York Water Company Releases 2024 10-K Report Highlighting Financial and Operational Performance
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The York Water Company, the oldest investor-owned water utility in the United States, has released its Form 10-K report for the fiscal year ending December 31, 2024. The report provides a comprehensive overview of the company's financial performance, business operations, strategic initiatives, and the challenges it faces in the regulated water utility industry.
Financial Highlights
- Operating Revenues: $74.959 million, increased by 5.5% from $71.031 million in 2023, primarily due to a rate increase effective March 1, 2023, and growth in the customer base.
- Operating Income: $28.041 million, decreased from $29.531 million in 2023, as the increase in operating expenses offset the revenue gains.
- Net Income: $20.325 million, a decrease of 14.4% from $23.757 million in 2023, primarily due to higher operating expenses, lower allowance for funds used during construction, and higher interest on debt.
- Basic Earnings Per Share: $1.42, down from $1.66 in 2023.
- Diluted Earnings Per Share: $1.42, down from $1.66 in 2023.
Business Highlights
- Company Overview: The York Water Company is the oldest investor-owned water utility in the United States, operating continuously since 1816. It provides water and wastewater services across 57 municipalities in four counties in south-central Pennsylvania.
- Regulatory Environment: The company operates under the regulation of the Pennsylvania Public Utility Commission (PPUC), which oversees billing, payment procedures, dispute processing, terminations, service territory, debt and equity financing, and rate setting.
- Water Supply and Infrastructure: The company sources its water from the South Branch and East Branch of the Codorus Creek, supplemented by a pipeline from the Susquehanna River. It operates two primary reservoirs, Lake Williams and Lake Redman, with a combined capacity of approximately 2.5 billion gallons.
- Wastewater Operations: The company owns and operates three wastewater collection systems and eleven wastewater collection and treatment systems.
- Customer Base and Growth: As of December 31, 2024, the company served an estimated population of 212,000. The number of customers increased from 77,893 to 79,771 during the year, primarily due to acquisitions and organic growth.
- Operational Challenges: The company's water business is somewhat dependent on weather conditions, particularly precipitation. Prolonged dry weather could lead to drought restrictions impacting revenues.
- Service Line Protection Program: The company offers a service line protection program where customers pay a fixed monthly fee for repair or replacement of damaged service lines.
- Acquisitions: In 2024, the company completed several acquisitions, including water and wastewater assets in various townships, adding approximately 1,010 new customers.
- Infrastructure Expansion: During 2024, the company installed an additional 97,400 feet of water distribution mains and acquired 33,000 feet of water distribution mains.
- Future Outlook: The company plans to continue seeking acquisition and expansion opportunities both within and outside its current service territory. It also anticipates construction and acquisition expenditures for 2025 and 2026 to be approximately $46 million and $48.5 million respectively.
Strategic Initiatives
- Growth through Acquisitions: The company is actively pursuing growth through acquisitions and infrastructure investments. It completed several acquisitions in 2024, adding new water and wastewater customers, and is planning further acquisitions in 2025.
- Infrastructure Investments: The company is investing in infrastructure improvements, including the replacement of water mains and upgrades to wastewater treatment facilities.
- Capital Management: The company has been managing its capital through a combination of debt and equity financing. In 2024, it issued $40 million in senior notes to refinance line of credit borrowings and fund capital projects. The company also maintains a $50 million line of credit to support its liquidity needs. Additionally, the company increased its quarterly dividend by 4% in 2024 and has a share repurchase program in place, although no shares were repurchased in 2024.
- Future Outlook: Looking ahead, the company plans to continue its strategic focus on acquisitions and infrastructure investments to drive growth. It anticipates construction and acquisition expenditures of approximately $46 million in 2025 and $48.5 million in 2026. The company expects to file a rate increase request in 2025 to support its financial performance and maintain a strong capital structure.
Challenges and Risks
- Regulatory Risks: The York Water Company operates within a regulated environment, which subjects it to various regulatory risks.
- Weather Dependency: The company is dependent on weather conditions, particularly precipitation, which can affect water usage and revenues. Prolonged dry weather could lead to drought restrictions, negatively impacting revenues despite having an adequate water supply.
- Operational Risks: The company faces operational risks related to increased operating expenses, higher interest expenses, and lower allowances for funds used during construction. These factors contributed to a decrease in net income in 2024 compared to 2023.
- Market Risks: The company is exposed to market risks due to potential changes in interest rates and the need for timely rate increases from the Pennsylvania Public Utility Commission (PPUC) to maintain profitability. The company plans to file a rate increase request in 2025 to address these financial challenges.
- Environmental Regulations: The company is subject to environmental regulations, including the Safe Drinking Water Act and the Clean Water Act, which require compliance with water quality standards. Future changes in these regulations could necessitate additional capital investments.