01—Abstract
Summary
Summary of the 10-Q filed May 3, 2017. Cited figures are marked; the original filing is the authoritative source.
American Water Works Company, Inc. (AWK) reported its first quarter 2017 financial results, showing a year-over-year increase in net income attributable to common stockholders of 13.4% to $93 milliona, or $0.52 per diluted share, up from $82 million, or $0.46 per diluted share, in the same period of 2016.
This growth was primarily driven by continued expansion in the Regulated Businesses segment, fueled by investments, acquisitions, and organic growth, along with a beneficial tax impact from the adoption of a new accounting standard for stock-based compensation. The company maintained its focus on safety, customers, people, growth, and technology.
Capital investments remain a priority, with approximately $1.5 billionb planned for 2017, largely directed towards infrastructure improvements within the Regulated Businesses. The company also reported an improvement in its adjusted Operation and Maintenance (O&M) efficiency ratio for its regulated operations, a key indicator of operational effectiveness.
02—Key points
Key Highlights
- Net income attributable to common stockholders increased by 13.4% to $93 million ($0.52 per diluted share) in Q1 2017, compared to $82 million ($0.46 per diluted share) in Q1 2016.
- Total operating revenues grew by 1.7% to $756 million, with the Regulated Businesses segment showing a 3.9% increase to $659 million.
- Capital expenditures for the first three months of 2017 were $270 million, with a full-year 2017 forecast of approximately $1.5 billion, primarily for infrastructure improvements in regulated operations.
- The company closed on $38 million in regulated acquisitions, adding approximately 13,000 customers by May 3, 2017, including the acquisition of Shorelands Water Company for $33 million.
- Adjusted O&M efficiency ratio for regulated businesses improved to 34.6% for the twelve months ended March 31, 2017, from 35.6% in the prior year period, indicating increased operational efficiency.
- The company declared a quarterly cash dividend of $0.415 per share, an increase from the previous quarter's $0.375 per share, demonstrating a commitment to returning value to shareholders.
- A significant charge related to the West Virginia chemical spill settlement ($126 million pre-tax, $65 million net of insurance) was recorded in Q3 2016, with the settlement amount reflected in liabilities as of March 31, 2017.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2017filed May 3, 2017Financial Statements
Q1 FY2017 against Q1 FY2016
| Line item | Q1 FY2017Q1 FY2016 | Change |
|---|---|---|
| Operating Expenses | $526.00M$529.00M | −0.6% |
| Operating Income | $230.00M$214.00M | +7.5% |
| Net Income | $93.00M$82.00M | +13.4% |
| EPS (Basic) | $0.52$0.46 | +13.0% |
| EPS (Diluted) | $0.52$0.46 | +13.0% |
| Shares Outstanding (Basic) | 178.00M178.00M | 0.0% |
| Shares Outstanding (Diluted) | 179.00M179.00M | 0.0% |
05—Questions
Frequently Asked Questions
What are the primary drivers of American Water Works' revenue growth in the first quarter of 2017?
Revenue growth was primarily driven by authorized rate increases in the Regulated Businesses segment, which funded infrastructure investment, acquisitions, and organic growth. There was also a contribution from newly acquired customers and price increases in the Homeowner Services Group. Partially offsetting this growth was a decrease in revenue from the Market-Based Businesses, specifically the Military Services Group, due to the completion of a large project and reduced budgets.
How is American Water Works managing its capital expenditures and investments?
American Water Works plans to invest approximately $1.5 billion in 2017, with the majority allocated to infrastructure improvements in its Regulated Businesses. This includes ongoing capital investments and strategic acquisitions. The company is also constructing a new corporate headquarters, with an estimated cost of up to $165 million.
What is the company's current financial health and liquidity position?
The company maintains a solid financial position. As of March 31, 2017, its debt-to-capitalization ratio was 0.58 to 1.00, well within its covenant of not more than 0.70 to 1.00. Liquidity is supported by cash flows from operations, a $1.75 billion revolving credit facility, and access to commercial paper markets. AWCC, the financing subsidiary, had $1.66 billion available under its revolving credit facility.
Are there any significant legal proceedings or contingencies that could impact the company's financial results?
The company is involved in several legal proceedings, most notably the West Virginia Elk River Freedom Industries Chemical Spill settlement. A binding global agreement in principle was reached for a pre-tax amount of $126 million, with $65 million being the net charge after insurance receivables as of March 31, 2017. Additionally, California-American Water Company (Cal Am) is involved in a residential rate design proceeding with the CPUC, which could result in a penalty, though the settlement proposed a $0.5 million waiver of cost recovery in lieu of a penalty. The company believes these contingencies will not have a material adverse effect, but outcomes are uncertain.
06—Continue