American States Water Management Discusses Q2 2012 Results - Earnings Call Transcript
August 6, 2012 4:00 PM ET
American States Water (AWR)
Q2 2012 Earnings Call
August 06, 2012 2:00 pm ET
Eva G. Tang - Chief Financial Officer, Principal Accounting Officer, Senior Vice President of Finance, Treasurer and Corporate Secretary
Robert J. Sprowls - Chief Executive Officer, President, Director, Member of Asus Committee, Chief Executive Officer of Golden State Water Company, Chief Executive Officer of Chaparral City Water Company, President of Golden State Water Company and President of Chaparral City Water Company
Ladies and gentlemen, thank you for standing by. Welcome to the American States Water Company, AWR, conference call discussing the second quarter of 2012 results. If you have not received a copy of this morning's earnings release, please call (909) 394-3600 extension 651, and one will be faxed or emailed to you. If you would like to listen to the replay of this call, it will begin this afternoon at approximately 2 p.m. Pacific time and run through Monday, August 13, 2012. After logging on the website, click the Investors button at the top of the page. The archive is located just above the Stock Quote section. [Operator Instructions] As a reminder, this call will be recorded and will be limited to no more than 1 hour. At this time, I would like to turn the call over to Eva Tang, Chief Financial Officer of American States Water Company.
Eva G. Tang
Hello, everyone. Welcome, and thank you for joining us today. On the call with me is our President and CEO, Bob Sprowls.
I would like to first remind you that certain matters discussed during this conference call maybe forward-looking statements intended to qualify for the Safe Harbors from liability established by the Private Securities Litigation Reform Act of 1995. Please review a description of our company's risks and uncertainties in our most recent Form 10-K and Form 10-Q on file with the Securities and Exchange Commission.
Before I discuss the results for the quarter, Bob would like to say a few words. Bob?
Robert J. Sprowls
Thank you, Eva, and thank you, everyone, for joining our call. As many of you know, our Board of Directors last week approved a $0.075 increase in the quarterly cash dividend to $0.355 per share. This represents a 27% increase in the quarterly dividend. This substantial increase reflects our board's confidence in the sustainability of the company's earnings and the prospects for the future at all of our business segments: our water utility, the electric utility and contracted services.
The dividend increase is also an indication of just how much our contracted services business has grown over the past several years as we have not historically paid a dividend on these earnings. We believe that long-term, sustainable earnings from this business will have a continued -- will be a continued source of dividends for our shareholders and we have adjusted our dividend accordingly.
I will discuss ASUS in more detail later and its contribution to the current dividend. Although we do not have a set dividend payout ratio, we believe that prudently increasing dividend enhances our ability to attract capital in the future. For 58 consecutive years, American States Water Company shareholders have received an increase in their annual dividend payments. I'm pleased to say that we are one of only a handful of companies on the New York Stock Exchange that can claim this kind of record. With that, I'll turn the call back over to Eva to discuss the results from the quarter.
Eva G. Tang
Thank you, Bob. I'm very pleased to report that we continue to deliver strong quarterly results with an increasing earnings from continuing operations of 15% to $0.79 per fully diluted share compared to $0.68 per share for the second quarter of 2011. Net income from continuing operations for the quarter increased by $2.4 million or 18.5% increase compared to the same period in 2011. The increase is driven by increases in earnings from all 3 of our business segments.
For the second quarter of 2012, our operating revenues increased by $4.5 million or 4.1% to $114.3 million. The main driver of this increase continues to be our contracted services segment, American States Utility Services, or ASUS. ASUS' revenue increased by $3.1 million to $25.1 million compared to the same period last year, primarily due to increased construction activity and favorable changes in cost estimates for water and wastewater pipeline replacement project at the Fort Bragg military base.
Water and electric utility revenue at Golden State Water increased by $1.4 million due to rate increases approved by the California Public Utilities Commission, effective January 1, 2012. 2012 is the final year of the current rate case cycle for both our water and electric utility business segments. The [ph] rate increases are the lowest during the last year of the rate cycle.
Our water electric supply costs were $26.7 million accounting for 31.7% of total operating expenses for the second quarter of '12. As you know, any changes in purchased water, power purchased for pumping, pump taxes for the water utility segment as compared to the adopted supply costs, are covered by Modified Cost Balancing Account. The electric utility segment also has a full cost balancing account to track the changes in purchased power and transmission-related costs. Other operation expenses remained constant as compared to the same period last year. Increases in conservation-related expenses, water treatment costs and employee-related costs at the water segment were offset by a lower precontract cost incurred at ASUS.
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