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Text: I'll begin with some brief comments on the quarter and some highlights for the year.
I would like to start by commenting on our fourth quarter performance.
We had a strong quarter with consolidated earnings of $0.54 per share versus $0.45 per share earned during the fourth quarter of 2019, a 20% increase.
You can see from this slide that each of our three operating segments contributed to the substantially improved performance.
Eva will discuss this slide in more detail in a few minutes.
Now, let's turn our attention to highlights for the full year, where we also had strong financial results in addition to providing essential uninterrupted services to our customers.
For the year, we reported diluted earnings per share of $2.33 as compared to $2.28 reported for 2019 or $2.24 per share after excluding the $0.04 per share retroactive impact of the electric general rate case decision from 2019 related to the full year of 2018.
In 2020, American States Water achieved a consolidated return on equity of 13.9%.
During the year, we also filed a new Golden State Water Company general rate case for the years 2022 through 2024, continued our capital improvement work at our regulated utilities, continued to improve water and wastewater systems on the military bases we serve, raised the dividend by nearly 10% and reached 66 consecutive years of annual dividend increases.
This was a unique and challenging year as a result of the COVID-19 pandemic.
First and foremost, we are proud that we were able to maintain essential, safe, and reliable services for our regulated customers and military service personnel across the country.
In order to do this, starting in March of last year, we made adjustments for our field workers to keep them safe and instructed or office staff to telecommute.
At the local level, we worked closely to manage changes in delays in construction schedules, balancing the needs of keeping the water, wastewater, and electric systems running well, with the uncertainty and needed flexibility that the pandemic has brought to communities.
In addition, the California Public Utilities Commission, or CPUC, has issued orders on service shut-off due to non-payment, helping those households who are unable to keep up with water or electric bills during this unprecedented time.
Recently, the CPUC extended the suspension of service shut-offs due to non-payment through June 30 of this year.
We continue to invest in the reliability of our systems, spending $123.4 million in company-funded infrastructure at our regulated utilities during the year.
At ASUS, we continue to perform necessary construction work on the military bases we serve and are well-positioned to win more contracts in the coming years.
We remain committed to our communities.
Golder State Water continue to spend with diverse business enterprises, achieving results that were well above the CPUC's requirements for the eighth consecutive year.
In addition, ASUS continue to exceed the U.S. government's requirements to hire small businesses to perform work on the bases it serves.
In addition to these fiscal 2020 highlights, we have received positive news at our water segment to start 2021 related to the continued use of the Water Revenue Adjustment Mechanism, or WRAM, as well as third-year rate increases, both of which I'll discuss later on during the call.
We at American States Water Company continue our steadfast commitment to our customers, broader communities, military personnel, shareholders, employees, and suppliers.
Our financial results are just one part of our efforts and success.
Let me start with an overview of our fourth quarter financial results on Slide 9.
As Bob mentioned, consolidated diluted earnings for the quarter were $0.54 per share compared to $0.45 per share.
Again, a 20% increase over the same period last year.
Earnings at our water segment increased $0.04 per share for the quarter.
The increase in the water segment's earnings were largely due to a higher water gross margin from new water rates.
In addition, a decrease in interest expense and an increase in gains earned on investments held to fund a retirement plan were partially offset by the impact of a higher effective income tax rate.
Overall, operating expenses other than supply costs were relatively flat for the water segment.
Earnings from the electric segment for the fourth quarter of 2020 were $0.07 per share as compared to $0.05 per share recorded for same period in 2019.
The increase was due to rate increases authorized by the CPUC, as well as lower overall operating and interest expenses.
Earnings from the contracted services segment were $0.17 per share as compared to $0.12 per share for the fourth quarter of '19.
This was largely due to an increase in construction activity as well as an overall decrease in operating expenses.
Consolidated revenue for the three months ended December 31, 2020, increased by approximately $11.2 million as compared to the same period in 2019.
The decreases were due to rate increases at both of our water and electric utilities and an increase in construction work at our contracted services business.
Turning to Slide 11, our water and electric supply costs were $24.1 million for the quarter, an increase of $900,000 from the same period last year.
Any changes in supply costs for both the water and electric segments as compared to the adopted supply costs are tracked in balancing accounts.
Looking at total operating expenses excluding supply costs, consolidated expenses increased approximately $5.8 million versus the fourth quarter of 2019, mostly due to an increase in construction costs at ASUS as a result of the higher construction activity and property and other taxes, partially offset by lower maintenance expenses resulting from timing differences and a decrease in outside service costs.
Other income and expense for the fourth quarter of 2020 was a net expense of $2.1 million, which was $1.8 million lower in the same period of last year due to lower interest rate, as well as an increase in gains generated on investments held in the trust to fund a retirement benefit plan.
Slide 12 shows the earnings per share bridge comparing the fourth quarter of 2020 with the same quarter of 2019.
The slide shows the full-year results.
Consolidated earnings for 2020 were $2.33 per share as compared to $2.28 per share for 2019.
The 2019 CPUC final decision on the electric general rate case was retroactive to January 2018.
And as a result, the cumulative retroactive earnings impact related to 2018 of $0.04 per share was recorded as part of 2019's results.
Excluding this retroactive impact, consolidated earnings for 2020 increased $0.09 per share as compared to $2.24 per share for 2019 as adjusted.
Earnings from the water segment increased by $0.05 per share as compared to 2019, mostly due to new water rates as result of the full second-year step increase effective January 1, 2020, which added $10.4 million in water gross margins for 2020.
The increase in earnings from the higher gross margin was partially offset by an increase in operating expenses and a higher effective income tax rate due to changes in flow-through adjustments.
Moving on to the electric segment, earnings were $0.05 per share higher than in 2019 after excluding the retroactive impact for 2018 from the 2019 CPUC final decision.
The higher electric earnings were due to new rates authorized in the final decision as well as lower interest expense and a lower effective income tax rate due to changes in certain flow-through taxes as compared to the year before.
These increases to earnings were partially offset by an overall increase in operating expenses.
For both 2020 and 2019, diluted earnings from contracted services were $0.47 per share, excluding a retroactive price adjustment of $0.01 per share recorded in 2019 related to period prior to 2019.
Earnings from the contracted services segment for 2020 increased by $0.01 per share, largely due to an increase in management fee and construction revenue and also overall lower operating expenses, partially offset by higher construction costs.
AWR parent's earnings decreased $0.01 per share compared to 2019 due to higher state unitary taxes recorded at the parent level.
Net cash provided by operating activities were $122.2 million as compared to $116.9 million in 2019.
The increase was primarily due to the refunding of $7.2 million to customers in 2019 related to the Tax Cuts and Jobs Act with no similar refund in 2020 and an increase in water customer usage.
These increases were partially offset by decreases in cash flows from accounts receivable from utility customers, due to the economic impact of the COVID-19 pandemic, and the CPUC-mandated suspension of service disconnections, and from the timing of billing of and cash receipt for construction work at military bases.
As Bob mentioned, our regulated utility invested $123.4 million in company-funded capital projects in 2020.
We expect to invest $120 million to $135 million in 2021.
At this time, we do not expect American States Water to issue additional equity.
I'd like to provide an update on our recent regulatory activity.
As you may know, the water segment has an earnings test it must meet before implementing the second and third-year step increases in the third-year rate cycle.
I'm pleased to report that we have timely invested our capital projects and achieved capital spending consistent with the amount authorized by the CPUC.
As a result, substantially all of the third-year step increases have been authorized and effective January 1, 2021.
These new rates are expected to generate an additional $11.1 million of water gross margin.
We continue to make prudent and timely capital investments.
In July 2020, Golden State Water filed a general rate case application for all of its water [Technical Issues] for new water rates for the years 2022, 2023, and 2024.
Golden State Water requested capital budgets in this application of approximately $450.6 million for the three-year rate cycle and another $11.4 million of capital projects to be filed for revenue recovery through advice letters when those projects are completed.
A decision in the water general rate case is scheduled for the fourth quarter of 2021 with new rates to become effective January 01, 2022.
In a procedural hearing held earlier this month on this pending general rate case, the assigned administrative law judge confirmed that Golden State Water is authorized to continue using the Water Revenue Adjustment Mechanism, or WRAM, and the Modified Cost Balancing Account, also known as the MCBA, until its next general rate case application covering the years 2025 through 2027.
If you recall, the CPUC issued a final decision in the first phase of its order instituting rulemaking, evaluating the low-income ratepayer assistance and affordability objectives contained in the PUC's 2010 Water Action Plan.
This final decision, among other things, removes the continued use of the WRAM and MCBA by California water utilities in any general rate case application filed after the August 27, 2020, effective date of this decision.
Golden State Water's pending water rate case application was filed in July 2020, prior to this effective date.
As a result of this procedural hearing, we will continue using the WRAM and MCBA mechanisms through the year 2024.
In January 2021, Golden State Water along with the three other large California water utilities requested a one-year deferral of the date by which each of them must file their next cost of capital application.
Golden State Water will file its cost of capital application by May 1 of this year with an effective date of January 1, 2022.
Turning our attention to Slide 17, this slide presents the growth in Golden State Water's rate base as authorized by the CPUC for 2018 through 2021.
The weighted average water rate base has grown from $752.2 million in 2018 to $980.4 million in 2021, a compound annual growth rate of 9.2%.
The rate base amounts for 2021 do not include any rate recovery for advice letter projects.
Let's move on to ASUS on Slide 18.
After adjusting the 2019 financial results for the $0.01 per share retroactive earnings impact related to periods prior to 2019 that Eva discussed earlier, ASUS's earnings contribution for 2020 increased by $0.01 per share as compared to 2019.
This was accomplished despite weather delays and slowdowns in permitting for construction projects and government funding for new capital projects experienced throughout 2020.
We continue to work closely with the U.S. government for contract modifications relating to potential capital upgrade work for improvement of the water and wastewater infrastructure at the military bases we serve.
During 2020, the U.S. government awarded ASUS $15.5 million in new construction projects for completion in 2020 and 2021.
Completion of filings for economic price adjustments, request for equitable adjustment, asset transfers, and contract modifications awarded for new projects provide ASUS with additional revenues and dollar margin.
We are actively involved in various stages of the proposal process at a number of other bases considering privatization.
The U.S. government is expected to release additional bases for bidding over the next several years.
Due to our strong relationship with the U.S. government as well as our expertise and experience in managing bases, we are well-positioned to compete for these new contracts.
In light of our continued uncertainty associated with the effects of COVID-19, we reaffirm our projection that ASUS will contribute $0.45 to $0.49 per share for 2021.
I would like to turn our attention to dividends outlined on Slide 19.
In 2020, we increased the annual dividend by 9.8% to $1.34 per share.
American States Water Company has paid dividends to shareholders every year since 1931, increasing the dividends received by shareholders each calendar year for 66 consecutive years, which places it in an exclusive group of companies on the New York Stock Exchange that have achieved that result.
On February 02, our Board of Directors approved a quarterly dividend of $0.335 per share.
As a reminder, our dividend policy is to achieve a compound annual growth rate in the dividend of more than 7% over the long term.
Our strength and attractiveness to customers and shareholders alike is our ability to execute on our business strategies, stability, continued timely investment in our systems and customer service, our regulated operations in a constructive regulatory environment in California, our growing contracted service business with strong market share and an unwavering commitment to reliability and safety.
Our capital investment includes replacing and upgrading critical infrastructure as well as ensuring we can meet our customers' needs for generations to come, all while driving operational efficiency and delivering outstanding customer service.

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compname reports q4 earnings per share of $0.54.
q4 earnings per share $0.54.

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