10-QPeriod: Q3 FY2009

American Water Works Company, Inc. Quarterly Report for Q3 Ended Sep 30, 2009

Filed November 9, 2009For Securities:AWK

Summary

American Water Works Company, Inc. (AWK) filed its Form 10-Q for the period ending September 30, 2009. The company reported net income of $91.6 million for the third quarter, an increase from $88.2 million in the prior year's quarter. However, for the first nine months of the year, AWK reported a net loss of $269.5 million, a significant improvement from a net loss of $598.8 million in the same period of 2008. This improvement is largely attributable to a reduction in goodwill impairment charges. Revenues saw a modest increase for both the quarter and the nine-month period, primarily driven by rate increases in its Regulated Businesses segment, which were partially offset by decreased customer usage due to weather and economic conditions. The company also highlighted its ongoing financing activities, including a significant equity offering in June 2009 that generated proceeds used to repay short-term debt, and ongoing efforts to manage its debt structure. Despite a challenging economic environment, AWK continues to invest in its infrastructure and pursue strategic acquisitions.

Financial Highlights

30 data points
Beta

Revenue

$679.96M

Net Income

$91.64M

13.5% Net Margin

EPS (Diluted)

$0.52

Cash & Equivalents

$7.83M

Free Cash Flow

$50.12M

Financial Statements
Beta
Revenue$679.96M
Operating Expenses$465.55M
Operating Income$214.41M
Interest Expense$74.12M
Net Income$91.64M
EPS (Basic)$0.52
EPS (Diluted)$0.52
Shares Outstanding (Basic)174.59M
Shares Outstanding (Diluted)174.69M

Key Highlights

  • 1Third-quarter net income rose to $91.6 million from $88.2 million year-over-year, driven by rate increases and operational management.
  • 2Nine-month net loss narrowed significantly to $269.5 million from $598.8 million in the prior year, primarily due to a $450 million reduction in goodwill impairment charges.
  • 3Total revenues increased by 1.2% for the third quarter and 4.2% for the nine months, primarily from rate adjustments in regulated operations.
  • 4Customer usage declined due to unfavorable weather and economic conditions, impacting revenues, though rate increases helped offset this.
  • 5The company successfully raised approximately $242.3 million in net proceeds from a common stock offering in June 2009 to reduce short-term debt.
  • 6Goodwill impairment charges decreased substantially to $450 million for the nine months ended September 30, 2009, from $750 million in the comparable period of 2008.
  • 7AWK continues to invest in capital expenditures, with $592.9 million used for investing activities during the nine months ended September 30, 2009, primarily for construction projects.

Frequently Asked Questions

The company's third-quarter performance was driven by an increase in operating revenues, primarily due to rate increases granted by regulatory agencies in its Regulated Businesses segment. This was partially offset by decreased customer usage due to wet and cool weather conditions and the general economic downturn. Operating expenses also saw an increase, particularly in depreciation and maintenance.

AWK experienced significant goodwill impairment charges in both 2008 and 2009. The charge for the nine months ending September 30, 2009, was $450 million, a substantial reduction from $750 million in the same period of 2008. This reduction was primarily due to a decrease in stock market volatility and the company's market price improving from its lowest points in early 2009.

AWK believes it has sufficient liquidity. It relies on internally generated cash flows from operations, supplemented by external financing through debt and equity offerings. As of November 5, 2009, the company had approximately $802.9 million available under its revolving credit facilities and capacity for commercial paper issuance. The company anticipates ongoing capital expenditures and expects to fund maturities of long-term debt through a combination of external financing and operational cash flow.

The company is involved in routine legal proceedings. Notably, California-American Water Company received a Cease and Desist Order regarding water diversions from the Carmel River, which AWK is appealing. The outcome and potential costs are uncertain. Additionally, the company is actively engaged with regulators regarding the recovery of increased pension and postretirement benefit costs.