- 5.6% increase in third quarter consolidated diluted EPS over
third quarter of 2020, or 8.6% increase as adjusted
- 11.7% increase in year-to-date consolidated diluted EPS over
prior year, or 10.7% increase as adjusted
American States Water Company (NYSE:AWR) today reported basic
and fully diluted earnings per share of $0.76 for the quarter ended
September 30, 2021, as compared to basic and fully diluted earnings
per share of $0.72 for the quarter ended September 30, 2020.
Included in the results for the third quarter of 2021 were minimal
gains on investments held to fund one of the company's retirement
plans, as compared to gains of $1.2 million, or $0.02 per share,
for the same period in 2020 largely due to volatility in the
financial markets resulting, in part, from the COVID-19 pandemic.
Excluding the gains on investments from both periods, adjusted
diluted earnings for the third quarter of 2021 were $0.76 per
share, as compared to adjusted diluted earnings of $0.70 per share
for the third quarter of 2020, an adjusted increase of $0.06 per
share, or 8.6%.
Third Quarter 2021 Results The table below sets forth a
comparison of diluted earnings per share contribution by business
segment and for the parent company as recorded during the third
quarter of 2021 and 2020.
Diluted Earnings per
Share
Three Months Ended
9/30/2021
9/30/2020
CHANGE
Water
$
0.62
$
0.57
$
0.05
Electric
0.04
0.04
—
Contracted services
0.11
0.10
0.01
AWR (parent)
(0.01
)
0.01
(0.02
)
Consolidated fully diluted earnings per
share, as reported
$
0.76
$
0.72
$
0.04
Water Segment:
Diluted earnings from AWR's regulated water utility segment,
Golden State Water Company ("GSWC"), for the three months ended
September 30, 2021 were $0.62 per share as compared to $0.57 per
share for the same period in 2020. Excluding the gains on
investments from both periods as discussed above, the water
segment's adjusted diluted earnings for the third quarter of 2021
were $0.62 per share, as compared to adjusted diluted earnings of
$0.55 per share for the third quarter of 2020, an adjusted increase
of $0.07 per share, due to the following items:
- An increase in water’s operating revenues less water supply
costs (“RLWSC”) of $3.1 million as a result of new rates authorized
by the California Public Utilities Commission ("CPUC"). Effective
January 1, 2021, GSWC received its full third-year step increase,
which it achieved as a result of passing an earnings test. The
higher water rates are expected to increase water’s RLWSC by $11.1
million for 2021.
- An overall increase in operating expenses (excluding supply
costs) of $766,000, which negatively impacted earnings and was
mainly due to increases in water treatment costs, conservation
costs, and depreciation expense, partially offset by a decrease in
maintenance expense.
- A decrease in interest expense (net of interest and other
income) of $754,000, which favorably impacted earnings and resulted
primarily from lower overall interest rates due, in large part, to
the early redemption of 9.56% private placement notes in the amount
of $28 million in May 2021.
- A decrease in the effective income tax rate, which favorably
impacted earnings and resulted primarily from changes in certain
flow-through taxes and permanent items during the three months
ended September 30, 2021, as compared to the same period in 2020.
As a regulated utility, GSWC treats certain temporary differences
as flow-through in computing its income tax expense consistent with
the income tax method used in its CPUC-jurisdiction ratemaking.
Changes in the magnitude of flow-through items either increase or
decrease tax expense, thereby affecting diluted earnings per
share.
Electric Segment:
Diluted earnings from the electric utility segment were $0.04
per share for the three months ended September 30, 2021 and 2020.
An increase in electric’s operating revenues less electric supply
costs (“RLESC”) was largely offset by higher operating
expenses.
Contracted Services Segment:
Diluted earnings from the contracted services segment for the
three months ended September 30, 2021 increased $0.01 per share as
compared to the same period in 2020, largely due to a decrease in
overall operating expenses.
AWR (parent):
Diluted earnings from AWR (parent) for the three months ended
September 30, 2021 decreased $0.02 per share due to changes in
state unitary taxes.
Year-To-Date 2021 Results Fully diluted earnings for the
nine months ended September 30, 2021 were $2.00 per share as
compared to $1.79 per share recorded for the same period in 2020.
Included in the results for the nine months ended September 30,
2021 were gains on investments held to fund one of the Company's
retirement plans totaling $2.3 million, or $0.04 per share, as
compared to $1.3 million, or $0.02 per share, in gains generated
during the same period in 2020 largely due to volatility in the
financial markets. Excluding these gains from both periods,
adjusted diluted earnings for the nine months ended September 30,
2021 were $1.96 per share as compared to adjusted diluted earnings
of $1.77 per share for the same period in 2020, an adjusted
increase of $0.19 per share, or 10.7%. The table below sets forth a
comparison of diluted earnings per share contribution by business
segment and for the parent company as recorded during the nine
months ended September 30, 2021 and 2020.
Diluted Earnings per
Share
Nine Months Ended
9/30/2021
9/30/2020
CHANGE
Water
$
1.51
$
1.35
$
0.16
Electric
0.14
0.13
0.01
Contracted services
0.35
0.30
0.05
AWR (parent)
—
0.01
(0.01
)
Consolidated fully diluted earnings per
share, as reported
$
2.00
$
1.79
$
0.21
Water Segment:
For the nine months ended September 30, 2021, diluted earnings
from the water segment were $1.51 per share as compared to $1.35
per share for the same period in 2020, an increase of $0.16 per
share. Excluding the gains on investments held to fund one of the
Company's retirement plans from both periods as discussed above,
adjusted diluted earnings for the nine months ended September 30,
2021 at the water segment were $1.47 per share as compared to
adjusted diluted earnings of $1.33 per share for the same period in
2020. This adjusted increase of $0.14 per share was due to the
following items:
- An increase in water’s RLWSC of $8.8 million as a result of new
rates authorized by the CPUC. GSWC received its full third-year
step increase effective January 1, 2021, which is expected to
increase water’s RLWSC by $11.1 million for 2021.
- An overall increase in operating expenses (excluding supply
costs) of $1.9 million, which negatively impacted earnings and was
primarily due to increases in water treatment costs, conservation
costs, regulatory costs, insurance premiums, depreciation expense,
and property and other non-income taxes as compared to the same
period in 2020, partially offset by a decrease in maintenance
expense.
- An overall increase in interest expense (net of interest and
other income) of $1.1 million, which negatively impacted earnings
and was primarily due to an overall increase in interest rates at
the water segment compared to the same period in 2020 due, in part,
to the issuance of long-term debt in July 2020. GSWC used the
proceeds to pay down its intercompany borrowings (as required by
the CPUC); intercompany borrowings bear lower short-term
rates.
- A decrease in the effective income tax rate, which favorably
impacted earnings and resulted primarily from changes in certain
flow-through taxes and permanent items during the nine months ended
September 30, 2021 as compared to the same period in 2020. As a
regulated utility, GSWC treats certain temporary differences as
flow-through in computing its income tax expense consistent with
the income tax method used in its CPUC-jurisdiction ratemaking.
Changes in the magnitude of flow-through items either increase or
decrease tax expense, thereby affecting diluted earnings per
share.
Electric Segment:
Diluted earnings from the electric segment for the nine months
ended September 30, 2021 increased by $0.01 per share as compared
to the same period in 2020. Increases in electric’s RLESC resulting
from new rates authorized by the CPUC, as well as a decrease in
interest expense, were partially offset by an increase in operating
expenses.
Contracted Services Segment:
Diluted earnings from the contracted services segment for the
nine months ended September 30, 2021 increased by $0.05 per share
as compared to the same period in 2020 primarily due to an overall
increase in construction activity and management fee revenue, as
well as a decrease in overall operating expenses including lower
legal and other outside services costs, labor costs and maintenance
expense. The increase in construction activity was largely due to
timing differences of when work was performed as compared to the
first nine months of 2020. We expect the contracted services
segment to contribute $0.45 to $0.49 per share for the year
2021.
AWR (parent):
Diluted earnings from AWR (parent) for the nine months ended
September 30, 2021 decreased $0.01 per share due to changes in
state unitary taxes.
Regulatory Matters On July 15, 2020, GSWC filed a general
rate case application for all its water regions and the general
office that will determine new water rates for the years 2022 –
2024. Among other things, GSWC requested capital budgets in this
application of approximately $450.6 million for the three-year rate
cycle, and another $11.4 million of capital projects to be filed
for revenue recovery only through advice letters when those
projects are completed. In September 2021, GSWC and the Public
Advocates Office at the CPUC reached a settlement in principle on
nearly all of the items in this general rate case application. The
unsettled matters are GSWC's requests for: (i) a medical cost
balancing account, (ii) a general liability insurance cost
balancing account, and (iii) the consolidation of two of GSWC's
customer service areas. The date to file a Joint Motion for
Approval of Settlement Agreement to the CPUC has been proposed for
November 23, 2021. As a result of this proposed timing, a final
decision from the CPUC on this general rate case application is not
expected by the end of 2021. For a final decision issued after
2021, new rates adopted in the case will be effective retroactively
to January 1, 2022.
Dividends On October 26, 2021, AWR's Board of Directors
approved a fourth quarter dividend of $0.365 per share on AWR's
Common Shares. Dividends on the Common Shares will be paid on
December 1, 2021 to shareholders of record at the close of business
on November 15, 2021. AWR has paid common dividends every year
since 1931, and has increased the dividends received by
shareholders each calendar year for 67 consecutive years, which
places it in an exclusive group of companies on the New York Stock
Exchange that have achieved that result. AWR'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 about “operating revenues less supply costs” at the
company’s water and electric segments. Operating revenues less
supply costs are computed by subtracting water supply costs from
water operating revenues (or RLWSC), and by subtracting electric
supply costs from electric operating revenues (or RLESC). The
company believes these measures are useful supplemental data in
that they remove the effects of pass-through supply costs that, due
to regulatory mechanisms in place, do not impact the profitability
of AWR’s water and electric segments. 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. Furthermore,
the gains generated on the investments held to fund one of the
company's retirement plans during the three-and nine-month periods
ended September 30, 2021 and 2020 have been excluded when
communicating the results to help facilitate comparisons of the
company’s performance from period to period. 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 “operating revenues less supply
costs” at its water and electric segments, and diluted earnings per
share by each 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.
However, these measures are not presented in accordance with GAAP
and should not be considered as an alternative to "operating
revenues" or "fully diluted earnings per common share", which are
determined in accordance with GAAP and presented in the company’s
consolidated statements of income. The company has provided the
computations and reconciliations of its non-GAAP measures to the
most directly comparable GAAP measures in this press release.
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 most
recent Form 10-Q and Form 10-K filed with the Securities and
Exchange Commission.
Conference Call Robert Sprowls, president and chief
executive officer, and Eva 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, November 2. 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 November 2, 2021 at 5:00 p.m.
Eastern Time (2:00 p.m. Pacific Time) through November 9, 2021.
About American States Water Company American States Water
Company is the parent of Golden State Water Company, Bear Valley
Electric Service, Inc. and American States Utility Services, Inc.,
serving over one million people in nine states. Through its water
utility subsidiary, Golden State Water Company, the company
provides water service to approximately 262,500 customer
connections located within more than 80 communities in Northern,
Coastal and Southern California. Through its electric utility
subsidiary, Bear Valley Electric Service, Inc., the company
distributes electricity to approximately 24,600 customer
connections 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 distribution and wastewater collection and
treatment facilities located on 11 military bases throughout the
country under 50-year privatization contracts with the U.S.
government.
American States Water
Company
Consolidated
Comparative Condensed Balance
Sheets (Unaudited)
(in thousands)
September 30, 2021
December 31, 2020
Assets
Net Property, Plant and Equipment
$1,594,546
$1,512,043
Goodwill
1,116
1,116
Other Property and Investments
37,287
35,318
Current Assets
143,659
157,115
Other Assets
98,192
86,011
Total Assets
$1,874,800
$1,791,603
Capitalization and Liabilities
Capitalization
$1,091,028
$1,082,021
Current Liabilities
151,120
118,572
Other Credits
632,652
591,010
Total Capitalization and
Liabilities
$1,874,800
$1,791,603
Condensed Statements of Income
(Unaudited)
Condensed Statements of Income
(Unaudited)
(in thousands,
except per share amounts)
Three months ended September
30,
Nine months ended September
30,
2021
2020
2021
2020
Operating Revenues
Water
$
102,768
$
98,701
$
269,430
$
257,199
Electric
8,564
8,288
28,211
26,935
Contracted services
25,423
26,699
84,588
79,909
Total operating revenues
136,755
133,688
382,229
364,043
Operating Expenses
Water purchased
24,093
23,445
60,248
56,291
Power purchased for pumping
3,584
3,369
8,590
7,626
Groundwater production assessment
5,185
5,962
14,845
15,140
Power purchased for resale
2,875
2,117
8,203
7,127
Supply cost balancing accounts
(2,446
)
(2,639
)
(7,959
)
(6,606
)
Other operation
9,414
8,128
26,165
24,573
Administrative and general
20,255
20,644
62,938
63,992
Depreciation and amortization
9,826
9,348
29,156
27,190
Maintenance
2,979
4,246
8,908
12,224
Property and other taxes
6,052
5,693
17,265
16,098
ASUS construction
12,154
13,568
42,910
39,166
Total operating expenses
93,971
93,881
271,269
262,821
Operating income
42,784
39,807
110,960
101,222
Other Income and Expenses
Interest expense
(5,553
)
(6,161
)
(17,843
)
(17,533
)
Interest income
333
316
1,136
1,364
Other, net
467
1,613
2,998
2,388
Total other income and expenses,
net
(4,753
)
(4,232
)
(13,709
)
(13,781
)
Income Before Income Tax
Expense
38,031
35,575
97,251
87,441
Income tax expense
9,878
9,045
23,254
21,227
Net Income
$
28,153
$
26,530
$
73,997
$
66,214
Weighted average shares outstanding
36,933
36,886
36,916
36,877
Basic earnings per Common Share
$
0.76
$
0.72
$
2.00
$
1.79
Weighted average diluted shares
37,025
37,002
37,004
36,990
Fully diluted earnings per Common
Share
$
0.76
$
0.72
$
2.00
$
1.79
Dividends paid per Common Share
$
0.365
$
0.335
$
1.035
$
0.945
Computations and Reconciliations of Non-GAAP Financial
Measures Below are the computations and reconciliations of
diluted earnings per share from the measure of operating income by
business segment as disclosed in the company’s most recent Form
10-Q (Note 10 to the Unaudited Consolidated Financial Statements),
to AWR’s consolidated fully diluted earnings per share for the
three and nine months ended September 30, 2021 and 2020.
Water
Electric
Contracted Services
AWR (Parent)
Consolidated (GAAP)
In 000's except per share
amounts
Q3 2021
Q3 2020
Q3 2021
Q3 2020
Q3 2021
Q3 2020
Q3 2021
Q3 2020
Q3 2021
Q3 2020
Operating income (Note 10)
$
35,459
$
33,149
$
2,053
$
1,865
$
5,273
$
4,794
$
(1
)
$
(1
)
$
42,784
$
39,807
Other income and expense
4,669
4,323
33
24
(111
)
(40
)
162
(75
)
4,753
4,232
Income tax expense (benefit)
7,993
7,683
537
533
1,265
1,150
83
(321
)
9,878
9,045
Net income
$
22,797
$
21,143
$
1,483
$
1,308
$
4,119
$
3,684
$
(246
)
$
395
$
28,153
$
26,530
Weighted Average Number of Diluted
Shares
37,025
37,002
37,025
37,002
37,025
37,002
37,025
37,002
37,025
37,002
Diluted earnings per share
$
0.62
$
0.57
$
0.04
$
0.04
$
0.11
$
0.10
$
(0.01
)
$
0.01
$
0.76
$
0.72
Water
Electric
Contracted Services
AWR (Parent)
Consolidated (GAAP)
In 000's except per share
amounts
YTD 2021
YTD 2020
YTD 2021
YTD 2020
YTD 2021
YTD 2020
YTD 2021
YTD 2020
YTD 2021
YTD 2020
Operating income (Note 10)
$
87,295
$
80,416
$
7,296
$
6,865
$
16,375
$
13,946
$
(6
)
$
(5
)
$
110,960
$
101,222
Other income and expense
13,589
13,530
107
426
(346
)
(266
)
359
91
13,709
13,781
Income tax expense (benefit)
17,718
17,031
1,879
1,722
3,927
3,199
(270
)
(725
)
23,254
21,227
Net income
$
55,988
$
49,855
$
5,310
$
4,717
$
12,794
$
11,013
$
(95
)
$629
$
73,997
66,214
Weighted Average Number of Diluted
Shares
37,004
36,990
37,004
36,990
37,004
36,990
37,004
36,990
37,004
36,990
Diluted earnings per share
$
1.51
$
1.35
$
0.14
$
0.13
$
0.35
$
0.30
$
—
$
0.01
$
2.00
$
1.79
The tables below provide the amounts (in thousands) of increases
(decreases) and percent changes in water and electric operating
revenues, water and electric supply costs, and operating revenues
less supply costs, during the three and nine months ended September
30, 2021 and 2020.
Three Months Ended September
30, 2021
Three Months Ended September
30, 2020
$ CHANGE
% CHANGE
WATER OPERATING REVENUES (GAAP)
(1)
$
102,768
$
98,701
$
4,067
4.1
%
WATER SUPPLY COSTS:
Water purchased (1)
$
24,093
$
23,445
$
648
2.8
%
Power purchased for pumping (1)
3,584
3,369
215
6.4
%
Groundwater production assessment
(1)
5,185
5,962
(777
)
(13.0
)%
Water supply cost balancing accounts
(1)
(2,114
)
(3,019
)
905
(30.0
)%
TOTAL WATER SUPPLY COSTS
$
30,748
$
29,757
$
991
3.3
%
WATER OPERATING REVENUES LESS WATER SUPPLY
COSTS (NON-GAAP)
$
72,020
$
68,944
$
3,076
4.5
%
ELECTRIC OPERATING REVENUES (GAAP)
(1)
$
8,564
$
8,288
$
276
3.3
%
ELECTRIC SUPPLY COSTS:
Power purchased for resale (1)
$
2,875
$
2,117
$
758
35.8
%
Electric supply cost balancing accounts
(1)
(332
)
380
(712
)
(187.4
)%
TOTAL ELECTRIC SUPPLY COSTS
$
2,543
$
2,497
$
46
1.8
%
ELECTRIC OPERATING REVENUES LESS ELECTRIC
SUPPLY COSTS (NON-GAAP)
$
6,021
$
5,791
$
230
4.0
%
Nine Months Ended September
30, 2021
Nine Months Ended September
30, 2020
$ CHANGE
% CHANGE
WATER OPERATING REVENUES (GAAP)
(1)
$
269,430
$
257,199
$
12,231
4.8
%
WATER SUPPLY COSTS:
Water purchased (1)
$
60,248
$
56,291
$
3,957
7.0
%
Power purchased for pumping (1)
8,590
7,626
964
12.6
%
Groundwater production assessment
(1)
14,845
15,140
(295
)
(1.9
)%
Water supply cost balancing accounts
(1)
(8,445
)
(7,297
)
(1,148
)
15.7
%
TOTAL WATER SUPPLY COSTS
$
75,238
$
71,760
$
3,478
4.8
%
WATER OPERATING REVENUES LESS WATER SUPPLY
COSTS (NON-GAAP)
$
194,192
$
185,439
$
8,753
4.7
%
ELECTRIC OPERATING REVENUES (GAAP)
(1)
$
28,211
$
26,935
$
1,276
4.7
%
ELECTRIC SUPPLY COSTS:
Power purchased for resale (1)
$
8,203
$
7,127
$
1,076
15.1
%
Electric supply cost balancing accounts
(1)
486
691
(205
)
(29.7
)%
TOTAL ELECTRIC SUPPLY COSTS
$
8,689
$
7,818
$
871
11.1
%
ELECTRIC OPERATING REVENUES LESS ELECTRIC
SUPPLY COSTS (NON-GAAP)
$
19,522
$
19,117
$
405
2.1
%
(1)
As reported on AWR’s GAAP
Consolidated Statements of Income, except for supply cost balancing
accounts. The sum of water and electric supply cost balancing
accounts in the tables above are shown in AWR’s GAAP Consolidated
Statements of Income and totaled $(2,446,000) and $(2,639,000) for
the three months ended September 30, 2021 and 2020, respectively,
and $(7,959,000) and $(6,606,000) for the nine months ended
September 30, 2021 and 2020, respectively.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211101005898/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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