10-QPeriod: Q1 FY2013

American Water Works Company, Inc. Quarterly Report for Q1 Ended Mar 31, 2013

Filed May 7, 2013For Securities:AWK

Summary

American Water Works Company, Inc. (AWK) reported solid financial results for the first quarter of 2013, demonstrating growth in both revenue and net income compared to the same period in the prior year. The company's strategic focus on addressing regulatory lag, improving operational efficiency, and capital discipline continues to yield positive outcomes. Revenue growth was primarily driven by rate increases across its Regulated Businesses segment, complemented by contributions from recent acquisitions. Despite challenges such as increased operation and maintenance expenses and depreciation, the company managed to improve its net income from continuing operations due to effective cost management and a beneficial reduction in income tax expenses. The company also highlighted its ongoing investments in infrastructure and its commitment to expanding its service footprint through strategic acquisitions. Overall, AWK appears to be navigating its regulatory environment effectively while pursuing growth opportunities, positioning itself for continued financial performance.

Financial Highlights

49 data points
Beta

Revenue

$631.94M

Net Income

$57.64M

9.1% Net Margin

EPS (Diluted)

$0.32

Total Assets

$14.79B

Cash & Equivalents

$21.18M

Free Cash Flow

-$63.46M

Financial Statements
Beta
Revenue$631.94M
Operating Expenses$471.90M
Operating Income$165.32M
Interest Expense$78.11M
Net Income$57.64M
EPS (Basic)$0.32
EPS (Diluted)$0.32
Shares Outstanding (Basic)177.33M
Shares Outstanding (Diluted)178.47M

Key Highlights

  • 1Net income increased to $57.6 million, or $0.32 per diluted share, compared to $41.8 million, or $0.24 per diluted share, in the first quarter of 2012.
  • 2Operating revenues grew by 2.8% to $636.1 million, driven by rate increases in the Regulated Businesses segment.
  • 3Operation and maintenance expenses saw a slight increase of 0.7% to $312.2 million, while depreciation and amortization increased by 8.2% due to new utility plant in service.
  • 4The company invested approximately $213 million in capital improvements during the quarter.
  • 5Market-Based Operations segment revenues decreased by $13.2 million, primarily due to lower revenues from contract operations.
  • 6The O&M efficiency ratio for Regulated Businesses improved to 42.9% from 43.6% in the prior year.
  • 7The company declared a quarterly cash dividend of $0.28 per share, payable in June 2013.

Frequently Asked Questions

The primary driver of revenue growth was rate increases obtained through rate authorizations in the company's Regulated Businesses segment, contributing approximately $25.3 million. Additional revenues came from acquisitions and increased surcharge and balancing account revenues.

While operation and maintenance expenses increased slightly by 0.7%, the company benefited from a decrease in its provision for income taxes, which included a $3.3 million tax benefit from a legal structure reorganization. Higher revenues in the regulated segment also helped offset some of the expense increases.

American Water Works invested approximately $213 million in capital improvements during the first quarter of 2013 and expects to invest $950 million for the full year. The company is also progressing with Phase II of its business transformation project, focusing on an Enterprise Asset Management system and a Customer Information System.

The Market-Based Operations segment experienced a decrease in revenues by $13.2 million, mainly due to a decline in Contract Operations Group revenues resulting from delays in military contracts and the termination of certain O&M contracts. This was partially offset by growth in the Homeowner Services Group.