Cal Water announces increased revenues and earnings for 4th quarter 2003
California Water Service Group announced fourth quarter 2003 net income of $7.0 million, up 146% over fourth quarter 2002.
SAN JOSE, Calif., Feb. 2, 2004 -- California Water Service Group announced fourth quarter 2003 net income of $7.0 million, up 146% over fourth quarter 2002, and diluted earnings per share of $0.41, an increase of 116% over the same period last year.
Revenue for the quarter increased $8.7 million or 14% to $69.6 million. Adding to revenue were $6.5 million in rate increases, $1.8 million in sales to new customers, and $0.4 million in increased sales to existing customers.
Operating expenses were $62.1 million, an increase of $6.6 million or 12% over the same period last year. The largest component of the increase was income and other taxes, which rose $3.3 million. Expenses also increased in most other categories, including purchased water, payroll, benefits, water treatment, and depreciation.
Fourth quarter results were bolstered by surplus property sales, as the company had pretax gains of $3.1 million compared to $1.0 million in the fourth quarter of 2002.
Full Year 2003 Results
2003 net income was $19.4 million, compared to $19.1 million in 2002, and diluted earnings per share were $1.21, compared to $1.25 in 2002. Earnings per share decreased 3% because 1.750 million additional shares were issued in August 2003.
Revenue for 2003 was $277.1 million, increasing $14.0 million or 5%, due to rate increases of $12.6 million and $6.0 million in revenues from sales to new customers. Partially offsetting these increases were decreased revenues of $4.6 million from sales to existing customers, primarily due to higher rainfall in the first half of 2003.
Total operating expenses increased by $14.5 million, or 6%, for the year. The company incurred higher wholesaler rates and purchased more water; as a result, water costs increased by $3.1 million. Other operating increases were primarily in payroll and benefit costs ($5.5 million or 10%), water treatment ($1.2 million or 24%), maintenance ($1.1 million or 10%), and depreciation ($2.0 million or 9%).
Interest expense increased due to additional long-term debt incurred during 2002 and in the first quarter of 2003. This was partially offset by reduced interest expense from refinancing a portion of our long-term debt and lower short-term debt levels due to pay downs made with funds obtained from the equity offering.
Pretax gains from surplus property sales were $4.6 million, which was $1.6 million higher than pretax gains in 2002.
The issuance of additional shares in August 2003 raised $43.8 million of capital, which strengthened the balance sheet. The percentage of equity to total capitalization increased from 44% to 47% as of December 31, 2002 and 2003 respectively.
President and CEO Peter C. Nelson characterized 2003 as a year in which the company "turned a corner" and finally began to receive critical rate relief in late 2003 from the California Public Utilities Commission ("Commission").
"For some time now, our financial performance has been significantly impacted by a lack of timely decisions from the Commission, but we are now seeing the results of fairer regulatory treatment. In 2003, we received approval for rate increases that will add an annual $26 million in revenues, as well as $9 million in surcharges collected over a 24-month period," Nelson said.
According to Nelson, because rate increases are not collected retroactively, it takes time to see their full effect.
"Our fourth quarter results showed a big improvement, as most of the 2003 rate increases were in place for the entire quarter. With the rate increases and gains from sales of surplus properties, we had a very good quarter," he said.
In January 2004, the Commission approved an additional rate increase of $4.2 million which became effective in January.
Pending applications to the Commission include general rate case filings and recovery of "balancing-type memorandum accounts," which primarily reflect electricity rate increases incurred in 2002. The company cannot predict the amount or the timing of Commission decisions on pending filings.
At their meeting yesterday, Directors increased the quarterly dividend on common stock from $.28125 to $.2825, which marks the company's 37th consecutive year the dividend has been increased. It is payable on February 21, 2004, to stockholders of record on February 7, 2004. The regular dividend on Series C preferred stock was also declared.
On Thursday, January 29, 2004, at 1 p.m. Pacific Standard Time (4 p.m. Eastern Standard Time), the Company will conduct a teleconference call, at which time management will provide comments about fourth quarter and year-end 2003 operating results and other pertinent matters. Any stockholder or interested investor can listen to the teleconference or a replay. The dial-in number to access the teleconference is 1-800-982-3654, call ID #359329. Additional information about the call, including replay information, is available at the Company's web site, at www.calwater.com.
California Water Service Group is the parent company of California Water Service Company, Washington Water Service Company, New Mexico Water Service Company, Hawaii Water Service Company, Inc. and CWS Utility Services. Together these companies provide regulated and non-regulated water service to over 2 million people in 99 communities in California, Washington, New Mexico and Hawaii. Group's common stock trades on the New York Stock Exchange under the symbol "CWT".