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York Water Company Reports Operating Results (10-Q)

November 09, 2009 | About:
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10qk

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York Water Company (YORW) filed Quarterly Report for the period ended 2009-09-30.

The York Water Company impoundspurifies and distributes water. They areregulated by the Pennsylvania Public Utility Commission in the areas of billingpayment proceduresdispute processingterminationsservice territoryand rate setting. They must obtain PPUC approval before changing any of the aforementioned procedures. York Water Company has a market cap of $174.63 million; its shares were traded at around $14.1 with a P/E ratio of 21.36 and P/S ratio of 5.32. The dividend yield of York Water Company stocks is 3.57%. York Water Company had an annual average earning growth of 8% over the past 5 years.

Highlight of Business Operations:

Operating expenses for the third quarter of 2009 increased $373, or 8.2%, from $4,541 for the third quarter of 2008 to $4,914 for the corresponding 2009 period. The increase was primarily due to higher depreciation of $199 due to increased plant investment, increased pension expense of $146, higher distribution system maintenance expense of $55, increased realty taxes of $47, higher chemical costs of $46 and increased rate case expense, power costs and customer service expenses aggregating approximately $62. The increase was partially offset by lower capital stock taxes, reduced health insurance costs, lower transportation expense, higher capitalized overhead, lower salary and wage expense, reduced legal fees, lower software support costs and reduced shareholder expenses aggregating approximately $182.

Interest expense on debt for the third quarter of 2009 decreased $171, or 12.0%, from $1,425 for the third quarter of 2008 to $1,254 for the corresponding 2009 period. Lower interest on the $12,000 variable rate bonds contributed approximately $286 to the decreased expenses due to lower variable interest rates and the swap loss recorded in the third quarter of 2008. Interest on the Company s lines of credit decreased by $86 due to lower interest rates. The average interest rate on the lines of credit was 1.40% for the quarter ended September 30, 2009 compared to 3.17% for the quarter ended September 30, 2008. The average debt outstanding under the lines of credit was $21,758 for the third quarter of 2009 and $20,112 for the third quarter of 2008. Other long-term interest decreased $24. Interest on the Company s long-term debt increased by $225 due to an increase in the amount of long-term debt outstanding due to new debt issued on October 15, 2008 in the aggregate principal amount of $15,000 at an interest rate of 6%.

Operating expenses for the first nine months of 2009 increased $1,115, or 8.2%, from $13,584 for the first nine months of 2008 to $14,699 for the corresponding 2009 period. The increase was primarily due to higher depreciation of $580 due to increased plant investment, increased pension expense of $437, higher salary and wage expense of $198 due mainly to the increased vacation accrual discussed in Note 4 and higher distribution system maintenance expense, increased chemical costs, rate case expense, power costs, realty taxes, banking fees and other expenses aggregating approximately $227. The increase was partially offset by reduced health insurance costs, higher capitalized overhead, lower software support costs and lower transportation expense aggregating approximately $327. Depreciation and pension expenses are expected to continue at a higher rate throughout 2009.

Interest expense on debt for the first nine months of 2009 increased $49, or 1.3%, from $3,738 for the first nine months of 2008 to $3,787 for the corresponding 2009 period. Interest on the Company s long-term debt increased by $673 due to an increase in the amount of long-term debt outstanding due to new debt issued on October 15, 2008 in the aggregate principal amount of $15,000 at an interest rate of 6%. The increased expenses were partially offset by lower interest on the $12,000 variable rate bonds of approximately $349 due to lower variable interest rates and the swap loss recorded in the third quarter of 2008. Interest on the Company s lines of credit decreased by $240 due to lower interest rates. The average interest rate on the lines of credit was 1.51% for the first nine months ended September 30, 2009 compared to 3.65% for the nine months ended September 30, 2008. The average debt outstanding under the lines of credit was $19,735 for the first nine months of 2009 and $16,213 for the corresponding period of 2008. Other long-term interest decreased $35.

Historically, the Company has borrowed $15.0 to $20.0 million under its lines of credit before refinancing with long-term debt or equity capital. As of September 30, 2009, 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 4.00% or LIBOR plus 0.70%, whichever is greater, and a $13,000 committed portion with a revolving 2-year maturity (currently May 2011), which currently carries an interest rate of LIBOR plus 0.70%. The Company had $3,824 in outstanding borrowings under the committed portion and no on-demand borrowings under this line of credit as of September 30, 2009. The second line of credit, in the amount of $11,000, is a committed line of credit, which matures in May 2010 and carries an interest rate of LIBOR plus 1.50%. This line of credit has a compensating balance requirement of $500. The Company had $4,000 in outstanding borrowings under this line of credit as of September 30, 2009. The third line of credit, in the amount of $5,000, is a committed line of credit, which matures in April 2010 and carries an interest rate of LIBOR plus 2.00%. The Company had $1,000 in outstanding borrowings under this line of credit as of September 30, 2009. The weighted average interest rate on line of credit borrowings as of September 30, 2009 was 1.47% compared to 3.18% as of September 30, 2008.

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. The Company has lines of credit with maximum availability of $33,000 with three banks. One such line of credit includes a $4,000 portion, which is payable upon demand and carries an interest rate of 4.00%, or LIBOR plus 0.70%, whichever is greater, and a $13,000 committed portion with a revolving 2-year maturity (currently May 2011), which currently carries an interest rate of LIBOR plus 0.70%. The Company had $3,824 in outstanding borrowings under the committed portion and no on-demand borrowings under this line of credit as of September 30, 2009. The second line of credit, in the amount of $11,000, is a committed line of credit, which matures in May 2010 and carries an interest rate of LIBOR plus 1.50%. This line of credit has a compensating balance requirement of $500 (see Note 11 to the financial statements included herein). The Company had $4,000 in outstanding borrowings under this line of credit as of September 30, 2009. The third line of credit, in the amount of $5,000, is a committed line of credit, which matures in April 2010 and carries an interest rate of LIBOR plus 2.00%. The Company had $1,000 in outstanding borrowings under this line of credit as of September 30, 2009. All lines of credit are unsecured. The weighted average interest rate on line of credit borrowings as of September 30, 2009 was 1.47%. Other than lines of credit, the Company has long-term fixed rate debt obligations as shown 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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