01—Abstract
Summary
Summary of the 10-Q filed July 27, 2022. Cited figures are marked; the original filing is the authoritative source.
American Water Works Company, Inc. (AWK) reported its second-quarter 2022 financial results, demonstrating resilience and continued investment in infrastructure.
While total operating revenues saw a slight decrease compared to the prior year's quarter, primarily due to divestitures, the regulated business segment showed growth. Diluted earnings per share saw a modest increase, driven by rate increases and acquisitions, partially offset by inflationary pressures. The company continues its strategic focus on capital investment in its regulated utilities and pursuing strategic acquisitions to expand its customer base.
Management highlighted significant capital expenditures in the first half of the year, primarily for infrastructure improvements and replacements. The company also reiterated its commitment to returning value to shareholders through consistent dividend payments. AWK maintains a strong liquidity position, supported by its revolving credit facility and cash flows from operations, positioning it to navigate potential market disruptions.
02—Key points
Key Highlights
- Diluted EPS increased to $1.20 for the three months ended June 30, 2022, up from $1.14 in the prior year period, and $2.07 for the six months ended June 30, 2022, up from $1.87 in the prior year period.
- The company invested $1.25 billion in the first six months of 2022, with $1.0 billion allocated to capital investments in regulated businesses and $240 million for regulated acquisitions, adding approximately 51,000 customers organically and through acquisitions.
- Operating revenues for the Regulated Businesses segment increased to $865 million for the three months ended June 30, 2022, and $1,643 million for the six months ended June 30, 2022.
- Interest income from the seller promissory note related to the Homeowner Services Group (HOS) sale provided a boost, contributing $0.06 and $0.12 per share for the three and six-month periods, respectively.
- The company ended the quarter with $1.826 billion in total available liquidity, comprising $71 million in cash and cash equivalents and $1.755 billion in availability on its revolving credit facility.
- Several states implemented new general rate cases and infrastructure surcharges, contributing to annualized incremental revenues and supporting infrastructure investments.
- The company has pending acquisition agreements expected to add approximately 29,200 additional customers to its regulated businesses.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2022filed July 27, 2022Financial Statements
Q2 FY2022 against Q2 FY2021
| Line item | Q2 FY2022Q2 FY2021 | Change |
|---|---|---|
| Revenue | $930.00M$990.00M | −6.1% |
| Operating Expenses | $610.00M$669.00M | −8.8% |
| Operating Income | $327.00M$330.00M | −0.9% |
| Net Income | $218.00M$207.00M | +5.3% |
| EPS (Basic) | $1.20$1.14 | +5.3% |
| EPS (Diluted) | $1.20$1.14 | +5.3% |
| Shares Outstanding (Basic) | 182.00M182.00M | 0.0% |
| Shares Outstanding (Diluted) | 182.00M182.00M | 0.0% |
05—Questions
Frequently Asked Questions
How did the sale of the Homeowner Services Group (HOS) impact the company's financial results?
The sale of HOS in late 2021 had a significant impact. For the three and six months ended June 30, 2022, the company recognized $10 million and $20 million in pre-tax income from post-close adjustments related to HOS. Additionally, interest income from the seller promissory note and income from revenue share agreements contributed $0.06 and $0.12 per diluted share for the respective periods, compared to HOS operating results of $0.08 and $0.16 per share in the prior year.
What is the company's outlook for capital investment and growth?
American Water plans to invest approximately $2.5 billion in 2022, with the majority directed towards capital investment in its regulated businesses for infrastructure improvements and replacements. The company also continues to pursue regulated acquisitions to expand its customer base, with agreements in place for pending acquisitions expected to add approximately 29,200 customers.
How is the company managing inflationary pressures?
The company noted that inflationary pressures were an offset to earnings growth, estimated at $0.06 to $0.08 per share for the year-to-date period. These pressures were partially mitigated by new rates implemented through general rate cases and infrastructure surcharges, which are designed to fund infrastructure investments.
What is the company's liquidity position?
American Water maintains a strong liquidity position. As of June 30, 2022, the company had $71 million in cash and cash equivalents and $1.755 billion in availability under its revolving credit facility, totaling $1.826 billion in available liquidity. This position is expected to provide sufficient funds to meet short-term requirements and manage expenditures, even in the event of capital market disruptions.
06—Continue