10-QPeriod: Q3 FY2017

American Water Works Company, Inc. Quarterly Report for Q3 Ended Sep 30, 2017

Filed November 1, 2017For Securities:AWK

Summary

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 billion 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.

Financial Highlights

48 data points
Beta

Net Income

$203.00M

EPS (Diluted)

$1.13

Total Assets

$19.36B

Cash & Equivalents

$93.00M

Free Cash Flow

$134.00M

Financial Statements
Beta
Operating Expenses$504.00M
Operating Income$432.00M
Net Income$203.00M
EPS (Basic)$1.14
EPS (Diluted)$1.13
Shares Outstanding (Basic)178.00M
Shares Outstanding (Diluted)179.00M

Key Highlights

  • 1For the nine months ended September 30, 2017, diluted EPS increased by 16.6% to $2.39 compared to the prior year.
  • 2Adjusted 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.
  • 3Total 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.
  • 4Operating revenues grew by 1.4% to $2,536 million for the nine months ended September 30, 2017, driven by authorized rate increases and acquisitions.
  • 5The 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.
  • 6The 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.
  • 7A 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.

Frequently Asked Questions

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.

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.

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.

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.