Exhibit 99.1
Southwest Water Company Reports 2004 Financial Results
LOS ANGELES--(BUSINESS WIRE)--March 15, 2005--For the year ended
December 31, 2004, Southwest Water Company (NASDAQ:SWWC) reported
revenues of $188.0 million, operating income of $11.6 million, net
income of $4.5 million and earnings per diluted common share of $0.24.
This compares with revenues of $173.0 million, operating income of
$14.8 million, net income of $7.2 million and earnings per diluted
common share of $0.47 for 2003. Weighted average shares outstanding
increased by 20 percent in 2004 as compared with 2003, primarily as a
result of equity offerings.
The company increased revenues by $15 million in 2004, driven
principally by its July 2004 acquisition of Monarch Utilities, Inc.,
increased water utility rates in California and Texas, and organic
revenue growth in the Services Group compared with 2003. This helped
to compensate for a $5.8 million reduction in construction-related
revenue from the water treatment plant project in San Juan Capistrano,
Calif.
Segment operating income in the company's Utility Group increased
by $4.8 million in 2004 compared with 2003, due largely to the Monarch
Utilities acquisition, increased water utility rates, higher customer
water consumption and a reduction in the average cost of water at the
company's California utility subsidiary. New wells that produce less
expensive water came online in 2004, which enabled the subsidiary to
reduce the amount of higher cost water purchased from outside sources.
Conversely, segment operating income in the Services Group decreased
by $3.3 million compared with the prior year, principally due to
project permitting delays, heavy rainfall that restricted billable
work in Texas, write-offs and reserves for inventory, unbilled revenue
and a loss on a small construction project in Virginia Beach, Va.
Corporate headquarters segment operating expenses increased by $4.6
million compared with the prior year.
In total, selling, general and administrative (SG&A) expenses
increased by $7.4 million to $29.5 million in 2004. Of that increase,
$4.4 million occurred in the fourth quarter of 2004, when SG&A
expenses increased to $8.7 million. The 2004 increase in SG&A expenses
included approximately $2.6 million related to the company's
documentation and compliance with the Sarbanes-Oxley Act; $0.8 million
related to executive separations and new business development
expenses; $0.4 million related to the write-off of a strategic
investment; $0.6 million related to newly acquired subsidiaries; and
$2.5 million from increases in professional fees, facilities costs,
salaries and benefits.
Anton C. Garnier, Southwest Water chairman and chief executive
officer, said, "Our Board and management team are very disappointed
with the company's overall 2004 financial results. While we
anticipated increased costs associated with growth and corporate
governance programs, certain SG&A expenses that occurred late in the
year were higher than expected. Consequently, as a percentage of
consolidated revenue, SG&A expenses increased from 13% in 2003 to 16%
in 2004. In addition, Services Group margins fell in 2004 from prior
years. SG&A expense management and Services Group margin improvement
are important profit drivers for us in 2005."
Garnier continued, "Southwest Water did achieve significant
operational milestones in 2004. We recorded increased revenues,
completed construction and began operating a showcase reverse osmosis
water treatment facility, and made the largest acquisition in our
history, Monarch Utilities, Inc. Acquisitions have been an important
part of our growth strategy, and each of the significant acquisitions
we have made over the past several years demonstrated year-to-year
financial improvement in 2004. Additionally, Monarch Utilities,
purchased in 2004, is performing ahead of our initial acquisition
forecast."
Garnier concluded, "In spite of the challenges we faced in 2004,
Southwest Water remains fundamentally strong. Our board of directors
affirmed its confidence in the company by declaring a regular cash
dividend for the first quarter of 2005, and at year-end we had $27
million available of our $50 million credit facility. We are committed
to regaining Southwest Water's positive earnings momentum in 2005."
Business Outlook
The company's outlook for 2005 anticipates:
-- Revenues increasing approximately 4% to approximately $195
million;
-- Operating income increasing approximately 60% to approximately
$19 million;
-- Net income increasing approximately 65% to approximately $7.5
million;
-- Utility Group revenue increasing from 37% to approximately 42%
of total revenues;
-- Company cash capital expenditures increasing to approximately
$20 million; and
-- An effective tax rate of 36%, consistent with 2004.
This business outlook assumes normal weather conditions.
2004 Form 10-K
The company's 2004 Form 10-K includes an assessment of its
internal controls. Management is completing its assessment concerning
the company's internal controls over financial reporting and expects
to file for a 15-day extension under SEC Rule 12b-25 for its 2004
Annual Report on Form 10-K. The company cannot assure that it will not
report a material weakness in its internal controls.
Conference Call
The company will provide more detail regarding its 2004 results
and 2005 business outlook in a conference call and Web cast to be held
today, March 15, 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 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 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 Years Ended
Ended
December 31, December 31,
2004 2003 2004 2003
-----------------------------------
Operating revenues $47,513 $43,984 $187,952 $172,974
Operating income 547 3,771 11,635 14,792
Net income (loss) (410) 2,024 4,534 7,193
Earnings (loss) per common share:
Diluted $(0.02) $0.12 $0.24 $0.47
Weighted average outstanding
common shares:
Diluted 19,336 16,303 18,489 15,394
NOTE: Per share amounts and weighted average outstanding common
shares reflect a 5 percent stock dividend on January 3, 2005.
CONSOLIDATED BALANCE SHEET INFORMATION
December 31, December 31,
2004 2003
-------------------------
Current assets $45,287 $35,394
Property, plant and equipment, net 302,596 221,087
Total assets $404,809 $296,222
Current liabilities $35,734 $31,389
Long-term debt 115,827 73,102
Contributions in aid of construction 89,623 81,556
Stockholders' equity 126,198 79,667
Total liabilities and stockholders' equity $404,809 $296,222
CONTACT: Southwest Water Company
Richard J. Shields or Cheryl L. Clary, 213-929-1800
www.swwc.com
or
PondelWilkinson Inc.
Robert Jaffe, 310-279-5969
www.pondel.com