- Quarterly diluted earnings per share
from continuing operations of $0.68 per share, an increase of 7.9
percent over adjusted earnings per share (a non-GAAP financial
measure) and 11.5 percent over GAAP earnings per share in same
quarter last year.
- Revenue up 3.6 percent to $782.1
million for the quarter.
- Expanded customer base through
acquisitions and agreements in both regulated and market-based
businesses.
- Affirmed 2015 earnings guidance from
continuing operations in the range of $2.55 to $2.65 per diluted
share.
American Water Works Company, Inc. (NYSE: AWK), the largest
publicly traded U.S. water and wastewater utility company, today
reported solid second quarter earnings for the three months ended
June 30, 2015.
“American Water’s employees continued to successfully execute
our strategies during the second quarter. We had solid earnings
growth, continued to invest in our infrastructure and improve
operational efficiency to the benefit of our customers, and
expanded our Regulated and Market-Based customers,” said Susan
Story, president and CEO of American Water. “We remain on track to
meet our long-term goal of growing earnings seven to ten percent.
Based on our results year-to-date including weather impacts in
July, we are affirming our 2015 earnings guidance to be in the
range of $2.55 to $2.65 per diluted common share.”
Continuing Operations
For the second quarter of 2015, GAAP income from continuing
operations was $123.1 million, or $0.68 per diluted common share
(“diluted share”), as compared to $0.61 per diluted share in the
second quarter of 2014, an 11.5 percent increase. For the first six
months of 2015, the company’s GAAP income from continuing
operations was $203.1 million, or $1.13 per diluted share, as
compared to $1.00 per diluted share for the first six months of
2014, a 13.0 percent increase.
Excluding the 2014 costs related to the Freedom Industries
chemical spill in West Virginia, adjusted diluted earnings per
share (a non-GAAP financial measure) grew 7.9 percent quarter over
quarter and 8.7 percent for the first six months. These increases
were mainly due to continued revenue growth in both the Regulated
and Market-based businesses, and lower operating and maintenance
expenses in the Regulated businesses.
In the first six months of 2015, the company made capital
investments of approximately $515 million, with nearly $474 million
to replace and improve infrastructure for continued reliable
service to customers. American Water plans to invest $1.2 to $1.3
billion in 2015, with over $1 billion of this total to improve
water and wastewater systems, and approximately $200 million for
acquisitions and strategic investments. This amount includes the
Keystone Clearwater Solutions acquisition, which closed on July 9,
2015.
Regulated Operations
American Water’s Regulated Businesses’ revenues increased by
$8.7 million, or 1.3 percent, for the quarter, and $16.5 million,
or 1.3 percent, for the six months ended June 30, 2015, compared to
the same periods in 2014. These increases in revenues were mainly
due to rate increases and surcharges in recognition of system
improvements to better serve customers.
The Regulated Businesses’ operation and maintenance (O&M)
expense decreased $13.8 million, or 4.9 percent, and $25.3 million,
or 4.5 percent, for the three and six months of 2015, respectively.
The decreased costs were mainly attributable to lower operating
supplies and services expenses, as well as 2014 costs related to
the Freedom Industries chemical spill.
American Water continued its focus on operational efficiencies
to maintain the reliability of water services through needed
capital investment while at the same time limiting the impact on
customer bills. For the 12-month period ended June 30, 2015, the
O&M efficiency ratio (a non-GAAP measure) improved to 35.9
percent, compared to 37.7 percent for the 12-month period ended
June 30, 2014.
As of July 31, 2015, the company received approximately $36.7
million in additional annualized revenues from general rate cases
and infrastructure charges for 2015.
As of July 31, 2015, the company was awaiting final orders
and/or proposed settlements for general rate cases in three states,
requesting approximately $127.0 million in total additional
revenues. The extent to which requested rate increases will be
granted by the applicable regulatory agencies will vary.
Since April 1, 2015, the company closed on its acquisitions of
regulated water and/or wastewater systems in Haddonfield, N.J.,
Russiaville, Ind., and Arnold and Redfield, Mo., adding
approximately 19,000 customers to its footprint. The company also
has 17 pending acquisition agreements in several states that will
add approximately 14,000 customers to the company’s footprint
following regulatory approval and/or financial close. This includes
the pending acquisition of Environmental Disposal Corporation in
N.J., which will add approximately 5,300 regulated customers once
completed.
Market-Based Operations
Market-Based revenues increased by $19.0 million, or 23.4
percent, for the quarter, and $30.6 million, or 19.5 percent the
first six months of 2015, compared to the same periods in 2014. The
increases were mainly due to increased construction activities and
the addition of two new contracts in the company’s Military
Services Group and continued growth in the homeowner services
business.
The Market-Based Businesses’ O&M expense increased by $15.3
million, or 23.4 percent, and $27.1 million, or 21.3 percent for
the second quarter and first six months of 2015, respectively,
compared to the same periods in 2014. Higher costs were related to
an increase in construction projects for military contracts and
costs associated with the addition of two military contracts.
Higher claims expenses in the company’s homeowner services business
also contributed to the increase.
American Water’s Market-Based Businesses continued to grow. The
company’s homeowner services business entered into an exclusive
contract with the city of Rialto, Calif. to offer service line
protection programs to its eligible homeowners, and was also
recently notified by the city of Wilmington, Del. of its intent to
award the company an exclusive contract to offer programs to its
residential customers, pending city council approval. The company
expects both programs to launch by year-end, following all
appropriate approvals.
On July 9, 2015, the company closed on its acquisition of
Keystone Clearwater Solutions. Keystone will be included in the
company’s third quarter 2015 10-Q as part of its Market-Based
segment. The company established Keystone under a holding company
separate from its existing Regulated Businesses and Market-Based
American Water Enterprises entity. American Water Enterprises is a
Market-Based subsidiary that includes the company’s Military,
Contract, and Homeowner Services lines of business.
“American Water continues to expand our footprint by offering
and providing services that meet customers’ needs,” said Story.
“The expertise of our employees in addressing water and wastewater
challenges allows us to bring needed solutions and value to all our
new customers, as well as existing ones.”
Quarterly Dividend
On July 24, 2015, American Water’s board of directors declared a
quarterly cash dividend payment of $0.34 per share of common stock,
in recognition of the company’s performance. The dividend will be
payable on Sept. 1, 2015, to all shareholders of record as of Aug.
10, 2015.
On April 28, 2015, American Water’s board of directors increased
the company’s quarterly cash dividend payment from $0.31 to $0.34
per share of common stock. The increased dividend was paid on June
1, 2015, to all shareholders of record as of May 11, 2015.
2015 Earnings Guidance
American Water affirmed its 2015 earnings guidance from
continuing operations to be in the range of $2.55 to $2.65 per
diluted common share. The company’s earnings forecasts are subject
to numerous risks and uncertainties, including, without limitation,
those described under “Forward-Looking Statements” below and under
“Risk Factors” in its annual and quarterly reports filed with the
Securities and Exchange Commission (SEC).
Non-GAAP Financial Measures
This press release includes a presentation of adjusted earnings
per share (EPS) from continuing operations. This item is derived
from American Water’s consolidated financial information but is not
presented in its financial statements prepared in accordance with
U.S. generally accepted accounting principles (GAAP). Adjusted EPS
from continuing operations is defined as GAAP diluted earnings per
common share from continuing operations excluding the one-time
impact of the Freedom Industries chemical spill in West Virginia in
2014. This item constitutes a “non-GAAP financial measure” under
SEC rules. This non-GAAP financial measure supplements the
company’s GAAP disclosures and should not be considered an
alternative to the GAAP measure.
Management believes that this adjustment provides the company
and its investors with an indication of American Water’s baseline
performance excluding items that are not considered to be
reflective of ongoing results. Management does not intend results
excluding the adjustment to represent results as defined by GAAP,
and the reader should not consider it as an alternative measurement
calculated in accordance with GAAP, or as an indicator of the
company’s performance. Accordingly, the measurements have
limitations depending on their use.
This press release also includes a presentation of adjusted
O&M efficiency ratio, which excludes from its calculation
estimated purchased water revenues and purchased water expenses,
and the allocable portion of non-O&M support services costs,
mainly depreciation and general taxes, and the impact of the
Freedom Industries chemical spill as well as the estimated impact
of weather. This item is derived from American Water’s consolidated
financial information but is not presented in its financial
statements prepared in accordance with GAAP. The item constitutes a
“non-GAAP financial measure” under SEC rules. This non-GAAP
financial measure supplements the company’s GAAP disclosures and
should not be considered an alternative to the GAAP measure.
Management believes that the presentation of this measure is
useful to investors because it provides a means of evaluating the
company’s operating performance without giving effect to estimated
purchased water revenues and purchased water expenses as well as
the allocable portion of non-O&M support services costs, mainly
depreciation and general taxes, and the impact of the Freedom
Industries chemical spill and weather, which involve items that are
not reflective of management’s ability to increase efficiency of
the company’s regulated operations. In preparing operating plans,
budgets and forecasts, and in assessing historical performance,
management relies, in part, on trends in the company’s historical
results, exclusive of estimated revenues and expenses related to
purchased water and the allocable portion of non-O&M support
services costs.
Set forth below are tables that reconcile the non-GAAP financial
measure to the most directly comparable GAAP financial
measures.
2015 Second Quarter Earnings Conference Call
The 2015 second quarter earnings conference call will take place
on Thursday, Aug. 6, 2015, at 9 a.m. Eastern Daylight Time.
Interested parties may listen over the Internet by logging on to
the Investor Relations page of the company’s website at
www.amwater.com. Presentation slides that will be used in
conjunction with the earnings conference call are also available
online at http://ir.amwater.com.
Following the earnings conference call, an audio archive of the
call will be available through Aug. 13, 2015, by dialing
412-317-0088 for U.S. and international callers. The access code
for replay is 10068691. The online archive of the webcast will be
available through Sept. 8, 2015, by accessing the Investor
Relations page of the company’s website located at
www.amwater.com.
About American Water
Founded in 1886, American Water (NYSE: AWK) is the largest and
most geographically diversified publicly traded U.S. water and
wastewater utility company. With headquarters in Voorhees, N.J.,
the company employs 6,800 dedicated professionals who provide
regulated and market-based drinking water, wastewater and other
related services to an estimated 15 million people in 47
states and Ontario, Canada. More information can be found at
www.amwater.com.
Cautionary Statement Concerning Forward-Looking
Statements
Certain statements in this press release including, without
limitation, 2015 earnings guidance and estimated revenues from rate
cases and other government agency authorizations, are
forward-looking statements within the meaning of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are predictions based on American
Water’s current expectations and assumptions regarding future
events. Actual results could differ materially because of factors
such as the decisions of governmental and regulatory bodies,
including decisions to raise or lower rates; the timeliness of
regulatory commissions’ actions concerning rates and other matters;
changes in laws, governmental regulations and policies, including
environmental, health and water quality, and public utility
regulations and policies; the outcome of litigation and government
action including with respect to the Freedom Industries chemical
spill in West Virginia; weather conditions, patterns or events or
natural disasters, including drought or abnormally high rainfall,
strong winds, coastal and intercoastal flooding, earthquakes,
landslides, hurricanes and tornadoes, and cooler than normal
temperatures; changes in customer demand for, and patterns of use
of, water, such as may result from conservation efforts; its
ability to appropriately maintain current infrastructure, including
its technology systems, and manage the expansion of its business;
its ability to obtain permits and other approvals for projects;
changes in its capital requirements; its ability to control
operating expenses and to achieve efficiencies in its operations;
the intentional or unintentional acts of a third party, including
contamination of its water supplies and attacks on its computer
systems; its ability to obtain adequate and cost-effective supplies
of chemicals, electricity, fuel, water and other raw materials that
are needed for its operations; its ability to successfully acquire
and integrate water and wastewater systems that are complementary
to its operations; its ability to successfully expand its business,
including concession arrangements and agreements for provision of
water services in shale regions for exploration and production;
cost overruns relating to improvements or the expansion of its
operations; changes in general economic, business and financial
market conditions; access to sufficient capital on satisfactory
terms; fluctuations in interest rates; the effect of restrictive
covenants or changes to credit ratings on its current or future
debt that could increase its financing costs or affect its ability
to borrow, make payments on debt or pay dividends; fluctuations in
the value of benefit plan assets and liabilities that could
increase financing costs and funding requirements; the ability to
utilize its U.S. and state net operating loss carryforwards;
migration of customers into or out of its service territories and
the condemnation of its systems by municipalities using the power
of eminent domain; difficulty in obtaining insurance at acceptable
rates and on acceptable terms and conditions; its ability to retain
and attract qualified employees; labor actions including work
stoppages and strikes; the incurrence of impairment charges; and
civil disturbance, terrorist threats or acts, or public
apprehension about future disturbances or terrorist threats or
acts.
For further information regarding risks and uncertainties
associated with American Water’s business, please refer to American
Water’s annual and quarterly SEC filings. The company undertakes no
duty to update any forward-looking statement, except as otherwise
required by the federal securities laws.
American Water Works Company, Inc. and Subsidiary
Companies Consolidated Statements of Income (Unaudited)
In thousands except per share data
For the
Three Months Ended
June 30,
For the Six Months Ended
June 30,
2015 2014
2015 2014 Operating revenues $
782,121 $ 754,778 $ 1,480,199 $ 1,433,781
Operating expenses Operation and maintenance 336,624 337,849
660,456 663,029 Depreciation and amortization 108,923 105,685
216,300 211,609 General taxes 60,222 56,802 123,918 117,469 Gain on
asset dispositions and purchases (1,209 ) (345 )
(2,337 ) (555 ) Total operating expenses, net
504,560 499,991 998,337
991,552 Operating income 277,561 254,787 481,862 442,229
Other income (expenses) Interest, net (75,421 ) (73,668 ) (151,094
) (147,228 ) Allowance for other funds used during construction
2,835 2,058 5,195 4,259 Allowance for borrowed funds used during
construction 1,542 1,271 4,064 2,754 Amortization of debt expense
(1,878 ) (1,629 ) (3,642 ) (3,302 ) Other, net (1,012 )
(316 ) 744 (1,857 ) Total other income
(expenses) (73,934 ) (72,284 ) (144,733 )
(145,374 ) Income from continuing operations before income
taxes 203,627 182,503 337,129 296,855 Provision for income taxes
80,552 72,329 134,011
117,568 Income from continuing operations 123,075
110,174 203,118 179,287 Loss from discontinued operations, net of
tax — (875 ) — (1,865 )
Net income $ 123,075 $ 109,299 $ 203,118 $
177,422 Basic earnings per share: (a) Income from continuing
operations $ 0.69 $ 0.62 $ 1.13 $ 1.00
Loss from discontinued operations, net of tax $ 0.00 $ (0.00
) $ 0.00 $ (0.01 ) Net income $ 0.69 $ 0.61 $
1.13 $ 0.99 Diluted earnings per share: (a) Income
from continuing operations $ 0.68 $ 0.61 $ 1.13
$ 1.00 Loss from discontinued operations, net of tax
$ 0.00 $ (0.00 ) $ 0.00 $ (0.01 ) Net income $ 0.68
$ 0.61 $ 1.13 $ 0.99 Average common
shares outstanding during the period Basic 179,564
178,863 179,511 178,702
Diluted 180,371 179,693 180,348
179,512 Dividends declared per common share $
0.34 $ 0.31 $ 0.34 $ 0.31
(a)
Earnings per share amounts are computed
independently for income from continuing operations, loss from
discontinued operations and net income. As a result, the sum of
per-share amounts from continuing operations and discontinued
operations may not equal the total per-share amount for net
income.
American Water Works Company, Inc. and Subsidiary
Companies Condensed Consolidated Balance Sheet Information
(Unaudited) In thousands
June 30,
December 31, 2015 2014 Cash and cash
equivalents $ 144,752 $ 23,080 Other current assets 745,333 638,289
Total property, plant and equipment 13,357,981 13,029,296 Total
regulatory and other long-term assets 2,484,266
2,440,291 Total Assets $ 16,732,332 $ 16,130,956 Short-term
debt $ 820,982 $ 449,959 Current portion of long-term debt 61,962
61,132 Other current liabilities 629,244 729,907 Long-term debt
5,447,530 5,448,245 Total regulatory and other long-term
liabilities 3,620,614 3,451,250 Contributions in aid of
construction 1,098,610 1,074,872 Total stockholders' equity
5,053,390 4,915,591 Total Capitalization and Liabilities $
16,732,332 $ 16,130,956
American Water
Works Company, Inc. and Subsidiary Companies Adjusted
Earnings Per Share from Continuing Operations (A Non-GAAP,
unaudited measure) For the Three Months
Ended
June 30,
For the Six Months Ended
June 30,
2015 2014 2015 2014 Income from
continuing operations per diluted common share $ 0.68 $ 0.61 $ 1.13
$ 1.00 Add: After-tax impact of West Virginia Freedom Industries
Chemical Spill - 0.02 - 0.04 Adjusted
income from continuing operations per diluted common share $ 0.68 $
0.63 $ 1.13 $ 1.04
American Water Works Company,
Inc. and Subsidiary Companies Adjusted Regulated Operations
and Maintenance Efficiency Ratio (A Non-GAAP, unaudited
measure) In thousands
For the Twelve Months Ended June
30, 2015 2014 Total
Operation and Maintenance Expense $ 1,347,291 $ 1,326,931 Less:
Operation and maintenance expense—Market-Based Operations 316,456
254,668 Operation and maintenance expense—Other (55,333 )
(53,896 ) Total Regulated Operation and Maintenance Expense
1,086,168 1,126,159 Less: Regulated purchased water expense 118,708
119,974 Allocation of non-operation and maintenance expense 39,165
36,027 Impact of West Virginia Freedom Industries chemical spill
618 9,820 Estimated impact of weather (mid-point of range)
(1,762 ) (893 ) Adjusted Regulated Operation and Maintenance
Expense (a) $ 929,439 $ 961,231 Total
Operating Revenues $ 3,057,746 $ 2,962,213 Less: Operating
revenues—Market-Based Operations 385,250 321,226 Operating
revenues—Other (18,309 ) (17,541 ) Total Regulated
Operating Revenues 2,690,805 2,658,528 Less: Regulated purchased
water expense* 118,708 119,974 Plus: Impact of West Virginia
Freedom Industries chemical spill — 1,012 Estimated impact of
weather (mid-point of range) 16,785 9,918
Adjusted Regulated Operating Revenues (b) $ 2,588,882
$ 2,549,484 Adjusted Regulated Operation and
Maintenance Efficiency Ratio (a)/(b) 35.9 % 37.7 % *
Calculation assumes purchased water revenues approximate purchased
water expenses.
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American Water Works Company, Inc.Gregory PanagosVice President,
Investor Relations856-566-4005gregory.panagos@amwater.comorMaureen
DuffyVice President,
Communications856-309-4546maureen.duffy@amwater.com
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