10-KPeriod: FY2018

American Water Works Company, Inc. Annual Report, Year Ended Dec 31, 2018

Filed February 19, 2019For Securities:AWK

Summary

American Water Works Company, Inc. (AWK) reported stable operating revenues in 2018, largely driven by its Regulated Businesses segment, which constitutes the vast majority of its revenue. The company is focused on significant capital investments to upgrade its aging infrastructure, with plans to invest between $7.3 billion and $8.6 billion from 2019 to 2023. This extensive capital expenditure program is aimed at maintaining and improving the reliability and quality of water and wastewater services for its 14 million customers across 46 states and Ontario. AWK's strategy emphasizes organic growth through infrastructure upgrades and customer acquisition, alongside strategic acquisitions. The company also operates market-based businesses, which, while smaller, contribute to overall revenue. Management is committed to operational excellence, safety, and customer satisfaction, highlighting ESG principles in its operations. Despite facing risks such as regulatory lag, environmental compliance costs, and potential service disruptions, AWK's diversified operations and regulatory framework provide a foundation for continued investment and service delivery.

Financial Highlights

51 data points
Beta

Revenue

$3.42B

Net Income

$567.00M

16.6% Net Margin

EPS (Diluted)

$3.15

Total Assets

$21.22B

Cash & Equivalents

$130.00M

Free Cash Flow

-$200.00M

Financial Statements
Beta
Revenue$3.42B
Operating Expenses$2.34B
Operating Income$1.10B
Net Income$567.00M
EPS (Basic)$3.16
EPS (Diluted)$3.15
Shares Outstanding (Basic)180.00M
Shares Outstanding (Diluted)180.00M

Key Highlights

  • 1AWK is the largest publicly traded water and wastewater utility in the U.S., serving over 14 million people across 46 states and Ontario, Canada.
  • 2The company plans to invest $7.3 billion over the next five years (2019-2023) in capital improvements for its Regulated Businesses, primarily for pipe replacement and facility upgrades.
  • 3Regulated Businesses accounted for 87% of total operating revenues in 2018, demonstrating the segment's primary importance to the company's financial performance.
  • 4AWK's growth strategy includes both organic growth from infrastructure investment and strategic acquisitions of smaller water and wastewater systems.
  • 5The company is investing in cybersecurity and resiliency measures to address evolving operational risks and climate variability.
  • 6Market-Based Businesses, including Homeowner Services Group and Military Services Group, contribute to revenue diversification, with Homeowner Services bolstered by the acquisition of Pivotal Home Solutions.
  • 7The company's financial health is supported by strong cash flows from operations and access to capital markets, though it manages significant debt levels.

Frequently Asked Questions

American Water Works Company's primary business focus is on its Regulated Businesses, which involve the ownership of utilities that provide water and wastewater services to residential, commercial, industrial, and other customers across 16 states. This segment is the largest contributor to the company's operating revenues.

The company has significant capital investment plans, intending to invest between $7.3 billion and $8.6 billion from 2019 to 2023. These investments are primarily directed towards replacing aging infrastructure, upgrading water and wastewater treatment facilities, enhancing system resiliency, and meeting new regulatory compliance needs.

American Water Works Company operates under economic regulation by state Public Utility Commissions (PUCs). To manage risks like 'regulatory lag' (the delay between incurring costs and recovering them through rates), the company actively pursues regulatory practices such as infrastructure replacement surcharges, future test year rate setting, and revenue stability mechanisms. These mechanisms aim to ensure timely recovery of capital investments and operating expenses, thereby supporting its infrastructure investment plans.

The Market-Based Businesses segment provides a range of water and wastewater-related services that are not subject to state PUC economic regulation. These include homeowner services (warranty protection), military services (water and wastewater systems for U.S. government installations), and specialized services for the natural gas industry. While smaller than the Regulated Businesses, this segment diversifies revenue streams and leverages the company's core competencies.