UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10-Q
_________________________
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2013
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 001-34028
_________________________
AMERICAN WATER WORKS COMPANY, INC.
(Exact name of registrant as specified in its charter)
_________________________
Delaware |
|
51-0063696 |
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
1025 Laurel Oak Road, Voorhees, NJ |
|
08043 |
(Address of principal executive offices) |
|
(Zip Code) |
(856) 346-8200
(Registrants telephone number, including area code)
_________________________
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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
|
x |
|
Accelerated filer |
|
¨ |
|
|
|
|
|
|
|
Non-accelerated filer |
|
¨ |
|
Smaller reporting company |
|
¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.). ¨ Yes x No
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.
Class |
|
Outstanding at October 31, 2013 |
Common Stock, $0.01 par value per share |
|
178,274,197 shares |
TABLE OF CONTENTS
AMERICAN WATER WORKS COMPANY, INC.
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED September 30, 2013
INDEX
|
2 |
| |
|
|
|
|
|
2-20 |
| |
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|
|
|
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
|
37 |
|
|
37-38 |
| |
|
|
|
|
|
38 |
| |
|
|
|
|
|
38 |
| |
|
38 |
| |
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
|
38 |
|
|
38 |
| |
|
38 |
| |
|
38 |
| |
|
39 |
| |
|
|
|
|
|
40 |
| |
|
|
| |
|
|
|
|
EXHIBIT 10.1 |
|
|
|
EXHIBIT 31.1 |
|
|
|
EXHIBIT 31.2 |
|
|
|
EXHIBIT 32.1 |
|
|
|
EXHIBIT 32.2 |
|
|
|
EXHIBIT 101 |
|
|
|
i
PART I. FINANCIAL INFORMATION
Water Works Company, Inc. and Subsidiary Companies
Consolidated Balance Sheets (Unaudited)
(In thousands, except per share data)
|
September 30, |
|
|
December 31, |
| ||
ASSETS |
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
|
|
|
|
|
Utility plantat original cost, net of accumulated depreciation of $3,815,118 at September 30 and $3,657,221 at December 31 |
$ |
11,963,377 |
|
|
$ |
11,584,944 |
|
Nonutility property, net of accumulated depreciation of $223,953 at September 30 and $199,467 at December 31 |
|
149,190 |
|
|
|
154,420 |
|
Total property, plant and equipment |
|
12,112,567 |
|
|
|
11,739,364 |
|
Current assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
32,454 |
|
|
|
24,433 |
|
Restricted funds |
|
25,429 |
|
|
|
29,756 |
|
Accounts receivable |
|
288,788 |
|
|
|
221,655 |
|
Allowance for uncollectible accounts |
|
(32,241 |
) |
|
|
(26,874 |
) |
Unbilled revenues |
|
209,865 |
|
|
|
180,628 |
|
Income taxes receivable |
|
15,107 |
|
|
|
9,594 |
|
Materials and supplies |
|
35,053 |
|
|
|
29,772 |
|
Other |
|
38,765 |
|
|
|
30,483 |
|
Total current assets |
|
613,220 |
|
|
|
499,447 |
|
Regulatory and other long-term assets |
|
|
|
|
|
|
|
Regulatory assets |
|
1,232,447 |
|
|
|
1,199,114 |
|
Restricted funds |
|
754 |
|
|
|
10,791 |
|
Goodwill |
|
1,207,741 |
|
|
|
1,207,250 |
|
Other |
|
61,717 |
|
|
|
63,010 |
|
Total regulatory and other long-term assets |
|
2,502,659 |
|
|
|
2,480,165 |
|
TOTAL ASSETS |
$ |
15,228,446 |
|
|
$ |
14,718,976 |
|
The accompanying notes are an integral part of these consolidated financial statements.
2
American Water Works Company, Inc. and Subsidiary Companies
Consolidated Balance Sheets (Unaudited)
(In thousands, except per share data)
|
September 30, |
|
|
December 31, |
| ||
CAPITALIZATION AND LIABILITIES |
|
|
|
|
|
|
|
Capitalization |
|
|
|
|
|
|
|
Common stock ($.01 par value, 500,000 shares authorized, 178,121 and 176,988 shares outstanding at September 30 and December 31, respectively) |
$ |
1,781 |
|
|
$ |
1,770 |
|
Paid-in-capital |
|
6,251,286 |
|
|
|
6,222,644 |
|
Accumulated deficit |
|
(1,505,191 |
) |
|
|
(1,664,955 |
) |
Accumulated other comprehensive loss |
|
(109,901 |
) |
|
|
(116,191 |
) |
Treasury stock |
|
(5,043 |
) |
|
|
0 |
|
Common stockholders equity |
|
4,632,932 |
|
|
|
4,443,268 |
|
Preferred stock without mandatory redemption requirements |
|
0 |
|
|
|
1,720 |
|
Total stockholders equity |
|
4,632,932 |
|
|
|
4,444,988 |
|
Long-term debt |
|
|
|
|
|
|
|
Long-term debt |
|
5,174,077 |
|
|
|
5,190,509 |
|
Redeemable preferred stock at redemption value |
|
17,635 |
|
|
|
18,861 |
|
Total capitalization |
|
9,824,644 |
|
|
|
9,654,358 |
|
Current liabilities |
|
|
|
|
|
|
|
Short-term debt |
|
389,435 |
|
|
|
269,985 |
|
Current portion of long-term debt |
|
113,661 |
|
|
|
115,919 |
|
Accounts payable |
|
209,768 |
|
|
|
279,613 |
|
Taxes accrued |
|
46,268 |
|
|
|
35,555 |
|
Interest accrued |
|
101,291 |
|
|
|
53,810 |
|
Other |
|
281,050 |
|
|
|
239,950 |
|
Total current liabilities |
|
1,141,473 |
|
|
|
994,832 |
|
Regulatory and other long-term liabilities |
|
|
|
|
|
|
|
Advances for construction |
|
372,484 |
|
|
|
379,737 |
|
Deferred income taxes |
|
1,744,330 |
|
|
|
1,545,513 |
|
Deferred investment tax credits |
|
26,783 |
|
|
|
27,909 |
|
Regulatory liabilities |
|
380,757 |
|
|
|
364,181 |
|
Accrued pension expense |
|
434,031 |
|
|
|
461,647 |
|
Accrued postretirement benefit expense |
|
251,637 |
|
|
|
254,147 |
|
Other |
|
36,475 |
|
|
|
40,516 |
|
Total regulatory and other long-term liabilities |
|
3,246,497 |
|
|
|
3,073,650 |
|
Contributions in aid of construction |
|
1,015,832 |
|
|
|
996,136 |
|
Commitments and contingencies (See Note 10) |
|
|
|
|
|
|
|
TOTAL CAPITALIZATION AND LIABILITIES |
$ |
15,228,446 |
|
|
$ |
14,718,976 |
|
The accompanying notes are an integral part of these consolidated financial statements.
3
American Water Works Company, Inc. and Subsidiary Companies
Consolidated Statements of Operations and Comprehensive Income (Unaudited)
(In thousands, except per share data)
|
Three Months Ended |
|
|
Nine Months Ended |
| ||||||||||
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
| ||||
Operating revenues |
$ |
829,196 |
|
|
$ |
831,815 |
|
|
$ |
2,189,598 |
|
|
$ |
2,195,976 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operation and maintenance |
|
343,610 |
|
|
|
355,126 |
|
|
|
979,133 |
|
|
|
992,707 |
|
Depreciation and amortization |
|
102,734 |
|
|
|
96,219 |
|
|
|
303,749 |
|
|
|
280,652 |
|
General taxes |
|
58,209 |
|
|
|
52,861 |
|
|
|
176,161 |
|
|
|
165,264 |
|
(Gain) loss on asset dispositions and purchases |
|
768 |
|
|
|
(31 |
) |
|
|
560 |
|
|
|
(657 |
) |
Total operating expenses, net |
|
505,321 |
|
|
|
504,175 |
|
|
|
1,459,603 |
|
|
|
1,437,966 |
|
Operating income |
|
323,875 |
|
|
|
327,640 |
|
|
|
729,995 |
|
|
|
758,010 |
|
Other income (expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest, net |
|
(77,389 |
) |
|
|
(76,616 |
) |
|
|
(233,260 |
) |
|
|
(236,000 |
) |
Allowance for other funds used during construction |
|
2,800 |
|
|
|
3,735 |
|
|
|
9,895 |
|
|
|
13,173 |
|
Allowance for borrowed funds used during construction |
|
1,679 |
|
|
|
1,548 |
|
|
|
5,102 |
|
|
|
5,942 |
|
Amortization of debt expense |
|
(1,524 |
) |
|
|
(1,322 |
) |
|
|
(4,729 |
) |
|
|
(3,949 |
) |
Other, net |
|
(449 |
) |
|
|
39 |
|
|
|
(1,481 |
) |
|
|
(242 |
) |
Total other income (expenses) |
|
(74,883 |
) |
|
|
(72,616 |
) |
|
|
(224,473 |
) |
|
|
(221,076 |
) |
Income from continuing operations before income taxes |
|
248,992 |
|
|
|
255,024 |
|
|
|
505,522 |
|
|
|
536,934 |
|
Provision for income taxes |
|
98,327 |
|
|
|
100,913 |
|
|
|
195,951 |
|
|
|
216,908 |
|
Income from continuing operations |
|
150,665 |
|
|
|
154,111 |
|
|
|
309,571 |
|
|
|
320,026 |
|
Loss from discontinued operations, net of tax |
|
0 |
|
|
|
(299 |
) |
|
|
0 |
|
|
|
(17,434 |
) |
Net income |
$ |
150,665 |
|
|
$ |
153,812 |
|
|
$ |
309,571 |
|
|
$ |
302,592 |
|
Other comprehensive income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension plan amortized to periodic benefit cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost, net of tax of $28 and $28 for the three months and $83 and $84 for the nine months ended, respectively |
$ |
43 |
|
|
$ |
44 |
|
|
$ |
130 |
|
|
$ |
132 |
|
Actuarial loss, net of tax of $1,424 and $1,167 for the three months and $4,273 and $3,501 for the nine months ended, respectively |
|
2,228 |
|
|
|
1,825 |
|
|
|
6,683 |
|
|
|
5,476 |
|
Foreign currency translation adjustment |
|
296 |
|
|
|
514 |
|
|
|
(523 |
) |
|
|
562 |
|
Other comprehensive income |
|
2,567 |
|
|
|
2,383 |
|
|
|
6,290 |
|
|
|
6,170 |
|
Comprehensive income |
$ |
153,232 |
|
|
$ |
156,195 |
|
|
$ |
315,861 |
|
|
$ |
308,762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share:(a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
$ |
0.85 |
|
|
$ |
0.87 |
|
|
$ |
1.74 |
|
|
$ |
1.81 |
|
Loss from discontinued operations, net of tax |
$ |
0.00 |
|
|
$ |
(0.00 |
) |
|
$ |
0.00 |
|
|
$ |
(0.10 |
) |
Net income |
$ |
0.85 |
|
|
$ |
0.87 |
|
|
$ |
1.74 |
|
|
$ |
1.72 |
|
Diluted earnings per common share:(a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
$ |
0.84 |
|
|
$ |
0.87 |
|
|
$ |
1.73 |
|
|
$ |
1.80 |
|
Loss from discontinued operations, net of tax |
$ |
0.00 |
|
|
$ |
(0.00 |
) |
|
$ |
0.00 |
|
|
$ |
(0.10 |
) |
Net income |
$ |
0.84 |
|
|
$ |
0.86 |
|
|
$ |
1.73 |
|
|
$ |
1.70 |
|
Average common shares outstanding during the period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
177,965 |
|
|
|
176,621 |
|
|
|
177,671 |
|
|
|
176,290 |
|
Diluted |
|
179,154 |
|
|
|
177,841 |
|
|
|
178,906 |
|
|
|
177,486 |
|
Dividends per common share |
$ |
0.28 |
|
|
$ |
0.25 |
|
|
$ |
0.56 |
|
|
$ |
0.73 |
|
(a) |
Amounts may not sum due to rounding. |
The accompanying notes are an integral part of these consolidated financial statements.
4
American Water Works Company, Inc. and Subsidiary Companies
Consolidated Statements of Cash Flows (Unaudited)
(In thousands, except per share data)
|
Nine Months Ended |
| |||||
|
2013 |
|
|
2012 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
Net income |
$ |
309,571 |
|
|
$ |
302,592 |
|
Adjustments |
|
|
|
|
|
|
|
Depreciation and amortization |
|
303,749 |
|
|
|
280,652 |
|
Provision for deferred income taxes |
|
195,240 |
|
|
|
197,001 |
|
Amortization of deferred investment tax credits |
|
(1,126 |
) |
|
|
(1,139 |
) |
Provision for losses on accounts receivable |
|
18,369 |
|
|
|
15,946 |
|
Allowance for other funds used during construction |
|
(9,895 |
) |
|
|
(13,173 |
) |
(Gain) loss on asset dispositions and purchases |
|
560 |
|
|
|
(657 |
) |
Pension and non-pension postretirement benefits |
|
58,552 |
|
|
|
60,426 |
|
Stock-based compensation expense |
|
8,916 |
|
|
|
8,549 |
|
Other, net |
|
(12,100 |
) |
|
|
(15,289 |
) |
Changes in assets and liabilities |
|
|
|
|
|
|
|
Receivables and unbilled revenues |
|
(109,372 |
) |
|
|
(106,911 |
) |
Taxes receivable, including income taxes |
|
(5,513 |
) |
|
|
(143 |
) |
Other current assets |
|
(13,410 |
) |
|
|
(15,671 |
) |
Pension and non-pension postretirement benefit contributions |
|
(77,664 |
) |
|
|
(96,036 |
) |
Accounts payable |
|
(28,061 |
) |
|
|
(47,121 |
) |
Taxes accrued, including income taxes |
|
9,934 |
|
|
|
33,721 |
|
Interest accrued |
|
47,481 |
|
|
|
46,617 |
|
Change in book overdraft |
|
(7,993 |
) |
|
|
36,206 |
|
Other current liabilities |
|
1,438 |
|
|
|
49,444 |
|
Net cash provided by operating activities |
|
688,676 |
|
|
|
735,014 |
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
Capital expenditures |
|
(665,262 |
) |
|
|
(680,357 |
) |
Acquisitions |
|
(16,554 |
) |
|
|
(44,333 |
) |
Proceeds from sale of assets and securities |
|
749 |
|
|
|
560,095 |
|
Removal costs from property, plant and equipment retirements, net |
|
(49,639 |
) |
|
|
(38,606 |
) |
Net funds (restricted) released |
|
11,339 |
|
|
|
17,845 |
|
Net cash used in investing activities |
|
(719,367 |
) |
|
|
(185,356 |
) |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
Proceeds from long-term debt |
|
2,737 |
|
|
|
14,730 |
|
Repayment of long-term debt |
|
(13,149 |
) |
|
|
(261,309 |
) |
Proceeds from short-term borrowings with maturities greater than three months |
|
20,000 |
|
|
|
0 |
|
Net borrowings (repayments) under short-term debt agreements with maturities three months or less |
|
99,450 |
|
|
|
(183,190 |
) |
Proceeds from issuances of employee stock plans and DRIP |
|
19,788 |
|
|
|
22,062 |
|
Advances and contributions for construction, net of refunds of $16,671 and $10,748 at September 30, 2013 and 2012, respectively |
|
13,486 |
|
|
|
22,182 |
|
Change in bank overdraft position |
|
0 |
|
|
|
(34,812 |
) |
Debt issuance costs |
|
(1,126 |
) |
|
|
0 |
|
Redemption of preferred stocks |
|
(2,920 |
) |
|
|
(3,927 |
) |
Dividends paid |
|
(99,554 |
) |
|
|
(125,023 |
) |
Other |
|
0 |
|
|
|
3,953 |
|
Net cash provided by (used in) financing activities |
|
38,712 |
|
|
|
(545,334 |
) |
Net increase in cash and cash equivalents |
|
8,021 |
|
|
|
4,324 |
|
Cash and cash equivalents at beginning of period |
|
24,433 |
|
|
|
14,207 |
|
Cash and cash equivalents at end of period |
$ |
32,454 |
|
|
$ |
18,531 |
|
Non-cash investing activity: |
|
|
|
|
|
|
|
Capital expenditures acquired on account but unpaid at quarter-end |
$ |
119,807 |
|
|
$ |
118,215 |
|
Non-cash financing activity: |
|
|
|
|
|
|
|
Advances and contributions |
$ |
9,379 |
|
|
$ |
9,185 |
|
Dividends accrued |
$ |
49,837 |
|
|
$ |
44,187 |
|
Long-term debt |
$ |
0 |
|
|
$ |
68,746 |
|
The accompanying notes are an integral part of these consolidated financial statements.
5
American Water Works Company, Inc. and Subsidiary Companies
Consolidated Statement of Changes in Stockholders Equity (Unaudited)
(In thousands, except per share data)
|
Common Stock |
|
|
Paid-in |
|
|
Accumulated |
|
|
Accumulated |
|
|
Treasury Stock |
|
|
Preferred |
|
|
Total |
| |||||||||||||||
|
Shares |
|
|
Par |
|
|
|
|
|
|
|
|
Shares |
|
|
At Cost |
|
|
|
|
| ||||||||||||||
Balance at December 31, 2012 |
|
176,988 |
|
|
$ |
1,770 |
|
|
$ |
6,222,644 |
|
|
$ |
(1,664,955 |
) |
|
$ |
(116,191 |
) |
|
|
0 |
|
|
$ |
0 |
|
|
$ |
1,720 |
|
|
$ |
4,444,988 |
|
Net income |
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
309,571 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
309,571 |
|
Direct stock reinvestment and purchase plan, net of expense of $41 |
|
35 |
|
|
|
0 |
|
|
|
1,399 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
1,399 |
|
Employee stock purchase plan |
|
81 |
|
|
|
1 |
|
|
|
3,270 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
3,271 |
|
Stock-based compensation activity, net of expense of $11 |
|
1,017 |
|
|
|
10 |
|
|
|
23,973 |
|
|
|
(416 |
) |
|
|
0 |
|
|
|
(132 |
) |
|
|
(5,043 |
) |
|
|
0 |
|
|
|
18,524 |
|
Subsidiary preferred stock redemption |
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
(1,720 |
) |
|
|
(1,720 |
) |
Other comprehensive income, net of tax of $4,356 |
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
6,290 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
6,290 |
|
Dividends |
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
(149,391 |
) |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
(149,391 |
) |
Balance at September 30, 2013 |
|
178,121 |
|
|
$ |
1,781 |
|
|
$ |
6,251,286 |
|
|
$ |
(1,505,191 |
) |
|
$ |
(109,901 |
) |
|
|
(132 |
) |
|
$ |
(5,043 |
) |
|
$ |
0 |
|
|
$ |
4,632,932 |
|
|
Common Stock |
|
|
Paid-in |
|
|
Accumulated |
|
|
Accumulated |
|
|
Treasury Stock |
|
|
Preferred Redemption |
|
|
Total |
| |||||||||||||||
|
Shares |
|
|
Par |
|
|
|
|
|
|
|
|
Shares |
|
|
At Cost |
|
|
|
|
| ||||||||||||||
Balance at December 31, 2011 |
|
175,664 |
|
|
$ |
1,757 |
|
|
$ |
6,180,558 |
|
|
$ |
(1,848,801 |
) |
|
$ |
(97,677 |
) |
|
|
0 |
|
|
$ |
0 |
|
|
$ |
4,547 |
|
|
$ |
4,240,384 |
|
Net income |
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
302,592 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
302,592 |
|
Direct stock reinvestment and purchase plan, net of expense of $14 |
|
42 |
|
|
|
0 |
|
|
|
1,445 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
1,445 |
|
Employee stock purchase plan |
|
57 |
|
|
|
0 |
|
|
|
2,161 |
|
|
|
0 |
|
|
|
0 |
|
|
|
31 |
|
|
|
1,046 |
|
|
|
0 |
|
|
|
3,207 |
|
Stock-based compensation activity |
|
985 |
|
|
|
10 |
|
|
|
28,874 |
|
|
|
(662 |
) |
|
|
0 |
|
|
|
(31 |
) |
|
|
(1,046 |
) |
|
|
0 |
|
|
|
27,176 |
|
Subsidiary preferred stock redemption |
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
(2,827 |
) |
|
|
(2,827 |
) |
Other comprehensive income, net of tax of $3,585 |
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
6,170 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
6,170 |
|
Dividends |
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
(128,807 |
) |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
(128,807 |
) |
Balance at September 30, 2012 |
|
176,748 |
|
|
$ |
1,767 |
|
|
$ |
6,213,038 |
|
|
$ |
(1,675,678 |
) |
|
$ |
(91,507 |
) |
|
|
0 |
|
|
$ |
0 |
|
|
$ |
1,720 |
|
|
$ |
4,449,340 |
|
The accompanying notes are an integral part of these consolidated financial statements.
6
American Water Works Company, Inc. and Subsidiary Companies
Notes to Consolidated Financial Statements (Unaudited)
(In thousands, except per share data)
Note 1: Basis of Presentation
The accompanying Consolidated Balance Sheet of American Water Works Company, Inc. and Subsidiary Companies (the Company) at September 30, 2013, the Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2013 and 2012, the Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012, and the Consolidated Statements of Changes in Stockholders Equity for the nine months ended September 30, 2013 and 2012, are unaudited, but reflect all adjustments, which are, in the opinion of management, necessary to present fairly the consolidated financial position, the consolidated changes in stockholders equity, the consolidated results of operations and comprehensive income, and the consolidated cash flows for the periods presented. All adjustments are of a normal, recurring nature, except as otherwise disclosed. Because they cover interim periods, the unaudited consolidated financial statements and related notes to the consolidated financial statements do not include all disclosures and notes normally provided in annual financial statements and, therefore, should be read in conjunction with the Companys Consolidated Financial Statements and related Notes included in the Companys Annual Report on Form 10-K for the year ended December 31, 2012. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the year, due primarily to the seasonality of the Companys operations.
Certain reclassifications have been made to previously reported data to conform to the current presentation.
Note 2: New Accounting Pronouncements
The following recently issued accounting standards have been adopted by the Company and have been included in the consolidated results of operations, financial position or footnotes of the accompanying Consolidated Financial Statements:
Balance Sheet Offsetting
In December 2011, the Financial Accounting Standards Board (FASB) issued accounting guidance to amend the existing disclosure requirements for offsetting financial assets and liabilities to enhance current disclosures, as well as to improve comparability of balance sheets prepared under U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS). In January 2013, the FASB issued additional guidance on the scope of these disclosures. The revised disclosure guidance applies to derivative instruments and securities borrowing and lending transactions that are either offset in the financial statements or subject to an enforceable master netting arrangement or similar agreement. The revised disclosure guidance is effective on a retrospective basis for interim and annual periods beginning January 1, 2013. As this guidance provides for additional disclosure requirements only, the adoption of this guidance did not have an impact on the Companys results of operations, financial position or cash flows.
Testing Indefinite-Lived Intangible Assets for Impairment
In July 2012, the FASB updated the accounting guidance related to testing indefinite-lived intangible assets for impairment. This update permits an entity to perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test under current guidance. This update is effective for annual and interim impairment tests performed by the Company beginning on January 1, 2013. The adoption of this guidance did not have an impact on the Companys results of operations, financial position or cash flows.
Amounts Reclassified Out of Accumulated Other Comprehensive Income (AOCI)
In February 2013, the FASB updated accounting guidance to add new disclosure requirements for items reclassified out of AOCI. The update does not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the amendments require an entity to provide information about the amounts reclassified out of AOCI by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of AOCI by the respective line items of net income, but only if the amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional detail about those amounts. The amendments are required to be applied prospectively for interim and annual reporting periods beginning January 1, 2013. As this guidance provides for additional disclosure requirements only, the adoption of this guidance did not have an impact on the Companys results of operations, financial position or cash flows.
7
Presentation of an Unrecognized Tax Benefit When a Net Operating Loss (NOL) or Tax Credit Carryforward Exists
In July 2013, the FASB updated the income tax accounting guidance to resolve diversity in presentation by addressing when an entity should present unrecognized tax benefits on a net basis if there are available NOL or tax credit carryforwards. The update requires an entity to net unrecognized tax benefits against the deferred tax assets for same-jurisdiction NOL or similar tax loss carryforwards or tax credit carryforwards. Gross presentation will be required only if such carryforwards are not available or would not be used by the entity to settle any additional income taxes resulting from disallowance of the uncertain tax position. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The amendments are required to be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application and early adoption are permitted. The Company adopted this guidance effective June 30, 2013. (See Note 8)
Inclusion of the Fed Funds Effective Swap Rate as a Benchmark Interest Rate for Hedge Accounting Purposes
In July 2013, the FASB updated the derivatives and hedging accounting guidance to provide for the inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate (OIS)) as a US benchmark interest rate for hedge accounting purposes, in addition to interest rates on direct Treasury obligations of the US government (UST) and the London Interbank Offered Rate ("LIBOR"). The amendment also removes the restriction on using different benchmark rates for similar hedges. The update is effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. As the Company has not entered into new or redesignated hedging relationships, the adoption of this guidance did not have an impact on the Companys results of operations, financial position or cash flows.
The following recently announced accounting standards are not yet required to be adopted by the Company or included in the consolidated results of operations, financial position or footnotes of the Company:
Obligations Resulting from Joint and Several Liability Arrangements
In February 2013, the FASB issued guidance for the recognition, measurement and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date. Examples of obligations within the scope of the updated guidance include debt arrangements, other contractual obligations and settled litigation and judicial rulings. The update requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date as the sum of the following: (a) the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and (b) any additional amount the reporting entity expects to pay on behalf of its co-obligors. The updated guidance also includes additional disclosures regarding the nature and amount of the obligation, as well as other information about those obligations. The update is effective on a retrospective basis for interim and annual periods beginning January 1, 2014. Early adoption is permitted. The Company is evaluating the specific provisions of the updated guidance, but does not expect the adoption of this guidance to have a significant impact on the Companys results of operations, financial position or cash flows.
Foreign Currency Matters
In June 2013, the FASB issued guidance for a parents accounting for the cumulative translation adjustment upon derecognition of certain subsidiaries or groups of assets within a foreign entity or of an investment in a foreign entity. The amendments resolve differing views in practice and apply to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or a business within a foreign entity. The update is effective prospectively for interim and annual periods beginning January 1, 2014. Early adoption is permitted. The Company does not expect the adoption of the updated guidance to have a significant impact on its results of operations, financial position or cash flows.
Note 3: Acquisitions and Divestitures
Acquisitions
For the period ended September 30, 2013, the Company closed on 12 acquisitions of various regulated water and wastewater systems for a total aggregate purchase price of $16,554. Assets acquired, principally plant, totaled $23,048. Liabilities assumed, primarily contributions in aid of construction, totaled $6,494.
Divestitures
As part of the Companys strategic review of its business investments, it entered into agreements to sell its Arizona, New Mexico and Ohio subsidiaries. In January 2012, the Company completed the sale of its Arizona and New Mexico subsidiaries. Initial sales proceeds were $461,057, and the Company recorded no gain or loss at the time of the sale closing. In June 2012, as part of post-
8
closing adjustments to finalize the sale, the Company remitted $2,448 to the purchaser and recorded a pretax loss on sale for the same amount.
In May 2012, the Company completed the sale of its Ohio subsidiary. Sales proceeds at closing totaled $101,083. The Company recorded a pretax loss on sale of $5,166 in the second quarter of 2012, primarily due to pension settlement costs calculated at closing.
A summary of discontinued operations presented in the Consolidated Statements of Operations and Comprehensive Income follows:
|
Three Months Ended |
|
|
Nine Months Ended |
| ||||||||||
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
| ||||
Operating revenues |
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
19,377 |
|
Total operating expenses, net |
|
0 |
|
|
|
493 |
|
|
|
0 |
|
|
|
28,411 |
|
Operating income (loss) |
|
0 |
|
|
|
(493 |
) |
|
|
0 |
|
|
|
(9,034 |
) |
Other income (expenses), net |
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
(167 |
) |
Income (loss) from discontinued operations before income taxes |
|
0 |
|
|
|
(493 |
) |
|
|
0 |
|
|
|
(9,201 |
) |
Provision (benefit) for income taxes |
|
0 |
|
|
|
(194 |
) |
|
|
0 |
|
|
|
8,233 |
|
Income (loss) from discontinued operations |
$ |
0 |
|
|
$ |
(299 |
) |
|
$ |
0 |
|
|
$ |
(17,434 |
) |
Provision for income taxes includes the recognition of tax expense related to the difference between the tax basis and book basis of assets upon the sale of Arizona, New Mexico and Ohio that resulted in taxable gains, since an election was made under Section 338(h)(10) of the Internal Revenue Code to treat the sales as asset sales.
Note 4: Goodwill
The Companys annual goodwill impairment test is conducted at November 30 of each calendar year. Interim reviews are performed when the Company determines that a triggering event that would more likely than not reduce the fair value of a reporting unit below its carrying value has occurred. The Company has determined no such triggering event had occurred during the nine months ended September 30, 2013.
The following table summarizes the nine-month changes in goodwill of the Companys continuing operations by reporting unit:
|
Regulated Unit |
|
|
Market-Based Units |
|
|
Consolidated |
| |||||||||||||||||||
|
Cost |
|
|
Accumulated |
|
|
Cost |
|
|
Accumulated |
|
|
Cost |
|
|
Accumulated |
|
|
Total Net |
| |||||||
Balance at January 1, 2013 |
$ |
3,411,549 |
|
|
$ |
(2,332,670 |
) |
|
$ |
235,990 |
|
|
$ |
(107,619 |
) |
|
$ |
3,647,539 |
|
|
$ |
(2,440,289 |
) |
|
$ |
1,207,250 |
|
Goodwill from acquisitions |
|
405 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
405 |
|
|
|
0 |
|
|
|
405 |
|
Reclassifications and other activity |
|
86 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
86 |
|
|
|
0 |
|
|
|
86 |
|
Balance at September 30, 2013 |
$ |
3,412,040 |
|
|
$ |
(2,332,670 |
) |
|
$ |
235,990 |
|
|
$ |
(107,619 |
) |
|
$ |
3,648,030 |
|
|
$ |
(2,440,289 |
) |
|
$ |
1,207,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|