-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B8UiQCJqRp7CLKkp79eLIILpXSr0H3r1aw6w5XrdbPKeB+RytC746necfR/ETeL4 3d7pue4M1SDDWE5rp85MbQ== 0000318819-96-000032.txt : 19960812 0000318819-96-000032.hdr.sgml : 19960812 ACCESSION NUMBER: 0000318819-96-000032 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960809 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN WATER WORKS CO INC CENTRAL INDEX KEY: 0000318819 STANDARD INDUSTRIAL CLASSIFICATION: WATER SUPPLY [4941] IRS NUMBER: 510063696 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03437 FILM NUMBER: 96607230 BUSINESS ADDRESS: STREET 1: 1025 LAUREL OAK RD CITY: VOORHEES STATE: NJ ZIP: 08043 BUSINESS PHONE: 6093468200 MAIL ADDRESS: STREET 1: 1025 LAUREL OAK ROAD CITY: VOORHEES STATE: NJ ZIP: 08043 10-Q 1 FORM 10-Q Page 1 of 20 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, 1996 --------------------------------------------- OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------------------------- ----------------- Commission File Number 1-3437-2 ----------------------------------------------------- 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 - --------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (609) 346-8200 - --------------------------------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable - --------------------------------------------------------------------------- (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, 1996, the number of shares of common stock, $1.25 par value, outstanding was 77,857,160 shares, reflecting a two-for-one stock split in the form of a 100% stock dividend, consummated after the close of the period ended June 30, 1996. Page 2 FORM 10-Q PART I FINANCIAL INFORMATION ---------------------------- 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) Three Months Ended June 30, 1996 1995 -------- -------- CONSOLIDATED INCOME Operating revenues $228,621 $200,662 -------- -------- Operating expenses Operation and maintenance 108,425 98,381 Depreciation and amortization 22,951 19,566 General taxes 20,448 18,924 -------- -------- 151,824 136,871 -------- -------- Operating income 76,797 63,791 Allowance for other funds used during construction 1,069 2,654 Gain from eminent domain litigation 0 6,600 Other income 556 178 -------- -------- 78,422 73,223 -------- -------- Income deductions Interest 34,622 29,239 Allowance for borrowed funds used during construction (1,041) (2,434) Amortization of debt expense 376 321 Preferred dividends of subsidiaries 909 926 Other deductions 442 579 -------- -------- 35,308 28,631 -------- -------- Income before income taxes 43,114 44,592 Provision for income taxes 16,609 17,167 Net income 26,505 27,425 Dividends on preferred stocks 996 996 -------- -------- Net income to common stock $ 25,509 $ 26,429 ======== ======== Average shares of common stock outstanding* 73,606 66,266 Earnings per common share on average shares outstanding* $ 0.35 $ 0.40 ======== ======== Page 3 FORM 10-Q Three Months Ended June 30, 1996 1995 -------- -------- CONSOLIDATED RETAINED EARNINGS Balance at beginning of period* $625,714 $579,798 Add - net income 26,505 27,425 Deduct - adjustment for 1996 two-for-one stock split, in the form of a 100% stock dividend, on shares issued after the close of the period 5,716 397 -------- -------- 646,503 606,826 -------- -------- Deduct - dividends Preferred stock 882 882 Preference stock 114 114 Common stock* - $.175 per share in 1996; $.16 per share in 1995 12,087 10,567 -------- -------- 13,083 11,563 -------- -------- Balance at end of period* $633,420 $595,263 ======== ======== *Adjusted for a two-for-one stock split, in the form of a 100% stock dividend, consummated after the close of the period. The accompanying notes are an integral part of these financial statements.
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) Six Months Ended June 30, 1996 1995 -------- -------- CONSOLIDATED INCOME Operating revenues $426,810 $381,506 -------- -------- Operating expenses Operation and maintenance 209,069 192,555 Depreciation and amortization 44,493 38,936 General taxes 41,026 38,214 -------- -------- 294,588 269,705 -------- -------- Operating income 132,222 111,801 Allowance for other funds used during construction 4,706 4,772 Gain from eminent domain litigation 0 6,600 Other income 839 515 -------- -------- 137,767 123,688 -------- -------- Income deductions Interest 67,320 57,917 Allowance for borrowed funds used during construction (3,669) (4,279) Amortization of debt expense 717 641 Preferred dividends of subsidiaries 1,821 1,860 Other deductions 787 990 -------- -------- 66,976 57,129 -------- -------- Income before income taxes 70,791 66,559 Provision for income taxes 27,255 25,587 Net income 43,536 40,972 Dividends on preferred stocks 1,992 1,992 -------- -------- Net income to common stock $ 41,544 $ 38,980 ======== ======== Average shares of common stock outstanding* 70,987 65,890 Earnings per common share on average shares outstanding* $ 0.59 $ 0.59 ======== ======== Page 5 FORM 10-Q Six Months Ended June 30, 1996 1995 -------- -------- CONSOLIDATED RETAINED EARNINGS Balance at beginning of period* $622,061 $578,051 Add - net income 43,536 40,972 Deduct - adjustment for 1996 two-for-one stock split, in the form of a 100% stock dividend, on shares issued after the close of the period 6,196 730 -------- -------- 659,401 618,293 -------- -------- Deduct - dividends Preferred stock 1,764 1,764 Preference stock 228 228 Common stock* - $.35 per share in 1996; $.32 per share in 1995 23,989 21,038 -------- -------- 25,981 23,030 -------- -------- Balance at end of period $633,420 $595,263 ======== ======== *Adjusted for a two-for-one stock split, in the form of a 100% stock dividend, consummated after the close of the period. The accompanying notes are an integral part of these financial statements.
Page 6 FORM 10-Q AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES ----------------------------------------------------------- Consolidated Balance Sheet (Unaudited) (In thousands) ** June 30 December 31 1996 1995 ---------- ----------- ASSETS Property, plant and equipment Utility plant - at original cost less accumulated depreciation $3,290,366 $ 2,884,681 Utility plant acquisition adjustments 55,972 34,974 Other utility plant adjustments 121 147 Non-utility property, net of accumulated depreciation 24,048 20,144 Excess of cost of investments in subsidiaries over book equity at acquisition 22,661 22,638 ---------- ----------- 3,393,168 2,962,584 ---------- ----------- Current assets Cash and cash equivalents 22,090 23,204 Temporary investments - at cost plus accrued interest 510 513 Customer accounts receivable 71,289 61,786 Allowance for uncollectible accounts (1,167) (1,030) Unbilled revenues 60,888 47,790 Miscellaneous receivables 5,417 4,571 Materials and supplies 12,206 9,599 Deferred vacation pay 12,912 9,374 Other 12,774 8,563 ---------- ----------- 196,919 164,370 ---------- ----------- Regulatory and other long-term assets Regulatory asset - income taxes recoverable through rates 175,332 172,265 Funds restricted for construction 7,528 13,927 Debt and preferred stock expense 26,137 20,753 Deferred pension expense 15,773 16,468 Deferred postretirement benefit expense 11,701 11,418 Accrued revenue 9,494 1,717 Deferred treatment plant costs 8,678 0 Tank painting costs 8,504 8,901 Other 36,712 30,738 ---------- ----------- 299,859 276,187 ---------- ----------- $3,889,946 $ 3,403,141 ========== =========== Page 7 FORM 10-Q AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES ----------------------------------------------------------- Consolidated Balance Sheet (Unaudited) (In thousands) ** June 30 December 31 1996 1995 ---------- ----------- CAPITALIZATION AND LIABILITIES Capitalization Common stock* $ 97,174 $ 84,783 Paid-in capital 285,324 114,161 Retained earnings* 633,420 622,061 Unearned compensation (2,119) (2,066) ---------- ----------- Common stockholders' equity 1,013,799 818,939 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 41,885 42,326 Preferred stocks of subsidiaries without mandatory redemption requirements 6,285 6,288 Long-term debt American Water Works Company, Inc. 116,000 116,000 Subsidiaries 1,447,988 1,268,649 ---------- ----------- 2,677,630 2,303,875 ---------- ----------- Current liabilities Bank debt 230,742 148,639 Current portion of long-term debt 64,788 44,321 Accounts payable 22,690 43,300 Taxes accrued, including federal income 23,322 13,098 Interest accrued 28,955 26,263 Accrued vacation pay 13,068 9,512 Other 35,409 35,940 ---------- ----------- 418,974 321,073 ---------- ----------- Page 8 FORM 10-Q ** June 30 December 31 1996 1995 ---------- ----------- Regulatory and other long-term liabilities Advances for construction $ 131,077 $ 131,141 Deferred income taxes 364,589 356,608 Deferred investment tax credits 37,913 38,515 Accrued pension expense 25,962 30,652 Accrued postretirement benefit expense 9,100 9,100 Other 9,989 3,840 ---------- ----------- 578,630 569,856 ---------- ----------- Contributions in aid of construction 214,712 208,337 ---------- ----------- Commitments and contingencies 0 0 ---------- ----------- $3,889,946 $ 3,403,141 ========== =========== *Adjusted for a two-for-one stock split, in the form of a 100% stock dividend, consummated after the close of the period. **Restated The accompanying notes are an integral part of these financial statements.
Page 9 FORM 10-Q AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES ----------------------------------------------------------- Consolidated Statement of Cash Flows (Unaudited) (In thousands) Six Months Ended June 30, 1996 1995 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 43,536 $ 40,972 Adjustments Depreciation and amortization 44,493 38,936 Provision for deferred income taxes 6,108 8,977 Provision for losses on accounts receivable 2,400 2,000 Allowance for other funds used during construction (4,706) (4,772) Employee benefit expenses less than funding (1,352) (1,920) Common stock contributions to employee benefit plans 2,433 717 Deferred tank painting costs (258) (231) Deferred rate case expense (1,324) (1,206) Amortization of deferred charges 4,763 3,710 Other, net (2,209) 582 Changes in assets and liabilities, net of effects from acquisition Accounts receivable (6,559) (9,586) Unbilled revenues (8,471) (10,153) Other current assets (5,383) (2,534) Accounts payable (20,610) (2,137) Taxes accrued, including federal income 10,224 5,518 Interest accrued 315 246 Other current liabilities (531) (2,561) -------- -------- Net cash from operating activities 62,869 66,558 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Construction expenditures (99,028) (136,517) Allowance for other funds used during construction 4,706 4,772 Water system acquisition, net of acquired cash (267,250) (4,215) Proceeds from the disposition of property, plant and equipment 531 1,166 Removal costs from property, plant and equipment retirements (1,757) (2,122) Funds restricted for construction activity 6,683 26,213 Temporary investments 3 906 -------- -------- Net cash used in investing activities (356,112) (109,797) -------- -------- Page 10 FORM 10-Q Six Months Ended June 30, 1996 1995 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long-term debt $ 71,000 $ 13,500 Proceeds from common stock 174,213 13,835 Net borrowings (repayments) under line-of-credit agreements 82,103 32,747 Advances and contributions for construction, net of refunds 3,862 4,053 Debt and stock issuance costs (453) (937) Repayment of long-term debt (12,171) (12,233) Redemption of preferred stocks (444) (561) Dividends paid (25,981) (23,030) -------- -------- Net cash from financing activities 292,129 27,374 -------- -------- Net decrease in cash and cash equivalents (1,114) (15,865) Cash and cash equivalents at beginning of period 23,204 30,091 -------- -------- Cash and cash equivalents at end of period $ 22,090 $ 14,226 ======== ======== Cash paid during the period for: Interest, net of capitalized amount $ 66,315 $ 59,041 ======== ======== Income taxes $ 14,152 $ 13,392 ======== ======== Common stock issued in lieu of cash in connection with the Employees Stock Ownership Plan and the Savings Plan for Employees totaled $2,433 in 1996 and $717 in 1995. Debt and liabilities of $141 million and $7 million, respectively, were assumed in connection with the Acquisition. The accompanying notes are an integral part of these financial statements.
Page 11 FORM 10-Q AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES ----------------------------------------------------------- Information Accompanying Financial Statements (Unaudited) (In thousands, except share and per share amounts) June 30 December 31 1996 1995 ---------- ----------- 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 Cumulative preferential stock - $35 par value Authorized - 3,000,000 shares 0 0 ---------- ----------- $ 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*- 300,000,000 shares Outstanding*- 77,739,518 shares at June 30, 1996; 67,826,670 at December 31, 1995 $ 97,174 $ 84,783 Paid-in capital 285,324 114,161 Retained earnings* 633,420 622,061 Unearned compensation (2,119) (2,066) ---------- ----------- $1,013,799 $ 818,939 ========== =========== During the first six months of 1996*, 8,400,000 shares of common stock were issued in connection with public and private offerings, 1,013,826 shares were issued in connection with the Dividend Reinvestment and Stock Purchase Plan, 132,458 shares were issued in connection with the Employees' Stock Ownership Plan, 124,992 shares were issued in connection with the Savings Plan for Employees and 241,572 shares were issued in connection with the Long-Term Performance-Based Incentive Plan. At June 30, 1996, common shares reserved for issuance in connection with the Company's stock plans were 60,923,162 shares for the Stockholder Rights Plan, 7,588,502 shares for the Dividend Reinvestment and Stock Purchase Plan, 937,240 shares for the Employees' Stock Ownership Plan, 449,474 shares for the Savings Plan for Employees and 458,428 shares for the Long-Term Performance-Based Incentive Plan. *Adjusted for a two-for-one stock split, in the form of a 100% stock dividend, consummated after the close of the period. Page 12 FORM 10-Q AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES ----------------------------------------------------------- Notes to Consolidated Financial Statements (Unaudited) June 30, 1996 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 -- Acquisition On February 16, 1996, Pennsylvania-American Water Company, a subsidiary of American Water Works Company, Inc. (the "Company"), purchased the water utility operations of Pennsylvania Gas & Water Company ("PG&W," now known as PG Energy Inc.) for approximately $414 million (subject to certain adjustments) (the "Acquisition"). The operations acquired generated revenues of $66.3 million in calendar year 1995. The Company is accounting for the Acquisition as a purchase. The purchase price is subject to adjustment based upon the actual value of the net assets of the acquired operations as of the date of consummation of the Acquisition as compared to the estimated value of the net assets as of December 31, 1995. The purchase was funded through short-term borrowings and the assumption of $141 million of long-term debt and $7 million of other liabilities. A portion of the short-term debt has been repaid with proceeds from the Company's public and private offerings as discussed in Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Capital Resources and Liquidity on page 17. Included in the Company's net income to common stock for the second quarter and first six months of 1996 was approximately $1.0 million ($.02 per share) and $1.6 million ($.03 per share), respectively, attributable to the Acquisition. The pro forma results listed below were prepared as if the Acquisition and the public and private offerings had occurred on January 1, 1995 and include the historical results of the Company and the acquired operations. This unaudited pro forma information is not necessarily indicative of the results of operations that might have occurred had the Acquisition actually taken place on the date indicated, or of future results of operations of the combined entities (dollars in thousands, except per share data): Six months ended June 30, 1996 1995 -------- -------- Revenues $434,354 $413,956 Net income 43,962 45,657 Earnings per common share $ 0.59 $ 0.66 Page 13 FORM 10-Q AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES ----------------------------------------------------------- Notes to Consolidated Financial Statements (Unaudited)(contd.) June 30, 1996 NOTE 3 -- Public and Private Offerings of Common Stock On April 5, 1996, the Company filed a registration statement with the Securities and Exchange Commission for a proposed public offering of 3,643,100 shares of its common stock. Concurrently with and conditioned upon the completion of this offering, certain members of families that are existing large holders of common stock (the "Ware Family Buyers") agreed to purchase from the Company and the Company agreed to sell to the Ware Family Buyers 556,900 shares of common stock at the price to public less underwriting discounts and commissions in a private offering. The Ware Family Buyers include a special purpose company of which Marilyn Ware Lewis is Manager, which was established by three trusts for the benefit of the children of John H. Ware, 3rd and his wife Marian S. Ware and which agreed to purchase 450,000 of the 556,900 shares to be sold to the Ware Family Buyers. The Ware Family Buyers also include Rhoda C. Ware (through a limited partnership controlled by her) and certain members of her family who agreed to purchase a total of 106,900 of the 556,900 shares to be sold to the Ware Family Buyers (including 10,000 to be purchased by William R. Cobb). Marilyn Ware Lewis, the Chairman of the Board of the Company, and Paul W. Ware, a director of the Company, are the daughter and son of John H. Ware, 3rd and Marian S. Ware. Nancy W. Wainwright and William R. Cobb are directors of the Company and the daughter and son-in-law, respectively, of Rhoda C. Ware. As of March 27, 1996, members of the Ware Family, and charitable foundations set up by such members, beneficially owned approximately 9.2 million (or approximately 27%) of the outstanding shares of common stock. On May 9, 1996, the Company sold 3,643,100 shares of common stock to the public at $37.625 per share and 556,900 shares to the Ware Family Buyers at the price to the public of the public offering, less underwriting discounts and commissions. The net proceeds from the sale were $152.6 million, after deducting the underwriting discounts and commissions and estimated offering expenses payable by the Company. NOTE 4 -- Stock Split On July 3, 1996, the Company's Board of Directors authorized a two-for-one common stock split, in conjunction with stockholder's approval of an increase in the number of shares of common stock the Company is authorized to issue. Stockholders of the Company approved the increase in the number of shares of common stock the Company is authorized to issue from 100,000,000 shares to 300,000,000 shares at the Company's Annual Meeting of Stockholders held May 2, 1996. The stock split was paid in the form of a 100% stock dividend whereby each holder of shares of common stock received one additional share of common stock for each share owned. The stock dividend was paid on July 25, 1996 to shareholders of record on July 15, 1996. Upon effecting the stock dividend, the Company's dividend was adjusted accordingly. Page 14 FORM 10-Q AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES ----------------------------------------------------------- Notes to Consolidated Financial Statements (Unaudited) (contd.) June 30, 1996 NOTE 5 -- Regulatory Decision On March 13, 1996, the New Jersey Board of Public Utilities approved a $39.5 million per annum rate increase for New Jersey-American Water Company ("New Jersey-American"), including an estimated $13.5 million in annual revenues from potential wholesale customers. The increase reflects the completion of the Tri-County Water Supply Project that takes water from the Delaware River to a new treatment plant and then delivers it throughout the southern New Jersey area by way of a 29 mile pipeline. This regional project was designed partly as a supply source for certain water resellers who have been mandated by the state to reduce their intake from an aquifer that is suffering from declining water levels. The actual revenues that New Jersey-American receives will depend on many factors, including the number of potential wholesale customers that ultimately enter into contracts to use water from the project as their alternative source of supply and the volume of water sold. The applicable New Jersey statute provides for a 45 day appeal period from the date of the order. Rates, however, may be placed in effect, subject to refund, prior to the end of the appeal period. An appeal was filed with the New Jersey Board of Public Utilities. A subsequent appeal has been filed with the Appellate Division of the Superior Court of New Jersey. New Jersey-American is contesting this appeal, and in the opinion of its management, such appeal is not likely to succeed. However, should this appeal be upheld, the result would not have a material adverse effect on the operating results or financial position of New Jersey-American or the Company. Page 15 FORM 10-Q PART I - FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - -------------------------------------------------------------------------- Results of Operations - --------------------- Operating revenues for the second quarter and the first six months of 1996 were higher than for the same periods of 1995 by 14% and 12%, respectively. The increases are due to the acquisition of the regulated water operations of PG Energy Inc. (formerly known as Pennsylvania Gas and Water Company) on February 16, 1996 (The "Acquisition"), and authorized rate increases and increased sales volume for several subsidiaries. Revenues for the second quarter and first six months of 1996 reflect $15.8 million and $23.7 million, respectively, related to the Acquisition. During the first seven months of 1996, nine regulated subsidiaries received rate orders which are expected to provide approximately $57.8 million in additional annual revenues. On March 13, 1996, the New Jersey Board of Public Utilities approved a $39.5 million per annum rate increase for the Company's subsidiary in New Jersey. See Note 5 to the "Notes to Consolidated Financial Statements (Unaudited)" on page 14 for more information on the regulatory decision. Five subsidiaries have rate increase applications on file before regulatory agencies which, if granted in full, would provide approximately $12.2 million in additional annual revenues. Water sales volume for the first six months of 1996 increased 8% to 115.9 billion gallons versus 107.4 billion gallons in the same period of 1995. Residential, commercial, industrial, and other customers accounted for 53%, 22%, 15%, and 10%, respectively, of the 8% increase in the first six months. The sales volume during the second quarter of 1996 increased 10% to 60.9 billion gallons from 55.6 billion gallons in the second quarter of 1995. Residential, commercial, industrial, and other customers accounted for 58%, 23%, 12%, and 7%, respectively, of the 10% increase in the second quarter. The acquisition accounted for approximately 3.0 billion gallons of water sold in the second quarter of 1996 and 4.4 billion gallons for the first six months of 1996. Total operating expenses for the second quarter and the first six months of 1996 increased by 11% and 9%, respectively, over the same periods last year. Operating expenses in 1996 include expenses relating to the regulated water operations of the Acquisition. Increases in operation and maintenance expenses were limited by continuing efforts to achieve cost efficiencies. 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 deductions, primarily interest, were 23% higher for the second quarter and 17% higher for the first six months when compared to 1995. This increase can be attributed primarily to an increase in debt to initially fund the Acquisition. Income taxes decreased in the second quarter and increased in the first six months of 1996 when compared to the same periods in 1995. The second quarter decrease was the result of the tax effect of a one-time gain from the conclusion of litigation relating to the sale of assets in Massachusetts in 1995. The first six months increase can be attributed to increased earnings in 1996. Page 16 FORM 10-Q PART I - FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (contd.) - -------------------------------------------------------------------------- Results of Operations - ------------------------------ Net income to common stock was $25.5 million for the second quarter of 1996 compared with $26.4 million for the same period in 1995. Net income to common stock for the first six months of 1996 was $41.5 million compared with $39.0 million for the first six months of 1995. 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 eminent domain litigation relating to the sale 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. The net income to common stock for the first quarter and first six months of 1996 included approximately $1.0 million and $1.6 million, respectively, attributed to the Acquisition. Page 17 FORM 10-Q PART I - FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (contd.) - -------------------------------------------------------------------------- Capital Resources and Liquidity - -------------------------------- During the balance of 1996, the Company plans to continue issuing common stock through its Dividend Reinvestment and Stock Purchase 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 $71.0 million of long-term debt during the first six months of 1996. One subsidiary, Pennsylvania-American Water Company, assumed $141 million of long-term debt in conjunction with the Acquisition. In addition, the Company invested $195.1 million in the common stock of six subsidiaries. The proceeds from these financing arrangements have been used to partially fund the Acquisition, fund construction programs and repay bank borrowings. It is anticipated that some subsidiaries will sell long-term debt to institutional investors, tax- exempt bonds through a government entity to the market place and common stock to the Company during the remainder of 1996, with the proceeds used to repay bank loans and to fund construction projects. In May, the Company's public offering of 3,643,100 shares of common stock at $37.625 per share was completed. All of the shares were sold by the Company. In addition, a private offering of 556,900 shares occurred at the price to the public of the public offering, less underwriting discounts and commissions. The Company used the proceeds from the sale of the common stock to invest in the common equity of its subsidiary, Pennsylvania-American Water Company, which in turn reduced short-term indebtedness incurred to finance the Acquisition. See Notes 2 and 3 to the "Notes to Consolidated Financial Statements (Unaudited)" on pages 12 and 13 for additional information relating to the Acquisition and the public and private offerings . The Company paid a 100 percent stock dividend on July 25, 1996 to shareholders of record on July 15, 1996. The Company also declared its regular quarterly dividend of 17.5 cents per share on its post-split common stock, payable August 15, 1996 to shareholders of record on August 2, 1996. For additional information relating to the stock split, see Note 4 to the "Notes to Consolidated Financial Statements (Unaudited)" on page 13. Page 18 FORM 10-Q PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders ------------------------------------------------------------ The 1996 annual meeting of stockholders of the Company was held on Thursday, May 2, 1996. A proposal to amend the Company's Restated Certificate of Incorporation, as amended, to increase the Company's number of authorized shares of common stock from 100,000,000 to 300,000,000 was voted upon at the meeting. Results of the voting were 25,332,483 votes cast in favor of the proposal to increase the number of authorized shares of the Company's common stock and 4,313,160 votes cast against such proposal and 232,047 votes abstained from voting on the proposal. "Abstain" votes and broker non-votes and the effect of an "against" vote in as much as the affirmative vote of a majority of the votes entitled to be cast on the proposal was necessary for approval. Page 19 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 electronically. B. Reports on Form 8-K ------------------- A current report on Form 8-K was filed on March 1, 1996, by the Company describing a subsidiary's acquisition (the "Acquisition") of the regulated water operations and certain related assets of PG Energy Inc. (formerly known as Pennsylvania Gas and Water Company)(the "Acquired Business"), as required under Item 2 of Form 8-K. Form 8-K/A was filed on April 3, 1996, amending Item 7. Financial Statements, Pro Forma Financial Information and Exhibits to the Current Form 8-K filed on March 1, 1996. The required financial statements were not filed with the Current Report on March 1, 1996, due to the impracticability of filing such information as allowed by Item 7(a)(4) and Item 7(b)(2). Form 8-K/A filed on April 3, 1996, included the unaudited pro forma balance sheet presenting the combined financial position of the Company and the Acquired Business as of December 31, 1995, assuming that the Acquisition had occurred as of December 31, 1995. The unaudited pro forma condensed statement of income was filed giving effect to the Acquisition by combining the results of operations of the Company for the year ended December 31, 1995, with the results of operations of the Acquired Business for the year ended December 31, 1995. In addition, the Report of Independent Public Accountants and the audited financial statements of the Acquired Business were included with the 8-K/A filed on April 3, 1996. A current report on Form 8-K was filed by the Company on April 25, 1996, reporting the results of operations for the quarter ended March 31, 1996. Page 20 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 7, 1996 /s/ George W. Johnstone - ------------------- -------------------------------------- George W. Johnstone, President and CEO (Authorized Officer) Date August 7, 1996 /s/ Robert D. Sievers - --------------------- -------------------------------------- Robert D. Sievers, Comptroller (Chief Accounting Officer) EX-27 2
OPUR1 0000318819 R. D. SIEVERS 1,000 6-MOS DEC-31-1996 JUN-30-1996 PER-BOOK 3,290,366 102,802 196,919 263,147 36,712 3,889,946 97,174 283,205 633,420 1,013,799 81,885 17,958 1,563,988 230,742 0 0 64,788 0 0 0 916,786 3,889,946 426,810 27,255 294,588 321,843 104,967 5,889 110,856 67,320 43,536 1,992 41,544 23,989 59,479 62,869 .59 0
-----END PRIVACY-ENHANCED MESSAGE-----