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Certain statements contained in this annual report and in documents incorporated by reference constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. Words such as "may," "should," "believe," "anticipate," "estimate," "expect," "intend," "plan" and similar expressions are intended to identify forward-looking statements. These forward-looking statements include certain information relating to the Company’s business strategy; statements including, but not limited to:
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statements regarding 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;
statements as to trends;
goals, priorities and plans for, and cost of, growth and expansion;
strategic initiatives;
availability of water supply;
water usage by customers; and
ability to pay dividends on common stock and the rate of those dividends.
The forward-looking statements in this Annual Report reflect what the Company currently anticipates will happen. What actually happens could differ materially from what it currently anticipates will happen. The Company does not intend to make a public announcement when forward-looking statements in this Annual Report are no longer accurate, whether as a result of new information, what actually happens in the future or for any other reason. Important matters that may affect what will actually happen include, but are not limited to:
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changes in weather, including drought conditions;
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changes in weather, including drought conditions;
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levels of rate relief granted;
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levels of rate relief granted;
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the level of commercial and industrial business activity within the Company's service territory;
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the level of commercial and industrial business activity within the Company's service territory;
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construction of new housing within the Company's service territory and increases in population;
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construction of new housing within the Company's service territory and increases in population;
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changes in government policies or regulations;
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changes in government policies or regulations;
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the ability to obtain permits for expansion projects;
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the ability to obtain permits for expansion projects;
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material changes in demand from customers, including the impact of conservation efforts which may impact the demand of customers for water;
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material changes in demand from customers, including the impact of conservation efforts which may impact the demand of customers for water;
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changes in economic and business conditions, including interest rates, which are less favorable than expected;
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changes in economic and business conditions, including interest rates, which are less favorable than expected;
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changes in, or unanticipated, capital requirements;
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changes in, or unanticipated, capital requirements;
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changes in accounting pronouncements;
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changes in accounting pronouncements;
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changes in the Company’s credit rating or the market price of its common stock;
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changes in the Company’s credit rating or the market price of its common stock;
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the ability to obtain financing; and
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the ability to obtain financing; and
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other matters set forth in Item 1A, “Risk Factors,” of this Annual Report.
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other matters set forth in Item 1A, “Risk Factors,” of this Annual Report.
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THE YORK WATER COMPANY
Business.
The York Water Company (the “Company”) is the oldest investor-owned water utility in the United States and is duly organized under the laws of the Commonwealth of Pennsylvania. The Company has operated continuously since 1816. The business of the Company is to impound, purify to meet or exceed safe drinking water standards and distribute water. The Company operates within its franchised territory, which covers 39 municipalities within York County, Pennsylvania and seven municipalities within Adams County, Pennsylvania. The Company is regulated by the Pennsylvania Public Utility Commission, or PPUC, in the areas of billing, payment procedures, dispute processing, terminations, service territory, debt and equity financing and rate setting. The Company must obtain PPUC approval before changing any practices associated with the aforementioned areas. Water service is supplied through the Company's own distribution system. The Company obtains its water supply from both the South Branch and East Branch of the Codorus Creek, which together have an average daily flow of 73.0 million gallons per day. This combined watershed area is approximately 117 square miles. The Company has two reservoirs, Lake Williams and Lake Redman, which together hold up to approximately 2.2 billion gallons of water. The Company has a 15-mile pipeline from the Susquehanna River to Lake Redman which provides access to an additional supply of 12.0 million gallons of untreated water per day. As of December 31, 2011, the Company's average daily availability was 35.0 million gallons, and daily consumption was approximately 18.5 million gallons. The Company's service territory had an estimated population of 187,000 as of December 31, 2011. Industry within the Company's service territory is diversified, manufacturing such items as fixtures and furniture, electrical machinery, food products, paper, ordnance units, textile products, air conditioning systems, laundry detergent, barbells and motorcycles.
The Company's business is somewhat dependent on weather conditions, particularly the amount of rainfall. Revenues are particularly vulnerable to weather conditions in the summer months. Prolonged periods of hot and dry weather generally cause increased water usage for watering lawns, washing cars, and keeping golf courses and sports fields irrigated. Conversely, prolonged periods of dry weather could lead to drought restrictions from governmental authorities. Despite the Company’s adequate water supply, customers may be required to cut back water usage under such drought restrictions which would negatively impact revenues. The Company has addressed some of this vulnerability by instituting minimum customer charges which are intended to cover fixed costs of operations under all likely weather conditions.
The Company’s business does not require large amounts of working capital and is not dependent on any single customer or a very few customers for a material portion of its business. Increases in revenues are generally dependent on the Company’s ability to obtain rate increases from the PPUC in a timely manner and in adequate amounts and to increase volumes of water sold through increased consumption and increases in the number of customers served. The Company continuously looks for acquisition and expansion opportunities both within and outside its current service territory. The Company also looks for additional opportunities to enter into bulk water contracts with municipalities and other entities to supply water.
In addition to its primary business of providing water, the Company has recently begun to provide sewer billing services for various municipalities. The level of activity has not reached that of a reportable segment.
Competition
As a regulated utility, the Company operates within an exclusive franchised territory that is substantially free from direct competition with other public utilities, municipalities and other entities. Although the Company has been granted an exclusive franchise for each of its existing community water systems, the ability of the Company to expand or acquire new service territories may be affected by currently unknown competitors obtaining franchises to surrounding water systems by application or acquisition. These competitors may include other investor-owned utilities, nearby municipally-owned utilities and sometimes from strategic or financial purchasers seeking to enter or expand in the water industry. The addition of new service territory and the acquisition of other utilities are generally subject to review and approval by the PPUC.