SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 31, 1995 Commission File No. 0-690 THE YORK WATER COMPANY (Exact name of Registrant as specified in its Charter) PENNSYLVANIA 23-1242500 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 130 East Market Street, York, Pennsylvania 17401 (Address of principal executive offices) (Zip Code) Registrant's telephone number including Area Code 717-845-3601 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common stock, $10 par value 631,585 Shares outstanding as of March 31, 1995 THE YORK WATER COMPANY PART I - FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheet (Unaudited) As Of As of Mar.31, 1995 Dec. 31, 1994 UTILITY PLANT, at original cost $84,628,027 $83,642,650 Less-Reserve for depreciation 10,936,411 10,535,512 73,691,616 73,107,138 OTHER PHYSICAL PROPERTY: Less-Reserve for depreciation of $51,480 in 1995 and $50,312 in 1994 428,995 430,162 CURRENT ASSETS: Receivables, less reserves of $90,000 in 1995 and in 1994 2,112,829 2,211,288 Materials and supplies, at cost (first-in, first-out) 244,159 298,356 Prepaid expenses 50,250 111,278 Deferred income taxes 63,187 64,877 2,470,425 2,685,799 OTHER LONG-TERM ASSETS: Prepaid pension cost 1,442,946 1,402,946 Deferred debt expense 431,879 445,713 Deferred rate case expense 115,523 139,864 Notes receivable 1,139,344 1,155,753 Deferred regulatory assets 6,980,756 6,885,508 Other 706,745 714,447 10,817,193 10,744,231 $87,408,229 $86,967,330 THE YORK WATER COMPANY Balance Sheet (Unaudited) As Of As Of Mar.31, 1995 Dec. 31, 1994 CAPITALIZATION Common stock $ 6,315,845 $ 6,296,836 Capital surplus 13,245,218 13,146,153 Earnings retained in the business 1,804,285 1,808,925 21,365,348 21,251,914 LONG-TERM DEBT 6.25% Ind. Dev. Auth. Rev. Refund Bonds, due 2000 4,300,000 4,300,000 10.05% Senior Notes, Series C, due 2020 6,500,000 6,500,000 10.17% Senior Notes, Series A, due 2019 6,000,000 6,000,000 9.6% Senior Notes, Series B,due 2019 5,000,000 5,000,000 8.43% Senior Notes,Series D,due 2022 7,500,000 7,500,000 4.75% Ind. Dev. Auth. Rev. Refunding Bonds, due 2009 2,700,000 2,700,000 32,000,000 32,000,000 CURRENT LIABILITIES Short-term borrowings 1,324,000 1,302,000 Accounts payable 55,978 891,034 Dividends payable 465,566 464,295 Accrued taxes 770,214 331,847 Advance water revenues 186,246 169,110 Accrued interest 501,690 680,240 Other accrued expenses 1,194,971 991,079 4,498,665 4,829,605 DEFERRED CREDITS Customers' advances for construction15,744,484 15,037,501 Contributions in aid of construction 4,375,345 4,375,345 Deferred income taxes 7,948,986 7,969,029 Deferred regulatory liabilities 1,475,401 1,503,936 29,544,216 28,885,811 $87,408,229 $86,967,330 THE YORK WATER COMPANY Statements of Income (Unaudited) (Unaudited) Three Months Ended March 31 1995 1994 WATER OPERATING REVENUES Residential $2,095,687 $1,984,738 Commercial and industrial 1,290,280 1,193,168 Other 309,041 282,269 3,695,008 3,460,175 OPERATING EXPENSES Operation and maintenance 754,120 786,081 Administrative and general 838,809 856,751 1,592,929 1,642,832 Depreciation 377,480 332,084 Taxes other than income taxes 249,537 243,122 Federal and state income taxes 329,654 264,715 2,549,600 2,482,753 Operating Income 1,145,408 977,422 INTEREST EXPENSE AND OTHER EXPENSE/(INCOME) Interest on long-term debt 693,175 734,237 Interest on interim bank loans 27,051 1,942 Allowance for funds used during construction (79,257) (8,418) Gain on sale of land - (215,417) Other income, net (57,635) (138,652) 583,334 373,692 Net Income $ 562,074 $ 603,730 Earnings Per Share $0.89 $0.97 Cash Dividends Per Share $0.90 $0.90 THE YORK WATER COMPANY Statements of Cash Flows (Unaudited) (Unaudited) Three Months Three Months Ended Ended March 31, 1995 March 31, 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 562,074 $ 603,730 Adjustments to reconcile net income to net cash provided by operating activities Gain on sale of land - (215,417) Depreciation 377,480 332,084 Provision for losses on accounts receivable 22,500 22,500 (Decrease) increase in deferred income taxes (including regulatory assets and liabilities) (142,136) 165,762 Changes in assets and liabilities: Decrease in accounts receivable 75,959 17,497 Decrease in materials and supplies 54,197 26,595 Decrease in prepaid expenses 21,028 31,941 Decrease in accounts payable, accrued expenses and other liabilities (612,757) (431,651) Increase (decrease) in accrued interest and taxes 259,817 (88,730) Decrease in other assets 73,909 13,007 Net cash provided by operating activities 692,071 477,318 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions of temporary investments - (8,072) Maturities of temporary investments - 1,007,310 Proceeds from the sale of land - 249,000 Costs incurred relating to the sale of land - (33,583) Construction expenditures (988,823) (365,885) Customers' advances for construction and contributions in aid of construction 706,983 131,670 Net cash (used in) provided by investing activities (281,840) 980,440 CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (repayments) under line-of-credit agreements 22,000 (452,000) Issuance of common stock under dividend reinvestment plan 100,995 97,016 Issuance of common stock under employee stock purchase plan 17,079 14,685 Dividends paid (566,714) (559,637) Decrease in notes receivable 16,409 5,721 Net cash (used in) financing activities (410,231) (894,215) Net increase in cash and cash equivalents - 563,543 Cash and cash equivalents at beginning of period - 42,634 Cash and cash equivalents at end of period $ - $ 606,177 Supplemental disclosures of cash flow information: Cash paid during the year for: Interest, net of amounts capitalized $ 792,468 $ 914,410 Income taxes 43,219 104,612 /TABLE THE YORK WATER COMPANY Notes to Interim Financial Statements 1. Interim Financial Information The interim financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary for a fair presentation of results for such periods. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company's Annual Report to Shareholders for the year ended 1994. 2. Earnings Per Share Earnings per share for the three months ended March 31, 1995 and 1994 were based on weighted average shares outstanding of 631,121 and 623,324, respectively. THE YORK WATER COMPANY Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Three Months Ended March 31, 1995 Compared with Three Months Ended March 31, 1994 Net income for the three months ended March 31, 1995 was $562,074, a decrease of $41,656 compared to the three months ended March 31, 1994. Operating revenues for the three months ended March 31, 1995 increased $234,833 (6.8%) compared to the three months ended March 31, 1994. The revenue increase resulted primarily from an increase in rates of 3.7% approved by the Pennsylvania Public Utility Commission (PPUC) effective September 23, 1994 and an increase in the volume of water sold as a result of adding 1,104 customers since March 31, 1994. Operation and maintenance expenses for the three months ended March 31, 1995 decreased $31,961 (4.1%) compared to the three months ended March 31, 1994 generally due to operation and maintenance expenses associated with the abnormal freezing weather which occurred during the three months ended March 31, 1994. Interest on long-term debt for the three months ended March 31, 1995 decreased $41,062 (5.6%) compared to the three months ended March 31, 1994. The decrease in interest on long-term debt is primarily related to the issuance of $2,700,000 4.75% Revenue Refunding Bonds to replace a like amount of bonds with an interest rate of 7.0% during the first quarter of 1994. During the three months ended March 31, 1994, the Company had a gain on the sale of one parcel of land of $215,417 ($124,759 after tax). Rate Developments Within the last several years the Company has filed written applications for rate increases with the PPUC and has been granted rate relief as a result of such requests. The most recent formal rate request was filed by the Company on April 29, 1994 seeking a 6.7% increase in annual revenues. Effective September 23, 1994, the PPUC authorized an increase in rates designed to produce approximately $550,000 in additional annual revenues, an increase of 3.7%. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources During the first three months of 1995, the per capita volume of water sold did not significantly change compared to the first three months of 1994. The Company does not anticipate any change in the level of water usage which would have a material impact on future results of operations. During the three months ended March 31, 1995, the Company had $988,823 of construction expenditures. The Company financed such expenditures through internally generated funds, customers' advances and proceeds from the issuance of common stock under its dividend reinvestment plan (stock issued in lieu of cash dividends) and employee stock purchase plan and short-term borrowings. The Company anticipates annual construction expenditures for 1995 and 1996 of approximately $4,491,000 and $3,645,000, respectively. The Company plans to finance such expenditures with internally generated funds, customers' advances short-term borrowings and proceeds from the issuance of common stock under its dividend reinvestment plan (stock issued in lieu of cash dividends) and employee stock purchase plan. The Company anticipates that it will submit an application in the future with the PPUC proposing increases in rates to provide a fair rates of return on the capital expenditures associated with its 1995 and 1996 construction projects. During three months ended March 31, 1995, net cash used in investing and financing activities exceeded net cash provided by operating activities. The Company anticipates that during the remainder of 1995 net cash used in investing and financing activities will again exceed net cash provided by operating activities. Customers' advances, borrowings against the Company's lines of credit and proceeds from the issuance of common stock under its dividend reinvestment plan (stock issued in lieu of cash dividends) and employee stock purchase plan are used to satisfy the need for additional cash. As of March 31,1995, current liabilities exceeded current assets by $2,028,240. As of December 31, 1994, current liabilities exceeded current assets by $2,143,806. Generally, the Company finances a portion of its construction expenditures with borrowings against its lines of credit until such borrowings reach an amount which would justify issuing long-term debt. Accordingly, current liabilities frequently exceed current assets on the Company's balance sheets. Short-term borrowings from lines of credit as of March 31, 1995 and December 31, 1994 were $1,324,000 and $1,302,000, respectively. The Company maintains lines of credit aggregating $10,000,000. Loans granted under these lines bear interest based on the prime or Libor rates. The Company is not required to maintain compensating balances on its lines of credit. During the three months ended March 31, 1995, the Company's dividend payout ratios relative to net income and cash provided by operating activities were 100.1% and 81.9%, respectively. The Company believes that these payout ratios are appropriate for the first quarter of 1995. Shareholders investment as a percent of total capitalization was 40.0% as of March 31, 1995 compared with 39.9% as of December 31, 1994. This increase was the result of an increase in the amount of shareholder equity. The Company like all other businesses is affected by inflation most notably by the continually increasing costs incurred to maintain and expand its service capacity. The cumulative effect of inflation results in significantly higher facility replacement costs which must be recovered from future cash flows. The ability of the Company to recover this increased investment in facilities is dependent upon future revenue increases which are subject to approval by the PPUC. Impact of Recent Accounting Pronouncements There are no issued but not effective accounting pronouncements of the Financial Accounting Standards Board that would have a material impact on the Company's financial position or results of operations. THE YORK WATER COMPANY SIGNATURES Pursuant to the requirements of the Securities Exchange Act of the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE YORK WATER COMPANY /s/William T. Morris William T. Morris Principal Executive Officer Date: May 10, 1995 /s/Jeffrey S. Osman Jeffrey S. Osman Principal Financial and Accounting Officer Date: May 10, 1995