10-KPeriod: FY2011

American Water Works Company, Inc. Annual Report, Year Ended Dec 31, 2011

Filed February 28, 2012For Securities:AWK

Summary

American Water Works Company, Inc. (AWK) reported revenues of $2.67 billion 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 million, 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.

Financial Highlights

50 data points
Beta

Revenue

$2.67B

Net Income

$309.61M

11.6% Net Margin

EPS (Diluted)

$1.75

Total Assets

$14.78B

Cash & Equivalents

$14.21M

Free Cash Flow

-$116.50M

Financial Statements
Beta
Revenue$2.67B
Operating Expenses$1.86B
Operating Income$803.14M
Interest Expense$312.42M
Net Income$309.61M
EPS (Basic)$1.76
EPS (Diluted)$1.75
Shares Outstanding (Basic)175.48M
Shares Outstanding (Diluted)176.53M

Key Highlights

  • 1Revenue increased by 4.4% to $2.67 billion in 2011, primarily due to rate increases in Regulated Businesses and growth in Market-Based Operations.
  • 2Net income from continuing operations grew to $304.9 million in 2011, up from $255.1 million in 2010.
  • 3Company continued portfolio optimization with divestitures (Texas, Arizona, New Mexico) and strategic acquisitions.
  • 4Capital investments totaled $925 million in 2011, focused on infrastructure renewal and system reliability, with $900 million planned for 2012.
  • 5Business transformation project is ongoing to improve operational efficiency and IT systems, with ERP go-live expected in August 2012.
  • 6The company received $461 million in proceeds from the sale of its Arizona and New Mexico subsidiaries in January 2012.
  • 7Significant risks include extensive economic regulation, environmental compliance costs, regulatory lag, and potential disruptions in capital markets.

Frequently Asked Questions

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.

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.

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.

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.