock split for shareholders of record on June 2, 1997,
in conjunction with the increase in authorized shares. The stock
was distributed on June 10, 1997. Shareholders of record
received three additional shares of common stock for each share
owned. The transaction had no effect on total stockholders'
equity. All per share amounts in this report have been restated
to reflect the effect of the stock split.
Certain statements contained herein and elsewhere in this Form
10-Q which are not historical facts are forward-looking
statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These forward-
looking statements address activities or events which the Company
expects will or may occur in the future. The Company cautions
that a number of important factors could cause the actual results
to differ materially from those expressed in any forward-looking
statements made on behalf of the Company.
Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 (SFAS 128),
"Earnings Per Share." SFAS 128 establishes standards for
computing and presenting earnings per share. SFAS 128 is
effective for financial statements issued for periods ending
after December 15, 1997. This statement is not expected to have
a material impact on the Company's financial statements.
In February 1997, FASB issued Statement of Financial Accounting
Standards No. 129, "Disclosure of Information about Capital
Structure" (SFAS 129). SFAS 129 establishes standards for
disclosing information about an entity's capital structure. SFAS
129 is effective for financial statements issued for periods
ending after December 15, 1997. This statement is not expected
to have a material impact on the Company's financial statements.
In June 1997, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," and No. 131, "Disclosures about Segments
of an Enterprise and Related Information." These statements
establish standards for reporting and display of comprehensive
income and its components and for reporting information about
business segments and products in financial statements, and are
effective for years beginning after December 15, 1997 Adoption
of these statements is not expected to have a material effect on
the Company's financial statements.
In January 1997, the Securities and Exchange Commission amended
regulations and forms, including regulations S-X and S-K, to
clarify and expand existing disclosure requirements about
accounting policies for certain derivative instruments, and to
add new disclosure requirements about the risk of loss from
changes in market rates or prices which are inherent in
derivatives. Adoption by the Company of the disclosure
requirements relating to risk of loss, which requirements are
effective for fiscal years ending after June 15, 1998, are not
expected to have a material effect on the Company's financial
statements.
THE YORK WATER COMPANY
Part II - Other Information
Item 4. Results of Votes of Security Holders
The Annual Meeting of the Shareholders of The York Water Company
was convened May 5, 1997 at the office of the Company, 130 East
Market Street, in the City of York, Pennsylvania, at 1:00 P.M.
for the purpose of taking action upon the following proposals:
(1) To elect three (3) Directors to three-year terms of
office.
The actions taken by the Shareholders concerning the election of
Directors are as follows:
Frank Motter George Hay Kain, III Michael W. Gang
For election 575,447.297 576,452.012 572,270.523
Shares withheld 4,777.333 3,691.532 6,306.139
The following Directors' terms of office continued after the
Annual Meeting.
Irvin S. Naylor Paul W. Ware
William T. Morris John L. Finlayson
Horace Keesey III Chloe R. Eichelberger
(2) To appoint KPMG Peat Marwick LLP as independent
accountants to audit the books and accounts of the
Company for the year 1997.
The actions taken by the Shareholders concerning the appointment
of KPMG Peat Marwick LLP as independent accountants are as
follows:
For Approval 571,997.566
Against Approval 3,043.780
Abstaining From Voting 3,358.950
(3) To amend and restate the Articles of Incorporation of
the Company.
For Approval 511,475.611
Against Approval 29,494.025
Abstaining From Voting 6,914.660
<PAGE>
THE YORK WATER COMPANY
Item 6. Exhibits and Reports on Form 8-K
The Company filed a report on Form 8-K on May 5, 1997, which
included a statement regarding the four-for-one stock split, the
increase in authorized capital, and the elimination of par value
of the capital stock.
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
William T. Morris
Principal Executive
Officer
Date: August 11, 1997
Jeffrey S. Osman
Principal Financial and
Accounting Officer
Date: August 11, 1997
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000108985
<NAME> YORK WATER CO
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
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