10-QPeriod: Q1 FY2012

American Water Works Company, Inc. Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 2, 2012For Securities:AWK

Summary

American Water Works Company, Inc. (AWK) reported solid financial results for the first quarter of 2012, demonstrating growth in both net income and income from continuing operations compared to the prior year. The company's strategic focus on portfolio optimization is progressing, with the divestiture of certain subsidiaries completed and acquisitions made to bolster regulated operations. Rate increases were a significant driver of revenue growth in the Regulated Businesses segment, though partially offset by decreased consumption. Market-Based Operations also saw revenue increases due to expansion in contract services. AWK's liquidity remains strong, supported by a substantial revolving credit facility and cash flows from operations. Capital expenditures increased year-over-year, reflecting ongoing investment in infrastructure. The company reaffirmed its commitment to returning value to shareholders through dividends, with a consistent quarterly payout. While risks associated with regulatory lag, declining usage, and market conditions persist, AWK's proactive management of these factors and its strategic initiatives position it for continued performance.

Financial Highlights

48 data points
Beta

Revenue

$618.55M

Net Income

$41.75M

6.8% Net Margin

EPS (Diluted)

$0.24

Total Assets

$14.09B

Cash & Equivalents

$9.50M

Free Cash Flow

-$85.27M

Financial Statements
Beta
Revenue$618.55M
Operating Expenses$458.82M
Operating Income$159.74M
Interest Expense$79.65M
Net Income$41.75M
EPS (Basic)$0.24
EPS (Diluted)$0.24
Shares Outstanding (Basic)175.91M
Shares Outstanding (Diluted)177.03M

Key Highlights

  • 1Net income increased to $41.8 million ($0.24 per diluted share) in Q1 2012 from $26.2 million ($0.15 per diluted share) in Q1 2011.
  • 2Income from continuing operations rose to $49.3 million ($0.28 per diluted share) in Q1 2012 from $40.7 million ($0.23 per diluted share) in Q1 2011.
  • 3Consolidated operating revenues grew by 3.7% to $618.6 million in Q1 2012, driven by rate increases and market-based operations.
  • 4The company continued its portfolio optimization with the divestiture of Arizona and New Mexico subsidiaries and the acquisition of seven regulated water systems in New York.
  • 5Regulated Businesses' O&M efficiency ratio improved to 45.3% in Q1 2012 from 48.1% in Q1 2011.
  • 6Capital expenditures increased by $57.0 million to $233.4 million in Q1 2012, primarily for infrastructure replacement and business transformation projects.
  • 7The company declared a quarterly cash dividend of $0.23 per share, consistent with the prior quarter.

Frequently Asked Questions

The primary drivers for the increase in net income from continuing operations were higher revenues, largely due to rate increases granted in the Regulated Businesses segment and slightly higher revenues in the Market-Based Operations segment. These were partially offset by increased depreciation expense in the Regulated segment due to additional utility plant placed in service.

The company is actively executing its portfolio optimization initiative. In Q1 2012, it completed the sale of its regulated operations in Arizona and New Mexico. Additionally, it acquired seven regulated water systems in New York, adding approximately 50,000 customers to its New York operations.

American Water Works is actively engaged in rate cases across its operating territories. In Q1 2012, it filed a rate case in Virginia and received approvals for rate increases totaling $32.6 million in Missouri, New York, and Iowa. The company is awaiting final orders in four states for additional requested revenues of $101.2 million.

The company believes its access to capital markets, its revolving credit facility with $840.0 million in commitments, and cash flows from operations are sufficient to fund its short-term capital requirements. In Q1 2012, cash flows from operating activities were $148.1 million, and the company had $803.2 million available under its credit facility.