01—Abstract
Summary
Summary of the 10-Q filed August 3, 2016. Cited figures are marked; the original filing is the authoritative source.
American Water Works Company, Inc. (AWK) reported solid financial results for the first six months of 2016, demonstrating consistent growth in its core Regulated Businesses segment.
Operating revenues increased by 6.1% year-over-year to $1.57 billiona, driven by authorized rate increases reflecting infrastructure investments and acquisitions, alongside incremental revenues from surcharges and balancing accounts. Net income attributable to common stockholders rose by 7.9% to $219 million. The company continued to execute its growth strategy through capital investments and strategic acquisitions, deploying approximately $552 million in the first half of 2016, primarily in regulated infrastructure.
Operationally, AWK maintained a focus on efficiency, improving its adjusted O&M efficiency ratio for its Regulated Businesses to 35.2%b for the twelve months ended June 30, 2016. The company also reported significant progress in its Market-Based Businesses, with revenue growth fueled by acquisitions like Keystone Clearwater Solutions, LLC. Looking ahead, AWK reaffirmed its full-year capital investment guidance and continues to pursue further acquisitions, demonstrating a commitment to long-term shareholder value creation.
02—Key points
Key Highlights
- Total operating revenues increased by 6.1% to $1.57 billion for the six months ended June 30, 2016, compared to the same period in 2015.
- Net income attributable to common stockholders rose by 7.9% to $219 million for the first six months of 2016.
- Capital expenditures for infrastructure improvements and acquisitions totaled $552 million in the first half of 2016.
- The adjusted O&M efficiency ratio for the Regulated Businesses improved to 35.2% for the twelve months ended June 30, 2016.
- Market-Based Businesses saw a significant revenue increase of 22.5% to $229 million for the six months ended June 30, 2016, driven by acquisitions and growth.
- The company successfully increased its revolving credit facility capacity to $1.75 billion and commercial paper program to $1.6 billion to support liquidity.
- AWK is actively pursuing regulatory approvals for additional annualized revenues through rate cases and infrastructure surcharges across various states.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2016filed August 3, 2016Financial Statements
Q2 FY2016 against Q2 FY2015
| Line item | Q2 FY2016Q2 FY2015 | Change |
|---|---|---|
| Operating Expenses | $528.00M$504.00M | +4.8% |
| Operating Income | $299.00M$278.00M | +7.6% |
| Net Income | $137.00M$123.00M | +11.4% |
| EPS (Basic) | $0.77$0.69 | +11.6% |
| EPS (Diluted) | $0.77$0.68 | +13.2% |
| Shares Outstanding (Basic) | 178.00M180.00M | −1.1% |
| Shares Outstanding (Diluted) | 178.00M180.00M | −1.1% |
05—Questions
Frequently Asked Questions
What is the primary driver of American Water's revenue growth in the first half of 2016?
The primary driver of American Water's revenue growth in the first half of 2016 was driven by authorized rate increases in its Regulated Businesses segment, which reflect investments in infrastructure and acquisitions. Additionally, incremental revenues from infrastructure surcharges and balancing accounts contributed to this growth.
How is American Water funding its capital investments and acquisitions?
American Water funds its capital investments and acquisitions through a combination of cash flows from operations, debt offerings (including commercial paper), and its revolving credit facility. For the first six months of 2016, they invested $552 million, with the majority allocated to regulated infrastructure improvements and acquisitions.
What is the significance of the improved O&M efficiency ratio?
The improvement in the adjusted O&M efficiency ratio for the Regulated Businesses to 35.2% indicates that American Water is becoming more efficient in managing its operating and maintenance costs relative to its revenues. This suggests better operational performance and cost control, which is favorable for profitability.
Are there any significant legal or regulatory matters that could impact the company?
Yes, American Water is involved in several legal and regulatory matters. A significant ongoing issue is the West Virginia Elk River chemical spill litigation, where the company is a defendant. While American Water believes it has strong defenses, adverse outcomes could materially impact its financial condition. Additionally, the company is navigating regulatory approvals for rate increases and potential acquisitions, such as the Scranton wastewater system acquisition, which is subject to regulatory approval.
06—Continue