York Water Co 10-K for FY2019

York Water Co (YORW)

10-K 2020-03-10 For: 2019-12-31

Added on April 12, 2026

About this 10-K

York Water Co filed this 10-K on March 10, 2020, covering the fiscal year ended December 31, 2019 (FY2019).

Headline figures

Fiscal year ended December 31, 2019, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $51.58M; up 6.5% from $48.44M a year earlier
Net income: $14.4M; up 7.7% from net income of $13.38M a year earlier
Diluted EPS: $1.11; up 6.7% from $1.04 a year earlier

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Mark One)
⌧	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2019
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from __________to____________

Commission file number 001-34245
THE YORK WATER COMPANY
(Exact name of registrant as specified in its charter)

PENNSYLVANIA					23-1242500
(State or other jurisdiction of incorporation or organization)					(I.R.S. Employer 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

Securities registered pursuant to Section 12(b) of the Act:					None
					(Title of Each Class)
Securities registered pursuant to Section 12(g) of the Act:

COMMON STOCK, NO PAR VALUE			YORW		The NASDAQ Global Select Market
(Title of Class)			(Trading Symbol)		(Name of Each Exchange on Which Registered)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☐ YES							⌧ NO
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
☐ YES							⌧ NO
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							☐ NO
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
⌧ YES							☐ NO
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐		Accelerated filer ⌧				Non-accelerated filer ☐

Small reporting company ⌧				Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ YES							⌧ NO
The aggregate market value of the Common Stock, no par value, held by nonaffiliates of the registrant on June 30, 2019
was $463,441,531.
As of March 10, 2020 there were 13,016,725 shares of Common Stock, no par value, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Company's 2020 Annual Meeting of Shareholders are incorporated by reference into Part I and Part III.

Forward-Looking Statements		3

PART I
Item 1.	Business	4
Item 1A.	Risk Factors	8
Item 1B.	Unresolved Staff Comments	8
Item 2.	Properties	8
Item 3.	Legal Proceedings	9
Item 4.	Mine Safety Disclosures	9

PART II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	10
Item 6.	Selected Financial Data	10
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	10
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 8.	Financial Statements	20
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	52
Item 9A.	Controls and Procedures	52
Item 9B.	Other Information	53

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	53
Item 11.	Executive Compensation	53
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	54
Item 13.	Certain Relationships and Related Transactions, and Director Independence	54
Item 14.	Principal Accounting Fees and Services	54

PART IV
Item 15.	Exhibits and Financial Statement Schedules	55
Item 16.	Form 10-K Summary	60

Signatures		62

•	the amount and timing of rate increases and other regulatory matters including the recovery of costs recorded as regulatory assets;
•	expected profitability and results of operations;
•	trends;
•	goals, priorities and plans for, and cost of, growth and expansion;
•	strategic initiatives;
•	availability of water supply;
•	water usage by customers; and
•	the ability to pay dividends on common stock and the rate of those dividends.

•	changes in weather, including drought conditions or extended periods of heavy rainfall;
•	levels of rate relief granted;
•	the level of commercial and industrial business activity within the Company's service territory;
•	construction of new housing within the Company's service territory and increases in population;
•	changes in government policies or regulations, including the tax code;
•	the ability to obtain permits for expansion projects;
•	material changes in demand from customers, including the impact of conservation efforts which may impact the demand of customers for water;
•	changes in economic and business conditions, including interest rates;
•	loss of customers;
•	changes in, or unanticipated, capital requirements;
•	the impact of acquisitions;
•	changes in accounting pronouncements;
•	changes in the Company’s credit rating or the market price of its common stock; and
•	the ability to obtain financing.

(In thousands of dollars)	For the Years Ended December 31
	2019		2018		2017
Revenues:
Residential	$	33,409	$	31,281	$	31,257
Commercial and industrial		14,441		13,578		13,729
Other		3,728		3,578		3,603
Total	$	51,578	$	48,437	$	48,589

Average daily water consumption (gallons per day)		20,157,000		19,517,000		18,378,000

Miles of water mains at year-end		984		980		973

Miles of wastewater mains at year-end		30		19		19

Additional water distribution mains installed/acquired (ft.)		21,676		36,598		31,709

Wastewater collection mains acquired (ft.)		55,952		-		57,386

Number of customers at year-end		71,411		70,263		69,604

Population served at year-end		201,000		199,000		198,000

Molly E. Norton	The York Water Company	(717) 718-2942
Investor Relations &	130 East Market Street	(800) 750-5561
Communications Administrator	York, PA 17401	mollyn@yorkwater.com

	Dec. 31, 2019			Dec. 31, 2018
ASSETS
UTILITY PLANT, at original cost	$	401,383		$	380,784
Plant acquisition adjustments		(3,318	)		(3,108	)
Accumulated depreciation		(84,841	)		(78,519	)
Net utility plant		313,224			299,157

OTHER PHYSICAL PROPERTY, net of accumulated depreciation
of $435 in 2019 and $410 in 2018		769			714

CURRENT ASSETS:
Cash and cash equivalents		2			2
Accounts receivable, net of reserves of $305 in 2019 and $305 in 2018		4,421			4,811
Unbilled revenues		2,276			2,427
Recoverable income taxes		547			–
Materials and supplies inventories, at cost		1,007			876
Prepaid expenses		1,131			895
Total current assets		9,384			9,011

OTHER LONG-TERM ASSETS:
Notes receivable		255			255
Deferred regulatory assets		34,189			32,353
Other assets		5,708			3,650
Total other long-term assets		40,152			36,258

Total Assets	$	363,529		$	345,140

	Dec. 31, 2019		Dec. 31, 2018
STOCKHOLDERS' EQUITY AND LIABILITIES
COMMON STOCKHOLDERS' EQUITY:
Common stock, no par value, authorized 46,500,000 shares, issued and outstanding 13,014,898 shares in 2019 and 12,943,536 shares in 2018	$	83,976	$	81,305
Retained earnings		50,209		44,890
Total common stockholders' equity		134,185		126,195

PREFERRED STOCK, authorized 500,000 shares, no shares issued		–		–

LONG-TERM DEBT, excluding current portion		94,535		93,328

COMMITMENTS		–		–

CURRENT LIABILITIES:
Short-term borrowings		–		1,000
Current portion of long-term debt		6,500		30
Accounts payable		3,452		3,030
Dividends payable		2,096		1,999
Accrued compensation and benefits		1,247		1,191
Accrued income taxes		–		150
Accrued interest		914		992
Deferred regulatory liabilities		609		2,104
Other accrued expenses		338		345
Total current liabilities		15,156		10,841

DEFERRED CREDITS:
Customers' advances for construction		7,844		6,849
Deferred income taxes		40,426		36,962
Deferred employee benefits		4,317		4,715
Deferred regulatory liabilities		24,790		24,710
Other deferred credits		2,247		1,815
Total deferred credits		79,624		75,051

Contributions in aid of construction		40,029		39,725

Total Stockholders' Equity and Liabilities	$	363,529	$	345,140

	Year Ended December 31
	2019			2018

OPERATING REVENUES	$	51,578		$	48,437

OPERATING EXPENSES:
Operation and maintenance		10,387			9,670
Administrative and general		8,517			8,095
Depreciation and amortization		7,688			7,010
Taxes other than income taxes		1,200			1,145
		27,792			25,920

Operating income		23,786			22,517

OTHER INCOME (EXPENSES):
Interest on debt		(5,124	)		(5,509	)
Allowance for funds used during construction		366			229
Other pension costs		(1,451	)		(1,285	)
Other income (expenses), net		(935	)		(85	)
		(7,144	)		(6,650	)

Income before income taxes		16,642			15,867

Income taxes		2,240			2,491

Net Income	$	14,402		$	13,376

Basic Earnings Per Share	$	1.11		$	1.04

Diluted Earnings Per Share	$	1.11		$	1.04

	Common Stock Shares		Common Stock Amount		Retained Earnings			Total

Balance, December 31, 2017		12,872,742	$	79,201	$	40,204		$	119,405
Net income		–		–		13,376			13,376
Cash dividends declared, $0.6731 per share		–		–		(8,690	)		(8,690	)
Issuance of common stock under dividend reinvestment, direct stock and employee stock purchase plans		67,051		2,024		–			2,024
Stock-based compensation		3,743		80		–			80
Balance, December 31, 2018		12,943,536		81,305		44,890			126,195
Net income		–		–		14,402			14,402
Cash dividends declared, $0.7001 per share		–		–		(9,083	)		(9,083	)
Issuance of common stock under dividend reinvestment, direct stock and employee stock purchase plans		64,399		2,505		–			2,505
Stock-based compensation		6,963		166		–			166
Balance, December 31, 2019		13,014,898	$	83,976	$	50,209		$	134,185

	December 31				Approximate range
Utility Plant Asset Category	2019		2018		of remaining lives
Mains and accessories	$	200,954	$	190,679	11 – 86 years
Services, meters and hydrants		77,501		74,178	17 – 51 years
Operations structures, reservoirs and water tanks		63,530		61,868	10 – 58 years
Pumping and treatment equipment		33,124		32,575	7 – 30 years
Office, transportation and operating equipment		14,464		13,531	3 – 23 years
Land and other non-depreciable assets		3,393		3,202	–
Utility plant in service		392,966		376,033
Construction work in progress		8,417		4,751	–
Total Utility Plant	$	401,383	$	380,784

	December 31				Remaining Recovery
	2019		2018		Periods
Assets
Income taxes	$	24,405	$	21,432	Various
Postretirement benefits		365		3,071	5 – 10 years
Unrealized swap losses		2,227		1,799	1 – 10 years
Utility plant retirement costs		5,012		4,841	5 years
Customer-owned lead service line replacements		944		304	Various
Income taxes on customers' advances for construction and contributions in aid of construction		998		577	Various
Service life study expenses		13		18	3 years
Rate case filing expenses		225		311	2 years
	$	34,189	$	32,353
Liabilities
Excess accumulated deferred income taxes on accelerated depreciation	$	14,008	$	14,184	Various
Income taxes		7,494		6,979	Various
IRS TPR catch-up deduction		3,671		3,887	14 years
Revenue reduction for tax rate change		226		1,764	1 year
	$	25,399	$	26,814

	As of			As of
	Dec. 31, 2019			Dec. 31, 2018			Change

Accounts receivable – customers	$	4,574		$	4,731		$	(157	)
Other receivables		152			385			(233	)
		4,726			5,116			(390	)
Less: allowance for doubtful accounts		(305	)		(305	)		–
Accounts receivable, net	$	4,421		$	4,811		$	(390	)

Unbilled revenue	$	2,276		$	2,427		$	(151	)

	2019		2018
Note receivable, including interest	$	255	$	255
Customers' advances for construction		303		305

	2019		2018
Weighted average common shares, basic		12,964,080		12,903,568
Effect of dilutive securities:
Employee stock-based compensation		2,212		268
Weighted average common shares, diluted		12,966,292		12,903,836

	2019			2018
10.17% Senior Notes, Series A, due 2019	$	–		$	6,000
9.60% Senior Notes, Series B, due 2019		–			5,000
1.00% Pennvest Note, due 2019		–			30
10.05% Senior Notes, Series C, due 2020		6,500			6,500
8.43% Senior Notes, Series D, due 2022		7,500			7,500
Variable Rate Pennsylvania Economic Development Financing Authority Exempt Facilities Revenue Refunding Bonds, Series 2008A, due 2029		12,000			12,000
4.75% York County Industrial Development Authority Revenue Bonds, Series 2006, due 2036		–			10,500
3.00% Pennsylvania Economic Development Financing Authority Exempt Facilities Revenue Refunding Bonds, Series A of 2019, due 2036		10,500			–
4.50% Pennsylvania Economic Development Financing Authority Exempt Facilities Revenue Refunding Bonds, Series 2014, due 2038		–			14,870
3.10% Pennsylvania Economic Development Financing Authority Exempt Facilities Revenue Refunding Bonds, Series B of 2019, due 2038		14,870			–
5.00% Monthly Senior Notes, Series 2010A, due 2040		–			15,000
3.23% Senior Notes, due 2040		15,000			–
4.00% - 4.50% York County Industrial Development Authority Exempt Facilities Revenue Bonds, Series 2015, due 2029 - 2045		10,000			10,000
4.54% Senior Notes, due 2049		20,000			–
Committed Lines of Credit, due 2021		7,672			8,508
Total long-term debt		104,042			95,908
Less discount on issuance of long-term debt		(192	)		(204	)
Less unamortized debt issuance costs		(2,815	)		(2,346	)
Less current maturities		(6,500	)		(30	)
Long-term portion	$	94,535		$	93,328

2020				2021				2022				2023				2024
	$	6,500			$	19,672			$	7,500			$	–			$	–

Description		December 31, 2019				Fair Value Measurements at Reporting Date Using Significant Other Observable Inputs (Level 2)
Interest Rate Swap		$	2,248			$	2,248

Description		December 31, 2018				Fair Value Measurements at Reporting Date Using Significant Other Observable Inputs (Level 2)
Interest Rate Swap		$	1,815			$	1,815

	2019		2018
Water utility service:
Residential	$	32,118	$	30,348
Commercial and industrial		14,161		13,351
Fire protection		3,074		2,931
Wastewater utility service:
Residential		1,291		933
Commercial and industrial		280		227
Billing and revenue collection services		70		64
Collection services		52		54
Other revenue		13		22
Total Revenue from Contracts with Customers		51,059		47,930
Rents from regulated property		519		507
Total Operating Revenue	$	51,578	$	48,437

Obligations and Funded Status At December 31	2019			2018

Change in Benefit Obligation
Pension benefit obligation beginning of year	$	41,511		$	44,636
Service cost		849			1,015
Interest cost		1,645			1,515
Actuarial (gain) loss		5,241			(4,140	)
Benefit payments		(1,716	)		(1,515	)
Pension benefit obligation end of year		47,530			41,511

Change in Plan Assets
Fair value of plan assets beginning of year		40,624			41,439
Actual return on plan assets		8,141			(1,600	)
Employer contributions		2,300			2,300
Benefits paid		(1,716	)		(1,515	)
Fair value of plan assets end of year		49,349			40,624

Funded Status of Plans at End of Year	$	1,819		$	(887	)

	2019			2018
Net gain (loss) arising during the period	$	(167	)	$	252
Recognized net actuarial loss		(421	)		(406	)
Recognized prior service credit		13			13
Total changes in regulatory asset during the year	$	(575	)	$	(141	)

	2019			2018
Net loss	$	8,154		$	8,742
Prior service credit		(76	)		(89	)
Regulatory asset	$	8,078		$	8,653

	2019		2018
Projected benefit obligation	$	47,530	$	41,511
Fair value of plan assets		49,349		40,624

	2019		2018
Accumulated benefit obligation	$	44,587	$	39,100
Fair value of plan assets		49,349		40,624

	2019	2018
Discount rate	3.10%	4.10%
Rate of compensation increase	2.50% – 3.00%	2.50% – 3.00%

	Total Fair Value				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)
Asset Category	2019		2018		2019		2018		2019		2018
Cash and Money Market Funds (a)	$	682	$	1,498	$	682	$	1,498	$	–	$	–
Equity Securities:
Common Equity Securities (b)		662		512		662		512		–		–
Equity Mutual Funds (c)		29,677		23,637		29,677		23,637		–		–
Fixed Income Securities:
U.S. Treasury Obligations		615		591		–		–		615		591
Corporate and Foreign Bonds (d)		6,078		5,315		–		–		6,078		5,315
Fixed Income Mutual Funds (e)		11,635		9,071		11,635		9,071		–		–
Total Plan Assets	$	49,349	$	40,624	$	42,656	$	34,718	$	6,693	$	5,906

	Number of Shares			Grant Date Weighted Average Fair Value
Nonvested at beginning of the year 2018		1,127			$37.76
Granted		3,743			$32.70
Vested		(1,790	)		$33.90
Forfeited		–			–
Nonvested at end of the year 2018		3,080			$33.85
Granted		6,963			$33.61
Vested		(2,701	)		$33.99
Forfeited		–			–
Nonvested at end of the year 2019		7,342			$33.57

	2019		2018
Regulatory Assessment	$	285	$	261
Property		348		345
Payroll, net of amounts capitalized		564		538
Other		3		1
Total taxes other than income taxes	$	1,200	$	1,145

	2019			2018
Federal current	$	1,148		$	1,715
State current		451			718
Federal deferred		475			216
State deferred		205			(119	)
Federal investment tax credit, net of current utilization		(39	)		(39	)
Total income taxes	$	2,240		$	2,491

	2019			2018
Statutory Federal tax provision	$	3,495		$	3,332
State income taxes, net of Federal benefit		574			471
IRS TPR deduction		(1,642	)		(1,307	)
Tax-exempt interest		(25	)		(22	)
Amortization of investment tax credit		(39	)		(39	)
Cash value of life insurance		6			(13	)
Amortization of excess accumulated deferred income taxes on accelerated depreciation		(149	)		–
Other, net		20			69
Total income taxes	$	2,240		$	2,491

	2019		2018
Deferred tax assets:
Reserve for doubtful accounts	$	88	$	88
Compensated absences		148		147
Deferred compensation		1,276		1,143
Excess accumulated deferred income taxes on accelerated depreciation		4,047		4,098
Deferred taxes associated with the gross-up of revenues necessary to return, in rates, the effect of temporary differences		2,104		2,077
Customers' advances for construction and contributions in aid of construction		998		577
Revenue reduction for tax rate change		7		333
Pensions		–		256
Other costs deducted for book, not for tax		69		40
Total deferred tax assets		8,737		8,759

Deferred tax liabilities:
Accelerated depreciation		28,891		28,479
Basis differences from IRS TPR		11,311		9,367
Investment tax credit		384		411
Deferred taxes associated with the gross-up of revenues necessary to recover, in rates, the effect of temporary differences		6,987		6,124
Pensions		525		–
Tax effect of pension regulatory asset		106		887
Unamortized debt issuance costs		531		197
Other costs deducted for tax, not for book		428		256
Total deferred tax liabilities		49,163		45,721

Net deferred tax liability	$	40,426	$	36,962

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)	(c)
Equity compensation plans approved by security holders*	-	-	86,558

Equity compensation plans not approved by security holders	-	-	0

Schedule	Schedule	Page
Number	Description	Number

II	Valuation and Qualifying Accounts	61
	for the years ended December 31, 2019 and 2018

Exhibit Number	Exhibit Description	Page Number of Incorporation By Reference

3	Amended and Restated Articles of Incorporation	Incorporated herein by reference. Filed previously with the Securities and Exchange Commission as Exhibit 3.1 to Form 8-K dated May 4, 2010.
3.1	Amended and Restated By-Laws	Incorporated herein by reference. Filed previously with the Securities and Exchange Commission as Exhibit 3.1 to Form 8-K dated January 26, 2012.

				Additions
Description	Balance at Beginning of Year			Charged to Cost and Expenses			Recoveries			Deductions			Balance at End of Year

FOR THE YEAR ENDED DECEMBER 31, 2019 Reserve for uncollectible accounts		$	305,000		$	258,542		$	51,900		$	310,442		$	305,000

FOR THE YEAR ENDED DECEMBER 31, 2018 Reserve for uncollectible accounts		$	305,000		$	250,884		$	57,633		$	308,517		$	305,000

	THE YORK WATER COMPANY
	(Registrant)

Dated: March 9, 2020	By: /s/ Joseph T. Hand
	Joseph T. Hand
	President and CEO


By: /s/ Joseph T. Hand	By: /s/ Matthew E. Poff
Joseph T. Hand	Matthew E. Poff
(Principal Executive Officer and Director)	(Principal Accounting Officer and Chief Financial Officer)
Dated: March 9, 2020	Dated: March 9, 2020

Directors:	Date:

By: /s/ James H. Cawley	March 9, 2020
James H. Cawley

By: /s/ Cynthia A. Dotzel	March 9, 2020
Cynthia A. Dotzel

By: /s/ Michael W. Gang	March 9, 2020
Michael W. Gang

By: /s/ Joseph T. Hand	March 9, 2020
Joseph T. Hand

By: /s/ Jeffrey R. Hines	March 9, 2020
Jeffrey R. Hines

By: /s/ George W. Hodges	March 9, 2020
George W. Hodges

By: /s/ George Hay Kain, III	March 9, 2020
George Hay Kain, III

By: /s/ Jody L. Keller	March 9, 2020
Jody L. Keller

By: /s/ Erin C. McGlaughlin	March 9, 2020
Erin C. McGlaughlin

By: /s/ Robert P. Newcomer	March 9, 2020
Robert P. Newcomer

By: /s/ Steven R. Rasmussen	March 9, 2020
Steven R. Rasmussen

By: /s/ Ernest J. Waters	March 9, 2020
Ernest J. Waters

	THE YORK WATER COMPANY

By:
Witness	President and CEO


Witness	Employee