AWR American States Water Co

• Second quarter 2024 recorded and adjusted earnings were both $0.85 per share compared to second quarter 2023 recorded earnings of $1.04 per share and adjusted earnings of $0.86 per share
  • Adjusted earnings for the second quarter 2023 exclude $0.18 per share related to the reversal of previously recorded revenues subject to refund following the receipt of a final decision in the cost of capital proceeding in June 2023

• AWR’s water utility reached a settlement agreement in connection with the general rate case that will determine new water rates for 2025 – 2027
  • Settlement agreement, if approved, authorizes $573.1 million in capital investment

• Quarterly dividend increased 8.3%, with first payment on September 3
  • This marks the 70th consecutive year that AWR has increased annual dividends to shareholders

• AWR’s contracted services subsidiary commenced operations of the water and wastewater utility systems at two new military bases in April 2024, contributing earnings in the second quarter and YTD June

American States Water Company (NYSE:AWR) today reported basic and fully diluted earnings per share of $0.85 for the quarter ended June 30, 2024, as compared to basic and fully diluted earnings per share of $1.04 for the quarter ended June 30, 2023, a decrease of $0.19 per share, which includes the impact of approximately $0.18 per share resulting from the reversal in June 2023 of previously recorded estimated revenues subject to refund as a result of the final cost of capital decision. Excluding this item from the three months ended June 30, 2023 results, adjusted consolidated diluted earnings were $0.86 per share compared to recorded consolidated diluted earnings of $0.85 per share for the three months ended June 30, 2024.

Second Quarter 2024 Results

The table below sets forth a comparison of the second quarter 2024 diluted earnings per share contribution recorded by business segment and for the parent company with amounts recorded during the same period in 2023.

 

 

Diluted Earnings per Share

 

 

Three Months Ended

 

 

 

 

6/30/2024

 

6/30/2023

 

CHANGE

Water

 

$

0.67

 

 

$

0.91

 

 

$

(0.24

)

Electric

 

 

0.01

 

 

 

0.03

 

 

 

(0.02

)

Contracted services

 

 

0.19

 

 

 

0.12

 

 

 

0.07

 

AWR (parent)

 

 

(0.02

)

 

 

(0.02

)

 

 

—

 

Consolidated diluted earnings per share, as recorded (GAAP)

 

 

0.85

 

 

 

1.04

 

 

 

(0.19

)

Adjustment to GAAP measure:

 

 

 

 

 

 

Impact related to the final cost of capital decision*

 

 

—

 

 

 

(0.18

)

 

 

0.18

 

Consolidated diluted earnings per share, as adjusted (Non-GAAP)*

 

$

0.85

 

 

$

0.86

 

 

$

(0.01

)

Water diluted earnings per share, as adjusted (Non-GAAP)*

 

$

0.67

 

 

$

0.73

 

 

$

(0.06

)

* The adjustment to 2023’s recorded diluted earnings per share relates to the water segment. The water segment’s adjusted earnings for 2023 exclude the impact from the final CPUC decision issued in June 2023 on the cost of capital proceeding that made all adjustments to rates prospective, and which is shown separately in the table above. As a result of that final decision, GSWC reversed its regulatory liability previously recorded during 2022 and through the end of the first quarter of 2023 for estimated revenues subject to refund at that time.

Water Segment:

For the three months ended June 30, 2024, recorded diluted earnings from the water utility segment were $0.67 per share, as compared to $0.91 per share for the same period in 2023, a decrease of $0.24 per share. Excluding the revenue impact of $9.3 million, or approximately $0.18 per share, resulting from the reversal of previously recorded estimated revenues subject to refund discussed above, adjusted diluted earnings for the second quarter of 2023 at the water segment were $0.73 per share, as compared to adjusted and recorded earnings of $0.67 per share for the second quarter of 2024, an adjusted decrease at the water segment of approximately $0.06 per share. The discussion below includes the major items, which impacted the comparability of the two periods as adjusted.

• Excluding the impact from the reversal of revenues subject to refund recorded during the three months ended June 30, 2023 due to the final cost of capital decision as previously discussed, there was a net increase in water operating revenues of approximately $3 million that was largely a result of the third-year rate increases related to the three months ended June 30, 2024. Furthermore, during the three months ended June 30, 2023, there was an increase in revenues as a result of recording regulatory adjustments of approximately $2 million that did not recur during the same period in 2024. The increase in water revenues during the second quarter of 2024 represents the difference from the third-year rate increases compared to the estimated second-year rate increases recorded during the three months ended June 30, 2023 as a result of receiving a final decision in the water general rate case.

• An increase in water supply costs of $0.7 million, which consist of purchased water, purchased power for pumping, groundwater production assessments and changes in the water supply cost balancing accounts. The increase in water supply costs is primarily related to an increase in customer water usage and an increase in overall actual supply costs in 2024. Actual water supply costs are tracked against adopted costs in the revenue requirement, and passed through to customers on a dollar-for-dollar basis by way of 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.

• An overall increase in operating expenses of $2.8 million (excluding supply costs) due primarily to increases in (i) overall labor costs, (ii) administrative and general expenses resulting largely from higher outside services costs related to the pending general rate case application and other regulatory filings, (iii) depreciation and amortization expenses resulting from additions to utility plant, and (iv) property taxes; partially offset by a decrease in maintenance expenses due to timing.

• An increase in interest expenses (net of interest income) of $1.6 million 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 expenditure 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 2023’s rates, as well as an increase in the level of regulatory assets recorded.

• An overall decrease in other income (net of other expenses) of $0.2 million due primarily to a decrease of $0.5 million in gains generated on investments held to fund one of the company’s retirement plans for the three months ended June 30, 2024 compared to the same period in 2023, due to financial market conditions, partially offset by the change 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.

• A decrease in earnings of approximately $0.01 per share due to the dilutive effects from the issuance of equity under AWR’s at-the-market (“ATM”) offering program. Under the ATM offering program, AWR may offer and sell its Common Shares, with an aggregate gross offering price of up to $200 million, from time to time at its sole discretion. Through June 30, 2024, AWR has sold 455,648 Common Shares through this ATM offering program.

Electric Segment:

Diluted earnings from the electric utility segment decreased $0.02 per share for the three months ended June 30, 2024 as compared to the same period in 2023, largely resulting from not having new rates while awaiting the processing of the pending electric general rate case that will set new rates for 2023 – 2026, while also experiencing continued increases in overall operating expenses and interest costs. When a decision is issued in the electric general rate case, new rates are expected to be retroactive to January 1, 2023 and cumulative adjustments will be recorded at that time.

Contracted Services Segment:

Diluted earnings from the contracted services segment increased $0.07 per share for the three months ended June 30, 2024 when compared to the same period in 2023, due to an increase in management fee revenue resulting from the resolution of various economic price adjustments and operation of the water and wastewater systems at the new bases (Naval Air Station Patuxent River and Joint Base Cape Cod) and an increase in construction activity largely resulting from timing differences of when construction work was performed in 2024 as compared to the same period in 2023, partially offset by an overall increase in operating expenses. The contracted services segment is expected to contribute $0.50 to $0.54 per share for the full 2024 year.

Year-to-Date (“YTD”) 2024 Results

• $0.50 per share decrease in recorded YTD 2024 consolidated diluted EPS compared to YTD 2023, or $0.01 per share increase as adjusted
  • YTD 2023 recorded results reflect the impact of retroactive rates of $0.38 per share related to the full year of 2022 due to receiving a final decision in the water utility general rate case.
  • YTD 2023 recorded results also reflect a favorable variance of $0.13 per share resulting from the reversal of revenues subject to refund previously recorded in 2022 following the receipt of a final decision in the cost of capital proceeding in June 2023.

The table below sets forth a comparison of the diluted earnings per share contribution by business segment and for the parent company as recorded during the year-to-date June 30, 2024 and 2023.

 

 

Diluted Earnings per Share

 

 

Six Months Ended

 

 

 

 

6/30/2024

 

6/30/2023

 

CHANGE

Water

 

$

1.15

 

 

$

1.65

 

 

$

(0.50

)

Electric

 

 

0.06

 

 

 

0.09

 

 

 

(0.03

)

Contracted services

 

 

0.32

 

 

 

0.27

 

 

 

0.05

 

AWR (parent)

 

 

(0.06

)

 

 

(0.04

)

 

 

(0.02

)

Consolidated diluted earnings per share, as recorded (GAAP)

 

$

1.47

 

 

$

1.97

 

 

$

(0.50

)

Adjustments to GAAP measure:

 

 

 

 

 

 

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

)

 

 

0.13

 

Consolidated diluted earnings per share, as adjusted (Non-GAAP)*

 

$

1.47

 

 

$

1.46

 

 

$

0.01

 

Water diluted earnings per share, as adjusted (Non-GAAP)*

 

$

1.15

 

 

$

1.14

 

 

$

0.01

 

* All adjustments to 2023’s recorded diluted earnings per share relate to the water segment. The water segment’s adjusted earnings for 2023 exclude both the impact of the final decision on the water general rate case that included retroactive rates related to the full year of 2022, and the impact of reversing previously recorded estimated 2022 revenues subject to refund as a result of the final cost of capital decision issued in June 2023 that made all adjustments to rates prospective. Both adjustments are shown separately in the table above.

As noted in the table above, consolidated diluted earnings for the six months ended June 30, 2024 were $1.47 per share, as compared to $1.97 per share recorded for the same period in 2023, a decrease of $0.50 per share. Included in the results for the six months ended June 30, 2023 were (i) the impact from the final decision in the water general rate case recorded in 2023 that included retroactive new rates related to the full 2022 year of $0.38 per share, and (ii) the impact of the final cost of capital decision that resulted in the reversal of estimated water revenues subject to refund previously recorded in 2022 of $6.4 million, or $0.13 per share. Excluding these items from the first half of 2023, adjusted consolidated diluted earnings were $1.46 per share, compared to recorded consolidated earnings of $1.47 per share during the same period in 2024, an adjusted increase of $0.01 per share. There was a decrease in earnings in the YTD 2024 results of approximately $0.01 per share due to the dilutive effects from the issuance of equity under AWR’s ATM offering program as previously discussed in the quarterly results.

The decrease in diluted earnings per share at the electric utility segment was largely due to not having new rates while awaiting the processing of the pending electric general rate case that will set new rates for 2023 – 2026. The increase in diluted earnings per share at the contracted services segment was largely due to an increase in management fee revenue resulting from the favorable resolution of various economic price adjustments and the commencement of operations of the water and wastewater systems at the new bases.

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 July 30, 2024, AWR’s Board of Directors approved an 8.3% increase in the third quarter dividend to $0.4655 per share from $0.4300 per share on AWR’s Common Shares. Dividends on the Common Shares will be paid on September 3, 2024 to shareholders of record at the close of business on August 16, 2024. AWR has paid common dividends every year since 1931, and has increased the dividends received by shareholders each calendar year for 70 consecutive years, which places it in an exclusive group of companies on the New York Stock Exchange that have achieved that result. The company has grown its quarterly dividend rate at a compound annual growth rate (CAGR) of 8.8% over the last five years since the third quarter of 2019 and is on pace to achieve an 8.0% CAGR in its calendar year dividend payments from 2014 – 2024. AWR's current policy is to achieve a CAGR in the dividend of more than 7% over the long-term.

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. 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 approved in June 2023, and the impact from the reversal of revenues subject to refund due to a change in estimates recorded during the three and six months ended June 30, 2023 following the receipt of a final cost of capital decision in June 2023 have been excluded in this analysis when communicating AWR’s consolidated and water segment results for the three and six months ended June 30, 2024 and 2023 to help facilitate comparisons of AWR’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 United States. These items constitute “non-GAAP financial measures” under Securities and Exchange Commission rules, which supplement our GAAP disclosures but should not be considered as an alternative to the respective 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 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 Wednesday, August 7. 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 7, 2024 at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) through August 14, 2024.

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 ten states. Through its water utility subsidiary, Golden State Water Company, the company provides water service to approximately 264,400 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 24,800 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, wastewater collection, and treatment facilities located on twelve military bases throughout the country under 50-year privatization contracts with the U.S. government and one military base under a 15-year contract.

American States Water Company

Consolidated

 

 

 

 

 

Comparative Condensed Balance Sheets (Unaudited)

(in thousands)

June 30, 2024

 

December 31, 2023

Assets

 

 

 

Net Property, Plant and Equipment

$

1,981,636

 

$

1,892,280

Goodwill

 

1,116

 

 

 

1,116

 

Other Property and Investments

 

45,923

 

 

 

42,932

 

Current Assets

 

209,523

 

 

 

205,978

 

Other Assets

 

110,122

 

 

 

103,816

 

Total Assets

$

2,348,320

 

 

$

2,246,122

 

Capitalization and Liabilities

 

 

 

Capitalization

$

1,473,505

 

 

$

1,351,664

 

Current Liabilities

 

299,118

 

 

 

166,623

 

Other Credits

 

575,697

 

 

 

727,835

 

Total Capitalization and Liabilities

$

2,348,320

 

 

$

2,246,122

 

 

 

Condensed Statements of Income (Unaudited)

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

(in thousands, except per share amounts)

 

2024

 

 

2023

 

 

 

2024

 

 

2023

 

 

 

 

 

 

 

Operating Revenues

 

 

 

 

 

Water

$

110,424

 

$

116,908

 

 

$

200,689

 

$

229,620

 

Electric

 

8,703

 

 

8,828

 

 

 

20,908

 

 

21,732

 

Contracted services

 

36,201

 

 

31,664

 

 

 

68,982

 

 

67,471

 

Total operating revenues

 

155,328

 

 

157,400

 

 

 

290,579

 

 

318,823

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

Water purchased

 

17,968

 

 

18,070

 

 

 

31,729

 

 

32,374

 

Power purchased for pumping

 

3,521

 

 

2,869

 

 

 

6,353

 

 

5,223

 

Groundwater production assessment

 

5,818

 

 

5,365

 

 

 

10,672

 

 

9,198

 

Power purchased for resale

 

1,503

 

 

2,469

 

 

 

5,835

 

 

7,455

 

Supply cost balancing accounts

 

3,436

 

 

2,837

 

 

 

2,828

 

 

14,403

 

Other operation

 

10,733

 

 

9,716

 

 

 

20,356

 

 

19,832

 

Administrative and general

 

23,487

 

 

21,503

 

 

 

48,834

 

 

45,050

 

Depreciation and amortization

 

10,770

 

 

10,258

 

 

 

21,492

 

 

21,461

 

Maintenance

 

3,535

 

 

3,779

 

 

 

6,760

 

 

6,929

 

Property and other taxes

 

6,612

 

 

5,555

 

 

 

13,099

 

 

11,850

 

ASUS construction

 

16,197

 

 

16,034

 

 

 

31,899

 

 

34,938

 

Total operating expenses

 

103,580

 

 

98,455

 

 

 

199,857

 

 

208,713

 

 

 

 

 

 

 

Operating income

 

51,748

 

 

58,945

 

 

 

90,722

 

 

110,110

 

 

 

 

 

 

 

Other Income and Expenses

 

 

 

 

 

Interest expense

 

(13,137

)

 

(10,728

)

 

 

(25,992

)

 

(20,209

)

Interest income

 

2,093

 

 

1,803

 

 

 

4,163

 

 

3,667

 

Other, net

 

1,519

 

 

1,705

 

 

 

3,861

 

 

3,316

 

Total other income and (expenses), net

 

(9,525

)

 

(7,220

)

 

 

(17,968

)

 

(13,226

)

 

 

 

 

 

 

Income Before Income Tax Expense

 

42,223

 

 

51,725

 

 

 

72,754

 

 

96,884

 

Income tax expense

 

10,359

 

 

13,204

 

 

 

17,755

 

 

23,956

 

Net Income

$

31,864

 

$

38,521

 

 

$

54,999

 

$

72,928

 

 

 

 

 

 

 

Weighted average shares outstanding

 

37,309

 

 

36,976

 

 

 

37,169

 

 

36,972

 

Basic earnings per Common Share

$

0.85

 

$

1.04

 

 

$

1.48

 

$

1.97

 

 

 

 

 

 

 

Weighted average diluted shares

 

37,418

 

 

37,067

 

 

 

37,263

 

 

37,058

 

Fully diluted earnings per Common Share

$

0.85

 

$

1.04

 

 

$

1.47

 

$

1.97

 

 

 

 

 

 

 

Dividends paid per Common Share

$

0.4300

 

$

0.3975

 

 

$

0.8600

 

$

0.7950

 

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, 2024 and 2023.

 

Water

 

Electric

 

Contracted Services

 

AWR (Parent)

 

Consolidated (GAAP)

In 000's except per share amounts

Q2 2024

 

Q2 2023

 

Q2 2024

 

Q2 2023

 

Q2 2024

 

Q2 2023

 

Q2 2024

 

Q2 2023

 

Q2 2024

 

Q2 2023

Operating income (loss)

$

40,565

 

$

50,524

 

$

1,233

 

$

2,103

 

$

9,952

 

$

6,354

 

$

(2

)

 

$

(36

)

 

$

51,748

 

$

58,945

Other (income) and expenses, net

 

6,883

 

 

 

5,057

 

 

 

930

 

 

 

645

 

 

 

379

 

 

 

357

 

 

 

1,333

 

 

 

1,161

 

 

 

9,525

 

 

 

7,220

 

Income tax expense (benefit)

 

8,487

 

 

 

11,934

 

 

 

(39

)

 

 

247

 

 

 

2,322

 

 

 

1,506

 

 

 

(411

)

 

 

(483

)

 

 

10,359

 

 

 

13,204

 

Net income (loss)

$

25,195

 

 

$

33,533

 

 

$

342

 

 

$

1,211

 

 

$

7,251

 

 

$

4,491

 

 

$

(924

)

 

$

(714

)

 

$

31,864

 

 

$

38,521

 

Weighted Average Number of Diluted Shares

 

37,418

 

 

 

37,067

 

 

 

37,418

 

 

 

37,067

 

 

 

37,418

 

 

 

37,067

 

 

 

37,418

 

 

 

37,067

 

 

 

37,418

 

 

 

37,067

 

Diluted earnings (loss) per share

$

0.67

 

 

$

0.91

 

 

$

0.01

 

 

$

0.03

 

 

$

0.19

 

 

$

0.12

 

 

$

(0.02

)

 

$

(0.02

)

 

$

0.85

 

 

$

1.04

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Water

 

Electric

 

Contracted Services

 

AWR (Parent)

 

Consolidated (GAAP)

In 000's except per share amounts

YTD 2024

 

YTD 2023

 

YTD 2024

 

YTD 2023

 

YTD 2024

 

YTD 2023

 

YTD 2024

 

YTD 2023

 

YTD 2024

 

YTD 2023

Operating income (loss)

$

69,732

 

 

$

90,763

 

 

$

4,374

 

 

$

5,734

 

 

$

16,619

 

 

$

13,650

 

 

$

(3

)

 

$

(37

)

 

$

90,722

 

 

$

110,110

 

Other (income) and expenses, net

 

12,432

 

 

 

8,923

 

 

 

1,769

 

 

 

1,205

 

 

 

712

 

 

 

614

 

 

 

3,055

 

 

 

2,484

 

 

 

17,968

 

 

 

13,226

 

Income tax expense (benefit)

 

14,311

 

 

 

20,844

 

 

 

521

 

 

 

948

 

 

 

3,882

 

 

 

3,191

 

 

 

(959

)

 

 

(1,027

)

 

 

17,755

 

 

 

23,956

 

Net income (loss)

$

42,989

 

 

$

60,996

 

 

$

2,084

 

 

$

3,581

 

 

$

12,025

 

 

$

9,845

 

 

$

(2,099

)

 

$

(1,494

)

 

$

54,999

 

 

$

72,928

 

Weighted Average Number of Diluted Shares

 

37,263

 

 

 

37,058

 

 

 

37,263

 

 

 

37,058

 

 

 

37,263

 

 

 

37,058

 

 

 

37,263

 

 

 

37,058

 

 

 

37,263

 

 

 

37,058

 

Diluted earnings (loss) per share

$

1.15

 

 

$

1.65

 

 

$

0.06

 

 

$

0.09

 

 

$

0.32

 

 

$

0.27

 

 

$

(0.06

)

 

$

(0.04

)

 

$

1.47

 

 

$

1.97

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240805810943/en/

Eva G. Tang Senior Vice President-Finance, Chief Financial Officer, Corporate Secretary and Treasurer Telephone: (909) 394-3600, ext. 707