American States Water Company Announces Second Quarter 2023 Results
-
American States Water Company receives final CPUC-decisions for its water utility general rate case and cost of capital proceedings in June 2023
-
per share increase in recorded second quarter 2023 consolidated diluted EPS (“2023 second quarter results”) compared to second quarter of 2022, or$0.50 per share increase as adjusted$0.19 -
2023 second quarter results reflect a net favorable variance of
per share resulting from the reversal of revenues subject to refund that had been previously recorded of$0.21 per share following the receipt of a final decision in the cost of capital proceeding in June 2023, of which$0.18 per share had been recorded during the same period in 2022.$0.03 -
2023 second quarter results also reflect a net favorable variance of
per share from gains on investments held to fund a retirement plan compared to losses during same period in 2022.$0.10
-
2023 second quarter results reflect a net favorable variance of
-
8.2% increase in quarterly dividend for September 1 dividend payment
On June 29, 2023, AWR’s regulated water utility segment, Golden State Water Company (“GSWC”), received a final decision from the California Public Utilities Commission (“CPUC”) in the cost of capital proceeding that, among other things, (i) adopts GSWC’s requested capital structure of
Also included in the results for the second quarter ended June 30, 2023 were gains of
Second Quarter 2023 Results
The table below sets forth a comparison of the second quarter 2023 diluted earnings per share contribution recorded by business segment and for the parent company with amounts recorded during the same period in 2022.
|
|
Diluted Earnings per Share |
||||||||||
|
|
Three Months Ended |
|
|
||||||||
|
|
6/30/2023 |
|
6/30/2022 |
|
CHANGE |
||||||
Water, as adjusted* |
|
$ |
0.73 |
|
|
$ |
0.43 |
|
|
$ |
0.30 |
|
Electric |
|
|
0.03 |
|
|
|
0.04 |
|
|
|
(0.01 |
) |
Contracted services |
|
|
0.12 |
|
|
|
0.10 |
|
|
|
0.02 |
|
AWR (parent) |
|
|
(0.02 |
) |
|
|
— |
|
|
|
(0.02 |
) |
Consolidated diluted earnings per share, as adjusted |
|
|
0.86 |
|
|
|
0.57 |
|
|
|
0.29 |
|
Impact related to the final cost of capital decision* |
|
|
0.18 |
|
|
|
(0.03 |
) |
|
|
0.21 |
|
Consolidated fully diluted earnings per share, as reported |
|
$ |
1.04 |
|
|
$ |
0.54 |
|
|
$ |
0.50 |
|
* |
The Water segment’s adjusted earnings for 2023 and 2022 exclude the impact of estimates and changes in estimates resulting from revenues subject to refund related to the cost of capital proceeding, as previously discussed and as shown separately in the table above. |
Water Segment:
For the three months ended June 30, 2023, recorded diluted earnings from the water utility segment were
Excluding from both periods the gains and losses on investments and the impact from the final cost of capital proceeding, adjusted diluted earnings at the water segment for the second quarter of 2023 were
-
An increase in water operating revenues of
largely as a result of the second-year rate increases related to the three months ended June 30, 2023. GSWC filed for the implementation of new 2023 rate increases upon receiving a final decision in its general rate case proceeding in June 2023. Because water revenues recorded during the three months ended June 30, 2022 were based on 2021 adopted rates, the increase in water revenues during the second quarter of 2023 represents the difference from the 2021 adopted rates and the 2023 second-year increases for the three months ended June 30, 2023.$15.0 million -
An increase in water supply costs of
, which consist of purchased water, purchased power for pumping, groundwater production assessments and changes in the water supply cost balancing accounts. Adopted supply costs for the second quarter of 2023 were based on 2023 authorized amounts approved in the final CPUC decision in the water general rate case application. Actual water supply costs are tracked and passed on to customers on a dollar-for-dollar basis through the CPUC-approved water supply cost balancing accounts. The increase in water supply costs results in a corresponding increase in water operating revenues and has no net impact on the water segment’s profitability.$2.8 million -
An overall increase in operating expenses of
(excluding supply costs), which negatively impacted earnings and was mainly due to increases in (i) overall labor costs, (ii) administrative and general expenses resulting largely from higher employee-related benefits and outside-services costs, and (iii) depreciation and amortization expenses resulting from additions to utility plant and the higher composite depreciation rates based on a revised depreciation study approved in the final decision on the water general rate case.$406,000 -
An increase in interest expense (net of interest income) of
resulting primarily from an overall increase in interest rates, as well as an overall increase in total borrowing levels to support, among other things, the capital expenditures programs at GSWC, partially offset by higher interest income earned on regulatory assets bearing interest at the current 90-day commercial-paper rate, which increased compared to 2022’s rates, as well as an increase in the level of regulatory assets recorded that resulted, in large part, from the final decision on the water general rate case.$1.2 million -
An overall increase in other expenses (net of other income) of
due primarily to an increase in the non-service cost components related to GSWC’s benefit plans resulting from changes in actuarial assumptions including expected returns on plan assets. However, as a result of GSWC’s two-way pension balancing accounts authorized by the CPUC, changes in total net periodic benefits costs related to the pension plan have no material impact to earnings.$1.1 million - Changes in certain flowed-through taxes and permanent items included in GSWC’s income tax expense for the three months ended June 30, 2023 as compared to the same period in 2022 that favorably impacted water earnings. As a regulated utility, GSWC treats certain temporary differences as being flowed-through in computing its income tax expense consistent with the income tax method used in its CPUC-jurisdiction rate making. Changes in the magnitude of flowed-through items either increase or decrease tax expense, thereby affecting diluted earnings per share.
Electric Segment:
Diluted earnings from the electric utility segment decreased by
Contracted Services Segment:
Diluted earnings from the contracted services segment increased
AWR (Parent):
For the second quarter of 2023, diluted earnings from AWR (parent) decreased
Year-To-Date (“YTD”) 2023 Results
-
per share increase in recorded YTD 2023 consolidated diluted EPS compared to YTD 2022, or$1.05 per share increase as adjusted$0.32 -
YTD 2023 results reflect the impact of retroactive rates of
per share related to the full year of 2022 because of receiving a final decision in the water utility general rate case.$0.38 -
YTD 2023 results also reflect a net favorable variance of
per share resulting from the reversal of revenues subject to refund that had been previously recorded in 2022 of$0.19 per share following the receipt of a final decision in the cost of capital proceeding in June 2023, of which$0.13 per share had been recorded during the same period in 2022.$0.06 -
YTD 2023 results also reflect a net favorable variance of
per share from gains on investments held to fund a retirement plan compared to losses during same period in 2022.$0.16
-
YTD 2023 results reflect the impact of retroactive rates of
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 six months ended June 30, 2023 and 2022.
|
|
Diluted Earnings per Share |
||||||||||
|
|
Six Months Ended |
|
|
||||||||
|
|
6/30/2023 |
|
6/30/2022 |
|
CHANGE |
||||||
Water, as adjusted* |
|
$ |
1.14 |
|
|
$ |
0.69 |
|
|
$ |
0.45 |
|
Electric |
|
|
0.09 |
|
|
|
0.12 |
|
|
|
(0.03 |
) |
Contracted services |
|
|
0.27 |
|
|
|
0.18 |
|
|
|
0.09 |
|
AWR (parent) |
|
|
(0.04 |
) |
|
|
(0.01 |
) |
|
|
(0.03 |
) |
Consolidated fully diluted earnings per share, as adjusted |
|
|
1.46 |
|
|
|
0.98 |
|
|
|
0.48 |
|
Impact of retroactive rates related to the full year of 2022 from the final decision in the water general rate case ( |
|
|
0.38 |
|
|
|
— |
|
|
|
0.38 |
|
Impact related to the final cost of capital decision* |
|
|
0.13 |
|
|
|
(0.06 |
) |
|
|
0.19 |
|
Consolidated diluted earnings per share, as recorded |
|
$ |
1.97 |
|
|
$ |
0.92 |
|
|
$ |
1.05 |
|
* |
The Water segment’s adjusted earnings for 2023 exclude the impact of retroactive rates related to the full year of 2022 resulting from the final CPUC decision in the general rate case, and for 2023 and 2022 they exclude the impact of estimates and changes in estimates resulting from revenues subject to refund related to the cost of capital proceeding, both shown separately in the table above. |
As noted in the table above, fully diluted earnings for the six months ended June 30, 2023 were
On June 29, 2023, the CPUC adopted a final decision in GSWC's general rate case application that determines new water rates for the years 2022–2024. The assigned administrative law judge at the CPUC had issued a proposed decision on April 13, 2023 that, among other things, (i) adopted the full settlement agreement between GSWC and the Public Advocates Office at the CPUC that resolved all issues related to the 2022 annual revenue requirement, and (ii) allowed for additional increases in adopted revenues for 2023 and 2024 subject to an earnings test and inflationary index values at the time of filing for implementation of the new rates. The final decision issued on June 29, 2023 is consistent in all material respects with the proposed decision issued in April.
Because of receiving a final decision that approves the settlement agreement in its entirety, the impact of retroactive new rates for the full year of 2022 of
The second-year rate increases for 2023 have also been reflected in the three and six months ended June 30, 2023. Through June 30, 2023, this included increases in revenues of
For more details on the YTD results, please refer to the company’s Form 10-Q filed with the Securities and Exchange Commission.
Dividends
On August 1, 2023, AWR’s Board of Directors approved an
Non-GAAP Financial Measures
This press release includes a discussion on 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 common shares. Furthermore, the gains and losses generated on the investments held to fund one of the company's retirement plans during the three and six months ended June 30, 2023 and 2022 have been excluded when communicating the results to help facilitate comparisons of the company’s performance from period to period. Finally, both the impact of retroactive rates related to the full year 2022 recorded during the six months ended June 30, 2023 resulting from the final decision on the water general rate case, and the impact from the estimates recorded in 2022 and changes in estimates recorded in 2023 following the receipt of a final cost of capital decision in June of 2023 have been excluded when communicating AWR’s consolidated and water segment’s results for the three and six months ended June 30, 2023 to help facilitate comparisons of the company’s performance from period to period. All of these measures 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 company uses earnings per share by business segment as an important measure in evaluating its operating results and believes this measure is a useful internal benchmark in evaluating the performance of its operating segments. The company reviews this measurement regularly and compares it to historical periods and to the operating budget. The company has provided the computations and reconciliations of diluted earnings per share from the measure of operating income by business segment to AWR’s consolidated fully diluted earnings per share 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, August 8. 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 August 8, 2023 at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) through August 15, 2023.
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 263,600 customer connections located within more than 80 communities in Northern, Coastal and
American States Water Company |
|||||
Consolidated |
|||||
|
|
|
|
||
|
Comparative Condensed Balance Sheets (Unaudited) |
||||
(in thousands) |
June 30, 2023 |
|
December 31, 2022 |
||
Assets |
|
|
|
||
Net Property, Plant and Equipment |
$ |
1,814,061 |
|
$ |
1,753,766 |
Goodwill |
|
1,116 |
|
|
1,116 |
Other Property and Investments |
|
39,889 |
|
|
36,907 |
Current Assets |
|
168,910 |
|
|
151,294 |
Other Assets |
|
115,659 |
|
|
91,291 |
Total Assets |
$ |
2,139,635 |
|
$ |
2,034,374 |
Capitalization and Liabilities |
|
|
|
||
Capitalization |
$ |
1,331,442 |
|
$ |
1,156,096 |
Current Liabilities |
|
140,930 |
|
|
396,522 |
Other Credits |
|
667,263 |
|
|
481,756 |
Total Capitalization and Liabilities |
$ |
2,139,635 |
|
$ |
2,034,374 |
|
Condensed Statements of Income (Unaudited) |
||||||||||||
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||
(in thousands, except per share amounts) |
2023 |
2022 |
|
2023 |
2022 |
||||||||
|
|
|
|
|
|||||||||
Operating Revenues |
|
|
|
|
|
||||||||
Water |
$ |
116,908 |
|
$ |
90,856 |
|
|
$ |
229,620 |
|
$ |
164,762 |
|
Electric |
|
8,828 |
|
|
8,217 |
|
|
|
21,732 |
|
|
20,109 |
|
Contracted services |
|
31,664 |
|
|
23,534 |
|
|
|
67,471 |
|
|
46,306 |
|
Total operating revenues |
|
157,400 |
|
|
122,607 |
|
|
|
318,823 |
|
|
231,177 |
|
|
|
|
|
|
|
||||||||
Operating Expenses |
|
|
|
|
|
||||||||
Water purchased |
|
18,070 |
|
|
19,963 |
|
|
|
32,374 |
|
|
37,811 |
|
Power purchased for pumping |
|
2,869 |
|
|
2,930 |
|
|
|
5,223 |
|
|
5,304 |
|
Groundwater production assessment |
|
5,365 |
|
|
4,865 |
|
|
|
9,198 |
|
|
9,076 |
|
Power purchased for resale |
|
2,469 |
|
|
1,347 |
|
|
|
7,455 |
|
|
6,513 |
|
Supply cost balancing accounts |
|
2,837 |
|
|
(457 |
) |
|
|
14,403 |
|
|
(6,800 |
) |
Other operation |
|
9,716 |
|
|
9,665 |
|
|
|
19,832 |
|
|
18,332 |
|
Administrative and general |
|
21,503 |
|
|
20,464 |
|
|
|
45,050 |
|
|
43,436 |
|
Depreciation and amortization |
|
10,258 |
|
|
10,171 |
|
|
|
21,461 |
|
|
20,285 |
|
Maintenance |
|
3,779 |
|
|
3,572 |
|
|
|
6,929 |
|
|
6,712 |
|
Property and other taxes |
|
5,555 |
|
|
5,452 |
|
|
|
11,850 |
|
|
11,305 |
|
ASUS construction |
|
16,034 |
|
|
10,318 |
|
|
|
34,938 |
|
|
20,521 |
|
Total operating expenses |
|
98,455 |
|
|
88,290 |
|
|
|
208,713 |
|
|
172,495 |
|
|
|
|
|
|
|
||||||||
Operating income |
|
58,945 |
|
|
34,317 |
|
|
|
110,110 |
|
|
58,682 |
|
|
|
|
|
|
|
||||||||
Other Income and Expenses |
|
|
|
|
|
||||||||
Interest expense |
|
(10,728 |
) |
|
(6,309 |
) |
|
|
(20,209 |
) |
|
(11,915 |
) |
Interest income |
|
1,803 |
|
|
437 |
|
|
|
3,667 |
|
|
720 |
|
Other, net |
|
1,705 |
|
|
(2,289 |
) |
|
|
3,316 |
|
|
(2,708 |
) |
Total other income and expenses, net |
|
(7,220 |
) |
|
(8,161 |
) |
|
|
(13,226 |
) |
|
(13,903 |
) |
|
|
|
|
|
|
||||||||
Income Before Income Tax Expense |
|
51,725 |
|
|
26,156 |
|
|
|
96,884 |
|
|
44,779 |
|
Income tax expense |
|
13,204 |
|
|
6,205 |
|
|
|
23,956 |
|
|
10,666 |
|
Net Income |
$ |
38,521 |
|
$ |
19,951 |
|
|
$ |
72,928 |
|
$ |
34,113 |
|
|
|
|
|
|
|
||||||||
Weighted average shares outstanding |
|
36,976 |
|
|
36,956 |
|
|
|
36,972 |
|
|
36,950 |
|
Basic earnings per Common Share |
$ |
1.04 |
|
$ |
0.54 |
|
|
$ |
1.97 |
|
$ |
0.92 |
|
|
|
|
|
|
|
||||||||
Weighted average diluted shares |
|
37,067 |
|
|
37,039 |
|
|
|
37,058 |
|
|
37,029 |
|
Fully diluted earnings per Common Share |
$ |
1.04 |
|
$ |
0.54 |
|
|
$ |
1.97 |
|
$ |
0.92 |
|
|
|
|
|
|
|
||||||||
Dividends paid per Common Share |
$ |
0.3975 |
|
$ |
0.3650 |
|
|
$ |
0.7950 |
|
$ |
0.7300 |
|
Computation and Reconciliation of Non-GAAP Financial Measure (Unaudited)
Below are the computation and reconciliation of diluted earnings per share from the measure of operating income by business segment to AWR’s consolidated fully diluted earnings per share for the three and six months ended June 30, 2023 and 2022.
|
Water |
|
Electric |
|
Contracted Services |
|
AWR (Parent) |
|
Consolidated (GAAP) |
|||||||||||||||||||||||
In 000's except per share amounts |
Q2 2023 |
|
Q2 2022 |
|
Q2 2023 |
|
Q2 2022 |
|
Q2 2023 |
|
Q2 2022 |
|
Q2 2023 |
|
Q2 2022 |
|
Q2 2023 |
|
Q2 2022 |
|||||||||||||
Operating income (loss) |
$ |
50,524 |
|
$ |
27,711 |
|
$ |
2,103 |
|
$ |
2,038 |
|
$ |
6,354 |
|
$ |
4,571 |
|
|
$ |
(36 |
) |
|
$ |
(3 |
) |
|
$ |
58,945 |
|
$ |
34,317 |
Other (income) and expenses, net |
|
5,057 |
|
|
7,720 |
|
|
645 |
|
|
218 |
|
|
357 |
|
|
(138 |
) |
|
|
1,161 |
|
|
|
361 |
|
|
|
7,220 |
|
|
8,161 |
Income tax expense (benefit) |
|
11,934 |
|
|
5,103 |
|
|
247 |
|
|
215 |
|
|
1,506 |
|
|
1,108 |
|
|
|
(483 |
) |
|
|
(221 |
) |
|
|
13,204 |
|
|
6,205 |
Net income (loss) |
$ |
33,533 |
|
$ |
14,888 |
|
$ |
1,211 |
|
$ |
1,605 |
|
$ |
4,491 |
|
$ |
3,601 |
|
|
$ |
(714 |
) |
|
$ |
(143 |
) |
|
$ |
38,521 |
|
$ |
19,951 |
Weighted Average Number of Diluted Shares |
|
37,067 |
|
|
37,039 |
|
|
37,067 |
|
|
37,039 |
|
|
37,067 |
|
|
37,039 |
|
|
|
37,067 |
|
|
|
37,039 |
|
|
|
37,067 |
|
|
37,039 |
Diluted earnings (loss) per share |
$ |
0.91 |
|
$ |
0.40 |
|
$ |
0.03 |
|
$ |
0.04 |
|
$ |
0.12 |
|
$ |
0.10 |
|
|
$ |
(0.02 |
) |
|
$ |
— |
|
|
$ |
1.04 |
|
$ |
0.54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Water |
|
Electric |
|
Contracted Services |
|
AWR (Parent) |
|
Consolidated (GAAP) |
|||||||||||||||||||||||
In 000's except per share amounts |
YTD 2023 |
|
YTD 2022 |
|
YTD 2023 |
|
YTD 2022 |
|
YTD 2023 |
|
YTD 2022 |
|
YTD 2023 |
|
YTD 2022 |
|
YTD 2023 |
|
YTD 2022 |
|||||||||||||
Operating income (loss) |
$ |
90,763 |
|
$ |
44,710 |
|
$ |
5,734 |
|
$ |
5,636 |
|
$ |
13,650 |
|
$ |
8,341 |
|
|
$ |
(37 |
) |
|
$ |
(5 |
) |
|
$ |
110,110 |
|
$ |
58,682 |
Other (income) and expenses, net |
|
8,923 |
|
|
13,463 |
|
|
1,205 |
|
|
188 |
|
|
614 |
|
|
(309 |
) |
|
|
2,484 |
|
|
|
561 |
|
|
|
13,226 |
|
|
13,903 |
Income tax expense (benefit) |
|
20,844 |
|
|
7,792 |
|
|
948 |
|
|
1,167 |
|
|
3,191 |
|
|
2,052 |
|
|
|
(1,027 |
) |
|
|
(345 |
) |
|
|
23,956 |
|
|
10,666 |
Net income (loss) |
$ |
60,996 |
|
$ |
23,455 |
|
$ |
3,581 |
|
$ |
4,281 |
|
$ |
9,845 |
|
$ |
6,598 |
|
|
$ |
(1,494 |
) |
|
$ |
(221 |
) |
|
$ |
72,928 |
|
$ |
34,113 |
Weighted Average Number of Diluted Shares |
|
37,058 |
|
|
37,029 |
|
|
37,058 |
|
|
37,029 |
|
|
37,058 |
|
|
37,029 |
|
|
|
37,058 |
|
|
|
37,029 |
|
|
|
37,058 |
|
|
37,029 |
Diluted earnings (loss) per share |
$ |
1.65 |
|
$ |
0.63 |
|
$ |
0.09 |
|
$ |
0.12 |
|
$ |
0.27 |
|
$ |
0.18 |
|
|
$ |
(0.04 |
) |
|
$ |
(0.01 |
) |
|
$ |
1.97 |
|
$ |
0.92 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20230804938262/en/
Eva G. Tang
Senior Vice President-Finance, Chief Financial Officer,
Corporate Secretary and Treasurer
Telephone: (909) 394-3600, ext. 707
Source: American States Water Company