What changed in this filing

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Item 1. Financial Statements

2021-11-05 compared with 2021-08-05 · 51 added, 53 removed, 345 unchanged (23% of the section changed)

57 unchanged sentences

(In thousands of dollars, except per share amounts)

Ended June 30

Ended September 30

OPERATING REVENUES

18 unchanged sentences

(In thousands of dollars, except per share amounts)

For the Periods Ended June 30, 2021 and 2020

Balance, March 31, 2021

For the Periods Ended September 30, 2021 and 2020

Balance, June 30, 2021

Cash dividends declared, $ 0.1874 per share

3 unchanged sentences

Stock-based compensation

Balance, June 30, 2021

Balance, September 30, 2021

Balance, December 31, 2020

4 unchanged sentences

Stock-based compensation

Balance, September 30, 2021

Balance, June 30, 2020

Balance, March 31, 2020

Cash dividends declared, $ 0.1802 per share

3 unchanged sentences

Stock-based compensation

Balance, June 30, 2020

Balance, September 30, 2020

Balance, December 31, 2019

4 unchanged sentences

Stock-based compensation

Balance, June 30, 2020

Balance, September 30, 2020

The accompanying notes are an integral part of these statements.

2 unchanged sentences

(In thousands of dollars, except per share amounts)

Ended June 30

Ended September 30

CASH FLOWS FROM OPERATING ACTIVITIES:

3 unchanged sentences

Stock-based compensation

Decrease in deferred income taxes

Increase in deferred income taxes

Changes in assets and liabilities:

5 unchanged sentences

expenses, deferred employee benefits, regulatory liabilities, and other deferred credits

Increase (decrease) in accrued interest

Increase in accrued interest

Net cash provided by operating activities

2 unchanged sentences

construction of $ 493 in 2021 and $ 184 in 2020

Acquisitions of wastewater systems

Cash received from surrender of life insurance policies

4 unchanged sentences

Proceeds of long-term debt issues

Debt issuance costs

Repayments of long-term debt

2 unchanged sentences

Dividends paid

Net cash used in financing activities

Net cash provided by financing activities

Net change in cash, cash equivalent, and restricted cash

6 unchanged sentences

Accounts payable includes $ 3,562 in 2021 and $ 3,647 in 2020 for the construction of utility plant.

Contributions in aid of construction includes $ 1,024 in 2020 recorded as part of the Felton Borough acquisition.

The accompanying notes are an integral part of these statements.

5 unchanged sentences

Because the financial statements cover an interim period, they do not include all disclosures and notes normally provided in annual financial statements, and therefore, should be read in conjunction with the financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 .

Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 .

Additionally, based on the duration and severity of the novel coronavirus ("COVID-19") pandemic, the Company is uncertain of the ultimate impact it could have on the business.

12 unchanged sentences

Common Stock and Earnings Per Share

Net income of $ 4,484 and $ 4,182 for the three months ended June 30, 2021 and 2020, respectively, and $ 8,189 and $ 8,184 for the six months ended June 30, 2021 and 2020, respectively, is used to calculate both basic and diluted earnings per share.

Net income of $ 4,794 and $ 4,704 for the three months ended September 30, 2021 and 2020, respectively, and $ 12,983 and $ 12,888 for the nine months ended September 30, 2021 and 2020, respectively, is used to calculate both basic and diluted earnings per share.

Basic earnings per share is based on the weighted average number of common shares outstanding.

2 unchanged sentences

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

Ended June 30

Ended September 30

Weighted average common shares, basic

5 unchanged sentences

The Company may suspend or discontinue the repurchase program at any time.

No shares were repurchased during the three or six months ended June 30, 2021 and 2020.

As of June 30, 2021, 618,004 shares remain authorized for repurchase.

For the six months ended June 30, 2021, the Company did not enter into any new long-term debt arrangements or modify its outstanding long-term debt, which is summarized in the table below.

No shares were repurchased during the three or nine months ended September 30, 2021 and 2020.

As of September 30, 2021, 618,004 shares remain authorized for repurchase.

8.43 % Senior Notes, Series D, due 2022

Variable Rate Pennsylvania Economic Development Financing Authority

Exempt Facilities Revenue Refunding Bonds, Series 2008A, due 2029

3.00 % Pennsylvania Economic Development Financing Authority Exempt

Facilities Revenue Refunding Bonds, Series A of 2019, due 2036

3.10 % Pennsylvania Economic Development Financing Authority Exempt

Facilities Revenue Refunding Bonds, Series B of 2019, due 2038

Variable Rate Pennsylvania Economic Development Financing Authority Exempt Facilities Revenue Refunding Bonds, Series 2008A, due 2029

3.00 % Pennsylvania Economic Development Financing Authority Exempt Facilities Revenue Refunding Bonds, Series A of 2019, due 2036

3.10 % Pennsylvania Economic Development Financing Authority Exempt Facilities Revenue Refunding Bonds, Series B of 2019, due 2038

3.23 % Senior Notes, due 2040

4.00 % - 4.50 % York County Industrial Development Authority Exempt

Facilities Revenue Bonds, Series 2015, due 2029 - 2045

4.00 % - 4.50 % York County Industrial Development Authority Exempt Facilities Revenue Bonds, Series 2015, due 2029 - 2045

4.54 % Senior Notes, due 2049

5 unchanged sentences

Long-term portion

Subsequent to June 30, 2021, the Company renewed its committed line of credit and extended the maturity date to September 2023.

In the third quarter of 2021, the Company renewed its committed line of credit and extended the maturity date to September 2023.

Interest Rate Swap Agreement

8 unchanged sentences

The intent is for the variable rate received from the swap counterparty to approximate the variable rate the Company pays to bondholders on its variable rate debt issue, resulting in a fixed rate being paid to the swap counterparty and reducing the Company's interest rate risk.

The Company’s net payment rate on the swap was 3.09 % and 2.91 % for the three months ended June 30, 2021 and 2020, respectively, and 3.02 % and 2.59 % for the six months ended June 30, 2021 and 2020, respectively.

The Company’s net payment rate on the swap was 3.13 % and 3.08 % for the three months ended September 30, 2021 and 2020, respectively, and 3.06 % and 2.76 % for the nine months ended September 30, 2021 and 2020, respectively.

The interest rate swap agreement is classified as a financial derivative used for non-trading activities.

5 unchanged sentences

Swap settlements are recorded in the income statement with the hedged item as interest expense.

Swap settlements resulted in the reclassification from regulatory assets to interest expense of $ 93 and $ 87 for the three months ended June 30, 2021 and 2020, respectively, and $ 184 and $ 156 for the six months ended June 30, 2021 and 2020, respectively.

The overall swap result was a (gain) loss of $ 212 and $ 189 for the three months ended June 30, 2021 and 2020, respectively, and $( 219 ) and $ 901 for the six months ended June 30, 2021 and 2020, respectively.

Swap settlements resulted in the reclassification from regulatory assets to interest expense of $ 94 and $ 93 for the three months ended September 30, 2021 and 2020, respectively, and $ 278 and $ 249 for the nine months ended September 30, 2021 and 2020, respectively.

The overall swap result was a (gain) loss of $( 31 ) and $ 10 for the three months ended September 30, 2021 and 2020, respectively, and $( 250 ) and $ 911 for the nine months ended September 30, 2021 and 2020, respectively.

The Company expects to reclassify $ 371 from regulatory assets to interest expense as a result of swap settlements over the next 12 months.

2 unchanged sentences

On October 8, 2021, Standard & Poor's affirmed the Company's credit rating at A-, with a stable outlook and adequate liquidity.

The Company's interest rate swap was in a liability position as of June 30, 2021.

If a violation due to credit rating, or some other default provision, were triggered on June 30, 2021, the Company would have been required to pay the counterparty approximately $ 2,368 .

The Company's interest rate swap was in a liability position as of September 30, 2021.

If a violation due to credit rating, or some other default provision, were triggered on September 30, 2021, the Company would have been required to pay the counterparty approximately $ 2,232 .

The interest rate swap will expire on October 1, 2029.

8 unchanged sentences

The table below illustrates the fair value of the interest rate swap as of the end of the reporting period.

June 30, 2021

September 30, 2021

Fair Value Measurements

4 unchanged sentences

These inputs to this calculation are deemed to be Level 2 inputs.

The balance sheet carrying value reflects the Company's credit quality as of June 30, 2021.

The rate used in discounting all prospective cash flows anticipated to be made under this swap reflects a representation of the yield to maturity for 30-year debt on utilities rated A- as of June 30, 2021.

The use of the Company's credit rating resulted in a reduction in the fair value of the swap liability of $ 40 as of June 30, 2021.

The balance sheet carrying value reflects the Company's credit quality as of September 30, 2021.

The use of the Company's credit rating resulted in a reduction in the fair value of the swap liability of $ 29 as of September 30, 2021.

The fair value of the swap reflecting the Company's credit quality as of December 31, 2020 is shown in the table below.

5 unchanged sentences

The carrying amount of current assets and liabilities that are considered financial instruments approximates fair value as of the dates presented.

The Company's total long-term debt, with a carrying value of $ 129,905 at June 30, 2021, and $ 126,570 at December 31, 2020, had an estimated fair value of approximately $ 147,000 and $ 151,000 , respectively.

The Company's total long-term debt, with a carrying value of $ 135,062 at September 30, 2021, and $ 126,570 at December 31, 2020, had an estimated fair value of approximately $ 150,000 and $ 151,000 , respectively.

The estimated fair value of debt was calculated using a discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration and risk profile.

1 unchanged sentence

The Company recognized its credit rating in determining the yield curve, and did not factor in third party credit enhancements including the letter of credit on the 2008 Pennsylvania Economic Development Financing Authority Series A issue.

Customers' advances for construction and note receivable had carrying values at June 30, 2021 of $ 10,907 and $ 255 , respectively.

Customers' advances for construction and note receivable had carrying values at September 30, 2021 of $ 11,358 and $ 255 , respectively.

At December 31, 2020, customers' advances for construction and note receivable had carrying values of $ 10,326 and $ 255 , respectively.

8 unchanged sentences

The Company will record the costs as a regulatory asset to be recovered in future base rates to customers, over a four-year period.

The cost for the customer-owned lead service line replacements was approximately $ 1,258 and $ 1,204 through June 30, 2021 and December 31, 2020 , respectively, and is included as a regulatory asset.

The cost for the customer-owned lead service line replacements was approximately $ 1,307 and $ 1,204 through September 30, 2021 and December 31, 2020 , respectively, and is included as a regulatory asset.

Based on its experience, the Company estimates that lead customer-owned service lines replacements will cost $ 1,500 .

1 unchanged sentence

The following table shows the Company’s revenues disaggregated by service and customer type.

Ended June 30

Ended September 30

Water utility service

62 unchanged sentences

The DSIC is capped at 5 % of base rates, and is reset to zero when new base rates that reflect the costs of those additions become effective or when a utility's earnings exceed a regulatory benchmark.

During its most recent quarterly reporting period, the Company's earnings were below the regulatory benchmark and the Company began recognizing DSIC in June 2021 for bills rendered after July 1, 2021 that included June consumption.

The DSIC provided revenues of $ 25 for the three and six months ended June 30, 2021 and $ 0 for the three and six months ended June 30, 2020.

The Company's earnings are currently below the regulatory benchmark allowing the Company to collect DSIC.

The DSIC provided revenues of $ 255 and $ 280 for the three and nine months ended September 30, 2021, respectively, and revenues of $ 0 for the three and nine months ended September 30, 2020.

Components of Net Periodic Pension Cost

Ended June 30

Ended September 30

Interest cost

8 unchanged sentences

The Company previously disclosed in its financial statements for the year ended December 31, 2020 that it expected to contribute $ 2,300 to its pension plans in 2021 .

For the six months ended June 30, 2021, contributions of $ 1,150 have been made.

The Company expects to contribute the remaining $ 1,150 during the final two quarters of 2021.

For the nine months ended September 30, 2021, contributions of $ 1,725 have been made.

The Company expects to contribute the remaining $ 575 during the final quarter of 2021.

Stock-Based Compensation

16 unchanged sentences

Restricted stock awards result in compensation expense valued at the fair market value of the stock on the date of the grant and are amortized ratably over the restriction period.

The following tables summarize the stock grant amounts and activity for the six months ended June 30, 2021.

The following tables summarize the stock grant amounts and activity for the nine months ended September 30, 2021.

Number of Shares

3 unchanged sentences

Nonvested at end of the period

For the three months ended June 30, 2021 and 2020, the statement of income includes $ 93 and $ 15 of stock-based compensation, respectively, and related recognized tax benefits of $ 27 and $ 4 , respectively.

For the six months ended June 30, 2021 and 2020, the statement of income includes $ 121 and $ 52 of stock-based compensation, respectively, and related recognized tax benefits of $ 35 and $ 15 , respectively.

The total fair value of the shares vested in the six months ended June 30, 2021 was $ 113 .

For the three months ended September 30, 2021 and 2020, the statement of income includes $ 46 and $ 74 of stock-based compensation, respectively, and related recognized tax benefits of $ 13 and $ 21 , respectively.

For the nine months ended September 30, 2021 and 2020, the statement of income includes $ 167 and $ 126 of stock-based compensation, respectively, and related recognized tax benefits of $ 48 and $ 36 , respectively.

The total fair value of the shares vested in the nine months ended September 30, 2021 was $ 167 .

Total stock-based compensation related to nonvested awards not yet recognized is $ 413 which will be recognized over the remaining three year vesting period.

3 unchanged sentences

It also results in increases to deferred tax liabilities and regulatory assets representing the appropriate book and tax basis difference on capital additions.

The Company’s effective tax rate was 3.4 % and 12.7 % for the three months ended June 30, 2021 and 2020 , respectively, and 5.2 % and 12.6 % for the six months ended June 30, 2021 and 2020 , respectively.

The Company’s effective tax rate was 11.5 % and 16.0 % for the three months ended September 30, 2021 and 2020 , respectively, and 7.7 % and 13.9 % for the nine months ended September 30, 2021 and 2020 , respectively.

The lower effective tax rate is primarily due to higher deductions from the TPR.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements