-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MJQ0jCDxfXBcVbxg0dLWAEJSSbothxWaj/t0ZRpf7vjySSXHAzml5yeD2VUDEsIf Y4WXMaFv0rVx/rROBOJoKA== 0000108985-03-000055.txt : 20031110 0000108985-03-000055.hdr.sgml : 20031110 20031110133403 ACCESSION NUMBER: 0000108985-03-000055 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031110 FILER: COMPANY DATA: COMPANY CONFORMED NAME: YORK WATER CO CENTRAL INDEX KEY: 0000108985 STANDARD INDUSTRIAL CLASSIFICATION: WATER SUPPLY [4941] IRS NUMBER: 231242500 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00690 FILM NUMBER: 03987626 BUSINESS ADDRESS: STREET 1: 130 E MARKET ST CITY: YORK STATE: PA ZIP: 17405 BUSINESS PHONE: 7178453601 MAIL ADDRESS: STREET 1: PO BOX 15089 10-Q 1 sept0310q.txt 3RD QUARTER 2003 10-Q 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 September 30, 2003 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 by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act), 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, No par value 6,405,843 Shares outstanding as of November 7, 2003

THE YORK WATER COMPANY Statements of Income
THE YORK WATER COMPANY Statements of Shareholders' Investment
THE YORK WATER COMPANY Statements of Cash Flows 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 of a normal recurring nature 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 December 31, 2002. Operating results for the three month and nine month periods ended September 30, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. 2. Basic Earnings Per Share Basic earnings per share for the nine months ended September 30, 2003 and 2002 were based on weighted average shares outstanding of 6,379,879 and 6,323,782, respectively. Since there are no common stock equivalents, there is no required calculation for diluted earnings per share. 3. As a result of the Company's recently approved rate case on June 26, 2003, and in accordance with SFAS No. 71, $260,910 in pension expenses have been classified as regulatory assets. SFAS No. 71 stipulates generally accepted accounting principles for companies whose rates are established by or are subject to approval by an independent third-party regulator. In accordance with SFAS No. 71, costs are deferred on the balance sheet as regulatory assets and liabilities when it is probable that these costs and credits will be recognized in the rate-making process in a period different from when the costs and credits were incurred. These deferred amounts are then recognized in the income statement in the same period that they are reflected in rates charged for water service. THE YORK WATER COMPANY Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-looking Information Certain statements contained herein and elsewhere in this Form 10-Q which are not historical facts are forward-looking statements under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements address among other things: various federal and state regulations concerning water quality and environmental standards; the adequacy of approved rates to allow for a fair rate of return on the investment in utility plant; the timeliness of rate relief; quantity of rainfall and temperature; industrial demand; financing costs; energy rates; consummation of capital markets transactions to finance capital expenditure projects; and environmental and water quality regulations, as well as information contained elsewhere in this report preceded by, followed by, or including the words "believes," "expects," "anticipates," "plans," or similar expressions. The statements are based on a number of assumptions concerning future events, many of which are outside the Company's control. The Company cautions that a number of important factors could cause the actual results to differ materially from those expressed in any forward-looking statements made on behalf of the Company. The Company undertakes no obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise. Results of Operations Three Months Ended September 30, 2003 Compared with Three Months Ended September 30, 2002 Net income for the third quarter of 2003 was $1,494,211, an increase of $378,668, or 33.9%, compared to the same period of 2002. Water operating revenues for the three months ended September 30, 2003 increased $509,931, or 9.7%, compared to the three months ended September 30, 2002. The increase resulted primarily from the 8.5% rate increase approved by the Pennsylvania Public Utility Commission (PPUC), effective June 26, 2003, and an increase in total customers since September 30, 2002. Operating expenses for the third quarter of 2003 increased $38,283, or 1.3%, compared to the third quarter of 2002. The primary reasons for the increase were higher depreciation expense, higher health and general insurance premiums and higher contractual fees amounting to $85,000. Emergency source of supply expenses and chemical expenses related to the drought incurred in the 2002 period in the amount of $47,000 partially offset the increase. THE YORK WATER COMPANY Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations (Continued) Allowance for funds used during construction for the third quarter 2003 increased $51,537, or 126.5%, when compared to third quarter 2002. Capitalized interest on the costs associated with the Susquehanna River project accounts for the increase. Federal and state income taxes increased $144,981, or 22.2%, due to an increase in taxable income. The effective tax rate was 34.8% for the third quarter of 2003 compared with 36.9% for the third quarter of 2002. Nine Months Ended September 30, 2003 Compared with Nine Months Ended September 30, 2002 Net income for the first three quarters of 2003 was $3,301,402, an increase of $389,478, or 13.4%, compared to the first three quarters of 2002. Water operating revenues for the year-to-date period ended September 30, 2003 increased $759,606, or 5.1%, compared to the same period in 2002. The increase resulted primarily from an increase of 863 customers since September 30, 2002, the distribution surcharge which was collected from all customers during the first half of 2003 for infrastructure improvements, and the rate increase effective June 26, 2003. Operating expenses for the first nine months of 2003 increased $264,212, or 3.1%, compared to the first nine months of 2002. Higher depreciation, insurance, rate case expense, contractual fees, and directors' fees in the amount of $261,000 were the primary reasons for the increase. Reduced pumping station maintenance, main maintenance, and realty taxes amounting to $186,000 partially offset the increase. Allowance for funds used during construction for 2003 increased $109,726, or 114.6%, when compared to 2002. Capitalized interest on the costs associated with the Susquehanna River project accounts for the increase. Other income, net decreased by $137,024 in 2003 compared to 2002 due to a $158,000 increase in supplemental retirement expenses caused by a decrease in the discount rate provided by our pension actuary and used in the present value calculations. An increase in interest income on water district notes receivable of $30,000 partially offset the decrease. THE YORK WATER COMPANY Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Rate Developments During 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 request was filed on January 24, 2003 seeking a $2,808,000 or 13.7% rate increase. Effective June 26, 2003, the PPUC authorized an increase in rates designed to produce approximately $1,725,000 in additional annual operating revenues, an increase of 8.5%. The Company plans to file its next rate increase request in the second quarter of 2004. Liquidity and Capital Resources During the first three quarters of 2003, the Company had $5,916,499 of construction expenditures. The Company financed such expenditures through 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 construction expenditures of approximately $4,000,000 for the last quarter of 2003, and will finance these expenditures in the same manner as the first three quarters of 2003. During the first nine months of 2003, net cash used in investing and financing activities equaled net cash provided by operating activities. The Company anticipates that during the remainder of 2003 net cash used in investing and financing activities will again equal cash provided by operating activities. Borrowings against the Company's lines of credit, 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 customers' advances are expected to be used to satisfy the need for additional cash. As of September 30, 2003, current liabilities exceeded current assets by $3,394,000. Short-term borrowings from lines of credit as of September 30, 2003 were $4,392,000. The Company maintains lines of credit aggregating $26,500,000. Loans granted under these lines of credit bear interest at the prime rate or LIBOR plus 1 to 1.25%. All lines of credit are unsecured and payable upon demand. The Company is not required to maintain compensating balances on its lines of credit. THE YORK WATER COMPANY Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Susquehanna River Project Update The Company received a favorable final ruling from the PPUC regarding its petition to reclassify Lake Redman from a cold water fishery to a warm water fishery. The Company is now waiting for the Environmental Protection Agency to approve the reclassification. Following this approval, a discharge permit will be issued and the construction permit will be amended to include a discharge into Lake Redman. The Groundbreaking Ceremony for the project was held on August 21, 2003. Construction on both the pumping station and the pipeline began in mid- September. The project is expected to be completed in one year at an estimated cost of $22 million. Susquehanna River pipeline construction expenditures and other capital expenditures are expected to be funded through a $7.3 million tax-exempt bond issue in the first quarter of 2004, a $7.5 million secondary common stock offering in the second quarter of 2004 and a $12 million tax- exempt bond issue in the fourth quarter of 2004. The Company has filed a financing application with the Pennsylvania Economic Development Financing Authority requesting approval to issue tax-exempt bonds to fund the project. Off-Balance Sheet Transactions The Company does not use off-balance sheet transactions, arrangements or obligations that may have a material current or future effect on financial condition, results of operations, liquidity, capital expenditures, capital resources or significant components of revenues or expenses. The Company does not use securitization of receivables or unconsolidated entities. The Company does not engage in trading or risk management activities, has no lease obligations, and does not have material transactions involving related parties Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company does not use derivative financial instruments for speculative trading purposes. The Company's operations are exposed to market risks primarily as a result of changes in interest rates. This exposure to these market risks relates to the Company's debt obligations under its lines of credit. Loans granted under these lines bear interest based upon the prime rate or LIBOR plus 1 to 1.25 percent. The Company has not entered into financial instruments such as interest rate swaps or interest rate lock agreements. The Company's 4.40% Industrial Development Authority Revenue Refunding Bonds Series 1994 have a mandatory tender date of May 15, 2004. The 6% Series 1995 bonds have a mandatory tender date of June 1, 2005. The Company is required to purchase any unremarketed 1994 and 1995 bonds, despite the rate. THE YORK WATER COMPANY Item 4. Controls and Procedures The Company's management, with the participation of the Company's President and Chief Executive Officer and Chief Financial Officer, evaluated the Company's disclosure controls and procedures as of the end of the period covered by this quarterly report. Based upon this evaluation, the Company's President and Chief Executive Officer along with the Company's Chief Financial Officer concluded that the Company's disclosure controls and procedures have been designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. The Company believes that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. No change in the Company's internal control over financial reporting occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. THE YORK WATER COMPANY Part II - Other Information Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 31.1 - Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. 31.2 - Certification of Chief Financial Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. 32.1 - Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350 32.2 - Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 (b) Reports on Form 8-K On August 11, 2003, the Company filed a Form 8-K for the purpose of furnishing the press release announcing its earnings for the second quarter of 2003. On October 9, 2003, the Company filed a Form 8-K reporting that its certified public accountant, Stambaugh Ness, PC, will not be standing for re-appointment following the 2003 audit. THE YORK WATER COMPANY SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE YORK WATER COMPANY /S/Jeffrey S. Osman Jeffrey S. Osman Principal Executive Officer Date: November 10, 2003 /S/Kathleen M. Miller Kathleen M. Miller Principal Financial and Accounting Officer Date: November 10, 2003 EXHIBIT 31.1 CERTIFICATIONS I, Jeffrey S. Osman, certify that: 1. I have reviewed this quarterly report on Form 10-Q of The York Water Company; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures, (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) {Paragraph omitted in accordance with SEC transition instructions contained in SEC Release 34-47986}; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 10, 2003 /S/Jeffrey S. Osman Jeffrey S. Osman President and CEO EXHIBIT 31.2 CERTIFICATIONS I, Kathleen M. Miller, certify that: 1. I have reviewed this quarterly report on Form 10-Q of The York Water Company; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures, (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) {Paragraph omitted in accordance with SEC transition instructions contained in SEC Release 34-47986}; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 10, 2003 /S/Kathleen M. Miller Kathleen M. Miller Chief Financial Officer EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 In connection with the Quarterly Report of The York Water Company on Form 10-Q for the period ending September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jeffrey S. Osman, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, that: (1) The Report fully complies with the requirements of Section 12 (a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m (a)); and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /S/Jeffrey S. Osman Jeffrey S. Osman Chief Executive Officer Date: November 10, 2003 EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 In connection with the Quarterly Report of The York Water Company on Form 10-Q for the period ending September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Kathleen M. Miller, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, that: (1) The Report fully complies with the requirements of Section 12 (a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m (a)); and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /S/Kathleen M. Miller Kathleen M. Miller Chief Financial Officer Date: November 10, 2003 -----END PRIVACY-ENHANCED MESSAGE-----