2014 Annual Report Our Service, Growth & Performance for 199 Years Pumping Station Circa 1914 York Water's original pumping station was built in 1896 with steam pumps coming on line in 1897. The station provided reliable steam power to operate our water pumps until 1981 when they were fully replaced with electric and diesel pumps. Although the chimney, coal bins, and steam boilers have been removed over the years, the pumping station still provides uninterrupted service to our customers. 2 0 1 4 A n n u a l R e p o r t 100 th 125 th 150 th th 175 ... “For almost Two Centuries, The York Water Company Tradition of Service, Growth and Performance Has Resulted in Success - a Tradition Worth Celebrating!" Many companies celebrate milestones – and next year The York Water Company will celebrate the 200th Anniversary of uninterrupted service. There are only a handful of public companies in America that can make that claim. In fact the average American company seldom lasts more than 40 years. Since we'll be celebrating 200 years in our next annual report, this year we've highlighted previous milestone annual reports. A look back into the past confirms that the determination, effort, and foresight that served our predecessors, our customers, and our shareholders, is propelling us forward to success – far beyond 200 years! 2 0 1 4 A n n u a l R e p o r t Jeffrey R. Hines, P.E. President and Chief Executive Officer Dear Shareholders, I am pleased to report that 2014 was a record year which continues our 199-year tradition of service, growth, and performance. Record Financial Performance Due to our continued growth, an increase in rates, and some beneficial changes to tax regulations, 2014 results were the best in our history. Operating revenues grew by 8.3% to $45.9 million in 2014. Operating income increased 6.3% to $22.1 million. Our net income increased by 19.0% to $11.5 million in 2014. Earnings per share increased 18.7% to $0.89. The implementation of the 2014 IRS tangible property regulations caused a reduction of $1.3 million in tax expense and contributed approximately $0.10 to earnings per share. We will continue to experience reduced income tax expense under these regulations in the future, the amount depending on our investment in assets eligible for the deduction. We are only including a summary of our financial results in this annual report. Please refer to our annual SEC 10-K Report, which was delivered with this report, or can be downloaded from the investor relations section of our website at www.yorkwater.com for a more detailed review of our financial performance. Continued Growth, Acquisitions, and Expansion The number of customers we served at the end of 2014 grew to 65,102 water and wastewater customers. This was an increase of 984 new customers. This 1.5% customer growth in 2014 was almost triple the previous year's growth, but still below our pre-recession growth rate of 2-3%. We are now authorized to serve in 48 municipalities in Adams and York Counties, and our population served grew by about 1.1% in 2014 to approximately 192,000 people. In 2014 the Company announced three water acquisitions which will provide approximately 330 new customers upon completion in 2015. Growth in Wastewater Business In 2014, we completed the acquisition of the wastewater assets of the East Prospect Borough Authority and are currently working to finalize the acquisition of the SYC, Inc. wastewater system. The East Prospect Borough Authority asset acquisition added approximately 400 customers. When the SYC system 2 0 1 4 A n n u a l R e p o r t acquisition is complete, we will have a total of approximately 660 wastewater customers and three 80,000 gallon per day wastewater treatment plants. York Water Continues to Assist Communities in Need In 2014, we completed the first phase of a project to install water lines in York Haven Borough in York County. This project is providing domestic water and high quality fire protection for the first time in the Borough's history. Fire protection was the original reason that York Water was created in 1816. Now nearly 200 years later, it is still an integral part of our service to our community. Rate Increase Approved, Water Still Costs Less than One Cent per Gallon On January 9, 2014 the Pennsylvania Public Utility Commission approved a $5.0 million per year increase in revenue. This increase in water and wastewater customer rates was effective February 28, 2014, and had a substantial impact on 2014 operating results. The rate filing will have much less of an impact on 2015 operating results, although still positive. Our customer complaint rate and water rates remain among the lowest in the state while still providing world class service to our customers. These measurements help us to maintain a productive relationship with our regulators, which is paramount to running a successful company. Dividends and Shareholder Value: An American Record! In line with our objective to maintain regular dividend increases, we raised the quarterly dividend rate by 4.5% during the year. This is the eighteenth consecutive year we have raised our dividend and the 199th consecutive year of dividend payments. We believe this to be the longest consecutive dividend record in America. Shareholder value continued to improve in 2014. The market price of our common stock increased 10.9% from $20.93 per share to $23.21. Paid dividends increased in 2014 by 3.5% to $0.5724 per share. The total increase in shareholder value for a share of stock purchased on January 1, 2014 was 13.6%. In 2013, we initiated a share repurchase program to add value for our shareholders. The Board of Directors authorized us to repurchase up to 1,200,000 shares of the Company's common stock from time to time. During 2014, the Company repurchased and retired 282,570 shares. As of December 31, 2014, 823,016 shares remain available for repurchase. Increasing Efficiency While Maintaining Personal Contact Although we are a 199-year-old company, we continue to make technological advances to assist our customers while still providing that personal touch. When you call our office, one of our friendly customer service representatives will answer the phone and assist you. We continue to expand our initiatives in paperless billing and electronic bill pay. In 2014, we increased the number of paperless billing customers by 46%, and we are working to continue this trend going forward. We also continue to deploy a state-of-the-art radio frequency drive-by and fixed meter reading system. Of course, our historic office in downtown York remains open for walk-in or phone-in customer support. Customers/Employee 600 550 500 450 400 1979 1989 1999 2014 National Average York Water York Water 2014 National Average 2 0 1 4 A n n u a l R e p o r t One of America's Most Trustworthy Companies! York Water was selected by Forbes as One of America's Top 100 Most Trustworthy Companies in 2014! Forbes based their ratings on our honesty, transparency, governance, and corporate responsibility. System Improvements for a Sustainable Future We continue to replace almost 1% of our existing water pipe each year. This reduces main breaks, water leakage, and potential property damage. York Water continues to work with local governments and other utilities to coordinate water main replacements prior to road resurfacing projects. This saves our customers money and provides the motoring public with a new road and equally new utilities below. At our Grantley Road Filter Plant we have nearly finished rebuilding all twelve water filters. This will increase our capacity and provide redundancy during emergencies and routine maintenance. The past two winters have demonstrated that our investments in back-up generators and infrastructure replacement ensure that our customers have a reliable and uninterrupted supply of water. Dedicated and Experienced Employees A Company that continues to thrive and grow, and improve service to its customers for nearly 200 years, can only be possible due to the dedication, loyalty, and hard work of its employees. York Water's talented employees have an average of 14 years at the Company, which is indicative of the rewarding environment and collaborative corporate culture of The York Water Company. We thank all of the York Water family for their commitment to make this Company the most efficient water utility in the nation. Outlook for our 200th Year As we begin our 200th year in business, we continue our efforts to grow and serve our communities. We monitor our operating region for opportunities to acquire new franchise territories in both water and wastewater and enter into non-regulated business activities so that we may provide our extensive history, experience, and know-how to communities that realize the importance of a high quality, drought-resistant supply of water for domestic, commercial, industrial, and fire protection uses. We will do all of this while managing our natural resources and the environment so that we are fully sustainable for the communities we serve for the next 200 years and beyond. We will continue to anticipate our communities' growth so that wherever and whenever "That good York water" supply and service is needed, we will be there. 200th Celebration! We will have much to celebrate in 2016: America's oldest publicly traded utility, 200 years of service, 200 years of consecutive dividends, America's longest consecutive dividend record, York City and York County's oldest business, and our 15th anniversary on NASDAQ. We will have a number of events throughout the year which will be posted on our website, and we hope you'll be able to join us for the celebration! 2 0 1 4 A n n u a l R e p o r t Highlights of Our 199th Year (In thousands of dollars, except per share amounts) For the Year 2014 2013 2012 2011 2010 Summary of Operations Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45,900 $ 42,383 $ 41,447 $ 40,629 $ 39,005 Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 23,823 Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,077 Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on sale of land . . . . . . . . . . . . . . . . . . . . . . . . . . 4,877 316 Other income (expenses), net . . . . . . . . . . . . (1,155) Income before income taxes . . . . . . . . . . . . . . 16,361 Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,877 21,622 20,761 5,162 - (133) 15,466 5,812 20,874 20,573 5,144 - (520) 14,909 5,606 20,754 19,875 5,155 - (677) 14,043 4,959 19,238 19,767 4,795 - (465) 14,507 5,578 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,484 $ 9,654 $ 9,303 $ 9,084 $ 8,929 Per Share of Common Stock Book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Basic earnings per share . . . . . . . . . . . . . . . . . . . . 8.15 0.89 $ 7.98 0.75 $ 7.73 0.72 $ $ 7.45 0.71 7.19 0.71 Cash dividends declared per share. . . . . 0.5788 0.5580 0.5391 0.5266 0.5150 Weighted average number of shares outstanding during the year . . . . . . . . . . . . 12,879,912 12,928,040 12,847,160 12,734,420 12,626,660 Utility Plant Original cost, net of acquisition adjustments. . . . . . . . . . . $ 313,003 $ 298,670 $ 289,579 $ 278,344 $ 269,856 Construction expenditures . . . . . . . . . . . . . . . . 14,139 9,852 11,543 9,472 10,541 Other Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 304,339 $ 282,529 $ 282,490 $ 274,219 $ 259,931 Long-term debt including current portion . . . . . . . . . . . . . . . . 84,885 84,928 84,975 85,017 85,173 For Management’s Discussion and Analysis of Financial Condition and Results of Operations, please refer to Item 7 in the Company’s Annual Report on Form 10-K. 2 0 1 4 A n n u a l R e p o r t Shareholder Information Market for Common Stock and Dividends The common stock of 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: High $21.50 20.98 21.20 24.25 2014 Low $19.45 19.00 18.85 19.75 Dividend* $0.1431 0.1431 0.1431 0.1495 High $19.24 19.64 21.99 22.00 2013 Low $17.62 17.86 18.92 19.70 Dividend* $0.1383 0.1383 0.1383 0.1431 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter * 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, 2014 numbered approximately 2,002. Performance Graph The following line graph presents the annual and cumulative total shareholder return for The York Water Company Common Stock over a five-year period from 2009 through 2014, based on the market price of the Common Stock and assuming reinvestment of dividends, compared with the cumulative total shareholder return of companies in the S&P 500 Index and a peer group made up of publicly traded water utilities, also assuming reinvestment of dividends. The peer group companies include: American States, American Water, Aqua America, Artesian Resources, California Water Service, Connecticut Water, Middlesex Water and San Jose Water. 2 0 1 4 A n n u a l R e p o r t Shareholder Information Dividend Policy Dividends on the Company's common stock are declared by the Board of Directors and are normally paid in January, April, July and October. Dividends are paid based on shares outstanding as of the stated record date, which is ordinarily the last day of the calendar month immediately preceding the dividend payment. The dividend paid on the Company’s common stock on January 15, 2015 was the 576th consecutive dividend paid by the Company. The Company has paid consecutive dividends for its entire history, since 1816. The policy of the Company’s Board of Directors is currently to pay cash dividends on a quarterly basis. The dividend rate has been increased annually for eighteen consecutive years. The Company’s Board of Directors declared dividend number 577 in the amount of $0.1495 per share at its January 2015 meeting. The dividend is payable on April 15, 2015 to shareholders of record as of February 27, 2015. Future cash dividends will be dependent upon the Company’s earnings, financial condition, capital demands and other factors and will be determined by the Company’s Board of Directors. See Note 4 to the Company’s financial statements included in the Company’s SEC Form 10-K for restrictions on dividend payments. Financial Reports and Investor Relations The Company makes available free of charge, on or through its website (www.yorkwater.com), its annual report on Form 10-K, its quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the SEC. Shareholders may request, without charge, copies of the Company’s financial reports. Such requests, as well as other investor relations inquiries, should be addressed to: Bonnie J. Rexroth — Investor Relations Administrator The York Water Company 130 East Market Street York, PA 17401 (717) 845-3601 (800) 750-5561 bonnier@yorkwater.com Stock Exchange Listing The Company’s common shares trade on the NASDAQ Global Select Market. The trading symbol is “YORW”. Transfer Agent & Registrar American Stock Transfer & Trust Company LLC 6201 15th Avenue Brooklyn, NY 11219 (877) 739-9990 www.amstock.com Independent Auditors Baker Tilly Virchow Krause LLP Suite 200 221 West Philadelphia Street York, PA 17401 Annual Meeting Information Monday, May 4, 2015 1:00 p.m. - Lunch 12:00 p.m. (reservation required) Strand-Capitol Performing Arts Center 50 North George Street York, PA 17401 In 1927 York Water issued this special booklet to commemorate York City's 150th anniversary. Next year York Water will be celebrating its 200th Anniversary. 2 0 1 4 A n n u a l R e p o r t Supplemental Information (Unaudited) (In thousands of dollars, except per share amounts) Year Ended December 31 Selected Financial Data Income 2014 2013 2012 Operating Revenues.............................................................................................. Operating Expenses .............................................................................................. Operating Income.................................................................................................. Interest Expense..................................................................................................... Net Income ............................................................................................................. Percent Change in Net Income Compared to Prior Year ................................ Common Stock Dividends ................................................................................... Dividend Payout Ratio ......................................................................................... $45,900 $23,823 $22,077 $4,877 $11,484 19.0% $7,443 64.8% $42,383 $21,622 $20,761 $5,162 $9,654 3.8% $7,214 74.7% $41,447 $20,874 $20,573 $5,144 $9,303 2.4% $6,929 74.5% Weighted Average Common Shares Outstanding............................................ 12,879,912 12,928,040 12,847,160 Basic Earnings Per Weighted Average Common Share................................... $0.89 $0.75 $0.72 Number of Common Shares Outstanding......................................................... 12,830,521 12,979,281 12,918,633 ROE on Year End Common Equity .................................................................... Common Stock Dividends Per Share ................................................................. Net Cash Flows From Operating Activities ...................................................... 11.0% $0.5788 $18,766 Balance Sheet Common Stockholders’ Equity ........................................................................... $104,563 Long-Term Debt Including Current Maturities ................................................ $84,885 Total Capitalization ............................................................................................... $189,448 Percent Common Stockholders’ Equity ............................................................. Percent Long-Term Debt ...................................................................................... 55% 45% 9.3% $0.5580 $18,438 $103,511 $84,928 $188,439 55% 45% 9.3% $0.5391 $16,422 $99,825 $84,975 $184,800 54% 46% Net Utility Plant .................................................................................................... $253,194 $244,237 $239,539 Operating Data Revenue Class Residential .............................................................................................................. Commercial and Industrial.................................................................................. Other........................................................................................................................ Total Operating Revenues.................................................................................... $29,079 $13,267 $3,554 $45,900 $26,796 $12,299 $3,288 $42,383 $26,114 $12,114 $3,219 $41,447 Construction Expenditures .......................................................................... $14,139 $9,852 $11,543 Other Operating Data Number of Customers .......................................................................................... 65,102 Number of Employees.......................................................................................... Common Shareholders ......................................................................................... Book Value Per Common Share .......................................................................... Market Value at Year End .................................................................................... Market Value to Book Value ................................................................................ P/E Ratio ................................................................................................................ 107 2,002 $8.15 $23.21 285% 26.1 64,118 104 2,023 $7.98 $20.93 262% 27.9 63,779 105 1,786 $7.73 $17.57 227% 24.4 2 0 1 4 A n n u a l R e p o r t Supplemental Information (Unaudited) (In thousands of dollars, except per share amounts) 2011 2010 2009 2008 2007 2006 2005 2004 $40,629 $20,754 $19,875 $5,155 $9,084 1.7% $6,708 73.8% $39,005 $19,238 $19,767 $4,795 $8,929 18.9% $6,506 72.9% $37,043 $19,655 $17,388 $4,780 $7,512 16.8% $6,050 80.5% $32,838 $18,158 $14,680 $4,112 $6,431 0.3% $5,526 85.9% $31,433 $17,333 $14,100 $3,916 $6,414 5.3% $5,332 83.1% $28,658 $15,754 $12,904 $3,727 $6,091 4.4% $4,820 79.1% $26,805 $14,049 $12,756 $3,423 $5,833 10.0% $4,392 75.3% $22,504 $12,627 $9,877 $2,132 $5,301 19.2% $3,930 74.1% 12,734,420 12,626,660 11,695,155 11,298,215 11,225,822 10,475,173 10,359,374 9,937,836 $0.71 $0.71 $0.64 $0.57 $0.57 $0.58 $0.56 $0.53 12,791,671 12,692,054 12,558,724 11,367,248 11,264,923 11,201,119 10,399,995 10,330,571 9.5% $0.5266 $17,474 $95,265 $85,017 $180,282 53% 47% 9.8% $0.5150 $14,755 $91,257 $85,173 $176,430 52% 48% 8.6% $0.5060 $15,801 $86,922 $77,568 $164,490 53% 47% 9.2% $0.4890 $11,527 9.5% $0.4750 $10,040 9.3% $0.4540 $7,116 $69,766 $86,353 $156,119 45% 55% $67,272 $70,505 $137,777 49% 51% $65,361 $62,335 $127,696 51% 49% 11.6% $0.4240 $8,451 $50,415 $51,874 $102,289 49% 51% 11.0% $0.3940 $7,670 $48,037 $51,913 $99,950 48% 52% $232,277 $227,677 $221,475 $210,820 $191,046 $173,800 $154,774 $139,454 $25,693 $11,820 $3,116 $40,629 $24,478 $11,440 $3,087 $39,005 $23,299 $10,734 $3,010 $37,043 $20,572 $9,671 $2,595 $32,838 $19,722 $9,290 $2,421 $31,433 $17,972 $8,497 $2,189 $28,658 $16,737 $8,009 $2,059 $26,805 $13,789 $6,893 $1,822 $22,504 $9,472 $10,541 $12,535 $24,438 $18,154 $20,678 $15,562 $25,689 62,738 106 1,658 $7.45 $17.64 237% 24.8 62,505 111 1,649 $7.19 $17.29 240% 24.4 62,186 111 1,516 $6.92 $14.51 210% 22.7 61,527 110 1,485 $6.14 $12.10 197% 21.2 58,890 109 1,443 $5.97 $15.50 260% 27.2 57,578 106 1,463 $5.84 $17.88 306% 30.8 55,731 97 1,449 $4.85 $17.23 356% 30.8 53,134 95 1,459 $4.65 $12.93 278% 24.3 2 0 1 4 A n n u a l R e p o r t Directors, Officers, & Key Employees Board of Directors Cynthia A. Dotzel, CPA (1) (2) (3) Age 60 Director Since 2009 Michael W. Gang, Esq. (1) (3) Age 64 Director Since 1996 Jeffrey R. Hines, P.E. (1) Age 53 Director Since 2008 George W. Hodges (1) Age 64 Chairman Director Since 2000 George Hay Kain, III (4) Age 66 Director Since 1986 Robert P. Newcomer (4) Age 66 Director Since 2013 Jeffrey S. Osman (1) Age 72 Director Since 2001 Steven R. Rasmussen, CPA (2) (3) Age 42 Director Since 2011 Ernest J. Waters (2) (4) Age 65 Director Since 2007 (1) Executive Committee (2) Audit Committee (3) Nomination and Corporate Governance Committee (4) Compensation Committee 2 0 1 4 A n n u a l R e p o r t Directors, Officers, & Key Employees Officers & Key Employees Vernon L. Bracey Age 53 Vice President- Customer Service Joseph T. Hand Age 52 Chief Operating Officer Jeffrey R. Hines, P.E. Age 53, President and Chief Executive Officer Bruce C. McIntosh Age 62 Vice President-Human Resources and Secretary Kathleen M. Miller Age 52 Chief Financial Officer and Treasurer John H. Strine Age 58 Vice President-Operations Bonnie J. Rexroth Age 54 Investor Relations Administrator Mark S. Snyder, P.E. Age 44 Vice President-Engineering Directors Emeriti Josephine S. Appell Chloé R. Eichelberger John L. Finlayson Horace E. Keesey, III William T. Morris Irvin S. Naylor Thomas C. Norris 2 0 1 4 A n n u a l R e p o r t Chartered Territory Distribution and Supply System A map of York Water’s 2014 chartered territory and service area. In 1927 we served 7 municipalities. Today we provide "that good York water" to 48 municipalities. 1914 - 2014 A Century in the Life of a Steam Pump York's Brillhart Pumping Station circa 1956 In 1914, York Water installed a Snow Cross Compound steam driven pump (Pump #3). This coal powered pump provided the residents of York with 8 million gallons of water per day. It operated for 67 years and was converted from coal to oil. Even though it was instrumental in recovering from Hurricane Agnes in 1972, it was finally replaced by diesel and electric pumps in 1981. The Snow pump has been moved and has now found a "retirement home" as one of the main attractions at the National Museum of Industrial History in Bethlehem, PA. The museum is expected to open in 2016. To learn more about this museum, go to their website: http://www.nmih.org/ The York Water Company 130 East Market Street York, Pennsylvania 17401 717-845-3601 www.yorkwater.com