UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

☐	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:

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 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 every Interactive Data File required to be submitted 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 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 ⌧

Smaller 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
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	14,374,163 Shares outstanding as of November 7, 2024

TABLE OF CONTENTS

PART I	Financial Information

Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26

PART II	Other Information

Item 5.	Other Information	26
Item 6.	Exhibits	27

Signatures		28

Page 2

THE YORK WATER COMPANY

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements.

Balance Sheets (Unaudited)

(In thousands of dollars, except per share amounts)

	Sep. 30, 2024			Dec. 31, 2023
ASSETS
UTILITY PLANT, at original cost	$	653,263		$	620,201
Plant acquisition adjustments		(9,437	)		(9,384	)
Accumulated depreciation		(122,158	)		(117,113	)
Net utility plant		521,668			493,704

OTHER PHYSICAL PROPERTY, net of accumulated depreciation of $526 in 2024 and $501 in 2023		1,544			1,569

CURRENT ASSETS:
Cash and cash equivalents		1			1
Accounts receivable, net of reserves of $1,455 in 2024 and $1,005 in 2023		7,712			7,837
Unbilled revenues		3,490			3,484
Recoverable income taxes		–			332
Materials and supplies inventories, at cost		3,775			3,109
Prepaid expenses		1,776			821
Total current assets		16,754			15,584

OTHER LONG-TERM ASSETS:
Prepaid pension cost		24,006			23,380
Note receivable		255			255
Deferred regulatory assets		52,110			48,949
Other assets		5,083			4,764
Total other long-term assets		81,454			77,348

Total Assets	$	621,420		$	588,205

The accompanying notes are an integral part of these statements.

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THE YORK WATER COMPANY

Balance Sheets (Unaudited)

(In thousands of dollars, except per share amounts)

	Sep. 30, 2024		Dec. 31, 2023
STOCKHOLDERS’ EQUITY AND LIABILITIES
COMMON STOCKHOLDERS’ EQUITY:
Common stock, no par value, authorized 46,500,000 shares, issued and outstanding 14,371,929 shares in 2024 and 14,332,245 shares in 2023	$	137,576	$	136,174
Retained earnings		91,112		85,004
Total common stockholders’ equity		228,688		221,178

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

LONG-TERM DEBT		198,439		180,007

COMMITMENTS		–		–

CURRENT LIABILITIES:
Accounts payable		11,503		10,873
Dividends payable		2,780		2,754
Accrued compensation and benefits		1,744		1,629
Accrued income taxes		336		–
Accrued interest		1,326		1,741
Deferred regulatory liabilities		809		644
Other accrued expenses		511		502
Total current liabilities		19,009		18,143

DEFERRED CREDITS:
Customers’ advances for construction		20,939		18,853
Deferred income taxes		58,964		55,235
Deferred employee benefits		3,719		3,847
Deferred regulatory liabilities		43,124		42,989
Other deferred credits		650		632
Total deferred credits		127,396		121,556

Contributions in aid of construction		47,888		47,321

Total Stockholders’ Equity and Liabilities	$	621,420	$	588,205

The accompanying notes are an integral part of these statements.

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THE YORK WATER COMPANY

Statements of Income (Unaudited)

(In thousands of dollars, except per share amounts)

	Three Months Ended September 30						Nine Months Ended September 30
	2024			2023			2024			2023

OPERATING REVENUES:	$	19,715		$	18,767		$	56,093		$	52,935

OPERATING EXPENSES:
Operation and maintenance		4,961			4,471			14,635			12,688
Administrative and general		3,013			2,605			9,244			8,028
Depreciation and amortization		3,297			2,944			9,647			8,777
Taxes other than income taxes		389			314			1,235			1,075
		11,660			10,334			34,761			30,568

Operating income		8,055			8,433			21,332			22,367

OTHER INCOME (EXPENSES):
Interest on debt		(2,243	)		(1,850	)		(6,549	)		(5,041	)
Allowance for funds used during construction		301			1,131			1,782			2,724
Other pension costs		159			(239	)		365			(842	)
Other income (expenses), net		(51	)		(68	)		(266	)		(368	)
		(1,834	)		(1,026	)		(4,668	)		(3,527	)

Income before income taxes		6,221			7,407			16,664			18,840

Income tax expense (benefit)		358			(161	)		1,481			1,095

Net Income	$	5,863		$	7,568		$	15,183		$	17,745

Basic Earnings Per Share	$	0.41		$	0.53		$	1.06		$	1.24

Diluted Earnings Per Share	$	0.41		$	0.53		$	1.06		$	1.24

The accompanying notes are an integral part of these statements.

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THE YORK WATER COMPANY

Statements of Common Stockholders’ Equity (Unaudited)

(In thousands of dollars, except per share amounts)

For the Periods Ended September 30, 2024 and 2023

	Common Stock Shares		Common Stock Amount		Retained Earnings			Total

Balance, June 30, 2024		14,361,225	$	137,138	$	88,277		$	225,415
Net income		–		–		5,863			5,863
Cash dividends declared, $0.2108 per share		–		–		(3,028	)		(3,028	)
Issuance of common stock under dividend reinvestment, direct stock and employee stock purchase plans		10,704		390		–			390
Stock-based compensation		–		48		–			48
Balance, September 30, 2024		14,371,929	$	137,576	$	91,112		$	228,688

Balance, December 31, 2023		14,332,245	$	136,174	$	85,004		$	221,178
Net income		–		–		15,183			15,183
Cash dividends declared, $0.6324 per share		–		–		(9,075	)		(9,075	)
Issuance of common stock under dividend reinvestment, direct stock and employee stock purchase plans		34,327		1,214		–			1,214
Stock-based compensation		5,357		188		–			188
Balance, September 30, 2024		14,371,929	$	137,576	$	91,112		$	228,688

	Common Stock Shares		Common Stock Amount		Retained Earnings			Total

Balance, June 30, 2023		14,309,160	$	135,199	$	77,345		$	212,544
Net income		–		–		7,568			7,568
Cash dividends declared, $0.2027 per share		–		–		(2,901	)		(2,901	)
Issuance of common stock under dividend reinvestment, direct stock and employee stock purchase plans		11,577		438		–			438
Stock-based compensation		–		58		–			58
Balance, September 30, 2023		14,320,737	$	135,695	$	82,012		$	217,707

Balance, December 31, 2022		14,285,584	$	134,220	$	72,963		$	207,183
Net income		–		–		17,745			17,745
Cash dividends declared, $0.6081 per share		–		–		(8,696	)		(8,696	)
Issuance of common stock under dividend reinvestment, direct stock and employee stock purchase plans		31,039		1,258		–			1,258
Stock-based compensation		4,114		217		–			217
Balance, September 30, 2023		14,320,737	$	135,695	$	82,012		$	217,707

The accompanying notes are an integral part of these statements.

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THE YORK WATER COMPANY

Statements of Cash Flows (Unaudited)

(In thousands of dollars, except per share amounts)

	Nine Months Ended September 30
	2024			2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	15,183		$	17,745
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		9,647			8,777
Stock-based compensation		188			217
Increase in deferred income taxes		124			757
Other		111			(750	)
Changes in assets and liabilities:
Increase in accounts receivable and unbilled revenues		(638	)		(929	)
Decrease in recoverable income taxes		332			304
Increase in materials and supplies, prepaid expenses, prepaid pension cost, regulatory and other assets		(7,662	)		(8,365	)
Increase in accounts payable, accrued compensation and benefits, accrued expenses, deferred employee benefits, regulatory liabilities, and other deferred credits		3,185			4,988
Increase (decrease) in accrued interest and taxes		(79	)		663
Net cash provided by operating activities		20,391			23,407

CASH FLOWS FROM INVESTING ACTIVITIES:
Utility plant additions, including debt portion of allowance for funds used during construction of $996 in 2024 and $1,522 in 2023		(32,993	)		(46,342	)
Acquisitions of water and wastewater systems		(264	)		(35	)
Net cash used in investing activities		(33,257	)		(46,377	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Customers’ advances for construction and contributions in aid of construction		3,042			3,434
Repayments of customer advances		(452	)		(240	)
Proceeds of long-term debt issues		71,764			85,643
Debt issuance costs		(167	)		(171	)
Repayments of long-term debt		(53,305	)		(57,303	)
Changes in cash overdraft position		(181	)		(966	)
Issuance of common stock		1,214			1,258
Dividends paid		(9,049	)		(8,685	)
Net cash provided by financing activities		12,866			22,970

Net change in cash and cash equivalents		–			–
Cash and cash equivalents at beginning of period		1			1
Cash and cash equivalents at end of period	$	1		$	1

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized	$	5,924		$	2,734
Income taxes		629			–

Supplemental disclosure of non-cash investing and financing activities:
Accounts payable includes $7,334 in 2024 and $7,017 in 2023 for the construction of utility plant.
Contributions in aid of construction includes $63 recorded as part of the MESCO, Inc. acquisition.

The accompanying notes are an integral part of these statements.

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THE YORK WATER COMPANY

Notes to Interim Financial Statements

(In thousands of dollars, except per share amounts)

1. Basis of Presentation

The interim financial statements are unaudited but, in the opinion of management, reflect all adjustments, consisting of only normal recurring accruals, necessary for a fair presentation of results for such periods. Because the financial statements cover an interim period, they do not include all disclosures and notes normally provided in annual financial statements, and therefore, should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

2. Acquisitions

On January 31, 2024, the Company completed the acquisition of the wastewater collection and treatment assets of MESCO, Inc. in Monaghan Township, York County, Pennsylvania. The Company began operating the existing wastewater collection and treatment assets on February 1, 2024. The acquisition resulted in the addition of approximately 180 wastewater customers with purchase price and acquisition costs of approximately $44, which is less than the depreciated original cost of the assets. The Company recorded a negative acquisition adjustment of $110 and will seek approval from the Pennsylvania Public Utility Commission, or PPUC, to amortize the acquisition adjustment over the remaining life of the acquired assets. This acquisition is immaterial to Company results.

On February 21, 2024, the Company completed the acquisition of the water assets of Longstown Mobile Estates in Windsor Township, York County, Pennsylvania. The Company began operating the existing water system through an interconnection with its current distribution system on February 26, 2024. The acquisition resulted in the addition of approximately 90 water customers with purchase price and acquisition costs of approximately $8, which is less than the depreciated original cost of the assets. The Company recorded a negative acquisition adjustment of $2 and will seek approval from the PPUC to amortize the acquisition adjustment over the remaining life of the acquired assets. These customers were previously served by the Company through a single customer connection to the mobile home park. This acquisition is immaterial to Company results.

On September 26, 2024, the Company completed the acquisition of the water assets of Houston Run Community Water System, LLC in Salisbury Township, Lancaster County, Pennsylvania. The Company began operating the existing water assets on September 30, 2024. The acquisition resulted in the addition of approximately 15 water customers with purchase price and acquisition costs of approximately $212. This acquisition is immaterial to Company results.

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3. Accounts Receivable and Contract Assets

Accounts receivable and contract assets are summarized in the following table:

	As of			As of
	Sep. 30, 2024			Dec. 31, 2023			Change

Accounts receivable – customers	$	8,677		$	8,250		$	427
Other receivables		490			592			(102	)
		9,167			8,842			325
Less: allowance for doubtful accounts		(1,455	)		(1,005	)		(450	)
Accounts receivable, net	$	7,712		$	7,837		$	(125	)

Unbilled revenue	$	3,490		$	3,484		$	6

Differences in timing of revenue recognition, billings, and cash collections result in receivables, which are contract assets. Generally, billing occurs subsequent to revenue recognition, resulting in unbilled revenue on the balance sheet, which is also a contract asset. The Company does not receive advances or deposits from customers before revenue is recognized so no contract liabilities are reported. Accounts receivable are recorded when the right to consideration becomes unconditional and are presented separately on the balance sheet. The changes in accounts receivable – customers and in unbilled revenue were primarily due to the normal timing difference between performance and the customer’s payments.

4. Common Stock and Earnings Per Share

Net income of $5,863 and $7,568 for the three months ended September 30, 2024 and 2023, respectively, and $15,183 and $17,745 for the nine months ended September 30, 2024 and 2023, respectively, is used to calculate both basic and diluted earnings per share. Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on the weighted average number of common shares outstanding plus potentially dilutive shares. The dilutive effect of employee stock-based compensation is included in the computation of diluted earnings per share and is calculated using the treasury stock method and expected proceeds upon exercise or issuance of the stock-based compensation.

The following table summarizes the shares used in computing basic and diluted earnings per share:

	Three Months Ended September 30				Nine Months Ended September 30
	2024		2023		2024		2023

Weighted average common shares, basic		14,354,021		14,300,995		14,339,876		14,288,580
Effect of dilutive securities:
Employee stock-based compensation		821		834		211		305
Weighted average common shares, diluted		14,354,842		14,301,829		14,340,087		14,288,885

On March 11, 2013, the Board of Directors, or the Board, authorized a share repurchase program granting the Company authority to repurchase up to 1,200,000 shares of the Company’s common stock from time to time. The stock repurchase program has no specific end date and the Company may repurchase shares in the open market or through privately negotiated transactions. The Company may suspend or discontinue the repurchase program at any time. No shares were repurchased during the three or nine months ended September 30, 2024 and 2023. As of September 30, 2024, 618,004 shares remain authorized for repurchase.

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5. Debt

	As of Sep. 30, 2024			As of Dec. 31, 2023

Variable Rate Pennsylvania Economic Development Financing Authority Exempt Facilities Revenue Refunding Bonds, Series 2008A, due 2029	$	12,000		$	12,000
3.00% Pennsylvania Economic Development Financing Authority Exempt Facilities Revenue Refunding Bonds, Series A of 2019, due 2036		10,500			10,500
3.10% Pennsylvania Economic Development Financing Authority Exempt Facilities Revenue Refunding Bonds, Series B of 2019, due 2038		14,870			14,870
3.23% Senior Notes, due 2040		15,000			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			20,000
3.24% Senior Notes, due 2050		30,000			30,000
5.50% Senior Notes, due 2053		40,000			40,000
5.67% Senior Notes, due 2054		40,000			–
Committed Line of Credit, due September 2026		8,732			30,273
Total long-term debt		201,102			182,643
Less discount on issuance of long-term debt		(138	)		(147	)
Less unamortized debt issuance costs		(2,525	)		(2,489	)
Long-term portion	$	198,439		$	180,007

On February 27, 2024, the Company entered into a note purchase agreement with certain institutional investors relating to the private placement of $40,000 aggregate principal amount of the Company’s senior notes. The senior notes bear interest at 5.67% per annum payable semiannually and mature on February 27, 2054. The senior notes are unsecured and unsubordinated obligations of the Company. The Company received net proceeds, after deducting issuance costs, of approximately $39,833. The net proceeds were used to refinance line of credit borrowings incurred by the Company as interim financing for various capital projects of the Company.

6. Interest Rate Swap Agreement

The Company is exposed to certain risks relating to its ongoing business operations. The primary risk managed by using derivative instruments is interest rate risk. The Company utilizes an interest rate swap agreement to effectively convert the Company’s $12,000 variable-rate debt issue to a fixed rate. Interest rate swaps are contracts in which a series of interest rate cash flows are exchanged over a prescribed period. The notional amount on which the interest payments are based ($12,000) is not exchanged. The interest rate swap provides that the Company pays the counterparty a fixed interest rate of 3.16% on the notional amount of $12,000. In exchange, the counterparty paid the Company a variable interest rate based on 59% of the U.S. Dollar one-month LIBOR rate on the notional amount. The variable interest rate changed to 59% of the daily simple Secured Overnight Financing Rate plus a spread adjustment of 11.448 basis points upon the discontinuance of LIBOR in 2023. The intent is for the variable rate received from the swap counterparty to approximate the variable rate the Company pays to bondholders on its variable rate debt issue, resulting in a fixed rate being paid to the swap counterparty and reducing the Company’s interest rate risk. The Company’s net payment rate on the swap averaged (0.03)% and 0.01% for the three months ended September 30, 2024 and 2023, respectively, and (0.04)% and 0.20% for the nine months ended September 30, 2024 and 2023, respectively.

The interest rate swap agreement is classified as a financial derivative used for non-trading activities. The accounting standards regarding accounting for derivatives and hedging activities require companies to recognize all derivative instruments as either assets or liabilities at fair value on the balance sheet. In accordance with the standards, the interest rate swap is recorded on the balance sheet in other deferred credits at fair value (see Note 7).

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The Company uses regulatory accounting treatment rather than hedge accounting to defer the unrealized gains and losses on its interest rate swap. These unrealized gains and losses are recorded as a regulatory asset or regulatory liability. Based on current ratemaking treatment, the Company expects the unrealized gains and losses to be recognized in rates as a component of interest expense as the swap settlements occur. Swap settlements are recorded in the income statement with the hedged item as interest expense. Swap settlements resulted in the reclassification from regulatory assets to interest expense of $(1) and $0 for the three months ended September 30, 2024 and 2023, respectively, and $(3) and $19 for the nine months ended September 30, 2024 and 2023, respectively. The overall swap result was a (gain) loss of $252 and $(211) for the three months ended September 30, 2024 and 2023, respectively, and $15 and $(351) for the nine months ended September 30, 2024 and 2023, respectively. The Company expects to reclassify $101 before tax from regulatory assets to interest expense as a result of swap settlements over the next 12 months.

The interest rate swap agreement contains provisions that require the Company to maintain a credit rating of at least BBB- with Standard & Poor’s. If the Company’s rating were to fall below this rating, it would be in violation of these provisions, and the counterparty to the derivative could request immediate payment if the derivative was in a liability position. On August 6, 2024, Standard & Poor’s affirmed the Company’s credit rating at A-, with a stable outlook and adequate liquidity. The Company’s interest rate swap was in a liability position as of September 30, 2024. If a violation due to credit rating, or some other default provision, were triggered on September 30, 2024, the Company would have been required to pay the counterparty approximately $658.

The interest rate swap will expire on October 1, 2029. Other than the interest rate swap, the Company has no other derivative instruments.

7. Fair Value of Financial Instruments

The accounting standards regarding fair value measurements establish a fair value hierarchy which indicates the extent to which inputs used in measuring fair value are observable in the market. Level 1 inputs include quoted prices for identical instruments and are the most observable. Level 2 inputs include quoted prices for similar assets and observable inputs such as interest rates, commodity rates and yield curves. Level 3 inputs are not observable in the market and include management’s own judgments about the assumptions market participants would use in pricing the asset or liability.

The Company has recorded its interest rate swap liability at fair value in accordance with the standards. The liability is recorded under the caption “Other deferred credits” on the balance sheet. The table below illustrates the fair value of the interest rate swap as of the end of the reporting period.

Description		September 30, 2024		Fair Value Measurements at Reporting Date Using Significant Other Observable Inputs (Level 2)
Interest Rate Swap		$650		$650

Fair values are measured as the present value of all expected future cash flows based on the swap yield curve as of the date of the valuation. These inputs to this calculation are deemed to be Level 2 inputs. The balance sheet carrying value reflects the Company’s credit quality as of September 30, 2024. The rate used in discounting all prospective cash flows anticipated to be made under this swap reflects a representation of the yield to maturity for 30-year debt on utilities rated A- as of September 30, 2024. The use of the Company’s credit rating resulted in a reduction in the fair value of the swap liability of $8 as of September 30, 2024. The fair value of the swap reflecting the Company’s credit quality as of December 31, 2023 is shown in the table below.

Description		December 31, 2023		Fair Value Measurements at Reporting Date Using Significant Other Observable Inputs (Level 2)
Interest Rate Swap		$632		$632

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The carrying amount of current assets and liabilities that are considered financial instruments approximates fair value as of the dates presented. The Company’s total long-term debt, with a carrying value of $201,102 at September 30, 2024, and $182,643 at December 31, 2023, had an estimated fair value of approximately $190,000 and $175,000, respectively. The estimated fair value of debt was calculated using a discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration and risk profile. These inputs to this calculation are deemed to be Level 2 inputs. The Company recognized its credit rating in determining the yield curve and did not factor in third-party credit enhancements including the letter of credit on the 2008 Pennsylvania Economic Development Financing Authority Series A issue.

Customers’ advances for construction and note receivable had carrying values at September 30, 2024 of $20,939 and $255, respectively. At December 31, 2023, customers’ advances for construction and note receivable had carrying values of $18,853 and $255, respectively. The relative fair values of these amounts cannot be accurately estimated since the timing of future payment streams is dependent upon several factors, including new customer connections, customer consumption levels and future rate increases.

SEC Form 10-Q filed by York Water Company