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 March 31, 1998 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 2,944,706 Shares outstanding
as of March 31, 1998
<PAGE>
THE YORK WATER COMPANY
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
(Unaudited)
As Of As of
Mar.31, 1998 Dec. 31, 1997
UTILITY PLANT, at original cost $98,406,183 $97,487,926
Less-Reserve for depreciation 14,761,294 14,332,890
83,644,889 83,155,036
OTHER PHYSICAL PROPERTY:
Less-Reserve for depreciation of
$66,193 in 1998 and $65,193 in 1997 497,600 498,859
CURRENT ASSETS:
Cash and Cash Equivalents -
Receivables, less reserves of
$102,000 in 1998 and $90,000 in
1997 2,433,323 2,540,075
Recoverable income taxes 444,661 547,182
Materials and supplies, at cost 338,629 337,837
Prepaid expenses 138,543 190,314
Deferred income taxes 75,017 75,017
3,703,860 3,690,425
OTHER LONG-TERM ASSETS:
Prepaid pension cost 1,769,906 1,732,394
Deferred debt expense 431,691 440,163
Deferred rate case expense 35,660 57,055
Notes receivable 886,789 913,934
Deferred regulatory assets 7,287,800 7,287,799
Other 1,144,580 1,078,409
11,556,426 11,509,754
$99,402,775 $98,854,074
<PAGE>
THE YORK WATER COMPANY
Balance Sheets
(Unaudited)
As Of As Of
Mar.31, 1998 Dec. 31, 1997
CAPITALIZATION
Common stock, no par value,
authorized 6,000,000 shares
in 1998 and in 1997, outstanding
2,944,706 shares in 1998 and
2,934,782 shares in 1997 $26,659,170 $26,453,873
Earnings retained in the business 2,721,119 2,696,913
29,380,289 29,150,786
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 700,000 843,000
Accounts payable 325,906 551,402
Dividends payable 488,330 488,483
Accrued taxes 226,871 115,073
Advance water revenues 189,094 182,118
Accrued interest 483,774 675,761
Other accrued expenses 344,036 345,939
2,758,011 3,201,776
DEFERRED CREDITS
Customers' advances for construction 16,690,900 16,219,638
Contributions in aid of construction 5,861,487 5,861,487
Deferred income taxes 10,034,014 9,807,788
Deferred regulatory liabilities 1,572,985 1,572,985
Deferred employee benefits 1,105,089 1,039,614
32,264,475 34,501,512
$99,402,775 $98,854,074
<PAGE>
THE YORK WATER COMPANY
Statements of Income
(Unaudited) (Unaudited)
Three Months Three Months
Ended Ended
Mar. 31, 1998 Mar. 31, 1997
WATER OPERATING REVENUES
Residential $2,348,525 $2,351,598
Commercial and industrial 1,227,561 1,252,868
Other 441,482 402,410
4,017,568 4,006,876
OPERATING EXPENSES
Operation and maintenance 892,827 796,010
Administrative and general 726,760 702,284
1,619,587 1,498,294
Depreciation 409,144 388,084
Taxes other than income taxes 271,687 263,297
Federal and state income taxes 358,112 402,096
2,658,530 2,551,771
Operating Income 1,359,038 1,455,105
INTEREST EXPENSE AND
OTHER EXPENSE/(INCOME)
Interest on long-term debt 679,738 679,738
Interest on interim bank loans 15,324 16,351
Allowance for funds used during
construction (26,506) (3,225)
Other income, net (8,723) (3,958)
659,833 688,906
Net Income $ 699,205 $ 766,199
Basic Earnings Per Share $0.24 $0.26
Cash Dividends Per Share $0.23 $0.23<PAGE>
<TABLE> THE YORK WATER COMPANY
Statements of Cash Flows
<CAPTION>
(Unaudited) (Unaudited)
Three Months Three Months
Ended Ended
March 31, 1998 March 31, 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 699,205 $ 766,199
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation 409,144 388,084
Provision for losses on accounts
receivable 25,500 22,500
Increase (decrease) in deferred
income taxes (including regulatory
assets and liabilities) 226,225 (145,842)
Changes in assets and liabilities:
Decrease in accounts receivable 81,252 21,850
Decrease in recoverable income taxes 102,521 59,203
Increase in materials and supplies (792) (835)
Decrease in prepaid expenses and
prepaid pension costs 14,259 52,881
Decrease in accounts payable,
accrued expenses, other liabilities
and deferred employee benefits (155,101) (145,834)
(Decrease) increase in accrued
interest and taxes (80,189) 260,498
Increase in other assets (9,404) (12,915)
Net cash provided by operating
activities 1,312,620 1,365,789
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures (924,638) (617,423)
Customers' advances for construction
and contributions in aid of
construction 471,262 133,175
Net cash used in investing
activities (453,376) (484,248)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments under line-of-
credit agreements (143,000) (637,000)
Issuance of common stock under
dividend reinvestment plan 186,221 119,587
Issuance of common stock under
employee stock purchase plan 19,076 18,533
Dividends paid (674,999) (652,616)
Decrease in notes receivable 27,145 41,264
Net cash used in financing
activities (585,557) (1,110,232)
Net increase (decrease) in cash
and cash equivalents 273,687 (228,691)
Cash and cash equivalents at
beginning of period - 694,491
Cash and cash equivalents at end
of period $ 273,687 $ 465,800
Supplemental disclosures of cash
flow information:
Cash paid during the year for:
Interest, net of amounts
capitalized $ 860,542 $ 884,852
Income taxes 29,365 60,614
/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 1997.
2. Basic Earnings Per Share
Basic earnings per share for the three months ended March 31,
1998 and 1997 were based on weighted average shares outstanding
of 2,942,258 and 2,906,787, 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 March 31, 1998 Compared
with Three Months Ended March 31, 1997
Water operating revenues for the three months ended March 31,
1998 increased $10,692 or .3% compared to the three months ended
March 31, 1997. Residential consumption declined slightly, while
commercial consumption increased, but was offset by lower
industrial consumption. Other revenues, primarily public
consumption, increased.
Operating expenses, exclusive of depreciation and taxes, for the
three months ended March 31, 1998 increased $121,293 or 8.1%
compared to the three months ended March 31, 1997. Maintenance
expenses associated with mains, services, hydrants, and filter
plant structures and equipment were the main causes of the
increase. Higher supplemental retirement and deferred
compensation costs added to the increase. A workers compensation
credit received in March 1998 for the 1997 policy year and a 1997
accrual for postretirement health insurance benefits partially
offset the increase.
Depreciation expense for the three months ended March 31, 1998
increased $21,060 or 5.4% compared to the three months ended
March 31, 1997 due to increased plant investment.
Federal and state income taxes for the three months ended March
31, 1998 decreased $43,984 or 10.9% when compared to the same
period in 1997 principally as a result of a decrease in taxable
income. The effective tax rates for the quarters ended March 31,
1998 and 1997 were 33.8 and 34.4, respectively.
Allowance for funds used during construction for the first three
months of 1998 increased $23,281 when compared to the same period
in 1997. The two main projects that caused the variance were the
Southern York County main extension and the Hametown Booster
Station.
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 9.6% 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%. The Company does
not expect to file another application for a rate increase until
after 1998.
Liquidity and Capital Resources
During the first three months of 1998, the per capita volume of
water sold did not significantly change compared to the first
three months of 1997. 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 first quarter of 1998, the Company had $924,638 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.
During the first quarter of 1998, net cash provided by operating
activities exceeded net cash used in investing and financing
activities. The Company anticipates that during the remainder of
1998 net cash used in investing and financing activities will
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 expected to be used to satisfy
the need for additional cash.
As of March 31, 1998, current assets exceeded current liabilities
by $945,849. Short-term borrowings from lines of credit as of
March 31, 1998 were $700,000. 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.
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.
<PAGE>
Recently Issued Accounting Standards
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, did not
have a material effect on the Company's financial statements.
In June 1997, the Financial Accounting Standards Board (FASB)
issued Statements of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," and No. 131, "Disclosure 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 did not have a material
effect on the Company's financial statements.
In February 1998, the FASB issued Statement of Financial
Accounting Standards No. 132, "Employers' Disclosures about
Pensions and Others Postretirement Benefits" (SFAS 132) which
amends the disclosure requirements of Statements No. 87,
"Employers' Accounting for Pensions" (SFAS 87), No. 88,
"Employers' Accounting for Settlements and Curtailments of
Defined Benefit Pension Plans and for Termination Benefits" (SFAS
88), and No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions (SFAS 106). The statement is
effective for fiscal years beginning after December 15, 1997.
Adoption of this statement did not have a material impact on the
Company's financial position, results of operations, or liquidity
as of March 31, 1998.<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: May 8, 1998
/s/ Jeffrey S. Osman
Jeffrey S. Osman
Principal Financial and
Accounting Officer
Date: May 8, 1998
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<NAME> YORK WATER CO
<S> <C>
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