Monday March 1, 2010
American Water Reports Fourth Quarter and Year-End 2009 Results; Announces 2010 Earnings Guidance
Source: Business Wire
--Net loss totaled $233.1 million or $1.39 per diluted share for 2009, including goodwill impairment charge
--Company is awarded annualized rate increases of approximately $80.9 million
--RWE completed divestiture in 2009
--Company announces earnings guidance for 2010: establishes range between $1.30 and $1.40 per share
American Water Works Company, Inc. /quotes/comstock/13*!awk/quotes/nls/awk (AWK 21.13, +0.05, +0.24%) , the largest investor-owned U.S. water and wastewater utility company, today reported results for the fourth quarter and year ended December 31, 2009. For the quarter, the company reported operating revenues of $597.8 million, a $29.3 million or 5.2 percent increase over the same period in 2008. For the year, the company reported operating revenues of $2.4 billion, a 4.4 percent increase over 2008 revenues of $2.3 billion.
Net income in the fourth quarter was $36.4 million, or $0.21 per basic and diluted common share, compared with $36.4 million or $0.23 per basic and diluted common share in the fourth quarter of 2008. For the year, including goodwill impairment charges, the company reported a net loss of $233.1 million, or $1.39 per basic and diluted common share, compared with a loss of $562.4 million, or $3.52 per basic and diluted common share in 2008. Excluding goodwill impairment charges, net income for 2009 was $209.9 million, or $1.25 per basic and diluted common share, compared with $176.1 million, or $1.10 per basic and diluted share in 2008, a 13.6 percent year-over-year increase in earnings per share.
"We are pleased with the solid results of the quarter and year," said Don Correll, president and CEO of American Water. "We faced challenges from the weather and the economy in 2009, yet we have grown our revenues, cash flow and excluding an impairment charge early on in the year primarily related to the weak stock market, we grew earnings per share by 13.6 percent."
In the fourth quarter 2009, the company's Regulated Businesses' revenues increased by $30.4 million or 6.0 percent over the prior year's period. For the year, the company's Regulated Businesses' revenues increased by $124.6 million or 6.0 percent over the prior year. The increases in both the quarter and the year were primarily a result of recognition of prudent investment through rate awards. Largely due to record-breaking wet, cool weather in many of American Water's regulated states, lower demand offset rate increases in 2009. Total volume of water sold decreased 6.2 percent for the quarter compared to the prior year's fourth quarter and 5.8 percent for the year compared to 2008.
The company's Non-regulated Businesses' revenues increased by $0.6 million, or 0.8 percent, for the fourth quarter of 2009 as compared to the prior year's fourth quarter and decreased by $14.5 million, or 5.3 percent, for the year compared to 2008. The decrease was primarily attributable to lower revenues in the Contract Operations Group and the Applied Water Management Group, partially offset by increased revenues in the Homeowner Services Group.
Operating expenses for the three-month period ended December 31, 2009, totaled $460.5 million, an increase of $21.0 million or 4.8 percent over the same period in 2008. For the year, operating expenses, excluding a goodwill impairment charge (a non-GAAP financial measure), totaled $1.8 billion, an increase of $43.3 million or 2.4 percent. The increase for both the quarter and year were primarily driven by increased cost of production, pension and other post-employment benefits expenses and depreciation.
Net cash provided by operating activities for the year ended December 31, 2009, increased approximately $44.0 million or 8.0 percent to $596.2 million. American Water received a $35.0 million federal income tax refund, including interest in the fourth quarter of 2008. Excluding the effect of this refund, 2009 cash flows from operating activities increased $79.0 million or 15.3 percent over 2008.
Capital expenditures for the year ended December 31, 2009, were $785.3 million compared to $1.0 billion in the prior year period.
"American Water continued its commitment to delivering reliable service to its customers in 2009," said Correll. "Reports from both the Environmental Protection Agency and the American Society of Civil Engineers relay that our country's water and wastewater infrastructure is facing a trillion dollar challenge and is in serious need of repair. American Water, through proactive, prudent investment has spent nearly two billion dollars in the last two years alone to help ensure the reliability of our water and wastewater services."
To fund American Water's ongoing capital program, repay short-term debt from the prior year, and return value to its shareholders through a dividend, the company received net proceeds of $242.3 million from its common equity issuance, incurred $722.9 million of incremental debt and used its cash flow from operations. The company issued $28.5 million in new tax-exempt bonds during the fourth quarter 2009, adding to a total of $179.9 million in tax-exempt bonds issued for the year. Additionally, the company remarketed, at fixed rates, $237.9 million in tax-exempt bonds during the fourth quarter 2009 and $339.0 million for the year.
The company received authorizations for additional annualized revenues from general rate cases of $49.5 million in the fourth quarter 2009, which brings the total for the year to $80.9 million. As of December 31, 2009, the company was awaiting final orders for general rate cases in nine states, requesting $218.9 million in total additional annual revenues. The extent to which requested rate increases will be granted by the applicable regulatory agencies will vary.
American Water continued to grow its business in 2009. Most recently, the company's subsidiary, American Water Enterprises, acquired Environmental Management Corporation (EMC). EMC has more than 50 contracts with industrial and municipal customers in the United States and Canada. During the year, the company also acquired several systems located in Pennsylvania, Indiana and West Virginia. With a combined purchase price of approximately $7.8 million, the newly acquired systems serve a total of nearly 5,000 people. The U.S. Department of Defense also continued to recognize American Water as a powerful solutions provider by awarding the company military base water and wastewater systems contracts. After earning several major contracts over the last two years, the company now serves approximately 400,000 servicemen and women, their families and support staff on bases across the U.S.
"American Water's growth during 2009 reflects a successful year of providing water solutions," said Correll. "From major military contracts to multiple acquisitions of water systems in need of repair, our experience and size allows us to offer innovative solutions to communities facing water quality, quantity and economic challenges."
In 2009, the divestiture of American Water stock by RWE was completed.
Also during the fourth quarter, the Board of Directors declared a quarterly cash dividend of $0.21 per common share. In 2009, the Board increased American Water's quarterly cash dividend payment by five percent from $0.20 to $0.21 per share. Dividends paid totaled $0.82 per common share for the year.
2010 Earnings Guidance
In order to enhance transparency for its investors, American Water has issued earnings guidance for 2010. The company's 2010 earnings are estimated to be in the range of $1.30 to $1.40 per share. The company's earnings forecasts are subject to numerous risks, including those described under "Forward-Looking Statements" below and under "Risk Factors" in its Annual Report on Form 10-K for the fiscal year ended December 31, 2009.
Non-GAAP Financial Measures
This press release includes a presentation of "Net income excluding impairment charge," "Basic income per common share excluding impairment charge," "Diluted net income per common share excluding impairment charge," and "Operating expenses excluding impairment charge." Each of these items is derived from our consolidated financial information but is not presented in our financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP). The items constitute "non-GAAP financial measures" under Securities and Exchange Commission rules. These non-GAAP financial measures supplement our GAAP disclosures and should not be considered an alternative to the GAAP measure.
Management believes that the presentation of these adjusted measures is useful to investors because it provides a means of evaluating the company's operating performance without giving effect to an impairment charge, which has been triggered principally by market factors that are largely out of the control of management and do not reflect the day-to-day operations of the company. Moreover, management believes that this presentation facilitates comparisons between the company and other companies in its industry. 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 impairment charges.
Set forth below are tables that reconcile the non-GAAP financial measures to the most directly comparable GAAP financial measure.
Fourth Quarter and Year-End 2009 Earnings Conference Call
The fourth quarter and year-end 2009 earnings conference call will take place Monday, March 1, 2010, at 9:00 a.m. Eastern Time. Interested parties may listen over the Internet by logging on to the Investor Relations page of the company's Web site at www.amwater.com.
Following the earnings conference call, an audio archive of the call will be available through March 8, 2010, by dialing 303-590-3030 for U.S. and international callers. The access code for replay is 4204123. The online archive of the webcast will be available through March 31, 2010, by accessing the Investor Relations page of the company's Web site located at www.amwater.com.
About American Water
Founded in 1886, American Water is the largest investor-owned U.S. water and wastewater utility company. With headquarters in Voorhees, N.J., the company employs more than 7, 000 dedicated professionals who provide drinking water, wastewater and other related services to approximately 16 million people in 35 states and Ontario and Manitoba, Canada.
Contact:
American Water Works Company, Inc.
Edward Vallejo
Vice President, Investor Relations
856-566-4005
edward.vallejo@amwater.com
or
Maureen Duffy
Director, Communications
856-309-4546
maureen.duffy@amwater.com
