American States Water Company (AWR, Financial) filed Quarterly Report for the period ended 2010-06-30.
American States Water Company has a market cap of $645.5 million; its shares were traded at around $34.76 with a P/E ratio of 19.3 and P/S ratio of 1.7. The dividend yield of American States Water Company stocks is 3%. 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.
As previously discussed, on June 7, 2010, Registrant entered into a stock purchase agreement to sell all of the common shares of CCWC for a total purchase price of $35 million, including the assumption of approximately $6 million of long-term debt. Approximately $29 million in cash will be paid to AWR at closing. The purchase price is subject to certain adjustments for changes in retained earnings. The consummation of the transaction contemplated by the agreement is subject to customary conditions, including among other things, regulatory approval by the ACC, which is anticipated to be received in 2011. Therefore, no gain on disposal of CCWC has been recorded during the three and six months ended June 30, 2010, pending regulatory approval. Had the transaction closed as of June 30, 2010, AWR would have recognized a pretax gain on disposal of approximately $6.0 million, net of transaction costs of $659,000. The results of operations of CCWC for the three and six months ended June 30, 2010 and 2009 have been presented as a discontinued operation.
For the three months ended June 30, 2010, net income was $9.0 million compared to $11.5 million in the same period of 2009, a decrease of 21.9%. Diluted earnings per share for the three months ended June 30, 2010 were $0.48 compared to $0.64 in the same period of 2009, a decrease of $0.16 per share. Impacting the comparability in the results of the two periods on a diluted per share basis are the following significant items, all of which are more fully discussed later: (i) a decrease in the dollar water margin of GSWC water operations of $1.8 million, or $0.06 per share, largely offset by an increase in the dollar electric margin of $1.5 million, or $0.05 per share; (ii) an increase in other operating expenses, including administrative and general expenses, at GSWC of $3.5 million, or $0.11 per share; (iii) the improved financial performance of the Military Utility Privatization Subsidiaries resulting in an increase in ASUS pretax operating income of $608,000, or $0.02 per share; (iv) an increase in income from discontinued operations of $0.01 per share, due to improved financial performance at CCWC; (v) an increase in interest expense, net of interest income of $452,000, or $0.01 per share; (vi) an overall increase in the effective income tax rate, or $0.03 per share, and (vii) 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 May 2009.
For the six months ended June 30, 2010, net income was $17.5 million compared to $16.4 million in the same period of 2009, an increase of 6.3%. Diluted earnings for the six months ended June 30, 2010 were $0.93 per share compared to $0.92 per share for the six months ended June 30, 2009. Impacting the comparability in the results of the two periods on a diluted per share basis are the following significant items, all of which are more fully discussed later: (i) an increase in the dollar electric margin of $4.0 million, or $0.13 per share, partially offset by a decrease in GSWCs dollar water margin of $1.1 million, or $0.04 per share; (ii) an increase in other operating expenses at GSWC, including administrative and general expenses, of $5.6 million, or $0.18 per share; (iii) an increase in operating income of $7.4 million, or $0.23 per share for contracted services due to the improved financial performance of the Military Utility Privatization Subsidiaries and the receipt of two equitable adjustments; (iv) an increase in interest expense, net of interest income of $462,000, or $0.01 per share; (v) 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 which did not recur in 2010; (vi) an overall increase in the effective income tax rate (excluding the tax benefit mentioned previously) decreasing earnings by approximately $0.05 per share, due primarily to changes between book and taxable income that are treated as flow-through adjustments in accordance with regulatory requirements; (vii) an increase in income from discontinued operations of $317,000, or $0.02 per share, due to improved financial performance at CCWC, and (viii) a decrease of $0.04 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 in May 2009.
Water - For the three months ended June 30, 2010, pretax operating income for water decreased by $4.3 million, or 18.7%. The decrease was primarily due to a $1.8 million decrease in the dollar water margin and a $2.5 million increase in operating expenses as compared to the same period in 2009, with no corresponding rate recovery due to the delay in the CPUCs decision on GSWCs Regions II, III and general office rate case. The dollar water margin decreased due to $2.8 million in additional revenues recorded during the second quarter of 2009 related to the CPUCs approval of the Water Conservation Memorandum Account (WCMA) to track the extraordinary expenses and revenue shortfall associated with conservation measures in conjunction with the declared drought in California. This decrease in water margin was partially offset by the implementation of the Water Revenue Adjustment Mechanism (WRAM) account and the Modified Cost Balancing Account (MCBA) for Region I, both implemented in September 2009. Operating expenses increased by $2.5 million primarily due to higher administrative and general expenses, maintenance costs, property and other taxes, and depreciation and amortization without the receipt of rate increases due to a delay in the CPUCs decision on GSWCs Regions II and III and general office rate case (discussed further in Regulatory Matters). Due to this delay, GSWCs revenues and supply costs for Regions II and III for the second quarter of 2010 have been recorded using 2009 adopted sales levels pending resolution of this general rate case, which is expected in October 2010. New rates, once approved by the CPUC, are expected to be retroactive to January 1, 2010.
Electric For the three months ended June 30, 2010, pretax operating income from electric operations increased by $621,000 due to an increase in the electric margin of $1.5 million due primarily to revenues related to rate increases effective November 2009 and January 2010, partially offset by an $879,000 increase in operating expenses.
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American States Water Company has a market cap of $645.5 million; its shares were traded at around $34.76 with a P/E ratio of 19.3 and P/S ratio of 1.7. The dividend yield of American States Water Company stocks is 3%. 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:
CCWC is an Arizona public utility company serving 13,455 customers at June 30, 2010, compared with 13,392 customers at June 30, 2009. Located in the town of Fountain Hills, Arizona and a portion of the City of Scottsdale, Arizona, the majority of CCWCs customers are residential. The Arizona Corporation Commission (ACC) regulates CCWC. On June 7, 2010, AWR entered into a stock purchase agreement with EPCOR (USA) Inc. (EPCOR) to sell all the common shares of CCWC for a total purchase price of $35 million, including the assumption of approximately $6 million of long-term debt. Approximately $29 million in cash will be paid to AWR at closing. The purchase price is subject to certain adjustments for changes in retained earnings. The consummation of the transaction contemplated by the agreement is subject to customary conditions, including among other things, regulatory approval by the ACC, which is anticipated to be received in 2011. Accordingly, the operational results of CCWC are reported in discontinued operations.As previously discussed, on June 7, 2010, Registrant entered into a stock purchase agreement to sell all of the common shares of CCWC for a total purchase price of $35 million, including the assumption of approximately $6 million of long-term debt. Approximately $29 million in cash will be paid to AWR at closing. The purchase price is subject to certain adjustments for changes in retained earnings. The consummation of the transaction contemplated by the agreement is subject to customary conditions, including among other things, regulatory approval by the ACC, which is anticipated to be received in 2011. Therefore, no gain on disposal of CCWC has been recorded during the three and six months ended June 30, 2010, pending regulatory approval. Had the transaction closed as of June 30, 2010, AWR would have recognized a pretax gain on disposal of approximately $6.0 million, net of transaction costs of $659,000. The results of operations of CCWC for the three and six months ended June 30, 2010 and 2009 have been presented as a discontinued operation.
For the three months ended June 30, 2010, net income was $9.0 million compared to $11.5 million in the same period of 2009, a decrease of 21.9%. Diluted earnings per share for the three months ended June 30, 2010 were $0.48 compared to $0.64 in the same period of 2009, a decrease of $0.16 per share. Impacting the comparability in the results of the two periods on a diluted per share basis are the following significant items, all of which are more fully discussed later: (i) a decrease in the dollar water margin of GSWC water operations of $1.8 million, or $0.06 per share, largely offset by an increase in the dollar electric margin of $1.5 million, or $0.05 per share; (ii) an increase in other operating expenses, including administrative and general expenses, at GSWC of $3.5 million, or $0.11 per share; (iii) the improved financial performance of the Military Utility Privatization Subsidiaries resulting in an increase in ASUS pretax operating income of $608,000, or $0.02 per share; (iv) an increase in income from discontinued operations of $0.01 per share, due to improved financial performance at CCWC; (v) an increase in interest expense, net of interest income of $452,000, or $0.01 per share; (vi) an overall increase in the effective income tax rate, or $0.03 per share, and (vii) 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 May 2009.
For the six months ended June 30, 2010, net income was $17.5 million compared to $16.4 million in the same period of 2009, an increase of 6.3%. Diluted earnings for the six months ended June 30, 2010 were $0.93 per share compared to $0.92 per share for the six months ended June 30, 2009. Impacting the comparability in the results of the two periods on a diluted per share basis are the following significant items, all of which are more fully discussed later: (i) an increase in the dollar electric margin of $4.0 million, or $0.13 per share, partially offset by a decrease in GSWCs dollar water margin of $1.1 million, or $0.04 per share; (ii) an increase in other operating expenses at GSWC, including administrative and general expenses, of $5.6 million, or $0.18 per share; (iii) an increase in operating income of $7.4 million, or $0.23 per share for contracted services due to the improved financial performance of the Military Utility Privatization Subsidiaries and the receipt of two equitable adjustments; (iv) an increase in interest expense, net of interest income of $462,000, or $0.01 per share; (v) 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 which did not recur in 2010; (vi) an overall increase in the effective income tax rate (excluding the tax benefit mentioned previously) decreasing earnings by approximately $0.05 per share, due primarily to changes between book and taxable income that are treated as flow-through adjustments in accordance with regulatory requirements; (vii) an increase in income from discontinued operations of $317,000, or $0.02 per share, due to improved financial performance at CCWC, and (viii) a decrease of $0.04 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 in May 2009.
Water - For the three months ended June 30, 2010, pretax operating income for water decreased by $4.3 million, or 18.7%. The decrease was primarily due to a $1.8 million decrease in the dollar water margin and a $2.5 million increase in operating expenses as compared to the same period in 2009, with no corresponding rate recovery due to the delay in the CPUCs decision on GSWCs Regions II, III and general office rate case. The dollar water margin decreased due to $2.8 million in additional revenues recorded during the second quarter of 2009 related to the CPUCs approval of the Water Conservation Memorandum Account (WCMA) to track the extraordinary expenses and revenue shortfall associated with conservation measures in conjunction with the declared drought in California. This decrease in water margin was partially offset by the implementation of the Water Revenue Adjustment Mechanism (WRAM) account and the Modified Cost Balancing Account (MCBA) for Region I, both implemented in September 2009. Operating expenses increased by $2.5 million primarily due to higher administrative and general expenses, maintenance costs, property and other taxes, and depreciation and amortization without the receipt of rate increases due to a delay in the CPUCs decision on GSWCs Regions II and III and general office rate case (discussed further in Regulatory Matters). Due to this delay, GSWCs revenues and supply costs for Regions II and III for the second quarter of 2010 have been recorded using 2009 adopted sales levels pending resolution of this general rate case, which is expected in October 2010. New rates, once approved by the CPUC, are expected to be retroactive to January 1, 2010.
Electric For the three months ended June 30, 2010, pretax operating income from electric operations increased by $621,000 due to an increase in the electric margin of $1.5 million due primarily to revenues related to rate increases effective November 2009 and January 2010, partially offset by an $879,000 increase in operating expenses.
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