01—Abstract
Summary
Summary of the 10-Q filed November 1, 2017. Cited figures are marked; the original filing is the authoritative source.
American Water Works Company, Inc. (AWK) reported solid financial results for the nine months ended September 30, 2017, demonstrating continued growth and operational efficiency.
The company saw an increase in both diluted earnings per share and adjusted diluted earnings per share, driven primarily by infrastructure investments, acquisitions, and organic growth within its Regulated Businesses segment, supported by contributions from its Market-Based Businesses. Revenue growth was observed across both segments, reflecting successful rate increases and expansion through acquisitions. Key financial developments include significant capital expenditures for infrastructure improvements, totaling approximately $1.0 billiona for the first nine months of 2017, with a full-year expectation of around $1.65 billion.
The company also successfully managed its debt structure through a substantial debt offering and subsequent repayments. While facing some regulatory and litigation matters, most notably the Freedom Industries chemical spill settlement, AWK has made progress in resolving these issues. The company's financial position remains robust, with a strong liquidity position and a commitment to returning value to shareholders through dividends.
02—Key points
Key Highlights
- For the nine months ended September 30, 2017, diluted EPS increased by 16.6% to $2.39 compared to the prior year.
- Adjusted diluted EPS (a non-GAAP measure) increased by 3.1% to $2.34 for the nine months ended September 30, 2017, reflecting underlying operational performance.
- Total capital investments for the first nine months of 2017 were approximately $1.0 billion, with a full-year expectation of $1.65 billion, primarily focused on regulated infrastructure improvements and acquisitions.
- Operating revenues grew by 1.4% to $2,536 million for the nine months ended September 30, 2017, driven by authorized rate increases and acquisitions.
- The company successfully issued $1.35 billion in long-term debt and managed repayments, resulting in a consolidated debt to capitalization ratio of 0.58 to 1.00 at September 30, 2017.
- The company achieved an improved adjusted O&M efficiency ratio of 34.2% for the twelve months ended September 30, 2017, down from 34.9% in the prior year period, indicating ongoing operational efficiency.
- A preliminary settlement in the Freedom Industries chemical spill litigation was preliminarily approved in September 2017, with the company's contribution reduced due to insurance settlements.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2017filed November 1, 2017Financial Statements
Q3 FY2017 against Q3 FY2016
| Line item | Q3 FY2017Q3 FY2016 | Change |
|---|---|---|
| Operating Expenses | $504.00M$611.00M | −17.5% |
| Operating Income | $432.00M$319.00M | +35.4% |
| Net Income | $203.00M$148.00M | +37.2% |
| EPS (Basic) | $1.14$0.83 | +37.3% |
| EPS (Diluted) | $1.13$0.83 | +36.1% |
| Shares Outstanding (Basic) | 178.00M178.00M | 0.0% |
| Shares Outstanding (Diluted) | 179.00M178.00M | +0.6% |
05—Questions
Frequently Asked Questions
How did American Water's revenue and earnings perform in the first nine months of 2017?
For the nine months ended September 30, 2017, American Water reported operating revenues of $2,536 million, a 1.4% increase over the same period in 2016. Diluted earnings per share (EPS) rose by 16.6% to $2.39. The company also reported an adjusted diluted EPS (a non-GAAP measure) of $2.34, an increase of 3.1% year-over-year, demonstrating improved operational performance.
What were the key drivers of growth for American Water during this period?
Growth was primarily driven by significant capital investments in infrastructure improvements within its Regulated Businesses segment, totaling approximately $1.0 billion in the first nine months of 2017. Acquisitions, which added about 16,000 customers, and organic growth also contributed to revenue increases. The Market-Based Businesses segment, particularly the Homeowner Services Group, also added to overall growth.
How is the company managing its debt and liquidity?
American Water maintains a strong liquidity position. During the nine months ended September 30, 2017, the company issued $1.35 billion in long-term debt and managed repayments, resulting in a consolidated debt to capitalization ratio of 0.58 to 1.00. The company has a $1.75 billion revolving credit facility, with $1.66 billion available as of September 30, 2017, providing ample resources for short-term liquidity needs.
Are there any significant legal or regulatory matters impacting the company?
Yes, the company is involved in several legal and regulatory matters. A significant development was the preliminary approval of a global settlement for the Freedom Industries chemical spill in West Virginia, with the company's contribution to the settlement reduced due to insurance recoveries. Other matters include ongoing regulatory proceedings for rate increases and infrastructure surcharges in various states, and a class action lawsuit related to a water main break in Dunbar, West Virginia.
06—Continue