10-QPeriod: Q1 FY2016

American Water Works Company, Inc. Quarterly Report for Q1 Ended Mar 31, 2016

Filed May 4, 2016For Securities:AWK

Summary

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 million, 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 billion. Capital expenditures remained significant, with $284 million 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.

Financial Highlights

47 data points
Beta

Net Income

$82.00M

EPS (Diluted)

$0.46

Total Assets

$17.42B

Cash & Equivalents

$66.00M

Free Cash Flow

-$24.00M

Financial Statements
Beta
Operating Expenses$529.00M
Operating Income$214.00M
Net Income$82.00M
EPS (Basic)$0.46
EPS (Diluted)$0.46
Shares Outstanding (Basic)178.00M
Shares Outstanding (Diluted)179.00M

Key Highlights

  • 1Net income attributable to common stockholders increased to $82 million in Q1 2016 from $80 million in Q1 2015.
  • 2Diluted EPS rose to $0.46 in Q1 2016 from $0.44 in Q1 2015.
  • 3Operating revenues grew by 6.4% year-over-year to $743 million.
  • 4Regulated Businesses segment revenue increased by 3.1% to $634 million, driven by rate increases and acquisitions.
  • 5The 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.
  • 6AWK expanded its credit facilities, increasing its revolving credit capacity to $1.75 billion and its commercial paper program to $1.6 billion.
  • 7Capital expenditures for the quarter totaled $284 million, focused on infrastructure improvements and acquisitions.

Frequently Asked Questions

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.

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.

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.

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.