10-QPeriod: Q1 FY2014

American Water Works Company, Inc. Quarterly Report for Q1 Ended Mar 31, 2014

Filed May 7, 2014For Securities:AWK

Summary

American Water Works Company, Inc. (AWK) reported a net income of $68.1 million for the first quarter of 2014, a significant increase from $57.6 million in the same period of 2013. This growth was primarily driven by increased operating revenues in its Regulated Businesses segment, which benefited from rate increases and higher consumption, as well as a notable contribution from its Market-Based Operations segment due to growth in military contracts and homeowner services. The company's operational efficiency also saw improvement, with the O&M efficiency ratio for its Regulated Businesses declining to 41.5% from 42.9% year-over-year. AWK continued its strategic capital investments, allocating approximately $175.2 million in the quarter towards infrastructure upgrades and acquisitions, with a full-year capital plan of around $1.1 billion. Despite facing challenges such as the West Virginia chemical spill impacting operations and a legal dispute in California, the company's financial position remains robust, supported by strong operating cash flows and substantial availability under its revolving credit facility.

Financial Highlights

48 data points
Beta

Revenue

$679.00M

Net Income

$68.00M

10.0% Net Margin

EPS (Diluted)

$0.38

Total Assets

$15.27B

Cash & Equivalents

$30.75M

Free Cash Flow

$52.41M

Financial Statements
Beta
Revenue$679.00M
Operating Expenses$491.56M
Operating Income$187.00M
Interest Expense$73.56M
Net Income$68.00M
EPS (Basic)$0.38
EPS (Diluted)$0.38
Shares Outstanding (Basic)178.54M
Shares Outstanding (Diluted)179.46M

Key Highlights

  • 1Net income increased by 18.3% to $68.1 million in Q1 2014 compared to $57.6 million in Q1 2013.
  • 2Operating revenues rose by 7.2% to $681.9 million, driven by rate increases and higher consumption in Regulated Businesses and increased contract activity in Market-Based Operations.
  • 3The O&M efficiency ratio for Regulated Businesses improved to 41.5% from 42.9% year-over-year, indicating enhanced operational efficiency.
  • 4Capital expenditures for the quarter totaled $192.5 million, with $175.2 million funded by the company, supporting ongoing infrastructure investments and acquisitions.
  • 5Cash flow from operating activities significantly increased to $244.9 million from $149.6 million, reflecting improved profitability and working capital management.
  • 6The company declared a quarterly cash dividend of $0.31 per share, payable in June 2014, demonstrating a commitment to returning value to shareholders.

Frequently Asked Questions

The increase in net income was primarily driven by higher operating revenues in the Regulated Businesses segment, attributed to rate increases, surcharges, and increased usage. Additionally, the Market-Based Operations segment contributed through incremental revenues from military contracts and growth in homeowner services. Improved operational efficiency also played a role.

American Water Works invested approximately $175.2 million in capital improvements during the first quarter of 2014, with a total capital plan of $1.1 billion for the year. This investment is focused on upgrading infrastructure and systems, as well as strategic acquisitions. The company also completed two acquisitions of regulated water and wastewater systems during the quarter.

The filing mentions ongoing legal proceedings, including the West Virginia Elk River chemical spill which resulted in a $5.9 million reduction in income before taxes for the quarter and faces potential adverse outcomes in lawsuits. There is also a legal dispute in California related to water supply agreements. The company's operations are also subject to regulatory lag and potential environmental matters.

The company relies on its revolving credit facility, capital markets, and cash flows from operations to meet its liquidity needs. As of March 31, 2014, AWCC had $1.2 billion available under its credit facility and $638.2 million in outstanding commercial paper. The company was in compliance with its debt covenants.