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American States Water Company Announces Earnings For The Fourth Quarter And The Year 2011

American States Water Company (NYSE:AWR) today reported net income of $6.7 million, or basic and fully diluted earnings per share of $0.36 and $0.35, respectively, for the quarter ended December 31, 2011, as compared to net income of $9.1 million, or basic and fully diluted earnings per share of $0.48 for the quarter ended December 31, 2010. Basic and fully diluted earnings from continuing operations were also $0.36 and $0.35 per common share, respectively, for the quarter ended December 31, 2011, as compared to basic and fully diluted earnings from continuing operations of $0.44 per common share for the quarter ended December 31, 2010. The table below sets forth a comparison of diluted earnings per share for the fourth quarter, as reported.

              Q4 2011     Q4 2010     $ Change
Income from continuing operations     $ 0.35     $ 0.44     ($0.09 )
Income from discontinued operations   ---       0.04       (0.04 )
Total diluted earnings per share $ 0.35     $ 0.48       ($0.13 )
 

Fourth Quarter 2011 Results

Continuing Operations:

Included in the results of the fourth quarter of 2010 from continuing operations was approximately $0.36 per share of pretax income recorded at AWR’s Golden State Water Company (“GSWC”) subsidiary representing the retroactive impact of a final decision issued by the California Public Utilities Commission (“CPUC”) in November 2010 approving the general rate case for Region II, Region III and the general office. Also impacting GSWC’s fourth quarter results for 2010 was a pretax charge of $7.6 million, or $0.23 per share, for the impairment of assets and loss contingencies resulting from regulatory matters. Excluding the effects of these two items, diluted earnings per share from continuing operations would have been $0.31 for the fourth quarter of 2010. The table below sets forth a comparison by segment excluding the effects of these two items:

      Q4 2011     Q4 2010     $ Change
Water, as adjusted     $ 0.22     $ 0.32     ($0.10 )
Electric 0.06 0.03 0.03
Contracted services 0.06 (0.04 ) 0.10
AWR (parent)   0.01       ---         0.01  
Adjusted diluted earnings from continuing operations (a non-GAAP financial measure)

$

0.35

   

$

0.31

     

$

0.04

 
 

Although adjusted diluted earnings from GSWC’s water operations decreased by $0.10 per share, it’s worth noting that the water segment also benefited by $0.06 per share in the fourth quarter of 2010 from two items that did not recur in 2011, a gain on the sale of some property and interest income associated with a settlement reached with the Internal Revenue Service (“IRS”). In addition, earnings for the water segment were reduced by $0.04 per share in the fourth quarter of 2011 due to a higher effective tax rate and a change in the methodology for allocating corporate overhead costs. These four items, along with other items impacting the comparability of the two periods, are detailed below:

  • An increase in the water margin of approximately $1.0 million, or $0.03 per share, for the three months ended December 31, 2011 compared to the same period of 2010 due primarily to CPUC-approved rate increases effective January 1, 2011 for all water regions.
  • An increase in operating expenses (other than supply costs) of $1.5 million, or $0.05 per share, due primarily to: (i) a change in allocation methodology causing higher amounts of costs from the general office allocated to the water segment and less to electric; (ii) an increase in legal and consulting costs, and (iii) higher labor and other employee benefits. These increases were partially offset by a decrease in maintenance expense.
  • A $645,000 net gain or 0.02 per share, on the sale of property in 2010 that did not recur in 2011.
  • An increase in interest and other non-operating expenses (net of interest income) of $937,000, or $0.03 per share, due primarily to interest income of approximately $1.3 million recorded during the fourth quarter of 2010 for a settlement reached with the IRS related to the Company’s refund claims associated with a tax-method change, which did not recur in 2011.
  • An increase in the effective income tax rate for the water segment during the quarter ended December 31, 2011 as compared to the same period in 2010, decreasing water earnings by approximately $0.03 per share, primarily resulting from changes between book and taxable income that are treated as flow-through adjustments in accordance with regulatory requirements, and changes in other permanent items.

Diluted earnings from GSWC’s electric operations increased by $0.03 per share over the prior year’s fourth quarter due primarily to an increase in rates approved by the CPUC, lower operating expenses due to less costs allocated from the general office to the electric segment and lower outside services costs, and a lower effective tax rate.

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