10-QPeriod: Q2 FY2016

American Water Works Company, Inc. Quarterly Report for Q2 Ended Jun 30, 2016

Filed August 3, 2016For Securities:AWK

Summary

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 billion, 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% 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.

Financial Highlights

48 data points
Beta

Net Income

$137.00M

EPS (Diluted)

$0.77

Total Assets

$17.71B

Cash & Equivalents

$52.00M

Free Cash Flow

-$37.00M

Financial Statements
Beta
Operating Expenses$528.00M
Operating Income$299.00M
Net Income$137.00M
EPS (Basic)$0.77
EPS (Diluted)$0.77
Shares Outstanding (Basic)178.00M
Shares Outstanding (Diluted)178.00M

Key Highlights

  • 1Total 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.
  • 2Net income attributable to common stockholders rose by 7.9% to $219 million for the first six months of 2016.
  • 3Capital expenditures for infrastructure improvements and acquisitions totaled $552 million in the first half of 2016.
  • 4The adjusted O&M efficiency ratio for the Regulated Businesses improved to 35.2% for the twelve months ended June 30, 2016.
  • 5Market-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.
  • 6The company successfully increased its revolving credit facility capacity to $1.75 billion and commercial paper program to $1.6 billion to support liquidity.
  • 7AWK is actively pursuing regulatory approvals for additional annualized revenues through rate cases and infrastructure surcharges across various states.

Frequently Asked Questions

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.

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.

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.

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.