01—Abstract
Summary
Summary of the 10-K filed February 28, 2012. Cited figures are marked; the original filing is the authoritative source.
American Water Works Company, Inc. (AWK) reported revenues of $2.67 billiona in 2011, a 4.4% increase from 2010, driven by rate increases across its Regulated Businesses and growth in Market-Based Operations.
Net income from continuing operations was $304.9 millionb, or $1.73 per diluted share, an improvement from $255.1 million in 2010. The company continued its portfolio optimization strategy, including divestitures and acquisitions, aiming to streamline operations and enhance its financial profile. Significant capital investments of approximately $925 million were made in 2011 to upgrade infrastructure, with continued investment planned for 2012.
The company is also advancing its business transformation project to improve operational efficiency and IT systems. Key risks identified include extensive economic regulation, environmental compliance, potential for regulatory lag, and access to capital markets.
02—Key points
Key Highlights
- Revenue increased by 4.4% to $2.67 billion in 2011, primarily due to rate increases in Regulated Businesses and growth in Market-Based Operations.
- Net income from continuing operations grew to $304.9 million in 2011, up from $255.1 million in 2010.
- Company continued portfolio optimization with divestitures (Texas, Arizona, New Mexico) and strategic acquisitions.
- Capital investments totaled $925 million in 2011, focused on infrastructure renewal and system reliability, with $900 million planned for 2012.
- Business transformation project is ongoing to improve operational efficiency and IT systems, with ERP go-live expected in August 2012.
- The company received $461 million in proceeds from the sale of its Arizona and New Mexico subsidiaries in January 2012.
- Significant risks include extensive economic regulation, environmental compliance costs, regulatory lag, and potential disruptions in capital markets.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 28, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $2.67B$2.56B | +4.4% |
| Operating Expenses | $1.86B$1.83B | +2.0% |
| Operating Income | $803.14M$728.12M | +10.3% |
| Interest Expense | $312.42M$313.76M | −0.4% |
| Net Income | $309.61M$267.83M | +15.6% |
| EPS (Basic) | $1.76$1.53 | +15.0% |
| EPS (Diluted) | $1.75$1.53 | +14.4% |
| Shares Outstanding (Basic) | 175.48M174.83M | +0.4% |
| Shares Outstanding (Diluted) | 176.53M175.12M | +0.8% |
05—Questions
Frequently Asked Questions
What were the main drivers of American Water's revenue growth in 2011?
Revenue growth in 2011 was primarily driven by rate increases authorized by state regulatory commissions for its Regulated Businesses and increased revenues from its Market-Based Operations, particularly within the Contract Operations Group due to military projects.
How is the company managing its significant capital expenditure requirements?
American Water is funding its capital expenditures through a combination of internally generated cash flows from operations, borrowings under its credit facilities, and issuances of long-term debt and equity securities. For 2011, capital investments were approximately $925 million, with plans to invest around $900 million in 2012.
What is the status of the business transformation project?
The business transformation project is progressing, with the Enterprise Resource Planning (ERP) application expected to go live in August 2012. The company has spent approximately $139.7 million on the project as of December 31, 2011, with total anticipated expenditures up to $280 million. This project aims to improve business processes and upgrade IT systems.
What are the key risks highlighted in the filing for investors?
Key risks include the impact of extensive economic regulation by state PUCs, compliance with stringent environmental, water quality, and health and safety laws, potential regulatory lag in recovering costs, securing adequate water supplies, managing the availability and cost of capital, and risks associated with its portfolio optimization efforts and business transformation project.
06—Continue