01—Abstract
Summary
Summary of the 10-K filed February 21, 2017. Cited figures are marked; the original filing is the authoritative source.
American Water Works Company, Inc. (AWK) operates as the largest investor-owned water and wastewater utility in the United States, serving approximately 15 million people across 47 states and Canada.
The company's core business, "Regulated Businesses," accounted for approximately 87% of its operating revenues in 2016, providing essential water and wastewater services under state regulatory commission oversight. The remaining 13% comes from its "Market-Based Businesses," which include military services, homeowner services, contract operations, and services for the oil and gas industry. In 2016, AWK demonstrated solid performance, with operating revenues growing by 4.5% to $3.3 billiona.
The company highlighted investments in infrastructure improvements and strategic acquisitions as key drivers of growth. Despite a significant charge related to the Freedom Industries chemical spill in West Virginia, adjusted diluted earnings per share saw an increase, driven by strong performance in its regulated operations. AWK continues to focus on customer satisfaction, safety, employee development, and efficient operations to maintain its leading market position and deliver value to shareholders.
02—Key points
Key Highlights
- American Water is the largest investor-owned water and wastewater utility in the U.S., serving approximately 15 million people.
- Regulated Businesses generated 87% of operating revenues ($2.87 billion) in 2016, reflecting a 4.7% increase year-over-year.
- Market-Based Businesses contributed 13% of operating revenues ($451 million) in 2016, showing growth driven by acquisitions and segment expansion.
- The company invested $1.3 billion in capital improvements in 2016, primarily in its Regulated Businesses segment, to enhance infrastructure.
- AWK reported a charge of $65 million (after-tax impact of $39 million or $0.22 per diluted share) related to the Freedom Industries chemical spill settlement.
- Excluding the chemical spill settlement charge, adjusted diluted earnings per share increased by approximately 7.6% due to strong regulated business growth.
- The company maintained a strong focus on customer satisfaction, achieving top-quartile ratings among industry peers for both satisfaction and service quality.
- AWK is planning significant capital investments of $6.7 to $7.3 billion over the next five years to support infrastructure improvements and growth through acquisitions.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 21, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Operating Expenses | $2.22B$2.08B | +6.4% |
| Operating Income | $1.08B$1.07B | +0.9% |
| Net Income | $468.00M$476.00M | −1.7% |
| EPS (Basic) | $2.63$2.66 | −1.1% |
| EPS (Diluted) | $2.62$2.64 | −0.8% |
| Shares Outstanding (Basic) | 178.00M179.00M | −0.6% |
| Shares Outstanding (Diluted) | 179.00M180.00M | −0.6% |
05—Questions
Frequently Asked Questions
What is American Water's primary business segment?
American Water's primary business segment is its 'Regulated Businesses,' which operates water and wastewater utilities in 16 states. This segment accounted for approximately 87% of the company's operating revenues in 2016.
How did the Freedom Industries chemical spill impact the company's financial results?
The company recorded a charge of $65 million (after-tax impact of $39 million or $0.22 per diluted share) in the third quarter of 2016 related to a binding global agreement in principle to settle claims arising from the Freedom Industries chemical spill in West Virginia. Excluding this charge, adjusted diluted earnings per share showed an increase.
What is the company's strategy for future growth?
American Water's growth strategy focuses on investing in infrastructure improvements within its Regulated Businesses, pursuing strategic acquisitions of water and wastewater systems (often referred to as 'tuck-ins'), and leveraging technology for operational efficiency and enhanced customer experience. The company plans to invest $6.7 to $7.3 billion over the next five years.
How is the company managing regulatory lag?
The company actively pursues regulatory practices that mitigate 'regulatory lag,' the delay between incurring costs and recovering them through rates. This includes supporting infrastructure replacement surcharges, future and hybrid test years, utility plant recovery mechanisms, and expense and revenue stability mechanisms, aiming for more timely cost recovery and return on investment.
06—Continue