Exhibit 99.1
Southwest Water Company Reports Second Quarter Financial Results
LOS ANGELES--(BUSINESS WIRE)--Aug. 9, 2005--Southwest Water
Company (NASDAQ:SWWC) today reported record second quarter revenues,
operating income and net income from continuing operations. A loss
incurred on the sale of a subsidiary in June 2005 resulted in a net
loss for the quarter.
Second Quarter Ended June 30, 2005 Results, Compared with Second
Quarter 2004:
-- Revenues increased 18 percent to $51.3 million from $43.4
million
-- Operating income grew 40 percent to $6.5 million, compared
with $4.6 million
-- Net income from continuing operations rose 30 percent to $3.0
million from $2.3 million
-- Diluted earnings per share from continuing operations totaled
$0.15, up from $0.13
-- Net loss, which includes a $4.8 million after-tax loss on
discontinued operations resulting from the sale of Master Tek
International, Inc., a subsidiary that provided billing and
collection services for multi-family residential properties,
was $1.7 million, or $0.09 per diluted share, compared with
net income of $2.5 million, or $0.14 per diluted share
Anton C. Garnier, Southwest Water chairman and chief executive
officer, said, "I am pleased that both our Utility Group and our
Services Group contributed to record second quarter revenues and
operating income. The financial success of our utility acquisition,
the favorable impact of new operations, maintenance and management
contracts and increased project work were primarily responsible for
our improved performance. Additionally, we benefited from our strategy
of geographic diversification. While unseasonably wet weather in
southern California impacted utility water sales, improved weather
conditions in Texas enabled us to overcome that challenge."
For the second quarter of 2005 compared with the same period a
year ago, Utility Group revenues increased by $3.7 million, or 22
percent, to $20.3 million. Monarch Utilities, Inc., acquired in July
2004, added $4.1 million to revenues. This increase was partially
offset by a $0.7 million revenue decrease in the company's California
utility as a result of significantly higher rainfall during the second
quarter of 2005 versus the second quarter of 2004.
In the Services Group, revenues for the three months ended June
30, 2005 increased $4.2 million, or 16 percent, to $31.0 million,
compared with the same quarter in 2004. New contracts, increased
project work, the contribution from acquisitions and favorable weather
generated higher revenues. The company's showcase reverse osmosis
water treatment plant in San Juan Capistrano, California, was
substantially complete as of December 31, 2004; therefore,
construction-related revenue decreased by $2.0 million for the second
quarter of 2005. Southwest Water has begun its 20-year, $20 million
contract to operate and maintain the facility.
Operating income for the second quarter of 2005 increased by $1.9
million compared with the same period in 2004. Services Group
operating income improved by $1.4 million and Utility Group operating
income increased $0.8 million. Selling, general and administrative
expenses increased by $1.4 million, or 23 percent, to $7.4 million
compared with the second quarter of 2004. This increase was primarily
associated with the expenses of operating newly acquired businesses.
Interest expense increased by $0.9 million, primarily due to the
higher debt level from the acquisition of Monarch Utilities and
continued investment in our regulated utility plant and equipment.
At the close of the 2005 second quarter, Southwest Water sold
Master Tek. The $3.7 million after-tax loss on the sale, as well as a
$1.1 million loss associated with Master Tek's current year operations
and reserves, are reflected in the company's financial statements as
discontinued operations.
Garnier stated, "The sale of Master Tek resulted from a careful
and thorough strategic review process. Our Board of Directors and
executive team concluded that rate-regulated water and wastewater
utilities and contract operations currently offer the potential for a
greater return on investment. The performance of our Utility and
Services Group companies during the second quarter of 2005 underscores
the wisdom of that decision."
Business Outlook
With the sale of the Master Tek subsidiary, the company's business
outlook for 2005 now includes net income from continuing operations
instead of net income. Assuming normal weather conditions for the
remainder of the year, the company's business outlook remains
unchanged:
-- Revenues of approximately $195 million
-- Operating income of $19 million
-- Net income from continuing operations (instead of net income)
of $7.5 million
-- Utility Group revenues of approximately 42 percent of revenues
-- Company cash capital expenditures of approximately $20 million
-- An effective tax rate of 36%
Conference Call
The company will provide more detail regarding its second quarter
2005 results and business outlook in a conference call and Web cast to
be held today, August 9, 2005, at 4:30 p.m. (Eastern time) and 1:30
p.m. (Pacific time). 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 operation,
maintenance and management services, including water production,
treatment and distribution; wastewater collection and treatment;
customer service; and utility infrastructure construction management.
The company owns regulated public utilities and also serves cities,
utility districts and private companies under contract. Approximately
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, and 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. For example, rainfall can significantly affect the
company's financial performance from one quarter to the next. More
detailed information about these factors is contained in the company's
filings with the Securities and Exchange Commission, including under
the caption "Risk Factors" in 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.
FINANCIAL HIGHLIGHTS - SOUTHWEST WATER COMPANY
(unaudited and in thousands, except per share amounts)
Three Months Six Months
Ended Ended
June 30, June 30,
2005 2004 2005 2004
-------- ----------------- --------
Operating revenues $51,282 $43,433 $96,513 $81,441
Operating income 6,490 4,628 7,975 5,251
Net income from continuing
operations 3,045 2,346 2,917 2,222
Discontinued operations (4,788) --- (4,902) ---
Net income (loss) (1,743) 2,554 (1,985) 2,572
Earnings (loss) per common share:
Diluted
Continuing operations $0.15 $0.13 $0.14 $0.13
Net income $(0.09) $0.14 $(0.10) $0.15
Weighted average outstanding
common shares:
Diluted 20,263 18,251 20,135 17,386
NOTE: Per share amounts and weighted average outstanding common shares
reflect a 5 percent stock dividend on January 3, 2005.
CONSOLIDATED BALANCE SHEET INFORMATION
June 30, December 31,
2005 2004
--------------------------
Current assets $53,150 $58,091
Property, plant and equipment, net 312,558 301,835
Total assets $413,371 $404,809
Current liabilities $32,894 $35,873
Long-term debt 126,620 115,827
Contributions in aid of construction 90,264 89,623
Stockholders' equity 124,553 126,198
Total liabilities and stockholders' equity $413,371 $404,809
CONTACT: Southwest Water Company
Cheryl L. Clary, 213-929-1800
www.swwc.com
or
PondelWilkinson Inc.
Cecilia Wilkinson or Robert Jaffe
310-279-5970 or 310-279-5969
www.pondel.com