Business Context and Reporting Period
Company: The York Water Company
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2009
Business Overview: A regulated utility organized in 1816, providing impounded, purified, and distributed water to approximately 62,186 customers across 46 municipalities in York and Adams Counties, Pennsylvania. The company serves a population of approximately 180,000. Operations are regulated by the Pennsylvania Public Utility Commission (PPUC) regarding rates, financing, and service territory.
Key Financial Metrics
Revenue (2009): $37,043,000 (Total)
- Residential: $23,299,000
- Commercial and Industrial: $10,734,000
- Other: $3,010,000
- Average Daily Consumption: 18.233 million gallons
- Average Daily Availability: 35.0 million gallons
- Miles of Mains: 938
- Employees: 111 (Full-time)
- Long-Term Debt: Total principal of approximately $77.564 million ($62.514 million fixed rate; $15.054 million variable rate). Includes a $12 million variable rate PEDFA Series A bond issue.
- Lines of Credit: $33 million total availability across three banks. Outstanding borrowings as of Dec 31, 2009, totaled $8.054 million ($3.054m + $3.000m + $2.000m).
- Interest Rates: Weighted average interest rate on line of credit borrowings was 1.56% as of Dec 31, 2009.
Material Changes vs. Prior Period
Revenue Growth: Total revenues increased from $32,838,000 in 2008 to $37,043,000 in 2009, representing a year-over-year increase of approximately 12.8%.
- Customer Base: Increased from 61,527 in 2008 to 62,186 in 2009.
- Infrastructure: Miles of mains increased from 884 in 2008 to 938 in 2009. Additional distribution mains installed/acquired totaled 286,326 feet in 2009.
- Consumption: Average daily consumption remained relatively stable, decreasing slightly from 18.298 million gallons in 2008 to 18.233 million gallons in 2009.
Outlook, Risks, and Management Commentary
Capital Projects and Dam Safety: The company is completing final design and permitting for armoring two dams (Lake Williams and Lake Redman) to meet spillway capacity requirements. Construction is expected to begin between 2010 and 2012, with an estimated cost of $5.5 million per dam.
Regulatory and Rate Risks: Future profitability depends on obtaining PPUC approval for rate increases to cover investments and expenses. Delays or inadequate rate approvals could adversely affect operations.
Environmental and Weather Risks: Operations are subject to seasonal fluctuations and weather conditions (drought, rainfall). The company faces potential costs from new water quality regulations and risks associated with water supply contamination or dam failure.
Dividends: The company has paid dividends since 1816 and increased them annually since 1997. However, future dividends depend on earnings, financial condition, and regulatory approvals. Debt instruments impose restrictions on dividend payments.
Market Risk: The company is exposed to interest rate risk on variable rate debt, which is partially hedged via an interest rate swap agreement on the $12 million PEDFA Series A bond issue.
Investor Verification Checklist
- Rate Case Status: Verify the status of any pending rate increase applications with the PPUC to assess revenue recovery timelines.
- Dam Armoring Costs: Confirm the final budget and funding sources for the $11 million total dam armoring project scheduled for 2010-2012.
- Debt Covenants: Review the specific covenants in the PEDFA Series A bond indenture and line of credit agreements regarding dividend restrictions and liquidity requirements.
- Full Financial Statements: Consult the 2009 Annual Report to Shareholders (Exhibit 13) for detailed Net Income, Operating Cash Flow, and Earnings Per Share figures not included in this summary.
- Weather Impact: Monitor regional rainfall and drought conditions in York and Adams Counties, as these directly impact water consumption and revenue.