10-KPeriod: FY2021

American Water Works Company, Inc. Annual Report, Year Ended Dec 31, 2021

Filed February 16, 2022For Securities:AWK

Summary

American Water Works Company, Inc. (AWK) reported its 2021 financial results, demonstrating resilience and strategic execution. The company, the largest publicly traded water utility in the U.S., primarily operates through its Regulated Businesses, which accounted for approximately 86% of total operating revenues in 2021. The company achieved significant operational and financial milestones, including growth in its Regulated Businesses driven by infrastructure investments and acquisitions. A notable event was the sale of its Homeowner Services Group (HOS) for $1.275 billion, generating a substantial pre-tax gain and allowing for capital redeployment into its core utility operations. AWK also continued its commitment to infrastructure modernization, with plans to invest between $28 billion and $32 billion over the next decade to upgrade and maintain its extensive water and wastewater systems. AWK's financial performance was bolstered by rate increases and infrastructure surcharges across its regulated jurisdictions. Despite some challenges like weather impacts and incremental operational costs related to COVID-19, the company maintained a strong focus on operational excellence and customer service. Key financial highlights include increased operating revenues and robust net income, demonstrating the company's stable business model and its ability to navigate regulatory and economic environments effectively.

Financial Highlights

49 data points
Beta

Revenue

$3.91B

Net Income

$1.26B

32.3% Net Margin

EPS (Diluted)

$6.95

Total Assets

$26.07B

Cash & Equivalents

$116.00M

Free Cash Flow

-$323.00M

Financial Statements
Beta
Revenue$3.91B
Operating Expenses$2.73B
Operating Income$1.20B
Net Income$1.26B
EPS (Basic)$6.96
EPS (Diluted)$6.95
Shares Outstanding (Basic)182.00M
Shares Outstanding (Diluted)182.00M

Key Highlights

  • 1American Water Works Company, Inc. (AWK) is the largest publicly traded water and wastewater utility in the U.S., serving over 14 million people across 24 states.
  • 2The company sold its Homeowner Services Group (HOS) for $1.275 billion, resulting in a pre-tax gain of $748 million, which will be reinvested into the Regulated Businesses.
  • 3AWK plans significant capital investments totaling $28 billion to $32 billion over the next 10 years to improve and expand its water and wastewater infrastructure.
  • 4Operating revenues for 2021 increased to $3,930 million, up from $3,777 million in 2020, primarily driven by rate increases and acquisitions in the Regulated Businesses.
  • 5Net income attributable to common shareholders increased significantly to $1,263 million ($6.95 per diluted share) in 2021, largely due to the HOS sale gain, compared to $709 million ($3.91 per diluted share) in 2020.
  • 6The company continues to leverage regulatory mechanisms like infrastructure surcharges and general rate cases to recover capital investments and ensure a stable return.
  • 7AWK maintained strong operational efficiency, with an adjusted regulated O&M efficiency ratio of 34.1% for 2021, reflecting effective cost management.

Frequently Asked Questions

The significant increase in net income for 2021 was primarily driven by the substantial pre-tax gain of $748 million from the sale of the Homeowner Services Group (HOS). Additionally, growth in the Regulated Businesses from infrastructure investments, acquisitions, and organic customer growth contributed positively. These factors more than offset certain increased expenses and a contribution to the American Water Charitable Foundation.

American Water has a robust capital investment strategy focused on enhancing its water and wastewater infrastructure. The company plans to invest between $28 billion and $32 billion over the next 10 years, with approximately $11.5 billion to $12 billion dedicated to infrastructure improvements within the Regulated Businesses over the next five years, and an additional $1.5 billion to $2 billion for regulated acquisitions during the same period. This investment is crucial for system renewal, reliability, and meeting evolving regulatory and customer demands.

The sale of HOS for $1.275 billion allowed AWK to generate significant cash proceeds, which are being redeployed into its core Regulated Businesses to fund capital investments and strategic acquisitions. This divestiture sharpened the company's focus on its regulated utility operations, which are considered the primary engine for long-term growth and value creation, while narrowing the scope of its Market-Based Businesses primarily to the Military Services Group (MSG).

AWK actively manages regulatory lag by employing various approved regulatory practices across its jurisdictions. These include infrastructure replacement surcharges, future test years, hybrid test years, utility plant recovery mechanisms, and expense mechanisms that allow for more timely recovery of costs and capital investments outside of general rate case proceedings. The company also engages with regulators to expand the use and enhance existing mechanisms to mitigate the time between incurring costs and recovering them through customer rates.