• 22% increase in Diluted EPS over fourth
quarter of 2018 • 33% increase over full year 2018 (30%
increase in adjusted EPS over 2018) • Increased earnings per
share in all business segments for full year 2019
American States Water Company (NYSE:AWR) today reported basic
and fully diluted earnings per share of $0.45 for the fourth
quarter ended December 31, 2019, as compared to basic and fully
diluted earnings per share of $0.37 for the fourth quarter ended
December 31, 2018. Fully diluted earnings for the year ended
December 31, 2019 were $2.28 per share, compared to $1.72 per share
for 2018.
Fourth Quarter 2019 Results
The table below sets forth a comparison of the fourth quarter
2019 diluted earnings per share by business segment, as reported,
with the same period in 2018:
Diluted Earnings per
Share
Three Months Ended
12/31/2019
12/31/2018
CHANGE
Water
$
0.28
$
0.17
$
0.11
Electric
0.05
0.03
0.02
Contracted services
0.12
0.18
(0.06
)
AWR (parent)
—
(0.01
)
0.01
Consolidated diluted earnings per
share
$
0.45
$
0.37
$
0.08
Water Segment:
Diluted earnings from the water segment of AWR’s Golden State
Water Company (GSWC) subsidiary increased by $0.11 per share for
the three months ended December 31, 2019, as compared to the same
period in 2018. The following items affected the comparability
between the two periods (excluding the impact of billed surcharges,
which have no impact to net earnings):
- An increase in the water gross margin increased earnings by
approximately $0.04 per share largely as a result of a May 2019
final decision approved by the California Public Utilities
Commission (CPUC) in the water general rate case, which approved
new water rates and adopted supply costs effective January 1, 2019.
The 2019 water revenue requirement has also been reduced to reflect
a decrease in depreciation expense, due to a reduction in the
overall composite depreciation rates based on a revised study filed
in the general rate case. The decrease in depreciation expense
lowers the water gross margin, and is offset by a corresponding
decrease in depreciation expense as discussed below, resulting in
no impact to net earnings.
- An overall decrease in operating expenses (excluding supply
costs), which positively impacted earnings by $0.03 per share
largely due to lower depreciation expense, as well as
administrative and general expenses. As discussed above, the lower
depreciation expense is reflected in the new revenue requirement
approved in the general rate case. The decrease in administrative
and general expenses was largely due to lower outside service and
legal fees, as well as lower regulatory-related costs resulting
from the timing of the rate case cycle and when such costs are
incurred. These decreases were partially offset by higher other
operation and maintenance expenses, as well as property and other
taxes.
- An increase in interest and other income (net of interest
expense), resulting in an increase in water earnings of
approximately $0.02 per share as compared to the same period in
2018. The increase was due to gains generated during the three
months ended December 31, 2019 on the company’s investments held to
fund a retirement benefit plan, as compared to losses during the
same period in 2018 due to market conditions. These gains were
partially offset by an increase in interest expense due to higher
borrowings to fund capital expenditures, as well as interest income
related to a federal tax refund recorded during the fourth quarter
of 2018 with no similar item in 2019.
- Changes in the water segment's effective income tax rate (ETR)
resulting from certain flow-through taxes and permanent items for
the three months ended December 31, 2019 as compared to the same
period in 2018, increased earnings at the water segment by
approximately $0.02 per share.
Electric Segment:
The electric segment’s recorded diluted earnings for the three
months ended December 31, 2019 were $0.05 per share as compared to
$0.03 per share for the same period in 2018. There was an increase
in the electric gross margin as a result of new rates authorized by
the CPUC in the August 2019 final decision on the electric general
rate case, partially offset by an increase in operating expenses
and the ETR as compared to the same period in 2018 resulting from
certain flow-through taxes.
Contracted Services Segment:
For the three months ended December 31, 2019, diluted earnings
from the contracted services segment were $0.12 per share as
compared to $0.18 per share for the same period in 2018. The
decrease of $0.06 per share was largely due to differences in the
timing of construction work performed in 2019 as compared to 2018,
as well as an increase in outside services during the fourth
quarter of 2019. Diluted earnings for the twelve months ended
December 31, 2019 for this segment were $0.05 per share higher than
2018, as discussed in the full year 2019 results below.
AWR (parent):
For the three months ended December 31, 2019, diluted earnings
at AWR (parent) increased $0.01 per share due primarily to changes
in state unitary taxes.
Full Year 2019 Results
In August 2019, the CPUC issued a final decision on the electric
general rate case, which set new rates for 2018 through 2022. Since
the new rates were retroactive to January 1, 2018, the cumulative
2018 earnings impact from the decision of $0.04 per share was
included in 2019 results. Excluding this retroactive impact related
to the full year 2018, which is shown on a separate line in the
table below, fully diluted earnings for the year ended December 31,
2019, as adjusted, were $2.24 per share compared to $1.72 per share
for 2018, a 30% increase. The table below sets forth a comparison
of the diluted earnings per share contribution by business segment
and for the parent company.
Diluted Earnings per
Share
For The Year Ended
12/31/2019
12/31/2018
CHANGE
Water
$
1.61
$
1.19
$
0.42
Electric, adjusted (2019 excludes
retroactive impact of CPUC decision in the general rate case
related to 2018)
0.15
0.11
0.04
Contracted services
0.47
0.42
0.05
AWR (parent)
0.01
—
0.01
Consolidated diluted earnings per share,
adjusted
2.24
1.72
0.52
Retroactive impact of CPUC decision in the
electric general rate case related to the full year of 2018
0.04
—
0.04
Consolidated diluted earnings per share,
as reported
$
2.28
$
1.72
$
0.56
Water Segment:
Diluted earnings per share from the water segment for the year
ended December 31, 2019 increased by $0.42 per share as compared to
the same period in 2018 largely due to the approval of the water
general rate case in May 2019 and effective January 1, 2019. Also
included in the earnings for 2019 was a $1.1 million reduction to
administrative and general expense, positively impacting earnings
by $0.02 per share, which reflects the CPUC's approval received in
the general rate case for recovery of costs previously expensed as
incurred and tracked in memorandum accounts. Excluding this $0.02
per share impact, diluted earnings per share from the water segment
for 2019 increased by $0.40 per share due to the following items
(excluding billed surcharges):
- An overall increase in the water gross margin of $0.21 per
share, largely as a result of the May 2019 CPUC decision on the
general rate case, which approved new water rates and adopted
supply costs for 2019. The 2019 water revenue requirement has also
been reduced to reflect a decrease in depreciation expense, due to
a reduction in the overall composite depreciation rates based on a
revised study filed in the general rate case. The decrease in
depreciation expense lowers the water gross margin and is offset by
a corresponding decrease in depreciation expense, resulting in no
impact to net earnings.
- An overall decrease in operating expenses (excluding supply
costs) increased earnings by approximately $0.11 per share due, in
large part, to lower depreciation expense. The lower depreciation
expense is reflected in the new revenue requirement approved in the
general rate case. There was also a decrease in administrative and
general expenses primarily due to lower regulatory-related costs
resulting from the timing of the rate case cycle and when such
costs are incurred. These decreases were partially offset by an
overall increase in labor costs and property and other taxes.
- An increase in interest and other income (net of interest
expense), which increased earnings by approximately $0.05 per share
due to gains generated during 2019 on the company’s investments
held to fund a retirement benefit plan as compared to losses
incurred during 2018 due to market conditions, partially offset by
lower interest income and an increase in interest expense.
- Changes in the water segment’s ETR resulting from certain
flow-through taxes and permanent items for the year ended December
31, 2019 as compared to the same period in 2018, increased earnings
at the water segment by approximately $0.03 per share.
Electric Segment:
Excluding the retroactive impact of $0.04 per share resulting
from the electric general rate case related to the full year 2018,
which is shown on a separate line in the table above, diluted
earnings from the electric segment for 2019 were $0.15 per share as
compared to $0.11 per share for 2018. The increase was due to a
higher electric gross margin as a result of new rates authorized by
the CPUC's final decision, partially offset by an increase in
operating expenses and a higher ETR as compared to 2018 due to
changes in certain flow-through taxes.
Contracted Services Segment:
For the year ended December 31, 2019, diluted earnings from
contracted services were $0.47 per share, compared to $0.42 per
share for 2018. The increase was due, in part, to the commencement
of operations at Fort Riley in July 2018. There was also an
increase in management fees at several other military bases due to
the successful resolution of various price adjustments during 2018
and 2019.
AWR (parent):
For the year ended December 31, 2019, diluted earnings from AWR
(parent) increased $0.01 per share compared to 2018 due primarily
to changes in state unitary taxes.
Liquidity
In 2019, GSWC invested $136.2 million in company-funded capital
projects, a record high for the company. Continuing our strong
capital investment levels is a critical factor in delivering
consistent, high-quality service to all our customers, as well as
improving safety. AWR borrows under a credit facility, which
expires in May 2023, and provides funds to its subsidiaries in
support of their operations and capital investment programs. As of
December 31, 2019, there was $205.0 million outstanding under this
facility. In October 2019, the credit facility was temporarily
increased by $25 million to $225.0 million, effective until June
30, 2020. In February 2020, AWR received a binding commitment from
its lender for the option to revise the temporary increase of the
credit facility to $260.0 million through the end of 2020. When
needed, AWR will be able to exercise this commitment and have
immediate access to the additional funds. On December 31, 2020, the
borrowing capacity will revert to $200.0 million. Management
intends to seek additional financing in 2020 through the issuance
of long-term debt at GSWC. GSWC intends to use the proceeds from
any additional long-term debt to reduce its intercompany borrowings
and to partially fund capital expenditures. AWR intends to use any
financing proceeds from GSWC to pay down the amounts outstanding
under its credit facility.
Dividends
On January 28, 2020, AWR's board of directors approved a first
quarter dividend of $0.305 per share on AWR's common shares.
Dividends on the common shares will be paid on March 2, 2020
to shareholders of record at the close of business on
February 14, 2020. The board of directors of AWR
approved a 10.9% increase in the company’s third quarter 2019 cash
dividend on the common shares of the company. American States
Water Company has paid dividends to shareholders every year since
1931, increasing the dividends received by shareholders each
calendar year for 65 consecutive years, which places it in an
exclusive group of companies on the New York Stock Exchange that
have achieved that result. The company’s current policy is to
achieve a compound annual growth rate in the dividend of more than
7% over the long-term.
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. Furthermore, the retroactive impact related to
fiscal 2018 resulting from the CPUC's final decision on the
electric general rate case issued in August 2019 have been excluded
when communicating that segment's full year 2019 results to help
facilitate comparisons of the company’s performance from period to
period. All of 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, 2019 as filed with the Securities and Exchange Commission.
Conference Call
Robert J. Sprowls, president and chief executive officer, and
Eva G. Tang, senior vice president and chief financial officer,
will host a conference call to discuss these results at 2:00 p.m.
Eastern Time (11:00 a.m. Pacific Time) on Tuesday, February 25.
There will be a question and answer session as part of the call.
Interested parties can listen to the live conference call and view
accompanying slides on the internet at www.aswater.com. The call
will be archived on the website and available for replay beginning
February 25, 2020 at 5:00 p.m. Eastern Time (2:00 p.m. Pacific
Time) through March 3, 2020.
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 261,000 customer connections located
within more than 80 communities in Northern, Coastal and Southern
California. The company also distributes electricity to
approximately 24,000 customer connections 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 distribution and
wastewater collection and treatment facilities located on eleven
military bases throughout the country under 50-year privatization
contracts with the U.S. government.
American States Water
Company
Consolidated
Comparative Condensed Balance
Sheets
(in thousands)
December 31, 2019
December 31, 2018
Assets
Utility Plant-Net
$
1,415,705
$
1,296,310
Goodwill
1,116
1,116
Other Property and Investments
30,293
25,356
Current Assets
122,456
131,468
Regulatory and Other Assets
71,761
47,183
Total Assets
$
1,641,331
$
1,501,433
Capitalization and Liabilities
Capitalization
$
882,526
$
839,310
Current Liabilities
115,998
146,585
Other Credits
642,807
515,538
Total Capitalization and
Liabilities
$
1,641,331
$
1,501,433
Condensed Statements of
Income
(in thousands, except per share
amounts)
Three months ended December
31,
Twelve months ended December
31,
2019
2018
2019
2018
Operating Revenues
(Unaudited)
Water
$
71,718
$
66,424
$
319,830
$
295,258
Electric
9,515
8,802
39,548
34,350
Contracted services
31,760
35,779
114,491
107,208
Total operating revenues
112,993
111,005
473,869
436,816
Operating Expenses
Water purchased
17,026
16,847
72,289
68,904
Power purchased for pumping
2,098
1,830
8,660
8,971
Groundwater production assessment
4,942
4,294
18,962
19,440
Power purchased for resale
3,298
3,151
11,796
11,590
Supply cost balancing accounts
(4,181
)
(4,539
)
(7,026
)
(15,649
)
Other operation
8,210
7,525
32,756
31,650
Administrative and general
21,207
20,519
83,034
82,595
Depreciation and amortization
8,904
10,631
35,397
40,425
Maintenance
5,738
4,761
15,466
15,682
Property and other taxes
5,042
4,541
20,042
18,404
ASUS construction
16,002
18,738
55,673
53,906
Gain on sale of assets
(17
)
(42
)
(253
)
(85
)
Total operating expenses
88,269
88,256
346,796
335,833
Operating income
24,724
22,749
127,073
100,983
Other Income and Expenses
Interest expense
(5,708
)
(5,514
)
(24,586
)
(23,433
)
Interest income
605
1,765
3,249
3,578
Other, net
1,203
(1,084
)
3,276
760
Total other income and expenses,
net
(3,900
)
(4,833
)
(18,061
)
(19,095
)
Income Before Income Tax
Expense
20,824
17,916
109,012
81,888
Income tax expense
4,124
4,127
24,670
18,017
Net Income
$
16,700
$
13,789
$
84,342
$
63,871
Weighted average shares outstanding
36,842
36,749
36,814
36,733
Basic earnings per Common Share
$
0.45
$
0.37
$
2.28
$
1.73
Weighted average diluted shares
36,996
36,959
36,964
36,936
Fully diluted earnings per Common
Share
$
0.45
$
0.37
$
2.28
$
1.72
Dividends paid per Common Share
$
0.305
$
0.275
$
1.160
$
1.060
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200224005855/en/
Eva G. Tang Senior Vice President-Finance, Chief Financial
Officer, Corporate Secretary and Treasurer Telephone: (909)
394-3600, ext. 707
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