10-QPeriod: Q1 FY2019

American Water Works Company, Inc. Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 1, 2019For Securities:AWK

Summary

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 million, 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%), 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 million 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.

Financial Highlights

48 data points
Beta

Revenue

$804.00M

Net Income

$113.00M

14.1% Net Margin

EPS (Diluted)

$0.62

Total Assets

$21.46B

Cash & Equivalents

$63.00M

Free Cash Flow

-$158.00M

Financial Statements
Beta
Revenue$804.00M
Operating Expenses$575.00M
Operating Income$238.00M
Net Income$113.00M
EPS (Basic)$0.62
EPS (Diluted)$0.62
Shares Outstanding (Basic)181.00M
Shares Outstanding (Diluted)181.00M

Key Highlights

  • 1Net income attributable to common shareholders rose 6.6% to $113 million ($0.62/diluted share) for Q1 2019.
  • 2Operating revenues increased 6.8% to $813 million, driven by growth in both Regulated and Market-Based Businesses.
  • 3The company continues its growth strategy, investing approximately $337 million in capital expenditures and making three regulated water and wastewater system acquisitions in Q1 2019.
  • 4Market-Based Businesses saw a substantial 34.0% increase in operating revenues, largely due to the acquisition of Pivotal Home Solutions and new military contracts.
  • 5The adjusted O&M efficiency ratio for Regulated Businesses remained stable at 35.5%, indicating continued operational effectiveness.
  • 6AWK declared a quarterly cash dividend of $0.50 per share, highlighting its commitment to returning value to shareholders.
  • 7The company successfully extended its revolving credit facility, ensuring continued access to liquidity for its operational and capital needs.

Frequently Asked Questions

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.

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.

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.

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.