01—Abstract
Summary
Summary of the 10-K filed February 18, 2020. Cited figures are marked; the original filing is the authoritative source.
American Water Works Company, Inc. (AWK) reported strong performance in its 2019 10-K filing, demonstrating continued growth and stability as the largest publicly traded water and wastewater utility in the United States.
The company's operations are primarily driven by its Regulated Businesses, which serve approximately 15 million people across 46 states and generate the vast majority of its revenue. AWK has a consistent strategy of investing in infrastructure improvements, evidenced by planned capital expenditures exceeding $8 billiona over the next five years, aimed at modernizing aging systems and enhancing service reliability. The company also highlighted growth in its Market-Based Businesses, which offer complementary services.
Despite a challenging regulatory environment and the inherent risks of utility operations, AWK's diversified geographic footprint, strong regulatory relationships, and commitment to operational excellence position it well for continued success. Investors can look to AWK's significant ongoing capital investments as a driver for future rate base growth and stable, predictable earnings, supported by a growing dividend history and a focus on environmental, social, and governance (ESG) principles.
02—Key points
Key Highlights
- American Water is the largest U.S. water and wastewater utility by revenue and population served, operating primarily through its Regulated Businesses across 16 states.
- The company plans significant capital investments of $8.2 billion over the next five years and $18-$19 billion over the next 10 years for infrastructure improvements.
- Operating revenues for the Regulated Businesses were $3.1 billion in 2019, a slight increase from 2018, driven by rate increases and acquisitions.
- Market-Based Businesses contributed $539 million in operating revenues in 2019, showing growth driven by acquisitions and new contracts.
- The company's commitment to sustainability and ESG principles is demonstrated through initiatives like GHG emission reductions and various index inclusions.
- AWK is actively managing its capital structure, with long-term debt and redeemable preferred stock representing 55.6% of its capitalization as of December 31, 2019.
- The company is in the process of selling its New York subsidiary to Liberty Utilities Co. for approximately $608 million, with an estimated completion by early 2021.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 18, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $3.59B$3.42B | +5.0% |
| Operating Expenses | $2.40B$2.34B | +2.5% |
| Operating Income | $1.21B$1.10B | +10.2% |
| Net Income | $621.00M$567.00M | +9.5% |
| EPS (Basic) | $3.44$3.16 | +8.9% |
| EPS (Diluted) | $3.43$3.15 | +8.9% |
| Shares Outstanding (Basic) | 181.00M180.00M | +0.6% |
| Shares Outstanding (Diluted) | 181.00M180.00M | +0.6% |
05—Questions
Frequently Asked Questions
What is American Water's primary business focus?
American Water's primary business is the ownership and operation of regulated water and wastewater utilities across the United States, referred to as its Regulated Businesses. These operations serve approximately 15 million people in 46 states. The company also operates market-based businesses that provide complementary services.
What is American Water's strategy for future growth?
American Water's growth strategy centers on continued capital investment in infrastructure to maintain and improve its regulated utility systems, as well as pursuing regulated acquisitions to expand its customer base and geographic footprint. It also seeks growth opportunities in its market-based businesses.
What are the major risks facing American Water?
Key risks include extensive regulation by state Public Utility Commissions (PUCs), which impacts rates and operations. Other risks involve environmental and water quality regulations, which can increase costs, potential limitations on water supply due to government restrictions or climate variability, and the need for significant capital investment to maintain aging infrastructure. The company also faces risks related to cybersecurity and potential disruptions from severe weather.
How is American Water investing in its infrastructure?
American Water plans to invest approximately $8.2 billion over the next five years and between $18 billion and $19 billion over the next 10 years in capital improvements for its Regulated Businesses. This investment is primarily directed towards replacing aging infrastructure, upgrading treatment facilities, and enhancing system resiliency.
06—Continue