American States Water Company Announces Fourth Quarter and Full Year 2017 Results
SAN DIMAS, Calif.–(BUSINESS WIRE)–American States Water Company (NYSE:AWR) today reported basic and fully
diluted earnings per share of $0.35 for the fourth quarter ended
December 31, 2017, as compared to basic and fully diluted earnings per
share of $0.30 for the fourth quarter ended December 31, 2016. Fully
diluted earnings for the year ended December 31, 2017 were $1.88 per
share, compared to $1.62 per share for 2016.
Fourth Quarter 2017 Results
The table below sets forth a comparison of the fourth quarter 2017
diluted earnings per share by business segment with diluted earnings per
share for the fourth quarter of 2016, as reported:
| Diluted Earnings per Share | ||||||
| Three Months Ended | ||||||
| 12/31/2017 | 12/31/2016 | CHANGE | ||||
| Water | $ | 0.18 | $ | 0.13 | $ | 0.05 |
| Electric | 0.02 | 0.04 | (0.02 | ) | ||
| Contracted services | 0.11 | 0.13 | (0.02 | ) | ||
| AWR (parent) | 0.04 | — | 0.04 | |||
| Consolidated diluted earnings per share, as reported | $ | 0.35 | $ | 0.30 | $ | 0.05 |
Water Segment
For the three months ended December 31, 2017, fully diluted earnings
from the water segment of AWR’s Golden State Water Company (“GSWC”)
subsidiary were $0.18 per share, as compared to $0.13 per share for the
three months ended December 31, 2016. The Tax Cuts and Jobs Act (“Tax
Act”) enacted in December 2017 reduces the federal corporate income tax
rate from 35% to 21% effective January 1, 2018. While the changes from
the Tax Act did not have a significant impact to AWR’s consolidated
results for 2017, they did have a negative effect on earnings at the
water segment, which was mostly offset by an increase in earnings at AWR
(parent) as discussed later and, to a lesser extent, at the other two
business segments. The water segment’s earnings for the fourth quarter
of 2017 were negatively impacted by approximately $0.03 per share as a
result of the remeasurement of cumulative deferred tax balances as of
December 31, 2017. Excluding this one-time cumulative impact from the
Tax Act, diluted earnings from the water segment during the fourth
quarter of 2017 increased by $0.08 per share as compared to the same
period in 2016 due primarily to the following items:
-
A downward adjustment to earnings of $0.08 per share was recorded in
the fourth quarter of 2016 related to the first three quarters of 2016
due to a delayed general rate case decision issued in December 2016 by
the California Public Utilities Commission (“CPUC”) to set rates for
years 2016 – 2018. -
An overall decrease in the water gross margin in the fourth quarter of
2017 primarily due to the cessation of GSWC’s Ojai operations
resulting from the sale of this water system in June 2017, partially
offset by CPUC-approved second year rate increases effective January
1, 2017. -
An increase in interest and other income (net of interest expense) due
primarily to (i) higher gains recorded on investments as compared to
2016, (ii) interest income related to a settlement payment received in
December 2017, and (iii) higher interest income earned on regulatory
assets resulting mostly from an increase in the 90-day commercial
paper rate.
Overall, operating expenses remained relatively flat due to a decrease
in legal expenses related to condemnation matters mostly offset by
increases in conservation costs, regulatory-related expenses, and
property and other taxes.
Electric Segment
For the three months ended December 31, 2017, diluted earnings from the
electric segment decreased by $0.02 per share as compared to the prior
year’s fourth quarter due primarily to a decrease in the electric gross
margin. Downward adjustments to the revenue requirement were recorded
during the fourth quarter of 2017 to reflect updated lower allocations
from the general office resulting from the final water general rate case
decision.
Contracted Services Segment
For the three months ended December 31, 2017, diluted earnings from
AWR’s contracted services subsidiary, American States Utility Services,
Inc. (“ASUS”), decreased by $0.02 per share as compared to the prior
year’s fourth quarter. Included in the results for the three months
ended December 31, 2016 was approximately $0.03 per share in retroactive
operations and maintenance revenues for periods prior to the fourth
quarter of 2016 resulting from the successful resolution of a price
redetermination for one of ASUS’s contracts with the U.S. government.
There were no similar retroactive revenues recorded during the fourth
quarter of 2017. Excluding the impact of this retroactive amount,
diluted earnings from ASUS increased by $0.01 per share during the
fourth quarter of 2017 as compared to the same period in 2016 due,
largely, to increases in ongoing operations and maintenance management
fees resulting from the successful resolution of various price
adjustments, as well as the commencement of operations at Eglin Air
Force Base (“Eglin”) in Florida in June 2017. This increase was
partially offset by lower construction revenue.
AWR (parent)
For the three months ended December 31, 2017, diluted earnings from AWR
(parent) increased $0.04 per share compared to the same period in 2016
due, in large part, to the remeasurement of federal deferred tax
liabilities associated with the California state unitary deferred tax
balances. The remeasurement was based on the Tax Act's lower federal
corporate tax rate of 21%, which increased earnings at AWR (parent) by
approximately $0.02 per share during the fourth quarter of 2017. Also
affecting the comparability were lower state taxes recorded at the
parent level during the fourth quarter of 2017 as compared to the same
period in 2016.
Full Year 2017 Results
Fully diluted earnings for the year ended December 31, 2017 were $1.88
per share, compared to $1.62 per share for the same period in 2016. The
table below sets forth a comparison of the recorded diluted earnings per
share contribution by business segment and for the parent company:
| Diluted Earnings per Share | ||||||
| For The Year Ended | ||||||
| 12/31/2017 | 12/31/2016 | CHANGE | ||||
| Water | $ | 1.35 | $ | 1.17 | $ | 0.18 |
| Electric | 0.11 | 0.10 | 0.01 | |||
| Contracted services | 0.37 | 0.33 | 0.04 | |||
| AWR (parent) | 0.05 | 0.02 | 0.03 | |||
| Consolidated diluted earnings per share, as reported | $ | 1.88 | $ | 1.62 | $ | 0.26 |
Water Segment
For the year ended December 31, 2017, diluted earnings from the water
segment increased by $0.18 per share to $1.35 per share as compared to
$1.17 per share for 2016. Included in the results for 2017 was a $0.13
per share gain on the sale of the Ojai water system in June 2017 in
connection with a settlement agreement reached in an eminent domain suit
filed against GSWC. In addition, in February 2017, the CPUC approved
recovery of incremental costs related to California's drought state of
emergency, which were previously expensed. As a result of this approval,
in 2017 GSWC recorded an increase to earnings of $0.02 per share.
Excluding the impact of the two items discussed above and the $0.03
negative impact from the Tax Act previously discussed, diluted earnings
from the water segment for 2017 increased by $0.06 per share as compared
to 2016 due to:
-
An overall decrease in operating expenses (excluding supply costs) due
mostly to lower legal expenses related to condemnation matters, and -
An increase in interest and other income (net of interest expense) due
primarily to (i) higher gains recorded on investments as compared to
2016, (ii) amounts collected from developers on certain outstanding
balances owed to GSWC, (iii) higher interest income on GSWC's
regulatory assets resulting mostly from an increase in the 90-day
commercial paper rate, and (iv) interest income related to a
settlement payment received in December 2017.
The increase in water’s diluted earnings discussed above was partially
offset by an overall decrease in the water gross margin mainly due to
the cessation of Ojai operations in June 2017, partially offset by
revenues generated from CPUC-approved second year rate increases
effective January 1, 2017.
Electric Segment
For the year ended December 31, 2017, diluted earnings from the electric
segment increased by $0.01 per share as compared to the same period in
2016. Operating expenses (excluding supply costs) decreased due to
additional costs incurred in 2016 in response to power outages caused by
severe winter storms experienced in January 2016, lower regulatory
costs, and lower costs associated with energy efficiency and solar power
programs approved by the CPUC. There was also a decrease in the ETR for
the electric segment as compared to the same period in 2016 resulting
from flow-through items. These increases to earnings were partially
offset by a lower electric gross margin, which was due to the downward
adjustment to the revenue requirement to reflect a decrease in the
general office allocation approved in the water general rate case.
Contracted Services Segment
For the year ended December 31, 2017, diluted earnings from contracted
services were $0.37 per share, compared to $0.33 per share for the same
period in 2016. There was an increase in management fee revenues from
the successful resolution of various price adjustments and asset
transfers received during 2016 and 2017. There was also an increase in
management fees and construction revenues generated from the operations
at Eglin. These increases to earnings were partially offset by higher
operating costs due to Eglin's transition activities and joint inventory
study, as well as increases in labor and outside services costs related
to business development and compliance.
AWR (parent)
For the year ended December 31, 2017, diluted earnings from AWR (parent)
increased $0.03 per share compared to 2016 due to lower state taxes
recorded at the parent level, as well as the remeasurement of federal
deferred tax liabilities associated with the California state unitary
deferred tax balances. The remeasurement utilizes the Tax Act's lower
federal corporate tax rate of 21%, which increased earnings at AWR
(parent) by approximately $0.02 per share in 2017.
Dividends
On January 30, 2018, AWR's Board of Directors approved a first quarter
dividend of $0.255 per share on the Common Shares of the company.
Dividends on the Common Shares are payable on March 1, 2018 to
shareholders of record at the close of business on February 15, 2018.
American States Water Company has paid dividends to shareholders every
year since 1931, increasing the dividends received by shareholders each
calendar year for 63 consecutive years, which places it in an exclusive
group of companies on the New York Stock Exchange that have achieved
that result.
Non-GAAP Financial Measures
This press release includes a discussion on the water and electric gross
margins for various periods, which are computed by subtracting total
supply costs from total revenues. The discussion also includes AWR’s
operations in terms of diluted earnings per share by business segment,
which is each business segment’s earnings divided by the company’s
weighted average number of diluted shares. These items are derived from
consolidated financial information but are not presented in our
financial statements that are prepared in accordance with Generally
Accepted Accounting Principles (“GAAP”) in the United States. These
items constitute "non-GAAP financial measures" under Securities and
Exchange Commission rules.
The non-GAAP financial measures supplement our GAAP disclosures and
should not be considered as alternatives to the GAAP measures.
Furthermore, the non-GAAP financial measures may not be comparable to
similarly titled non-GAAP financial measures of other registrants. The
company uses the water and electric gross margins and earnings per share
by business segment as important measures in evaluating its operating
results and believes these measures are useful internal benchmarks in
evaluating the performance of its operating segments. The company
reviews these measurements regularly and compares them to historical
periods and to the operating budget.
Forward-Looking Statements
Certain matters discussed in this press 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, 2017 as filed with
the Securities and Exchange Commission.
Conference Call
The company will host a conference call on February 27, 2018 at 2:00
p.m. Eastern Time (11:00 a.m. Pacific Time) to discuss the company and
its financial results. Interested parties can listen to the live
conference call and view accompanying slides on the Internet at www.aswater.com
by clicking the “Investors” button at the top of the page. The call will
be archived on the website and available for replay beginning February
27, 2018 at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) through
March 6, 2018.
About American States Water
American States Water Company is the parent of Golden State Water
Company and American States Utility Services, Inc. Through its utility
subsidiary, Golden State Water Company, AWR provides water service to
approximately 259,000 customers located throughout 10 counties in
Northern, Coastal and Southern California. The company also distributes
electricity to approximately 24,000 customers in the City of Big Bear
and surrounding areas in San Bernardino County, California. Through its
contracted services subsidiary, American States Utility Services, Inc.,
the company provides operations, maintenance and construction management
services for water and wastewater systems located on military bases
throughout the country under 50-year privatization contracts with the
U.S. government.
| American States Water Company | ||||||||
| Consolidated | ||||||||
| Comparative Condensed Balance Sheets | ||||||||
| December 31, | ||||||||
| (in thousands) | 2017 | 2016 | ||||||
| Assets | ||||||||
| Utility Plant-Net | $ | 1,204,992 | $ | 1,150,926 | ||||
| Goodwill | 1,116 | 1,116 | ||||||
| Other Property and Investments | 24,070 | 20,836 | ||||||
| Current Assets | 155,463 | 166,875 | ||||||
| Regulatory and Other Assets | 31,093 | 130,740 | ||||||
| $ | 1,416,734 | $ | 1,470,493 | |||||
| Capitalization and Liabilities | ||||||||
| Capitalization | $ | 850,984 | $ | 815,278 | ||||
| Current Liabilities | 156,662 | 177,944 | ||||||
| Other Credits | 409,088 | 477,271 | ||||||
| $ | 1,416,734 | $ | 1,470,493 | |||||
| Condensed Statements of Income | Three months ended | Twelve months ended | ||||||
| (in thousands, except per share amounts) | December 31, | December 31, | ||||||
| 2017 | 2016 | 2017 | 2016 | |||||
| (Unaudited) | ||||||||
| Operating Revenues | ||||||||
| Water | $ | 67,275 | $ | 64,944 | $ | 306,332 | $ | 302,931 |
| Electric | 7,861 | 9,351 | 33,969 | 35,771 | ||||
| Contracted services | 29,044 | 32,505 | 100,302 | 97,385 | ||||
| Total operating revenues | $ | 104,180 | $ | 106,800 | $ | 440,603 | $ | 436,087 |
| Operating Expenses | ||||||||
| Water purchased | $ | 17,683 | $ | 15,177 | $ | 68,302 | $ | 64,442 |
| Power purchased for pumping | 1,851 | 1,911 | 8,518 | 8,663 | ||||
| Groundwater production assessment | 4,462 | 3,843 | 18,638 | 14,993 | ||||
| Power purchased for resale | 2,873 | 2,906 | 10,720 | 10,387 | ||||
| Supply cost balancing accounts | (6,276 | ) | (2,061 | ) | (17,939 | ) | (12,206 | ) |
| Other operation | 8,005 | 6,926 | 29,994 | 28,257 | ||||
| Administrative and general | 19,128 | 19,165 | 81,662 | 80,994 | ||||
| Depreciation and amortization | 9,847 | 9,972 | 39,031 | 38,850 | ||||
| Maintenance | 4,884 | 4,562 | 15,176 | 16,470 | ||||
| Property and other taxes | 4,519 | 3,938 | 17,905 | 16,801 | ||||
| ASUS construction | 15,249 | 18,369 | 49,838 | 53,720 | ||||
| Gain on sale of assets | – | – | (8,318 | ) | – | |||
| Total operating expenses | 82,225 | 84,708 | 313,527 | 321,371 | ||||
| Operating income | $ | 21,955 | $ | 22,092 | $ | 127,076 | $ | 114,716 |
| Other Income and Expenses | ||||||||
| Interest expense | (4,976 | ) | (5,036 | ) | (22,582 | ) | (21,992 | ) |
| Interest income | 590 | 189 | 1,790 | 757 | ||||
| Other, net | 603 | 125 | 2,057 | 997 | ||||
| Total other income and expenses | (3,783 | ) | (4,722 | ) | (18,735 | ) | (20,238 | ) |
| Income from Operations Before Income Tax Expense | $ | 18,172 | $ | 17,370 | $ | 108,341 | $ | 94,478 |
| Income tax expense | 5,304 | 6,158 | 38,974 | 34,735 | ||||
| Net Income | $ | 12,868 | $ | 11,212 | $ | 69,367 | $ | 59,743 |
| Basic Earnings Per Share | $ | 0.35 | $ | 0.30 | $ | 1.88 | $ | 1.63 |
| Fully Diluted Earnings Per Share | $ | 0.35 | $ | 0.30 | $ | 1.88 | $ | 1.62 |
| Weighted average shares outstanding | 36,680 | 36,570 | 36,638 | 36,552 | ||||
| Weighted average diluted shares | 36,898 | 36,772 | 36,844 | 36,750 | ||||
| Dividends paid per Common Share | $ | 0.255 | $ | 0.242 | $ | 0.994 | $ | 0.914 |
Contacts
American States Water Company
Eva G. Tang
Senior Vice
President-Finance, Chief Financial Officer,
Corporate Secretary and
Treasurer
Telephone: (909) 394-3600, ext. 707
