American States Water pany(AWR) - 2023 Q4 - Annual Results

Financial Highlights The company reported strong 2023 earnings growth, record capital spending, and a continued increase in dividends Fourth Quarter and Full Year 2023 Highlights The company reported higher Q4 and full-year 2023 EPS, achieved record capital expenditures, and increased its quarterly dividend - Consolidated diluted EPS for Q4 2023 increased by 10% (or $0.05 per share) compared to Q4 2022[1][2] - Full-year 2023 reported consolidated diluted EPS increased by $1.25 per share compared to 2022[1] - Regulated utilities spent a record $175.7 million in company-funded capital expenditures in 2023 and filed a new general rate case outlining a $611.4 million investment plan for 2025-2027[1] - The quarterly dividend was increased by 8.2% during 2023, and has grown at a compound annual growth rate (CAGR) of 9.4% over the last five years[2] Fourth Quarter 2023 Performance Analysis This section details the fourth-quarter 2023 financial performance across the company's various operating segments Consolidated Results - Q4 2023 Consolidated diluted EPS for Q4 2023 rose to $0.55, an adjusted increase of $0.02 per share over the prior year Q4 2023 Diluted EPS by Segment (GAAP vs. Non-GAAP) | Segment | Q4 2023 Diluted EPS | Q4 2022 Diluted EPS (GAAP) | Q4 2022 Diluted EPS (Adjusted) | Change (vs Adjusted) | | :--- | :--- | :--- | :--- | :--- | | Water | $0.41 | $0.28 | $0.31 | +$0.10 | | Electric | $0.07 | $0.08 | $0.08 | -$0.01 | | Contracted services | $0.12 | $0.17 | $0.17 | -$0.05 | | AWR (parent) | ($0.04) | ($0.03) | ($0.03) | -$0.01 | | Consolidated | $0.55 | $0.50 | $0.53 | +$0.02 | Water Segment - Q4 2023 The Water segment's EPS grew due to rate increases, partially offset by higher operating and interest expenses - Water operating revenues increased by approximately $11.0 million, largely due to second-year rate increases effective July 31, 2023[7] - Operating expenses (excluding supply costs) rose by $700,000 due to higher labor, water treatment, and administrative costs[9][10] - Net interest expense increased by $1.4 million resulting from higher interest rates and increased borrowing levels to support capital expenditure programs[11] Electric Segment - Q4 2023 The Electric segment's EPS declined slightly due to increased costs while awaiting a new rate case decision - The decrease in EPS was mainly due to rising operating expenses and interest costs without new rates in place for 2023[14] - New rates, when a decision is issued in the electric general rate case, are expected to be retroactive to January 1, 2023[14] Contracted Services Segment - Q4 2023 The Contracted Services segment's EPS decreased due to the timing of construction activities - The EPS decrease was largely due to a reduction in construction activity resulting from timing differences of when work was performed[15] - The decline was partly offset by higher management fee revenues resulting from the resolution of various economic price adjustments[15] AWR (Parent) - Q4 2023 The parent company's net loss per share increased primarily due to higher interest expense and state taxes - The increased loss per share was primarily due to higher interest expense on borrowings and the effect of changes in state unitary taxes[16] Full Year 2023 Performance Analysis This section analyzes the full-year 2023 financial results, highlighting significant growth driven by regulatory outcomes Consolidated Results - Full Year 2023 Full-year 2023 reported EPS rose to $3.36, a $1.25 increase driven by retroactive rates and investment gains Full Year 2023 Diluted EPS by Segment (GAAP) | Segment | 2023 Diluted EPS | 2022 Diluted EPS | Change | | :--- | :--- | :--- | :--- | | Water | $2.77 | $1.45 | +$1.32 | | Electric | $0.20 | $0.24 | -$0.04 | | Contracted services | $0.50 | $0.46 | +$0.04 | | AWR (parent) | ($0.10) | ($0.04) | -$0.06 | | Consolidated | $3.36 | $2.11 | +$1.25 | - Full-year results included a $0.38 per share impact from retroactive rates for 2022 due to the final decision in the water general rate case[17][21] - A net favorable variance of $0.26 per share resulted from the reversal of revenues subject to refund related to the cost of capital proceeding[17][21] - A net favorable variance of $0.20 per share came from gains on investments held to fund a retirement plan, compared to losses in 2022[17][21] Segment Performance - Full Year 2023 The Water segment's significant EPS growth from a favorable rate case decision drove the company's overall 2023 performance - The Water segment's performance was significantly boosted by a CPUC final decision in June 2023, which determined new water rates for 2022–2024, retroactive to January 1, 2022[23] - As of December 31, 2023, an aggregate cumulative balance of $52.8 million in CPUC-approved general rate case memorandum accounts was recognized as regulatory assets and water revenues[23] - The Electric segment's EPS declined from $0.24 in 2022 to $0.20 in 2023, while the Contracted Services segment's EPS grew from $0.46 to $0.50[19] Corporate and Regulatory Updates This section covers key updates on regulatory decisions, dividend policy, and the company's strong credit ratings Regulatory Matters The company secured a higher return on equity and a deferral for its next cost of capital application - GSWC's adopted return on equity increased to 9.36% effective July 31, 2023, and was further increased to 10.06% effective January 1, 2024, due to WCCM adjustments[25] - GSWC, along with other Class A water utilities, received CPUC approval to defer the filing of their next cost of capital applications by one year to May 1, 2025[26] - GSWC's current authorized rate of return on rate base of 7.93% will continue in effect through December 31, 2025[26] Dividends The company declared a Q1 2024 dividend, marking 69 consecutive years of increases with a strong growth target - A first-quarter 2024 dividend of $0.43 per share was approved by the Board of Directors[27] - The company has increased dividends each calendar year for 69 consecutive years, placing it in an exclusive group of NYSE companies[27] - The quarterly dividend rate has grown at a 5-year CAGR of 9.4%, and the company's policy is to achieve a CAGR of more than 7% long-term[27] Credit Ratings The company and its subsidiary maintain strong, stable investment-grade credit ratings from S&P and Moody's - AWR maintains a credit rating of 'A Stable' with S&P[28] - GSWC maintains an 'A+ Stable' rating with S&P and an 'A2 Stable' rating with Moody's Investors Service[28] Financial Statements and Reconciliations This section presents condensed financial statements and reconciles GAAP to non-GAAP measures by business segment Consolidated Comparative Condensed Balance Sheets Total assets and capitalization grew in 2023, driven by increased investment in property, plant, and equipment Condensed Balance Sheet Data (in thousands) | Account | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Net Property, Plant and Equipment | $1,892,280 | $1,753,766 | | Total Assets | $2,246,122 | $2,034,374 | | Capitalization | $1,351,664 | $1,156,096 | | Current Liabilities | $166,623 | $396,522 | | Total Capitalization and Liabilities | $2,246,122 | $2,034,374 | Condensed Statements of Income Full-year 2023 operating revenues and net income showed significant growth compared to the prior year Key Income Statement Data (in thousands) | Metric | Full Year 2023 | Full Year 2022 | Q4 2023 | Q4 2022 | | :--- | :--- | :--- | :--- | :--- | | Total operating revenues | $595,699 | $491,528 | $125,180 | $125,367 | | Operating income | $196,740 | $126,636 | $34,879 | $27,614 | | Net Income | $124,921 | $78,396 | $20,428 | $18,629 | Earnings Per Share | Metric | Full Year 2023 | Full Year 2022 | Q4 2023 | Q4 2022 | | :--- | :--- | :--- | :--- | :--- | | Basic EPS | $3.37 | $2.12 | $0.55 | $0.50 | | Fully diluted EPS | $3.36 | $2.11 | $0.55 | $0.50 | Computation and Reconciliation of Non-GAAP Financial Measure This section provides a detailed breakdown of net income and EPS by segment for Q4 and the full year 2023 vs 2022 Q4 2023 Net Income by Segment (in thousands) | Segment | Q4 2023 Net Income (Loss) | Q4 2022 Net Income (Loss) | | :--- | :--- | :--- | | Water | $15,119 | $10,390 | | Electric | $2,449 | $2,979 | | Contracted Services | $4,405 | $6,377 | | AWR (Parent) | ($1,545) | ($1,117) | | Consolidated | $20,428 | $18,629 | Full Year 2023 Net Income by Segment (in thousands) | Segment | Full Year 2023 Net Income (Loss) | Full Year 2022 Net Income (Loss) | | :--- | :--- | :--- | | Water | $102,708 | $53,770 | | Electric | $7,479 | $8,876 | | Contracted Services | $18,596 | $17,246 | | AWR (Parent) | ($3,862) | ($1,496) | | Consolidated | $124,921 | $78,396 |