American States Water Company Announces Fourth Quarter and Full Year 2018 Results
Fourth Quarter 2018 Results
The table below sets forth a comparison of the fourth quarter 2018 diluted earnings per share by business segment with diluted earnings per share for the fourth quarter of 2017, as reported:
Diluted Earnings per Share | ||||||||||||||
Three Months Ended | ||||||||||||||
12/31/2018 | 12/31/2017 | CHANGE | ||||||||||||
Water | $ | 0.17 | $ | 0.18 | $ | (0.01 | ) | |||||||
Electric | 0.03 | 0.02 | 0.01 | |||||||||||
Contracted services | 0.18 | 0.11 | 0.07 | |||||||||||
AWR (parent) | (0.01 | ) | 0.04 | (0.05 | ) | |||||||||
Consolidated diluted earnings per share, as reported | $ | 0.37 | $ | 0.35 | $ | 0.02 | ||||||||
Water Segment
For the three months ended
-
An overall increase in the water gross margin, which increased net
earnings by approximately
$0.02 per share, due primarily to third-year rate increases approved by theCalifornia Public Utilities Commission (“CPUC”) effectiveJanuary 1, 2018 . This increase was partially offset by the revenue impact from a lower authorized return on rate base approved in the cost of capital decision issued by the CPUC inMarch 2018 , which was effective in 2018. The lower authorized return decreased the water gross margin during the three months endedDecember 31, 2018 by approximately$0.02 per share. -
An increase in operating expenses (excluding supply costs) decreased
earnings by approximately
$0.02 per share due, in large part, to a reduction in legal costs of$1.8 million , or$0.03 per share recorded inDecember 2017 for amounts received pursuant to a settlement agreement, with no similar item in the fourth quarter of 2018. Excluding this item, overall recurring operating expenses decreased by$0.01 per share in the fourth quarter of 2018 primarily due to lower regulatory- and conservation-related costs. -
Excluding gains and losses from investments, there was an increase in
interest and other income (net of interest expense), which increased
earnings by approximately
$0.02 per share, due primarily to interest income related to a federal tax refund recorded during the fourth quarter of 2018. -
An overall decrease in the water segment's effective income tax rate
("ETR") increased earnings by approximately
$0.01 per share. The decrease in the ETR was due, in large part, to the unfavorable remeasurement adjustment recorded during the fourth quarter of 2017 at the water segment related to certain non-rate-regulated deferred tax assets (primarily compensation- and benefit-related items) in connection with the Tax Cuts and Jobs Act (“Tax Act”) enacted inDecember 2017 . 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 of$0.03 per share, which was mostly offset by an increase in earnings at AWR (parent) and, to a lesser extent, at the other two business segments. Excluding the effect of the remeasurement in 2017, the water ETR increased during the fourth quarter of 2018, as compared to the same period in 2017, due primarily to changes in flow-through adjustments recorded in accordance with regulatory requirements (primarily related to plant and compensation-related items).
The comparison between the two periods discussed above also excluded the reductions in water revenue in 2018 resulting from the Tax Act and billed surcharges, both of which had no material impact to earnings.
Electric Segment
For the three months ended
Contracted Services Segment
For the three months ended
AWR (parent)
For the three months ended
Full Year 2018 Results
Fully diluted earnings for the year ended
Diluted Earnings per Share | |||||||||||||
For The Year Ended | |||||||||||||
12/31/2018 | 12/31/2017 | CHANGE | |||||||||||
Water, excluding one-time gain on sale of Ojai water system |
$ | 1.19 | $ | 1.22 | $ | (0.03 | ) | ||||||
Electric | 0.11 | 0.11 | — | ||||||||||
Contracted services | 0.42 | 0.37 | 0.05 | ||||||||||
AWR (parent) | — | 0.05 | (0.05 | ) | |||||||||
Consolidated diluted earnings per share, adjusted | $ | 1.72 | $ | 1.75 | $ | (0.03 | ) | ||||||
Gain on sale of Ojai water system | — | 0.13 | (0.13 | ) | |||||||||
Totals from operations, as reported | $ | 1.72 | $ | 1.88 | $ | (0.16 | ) | ||||||
Water Segment
Included in the results for the year ended
Excluding the impact of the items discussed above, diluted earnings from
the water segment for 2018 increased by
-
An overall increase in the water gross margin of
$0.03 per share, largely due to revenues generated from CPUC-approved third-year rate increases effectiveJanuary 1, 2018 , partially offset by the effect of the cessation of theOjai operations in June of 2017 and the revenue impact from the lower authorized return on rate base in the cost of capital proceeding approved by the CPUC and effective in 2018. The lower return on rate base decreased GSWC’s 2018 adopted annual revenue requirement by approximately$3.6 million , or$0.07 per share. -
An increase in operating expenses (excluding supply costs) decreased
earnings by approximately
$0.04 per share due, in large part, to a reduction in legal costs of$1.8 million , or$0.03 per share, recorded inDecember 2017 for amounts received pursuant to a settlement agreement, with no similar item in the fourth quarter of 2018. Excluding this item, overall recurring operating expenses increased by approximately$0.01 per share due mostly to higher depreciation and property tax expenses, both of which are due to plant additions. -
Excluding gains and losses from investments, there was an increase in
interest and other income (net of interest expense), which increased
earnings by approximately
$0.01 per share due, in part, to interest income related to a federal tax refund recorded during the fourth quarter of 2018, partially offset by an increase in interest expense resulting from higher short-term borrowings to fund operations and a portion of GSWC’s capital expenditures. -
An overall decrease in the water segment's ETR, which positively
impacted earnings by approximately
$0.04 per share. As previously discussed, the decrease was due, in large part, to the unfavorable remeasurement adjustment of certain deferred tax balances in connection with the Tax Act, which negatively impacted the water segment’s earnings in 2017 by approximately$0.03 per share. In addition, the water ETR was favorably impacted in 2018 due to changes in flow-through adjustments recorded in accordance with regulatory requirements (primarily related to plant and compensation-related items).
The comparison between the two periods discussed above also excluded the reductions in water revenue in 2018 resulting from the Tax Act and billed surcharges, both of which had no material impact to earnings.
Electric Segment
For each of the years ended
Contracted Services Segment
For the year ended
AWR (parent)
For the year ended
Dividends
On
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 discussion
refers to a non-core business activity related to gains and losses on
investments held to fund a retirement benefit plan, which is excluded
when communicating earnings 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 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 excludes non-core business activities when discussing earnings results, and 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
Conference Call
The company will host a conference call on
About
American States Water Company | ||||||||||||||||||||
Consolidated | ||||||||||||||||||||
Comparative Condensed Balance Sheets | ||||||||||||||||||||
December 31, | ||||||||||||||||||||
(in thousands) | 2018 | 2017 | ||||||||||||||||||
Assets | ||||||||||||||||||||
Utility Plant-Net | $ | 1,296,310 | $ | 1,204,992 | ||||||||||||||||
Goodwill | 1,116 | 1,116 | ||||||||||||||||||
Other Property and Investments | 25,356 | 24,070 | ||||||||||||||||||
Current Assets | 131,468 | 155,463 | ||||||||||||||||||
Regulatory and Other Assets | 47,183 | 31,093 | ||||||||||||||||||
$ | 1,501,433 | $ | 1,416,734 | |||||||||||||||||
Capitalization and Liabilities | ||||||||||||||||||||
Capitalization | $ | 839,310 | $ | 850,984 | ||||||||||||||||
Current Liabilities | 146,585 | 156,662 | ||||||||||||||||||
Other Credits | 515,538 | 409,088 | ||||||||||||||||||
$ | 1,501,433 | $ | 1,416,734 | |||||||||||||||||
Condensed Statements of Income | Three months ended | Twelve months ended | ||||||||||||||||||
(in thousands, except per share amounts) | December 31, | December 31, | ||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Operating Revenues | ||||||||||||||||||||
Water | $ | 66,424 | $ | 67,275 | $ | 295,258 | $ | 306,332 | ||||||||||||
Electric | 8,802 | 7,861 | 34,350 | 33,969 | ||||||||||||||||
Contracted services | 35,779 | 29,044 | 107,208 | 100,302 | ||||||||||||||||
Total operating revenues | $ | 111,005 | $ | 104,180 | $ | 436,816 | $ | 440,603 | ||||||||||||
Operating Expenses | ||||||||||||||||||||
Water purchased | $ | 16,847 | $ | 17,683 | $ | 68,904 | $ | 68,302 | ||||||||||||
Power purchased for pumping | 1,830 | 1,851 | 8,971 | 8,518 | ||||||||||||||||
Groundwater production assessment | 4,294 | 4,462 | 19,440 | 18,638 | ||||||||||||||||
Power purchased for resale | 3,151 | 2,873 | 11,590 | 10,720 | ||||||||||||||||
Supply cost balancing accounts | (4,539 | ) | (6,276 | ) | (15,649 | ) | (17,939 | ) | ||||||||||||
Other operation | 7,525 | 8,005 | 31,650 | 29,994 | ||||||||||||||||
Administrative and general | 20,519 | 19,124 | 82,595 | 81,643 | ||||||||||||||||
Depreciation and amortization | 10,631 | 9,847 | 40,425 | 39,031 | ||||||||||||||||
Maintenance | 4,761 | 4,884 | 15,682 | 15,176 | ||||||||||||||||
Property and other taxes | 4,541 | 4,519 | 18,404 | 17,905 | ||||||||||||||||
ASUS construction | 18,738 | 15,249 | 53,906 | 49,838 | ||||||||||||||||
Gain on sale of assets | (42 | ) | - | (85 | ) | (8,318 | ) | |||||||||||||
Total operating expenses | 88,256 | 82,221 | 335,833 | 313,508 | ||||||||||||||||
Operating income | $ | 22,749 | $ | 21,959 | $ | 100,983 | $ | 127,095 | ||||||||||||
Other Income and Expenses | ||||||||||||||||||||
Interest expense | (5,514 | ) | (4,976 | ) | (23,433 | ) | (22,582 | ) | ||||||||||||
Interest income | 1,765 | 590 | 3,578 | 1,790 | ||||||||||||||||
Other, net | (1,084 | ) | 599 | 760 | 2,038 | |||||||||||||||
Total other income and expenses | (4,833 | ) | (3,787 | ) | (19,095 | ) | (18,754 | ) | ||||||||||||
Income from Operations Before Income Tax Expense | $ | 17,916 | $ | 18,172 | $ | 81,888 | $ | 108,341 | ||||||||||||
Income tax expense | 4,127 | 5,304 | 18,017 | 38,974 | ||||||||||||||||
Net Income | $ | 13,789 | $ | 12,868 | $ | 63,871 | $ | 69,367 | ||||||||||||
Basic Earnings Per Share | $ | 0.37 | $ | 0.35 | $ | 1.73 | $ | 1.88 | ||||||||||||
Fully Diluted Earnings Per Share | $ | 0.37 | $ | 0.35 | $ | 1.72 | $ | 1.88 | ||||||||||||
Weighted average shares outstanding | 36,749 | 36,680 | 36,733 | 36,638 | ||||||||||||||||
Weighted average diluted shares | 36,959 | 36,898 | 36,936 | 36,844 | ||||||||||||||||
Dividends paid per Common Share | $ | 0.275 | $ | 0.255 | $ | 1.060 | $ | 0.994 | ||||||||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20190225005937/en/
Source:
Eva G. Tang
Senior Vice President-Finance, Chief Financial Officer,
Corporate
Secretary and Treasurer
Telephone: (909) 394-3600, ext. 707