American States Water Company Announces Third Quarter 2017 Results
SAN DIMAS, Calif.–(BUSINESS WIRE)–American States Water Company (NYSE: AWR) today reported basic and fully
diluted earnings per share of $0.57 for the quarter ended
September 30, 2017, as compared to basic and fully diluted earnings per
share of $0.59 for the quarter ended September 30, 2016.
Third Quarter 2017 Results
The table below sets forth a comparison of the third quarter diluted
earnings per share by business segment, as reported:
| Diluted Earnings per Share | |||||||
| Three Months Ended | |||||||
| 9/30/2017 | 9/30/2016 | CHANGE | |||||
| Water | $ | 0.44 | $ | 0.47 | $ | (0.03 | ) |
| Electric | 0.03 | 0.02 | 0.01 | ||||
| Contracted services | 0.10 | 0.10 | — | ||||
| Consolidated diluted earnings per share, as reported | $ | 0.57 | $ | 0.59 | $ | (0.02 | ) |
Water Segment:
For the three months ended September 30, 2017, diluted earnings per
share from the water segment decreased by $0.03 to $0.44 per share as
compared to the same period in 2016. Impacting the quarter-over-quarter
comparison was a decrease in the water gross margin of $2.0 million, or
$0.03 per share, that was not reflected in the results for the three
months ended September 30, 2016 due to the delay by the California
Public Utilities Commission (CPUC) in issuing a decision on the water
general rate case for Golden State Water Company (GSWC). The water gross
margin recorded through September 30, 2016 reflected GSWC’s litigated
positions in the then pending water general rate case, which assumed the
CPUC would adopt GSWC’s positions in their entirety. When the decision
was issued in December 2016 with new rates retroactive to
January 1, 2016, a cumulative downward adjustment of $5.2 million to the
water gross margin was recorded in the fourth quarter of 2016 related to
the first three quarters of 2016. Approximately $2.0 million of this
amount would have lowered the water gross margin in the third quarter of
2016, had the CPUC decision been issued on time.
Excluding the impact of the item discussed above and surcharges
implemented to recover previously incurred costs which have no impact to
earnings, diluted earnings from the water segment for the quarter were
unchanged as compared to the same period in 2016. There was an overall
decrease in operating expenses (excluding supply costs) resulting mainly
from lower maintenance costs, as well as lower legal expenses related to
condemnation matters as compared to the same period in 2016. There was
also CPUC-approved second year rate increases effective January 1, 2017.
These increases to earnings were offset by lower water earnings due to
the cessation of Ojai operations as a result of GSWC’s sale of its Ojai
water system in June 2017, as well as a higher effective income tax rate
as compared to the third quarter of 2016.
Electric Segment:
For the three months ended September 30, 2017, diluted earnings from the
electric segment increased by $0.01 per share as compared to the same
period in 2016 due primarily to a lower effective income tax rate
resulting from differences between book and taxable income that are
treated as flow-through adjustments in accordance with regulatory
requirements (primarily related to plant, rate case and
compensation-related items). Flow-through adjustments increase or
decrease tax expense in one period, with an offsetting decrease or
increase in another period.
Contracted Services Segment:
For the three months ended September 30, 2017 and 2016, diluted earnings
per share from the contracted services segment were $0.10 per share.
There was an increase in management fee revenue for the third quarter of
2017 due to the successful resolution of various price adjustments and
asset transfers during 2016 and 2017, and the revenue generated from
Eglin Air Force Base in Florida (Eglin) since assuming the operation of
its water and wastewater systems on June 15, 2017. This increase in
management fee revenue was offset by lower construction activity and
higher operating expenses as compared to the third quarter of 2016.
Year-to-Date 2017 Results
Basic and fully diluted earnings were $1.53 per share for the nine
months ended September 30, 2017, as compared to basic and fully diluted
earnings of $1.32 per share for the same period in 2016. The table below
sets forth a comparison of the year-to-date diluted earnings per share
by business segment, as reported:
| Diluted Earnings per Share | ||||||
| Nine Months Ended | ||||||
| 9/30/2017 | 9/30/2016 | CHANGE | ||||
| Water | $ | 1.17 | $ | 1.04 | $ | 0.13 |
| Electric | 0.09 | 0.06 | 0.03 | |||
| Contracted services | 0.26 | 0.20 | 0.06 | |||
| AWR (parent) | 0.01 | 0.02 | (0.01 | ) | ||
| Consolidated diluted earnings per share, as reported | $ | 1.53 | $ | 1.32 | $ | 0.21 |
Water Segment:
For the nine months ended September 30, 2017, diluted earnings per share
from the water segment increased by $0.13 to $1.17 per share as compared
to the same period in 2016 due, in large part, to the recognition of a
pretax gain of $8.3 million, or $0.13 per share, on the sale of GSWC's
Ojai water system in June 2017. Furthermore, the following two items
related to other periods impacted the comparability of the results for
the nine months ended September 30, 2017 and 2016 which, when netted,
negatively impacted the reported results through September 30, 2017
compared to 2016 by approximately $3.7 million, or $0.06 per share:
-
A decrease in the water gross margin of $5.2 million, or $0.08 per
share, was not reflected in the results for the nine months ended
September 30, 2016 due to the delay by the CPUC in issuing a decision
on the water general rate case. When the decision was issued in
December 2016 with new rates retroactive to January 1, 2016, a
cumulative downward adjustment of $5.2 million was recorded to the
water gross margin in the fourth quarter of 2016, which related to the
first three quarters of 2016. -
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, during the nine
months ended September 30, 2017 GSWC recorded a regulatory asset and a
corresponding increase to pretax earnings of $1.5 million, or $0.02
per share, of which $1.2 million was reflected as a reduction to other
operation expenses and approximately $260,000 as additional revenue.
Excluding the impact of the items discussed above and a $3.1 million
increase in billed surcharges which have no impact to earnings, diluted
earnings from the water segment for the nine months ended September 30,
2017 increased by $0.06 per share as compared to the same period in
2016. The following items impacted the comparability between the two
periods:
-
A decrease in operating expenses (excluding supply costs) of $3.2
million, or $0.05 per share, due mostly to lower legal expenses
related to condemnation matters, as well as lower maintenance costs. -
An increase in interest and other income of $1.1 million, or $0.02 per
share, due to amounts collected from developers on certain outstanding
balances owed to GSWC and higher gains recorded on investments as
compared to 2016. -
A higher effective income tax rate, negatively impacting earnings by
$0.01 per share, resulting from differences between book and taxable
income that are treated as flow-through adjustments in accordance with
regulatory requirements (primarily plant, rate case and
compensation-related items).
Electric Segment:
For the nine months ended September 30, 2017, diluted earnings from the
electric segment were $0.09 per share as compared to $0.06 per share for
the same period in 2016. Operating expenses (other than supply costs)
decreased by $1.6 million primarily 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 the solar power program approved by the CPUC. There was
also a decrease in the effective income tax rate for the electric
segment as compared to the same period in 2016 resulting from
flow-through items as previously discussed.
Contracted Services Segment:
For the nine months ended September 30, 2017, diluted earnings per share
from the contracted services segment increased by $0.06 to $0.26 per
share as compared to the same period in 2016. There was an increase in
management fees from the successful resolution of various price
adjustments and asset transfers received during 2016 and 2017, including
approximately $1.0 million, or $0.02 per share, of retroactive
management fees recorded in 2017 which related to periods prior to 2017,
as well as a higher direct construction margin resulting primarily from
improved cost efficiencies. There was also an increase in management
fees and construction revenues generated from the operations at Eglin,
which began in June 2017. These increases to earnings were partially
offset by higher operation 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.
New Privatization Contract Award
On September 29, 2017, AWR’s contracted services segment, American
States Utility Services, Inc. (ASUS), was awarded a new 50-year contract
by the U.S. government to operate, maintain, and provide construction
management services for the water distribution, and wastewater
collection and treatment facilities at Fort Riley, a United States Army
installation located in Kansas. The initial value of the contract is
approximately $601 million over the 50-year period and is subject to
annual economic price adjustments. This initial value is also subject to
adjustment based on the results of a joint inventory of assets to be
performed. ASUS will assume operations at Fort Riley following the
completion of a six-to-twelve-month transition period currently underway.
Dividends
On October 30, 2017, AWR's Board of Directors approved the fourth
quarter dividend of $0.255 per share on AWR's Common Shares. Dividends
on the Common Shares will be payable on December 1, 2017 to shareholders
of record at the close of business on November 15, 2017. 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 gross margin for
various periods, which is computed by subtracting total water supply
costs from total water revenues. The discussion also includes AWR’s
operations in terms of diluted earnings per share by business segment,
which is each business segment’s net income 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 accounting
principles generally accepted in the United States (GAAP). 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 gross margin 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
measures regularly and compares them to historical periods and to the
operating budget.
Forward-Looking Statements
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 most recent Form 10-Q and Form 10-K filed with the Securities
and Exchange Commission.
Conference Call
The Company will host a conference call on November 7, 2017 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 Tuesday,
November 7, 2017 at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time)
through Tuesday, November 14, 2017.
About American States Water Company
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
Lake 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 | ||||||||
| September 30, | December 31, | |||||||
| (in thousands) | 2017 | 2016 | ||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Utility Plant-Net | $ | 1,181,616 | $ | 1,150,926 | ||||
| Goodwill | 1,116 | 1,116 | ||||||
| Other Property and Investments | 23,346 | 20,836 | ||||||
| Current Assets | 146,663 | 166,875 | ||||||
| Regulatory and Other Assets | 133,745 | 130,740 | ||||||
| Total Assets | $ | 1,486,486 | $ | 1,470,493 | ||||
| Capitalization and Liabilities | ||||||||
| Capitalization | $ | 846,761 | $ | 815,278 | ||||
| Current Liabilities | 151,869 | 177,944 | ||||||
| Other Credits | 487,856 | 477,271 | ||||||
| Total Capitalization and Liabilities | $ | 1,486,486 | $ | 1,470,493 | ||||
| Condensed Statements of Income | Three months ended | Nine months ended | ||||||
| (in thousands, except per share amounts) | September 30, | September 30, | ||||||
| 2017 | 2016 | 2017 | 2016 | |||||
| (Unaudited) | (Unaudited) | |||||||
| Operating Revenues | ||||||||
| Water | $ | 91,919 | $ | 90,617 | $ | 239,057 | $ | 237,987 |
| Electric | 7,994 | 8,146 | 26,108 | 26,420 | ||||
| Contracted services | 24,505 | 25,043 | 71,258 | 64,880 | ||||
| Total operating revenues | $ | 124,418 | $ | 123,806 | $ | 336,423 | $ | 329,287 |
| Operating Expenses | ||||||||
| Water purchased | $ | 20,576 | $ | 19,631 | $ | 50,619 | $ | 49,265 |
| Power purchased for pumping | 2,913 | 2,988 | 6,667 | 6,752 | ||||
| Groundwater production assessment | 5,870 | 4,482 | 14,176 | 11,150 | ||||
| Power purchased for resale | 2,439 | 2,394 | 7,847 | 7,481 | ||||
| Supply cost balancing accounts | (4,621 | ) | (4,213 | ) | (11,663 | ) | (10,145 | ) |
| Other operation | 7,657 | 7,448 | 21,989 | 21,331 | ||||
| Administrative and general | 21,790 | 19,768 | 62,534 | 61,829 | ||||
| Depreciation and amortization | 9,854 | 9,486 | 29,184 | 28,878 | ||||
| Maintenance | 3,222 | 4,203 | 10,292 | 11,908 | ||||
| Property and other taxes | 4,475 | 4,317 | 13,386 | 12,863 | ||||
| ASUS construction | 11,693 | 13,685 | 34,589 | 35,351 | ||||
| Gain on sale of assets | (17 | ) | – | (8,318 | ) | – | ||
| Total operating expenses | $ | 85,851 | $ | 84,189 | $ | 231,302 | $ | 236,663 |
| Operating income | $ | 38,567 | $ | 39,617 | $ | 105,121 | $ | 92,624 |
| Other Income and Expenses | ||||||||
| Interest expense | (5,775 | ) | (5,730 | ) | (17,606 | ) | (16,956 | ) |
| Interest income | 321 | 206 | 1,200 | 568 | ||||
| Other, net | 401 | 254 | 1,454 | 872 | ||||
| Total other income and expenses, net | (5,053 | ) | (5,270 | ) | (14,952 | ) | (15,516 | ) |
| Income Before Income Tax Expense | $ | 33,514 | $ | 34,347 | $ | 90,169 | $ | 77,108 |
| Income tax expense | 12,508 | 12,708 | 33,670 | 28,577 | ||||
| Net Income | $ | 21,006 | $ | 21,639 | $ | 56,499 | $ | 48,531 |
| Weighted average shares outstanding | 36,659 | 36,561 | 36,625 | 36,546 | ||||
| Basic earnings per Common Share | $ | 0.57 | $ | 0.59 | $ | 1.53 | $ | 1.32 |
| Weighted average diluted shares | 36,856 | 36,762 | 36,813 | 36,743 | ||||
| Fully diluted earnings per Common Share | $ | 0.57 | $ | 0.59 | $ | 1.53 | $ | 1.32 |
|
Dividends declared per Common Share |
$ | 0.255 | $ | 0.224 | $ | 0.739 | $ | 0.672 |
Contacts
American States Water Company
Eva G. Tang
Senior Vice
President-Finance, Chief Financial Officer,
Corporate Secretary and
Treasurer
(909) 394-3600, ext. 707
