Aqua America (NYSE:WTR) Today : Wednesday 3 August 2011 Aqua America, Inc. (NYSE: WTR) today reported record second quarter results for the quarter ending June 30, 2011. For the quarter, net income rose to $37.6 million from $29.9 million in the same quarter of 2010, an increase of 26 percent. Earnings per diluted share for the quarter were $0.27 compared to $0.22 for the second quarter of 2010, on one percent more shares outstanding. Revenues for the quarter were $188.2 million compared to $178.4 million in the same period of 2010, an increase of 5.5 percent. Second quarter net income and cash generation were positively impacted by increased sales, cost controls (improving margins), and the net state tax benefits of $3.5 million from the 100 percent bonus depreciation for the quarter resulting from the regulatory treatment afforded to such items.
Income before the effect of the net state income tax benefits associated with 100 percent bonus depreciation (a non-GAAP financial measure) also increased substantially to $34.1 million, or 14 percent higher than 2010 second quarter earnings. The corresponding earnings per diluted share was $0.25, versus $0.22 in the same period of 2010. The second quarter earnings are a record for the second quarter for the company, before accounting for the state bonus depreciation recognition. A reconciliation of non-GAAP to GAAP financial measures is provided in the accompanying financial tables.
On August 2, 2011, the Board of Directors declared a quarterly dividend increase of $0.01 per share from $0.155 to $.165 per share, an increase of 6.5 percent, for the December 1, 2011 quarterly dividend to all shareholders of record on November 17, 2011. On an annualized basis, this increase is equivalent to $0.66 per share or $0.04 above the current annualized dividend rate of $0.62 per share. This was the 21st dividend increase in 20 years. The Board of Directors also declared the regular quarterly cash dividend payment of $0.155 per share payable on September 1, 2011 to all shareholders of record on August 17, 2011. Aqua has paid a consecutive quarterly dividend for more than 65 years.
Aqua America Chairman and CEO Nicholas DeBenedictis said, “The Board’s consistent action of increasing the dividend demonstrates its continued confidence in the company’s strategic business model.”
DeBenedictis added, “The Company’s excellent second quarter results reflect the ability of management to limit operating costs, while at the same time focusing on continued investments for needed infrastructure improvements.”
Operating revenues for the first half of 2011 totaled $359.6 million, an increase of six percent from revenues of $339.0 million for the same period in 2010. For the first two quarters of 2011, net income increased 32 percent to $67.9 million from $51.4 million, and corresponding diluted earnings per share increased to $0.49 from $0.38 for the same period last year. Compared to the first half of 2010, income before the effect of the net state income tax benefits associated with 100 percent bonus depreciation (a non-GAAP financial measure) increased 17 percent to $60.1 million from $51.4 million, and corresponding diluted earnings per share increased to $0.43 from $0.38 for the same period last year.
On July 11, 2011, Aqua America announced an agreement to purchase all of American Water Works Company, Inc.’s (NYSE: AWK) regulated operations in Ohio, acquiring approximately $98 million in additional rate base and 57,000 additional customers (approximately 66 percent customer growth in Ohio), and to simultaneously sell Aqua’s New York regulated operations, which includes approximately $50 million in rate base including 7 water systems, serving approximately 51,000 customers in New York to American Water. The company expects to complete these transactions during the first quarter of 2012 and does not expect to raise new equity to fund the Ohio transaction. Aqua America’s sale of its New York operations will conclude its regulated operations in that state. This is the second transaction Aqua America has made with American Water in the last 7 months. In June the company closed its agreement with American Water in which Aqua America purchased American Water’s regulated Texas operations and sold the bulk of its regulated Missouri operations to American Water.
On July 27, 2011, Aqua America announced an agreement to sell its regulated operations in Maine to Connecticut Water Service, Inc. (NASDAQ:CTWS) for $53.5 million, subject to certain adjustments at closing. Aqua’s Maine operations include 11 systems serving 16,000 customers. This transaction, which is subject to regulatory approval, is expected to close in early 2012.
DeBenedictis said, “These transactions demonstrate the continued commitment to our growth-through-acquisition strategy, including states like Texas and Ohio where we are building critical mass allowing Aqua America subsidiaries to spread their fixed costs over more customers. This should provide more cost efficiency to help address future rates.”
DeBenedictis added, “Ohio and Texas, in addition to our largest state, Pennsylvania, offer opportunities for the water-energy nexus that could have a positive impact on the future of our company. We are prepared to take a responsible and active role in what is becoming the next energy boom—natural gas drilling, which is a very water intensive business that can provide an economic boost well into the future if it’s done right environmentally. We are currently pursuing the growth opportunities provided by the shale drilling industry, and more importantly focusing on the “clean water” aspects of the drilling business.”
Aqua America has continued to expand its operations and completed six acquisitions of water or wastewater utility systems this year. These acquisitions not only included approximately 5,300 customers added through the Texas American acquisition, but also included the water and wastewater system assets of Colvard Farms Subdivision in Chatham County, North Carolina which serve approximately 400 people and two water systems in Virginia that serve approximately 375 people in New Kent and Culpeper counties. Tuck-in acquisitions like the ones in North Carolina and Virginia allow the company to grow its customer base and improve economies of scale by expanding operations to areas within, or just outside, of existing service territories.
For the first half of 2011, operations and maintenance expenses increased less than one percent, compared to the same period in 2010. “Through the first half of 2011, management was diligent in working to control operating costs and they continue to focus on limiting expense growth. I am confident in their ability to continue to improve the operations and maintenance expense to revenue ratio, which at 38.3 percent year-to-date compares favorably to 40.4 percent during the same period of 2010,” said DeBenedictis.
To date in 2011, the company has received water and wastewater rate awards estimated to increase annualized revenues by approximately $18 million in Pennsylvania, Indiana and Ohio, including infrastructure surcharges in various states. The company has approximately $25 million of rate cases pending before seven state regulatory bodies, including rate cases in North Carolina, Texas, and Illinois. The company expects to seek additional rate relief by filing cases and infrastructure surcharges in seven states later in 2011 that are expected to impact 2012 results. The primary driver of these filings is the recovery of capital (infrastructure) investments and increased expenses since the companies’ previous rate filings. The timing and extent to which rate increases might be granted by the applicable regulatory agencies will vary by state.
As part of its capital investment plan, the company has invested $134.4 million in infrastructure improvements through the first six months of 2011. The company remains on track to invest record levels of approximately $325 million, which is roughly three times depreciation, to improve infrastructure and service reliability for its customers.
As of June 30, 2011, Aqua America’s weighted average cost of fixed-rate long-term debt was 5.34 percent, and the company had $63.5 million available on its credit lines. In June Standard and Poor’s reiterated it’s A+ credit rating for Aqua Pennsylvania, Inc., Aqua America’s largest subsidiary.
DeBenedictis said, “I am extremely pleased with our strong performance in the second quarter of 2011. The company was able to achieve record financial results, while at the same time working diligently to complete acquisitions and strategically prune operations to enhance our long-term ability to efficiently deliver quality water and wastewater services to our customers. In addition to our investments in the acquisition of new systems we continue to make significant investments in infrastructure which we are able to increasingly fund internally through our increasing cash generation. We look to continue to execute our long-term strategy, which has provided the core for our earnings growth.”
The company’s conference call with financial analysts will take place on Wednesday, August 3, 2011 at 11 a.m. Eastern Daylight Time. The call will be webcast live so that interested parties may listen over the Internet by logging on to www.aquaamerica.com and following the link for Investor Relations. The conference call will be archived in the investor relations section of the company’s Web site for 90 days following the call. Additionally, the call will be recorded and made available for replay at 2 p.m. on August 3, 2011 for 10 business days following the call. To access the audio replay in the U.S., dial 888.203.1112 (pass code 7104800). International callers can dial 719.457.0820 (pass code 7104800).
News 
Market Data 
Discover 
AI
