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, 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 2,956,381 Shares outstanding
as of June 30, 1998
<PAGE>
THE YORK WATER COMPANY
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
(Unaudited)
As Of As of
June 30,1998 Dec. 31, 1997
UTILITY PLANT, at original cost $99,761,632 $97,487,926
Less-Reserve for depreciation 15,044,271 14,332,890
84,717,361 83,155,036
OTHER PHYSICAL PROPERTY:
Less-Reserve for depreciation of
$67,711 in 1998 and $65,193 in 1997 499,013 498,859
CURRENT ASSETS:
Cash and cash equivalents 657,127 -
Receivables, less reserves of
$105,000 in 1998 and $110,000
in 1997 2,568,932 2,540,075
Recoverable income taxes 150,041 547,182
Materials and supplies, at cost 341,315 337,837
Prepaid expenses 250,475 190,314
Deferred income taxes 75,017 75,017
4,015,907 3,690,425
OTHER LONG-TERM ASSETS:
Prepaid pension cost 1,807,418 1,732,394
Deferred debt expense 423,220 440,163
Deferred rate case expense 14,264 57,055
Notes receivable 860,027 913,934
Deferred regulatory assets 7,412,338 7,287,799
Other 1,178,811 1,078,409
11,696,078 11,509,754
$100,928,359 $98,854,074<PAGE>
THE YORK WATER COMPANY
Balance Sheets
(Unaudited)
As Of As Of
June 30,1998 Dec. 31, 1997
CAPITALIZATION
Common stock, no par value,
authorized 6,000,000 shares in
1998 and in 1997, outstanding
2,956,381 shares in 1998 and
2,934,782 shares in 1997 $26,868,810 $26,453,873
Earnings retained in the business 2,802,844 2,696,913
29,671,654 29,150,786
LONG-TERM DEBT
5.0% Industrial Development
Authority Revenue Refunding
Bonds, Series 1995, 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% Industrial Development
Authority Revenue Refunding
Bonds, Series 1994, due 2009 2,700,000 2,700,000
32,000,000 32,000,000
CURRENT LIABILITIES
Short-term borrowings 500,000 843,000
Accounts payable 471,534 551,402
Dividends payable 487,797 488,483
Accrued taxes 105,793 115,073
Advance water revenues 205,123 182,118
Accrued interest 675,761 675,761
Other accrued expenses 381,300 345,939
2,827,308 3,201,776
DEFERRED CREDITS
Customers' advances for construction 17,409,487 16,219,638
Contributions in aid of construction 6,007,805 5,861,487
Deferred income taxes 10,256,511 9,807,788
Deferred regulatory liabilities 1,586,964 1,572,985
Deferred employee benefits 1,168,630 1,039,614
36,429,397 34,501,512
$100,928,359 $98,854,074
<PAGE>
<TABLE> THE YORK WATER COMPANY
Statements of Income
<CAPTION> (Unaudited) (Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
<S> 1998 1997 1998 1997
WATER OPERATING REVENUES <C> <C> <C> <C>
Residential $2,480,183 $2,457,077 $4,828,708 $4,808,675
Commercial and
industrial 1,327,641 1,278,722 2,555,202 2,531,590
Other 451,453 424,306 892,935 826,716
4,259,277 4,160,105 8,276,845 8,166,981
OPERATING EXPENSES
Operation and
maintenance 1,048,226 972,281 1,941,053 1,768,291
Administrative and
general 752,673 822,707 1,479,433 1,524,991
1,800,899 1,794,988 3,420,486 3,293,282
Depreciation 409,145 388,085 818,289 776,169
Taxes other than
income taxes 259,423 252,580 531,110 515,877
Federal and state
income taxes 395,567 317,755 753,679 719,851
2,865,034 2,753,408 5,523,564 5,305,179
Operating Income 1,394,243 1,406,697 2,753,281 2,861,802
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 7,231 9,161 22,555 25,512
Allowance for funds
used during
construction (25,641) (6,277) (52,147) (9,502)
Other income, net (26,091) (62,029) (34,814) (65,987)
635,236 620,592 1,295,069 1,309,498
Net Income $759,007 $786,105 $1,458,212 $1,552,304
Basic Earnings Per Share $.25 $.27 $.49 $.53
Cash Dividends Per Share $.23 $.23 $.46 $.45
</TABLE>
<PAGE>
<TABLE> THE YORK WATER COMPANY
Statements of Cash Flows
<CAPTION> (Unaudited) (Unaudited)
Six Months Six Months
Ended Ended
June 30, 1998 June 30, 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,458,212 $1,552,304
Adjustments to reconcile net
income to net cash provided by
operating activities
Depreciation 818,289 776,169
Provision for losses on accounts
receivable 51,000 45,000
Increase (decrease) in deferred
income taxes (including regulatory
assets and liabilities) 338,163 (163,817)
Changes in assets and liabilities:
Increase in accounts receivable (79,857) (83,847)
Decrease in recoverable income
taxes 397,141 159,203
Decrease (increase) in materials
and supplies 23,522 (12,631)
Increase in prepaid expenses and
prepaid pension costs (135,185) (127,933)
Increase (decrease) in accounts
payable, accrued expenses, other
liabilities and deferred employee
benefits 106,828 (9,655)
(Decrease) increase in accrued
interest and taxes (9,280) 212,415
(Increase) decrease in other
assets (53,065) 14,851
Net cash provided by operating
activities 2,915,768 2,362,059
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures (2,368,371) (1,469,636)
Customers' advances for
construction and contributions
in aid of construction 1,336,167 647,074
Net cash used in investing
activities (1,032,204) (822,562)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments under
line-of-credit agreements (343,000) (1,237,000)
Issuance of common stock under
dividend reinvestment plan 375,355 240,462
Issuance of common stock under
employee stock purchase plan 39,582 39,323
Dividends paid (1,352,281) (1,307,103)
Decrease in notes receivable 53,907 49,921
Net cash used in financing
activities (1,226,437) (2,214,397)
Net increase (decrease) in cash
and cash equivalents 657,127 (674,900)
Cash and cash equivalents at
beginning of period - 694,491
Cash and cash equivalents at end
of period 657,127 $ 19,591
Supplemental disclosures of cash
flow information:
Cash paid during the year for:
Interest, net of amounts
capitalized $1,328,746 $1,378,194
Income taxes 417,298 546,217
</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.
Operating results for the three month and six month periods
ended June 30, 1998, are not necessarily indicative of the
results that may be expected for the year ending December
31, 1998.
2. Basic Earnings Per Share
Basic earnings per share for the six months ended June 30,
1998 and 1997 were based on weighted average shares
outstanding of 2,948,130 and 2,910,164, 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 June 30, 1998 Compared
with Three Months Ended June 30, 1997
Water operating revenues for the three months ended June 30, 1998
increased $99,172 or 2.4% compared to the three months ended June
30, 1997. Consumption was up slightly in all sectors.
Operating expenses, exclusive of depreciation and taxes, for the
three months ended June 30, 1998 increased $5,911 or .3% compared
to the three months ended June 30, 1997. Increases in water
analysis fees, pension expense, year 2000 system maintenance,
main maintenance, deferred compensation and retirement costs
caused the increase. Workers compensation and package commercial
insurance credits, lower meter reading expenses, reduced postage,
legal fees, and lower hydrant maintenance costs almost negated
the increase.
Depreciation expense for the three months ended June 30, 1998
increased $21,060 or 5.4% compared to the three months ended June
30, 1997 due to increased plant investment.
Federal and state income taxes for the three months ended June
30, 1998 increased $77,812 or 24.5% compared to the three months
ended June 30, 1997 principally as a result of an increase in
taxable net income. The effective tax rates for the quarters
ended June 30, 1998 and 1997 were 34.3% and 28.8%, respectively.
Allowance for funds used during construction for the three months
ended June 30, 1998 increased $19,364 when compared to the same
period in 1997. The increase was due to two main projects at the
Southern York County main extension and the Hametown Booster
Station.
Six Months Ended June 30, 1998 Compared
with Six Months Ended June 30, 1997
Net income for the six months ended June 30, 1998 was $1,458,212,
a decrease of $94,092 (6.1%) compared to the six months ended
June 30, 1997.
Water operating revenues for the six months ended June 30, 1998
increased $109,864 (1.3%) compared to six months ended June 30,
1997. Consumption was higher in the residential, commercial and
other sectors, while declining slightly in the industrial sector.
Operating expenses, exclusive of depreciation and taxes, for the
six months ended June 30, 1998 increased $127,204 or 3.9%
compared to the six months ended June 30, 1997. The main causes
of the increase were higher pension expense, main, service and
filter plant maintenance, and additional deferred compensation
and supplemental retirement plan liabilities. Expenses for water
analysis required by the Safe Drinking Water Act and computer
system maintenance for the year 2000 added to the increase.
These increases were significantly offset by workers compensation
and package commercial premium credits, reduced legal fees, lower
postage and lower meter reading expenses.
Depreciation expense for the six months ended June 30, 1998
increased $42,120 or 5.4% compared to the six months ended June
30, 1997 due to increased plant investment.
Federal and state income taxes for the six months ended June 30,
1998 increased $33,828 or 4.7% when compared to the same period
in 1997 principally as a result of an increase in taxable income.
The effective tax rates for the year-to-date periods ended June
30, 1998 and 1997 were 34.1% and 31.7%, respectively.
Allowance for funds used during construction for the first six
months of 1998 increased $42,645 when compared to the same period
in 1997. The increase was due to two main projects at 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 for another rate increase until after 1998.
Liquidity and Capital Resources
During the first half of 1998, the per capita volume of water
sold did not significantly change compared to the first half 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 six months ended June 30, 1998, the Company had
$2,368,371 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 half 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 June 30, 1998, current assets exceeded current liabilities
by $1,188,599. Short-term borrowings from lines of credit as of
June 30, 1998 were $500,000. 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.
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 Other 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 June 30, 1998.
In June 1998, the FASB issued Statement of Financial Position No.
133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133). The statement establishes accounting and
reporting standards for derivative instruments and is effective
for fiscal years beginning after June 15, 1999. Adoption of this
statement is not expected to have a material effect on the
Company's financial position, results of operations, or
liquidity.
<PAGE>
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 4, 1998 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:
Irvin S. Naylor William T. Morris Horace Keesey III
For election 2,248,968.567 2,265,726.949 2,254,959.036
Shares withheld 85,297.234 77,363.770 81,303.921
The following Directors' terms of office continued after the
Annual Meeting.
Frank Motter Paul W. Ware
George Hay Kain, III John L. Finlayson
Michael W. Gang 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 1998.
The actions taken by the Shareholders concerning the appointment
of KPMG Peat Marwick LLP as independent accountants are as
follows:
For Approval 2,321,587.578
Against Approval 752.578
Abstaining From Voting 11,562.799
<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
William T. Morris
Principal Executive
Officer
Date: August 10, 1998
Jeffrey S. Osman
Principal Financial and
Accounting Officer
Date: August 10, 1998
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000108985
<NAME> YORK WATER CO
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 84717361
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