Philadelphia Suburban Corporation Reports Operating Results for Second Quarter 2003; Company Reports Acquisition of AquaSource Immediately Accretive
BRYN MAWR, Pa.--(BUSINESS WIRE)--Aug. 6, 2003--Philadelphia Suburban Corporation (NYSE:PSC) today reported $0.22 in net income per diluted share for the quarter ended June 30, 2003, compared to $0.21 per diluted share last year--or a five percent increase. Corresponding net income increased to $15.2 million, from $14.8 million, for the same quarter in 2002. Second quarter 2002 net income per diluted share, included $0.01 per share from a net gain on the sale of other assets.
Operating revenues grew nine percent in the second quarter to $83.4 million, versus $76.6 million for the same period in 2002 in spite of unfavorable weather throughout the quarter in PSC's primary service areas. Operating revenues in the quarter increased due to rate relief as well as a larger customer base from acquisitions in the various states in which the company operates.
"I am pleased with our performance in spite of the fact that we have experienced an unusually cool and wet spring," said Nicholas DeBenedictis, PSC Chairman and President. "May and June traditionally represent the beginning of our heavy demand period. However, during the second quarter, several of our key service areas experienced rainfall more than 100 percent above normal precipitation levels combined with cool, cloudy weather. Poor weather has historically had a five to 10 percent impact on the company's quarterly earnings per share. However, with the addition of the AquaSource states, we gain greater geographic diversity to help mitigate the impact of regional weather anomalies on the company's performance. "
The PSC efficiency ratio, or measure of operating and maintenance expenses to revenue, measured 37.2 percent for the second quarter, down from 37.7 percent for the same period in 2002. Year to date 2003, the efficiency ratio was 37.6 percent, also slightly improved from the company's ratio for the first six months of 2002 of 37.9 percent, due to continuing expense management within PSC's operations. "Even though some expenses, such as pension and insurance costs, were up over last year, our management team continues to do an effective job of mitigating increases in controllable expenses to maintain our industry-leading efficiency ratio," explained DeBenedictis.
PSC closed the second largest acquisition in the company's history on July 31, 2003. The acquisition of the investor-owned water and wastewater systems of AquaSource, Inc.--a subsidiary of DQE (NYSE:DQE)--was capitalized at a lower cost of debt than originally expected (4.87 percent), and for a lower-than-expected purchase price ($195 million compared to the initial target of $205 million plus working capital), which will help make the transaction immediately accretive to earnings. Based upon specific performance measures, including revenue, rate base, customer connections, and working capital the final purchase price might be further reduced to a price lower than the stated $195 million.
Synergies have been identified and will be acted upon quickly to improve current AquaSource operating efficiencies. Redundant AquaSource overhead functions have been folded into PSC, enabling cost reduction.
PSC announced in May 2003 that it had reached an agreement to sell the Connecticut and New York operations of AquaSource, Inc. The strategic decision to quickly prune the Connecticut and New York operations is consistent with PSC's desire to focus on growth of its regulated operations in planned growth markets for the company. The regulated operations of Connecticut and New York represent approximately two percent of the AquaSource customers being acquired.
"PSC will continue to seek profitability through a combination of accretive acquisitions in all of the states where we operate, and the strategic pruning of current operations that do not meet our desired profile of a promising growth rate and economies of scale. Any asset sales will then be reinvested in our faster growing franchise areas," said DeBenedictis.
On the heels of the AquaSource acquisition, the PSC Board also announced that in October, the company will change its name to Aqua America, Inc. to reflect its position as the largest investor-owned water utility based in the U.S. The company will also change the names of each of its subsidiaries. DeBenedictis said that PSC's expansive customer growth (more than 300 percent in the past 10 years) from a regional company in Pennsylvania to a national company weighed heavily in the decision to change the company's name.
The PSC Directors also authorized a 7.1 percent cash dividend increase above the September 1, 2003 quarterly cash dividend payment and also approved for the fifth time in seven years a stock split for 2003, to be effected in the form of a 25 percent stock distribution. Both the increased dividend and stock distribution will be paid December 1, 2003 to shareholders of record on November 14, 2003.
Additionally, the Board declared the regular $.14 per share quarterly common stock cash dividend to be paid on September 1, 2003 to shareholders of record on August 15, 2003.
Beginning with the December 1, 2003 payment, PSC's quarterly dividend will increase to $.15 per share from $.14 per share ($.60 per share versus $.56 on an annualized basis) on the pre-split shares. The new quarterly cash dividend rate will be $.12 per share on the increased number of shares resulting from the stock distribution or $.48 per share annualized.
The company's quarterly conference call with analysts will be held today at 11:00 a.m. Eastern Daylight Time, and will be available via webcast so that interested parties may listen to the call over the Internet by logging on to www.suburbanwater.com.
The conference call will be archived in the investor relations section of the company's website for 90 days after the call. Additionally, the call will be recorded and made available for replay for 10 business days following the call, beginning 12:00 p.m. Wednesday, August 6, 2003 through August 20. The dial-in telephone number for the audio replay is 973-341-3080 (pin number 4066615).
NOTE: Effective October 13, 2003, PSC will begin officially operating under the new company name of Aqua America, Inc, and will begin trading under a new ticker symbol, "WTR."
PSC is the largest U.S.-based investor-owned water utility serving approximately 2.5 million residents in Pennsylvania, Ohio, Illinois, Texas, New Jersey, Indiana, Virginia, Florida, North Carolina, Maine, Missouri, Connecticut, New York, South Carolina and Kentucky. PSC is a publicly traded company listed on both the New York and Philadelphia Stock Exchanges under the ticker symbol "PSC." The company has been committed to the preservation and improvement of the environment throughout its history, which spans more than 100 years.
The following table shows selected operating data for the quarters ended June 30, 2003 and 2002 (in thousands, except per share data) for Philadelphia Suburban Corporation.
(Unaudited)
Quarter Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
----------- -------- --------- ---------
Operating revenues $83,379 $76,615 $163,868 $148,284
=========== ======== ========= =========
Net income available to
common stock $15,235 $14,818 $28,559 $26,693
=========== ======== ========= =========
Basic net income per share $0.22 $0.22 $0.42 $0.39
=========== ======== ========= =========
Diluted net income per share $0.22 $0.21 $0.41 $0.38
=========== ======== ========= =========
Average common shares
outstanding:
Basic 68,843 68,701 68,395 68,576
=========== ======== ========= =========
Diluted 69,615 69,461 69,123 69,408
=========== ======== ========= =========
This release contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 that address, among other things, the effect of acquisitions, the impact of regional weather conditions, the final AquaSource purchase price, plans to seek future acquisition candidates and consider selective dispositions and actions to integrate AquaSource operations. 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.
Philadelphia Suburban Corporation and Subsidiaries
Consolidated Statements of Income and Comprehensive Income
(In thousands, except per share amounts)
(Unaudited)
Quarter Ended Six Months Ended
June 30, June 30,
-------- --------
2003 2002 2003 2002
-------- -------- --------- ---------
Operating revenues $83,379 $76,615 $163,868 $148,284
Cost & expenses:
Operations and maintenance 31,029 28,915 61,693 56,200
Depreciation 11,464 10,307 22,811 20,200
Amortization 650 669 1,362 1,209
Taxes other than income
taxes 4,946 4,621 10,266 9,935
-------- -------- --------- ---------
Total 48,089 44,512 96,132 87,544
-------- -------- --------- ---------
Operating income 35,290 32,103 67,736 60,740
Other expense (income):
Interest expense, net 10,651 9,891 21,263 19,671
Allowance for funds used
during construction (500) (546) (876) (932)
Gain on sale of other
assets (165) (1,409) (220) (1,758)
-------- -------- --------- ---------
Income before income taxes 25,304 24,167 47,569 43,759
Provision for income taxes 10,067 9,337 19,005 17,039
-------- -------- --------- ---------
Net income 15,237 14,830 28,564 26,720
Dividends on preferred stock 2 12 5 27
-------- -------- --------- ---------
Net income available to common
stock $15,235 $14,818 $28,559 $26,693
======== ======== ========= =========
Net income $15,237 $14,830 $28,564 $26,720
Other comprehensive income
(loss), net of tax:
Unrealized gain on
securities 102 217 149 345
Reclassification
adjustment for gains
reported in net income (11) (466) (11) (693)
-------- -------- --------- ---------
Comprehensive income $15,328 $14,581 $28,702 $26,372
======== ======== ========= =========
Net income per common share:
Basic $0.22 $0.22 $0.42 $0.39
Diluted $0.22 $0.21 $0.41 $0.38
Average common shares
outstanding:
Basic 68,843 68,701 68,395 68,576
======== ======== ========= =========
Diluted 69,614 69,461 69,123 69,408
======== ======== ========= =========
Philadelphia Suburban Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands of dollars)
(Unaudited)
June 30, Dec. 31,
2003 2002
----------- -----------
Net property, plant and equipment $1,529,091 $1,490,841
Current assets 73,381 70,908
Regulatory assets and other assets 151,173 155,320
----------- -----------
$1,753,645 $1,717,069
=========== ===========
Stockholders' equity $541,762 $493,097
Long-term debt, excluding current portion 584,118 582,910
Current portion of long-term debt and loans
payable 131,112 149,378
Other current liabilities 65,906 77,153
Deferred credits and other liabilities 430,747 414,531
----------- -----------
$1,753,645 $1,717,069
=========== ===========
CONTACT: Philadelphia Suburban Corporation Cheryl Hansen, 610-645-1084
hansenc@suburbanwater.com
or
Randi Polanich, 610-645-1175
polanichr@suburbanwater.com
SOURCE: Philadelphia Suburban Corporation