01—Abstract
Summary
Summary of the 10-Q filed May 2, 2018. Cited figures are marked; the original filing is the authoritative source.
American Water Works Company, Inc. (AWK) reported solid financial results for the first quarter ended March 31, 2018.
Net income attributable to common stockholders increased by 14.0% to $106 milliona, or $0.59 per diluted share, compared to the same period in the prior year. This growth was driven by infrastructure investments, acquisitions, and organic growth within its Regulated Businesses, complemented by contributions from its Market-Based Businesses. The company continues to execute on its strategic growth initiatives, investing significantly in infrastructure improvements and completing small acquisitions.
Looking ahead, AWK has announced significant pending acquisitions, including Pivotal Home Solutions and the City of Alton, Illinois' wastewater system, which are expected to further enhance its market position. The company also remains focused on operational efficiency and technological advancements to drive long-term shareholder value.
02—Key points
Key Highlights
- Net income attributable to common stockholders rose 14.0% to $106 million ($0.59 per diluted share) for the first quarter of 2018, up from $93 million ($0.52 per diluted share) in the prior year.
- Operating revenues increased slightly by 0.7% to $761 million, driven by growth in Regulated Businesses, partially offset by a reserve for TCJA tax savings and a decrease in Market-Based Businesses.
- Capital expenditures for the first three months of 2018 were $343 million, with $1.9 billion to $2.1 billion planned for the full year, including significant pending acquisitions.
- The company enhanced its liquidity by upsizing its revolving credit facility to $2.25 billion and increasing its commercial paper program authorization to $2.10 billion.
- The adoption of the Tax Cuts and Jobs Act (TCJA) significantly reduced the effective income tax rate to 24.3% from 35.9%, though a $32 million reserve was recorded for customer benefits from these savings.
- The company is advancing its strategic growth through announced acquisitions of Pivotal Home Solutions for approximately $365 million and the City of Alton, Illinois' wastewater system for approximately $54 million.
- The West Virginia Elk River chemical spill settlement process is progressing, with preliminary approval received, and the company's share of the settlement is approximately $126 million, with insurance recoveries being pursued.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2018filed May 2, 2018Financial Statements
Q1 FY2018 against Q1 FY2017
| Line item | Q1 FY2018Q1 FY2017 | Change |
|---|---|---|
| Revenue | $756.00M— | — |
| Operating Expenses | $544.00M$526.00M | +3.4% |
| Operating Income | $217.00M$230.00M | −5.7% |
| Net Income | $106.00M$93.00M | +14.0% |
| EPS (Basic) | $0.60$0.52 | +15.4% |
| EPS (Diluted) | $0.59$0.52 | +13.5% |
| Shares Outstanding (Basic) | 178.00M178.00M | 0.0% |
| Shares Outstanding (Diluted) | 179.00M179.00M | 0.0% |
05—Questions
Frequently Asked Questions
What was the primary driver of the increase in net income?
The primary driver of the increase in net income was continued growth in the Regulated Businesses, fueled by infrastructure investments, acquisitions, and organic growth. Growth in Market-Based Businesses, particularly the Homeowner Services Group, also contributed positively.
How did the Tax Cuts and Jobs Act (TCJA) impact the company's financial results?
The TCJA significantly reduced the federal corporate income tax rate from 35% to 21%, leading to a lower effective income tax rate (24.3% in Q1 2018 vs. 35.9% in Q1 2017). However, the company recorded a $32 million reserve for estimated tax savings to benefit its regulated customers, which offset some of the revenue impact in the Regulated Businesses.
What are the company's key growth strategies and upcoming developments?
American Water's growth strategies include continued investment in infrastructure improvements in its Regulated Businesses and pursuing strategic acquisitions. Key upcoming developments include the anticipated acquisitions of Pivotal Home Solutions and the City of Alton, Illinois' wastewater system. The company also continues to focus on operational efficiency and technological advancements.
How is the company managing its liquidity and debt?
The company enhanced its liquidity by increasing its revolving credit facility to $2.25 billion and its commercial paper program to $2.10 billion. Its debt-to-capitalization ratio remained strong at 0.59 to 1.00 as of March 31, 2018, well within its debt covenants.
06—Continue