American States Water Company Announces Earnings for the Second Quarter of 2012

  American States Water Company Announces Earnings for the Second Quarter of
  2012

            EPS from Continuing Operations up 16% Over Prior Year

Business Wire

SAN DIMAS, Calif. -- August 06, 2012

American States Water Company (NYSE:AWR) today reported net income from
continuing operations of $15.1 million, or $0.79 per basic and fully diluted
share for the quarter ended June 30, 2012, as compared to net income from
continuing operations of $12.7 million, or $0.68 per basic and fully diluted
share for the same period in 2011, a 16% increase in earnings per share. Total
basic and fully diluted earnings per share were $0.79 for the quarter ended
June 30, 2012, as compared to basic and fully diluted earnings per share of
$0.85 for the quarter ended June 30, 2011. Included in the results for the
second quarter of 2011 were earnings from discontinued operations of $0.17 per
share resulting from the operation and sale of Chaparral City Water Company
which was completed in May 2011. The table below sets forth a comparison of
diluted earnings per share for the second quarter.


                     Q2 2012    Q2 2011    $ Change      % Change
Income from
continuing            $  0.79    $  0.68    $ 0.11        16    %
operations
Income from
discontinued               ---       0.17     (0.17  )    (100  %)
operations
Total diluted            $  0.79    $  0.85     ($0.06 )    (7    %)
earnings per share


Second Quarter 2012 Results

Continuing Operations:

The table below sets forth a comparison of the second quarter diluted earnings
per share from continuing operations by business segment:


                                    Q2 2012    Q2 2011    $ Change
Water                                $  0.56    $  0.51    $  0.05
Electric                                   0.04          0.03          0.01
Contracted services                       0.19      0.14      0.05
Totals from continuing operations       $  0.79    $  0.68    $  0.11


Water

For the three months ended June 30, 2012, fully diluted earnings from the
water operations of AWR’s Golden State Water Company (“GSWC”) subsidiary
increased by $0.05 per share to $0.56 per share as compared to $0.51 per share
for the three months ended June 30, 2011. It is worth noting that 2012 is the
last year of a rate case cycle for all of GSWC’s water regions, and rate
increases are typically lowest in the final year of a rate case cycle. Items
impacting the comparability of the two periods are detailed below:

  *An increase in the water gross margin of approximately $305,000, or $0.01
    per share, during the three months ended June 30, 2012 as compared to the
    same period in 2011 due to third year rate increases for Regions II and
    III approved by the California Public Utilities Commission (“CPUC”)
    effective January 1, 2012.
  *An increase in operating expenses (other than supply costs) by
    approximately $1.0 million, or $0.03 per share, due primarily to increases
    in depreciation expense resulting from additions to utility plant,
    conservation related costs, and employee related costs.
  *An overall decrease in interest expense (net of interest income) of $1.3
    million, or $0.04 per share, due primarily to lower short-term bank
    borrowings and the recording of a $381,000 reduction in interest expense
    in connection with the CPUC’s final decision on the water cost of capital
    proceeding. In addition, included in the three months ended June 30, 2011
    results were interest charges totaling $553,000 related to the redemption
    of $22.0 million of GSWC’s 7.65% Medium-Term Notes, which did not recur in
    2012.
  *A decrease in the effective tax rate increased earnings by approximately
    $0.03 per share during the second quarter of 2012 primarily resulting from
    changes between book and taxable income that are treated as flow-through
    adjustments in accordance with regulatory requirements, and changes in
    certain permanent items.

Electric

For the three months ended June 30, 2012, fully diluted earnings from GSWC’s
electric operations were $0.04 per share, an increase of $0.01 per share
compared to the same period in the prior year due to an increase in the
electric gross margin, partially offset by increased operating expenses.

Contracted Services

For the three months ended June 30, 2012, fully diluted earnings from AWR’s
contracted services subsidiary, American States Utility Services, Inc.
(“ASUS”), increased by $0.05 per share to $0.19 per share as compared to the
same period in 2011 primarily due to an increase in construction activities
and favorable changes in cost estimates at the Fort Bragg military base in
North Carolina. ASUS serves Fort Bragg under a 50-year privatization contract
with the U.S. government.

Discontinued Operations:

On May 31, 2011, AWR completed the sale of Chaparral City Water Company
(“CCWC”) and recorded a gain, net of taxes and transaction costs, of $0.12 per
share. Excluding the gain on sale, the operation of CCWC during the three
months ended June 30, 2011 resulted in earnings of $0.05 per share.

Year-to-Date 2012 Results

Basic and fully diluted earnings per share for the six months ended June 30,
2012 were $1.33 and $1.32, respectively, compared to $1.25 per share on a
basic and fully diluted basis, for the six months ended June 30, 2011. Basic
and diluted earnings per share from continuing operations for the six months
ended June 30, 2012 were also $1.33 and $1.32, respectively, compared to $1.05
per share on a basic and fully diluted basis, for the six months ended
June30,2011. This represents a 26% increase over the prior year in fully
diluted earnings per share from continuing operations.

Continuing Operations:

The table below sets forth a comparison of the year-to-date diluted earnings
per share contribution from continuing operations by business segment:


                                     Six Months Ended June 30,
                                    2012      2011      $ Change
Water                                   $ 0.83    $ 0.80    $  0.03
Electric                                  0.15         0.07          0.08
Contracted services                      0.34     0.18      0.16
Totals from continuing operations       $ 1.32    $ 1.05    $  0.27


Water

Fully diluted earnings contributed by GSWC’s water operations increased by
$0.03 per share, to $0.83 per share for the six months ended June 30, 2012, as
compared to $0.80 per share for the six months ended June 30, 2011, primarily
due to:

  *An increase in the water gross margin of $2.1 million, or $0.07 per share,
    during the six months ended June 30, 2012 primarily as the result of
    CPUC-approved third year rate increases for Regions II and III effective
    January 1, 2012.
  *An increase in operating expenses (other than supply costs) by
    approximately $2.8 million, or $0.09 per share, due primarily to increases
    in: (i) depreciation expense of $1.3 million resulting from additions to
    utility plant, and (ii) other operation expenses of $1.2 million due, in
    large part, to higher labor and other employee benefits, conservation
    costs and bad debt expense.
  *An overall decrease in interest expense (net of interest income) of
    approximately $1.0 million, or $0.03 per share, primarily due to debt
    redemption costs incurred in 2011 and a true-up of interest expense as a
    result of the water cost of capital final decision, as previously
    discussed.
  *A decrease in the effective income tax rate during the six months ended
    June 30, 2012 as compared to the same period in 2011, increasing earnings
    by approximately $0.02 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 certain permanent
    items.

Electric

For the six months ended June 30, 2012, fully diluted earnings from GSWC’s
electric operations increased by $0.08 per share as compared to the same
period in 2011, due primarily to: (i) the CPUC’s approval of GSWC’s
application to recover $1.2 million, or $0.04 per share, in legal and outside
services costs incurred from September 2007 through March 2011 in connection
with its efforts to procure renewable energy resources, (ii) an increase in
the electric gross margin of $1.1 million, or $0.03 per share, and (iii) a
decrease in the effective income tax rate increasing earnings by approximately
$0.01 per share.

Contracted Services

For the six months ended June 30, 2012, fully diluted earnings from ASUS
increased by $0.16 per share as compared to the same period in 2011 due
primarily to an increase in construction activities at Fort Bragg in North
Carolina and significant progress made on a major water and wastewater
pipeline replacement project as a result of better than expected weather
conditions at Fort Bragg during the first several months of 2012. This project
is estimated to be completed in early 2014.

Discontinued Operations:

On May 31, 2011, AWR completed the sale of Chaparral City Water Company
(“CCWC”) and recorded a gain, net of taxes and transaction costs, of $0.12 per
share. Excluding the gain on sale, the operation of CCWC during the first five
months of 2011 resulted in earnings of $0.08 per share.

Regulatory Matters

In July 2012, the CPUC issued a final decision on GSWC’s cost of capital
proceeding filed in May 2011. The decision approves the settlement agreement
entered into between GSWC, along with three other California water utilities,
and the CPUC’s Division of Ratepayer Advocates (“DRA”) in November 2011. The
approved settlement authorizes a Return on Equity (“ROE”) of 9.99% and a
rate-making capital structure for GSWC of 55% equity and 45% debt. The
weighted cost of capital (return on rate base), with an updated embedded debt
cost and the authorized ROE, is 8.64%. The new rate of return authorized by
the CPUC’s final decision will be implemented into water rates retroactive to
January 1, 2012. The CPUC decision also authorized GSWC to continue the Water
Cost of Capital Mechanism (“WCCM”). The WCCM adjusts ROE and rate of return on
rate base between the three-year cost of capital proceedings only if there is
a positive or negative change of more than 100 basis points in the average of
the Moody’s Aa utility bond rate as measured over the period October 1 through
September 30. If the average Moody’s rate for this period changes by over 100
basis points from the benchmark, the ROE will be adjusted by one half of the
difference. For the first ten months of the period, the rate has declined by
more than 100 basis points from the benchmark. Based upon this data, at this
time GSWC expects that it will have to lower its ROE by about 50 to 60 basis
points, effective January 1, 2013.

On June 21, 2012, GSWC filed a motion to adopt a settlement agreement between
GSWC, the DRA, and The Utility Reform Network (“TURN”) in connection with the
water General Rate Case (“GRC”) filing made in July 2011. The proposed
settlement, if approved by the CPUC, resolves almost all of the issues in the
GRC application and would generate approximately $9 million in additional
annual revenues starting in 2013 as compared to 2012 adopted revenues. The
proposed rate increases for 2014 over 2013 are $8 million or 3%, and the 2015
proposed rate increases over 2014 amount to $6.5 million, or 2%. While the
increase in 2013 revenues would be approximately $9 million under the
settlement agreement, the increase in the settled water gross margin is
approximately $18 million, or 8.4%, when compared to the 2012 adopted water
gross margin. Supply costs, which are a pass-through, are projected to
decrease by $9 million in 2013 as compared to 2012 adopted supply costs
resulting primarily from lower customer consumption as compared to 2012
adopted consumption levels. In addition, the CPUC requested GSWC, DRA and TURN
to file additional testimony to justify the reasonableness of the Water
Revenue Adjustment Mechanism (“WRAM”) and address the CPUC’s questions
regarding the WRAM. In July 2012, all three parties filed additional testimony
addressing the WRAM. The settlement agreement for the GRC is subject to an
acceptable resolution regarding the WRAM matter.

Contracted Services

During the second quarter of 2012, the U.S. government reached an agreement
with ASUS on the first price redetermination for Andrews Air Force Base in
Maryland. A final modification of the contract for the funding is pending the
U.S. government’s approval. Price redeterminations for Fort Bliss, Fort
Jackson, Fort Bragg, and the military bases in Virginia have been filed and
are under review by the U.S. government.

Non-GAAP Financial Measures

This press release includes a discussion on water and electric gross margins,
which are computed by taking total water and electric revenues, less total
supply costs. The discussion also includes 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. These items 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.

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. Registrant uses water and electric
gross margins 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.
Registrant reviews these measurements regularly and compares them to
historical periods and to our operating budget.

Other - Certain matters discussed in this news 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 Form
10-Q for the quarter ended June 30, 2012 to be filed with the Securities and
Exchange Commission.

Second Quarter 2012 Earnings Release Conference Call - The Company will host a
conference call today, August 6, 2012 at 11:00 a.m. Pacific Time (“PT”).
Interested parties can listen to the live conference call over the Internet by
logging on to www.aswater.com.

The call will also be archived on our website and can be replayed beginning
Monday, August 6, 2012 at 2:00 p.m. PT through Monday, August 13, 2012. After
logging on to the website, click the “Investors” button at the top of the
page. The archive is located just above the “Stock Quote” section.

American States Water Company is the parent of Golden State Water Company and
American States Utility Services, Inc. Through its utility subsidiary, Golden
State Water Company, AWR provides water service to approximately 1 out of 36
Californians located within 75 communities throughout 10 counties in Northern,
Coastal and Southern California (approximately 255,000 customers). The Company
also distributes electricity to over 23,000 customers in the Big Bear
recreational area of California. Through its contracted services subsidiary,
American States Utility Services, Inc., the Company provides operations,
maintenance and construction management services for water and wastewater
systems located on military bases throughout the country through 50-year
privatization contracts with the U.S. government.

American States Water Company has paid dividends to shareholders every year
since 1931, increasing the dividends received by shareholders each calendar
year since 1953. On July 31, 2012, the Board of Directors approved a 27%
increase in the quarterly dividend to $0.355 per share on the Common Shares of
the Company.


American States Water Company
Consolidated
Comparative Condensed Balance Sheets

                                  June 30,       December 31,
(in thousands)                    2012           2011
                                     (Unaudited)
Assets
Utility Plant-Net                    $ 900,009         $  896,500
Goodwill                               1,116              1,116
Other Property and Investments         13,471             11,803
Current Assets                         175,854            165,601
Regulatory and Other Assets        162,310        163,342
                                 $ 1,252,760    $  1,238,362
Capitalization and Liabilities
Capitalization                       $ 768,455         $  749,061
Current Liabilities                    99,615             104,370
Other Credits                      384,690        384,931
                                 $ 1,252,760    $  1,238,362



Condensed
Statements of    Three months ended             Six months ended
Income
(in thousands,
except per       June 30,                          June 30,
share amounts)
                   2012          2011              2012          2011
                   (Unaudited)                       (Unaudited)
Operating          $ 114,311    $ 109,829        $ 220,959    $ 204,136 
Revenues
                                                                
Operating
Expenses:
Supply costs         26,675          26,074            47,734          47,851
Other
operation            6,851           6,946             14,277          13,863
expenses
Administrative
and general          17,792          17,740            34,377          36,159
expenses
Maintenance          3,852           4,623             7,183           8,349
Depreciation
and                  10,407          9,538             20,897          19,275
amortization
Property and         3,716           3,406             7,821           6,958
other taxes
ASUS
construction         14,896          12,491            35,181          24,675
expenses
Net gain on
sale of             (3      )    (128    )        (3      )    (128    )
property
Total
operating            84,186          80,690            167,467         157,002
expenses
                                                                     
Operating            30,125          29,139            53,492          47,134
income
                                                                     
Interest             (5,720  )       (6,869  )         (11,790 )       (12,613 )
expense
Interest             495             161               710             298
income
Other               (13     )    (289    )        216         (209    )
                                                                     
Income from
continuing
operations           24,887          22,142            42,628          34,610
before income
tax expense
Income tax          9,809       9,414           17,435      14,927  
expense
Income from
continuing           15,078          12,728            25,193          19,683
operations
                                                                     
Income from
discontinued      -           3,234           -           3,868   
operations,
net of taxes
Net Income       $ 15,078     $ 15,962         $ 25,193     $ 23,551  
                                                                     
Basic Earnings
Per Share
Income from
continuing         $ 0.79          $ 0.68            $ 1.33          $ 1.05
operations
Income from
discontinued      -           0.17            -           0.20    
operations
Net Income       $ 0.79       $ 0.85           $ 1.33       $ 1.25    
                                                                     
Fully Diluted
Earnings Per
Share
Income from
continuing         $ 0.79          $ 0.68            $ 1.32          $ 1.05
operations
Income from
discontinued      -           0.17            -           0.20    
operations
Net Income       $ 0.79       $ 0.85           $ 1.32       $ 1.25    
                                                                     
Weighted
Average Shares       18,882          18,668            18,857          18,658
Outstanding
Weighted
Average              18,945          18,738            18,988          18,797
Diluted Shares
                                                                     
Dividends
Declared Per       $ 0.28          $ 0.28            $ 0.56          $ 0.54
Common Share


Contact:

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