FORM 10-Q Page 1 of 14
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
---------------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-3437-2
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AMERICAN WATER WORKS COMPANY, INC.
- ---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 51-0063696
- ------------------------------- -----------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1025 Laurel Oak Road, Voorhees, New Jersey 08043
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(Address of principal executive offices) (Zip Code)
(609) 346-8200
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
At May 1, 1995, the number of shares of common stock, $1.25 par value,
outstanding was 33,024,458 shares.
<PAGE> Page 2 FORM 10-Q
PART I FINANCIAL INFORMATION
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Item 1. Financial Statements
-----------------------------
AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES
-----------------------------------------------------------
Consolidated Statements of Income and Retained Earnings (Unaudited)
(In thousands, except per share amounts)
<TABLE>
Three Months Ended
March 31,
1995 1994
-------- --------
<S> <C> <C>
CONSOLIDATED INCOME
Operating revenues $180,844 $177,659
-------- --------
Operating expenses
Operation and maintenance 94,174 97,148
Depreciation and amortization 19,370 17,878
General taxes 19,290 18,747
State income taxes 1,182 1,108
Federal income taxes 7,238 5,963
-------- --------
141,254 140,844
-------- --------
Operating income 39,590 36,815
Allowance for other funds used during
construction 2,118 1,105
Other income 337 385
-------- --------
42,045 38,305
-------- --------
Income deductions
Interest 28,678 26,720
Allowance for borrowed funds used
during construction (1,845) (741)
Amortization of debt expense 320 293
Preferred dividends of subsidiaries 934 972
Other deductions 411 631
-------- --------
28,498 27,875
-------- --------
Net income 13,547 10,430
Dividends on preferred stocks 996 996
-------- --------
Net income to common stock $ 12,551 $ 9,434
======== ========
Average shares of common stock outstanding 32,794 31,305
Earnings per common share on average shares
outstanding $ 0.38 $ 0.30
======== ========
CONSOLIDATED RETAINED EARNINGS
Balance at beginning of period $618,875 $578,593
Add - net income 13,547 10,430
-------- --------
632,422 589,023
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<PAGE> Page 3 FORM 10-Q
Three Months Ended
March 31,
1995 1994
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<S> <C> <C>
Deduct - dividends
Preferred stock $ 882 $ 882
Preference stock 114 114
Common stock - $.32 per share in 1995;
$.27 per share in 1994 10,471 8,439
-------- --------
11,467 9,435
-------- --------
Balance at end of period $620,955 $579,588
======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> Page 4 FORM 10-Q
AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES
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Consolidated Balance Sheet (Unaudited)
(In thousands)
March 31 December 31
1995 1994
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ASSETS
Property, plant and equipment
Utility plant - at original cost less
accumulated depreciation $2,682,133 $2,645,079
Utility plant acquisition adjustments 38,247 39,212
Other utility plant adjustments 184 196
Non-utility property, net of accumulated
depreciation 19,197 18,951
Excess of cost of investments in
subsidiaries over book equity at
acquisition 22,693 22,681
---------- ----------
2,762,454 2,726,119
---------- ----------
Current assets
Cash and cash equivalents 42,974 30,091
Temporary investments - at cost plus
accrued interest 951 1,448
Customer accounts receivable 45,301 50,375
Allowance for uncollectible accounts (930) (999)
Unbilled revenues 57,876 57,687
Miscellaneous receivables 4,237 5,342
Materials and supplies 10,167 9,846
Deferred vacation pay 10,617 9,256
Other 6,606 7,531
---------- ----------
177,799 170,577
---------- ----------
Regulatory and other long-term assets
Regulatory asset - income taxes
recoverable through rates 202,347 202,967
Funds restricted for construction 4,582 26,213
Debt and preferred stock expense 18,631 18,882
Deferred pension expense 17,564 17,931
Deferred postretirement benefit expense 9,026 8,545
Tank painting costs 8,660 8,997
Other 27,776 26,423
---------- ----------
288,586 309,958
---------- ----------
$3,228,839 $3,206,654
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE> Page 5 FORM 10-Q
AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES
-----------------------------------------------------------
Consolidated Balance Sheet (Unaudited)
(In thousands)
<TABLE>
March 31 December 31
1995 1994
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<S> <C> <C>
CAPITALIZATION AND LIABILITIES
Capitalization
Common stock $ 41,158 $ 40,824
Paid-in capital 83,849 76,003
Retained earnings 620,955 618,875
Unearned compensation (2,645) (2,262)
---------- ----------
Common stockholders' equity 743,317 733,440
Preferred stocks with mandatory redemption
requirements 40,000 40,000
Preferred stocks without mandatory
redemption requirements 11,673 11,673
Preferred stocks of subsidiaries with
mandatory redemption requirements 43,472 43,737
Preferred stocks of subsidiaries without
mandatory redemption requirements 6,288 6,288
Long-term debt
American Water Works Company, Inc. 131,000 131,000
Subsidiaries 1,166,425 1,177,043
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2,142,175 2,143,181
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Current liabilities
Bank debt 98,482 82,425
Current portion of long-term debt 79,385 73,929
Accounts payable 29,396 43,629
Taxes accrued, including federal income 20,447 13,352
Interest accrued 31,185 26,296
Accrued vacation pay 10,988 9,575
Other 26,625 27,587
---------- ----------
296,508 276,793
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<PAGE> Page 6 FORM 10-Q
March 31 December 31
1995 1994
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<S> <C> <C>
Regulatory and other long-term liabilities
Advances for construction $ 128,646 $ 130,617
Deferred income taxes 335,175 331,889
Regulatory liability - income taxes
refundable through rates 42,311 42,946
Deferred investment tax credits 39,390 39,702
Accrued pension expense 28,355 29,121
Accrued postretirement benefit expense 9,100 9,100
Other 7,018 4,902
---------- ----------
589,995 588,277
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Contributions in aid of construction 200,161 198,403
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Commitments and contingencies 0 0
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$3,228,839 $3,206,654
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> Page 7 FORM 10-Q
AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES
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Consolidated Statement of Cash Flows (Unaudited)
(In thousands)
<TABLE>
Three Months Ended
March 31,
1995 1994
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 13,547 $ 10,430
Adjustments
Depreciation and amortization 19,370 17,878
Provision for deferred income taxes 4,835 3,664
Provision for losses on accounts receivable 951 740
Allowance for other funds used during
construction (2,118) (1,105)
Employee benefit expenses less
than funding (315) (321)
Common stock contributions to employee
benefit plans 353 117
Deferred revenues, net (4) 0
Deferred tank painting costs (16) (41)
Deferred rate case expense (452) (303)
Amortization of deferred charges 1,893 2,224
Other, net 1,416 203
Changes in assets and liabilities
Accounts receivable 5,159 677
Unbilled revenues (189) 415
Other current assets 604 (1,092)
Accounts payable (14,233) (8,661)
Taxes accrued, including federal income 7,095 8,049
Interest accrued 4,889 7,351
Other current liabilities (962) (7,098)
-------- --------
Net cash from operating activities 41,823 33,127
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CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures (57,131) (32,003)
Allowance for other funds used during
construction 2,118 1,105
Water system acquisition, net of acquired cash (15) 0
Proceeds from the disposition of property,
plant and equipment 151 359
Removal costs from property, plant and
equipment retirements (965) (818)
Funds restricted for construction activity 21,631 2,035
Temporary investments 497 (271)
-------- --------
Net cash used in investing activities (33,714) (29,593)
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<PAGE> Page 8 FORM 10-Q
Three Months Ended
March 31,
1995 1994
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<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt $ 0 $ 70,600
Proceeds from common stock 5,182 4,780
Net borrowings (repayments)
under line-of-credit agreements 16,057 (74,709)
Advances and contributions for construction,
net of refunds 531 1,660
Debt and stock issuance costs (102) (1,051)
Repayment of long-term debt (5,162) (245)
Redemption of preferred stocks (265) (1,577)
Dividends paid (11,467) (9,435)
-------- --------
Net cash from (used in) financing activities 4,774 (9,977)
-------- --------
Net increase (decrease) in cash and
cash equivalents 12,883 (6,443)
Cash and cash equivalents at beginning
of period 30,091 52,979
-------- --------
Cash and cash equivalents at end of period $ 42,974 $ 46,536
======== ========
Cash paid during the period for:
Interest, net of capitalized amount $ 24,487 $ 19,773
======== ========
Income taxes $ 2,273 $ 1,518
======== ========
Common stock issued in lieu of cash in connection with the Savings Plan
for Employees totaled $353 in 1995 and $117 in 1994.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> Page 9 FORM 10-Q
AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES
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Information Accompanying Financial Statements (Unaudited)
(In thousands, except share and per share amounts)
March 31 December 31
1995 1994
-------- --------
Capital Stock of American Water Works Company, Inc.
Preferred stocks with mandatory redemption requirements
Cumulative preferred stock - $25 par value
Authorized - 1,770,000 shares
8.50% series (non-voting) - 1,600,000 shares
outstanding $ 40,000 $ 40,000
-------- --------
$ 40,000 $ 40,000
======== ========
Preferred stocks without mandatory redemption requirements
Cumulative preferred stock - $25 par value
5% series (one-tenth of a vote per share)
- 101,777 shares outstanding $ 2,544 $ 2,544
Cumulative preference stock - $25 par value
Authorized - 750,000 shares
5% series (non-voting) - 365,158 shares
outstanding 9,129 9,129
-------- --------
$ 11,673 $ 11,673
======== ========
The terms of the 8.50% preferred stock provide that all shares of the
series shall be redeemed on December 1, 2000.
Common stockholders' equity
Common stock - $1.25 par value
Authorized - 100,000,000 shares
Outstanding - 32,926,189 shares at
March 31, 1995;
32,659,187 at December 31, 1994 $ 41,158 $ 40,824
Paid-in capital 83,849 76,003
Retained earnings 620,955 618,875
Unearned compensation (2,645) (2,262)
-------- --------
$743,317 $733,440
======== ========
During the first three months of 1995, 240,628 shares of common stock were
issued in connection with the Dividend Reinvestment and Stock Purchase
Plan, and 26,374 shares were issued in connection with the Savings Plan for
Employees. At March 31, 1995, common shares reserved for issuance in
connection with the Company's stock plans were 30,461,581 shares for the
Stockholder Rights Plan, 135,015 shares for the Dividend Reinvestment and
Stock Purchase Plan, 612,214 shares for the Employees' Stock Ownership
Plan, 363,163 shares for the Savings Plan for Employees and 350,000 shares
for the Long-Term Performance-Based Incentive Plan .
<PAGE> Page 10 FORM 10-Q
AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES
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Notes to Consolidated Financial Statements (Unaudited)
March 31, 1995
NOTE 1 -- Financial Statement Presentation
The information presented in this Form 10-Q is unaudited. In the opinion
of management the information reported reflects all adjustments, consisting
of normal recurring adjustments, which were necessary to a fair statement
of the results for the periods reported. Certain reclassifications have
been made to conform previously reported data to the current presentation.
<PAGE> Page 11 FORM 10-Q
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
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Results of Operations
- ---------------------
Operating revenues for the first quarter of 1995 were 2% higher than for
the first quarter of 1994 due to rate increases authorized for certain
subsidiaries.
During the first four months of 1995, two regulated subsidiaries received
rate orders which are expected to provide approximately $1.5 million in
additional annual revenues. Twelve subsidiaries have rate increase
applications on file before regulatory agencies which, if granted in full,
would provide approximately $100 million in additional revenues.
The 51.9 billion gallons of water sold in the first quarter of 1995 was 3%
less than the 53.3 billion gallons sold in the first quarter of 1994.
Residential, industrial and other customers accounted for 31%, 33% and 35%,
respectively, of the 3% decrease.
Operating expenses for the first quarter of 1995 remained at essentially
the same level as a year ago. Lower operation and maintenance expenses were
the result of significant efforts to improve productivity and milder winter
weather conditions. Depreciation expense was higher due to growth in
utility plant in service. Higher general tax expense reflects higher
property values and increased gross receipts. Income taxes increased as a
result of increased earnings.
Income deductions, primarily interest, were 2% higher for the first three
months when compared to 1994. This increase can be attributed primarily to
an increase in debt.
Net income to common stock was $12.6 million for the first quarter of 1995
compared with $9.4 million for the same period in 1994.
<PAGE> Page 12 FORM 10-Q
Capital Resources and Liquidity
- --------------------------------
During the balance of 1995, the Company plans to issue shares of common
stock through its Dividend Reinvestment and Stock Purchase Plan, the
Employees' Stock Ownership Plan, and the Savings Plan for Employees.
Proceeds from the issuance of common stock will fund additional equity
investments in subsidiaries.
One regulated subsidiary issued $3.0 million of long-term debt during the
first four months of 1995. In addition, the Company invested $2.0 million
in the common stock of the subsidiary. The proceeds from these financing
arrangements have been used to fund construction programs and repay bank
borrowings. It is anticipated that some subsidiaries will sell long-term
debt to institutional investors and common stock to the Company during the
remainder of 1995, with the proceeds used to repay bank loans and fund
construction projects.
In late April, the Company announced that its subsidiary, Pennsylvania-
American Water Company (PAWC), has agreed to purchase the water utility
operations of Pennsylvania Gas and Water Company(PG&W), a subsidiary of
Pennsylvania Enterprises, Inc.(PEI), for approximately $409 million. The
acquisition is contingent on, among other things, the approval of the
Pennsylvania Public Utility Commission and the stockholders and certain
debt holders of PEI and PG&W. The acquisition will serve a population of
approximately 400,000 people in 62 communities in northeastern
Pennsylvania.
Pennsylvania-American Water Company will fund the acquisition of the water
utility operations of Pennsylvania Gas and Water Company, if approved,
through short-term debt. The short-term debt will be refunded through the
issuance of long-term debt and the sale of common stock to the Company.
<PAGE> Page 13 FORM 10-Q
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
A. Exhibits
--------
Exhibit number (27), Financial Data Schedule, is filed herewith.
B. Reports on Form 8-K
-------------------
No report on Form 8-K was filed by the registrant during the quarter
ended March 31, 1995.
<PAGE> Page 14 FORM 10-Q
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN WATER WORKS COMPANY, INC.
Date May 5, 1995 /s/ George W. Johnstone
---------------- --------------------------------------
George W. Johnstone, President and CEO
(Authorized Officer)
Date May 5, 1995 /s/ Robert D. Sievers
---------------- --------------------------------------
Robert D. Sievers, Comptroller
(Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> OPUR1
<CIK> 0000318819
<NAME> R. D. SIEVERS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,682,133
<OTHER-PROPERTY-AND-INVEST> 80,321
<TOTAL-CURRENT-ASSETS> 177,799
<TOTAL-DEFERRED-CHARGES> 260,810
<OTHER-ASSETS> 27,776
<TOTAL-ASSETS> 3,228,839
<COMMON> 41,158
<CAPITAL-SURPLUS-PAID-IN> 81,204
<RETAINED-EARNINGS> 620,955
<TOTAL-COMMON-STOCKHOLDERS-EQ> 743,317
83,472
17,961
<LONG-TERM-DEBT-NET> 1,297,425
<SHORT-TERM-NOTES> 98,482
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 79,385
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 908,797
<TOT-CAPITALIZATION-AND-LIAB> 3,228,839
<GROSS-OPERATING-REVENUE> 180,844
<INCOME-TAX-EXPENSE> 8,420
<OTHER-OPERATING-EXPENSES> 132,834
<TOTAL-OPERATING-EXPENSES> 141,254
<OPERATING-INCOME-LOSS> 39,590
<OTHER-INCOME-NET> 2,635
<INCOME-BEFORE-INTEREST-EXPEN> 42,225
<TOTAL-INTEREST-EXPENSE> 28,678
<NET-INCOME> 13,547
996
<EARNINGS-AVAILABLE-FOR-COMM> 12,551
<COMMON-STOCK-DIVIDENDS> 10,471
<TOTAL-INTEREST-ON-BONDS> 27,938
<CASH-FLOW-OPERATIONS> 41,823
<EPS-PRIMARY> .38
<EPS-DILUTED> 0
</TABLE>
