SAN DIMAS, Calif.--(BUSINESS WIRE)--Nov. 4, 2004--American States Water Company (NYSE:AWR) today reported basic and fully diluted earnings of $0.52 per share for the three months ended September 30, 2004 as compared to basic and fully diluted earnings of $0.51 per share reported for the same period ended September 30, 2003. Basic and fully diluted earnings were both $1.04 per share for the nine months ended September 30, 2004 as compared to basic and fully diluted earnings of $0.90 per share reported for the same period ended September 30, 2003.

Commenting on the results, President and Chief Executive Officer Floyd E. Wicks said, "The reported earnings reflect the results of receiving favorable decisions and rate increases from the California Public Utilities Commission ("CPUC") throughout the year. This quarter reflects the effects of an increase in our Southern California Water Company ("SCW") Region III service area that became effective in March 2004 and the new rates authorized by the CPUC in August 2004 for SCW's Region II which were retroactive to February 14, 2004. It is important to note that recently approved rate increases will continue to provide additional revenue in 2005, subject to an earnings test.

"As stated in our press release earlier this week, another significant action this quarter was AWR's execution of a Settlement Agreement and Release with the Aerojet-General (Aerojet) subsidiary of GenCorp, Inc., for the settlement of legal actions brought against Aerojet by AWR and its subsidiary SCW, for damages which include past costs, replacement water for contaminated wells near Aerojet's manufacturing facility in Sacramento, California and other future damages."

Third Quarter 2004 Results - Total operating revenues of $69.0 million for the third quarter of 2004 increased by $5.3 million compared to revenues of $63.7 million recorded in the third quarter of 2003. Of the total increase in revenues, water revenues increased by 8.5% due to rate increases in Region III of SCW that were effective in March 2004, rate increases in Region II of SCW that were retroactive to February 14, 2004, and a 1.7% increase in water consumption resulting from warmer temperatures in most of SCW's service areas during 2004 as compared to 2003. Electric revenues increased by 5.1% due to an increase in consumption.

Total operating expenses increased by 9.3% to $56.3 million for the three months ended September 30, 2004 as compared to the $51.5 million recorded for the same period in 2003. The increases reflect: (i) higher purchased water costs caused by the need to replace groundwater supply due to wells being removed from service for water quality and mechanical reasons; (ii) the trucking of water in one of SCW's customer service areas due to a continued decline in water levels and production capacity in SCW's existing wells and the delay in completion of a new well; and (iii) increased consumption. The higher operating expenses also reflect increases in: (i) administrative and general expenses resulting from increases in outside legal and consulting services, and pension and benefits costs; (ii) depreciation and maintenance expenses; and (iii) taxes on income.

Other income decreased to a loss of $84,000 for the three months ended September 30, 2004 from income of $128,000 for the same period in 2003. This decline was largely due to the recording of the current year's revenues from leasing water rights to the City of Folsom as a regulatory liability, while these amounts were recorded as other income during the same period last year. This change is the result of the March 16, 2004 CPUC decision that ordered SCW to refund to customers 70% of the total amount of lease revenues received from 1994 through 2003, plus interest. Pursuant to the order, the apportionment of any lease revenues SCW collects in the future will be determined by a later decision; therefore, beginning in the first quarter of 2004, all amounts billed to the City of Folsom are included in a regulatory liability account until further notice from the CPUC.

Interest charges increased by 1.2% to $4,564,000 for the quarter ended September 30, 2004 as compared to interest charges of $4,511,000 for the quarter ended September 30, 2003. The increase is due primarily to an increase in short-term borrowings, partially offset by the effect of the repayment of $12.5 million of long-term debt in October of 2003.

Year-To-Date 2004 Results - Total operating revenues of $175.0 million for the nine months ended September 30, 2004 increased by $12.8 million compared to operating revenues of $162.2 million recorded for the nine months ended September 30, 2003. Of the total increase in revenues, water revenues increased by 8.1% due to rate increases in Region II of SCW that were retroactive to February 2004, previous rate increases in Region III, and a 4.5% increase in water consumption resulting from warmer temperatures in most of SCW's service areas during 2004 as compared to 2003. Electric revenues increased by 5.6% due to increased consumption.

Total operating expenses increased by 8.1% to $146.1 million for the nine months ended September 30, 2004 as compared to the $135.1 million recorded for the same period in 2003, reflecting higher purchased water costs as discussed above, and an increase in the supply-cost balancing accounts. The increase in the balancing accounts was the result of the recording of $2.3 million of net over-collections in the memorandum supply-cost accounts. The increases in operating expenses are also due to: (i) higher administrative and general expenses resulting from increased outside legal and consulting services, as well as increased pension and benefit costs; (ii) a decrease in the unrealized gain on purchased power contracts; (iii) increases in depreciation and maintenance expenses; and (iv) an increase in taxes on income. These increases were offset by a favorable decision issued by the CPUC on July 8, 2004 that resulted in a $5.2 million pre-tax increase to operating income during the nine months ended September 30, 2004. SCW received $5.7 million in May of 2004 from the City of Santa Monica ("City") pursuant to a settlement agreement in which SCW sold its water rights in the Charnock Groundwater Basin ("Basin") to the City and assigned to the City its rights against all potentially responsible parties who contaminated the Basin. The total proceeds of $5.7 million from the sale and the assignment of rights were offset by an impairment loss of $482,000 associated with assets removed from rate base, pursuant to the decision, resulting in a $5.2 million net pre-tax increase in operating income.

Other income, net of taxes, increased to $371,000 for the nine months ended September 30, 2004 as compared to $159,000 for the same period in 2003 due primarily to a reduction in SCW's estimate of customer refunds associated with lease revenues from the City of Folsom resulting from the March 16, 2004 CPUC decision previously described. The effect of this reduction was partially offset by the recording of current year's revenues from leasing water rights to the City of Folsom as a regulatory liability account, while these amounts were recorded as other income during the same period last year, as previously discussed.

Interest charges decreased by 2.3% to $13.3 million for the nine months ended September 30, 2004 as compared to $13.6 million for the nine months ended September 30, 2003. The decrease is due primarily to the repayment of $12.5 million of long-term debt in October of 2003 and recovery of carrying costs on the expenses incurred in the water quality Order Instituting Investigation matter that was authorized by the CPUC in March 2004, partially offset by the increases in short-term borrowings.

Other - Certain matters discussed in this news release with regard to the Company's expectations may be forward-looking statements that involve risks and uncertainties. The assumptions and risk factors that could cause actual results to differ materially include those described in the Company's Form 10-Q and Form 10-K filed with the Securities and Exchange Commission.

Q3 2004 Earnings Release Conference Call - The Company will host a conference call today, Thursday, November 4, 2004 at 11:00 a.m. Pacific Time (PT), during which management will be making a brief presentation focusing on the Company's results, strategies, and operating trends.

Interested parties can listen to the conference call over the Internet by logging on to www.aswater.com. The call will also be recorded and replayed beginning Thursday, November 4, 2004 at 1:00 p.m. PT and will run through Thursday, November 11, 2004. The dial-in number for the audio replay is (888) 203-1112, Passcode 89551.

American States Water Company is the parent company of Southern California Water Company, American States Utility Services, Inc. and Chaparral City Water Company. Through its subsidiaries, AWR provides water service to 1 out of 30 Californians located within 75 communities throughout 10 counties in Northern, Coastal and Southern California and to approximately 12,000 customers in the city of Fountain Hills, Arizona and portions of Scottsdale, Arizona. The Company distributes electricity to approximately 22,000 customers in the Big Bear recreational area of California and contracts, either directly or through its wholly-owned subsidiary, American States Utility Services, Inc., with various municipalities, the U.S. Government and private entities to provide various water and wastewater services, including billing and meter reading, water marketing and operation and maintenance of water and wastewater systems.

                    American States Water Company
                             Consolidated

Comparative Condensed Balance Sheets
                                                   September December
                                                      30,       31,
          (in thousands)                             2004      2003
                                                       (Unaudited)
Assets

Utility Plant-Net                                  $643,487  $602,298
Other Property and Investments                       22,121    22,120
Current Assets                                       47,509    58,359
Regulatory and Other Assets                          73,764    74,698
                                                   $786,881  $757,475

Capitalization and Liabilities

Capitalization                                     $483,561  $442,286
Current Liabilities                                  74,617    95,898
Other Credits                                       228,703   219,291
                                                   $786,881  $757,475



Condensed Statements of Income
                                Three Months Ended  Nine Months Ended
(in thousands, except per share     September 30,      September 30,
 amounts)                          2004     2003      2004      2003
                                    (Unaudited)         (Unaudited)
Operating Revenues               $68,961  $63,725  $174,956  $162,218

Operating Expenses:
      Operations                  39,962   38,054   110,419   100,843
      Unrealized (gain) loss on
       power purchased
       contracts                     224      420      (257)     (854)
      Gain on sale of water
       rights                          -        -    (5,675)        -
      Maintenance                  2,593    2,181     7,529     6,430
      Depreciation and
       amortization                5,589    4,944    15,839    14,836
      Taxes on income              5,692    3,915    11,720     7,700
      Property and other taxes     2,235    2,032     6,566     6,110

Total operating expenses          56,295   51,546   146,141   135,065

Net operating income              12,666   12,179    28,815    27,153

Other income, net of taxes           (84)     128       371       159

Interest Charges                   4,564    4,511    13,312    13,615
Net Income                        $8,018   $7,796   $15,874   $13,697

Earnings Available for Common
 Shareholders                     $8,018   $7,796   $15,874   $13,697
Weighted Average Shares
 Outstanding                      15,318   15,202    15,264    15,198
Basic Earnings Per Common Share    $0.52    $0.51     $1.04     $0.90
Weighted Average Diluted Shares   15,338   15,244    15,288    15,230
Diluted Earnings Per Share         $0.52    $0.51     $1.04     $0.90
Dividends Paid Per Common Share   $0.221   $0.221    $0.663    $0.663

CONTACT: American States Water Company
Robert J. Sprowls, 909-394-3600, ext. 647

SOURCE: American States Water Company