10-QPeriod: Q3 FY2020

American Water Works Company, Inc. Quarterly Report for Q3 Ended Sep 30, 2020

Filed November 4, 2020For Securities:AWK

Summary

American Water Works Company, Inc. (AWK) reported solid financial performance for the nine months ended September 30, 2020, with net income attributable to common shareholders increasing to $564 million, or $3.11 per diluted share, compared to $523 million, or $2.90 per diluted share, in the prior year period. This growth was primarily driven by continued investment in infrastructure and regulated acquisitions within its Regulated Businesses segment, alongside organic growth. The company maintained a strong liquidity position, with $560 million in cash and cash equivalents and $1.63 billion available on its revolving credit facility as of September 30, 2020. AWK also successfully executed a $1.0 billion debt offering in April 2020, enhancing its financial flexibility. While the COVID-19 pandemic has introduced some financial impacts, such as increased uncollectible accounts and waived fees, the company is actively managing these through regulatory mechanisms in most jurisdictions, with $29 million in regulatory assets recorded. Looking ahead, AWK remains committed to growth through capital investments and strategic acquisitions in its Regulated Businesses, while also expanding its Market-Based Businesses. The company anticipates investing approximately $1.9 billion in 2020. A significant event is the pending sale of its New York subsidiary, expected to close in early 2021, for approximately $608 million, which will further strengthen its financial position.

Financial Highlights

48 data points
Beta

Revenue

$1.07B

Net Income

$264.00M

24.6% Net Margin

EPS (Diluted)

$1.46

Total Assets

$24.39B

Cash & Equivalents

$560.00M

Free Cash Flow

$13.00M

Financial Statements
Beta
Revenue$1.07B
Operating Expenses$646.00M
Operating Income$433.00M
Net Income$264.00M
EPS (Basic)$1.46
EPS (Diluted)$1.46
Shares Outstanding (Basic)181.00M
Shares Outstanding (Diluted)182.00M

Key Highlights

  • 1Net income attributable to common shareholders increased to $564 million ($3.11/share) for the nine months ended September 30, 2020, up from $523 million ($2.90/share) in the prior year.
  • 2Total assets grew to $24.39 billion as of September 30, 2020, from $22.68 billion at the end of 2019, reflecting ongoing capital investments and acquisitions.
  • 3Operating revenues for the nine months ended September 30, 2020, were $2.85 billion, an increase from $2.71 billion in the same period of 2019, driven by rate increases and acquisitions.
  • 4The company has $560 million in cash and cash equivalents and $1.63 billion available on its revolving credit facility as of September 30, 2020, indicating a strong liquidity position.
  • 5American Water continues to invest in infrastructure, with $1.31 billion in capital expenditures in the Regulated Businesses during the first nine months of 2020.
  • 6The pending sale of its New York subsidiary for approximately $608 million is expected to close in early 2021, subject to regulatory approvals.
  • 7The company recorded $29 million in regulatory assets related to COVID-19 financial impacts, with 11 out of 14 jurisdictions authorizing deferred accounting for these impacts.

Frequently Asked Questions

The COVID-19 pandemic resulted in financial impacts including an increase in uncollectible accounts expense, additional debt costs, and incremental operation and maintenance expenses. The company also experienced decreased revenues due to the waiver of late fees and foregone reconnect fees. However, 11 of 14 jurisdictions have authorized deferred accounting for these impacts, and $29 million in regulatory assets have been recorded. Despite these challenges, the company saw increased residential customer demand due to stay-at-home activities, which partially offset negative impacts.

American Water entered into a Stock Purchase Agreement to sell its New York subsidiary to Liberty Utilities Co. for approximately $608 million, with an expected closing in early 2021. The assets and liabilities of the New York subsidiary were classified as held for sale as of September 30, 2020. The transaction is subject to various conditions, including regulatory approvals.

American Water funds its capital expenditures and growth through a combination of cash flows from operations, public and private debt offerings, and borrowings under its credit facilities. The company invested approximately $1.38 billion in the first nine months of 2020, primarily in its Regulated Businesses, and plans to invest around $1.9 billion in 2020. The company also recently completed a $1.0 billion debt offering, enhancing its financial flexibility.

American Water operates primarily through its Regulated Businesses segment, which provides water and wastewater services subject to state commission regulation. It also has Market-Based Businesses that offer complementary services. For the nine months ended September 30, 2020, Regulated Businesses' operating revenues increased to $2.47 billion, driven by rate increases and acquisitions. Market-Based Businesses' operating revenues were $399 million, with performance influenced by military contracts (MSG) and the sale of certain operations.