Financial Results Call Presentation. First Quarter 2016

Transcription

1 Financial Results Call Presentation First Quarter 2016 May 5, 2016 NYSE: AWR

2 Today s Presenters Robert J. Sprowls President & CEO Eva G. Tang SVP Finance & CFO 2

3 Forward-Looking Statement Certain matters discussed during this conference call may be forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of Please review a description of the Company s risks and uncertainties in our most recent Form 10-K and Form 10-Q on file with the Securities and Exchange Commission (SEC). 3

4 Non-GAAP Financial Measures This conference call includes a discussion of certain measures that are not prepared in accordance with Generally Accepted Accounting Principles (GAAP) in the United States, and constitute "non-gaap financial measures" under SEC rules. These non- GAAP financial measures are derived from consolidated financial information but are not presented in our financial statements that are prepared in accordance with GAAP. Non-GAAP financial measures discussed in this conference call include (i) the water gross margin, which is computed by subtracting total water supply costs from total water revenues, and (ii) 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 shares. The non-gaap financial measures supplement our GAAP disclosures and should not be considered as alternatives to the 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 water gross margin and earnings per share by business segment as important measures in evaluating its operating results and believes these measures are useful internal benchmarks in evaluating the performance of its operating segments. The Company reviews these measures regularly and compares them to historical periods and to the operating budget. 4

5 Presentation Overview Diluted EPS by Segment Financial Results Operating Revenues by Segment Operating Expenses EPS Bridge Q to Q Liquidity and Capital Resources Water General Rate Case California Drought American States Utility Services, Inc. (ASUS) Dividends 5

6 Diluted EPS by Segment Q Q Variance Water $0.22 $0.24 ($0.02) Electric Contracted Services (0.01) AWR (parent) 0.01 (0.01) Consolidated $0.28 $0.32 ($0.04) 6

7 Financial Results (amounts in millions, except for EPS) Q Q Variance Operating Revenues $93.5 $100.9 ($7.4) Operating Expenses (3.7) Income from Operations (3.7) Interest Expense and Other Income Tax Expense (2.1) Net Income * $10.2 $12.1 ($1.9) EPS $0.28 $0.32 ($0.04) * Line item does not total due to rounding 7

8 Operating Revenues by Segment (amounts in millions) Q Q Variance Water $66.3 (1) $71.5 ($5.2) Electric (0.4) Contracted Services (1.8) Total Operating Revenues $93.5 $100.9 ($7.4) (1) Adjusted downward to reflect stipulated and settled positions within the pending water general rate case. Adjustments did not have a significant impact to pretax operating income for the first quarter of

9 Operating Expenses (amounts in millions) Q Q Variance Water and Electric Supply Costs $17.6 (1) $22.0 ($4.4) Other Operation Administrative and General 20.8 (1) Depreciation and Amortization 9.8 (1) 10.5 (0.7) Maintenance Property and Other Taxes ASUS Construction (1.3) Total Operating Expenses $72.3 $76.0 ($3.7) (1) Adjusted downward to reflect stipulated and settled positions within the pending water general rate case. Adjustments did not have a significant impact to pretax operating income for the first quarter of

10 EPS Bridge Q to Q $0.40 $0.35 $0.30 $0.25 $0.20 $0.15 $0.10 $0.05 $0.00 $0.32 -$0.02 -$0.01 $0.01 -$0.02 $0.01 -$0.01 Regulated Utilities Contracted Services AWR Parent $

11 Liquidity and Capital Resources Operating cash flows decreased by $10.9 million primarily due to: Timing of billings of and cash receipts for construction work at military bases Increase in Water Revenue Adjustment Mechanism (WRAM) regulatory assets In early March 2016, we implemented surcharges to recover the 2015 WRAM balances Higher income tax payments Approximately $29 million in capital expenditures during Q1 2016, substantially exceeding Q We expect to invest $85 - $95 million during 2016, which may change once a decision is issued by the CPUC on the pending water rate case Standard & Poor s Ratings Services (S&P) affirmed the A+ credit rating and stable outlook on both American States Water Company and Golden State Water Company (GSWC) 11

12 Water General Rate Case Golden State Water Company Customer Service Areas Application will determine rates for the years 2016, 2017 and 2018 Capital budget request averaging ~$90 million a year for the three year period GSWC has settled with the CPUC s Office of Ratepayer Advocates nearly all of GSWC s operating expenses and consumption levels Adopted revenues for 2016 are expected to be lower than the 2015 adopted levels due primarily to decreases in: supply costs caused by lower consumption depreciation expense resulting from an updated depreciation study other operating expenses due to cost management A final decision is expected in

13 California Drought In February 2016, the State Water Resources Control Board (SWRCB) extended the mandatory water restrictions through October 31, 2016, as allowed under the Governor s Executive Order As of March 1, 2016, the SWRCB modified the mandatory reductions for each water system All except one of GSWC s water systems meet the revised conservation standard. Additional actions will be taken to ensure further reductions are realized We are in the process of preparing to file with the CPUC for recovery of drought-related items of approximately $1.3 million, incurred mostly in 2015 As of April 26, 2016, the U.S. Drought Monitor estimates 74% of California remains in a Severe Drought 13

14 American States Utility Services, Inc. (ASUS) Construction activity expected to increase during the remainder of 2016 as construction slowed during Q due to engineering and bidding activities on renewal and replacement and new capital upgrade projects ASUS is projected to contribute $0.28 -$0.32 per share in 2016 Fourth price redetermination for Fort Bliss anticipated in the second quarter of 2016 Third price redetermination for Fort Bragg anticipated in the third quarter of 2016 We are actively engaged in bidding on new bases that are being privatized and continue to develop significant opportunities for new construction work on the bases we currently serve Serving Those Who Serve 14

15 Dividends On May 2, 2016, AWR Board of Directors approved a second quarter dividend of $0.224 per share Payable on June 1, 2016 to shareholders of record at the close of business on May 18, 2016 American States Water Company has paid dividends every year since 1931, increasing the dividend received by shareholders each calendar year for 61 consecutive years, which places it in an exclusive group of companies on the New York Stock Exchange that have achieved that result (Per share) $0.90 $0.85 $0.80 $0.75 $0.70 $0.65 $0.60 $0.55 $0.50 $0.45 Dividend Growth CAGR ~11% $ $

16 Questions and Answers 16