SWWC Southwest Water (MM)

Southwest Water Company (NASDAQ:SWWC), a leading provider of water, wastewater and public works services, today reported financial results for the second quarter ended June 30, 2007. For the quarter, revenues increased 1% to $55.0 million from $54.3 million in the second quarter of 2006. Operating income rose 12% to $5.5 million compared with $5.0 million in prior year second quarter. Net income was up 22% to $2.2 million, or $0.09 per diluted share, compared to $1.8 million, or $0.08 per diluted share, in the same quarter of 2006. Weighted average diluted shares outstanding increased 4% to 24.4 million. �This quarter�s results were dominated by weather patterns,� said Mark A. Swatek, Southwest Water chief executive officer and chairman. �In California, warm, dry weather drove higher water consumption, and in Texas, record wet weather reduced water consumption at our utilities and limited the amount of construction and repair work our Services Group could perform.� Utility Group Results In the Utility Group, revenues were up 13% to $24.0 million from $21.2 million in the second quarter of 2006, which include intersegment revenues of $438,000 and $384,000, respectively. This increase was primarily due to higher consumption in California as well as rate increases implemented in the second half of 2006 in California and in one of the company�s Texas utilities. Operating income increased to $8.6 million compared with $8.4 million in the second quarter 2006. Services Group Results Services Group revenues were down 10% to $37.0 million from $41.2 million in the 2006 second quarter, which include intersegment revenues of $6.3 million and $9.6 million, respectively. This decrease was primarily due to reduced field work in Texas as a result of wet weather throughout the quarter, a slow down in housing construction and a reduction in the company�s contract base in its southeast division. Operating income for the quarter increased to $744,000 from $604,000 in 2006. SG&A and Capital Expenditures Consolidated selling, general and administrative (SG&A) expenses for the quarter were $9.3 million versus $9.2 million in the second quarter of 2006. Included in SG&A is $200,000 of legal costs associated with the condemnation litigation against the company�s New Mexico utility. According to New Mexico statute, the company will be entitled to reimbursement of these costs if the company prevails in the legal actions. Additionally, SG&A includes $400,000 of costs related to a company-wide initiative to implement a single, integrated operating system. �The company�s current operating systems are inefficient, costly to operate and make data consolidation time-consuming,� said Swatek. �This initiative will take time and significant investment, but we believe that with this new technology we can implement best business practices across the company, enhance customer service and create a competitive advantage for our Services Group.� He noted that the majority of the expenditures related to this initiative will be capitalized, though certain costs will be expensed as incurred. Total company funded capital expenditures were $9.6 million in the quarter, including $2.4 million related to the operating system project, compared to $9.1 million in the second quarter of 2006. Six Month Results For the six months ended June 30, 2007 compared with June 30, 2006; revenues were $103.0 million versus $103.9 million, operating income grew to $8.5 million from $8.0 million and net income rose to $2.8 million from $2.6 million. Conference Call The company will provide more detail regarding its second quarter operating results in a conference call and web cast to be held today, August 9, 2007, 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 6:30 p.m. Eastern (3:30 p.m. Pacific) until midnight August 16, 2007 at 888-286-8010 (international callers 617-801-6888), passcode 25024994. 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 in 10 states 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 2006 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 Ended Six Months Ended June 30, June 30, 2007 � 2006 � 2007 � 2006 � Operating revenues $54,975 $54,296 $103,049 $103,890 � Operating income 5,547 4,960 8,490 7,977 Net income 2,223 1,816 2,837 2,588 � Diluted earnings per common share $0.09 $ 0.08 $0.12 $ 0.11 � Weighted average outstanding common shares (diluted) 24,386 23,451 24,301 23,338 CONSOLIDATED BALANCE SHEET INFORMATION � June 30, December 31, 2007 � 2006 � Current assets $ 45,803 $ 48,257 Property, plant and equipment, net 411,685 389,625 Total assets $511,319 $491,693 � Current liabilities $ 32,149 $ 35,830 Long-term debt 143,629 128,624 Contributions in aid of construction 113,708 110,024 Stockholders� equity 170,376 166,527 Total liabilities and stockholders� equity $511,319 $491,693