YORW

Business Context and Reporting Period

Company: The York Water Company
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 31, 2010
Business Overview: A regulated public utility organized in 1816, providing water impoundment, purification, and distribution services. The company operates within an exclusive franchise covering 39 municipalities in York County and 7 in Adams County, Pennsylvania. It serves an estimated population of 182,000 with 62,505 customers as of year-end 2010.

Key Financial Metrics

Revenue (2010): $39,005,000 (Total)

• Residential: $24,478,000
• Commercial and Industrial: $11,440,000
• Other: $3,087,000

Operational Metrics:

• Average Daily Consumption: 18,875,000 gallons
• Average Daily Availability: 35,000,000 gallons
• Miles of Mains: 925

Debt and Liquidity:

• Long-term Fixed Rate Debt: $73,173,000 (Total principal)
• Variable Rate Debt: $12,000,000 (PEDFA Series A Bonds)
• Lines of Credit: $33,000,000 total availability across three banks (No outstanding borrowings as of Dec 31, 2010)

Profit and Cash Flow: The filing text incorporates the Statements of Income and Cash Flows by reference to the 2010 Annual Report to Shareholders (Exhibit 13). Specific net income, operating cash flow, and margin percentages are not explicitly stated in the provided text.

Material Changes vs. Prior Period

Revenue Growth: Total revenues increased from $37,043,000 in 2009 to $39,005,000 in 2010, representing a 5.3% year-over-year increase.

• Residential revenue grew 5.1% ($23.3M to $24.5M).
• Commercial and industrial revenue grew 6.6% ($10.7M to $11.4M).

Operational Growth:

• Customer count increased from 62,186 in 2009 to 62,505 in 2010.
• Population served increased from 180,000 to 182,000.
• Miles of mains increased from 922 to 925.

Debt Structure: The company maintains a mix of fixed and variable rate debt. The $12,000,000 variable rate PEDFA Series A bond issue is hedged via an interest rate swap to manage exposure to benchmark rate fluctuations.

Guidance, Outlook, Risks, and Contingencies

Capital Projects and Outlook:

• Dam Armoring: The company is finalizing designs to armor Lake Williams and Lake Redman dams to meet Probable Maximum Flood (PMF) standards. Construction is expected to begin between 2011 and 2013. Estimated cost is approximately $5.5 million per dam.
• Filtration Plant: Upgrades to increase capacity are ongoing and expected to continue over several years.

Key Risks:

• Regulatory: Rates are subject to Pennsylvania Public Utility Commission (PPUC) approval. Delays or inadequate rate increases could adversely affect operations.
• Weather: Business is subject to seasonal fluctuations and weather conditions (drought, rainfall, freezing) which impact demand and supply.
• Environmental: Compliance with Safe Drinking Water Act and Clean Water Act requires ongoing testing and potential capital expenditures.
• Interest Rate: Exposure to variable rates on the $12M PEDFA bond, though hedged.

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.

Investor Verification Checklist

• Rate Case Status: Verify the status of any pending rate increase applications with the PPUC to assess revenue recovery timelines.
• Dam Project Costs: Confirm the final budget and funding sources for the $11 million dam armoring project.
• Debt Covenants: Review the specific covenants in the PEDFA loan agreements and trust indentures regarding dividend restrictions and liquidity requirements.
• Weather Impact: Monitor local weather patterns in York and Adams Counties for potential impacts on water consumption and revenue in the upcoming quarters.
• Acquisition Strategy: Assess the pipeline for potential acquisitions, as this is a stated element of the company's growth strategy.