American Water Reports 2013 Year-End and Fourth Quarter Results; Year Marked by Growth
Dateline City:
VOORHEES, N.J.
- Ongoing operations generated $2.9 billion in total operating revenue.
- Adjusted net income (a non-GAAP financial measure) for continuing operations totaled $394.0 million, or $2.20 per diluted common share for 2013, excluding an approximate $0.14 per share one-time charge associated with the completed debt tender offer. Net income including this one-time charge was $369.3 million, or $2.06 per diluted common share.
- Company executed growth strategy adding approximately 30,000 regulated customers and expanding market-based businesses.
- Company invested approximately $950 million to ensure reliable water service.
VOORHEES, N.J.--(BUSINESS WIRE)--American Water Works Company, Inc. (NYSE: AWK), the largest publicly
traded U.S. water and wastewater utility company, today reported solid
results for the year and quarter ended Dec. 31, 2013.
“Before speaking about our results, I want to speak about recent events
in West Virginia, which truly highlight the importance of the service we
provide,” said Jeff Sterba, president and CEO of American Water. "We are
extremely proud of how our people responded to the Freedom Industries
chemical spill. From the onset, we provided approximately 95,000
customers with water for basic sanitation and fire protection, and
bottled and bulk water for drinking, while dealing with the
contamination issue. Working closely with federal and state health
agencies and regulators in a massive sampling and testing program, we
were able to lift the ‘Do Not Use’ order in stages over a five day
period beginning on Jan. 13. Informed discussion on possible legislation
and/or regulation to help keep such incidents from happening is
essential. American Water has been and will continue to be fully engaged
in these conversations because nothing matters more to us than providing
safe, reliable water service to our communities and customers."
“Achieving excellence in customer service is a key driver of our results
and 2013 was another year of strong performance on all fronts,”
continued Sterba. “We achieved our operations and maintenance efficiency
rate goal, grew both our regulated and market-based businesses and
completed a multi-year effort to upgrade our technology platforms.”
For the year, the company reported net income of $369.3 million, or
$2.06 per diluted common share, including an approximate $0.14 per share
one-time, after-tax charge related to the completed debt tender offer by
American Water’s finance subsidiary, American Water Capital Corp.,
recorded in October 2013. The company’s adjusted net income (a non-GAAP
financial measure) for continuing operations, excluding this one-time
charge, was $394.0 million, or $2.20 per diluted common share, compared
with net income for continuing operations of $374.3 million, or $2.11
per diluted common share, in 2012.
The company’s capital expenditures for 2013 were approximately $950
million, compared to $983 million in the prior year. The company
anticipates investing $5.8 billion over the next five years in the water
and wastewater systems that provide reliability and quality to its
customers.
In the year 2013, American Water added approximately 30,000 customers to
its regulated customer base, which is more than in the past five years
combined. Approximately 20,000 of these are wastewater customers. The
expansion of wastewater services is a key part of American Water’s
long-term growth strategy.
Regulated Operations
For the year ending Dec. 31, 2013, American Water’s Regulated
Businesses’ revenues increased by $29.5 million, or 1.1 percent,
compared to the year ending Dec. 31, 2012. The increase in revenues was
primarily due to rate increase authorizations, as well as by increased
infrastructure surcharges and acquisitions, including the company’s New
York acquisitions in May 2012 and the Dale Service acquisition in the
fourth quarter of 2013. These increases in revenues were partially
offset by decreased customer demand driven by cooler, wetter weather
conditions in 2013, as compared to the hot, dry weather conditions in
2012.
The Regulated Businesses’ operation and maintenance (O&M) expense
decreased $24.5 million, or 2.2 percent year-over-year. The regulated
entities showed continued improvement in their O&M efficiency ratio (a
non-GAAP measure). For the 12 months ended Dec. 31, 2013, the O&M
efficiency ratio was 38.7 percent, compared to 40.1 percent for the same
12-month period in 2012.
American Water’s Regulated Businesses continue to upgrade and maintain
their water systems in 2013 investing approximately $950 million. In
recognition of that investment, the company received and put into effect
authorizations for additional annualized revenues from general rate
cases of $15.5 million in 2013, and received authorization for
additional annualized revenues of $26 million in Pennsylvania effective
Jan. 1, 2014. The company also received $36.1 million in additional
annualized revenues from infrastructure surcharges in several states
during 2013. Since Jan. 1, 2014, additional annualized revenues of $13.1
million in infrastructure surcharges were granted to the company’s New
York, New Jersey and Illinois subsidiaries. As of Feb. 21, 2014, the
company was awaiting final orders for general rate cases in three
states, requesting $58.4 million in total additional annual revenues.
The extent to which requested rate increases will be granted by the
applicable regulatory agencies will vary. All annualized revenue amounts
are based on current usage.
"Providing safe and reliable water and wastewater service is our
business, which is why we invest almost a billion dollars in capital
improvements on an annual basis,” said Sterba. “We are planning to
increase that needed investment in the next five years while increasing
our efficiencies and managing our costs to ensure we strike the right
balance between needed upgrades and the cost of providing reliable
service."
American Water’s Regulated Business added approximately 30,000 customers
to its customer base through the acquisition of ten water and five
wastewater systems in 2013. The company also continued to provide a
reliable supply of water to the communities in shale enriched areas in
Pennsylvania as well as to multiple energy companies and now has 34
points of interconnection in that area. Since 2014 began, the company
has already announced three more acquisitions in California, Illinois
and New York.
Market-Based Operations
The company’s Market-Based Businesses’ revenues decreased by $4.9
million for the year compared to 2012. The decrease was mainly due to
lower revenues from the termination of certain contracts in the
company’s Contract Services Group, as well as decreases in capital
projects in the company’s Military Services Group contracts as compared
to the prior year. These decreases were offset by higher revenues in the
company’s Homeowner Services Group and price redeterminations for
several of the company’s military contracts. The Market-Based Business’
O&M expense decreased $12.6 million, or 4.5 percent, for the year as
compared to the previous year.
American Water’s Market-Based Businesses continue to grow. The company
recently announced its tenth contract with the U.S. military at Hill Air
Force Base in Utah, and approximately $200 million of already awarded
infrastructure projects will be executed in the next three years on the
other military installations for which American Water provides service.
The company’s homeowner services business, American Water Resources,
also grew via geographic expansion and additional service offerings.
Beyond residential customers, American Water Resources announced
municipal partnerships with New York City, Nashville and Houston in
2013, and currently has nearly 700,000 customers and 1.25 million
customer contracts.
Quarterly Dividend
In recognition of the company’s financial performance, the board of
directors declared, during the fourth quarter of 2013, a quarterly cash
dividend of $0.28 per common share, payable on Mar. 3, 2014, to all
shareholders of record as of Feb. 3, 2014.
2014 Earnings Guidance
American Water reaffirmed the 2014 earnings guidance issued on Dec. 17,
2013. The company estimates its 2014 ongoing earnings to be in the range
of $2.35 to $2.45 per share, excluding the impact of the Freedom
Industries chemical spill in West Virginia, which is estimated to be
$0.02 per share through Feb. 26, 2014. The company’s earnings forecasts
are subject to numerous risks such as extreme weather, costs associated
with the company’s SAP implementation and other factors described under
“Forward-Looking Statements” below and under “Risk Factors” in its
annual and quarterly reports.
Non-GAAP Financial Measures
This press release includes a presentation of adjusted net income and
adjusted earnings per share (EPS). These items are derived from American
Water’s consolidated financial information but are not presented in its
financial statements prepared in accordance with U.S. generally accepted
accounting principles (GAAP). Adjusted net income and adjusted EPS are
defined, respectively, as GAAP net income and GAAP diluted earnings per
common share excluding the nonrecurring charge recorded in October 2013
of $24.8 million associated with the company’s tender offer. These items
constitute “non-GAAP financial measures” under Securities and Exchange
Commission (SEC) rules. These non-GAAP financial measures supplement the
company’s GAAP disclosures and should not be considered an alternative
to the GAAP measure.
Management believes that these adjustments provide 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 adjustments 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 O&M efficiency ratio,
which excludes from its calculation 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. 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). The item
constitutes a “non-GAAP financial measure” under Securities and Exchange
Commission (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, 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 is a table that reconciles the non-GAAP financial
measures to the most directly comparable GAAP financial measures.
Year-End 2013 Earnings Conference Call
The year-end 2013 earnings conference call will take place on Thursday,
Feb. 27, 2014 at 9 a.m. Eastern 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.
Following the earnings conference call, an audio archive of the call
will be available through March 6, 2014, by dialing 303-590-3030 for
U.S. and international callers. The access code for replay is 4662798.
The online archive of the webcast will be available through March 28,
2014, 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 publicly
traded U.S. water and wastewater utility company. With headquarters in
Voorhees, N.J., the company employs approximately 6,600 dedicated
professionals who provide drinking water, wastewater and other related
services to an estimated 14 million people in more than 40 states and
parts of Canada. More information can be found at www.amwater.com.
Cautionary Statement Concerning Forward-Looking Statements
Certain statements in this press release 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 and may relate to,
among other things, its future financial performance, including
earnings, growth and portfolio optimization strategies, its ability to
finance current operations and growth initiatives, trends in its
industry, regulatory or legal developments or rate adjustments. 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; 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 related to the Freedom Industries chemical spill in
West Virginia; weather conditions, patterns or events, including drought
or abnormally high rainfall, strong winds and coastal and intercoastal
flooding; 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 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; 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 and the
growth of its business, including, among other core growth
opportunities, concession arrangements and agreements for the provision
of water services in the unregulated shale arena; 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;
restrictive covenants in or changes to the credit ratings on the
company’s 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 its cost and funding requirements; migration of customers
into or out of its service territories; difficulty in obtaining
insurance at acceptable rates and on acceptable terms and conditions;
its ability to retain and attract qualified employees; the incurrence of
impairment charges; labor actions including work stoppages and strikes;
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,
quarterly and current SEC filings. The company undertakes no duty to
update any forward-looking statement.
American Water Works Company, Inc. and Subsidiary Companies
Consolidated Statements of Income (Unaudited)
In thousands except per share data
Three Months Ended
Years Ended
December 31,
December 31,
2013
2012
2013
2012
Operating revenues
$
712,260
$
680,913
$
2,901,858
$
2,876,889
Operating expenses
Operation and maintenance
333,591
357,333
1,312,724
1,350,040
Depreciation and amortization
103,969
100,851
407,718
381,503
General taxes
58,481
55,948
234,642
221,212
(Gain) loss on asset dispositions and purchases
365
(182
)
925
(839
)
Total operating expenses, net
496,406
513,950
1,956,009
1,951,916
Operating income
215,854
166,963
945,849
924,973
Other income (expenses)
Interest, net
(74,904
)
(74,794
)
(308,164
)
(310,794
)
Loss on extinguishment of debt
(40,583
)
-
(40,583
)
-
Allowance for other funds used during construction
2,744
2,419
12,639
15,592
Allowance for borrowed funds used during construction
1,275
1,829
6,377
7,771
Amortization of debt expense
(1,874
)
(1,409
)
(6,603
)
(5,358
)
Other, net
(2,564
)
(684
)
(4,045
)
(926
)
Total other income (expenses)
(115,906
)
(72,639
)
(340,379
)
(293,715
)
Income from continuing operations before income taxes
99,948
94,324
605,470
631,258
Provision for income taxes
40,255
40,100
236,206
257,008
Income from continuing operations
59,693
54,224
369,264
374,250
Income (loss) from discontinued operations, net of tax
-
1,254
-
(16,180
)
Net income
$
59,693
$
55,478
$
369,264
$
358,070
Basic earnings per common share: (1)
Income from continuing operations
$
0.33
$
0.31
$
2.08
$
2.12
Income (loss) from discontinued operations, net of tax
$
-
$
0.01
$
-
$
(0.09
)
Net income
$
0.33
$
0.31
$
2.08
$
2.03
Diluted earnings per common share: (1)
Income from continuing operations
$
0.33
$
0.30
$
2.06
$
2.11
Income (loss) from discontinued operations, net of tax
$
-
$
0.01
$
-
$
(0.09
)
Net income
$
0.33
$
0.31
$
2.06
$
2.01
Average common shares outstanding during the period:
Basic
178,237
176,907
177,814
176,445
Diluted
179,469
178,113
179,056
177,671
Dividends per common share
$
0.28
$
0.25
$
1.12
$
0.98
(1) Amounts may not sum due to rounding
American Water Works Company, Inc. and Subsidiary Companies
Condensed Consolidated Balance Sheet Information (Unaudited)
In thousands
December 31,
2013
2012
Cash and cash equivalents
$
26,964
$
24,433
Other current assets
523,426
475,014
Total property, plant and equipment
12,391,162
11,739,364
Total regulatory and other long-term assets
2,127,981
2,480,165
Total Assets
$
15,069,533
$
14,718,976
Short-term debt
$
630,307
$
269,985
Current portion of long-term debt
14,174
115,919
Other current liabilities
591,052
608,928
Long-term debt
5,230,058
5,209,370
Total regulatory and other long-term liabilities
2,833,434
3,073,650
Contributions in aid of construction
1,042,704
996,136
Total stockholders' equity
4,727,804
4,444,988
Total Capitalization and Liabilities
$
15,069,533
$
14,718,976
Adjusted net income and EPS (A Non-GAAP, unaudited measure)
In thousands except per share data
Year Ended December 31, 2013
Diluted Earnings
Income
Per Share
Net income per GAAP
$
369,264
$
2.06
Add: After-tax impact of tender offer loss on debt extinguishment (a)
24,756
0.14
Adjusted net income
$
394,020
$
2.20
(a) Includes repurchase premium, transaction fees and write-off of
unamortized debt issuance costs
Regulated Operations and Maintenance Efficiency Ratio (A
Non-GAAP, unaudited measure)
In thousands
Years Ended
December 31,
2013
2012
Total Operation and Maintenance Expenses
$
1,312,724
$
1,350,040
Less:
Operation and maintenance expenses- Market-Based Operations
264,253
276,809
Operation and maintenance expenses- Other
(56,973
)
(56,755
)
Total Regulated Operation and Maintenance Expense
1,105,444
1,129,986
Less:
Regulated purchase water expense (a)
111,119
110,173
Allocation of non-Operation and maintenance expense
34,635
35,067
Adjusted Regulated Operation and Maintenance Expenses
$
959,690
$
984,746
Total Operating Revenues
$
2,901,858
$
2,876,889
Less:
Operating revenues - Market-Based Operations
325,463
330,329
Operating revenues - Other
(17,523
)
(17,874
)
Total Regulated operating revenues
2,593,918
2,564,434
Less:
Regulated purchase water revenues (a)
111,119
110,173
Adjusted Regulated Operating Revenues
$
2,482,799
$
2,454,261
Regulated Operations and Maintenance Efficiency Ratio
38.7
%
40.1
%
(a) Calculation assumes purchased water revenues approximate
purchased water expenses.
Click
here to subscribe to Mobile Alerts for American Water.
Language:
English
Contact:
American Water Works Company, Inc.
Edward Vallejo
Vice President, Investor Relations
856-566-4005
edward.vallejo@amwater.com
or
Maureen Duffy
Vice President, Communications
856-309-4546
maureen.duffy@amwater.com
Ticker Slug:
Ticker: AWK Exchange: NYSE
- Ongoing operations generated $2.9 billion in total operating revenue.
- Adjusted net income (a non-GAAP financial measure) for continuing operations totaled $394.0 million, or $2.20 per diluted common share for 2013, excluding an approximate $0.14 per share one-time charge associated with the completed debt tender offer. Net income including this one-time charge was $369.3 million, or $2.06 per diluted common share.
- Company executed growth strategy adding approximately 30,000 regulated customers and expanding market-based businesses.
- Company invested approximately $950 million to ensure reliable water service.
VOORHEES, N.J.--(BUSINESS WIRE)--American Water Works Company, Inc. (NYSE: AWK), the largest publicly traded U.S. water and wastewater utility company, today reported solid results for the year and quarter ended Dec. 31, 2013.
“Before speaking about our results, I want to speak about recent events in West Virginia, which truly highlight the importance of the service we provide,” said Jeff Sterba, president and CEO of American Water. "We are extremely proud of how our people responded to the Freedom Industries chemical spill. From the onset, we provided approximately 95,000 customers with water for basic sanitation and fire protection, and bottled and bulk water for drinking, while dealing with the contamination issue. Working closely with federal and state health agencies and regulators in a massive sampling and testing program, we were able to lift the ‘Do Not Use’ order in stages over a five day period beginning on Jan. 13. Informed discussion on possible legislation and/or regulation to help keep such incidents from happening is essential. American Water has been and will continue to be fully engaged in these conversations because nothing matters more to us than providing safe, reliable water service to our communities and customers."
“Achieving excellence in customer service is a key driver of our results and 2013 was another year of strong performance on all fronts,” continued Sterba. “We achieved our operations and maintenance efficiency rate goal, grew both our regulated and market-based businesses and completed a multi-year effort to upgrade our technology platforms.”
For the year, the company reported net income of $369.3 million, or $2.06 per diluted common share, including an approximate $0.14 per share one-time, after-tax charge related to the completed debt tender offer by American Water’s finance subsidiary, American Water Capital Corp., recorded in October 2013. The company’s adjusted net income (a non-GAAP financial measure) for continuing operations, excluding this one-time charge, was $394.0 million, or $2.20 per diluted common share, compared with net income for continuing operations of $374.3 million, or $2.11 per diluted common share, in 2012.
The company’s capital expenditures for 2013 were approximately $950 million, compared to $983 million in the prior year. The company anticipates investing $5.8 billion over the next five years in the water and wastewater systems that provide reliability and quality to its customers.
In the year 2013, American Water added approximately 30,000 customers to its regulated customer base, which is more than in the past five years combined. Approximately 20,000 of these are wastewater customers. The expansion of wastewater services is a key part of American Water’s long-term growth strategy.
Regulated Operations
For the year ending Dec. 31, 2013, American Water’s Regulated Businesses’ revenues increased by $29.5 million, or 1.1 percent, compared to the year ending Dec. 31, 2012. The increase in revenues was primarily due to rate increase authorizations, as well as by increased infrastructure surcharges and acquisitions, including the company’s New York acquisitions in May 2012 and the Dale Service acquisition in the fourth quarter of 2013. These increases in revenues were partially offset by decreased customer demand driven by cooler, wetter weather conditions in 2013, as compared to the hot, dry weather conditions in 2012.
The Regulated Businesses’ operation and maintenance (O&M) expense decreased $24.5 million, or 2.2 percent year-over-year. The regulated entities showed continued improvement in their O&M efficiency ratio (a non-GAAP measure). For the 12 months ended Dec. 31, 2013, the O&M efficiency ratio was 38.7 percent, compared to 40.1 percent for the same 12-month period in 2012.
American Water’s Regulated Businesses continue to upgrade and maintain their water systems in 2013 investing approximately $950 million. In recognition of that investment, the company received and put into effect authorizations for additional annualized revenues from general rate cases of $15.5 million in 2013, and received authorization for additional annualized revenues of $26 million in Pennsylvania effective Jan. 1, 2014. The company also received $36.1 million in additional annualized revenues from infrastructure surcharges in several states during 2013. Since Jan. 1, 2014, additional annualized revenues of $13.1 million in infrastructure surcharges were granted to the company’s New York, New Jersey and Illinois subsidiaries. As of Feb. 21, 2014, the company was awaiting final orders for general rate cases in three states, requesting $58.4 million in total additional annual revenues. The extent to which requested rate increases will be granted by the applicable regulatory agencies will vary. All annualized revenue amounts are based on current usage.
"Providing safe and reliable water and wastewater service is our business, which is why we invest almost a billion dollars in capital improvements on an annual basis,” said Sterba. “We are planning to increase that needed investment in the next five years while increasing our efficiencies and managing our costs to ensure we strike the right balance between needed upgrades and the cost of providing reliable service."
American Water’s Regulated Business added approximately 30,000 customers to its customer base through the acquisition of ten water and five wastewater systems in 2013. The company also continued to provide a reliable supply of water to the communities in shale enriched areas in Pennsylvania as well as to multiple energy companies and now has 34 points of interconnection in that area. Since 2014 began, the company has already announced three more acquisitions in California, Illinois and New York.
Market-Based Operations
The company’s Market-Based Businesses’ revenues decreased by $4.9 million for the year compared to 2012. The decrease was mainly due to lower revenues from the termination of certain contracts in the company’s Contract Services Group, as well as decreases in capital projects in the company’s Military Services Group contracts as compared to the prior year. These decreases were offset by higher revenues in the company’s Homeowner Services Group and price redeterminations for several of the company’s military contracts. The Market-Based Business’ O&M expense decreased $12.6 million, or 4.5 percent, for the year as compared to the previous year.
American Water’s Market-Based Businesses continue to grow. The company recently announced its tenth contract with the U.S. military at Hill Air Force Base in Utah, and approximately $200 million of already awarded infrastructure projects will be executed in the next three years on the other military installations for which American Water provides service. The company’s homeowner services business, American Water Resources, also grew via geographic expansion and additional service offerings. Beyond residential customers, American Water Resources announced municipal partnerships with New York City, Nashville and Houston in 2013, and currently has nearly 700,000 customers and 1.25 million customer contracts.
Quarterly Dividend
In recognition of the company’s financial performance, the board of directors declared, during the fourth quarter of 2013, a quarterly cash dividend of $0.28 per common share, payable on Mar. 3, 2014, to all shareholders of record as of Feb. 3, 2014.
2014 Earnings Guidance
American Water reaffirmed the 2014 earnings guidance issued on Dec. 17, 2013. The company estimates its 2014 ongoing earnings to be in the range of $2.35 to $2.45 per share, excluding the impact of the Freedom Industries chemical spill in West Virginia, which is estimated to be $0.02 per share through Feb. 26, 2014. The company’s earnings forecasts are subject to numerous risks such as extreme weather, costs associated with the company’s SAP implementation and other factors described under “Forward-Looking Statements” below and under “Risk Factors” in its annual and quarterly reports.
Non-GAAP Financial Measures
This press release includes a presentation of adjusted net income and adjusted earnings per share (EPS). These items are derived from American Water’s consolidated financial information but are not presented in its financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP). Adjusted net income and adjusted EPS are defined, respectively, as GAAP net income and GAAP diluted earnings per common share excluding the nonrecurring charge recorded in October 2013 of $24.8 million associated with the company’s tender offer. These items constitute “non-GAAP financial measures” under Securities and Exchange Commission (SEC) rules. These non-GAAP financial measures supplement the company’s GAAP disclosures and should not be considered an alternative to the GAAP measure.
Management believes that these adjustments provide 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 adjustments 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 O&M efficiency ratio, which excludes from its calculation 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. 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). The item constitutes a “non-GAAP financial measure” under Securities and Exchange Commission (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, 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 is a table that reconciles the non-GAAP financial measures to the most directly comparable GAAP financial measures.
Year-End 2013 Earnings Conference Call
The year-end 2013 earnings conference call will take place on Thursday, Feb. 27, 2014 at 9 a.m. Eastern 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.
Following the earnings conference call, an audio archive of the call will be available through March 6, 2014, by dialing 303-590-3030 for U.S. and international callers. The access code for replay is 4662798. The online archive of the webcast will be available through March 28, 2014, 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 publicly traded U.S. water and wastewater utility company. With headquarters in Voorhees, N.J., the company employs approximately 6,600 dedicated professionals who provide drinking water, wastewater and other related services to an estimated 14 million people in more than 40 states and parts of Canada. More information can be found at www.amwater.com.
Cautionary Statement Concerning Forward-Looking Statements
Certain statements in this press release 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 and may relate to, among other things, its future financial performance, including earnings, growth and portfolio optimization strategies, its ability to finance current operations and growth initiatives, trends in its industry, regulatory or legal developments or rate adjustments. 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; 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 related to the Freedom Industries chemical spill in West Virginia; weather conditions, patterns or events, including drought or abnormally high rainfall, strong winds and coastal and intercoastal flooding; 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 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; 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 and the growth of its business, including, among other core growth opportunities, concession arrangements and agreements for the provision of water services in the unregulated shale arena; 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; restrictive covenants in or changes to the credit ratings on the company’s 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 its cost and funding requirements; migration of customers into or out of its service territories; difficulty in obtaining insurance at acceptable rates and on acceptable terms and conditions; its ability to retain and attract qualified employees; the incurrence of impairment charges; labor actions including work stoppages and strikes; 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, quarterly and current SEC filings. The company undertakes no duty to update any forward-looking statement.
American Water Works Company, Inc. and Subsidiary Companies | ||||||||||||||||
Consolidated Statements of Income (Unaudited) | ||||||||||||||||
In thousands except per share data | ||||||||||||||||
Three Months Ended | Years Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Operating revenues | $ | 712,260 | $ | 680,913 | $ | 2,901,858 | $ | 2,876,889 | ||||||||
Operating expenses | ||||||||||||||||
Operation and maintenance | 333,591 | 357,333 | 1,312,724 | 1,350,040 | ||||||||||||
Depreciation and amortization | 103,969 | 100,851 | 407,718 | 381,503 | ||||||||||||
General taxes | 58,481 | 55,948 | 234,642 | 221,212 | ||||||||||||
(Gain) loss on asset dispositions and purchases | 365 | (182 | ) | 925 | (839 | ) | ||||||||||
Total operating expenses, net | 496,406 | 513,950 | 1,956,009 | 1,951,916 | ||||||||||||
Operating income | 215,854 | 166,963 | 945,849 | 924,973 | ||||||||||||
Other income (expenses) | ||||||||||||||||
Interest, net | (74,904 | ) | (74,794 | ) | (308,164 | ) | (310,794 | ) | ||||||||
Loss on extinguishment of debt | (40,583 | ) | - | (40,583 | ) | - | ||||||||||
Allowance for other funds used during construction | 2,744 | 2,419 | 12,639 | 15,592 | ||||||||||||
Allowance for borrowed funds used during construction | 1,275 | 1,829 | 6,377 | 7,771 | ||||||||||||
Amortization of debt expense | (1,874 | ) | (1,409 | ) | (6,603 | ) | (5,358 | ) | ||||||||
Other, net | (2,564 | ) | (684 | ) | (4,045 | ) | (926 | ) | ||||||||
Total other income (expenses) | (115,906 | ) | (72,639 | ) | (340,379 | ) | (293,715 | ) | ||||||||
Income from continuing operations before income taxes | 99,948 | 94,324 | 605,470 | 631,258 | ||||||||||||
Provision for income taxes | 40,255 | 40,100 | 236,206 | 257,008 | ||||||||||||
Income from continuing operations | 59,693 | 54,224 | 369,264 | 374,250 | ||||||||||||
Income (loss) from discontinued operations, net of tax | - | 1,254 | - | (16,180 | ) | |||||||||||
Net income | $ | 59,693 | $ | 55,478 | $ | 369,264 | $ | 358,070 | ||||||||
Basic earnings per common share: (1) | ||||||||||||||||
Income from continuing operations | $ | 0.33 | $ | 0.31 | $ | 2.08 | $ | 2.12 | ||||||||
Income (loss) from discontinued operations, net of tax | $ | - | $ | 0.01 | $ | - | $ | (0.09 | ) | |||||||
Net income | $ | 0.33 | $ | 0.31 | $ | 2.08 | $ | 2.03 | ||||||||
Diluted earnings per common share: (1) | ||||||||||||||||
Income from continuing operations | $ | 0.33 | $ | 0.30 | $ | 2.06 | $ | 2.11 | ||||||||
Income (loss) from discontinued operations, net of tax | $ | - | $ | 0.01 | $ | - | $ | (0.09 | ) | |||||||
Net income | $ | 0.33 | $ | 0.31 | $ | 2.06 | $ | 2.01 | ||||||||
Average common shares outstanding during the period: | ||||||||||||||||
Basic | 178,237 | 176,907 | 177,814 | 176,445 | ||||||||||||
Diluted | 179,469 | 178,113 | 179,056 | 177,671 | ||||||||||||
Dividends per common share | $ | 0.28 | $ | 0.25 | $ | 1.12 | $ | 0.98 | ||||||||
(1) Amounts may not sum due to rounding | ||||||||||||||||
American Water Works Company, Inc. and Subsidiary Companies | ||||||||
Condensed Consolidated Balance Sheet Information (Unaudited) | ||||||||
In thousands | ||||||||
December 31, | ||||||||
2013 | 2012 | |||||||
Cash and cash equivalents | $ | 26,964 | $ | 24,433 | ||||
Other current assets | 523,426 | 475,014 | ||||||
Total property, plant and equipment | 12,391,162 | 11,739,364 | ||||||
Total regulatory and other long-term assets | 2,127,981 | 2,480,165 | ||||||
Total Assets | $ | 15,069,533 | $ | 14,718,976 | ||||
Short-term debt | $ | 630,307 | $ | 269,985 | ||||
Current portion of long-term debt | 14,174 | 115,919 | ||||||
Other current liabilities | 591,052 | 608,928 | ||||||
Long-term debt | 5,230,058 | 5,209,370 | ||||||
Total regulatory and other long-term liabilities | 2,833,434 | 3,073,650 | ||||||
Contributions in aid of construction | 1,042,704 | 996,136 | ||||||
Total stockholders' equity | 4,727,804 | 4,444,988 | ||||||
Total Capitalization and Liabilities | $ | 15,069,533 | $ | 14,718,976 | ||||
Adjusted net income and EPS (A Non-GAAP, unaudited measure) | ||||||||
In thousands except per share data | ||||||||
Year Ended December 31, 2013 | ||||||||
Diluted Earnings | ||||||||
Income | Per Share | |||||||
Net income per GAAP | $ | 369,264 | $ | 2.06 | ||||
Add: After-tax impact of tender offer loss on debt extinguishment (a) | 24,756 | 0.14 | ||||||
Adjusted net income | $ | 394,020 | $ | 2.20 | ||||
(a) Includes repurchase premium, transaction fees and write-off of unamortized debt issuance costs | ||||||||
Regulated Operations and Maintenance Efficiency Ratio (A Non-GAAP, unaudited measure) | ||||||||
In thousands | ||||||||
Years Ended | ||||||||
December 31, | ||||||||
2013 | 2012 | |||||||
Total Operation and Maintenance Expenses | $ | 1,312,724 | $ | 1,350,040 | ||||
Less: | ||||||||
Operation and maintenance expenses- Market-Based Operations | 264,253 | 276,809 | ||||||
Operation and maintenance expenses- Other | (56,973 | ) | (56,755 | ) | ||||
Total Regulated Operation and Maintenance Expense | 1,105,444 | 1,129,986 | ||||||
Less: | ||||||||
Regulated purchase water expense (a) | 111,119 | 110,173 | ||||||
Allocation of non-Operation and maintenance expense | 34,635 | 35,067 | ||||||
Adjusted Regulated Operation and Maintenance Expenses | $ | 959,690 | $ | 984,746 | ||||
Total Operating Revenues | $ | 2,901,858 | $ | 2,876,889 | ||||
Less: | ||||||||
Operating revenues - Market-Based Operations | 325,463 | 330,329 | ||||||
Operating revenues - Other | (17,523 | ) | (17,874 | ) | ||||
Total Regulated operating revenues | 2,593,918 | 2,564,434 | ||||||
Less: | ||||||||
Regulated purchase water revenues (a) | 111,119 | 110,173 | ||||||
Adjusted Regulated Operating Revenues | $ | 2,482,799 | $ | 2,454,261 | ||||
Regulated Operations and Maintenance Efficiency Ratio | 38.7 | % | 40.1 | % | ||||
(a) Calculation assumes purchased water revenues approximate purchased water expenses. | ||||||||
Click here to subscribe to Mobile Alerts for American Water.
American Water Works Company, Inc.
Edward Vallejo
Vice President, Investor Relations
856-566-4005
edward.vallejo@amwater.com
or
Maureen Duffy
Vice President, Communications
856-309-4546
maureen.duffy@amwater.com