SAN DIMAS, Calif.--(BUSINESS WIRE)--May. 11, 2009--
American States Water Company (NYSE:AWR) today reported basic and fully
diluted earnings of $0.28 per common share for the first quarter ended
March 31, 2009 as compared to basic and fully diluted earnings of $0.31
and $0.30 per common share, respectively, for the first quarter ended
March 31, 2008.
The following table provides diluted earnings per share (“EPS”), as
adjusted (a non-GAAP financial measure), for 2008 to remove the effects
of an unrealized gain on purchased power contracts.
|
|
First Quarter
|
|
2009
|
|
2008
|
Diluted EPS, as reported
|
|
$
|
0.28
|
|
$
|
0.30
|
|
Unrealized gain on purchased power contracts
|
|
|
-
|
|
|
(0.10
|
)
|
Diluted EPS, as adjusted
|
|
$
|
0.28
|
|
$
|
0.20
|
|
|
|
|
|
|
*Adjusted diluted EPS is a non-GAAP financial measure and excludes
an unrealized gain on purchased power contracts for 2008.
|
|
First Quarter Results, as reported
The $0.02 per share decrease in reported diluted earnings for the first
quarter of 2009, as compared to the same period of 2008, included an
unrealized gain on purchased power contracts, which increased pretax
income by $2.8 million, or $0.10 per share, during the three months
ended March 31, 2008. These purchased power contracts expired on
December 31, 2008 and effective January 1, 2009, the Company began
taking delivery of power under a new contract. The California Public
Utilities Commission (“CPUC”) issued a proposed decision (“PD”) in 2009
approving the new purchased power contract that became effective January
1, 2009. The PD permits the Company to establish a regulatory asset and
liability memorandum account to offset the derivative gains and losses
on the purchased power contract. Accordingly, the Company will defer all
unrealized gains and losses generated from the new purchased power
contract on a monthly basis into the non-interest bearing regulatory
memorandum account that will track the changes in fair value of the
derivative throughout the term of the contract. As of March 31, 2009,
$8.4 million of an unrealized loss has been included in this memorandum
account. As a result, this unrealized loss did not impact earnings
during the three months ended March 31, 2009.
EPS was $0.28 for the three months ended March 31, 2009 and, removing
the effects of the item discussed above, adjusted EPS was $0.20 for the
same period in 2008. Impacting the comparability in the results of the
two periods are the following significant items:
-
The water margin increased by $0.8 million, or $0.03 per share, during
the first quarter of 2009 due to higher water rates approved by the
CPUC effective January 1, 2009 and the implementation of a Water
Revenue Adjustment Mechanism (“WRAM”) account and a Modified Cost
Balancing Account (“MCBA”) in late November of 2008, discussed below.
-
Other operating expenses, including administrative and general
expenses, increased at Golden State Water Company (“GSWC”) by $2.5
million, or $0.08 per share, for the first quarter of 2009 due to an
increase in outside services costs primarily associated with GSWC’s
current rate cases, and an increase in pension expenses of
approximately $759,000.
-
AWR’s subsidiary, American States Utility Services, Inc. (“ASUS”),
recorded pretax operating income (before interest expense) of $1.1
million for contracted services during the first quarter of 2009, an
increase of $1.6 million, or $0.05 per share, as compared to the first
quarter of 2008 due primarily to an increase in special construction
projects at Fort Bliss and military bases in Virginia.
-
A decrease in the effective income tax rate in the first quarter of
2009, due to changes between book and taxable income that are treated
as flow-through adjustments in accordance with regulatory requirements
and a tax benefit resulting from new California apportionment laws as
well as refining certain related estimates, favorably impacted
earnings by $0.08 per share during the first quarter of 2009 as
compared to the same period in 2008.
Total operating revenues increased by $10.7 million to $79.6 million for
the first quarter of 2009, compared to revenues recorded in the first
quarter of 2008, an increase of 15.5%. The table below sets forth
summaries of operating revenues by segment:
(in thousands)
|
|
2009
|
|
|
2008
|
|
|
$ Change
|
|
% Change
|
Water
|
|
$
|
56,794
|
|
|
$
|
52,089
|
|
|
$
|
4,705
|
|
|
9.0
|
%
|
Electric
|
|
|
8,632
|
|
|
|
8,803
|
|
|
|
(171
|
)
|
|
(1.9
|
%)
|
Contracted services
|
|
|
14,183
|
|
|
|
8,050
|
|
|
|
6,133
|
|
|
76.2
|
%
|
Total operating revenues
|
|
$
|
79,609
|
|
|
$
|
68,942
|
|
|
$
|
10,667
|
|
|
15.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water revenues for the first
quarter of 2009 increased by $4.7 million or 9%. Contributing to this
increase were rate increases approved by the CPUC effective January 1,
2009, which added approximately $1.8 million of water revenues during
the first quarter of 2009. The impact of these rate increases was
partially offset by approximately $1.0 million resulting from a 3.5%
decrease in actual consumption when compared to the first quarter of
2008, mostly due to the continued effects of statewide customer
conservation efforts. However, as a result of the implementation of a
WRAM account for Regions II and III in late November of 2008, GSWC
recorded $3.7 million in additional revenues to adjust the first quarter
2009 revenues to consumption levels approved by the CPUC.
Although the recording of the WRAM added $3.7 million of water revenues,
this favorable impact to earnings was reduced by $1.1 million of water
supply over-collection costs tracked in the MCBA account, also
implemented in late November 2008. The over-collection in the MCBA
account is due to: (1) lower consumption in the first quarter of 2009 as
compared to the consumption levels approved by the CPUC, and (2) a lower
percentage of purchased water in the supply mix during 2009 when
compared to the supply mix included in customer rates, partially offset
by increases in rates charged by GSWC’s wholesale suppliers. The net
impact of recording the WRAM and MCBA was approximately $2.6 million, or
$0.09 per share, for the first quarter of 2009.
Electric revenues from GSWC’s Bear
Valley Electric Division decreased by 1.9% to $8.6 million compared to
$8.8 million for the three months ended March 31, 2008 due primarily to
a decrease in electric usage.
Contracted services revenues are
composed of construction revenues and management fees for operating and
maintaining the water and/or wastewater systems at certain military
bases. Such revenues increased by $6.1 million, or 76.2%, during the
first quarter of 2009 primarily due to an increase in construction
revenues. Construction revenues increased by $5.9 million primarily
related to special projects at Fort Bliss and military bases in
Virginia, partially offset by lower construction revenues at Andrews Air
Force Base.
In December 2008, the U.S. government authorized an interim price
adjustment at Fort Bliss, which increased monthly water and wastewater
fees by 50% and 59%, respectively, pending the resolution of a Request
for Equitable Adjustment filed by ASUS’ subsidiary Fort Bliss Water
Services Company due to a higher than originally estimated inventory
level at the base. These interim increases at Fort Bliss resulted in
additional management fees of $294,000 for the first quarter of 2009 as
compared to the first quarter of 2008.
Total operating expenses for the
first quarter of 2009, increased by $13.7 million to $68.2 million as
compared to the $54.5 million recorded for the same period in 2008,
mainly reflecting: (i) an increase of $4.0 million in water supply costs
primarily resulting from a $1.1 million over-collection in the MCBA
account previously discussed, and a $1.9 million increase in the
amortization of previously incurred supply costs from surcharges
currently in effect; (ii) an unrealized gain of $2.8 million on
purchased power contracts for the first three months of 2008, related to
the contracts that expired at December 31, 2008; (iii) a decrease in
other operating expenses due to $701,000 of transition costs incurred in
2008 and not in 2009 related to the commencement of the operation by
ASUS of the water and wastewater systems at military bases in North
Carolina and South Carolina; (iv) an increase of $2.0 million in
administrative and general expenses, relating to increased pension
costs, higher labor and other employee benefit costs, and increased
consulting and legal expense related to GSWC’s general rate cases; (v)
an increase in maintenance, depreciation and amortization expenses; (vi)
higher property and other taxes; and (vii) a $4.6 million increase in
construction expenses primarily related to new construction projects at
Fort Bliss and military bases in Virginia.
The table below sets forth pretax operating income by segment for the
first quarter:
(in thousands)
|
|
2009
|
|
2008
|
|
$ Change
|
|
% Change
|
Water
|
|
$
|
10,944
|
|
|
$
|
11,695
|
|
|
$
|
(751
|
)
|
|
(6.4
|
%)
|
Electric
|
|
|
(544
|
)
|
|
|
3,410
|
|
|
|
(3,954
|
)
|
|
(116.0
|
%)
|
Contracted services
|
|
|
1,068
|
|
|
|
(541
|
)
|
|
|
1,609
|
|
|
297.4
|
%
|
AWR parent
|
|
|
(50
|
)
|
|
|
(102
|
)
|
|
|
52
|
|
|
51.0
|
%
|
Total pretax operating income
|
|
$
|
11,418
|
|
|
$
|
14,462
|
|
|
$
|
(3,044
|
)
|
|
(21.0
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense decreased by
$84,000 to $5.3 million during the first quarter of 2009 compared to the
first quarter of 2008. The decrease reflected lower interest rates,
partially offset by an increase in short-term borrowings. The average
interest rate on short-term borrowings during the three months ended
March 31, 2009 was 1.3%, compared to 4.4% for the same period in 2008.
The average balance of short-term borrowings was $74 million during the
three months ended March 31, 2009 compared to $42 million for the same
period in 2008.
Interest income decreased by
$159,000 during the first quarter of 2009 due primarily to a decrease of
$127,000 in interest accrued on the uncollected balance of the CPUC
authorized Aerojet litigation memorandum account due to lower interest
rates.
Income tax expense for the first
quarter of 2009 decreased by $2.9 million to $1.4 million as compared to
the same period in 2008 primarily due to a decrease in pretax income and
a lower effective income tax rate (“ETR”). The ETR for the three months
ended March 31, 2009 was 21.7% compared to 44.5% for the same period of
2008. The significant decrease in the ETR is principally due to a tax
benefit of $918,000 resulting from new California apportionment laws
enacted during the first quarter of 2009 as well as refining certain
related estimates. Absent this tax benefit, the ETR for the first
quarter would have been 36.2%. There were also changes between book and
taxable income that are treated as flow-through adjustments in
accordance with regulatory requirements (principally plant, rate case
and compensation related items). Flow-through adjustments increase or
decrease tax expense in one period, with an offsetting increase or
decrease occurring in another period.
Regulatory Matters
In August 2008, the CPUC approved an advice letter filing to allow GSWC
to create and implement a Water Conservation Memorandum Account (“WCMA”)
to track the extraordinary expenses and revenue shortfall associated
with conservation measures in conjunction with the declared drought in
California. The WCMA was effective August 18, 2008 and was used to track
the revenue shortfall until the WRAM was implemented on November 25,
2008. At November 24, 2008, approximately $1.9 million of net
under-collections were included in the WCMA for Regions II and III prior
to the implementation of the WRAM.
Unlike the WRAM which is probable for recovery according to the CPUC
decision, the recovery of the WCMA was less certain and therefore GSWC
did not record the under-collection as of March 31, 2009. On April 16,
2009, the CPUC approved the advice letter filed by GSWC to recover the
$1.9 million included in the WCMA and authorized GSWC to establish a
12-month surcharge to customers’ bills. The surcharge went into effect
on April 21, 2009. Accordingly, GSWC established a $1.9 million
regulatory asset, which will result in a corresponding increase to
income for the second quarter of 2009 of $0.07 per share. The WCMA
continues to track extraordinary expenses associated with conservation
efforts.
On May 7, 2009, the CPUC also authorized GSWC to implement an increasing
block rate design in GSWC’s Region I to encourage water conservation and
to establish a WRAM and MCBA for Region I once the block rates are
implemented. GSWC will implement the new tiered rates in 90 days as
indicated in the CPUC decision. GSWC will file for recovery of the WCMA
in Region I after the WRAM is in place.
In addition, on May 7, 2009 the CPUC approved a final decision on Phase
I of GSWC’s cost of capital application, adopting a return on equity of
10.2%.
Non-GAAP Financial Measures
This press release includes a presentation of “Diluted EPS, as adjusted”
which excludes an unrealized gain on purchased power contracts during
the three months ended March 31, 2008. This item is derived from
consolidated financial information but not presented in our financial
statements that are prepared in accordance with Generally Accepted
Accounting Principles in the United States (“GAAP”). This item
constitutes a "non-GAAP financial measures" under Securities and
Exchange Commission rules. The non-GAAP financial measures supplement
our GAAP disclosures and should not be considered an alternative to the
GAAP measure. Furthermore, the non-GAAP financial measures may not be
comparable to similarly titled non-GAAP financial measures of other
registrants.
Management believes that the presentation of these adjusted measures is
useful to investors because it provides a means of evaluating the
Company's operating performance without giving effect to unrealized
gains and losses on purchased power contracts, which have been triggered
principally by market factors that are largely out of the control of
management and do not reflect the day-to-day operations of the Company.
Moreover, management believes that this presentation facilitates
comparisons between the Company and other companies in its industry but
again may not be comparable to similarly titled non-GAAP financial
measures of other registrants. In preparing operating plans, budgets and
forecasts, and in assessing historical performance, management relies,
in part, on trends in the Company's historical results, exclusive of
unrealized gains/losses on purchased power contracts.
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-K for the year ended December 31,
2008 filed with the Securities and Exchange Commission.
First Quarter 2009 Earnings Release Conference Call - The Company
will host a conference call today, May 11, 2009 at 11:00 a.m. Pacific
Time (“PT”). Interested parties can listen to the live conference call
over the Internet by logging on to www.aswater.com.
The call will also be recorded and replayed beginning Monday, May 11,
2009 at 2:00 p.m. PT and will run through Monday, May 18, 2009. The
dial-in number for the audio replay is (800) 642-1687, Confirmation ID#
97096042.
American States Water Company is the parent of Golden State Water
Company, American States Utility Services, Inc. and Chaparral City Water
Company. Through its subsidiaries, AWR provides water service to 1 out
of 37 Californians located within 75 communities throughout 10 counties
in Northern, Coastal and Southern California (approximately 254,000
customers) and to over 13,000 customers in the city of Fountain Hills,
Arizona and a small portion of Scottsdale, Arizona. The Company also
distributes electricity to over 23,000 customers in the Big Bear
recreational area of California. Through its contracted services
subsidiary, American States Utility Services, Inc., the Company
contracts with the U.S. government and private entities to provide
various services, including water marketing and operation and
maintenance of water and wastewater systems.
American States Water Company
|
Consolidated
|
Comparative Condensed Balance Sheets
|
|
|
March 31
|
|
December 31
|
(in thousands)
|
|
2009
|
|
2008
|
|
|
(Unaudited)
|
Assets
|
|
|
|
|
Utility Plant-Net
|
|
$
|
836,502
|
|
|
$
|
825,262
|
|
Goodwill
|
|
|
4,610
|
|
|
|
4,610
|
|
Other Property and Investments
|
|
|
10,600
|
|
|
|
10,689
|
|
Current Assets
|
|
|
107,261
|
|
|
|
90,614
|
|
Regulatory and Other Assets
|
|
|
136,299
|
|
|
|
130,112
|
|
|
|
$
|
1,095,272
|
|
|
$
|
1,061,287
|
|
Capitalization and Liabilities
|
|
|
|
|
Capitalization
|
|
$
|
618,326
|
|
|
$
|
577,039
|
|
Current Liabilities
|
|
|
131,275
|
|
|
|
137,397
|
|
Other Credits
|
|
|
345,671
|
|
|
|
346,851
|
|
|
|
$
|
1,095,272
|
|
|
$
|
1,061,287
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Statements of Income
|
|
Three months ended
|
(in thousands, except per share amounts)
|
|
March 31,
|
|
|
2009
|
|
2008
|
|
|
(Unaudited)
|
Operating Revenues
|
|
$
|
79,609
|
|
|
$
|
68,942
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
Supply costs
|
|
$
|
19,909
|
|
|
$
|
16,140
|
|
Unrealized gain on purchased power contracts
|
|
|
-
|
|
|
|
(2,843
|
)
|
Other operating expenses
|
|
|
7,153
|
|
|
|
7,996
|
|
Administrative and general expenses
|
|
|
16,865
|
|
|
|
14,827
|
|
Maintenance
|
|
|
4,073
|
|
|
|
3,772
|
|
Depreciation and amortization
|
|
|
8,361
|
|
|
|
7,793
|
|
Property and other taxes
|
|
|
3,400
|
|
|
|
2,920
|
|
ASUS construction expenses
|
|
|
8,445
|
|
|
|
3,875
|
|
Net gain on sale of property
|
|
|
(15
|
)
|
|
|
-
|
|
Total operating expenses
|
|
$
|
68,191
|
|
|
$
|
54,480
|
|
|
|
|
|
|
Operating income
|
|
$
|
11,418
|
|
|
$
|
14,462
|
|
|
|
|
|
|
Interest expense
|
|
|
(5,294
|
)
|
|
|
(5,378
|
)
|
Interest income
|
|
|
202
|
|
|
|
361
|
|
Other
|
|
|
(30
|
)
|
|
|
114
|
|
|
|
|
|
|
Income From Operations Before Income Tax Expense
|
|
$
|
6,296
|
|
|
$
|
9,559
|
|
|
|
|
|
|
Income tax expense
|
|
|
1,364
|
|
|
|
4,255
|
|
|
|
|
|
|
Net Income
|
|
$
|
4,932
|
|
|
$
|
5,304
|
|
|
|
|
|
|
Weighted Average Shares Outstanding
|
|
|
17,312
|
|
|
|
17,239
|
|
Earnings Per Common Share
|
|
$
|
0.28
|
|
|
$
|
0.31
|
|
Weighted Average Diluted Shares
|
|
|
17,440
|
|
|
|
17,357
|
|
Earnings Per Diluted Share
|
|
$
|
0.28
|
|
|
$
|
0.30
|
|
Dividends Declared Per Common Share
|
|
$
|
0.250
|
|
|
$
|
0.250
|
|
Source: American States Water Company
American States Water Company
Eva G. Tang
Senior Vice
President-Finance, Chief Financial Officer,
Corporate Secretary and
Treasurer
909-394-3600, ext. 707