Business Context and Reporting Period
Company: The York Water Company
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2008
Business Overview: The Company is a regulated public utility organized in Pennsylvania in 1816. It impounds, purifies, and distributes water to approximately 61,527 customers across 46 municipalities in York and Adams Counties, serving a population of 176,000. Operations are regulated by the Pennsylvania Public Utility Commission (PPUC).
Key Financial Metrics
Revenue (2008): $32,838,000 (Total)
- Residential: $20,572,000
- Commercial and Industrial: $9,671,000
- Other: $2,595,000
- Average Daily Consumption: 18,298,000 gallons
- Average Daily Availability: 35,000,000 gallons
- Miles of Mains: 884
- Employees: 110
- Long-term Fixed Rate Debt: $65,255,000 (Total principal)
- Variable Rate Debt: $21,098,000 (Includes $12,000,000 PEDFA Series A bonds and $9,098,000 line of credit borrowings)
- Lines of Credit: $28,000,000 total availability; $15,098,000 outstanding as of Dec 31, 2008.
- Weighted Average Interest Rate on Lines of Credit: 2.32%
Material Changes vs. Prior Period
Revenue Growth: Total revenues increased from $31,433,000 in 2007 to $32,838,000 in 2008, a year-over-year increase of approximately 4.5%.
Customer Base: The number of customers grew from 58,890 in 2007 to 61,527 in 2008.
Infrastructure Expansion: The Company installed 206,140 feet of additional distribution mains in 2008, compared to 147,803 feet in 2007. Total miles of mains increased from 845 to 884.
Consumption: Average daily consumption decreased slightly from 19,058,000 gallons in 2007 to 18,298,000 gallons in 2008.
Capital Projects: A new sediment recycling facility was completed and brought online in September 2008. Construction on a new booster station in northwest York commenced in 2008.
Guidance, Outlook, Risks, and Unusual Items
Outlook and Guidance: The Company does not provide specific numerical guidance in this text. Management anticipates continued growth in customers and facilities. Future profitability depends on the ability to obtain timely and adequate rate increases from the PPUC to cover investments and expenses.
Key Risks:
- Regulatory Risk: Dependence on PPUC approval for rate increases to recover costs. Delays or denials could adversely affect operations.
- Weather and Supply: Business is subject to seasonal fluctuations and weather conditions (drought, rainfall) affecting demand and water supply availability.
- Interest Rate Risk: Exposure to variable rates on $12,000,000 PEDFA Series A bonds, though hedged with an interest rate swap.
- Competition: Competition for acquisitions and franchise territories may hinder growth.
- Environmental: Risks related to water contamination, dam failure, and compliance with EPA/DEP regulations.
Investor Verification Checklist
- Rate Case Status: Verify the current status of any pending rate increase applications with the PPUC and the timeline for approval.
- Dividend History: Confirm the Company's ability to maintain its dividend streak (paid annually since 1816, increased annually since 1997) given the regulatory environment.
- Debt Maturity Profile: Review the specific maturity dates of the $65.2 million in fixed-rate debt and the terms of the variable-rate PEDFA bonds.
- Capital Expenditures: Assess the funding sources for ongoing projects, including the filtration plant upgrades and the new northwest booster station.
- Weather Impact: Monitor local weather patterns in York and Adams Counties for potential impacts on water consumption and supply levels.