American States Water Company (AWR, Financial) filed Amended Quarterly Report for the period ended 2008-09-30.
American States is a public utility company engaged principally in thepurchase production distribution and sale of water. The company alsodistributes electricity in some communities. In the customer service areas for both water and electric rates and operations are subject to the jurisdiction of the California Public Utilities Commission. American States Water Company has a market cap of $566.39 million; its shares were traded at around $32.98 with a P/E ratio of 20.9 and P/S ratio of 1.88. The dividend yield of American States Water Company stocks is 3.05%. American States Water Company had an annual average earning growth of 5.4% over the past 10 years. GuruFocus rated American States Water Company the business predictability rank of 5-star.
Derivative accounting is required for the purchased power contracts at GSWCs BVES division. Unrealized gains and losses on purchased power contracts have been impacting GSWCs earnings since 2002 when GSWC entered into certain purchased power contracts. These contracts qualified as derivative instruments under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. The power purchased under the contract is only used to service electric customers demand and Registrant does not engage in trading of purchased power. Although the unrealized gains and losses result in significant fluctuations to the income statement, there is no effect on Registrants cash flows. When analyzing the financial performance of AWR, Registrant excludes the effect of unrealized derivative gains or losses, as they are not reflective of day-to-day operations. The unrealized derivative gains and losses are reflective of changes in future electricity costs that are outside of managements control. Due to decreasing energy prices, during the three months ended September 30, 2008, Registrant recorded a pretax unrealized loss on purchased power of $3.7 million, or $0.13 per share, as compared to an unrealized loss of $896,000, or $0.03 per share, during the three months ended September 30, 2007, a net decrease of $0.10 per share. During the nine months ended September 30, 2008, Registrant recorded a pretax unrealized gain of $766,000, or $0.03 per share, as compared to a gain of $1.6 million, or $0.05 per share, for the same period in 2007, a net decrease of $0.02 per share.
Water - For the three months ended September 30, 2008, pretax operating income for water increased slightly by $46,000, or 0.2%. The dollar water margin increased $2.5 million as compared to the same period of 2007 caused by higher water rates approved by the CPUC subsequent to September 30, 2007, offset by lower water consumption. A 6.8% decrease in water consumption during the three months ended September 30, 2008 resulted in a $2.9 million decrease in water revenues, or $0.07 per share. Although precipitation was overall lower in the three months ended September 30, 2008 compared to same period 2007, the 2008 water revenues appear to have been impacted by the effects of state-wide customer conservation efforts. Differences in temperature and rainfall in Registrants service areas as well as the effects of conservation, has impacted consumption of water by customers causing fluctuations in Registrants revenues and earnings between comparable periods. In August 2008, the CPUC issued a final decision regarding conservation rate design that allows for the establishment and implementation of a Water Revenue Adjustment Mechanism (WRAM) to decouple sales from revenues. GSWC intends to implement the WRAM in November 2008 prospectively. This should help mitigate fluctuations in Registrants future revenues and earnings due to changes in water consumption. In addition, the CPUC also approved an advice letter filed by GSWC to allow GSWC to create and implement a Water Conservation Memorandum Account (WCMA)
Electric - For the three months ended September 30, 2008, pretax operating income from electric operations decreased by $3.1 million due primarily to a $2.8 million increase in the unrealized loss on purchased power contracts. The unrealized loss on purchased power contracts decreased operating income by approximately $3.7 million for the three months ended September 30, 2008, or $0.13 per share, as compared to $896,000, or $0.03 per share, for the same period in 2007. In addition, other operating expenses increased by $514,000 compared to the same period in 2007 primarily caused by a $381,000 increase in allocation of costs from the corporate headquarters to BVES. Offsetting these decreases in pretax operating income was a slight increase in the dollar electric margin of $249,000 caused by the initial recording in the third quarter of 2007 of a regulatory liability totaling $442,000 for probable refunds to customers related to an overcollection of the total costs associated with the 8.4MW natural gas-fueled generation plant. In April 2005, new customer rates went into effect related to this generation plant, which resulted in an increase of approximately $2.3 million in annual revenue based on an estimated total capital-related cost of $13 million. The rates are subject to refund pending the CPUCs final cost review, which is scheduled to occur as part of BVES general rate case that was recently filed. The CPUC also ordered GSWC to establish a memorandum account to track the capital-related costs of the generation plant. If actual recorded costs in the memorandum account are less than the costs authorized by the CPUC of $13 million, the revenue requirement for the difference is to be refunded to customers. During the third quarter of 2007, GSWC received vendor credits of approximately $851,000, which reduced the actual recorded costs of the generation plant to approximately $12.5 million. During the third quarter of 2008, approximately $23,000 of additional regulatory liability for probable refunds was recorded.
Contracted Services - For the three months ended September 30, 2008, the pretax operating loss for contracted services increased by $1.4 million. This was primarily due to losses incurred at military bases under two new contracts. ASUS began operating and maintaining the water and wastewater systems under two new contracts in North Carolina and South Carolina during the first quarter of 2008. Pretax operating losses at these two bases were $1.6 million for the three months ended September 30, 2008, including $72,000 for emergency construction at PSUS to address pre-existing conditions not anticipated in the contract and for which ASUS is pursuing recovery from the U.S. government and $339,000 in anticipated losses associated with certain initial capital upgrade projects. Based on current estimates of construction costs, ASUS expects to incur losses on these initial capital upgrade projects at PSUS. In September 2008, PSUS submitted a Request for Equitable Adjustment (REA) for the water and wastewater systems at Fort Jackson, South Carolina requesting a contract modification for these initial capital upgrades and emergency construction costs. The aggregate value of the REA relating to construction work is approximately $1.6 million. The REA has not yet been approved by the U.S. government, and therefore, the anticipated losses on these projects and the pre-contract costs have been recorded during the third quarter of 2008 in construction expense. Higher than anticipated transition costs, increases in nonincome tax assessments and other operating expenses, including $488,000 of allocations from ASUS and corporate headquarters, also contributed to the losses at these two new bases.
Water - For the nine months ended September 30, 2008, pretax operating income for water increased by $3.2 million, or 6.9%, primarily due to an $8.2 million increase in the dollar water margin as compared to the same period of 2007 caused by higher water rates approved by
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American States is a public utility company engaged principally in thepurchase production distribution and sale of water. The company alsodistributes electricity in some communities. In the customer service areas for both water and electric rates and operations are subject to the jurisdiction of the California Public Utilities Commission. American States Water Company has a market cap of $566.39 million; its shares were traded at around $32.98 with a P/E ratio of 20.9 and P/S ratio of 1.88. The dividend yield of American States Water Company stocks is 3.05%. American States Water Company had an annual average earning growth of 5.4% over the past 10 years. GuruFocus rated American States Water Company the business predictability rank of 5-star.
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Registrant plans to continue to seek additional rate increases in future years to recover operating and supply costs and receive fair returns on invested capital. Capital expenditures in future years are expected to remain at much higher levels than depreciation expense. Cash solely from operations is not expected to be sufficient to fund Registrants needs for capital expenditures, dividends, investments in Registrants contract business and other cash requirements. Registrant expects to fund a portion of these needs through a combination of debt and common share offerings in the ensuing years. Registrant is planning on issuing common shares over the next twelve months depending on market conditions. On August 25, 2008, AWR amended its $85 million syndicated credit facility, to increase the aggregate bank commitments by $30 million to $115 million.Derivative accounting is required for the purchased power contracts at GSWCs BVES division. Unrealized gains and losses on purchased power contracts have been impacting GSWCs earnings since 2002 when GSWC entered into certain purchased power contracts. These contracts qualified as derivative instruments under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. The power purchased under the contract is only used to service electric customers demand and Registrant does not engage in trading of purchased power. Although the unrealized gains and losses result in significant fluctuations to the income statement, there is no effect on Registrants cash flows. When analyzing the financial performance of AWR, Registrant excludes the effect of unrealized derivative gains or losses, as they are not reflective of day-to-day operations. The unrealized derivative gains and losses are reflective of changes in future electricity costs that are outside of managements control. Due to decreasing energy prices, during the three months ended September 30, 2008, Registrant recorded a pretax unrealized loss on purchased power of $3.7 million, or $0.13 per share, as compared to an unrealized loss of $896,000, or $0.03 per share, during the three months ended September 30, 2007, a net decrease of $0.10 per share. During the nine months ended September 30, 2008, Registrant recorded a pretax unrealized gain of $766,000, or $0.03 per share, as compared to a gain of $1.6 million, or $0.05 per share, for the same period in 2007, a net decrease of $0.02 per share.
Water - For the three months ended September 30, 2008, pretax operating income for water increased slightly by $46,000, or 0.2%. The dollar water margin increased $2.5 million as compared to the same period of 2007 caused by higher water rates approved by the CPUC subsequent to September 30, 2007, offset by lower water consumption. A 6.8% decrease in water consumption during the three months ended September 30, 2008 resulted in a $2.9 million decrease in water revenues, or $0.07 per share. Although precipitation was overall lower in the three months ended September 30, 2008 compared to same period 2007, the 2008 water revenues appear to have been impacted by the effects of state-wide customer conservation efforts. Differences in temperature and rainfall in Registrants service areas as well as the effects of conservation, has impacted consumption of water by customers causing fluctuations in Registrants revenues and earnings between comparable periods. In August 2008, the CPUC issued a final decision regarding conservation rate design that allows for the establishment and implementation of a Water Revenue Adjustment Mechanism (WRAM) to decouple sales from revenues. GSWC intends to implement the WRAM in November 2008 prospectively. This should help mitigate fluctuations in Registrants future revenues and earnings due to changes in water consumption. In addition, the CPUC also approved an advice letter filed by GSWC to allow GSWC to create and implement a Water Conservation Memorandum Account (WCMA)
Electric - For the three months ended September 30, 2008, pretax operating income from electric operations decreased by $3.1 million due primarily to a $2.8 million increase in the unrealized loss on purchased power contracts. The unrealized loss on purchased power contracts decreased operating income by approximately $3.7 million for the three months ended September 30, 2008, or $0.13 per share, as compared to $896,000, or $0.03 per share, for the same period in 2007. In addition, other operating expenses increased by $514,000 compared to the same period in 2007 primarily caused by a $381,000 increase in allocation of costs from the corporate headquarters to BVES. Offsetting these decreases in pretax operating income was a slight increase in the dollar electric margin of $249,000 caused by the initial recording in the third quarter of 2007 of a regulatory liability totaling $442,000 for probable refunds to customers related to an overcollection of the total costs associated with the 8.4MW natural gas-fueled generation plant. In April 2005, new customer rates went into effect related to this generation plant, which resulted in an increase of approximately $2.3 million in annual revenue based on an estimated total capital-related cost of $13 million. The rates are subject to refund pending the CPUCs final cost review, which is scheduled to occur as part of BVES general rate case that was recently filed. The CPUC also ordered GSWC to establish a memorandum account to track the capital-related costs of the generation plant. If actual recorded costs in the memorandum account are less than the costs authorized by the CPUC of $13 million, the revenue requirement for the difference is to be refunded to customers. During the third quarter of 2007, GSWC received vendor credits of approximately $851,000, which reduced the actual recorded costs of the generation plant to approximately $12.5 million. During the third quarter of 2008, approximately $23,000 of additional regulatory liability for probable refunds was recorded.
Contracted Services - For the three months ended September 30, 2008, the pretax operating loss for contracted services increased by $1.4 million. This was primarily due to losses incurred at military bases under two new contracts. ASUS began operating and maintaining the water and wastewater systems under two new contracts in North Carolina and South Carolina during the first quarter of 2008. Pretax operating losses at these two bases were $1.6 million for the three months ended September 30, 2008, including $72,000 for emergency construction at PSUS to address pre-existing conditions not anticipated in the contract and for which ASUS is pursuing recovery from the U.S. government and $339,000 in anticipated losses associated with certain initial capital upgrade projects. Based on current estimates of construction costs, ASUS expects to incur losses on these initial capital upgrade projects at PSUS. In September 2008, PSUS submitted a Request for Equitable Adjustment (REA) for the water and wastewater systems at Fort Jackson, South Carolina requesting a contract modification for these initial capital upgrades and emergency construction costs. The aggregate value of the REA relating to construction work is approximately $1.6 million. The REA has not yet been approved by the U.S. government, and therefore, the anticipated losses on these projects and the pre-contract costs have been recorded during the third quarter of 2008 in construction expense. Higher than anticipated transition costs, increases in nonincome tax assessments and other operating expenses, including $488,000 of allocations from ASUS and corporate headquarters, also contributed to the losses at these two new bases.
Water - For the nine months ended September 30, 2008, pretax operating income for water increased by $3.2 million, or 6.9%, primarily due to an $8.2 million increase in the dollar water margin as compared to the same period of 2007 caused by higher water rates approved by
Read the The complete ReportMore on AWR:
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10-year financial history of AWR.
Insider buys/sells of AWR.
