Business Context and Reporting Period
Company: The York Water Company (York, PA)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Quarter ended March 31, 1998
Shares Outstanding: 2,944,706 as of March 31, 1998
Key Financial Metrics
| Metric | Q1 1998 | Q1 1997 |
|---|---|---|
| Water Operating Revenues | $4,017,568 | $4,006,876 |
| Operating Income | $1,359,038 | $1,455,105 |
| Net Income | $699,205 | $766,199 |
| Basic EPS | $0.24 | $0.26 |
| Cash Dividends Per Share | $0.23 | $0.23 |
| Net Cash from Operating Activities | $1,312,620 | $1,365,789 |
| Long-Term Debt | $32,000,000 | $32,000,000 |
| Short-Term Borrowings | $700,000 | $843,000 |
| Working Capital (Current Assets - Current Liab.) | $945,849 | N/A |
Material Changes vs. Prior Period
- Revenue: Increased by $10,692 (0.3%). Growth was driven by higher commercial and "other" (public) consumption, offsetting a slight decline in residential usage and lower industrial consumption.
- Operating Expenses: Increased by $121,293 (8.1%) excluding depreciation and taxes. Primary drivers were higher maintenance costs for mains, services, hydrants, and filter plant equipment, as well as increased supplemental retirement and deferred compensation costs.
- Depreciation: Increased by $21,060 (5.4%) due to increased plant investment.
- Income Taxes: Decreased by $43,984 (10.9%) due to lower taxable income. The effective tax rate dropped from 34.4% to 33.8%.
- Net Income: Declined by $66,994 (8.7%) primarily due to the rise in operating expenses outpacing revenue growth.
- Construction: Expenditures rose to $924,638 from $617,423 in the prior year quarter.
Outlook, Management Commentary, and Risks
- Rate Developments: The company does not expect to file a new rate increase application until after 1998. The last approved increase (effective Sept 1996) added approximately $960,000 in annual revenues.
- Liquidity: Current assets exceeded current liabilities by $945,849. The company maintains $20,000,000 in lines of credit, with $700,000 utilized as of March 31, 1998.
- Cash Flow Outlook: While operating cash flow exceeded investing and financing needs in Q1, management anticipates that for the remainder of 1998, cash used for investing and financing will exceed operating cash provided. Future funding will rely on credit lines, stock issuance (dividend reinvestment/employee plans), and customer advances.
- Usage Trends: Per capita water volume did not change significantly; no material impact on future results is anticipated from usage levels.
- Accounting Standards: Adoption of new FASB statements (SFAS 130, 131, 132) and SEC derivative regulations did not have a material effect on financial statements as of March 31, 1998.
Investor Verification Checklist
- Verify the sustainability of the 8.1% increase in operating expenses, specifically regarding maintenance and retirement costs.
- Confirm the timeline and potential magnitude of the next rate increase application expected post-1998.
- Monitor the utilization of the $20 million credit line given the projected cash deficit for the remainder of 1998.
- Review the specific impact of the Southern York County main extension and Hametown Booster Station projects on future capital expenditures.
- Assess the stability of industrial consumption, which declined in Q1 1998.