SAN DIMAS, Calif.--(BUSINESS WIRE)--Aug. 6, 2009--
American States Water Company (NYSE:AWR) today reported basic and fully
diluted earnings of $0.64 per common share for the second quarter ended
June 30, 2009 as compared to basic and fully diluted earnings of $0.54
and $0.53 per common share, respectively, for the second quarter ended
June 30, 2008.
The $0.11 per share increase in reported diluted earnings for the second
quarter of 2009, as compared to the same period of 2008, included a
$0.06 per share unrealized gain on purchased power contracts during the
three months ended June 30, 2008. The following table provides diluted
earnings per share (“EPS”), as adjusted (a non-GAAP financial measure),
for 2008 to remove the effects of the unrealized gain on purchased power
contracts.
|
|
Second Quarter
|
|
2009
|
|
2008
|
Diluted EPS, as reported
|
|
$0.64
|
|
$0.53
|
Unrealized gain on purchased power contracts
|
|
-
|
|
(0.06)
|
Diluted EPS, as adjusted *
|
|
$0.64
|
|
$0.47
|
|
|
|
|
|
*Diluted EPS, as adjusted, is a non-GAAP financial measure and
excludes an unrealized gain on purchased power contracts for 2008.
|
|
|
|
|
The purchased power contracts expired on December 31, 2008 and effective
January 1, 2009, the Company began taking delivery of power under a new
contract. Pursuant to a decision issued in May 2009 by the California
Public Utilities Commission (“CPUC”), the Company will defer all
unrealized gains and losses resulting from the new purchased power
contract on a monthly basis into a regulatory memorandum account that
will track the changes in fair value of the derivative throughout the
term of the contract. As of June 30, 2009, $8.5 million of a cumulative
unrealized loss has been included in this memorandum account; therefore
not impacting the Company’s earnings in 2009.
EPS was $0.64 for the three months ended June 30, 2009 and, removing the
effects of the item discussed above, diluted EPS, as adjusted, was $0.47
for the same period in 2008, an increase of $0.17 per share. Impacting
the comparability in the results of the two periods are the following
significant items:
-
The water and electric margin increased by $5.5 million, or $0.18 per
share, primarily due to higher water revenues, as more fully discussed
below.
-
In May 2009, AWR’s subsidiary, Golden State Water Company (“GSWC”),
reached a settlement agreement with Mirant Trading and recorded the
settlement proceeds of $1.0 million, or $0.03 per share, as a
reduction to legal costs. There was no similar gain in the same period
of 2008.
-
Excluding the gain from the settlement agreement with Mirant Trading
mentioned above, other operating expenses, including administrative
and general expenses, increased at GSWC by $1.3 million, or $0.04 per
share, due primarily to an increase in pension expense of
approximately $855,000 and an increase in depreciation expense of
$469,000.
-
Pretax operating income through AWR’s contracted services subsidiary,
American States Utility Services, Inc. (“ASUS”), increased by $1.6
million, or $0.05 per share, as compared to the second quarter of 2008
due primarily to an increase in special construction projects at Fort
Bliss and the military bases in Virginia, and improved performance at
Fort Jackson and Fort Bragg military bases.
-
An increase in net interest expense (interest expense less interest
income) of $844,000, or $0.03 per share, was due to an increase in
long-term debt resulting from the issuance of $40.0 million of notes
in March 2009 and the recording of $480,000 of interest income during
the second quarter of 2008 in connection with an Internal Revenue
Service’s (“IRS’s”) examination of AWR’s 2002 income tax return. There
was no similar interest income recorded in the same period of 2009
-
The effective income tax rate in the second quarter of 2009 was higher
due to changes between book and taxable income that are treated as
flow-through adjustments in accordance with regulatory requirements,
which negatively impacted earnings by $0.02 per share during the
second quarter of 2009 as compared to the same period in 2008.
Total operating revenues increased by $13.2 million to $93.6
million for the second quarter of 2009, compared to $80.3 million
recorded in the second quarter of 2008, an increase of 16.5%. The table
below sets forth summaries of operating revenues by segment:
(in thousands)
|
|
2009
|
|
2008
|
|
$ Change
|
|
% Change
|
Water
|
|
$74,157
|
|
$65,370
|
|
$8,787
|
|
13.4%
|
Electric
|
|
5,888
|
|
6,208
|
|
(320)
|
|
(5.2%)
|
Contracted services
|
|
13,508
|
|
8,735
|
|
4,773
|
|
54.6%
|
Total operating revenues
|
|
$93,553
|
|
$80,313
|
|
$13,240
|
|
16.5%
|
Water revenues for the second
quarter of 2009 increased by $8.8 million or 13.4%, due primarily to:
(i) higher customer rates approved by the CPUC effective January 1,
2009, which added approximately $2.4 million of water revenues; (ii) the
recording of $2.9 million in additional revenues to adjust to
consumption levels approved by the CPUC as a result of the
implementation of the Water Revenue Adjustment Mechanism (“WRAM”)
accounts in Regions II and III in late November 2008, and (iii) the
recording of $2.8 million of additional water revenues at all GSWC water
regions due to the CPUC’s approval in April 2009 of the Water
Conservation Memorandum Accounts (“WCMA”). These increases were
partially offset by a decrease of 4.2% in water consumption as compared
to the same period in 2008.
Although the recording of the WRAM added $2.9 million of water revenues,
this favorable impact to earnings was reduced by $0.7 million of
over-collected water supply costs tracked in the Modified Cost Balancing
Account (“MCBA”), also implemented in late November 2008 for Regions II
and III. The over-collection in the MCBA account was due to: (i) lower
consumption in the second quarter of 2009 as compared to the consumption
level approved by the CPUC, and (ii) 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 purchased
water and/or pump tax rates charged by GSWC’s suppliers. The net dollar
water margin impact of recording the WRAM and MCBA for the quarter was
approximately $2.2 million, or $0.07 per share. On May 7, 2009, the CPUC
approved tiered rates for Region I and the establishment of a WRAM and
MCBA which will go into effect on or about September 1, 2009.
Electric revenues from GSWC’s Bear
Valley Electric Division decreased by 5.2% to $5.9 million compared to
$6.2 million for the three months ended June 30, 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 $4.8 million, or 54.6%, during the
second quarter of 2009 primarily due to an increase in construction
revenues. Construction revenues increased by $4.4 million primarily
related to special projects at Fort Bliss, Fort Bragg and the military
bases in Virginia.
In addition, during December 2008 the U.S. government authorized an
interim price adjustment at Fort Bliss, which increased monthly water
and wastewater management 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 second quarter of 2009 as compared to the second
quarter of 2008.
Total operating expenses for the
second quarter of 2009, increased by $8.3 million to $69.0 million as
compared to the $60.7 million recorded for the same period in 2008,
mainly reflecting: (i) an increase of $3.0 million in water supply costs
primarily resulting from a $0.7 million over-collection in the MCBA
account previously discussed, and a $2.1 million increase in the
amortization of previously incurred supply costs from surcharges
currently in effect; (ii) an unrealized gain of $1.7 million on
purchased power contracts for the three months ended June 30, 2008,
related to the contracts that expired at December 31, 2008; (iii) an
increase in other operating and administrative and general expenses of
$1.7 million due to higher labor, pension and other employee related
costs, and outside consulting costs, partially offset by the $1.0
million settlement with Mirant Trading, previously discussed; (iv) a
decrease in required and emergency maintenance activities on GSWC’s
wells, water supply and distribution facilities, some of which has been
deferred to later in the year; (v) an increase in depreciation and
amortization expenses, reflecting, among other things, the effects of
closing approximately $73.6 million of additions to utility plant during
2008; (vi) lower property and other taxes; and (vii) a $3.4 million
increase in construction expenses primarily related to special
construction projects at Fort Bliss and the military bases in Virginia.
The table below sets forth pretax operating income by segment for the
second quarter:
(in thousands)
|
|
2009
|
|
2008
|
|
$ Change
|
|
% Change
|
Water
|
|
$23,438
|
|
$18,529
|
|
$4,909
|
|
|
Electric
|
|
72
|
|
1,673
|
|
(1,601)
|
|
|
Contracted services
|
|
1,015
|
|
(608)
|
|
1,623
|
|
|
AWR parent
|
|
(11)
|
|
(13)
|
|
2
|
|
|
Total pretax operating income
|
|
$24,514
|
|
$19,581
|
|
$4,933
|
|
25.2%
|
Interest expense increased by
$365,000 to $5.7 million during the second quarter of 2009 as compared
to $5.3 million during the second quarter of 2008. The increase
reflected the issuance of $40.0 million of notes in March 2009.
Interest income decreased by
$479,000 during the second quarter of 2009, due primarily to the
recording of $480,000 in interest income during the second quarter of
2008 in connection with an IRS examination of the 2002 income tax return.
Income tax expense for the second
quarter of 2009 increased by $1.9 million to $7.7 million as compared to
$5.8 million for the same period in 2008 primarily due to an increase in
pretax income and a higher effective income tax rate (“ETR”). The ETR
for the three months ended June 30, 2009 was 40.2% compared to 38.4% for
the same period of 2008 due primarily to 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.
Year-to Date 2009 Results
Diluted earnings per share for the first six months of 2009 were $0.92
compared to $0.84 for 2008. Included in 2008’s diluted EPS was an
unrealized gain on purchased power contracts, which increased pretax
income by $4.5 million, or $0.15 per share, during the six months ended
June 30, 2008. Excluding the effects of this unrealized gain, diluted
EPS, as adjusted in 2008 was $0.69 as compared to $0.92 reported in
2009, an increase of $0.23 per share. Impacting the comparability in the
results of the two periods on a diluted per share basis, as adjusted,
are the following significant items: (i) an increase in the water and
electric margin of $6.2 million, or $0.21 per share, primarily due to
higher water revenues; (ii) an increase in other operating expenses of
$4.1 million, or $0.14 per share, at the Company’s utility businesses,
due to higher labor, pension and outside service costs; (iii) the
improved financial performance of contracted services at military bases
resulting in an increase in ASUS’ pretax operating income of $3.2
million, or $0.11 per share; (iv) the recording of $1.0 million in
settlement proceeds, or $0.03 per share, resulting from a settlement
agreement reached with Mirant Trading as discussed in the quarterly
results; (v) an increase in interest expense of $281,000, or $0.01 per
share, due to an increase in long-term debt resulting from the issuance
of $40.0 million of notes in March 2009; (vi) a decrease in interest
income of $638,000, or $0.02 per share, primarily reflecting $480,000 of
interest income in 2008 from the examination by the IRS of AWR’s 2002
income tax return, and (vii) a tax benefit of $918,000, or $0.05 per
share, recorded in the first quarter of 2009 due to changes in state
apportionment laws.
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 revenue shortfall associated with conservation measures
until the WRAM is implemented and the extraordinary expenses in
conjunction with the declared drought in California. In April 2009, the
CPUC approved the advice letter filed by GSWC to recover $2.0 million
included in the WCMA for Regions II and III and authorized GSWC to
establish a 12-month surcharge to customers’ bills. Accordingly, GSWC
established a $2.0 million regulatory asset, which was recorded as
additional water revenue in the second quarter of 2009. In addition,
GSWC established an $852,000 regulatory asset and additional water
revenues for Region I’s WCMA balance incurred during the period of
August 18, 2008 through June 30, 2009, which is now probable of recovery.
Non-GAAP Financial Measures
This press release includes a presentation of “Diluted EPS, as adjusted”
which excludes unrealized gains on purchased power contracts during the
three and six months ended June 30, 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 measure" under Securities and Exchange
Commission rules. The non-GAAP financial measure supplements our GAAP
disclosures and should not be considered an alternative to GAAP
measures. Furthermore, the non-GAAP financial measure 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.
Second Quarter 2009 Earnings Release Conference Call - The
Company will host a conference call today, August 6, 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 Thursday, August
6, 2009 at 2:00 p.m. PT and will run through Thursday, August 13, 2009.
The dial-in number for the audio replay is (800) 642-1687, Confirmation
ID# 19929323.
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 255,000
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
|
|
|
|
|
|
|
June 30
|
|
December 31
|
|
|
(in thousands)
|
|
2009
|
|
2008
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Utility Plant-Net
|
|
$847,849
|
|
|
$825,262
|
|
|
|
|
|
Goodwill
|
|
4,610
|
|
|
4,610
|
|
|
|
|
|
Other Property and Investments
|
|
11,484
|
|
|
10,689
|
|
|
|
|
|
Current Assets
|
|
97,416
|
|
|
90,614
|
|
|
|
|
|
Regulatory and Other Assets
|
|
139,720
|
|
|
130,112
|
|
|
|
|
|
|
|
$1,101,079
|
|
|
$1,061,287
|
|
|
|
|
|
Capitalization and Liabilities
|
|
|
|
|
|
|
Capitalization
|
|
$660,325
|
|
|
$577,039
|
|
|
|
|
|
Current Liabilities
|
|
88,863
|
|
|
137,397
|
|
|
|
|
|
Other Credits
|
|
351,891
|
|
|
346,851
|
|
|
|
|
|
|
|
$1,101,079
|
|
|
$1,061,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Statements of Income
|
|
Three months ended
|
|
Six months ended
|
(in thousands, except per share amounts)
|
|
June 30,
|
|
June 30,
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
(Unaudited)
|
|
(Unaudited)
|
Operating Revenues
|
|
$93,553
|
|
|
$80,313
|
|
|
$173,162
|
|
|
$149,255
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
Supply costs
|
|
$23,537
|
|
|
$20,547
|
|
|
$43,446
|
|
|
$36,687
|
|
Unrealized gain on purchased power contracts
|
|
-
|
|
|
(1,664
|
)
|
|
-
|
|
|
(4,507
|
)
|
Other operating expenses
|
|
7,165
|
|
|
7,053
|
|
|
14,318
|
|
|
15,049
|
|
Administrative and general expenses
|
|
15,522
|
|
|
14,943
|
|
|
32,387
|
|
|
29,770
|
|
Maintenance
|
|
3,887
|
|
|
4,770
|
|
|
7,960
|
|
|
8,542
|
|
Depreciation and amortization
|
|
8,387
|
|
|
7,810
|
|
|
16,748
|
|
|
15,603
|
|
Property and other taxes
|
|
2,712
|
|
|
2,839
|
|
|
6,112
|
|
|
5,759
|
|
ASUS construction expenses
|
|
7,829
|
|
|
4,434
|
|
|
16,274
|
|
|
8,309
|
|
Net gain on sale of property
|
|
-
|
|
|
-
|
|
|
(15
|
)
|
|
-
|
|
Total operating expenses
|
|
$69,039
|
|
|
$60,732
|
|
|
$137,230
|
|
|
$115,212
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$24,514
|
|
|
$19,581
|
|
|
$35,932
|
|
|
$34,043
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
(5,659
|
)
|
|
(5,294
|
)
|
|
(10,953
|
)
|
|
(10,672
|
)
|
Interest income
|
|
296
|
|
|
775
|
|
|
498
|
|
|
1,136
|
|
Other
|
|
82
|
|
|
7
|
|
|
52
|
|
|
121
|
|
|
|
|
|
|
|
|
|
|
Income From Operations Before Income Tax Expense
|
|
$19,233
|
|
|
$15,069
|
|
|
$25,529
|
|
|
$24,628
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
7,734
|
|
|
5,786
|
|
|
9,098
|
|
|
10,041
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$11,499
|
|
|
$9,283
|
|
|
$16,431
|
|
|
$14,587
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding
|
|
17,861
|
|
|
17,248
|
|
|
17,588
|
|
|
17,243
|
|
Earnings Per Common Share
|
|
$0.64
|
|
|
$0.54
|
|
|
$0.93
|
|
|
$0.84
|
|
Weighted Average Diluted Shares
|
|
17,987
|
|
|
17,325
|
|
|
17,718
|
|
|
17,362
|
|
Earnings Per Diluted Share
|
|
$0.64
|
|
|
$0.53
|
|
|
$0.92
|
|
|
$0.84
|
|
Dividends Declared Per Common Share
|
|
$0.250
|
|
|
$0.250
|
|
|
$0.500
|
|
|
$0.500
|
|
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