American States Announces Earnings for the Fourth Quarter and the Year 2012

  American States Announces Earnings for the Fourth Quarter and the Year 2012

    Contracted Services Contributed to Record 2012 Earnings Due to Capital
                    Construction at Several Military Bases

Business Wire

SAN DIMAS, Calif. -- February 28, 2013

American States Water Company (NYSE:AWR) today reported net income of $10.3
million, or basic and fully diluted earnings per share of $0.54 and $0.53,
respectively, for the quarter ended December 31, 2012, as compared to 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, a 51.4%
increase in diluted earnings per share.

“We are very pleased with our fourth quarter and full year earnings,
particularly the performance of our contracted service business segment,” said
President and Chief Executive Officer Robert J. Sprowls. “The improved
performance of this segment in 2012 was driven by several large, multi-year
construction projects, which we expect to continue in 2013 though tempered by
some slowing in renewal and replacement capital work,” Sprowls added.

Fourth Quarter 2012 Results

The table below sets forth a comparison of the fourth quarter diluted earnings
per share by business segment:

                     Q4 2012   Q4 2011   Change
Water                 $  0.25   $  0.22   $ 0.03
Electric                   0.05        0.06       (0.01 )
Contracted services        0.23        0.06       0.17
AWR (parent)              ---      0.01    (0.01 )
Totals                  $  0.53   $  0.35   $ 0.18  
                                                        

Water

For the three months ended December 31, 2012, fully diluted earnings from the
water segment of AWR’s Golden State Water Company (“GSWC”) subsidiary
increased by $0.03 per share to $0.25 per share, as compared to $0.22 per
share for the three months ended December31,2011. Items impacting the
comparability of the two periods are detailed below:

  *An increase in the water gross margin of approximately $2.4 million, or
    $0.07 per share, during the three months ended December 31, 2012 as
    compared to the same period in 2011 due primarily to rate increases in
    2012 approved by the California Public Utilities Commission (“CPUC”) to
    recover infrastructure improvements and operating costs;
  *An increase in operating expenses (other than supply costs) of $1.9
    million, or $0.06 per share, due primarily to an increase in: (i)
    depreciation expense resulting from additions to utility plant; (ii) other
    operation expense resulting from higher labor and related employee
    benefits, and water treatment costs; (iii) maintenance expense resulting
    from an increase in planned maintenance activities during the fourth
    quarter of 2012, and (iv) property and other taxes. These increases were
    partially offset by a decrease in administrative and general expense
    resulting from lower outside service costs;
  *An increase in interest and other non-operating expenses (net of interest
    income) of $355,000, or $0.01 per share, due primarily to the reversal of
    redemption costs in the fourth quarter of 2011 associated with high
    interest-rate senior notes. The redemption costs were capitalized in the
    fourth quarter of 2011 to be amortized over the life of new notes pursuant
    to the cost of capital proceeding; and
  *A decrease in the effective income tax rate for the water segment during
    the quarter ended December 31, 2012 as compared to the same period in
    2011, which increased earnings by $0.03 per share, primarily due to
    changes between book and taxable income that were treated as flow-through
    adjustments in accordance with regulatory requirements.

Electric

Diluted earnings from GSWC’s electric operations decreased by $0.01 per share
over the prior year’s fourth quarter due primarily to an increase in other
operating expenses, partially offset by an increase in rates approved by the
CPUC and a lower effective tax rate.

Contracted Services

Diluted earnings from AWR’s contracted services subsidiary, American States
Utility Services, Inc. (“ASUS”) increased by $0.17 per share over the prior
year’s fourth quarter, due primarily to an increase in construction activity
at the Fort Bragg military base in North Carolina and Fort Bliss in Texas. At
Fort Bragg, there continues to be progress made on a major water and
wastewater pipeline replacement project estimated to be substantially
completed by the end of 2013. A backflow preventer and meter project at Fort
Bragg is also underway and is expected to be completed by mid-2014. There has
also been an overall increase in the renewal and replacement capital work at
Fort Bliss consistent with the requirements to construct replacement assets
under the 50-year contract with the U.S. government.

Full Year 2012 Results

Basic and fully diluted earnings per share for the year ended December 31,
2012 were $2.83 and $2.82, respectively, compared to $2.44 and $2.43 per
common share on a basic and fully diluted basis, respectively, for the same
period in 2011. Basic and diluted earnings per share from continuing
operations for the year ended December 31, 2012 were also $2.83 and $2.82 per
common share, respectively, compared to $2.24 and $2.23 per common share,
respectively, for the year ended December 31, 2011. This represents a 26.5%
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 diluted earnings per share
contribution from continuing operations by business segment:

                                    Year Ended December 31,
                                   2012      2011      Change
Water                                 $ 1.80    $ 1.66    $ 0.14
Electric                                0.24       0.18       0.06
Contracted services                     0.78       0.38       0.40
AWR (parent)                           ---     0.01    (0.01 )
Totals from continuing operations     $ 2.82   $ 2.23   $ 0.59  
                                                                    

Water

For the year ended December 31, 2012, fully diluted earnings per share
contributed by the water segment increased by $0.14 per share to $1.80 per
share, as compared to $1.66 per share for the same period of 2011. Items
impacting the comparability of the two periods are detailed below:

  *An increase in the water gross margin of $5.9 million, or $0.18 per share,
    during the year ended December31,2012 compared to the same period of
    2011 primarily as the result of CPUC-approved rate increases effective
    January 1, 2012 to recover infrastructure improvements and operating
    costs;
  *An increase in operating expenses (other than supply costs) of
    approximately $4.5 million, or $0.14 per share, due, in large part, to an
    increase in depreciation expense of $2.5 million resulting from additions
    to utility plant. There was also an increase in: (i) other operation
    expense due primarily to higher labor and other employee related benefits
    and bad debt expense, and (ii) property and other taxes. These increases
    were partially offset by decreases in maintenance costs and administrative
    and general expense resulting primarily from lower outside service costs;
  *An overall decrease in interest expense (net of interest income and other
    non-operating items) of approximately $2.0 million, or $0.06 per share,
    due primarily to: (i) a decrease in short-term bank borrowings; (ii) the
    redemption on October 1, 2012 of $8 million of notes with a 7.55% interest
    rate; (iii) a reduction in interest expense in connection with the CPUC’s
    final decision issued in July 2012 on the water cost of capital
    proceeding; (iv) higher interest income earned on regulatory assets and a
    refund claim approved by the Internal Revenue Service, and (v) gains
    recorded on one of GSWC’s investments; and
  *A decrease in the effective income tax rate for the water segment during
    the year ended December 31, 2012 as compared to 2011 which increased
    earnings by approximately $0.04 per share primarily resulting from changes
    between book and taxable income that are treated as flow-through
    adjustments in accordance with regulatory requirements.

Electric

Diluted earnings from electric operations increased by $0.06 per share during
the year ended December31, 2012 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 previously incurred in connection with GSWC’s efforts
to procure renewable energy resources; (ii) an increase in the electric gross
margin of $1.4 million, or $0.04 per share, and (iii) a decrease in the
effective income tax rate which increased earnings by approximately $0.01 per
share primarily resulting from changes between book and taxable income that
are treated as flow-through adjustments in accordance with regulatory
requirements. These increases were partially offset by an increase in other
operating expenses (excluding the $1.2 million recovery of legal costs
discussed above), which decreased earnings by $0.03 per share.

Contracted Services

Diluted earnings from contracted services increased by $0.40 per share during
the year ended December 31, 2012 due primarily to an increase in construction
activities at all military bases served, particularly at Fort Bragg in North
Carolina, the military bases in Virginia, and Fort Bliss in Texas. In addition
to the construction projects previously discussed in the fourth quarter
results above, there was also increased construction activity at the military
bases in Virginia primarily due to a pipeline and pump station replacement
project, expected to be completed by September 2013. Finally, there was also
an overall increase in renewal and replacement capital work, particularly at
Fort Bliss consistent with the requirements to construct replacement assets
under the 50-year contracts 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 first five
months of 2011 resulted in earnings of $0.08 per share.

Regulatory Matters

In July 2011, the CPUC issued an order granting the Division of Ratepayer
Advocates’ (“DRA’s”) request to rehear certain issues from the Region II,
Region III and general office rate case approved in November 2010. Among the
issues in the rehearing is the La Serena plant improvement project included in
rate base totaling approximately $3.5 million. In January 2013, GSWC and DRA
entered into settlement discussions to resolve all the issues in the
rehearing. A settlement agreement, if reached, would be subject to CPUC
approval. However, as a result of these settlement discussions, GSWC recorded
an additional pretax charge of $416,000 for 2012, representing plant
improvement project costs and related revenues earned on those costs that it
expects will be refunded to customers based upon the terms of the settlement
being discussed. A settlement, if finalized and approved, would resolve all
issues arising from the rehearing.

In June 2012, GSWC filed a motion to adopt a settlement agreement between
GSWC, the DRA, and The Utility Reform Network in connection with the water
general rate case (“GRC”) filing made in July 2011. The proposed settlement,
if approved by the CPUC, would resolve almost all of the issues in the GRC
application and would generate an increase in the annual water gross margin of
approximately $14.5 million starting in 2013 as compared to the gross margin
as authorized in rates for 2012. A proposed decision on the GRC is expected
from the CPUC during the first quarter of 2013. A final decision is expected
during the second quarter of 2013, with new rates retroactive to January 1,
2013.

Contracted Services

In October 2012, the third price redetermination for Fort Bliss was finalized
and a contract modification funding the increases in annual fees was issued by
the U.S. government in January 2013. The final price redetermination provides
for an annual increase of approximately $450,000 to the operations and
maintenance fee compared to the amounts previously in effect.

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. The Company 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.
The Company reviews these measurements regularly and compares them to
historical periods and to the 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-K for the year ended December 31, 2012 to be filed with the Securities and
Exchange Commission.

Fourth Quarter 2012 Earnings Release Conference Call - The Company will host a
conference call today, February 28, 2013 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
Thursday, February 28,2013 at 2:00 p.m. PT and will run through Thursday,
March 7, 2013. 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 256,000 customers). The Company
also distributes electricity to over 23,000 customers in the City of Big Bear
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 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 1954. On January 29, 2013, the Board of Directors approved a
quarterly dividend of $0.355 per share on the Common Shares of the Company.

American States Water Company
Consolidated
Comparative Condensed Balance Sheets
                 December 31,                                   
(in thousands)   2012            2011
                   (Unaudited)
Assets                            
Utility            $ 917,791         $ 896,500
Plant-Net
Goodwill             1,116             1,116
Other Property
and                  13,755            11,803
Investments
Current Assets       184,033           165,601
Regulatory and    164,248       163,342   
Other Assets
                $ 1,280,943    $ 1,238,362 
Capitalization
and
Liabilities
Capitalization     $ 787,042         $ 749,061
Current              93,697            107,583
Liabilities
Other Credits     400,204       381,718   
                $ 1,280,943    $ 1,238,362 
                                                                       
Condensed
Statements of      Three months ended                  Twelve months ended
Income
(in thousands,
except per       December 31,                        December 31,
share amounts)
                   2012            2011              2012          2011
                   (Unaudited)                         (Unaudited)
Operating          $ 111,541      $ 95,245         $ 466,908    $ 419,913 
Revenues
                                                                       
Operating
Expenses:
Water              $ 11,753          $ 9,851           $ 54,010        $ 47,530
purchased
Power
purchased for        1,713             1,756             8,355           8,598
pumping
Groundwater
production           3,504             3,243             14,732          13,550
assessment
Power
purchased for        3,395             3,807             12,120          13,574
resale
Supply cost
balancing            2,149             4,374             11,709          18,748
accounts
Other                7,943             7,051             29,790          28,312
operation
Administrative       18,106            19,057            70,556          74,061
and general
Depreciation
and                  10,258            9,520             41,385          38,349
amortization
Maintenance          4,472             4,662             15,887          17,357
Property and         3,682             3,570             15,381          14,210
other taxes
ASUS                 23,444            12,804            81,957          50,648
construction
Net gain on
sale of             -             -               (68     )    (128    )
property
Total
operating          $ 90,419          $ 79,695          $ 355,814       $ 324,809
expenses
                                                                       
Operating          $ 21,122          $ 15,550          $ 111,094       $ 95,104
income
                                                                       
Interest             (4,957    )       (4,874    )       (22,765 )       (23,681 )
expense
Interest             204               359               1,333           859
income
Other               (4        )    183             431         (196    )
Total other
income and           (4,757    )       (4,332    )       (21,001 )       (23,018 )
expenses
                                                                       
Income from
continuing
operations         $ 16,365          $ 11,218          $ 90,093        $ 72,086
before income
tax expense
Income tax          6,074         4,508           35,945      30,076  
expense
Income from
continuing           10,291            6,710             54,148          42,010
operations
                                                                       
Income (loss)
from
discontinued      -             (1        )      -           3,849   
operations,
net of taxes
Net Income        10,291        6,709          $ 54,148     $ 45,859  
                                                                       
Basic Earnings
Per Share
Income from
continuing         $ 0.54            $ 0.36            $ 2.83          $ 2.24
operations
Income from
discontinued      -             -               -           0.20    
operations
Net Income       $ 0.54         $ 0.36           $ 2.83       $ 2.44    
                                                                       
Fully Diluted
Earnings Per
Share
Income from
continuing         $ 0.53            $ 0.35            $ 2.82          $ 2.23
operations
Income from
discontinued      -             -               -           0.20    
operations
Net Income       $ 0.53         $ 0.35           $ 2.82       $ 2.43    
                                                                       
Weighted
Average Shares       19,222            18,756            18,999          18,693
Outstanding
Weighted
Average              19,369            18,919            19,131          18,837
Diluted Shares
                                                                       
Dividends
Declared Per       $ 0.355           $ 0.280           $ 1.27          $ 1.10
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
 
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