10-QPeriod: Q2 FY2010

American Water Works Company, Inc. Quarterly Report for Q2 Ended Jun 30, 2010

Filed August 4, 2010For Securities:AWK

Summary

American Water Works Company, Inc. (AWK) reported improved financial performance in the second quarter and first half of 2010 compared to the same periods in 2009. Net income for the three months ended June 30, 2010, was $72.8 million, a significant increase from $52.0 million in the prior year, with diluted EPS rising to $0.42 from $0.32. For the six months ended June 30, 2010, net income reached $103.6 million, a substantial turnaround from a net loss of $361.1 million in the first half of 2009, largely due to the absence of a significant goodwill impairment charge recorded in 2009. The company saw revenue growth driven by rate increases in its Regulated Businesses and increased activity in its Non-Regulated Contract Operations Group. Capital expenditures remain substantial, with the company investing in infrastructure renewal and new projects. AWK maintained access to liquidity through its credit facilities and commercial paper, reporting stable credit ratings.

Financial Highlights

48 data points
Beta

Revenue

$630.76M

Net Income

$72.75M

11.5% Net Margin

EPS (Diluted)

$0.42

Total Assets

$13.77B

Cash & Equivalents

$20.61M

Free Cash Flow

-$63.08M

Financial Statements
Beta
Revenue$630.76M
Operating Expenses$446.63M
Operating Income$188.37M
Interest Expense$78.44M
Net Income$72.75M
EPS (Basic)$0.42
EPS (Diluted)$0.42
Shares Outstanding (Basic)174.77M
Shares Outstanding (Diluted)174.85M

Key Highlights

  • 1Net income for Q2 2010 was $72.8 million, up from $52.0 million in Q2 2009, with diluted EPS increasing to $0.42 from $0.32.
  • 2Six-month net income for 2010 was $103.6 million, a significant improvement from a net loss of $361.1 million in the same period of 2009, primarily due to the absence of a large goodwill impairment charge in 2010.
  • 3Total operating revenues increased by 9.5% in Q2 2010 compared to Q2 2009, driven by rate increases in Regulated Businesses and growth in Non-Regulated Businesses.
  • 4The company received authorizations for approximately $120.6 million in annualized revenues from general rate cases and infrastructure charges during Q2 2010.
  • 5Capital expenditures for the first six months of 2010 were $327.3 million, a decrease from $400.2 million in the prior year, as the company manages investment plans.
  • 6AWK maintained adequate liquidity with $807.2 million available under its credit facilities and commercial paper programs as of July 31, 2010.
  • 7The company declared a quarterly cash dividend of $0.22 per share, an increase from the previous $0.21 per share.

Frequently Asked Questions

The primary driver for the significant improvement in net income from a loss in the first half of 2009 to a profit in the first half of 2010 was the absence of a $450 million goodwill impairment charge recorded in the first half of 2009. Revenue growth from rate increases in regulated operations and increased activity in non-regulated segments also contributed positively.

The company is continuing to invest in infrastructure renewal and major capital projects, with capital expenditures for the first six months of 2010 at $327.3 million. While this is a decrease from the prior year, the company estimates overall capital investment to be between $800 million and $1 billion for 2010. They are strategically investing to meet customer growth and regulatory requirements, while also considering acquisitions and system upgrades.

American Water Works Company maintains a strong liquidity position, with $807.2 million available under its credit facilities and commercial paper programs as of July 31, 2010. The company funds its operations, capital expenditures, and dividends through internally generated cash flows and by accessing debt and equity markets. They are working to manage their capital structure, with long-term debt representing approximately 55% of their capitalization as of June 30, 2010.

The PPACA has changed the tax treatment of federal subsidies for retiree health benefit plans, making them taxable starting in 2013. In the first quarter of 2010, American Water Works Company recorded a reduction in its deferred tax assets and an increase in its regulatory assets of $27.1 million to reflect the accounting impact of this legislation. The company is still assessing the full cost impact of the Acts on future medical benefit expenses.