Business Context and Reporting Period
Company: The York Water Company (YORW)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 31, 2025
Business Overview: The oldest investor-owned water utility in the U.S., operating continuously since 1816. The Company provides water and wastewater services to approximately 81,292 customers across 58 municipalities in four counties in south-central Pennsylvania. It is regulated by the Pennsylvania Public Utility Commission (PPUC).
Key Financial Metrics
| Metric (in thousands, except per share) | 2025 | 2024 |
|---|---|---|
| Operating Revenues | $77,488 | $74,959 |
| Operating Expenses | $49,783 | $46,918 |
| Operating Income | $27,705 | $28,041 |
| Net Income | $20,058 | $20,325 |
| Earnings Per Share (Diluted) | $1.39 | $1.42 |
| Net Cash Provided by Operating Activities | $29,860 | $30,559 |
| Capital Expenditures | $48,725 | $48,226 |
| Total Long-Term Debt | $221,900 | $205,561 |
| Short-Term Borrowings | $10,000 | $0 |
| Line of Credit Outstanding | $32,290 | $15,808 |
| Return on Year-End Common Equity | 8.3% | 10.3% (5-yr avg) |
Material Changes vs. Prior Period
- Revenue Growth: Operating revenues increased 3.4% to $77.5 million, driven by a 1,165 increase in water customers and $1.99 million in Distribution System Improvement Charge (DSIC) revenues.
- Profitability Decline: Net income decreased 1.3% to $20.1 million. This was primarily due to a 6.1% increase in operating expenses (wages, depreciation, maintenance) and a 15.3% increase in interest expense ($10.3 million vs. $8.9 million), partially offset by a $0.83 million non-recurring gain on life insurance and lower income taxes.
- Expense Drivers: Operating expenses rose by $2.9 million, with significant increases in depreciation ($1.3 million), wages and benefits ($0.9 million), and distribution system maintenance ($0.4 million).
- Debt Levels: Total debt increased due to higher line of credit utilization ($32.3 million outstanding) and a new $10 million term loan entered in December 2025. Interest rates on borrowings rose, with the weighted average rate on the line of credit increasing to 5.41%.
- Customer Base: Total customers grew from 79,771 to 81,292, aided by acquisitions completed in 2024 and organic growth.
Guidance, Outlook, and Risks
- Rate Increases: New water and wastewater rates took effect on March 1, 2026, expected to generate approximately $18.85 million in additional annual revenue. The DSIC reset to zero upon the implementation of these new rates.
- Capital Plan: The Company anticipates construction and acquisition expenditures of approximately $48 million annually for 2026 and 2027. Funding will come from internally generated funds, line of credit borrowings, and potential debt/equity offerings.
- Acquisitions: Several acquisitions signed in late 2025 (Lenwood Management, Mt. Rock Manor, Pine Run Retirement Community, Eagle View) are expected to close in 2026, adding approximately 470 customers. A subsequent acquisition of CMV Sewage Co. (280 customers) closed in January 2026.
- Dividends: The quarterly dividend was increased by 4.0% to $0.2280 per share in Q4 2025. The payout ratio relative to net income was 63.7% in 2025.
- Risks and Contingencies:
- Drought: Drought watches and warnings were declared for parts of the service territory in early 2026, potentially impacting consumption and revenues.
- Regulatory: A tariff modification allowing recovery of lead service line replacement costs expires March 8, 2026, unless extended.
- Cybersecurity: The Company faces risks related to ransomware and unauthorized access to critical infrastructure, though no material breaches have occurred to date.
- Interest Rates: Rising interest rates increase borrowing costs, impacting net income.
Investor Verification Checklist
- Rate Case Impact: Verify the actual revenue uplift from the March 1, 2026 rate increase against the projected $18.85 million.
- Debt Refinancing: Monitor the Company's ability to refinance the $32.3 million line of credit and $10 million term loan with long-term debt to manage interest rate exposure.
- Acquisition Integration: Track the closing and integration of the pending 2025 acquisitions to ensure projected customer growth materializes.
- Drought Mitigation: Assess the impact of ongoing drought conditions in Pennsylvania on water consumption volumes and revenue stability.
- Lead Service Line Costs: Confirm the status of the PPUC tariff extension for lead service line replacement cost recovery beyond March 2026.