01—Abstract
Summary
Summary of the 10-Q filed May 4, 2016. Cited figures are marked; the original filing is the authoritative source.
American Water Works Company, Inc. (AWK) reported a modest increase in net income attributable to common stockholders for the first quarter of 2016, reaching $82 milliona, or $0.46 per diluted share, compared to $80 million, or $0.44 per diluted share, in the prior year period.
This growth was primarily driven by investments in infrastructure and strategic acquisitions within its Regulated Businesses segment, which saw operating revenue increase by 3.1%. The company also continued its focus on operational efficiency, with an improved adjusted O&M efficiency ratio of 35.6% for the twelve months ended March 31, 2016. AWK demonstrated solid liquidity, increasing its revolving credit facility capacity to $1.75 billion and its commercial paper program to $1.6 billionb.
Capital expenditures remained significant, with $284 millionc invested in infrastructure improvements and acquisitions. While the company faces ongoing litigation related to the West Virginia chemical spill and a surcharge dispute in Missouri, management believes these matters will not have a material adverse effect on the company's financial condition. The company also announced a significant acquisition of wastewater assets in Scranton, Pennsylvania, expected to close in the second half of 2016.
02—Key points
Key Highlights
- Net income attributable to common stockholders increased to $82 million in Q1 2016 from $80 million in Q1 2015.
- Diluted EPS rose to $0.46 in Q1 2016 from $0.44 in Q1 2015.
- Operating revenues grew by 6.4% year-over-year to $743 million.
- Regulated Businesses segment revenue increased by 3.1% to $634 million, driven by rate increases and acquisitions.
- The company's adjusted O&M efficiency ratio for regulated businesses improved to 35.6% for the twelve months ended March 31, 2016, from 36.3% in the prior year.
- AWK expanded its credit facilities, increasing its revolving credit capacity to $1.75 billion and its commercial paper program to $1.6 billion.
- Capital expenditures for the quarter totaled $284 million, focused on infrastructure improvements and acquisitions.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2016filed May 4, 2016Financial Statements
Q1 FY2016 against Q1 FY2015
| Line item | Q1 FY2016Q1 FY2015 | Change |
|---|---|---|
| Operating Expenses | $529.00M$494.00M | +7.1% |
| Operating Income | $214.00M$204.00M | +4.9% |
| Net Income | $82.00M$80.00M | +2.5% |
| EPS (Basic) | $0.46$0.45 | +2.2% |
| EPS (Diluted) | $0.46$0.44 | +4.5% |
| Shares Outstanding (Basic) | 178.00M179.00M | −0.6% |
| Shares Outstanding (Diluted) | 179.00M180.00M | −0.6% |
05—Questions
Frequently Asked Questions
What drove the increase in net income for the first quarter of 2016?
The increase in net income was primarily driven by continued growth in the Regulated Businesses segment, largely attributable to additional authorized revenue from investment growth and acquisitions, alongside strategic capital investments and an improved operational efficiency ratio.
How is American Water managing its liquidity and capital resources?
American Water is managing its liquidity through cash flows from operations, public and private debt offerings, and its commercial paper program. The company recently increased its revolving credit facility capacity to $1.75 billion and its commercial paper program to $1.6 billion, indicating a strong focus on maintaining robust liquidity.
What are the significant ongoing legal matters impacting the company?
The company is involved in litigation related to the West Virginia Elk River chemical spill and a dispute concerning an infrastructure system replacement surcharge in Missouri. While these matters are ongoing, American Water believes the causes of action are without merit and estimates potential losses for the Missouri case to be between $0 and $26 million. Management believes that individually or in aggregate, these contingencies will not have a material adverse effect on the company.
What is the company's outlook for capital investments and growth?
For the full year 2016, American Water expects total capital investment, including acquisitions, to be in the range of $1.3 billion to $1.4 billion. A significant portion of this will be allocated to improving infrastructure in its Regulated Businesses, and the company is pursuing several acquisitions, including a substantial wastewater system in Scranton, Pennsylvania.
06—Continue