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American States Water Company Reports Operating Results (10-Q)

May 07, 2010 | About:
10qk

10qk

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American States Water Company (AWR) filed Quarterly Report for the period ended 2010-03-31.

American States Water Company has a market cap of $679.3 million; its shares were traded at around $36.61 with a P/E ratio of 22.3 and P/S ratio of 2. The dividend yield of American States Water Company stocks is 2.8%. American States Water Company had an annual average earning growth of 5.1% over the past 10 years. GuruFocus rated American States Water Company the business predictability rank of 3.5-star.AWR is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Registrant plans to continue to seek additional rate increases in future years to recover operating and supply costs and receive reasonable returns on invested capital. Capital expenditures in future years are expected to remain at much higher levels than depreciation expense. When necessary, Registrant obtains funds from external sources in the capital markets and through bank borrowings. In May 2009, AWR completed a public offering of 1,150,000 shares of its Common Shares, including 150,000 shares issued upon exercise of an option granted to the underwriters to cover over-allotments, at a price to the public of $31 per share. The net proceeds from the offering were $34.0 million, after deductions for underwriting commissions and discounts, and direct legal and accounting fees. The Company used the proceeds of the offering to repay short-term debt. In addition, a senior note was issued by GSWC on March 10, 2009, to CoBank, ACB (CoBank). Under the terms of this senior note, CoBank

For three months ended March 31, 2010, net income was $8.5 million compared to $4.9 million in the same period of 2009, an increase of 72.1%. Diluted earnings per share for the three months ended March 31, 2010 were $0.45 compared to $0.28 in the same period of 2009. The increase in earnings is due primarily to: (i) an increase in the water and electric margins of $3.3 million or $0.11 per share due to higher customer rates approved by the CPUC and ACC, the implementation of the Water Revenue Adjustment Mechanism (WRAM) for Region I, and the CPUCs authorization of additional revenues to cover increased general office allocation to BVES, and (ii) an increase in pretax operating income for contracted services of $6.8 million, or $0.23 per share, during the three months ended March 31, 2010 when compared to 2009.

These increases to earnings were partially offset by: (i) higher operating expenses at the Companys utility businesses of $1.9 million, or $0.06 per share; (ii) a change in enacted state tax law during the first quarter of 2009 which resulted in a tax benefit of $918,000, or $0.05 per share and did not recur in first quarter of 2010; (iii) an overall increase in the effective income tax rate (excluding the tax benefit mentioned previously) decreasing earnings by approximately $0.03 per share, due primarily to changes between book and taxable income that are treated as flow-through adjustments in accordance with regulatory requirements, and (iv) a decrease of $0.03 per share due to an increase in the weighted average number of common shares outstanding resulting from the issuance of 1.15 million shares of AWRs Common Shares in a public offering completed in May 2009.

Water Pretax operating income for water decreased by $1.6 million, or 14.8%, due to higher operating expenses of $2.5 million, as more fully described later. Higher operating expenses were partially offset by an increase in the dollar water margin of $828,000 as a result of rate increases at CCWC approved by the ACC in October 2009 and as a result of the WRAM account implemented for Region I in September 2009. Due to the delay in GSWCs Regions II and III and general office rate case (discussed further in Regulatory Matters), GSWCs revenues and supply costs for Regions II and III for the first quarter of 2010 have been recorded using 2009 adopted levels pending resolution of this general rate case, which is expected in September 2010.

Electric For the three months ended March 31, 2010, pretax operating income from electric operations increased by $3.0 million due to an increase in rates which went into effect in November 2009. In addition, as a result of the Base Revenue Requirement Adjustment Mechanism (BRRAM) which also went into effect in November 2009, BVES recorded $320,000 in additional revenues due to lower customer usage. Also, in March 2010, the CPUC approved for recovery a memorandum account which tracked the difference between the 2007 adopted general office cost allocation to BVES and the 1996 adopted general office cost allocation, effective and retroactive from June 4, 2009 to October 31, 2009. As a result, during the first quarter of 2010, BVES recorded a regulatory asset of $958,000 and a corresponding increase to revenues for amounts included in this memorandum account. Finally, other operating expenses decreased due to lower outside services costs. Costs for outside services

Contracted Services - For the three months ended March 31, 2010, pretax operating income for contracted services increased by $6.8 million, or $0.23 per share. This was primarily due to contract modifications approved by the U.S. government during the first quarter of 2010 in connection with two separate requests for equitable adjustment previously filed for inventory price adjustments at Fort Bliss in Texas and Fort Bragg in North Carolina. These two contract modifications increased revenues and pretax operating income by a combined $5.6 million. There was also an increase in construction revenues of $1.5 million, partially offset by increases in other operating expenses due to increased labor and related benefits and outside service costs. Earnings and cash flows from amendments and modifications to the original 50-year contracts with the U.S. government may or may not continue in future periods.

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