Exhibit 99.1
FOR RELEASE: May 3, 2006
Contact: Cheryl Hansen
Director, Investor Relations
(610)645-1084
clhansen@aquaamerica.com
Donna Alston
Manager, Communications
(610) 645-1095
dpalston@aquaamerica.com
AQUA AMERICA REPORTS EARNINGS FOR FIRST QUARTER 2006
COMPANY EXPECTS RETURN TO EARNINGS GROWTH IN SECOND HALF
BRYN MAWR, PA, May 3, 2006 - Aqua America, Inc. (NYSE: WTR) today reported
diluted earnings per share of $0.13 and net income of $16.6 million for the
quarter ending March 31, 2006. For the same period in 2005, the company reported
diluted earnings per share of $0.15 and net income of $18.9 million.
First quarter 2006 operating revenues increased to $117.9 million from $114.0
million for the same period in 2005 primarily due to customer growth and rate
increases. Most of the rate increases received during the quarter came from
infrastructure rehabilitation surcharges (DSIC, QIPS, SIC). The company did not
receive any major base rate increases to affect first quarter 2006, therefore
the impact on revenue from rates was less than normal. Major base rate increases
are expected to be received in the second half of this year.
Aqua America Chairman and CEO Nicholas DeBenedictis said, "While we are pleased
with the four million in new revenue in the first quarter, our results reflect
the effects of projected regulatory lag - a period of time between a rise in
costs and the recognition of those costs in rates - in the first half of 2006
due to record capital investments over the past few years and rising expenses
over the past several quarters, neither of which have been fully recovered in
rates. Also, for the first time, as required by a new accounting standard, a
non-cash charge for stock options expense affected 2006 first quarter net income
without a comparable charge in the same quarter in 2005. We currently have more
than $50 million in rate requests pending in various state jurisdictions,
including major cases in Pennsylvania - our largest rate jurisdiction - New
Jersey, Illinois and Virginia. We hope to conclude these cases ameliorating the
regulatory lag and receive the rate awards which will start benefiting revenues
and earnings chiefly in the third and fourth quarters in 2006."
DeBenedictis continued, "Over the past three years, Aqua America has invested
approximately $600 million in capital and $250 million in acquisitions,
resulting in our rate base - the investments made by the company to serve
customers and drive our future earnings power - growing at a compounded annual
growth rate of 14 percent to the current level of $1.9 billion. This significant
increase in rate base resulted, in part, from major infrastructure
rehabilitation in states like Pennsylvania, Ohio, New Jersey, Indiana, Illinois
and Maine."
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Operating and maintenance expenses increased due, in part, to double-digit
increases in water production costs, such as power, transportation and
chemicals, resulting from skyrocketing oil and gas prices over the last several
quarters. Additionally, stock options were expensed for the first time this
quarter representing 17 percent of the company's increase in operating and
maintenance expenses. Expenses were also impacted by: a 15 percent increase in
depreciation - a non-cash expense which, when received in rates, generates cash
for future investment; and rising interest expenses - up 11 percent this quarter
as a result of increased borrowing for the capital program, even though the
company's embedded cost of long-term debt was lower than first quarter 2005.
DeBenedictis said, "Rising expenses impact earnings in periods of regulatory
lag. We believe that a significant portion of the increased costs will be
recovered in cases that are currently pending and we anticipate receiving in the
second half of this year."
During the first quarter the company completed seven acquisitions of both water
and wastewater systems. DeBenedictis said, "These seven acquisitions continue
the momentum we gained completing a record 30 acquisitions in 2005. We believe
that our acquisition pipeline is full and that the company is on track to
deliver our customer growth goals in 2006. Acquisitions provide the building
blocks for future growth by bringing new revenues, new opportunities for future
capital investment and new platforms from which to grow our customer base."
In March 2006 the company finalized the purchase of the utility operations of
Florida Water Services resulting in a favorable purchase price adjustment of
$1.6 million. The final purchase price of $13.0 million equates to approximately
$950 per customer, which the company believes will be fully recovered in rates.
DeBenedictis said, "Now that this acquisition is finalized, we are in the
process of filing much needed rate requests which will allow the Florida systems
to begin earning their fair, regulated returns."
The company recently completed its evaluation of internal control over financial
reporting as required by the Sarbanes-Oxley Act. As outlined in the company's
Annual Report on Form 10-K, management concluded that as of December 31, 2005,
Aqua America's internal control over financial reporting was effective. The
company's independent registered public accounting firm has issued an
unqualified opinion as a result of its audit of Aqua America's consolidated
financial statements, internal control over financial reporting and management's
assessment of internal control over financial reporting.
As the company prepares to enter the normally higher customer demand period of
May through September, it is pleased to report that all reservoirs are filled to
capacity. "From late spring throughout the summer, hot, dry weather drives
incremental water sales. Weather can impact earnings during this period from
five to 10 percent, so it is important that our reservoirs are full at this time
of year in anticipation of the warmer weather," said DeBenedictis.
The company's conference call with analysts will take place on Wednesday, May 3,
2006 at 5:00 p.m. Eastern Daylight Time. The call will be webcast live so that
interested parties may listen over the Internet by logging on to
www.aquaamerica.com. The conference call will be archived in the investor
relations section of the company's Web site for 90 days following the call.
Additionally, the call will be recorded and made available for replay at 7:00
p.m. on May 3, 2006 for 10 business days following the call. To access the audio
replay in the U.S., dial 888.286.8010 (passcode 78219198). For international
callers, dial 617.801.6888 (passcode 78219198).
Aqua America, Inc. is the largest U.S.-based publicly-traded water utility,
serving more than 2.5 million residents in Pennsylvania, Ohio, North Carolina,
Illinois, Texas, Florida, New Jersey, Indiana, Virginia, Maine, Missouri, New
York, and South Carolina. Aqua America is listed on both the New York and
Philadelphia Stock Exchanges under the ticker symbol WTR.
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This release contains forward looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, regarding, among other things,
the expected recovery of capital expenditures and expenses in rates, the timing
and amounts of rate recoveries, the success of our acquisition program, the
impact of our acquisitions and capital investment program, and increased
opportunities from acquisitions for further growth and to invest and earn a
return on infrastructure improvements. There are important factors that could
cause actual results to differ materially from those expressed or implied by
such forward-looking statements including: general economic business conditions,
unfavorable weather conditions, the success of certain cost containment
initiatives, changes in regulations or regulatory treatment, availability and
the cost of capital, the success of growth initiatives, and other factors
discussed in our filings with the Securities and Exchange Commission.
# # #
WTRF
The following table shows selected operating data for the quarters ended March
31, 2006 and 2005 (in thousands, except per share data) for Aqua America, Inc.
All share and per share data have been restated to reflect the December 1, 2005
four-for-three stock split.
(Unaudited)
Quarter Ended
March 31,
2006 2005
--------- ---------
Operating revenues $ 117,949 $ 113,988
========================
Net income $ 16,564 $ 18,871
========================
Basic net income per share $ 0.13 0.15
========================
Diluted net income per share $ 0.13 0.15
========================
Average common shares outstanding:
Basic 129,181 127,361
========================
Diluted 130,893 128,886
========================
Aqua America, Inc. and Subsidiaries
Consolidated Statements of Income and Comprehensive Income
(In thousands, except per share amounts)
(Unaudited)
Quarter Ended
March 31,
-------------------------
2006 2005
--------- ---------
Operating revenues $ 117,949 $ 113,988
Cost & expenses:
Operations and maintenance 51,316 47,309
Depreciation 16,830 14,683
Amortization 1,114 1,228
Taxes other than income taxes 8,067 7,997
--------- ---------
Total 77,327 71,217
--------- ---------
Operating income 40,622 42,771
Other expense (income):
Interest expense, net 14,172 12,795
Allowance for funds used
during construction (918) (364)
Gain on sale of other assets (267) (481)
--------- ---------
Income before income taxes 27,635 30,821
Provision for income taxes 11,071 11,950
--------- ---------
Net income $ 16,564 $ 18,871
========= =========
Net income per common share:
Basic $ 0.13 $ 0.15
Diluted $ 0.13 $ 0.15
Average common shares outstanding:
Basic 129,181 127,361
========= =========
Diluted 130,893 128,886
========= =========
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Aqua America, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands of dollars)
(Unaudited)
March 31, December 31,
2006 2005
--------- ------------
Net property, plant and equipment $2,312,171 $2,279,950
Current assets 125,760 89,956
Regulatory assets and other assets 253,202 256,819
---------- ----------
$2,691,133 $2,626,725
========== ==========
Common stockholders' equity $ 824,194 $ 811,923
Long-term debt, excluding current portion 916,459 878,438
Current portion of long-term debt and loans payable 191,816 163,150
Other current liabilities 76,694 100,189
Deferred credits and other liabilities 681,970 673,025
---------- ----------
$2,691,133 $2,626,725
========== ==========
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