Exhibit 99.1
Southwest Water Company Reports Second Quarter 2006 Results
LOS ANGELES--(BUSINESS WIRE)--Aug. 9, 2006--Southwest Water
Company (NASDAQ:SWWC) today reported financial results for the second
quarter ended June 30, 2006. For the 2006 second quarter, revenues
increased to $55.4 million from $51.3 million in the second quarter of
2005. Income from continuing operations was $1.8 million compared with
$3.0 million in the second quarter of 2005. The decline in income from
continuing operations was primarily due to one-time costs of $0.7
million for executive relocation and $0.7 million for impairment of
goodwill and, to a lesser degree, reduced consumption at the company's
California utility and increased operating costs. Increased costs were
partially offset by a $1.4 million decrease in expenses due to a
California Public Utilities Commission decision which allows the use
of a balancing account for costs that are recoverable. Net income was
$1.8 million, or $0.08 per diluted share, compared with a net loss of
($1.7) million, or ($0.08) per share, in the second quarter 2005,
which included a loss on discontinued operations of ($4.8) million, or
($0.22) per share, due to the sale of a subsidiary in 2005. Weighted
average diluted shares outstanding for the quarter increased 10% to
23.5 million.
"Revenues from our Services Group were better than expected while
revenues from our Utility Group were impacted by the unseasonably wet,
cool temperatures in southern California during the first two months
of the quarter. This, combined with rising costs for chemicals and
petroleum across the country, caused our operational results to be
less robust than we are accustomed to for this time of year," said
Mark A. Swatek, Southwest Water chief executive officer and chairman.
"In addition, we experienced one time costs associated with the change
in leadership and re-assessment of some of our business units."
"Southwest Water is a company with a solid foundation," continued
Swatek. "We are committed to growing our bottom line and we have begun
the process of reviewing each subsidiary and putting plans in place
designed to make them more profitable. This will mean that some
divisions will see an increase in resources allocated to them while
others may be scaled back, as demonstrated this quarter by our
write-down in goodwill. In light of our year to date results and the
one time costs we have absorbed, we believe our full year net income
will be at the low end of our previous guidance of 10% to 15% growth
over 2005 income from continuing operations. We continue to be
comfortable with the remainder of our stated guidance for full year
2006."
Operating income was $5.0 million, down from $6.5 million in the
second quarter of 2005, primarily due to increased SG&A and the
previously mentioned impairment of goodwill. SG&A expenses were $9.2
million, representing 16.6% of revenues, versus $7.4 million in the
second quarter 2005, or 14.5% of revenues. The increase in SG&A was
primarily due to an increase in salaries and wages to support business
growth and the nonrecurring charge for executive relocation
assistance.
Total company funded capital expenditures were $9.1 million in the
second quarter, representing on-going investment in the company's
utility rate base. The company intends to continue to invest in
infrastructure with company funded capital expenditures expected to be
approximately $30 million for full year 2006.
Division Results
In the Utility Group, revenues were $20.8 million, up from $20.3
million in the second quarter of 2005, primarily due to the
acquisition of an Alabama wastewater treatment facility in the third
quarter of 2005 and increased connections in Texas and New Mexico,
partially offset by decreased consumption in California due to cooler
temperatures and higher rainfall versus the comparable period.
Operating income increased to $8.4 million compared with $7.7 million
in the second quarter 2005, primarily due to a $1.4 million decrease
in expenses as a result of the California Public Utilities
Commission's decision, partially offset by increased operating costs
in California and Texas.
In the Services Group, revenues were $34.6 million, up from $31.0
million in the second quarter of 2005, primarily due to increased
contract operations, maintenance and construction work. Operating
income in the Services Group was $0.6 million, down from $1.7 million
in the second quarter 2005, primarily due to the goodwill impairment,
an increase in staffing to support the additional work and increased
fuel and fleet operating expenses.
Six Month Results
For the six months ended June 30, 2006, revenues were $106.2
million compared to $96.5 million for the same period in 2005.
Operating income was flat at $8.0 million for both periods. Income
from continuing operations was $2.5 million compared to $2.9 million
in 2005. Net income was $2.6 million versus a loss of $2.0 million in
2005.
Conference Call
The company will provide more detail regarding its second quarter
results in a conference call and Web cast to be held today, August 9,
2006, at 4:30 p.m. Eastern time (1:30 p.m. Pacific). The conference
call can be accessed on the company's website 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 website. A
telephonic replay will also be available beginning at 7:30 p.m.
Eastern (4:30 p.m. Pacific) until midnight August 16, 2006 at
888-286-8010 (international callers 617-801-6888), passcode 20787708.
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 website: 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 under the caption "Risk Factors" in the company's 2005
Annual Report on Form 10-K. The company assumes no obligation to
update these forward-looking statements to reflect any change in
future events.
SOUTHWEST WATER COMPANY
SECOND QUARTER 2006 RESULTS
FINANCIAL HIGHLIGHTS - SOUTHWEST WATER COMPANY
(unaudited and in thousands, except per share amounts)
Three Months Six Months
Ended Ended
June 30, June 30,
2006 2005 2006 2005
-------- ------------------ --------
Operating revenues $55,360 $51,282 $106,162 $96,513
Operating income 4,960 6,490 7,977 7,975
Income from continuing operations 1,816 3,045 2,517 2,917
Discontinued operations - (4,788) - (4,902)
Net income (loss) 1,816 (1,743) 2,588 (1,985)
Earnings (loss) per common share:
Diluted
Continuing operations $0.08 $0.14 $0.11 $0.14
Net income $0.08 $(0.08) $0.11 $(0.09)
Weighted average outstanding
common shares:
Diluted 23,451 21,276 23,338 21,142
NOTE: Per share amounts and weighted average outstanding common
shares reflect a 5 percent stock dividend on January 1, 2006.
CONSOLIDATED BALANCE SHEET INFORMATION
June December
30, 31,
2006 2005
-------------------
Current assets $48,999 $47,746
Property, plant and equipment, net 361,685 344,821
Total assets $464,000 $444,725
Current liabilities $41,765 $40,579
Long-term debt 122,490 117,603
Contributions in aid of construction 99,747 94,660
Stockholders' equity 152,430 145,253
Total liabilities and stockholders' equity $464,000 $444,725
CONTACT: Southwest Water Company
DeLise Keim, 213-929-1846
www.swwc.com
or
PondelWilkinson Inc.
Robert Jaffe, 310-279-5969
www.pondel.com