Southwest Water (NASDAQ:SWWC)
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Southwest Water Company (NASDAQ:SWWC) today reported its
financial results for the three months ended March 31, 2005.
First Quarter 2005, Compared with First Quarter 2004:
-- Revenues increased 18 percent to $46.9 million from $39.7
million.
-- Operating income rose 59 percent to $1.5 million from
$933,000.
-- Net loss, after interest expense of $2.0 million, was
$241,000, or $0.01 per share, versus net income, after
interest expense of $1.1 million, of $18,000, equal to
break-even on a diluted per-share basis.
Anton C. Garnier, Southwest Water chairman and chief executive
officer, said, "Improved financial performance from our Services Group
and the positive results from the acquisition of our Texas-based
Monarch Utilities contributed to the positive, quarter-over-quarter
growth in revenues and operating income. A higher level of selling,
general and administrative expenses and increased interest expense,
combined with the adverse impact on Utility Group profitability of
nearly double the amount of average seasonal rainfall in Southern
California, resulted in a 2005 first quarter net loss."
Utility Group revenues for the 2005 first quarter rose $2.5
million, or 19 percent, compared with the same quarter last year,
largely due to the addition of Monarch Utilities, acquired in July
2004, and other new customer connections. The increased revenues were
partially offset by a decrease in California utility revenues of $1.2
million as a result of the exceptionally wet weather.
For the 2005 first quarter, Services Group revenues increased by
$4.7 million, or 18 percent, compared with the 2004 first quarter. New
operating contracts, project work that had been delayed during 2004,
increased billable services and two small acquisitions added
approximately $7 million to revenues. This increase was partially
offset by a $2.3 million reduction in construction-related revenue
from the water treatment plant project in San Juan Capistrano, which
was substantially complete at the end of 2004.
Segment operating income in the Services Group for the first
quarter of 2005 improved by approximately $2 million, compared with
the same period a year ago. In the Utility Group, segment operating
income for the first quarter of 2005 was basically flat in comparison
to that of the first quarter in the prior year, as the operating
income contribution from the Monarch Utilities acquisition offset much
of the negative impact of the unusually wet Southern California
weather.
For the first three months of 2005, selling, general and
administrative expenses rose by $1.7 million, or 25 percent, compared
with the first quarter of 2004, due to expenses for audit, legal and
other outside services, as well as higher expenses associated with the
Sarbanes-Oxley Act of 2002 and related regulations. As expected, the
recent acquisitions also resulted in higher general and administrative
expenses. In addition, interest expense increased approximately
$900,000, primarily due to the increased debt level associated with
the acquisition of Monarch Utilities and additional fixed rate,
long-term debt to fund investment in utility plant assets.
Garnier concluded, "Southwest Water typically generates its lowest
levels of revenue and profitability in the first quarter of any
calendar year, primarily due to seasonably cool, wet weather that
restricts utility water sales. As demonstrated in the first quarter of
2005, our geographic operations footprint, stretching from coast to
coast, helps mitigate the effects of regional weather extremes in any
season."
Business Outlook
The company reaffirms its guidance for 2005 as follows:
-- Revenues of approximately $195 million;
-- Operating income of approximately $19 million;
-- Net income of approximately $7.5 million;
-- Utility Group revenues of approximately 42% of total revenues;
-- Company cash capital expenditures increasing to approximately
$20 million; and
-- An effective tax rate of 36%.
This business outlook assumes normal weather conditions.
Conference Call
The company will discuss its first quarter 2005 results in a
conference call and Web cast to be held today, May 10, 2005, at 4:30
p.m. Eastern time (1:30 p.m. Pacific). The conference call can be
accessed on the company's Web site at www.swwc.com. For those unable
to participate in the live Web cast, a replay will be available
shortly after the call on the company's Web site.
Southwest Water Company provides a broad range of operations,
management and maintenance services, including water production,
treatment and distribution; wastewater collection and treatment;
utility billing and collection; customer service; and utility
infrastructure construction management. The company owns regulated
public utilities and also serves cities, utility districts and private
companies under contract. More than two million people from coast to
coast depend on Southwest Water for high-quality, reliable service.
Additional information may be found on the company's Web site:
www.swwc.com.
This document contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements, including expectations relating to future revenues and
income, the company's ability to gain new business and control costs,
involve risks and uncertainties, as well as assumptions that, if they
prove incorrect or never materialize, could cause the results of the
company to differ materially from those expressed or implied by such
forward-looking statements. Actual results may differ materially from
these expectations due to changes in regulatory, political, weather,
economic, business, competitive, market, environmental and other
factors. More detailed information about these factors is contained in
the company's filings with the Securities and Exchange Commission,
including the company's 2004 Annual Report on Form 10-K. The company
assumes no obligation to update these forward-looking statements to
reflect any change in future events.
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FINANCIAL HIGHLIGHTS - SOUTHWEST WATER COMPANY
(unaudited and in thousands, except per share amounts)
Three Months Ended
March 31,
2005 2004
----------- -----------
Operating revenues $ 46,866 $ 39,727
Operating income 1,479 933
Net income (loss) (241) 18
Income (loss) per common share:
Diluted $ (0.01) $ 0.00
Weighted average outstanding
common shares:
Diluted 19,411 16,470
NOTE: Per share amounts and weighted average outstanding common
shares reflect a 5 percent stock dividend on January 3, 2005.
CONSOLIDATED BALANCE SHEET INFORMATION
March 31, December 31,
2005 2004
----------- ------------
Current assets $ 46,222 $ 45,287
Property, plant and equipment, net 306,893 302,596
Total assets $ 413,737 $ 404,809
Current liabilities $ 32,390 $ 35,734
Long-term debt 128,335 115,827
Contributions in aid of construction 89,511 89,623
Stockholders' equity 125,442 126,198
Total liabilities and stockholders' equity $ 413,737 $ 404,809
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