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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 8, 2007
AMERICAN STATES WATER COMPANY
(Exact name of registrant as specified in its charter)
California 001-14431 95-4676679
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
630 East Foothill Blvd.
San Dimas, California 91773
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (909) 394-3600
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing requirement of the registrant under any of the
following provisions (see General Instruction A.2 below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the exchange Act (17 CFR
14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Section 2-Financial Information
Item 2.02. Results of Operations and Financial Condition
On November 8, 2007 American States Water Company released earnings for the
three and nine months ended September 30, 2007. A copy of the Company's press
release is attached hereto as Exhibit 99.1.
This Form 8-K and the attached exhibits are furnished to, but not filed with,
the Securities and Exchange Commission.
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Section 9-Financial Statements and Exhibits
Item 9.01. Financial Statements and Exhibits
The following exhibit is furnished hereunder:
Exhibit 99.1 Press Release dated November 8, 2007
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN STATES WATER COMPANY
Date: November 8, 2007 /s/ Robert J. Sprowls
--------------------------------------------
Robert J. Sprowls
Sr. Vice President, Chief Financial Officer,
Treasurer and Corporate Secretary
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EXHIBIT INDEX
Exhibit No. Description
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99.1 Press Release dated November 8, 2007
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Exhibit 99.1
American States Water Company
Announces Earnings for the Three and Nine Months Ended September 30,
2007
SAN DIMAS, Calif.--(BUSINESS WIRE)--Nov. 8, 2007--American States
Water Company (NYSE:AWR) today reported basic and fully diluted
earnings of $0.44 per share for the three months ended September 30,
2007 as compared to basic and fully diluted earnings of $0.32 per
share, reported for the same period ended September 30, 2006. Basic
and fully diluted earnings were $1.26 per share for the nine months
ended September 30, 2007, as compared to basic and fully diluted
earnings of $1.03, for the nine months ended September 30, 2006.
Third Quarter 2007 Results
The $0.12 increase in the third quarter of 2007 as compared to the
same period of 2006 is due primarily to:
-- An increase of $1.7 million in the pretax margin, which is net
of operating revenues and supply costs, for the water
segment's operations, or $0.06 per share, as compared to the
same period of 2006, due to increased water rates approved by
the California Public Utilities Commission ("CPUC") that were
effective January 1, 2007, and a favorable change in the
supply mix caused by an increased volume of groundwater supply
pumped in 2007 as compared to the prior year.
-- An unrealized loss on purchased power contracts ("derivative")
which decreased pretax income by $896,000, or approximately
$0.03 per share for the three months ended September 30, 2007,
as compared to a $2.8 million unrealized loss, or $0.10 per
share, for the three months ended September 30, 2006. Although
the unrealized gains and losses result in significant
fluctuations to the statements of income, it has no effect on
our cash flows. When analyzing the financial performance of
the Company, we exclude the effect of derivative gains or
losses as they are not reflective of our day-to-day
operations.
-- Higher operating expenses and other items described below,
partially offset by a decrease in the effective income tax
rate.
Total operating revenues increased by $602,000 to $75.8 million
for the third quarter of 2007, compared to revenues of $75.2 million
recorded in the third quarter of 2006, a slight increase of 0.8%. The
table below sets forth summaries of operating revenues by segment (in
thousands):
2007 2006 $ Change % Change
-------------------------------------------
Water $65,445 $65,292 $153 0.2%
Electric 6,289 6,444 (155) -2.4%
Contracted services 4,108 3,504 604 17.2%
-------------------------------------------
Total operating revenues $75,842 $75,240 $602 0.8%
===========================================
Water revenues for the quarter remained flat; increasing by only
0.2%. Rate increases approved by the CPUC effective January 1, 2007
were offset by the expiration in October 2006 of a positive surcharge
that was in rates to recover previously incurred supply costs in
Region III service areas of its Golden State Water Company ("GSWC")
unit. Consumption remained relatively unchanged when compared to the
same period in 2006.
Also negatively impacting water revenues for the quarter were
delays by the CPUC in receiving final approval of GSWC's Region II
rate case and the application for rate increases to cover general
office expenses at the Corporate Headquarters. On October 26, 2007,
the CPUC issued a proposed decision to approve rate increases for
Region II. The written version of the decision that the CPUC approved
on October 18, 2007 contained a number of inaccuracies. A proposed
decision that corrects the inaccuracies will be placed on the agenda
for the CPUC to approve on November 16, 2007. Because of the nearly 11
month delay in issuing a final decision on this application, the CPUC
had previously approved an interim rate increase totaling $1.2 million
that became effective January 1, 2007. Based on the proposed decision
issued by the CPUC on October 26, 2007, the revenue increase for 2007
would total approximately $6.7 million, which is retroactive to
January 1, 2007. The proposed decision authorizes GSWC to track the
difference between the interim rates and the final rates approved by
the CPUC and to recover the difference via a temporary surcharge. This
unbilled revenue covers the period from January 1, 2007 through the
implementation of the new final rates to be approved on November 16,
2007. The effect of the increased revenues in 2007 will be partially
offset by the reversal of previously recorded supply cost
under-collections as discussed later.
Additionally, the proposed decision also reflects rate increases
of approximately $3.0 million for 2007 to recover general office
expenses allocated to Region III. Similar to Region II, the CPUC had
previously approved an interim rate increase for Region III, totaling
$135,000 which became effective January 1, 2007. GSWC will implement a
temporary surcharge to recover the revenue difference between the
interim rates implemented on January 1, 2007 and the final rates
authorized by the CPUC for the period from January 1 through the
implementation of the final rates to be approved on November 16, 2007.
Had the CPUC decisions and final rates been in place prior to the
end of September 30, 2007, the 2007 results to-date would have
included an increase in revenues, offset by the reversal of previously
recorded supply cost under collections, of approximately $3.3 million,
or $0.11 per share.
The final decision will also impose an increased allocation of
corporate headquarters' expenses to ASUS. This would result in an
increase in expense allocated to ASUS. This adjustment is also
retroactive to January 1, 2007 and will be made in the fourth quarter,
thus negatively impacting ASUS' pretax income ranging from $450,000 to
$600,000 for the nine months ended September 30, 2007, and positively
impacting GSWC's pretax income by the same amount. While this
additional allocation to ASUS has no impact on the consolidated
earnings based on the new rates authorized by the CPUC, it should be
noted that revenue requirements would be higher for GSWC's Region II
and Region III, had the allocation of corporate headquarters' costs to
ASUS been lower.
Electric revenues from GSWC's Bear Valley Electric Division
decreased by 2.4% due primarily to the recording of a regulatory
liability of approximately $442,000 and a corresponding reduction in
revenues for probable refunds to customers related to the 8.4 MW
natural gas-fueled generation plant. The rate increase for the
generation plant resulted in an increase of approximately $2.3 million
in annual revenues, effective April 2005, based on an estimated total
capital-related cost of $13 million. The rate increase is subject to
refund pending the CPUC's final cost review. If actual recorded costs
are less than the costs authorized by the CPUC of $13 million, the
revenue requirement for the difference is to be refunded to
ratepayers. During the third quarter of 2007, GSWC received vendor
credits which reduced the actual recorded costs of the generation
plant below $13 million, which resulted in the recording of a
regulatory liability and reduction in electric revenues. This decrease
in electric revenues was partially offset by an increase in
kilowatt-hour usage by customers.
Contracted services operating revenues are comprised of
construction revenues and management fees for operating and
maintaining the water and wastewater systems at military bases; the
services being conducted by AWR's subsidiary, American States Utility
Services, Inc. ("ASUS"). Such revenues increased by $604,000 during
the third quarter of 2007 primarily due to an increase in construction
revenues for a special wastewater infrastructure expansion project
performed by ASUS's Fort Bliss Water Services Company subsidiary. This
project was an amendment and supplemental to the 50-year contract with
the U.S. government to manage the entire water and wastewater systems
at Fort Bliss. The project was completed in August 2007 and there will
be no further construction revenues associated with this amendment.
Earnings and cash flows from these military special projects have been
intermittent to date and may or may not continue in future periods.
Total operating expenses, for the three months ended September 30,
2007, decreased to $58.3 million as compared to the $60.0 million
recorded for the same period in 2006, reflecting: (i) an overall
decrease in water supply costs resulting from more pumping from GSWC's
own wells; (ii) a decrease of $1.9 million in the pretax unrealized
loss on purchased power contracts in 2007 compared to same period in
2006, and (iii) a decrease in administrative and general expenses due
to lower outside services, such as legal, consulting and accounting,
incurred during the period. These decreases were partially offset by:
(i) increases in other operating expenses due to higher chemical and
water treatment costs; (ii) an increase in required and emergency
maintenance activities on GSWC's wells; (iii) increased depreciation
and amortization expense reflecting, among other things, the effects
of closing approximately $73 million of additions to utility plant
during 2006; (iv) higher property taxes and payroll taxes; and (v) an
increase in construction expenses reflecting primarily the costs
incurred for the special wastewater expansion project at Fort Bliss.
The proposed CPUC decision discussed previously also changes the
revenue requirement related to the adopted rates for the supply costs
that will also be retroactive to January 1, 2007. Accordingly, GSWC
will re-calculate, among other items, the amount recorded in Region
II's supply cost memorandum account based on the new rates. As of
September 30, 2007, an amount of $2.2 million was recorded as an
under-collection of supply costs generated in 2007 which positively
impacted earnings and increased regulatory assets for the period. We
expect most of the under-collected amount as recorded to be reversed
in the fourth quarter, based on the new rates for supply costs,
partially offsetting the retroactive revenues as discussed above, also
to be recorded in the fourth quarter of 2007.
In summary, the table below sets forth pretax operating income by
segment for the third quarter (in thousands):
2007 2006 $ Change % Change
---------------------------------------------
Water $18,538 $18,067 $471 2.6%
Electric (901) (2,689) 1,788 66.5%
Contracted services (60) (144) 84 58.3%
AWR parent (52) (25) (27) (108.0%)
---------------------------------------------
Total pretax operating
income $17,525 $15,209 $2,316 15.2%
=============================================
Interest expense remained unchanged at $5.3 million. Average bank
loan balances outstanding under AWR's credit facility remained
constant for the third quarter of 2007 and 2006 at approximately $27
million.
The third quarter 2007 income tax expense increased to $5.2
million compared to $4.8 million for the same period of 2006, due
primarily to a 24.0% increase in pretax income. Partially offsetting
the increase is a reduction in the effective tax rate primarily as a
result of differences between book and taxable income that are treated
as flow-through adjustments in accordance with regulatory
requirements. This decrease in the effective tax rate for the three
months ended September 30, 2007 is principally due to a net reduction
in compensatory, related flow-through adjustments.
Year-to-Date 2007 Results
The $0.23 per share increase in earnings for the nine months ended
September 30, 2007 compared to the same period of 2006 reflects
primarily:
-- An unrealized gain on purchased power contracts which
increased pretax income by approximately $1.6 million, or
$0.05 per share for the nine months ended September 30, 2007,
as compared to a $5.9 million unrealized loss, or $0.21 per
share, for the nine months ended September 30, 2006.
-- A decision issued by the CPUC on April 13, 2006 regarding the
accounting treatment of GSWC's water rights lease revenues,
which increased pretax operating income by about $2.3 million
in March 2006, or approximately $0.08 per share, when compared
to the same period in 2007.
-- An increase, excluding the $2.3 million of water rights lease
revenues as discussed above, in the 2007 margin for the water
segment of $10.1 million, or $0.35 per share, as compared to
the same period of 2006 due to increased water rates, an
increase in water consumption, and a favorable supply mix
change.
-- An increase in contracted services' pretax operating income of
$3.5 million, or $0.12 per share, as compared to the same
period of 2006 for operating, maintaining and improving the
water and wastewater systems at military bases for the U.S.
government. The increase in pretax operating income is
primarily due to a special wastewater expansion project at one
of the military installations undergoing significant
expansion. The project was completed in August 2007 and there
will be no further construction revenues associated with this
special project after that date.
-- Other higher operating expenses, a change in the effective
income tax rate, as well as other items described below,
contributed to an overall decrease of $0.42 per share to the
results of operations.
Total operating revenues of $227.4 million for the first nine
months of 2007 increased by $12.2% compared to revenues of $202.7
million recorded in the same period in 2006. Of the total increase in
revenues, water revenues increased by 4.2% due to rate increases and
higher consumption caused by warmer and drier weather. Electric
revenues decreased by 1.8% to $21.4 million reflecting the recording
of a probable refund to customers, discussed above in the quarterly
results. Contracted services revenues, comprised of construction
revenues and management fees for operating and maintaining the water
and wastewater systems at military bases, increased to $29.3 million,
an $18.0 million increase due primarily to the wastewater
infrastructure expansion project at Fort Bliss for the nine months
ended September 30, 2007.
Total operating expenses for the first nine months of 2007
increased to $175.5 million as compared to the $159.1 million recorded
for the same period in 2006. Impacting the comparability of the two
periods were: (i) an overall decrease in water supply costs reflecting
a favorable change in the supply mix, partially offset by higher
consumption; (ii) an increase of $7.5 million in the unrealized gain
on purchased power contracts due to an increase in forward energy
prices; (iii) increased other operating expenses due to increased
chemical and water treatment costs, as well as the operation of water
and wastewater systems at the Maryland and Virginia military bases for
a full nine months in 2007; (iv) increased administrative and general
expenses resulting from higher labor and outside service costs; (v)
increased maintenance expense reflecting emergency and scheduled
maintenance on wells; (vi) increased depreciation and amortization;
(vii) increased property and other taxes due to increased assessed
property values and increased payroll taxes; (viii) increased
construction cost and expenses of $13.4 million at Fort Bliss and
other military bases; and (ix) a net gain of $470,000 on the sale of
property.
Interest expenses increased for the nine months ended September
30, 2007 reflecting an increase in short-term interest rates and an
increase in the level of average borrowing.
Interest income decreased for the nine months ended September 30,
2007 due primarily to the initial recording in the first quarter of
2006 of interest accrued on the uncollected balance of the Aerojet
litigation memorandum account authorized by the CPUC and the receipt
of interest amounting to $381,000 related to a $3.0 million Internal
Revenue Service refund in May 2006. There was no such interest income
in the same period of 2007.
Income tax expense increased due to an increase in pretax income.
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.
Third Quarter 2007 Earnings Release Conference Call - The Company
will host a conference call today, Thursday, November 8, 2007 at 11:00
a.m. Pacific Time (PT), during which management will be making a brief
presentation focusing on the Company's third quarter results,
strategies, and operating trends.
Interested parties can listen to the conference call over the
Internet by logging onto www.aswater.com. The call will also be
recorded and replayed beginning Thursday, November 8, 2007 at 3:00
p.m. PT and will run through Thursday, November 15, 2007. The dial-in
number for the audio replay is (800) 642-1687, Conference ID#
20300962.
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 30 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 portions of Scottsdale, Arizona. The
Company also distributes electricity to over 23,000 customers in the
Big Bear recreational area of California. Through its non-regulated
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
September 30, December 31,
(in thousands) 2007 2006
---------------------------------
(Unaudited)
Assets
Utility Plant-Net $762,050 $750,601
Other Property and Investments 21,623 21,591
Current Assets 69,198 64,436
Regulatory and Other Assets 112,724 100,327
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$965,595 $936,955
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Capitalization and Liabilities
Capitalization $566,523 $551,567
Current Liabilities 89,012 85,903
Other Credits 310,060 299,485
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$965,595 $936,955
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Condensed Statements of Income Three months
(in thousands, except per share ended Nine months ended
amounts) September 30, September 30,
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2007 2006 2007 2006
----------------- -------------------
(Unaudited) (Unaudited)
Operating Revenues $75,842 $75,240 $227,358 $202,677
----------------- -------------------
Operating Expenses:
Supply costs $22,558 $24,046 $58,413 $59,122
Unrealized loss (gain) on
purchased power contracts 896 2,807 (1,578) 5,886
Other operating expenses 7,004 6,677 20,160 17,264
Administrative and general
expenses 11,789 12,614 38,460 34,628
Maintenance 3,897 3,395 11,223 9,113
Depreciation and amortization 7,439 6,634 21,616 19,726
Property and other taxes 2,820 2,660 8,593 7,687
Construction expenses 1,903 1,322 19,232 5,833
Net loss (gain) on sale of
property 11 (124) (594) (124)
----------------- -------------------
Total operating expenses $58,317 $60,031 $175,525 $159,135
Operating income $17,525 $15,209 $51,833 $43,542
Interest expenses (5,347) (5,349) (16,413) (16,037)
Interest income 590 522 1,742 2,298
Other 102 - 234 -
----------------- -------------------
Income From Operations Before
Income Tax Expenses $12,870 $10,382 $37,396 $29,803
Income tax expenses 5,241 4,809 15,461 12,061
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Net Income $7,629 $5,573 $21,935 $17,742
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Weighted Average Shares
Outstanding 17,197 17,003 17,091 16,898
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Earnings Per Common Share $0.44 $0.32 $1.26 $1.03
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Weighted Average Diluted Shares 17,239 17,057 17,132 16,949
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Earnings Per Diluted Share $0.44 $0.32 $1.26 $1.03
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Dividends Declared Per Common
Share $0.235 $0.225 $0.705 $0.675
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CONTACT: American States Water Company
Robert J. Sprowls
Senior Vice President, Chief Financial Officer,
Treasurer and Corporate Secretary
(909) 394-3600, ext. 647