York Water Co (YORW) 2010年年度報告「NASDAQ」.pdf

1、2010 Annual Report1 9 5 Y e a rthroughCustomer ServiceGrowthPerformanceT h e Y o r k W a t e r C o m p a n y ProvidingVALUEfor 195 YearsFront Cover:The original directors and employees of The York Water Company insert the first tapinto the wooden water main,in 1816.“Hydran Water”by Folk Artist,Lewis

2、 Miller(1796-1882)is from the collection of the York County Heritage Trust,York,PA.President and CEOs LetterDear Shareholders.2FinancialsHighlights of Our 195th Year.5Shareholder Information.6Managements Discussion and Analysis.8Managements Report on Internal Control Over Financial Reporting.18Repor

3、t of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting.19Report of Independent Registered Public Accounting Firm.20Balance Sheets.21Statements of Income.22Statements of Common Stockholders Equity and Comprehensive Income.23Statements of Cash Flows.24Notes to

4、Financial Statements.25Additional InformationSupplemental Information.44Directors.46Officers and Key Employees.47Transfer Agent and Registrar.47Stock Exchange Listing.47Independent Auditors.47Chartered Territory Distribution and Supply System.48T a b l e o f C o n t e n t sT h e Y o r k W a t e r C

5、o m p a n y2010 Annual ReportP a g e 1Almost 200 years have gone by since Yorks first water wassupplied from a spring located on Peter Smalls tract of land to customers through bored out“wooden maines”.Those first water mains were constructed to provide a growing community with protection against fi

6、res.Over the years the mission has grown to also provide drinking water and economic development.Ten years have gone by since The York Water Company was listed on NASDAQ celebrated in 2010 with the ceremonial ringing of the closing bell on October 25 in New York City.Through twocenturies of dedicate

7、d service,consistent growth,and excellent performance,Americas oldest investor owned water company continues to provide exceptionalValue to Customers,Shareholders,and the Communities we serve.Through acquisition of existing water systems in new areas,and servicing new regionalmanufacturing/distribut

8、ion facilities,both Residential and Commercial customer bases wereexpanded in 2010.At less than a penny per gallon some of the lowest regulated water rates inPennsylvania,The York Water Company provides exceptionalValue to its Customers.Despite the continuation of an uncertain economic climate throu

9、ghout 2010,The York Water Companycontinued to thrive and achieved a Record Year of financial growth and provided dividend paymentsfor the 195th consecutive year-a remarkable Value for our shareholders.Planned capital expenditures continued for infrastructure replacement,facility expansion,anddistrib

10、ution system improvements to insure that there is a safe,reliable,and abundant supply of water available to current and future customers-an investment withValue for theCommunities we serve.With strong leadership and dedicated experienced employees,The York Water Company is wellpositioned to continue

11、 this long-standing tradition of providingValue through customerservice,growth,and performancefor many years to come-doing whatever is required to provide“That good York water”for our growing communities.throughCustomer ServiceGrowthPerformanceProvidingVALUEfor 195 YearsDear Shareholders,I am please

12、d to report a record year for The York Water Company whichcontinues its 195 year tradition of service,growth,and performance.Record Financial PerformanceDue to our continued growth,2010 results were the best in our history.Operating revenues grew by 5.3%to$39.0 million in 2010.Operating incomeincrea

13、sed 13.7%to$19.8 million.Our net income increased by 18.9%to$8.9million in 2010.Earnings per share increased 10.9%to$0.71 per share.Continued Growth,Acquisitions,and Expansion The average number of customers served grew by 0.9%during 2010 to 62,474.The percent of customer growth in 2010 was below ou

14、r five year average of 3%due to a slowdown in the housing market due to the economy.The Company isnow authorized to serve in 46 municipalities in Adams and York Counties.Population served grew by 1.1%in 2010 to approximately 182,000.In 2010,The York Water Company continued its long tradition of acqu

15、iringtroubled water systems and providing water service into new areas.In 2010,the customers of the Evergreen Lane Water System in York County becamecustomers of York Water.Evergreen Lane,which served approximately50 people,is now a part of York Waters service population of over 182,000.Church&Dwigh

16、t Expands Major Facility in YorkIn 2010,Church&Dwight Co,Inc.expanded operations at their recentlycompleted Arm&Hammer detergent manufacturing and distribution facility inYork.They are currently our fourth largest customer.At full production it isanticipated that this facility will be our second lar

17、gest customer.One of the majorreasons that Church&Dwight expanded the facility in York was a reasonablecost structure and an abundant supply of high quality water.Debt IssueIn the fall of 2010,the Company issued$15,000,000 of 5.00%senior notes due in2040.The debt proceeds were used to pay off short-

18、term borrowings used foracquisitions,to retire maturing long-term debt issues,and for constructionexpenditures including:replacements and expansion at the filter plant andpumping station,and a continuing water main replacement and distributionsystem improvement program.Jeffrey R.Hines,P.E.President

19、and Chief Executive OfficerT h e Y o r k W a t e r C o m p a n y2010 Annual Report P a g e 2Dividends and Shareholder ValueIn line with our objective to maintain regular dividend increases,we raised thequarterly dividend rate by 2.3%during the year.This is the fourteenth consecutive yearwe have rais

20、ed our dividend and the 195th consecutive year of dividend payments.We believe this to be the longest consecutive dividend record of any public corporationin America.Our financial position continued to excel in 2010.The market price of our common stockincreased$2.78 per share to$17.29,or a 19.2%incr

21、ease.In addition,the dividend wasincreased in 2010 by 1.8%to$0.515 per share,for a yield on December 31,2010 of about3.0%.If a share of stock were purchased on December 31,2009,the total return for theyear would be 22.2%.If a share of stock were purchased at the markets low point of theyear:May 26,2

22、010,at$13.01,the total return for the year would have been above 35%.Continued Success of a Direct Stock Purchase PlanIn 2010 the Company continued its Direct Stock Purchase Plan that allows for thepurchase of up to$40,000 per year directly from the company at market price withoutany fees.Dividends

23、can then be reinvested automatically at a 5%discount,again withno fees.Interested investors should go to and review theprospectus for additional information and to participate in the program.Rate Increase Approved,Water Still Costs Less than One Cent per GallonOn November 4,2010 the Pennsylvania Pub

24、lic Utility Commission approved a$3.4million per year increase in revenue.Although it was a difficult time to raise customersrates,it was necessary to pay for$30 million in capital improvements that have beencompleted since the last rate increase.Much of this investment was required to replacecritic

25、al infrastructure and to insure our customers have a safe,reliable,and abundantsupply of water now and into the future.The York Water Company continues to maintain the lowest customer complaint rate inthe state and York Waters rates remain among the lowest in the state.T h e Y o r k W a t e r C o m

26、p a n y2010 Annual Report P a g e 3 The York Water Company celebrated its 195th Business Anniversary and 10 Year Listing on NASDAQ byringing the NASDAQ Stock Market Closing Bell.P a g e 4Personal Service and“green”Electronic BillingAlthough we are a 195 year old company,we continue to make technolog

27、icaladvances to assist our customers.However we still strive to provide that personaltouch.When you call our office,one of our friendly customer service representativeswill answer the phone and assist you.In 2010 we initiated electronic billing.Now,instead of receiving a paper bill,customers have th

28、e option of getting it delivered totheir email account each month with directions on how they can pay their billon-line.Of course,our historic office in downtown York remains open for walk-in orphone-in customer support.Dedicated and Experienced EmployeesA Company that continues to thrive and grow,a

29、nd improve service to its customersfor 195 years,can only be possible due to the dedication,loyalty,and hard work ofits talented employees.We thank all of the York Water family for their commitmentto make this Company the most efficient water utility in the nation.William T.Morris Retires After 43 Y

30、ears of ServiceWilliam T.Morris has been a leader of The York Water Company as General Managerand President for 30 years,Chairman of the Board for 7 years,and as a Director for32 years.During his long tenure,Bill demonstrated a resolute dedication to theCompany and helped transform it into its preem

31、inent position in the communityand in the water profession.Bill will continue to serve the Company as a DirectorEmeritus.OutlookWe continue our efforts to grow our business and serve our communities.Wemonitor our operating region for opportunities to acquire new franchise territoriesand enter into n

32、on-regulated business activities so that we may provide our richhistory,experience,and knowhow to communities that realize the importance of ahigh quality,drought-resistant supply of water for domestic,commercial,industrial,and fire protection uses.In 2011 we will enter into our first wastewater con

33、tract andprovide billing and customer service to area wastewater authorities,starting with theJefferson-Codorus Joint Sewer Authority.We will continue to anticipate ourcommunities growth so that wherever and whenever“That good York water”isneeded,it will be available in plentiful supply.T h e Y o r

34、k W a t e r C o m p a n y2010 Annual ReportPhoto above:Jeffrey R.Hines,P.E.(on right)expresses appreciation to William T.Morris(on left)for43 years of service to The York Water Company.Photo on right:Filter Plant operators understand the value of a clean and consistent water supply.In 2010the Operat

35、ors celebrated the accomplishment of maintaining filtered water turbidity below.10 NTUs forten straight years,well below the.30 NTU requirement.Filter Plant operators(front row)Dave Zarfoss,Dale Barnhart(Asst.Superintendent),John Poklembo(Superintendent),John Gunnet;(back row)MikeSpilman,George Roun

36、dtree,Tom Bailey,and Sharon Markey.(Not shown:Sam Napier).Note:Efficiency ratio as measured bynet income as a percent of revenue.P a g e 5T h e Y o r k W a t e r C o m p a n y2010 Annual ReportHighlights of Our 195th Year(In thousands of dollars,except per share amounts)Summary of OperationsFor the

37、Year20102009200820072006Water operating revenues.$39,005$37,043$32,838$31,433$28,658Operating expenses.19,23819,65518,15817,33315,754Operating income.19,76717,38814,68014,10012,904Interest expense.4,7954,7804,1123,9163,727Other income(expenses),net.(465)(517)(509)(78)110Income before income taxes.14

38、,50712,09110,05910,1069,287Income taxes.5,5784,5793,6283,6923,196Net income.$8,929$7,512$6,431$6,414$6,091Per Share of Common StockBook value.$7.19$6.92$6.14$5.97$5.84Basic earnings per share.0.710.64 0.570.57 0.58Cash dividends declared per share.0.5150.5060.4890.4750.454Weighted average number of

39、sharesoutstanding during the year.12,626,66011,695,15511,298,21511,225,82210,475,173Utility PlantOriginal cost,net of acquisition adjustments.$269,856$259,839$245,249$222,354$202,020Construction expenditures.10,54112,53524,43818,15420,678OtherTotal assets.$259,931$248,837$240,442$210,969$196,064Long

40、-term debt including current portion.85,17377,56886,35370,50562,335For Managements Discussion and Analysis of Financial Condition and Results of Operations,please refer to page 8.P a g e 6T h e Y o r k W a t e r C o m p a n y2010 Annual ReportMarket for Common Stock and DividendsThe common stock of

41、The York Water Company is traded on the NASDAQ Global Select Market(Symbol“YORW”).Quarterly price ranges and cash dividends per share for the last two years follow:20102009HighLowDividend*HighLowDividend*1st Quarter$15.00$13.04$0.128$13.50$9.74$0.1262ndQuarter15.6012.830.12816.2611.750.1263rd Quarte

42、r16.4013.420.12817.9513.750.1264th Quarter18.0015.520.13115.2413.650.128200520062007200820092010The York Water Company100.00106.3794.8476.6795.34117.43S&P 500 Index100.00113.62117.6372.3689.33100.75Peer Group*100.00100.1996.7997.2588.32106.26*ARTNA,AWR,CTWS,CWT,MSEX,PNNW,SJW,WTRSource:FactSet Resear

43、ch Systems Inc.*Cash dividends per share reflect dividends declared at each dividend date.Prices listed in the above table are sales prices as listed on the NASDAQ Global Select Market.Shareholders of record(excluding individual participants in securities positions listings)as of December 31,2010 nu

44、mbered approximately 1,649.Performance GraphThe following line graph presents the annual and cumulative total shareholder return for The York Water Company CommonStock over a five-year period from 2005 through 2010,based on the market price of the Common Stock and assumingreinvestment of dividends,c

45、ompared with the cumulative total shareholder return of companies in the S&P 500 Index and apeer group made up of publicly traded water utilities,also assuming reinvestment of dividends.The peer group companiesinclude:American States,Aqua America,Artesian Resources,California Water Service,Connectic

46、ut Water Service,MiddlesexWater,Pennichuck Corporation and San Jose Water.Shareholder Information P a g e 7T h e Y o r k W a t e r C o m p a n y2010 Annual Report Shareholder Information Dividend PolicyDividends on the Companys common stock are declared by the Board of Directors and are normally pai

47、d in January,April,July and October.Dividends are paid based on shares outstanding as of the stated record date,which is ordinarily the lastday of the calendar month immediately preceding the dividend payment.The dividend paid on the Companys common stock on January 14,2011 was the 560th consecutive

48、 dividend paid by theCompany.The Company has paid consecutive dividends for its entire history,since 1816.The policy of our Board of Directorsis currently to pay cash dividends on a quarterly basis.The dividend rate has been increased annually for fourteenconsecutive years.The Companys Board of Dire

49、ctors declared dividend number 561 in the amount of$0.131 per share at itsJanuary 2011 meeting.The dividend is payable on April 15,2011 to shareholders of record as of February 28,2011.Futurecash dividends will be dependent upon the Companys earnings,financial condition,capital demands and other fac

50、tors andwill be determined by the Companys Board of Directors.See Note 4 to the Companys financial statements included hereinfor restrictions on dividend payments.Financial Reports and Investor RelationsShareholders may request,without charge,copies of the Companys financial reports,including Annual

51、 Reports,and Forms 8-K,10-K and 10-Q filed with the Securities and Exchange Commission(SEC).Such requests,as well as other investor relations inquiries,should be addressed to:The Annual Report as well as reports filed with the SEC and other information about the Company can also be found on the Comp

52、anys website at:.(717)845-3601(800)750-The York Water CompanyP.O.Box 15089,York,PA 17405-7089Kathleen M.Miller Chief Financial Officer P a g e 8T h e Y o r k W a t e r C o m p a n y2010 Annual ReportForward-looking StatementsThis Annual Report contains certain matters which are not historical facts,

53、but which are forward-looking statements.Words such as“may,”“should,”“believe,”“anticipate,”“estimate,”“expect,”“intend,”“plan”and similar expressions areintended to identify forward-looking statements.The Company intends these forward-looking statements to qualify for safeharbor from liability esta

54、blished by the Private Securities Litigation Reform Act of 1995.These forward-looking statementsinclude certain information relating to the Companys business strategy;statements including,but not limited to:expected profitability and results of operations;goals,priorities and plans for,and cost of,g

55、rowth and expansion;strategic initiatives;availability of water supply;water usage by customers;andability 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.Whatactually hap

56、pens could differ materially from what it currently anticipates will happen.The Company does not intend tomake a public announcement when forward-looking statements in this Annual Report are no longer accurate,whether as aresult of new information,what actually happens in the future or for any other

57、 reason.Important matters that may affect whatwill actually happen include,but are not limited to:changes in weather,including drought conditions;levels of rate relief granted;the level of commercial and industrial business activity within the Companys service territory;construction of new housing w

58、ithin the Companys service territory and increases in population;changes in government policies or regulations;the ability to obtain permits for expansion projects;material changes in demand from customers,including the impact of conservation efforts which may impact the demand of customers for wate

59、r;changes in economic and business conditions,including interest rates,which are less favorable than expected;changes in,or unanticipated,capital requirements;changes in accounting pronouncements;changes in our credit rating or the market price of our common stock;the ability to obtain financing;and

60、 other matters set forth in Item 1A,“Risk Factors,”of the Companys Annual Report on Form 10-K for the year ended December 31,2010.OverviewThe Company is the oldest investor-owned water utility in the United States and is duly organized under the laws of theCommonwealth of Pennsylvania.The Company ha

61、s operated continuously since 1816.The business of the Company is toimpound,purify to meet or exceed safe drinking water standards and distribute water.The Company operates within itsfranchised territory,which covers 39 municipalities within York County,Pennsylvania and seven municipalities within A

62、damsCounty,Pennsylvania.The Company is regulated by the Pennsylvania Public Utility Commission,or PPUC,in the areas ofbilling,payment procedures,dispute processing,terminations,service territory,debt and equity financing and rate setting.Managements Discussion&Analysis of Financial Condition&Results

63、 of Operations(In thousands of dollars,except per share amounts)P a g e 9T h e Y o r k W a t e r C o m p a n y2010 Annual Report Managements Discussion&Analysis of Financial Condition&Results of Operations(In thousands of dollars,except per share amounts)The Company must obtain PPUC approval before

64、changing any practices associated with the aforementioned areas.Waterservice is supplied through the Companys own distribution system.The Company obtains its water supply from both theSouth Branch and East Branch of the Codorus Creek,which together have an average daily flow of 73.0 million gallons

65、perday.This combined watershed area is approximately 117 square miles.The Company has two reservoirs,Lake Williams andLake Redman,which together hold up to approximately 2.2 billion gallons of water.The Company has a 15-mile pipelinefrom the Susquehanna River to Lake Redman which provides access to

66、an additional supply of 12.0 million gallons ofuntreated water per day.As of December 31,2010,the Companys average daily availability was 35.0 million gallons,anddaily consumption was approximately 18.9 million gallons.The Companys service territory had an estimated population of182,000 as of Decemb

67、er 31,2010.Industry within the Companys service territory is diversified,manufacturing such items asfixtures and furniture,electrical machinery,food products,paper,ordnance units,textile products,air conditioning systems,laundry detergent,barbells and motorcycles.The Companys business is somewhat de

68、pendent on weather conditions,particularly the amount of rainfall.Revenues areparticularly vulnerable to weather conditions in the summer months.Prolonged periods of hot and dry weather generallycause increased water usage for watering lawns,washing cars,and keeping golf courses and sports fields ir

69、rigated.Conversely,prolonged periods of dry weather could lead to drought restrictions from governmental authorities.Despite theCompanys adequate water supply,customers may be required to cut back water usage under such drought restrictionswhich would negatively impact our revenues.The Company has a

70、ddressed some of this vulnerability by institutingminimum customer charges which are intended to cover fixed costs of operations under all likely weather conditions.In 2010,per capita consumption by industrial and commercial customers showed a modest increase over prior year while residentialcustome

71、r use decreased slightly.Total per capita consumption for the year was approximately 0.3%higher compared to 2009.The Companys business does not require large amounts of working capital and is not dependent on any single customeror a very few customers for a material portion of its business.In 2010,o

72、perating revenue was derived from the followingsources and in the following percentages:residential,63%;commercial and industrial,29%;and other,8%,which is primarilyfrom the provision for fire service.Increases in revenues are generally dependent on the Companys ability to obtain rateincreases from

73、regulatory authorities in a timely manner and in adequate amounts and to increase volumes of water soldthrough increased consumption and increases in the number of customers served.The Company continuously looks foracquisition and expansion opportunities both within and outside its current service t

74、erritory.The Company also looks foradditional opportunities to enter into bulk water contracts with municipalities and other entities to supply water.During the five-year period ended December 31,2010,the Company has maintained growth in the number of customers anddistribution facilities as demonstr

75、ated by the following chart:20102009200820072006Average daily consumption(gallons per day)18,875,00018,233,00018,298,00019,058,00018,769,000Miles of mains at year-end925922884845817Additional distribution mains installed/acquired(ft.)19,886200,439206,140147,803159,330Number of customers at year-end6

76、2,50562,18661,52758,89057,578Population served at year-end182,000180,000176,000171,000166,000 P a g e 1 0T h e Y o r k W a t e r C o m p a n y2010 Annual ReportPerformance MeasuresCompany management uses financial measures including operating revenues,net income,earnings per share and returnon equit

77、y to evaluate its financial performance.Additional statistical measures including number of customers,customercomplaint rate,annual customer rates and the efficiency ratio are used to evaluate performance quality.These measures arecalculated on a regular basis and compared with historical informatio

78、n,budget and the other publicly-traded water companies.The Companys 2010 performance was strong under the above measures.Increases in the number of customers and percapita water usage by the customers,increased rates from a rate filing and a higher distribution system improvement charge(DSIC)resulte

79、d in higher revenue.The DSIC allows the Company to add a charge to customers bills for qualifiedreplacement costs of certain infrastructure without submitting a rate filing.In addition,the Company incurred loweroperating and maintenance expenses in 2010.The overall effect was an increase in net inco

80、me in 2010 over 2009 of 18.9%anda return on year end common equity at its highest level in five years.The efficiency ratio,which is calculated as net income divided by revenues,is used by management to evaluate itsability to keep expenses in line.Over the five previous years,our ratio averaged 20.7%

81、.In 2010,the ratio increased to 22.9%due to the higher net income resulting from higher revenue and reduced expenses.Management is confident that our ratiowill again exceed that of our peers.Management continues to look for ways to decrease expenses and increase efficiency aswell as to file for rate

82、 increases promptly when needed.Effective November 4,2010,the PPUC authorized an increase in rateswhich will allow for recovery of some of the expected increases in expense.Results of Operations2010 Compared with 2009Net income for 2010 was$8,929,an increase of$1,417,or 18.9%,from net income of$7,51

83、2 for 2009.The primarycontributing factors to the increase in net income were higher water revenues and reduced expenses for salary and wages,distribution system maintenance and employee retirement.Higher capitalized overhead and lower interest expense added tothe reduction in expenses which were pa

84、rtially offset by higher depreciation expense,a reduced allowance for funds usedduring construction,higher power costs and increased capital stock tax.Water operating revenues for the year increased$1,962,or 5.3%,from$37,043 for 2009 to$39,005 for 2010.The primaryreasons for the increase in revenues

85、 were an increased DSIC,a rate increase effective November 4,2010 and growth in thecustomer base.The average number of customers served in 2010 increased as compared to 2009 by 577 customers,from 61,897to 62,474 customers.The total per capita volume of water sold in 2010 increased compared to 2009 b

86、y approximately 0.3%.Per capita consumption by industrial and commercial customers showed a modest increase over prior year and was partiallyoffset by a slight decrease in use by residential customers.The Company expects revenues to continue to increase in 2011 asa result of the full years impact of

87、 the rate increase granted in November 2010.Drought warnings or restrictions as well asregulatory actions and weather patterns could impact results.Operating expenses for the year decreased$417,or 2.1%,from$19,655 for 2009 to$19,238 for 2010.The decrease wasprimarily due to lower salary and wage exp

88、ense of approximately$177.This was mainly a result of the vacation accrualrecorded in 2009 as discussed in Note 1(Reclassifications)to the Companys financial statements included herein.Lowerdistribution system maintenance expense of approximately$158,increased capitalized overhead of approximately$1

89、52,andreduced pension cost and other expenses aggregating approximately$275 added to the reduction of expenses.Higherdepreciation expense due to increased plant investment,increased power costs and higher capital stock tax aggregatingManagements Discussion&Analysis of Financial Condition&Results of

90、Operations(In thousands of dollars,except per share amounts)P a g e 1 1T h e Y o r k W a t e r C o m p a n y2010 Annual Report approximately$345 partially offset the decrease.Depreciation expenses are expected to continue to rise due to investment inutility plant,pension expense is expected to rise

91、due to an expected increase in contributions to be made to the plans andother operating expenses are expected to increase at a moderate rate as costs to serve customers and to extend our distributionsystem continue to rise.Interest on debt for 2010 decreased$84,or 1.7%,from$4,990 for 2009 to$4,906 f

92、or 2010.The primary reasons for the decreasewere lower interest payments of$131 due to the retirement of the 3.60%Industrial Development Authority RevenueRefunding Bonds,Series 1994,in May of 2009 and the 3.75%Industrial Development Authority Revenue Refunding Bonds,Series 1995,in June of 2010,lower

93、 interest of$81 on the Companys lines of credit due to reduced borrowings and lowerinterest of$47 on the$12,000 variable rate bonds due to reduced interest rates.The decrease in expense was partially offsetby higher interest of$175 primarily for the newly issued 5.00%Senior Notes,Series 2010A,in Oct

94、ober of 2010.The averageinterest rate on the lines of credit was 1.54%for 2010 compared to 1.41%for 2009.The average debt outstanding under thelines of credit was$7,191 for 2010 and$16,848 for 2009.Interest expense is expected to increase due to the long-term debtissued in October.Allowance for fund

95、s used during construction decreased$99,from$210 for 2009 to$111 in 2010,due to a lower volume ofeligible construction.Eligible 2009 construction expenditures included a main extension to West Manheim Township.Allowance for funds used during construction is expected to remain consistent in 2011 with

96、 the 2010 level based on aprojected comparable amount of construction expenditures.Other income(expenses),net for 2010 reflects decreased expenses of$52 as compared to 2009.The decrease was primarilydue to lower employee retirement expense.Income taxes for 2010 increased by$999,or 21.8%,compared to

97、2009,primarily due to an increase in taxable income.TheCompanys effective tax rate was 38.5%in 2010 and 37.9%in 2009.2009 Compared with 2008Net income for 2009 was$7,512,an increase of$1,081,or 16.8%,from net income of$6,431 for 2008.The primary contributingfactors to the increase in net income were

98、 higher water revenues which were partially offset by increased depreciation,higherpension cost,reduced interest capitalized,increased interest expense on debt and higher salary and wage expense.Water operating revenues for the year increased$4,205,or 12.8%,from$32,838 for 2008 to$37,043 for 2009.Th

99、e primaryreasons for the increase in revenues were a rate increase of 17.9%effective October 9,2008 and growth in the customer base.Theaverage number of customers served in 2009 increased as compared to 2008 by 2,414 customers,from 59,483 to 61,897 customers.Approximately 2,050 of the additional cus

100、tomers were due to the Asbury Pointe and West Manheim acquisitions.Despite thisincrease in customers,the total per capita volume of water sold in 2009 decreased compared to 2008 by approximately 5.7%.Thelargest decline occurred in the industrial category followed by the commercial and residential ca

101、tegories.Operating expenses for the year increased$1,497,or 8.2%,from$18,158 for 2008 to$19,655 for 2009.The increase wasprimarily due to higher depreciation of$790 due to increased plant investment,increased pension expense of$487,highersalary and wage expense of$229 due mainly to the increased vac

102、ation accrual discussed in Note 1(Reclassifications)to theCompanys financial statements included herein and higher distribution system maintenance expense,chemical expense,power costs,rate case expense,provision for doubtful accounts,banking fees,realty taxes and other expenses aggregatingapproximat

103、ely$482.The increase was partially offset by reduced health insurance costs,increased capitalized overhead,lower transportation expenses and reduced software support and legal expenses aggregating approximately$491.Managements Discussion&Analysis of Financial Condition&Results of Operations(In thous

104、ands of dollars,except per share amounts)P a g e 1 2T h e Y o r k W a t e r C o m p a n y2010 Annual ReportInterest on debt for 2009 increased$231,or 4.9%,from$4,759 for 2008 to$4,990 for 2009.Interest on the Companyslong-term debt increased by$706 due to an increase in the amount of long-term debt

105、outstanding from new debt issued onOctober 15,2008 in the aggregate principal amount of$15,000 at an interest rate of 6%.The increased expenses were partiallyoffset by lower interest on the$12,000 variable rate bonds of approximately$69 due to lower variable interest rates.Intereston the Companys li

106、nes of credit decreased by$346 due to lower interest rates.The average interest rate on the lines of creditwas 1.41%for 2009 compared to 3.61%for 2008.The average debt outstanding under the lines of credit was$16,848 for 2009and$16,128 for 2008.Other long-term interest decreased$60.Allowance for fun

107、ds used during construction decreased$437,from$647 for 2008 to$210 in 2009,due to a lower volumeof eligible construction.Eligible 2008 construction expenditures included an investment in a large water treatment replacementand expansion project and a main extension to West Manheim Township that was p

108、laced in service in December,2008.Other income(expenses),net for 2009 reflects increased expenses of$8 as compared to 2008.The increase was primarilydue to increased charitable contributions,higher debt cost amortization and other expenses which were partially offset byreduced retirement expenses.In

109、come taxes for 2009 increased by$951,or 26.2%,compared to 2008,primarily due to an increase in taxable income.TheCompanys effective tax rate was 37.9%in 2009 and 36.1%in 2008.The increase in the effective tax rate was due to taxablegains on the surrender of life insurance policies and bonus deprecia

110、tion initially being taxable for state tax purposes.Rate DevelopmentsFrom time to time,the Company files applications for rate increases with the PPUC and is granted rate relief as a result ofsuch requests.These rate increases are designed to cover operating expenses,taxes,interest on debt used to f

111、inance capitalinvestments and a return on equity.The most recent rate request was filed by the Company on May 14,2010 and sought anincrease of$6,220,which would have represented a 15.9%increase in rates.Effective November 4,2010,the PPUC authorizedan average increase of 8.7%in rates designed to prod

112、uce approximately$3,400 in additional annual revenues.The Companydoes not expect to file a base rate increase request in 2011.AcquisitionsSee Note 2 to the Companys financial statements included herein for a discussion of our acquisitions.Capital ExpendituresDuring 2010,the Company invested$10,541 i

113、n construction expenditures including routine items,upgrades to its watertreatment facilities,backup generators at various booster stations,reinforcing water mains,and various replacements of aginginfrastructure.The Company replaced and relined over 37,000 feet of main in 2010.The Company was able t

114、o fund operatingactivities and construction expenditures using internally-generated funds,borrowings against the Companys lines of credit,proceeds from a long-term debt issue,proceeds from its stock purchase plans(see Note 5 to the Companys financialstatements included herein),customer advances and

115、the DSIC allowed by the PPUC.The Company anticipates construction and acquisition expenditures for 2011 and 2012 of approximately$12,800 and$13,415,respectively.In addition to routine transmission and distribution projects,a portion of the anticipated 2011 and 2012expenditures will be for additional

116、 main extensions,further upgrades to water treatment facilities,reinforcement of one ofManagements Discussion&Analysis of Financial Condition&Results of Operations(In thousands of dollars,except per share amounts)Results of Operations(continued)P a g e 1 3T h e Y o r k W a t e r C o m p a n y2010 An

117、nual Report Managements Discussion&Analysis of Financial Condition&Results of Operations(In thousands of dollars,except per share amounts)our dams,and various replacements of aging infrastructure including a standpipe.The Company intends to useinternally-generated funds for at least half of our anti

118、cipated 2011 and 2012 construction and fund the remainder throughline of credit borrowings,proceeds from our stock purchase plans,potential debt and equity offerings,the DSIC and customeradvances and contributions(see Note 1 to the Companys financial statements included herein).Customer advances and

119、contributions are expected to account for approximately 8%of funding requirements in 2011 and 15%of fundingrequirements in 2012.We believe we will have adequate access to the capital markets,if necessary during 2011,to fundanticipated construction and acquisition expenditures.Liquidity and Capital R

120、esourcesCashAlthough the Company is able to generate funds internally through customer bill payments,we have not historically maintainedcash on the balance sheet.The Company manages its cash through a cash management account that is directly connected to aline of credit.Excess cash generated automat

121、ically pays down outstanding borrowings under the line of credit arrangement.Ifthere are no outstanding borrowings,the cash is automatically invested in an interest-bearing account overnight.Likewise,ifadditional funds are needed,besides what is generated internally,for payroll,to pay suppliers,or t

122、o pay debt service,funds areautomatically borrowed under the line of credit.The cash management facility has historically provided the necessary liquidityand funding for our operations and we expect that to continue to be the case for the foreseeable future.The cash balance of$1,327 at December 31,2

123、010 represents the proceeds of the October long-term debt issue that were not utilized until 2011.Accounts ReceivableHistorically the Company has seen an upward trend in its accounts receivable balance.This trend is generally a result ofincreased revenues.Increases in accounts receivable have corres

124、ponded with increases in revenue.Recently the Company hasnoticed a decline in the timeliness of payments by its customers resulting in an increase in accounts receivable in excess ofthe increase in revenues.Despite this trend of slower payments,the Company has not seen a dramatic deterioration of it

125、saccounts receivable aging or the amount of uncollectible accounts written off.The Company has increased its allowance fordoubtful accounts in consideration of this trend.If this trend continues,the Company may incur additional expenses foruncollectible accounts and see a reduction in its internally

126、-generated funds.Internally-generated FundsThe amount of internally-generated funds available for operations and construction depends on our ability to obtain timelyand adequate rate relief,our customers water usage,weather conditions,customer growth and controlled expenses.In 2010,we generated$14,7

127、55 internally as compared to$15,801 in 2009 and$11,527 in 2008.An increase in net income was offset byhigher accounts receivable and an increase in income taxes paid resulting in lower cash flow from operating activities during2010.In addition to internally-generated funds,we used our bank lines of

128、credit and proceeds from a long-term debt issue tohelp fund operations and construction.Credit LinesHistorically,the Company has borrowed$15,000 to$20,000 under its lines of credit before refinancing with long-term debt orequity capital.As of December 31,2010,the Company maintained unsecured lines o

129、f credit aggregating$33,000 with threebanks.One line of credit includes a$4,000 portion which is payable upon demand and carries an interest rate of LIBOR plus2.00%,and a$13,000 committed portion with a revolving 2-year maturity(currently May 2012),which carries an interest rateof LIBOR plus 2.00%.T

130、he Company had no outstanding borrowings under the committed portion and no on-demandborrowings under this line of credit as of December 31,2010.The second line of credit,in the amount of$11,000,is acommitted line of credit,which matures in May 2012 and carries an interest rate of LIBOR plus 1.50%.T

131、his line of credit hasa compensating balance requirement of$500.The Company had no outstanding borrowings under this line of credit as ofDecember 31,2010.The third line of credit,in the amount of$5,000,is a committed line of credit,which matures in June 2011 P a g e 1 4T h e Y o r k W a t e r C o m

132、p a n y2010 Annual ReportLiquidity and Capital Resources(continued)Managements Discussion&Analysis of Financial Condition&Results of Operations(In thousands of dollars,except per share amounts)and carries an interest rate of LIBOR plus 2.00%.The Company had no outstanding borrowings under this line

133、of credit as ofDecember 31,2010.The Company plans to renew the line of credit that expires in 2011 under similar terms and conditions.The credit and liquidity crisis which began in 2008 has caused substantial volatility and uncertainty in the capital marketsand in the banking industry resulting in i

134、ncreased borrowing costs and reduced credit availability.While actual interest ratesare currently low,one of our banks increased the interest rate on our line of credit from LIBOR plus 70 basis points to LIBORplus 200 basis points in 2009.The higher interest rate remains in effect.One of the lines o

135、f credit also carries a commitmentfee.Although we have taken steps to manage the risk of reduced credit availability such as maintaining primarily committedlines of credit that cannot be called on demand and obtaining a 2-year revolving maturity,there is no guarantee that we willbe able to obtain su

136、fficient lines of credit with favorable terms in the future.In addition,if the Company is unable to refinanceour line of credit borrowings with long-term debt or equity when necessary,we may have to eliminate or postpone capitalexpenditures.The Company was able to pay off its line of credit borrowin

137、gs by issuing long-term debt in October 2010.Webelieve we will have adequate capacity under our current lines of credit to meet our financing needs throughout 2011.Long-term DebtThe Companys loan agreements contain various covenants and restrictions.We believe we are currently in compliance withall

138、of these restrictions.See Note 4 to the Companys financial statements included herein for additional informationregarding these restrictions.The 3.75%Industrial Development Authority Revenue Refunding Bonds,Series 1995,had a mandatory tender date of June1,2010.The Company retired the$4,300 bonds usi

139、ng funds available under its lines of credit.On October 8,2010,the Company issued$15,000 aggregate principal amount of 5.00%Monthly Senior Notes Series 2010Adue October 1,2040(the“Senior Notes”)pursuant to the terms of an indenture,as supplemented by a first supplementalindenture,each dated as of Oc

140、tober 1,2010,between the Company and Manufacturers and Traders Trust Company,as trustee.The Senior Notes bear interest at a rate of 5.00%payable monthly with a maturity date of October 1,2040.The Senior Notesare direct,unsecured and unsubordinated obligations of the Company.The Company received net

141、proceeds,after deductingissuance costs,of approximately$14,300.The net proceeds were used to pay off the Companys line of credit borrowingsincurred for capital expenditures and acquisitions,to retire maturing long-term debt issues,and for general corporatepurposes.The Senior Notes are subject to red

142、emption at the direction of the Company,in whole or in part,at any time on orafter October 1,2015.The Companys debt(long-term debt plus current portion of long-term debt)as a percentage of the total capitalization,defined as total common stockholders equity plus long-term debt(including current port

143、ion of long-term debt),was 48.3%as of December 31,2010,compared with 47.2%as of December 31,2009.As our debt load trends upward in the future,wewill likely match increasing debt with increasing equity so that our debt to total capitalization ratio remains at nearly fiftypercent.This capital structur

144、e has historically been acceptable to the PPUC in that prudent debt costs and a fair return havebeen granted by the PPUC in rate filings.See Note 4 to the Companys financial statements included herein for the details ofour long-term debt outstanding as of December 31,2010.The Company has an effectiv

145、e“shelf”Registration Statement on Form S-3 on file with the Securities and ExchangeCommission(SEC),pursuant to which the Company may offer an aggregate remaining amount of up to$25,000 of itscommon stock or debt securities subject to market conditions at the time of any such offering.P a g e 1 5T h

146、e Y o r k W a t e r C o m p a n y2010 Annual Report Deferred Income TaxesThe Company has seen an increase in its deferred income tax liability amounts over the last several years.This is primarilya result of the accelerated and bonus depreciation deduction available for federal tax purposes which cr

147、eates differencesbetween book and tax depreciation expense.We expect this trend to continue as we make significant investments in capitalexpenditures and as the tax code continues to extend bonus depreciation.Despite having a significant deferred income taxasset balance,the Company does not believe

148、a valuation allowance is required due to the expected generation of futuretaxable income during the periods in which those temporary differences become deductible.The Company has determinedthere are no uncertain tax positions that require recognition as of December 31,2010.Common StockCommon stockho

149、lders equity as a percent of the total capitalization was 51.7%as of December 31,2010,compared with52.8%as of December 31,2009.It is the Companys intent to maintain a ratio near fifty percent.The 2009 common stockoffering improved our ratio substantially.Under the Registration Statement previously m

150、entioned,we have the ability toissue additional shares of the Companys common stock,subject to market conditions at the time of any such offering.Credit RatingOur ability to maintain our credit rating depends,among other things,on adequate and timely rate relief,which we havebeen successful in obtai

151、ning,and our ability to fund capital expenditures in a balanced manner using both debt and equity.In 2011,our objectives will be to continue to maximize our funds provided by operations and maintain the equitycomponent of total capitalization.DividendsDuring 2010,the Companys dividend payout ratios

152、relative to net income and cash provided by operating activities were72.9%and 43.8%,respectively.During 2009,the Companys dividend payout ratios relative to net income and cash providedby operating activities were 80.5%and 37.0%,respectively.During the fourth quarter of 2010,the Board of Directors i

153、ncreasedthe dividend by 2.3%from$0.128 per share to$0.131 per share per quarter.This was the fourteenth consecutive annualdividend increase and the 195th consecutive year of paying dividends.The Companys Board of Directors declared a dividend in the amount of$0.131 per share at its January 2011 meet

154、ing.Thedividend is payable on April 15,2011 to shareholders of record as of February 28,2011.While the Company expects tomaintain this dividend amount in 2011,future dividends will be dependent upon the Companys earnings,financialcondition,capital demands and other factors and will be determined by

155、the Companys Board of Directors.See Note 4 to theCompanys financial statements included herein for restrictions on dividend payments.InflationThe Company is affected by inflation,most notably by the continually increasing costs incurred to maintain and expandits service capacity.The cumulative effec

156、t of inflation results in significantly higher facility replacement costs which mustbe recovered from future cash flows.The ability of the Company to recover this increased investment in facilities isdependent upon future rate increases,which are subject to approval by the PPUC.The Company can provi

157、de no assurancesthat its rate increases will be approved by the PPUC;and,if approved,the Company cannot guarantee that these rateincreases will be granted in a timely or sufficient manner to cover the investments and expenses for which the rate increasewas sought.Managements Discussion&Analysis of F

158、inancial Condition&Results of Operations(In thousands of dollars,except per share amounts)P a g e 1 6T h e Y o r k W a t e r C o m p a n y2010 Annual ReportPayments Due by PeriodTotal20112012201320142015ThereafterLong-term debt obligations(a)$85,173$41$12,042$42$43$43$72,962Interest on long-term deb

159、t(b)84,8634,8714,8704,8704,8694,86960,514Purchase obligations(c)1,0531,053Defined benefit obligations(d)3,1861,5931,593Deferred employee benefits(e)4,6292252392302412403,454Other deferred credits(f)1,601351307226157103457Total$180,505$8,134$19,051$5,368$5,310$5,255$137,387Critical Accounting Estimat

160、esThe methods,estimates and judgments we use in applying our accounting policies have a significant impact on the resultswe report in our financial statements.Our accounting policies require us to make subjective judgments because of the needto make estimates of matters that are inherently uncertain

161、.Our most critical accounting estimates include:regulatory assetsand liabilities,revenue recognition and accounting for our pension plans.Regulatory Assets and LiabilitiesGenerally accepted accounting principles define professional standards for companies whose rates are established by or aresubject

162、 to approval by an independent third-party regulator.In accordance with the professional standards,the Companydefers costs and credits on its balance sheet as regulatory assets and liabilities when it is probable that these costs and creditswill be recognized in the rate-making process in a period d

163、ifferent from when the costs and credits were incurred.(a)Represents debt maturities including current maturities.Included in the table is a payment of$12,000 in 2012 on the variable rate bonds which would only be due if the bonds were unable to be remarketed.There is currently no such indication of

164、 this happening.(b)Excludes interest on the$12,000 variable rate debt as these payments cannot be reasonably estimated.The interest rate on this issue is reset weekly by the remarketing agent based on then current market conditions.Also excludes interest on the committed line of credit due to the va

165、riability of both the outstanding amount and the interest rate.(c)Represents an approximation of open purchase orders at year end.(d)Represents contributions expected to be made to qualified defined benefit plans.The contribution may increase if the minimumrequired contribution as calculated under E

166、mployee Retirement Income Security Act(ERISA)standards is higher than these amountsbut in no case will the amount be less.The amount of required contributions in 2013 and thereafter is not currently determinable.(e)Represents the obligations under the Companys Supplemental Retirement and Deferred Co

167、mpensation Plans for executives.(f)Represents the estimated settlement payments to be made under the Companys interest rate swap contract.In addition to these obligations,the Company makes refunds on Customers Advances for Construction over a specific periodof time based on operating revenues relate

168、d to developer-installed water mains or as new customers are connected to andtake service from such mains.The refund amounts are not included in the above table because the timing cannot be accuratelyestimated.Portions of these refund amounts are payable annually through 2021 and amounts not paid by

169、 the contract expirationdates become non-refundable and are transferred to Contributions in Aid of Construction.See Note 9 to the Companys financial statements included herein for a discussion of our commitments.Contractual ObligationsThe following summarizes the Companys contractual obligations by

170、period as of December 31,2010:Managements Discussion&Analysis of Financial Condition&Results of Operations(In thousands of dollars,except per share amounts)P a g e 1 7T h e Y o r k W a t e r C o m p a n y2010 Annual Report These deferred amounts are then recognized in the statement of income in the

171、period in which they are reflected in customerrates.If the Company later finds that these assets and liabilities cannot be included in rate-making,they are adjustedappropriately.See Note 1 for additional details regarding regulatory assets and liabilities.Revenue RecognitionRevenues include amounts

172、billed to metered customers on a cycle basis and unbilled amounts based on both actual andestimated usage from the latest meter reading to the end of the accounting period.Estimates are based on average daily usagefor those particular customers.The unbilled revenue amount is recorded as a current as

173、set on the balance sheet.Actual resultscould differ from these estimates and would result in operating revenues being adjusted in the period in which the actualusage is known.Based on historical experience,the Company believes its estimate of unbilled revenues is reasonable.Pension AccountingAccount

174、ing for defined benefit pension plans requires estimates of future compensation increases,mortality,the discount rate,and expected return on plan assets as well as other variables.These variables are reviewed annually with the Companys pensionactuary.The Company selected its December 31,2010 and 200

175、9 discount rates based on the Citigroup Pension Liability Index.This index uses the Citigroup spot rates for durations out to 30 years and matches them to expected disbursements from the planover the long term.The Company believes this index most appropriately matches its pension obligations.The pre

176、sent values of the Companys future pension obligations were determined using a discount rate of 5.35%at December 31,2010 and 6.0%atDecember 31,2009.Choosing a lower discount rate normally increases the amount of pension expense and the corresponding liability.In the case ofthe Company,a reduction in

177、 the discount rate would increase its liability,but would not have an impact on its pension expense.The PPUC,in a previous rate settlement,agreed to grant recovery of the Companys contribution to the pension plans in customerrates.As a result,under the professional standards,expense in excess of the

178、 Companys pension plan contribution is deferred asa regulatory asset and will be expensed as contributions are made to the plans and the contributions are recovered in customerrates.Therefore,changes in the discount rate affect regulatory assets rather than pension expense.The Companys estimate of t

179、he expected return on plan assets is primarily based on the historic returns and projected futurereturns of the asset classes represented in its plans.The target allocation of pension assets is 50%to 70%equity securities,30%to50%debt securities,and 0%to 10%reserves.The Company used 7%as its estimate

180、 of expected return on assets in both 2010 and2009.If the Company were to reduce the expected return,its liability would increase,but its expense would again remainunchanged because the expense is equal to the Companys contribution to the plans.The additional expense would instead berecorded as an i

181、ncrease to regulatory assets.Other critical accounting estimates are discussed in the Significant Accounting Policies Note to the Financial Statements.Off-Balance Sheet TransactionsThe Company does not use off-balance sheet transactions,arrangements or obligations that may have a material current or

182、future effect on financial condition,results of operations,liquidity,capital expenditures,capital resources or significantcomponents of revenues or expenses.The Company does not use securitization of receivables or unconsolidated entities.TheCompany uses a derivative financial instrument,an interest

183、 rate swap agreement discussed in Note 4 to the financialstatements included herein,for risk management purposes.The Company does not engage in trading or other riskmanagement activites,does not use other derivative financial instruments for any purpose,has no lease obligations,noguarantees and does

184、 not have material transactions involving related parties.Impact of Recent Accounting PronouncementsSee Note 1 to the Companys financial statements included herein for a discussion on the effect of new accounting pronouncements.Managements Discussion&Analysis of Financial Condition&Results of Operat

185、ions(In thousands of dollars,except per share amounts)P a g e 1 8T h e Y o r k W a t e r C o m p a n y2010 Annual ReportManagements Report on Internal Control Over Financial ReportingManagement of The York Water Company(the“Company”)is responsible for establishing and maintainingadequate internal co

186、ntrol over financial reporting.Internal control over financial reporting is a process designed toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles.

187、A companys internal control over financialreporting includes those policies and procedures that pertain to the maintenance of records that,in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company;provide reasonable assurance thattransactions a

188、re recorded as necessary to permit preparation of financial statements in accordance with generally acceptedaccounting principles,and that receipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the company;and provide reasonable a

189、ssurance regarding prevention ortimely detection of unauthorized acquisition,use,or disposition of the companys assets that could have a material effect onthe financial statements.Because of its inherent limitations,internal control over financial reporting may not prevent or detect misstatements.Al

190、so,projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequatebecause of changes in conditions,or that the degree of compliance with the policies or procedures may deteriorate.Management evaluated the Companys internal control over fin

191、ancial reporting as of December 31,2010.In making thisassessment,management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission in Internal ControlIntegrated Framework(COSO).As a result of this assessment and based on the criteria in theCOSO framework,m

192、anagement has concluded that,as of December 31,2010,the Companys internal control over financialreporting was effective.The Companys independent auditors,ParenteBeard LLC,have audited the Companys internal control over financialreporting.Their opinions on the Companys internal control over financial

193、 reporting and on the Companys financialstatements appear on the following pages of this annual report.Jeffrey R.HinesPresident,Chief Executive OfficerKathleen M.MillerChief Financial OfficerMarch 8,2011P a g e 1 9T h e Y o r k W a t e r C o m p a n y2010 Annual Report Report of Independent Register

194、ed Public Accounting FirmTo the Board of Directors and Stockholders of The York Water CompanyWe have audited The York Water Companys(the“Company”)internal control over financial reporting as of December 31,2010,based on criteria established in Internal ControlIntegrated Framework issued by the Commi

195、ttee of SponsoringOrganizations of the Treadway Commission(COSO).The York Water Companys management is responsible for maintainingeffective internal control over financial reporting,and for its assessment of the effectiveness of internal control over financialreporting,included in the accompanying M

196、anagements Report on Internal Control over Financial Reporting.Ourresponsibility is to express an opinion on the Companys internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board(UnitedStates

197、).Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effectiveinternal control over financial reporting was maintained in all material respects.Our audit of internal control over financialreporting included obtaining an understanding of internal c

198、ontrol over financial reporting,assessing the risk that a materialweakness exists,and testing and evaluating the design and operating effectiveness of internal control based on the assessedrisk.Our audit also included performing such other procedures as we considered necessary in the circumstances.W

199、e believethat our audit provides a reasonable basis for our opinion.A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements for external purposes in accordan

200、ce withaccounting principles generally accepted in the United States of America.A companys internal control over financialreporting includes those policies and procedures that(1)pertain to the maintenance of records that,in reasonable detail,accurately and fairly reflect the transactions and disposi

201、tions of the assets of the company;(2)provide reasonable assurancethat transactions are recorded as necessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles,and that receipts and expenditures of the company are being made only in accordance w

202、ithauthorizations of management and directors of the company;and(3)provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition,use,or disposition of the companys assets that could have a material effect onthe financial statements.Because of its inherent limitatio

203、ns,internal control over financial reporting may not prevent or detect misstatements.Also,projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequatebecause of changes in conditions,or that the degree of compliance with the policies or

204、 procedures may deteriorate.In our opinion,The York Water Company maintained,in all material respects,effective internal control over financialreporting as of December 31,2010,based on criteria established in Internal ControlIntegrated Framework issued by theCommittee of Sponsoring Organizations of

205、the Treadway Commission(COSO).We have also audited,in accordance with the standards of the Public Company Accounting Oversight Board(United States),the balance sheets and the related statements of income,common stockholders equity and comprehensive income,and cashflows of The York Water Company,and

206、our report dated March 8,2011 expressed an unqualified opinion.ParenteBeard LLCYork,PennsylvaniaMarch 8,2011 P a g e 2 0T h e Y o r k W a t e r C o m p a n y2010 Annual ReportReport of Independent Registered Public Accounting FirmTo the Board of Directors and Stockholders of The York Water CompanyWe

207、 have audited the accompanying balance sheets of The York Water Company(the“Company”)as of December 31,2010and 2009,and the related statements of income,common stockholders equity and comprehensive income,and cash flows foreach of the years in the three-year period ended December 31,2010.These finan

208、cial statements are the responsibility of theCompanys management.Our responsibility is to express an opinion on these financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board(UnitedStates).Those standards requi

209、re that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement.An audit includes examining,on a test basis,evidence supporting theamounts and disclosures in the financial statements.An audit also includes assessing the acc

210、ounting principles used andsignificant estimates made by management,as well as evaluating the overall financial statement presentation.We believe thatour audits provide a reasonable basis for our opinion.In our opinion,the financial statements referred to above present fairly,in all material respect

211、s,the financial position of The York Water Company as of December 31,2010 and 2009,and the results of its operations and its cash flows for each ofthe years in the three-year period ended December 31,2010 in conformity with accounting principles generally accepted inthe United States of America.We a

212、lso have audited,in accordance with the standards of the Public Company Accounting Oversight Board(United States),The York Water Companys internal control over financial reporting as of December 31,2010,based on criteria established inInternal ControlIntegrated Framework issued by the Committee of S

213、ponsoring Organizations of the Treadway Commission(COSO),and our report dated March 8,2011 expressed an unqualified opinion.ParenteBeard LLCYork,PennsylvaniaMarch 8,2011P a g e 2 1T h e Y o r k W a t e r C o m p a n y2010 Annual Report December 31Assets20102009Utility Plant,at original cost.$272,565

214、$262,598Plant acquisition adjustments.(2,709)(2,759)Accumulated depreciation.(42,179)(38,364)Net utility plant.227,677221,475Other Physical Property:Net of accumulated depreciation of$190 in 2010 and$175 in 2009.712554Current Assets:Cash and cash equivalents.1,327Restricted cash-compensating balance

215、.500Accounts receivable,net of reserves of$245 in 2010 and$225 in 2009 .3,7692,938Unbilled revenues.2,5032,451Recoverable income taxes.21Materials and supplies inventories,at cost.608716Prepaid expenses .398387Deferred income taxes.167154Total current assets.8,7937,146Other Long-Term Assets:Deferred

216、 debt expense .2,5011,906Notes receivable .407476Deferred regulatory assets.15,82114,010Restricted cash-compensating balance.500Other assets.3,5203,270Total other long-term assets.22,74919,662Total Assets$259,931$248,837Stockholders Equity and LiabilitiesCommon Stockholders Equity:Common stock,no pa

217、r value,authorized 46,500,000 shares,issued and outstanding 12,692,054 shares in 2010 and 12,558,724 shares in 2009.$75,481$73,569Retained earnings .15,77613,353Total common stockholders equity.91,257 86,922Preferred Stock,authorized 500,000 shares,no shares issued.Long-term Debt,excluding current p

218、ortion.85,13273,227CommitmentsCurrent Liabilities:Short-term borrowings.5,000Current portion of long-term debt .414,341Accounts payable.1,245892Dividends payable.1,4401,393Accrued taxes.19488Accrued interest.1,0681,019Other accrued expenses.1,5181,472Total current liabilities.5,33114,605Deferred Cre

219、dits:Customers advances for construction.15,03116,188Deferred income taxes .25,43722,507Deferred employee benefits.9,8148,765Other deferred credits.2,0031,679Total deferred credits.52,28549,139Contributions in aid of construction .25,92624,944Total Stockholders Equity and Liabilities$259,931$248,837

220、The accompanying notes are an integral part of these statements.Balance Sheets(In thousands of dollars,except per share amounts)P a g e 2 2T h e Y o r k W a t e r C o m p a n y2010 Annual ReportWater Operating Revenues:Residential.$24,478$23,299$20,572Commercial and industrial.11,44010,7349,671Other

221、.3,0873,0102,59539,00537,04332,838Operating Expenses:Operation and maintenance.6,7607,0676,749Administrative and general.6,7257,1016,685Depreciation and amortization.4,5924,4123,622Taxes other than income taxes.1,1611,0751,10219,23819,65518,158Operating income.19,76717,38814,680Other Income(Expenses

222、):Interest on debt.(4,906)(4,990)(4,759)Allowance for funds used during construction.111210647Other income(expenses),net.(465)(517)(509)(5,260)(5,297)(4,621)Income before income taxes.14,50712,09110,059Income taxes.5,5784,5793,628Net Income.$8,929$7,512$6,431Basic Earnings Per Share$0.71$0.64$0.57Ca

223、sh Dividends Declared Per Share$0.515$0.506$0.489Statements of Income(In thousands of dollars,except per share amounts)The accompanying notes are an integral part of these statements.201020092008Year Ended December 31P A G E 2 3T h e Y o r k W a t e r C o m p a n y2010 Annual ReportStatements of Com

224、mon Stockholders Equity and Comprehensive IncomeFor the Years Ended December 31,2010,2009 and 2008(In thousands of dollars,except per share amounts)AccumulatedOtherCommonRetainedComprehensiveStockEarningsIncome(Loss)TotalBalance,December 31,2007.$56,566$10,986$(280)$67,272Net income.6,4316,431Other

225、comprehensive income:Reclassification adjustment for unrealized loss on interest rate swap to regulatory asset,net of$191 income tax.280280Comprehensive income.6,711Dividends($0.489 per share).(5,526)(5,526)Issuance of common stock under dividend reinvestment,direct stock and employee stock purchase

226、 plans.1,3091,309Balance,December 31,2008.57,87511,89169,766Net income.7,5127,512Dividends($0.506 per share).(6,050)(6,050)Issuance of 1,070,000 shares of common stock.14,09414,094Issuance of common stock under dividend reinvestment,direct stock and employee stock purchase plans.1,6001,600Balance,De

227、cember 31,2009.73,56913,35386,922Net income.8,9298,929Dividends($0.515 per share).(6,506)(6,506)Issuance of common stock under dividend reinvestment,direct stock and employee stock purchase plans.1,9121,912Balance,December 31,2010.$75,481$15,776$91,257The accompanying notes are an integral part of t

228、hese statements.P a g e 2 4T h e Y o r k W a t e r C o m p a n y2010 Annual ReportStatements of Cash Flows(In thousands of dollars,except per share amounts)Cash Flows from Operating Activities:Net income.$8,929$7,512$6,431Adjustments to reconcile net income tonet cash provided by operating activitie

229、s:Depreciation and amortization.4,5924,4123,622Increase in deferred income taxes.2,5912,5151,911Other.9939(166)Changes in assets and liabilities:(Increase)decrease in accounts receivable,unbilled revenues and recoverable income taxes.(1,127)440(816)Decrease in materials and supplies and prepaid expe

230、nses.9750105Increase in accounts payable,accrued expenses,regulatoryand other liabilities,and deferred employee benefits and credits.705666870Increase(decrease)in accrued interest and taxes.(420)352221Increase in regulatory and other assets.(711)(185)(651)Net cash provided by operating activities.14

231、,75515,80111,527Cash Flows from Investing Activities:Utility plant additions,including debt portion of allowance for funds used during construction of$62 in 2010,$117 in 2009 and$427 in 2008.(10,541)(12,535)(24,438)Acquisitions of water systems.(2,236)(259)Increase in compensating balance.(500)Decre

232、ase in notes receivable.696074Net cash used in investing activities.(10,472)(15,211)(24,623)Cash Flows from Financing Activities:Customers advances for construction and contributions in aid of construction.428443804Repayments of customer advances.(544)(926)(1,489)Proceeds of long-term debt issues.39

233、,49123,65952,308Debt issuance costs.(703)(950)Repayments of long-term debt.(34,886)(32,444)(36,460)Borrowings(repayments)under short-term line of credit agreements.(2,000)(1,000)3,000Changes in cash overdraft position.(195)(167)34Issuance of common stock.1,91215,6941,309Dividends paid.(6,459)(5,849)

234、(5,460)Net cash(used in)provided by financing activities.(2,956)(590)13,096Net change in cash and cash equivalents.1,327Cash and cash equivalents at beginning of year.Cash and cash equivalents at end of year.$1,327$Supplemental disclosures of cash flow information:Cash paid during the year for:Inter

235、est,net of amounts capitalized.$4,797$4,911$4,200Income taxes.3,5131,2841,611201020092008Year Ended December 31Supplemental schedule of non-cash investing and financing activities:Accounts payable includes$726 in 2010,$292 in 2009 and$950 in 2008 for the construction of utility plant.Accounts payabl

236、e and other deferred credits includes$19 in 2009 and$93 in 2008 for the acquisition of water systems.Contributions in aid of construction includes$51 of contributed land in 2008.Short-term line of credit borrowings amounting to$3,000 were reclassified as long-term borrowings in 2010.The accompanying

237、 notes are an integral part of these statements.P a g e 2 5T h e Y o r k W a t e r C o m p a n y2010 Annual Report Notes to Financial Statements(In thousands of dollars,except per share amounts)1.Significant Accounting PoliciesThe business of The York Water Company is to impound,purify and distribut

238、e water.The Company operates within itsfranchised territory located in York and Adams Counties,Pennsylvania,and is subject to regulation by the PennsylvaniaPublic Utility Commission,or PPUC.The following summarizes the significant accounting policies employed by The York Water Company.Utility Plant

239、and DepreciationThe cost of additions includes contracted cost,direct labor and fringe benefits,materials,overhead and,for certain utilityplant,allowance for funds used during construction.In accordance with regulatory accounting requirements,watersystems acquired are recorded at estimated original

240、cost of utility plant when first devoted to utility service and the applicable depreciation is recorded to accumulated depreciation.The difference between the estimated original costless applicable accumulated depreciation,and the purchase price is recorded as an acquisition adjustment within utilit

241、yplant.At December 31,2010 and 2009,utility plant includes a credit acquisition adjustment of$2,709 and$2,759,respectively.The net acquisition adjustment is being amortized over the remaining life of the respective assets.Amortization amounted to$50 in 2010,$49 in 2009,and$27 in 2008.Upon normal ret

242、irement of depreciable property,the estimated or actual cost of the asset is credited to the utility plantaccount,and such amounts,together with the cost of removal less salvage value,are charged to the reserve fordepreciation.To the extent the Company recovers cost of removal or other retirement co

243、sts through rates after theretirement costs are incurred,a regulatory asset is reported.Gains or losses from abnormal retirements are reflected inincome currently.The Company charges to maintenance expense the cost of repairs and replacements and renewals of minor items ofproperty.Maintenance of tra

244、nsportation equipment is charged to clearing accounts and apportioned therefrom in amanner similar to depreciation.The cost of replacements,renewals and betterments of units of property is capitalized tothe utility plant accounts.The straight-line remaining life method is used to compute depreciatio

245、n on utility plant cost,exclusive of land and landrights.Annual provisions for depreciation of transportation and mechanical equipment included in utility plant arecomputed on a straight-line basis over the estimated service lives.Such provisions are charged to clearing accounts andapportioned there

246、from to operating expenses and other accounts in accordance with the Uniform System of Accounts asprescribed by the PPUC.P a g e 2 6T h e Y o r k W a t e r C o m p a n y2010 Annual ReportNotes to Financial Statements(In thousands of dollars,except per share amounts)1.Significant Accounting Policies(

247、continued)Accounts ReceivableAccounts receivable are stated at outstanding balances,less a reserve for doubtful accounts.The reserve for doubtful accounts isestablished through provisions charged against income.Accounts deemed to be uncollectible are charged against the reserve andsubsequent recover

248、ies,if any,are credited to the reserve.The reserve for doubtful accounts is maintained at a level consideredadequate to provide for losses that can be reasonably anticipated.Managements periodic evaluation of the adequacy of thereserve is based on past experience,agings of the receivables,adverse si

249、tuations that may affect a customers ability to pay,currenteconomic conditions,and other relevant factors.This evaluation is inherently subjective.Unpaid balances remaining after thestated payment terms are considered past due.RevenuesRevenues include amounts billed to customers on a cycle basis and

250、 unbilled amounts based on actual and estimated usage fromthe latest meter reading to the end of the accounting period.Deferred Debt Expense Deferred debt expense is amortized on a straight-line basis over the term of the related debt.Notes ReceivableNotes receivable are recorded at cost and represe

251、nt amounts due from various municipalities for construction of water mains intotheir particular municipality.Management,considering current information and events regarding the borrowers ability to repaytheir obligations,considers a note to be impaired when it is probable that the Company will be un

252、able to collect all amounts dueaccording to the contractual terms of the note agreement.When a note is considered to be impaired,the carrying value of the noteis written down.The amount of the impairment is measured based on the present value of expected future cash flows discountedat the notes effe

253、ctive interest rate.Regulatory Assets and LiabilitiesThe Company is subject to the provisions of generally accepted accounting principles regarding rate-regulated entities.The professional standards provide for the recognition of regulatory assets and liabilities as allowed by regulators for costs o

254、rcredits that are reflected in current customer rates or are considered probable of being included in future rates.The regulatoryMains and accessories.$142,162$138,73812-85yrsServices,meters and hydrants.54,97053,19521-53yrsOperations structures,reservoirs and water tanks.40,38739,9288-64yrsPumping

255、and purification equipment.20,56316,1676-25yrsOffice,transportation and operating equipment.9,4249,2123-23yrsLand and other non-depreciable assets.2,9732,963Utility plant in service.270,479260,203Construction work in progress.2,0862,395Total Utility Plant.$272,565$262,598Utility Plant Asset Category

256、December 31,20102009Approximate range of remaining livesThe effective rate of depreciation was 2.06%in 2010,2.10%in 2009,and 1.94%in 2008 on average utility plant,net ofcustomers advances and contributions.Larger depreciation provisions resulting from allowable accelerated methods arededucted for ta

257、x purposes.The following remaining lives are used for financial reporting purposes:P a g e 2 7T h e Y o r k W a t e r C o m p a n y2010 Annual Report Certain items giving rise to deferred state income taxes,as well as a portion of deferred federal income taxes related primarily todifferences between

258、 book and tax depreciation expense,are recognized for ratemaking purposes on a cash or flow-through basisand will be recovered in rates as they reverse.Postretirement benefits include(a)deferred pension expense in excess of contributions made to the plans,and(b)the underfundedstatus of the pension p

259、lans.The underfunded status represents the excess of the projected benefit obligation over the fair marketvalue of the assets.Both are expected to be recovered in future years as additional contributions are made.The recovery period isdependent on contributions made to the plans,plan asset performan

260、ce and the discount rate used to value the obligations.Theperiod is estimated at between 10 and 20 years.Beginning October 1,2008,the Company began using regulatory accounting treatment to defer the mark-to-market unrealizedgains and losses on its interest rate swap to reflect that the gain or loss

261、is included in the ratemaking formula when the transactionactually settles.The value of the swap as of the balance sheet date is recorded as part of other deferred credits.Realized gains orlosses on the swap will be recorded as interest expense in the statement of income over its remaining life of 1

262、9 years.The regulatory asset for utility plant retirement costs,including cost of removal,represents costs already incurred which areexpected to be recovered over a five-year period in rates,through depreciation expense.Rate case filing expenses are deferred andamortized over a period of two years.R

263、egulatory liabilities relate mainly to deferred investment tax credits,and additionally to deferred taxes related to postretirementdeath benefits and bad debts.These liabilities will be given back to customers in rates as tax deductions occur over the next 1-50 years.Regulatory liabilities are part

264、of other accrued expenses and other deferred credits on the balance sheets.Materials and Supplies InventoriesMaterials and supplies inventories are stated at cost.Costs are determined using the average cost method.Other Assets Other assets consist mainly of the cash value of life insurance policies

265、held as an investment by the Company forreimbursement of costs and benefits associated with its supplemental retirement and deferred compensation programs.Notes to Financial Statements(In thousands of dollars,except per share amounts)AssetsIncome taxes.$4,008$3,706Various Postretirement benefits.9,4

266、548,63210-20 yearsUnrealized swap losses.1,3109491-19 yearsUtility plant retirement costs.8436005 yearsRate case filing expenses.2061232 years$15,821$14,010 LiabilitiesIncome taxes.$830$8531-50 yearsDecember 31,20102009assets or liabilities are then relieved as the cost or credit is reflected in rat

267、es.Regulatory assets represent costs that are expectedto be fully recovered from customers in future rates while regulatory liabilities represent amounts that are expected to berefunded to customers in future rates.These deferred costs have been excluded from the Companys rate base and,therefore,no

268、return is being earned on the unamortized balances.RemainingRecovery PeriodsRegulatory assets and liabilities are comprised of the following:P a g e 2 8T h e Y o r k W a t e r C o m p a n y2010 Annual ReportCustomers Advances for ConstructionCustomer advances are cash payments from developers,munici

269、palities,customers or builders for construction of utilityplant,and are refundable upon completion of construction,as operating revenues are earned.If the Company loaned fundsfor construction to the customer,the refund amount is credited to the note receivable rather than paid out in cash.After allr

270、efunds to which the customer is entitled are made,any remaining balance is transferred to contributions in aid ofconstruction.From 1986 to 1996 when customer advances were taxable income to the Company,additional funds werecollected from customers to cover the taxes.Those funds were recorded as a li

271、ability within Customer Advances and arebeing amortized as deferred income over the tax life of the underlying assets.Contributions in Aid of ConstructionContributions in Aid of Construction is composed of(i)direct,non-refundable contributions from developers,customers orbuilders for construction of

272、 water infrastructure and(ii)customer advances that have become non-refundable.Contributions in aid of construction are deducted from the Companys rate base,and therefore,no return is earned onproperty financed with contributions.The PPUC requires that contributions received remain on the Companys b

273、alancesheet indefinitely as a long-term liability.Comprehensive IncomeAccounting principles generally accepted in the United States of America require that recognized revenue,expenses,gains andlosses be included in net income.Although certain changes in assets and liabilities,such as unrealized gain

274、s and losses on interestrate swaps,are usually reported as a separate component of the equity section of the balance sheet,such items,along with netincome,are components of comprehensive income.Since October 1,2008,the Company has used regulatory accounting for itsunrealized gains and losses on its

275、interest rate swap,and will no longer report comprehensive income for this item in the future.Interest Rate Swap AgreementThe Company is exposed to certain risks relating to its ongoing business operations.The primary risk managed by usingderivative instruments is interest rate risk.The Company util

276、izes an interest rate swap agreement to convert a portion of itsvariable-rate debt to a fixed rate.The Company had designated the interest rate swap agreement as a cash flow hedge.Interestrate swaps are contracts in which a series of interest rate cash flows are exchanged over a prescribed period.Th

277、e notionalamount on which the interest payments are based is not exchanged.The interest rate swap agreement is classified as a financial derivative used for non-trading activities.The professional standards regarding accounting for derivatives and hedging activities requires companies to recognize a

278、llderivative instruments as either assets or liabilities at fair value on the balance sheet.In accordance with the standards,theinterest rate swap is recorded on the balance sheet in other deferred credits at fair value.Prior to October 1,2008,theCompany used hedge accounting to record its swap tran

279、sactions.The effective portion of the gain or loss on a derivativedesignated and qualifying as a cash flow hedging instrument was initially reported as a component of othercomprehensive income and subsequently reclassified into earnings as interest expense in the same period or periodsduring which t

280、he hedged transaction affected earnings.The ineffective portion of the gain or loss on the derivativeinstrument was recognized in earnings.The Company began using regulatory accounting treatment rather than hedge accounting to defer the unrealized gains andlosses on its interest rate swap on October

281、 1,2008.Instead of the effective portion being recorded as other comprehensive incomeand the ineffective portion being recognized in earnings,the entire unrealized swap value is now recorded as a regulatory asset.Based on current ratemaking treatment,the Company expects the gains and losses to be re

282、cognized in rates and in interest1.Significant Accounting Policies(continued)Notes to Financial Statements(In thousands of dollars,except per share amounts)P a g e 2 9T h e Y o r k W a t e r C o m p a n y2010 Annual Report expense as the swap settlements occur.Swap settlements are recorded in the in

283、come statement with the hedged item as interest expense.During the year ended December 31,2010,$360 was reclassified from regulatory assets to interest expense as a resultof swap settlements.The overall swap result was a loss of$722 for the year ended December 31,2010.During the twelve monthsending

284、December 31,2011,the Company expects to reclassify$351(before tax)from regulatory assets to interest expense.The interest rate swap will expire on October 1,2029.Income Taxes Certain income and expense items are accounted for in different time periods for financial reporting than for income taxrepor

285、ting purposes.Income taxes are accounted for under the asset and liability method.Deferred tax assets and liabilities are recognized for thefuture tax consequences attributable to differences between the financial statement carrying amounts of existing assets andliabilities and their respective tax

286、bases and tax credit carryforwards.Deferred tax assets and liabilities are measured usingenacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to berecovered or settled.The effect on deferred tax assets and liabilities of a change in tax

287、 rates is recognized in income in theperiod that includes the enactment date.To the extent such income taxes increase or decrease future rates,an offsettingregulatory asset or liability has been recorded.Investment tax credits have been deferred and are being amortized to income over the average est

288、imated service lives of therelated assets.As of December 31,2010 and 2009,deferred investment tax credits amounted to$890 and$928,respectively.Allowance for Funds Used During ConstructionAllowance for funds used during construction(AFUDC)represents the estimated cost of funds used for constructionpu

289、rposes during the period of construction.These costs are reflected as non-cash income during the construction periodand as an addition to the cost of plant constructed.AFUDC includes the net cost of borrowed funds and a rate of return onother funds.The PPUC approved rate of 10.04%was applied for 201

290、0 and 2009.We applied a blended rate in 2008 due toour partial use of tax-exempt financing for 2008 construction projects.The tax-exempt borrowing rate of 6.00%was appliedto those expenditures so financed,whereas the approved 10.04%rate was applied to the remainder of 2008 expenditures.AFUDC is reco

291、vered through water rates as utility plant is depreciated.Cash and Cash EquivalentsFor the purposes of the statements of cash flows,the Company considers all highly liquid debt instruments purchased witha maturity of three months or less to be cash equivalents except for those instruments earmarked

292、to fund constructionexpenditures or repay long-term debt.The Company had a book overdraft of$0 and$195 at December 31,2010 and 2009,respectively.The book overdraft representsoutstanding checks and other items which had not cleared the bank as of the end of the period.The overdraft is included inacco

293、unts payable on the balance sheet and the change in overdraft position is recorded as a financing activity on the statementof cash flows.Use of Estimates in the Preparation of Financial StatementsThe preparation of financial statements in conformity with accounting principles generally accepted in t

294、he United States ofAmerica requires management to make estimates and assumptions that affect the reported amounts of assets and liabilitiesand disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenuesand expenses during the reporting

295、 period.Actual results could differ from those estimates.Notes to Financial Statements(In thousands of dollars,except per share amounts)P a g e 3 0T h e Y o r k W a t e r C o m p a n y2010 Annual ReportReclassificationsAs discussed above,the Company changed the accounting treatment for its interest

296、rate swap.For the nine months endedSeptember 30,2008,the Company accounted for the interest rate swap as a cash flow hedge.As of October 1,2008,management assessed the probability of collecting the unrealized gain or loss value of the swap in rates as the Companyis currently reflecting the realized

297、gain or loss as a component of interest expense in the statement of income.This changein accounting treatment resulted in the reversal of$224 of long-term interest expense,$189 recorded in deferred incometaxes and$277 recorded in accumulated other comprehensive income as of September 30,2008.Managem

298、ent determinedthat the amounts previously reported using the cash flow hedge method of accounting for each of the three quarters andperiods ended March 31,2008,June 30,2008 and September 30,2008 were not materially misstated.During the first quarter of 2009,the Company determined that it had underst

299、ated the amount of accrued vacation recordedin its financial statements.As a result,the Company recorded additional salary and wage expense of$257 in accordancewith the professional standards regarding accounting for compensated absences.The additional accrual,amounting to$152 after taxes,represents

300、 an error correction from prior periods.Management determined that the financial statementsas of and for the year ended December 31,2008 were not materially misstated.Impact of Recent Accounting PronouncementsIn November 2008,the Securities and Exchange Commission(SEC)released a proposed roadmap reg

301、arding the potentialuse by U.S.issuers of financial statements prepared in accordance with International Financial Reporting Standards(IFRS).IFRS is a comprehensive series of accounting standards published by the International Accounting Standards Board(IASB).In February 2010,the SEC expressed suppo

302、rt for a single set of high-quality globally accepted accounting standardsand established a work plan that sets forth specific areas and factors before transitioning to IFRS.The SEC will make adetermination in 2011 regarding the mandatory adoption of IFRS with the expectation that any decision to ad

303、opt IFRSwould allow issuers four to five years to prepare for the transition.The Company is currently assessing the impact thatthis potential change would have on its financial statements,and it will continue to monitor the development of thepotential implementation of IFRS.2.AcquisitionsOn November

304、 24,2008,the Company completed the acquisition of the water facilities of Asbury Pointe Water Companyin York County,Pennsylvania.The Company acquired and is using Asbury Pointes distribution system through aninterconnection with its current distribution system.This acquisition resulted in the additi

305、on of approximately 250 customers and the purchase price was approximately$242,which is less than the depreciated original cost of the assets.The Company recorded a negative acquisition adjustment of approximately$207 as of December 31,2008.Additionalacquisition expenditures during the first quarter

306、 of 2009 of approximately$22 resulted in a reduction of the negativeacquisition adjustment to$185.The Company is amortizing the negative acquisition adjustment over the remaining life ofthe underlying assets.On January 9,2009,the Company completed the acquisition of the water system of West Manheim

307、Township in YorkCounty,Pennsylvania.The Company had begun serving the customers of West Manheim Township in December 2008through an interconnection with its current distribution system.This acquisition resulted in the addition of 1,800customers at a purchase price of approximately$2,075,which is les

308、s than the depreciated original cost of the assets.TheCompany recorded a negative acquisition adjustment of approximately$1,440 and is amortizing it over the remaining lifeof the underlying assets.1.Significant Accounting Policies(continued)Notes to Financial Statements(In thousands of dollars,excep

309、t per share amounts)P a g e 3 1T h e Y o r k W a t e r C o m p a n y2010 Annual Report On November 12,2009,the Company completed the acquisition of the water system of Beaver Creek Village inAdams County,Pennsylvania.The Company acquired and is using Beaver Creek Villages distribution facilitiesthro

310、ugh an interconnection with its current distribution system.This acquisition resulted in the addition of 167customers at a purchase price of approximately$70,which is less than the depreciated original cost of the assets.TheCompany recorded a negative acquisition adjustment of approximately$26 and i

311、s amortizing it over the remaininglife of the underlying assets.The Company began to include the operating results of the Asbury Pointe and Beaver Creek Village acquisitions inits operating results on the acquisition dates.The West Manheim acquisition was included in operating results priorto the cl

312、osing date as indicated above.The results have been immaterial to total company results.Notes to Financial Statements(In thousands of dollars,except per share amounts)3.Income TaxesThe provisions for income taxes consist of:201020092008Federal current.$1,872$1,176$1,157State current.1,115888559Feder

313、al deferred.2,6452,5641,954State deferred.(16)(10)(3)Federal investment tax credit,net of current utilization.(38)(39)(39)Total income taxes.$5,578$4,579$3,628A reconciliation of the statutory Federal tax provision(34%)to the total provision follows:201020092008Statutory Federal tax provision.$4,933

314、$4,111$3,420State income taxes,net of Federal benefit.725579367Tax-exempt interest.(37)(39)(39)Amortization of investment tax credit.(38)(39)(39)Cash value of life insurance.7068(29)Domestic production deduction.(127)(79)(62)Other,net.52(22)10Total income taxes.$5,578$4,579$3,628 P a g e 3 2T h e Y

315、o r k W a t e r C o m p a n y2010 Annual ReportThe Company determined that there were no uncertain tax positions meeting the recognition and measurement test of theprofessional standards recorded in the years that remain open for review by taxing authorities.The federal income taxreturns and the sta

316、te income tax returns for the years 2007 through 2009 remain open.The Company has not yet filed taxreturns for 2010,but has not taken any new positions in its 2010 income tax provision.The Companys policy is to recognize interest and penalties related to income tax matters in other expenses.There we

317、re nointerest or penalties for the years ended December 31,2010,2009 and 2008.Notes to Financial Statements(In thousands of dollars,except per share amounts)The tax effects of temporary differences between book and tax balances that give rise to significant portions of the deferred tax assets and de

318、ferred tax liabilities as of December 31,2010 and 2009 are summarized in the following table:Deferred tax assets:Reserve for doubtful accounts.$99$91Compensated absences.188166Deferred compensation.1,091995Customers advances and contributions.81111Deferred taxes associated with the gross-up of reven

319、ues necessaryto return,in rates,the effect of temporary differences.9089Pensions.2,9512,617Costs deducted for book,not for tax.3339Total deferred tax assets.4,5334,108Deferred tax liabilities:Accelerated depreciation.23,67320,801Investment tax credit.529551Deferred taxes associated with the gross-up

320、 of revenues necessary to recover,in rates,the effect of temporary differences.1,3791,247Tax effect of pension regulatory asset.3,8383,504Costs deducted for tax,not for book.384358Total deferred tax liabilities.29,80326,461Net deferred tax liability.$25,270$22,353Reflected on balance sheets as:Curre

321、nt deferred tax asset.$(167)$(154)Noncurrent deferred tax liability.25,43722,507Net deferred tax liability.$25,270$22,353No valuation allowance is required for deferred tax assets as of December 31,2010 and 2009.In assessing the soundness ofdeferred tax assets,management considers whether it is more

322、 likely than not that some portion or all of the deferred taxassets will not be realized.The ultimate realization of deferred tax assets is dependent upon the generation of future taxableincome during the periods in which those temporary differences become deductible.Management considers the schedul

323、edreversal of deferred tax liabilities,projected future taxable income,and tax planning strategies in making this assessment.Based upon the level of historical taxable income and the current regulatory environment,management believes it is morelikely than not the Company will realize the benefits of

324、 these deductible differences.201020093.Income Taxes(continued)P a g e 3 3T h e Y o r k W a t e r C o m p a n y2010 Annual Report Notes to Financial Statements(In thousands of dollars,except per share amounts)Long-term debt as of December 31,2010 and 2009 is summarized in the following table:3.75%In

325、dustrial Development Authority RevenueRefunding Bonds,Series 1995,due 2010.$4,3004.05%Pennsylvania Economic Development Financing AuthorityExempt Facilities Revenue Bonds,Series A,due 2016.2,3502,3505.00%Pennsylvania Economic Development Financing Authority Exempt Facilities Revenue Bonds,Series A,d

326、ue 2016.4,9504,95010.17%Senior Notes,Series A,due 2019.6,0006,0009.60%Senior Notes,Series B,due 2019.5,0005,0001.00%Pennvest Loan,due 2019.37341410.05%Senior Notes,Series C,due 2020.6,5006,5008.43%Senior Notes,Series D,due 2022.7,5007,500Variable Rate Pennsylvania Economic Development Financing Auth

327、ority Exempt Facilities Revenue Bonds,Series 2008A,due 2029.12,00012,0004.75%Industrial Development Authority Revenue Bonds,Series 2006,due 2036.10,50010,5006.00%Pennsylvania Economic Development Financing AuthorityExempt Facilities Revenue Bonds,Series 2008B,due 2038.15,00015,0005.00%Monthly Senior

328、 Notes,Series 2010A,due 2040.15,000Committed Lines of Credit,due 2012.3,054Total long-term debt.85,17377,568Less current maturities.(41)(4,341)Long-term portion.$85,132$73,2274.Long-Term Debt and Short-Term BorrowingsPayments due by year:20112012201320142015$41$12,042$42$43$4320102009Payments due in

329、 2012 include payments of$12,000 on the variable rate bonds(due 2029)which would only be payable if all ofthe bonds were tendered and could not be remarketed.There is currently no such indication of this happening.On October 8,2010,the Company issued$15,000 aggregate principal amount of 5.00%Monthly

330、 Senior Notes Series 2010Adue October 1,2040(the“Senior Notes”)pursuant to the terms of an indenture,as supplemented by a first supplementalindenture,each dated as of October 1,2010,between the Company and Manufacturers and Traders Trust Company,as trustee.P a g e 3 4T h e Y o r k W a t e r C o m p

331、a n y2010 Annual ReportThe Senior Notes bear interest at a rate of 5.00%payable monthly with a maturity date of October 1,2040.The Senior Notesare direct,unsecured and unsubordinated obligations of the Company.The Company received net proceeds,after deductingissuance costs,of approximately$14,300.Th

332、e net proceeds were used to pay off the Companys line of credit borrowingsincurred for capital expenditures and acquisitions,to retire maturing long-term debt issues,and for general corporatepurposes.The Senior Notes are subject to redemption at the direction of the Company,in whole or in part,at an

333、y time on orafter October 1,2015.The 3.75%Industrial Development Authority Revenue Refunding Bonds,Series 1995,had a mandatory tender date ofJune 1,2010.The Company retired the$4,300 obligation using funds available under its lines of credit.On May 7,2008,the PEDFA issued$12,000 aggregate principal amount of PEDFA Exempt Facilities Revenue RefundingBonds,Series A of 2008(York Water Company Project