10-KPeriod: FY2014

American Water Works Company, Inc. Annual Report, Year Ended Dec 31, 2014

Filed February 25, 2015For Securities:AWK

Summary

American Water Works Company, Inc. (AWK) reported solid performance in its 2014 10-K filing, with operating revenues reaching $3.01 billion, 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 billion 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 $2.39. The company also maintained a strong balance sheet and provided a positive outlook for continued investment and growth.

Financial Highlights

50 data points
Beta

Revenue

$3.01B

Net Income

$423.00M

14.0% Net Margin

EPS (Diluted)

$2.35

Total Assets

$16.04B

Cash & Equivalents

$23.00M

Free Cash Flow

$141.00M

Financial Statements
Beta
Revenue$3.01B
Operating Expenses$2.01B
Operating Income$1.00B
Interest Expense$297.82M
Net Income$423.00M
EPS (Basic)$2.36
EPS (Diluted)$2.35
Shares Outstanding (Basic)179.00M
Shares Outstanding (Diluted)180.00M

Key Highlights

  • 1Operating revenues increased by 4.6% to $3.01 billion in 2014, driven by growth in both Regulated Businesses and Market-Based Operations.
  • 2Capital expenditures for infrastructure upgrades and renewals totaled approximately $1 billion in 2014.
  • 3The O&M efficiency ratio for Regulated Businesses improved to 36.7%, indicating enhanced operational performance.
  • 4Diluted earnings per share from continuing operations increased by 10% to $2.39.
  • 5The company acquired 13 regulated water and wastewater systems, adding approximately 2,100 water and 2,400 wastewater customers.
  • 6The company secured new contracts for its Military Services Group, including operations at Hill Air Force Base and Picatinny Arsenal.
  • 7AWK managed its debt effectively, maintaining a consolidated debt to consolidated capitalization ratio of 0.55 to 1.00, well within covenants.

Frequently Asked Questions

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).

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.

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.

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.