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, 1999 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 2,991,889 Shares outstanding
as of March 31, 1999
<PAGE>
THE YORK WATER COMPANY
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets
(Unaudited)
As Of As of
Mar. 31, 1999 Dec. 31, 1998
UTILITY PLANT, at original cost $103,002,586 $102,088,220
Less-Reserve for depreciation 16,053,663 15,687,003
86,948,923 86,401,217
OTHER PHYSICAL PROPERTY:
Less-Reserve for depreciation of
$71,773 in 1999 and $70,457 in 1998 493,950 495,267
CURRENT ASSETS:
Cash and Cash Equivalents 448,987 257,706
Receivables, less reserves of
$120,000 in 1999 and in 1998 2,398,722 2,481,799
Materials and supplies, at cost 338,157 361,400
Prepaid expenses 156,884 174,888
Deferred income taxes 81,836 81,836
3,424,586 3,357,629
OTHER LONG-TERM ASSETS:
Prepaid pension cost 1,850,044 1,826,514
Deferred debt expense 397,806 406,277
Deferred rate case expense 10,830 4,820
Notes receivable 780,455 813,075
Deferred regulatory assets 7,991,265 7,959,948
Other 1,270,252 1,214,344
12,300,652 12,224,978
$103,168,111 $102,479,091
<PAGE>
THE YORK WATER COMPANY
Balance Sheets
(Unaudited)
As Of As Of
Mar. 31, 1999 Dec. 31, 1998
CAPITALIZATION
Common stock, no par value,
authorized 6,000,000 shares, out-
standing 2,991,889 shares in 1999
and 2,979,722 shares in 1998 $ 27,503,082 $ 27,292,726
Earnings retained in the business 3,087,034 3,087,710
30,590,116 30,380,436
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 - -
Accounts payable 303,263 290,179
Dividends payable 509,040 506,415
Accrued taxes 440,414 347,244
Advance water revenues 209,314 216,478
Accrued interest 483,774 675,761
Other accrued expenses 385,960 338,431
2,331,765 2,374,508
DEFERRED CREDITS
Customers' advances for construction 16,974,532 16,689,050
Contributions in aid of construction 7,017,697 7,080,610
Deferred income taxes 11,200,182 10,967,235
Deferred regulatory liabilities 1,706,139 1,681,584
Deferred employee benefits 1,347,680 1,305,668
38,246,230 37,724,147
$103,168,111 $102,479,091
<PAGE>
THE YORK WATER COMPANY
Statements of Income
(Unaudited) (Unaudited)
Three Months Three Months
Ended Ended
Mar. 31, 1999 Mar. 31, 1998
WATER OPERATING REVENUES
Residential $2,460,272 $2,348,525
Commercial and industrial 1,225,187 1,227,561
Other 473,258 441,482
4,158,717 4,017,568
OPERATING EXPENSES
Operation and maintenance 883,763 892,827
Administrative and general 848,310 726,760
1,732,073 1,619,587
Depreciation 413,286 409,144
Taxes other than income taxes 266,771 271,687
Federal and state income taxes 398,838 358,112
2,810,968 2,658,530
Operating Income 1,347,749 1,359,038
INTEREST EXPENSE AND OTHER
EXPENSE/(INCOME)
Interest on long-term debt 679,738 679,738
Interest on interim bank loans 786 15,324
Allowance for funds used during
construction (13,261) (26,506)
Other income, net (19,073) (8,723)
648,190 659,833
Net Income $ 699,559 $ 699,205
Basic Earnings Per Share $0.23 $0.24
Cash Dividends Per Share $0.24 $0.23
<PAGE>
THE YORK WATER COMPANY
Statements of Cash Flows
(Unaudited) (Unaudited)
Three Months Three Months
Ended Ended
Mar. 31, 1999 Mar. 31, 1998
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 699,559 $ 699,205
Adjustments to reconcile net
income to net cash provided
by operating activities
Depreciation 413,286 409,144
Provision for losses on
accounts receivable 29,250 25,500
Increase in deferred income taxes
(including regulatory assets and
liabilities) 226,185 226,225
Changes in assets and liabilities:
Decrease in accounts receivable 53,827 81,252
Decrease in recoverable income taxes - 102,521
Decrease (increase) in materials and
supplies 23,243 (792)
(Increase) decrease in prepaid
expenses and prepaid pension costs (5,526) 14,259
Increase (decrease) in accounts
payable, accrued expenses, other
liabilities and deferred employee
benefits 98,086 (155,101)
Decrease in accrued interest
and taxes (98,817) (80,189)
Decrease (increase) in other
assets 52,559 (9,404)
Net cash provided by operating
activities 1,491,652 1,312,620
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures (1,065,681) (924,638)
Customers' advances for
construction and contributions in
aid of construction 222,569 471,262
Net cash used in investing
activities (843,112) (453,376)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net repayments under line-of-credit
agreements - (143,000)
Issuance of common stock under
dividend reinvestment plan 190,961 186,221
Issuance of common stock under
employee stock purchase plan 19,395 19,076
Dividends paid (700,235) (674,999)
Decrease in notes receivable 32,620 27,145
Net cash used in financing
activities (457,259) (585,557)
Net increase in cash and cash
equivalents 191,281 273,687
Cash and cash equivalents at
beginning of period 257,706 -
Cash and cash equivalents at end
of period $ 448,987 $ 273,687
Supplemental disclosures of cash
flow information:
Cash paid during the year for:
Interest, net of amounts
capitalized $ 859,251 $ 860,542
Income taxes 44,641 29,365
<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
December 31, 1998.
2. Basic Earnings Per Share
Basic earnings per share for the three months ended March
31, 1999 and 1998 were based on weighted average shares
outstanding of 2,988,884 and 2,942,258, 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, 1999 Compared
with Three Months Ended March 31, 1998
Water operating revenues for the three months ended March 31,
1999 increased $141,149 or 3.5% compared to the three months
ended March 31, 1998. Residential consumption increased 2.7% ,
while net commercial and industrial consumption declined by 1.5%.
Other revenues including public consumption and fire service
revenues increased in 1999 compared to 1998.
Operating expenses, exclusive of depreciation and taxes, for the
three months ended March 31, 1999 increased $112,486 or 6.9%
compared to the three months ended March 31, 1998. Expenses
related to the printing of our first water quality report, legal
fees related to strategic planning and shareholder rights, year
2000 system maintenance, and increases in workers compensation,
pumping equipment maintenance, and payroll expenses were the
primary reasons for the increase. Timing differences in the
payment of dues and office supplies accounted for the remainder
of the increase. Declines in rate case expense, filter plant
maintenance, and maintenance of service lines and hydrants
partially offset the increase.
Federal and state income taxes for the three months ended March
31, 1999 increased $40,726 or 11.4% when compared to the same
period in 1998 primarily as a result of an increase in taxable
income. The effective tax rates for the quarters ended March 31,
1999 and 1998 were 36.3 and 33.8, respectively.
Interest on interim bank loans decreased $14,538 or 94.8% through
March 31, 1999 compared to March 31, 1998 due to a decrease in
short-term debt outstanding in 1999. The average short-term debt
outstanding in 1999 and 1998 was $48,611 and $882,000,
respectively.
Allowance for funds used during construction for the first three
months of 1999 decreased $13,245 when compared to the same period
in 1998 due mainly to the completion of 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 April 22,
1999 seeking a $1,535,946 or 8.8% increase in annual revenues.
The PPUC is currently examining the potential rate increase.
<PAGE>
THE YORK WATER COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
During the first three months of 1999, the per capita volume of
water sold did not significantly change compared to the first
three months of 1998. 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 1999, the Company had $1,065,681 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 1999, net cash provided by operating
activities exceeded net cash used in investing and financing
activities. The Company anticipates that during the remainder of
1999 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, 1999, current assets exceeded current liabilities
by $1,092,821. Short-term borrowings from lines of credit as of
March 31, 1999 were $0. 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>
YEAR 2000
This statement constitutes a year 2000 readiness disclosure by
The York Water Company, under the Year 2000 Information and
Readiness Disclosure Act.
<PAGE>
THE YORK WATER COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company is aware of the issues associated with the
programming code in existing computer systems as the millennium
(year 2000) approaches. The "year 2000" issue is pervasive and
complex as virtually every computer operation will be affected in
some way by the rollover of the two digit year value to 00. The
issue is whether computer systems will properly recognize date
sensitive information when the year changes to 2000. Systems
that do not properly recognize such information could generate
erroneous data or cause a system to fail.
The Company has done an inventory of programs and has developed a
plan, including a timetable, for solving and testing year 2000
issues.
The Company has identified three areas that do have year 2000
compliance issues: Accounting, communications and embedded
technology.
As far as accounting, the Company will be replacing all of its
current software. The software upgrade is approximately 60%
complete and is expected to be completely installed by the end of
second quarter 1999. This will allow for testing and adjustments
to be made through the remainder of 1999. Current software will
be used in the event something unanticipated occurs with the
software upgrade.
The Company's electronic communications review has been completed
and all necessary changes have been made. Only slight
modifications were required.
In the area of embedded technology, the Company is working with
the manufacturers of all our time-sensitive equipment to make
sure the date field in the software has been located and updated
to accept a four-digit date. The Company has identified filter
plant control units, PC's, burglar alarms, and the check encoder
as some of the items to be addressed for year 2000 problems. The
Company expects to solve problems and test solutions in this area
by the end of June 1999.
As of March 31, 1999, the Company incurred costs of approximately
$68,000, and estimates total costs of year 2000 remediation
efforts to reach $100,000.
While the Company anticipates that critical vendors and suppliers
will be year 2000 compliant, contingency plans will be put in
place so that water service to customers will not be interrupted.
In one of our most critical areas, energy, the Company already
has emergency power generators installed as backups at most
locations. Those locations which currently have no emergency
backup, will have generators by the year 2000.
<PAGE>
THE YORK WATER COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Company's 4.75% Industrial Development Authority Revenue
Refunding bonds Series 1994 have mandatory tender dates of May
15, 1999 and May 15, 2004. The bonds will be remarketed and the
interest rate redetermined to 4.40% on May 15, 1999. Under the
terms of the bonds, existing bond holders may elect to retain
their bonds at the 4.40% interest rate. All bonds not retained
by current bond holders have been remarketed. The newly issued
bonds will mature on May 15, 2009.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company filed a report on Form 8-K on January 26, 1999, which
included a statement providing for a Shareholder Rights Plan
designed to protect the Company's shareholders in the event of an
unsolicited, unfair offer to acquire the Company.
<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
William T. Morris
Principal Executive Officer
Date: May 12, 1999
Jeffrey S. Osman
Principal Financial and
Accounting Officer
Date: May 12, 1999
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