8-K: York Water Company Reports Mixed Results for Third Quarter and First Nine Months of 2024

York Water Company's third quarter earnings decreased despite increased revenues, while the first nine months also saw a decrease in net income despite revenue growth.

Summary

• York Water Company announced its third quarter and first nine months financial results for 2024.
• Third quarter operating revenues increased to $19.715 million, a $948,000 increase compared to the same period in 2023.
• However, third quarter net income decreased to $5.863 million, a $1.705 million decrease compared to the third quarter of 2023.
• Basic and diluted earnings per share for the third quarter were $0.41, a decrease of $0.12 compared to the same period last year.
• For the first nine months of 2024, operating revenues increased to $56.093 million, a $3.158 million increase compared to the same period in 2023.
• Net income for the first nine months decreased to $15.183 million, a $2.562 million decrease compared to the first nine months of 2023.
• Basic and diluted earnings per share for the first nine months were $1.06, a decrease of $0.18 compared to the same period last year.
• The company invested $33 million in capital projects during the first nine months of 2024.
• An additional $9.7 million is estimated to be invested in 2024, excluding acquisitions.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to the decrease in net income and earnings per share, despite revenue growth. The increased expenses and lower AFUDC are concerning.

Positives

• Operating revenues increased in both the third quarter and the first nine months of 2024.
• Revenue growth was driven by the Distribution System Improvement Charge (DSIC) and an increase in the customer base.
• The company acquired the Houston Run Community Water System, expanding its service area.
• The company incurred lower pension costs in the first nine months of 2024.

Negatives

• Net income decreased in both the third quarter and the first nine months of 2024.
• Increased operating and maintenance expenses, depreciation, and lower allowance for funds used during construction (AFUDC) offset revenue gains.
• Income taxes increased due to lower deductions from IRS tangible property regulations.
• Interest on debt increased in the first nine months of 2024.

Risks

• The company's financial results are subject to risks, uncertainties, and other events that could cause actual results to differ materially from forward-looking statements.
• Increased operating and maintenance expenses, depreciation, and interest on debt could continue to impact profitability.
• Changes in tax regulations could negatively affect the company's financial performance.

Future Outlook

The company may make forward-looking statements regarding operational and financial expectations, but undertakes no duty to update them.

Management Comments

• President JT Hand announced the company's financial results for the third quarter and the first nine months of 2024.
• President Hand reported that increased revenues were primarily due to revenues from Distribution System Improvement charge (DSIC) and growth in the customer base.
• President Hand also reported that the increased revenue and lower pension costs were more than offset by higher operation and maintenance expenses, depreciation, interest on debt, and a lower AFUDC.

Industry Context

The results reflect the challenges faced by regulated water utilities in balancing infrastructure investments and operational costs with rate increases and customer growth. The DSIC mechanism is a common approach to fund infrastructure upgrades in the industry.

Comparison to Industry Standards

• Comparing York Water's results to other small-cap water utilities, the revenue growth is in line with industry trends, but the decrease in net income is a concern.
• Companies like Middlesex Water Company (MSEX) and SJW Group (SJW) have also been investing heavily in infrastructure, but their ability to maintain profitability varies.
• The impact of increased operating expenses and depreciation is a common challenge across the sector, and York Water's experience is not unique.
• The company's capital expenditure plans are consistent with the need to maintain and upgrade aging infrastructure, which is a key focus for the industry.

Stakeholder Impact

• Shareholders may be concerned about the decrease in net income and earnings per share.
• Customers may benefit from the infrastructure improvements funded by the DSIC.
• Employees may be impacted by the company's financial performance and future investment decisions.

Next Steps

• The company will continue to invest in capital projects, including the completion of the Lake Williams dam spillway and additional main extensions.
• The company will continue to monitor and manage operating expenses and depreciation.

Key Dates

Keywords

York Water Company, Financial Results, Earnings, Revenue, Net Income, EPS, Water Utility, Infrastructure, Capital Projects, Acquisition, DSIC