The York Water(YORW) - 2024 Q1 - Quarterly Report

PART I: Financial Information Financial Statements This section presents the unaudited interim financial statements for The York Water Company as of March 31, 2024, and for the three-month period then ended, reflecting all normal recurring adjustments necessary for a fair presentation - The interim financial statements are unaudited and should be read in conjunction with the company's 2023 Annual Report on Form 10-K[26] Balance Sheets As of March 31, 2024, total assets increased to $602.3 million from $588.2 million at year-end 2023, driven by growth in Net Utility Plant and cash, while total stockholders' equity rose slightly to $222.9 million and long-term debt increased to $189.6 million Key Balance Sheet Items (in thousands) | Account | Mar. 31, 2024 | Dec. 31, 2023 | | :--- | :--- | :--- | | Total Assets | $602,287 | $588,205 | | Net utility plant | $502,428 | $493,704 | | Cash and cash equivalents | $3,321 | $1 | | Total Liabilities & Equity | $602,287 | $588,205 | | Long-term debt | $189,613 | $180,007 | | Total common stockholders' equity | $222,931 | $221,178 | Statements of Income For Q1 2024, net income increased by 18.5% to $4.3 million, driven by a 14.5% rise in operating revenues that outpaced operating expense growth, leading to diluted earnings per share of $0.30 Q1 Income Statement Highlights (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Operating Revenues | $17,628 | $15,401 | +14.5% | | Operating Income | $6,215 | $5,418 | +14.7% | | Net Income | $4,327 | $3,653 | +18.5% | | Diluted EPS | $0.30 | $0.26 | +15.4% | Statements of Common Stockholders' Equity Total common stockholders' equity increased from $221.2 million at year-end 2023 to $222.9 million by March 31, 2024, primarily due to net income of $4.3 million, partially offset by $3.0 million in cash dividends Changes in Stockholders' Equity Q1 2024 (in thousands) | Description | Amount | | :--- | :--- | | Balance, December 31, 2023 | $221,178 | | Net income | $4,327 | | Cash dividends declared | ($3,022) | | Issuance of common stock & other | $448 | | Balance, March 31, 2024 | $222,931 | Statements of Cash Flows In Q1 2024, net cash from operating activities was $6.1 million, with $8.5 million used in investing activities and $5.7 million provided by financing activities, resulting in a net cash increase of $3.3 million Q1 Cash Flow Summary (in thousands) | Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $6,138 | $6,224 | | Net cash used in investing activities | ($8,502) | ($10,581) | | Net cash provided by financing activities | $5,684 | $4,522 | | Net change in cash and cash equivalents | $3,320 | $165 | Notes to Interim Financial Statements The notes detail two immaterial Q1 2024 acquisitions, the issuance of $40 million in new senior notes, the impact of a March 2023 rate increase on revenues, and ongoing capital commitments for the Lake Williams dam project - In Q1 2024, the company completed two immaterial acquisitions, adding approximately 180 wastewater customers and 90 water customers[28][29] - On February 27, 2024, the company issued $40 million of 5.67% Senior Notes due 2054, using the proceeds to refinance line of credit borrowings[35] - A PPUC-authorized rate increase, effective March 1, 2023, was a primary driver of revenue growth in Q1 2024 compared to Q1 2023[58] - The company has a remaining commitment of approximately $1.8 million for the Lake Williams dam spillway project as of March 31, 2024[48] Management's Discussion and Analysis (MD&A) Management discusses Q1 2024 financial results, highlighting an 18.5% net income increase driven by a rate increase, outlines $33.7 million in planned capital expenditures, details liquidity strengthened by a $40 million debt issuance, and covers growth strategy and operational risks Results of Operations Net income for Q1 2024 increased by $674,000 (18.5%) to $4.3 million, primarily due to a $2.2 million (14.5%) rise in operating revenues, partially offset by a $1.4 million (14.3%) increase in operating expenses and a $610,000 rise in interest expense - Net income increased by 18.5% in Q1 2024 compared to Q1 2023, primarily due to higher operating revenues[81] - Operating revenues grew 14.5%, mainly because of a rate increase effective March 1, 2023, and growth in the water and wastewater customer base[82] - Operating expenses increased 14.3%, with notable rises in distribution system maintenance (+$365 thousand), depreciation (+$269 thousand), and wages (+$205 thousand)[83] - Interest on debt increased by 40.3% due to a larger amount of long-term debt outstanding and higher interest rates on the line of credit[84] Acquisitions and Growth The company is actively pursuing growth through five signed agreements to acquire small water and wastewater systems, expected to add approximately 560 customers upon regulatory approval and closing between H2 2024 and H1 2025 - The company has signed five agreements to acquire small water and wastewater systems, which are expected to add approximately 560 new customers upon closing[89][90][91] - Closing for these acquisitions is contingent on regulatory approvals and is anticipated between H2 2024 and H1 2025[90][91][93] Capital Expenditures The company invested $8.5 million in capital projects during Q1 2024, with an additional $33.7 million planned for the remainder of 2024, funded by internally-generated funds, line of credit borrowings, and stock plans - Invested $8,457 thousand in construction expenditures for the three months ended March 31, 2024[96] - Anticipates approximately $33,700 thousand in additional construction expenditures for the remainder of 2024, excluding potential acquisitions[97] - Primary funding sources for 2024 capital projects will be internally-generated funds, supplemented by line of credit borrowings and stock purchase plans[97] Liquidity and Capital Resources The company maintains strong liquidity with a $50 million unsecured line of credit and internally generated cash flow, having issued $40 million in long-term debt in February 2024 to refinance its line of credit, while targeting an equity ratio between 50% and 55% - Maintains a $50,000 thousand unsecured line of credit, which had no outstanding balance as of March 31, 2024, after being repaid with proceeds from a new debt offering[103] - In February 2024, issued $40,000 thousand in 5.67% senior notes to refinance the line of credit used for interim financing of capital projects[106] Capitalization Ratios | Metric | Mar. 31, 2024 | Dec. 31, 2023 | | :--- | :--- | :--- | | Common Stockholders' Equity % | 53.7% | 54.8% | | Long-term Debt % | 46.3% | 45.2% | - Standard & Poor's affirmed the company's credit rating at A- with a stable outlook on July 26, 2023[113] Environmental Matters The company is implementing a PPUC-approved plan to replace up to 400 customer-owned lead service lines annually, with costs recorded as a regulatory asset, having spent approximately $1.8 million as of March 31, 2024, while all Pennsylvania counties returned to normal drought status in March 2024 - The company has a program to replace up to 400 customer-owned lead service lines annually, with costs recovered through future rates. The cumulative cost was approximately $1,819 thousand as of March 31, 2024[119] - On March 6, 2024, Pennsylvania state officials returned all counties to normal drought status[120] Quantitative and Qualitative Disclosures About Market Risk The company has determined that this item is not applicable for the reporting period - Not applicable[123] Controls and Procedures Based on management's evaluation, including the CEO and CFO, the company's disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the first quarter - The President and CEO, along with the CFO, concluded that the company's disclosure controls and procedures are effective as of the end of the reporting period[124] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[125] Other Information During the first quarter of 2024, no director, officer, or the company itself adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended March 31, 2024[126] PART II: Other Information Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications required by the Sarbanes-Oxley Act and Inline XBRL documents for interactive data - The filing includes CEO and CFO certifications pursuant to Rule 13a-14(a)/15d-14(a) and Section 906 of the Sarbanes-Oxley Act of 2002[130] - Interactive Data Files (XBRL) are included as exhibits 101 and 104[130] Signatures The report was officially signed and authorized on May 7, 2024, by the company's Principal Executive Officer, Joseph T. Hand, and its Principal Financial and Accounting Officer, Matthew E. Poff - The report is signed by Joseph T. Hand, Principal Executive Officer, and Matthew E. Poff, Principal Financial and Accounting Officer[134] - The date of the signatures is May 7, 2024[134]