01—Abstract
Summary
Summary of the 10-K filed February 25, 2015. Cited figures are marked; the original filing is the authoritative source.
American Water Works Company, Inc. (AWK) reported solid performance in its 2014 10-K filing, with operating revenues reaching $3.01 billiona, an increase of 4.6% year-over-year.
The company highlighted growth in its Regulated Businesses segment, driven by rate increases and acquisitions, which contributed significantly to overall revenue. Market-Based Operations also saw revenue growth, primarily from military contracts and homeowner services. AWK continued its focus on infrastructure investment, with capital expenditures of approximately $1 billionb in 2014 aimed at system upgrades and renewals.
The company also emphasized operational efficiency, evidenced by an improved O&M efficiency ratio of 36.7% for its Regulated Businesses. Despite a 4-cent per diluted share impact from the West Virginia chemical spill, the company demonstrated earnings growth, with diluted earnings per share from continuing operations increasing to $2.39c. The company also maintained a strong balance sheet and provided a positive outlook for continued investment and growth.
02—Key points
Key Highlights
- Operating revenues increased by 4.6% to $3.01 billion in 2014, driven by growth in both Regulated Businesses and Market-Based Operations.
- Capital expenditures for infrastructure upgrades and renewals totaled approximately $1 billion in 2014.
- The O&M efficiency ratio for Regulated Businesses improved to 36.7%, indicating enhanced operational performance.
- Diluted earnings per share from continuing operations increased by 10% to $2.39.
- The company acquired 13 regulated water and wastewater systems, adding approximately 2,100 water and 2,400 wastewater customers.
- The company secured new contracts for its Military Services Group, including operations at Hill Air Force Base and Picatinny Arsenal.
- AWK managed its debt effectively, maintaining a consolidated debt to consolidated capitalization ratio of 0.55 to 1.00, well within covenants.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 25, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $3.01B$2.88B | +4.6% |
| Operating Expenses | $2.01B$1.93B | +4.0% |
| Operating Income | $1.00B$948.00M | +5.8% |
| Interest Expense | $297.82M$308.16M | −3.4% |
| Net Income | $423.00M$369.00M | +14.6% |
| EPS (Basic) | $2.36$2.08 | +13.5% |
| EPS (Diluted) | $2.35$2.06 | +14.1% |
| Shares Outstanding (Basic) | 179.00M178.00M | +0.6% |
| Shares Outstanding (Diluted) | 180.00M179.00M | +0.6% |
05—Questions
Frequently Asked Questions
What was American Water's primary source of revenue in 2014?
American Water's primary source of revenue in 2014 was its Regulated Businesses segment, which generated $2.67 billion in operating revenues, representing approximately 89% of total operating revenues. This segment is subject to economic regulation by state Public Utility Commissions (PUCs).
How did the company manage its capital investments?
In 2014, American Water invested approximately $1 billion in capital improvements, focusing on upgrading and renewing its infrastructure and systems to ensure reliability, meet regulatory requirements, and accommodate new customer growth. A significant portion of this investment, $5.2 billion, is projected for infrastructure upgrades over the next five years.
What impact did the West Virginia chemical spill have on the company's financials?
The chemical spill in West Virginia resulted in a reduction of income by $7.0 million, or $0.04 per diluted share, in 2014. The company stated that it believes its subsidiary responded appropriately to the spill and has valid defenses against the lawsuits filed.
What is American Water's strategy for growth?
American Water's growth strategy is centered around investing in its regulated infrastructure, expanding its regulated customer base through acquisitions (referred to as 'tuck-ins' of smaller systems), and growing its Market-Based Operations. The company plans to invest approximately $6 billion over the next five years, with a significant portion dedicated to infrastructure improvements and acquisitions.
06—Continue