-----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, FkfKGV/wBJVDNicwx4U03973YWCNzi5vfV4jzNqr9q9y75tme0AA0TcZI/i0Sz5U NITmLWh0Z6SNXcPmc7M/hQ== 0000318819-98-000011.txt : 19980514 0000318819-98-000011.hdr.sgml : 19980514 ACCESSION NUMBER: 0000318819-98-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980513 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: SEC FILE NUMBER: 001-03437 FILM NUMBER: 98617634 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 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, 1998 --------------------------------------------- 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 May 1, 1998, the number of shares of common stock, $1.25 par value, outstanding was 80,107,062 shares. 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 March 31, 1998 1997 -------- -------- CONSOLIDATED INCOME Operating revenues $226,000 $213,357 -------- -------- Operating expenses Operation and maintenance 102,032 100,753 Depreciation and amortization 28,509 25,057 General taxes 23,543 22,644 -------- -------- 154,084 148,454 -------- -------- Operating income 71,916 64,903 Allowance for other funds used during construction 1,577 1,404 Other income, net (169) 109 -------- -------- 73,324 66,416 -------- -------- Income deductions Interest 36,546 35,618 Allowance for borrowed funds used during construction (783) (701) Amortization of debt expense 426 392 Preferred dividends of subsidiaries 866 889 Other deductions 807 861 -------- -------- 37,862 37,059 -------- -------- Income before income taxes 35,462 29,357 Provision for income taxes 13,874 11,327 -------- -------- Net income 21,588 18,030 Dividends on preferred stocks 996 996 -------- -------- Net income to common stock $ 20,592 $ 17,034 ======== ======== Average shares of basic common stock outstanding 79,815 78,676 Basic and diluted earnings per common share on average shares outstanding $ 0.26 $ 0.22 ======== ======== Page 3 FORM 10-Q Three Months Ended March 31, 1998 1997 -------- -------- CONSOLIDATED RETAINED EARNINGS Balance at beginning of period $717,243 $662,183 Add - net income 21,588 18,030 -------- -------- 738,831 680,213 -------- -------- Deduct - dividends Preferred stock 882 882 Preference stock 114 114 Common stock - $.205 per share in 1998, $.19 per share in 1997 16,346 14,912 -------- -------- 17,342 15,908 -------- -------- Balance at end of period $721,489 $664,305 ======== ======== 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 Balance Sheet (Unaudited) (In thousands) March 31 December 31 1998 1997 ----------- ----------- ASSETS Property, plant and equipment Utility plant - at original cost less accumulated depreciation $ 3,740,883 $ 3,713,390 Utility plant acquisition adjustments, net 58,144 58,976 Non-utility property, net of accumulated depreciation 32,595 32,942 Excess of cost of investments in subsidiaries over book equity at acquisition 22,762 22,745 ----------- ----------- 3,854,384 3,828,053 ----------- ----------- Current assets Cash and cash equivalents 25,257 12,661 Customer accounts receivable 62,768 67,318 Allowance for uncollectible accounts (1,319) (1,249) Unbilled revenues 54,735 55,750 Miscellaneous receivables 5,633 5,673 Materials and supplies 12,721 11,415 Deferred vacation pay 12,081 11,132 Other 27,585 10,158 ----------- ----------- 199,461 172,858 ----------- ----------- Regulatory and other long-term assets Regulatory asset - income taxes recoverable through rates 182,284 181,566 Debt and preferred stock expense 31,463 30,216 Deferred pension expense 23,218 22,163 Deferred postretirement benefit expense 12,318 11,372 Deferred treatment plant costs 7,431 7,690 Deferred water utility billings 3,370 4,013 Deferred tank painting costs 10,222 10,531 Funds restricted for construction 6,180 5,340 Other 47,675 40,484 ----------- ----------- 324,161 313,375 ----------- ----------- $ 4,378,006 $ 4,314,286 =========== =========== Page 5 FORM 10-Q March 31 December 31 1998 1997 ----------- ----------- CAPITALIZATION AND LIABILITIES Capitalization Common stock $ 99,962 $ 99,607 Paid-in capital 333,830 326,382 Retained earnings 721,489 717,243 Unearned compensation (1,428) (816) ----------- ----------- Common stockholders' equity 1,153,853 1,142,416 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 39,328 39,734 Preferred stocks of subsidiaries without mandatory redemption requirements 6,256 6,256 Long-term debt American Water Works Company, Inc. 116,000 116,000 Subsidiaries 1,761,244 1,754,766 ----------- ----------- 3,128,354 3,110,845 ----------- ----------- Current liabilities Bank debt 160,192 134,762 Current portion of long-term debt 31,303 25,148 Accounts payable 26,877 42,766 Taxes accrued, including federal income 32,360 14,409 Interest accrued 40,490 33,404 Accrued vacation pay 12,204 11,239 Other 35,831 44,725 ----------- ----------- 339,257 306,453 ----------- ----------- Page 6 FORM 10-Q March 31 December 31 1998 1997 ----------- ----------- Regulatory and other long-term liabilities Advances for construction $ 128,214 $ 127,457 Deferred income taxes 423,546 418,248 Deferred investment tax credits 35,949 36,239 Accrued pension expense 42,883 41,079 Accrued postretirement benefit expense 13,774 10,034 Other 7,112 6,197 ----------- ----------- 651,478 639,254 ----------- ----------- Contributions in aid of construction 258,917 257,734 ----------- ----------- Commitments and contingencies 0 0 ----------- ----------- $ 4,378,006 $ 4,314,286 =========== =========== The accompanying notes are an integral part of these financial statements.
Page 7 FORM 10-Q AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES ----------------------------------------------------------- Consolidated Statement of Cash Flows (Unaudited) (In thousands) Three Months Ended March 31, 1998 1997 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 21,588 $ 18,030 Adjustments Depreciation and amortization 28,509 25,057 Provision for deferred income taxes 4,849 7,275 Provision for losses on accounts receivable 1,299 1,825 Allowance for other funds used during construction (1,577) (1,404) Employee benefit expenses greater than funding 442 46 Employee stock plan expenses 998 973 Deferred tank painting costs (138) (214) Deferred rate case expense (265) (835) Amortization of deferred charges 2,334 2,744 Other, net (3,306) (1,812) Changes in assets and liabilities Accounts receivable 3,361 133 Unbilled revenues 1,015 1,018 Other current assets (330) (947) Accounts payable (15,889) (13,516) Taxes accrued, including federal income 17,951 17,745 Interest accrued 7,086 5,393 Other current liabilities (8,894) (5,640) -------- -------- Net cash from operating activities 59,033 55,871 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Construction expenditures (52,963) (55,096) Allowance for other funds used during construction 1,577 1,404 Water and wastewater system acquisitions (21,384) (125) Proceeds from the disposition of property, plant and equipment 228 180 Removal costs related to property, plant and equipment retirements (227) (1,256) Funds restricted for construction activity (840) (476) -------- -------- Net cash used in investing activities (73,609) (55,369) -------- -------- Page 8 FORM 10-Q Three Months Ended March 31, 1998 1997 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long-term debt $ 17,200 $ 19,000 Proceeds from common stock 5,381 5,869 Net borrowings under line-of-credit agreements 25,430 15,589 Advances and contributions for construction, net of refunds 2,964 3,901 Debt issuance costs (1,488) (430) Repayment of long-term debt (4,567) (30,883) Redemption of preferred stocks (406) (255) Dividends paid (17,342) (15,908) -------- -------- Net cash from(used in) financing activities 27,172 (3,117) -------- -------- Net increase(decrease) in cash and cash equivalents 12,596 (2,615) Cash and cash equivalents at beginning of period 12,661 12,974 -------- -------- Cash and cash equivalents at end of period $ 25,257 $ 10,359 ======== ======== Cash paid during the period for: Interest, net of capitalized amount $ 29,947 $ 31,060 ======== ======== Income taxes $ 8,917 $ 6,738 ======== ======== Common stock issued in lieu of cash in connection with the Savings Plan for Employees and the Long-Term Performance-Based Incentive Plan totaled $3,172 in 1998 and $2,046 in 1997. The accompanying notes are an integral part of these financial statements.
Page 9 FORM 10-Q AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES ----------------------------------------------------------- Information Accompanying Financial Statements (Unaudited) (In thousands, except share and per share amounts) March 31 December 31 1998 1997 ---------- ----------- Common stockholders' equity Common stock - $1.25 par value Authorized - 300,000,000 shares Outstanding - 79,969,126 shares at March 31, 1998, 685,612 at December 31, 1997 $ 99,962 $ 99,607 Paid-in capital 333,830 326,382 Retained earnings 721,489 717,243 Unearned compensation (1,428) (816) ---------- ----------- $1,153,853 $ 1,142,416 ========== =========== During the first three months of 1998, 165,035 shares were issued in connection with the Dividend Reinvestment and Stock Purchase Plan, 48,029 shares were issued in connection with the Savings Plan for Employees and 70,450 shares were issued in connection with the Long-Term Performance-Based Incentive Plan. At March 31, 1998, common shares reserved for issuance in connection with the Company's stock plans were 60,923,162 shares for the Stockholder Rights Plan, 6,029,851 shares for the Dividend Reinvestment and Stock Purchase Plan, 803,058 shares for the Employees' Stock Ownership Plan, 43,992 shares for the Savings Plan for Employees and 327,135 shares for the Long-Term Performance-Based Incentive Plan. 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, no 0 0 outstanding shares ---------- ----------- $ 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. Page 10 FORM 10-Q AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES ----------------------------------------------------------- Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except per share amounts) NOTE 1 -- Financial Statement Presentation The information presented in this Form 10-Q is unaudited. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain reclassifications have been made to conform previously reported data to the current presentation. NOTE 2 -- Acquisition On April 1, 1998, the Company completed the previously announced acquisition of East Honolulu Community Services, Inc. ("EHCS"), a suburban Honolulu wastewater utility located on the eastern tip of Oahu, Hawaii. The system was acquired for $18.4 million from Maunalua Associates, Inc., a subsidiary of Kemper Corporation. At March 31, 1998, the $18.4 million payment was in escrow and recorded as an other current asset. EHCS provides wastewater service to a population of approximately 29,000 in the community of Hawaii Kai. For the latest fiscal year ended December 31, 1997, EHCS had unaudited revenues of $6.3 million, net income of $.8 million and total assets of $17.1 million. NOTE 3 -- New Accounting Standards In 1998, the Company will adopt two new accounting standards issued by the Financial Accounting Standards Board in June of 1997. Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," and SFAS No. 131 "Disclosures About Segments of an Enterprise and Related Information," neither of which will have any effect on the Company's financial position or results of operations as they require only changes to, or additions to, current disclosures. Also in 1998, the Company will adopt SFAS No. 132, "Employers' Disclosures about Pensions and Postretirement Benefits," which revises and standardizes employers' disclosures about pension and other postretirement benefit plans required by SFAS No. 87, "Employers' Accounting for Pensions," SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," and SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," but does not change the measurement or recognition of those plans. This new standard, issued in February 1998, is effective for fiscal years beginning after December 15, 1997. Page 11 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 first quarter of 1998 were 6% higher than for the first quarter of 1997 primarily due to authorized rate increases for several subsidiaries in the latter part of 1997. During the first four months of 1998, two utility subsidiaries received rate orders which are expected to provide approximately $1.7 million in additional annual revenues. Six subsidiaries have rate increase applications on file before regulatory agencies which, if granted in full, would provide approximately $46.1 million in additional annual revenues. The 55.3 billion gallons of water sold in the first quarter of 1998 was 1% less than the 55.9 billion gallons sold in the first quarter of 1997. Total operating expenses for the first quarter of 1998 were 4% higher than a year ago. Operation and maintenance expenses were 1% higher than the first quarter of 1997. Depreciation expense was higher due to growth in utility plant in service. Increased general tax expense reflects higher property values and increased gross receipts. Income deductions increased by 2% in the first quarter of 1998 compared to the same period last year. Interest expense rose by 3% to $36.5 million in the first quarter of 1998 compared to the first quarter of 1997, primarily due to an increase in total debt to fund construction of new water service assets. The total allowance for funds used during construction ("AFUDC") recorded in the first quarter of 1998 was 12% higher than the first quarter of 1997. The utility subsidiaries record AFUDC to the extent permitted by the regulatory authorities. Income taxes increased in the first three months of 1998 when compared to the first three months in 1997, as a result of increased earnings and the reversal of flow-through differences primarily relating to depreciation. Net income to common stock was $20.6 million for the first quarter of 1998 compared with $17.0 million for the same period in 1997. Page 12 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 - -------------------------------- All shares of common stock issued during 1998 have been the result of stock issued in conjunction with the Dividend Reinvestment and Stock Purchase Plan, the Savings Plan for Employees and the Long-Term Performance-Based Incentive Plan. On April 16, 1998, the Company announced that purchases of the Company's common stock made through the Dividend Reinvestment and Stock Purchase Plan ("Plan") will be priced at a two percent discount effective May 15, 1998. The two percent discount from the applicable average market price will be applied to common shares purchased through the reinvestment of dividends paid on the Company's common, preferred and preference stocks, as well as to any optional cash investments made by stockholders. The discount will also be applied to initial cash investments made by customers of the Company's utility subsidiaries. During the balance of 1998, 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. Four utility subsidiaries issued $21.7 million of long-term debt during the first four months of 1998. In addition, the Company invested $30.4 million in the common stock of five 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 1998, with the proceeds used to repay bank loans and fund construction projects. 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 electronically. B. Reports on Form 8-K ------------------- No report on Form 8-K was filed by the registrant during the quarter ended March 31, 1998. 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 11, 1998 /s/ J. James Barr - ---------------------- -------------------------------------- J. James Barr, President and Chief Executive Officer (Authorized Officer) Date May 11, 1998 /s/ Robert D. Sievers - ---------------------- -------------------------------------- Robert D. Sievers, Comptroller (Chief Accounting Officer) EX-27 2
OPUR1 0000318819 R. D. SIEVERS 1,000 3-MOS DEC-31-1998 MAR-31-1998 PER-BOOK 3,740,883 113,501 199,461 276,486 47,675 4,378,006 99,962 332,402 721,489 1,153,853 79,328 17,929 1,877,244 160,192 0 0 31,303 0 0 0 1,058,157 4,378,006 226,000 13,874 154,084 167,958 58,042 92 58,134 36,546 21,588 996 20,592 16,346 34,834 59,033 0.26 0.26
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