10-QPeriod: Q3 FY2012

American Water Works Company, Inc. Quarterly Report for Q3 Ended Sep 30, 2012

Filed November 7, 2012For Securities:AWK

Summary

American Water Works Company, Inc. (AWK) reported strong financial performance for the nine months ended September 30, 2012, with net income increasing to $302.6 million from $244.8 million in the prior year period. This growth was primarily driven by increased revenues in the Regulated Businesses segment, attributed to rate increases and higher customer demand, as well as contributions from acquisitions. The company continues to execute its portfolio optimization initiative, successfully divesting non-core assets while strategically acquiring new regulated water systems, notably in New York. The company is actively managing regulatory lag and declining usage through rate case approvals and infrastructure charges. Furthermore, AWK is demonstrating improved operational efficiency within its Regulated Businesses, as evidenced by a lower O&M efficiency ratio. The Market-Based Operations segment also showed revenue growth, driven by the Homeowner Services Group and military contract operations. While the company incurred significant expenses related to its business transformation project, which is expected to yield long-term benefits, it also successfully navigated potential impacts from Hurricane Sandy with minimal material effect on its financial position.

Financial Highlights

48 data points
Beta

Revenue

$831.82M

Net Income

$153.81M

18.5% Net Margin

EPS (Diluted)

$0.86

Total Assets

$14.60B

Cash & Equivalents

$18.53M

Free Cash Flow

$214.09M

Financial Statements
Beta
Revenue$831.82M
Operating Expenses$504.18M
Operating Income$327.64M
Interest Expense$76.62M
Net Income$153.81M
EPS (Basic)$0.87
EPS (Diluted)$0.86
Shares Outstanding (Basic)176.62M
Shares Outstanding (Diluted)177.84M

Key Highlights

  • 1Net income increased by 23.6% to $302.6 million for the nine months ended September 30, 2012.
  • 2Operating revenues grew by 8.4% to $2.2 billion for the nine months ended September 30, 2012, driven by rate increases and higher demand in regulated operations.
  • 3The company completed the divestiture of Arizona, New Mexico, and Ohio subsidiaries as part of its portfolio optimization initiative.
  • 4AWK acquired seven regulated water systems in New York, adding approximately 50,000 customers.
  • 5The O&M efficiency ratio for Regulated Businesses improved to 39.6% for the nine months ended September 30, 2012, down from 43.3% in the prior year.
  • 6Capital expenditures for the nine months ended September 30, 2012 were $680.4 million, reflecting ongoing investment in infrastructure.
  • 7The company secured a new $1 billion revolving credit facility expiring in October 2017, enhancing its liquidity.

Frequently Asked Questions

Revenue growth was primarily driven by rate increases secured through regulatory approvals in its Regulated Businesses segment and higher customer consumption, partly due to warmer weather. Acquisitions, particularly in New York, also contributed to the revenue increase.

The company is focused on improving its O&M efficiency ratio within its Regulated Businesses, which has shown improvement. This is achieved through ongoing efforts to enhance operational excellence, cost effectiveness, and the benefits expected from its business transformation project, such as the Enterprise Resource Planning (ERP) system.

The company has made significant progress, completing the divestiture of its Arizona, New Mexico, and Ohio subsidiaries. Simultaneously, it has strategically acquired new regulated water systems, notably in New York, which are being integrated into its existing operations.

Hurricane Sandy caused widespread power outages in its east coast service areas. However, due to the reliance on generators for critical water and wastewater facilities, the impact on customers was minimal. The company believes damages are not significant and does not expect a material adverse impact on its financial results, with potential recovery for insurable expenses through the rate-making process.