Citing increased revenues resulting from continued customer growth and water consumption due to favorable weather conditions, Philadelphia Suburban Corporation (NYSE:PSC) reported increased earnings for the quarter ended September 30, 2001.
Diluted net income per share of $.35 was up 9.4 percent in comparison to 2000 third quarter levels of $.32, on 5.5 percent more shares outstanding. Diluted income per share from operations increased to $.35 per share, up 20.7 percent, versus $.29 for the third quarter of 2000 (2000 income from operations is exclusive of one-time recovery of net merger expenses).
Net income increased 16.6 percent to $19.3 million for the quarter, versus $16.5 million in the prior year. Income from operations increased 26.2 percent to $19.3 million versus $15.3 million in the prior year.
Revenues for the quarter grew 17.5 percent to $84.7 million from third quarter 2000 revenues of $72.1 million. The company's increase in revenues is attributed to increased water sales, aided by favorable weather conditions in the mid-Atlantic and mid-western states in which the company operates and continued customer growth.
PSC completed five agreements for new acquisitions and other growth ventures during the quarter and has completed 16 acquisitions and growth ventures during the first nine months of 2001, versus 14 for the same period in 2000.
According to PSC Chairman and President Nicholas DeBenedictis, "The company has outpaced last year's growth rate for the same period of time. Based on our pipeline of potential growth activity, we have every reason to expect continued growth during the fourth quarter." The company has achieved a 3.2 percent increase in its customer base for the first nine months of 2001 bringing the company's number of customers to approximately 598,000, in comparison to a 1.8 percent increase to approximately 567,800 customers for the first nine months of 2000. PSC's most recent purchase of the water utility assets of Chalfont Borough in Bucks County, Pennsylvania on November 1, 2001 will add over 2,100 customers to the company's customer base in the fourth quarter of 2001.
PSC has invested over $100 million in capital during the 12 months ended September 30, 2001 in order to continue meeting and outperforming federal and state water quality standards and provide reliable service to its customers.
Despite the company's increased capital expenditures, PSC's interest expense for the quarter has decreased over 4 percent due to lower short-term interest rates and the company's ability to obtain long-term low interest financing.
PSC's operations and maintenance (O&M) expenses as a percentage of revenue (efficiency ratio) continued to improve for the 12 months ended September 30, 2001 to 36.2 percent, versus 38.0 percent for the 12 months ended September 30, 2000. The ratio improved by 180 basis points for the 12-month period despite a 15.8 percent increase in O&M expenses for the third quarter 2001 in comparison to the prior year. The rise in O&M expenses is related to customer growth, including acquisitions in new areas, increased water production costs associated with greater water sales, insurance expenses, and labor costs. PSC's O&M expenses on a per customer basis have only increased 1.7 percent for the last 12 months. During the quarter, the PSC Board of Directors approved a nearly 7 percent increase to the cash dividend and a five-for-four stock split effected in the form of a 25 percent stock distribution. This is the eleventh cash dividend increase granted by the company in the last 10 years and the fourth stock split in six years.
Both the increased dividend and stock split will be payable to shareholders of record on November 16, 2001, and will be effective December 1, 2001. The increase in the company's December 1, 2001 cash dividend from $.155 per share to $.1656 per share on the pre-split shares represents an increase, on an annualized basis, to $.66 per share from the former annual rate of $.62 per share.
The new quarterly cash dividend rate will be $.1325 per share on the increased number of shares from the stock split or $.53 per share annualized.