News Column

American States Water Announces Earnings for the Fourth Quarter and the Year 2013

February 26, 2014

SAN DIMAS, Calif.--(BUSINESS WIRE)-- American States Water Company (NYSE:AWR) today reported net income of $11.8 million, or basic and fully diluted earnings per share of $0.30 for the quarter ended December 31, 2013, as compared to net income of $10.3 million, or basic and fully diluted earnings per share of $0.27, for the quarter ended December 31, 2012, an 11.1% increase in diluted earnings per share.

Fourth Quarter 2013 Results

The table below sets forth a comparison of the fourth quarter diluted earnings per share by business segment:

          Q4 2013     Q4 2012     Change
Water     $0.18       $0.13       $0.05
Electric 0.01 0.02 (0.01 )
Contracted services 0.10 0.12 (0.02 )
AWR (parent) 0.01     0.01  
Totals   $0.30         $0.27         $0.03  
 


Water

For the three months ended December 31, 2013, fully diluted earnings from the water segment of AWR’s Golden State Water Company (“GSWC”) subsidiary increased by $0.05 per share to $0.18 per share, as compared to $0.13 per share for the three months ended December 31, 2012. Items impacting the comparability of the two periods are detailed below:

  • An increase in the water gross margin of approximately $3.1 million, or $0.05 per share, due primarily to a higher adopted gross margin effective January 1, 2013 approved by the California Public Utilities Commission ("CPUC") on May 9, 2013 in connection with the water general rate case. In addition, there was an increase of $2.8 million in revenues with a corresponding increase in operating expenses, representing new surcharges billed to customers during the fourth quarter of 2013 as compared to the same period in 2012 to recover previously incurred costs. These surcharges had no impact to net earnings;
  • Excluding supply costs and the $2.8 million of surcharges discussed above, operating expenses decreased by approximately $1.0 million, or $0.02 per share, due primarily to decreases in: (i) depreciation expense as a result of lower composite depreciation rates approved in the water general rate case; (ii) planned maintenance expense, and (iii) administrative and general expenses resulting primarily from lower employee-related benefits, and
  • An increase in the effective income tax rate for the water segment during the quarter ended December 31, 2013 as compared to the same period in 2012, which decreased earnings by $0.02 per share, primarily due to changes between book and taxable income that were treated as flow-through adjustments in accordance with regulatory requirements.

    Electric

    Diluted earnings from GSWC’s electric operations decreased by $0.01 per share over the prior year’s fourth quarter due primarily to an increase in other operating expenses and a higher electric effective income tax rate.

    Contracted Services

    Diluted earnings from AWR’s contracted services subsidiary, American States Utility Services, Inc. (“ASUS”), decreased by $0.02 per share over the prior year’s fourth quarter, due primarily to an overall decrease in construction activity as compared to the same period in 2012. The level of construction activities tends to fluctuate period over period. In addition, there was an expected slowdown of renewal and replacement capital work at various bases over the prior year’s fourth quarter. Furthermore, diluted earnings from contracted services decreased due to an increase in operating expenses related to employee related costs, consulting and other outside services costs due, in part, to the pursuit of new military base utility privatization opportunities. The decrease in construction activities and higher operating expenses resulted in a decrease to earnings of approximately $0.05 per share. These decreases in diluted earnings were partially offset by a lower effective income tax rate, increasing earnings by $0.03 per share, primarily as the result of a cumulative tax deduction taken for certain construction activities on a recently filed tax return and expected to be taken on amended tax returns.

    Full Year 2013 Results

    Basic and fully diluted earnings per share for the year ended December 31, 2013 were $1.61, compared to $1.42 and $1.41 per common share on a basic and fully diluted basis, respectively, for the same period in 2012. This represents a 14.2% increase over the prior year in fully diluted earnings per share. The table below sets forth a comparison of the diluted earnings per share contribution by business segment for 2013 with 2012:

            Year Ended December 31,
        2013     2012     Change
    Water   $1.19       $0.90     $0.29
    Electric 0.06 0.12 (0.06 )
    Contracted services 0.30 0.39 (0.09 )
    AWR (parent) 0.06             0.06  
    Totals   $1.61         $1.41         $0.20  
     

     

      Increase/

    Reconciliation of changes in EPS from 2012 to 2013:

    (decrease)

     

    Water Segment:

    Water gross margin contribution due to rate increases (excluding surcharges)

    $0.20
    One-time recovery of previously incurred costs 0.04

    Higher operating expenses – primarily planned maintenance costs (excluding surcharges)

    (0.01 )

    Lower depreciation & amortization expense (excluding surcharges)

    0.04
    Lower effective income tax rate due to flow-through adjustments 0.02

    Electric Segment:

    A decrease in the recovery of costs associated with the Renewables Portfolio Standard, an increase in A&G expenses due primarily to the processing of the general rate case, and a higher effective income tax rate

    (0.06

    )

    Contracted Services Segment:

    Lower construction activities due to weather conditions and other delays

    (0.10

    )

    Higher operating and administrative expenses due, in part, to pursue new military base opportunities (0.03 )
    Lower effective income tax rate due to a cumulative tax deduction on construction activities ($0.03 per share relates to periods prior to 2013) 0.04

    AWR parent:

    Increase due primarily to a cumulative tax benefit related to an employee benefit program ($0.03 per share relates to periods prior to 2013)

    0.06

     

    2013 Consolidated EPS increase

    $0.20

     
     



    Non-GAAP Financial Measures

    This press release includes a discussion on water and electric gross margins, which are computed by taking total water and electric revenues, less total supply costs. 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 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 measures regularly and compares them to historical periods and to the operating budget.

    Other - 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, 2013 as filed with the Securities and Exchange Commission.

    Fourth Quarter 2013 Earnings Release Conference Call - The Company will host a conference call on February 27, 2014 at 2:00 p.m. Eastern Time (11:00 a.m. Pacific Time). Interested parties can listen to the live conference call over the Internet by logging on to www.aswater.com.

    The call will also be archived on our website and can be replayed beginning Thursday, February 27, 2014 at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) and will run through Thursday, March 6, 2014. After logging on to the website, click the “Investors” button at the top of the page. The archive is located just above the “Stock Quote” section.

    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 257,000 customers located within 75 communities 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 through 50-year privatization contracts with the U.S. government.

    American States Water Company has paid dividends to shareholders every year since 1931, increasing the dividends received by shareholders each calendar year since 1954.

    American States Water Company
    Consolidated
    Comparative Condensed Balance Sheets        
    December 31,
    (in thousands)   2013     2012  
    (Unaudited)
    Assets
    Utility Plant-Net $981,477$917,791
    Goodwill 1,116 1,116
    Other Property and Investments 15,806 13,755
    Current Assets 191,617 184,033
    Regulatory and Other Assets   120,167     164,248  
        $1,310,183     $1,280,943  
    Capitalization and Liabilities
    Capitalization $818,483$787,042
    Current Liabilities 100,906 93,697
    Other Credits   390,794     400,204  
        $1,310,183     $1,280,943  
     
    Condensed Statements of Income Three months ended Twelve months ended
    (in thousands, except per share amounts)   December 31, December 31,
    2013     2012   2013     2012  
    (Unaudited) (Unaudited)
    Operating Revenues
    Water $72,897$67,564$320,131$305,898
    Electric 10,429 9,298 38,409 37,033
    Contracted services 26,590     34,679   113,537     123,977  
    Total operating revenues$109,916$111,541$472,077$466,908
     
    Operating Expenses
    Water purchased $12,282$11,753$58,930$54,010
    Power purchased for pumping 2,133 1,713 9,518 8,355

    Groundwater production assessment

    3,875 3,504 15,541 14,732
    Power purchased for resale 3,498 3,395 13,392 12,120
    Supply cost balancing accounts 223 2,149 214 11,709
    Other operation 8,609 7,943 27,767 29,790
    Administrative and general 21,188 18,106 77,291 70,556
    Depreciation and amortization 10,753 10,258 40,090 41,385
    Maintenance 4,259 4,472 17,772 15,887
    Property and other taxes 3,861 3,682 15,865 15,381
    ASUS construction 17,574 23,444 76,627 81,957
    Net gain on sale of property 10     -   (2 )   (68 )
    Total operating expenses 88,265 90,419 353,005 355,814
     
    Operating income$21,651$21,122$119,072$111,094
     
    Other Income and Expenses
    Interest expense (5,017 ) (4,957 ) (22,415 ) (22,765 )
    Interest income 195 204 707 1,333
    Other, net 432     (4 ) 1,105     431  
    Total other income and expenses (4,390 ) (4,757 ) (20,603 ) (21,001 )
     
     
    Income from Operations Before Income Tax Expense$17,261$16,365$98,469$90,093
    Income tax expense   5,481     6,074   35,783     35,945  
    Net Income   $11,780     $10,291   $62,686     $54,148  
     
    Basic Earnings Per Share$0.30$0.27$1.61$1.42
    Fully Diluted Earnings Per Share$0.30$0.27$1.61$1.41
    Weighted average shares outstanding38,71738,44438,63937,998
    Weighted average diluted shares38,95638,73838,86938,262
     
    Dividends Declared Per Common Share$0.2025$0.1775$0.760$0.635





    American States Water Company

    Eva G. Tang

    Senior Vice President-Finance, Chief Financial Officer,

    Corporate Secretary and Treasurer

    (909) 394-3600, ext. 707


    Source: American States Water Company


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