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, 2024
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 79,771 customers across 57 municipalities in four counties in south-central Pennsylvania. It is regulated by the Pennsylvania Public Utility Commission (PPUC).
Key Financial Metrics
| Metric (in thousands) | 2024 | 2023 |
|---|---|---|
| Operating Revenues | $74,959 | $71,031 |
| Operating Expenses | $46,918 | $41,500 |
| Operating Income | $28,041 | $29,531 |
| Net Income | $20,325 | $23,757 |
| Earnings Per Share (Diluted) | $1.42 | $1.66 |
| Net Cash Provided by Operating Activities | $30,559 | $31,908 |
| Capital Expenditures | $48,226 | $64,640 |
| Total Long-Term Debt | $205,561 | $180,007 |
| Common Stockholders' Equity | $231,192 | $221,178 |
| Return on Year-End Common Equity | 8.8% | 10.7% (5-yr avg) |
Material Changes vs. Prior Period
- Revenue Growth: Operating revenues increased 5.5% to $74.96 million, driven by residual effects of a March 2023 rate increase, customer base growth (from 77,893 to 79,771 customers), and higher Distribution System Improvement Charge (DSIC) revenues.
- Profitability Decline: Net income decreased 14.4% to $20.33 million. This was primarily due to a 13.1% increase in operating expenses, higher interest expense on debt, and a lower Allowance for Funds Used During Construction (AFUDC). These factors were partially offset by lower pension costs.
- Expense Increases: Operating expenses rose $5.42 million, with significant increases in depreciation ($1.22M), wages and benefits ($1.01M), and distribution system maintenance ($0.99M).
- Debt and Interest: Interest on debt increased 26.4% to $8.90 million due to higher long-term debt outstanding and the issuance of 5.67% Senior Notes. Total long-term debt increased to $205.6 million.
- Capital Program: Capital expenditures decreased to $48.2 million in 2024 compared to $64.6 million in 2023, largely due to the completion of the Lake Williams dam armoring and spillway replacement project in 2023.
Guidance, Outlook, and Risks
- Rate Matters: The Company expects to file a rate increase request in 2025. A DSIC of 2.20% on revenues became effective January 1, 2025.
- Capital Expenditures: Anticipated construction and acquisition expenditures are approximately $46.0 million for 2025 and $48.5 million for 2026. Funding will come from internally generated funds, line of credit borrowings, and potential debt/equity offerings.
- Acquisitions: The Company signed agreements in 2024 and early 2025 to acquire water and wastewater assets (Eagle View, CMV Sewage Co., Margaretta Mobile Home Park), expected to close in the second half of 2025, adding approximately 485 customers.
- Dividends: The quarterly dividend was increased by 4.00% to $0.2192 per share in Q4 2024. The Board declared a dividend of $0.2192 per share payable April 15, 2025.
- Risks and Contingencies:
- Drought: A drought watch was declared for the service territory in November 2024, potentially impacting future revenues if restrictions are enforced.
- Regulatory Compliance: Ongoing costs related to the Lead and Copper Rule Revisions (LCRR) and Improvements (LCRI), including service line replacements.
- Cybersecurity: The Company faces risks from ransomware and unauthorized access but has not experienced material breaches. Oversight is managed by the Audit Committee.
Investor Verification Checklist
- Rate Case Timing: Verify the filing date and potential approval timeline for the 2025 rate increase request, which is critical for future margin recovery.
- Debt Servicing: Monitor the impact of rising interest rates on the $205.6 million long-term debt portfolio and the $15.8 million line of credit utilization.
- Capital Project Completion: Confirm the completion of the Lake Williams dam sitework and the status of the Lake Redman dam reassessment.
- Acquisition Closings: Track the regulatory approval and closing dates for the three pending acquisitions (Eagle View, CMV, Margaretta) to assess customer growth targets.
- Drought Impact: Assess the duration and severity of the Pennsylvania drought watch and its potential effect on per capita water consumption and revenue.