Exhibit 99.1
Southwest Water Company Reports Third Quarter 2004 Revenues and Earnings
LOS ANGELES--(BUSINESS WIRE)--Nov. 9, 2004--Southwest Water
Company (Nasdaq:SWWC) today is reporting revenues and earnings for the
third quarter ended September 30, 2004. The company is also updating
its business outlook for the remainder of 2004.
Third Quarter 2004 Summary, Compared with Third Quarter 2003:
-- Revenues were $55.0 million, compared with $51.4 million.
-- Operating income totaled $5.0 million, compared with $6.6
million.
-- Net income was $2.4 million, compared with $3.4 million.
-- Diluted earnings per share totaled $0.13, compared with $0.22.
As a result of two public offerings in 2004, the weighted
average number of shares outstanding increased by 19 percent,
compared with the third quarter of 2003.
Anton C. Garnier, Southwest Water chairman and chief executive
officer, said, "Financially, the third quarter was very challenging,
with a combination of several events that impacted our operations. Our
Utility Group profitability was adversely affected by two source of
supply issues in our Southern California utility at the height of the
summer water demand. A break in a major pipeline owned by a
third-party water supplier forced our utility to purchase
significantly more expensive Metropolitan Water District water.
Secondly, we lost production from one of our wells, which also caused
us to purchase substantially higher priced water. We are working to
replace this well, and we expect that both of these events will not
affect our earnings going forward."
Garnier continued: "In our Services Group, unexpected delays in
obtaining permits for construction projects in Texas impacted our
third quarter operating profit. Some of these delayed projects broke
ground in the fourth quarter, but we do not anticipate making up the
earnings shortfall associated with the delays in the remainder of this
year. Finally, in our Services Group, we completed several
acquisitions in our multi-family billing and collection subsidiary in
the first half of this year. As we have integrated those acquisitions,
we realized the benefits of focusing our ongoing marketing efforts on
third-party equipment; consequently, we took an inventory valuation
reserve of approximately $300,000 for our proprietary equipment.
"The impact of these operational events and inventory valuation
adjustments is a reduction in pre-tax income of approximately
$1,500,000, and because we do not see a recovery of these expenses in
the fourth quarter, we are changing our 2004 guidance for
accordingly."
Garnier noted, "In comparing the third quarter of 2004 with the
third quarter of 2003, we have incurred significantly higher selling,
general and administrative expenses due to our compliance efforts with
the Sarbanes-Oxley Act, including independent auditor fees,
independent internal audit fees, board governance fees and engagement
of consultants for the purpose of completing documentation and testing
required by Sarbanes-Oxley Section 404."
Garnier added, "On a positive note, during the third quarter we
completed the acquisition of approximately 25,000 utility accounts
from Tecon Water Holdings, L.P. This utility, which we have renamed
Monarch Utility Company, Inc., is outperforming our internal plans for
revenues and profitability. During the fourth quarter, we settled a
pending rate case for the utility at approximately 80 percent of the
increase originally requested by Tecon. The remaining 20 percent of
the original request will be added to customer rates in October 2005."
Garnier concluded, "The past quarter was challenging, but we
believe that our underlying businesses remain strong. We will continue
to strategically review the performance of each business unit and make
changes as warranted. We remain focused on long-term revenue growth
and profitability improvement."
Business Outlook
The company's revised outlook for 2004 anticipates:
-- Revenues of approximately $190 million, up from prior guidance
of $185 million;
-- Operating income of $17 million, down from prior guidance of
$19 million;
-- Income before taxes of $12.5 million, down from prior guidance
of $14 million;
-- Net income of $8 million, down from prior guidance of $9
million.
Revenue guidance assumes normal weather conditions during the
fourth quarter.
Conference Call
The company will provide more detail regarding its third quarter
2004 results and business outlook in a conference call and webcast to
be held today, November 9, 2004, 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
webcast, a replay will be available shortly after the call on the
company's Web site.
Southwest Water Company provides a broad range of services,
including water production, treatment and distribution; wastewater
collection and treatment; utility billing and collection; utility
infrastructure construction management; and public works services. The
company owns regulated public utilities and also serves cities,
utility districts and private companies under contract. More than two
million people in 35 states 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 2003 Annual Report on Form 10-K. The company
assumes no obligation to update these forward-looking statements to
reflect any change in future events.
FINANCIAL HIGHLIGHTS -- SOUTHWEST WATER COMPANY
(unaudited and in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
--------------------------------------
Operating revenues $55,018 $51,412 $140,439 $128,990
Operating income 4,987 6,603 11,088 11,021
Net income 2,373 3,429 4,944 5,169
Earnings per common share:
Diluted $0.13 $0.22 $0.29 $0.36
Weighted average outstanding
common shares:
Diluted 18,154 15,315 17,066 14,363
NOTE: Per share amounts and weighted average outstanding common shares
reflect a 4-for-3 stock dividend on January 1, 2004.
CONSOLIDATED BALANCE SHEET INFORMATION
September 30, December 31,
2004 2003
--------------------------
Current assets $48,777 $35,394
Property, plant and equipment, net 294,623 221,087
Total assets $398,323 $296,222
Current liabilities $33,995 $31,389
Long-term debt 69,407 56,493
Contributions in aid of construction 87,868 81,556
Stockholders' equity 126,894 79,667
Total liabilities and stockholders' equity $398,323 $296,222
CONTACT: Southwest Water Company
Richard J. Shields, 213-929-1800
www.swwc.com
or
PondelWilkinson Inc
Cecilia Wilkinson or Robert Jaffe
310-279-5970 or 310-279-5969
www.pondel.com