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, 2001 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 3,052,344 Shares outstanding as of April 30, 2001
THE YORK WATER COMPANY PART I - FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets (Unaudited) As Of As of Mar. 31, 2001 Dec. 31, 2000 UTILITY PLANT, at original cost $116,598,778 $114,748,545 Less-Reserve for depreciation 18,757,381 18,314,880 97,841,397 96,433,665 OTHER PHYSICAL PROPERTY: Less-Reserve for depreciation of $84,571 in 2001 and $80,985 in 2000 515,828 519,414 CURRENT ASSETS: Receivables, less reserves of $130,000 in 2001 and 2000 2,538,977 2,854,593 Materials and supplies, at cost 433,146 402,770 Prepaid expenses 237,481 258,236 Deferred income taxes 88,655 88,655 3,298,259 3,604,254 OTHER LONG-TERM ASSETS: Prepaid pension cost 2,214,419 2,178,423 Deferred debt expense 384,403 394,422 Deferred rate case expense 55,198 46,950 Notes receivable 1,085,733 985,794 Deferred regulatory assets 8,403,479 10,360,708 Other 1,430,832 1,862,977 13,574,064 15,829,274 $115,229,548 $116,386,607
THE YORK WATER COMPANY Balance Sheets (Unaudited) As Of As Of Mar. 31, 2001 Dec. 31, 2000 CAPITALIZATION Common stock, no par value, authorized 31,000,000 shares, out- standing 3,052,344 shares in 2001 and 3,042,733 shares in 2000 $ 29,083,152 $ 28,899,504 Earnings retained in the business 4,267,568 4,226,051 Treasury stock, 38,000 shares in 2001 and 2000 (687,800) (687,800) 32,662,920 32,437,755 LONG-TERM DEBT 1.0% Pennvest Loan, due 2019 718,797 728,220 6.0% 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 4.40% Industrial Development Authority Revenue Refunding Bonds Series 1994, due 2009 2,700,000 2,700,000 32,718,797 32,728,220 CURRENT LIABILITIES Short-term borrowings 3,079,266 2,648,946 Current portion of long-term debt 37,593 37,500 Accounts payable 806,455 1,168,824 Dividends payable 581,635 577,914 Accrued taxes 397,291 165,002 Advance water revenues 23,846 21,182 Accrued interest 494,564 678,164 Other accrued expenses 397,781 466,563 5,818,431 5,764,095 DEFERRED CREDITS Customers' advances for construction 17,071,578 16,746,170 Contributions in aid of construction 10,157,133 10,157,133 Deferred income taxes 13,360,824 15,117,013 Deferred regulatory liabilities 1,799,682 1,811,825 Deferred employee benefits 1,640,183 1,624,396 44,029,400 45,456,537 $115,229,548 $116,386,607
THE YORK WATER COMPANY Statements of Income (Unaudited) (Unaudited) Three Months Three Months Ended Ended Mar. 31, 2001 Mar. 31, 2000 WATER OPERATING REVENUES Residential $2,700,543 $2,663,753 Commercial and industrial 1,235,713 1,262,604 Other 559,194 574,818 4,495,450 4,501,175 OPERATING EXPENSES Operation and maintenance 988,892 957,114 Administrative and general 927,181 886,528 Depreciation and amortization 441,689 418,429 Taxes other than income taxes 200,300 335,759 2,558,062 2,597,830 Operating income 1,937,388 1,903,345 INTEREST EXPENSE AND OTHER INCOME Interest on long-term debt 690,042 677,060 Interest on interim bank loans 51,176 22,320 Allowance for funds used during construction (8,607) (20,203) Other income, net (8,468) (35,700) 724,143 643,477 Income before income taxes 1,213,245 1,259,868 Federal and state income taxes 411,045 456,585 Net income $ 802,200 $ 803,283 Basic Earnings Per Share $0.26 $0.27 Cash Dividends Per Share $0.25 $0.24
THE YORK WATER COMPANY Statements of Shareholders' Investment Earnings Retained Common in the Treasury Stock Business Stock Balance, December 31, 2000 $28,899,504 $4,226,051 $(687,800) Net Income - 858,097 - Cash Dividends - (760,683) - Issuance of common stock under dividend reinvest- ment plan 164,178 - - Issuance of common stock under employee stock purchase plan 19,470 - - Balance, March 31, 2001 $29,083,152 $4,323,465 (687,800)
THE YORK WATER COMPANY Statements of Cash Flows (Unaudited) (Unaudited) Three Months Three Months Ended Ended Mar. 31, 2001 Mar. 31, 2000 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 802,200 $ 803,283 Adjustments to reconcile net income to net cash provided by operating activities Depreciation 441,689 418,429 Provision for losses on accounts receivable 32,500 32,500 Increase in deferred income taxes (including regulatory assets and liabilities) 188,897 260,565 Changes in assets and liabilities: Decrease in accounts receivable 283,116 56,643 Decrease in recoverable income taxes - 5,702 (Increase) decrease in materials and supplies (30,376) 10,890 (Increase) decrease in prepaid expenses and prepaid pension costs (15,241) 16,705 Decrease in accounts payable, accrued expenses, other liabilities and deferred employee benefits (408,979) (99,982) Increase in accrued interest and taxes 48,689 179,190 Decrease (increase) in other assets 429,433 (21,866) Net cash provided by operating activities 1,771,928 1,662,059 CASH FLOWS FROM INVESTING ACTIVITIES: Construction expenditures (1,841,352) (1,065,172) Customers' advances for construction and contributions in aid of construction 325,408 855,643 Increase in notes receivable (99,939) (234,575) Net cash used in investing activities (1,615,883) (444,104) CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of long-term debt (9,330) (9,343) Net borrowings (repayments) under line-of-credit agreements 430,320 (690,632) Issuance of common stock under dividend reinvestment plan 164,178 179,867 Issuance of common stock under employee stock purchase plan 19,470 19,535 Dividends paid (760,683) (717,382) Net cash used in financing activities (156,045) (1,217,955) Net increase in cash and cash equivalents - - Cash and cash equivalents at beginning of period - - Cash and cash equivalents at end of period $ - $ - Supplemental disclosures of cash flow information: Cash paid during the year for: Interest, net of amounts capitalized $ 916,565 $ 871,334 Income taxes 53,897 53,897
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 of a normal recurring nature 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, 2000. Operating results for the three months ended March 31, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. 2. Basic Earnings Per Share Basic earnings per share for the three months ended March 31, 2001 and 2000 were based on weighted average shares outstanding of 3,044,387 and 2,999,510, respectively.
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, 2001 Compared with Three Months Ended March 31, 2000 Net income for the first three months of 2001 was $802,200, a decrease of $1,083 or .1% compared to the same period of 2000. Water operating revenues for the three months ended March 31, 2001 decreased $5,725 or .1% compared to the three months ended March 31, 2000. The decrease resulted from lower consumption primarily by commercial and industrial customers of approximately 10.7%. Other revenues, including public consumption (schools, churches, etc.) and fire service also declined during the first three months of 2001 compared to 2000. Residential revenues increased during 2001 compared to 2000 due to an increase in customers. Operating expenses for the first three months of 2001 decreased $39,768 or 1.5% compared to the same period in 2000. Reduced public utility realty taxes due to a lower tax base and rate, and lower main and service line maintenance were the primary reasons for the decrease. These decreases were partially offset by increased maintenance associated with pumping and water treatment equipment and facilities, Nasdaq fees, and increased depreciation due to plant investment. Interest on long-term debt increased $12,982 through March 2001 compared to March 2000 due to the remarketing of the 5% Industrial Development Bonds in July 2000 at a rate of 6%. Interest on interim bank loans increased $28,856 for the first three months of 2001 compared to the same period in 2000 due to an increase in short-term debt outstanding in 2001. The average daily short-term debt outstanding in 2001 and 2000 was $3,108,346 and $1,098,856, respectively. Allowance for funds used during construction for 2001 decreased $11,596 or 57.4% when compared to 2000. Interest was capitalized on large main extension projects (Conewago Township and Railroad/New Freedom) at the beginning of 2000, while first quarter 2001 projects were of smaller magnitude. Other income, net decreased by $27,232 during first quarter 2001 compared to first quarter 2000 due to increased donations and reduced interest income on water district notes receivable. Federal and state income taxes for the period ended March 31, 2001 were $45,540 or 10.0% lower than the period ended March 31, 2000 due to lower taxable income. 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 request was filed on March 20, 2001 seeking a $2,039,790 or 11.1% rate increase. The PPUC is currently examining the request. Liquidity and Capital Resources During the first three months of 2001, the per capita volume of water sold declined in the industrial class primarily due to the loss of a large industrial customer who closed its operation in December 2000. The per capita volume of water sold did not change significantly in the other customer classifications. This closing will reduce industrial revenues for the remainder of the year unless the vacated industrial sites are re-occupied with large operations. The Company does not anticipate any further change in the level of water usage which would have a material impact on future results of operations. During the first quarter of 2001, the Company had $1,841,352 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 2001, net cash provided by operating activities equaled net cash used in investing and financing activities. The Company anticipates that during the remainder of 2001 net cash used in investing and financing activities will again equal 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, 2001, current liabilities exceeded current assets by $2,520,172. Short-term borrowings from lines of credit as of March 31, 2001 were $3,079,266. The Company maintains lines of credit aggregating $16,000,000. 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.
THE YORK WATER COMPANY PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K The Company filed a Form 8-K on January 10, 2001 announcing that its common stock was approved for listing on the Nasdaq National Market. The Company filed a Form 8-K on March 21, 2001 announcing its record earnings for 2000. The Company filed a Form 8-K on March 21, 2001 reporting its filing for a $2,039,790 or 11.1% rate increase with the Pennsylvania Public Utility Commission.
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 11, 2001 Jeffrey S. Osman Principal Financial and Accounting Officer Date: May 11, 2001