01—Abstract
Summary
Summary of the 10-Q filed May 1, 2019. 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 of 2019, with net income attributable to common shareholders increasing by 6.6% to $113 milliona, or $0.62 per diluted share, compared to $106 million, or $0.59 per diluted share, in the prior year.
This growth was primarily driven by increased revenues in its Regulated Businesses, stemming from infrastructure investments, acquisitions, and organic growth, alongside expansion in its Market-Based Businesses, particularly through its Homeowner Services Group. The company also saw a significant increase in its Market-Based Businesses' operating revenues (34.0%b), largely due to the acquisition of Pivotal Home Solutions and new military contracts. Despite higher interest expenses to support growth, AWK demonstrated continued operational efficiency, with its adjusted O&M efficiency ratio remaining stable.
The company also made strategic capital investments of approximately $337 millionc during the quarter, with plans for $1.7 billion to $1.8 billion in capital investments and acquisitions for the full year. AWK also successfully acquired three regulated water and wastewater systems, adding 4,700 customers and continuing its growth trajectory through strategic acquisitions and organic development.
02—Key points
Key Highlights
- Net income attributable to common shareholders rose 6.6% to $113 million ($0.62/diluted share) for Q1 2019.
- Operating revenues increased 6.8% to $813 million, driven by growth in both Regulated and Market-Based Businesses.
- The company continues its growth strategy, investing approximately $337 million in capital expenditures and making three regulated water and wastewater system acquisitions in Q1 2019.
- Market-Based Businesses saw a substantial 34.0% increase in operating revenues, largely due to the acquisition of Pivotal Home Solutions and new military contracts.
- The adjusted O&M efficiency ratio for Regulated Businesses remained stable at 35.5%, indicating continued operational effectiveness.
- AWK declared a quarterly cash dividend of $0.50 per share, highlighting its commitment to returning value to shareholders.
- The company successfully extended its revolving credit facility, ensuring continued access to liquidity for its operational and capital needs.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2019filed May 1, 2019Financial Statements
Q1 FY2019 against Q1 FY2018
| Line item | Q1 FY2019Q1 FY2018 | Change |
|---|---|---|
| Revenue | $804.00M$756.00M | +6.3% |
| Operating Expenses | $575.00M$544.00M | +5.7% |
| Operating Income | $238.00M$217.00M | +9.7% |
| Net Income | $113.00M$106.00M | +6.6% |
| EPS (Basic) | $0.62$0.60 | +3.3% |
| EPS (Diluted) | $0.62$0.59 | +5.1% |
| Shares Outstanding (Basic) | 181.00M178.00M | +1.7% |
| Shares Outstanding (Diluted) | 181.00M179.00M | +1.1% |
05—Questions
Frequently Asked Questions
What drove the increase in net income for American Water Works in the first quarter of 2019?
The increase in net income was primarily driven by growth in the company's Regulated Businesses from infrastructure investment, acquisitions, and organic growth. Additionally, the Market-Based Businesses, particularly the Homeowner Services Group and Military Services Group, contributed to the revenue increase, partly due to the acquisition of Pivotal Home Solutions and new military contracts. These positive factors were partially offset by higher interest expenses.
How is American Water Works continuing to invest in its business?
American Water Works invested approximately $337 million in capital expenditures during the first quarter of 2019, with the majority allocated to its Regulated Businesses for infrastructure improvements. The company plans to invest between $1.7 billion and $1.8 billion in capital expenditures and acquisitions for the full year 2019.
What impact did the adoption of the new lease accounting standard have?
On January 1, 2019, American Water Works adopted the new lease accounting standard (ASC Topic 842). This adoption resulted in the recognition of operating lease right-of-use (ROU) assets and operating lease liabilities on the balance sheet, totaling approximately $117 million and $115 million, respectively. The company utilized a modified retrospective approach and did not restate prior periods. The adoption did not materially impact the consolidated results of operations or cash flows.
Are there any significant legal or contingent liabilities impacting the company?
American Water Works is involved in ongoing legal actions, including a class action lawsuit in West Virginia related to a water main break and previously, a settlement related to the Freedom Industries chemical spill. While the company has accrued for probable loss contingencies and estimates potential losses for reasonably possible ones, it believes that outcomes in other matters will not have a material adverse effect. The company is also involved in litigation regarding water supply projects in California.
06—Continue