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York Water Company Reports Operating Results (10-Q)

August 06, 2010 | About:
10qk

10qk

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York Water Company (YORW) filed Quarterly Report for the period ended 2010-06-30.

York Water Company has a market cap of $186.9 million; its shares were traded at around $14.82 with a P/E ratio of 22.4 and P/S ratio of 5.1. The dividend yield of York Water Company stocks is 3.4%. York Water Company had an annual average earning growth of 5.9% over the past 10 years. GuruFocus rated York Water Company the business predictability rank of 3-star.

Highlight of Business Operations:

Operating expenses for the second quarter of 2010 decreased $79, or 1.7%, from $4,782 for the second quarter of 2009 to $4,703 for the corresponding 2010 period. The decrease was primarily due to reduced distribution system maintenance expense of approximately $61 and lower pension expense of approximately $54. Higher capitalized overhead, lower pension administration fees and reduced chemical expense aggregating approximately $85 also added to the reduction of expenses. Higher depreciation expense due to increased plant investment, increased salary and wage expense, higher power costs, increased capital stock tax and other expenses aggregating approximately $121 partially offset the decrease.

Interest expense on debt for the second quarter of 2010 decreased $61, or 4.8%, from $1,262 for the second quarter of 2009 to $1,201 for the corresponding 2010 period. The primary reasons for the decrease were lower interest of $30 on the Company s lines of credit due to reduced borrowings and lower interest payments of $23 due to retirement of the 3.60% Industrial Development Authority Revenue Refunding Bonds, Series 1994, in May of 2009 and the 3.75% Industrial Development Authority Revenue Refunding Bonds, Series 1995, in June of 2010. Interest on the $12,000 variable rate bonds decreased $8 due to reduced interest rates. The average interest rate on the lines of credit was 2.09% for the quarter ended June 30, 2010 compared to 1.51% for the quarter ended June 30, 2009. The average debt outstanding under the lines of credit was $8,957 for the second quarter of 2010 and $20,494 for the second quarter of 2009.

Operating expenses for the first six months of 2010 decreased $341, or 3.5%, from $9,785 for the first six months of 2009 to $9,444 for the corresponding 2010 period. The decrease was primarily due to lower salary and wage expense of approximately $230. This was mainly a result of the vacation accrual recorded last year as discussed in Form 10-K for the year ended December 31, 2009. Lower distribution system maintenance expense, reduced pension cost, increased capitalized overhead and other expenses aggregating approximately $331 added to the reduction of expenses. Higher depreciation expense due to increased plant investment, increased power costs and higher capital stock tax aggregating approximately $220 partially offset the decrease. For the remainder of the year, depreciation expense is expected to continue to rise due to investment in plant, and other operating expenses are expected to increase at a moderate rate as costs to serve customers and to extend our distribution system continue to rise.

Interest expense on debt for the first six months of 2010 decreased $129, or 5.1%, from $2,533 for the first six months of 2009 to $2,404 for the corresponding 2010 period. The primary reasons for the decrease were lower interest payments of $49 due to retirement of the 3.60% Industrial Development Authority Revenue Refunding Bonds, Series 1994, in May of 2009 and the 3.75% Industrial Development Authority Revenue Refunding Bonds, Series 1995, in June of 2010, lower interest of $42 on the $12,000 variable rate bonds due to reduced interest rates and lower interest of $38 on the Company s lines of credit due to reduced borrowings. The average interest rate on the lines of credit was 1.98% for the six months ended June 30, 2010 compared to 1.36% for the six months ended June 30, 2009. The average debt outstanding under the lines of credit was $8,205 for the first six months of 2010 and $18,706 for the first six months of 2009.

Historically, the Company has borrowed $15,000 to $20,000 under its lines of credit before refinancing with long-term debt or equity capital. As of June 30, 2010, the Company maintained unsecured lines of credit aggregating $33,000 with three banks. One line of credit includes a $4,000 portion which is payable upon demand and carries an interest rate of LIBOR plus 2.00%, and a $13,000 committed portion with a revolving 2-year maturity (currently May 2012), which currently carries an interest rate of LIBOR plus 2.00%. The Company had $3,758 in outstanding borrowings under the committed portion and no on-demand borrowings under this line of credit as of June 30, 2010. The second line of credit, in the amount of $11,000, is a committed line of credit, which matures in May 2012 and carries an interest rate of LIBOR plus 1.50%. This line of credit has a compensating balance requirement of $500 (see Note 10 to the financial statements included herein). The Company had $5,000 in outstanding borrowings under this line of credit as of June 30, 2010. The third line of credit, in the amount of $5,000, is a committed line of credit, which matures in June 2011 and carries an interest rate of LIBOR plus 2.00%. The Company had $3,000 in outstanding borrowings under this line of credit as of June 30, 2010. The weighted average interest rate on line of credit borrowings as of June 30, 2010 was 2.15% compared to 1.41% as of June 30, 2009.

The Company's operations are exposed to market risks primarily as a result of changes in interest rates under its lines of credit. The Company has unsecured lines of credit with three banks having a combined maximum availability of $33,000. One line of credit includes a $4,000 portion, which is payable upon demand and carries an interest rate of LIBOR plus 2.00%, and a $13,000 committed portion with a revolving 2-year maturity (currently May 2012), which currently carries an interest rate of LIBOR plus 2.00%. The Company had $3,758 in outstanding borrowings under the committed portion and no on-demand borrowings under this line of credit as of June 30, 2010. The second line of credit, in the amount of $11,000, is a committed line of credit, which matures in May 2012 and carries an interest rate of LIBOR plus 1.50%. This line of credit has a compensating balance requirement of $500 (see Note 10 to the financial statements included herein). The Company had $5,000 in outstanding borrowings under this line of credit as of June 30, 2010. The third line of credit, in the amount of $5,000, is a committed line of credit, which matures in June 2011 and carries an interest rate of LIBOR plus 2.00%. The Company had $3,000 in outstanding borrowings under this line of credit as of June 30, 2010. The weighted average interest rate on line of credit borrowings as of June 30, 2010 was 2.15%. Other than lines of credit, the Company has long-term fixed rate debt obligations as discussed in Note 8 to the financial statements included herein and a variable rate Pennsylvania Economic Development Financing Authority (PEDFA) loan agreement described below.

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