FORM 10-Q Page 1 of 16
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 June 30, 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.
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(Exact name of registrant as specified in its charter)
Delaware 51-0063696
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(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 August 1, 1995, the number of shares of common stock, $1.25 par value,
outstanding was 33,403,919 shares.
<PAGE> Page 2 FORM 10-Q
PART I FINANCIAL INFORMATION
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Item 1. Financial Statements
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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
June 30,
1995 1994
-------- --------
<S> <C> <C>
CONSOLIDATED INCOME
Operating revenues $200,662 $195,136
-------- --------
Operating expenses
Operation and maintenance 98,381 96,263
Depreciation and amortization 19,566 17,793
General taxes 18,924 18,036
State income taxes 2,517 2,102
Federal income taxes 14,650 12,242
-------- --------
154,038 146,436
-------- --------
Operating income 46,624 48,700
Allowance for other funds used during
construction 2,654 1,367
Gain from eminent domain litigation 6,611 0
Other income 167 714
-------- --------
56,056 50,781
-------- --------
Income deductions
Interest 29,239 27,500
Allowance for borrowed funds used
during construction (2,434) (1,033)
Amortization of debt expense 321 308
Preferred dividends of subsidiaries 926 954
Other deductions 579 323
-------- --------
28,631 28,052
-------- --------
Net income 27,425 22,729
Dividends on preferred stocks 996 996
-------- --------
Net income to common stock $ 26,429 $ 21,733
======== ========
Average shares of common stock outstanding 33,133 31,736
Earnings per common share on average shares
outstanding $ 0.80 $ 0.68
======== ========
CONSOLIDATED RETAINED EARNINGS
Balance at beginning of period $620,955 $579,588
Add - net income 27,425 22,729
-------- --------
648,380 602,317
-------- --------
<PAGE> Page 3 FORM 10-Q
Three Months Ended
June 30,
1995 1994
-------- --------
<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 10,567 8,537
-------- --------
11,563 9,533
-------- --------
Balance at end of period $636,817 $592,784
======== ========
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
-----------------------------------------------------------
Consolidated Statements of Income and Retained Earnings (Unaudited)
(In thousands, except per share amounts)
<TABLE>
Six Months Ended
June 30,
1995 1994
-------- --------
<S> <C> <C>
CONSOLIDATED INCOME
Operating revenues $381,506 $372,795
-------- --------
Operating expenses
Operation and maintenance 192,555 193,411
Depreciation and amortization 38,936 35,671
General taxes 38,214 36,783
State income taxes 3,699 3,210
Federal income taxes 21,888 18,205
-------- --------
295,292 287,280
-------- --------
Operating income 86,214 85,515
Allowance for other funds used during
construction 4,772 2,472
Gain from eminent domain litigation 6,611 0
Other income 504 1,099
-------- --------
98,101 89,086
-------- --------
Income deductions
Interest 57,917 54,220
Allowance for borrowed funds used
during construction (4,279) (1,774)
Amortization of debt expense 641 601
Preferred dividends of subsidiaries 1,860 1,926
Other deductions 990 954
-------- --------
57,129 55,927
-------- --------
Net income 40,972 33,159
Dividends on preferred stocks 1,992 1,992
-------- --------
Net income to common stock $ 38,980 $ 31,167
======== ========
Average shares of common stock outstanding 32,945 31,500
Earnings per common share on average shares
outstanding $ 1.18 $ 0.99
======== ========
CONSOLIDATED RETAINED EARNINGS
Balance at beginning of period $618,875 $578,593
Add - net income 40,972 33,159
-------- --------
659,847 611,752
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<PAGE> Page 5 FORM 10-Q
Six Months Ended
June 30,
1995 1994
-------- --------
<S> <C> <C>
Deduct - dividends
Preferred stock $ 1,764 $ 1,764
Preference stock 228 228
Common stock - $.64 per share in 1995;
$.54 per share in 1994 21,038 16,976
-------- --------
23,030 18,968
-------- --------
Balance at end of period $636,817 $592,784
======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> Page 6 FORM 10-Q
AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES
-----------------------------------------------------------
Consolidated Balance Sheet (Unaudited)
(In thousands)
June 30 December 31
1995 1994
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ASSETS
Property, plant and equipment
Utility plant - at original cost less
accumulated depreciation $2,745,078 $2,645,079
Utility plant acquisition adjustments 38,359 39,212
Other utility plant adjustments 171 196
Non-utility property, net of accumulated
depreciation 19,603 18,951
Excess of cost of investments in
subsidiaries over book equity at
acquisition 22,706 22,681
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2,825,917 2,726,119
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Current assets
Cash and cash equivalents 14,226 30,091
Temporary investments - at cost plus
accrued interest 542 1,448
Customer accounts receivable 50,536 50,375
Allowance for uncollectible accounts (1,020) (999)
Unbilled revenues 67,840 57,687
Miscellaneous receivables 12,788 5,342
Materials and supplies 10,524 9,846
Deferred vacation pay 10,838 9,256
Other 9,387 7,531
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175,661 170,577
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Regulatory and other long-term assets
Regulatory asset - income taxes
recoverable through rates 203,889 202,967
Funds restricted for construction 0 26,213
Debt and preferred stock expense 18,957 18,882
Deferred pension expense 17,161 17,931
Deferred postretirement benefit expense 9,328 8,545
Tank painting costs 8,521 8,997
Other 29,575 26,423
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287,431 309,958
---------- ----------
$3,289,009 $3,206,654
========== ==========
<PAGE> Page 7 FORM 10-Q
AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES
-----------------------------------------------------------
Consolidated Balance Sheet (Unaudited)
(In thousands)
<TABLE>
June 30 December 31
1995 1994
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<S> <C> <C>
CAPITALIZATION AND LIABILITIES
Capitalization
Common stock $ 41,554 $ 40,824
Paid-in capital 92,416 76,003
Retained earnings 636,817 618,875
Unearned compensation (2,591) (2,262)
---------- ----------
Common stockholders' equity 768,196 733,440
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 43,176 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 1,178,439 1,177,043
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2,178,772 2,143,181
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Current liabilities
Bank debt 115,172 82,425
Current portion of long-term debt 73,800 73,929
Accounts payable 41,492 43,629
Taxes accrued, including federal income 18,870 13,352
Interest accrued 26,542 26,296
Accrued vacation pay 11,179 9,575
Other 25,026 27,587
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312,081 276,793
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<PAGE> Page 8 FORM 10-Q
June 30 December 31
1995 1994
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<S> <C> <C>
Regulatory and other long-term liabilities
Advances for construction $ 127,809 $ 130,617
Deferred income taxes 340,795 331,889
Regulatory liability - income taxes
refundable through rates 41,968 42,946
Deferred investment tax credits 39,080 39,702
Accrued pension expense 28,157 29,121
Accrued postretirement benefit expense 9,100 9,100
Other 7,347 4,902
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594,256 588,277
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Contributions in aid of construction 203,900 198,403
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Commitments and contingencies 0 0
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$3,289,009 $3,206,654
========== ==========
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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Consolidated Statement of Cash Flows (Unaudited)
(In thousands)
<TABLE>
Six Months Ended
June 30,
1995 1994
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 40,972 $ 33,159
Adjustments
Depreciation and amortization 38,936 35,671
Provision for deferred income taxes 8,977 7,028
Provision for losses on accounts receivable 2,000 1,676
Allowance for other funds used during
construction (4,772) (2,472)
Employee benefit expenses less
than funding (1,920) (754)
Common stock contributions to employee
benefit plans 717 1,725
Deferred revenues, net (6) (30)
Deferred tank painting costs (231) (582)
Deferred rate case expense (1,206) (821)
Amortization of deferred charges 3,710 4,162
Other, net 588 (3,487)
Changes in assets and liabilities
Accounts receivable (9,586) (6,676)
Unbilled revenues (10,153) (9,934)
Other current assets (2,534) (5,026)
Accounts payable (2,137) (4,449)
Taxes accrued, including federal income 5,518 8,310
Interest accrued 246 2,662
Other current liabilities (2,561) 4,085
-------- --------
Net cash from operating activities 66,558 64,247
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CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures (136,517) (101,211)
Allowance for other funds used during
construction 4,772 2,472
Water system acquisition, net of acquired cash (4,215) (3,057)
Proceeds from the disposition of property,
plant and equipment 1,166 991
Removal costs from property, plant and
equipment retirements (2,122) (1,656)
Funds restricted for construction activity 26,213 4,492
Temporary investments 906 (1)
-------- --------
Net cash used in investing activities (109,797) (97,970)
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<PAGE> Page 10 FORM 10-Q
Six Months Ended
June 30,
1995 1994
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<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt $ 13,500 $ 86,100
Proceeds from common stock 13,835 19,140
19,140 Net borrowings (repayments)
under line-of-credit agreements 32,747 (86,395)
Advances and contributions for construction,
net of refunds 4,053 7,391
Debt and stock issuance costs (937) (1,455)
Repayment of long-term debt (12,233) (2,308)
Redemption of preferred stocks (561) (1,842)
Dividends paid (23,030) (18,968)
-------- --------
Net cash from financing activities 27,374 1,663
-------- --------
Net decrease in cash and
cash equivalents (15,865) (32,060)
Cash and cash equivalents at beginning
of period 30,091 52,979
-------- --------
Cash and cash equivalents at end of period $ 14,226 $ 20,919
======== ========
Cash paid during the period for:
Interest, net of capitalized amount $ 59,041 $ 52,269
======== ========
Income taxes $ 13,392 $ 12,500
======== ========
Common stock issued in lieu of cash in connection with the Savings Plan
for Employees and the Employees' Stock Ownership Plan totaled $717 in 1995
and $1,725 in 1994.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> Page 11 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)
June 30 December 31
1995 1994
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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 - 33,243,394 shares at
June 30, 1995;
32,659,187 at December 31, 1994 $ 41,554 $ 40,824
Paid-in capital 92,416 76,003
Retained earnings 636,817 618,875
Unearned compensation (2,591) (2,262)
-------- --------
$768,196 $733,440
======== ========
During the first six months of 1995, 531,093 shares of common stock were
issued in connection with the Dividend Reinvestment and Stock Purchase
Plan, and 53,114 shares were issued in connection with the Savings Plan for
Employees. At June 30, 1995, common shares reserved for issuance in
connection with the Company's stock plans were 30,461,581 shares for the
Stockholder Rights Plan, 4,844,550 shares for the Dividend Reinvestment and
Stock Purchase Plan, 612,214 shares for the Employees' Stock Ownership
Plan, 336,423 shares for the Savings Plan for Employees and 350,000 shares
for the Long-Term Performance-Based Incentive Plan.
<PAGE> Page 12 FORM 10-Q
AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES
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Notes to Consolidated Financial Statements (Unaudited)
June 30, 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.
NOTE 2 -- Acquisitions
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.
NOTE 3 -- Grafton Settlement
During the second quarter the Company resolved its litigation with the
Grafton Water District in Massachusetts to recover the fair market value of
the water utility taken through eminent domain by the District in 1988. In
1990, a jury awarded the Company $5.6 million for these assets. Since that
time, the District pursued various appeals, all of which resulted in
reaffirmation of the jury award. In addition to the approximately $1.1
million paid by the District in 1988, the Company received $6.6 million
which includes the remainder of the jury award and $2.1 million in
interest. This produced a gain of $3.9 million after applicable income
taxes.
<PAGE> Page 13 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 second quarter and the first six months of 1995
were higher than for the same periods of 1994 by 3% and 2%, respectively.
The increases are due to the result of rate increases authorized for
certain subsidiaries.
During the first seven months of 1995, four operating subsidiaries received
rate orders which are expected to provide approximately $9.6 million in
additional annual revenues. Eleven subsidiaries have rate increase
applications on file before regulatory agencies which, if granted in full,
would provide approximately $83.1 million in additional revenues.
Water sales volume for the first six months of 1995 declined 2% to 107.4
billion gallons versus 109.7 billion gallons in 1994. Residential,
commercial, industrial, and other customers accounted for 26%, 10%, 34%,
and 28%, respectively, of the 2% decrease in the first six months. The
sales volume during the second quarter decreased 2% to 55.6 billion gallons
from 56.4 billion gallons in 1994. Residential, commercial, industrial,
and other customers accounted for 20%, 25%, 36%, and 19%, respectively, of
the 2% decrease in the second quarter.
Operating expenses for the second quarter and the first six months of 1995
increased by 5% and 3%, respectively, over the same periods last year. The
increase in operating expenses can be attributed to higher general tax,
income tax, and depreciation expenses.
Income deductions, primarily interest, were 2% higher for the second
quarter and the first six months when compared to 1994. This increase can
be attributed primarily to an increase in debt.
Net income to common stock was $26.4 million for the second quarter of 1995
compared with $21.7 million for the same period in 1994. Net income to
common stock for the first six months of 1995 was $39.0 million compared
with $31.2 million for the first six months of 1994. A one-time after-tax
gain of $3.9 million was recorded in the second quarter of 1995 reflecting
proceeds of $6.6 million from the conclusion of litigation relating to the
condemnation of water system assets in Grafton, Massachusetts. Without
this one-time gain, net income to common stock for the second quarter and
the first six months of 1995 was $22.5 million and $35.1 million.
<PAGE> Page 14 FORM 10-Q
Capital Resources and Liquidity
--------------------------------
During the balance of 1995, the Company plans to continue issuing 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.
Four operating subsidiaries issued $13.5 million of long-term debt during
the first six months of 1995. In addition, the Company invested $32.0
million in the common stock of four subsidiaries. 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 to 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.
In July, the Orange County Local Agency Formation Commission decided not to
approve a $300 million proposal from California-American Water company, a
subsidiary, to acquire the water and wastewater systems of the Santa
Margarita Water District ("the District") in Orange County, California.
This proposal, made in conjunction with a petition by customers of the
District, was filed in May 1994.
The Company will continue to seek other opportunities, large and small, to
acquire public water systems where we believe our ownership and operations
will cause more effective and efficient water service to be provided.
<PAGE> Page 15 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 June 30, 1995.
<PAGE> Page 16 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 August 4, 1995 /s/ George W. Johnstone
---------------- --------------------------------------
George W. Johnstone, President and CEO
(Authorized Officer)
Date August 4, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,745,078
<OTHER-PROPERTY-AND-INVEST> 80,839
<TOTAL-CURRENT-ASSETS> 175,661
<TOTAL-DEFERRED-CHARGES> 257,856
<OTHER-ASSETS> 29,575
<TOTAL-ASSETS> 3,289,009
<COMMON> 41,554
<CAPITAL-SURPLUS-PAID-IN> 89,825
<RETAINED-EARNINGS> 636,817
<TOTAL-COMMON-STOCKHOLDERS-EQ> 768,196
83,176
17,961
<LONG-TERM-DEBT-NET> 1,309,439
<SHORT-TERM-NOTES> 115,172
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 73,800
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 921,265
<TOT-CAPITALIZATION-AND-LIAB> 3,289,009
<GROSS-OPERATING-REVENUE> 381,506
<INCOME-TAX-EXPENSE> 25,587
<OTHER-OPERATING-EXPENSES> 269,705
<TOTAL-OPERATING-EXPENSES> 295,292
<OPERATING-INCOME-LOSS> 86,214
<OTHER-INCOME-NET> 12,675
<INCOME-BEFORE-INTEREST-EXPEN> 98,889
<TOTAL-INTEREST-EXPENSE> 57,917
<NET-INCOME> 40,972
1,992
<EARNINGS-AVAILABLE-FOR-COMM> 38,980
<COMMON-STOCK-DIVIDENDS> 21,038
<TOTAL-INTEREST-ON-BONDS> 55,957
<CASH-FLOW-OPERATIONS> 66,558
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 0
</TABLE>
