01—Abstract
Summary
Summary of the 10-Q filed November 2, 2016. Cited figures are marked; the original filing is the authoritative source.
American Water Works Company, Inc. (AWK) reported third-quarter 2016 results with net income attributable to common stockholders of $148 milliona, or $0.83 per diluted share, a decrease from $174 million, or $0.97 per diluted share, in the prior year period.
For the first nine months of 2016, net income was $367 millionb, or $2.05 per diluted share, down from $377 million, or $2.10 per diluted share, in the comparable 2015 period. This decline was largely due to a significant after-tax charge of $39 million ($0.22 per diluted share) related to the binding global agreement in principle to settle claims arising from the 2014 Freedom Industries chemical spill in West Virginia. Excluding this charge, the company demonstrated continued growth in its Regulated Businesses segment, driven by infrastructure investments and acquisitions, while its Market-Based Businesses experienced lower net income due to reduced capital upgrade revenue in the Military Services Group.
The company continued to invest in its infrastructure, with capital expenditures of $905 millionc in the first nine months of 2016, primarily focused on its Regulated Businesses. AWK also pursued strategic acquisitions, adding approximately 7,600 water and wastewater customers. Management remains focused on its five central themes: Safety, Customers, People, Growth, and Technology and Operational Efficiency, aiming to deliver long-term value to stockholders through responsible operations and strategic capital investments.
02—Key points
Key Highlights
- Net income attributable to common stockholders for Q3 2016 was $148 million, a decrease from $174 million in Q3 2015, impacted by a significant charge related to the Freedom Industries chemical spill settlement.
- Year-to-date net income for the nine months ended September 30, 2016, was $367 million, down from $377 million in the prior year, also impacted by the chemical spill settlement charge.
- Excluding the $39 million after-tax charge for the chemical spill settlement, the company saw growth in its Regulated Businesses segment due to infrastructure investments and acquisitions.
- Capital expenditures totaled $905 million in the first nine months of 2016, with the majority directed towards infrastructure improvements in the Regulated Businesses segment.
- The company successfully completed ten acquisitions in the first nine months of 2016, adding approximately 7,600 water and wastewater customers.
- The adjusted O&M efficiency ratio for the Regulated Businesses improved to 34.9% for the twelve months ended September 30, 2016, from 35.8% in the prior year period.
- AWK's credit facility capacity was increased to $1.75 billion in March 2016, and the commercial paper program was increased to $1.6 billion, providing ample liquidity.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2016filed November 2, 2016Financial Statements
Q3 FY2016 against Q3 FY2015
| Line item | Q3 FY2016Q3 FY2015 | Change |
|---|---|---|
| Operating Expenses | $611.00M$535.00M | +14.2% |
| Operating Income | $319.00M$361.00M | −11.6% |
| Net Income | $148.00M$174.00M | −14.9% |
| EPS (Basic) | $0.83$0.97 | −14.4% |
| EPS (Diluted) | $0.83$0.96 | −13.5% |
| Shares Outstanding (Basic) | 178.00M179.00M | −0.6% |
| Shares Outstanding (Diluted) | 178.00M180.00M | −1.1% |
05—Questions
Frequently Asked Questions
What was the primary reason for the decline in net income for the third quarter and year-to-date?
The primary reason for the decline in net income for both the third quarter and the nine months ended September 30, 2016, was a significant after-tax charge of $39 million ($0.22 per diluted share) related to the binding global agreement in principle to settle claims arising from the 2014 Freedom Industries chemical spill in West Virginia.
How is the company investing in its future growth?
American Water Works is investing in its future growth through significant capital expenditures focused on infrastructure improvements in its Regulated Businesses, totaling $905 million in the first nine months of 2016. Additionally, the company is actively pursuing strategic acquisitions to expand its customer base and service offerings.
What is the status of the Freedom Industries chemical spill litigation?
As of October 31, 2016, the company reached a binding global agreement in principle to settle claims related to the Freedom Industries chemical spill. The settlement includes a pre-tax amount of $126 million, of which $65 million was recorded as a charge in the third quarter of 2016. The company has also been dismissed as a defendant in federal court litigation concerning the spill due to lack of personal jurisdiction.
How is the company managing its operational efficiency?
The company is focused on improving its operational efficiency, as demonstrated by the improvement in its adjusted O&M efficiency ratio for the Regulated Businesses. For the twelve months ended September 30, 2016, this ratio was 34.9%, an improvement from 35.8% in the prior year period. This improvement is attributed to revenue increases and the timing of O&M expenses.
06—Continue