10-QPeriod: Q2 FY2011

American Water Works Company, Inc. Quarterly Report for Q2 Ended Jun 30, 2011

Filed August 3, 2011For Securities:AWK

Summary

American Water Works Company, Inc. (AWK) reported strong financial performance for the six months ended June 30, 2011, with net income increasing by 27.4% to $131.9 million, compared to $103.6 million in the prior year. This growth was driven by increased revenues, primarily from rate increases in its Regulated Businesses segment and higher revenues in Market-Based Operations. The company continued to execute its portfolio optimization strategy, including the sale of its Texas subsidiary and agreements for the sale of its Arizona, New Mexico, and Ohio operations. Strategic acquisitions, such as the Missouri water systems, also contributed to growth. While operating expenses and depreciation increased, partly due to new utility plant in service and business transformation projects, the company demonstrated improved operating efficiency in its regulated segment. AWK's liquidity remains solid, supported by cash flows from operations and committed credit facilities. The company also reaffirmed its commitment to returning value to shareholders through consistent dividend payments, with an increased quarterly dividend declared in June 2011. The company's outlook remains focused on resolving rate cases, enhancing operating efficiency, and selectively expanding its market-based businesses.

Financial Highlights

49 data points
Beta

Revenue

$668.87M

Net Income

$81.11M

12.1% Net Margin

EPS (Diluted)

$0.46

Total Assets

$14.32B

Cash & Equivalents

$13.47M

Free Cash Flow

-$114.51M

Financial Statements
Beta
Revenue$668.87M
Operating Expenses$467.48M
Operating Income$201.40M
Interest Expense$78.47M
Net Income$81.11M
EPS (Basic)$0.46
EPS (Diluted)$0.46
Shares Outstanding (Basic)175.47M
Shares Outstanding (Diluted)176.42M

Key Highlights

  • 1Net income increased by 27.4% to $131.9 million for the six months ended June 30, 2011, compared to $103.6 million in the prior year.
  • 2Operating revenues grew by 7.0% to $1.28 billion for the six months ended June 30, 2011, driven by rate increases and market-based operations.
  • 3The company is actively executing its portfolio optimization strategy, including the sale of its Texas subsidiary and agreements to sell operations in Arizona, New Mexico, and Ohio.
  • 4Capital expenditures increased to $391.8 million for the six months ended June 30, 2011, reflecting investments in treatment facilities and infrastructure.
  • 5The company's operating efficiency ratio for regulated businesses improved slightly to 45.5% for the six months ended June 30, 2011, from 46.2% in the prior year.
  • 6Short-term debt increased significantly to $449.9 million at June 30, 2011, compared to $228.5 million at December 31, 2010.
  • 7A quarterly cash dividend of $0.23 per share was declared in June 2011, an increase from $0.21 per share in the prior year.

Frequently Asked Questions

The primary driver was increased revenues resulting from rate increases in the Regulated Businesses segment and slightly higher revenues in the Market-Based Operations segment. Additionally, the cessation of depreciation on assets held by discontinued operations contributed to higher reported net income.

American Water is actively executing a portfolio optimization strategy, which includes selling certain subsidiaries. In June 2011, the Texas subsidiary assets were sold. Agreements are in place to sell the Arizona and New Mexico subsidiaries, expected in late 2011 or early 2012, and the Ohio subsidiary, expected in early 2012. The financial results of these businesses are presented as discontinued operations.

The company funds its liquidity needs through cash flows from operations, debt offerings, commercial paper, and credit facilities. At June 30, 2011, AWK had $813.7 million in available capacity under its revolving credit facilities to support its operations and commercial paper program. The company expects to use proceeds from divestitures to reduce outstanding commercial paper.

The company has seen success in resolving rate cases, with approvals in Tennessee and West Virginia in Q2 2011. It has filed for significant additional annualized revenues in several states, including Pennsylvania, Iowa, New York, Indiana, New Mexico, and Missouri, and is awaiting final orders in eleven states. The company continues to seek rate increases to offset declining water usage and maintain its rate of return.