U i f ! Z p s l ! X b u f s ! D p n q b o z 2016 Annual Report Commitment to Customers & Community 200 for Over Years York Water built a float for several local parades. This float was a recreation of the original construction of wooden water mains from 1816. Above: York Water sponsored a new gateway fountain into the City of York. This community project celebrated the Rotary Club of York’s 100th anniversary and The York Water Company’s 200th anniversary. York sponsored several “Water in Art” exhibits and events. This was a Plein Air event where local artists came to York Water’s reservoirs to paint the beauty and majesty of water. York Water sponsored a “Water in Music” event with the York Symphony and other community events throughout the year. U i f ! Z p s l ! X b u f s ! D p n q b o z 2 0 1 6 A n n u a l R e p o r t In 2016, The York Water Company continued to Thrive, Grow, and Improve Service to our customers for the 201st year – due to the dedication, loyalty, and hard work of our employees. Being America’s Oldest Public Company – Oldest Investor-Owned Utility – with America’s longest Dividend Record might be enough for some companies, but not for The York Water Company. We celebrated our 200 years in 2016 with a variety of community projects, programs, and events. The York Water Company sponsored art exhibits, musical performances, construction of a gateway water sculpture – and even built a float for several local parades. After all, our success is tied to the communities we serve and where we have lived and worked for Over Two Hundred Years. Q b h f ! 2 U i f ! Z p s l ! X b u f s ! D p n q b o z 2 0 1 6 A n n u a l R e p o r t Jeffrey R. Hines, P.E. President and Chief Executive Officer Dear Shareholders, Congratulations! You Are The Proud Owner of Shares in America’s Oldest Public Company. I am pleased to report that 2016 continued our track record of over 200 years of service to our community. Dividends and Shareholder Value: An American Record! In line with our objective to maintain regular dividend increases, we raised the quarterly dividend rate by 3.0% during the year. This is the 20th consecutive year we have raised our dividend and the 201st consecutive year of dividend payments. We believe this to be the longest consecutive dividend record in America. Shareholder value continued to improve in 2016. The market price of our common stock increased 53% from $24.94 per share to $38.20. Dividends increased in 2016 by 3.8% to $0.6267 per share. The total increase in shareholder value, including dividends, for a share of stock purchased on January 1, 2016 was 56%. In 2013, we initiated a share repurchase program to add value to 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 2016, the Company repurchased and retired 46,771 shares. As of December 31, 2016, 655,233 shares remain available for repurchase. Operating revenues grew by 1.1% to $47.58 million in 2016. Operating income increased 1.0% to $22.89 million. Our net income decreased by 5.1% to $11.8 million in 2016. Earnings per share decreased 5.2% to $0.92. We are only including a summary of our financial results in this annual report. Please refer to our annual SEC 10K 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. Q b h f ! 3 U i f ! Z p s l ! X b u f s ! D p n q b o z 2 0 1 6 A n n u a l R e p o r t Continued Growth, Acquisitions, and Expansion The number of customers we served at the end of 2016 grew to 67,052 water and wastewater customers. This was an increase of 965 new customers. This 1.5% customer growth in 2016 was consistent with the previous year, but still below our pre-recession growth rate of 2-3%. The Company is now authorized to serve in 48 municipalities in Adams and York Counties, and our population served grew by about 1.1% in 2016 to approximately 196,200 people. In 2016 the Company announced one wastewater and one water acquisition which will provide approximately 1,780 new customers upon completion in 2017. Growth in Wastewater Business In 2016, we announced the acquisition of the West York Borough sewer collection system. When completed in 2017, this wastewater acquisition will add approximately 1,700 customers. York Water will then have approximately 2,300 wastewater customers and two 80,000-gallon-per-day wastewater treatment plants. Water Still Costs Less than One Cent per Gallon 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. Increasing Efficiency While Maintaining Personal Contact Although we are a 201-year-old company, we continue to make technological advances to assist our customers while still providing that personal touch. We continue to expand our initiatives in online applications and scheduling, paperless billing and electronic bill pay. 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. 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, potential property damage, and reduces costs. 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 finished rebuilding all of our water filters. This increased our capacity by 30% and provides redundancy during emergencies and routine maintenance. In 2016 the American Water Works Association recommended that all water systems should have a goal of eliminating lead service lines. York Water estimates that we have about 1,600 company-owned lead service lines and has committed to replacing all of them within 4 years. The Company is also committed to replacing all customer-owned lead services over the following years with a goal of the complete elimination of these lines from our community. Q b h f ! 4 U i f ! Z p s l ! X b u f s ! D p n q b o z 2 0 1 6 A n n u a l R e p o r t Additional Pumping Station Under Construction We are constructing an additional 20-million-gallon-per-day pumping station at our Lake Redman reservoir. When completed in mid-2017, this station and a 3.5 mile transmission main to our Filter Plant will provide redundant capacity in the event of a contamination event, power outage, or flooding. Dedicated and Experienced Employees York Water’s talented employees have an average of 15 years at the Company, which is indicative of the rewarding environment and collaborative corporate culture of The York Water Company. A Company that continues to thrive and grow, and improve service to its customers for 201 years, can only be possible due to the dedication, loyalty, and hard work of its employees. We thank all of the York Water family for their commitment to make this Company the most efficient water utility in the nation. Being America’s Oldest Public Company ... is only possible because of York Water’s commitment to the community and customers whom we serve. Companies may come and go and in recent history a typical public company lasts less than 15 years. How has York Water managed to thrive for over 200 years? The number one reason is our commitment to our customers and the communities we serve. Along the Way We’ve Recorded a Few Records: America’s Oldest Public Company. In 1816, a group of local business leaders got together and issued 520 shares of stock at $25 each. The $13,000 that was collected was used to purchase rights to a spring tract, land for a reservoir, and 12,000 feet of logs to be bored out and used as water mains. By the end of the first year the Company had 55 customers. Fortunately for these early investors, they selected the right company! They could have invested in banks, or a while later invested in railroads, canals, and turnpikes; but, in the long run, it turned out that a public water supply in a growing industrial community would be an investment in the future. America’s Longest Dividend Record. On July 25, 1817, dividend number 1 was declared at 2.5%. This process of consistently rewarding shareholders with a reasonable return on their investment would continue uninterrupted for over 200 years, with the 585th consecutive dividend declared earlier this year. Continued investment in our infrastructure has meant a steady need for capital throughout our history. A reliable dividend assured our investors that York Water was a wise investment in good times and in bad. America’s Oldest Investor-Owned Utility. In 1816, York Water was the 25th water utility to be created in the United States and is the oldest investor-owned utility in the nation. Although many investor- owned utilities were acquired or taken over by municipal governments, York Water maintained its focus on providing exceptional customer service, reasonable rates, and a sustainable supply of water for our growing community. Q b h f ! 5 U i f ! Z p s l ! X b u f s ! D p n q b o z 2 0 1 6 A n n u a l R e p o r t Highlights of Our 201st Year (In thousands of dollars, except per share amounts) Summary of Operations For the Year 2016 2015 2014 2013 2012 Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . $ 47,584 $ 47,089 $ 45,900 $ 42,383 $ 41,447 Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 24,696 Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,888 Interest expense* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,037 Gain on sale of land . . . . . . . . . . . . . . . . . . . . . . . . . . Other income (expenses), net * . . . . . . . . . . . 36 (632) Income before income taxes . . . . . . . . . . . . . . 17,255 Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,409 24,428 22,661 4,976 - (456) 17,229 4,740 23,823 22,077 4,996 316 (1,036) 16,361 4,877 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,846 $ 12,489 $ 11,484 Per Share of Common Stock Book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8.87 $ 8.51 $ 8.15 Earning per share Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.92 0.92 0.97 0.97 0.89 0.89 21,622 20,761 5,267 - (28) 15,466 5,812 9,654 7.98 0.75 0.75 $ $ 20,874 20,573 5,249 - (415) 14,909 5,606 9,303 7.73 0.72 0.72 $ $ Weighted average number of shares outstanding during the year Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,845,955 12,831,687 12,879,912 12,928,040 12,847,160 Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,845,973 12,831,687 12,879,912 12,928,040 12,847,160 Cash dividends declared per share . . . . 0.6267 0.6040 0.5788 0.5580 0.5391 Utility Plant Original cost, net of acquisition adjustments . . . . . . . . . $ 339,745 $ 325,691 $ 313,003 $ 298,670 $ 289,579 Construction expenditures . . . . . . . . . . . . . . . . 13,158 13,844 14,139 9,852 11,543 Other Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 320,494 $ 310,533 $ 300,708 $ 280,123 $ 279,991 Long-term debt including current portion* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,653 84,562 82,312 82,741 82,684 *Certain prior year amounts have been reclassified to conform to the 2016 presentation. 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. Q b h f ! 6 U i f ! Z p s l ! X b u f s ! D p n q b o z 2 0 1 6 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 $30.99 33.40 32.24 39.85 2016 Low $23.79 26.54 27.68 28.61 Dividend* $0.1555 0.1555 0.1555 0.1602 High $24.97 25.99 22.72 26.67 2015 Low $21.08 20.69 19.69 20.93 Dividend* $0.1495 0.1495 0.1495 0.1555 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, 2016 numbered approximately 2,052. 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 2011 through 2016, 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. Q b h f ! 7 U i f ! Z p s l ! X b u f s ! D p n q b o z 2 0 1 6 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 17, 2017 was the 584th 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 twenty consecutive years. The Company’s Board of Directors declared dividend number 585 in the amount of $0.1602 per share at its January 2017 meeting. The dividend is payable on April 17, 2017 to shareholders of record as of February 28, 2017. 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 Annual Report on 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: Molly E. Norton – Investor Relations and Communications Administrator The York Water Company 130 East Market Street York, PA 17401 (717) 718-2942 (800) 750-5561 mollyn@yorkwater.com Stock Exchange Listing The Company’s common shares trade on the NASDAQ Global Select Market. The trading symbol is “YORW”. Independent Auditors Baker Tilly Virchow Krause LLP Suite 200 221 West Philadelphia Street York, PA 17401 Transfer Agent & Registrar Broadridge Corporate Issuer Solutions, Inc. P.O. Box 1342 Brentwood, NY 11717 (844) 317-3311 (toll free) Internet: http://shareholder.broadridge.com/YORW Annual Meeting Information Monday, May 1, 2017 1:00 p.m. - Lunch 12:00 p.m. (reservation required) Strand-Capitol Performing Arts Center 50 North George Street York, PA 17401 Q b h f ! 8 U i f ! Z p s l ! X b u f s ! D p n q b o z 2 0 1 6 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 2016 2015 2014 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 ......................................................................................... $47,584 $24,696 $22,888 $5,037 $11,846 -5.1% $8,051 68.0% $47,089 $24,428 $22,661 $4,976 $12,489 8.8% $7,743 62.0% $45,900 $23,823 $22,077 $4,996 $11,484 19.0% $7,443 64.8% Weighted Average Common Shares Outstanding, Basic ................................ 12,845,955 12,831,687 12,879,912 Basic & Diluted Earnings Per Weighted Average Common Share................ $0.92 $0.97 $0.89 Number of Common Shares Outstanding ........................................................ 12,852,295 12,812,377 12,830,521 ROE on Year End Common Equity .................................................................... Common Stock Dividends Per Share ................................................................. Net Cash Flows From Operating Activities ...................................................... 10.4% $0.6267 $19,365 Balance Sheet Common Stockholders’ Equity ........................................................................... $114,061 Long-Term Debt Including Current Maturities* .............................................. $84,653 Total Capitalization ............................................................................................... $198,714 Percent Common Stockholders’ Equity ............................................................. Percent Long-Term Debt ...................................................................................... 57% 43% 11.5% $0.6040 $20,710 $109,070 $84,562 $193,632 56% 44% 11.0% $0.5788 $18,766 $104,563 $82,312 $186,875 56% 44% Net Utility Plant .................................................................................................... $270,907 $261,420 $253,194 Operating Data Revenue Class Residential .............................................................................................................. Commercial and Industrial.................................................................................. Other........................................................................................................................ Total Operating Revenues.................................................................................... $30,142 $13,760 $3,682 $47,584 $29,682 $13,822 $3,585 $47,089 $29,079 $13,267 $3,554 $45,900 Construction Expenditures .......................................................................... $13,158 $13,844 $14,139 Other Operating Data Number of Customers .......................................................................................... 67,052 Number of Employees.......................................................................................... Common Shareholders ......................................................................................... Book Value Per Common Share .......................................................................... Market Value at Year End .................................................................................... Market Value to Book Value ................................................................................ P/E Ratio ................................................................................................................ 103 2,052 $8.87 $38.20 431% 41.5 *Certain prior year amounts have been reclassified to conform to the 2016 presentation. 66,087 107 2,007 $8.51 $24.94 293% 25.7 65,102 107 2,002 $8.15 $23.21 285% 26.1 Q b h f ! 9 U i f ! Z p s l ! X b u f s ! D p n q b o z 2 0 1 6 A n n u a l R e p o r t Supplemental Information (Unaudited) (In thousands of dollars, except per share amounts) 2013 2012 2011 2010 2009 2008 2007 2006 $42,383 $21,622 $20,761 $5,267 $9,654 3.8% $7,214 74.7% $41,447 $20,874 $20,573 $5,249 $9,303 2.4% $6,929 74.5% $40,629 $20,754 $19,875 $5,260 $9,084 1.7% $6,708 73.8% $39,005 $19,238 $19,767 $4,894 $8,929 18.9% $6,506 72.9% $37,043 $19,655 $17,388 $4,896 $7,512 16.8% $6,050 80.5% $32,838 $18,158 $14,680 $4,219 $6,431 0.3% $5,526 85.9% $31,433 $17,333 $14,100 $4,009 $6,414 5.3% $5,332 83.1% $28,658 $15,754 $12,904 $3,805 $6,091 4.4% $4,820 79.1% 12,928,040 12,847,160 12,734,420 12,626,660 11,695,155 11,298,215 11,225,822 10,475,173 $0.75 $0.72 $0.71 $0.71 $0.64 $0.57 $0.57 $0.58 12,979,281 12,918,633 12,791,671 12,692,054 12,558,724 11,367,248 11,264,923 11,201,119 9.3% $0.5580 $18,438 $103,511 $82,741 $186,252 56% 44% 9.3% $0.5391 $16,422 $99,825 $82,684 $182,509 55% 45% 9.5% $0.5266 $17,474 $95,265 $82,621 $177,886 54% 46% 9.8% $0.5150 $14,755 8.6% $0.5060 $15,801 9.2% $0.4890 $11,527 9.5% $0.4750 $10,040 9.3% $0.4540 $7,116 $91,257 $82,672 $173,929 52% 48% $86,922 $75,662 $162,584 53% 47% $69,766 $84,340 $154,106 45% 55% $67,272 $69,335 $136,607 49% 51% $65,361 $61,072 $126,433 52% 48% $244,237 $239,539 $232,277 $227,677 $221,475 $210,820 $191,046 $173,800 $26,796 $12,299 $3,288 $42,383 $26,114 $12,114 $3,219 $41,447 $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 $9,852 $11,543 $9,472 $10,541 $12,535 $24,438 $18,154 $20,678 64,118 104 2,023 $7.98 $20.93 262% 27.9 63,779 105 1,786 $7.73 $17.57 227% 24.4 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 Q b h f ! : U i f ! Z p s l ! X b u f s ! D p n q b o z 2 0 1 6 A n n u a l R e p o r t Directors, Officers, & Key Employees Board of Directors Erin C. Casey (2) (4) Age 43 Director Since 2016 James H. Cawley (1) (3) Age 71 Director Since 2016 Michael W. Gang, Esq. (1) (3) Age 66 Director Since 1996 Jeffrey R. Hines, P.E. (1) Age 55 Director Since 2008 George W. Hodges (1) Age 66 Chairman Director Since 2000 George Hay Kain, III (4) Age 68 Director Since 1986 Jody L. Keller (3) Age 63 Director Since 2015 Robert P. Newcomer (1) (2) (4) Age 68 Director Since 2013 Key (1) Executive Committee (2) Audit Committee (3) Nomination and Corporate Governance Committee (4) Compensation Committee Steven R. Rasmussen, CPA (2) (3) Age 44 Director Since 2011 Ernest J. Waters (1) (2) (4) Age 67 Director Since 2007 Q b h f ! 2 1 U i f ! Z p s l ! X b u f s ! D p n q b o z 2 0 1 6 A n n u a l R e p o r t The Board of Directors stand in front of York Water’s new mural. The mosaic is on an exterior wall at the main office to commemorate 200 years of service. The mosaic is a reproduction of a drawing by David Heckert in 1903 from his recollection of the installation of wooden water mains in the mid-1800’s. Q b h f ! 2 2 U i f ! Z p s l ! X b u f s ! D p n q b o z 2 0 1 6 A n n u a l R e p o r t Directors, Officers, & Key Employees Officers & Key Employees Vernon L. Bracey Age 55 Vice President- Customer Service Joseph T. Hand Age 54 Chief Operating Officer Jeffrey R. Hines, P.E. Age 55, President and Chief Executive Officer Bruce C. McIntosh Age 64 Vice President-Human Resources and Secretary Kathleen M. Miller Age 54 Chief Financial Officer and Treasurer Molly E. Norton Age 24 Investor Relations and Communications Administrator Directors Emeriti Josephine S. Appell Cynthia A. Dotzel Chloé R. Eichelberger John L. Finlayson Horace E. Keesey, III William T. Morris Irvin S. Naylor Thomas C. Norris Jeffrey S. Osman Mark S. Snyder, P.E. Age 46 Vice President-Engineering John H. Strine Age 60 Vice President-Operations Q b h f ! 2 3 U i f ! Z p s l ! X b u f s ! D p n q b o z 2 0 1 6 A n n u a l R e p o r t Chartered Territory Distribution and Supply System A map of York Water’s 2016 chartered territory and service area. In 1927 we served 7 municipalities. Today we provide "That good York water" to 48 municipalities. The York Water Company 130 East Market Street York, Pennsylvania 17401 717-845-3601 www.yorkwater.com