WEST COVINA, Calif., Aug. 12, 2003 -- Southwest Water Co. reported increased revenues and earnings for the second quarter ended June 30, 2003. The company is also updating its business outlook for the remainder of 2003.
For the second quarter of 2003, the company reported revenues of $41.5 million, operating income of $3.5 million, and net income of $1.9 million, or $0.18 per diluted share. This compares to revenues of $32.7 million, operating income of $1.9 million, and net income of $1.7 million, or $0.16 per diluted share, for the same three-month period in 2002.
For the six months ended June 30, 2003, revenues rose 27 percent to $77.6 million from $60.9 million a year ago. For the same period, operating income increased 15 percent to $4.4 million from $3.8 million in the prior-year period. For the first six months in 2003, net income decreased by 40 percent, to $1.7 million, or $0.17 per diluted share, from $2.9 million, or $0.28 per diluted share, in the same period a year ago.
Net income for the first six months in 2002 included non-recurring, after-tax gains of $1.1 million, or $0.10 per diluted share, from reimbursement of water quality infrastructure investments, and $637,000, net of tax, or $0.06 per diluted share, from a pension plan termination. Net income for the second quarter of 2003 includes $454,000, net of tax, or $0.04 per diluted share, from the sale of excess land not needed for current or planned operations.
Anton C. Garnier, Southwest Water president and CEO, said, "We are pleased with our second quarter increases in revenue, which were driven largely by our Services Group. Last November's acquisition of Aqua Services, continued organic growth in our Texas subsidiaries and our ongoing construction management of a $25 million reverse osmosis water treatment facility in San Juan Capistrano, California, contributed significantly to the second quarter revenue increase.
"On June 1, 2003, our Services Group began a 10-year, $30 million contract to operate and maintain the public works department in Pascagoula, Mississippi. The work includes managing water production and distribution, sewage collection and treatment, and other public works services for 30,000 residents of the Gulf Coast city. The contract also calls for operation of three reverse osmosis water treatment plants, thus expanding our involvement with this technology and supporting our efforts in other cities where reverse osmosis offers a practical solution to water supply challenges."
Garnier continued, "In our Utility Group, revenues increased 2 percent in the second quarter of 2003 compared to the same period a year ago. Continued growth in our New Mexico utility customer base and a step rate increase at one of our Texas utilities drove much of this growth. In May 2003 our California utility's completion of a general rate case, initially filed with the California Public Utilities Commission in April 2002, resulted in a 17 percent rate increase, effective May 28, 2003. The increased rates should improve our Utility Group's financial performance in subsequent periods."
Garnier added, "One of our challenges this year is to replace the 2002 income from non-recurring items with continuing operating income in 2003. In the second quarter we made significant progress toward this goal."
He concluded, "During the second quarter of 2003, we also improved our capital structure. We completed a private placement of 1.1 million shares of newly issued common stock for $12 million with net proceeds of approximately $11 million. These proceeds will support our growth strategy."
Business Outlook
The company is announcing that it expects full year 2003 revenues to increase by 25 to 30 percent from 2002 results, up from prior guidance of 20 to 25 percent. Operating income for 2003 is expected to increase by 35 to 40 percent, up from prior guidance of 30 to 35 percent.
The company's prior guidance remains the same with respect to the following: The Services Group will be the primary driver of revenue growth for the current year, contributing between 65 percent and 70 percent of total revenues. Cash capital expenditures, primarily in the Utility Group, are expected to increase by five to 10 percent, from approximately $13 million in 2002. The company expects its tax rate will be approximately 37 percent in 2003.
More information can be found on the company's web site at www.southwestwater.com.
Southwest Water Company provides a broad range of services: water production, treatment and distribution; wastewater collection and treatment; public works services; utility submetering; and 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 in 31 states from coast to coast depend on Southwest Water for service.
