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, 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 2,924,310 Shares outstanding
as of September 30, 1997
<PAGE>
THE YORK WATER COMPANY
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
(Unaudited)
As Of As of
Sept.30,1997 Dec. 31, 1996
UTILITY PLANT, at original cost $95,872,249 $93,492,775
Less-Reserve for depreciation 14,103,564 13,158,637
81,768,685 80,334,138
OTHER PHYSICAL PROPERTY:
Less-Reserve for depreciation of
$63,999 in 1997 and $60,326 in 1996 495,365 421,145
CURRENT ASSETS:
Cash and Cash Equivalents 132,997 694,491
Receivables, less reserves of
$90,000 in 1997 and 1996 2,667,408 2,523,510
Recoverable income taxes - 159,203
Materials and supplies, at cost 300,458 302,821
Prepaid expenses 280,246 221,402
Deferred income taxes 61,377 61,377
3,442,486 3,962,804
OTHER LONG-TERM ASSETS:
Prepaid pension cost 1,792,822 1,680,286
Deferred debt expense 448,634 474,049
Deferred rate case expense 78,451 142,385
Notes receivable 947,074 990,448
Deferred regulatory assets 7,834,938 7,827,988
Other 934,732 903,191
12,036,651 12,018,347
$97,743,187 $96,736,434
<PAGE>
THE YORK WATER COMPANY
Balance Sheets
(Unaudited)
As Of As Of
Sept.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, 924,310 shares in
1997 and 2,900,524 shares in 1996 $26,247,969 $25,775,639
Earnings retained in the business 2,753,258 2,227,118
29,001,227 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 339,000 1,237,000
Accounts payable 225,083 376,469
Dividends payable 496,498 531,977
Accrued taxes 368,003 117,668
Advance water revenues 194,638 164,256
Accrued interest 483,774 675,761
Other accrued expenses 340,012 391,483
2,447,008 3,494,614
DEFERRED CREDITS
Customers' advances for construction 16,484,168 15,471,245
Contributions in aid of construction 5,606,920 5,606,358
Deferred income taxes 9,650,148 9,744,675
Deferred regulatory liabilities 1,528,582 1,528,582
Deferred employee benefits 1,025,134 888,203
34,294,952 33,239,063
$97,743,187 $96,736,434
<PAGE>
<TABLE> THE YORK WATER COMPANY
Statements of Income
<CAPTION> (Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
<S> 1997 1996 1997 1996
WATER OPERATING REVENUES <C> <C> <C> <C>
Residential $2,718,675 $2,326,006 $7,527,350 $6,807,405
Commercial and
industrial 1,442,767 1,207,861 3,974,357 3,579,330
Other 451,465 387,572 1,278,181 1,081,399
4,612,907 3,921,439 12,779,888 11,468,134
OPERATING EXPENSES
Operation and
maintenance 1,066,201 991,599 2,834,492 2,612,855
Administrative and
general 822,852 840,635 2,347,843 2,353,199
1,889,053 1,832,234 5,182,335 4,966,054
Depreciation 388,085 342,613 1,164,254 1,027,840
Taxes other than
income taxes 263,168 227,531 779,045 720,424
Federal and state
income taxes 524,469 281,387 1,244,320 864,800
3,064,775 2,683,765 8,369,954 7,579,118
Operating Income 1,548,132 1,237,674 4,409,934 3,889,016
INTEREST EXPENSE AND
OTHER EXPENSE/(INCOME)
Interest on long-term
debt 679,738 679,738 2,039,213 2,039,213
Interest on short-term
debt 2,158 97,107 27,670 248,313
Allowance for funds used
during construction (12,140) (28,960) (21,642) (87,000)
Other income, net (73,132) (47,665) (139,119) (113,215)
596,624 700,220 1,906,122 2,087,311
Net Income $ 951,508 $ 537,454 $2,503,812 $1,801,705
Earnings Per Share $.33 $.22 $.86 $.71
Cash Dividends Per Share $.23 $.23 $.68 $.68
/TABLE
<PAGE>
<TABLE> THE YORK WATER COMPANY
Statements of Cash Flows
<CAPTION> (Unaudited) (Unaudited)
Nine Months Nine Months
Ended Ended
Sept.30, 1997 Sept.30, 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,503,812 $ 1,801,705
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation 1,164,254 1,027,840
Provision for losses on accounts
receivable 73,500 56,250
(Decrease) increase in deferred
income taxes (including regulatory
assets and liabilities) (101,477) 304,766
Changes in assets and liabilities:
Increase in accounts receivable (217,398) (44,208)
Decrease in recoverable income taxes 159,203 30,584
Decrease in materials and supplies 2,363 6,346
Increase in prepaid expenses and
prepaid pension costs (171,380) (190,488)
(Decrease) increase in accounts
payable, accrued expenses, other
liabilities and deferred employee
benefits (71,023) 197,643
Increase (decrease) in accrued
interest and taxes 58,348 (190,823)
Decrease (increase) in other assets 112,176 (238,144)
Net cash provided by operating
activities 3,512,378 2,761,471
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures (2,727,389) (3,302,315)
Customers' advances for construction
and contributions in aid of
construction 1,013,485 439,661
Net cash used in investing
activities (1,713,904) (2,862,654)
<PAGE>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments)/borrowings under
line-of-credit agreements (898,000) 1,389,000
Issuance of common stock under
dividend reinvestment plan 413,205 269,023
Issuance of common stock under
employee stock purchase plan 59,125 57,991
Dividends paid (1,977,672) (1,725,923)
Decrease in notes receivable 43,374 111,092
Net cash (used in)/provided by
financing activities (2,359,968) 101,183
Net decrease in cash and cash
equivalents (561,494) -
Cash and cash equivalents at beginning
of period 694,491 -
Cash and cash equivalents at end
of period $ 132,997 $ -
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest, net of amounts capitalized $2,241,957 $2,412,750
Income taxes 1,029,567 619,151
/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 nine months ended September 30,
1997 and 1996 were based on weighted average shares
outstanding of 2,912,372 and 2,560,824, respectively.
3. Articles of Incorporation
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. Stock Split
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 September 30, 1997 Compared
with Three Months Ended September 30, 1996
Water operating revenues for the three months ended September 30,
1997 increased $691,468 or 17.6% compared to the three months
ended September 30, 1996. Part of the increase resulted from an
increase in consumption, with August 1997 consumption being
recorded at our highest level since September 1995. The
remaining increase resulted from an increase in rates of 6.0%
approved by the Pennsylvania Public Utility Commission (PPUC)
effective September 5, 1996.
Operating expenses, exclusive of depreciation and taxes, for the
three months ended September 30, 1997 increased $56,819 or 3.1%.
Expenses incurred in relation to the Information Collection Rule
(part of the re-authorization of the Safe Drinking Water Act) and
to maintain purification structures were the primary reasons for
the increase. Additional costs associated with maintenance of
mains, services, and office equipment contributed to the
increase. 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. The increase in operating expenses was
partially offset by lower workers compensation insurance premiums
and reduced health insurance premiums due to higher union
employee contributions to the plan.
Depreciation expense for the three months ended September 30,
1997 increased $45,472 or 13.3% compared to 1996 as a result of
increased depreciable plant.
Federal and state income taxes for the three months ended
September 30, 1997 increased $243,082 compared to the three
months ended September 30, 1996 principally as a result of an
increase in taxable net income.
Interest on short-term debt for the three months ended September
30, 1997 declined $94,949 when compared to the same period in
1996. The decline was due to a decrease in the average
short-term debt outstanding from approximately $5,400,000 in 1996
to approximately $124,000 in 1997.
Nine Months Ended September 30, 1997 Compared
with Nine Months Ended September 30, 1996
Net income for the nine months ended September 30, 1997 was
$2,503,812, an increase of $702,107 (39.0%) compared to the nine
months ended September 30, 1996.
Water operating revenues for the nine months ended September 30,
1997 increased $1,311,754 (11.4%) compared to the nine months
ended September 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 the residential,
commercial, and public sectors, while industrial consumption
declined in 1997 compared to 1996.
Operating expenses, exclusive of depreciation and taxes, for the
nine months ended September 30, 1997 increased $216,281 or 4.4%.
Increases in electric, maintenance of mains, services and
hydrants, and maintenance of facilities including the sediment
pond were the primary causes for the increase. In addition, 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. Computer mapping system and printer maintenance also
increased in 1997 compared to 1996. Decreases in workers
compensation insurance, meter reading unit expense, and
maintenance of pumping equipment partially offset the increased
expenses.
Depreciation expense for the nine months ended September 30, 1997
increased $136,414 or 13.3% compared to 1996 as a result of
increased depreciable plant.
Taxes other than income taxes increased $58,621 in 1997 due to
higher realty taxes. The Public Utility Commission assessment
and capital stock tax were also slightly higher in 1997 than in
1996.
Federal and state income taxes for the nine months ended
September 30, 1997 increased $379,520 or 43.9% compared to the
nine months ended September 30, 1996 principally as a result of
an increase in taxable net income.
Interest on short-term debt for the nine months ended September
30, 1997 declined $220,643 when compared to the same period in
1996. The decline was due to a decrease in the average
short-term debt outstanding from approximately $4,600,000 in 1996
to approximately $500,000 in 1997.
Allowance for funds used during construction was $65,358 lower
during the nine months ended September 30, 1997 when compared to
the nine months ended September 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 nine 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%. Management does not
expect to file for another rate increase until after 1998.
Liquidity and Capital Resources
During the first nine months of 1997, the per capita volume of
water sold did not significantly change compared to the first
nine months 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 nine months ended September 30, 1997, the Company
incurred $2,727,389 of construction expenditures. The Company
financed such expenditures primarily through internally generated
funds, customers' advances, 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 1997 and
1998 of approximately $4,108,000 and $4,210,000, respectively.
These expenditures will be financed in the same manner.
During the first nine months 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 September 30, 1997, current assets exceeded current
liabilities by $995,478. Short-term borrowings from lines of
credit were $339,000. The Company maintains lines of credit
aggregating $20,000,000. 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.
<PAGE>
THE YORK WATER COMPANY
SIGNATURES
Pursuant to the requirements 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
/s/ William T. Morris
William T. Morris
Principal Executive Officer
Date: November 12, 1997
/s/ Jeffrey S. Osman
Jeffrey S. Osman
Principal Financial and
Accounting Officer
Date: November 12, 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> SEP-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 81768685
<OTHER-PROPERTY-AND-INVEST> 495365
<TOTAL-CURRENT-ASSETS> 3442486
<TOTAL-DEFERRED-CHARGES> 8362023
<OTHER-ASSETS> 3674628
<TOTAL-ASSETS> 97743187
<COMMON> 26247969
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 2753258
<TOTAL-COMMON-STOCKHOLDERS-EQ> 29001227
0
0
<LONG-TERM-DEBT-NET> 32000000
<SHORT-TERM-NOTES> 339000
<LONG-TERM-NOTES-PAYABLE> 0
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0
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<TOTAL-OPERATING-EXPENSES> 3064775
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<INCOME-BEFORE-INTEREST-EXPEN> 1621264
<TOTAL-INTEREST-EXPENSE> 669756
<NET-INCOME> 951508
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<EARNINGS-AVAILABLE-FOR-COMM> 951508
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<TOTAL-INTEREST-ON-BONDS> 871725
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<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
