01—Abstract
Summary
Summary of the 10-Q filed August 7, 2013. Cited figures are marked; the original filing is the authoritative source.
This 10-Q filing for American Water Works Company, Inc. (AWK) for the period ending June 30, 2013, indicates a decrease in operating revenues and net income for the quarter compared to the prior year, primarily driven by lower demand in its Regulated Businesses segment due to weather patterns.
The company continues to invest in capital expenditures, with approximately $429.8 milliona spent in the first six months of 2013, including progress on its business transformation project. Despite a slight decrease in revenue, the company highlights progress in addressing regulatory lag and improving operational efficiency. Financially, AWK maintained a strong capital structure with a debt-to-capitalization ratio of 56%, and received upgrades to its credit ratings from both Moody's and Standard & Poor's during the period, reflecting improved financial health.
The company also continues its dividend payment history, declaring a quarterly cash dividend of $0.28b per share. Acquisitions remain a focus for growth, with several water and wastewater systems purchased during the period and an agreement to acquire a wastewater utility in Virginia.
Key challenges include managing regulatory lag and the impact of declining customer usage, as well as the ongoing costs associated with its business transformation project. However, the company's diversified operations, commitment to infrastructure investment, and strategic acquisitions position it for continued stability and growth within the utility sector.
02—Key points
Key Highlights
- Total assets grew to $14.98 billion as of June 30, 2013, up from $14.72 billion at year-end 2012.
- Net income for the six months ended June 30, 2013, was $158.9 million, a slight increase from $148.8 million in the prior year's period.
- Capital expenditures for the six months ended June 30, 2013, totaled $429.8 million, reflecting continued investment in infrastructure.
- The company repurchased treasury stock, with $5.04 million recorded at June 30, 2013, indicating a return of capital to shareholders.
- Long-term debt remained substantial at $5.31 billion, though slightly decreased from $5.33 billion at the end of 2012.
- The company's debt-to-capitalization ratio was 56% at June 30, 2013, indicating a manageable leverage position.
- Credit ratings were upgraded by both Moody's and Standard & Poor's during the period, reflecting improved financial standing.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2013filed August 7, 2013Financial Statements
Q2 FY2013 against Q2 FY2012
| Line item | Q2 FY2013Q2 FY2012 | Change |
|---|---|---|
| Revenue | $718.57M$745.61M | −3.6% |
| Operating Expenses | $482.38M$474.98M | +1.6% |
| Operating Income | $242.03M$270.63M | −10.6% |
| Interest Expense | $77.76M$79.73M | −2.5% |
| Net Income | $101.26M$107.03M | −5.4% |
| EPS (Basic) | $0.57$0.61 | −6.6% |
| EPS (Diluted) | $0.57$0.60 | −5.0% |
| Shares Outstanding (Basic) | 177.72M176.33M | +0.8% |
| Shares Outstanding (Diluted) | 178.91M177.49M | +0.8% |
05—Questions
Frequently Asked Questions
What were the main drivers of the change in operating revenues compared to the prior year?
For the three months ended June 30, 2013, operating revenues decreased by $21.3 million primarily due to a $19.7 million decrease in the Regulated Businesses segment, mainly caused by lower demand linked to weather patterns. Additionally, the Market-Based Operations segment saw a $2.0 million decrease due to contract terminations.
How is the company managing its capital expenditures and investments?
American Water invested approximately $429.8 million in capital improvements during the first six months of 2013. This includes ongoing investments in its business transformation project (Enterprise Asset Management and Customer Information systems), which aims to enhance operational efficiency. The company also continues to expand its Regulated Businesses through acquisitions, having completed several water and wastewater system purchases.
What is the company's current financial health and credit standing?
The company's financial health appears solid, with total assets of $14.98 billion and a debt-to-capitalization ratio of 56% at June 30, 2013. Notably, both Moody's and Standard & Poor's upgraded their outlook and ratings for American Water and its financing subsidiary during the period, reflecting confidence in its financial stability.
How is the company addressing regulatory lag and its impact on earnings?
American Water is actively working to address regulatory lag by filing for rate increases and infrastructure surcharges in various states. For the six months ended June 30, 2013, several rate increases and infrastructure charges became effective, contributing to annualized revenue. The company also seeks mechanisms to recognize declining usage, which can impact revenue.
06—Continue