Net income increases 10 percent on strong revenue growth
Major Ohio acquisition successfully integrated
BRYN MAWR, Pa.--(BUSINESS WIRE)--
Aqua America, Inc. (NYSE: WTR) today reported results for the quarter
ending June 30, 2012. Diluted earnings per share for the quarter were
$0.30, compared to $0.27 for the corresponding quarter in 2011, on less
than one percent more shares outstanding. Revenues for the quarter were
$198.2 million compared to $178.3 million in the same period of 2011, an
increase of 11.2 percent. Net income for the quarter rose to $41.4
million from $37.6 million in the same quarter of 2011, an increase of
10.3 percent.
Income from continuing operations (GAAP financial measure) for the
quarter were $42.6 million compared to $36.6 million for the same period
in 2011, an increase of 16.5 percent. Income from continuing operations
in the second quarter of 2011 was positively impacted by $3.5 million of
net state income tax benefits that did not occur in 2012. Second quarter
net income in 2012 was negatively impacted by charges incurred from the
disposal of Aqua America's New York subsidiary, which resulted in a loss
from discontinued operations of $1.2 million. The corresponding earnings
per diluted share from continuing operations for the quarter were $0.30,
compared to $0.26 for the same quarter in 2011. Income from continuing
operations before net state income tax benefit associated with 100
percent bonus depreciation (Non-GAAP financial measure) increased 28.7
percent in the second quarter of 2012 to $42.6 million from $33.1
million for the same period in 2011. The corresponding (Non-GAAP)
earnings per diluted share for the quarter were $0.30, compared to $0.24
for the same quarter in 2011, an increase of 25 percent. A
reconciliation of non-GAAP to GAAP financial measures is provided in the
accompanying financial tables.
For the first two quarters of 2012, net income increased 16.8 percent to
$79.3 million from $67.9 million and corresponding diluted earnings per
share increased 16.3 percent to $0.57 from $0.49 for the same period in
2011. Operating revenues for the first six months of 2012 totaled $368.4
million, an increase of 7.8 percent from revenues of $341.9 million for
the six months ending June 30, 2011.
Aqua America Chairman and CEO Nicholas DeBenedictis said, "The company's
solid second quarter financial results reflect management's focus on
investing for growth and environmental improvements, while diligently
working to control operating costs. Also, I am very pleased with our
ability to implement our portfolio rationalization by simultaneously
completing the sale of our New York operation and successfully
integrating 57,000 new Ohio customers in an efficient manner."
In May, Aqua America completed the purchase of all of American Water
Works Company, Inc.'s (NYSE: AWK) regulated operations in Ohio and
simultaneously sold its regulated operations in New York to American
Water. Aqua is now the largest investor-owned water utility in Ohio.
This is the latest of five successful transactions Aqua America has
completed in a one-year period to consolidate and grow its customer base
in fewer states, improving its operating efficiency, while pruning
assets in areas that do not present those opportunities. Since May 2011,
Aqua America has sold its Missouri operations to American Water;
purchased American Water's Texas operations; and sold its Maine
operations to Connecticut Water. "Transactions like these are consistent
with Aqua America's strategy to leverage greater economies of scale and
customer growth opportunities in states that demonstrate a positive
regulatory environment," said DeBenedictis.
DeBenedictis added, "Through the first half of 2012, management was
diligent in working to control operating costs. I am confident in Aqua's
ability to continue to improve the operations and maintenance
expense-to-revenue ratio on a year-over-year basis, which at 37.3
percent for the trailing 12 months ending June 30, 2012 compares
favorably to 37.8 percent during the same period of 2011."
To date in 2012, the company has received rate awards in New Jersey,
Pennsylvania, Ohio, Illinois, and Florida, and infrastructure surcharges
in various states estimated to increase annualized revenues by
approximately $41.3 million. The company still has $9.3 million of rate
cases pending before two state regulatory bodies in Texas and Virginia.
Additionally, state subsidiaries are expected to seek rate relief by
filing rate requests or surcharges of more than $13.5 million later in
2012. The primary driver of these filings is the recovery of capital
(infrastructure) investments and increased expenses since the companies'
previous rate filings in those states. The timing and extent to which
rate increases might be granted by the applicable regulatory agencies
will vary by state.
In the first six months of 2012, the company invested $171.4 million in
infrastructure improvements as part of its capital investment program,
compared to $141.3 million in the same period of 2011. "The company
remains on track to invest more than $300 million in 2012. Our capital
expenditures are focused on pipe replacement projects to improve our
distribution network and plant upgrades to enhance water quality and
service reliability for our customers," said DeBenedictis.
Aqua America remains committed to expanding its operations through its
growth-through-acquisition program and has completed eight acquisitions
to date in 2012. This includes the most recently announced acquisitions
by Aqua America's Pennsylvania subsidiary of the water and wastewater
system assets of Total Environmental Solutions, Inc. ("TESI"), which
serve approximately 2,300 people in the Beech Mountain Lakes Resort
Community located in portions of Butler and Dennison townships, Luzerne
County. The systems are operated by Aqua Pennsylvania's White Haven
Division, which currently provides water and wastewater service to about
20,000 people, including those in many Luzerne County municipalities.
"The Beech Mountain community is an example of a tuck-in acquisition
that fits nicely into our existing service territory, which already
includes customers in Butler and Dennison townships," said DeBenedictis.
"Once again, we are acquiring assets and customers within our existing
footprint and maximizing our economies of scale, which benefits our
customers as well as the company."
In late 2011, certain Aqua America and Penn Virginia operating
subsidiaries entered into a joint venture to form Aqua — PVR Water
Services, LLC to construct and operate a private pipeline system to
supply fresh water to certain natural gas producers drilling in the
Marcellus Shale. The 18-mile steel pipeline began servicing drillers in
North-Central Pennsylvania on an as-needed basis in April this year.
Phase II construction of the second 18-mile stretch began in June and is
expected to be completed by the end of the year. "Ensuring that water is
delivered to drillers through an environmentally conscious and efficient
method has inspired Aqua America and gas companies to develop a
collaborative infrastructure," said DeBenedictis. "Both local
communities and drillers have already realized the benefits of these
efforts through a reduction in truck traffic on local roads."
In May, Aqua America announced a plan to transition portions of its
vehicle fleet to compressed natural gas (CNG). With an anticipated cost
of less than $2 per gas gallon equivalent, it will be nearly half the
cost of petroleum-based fuels. Further, the maintenance costs of CNG
fueled engines are lower. "I believe that the natural gas industry in
Pennsylvania will become the biggest economic driver in the state since
the days of coal and steel. Pennsylvania has always been an energy-rich
state with natural gas being its latest opportunity," said DeBenedictis.
"CNG makes sense economically because it is less expensive than
petroleum-based fuels and environmentally because it is a clean-burning
fuel, thereby reducing carbon emissions."
Recently, Aqua Pennsylvania dedicated its second solar farm at its
Pickering water treatment plant near Valley Forge. This is Aqua
America's largest solar farm and the eighth-largest solar installation
in Pennsylvania. Over the past two years, Aqua America's Pennsylvania
and New Jersey subsidiaries have constructed four solar farms to power
their treatment facilities in an effort to reduce emissions, which
shrinks the company's carbon footprint and helps lower the need for the
construction of new power generation facilities. A similar facility was
built in 2010 and powers the Ingram's Mill Water Treatment Plant near
West Chester, Pennsylvania. In 2011, Aqua America's New Jersey
subsidiary constructed solar farms in Lopatcong Township, Warren County
to power a water treatment plant, and in Gloucester Township, Camden
County to power a well station. Collectively, the solar farms are
expected to reduce Aqua's grid-tied usage, resulting in a direct
economic benefit to Aqua's ratepayers of approximately $500,000 in
avoided energy costs in 2012.
As of June 30, 2012, Aqua America's weighted average cost of fixed-rate
long-term debt was 5.21% percent, and the company had $124 million
available on its credit lines. In April, Standard & Poor's reiterated
its A+ credit rating for Aqua Pennsylvania, Inc., Aqua America's largest
subsidiary. Of the 227 electric, gas and water utilities rated by
Standard & Poor's, only one has a higher rating than Aqua Pennsylvania.
The company's conference call with financial analysts will take place on
Tuesday, July 31, 2012 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 website
for 90 days following the call. Additionally, the call will be recorded
and made available for replay at 2 p.m. on July 31, 2012 for 10 business
days following the call. To access the audio replay in the U.S., dial
888.203.1112 (pass code 3650439). International callers can dial
719.457.0820 (pass code 3650439).
Aqua America is one of the largest U.S.-based, publicly-traded water
utilities and serves almost 3 million residents in Pennsylvania, Ohio,
North Carolina, Illinois, Texas, New Jersey, Indiana, Florida, Virginia,
and Georgia. Aqua America is listed on the New York Stock Exchange under
the ticker symbol WTR.
This release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995, including, among
others, management's continuation of improvement in the operations and
maintenance expense to revenue ratio, the estimated revenues from rate
awards received, the completion of major rate cases later in 2012, the
company's plans to file future rate increases and the timing of the
impact of such cases, the continuation of the company's capital
investment program and the amount of capital investment by the company
planned for 2012, the projected impact of recent transactions, the
company's commitment to its growth-through-acquisition program, the
anticipated completion of the next phase of the Marcellus Shale water
pipeline project, the plan to transition portions of the company's
vehicles to natural gas and the costs savings from this transition and
the projected benefits from the company's solar farms. There are
important factors that could cause actual results to differ materially
from those expressed or implied by such forward-looking statements
including: general economic business conditions; housing and customer
growth trends; unfavorable weather conditions; the success of certain
cost containment initiatives; the extent to which rate increase requests
are granted and the timing of rate awards; changes in regulations or
regulatory treatment; availability and the cost of capital; disruptions
in the credit markets; the success of growth initiatives; and other
factors discussed in our Annual Report on Form 10-K for the period
ending December 31, 2011, which is on file with the SEC. We undertake no
obligation to publicly update or revise any forward-looking statement.
WTRF
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Aqua America, Inc. and Subsidiaries
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Selected Operating Data
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(In thousands, except per share amounts)
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(Unaudited)
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|
|
|
|
|
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|
|
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Quarter Ended
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Six Months Ended
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June 30,
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June 30,
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|
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2012
|
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2011
|
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2012
|
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2011
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
$
|
198,204
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$
|
178,313
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|
$
|
368,448
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|
$
|
341,928
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|
|
|
|
|
|
|
|
|
|
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Net income attributable to common shareholders
|
|
$
|
41,445
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$
|
37,590
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|
$
|
79,349
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|
$
|
67,941
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|
|
|
|
|
|
|
|
|
|
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Basic net income per common share
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|
$
|
0.30
|
|
$
|
0.27
|
|
$
|
0.57
|
|
$
|
0.49
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|
Diluted net income per common share
|
|
$
|
0.30
|
|
$
|
0.27
|
|
$
|
0.57
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|
$
|
0.49
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|
|
|
|
|
|
|
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Basic average common shares outstanding
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|
139,108
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|
|
138,114
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|
|
138,935
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|
|
137,971
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Diluted average common shares outstanding
|
|
|
139,843
|
|
|
138,781
|
|
|
139,577
|
|
|
138,518
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|
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Aqua America, Inc. and Subsidiaries
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Consolidated Statement of Income
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(In thousands, except per share amounts)
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(Unaudited)
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|
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Quarter Ended
|
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Six Months Ended
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June 30,
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June 30,
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|
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2012
|
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2011
|
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2012
|
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2011
|
|
|
|
|
|
|
|
|
|
|
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Operating revenues
|
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$
|
198,204
|
|
|
$
|
178,313
|
|
|
$
|
368,448
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|
|
$
|
341,928
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|
|
|
|
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|
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Cost & expenses:
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Operations and maintenance
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66,980
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|
|
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66,765
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|
|
|
135,245
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|
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$
|
130,496
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Depreciation
|
|
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28,696
|
|
|
|
26,550
|
|
|
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56,291
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|
|
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52,826
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Amortization
|
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|
1,540
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|
|
|
1,624
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|
|
|
2,755
|
|
|
|
3,261
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|
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Taxes other than income taxes
|
|
|
12,593
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|
|
|
10,751
|
|
|
|
22,683
|
|
|
|
21,802
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Total
|
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|
109,809
|
|
|
|
105,690
|
|
|
|
216,974
|
|
|
|
208,385
|
|
|
|
|
|
|
|
|
|
|
|
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Operating income
|
|
|
88,395
|
|
|
|
72,623
|
|
|
|
151,474
|
|
|
|
133,543
|
|
|
|
|
|
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|
|
|
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|
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Other expense (income):
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|
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Interest expense, net
|
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19,538
|
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|
|
19,541
|
|
|
|
38,786
|
|
|
|
38,897
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|
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Allowance for funds used during construction
|
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|
(1,244
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)
|
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|
(1,929
|
)
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|
|
(2,588
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)
|
|
|
(3,906
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)
|
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Gain on sale of other assets
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(64
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)
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|
|
(138
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)
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(506
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)
|
|
|
(259
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)
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Equity earnings in joint venture
|
|
|
(249
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)
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|
-
|
|
|
|
(249
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)
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|
|
-
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Income from continuing operations before income taxes
|
|
|
70,414
|
|
|
|
55,149
|
|
|
|
116,031
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|
|
|
98,811
|
|
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Provision for income taxes
|
|
|
27,787
|
|
|
|
18,554
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|
|
|
45,746
|
|
|
|
31,570
|
|
|
Income from continuing operations
|
|
|
42,627
|
|
|
|
36,595
|
|
|
|
70,285
|
|
|
|
67,241
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|
|
|
|
|
|
|
|
|
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|
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Discontinued operations:
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|
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|
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(Loss) income from discontinued operations before income taxes
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|
|
(1,550
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)
|
|
|
1,652
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|
|
|
15,367
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|
|
|
1,130
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|
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Provision for income taxes
|
|
|
(368
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)
|
|
|
657
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|
|
|
6,303
|
|
|
|
430
|
|
|
(Loss) income from discontinued operations
|
|
|
(1,182
|
)
|
|
|
995
|
|
|
|
9,064
|
|
|
|
700
|
|
|
Net income attributable to common shareholders
|
|
$
|
41,445
|
|
|
$
|
37,590
|
|
|
$
|
79,349
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|
|
$
|
67,941
|
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|
|
|
|
|
|
|
|
|
|
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Income from continuing operations per share:
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|
|
|
|
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Basic
|
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$
|
0.31
|
|
|
$
|
0.26
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|
|
$
|
0.51
|
|
|
$
|
0.49
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|
|
Diluted
|
|
$
|
0.30
|
|
|
$
|
0.26
|
|
|
$
|
0.50
|
|
|
$
|
0.49
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations per share:
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|
|
|
|
|
|
|
|
|
Basic
|
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$
|
(0.01
|
)
|
|
$
|
0.01
|
|
|
$
|
0.07
|
|
|
$
|
0.01
|
|
|
Diluted
|
|
$
|
(0.01
|
)
|
|
$
|
0.01
|
|
|
$
|
0.06
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.30
|
|
|
$
|
0.27
|
|
|
$
|
0.57
|
|
|
$
|
0.49
|
|
|
Diluted
|
|
$
|
0.30
|
|
|
$
|
0.27
|
|
|
$
|
0.57
|
|
|
$
|
0.49
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
139,108
|
|
|
|
138,114
|
|
|
|
138,935
|
|
|
|
137,971
|
|
|
Diluted
|
|
|
139,843
|
|
|
|
138,781
|
|
|
|
139,577
|
|
|
|
138,518
|
|
|
|
|
|
|
|
|
|
|
|
Aqua America, Inc. and Subsidiaries
Reconciliation of GAAP to
Non-GAAP Financial Measure
(In thousands, except per share amounts)
(Unaudited)
This press release includes a presentation of "income from continuing
operations before net state income tax benefit associated with 100
percent bonus depreciation" and "diluted income from continuing
operations per common share before net state income tax benefit
associated with 100 percent bonus depreciation" (net state income tax
benefit associated with 100 percent bonus depreciation is referred to
herein as the "special item"). These financial measures are measures of
the Company's operating performance that do not comply with U.S.
generally accepted accounting principles (GAAP), and are thus considered
to be "non-GAAP financial measures" under applicable SEC regulations.
These non-GAAP financial measures are derived from our consolidated
financial information, and should only be used as a supplement to our
GAAP disclosures.
The Company is providing disclosure of the reconciliation of these
non-GAAP financial measures to the most comparable GAAP financial
measures. The Company believes that the non-GAAP financial measures
provide investors the ability to measure the Company's financial
operating performance excluding the special item, which is more
indicative of the Company's ongoing performance and is more comparable
to measures reported by other companies. The Company further believes
that the presentation of these non-GAAP financial measures is useful to
investors as a more meaningful way to compare the Company's operating
performance against its historical financial results and to assess the
underlying profitability of our core business. 100 percent bonus
depreciation was in effect for qualifying capital additions placed in
service from September 8, 2010 through December 31, 2011.
The reconciliation of the non-GAAP financial measures to the comparable
U.S. GAAP results provided for each period are presented below:
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|
|
|
|
|
Aqua America, Inc. and Subsidiaries
|
|
Income Excluding Net State Income Tax Benefit
|
|
Associated with 100% Bonus Depreciation
|
|
(In thousands, except per share amounts)
|
|
(A Non-GAAP, Unaudited Number)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations (GAAP financial measure)
|
|
$
|
42,627
|
|
$
|
36,595
|
|
$
|
70,285
|
|
$
|
67,241
|
|
Less: Net state income tax benefit associated with 100% bonus
depreciation
|
|
|
-
|
|
|
3,483
|
|
|
-
|
|
|
7,811
|
|
Income from continuing operations before net state income tax
benefit associated with 100% bonus depreciation (Non-GAAP
financial measure)
|
|
$
|
42,627
|
|
$
|
33,112
|
|
$
|
70,285
|
|
$
|
59,430
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations per common share (GAAP financial
measure):
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.31
|
|
$
|
0.26
|
|
$
|
0.51
|
|
$
|
0.49
|
|
Diluted
|
|
$
|
0.30
|
|
$
|
0.26
|
|
$
|
0.50
|
|
$
|
0.49
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations per common share before net
state income tax benefit associated with 100% bonus depreciation
(Non-GAAP financial measure):
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.31
|
|
$
|
0.24
|
|
$
|
0.51
|
|
$
|
0.43
|
|
Diluted
|
|
$
|
0.30
|
|
$
|
0.24
|
|
$
|
0.50
|
|
$
|
0.43
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
139,108
|
|
|
138,114
|
|
|
138,935
|
|
|
137,971
|
|
Diluted
|
|
|
139,843
|
|
|
138,781
|
|
|
139,577
|
|
|
138,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aqua America, Inc. and Subsidiaries
|
|
Condensed Consolidated Balance Sheets
|
|
(In thousands of dollars)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
Net property, plant and equipment
|
|
$
|
3,865,256
|
|
$
|
3,612,926
|
|
Current assets
|
|
|
147,237
|
|
|
320,453
|
|
Regulatory assets and other assets
|
|
|
407,754
|
|
|
415,041
|
|
|
|
$
|
4,420,247
|
|
$
|
4,348,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
$
|
1,302,683
|
|
$
|
1,251,817
|
|
Long-term debt, excluding current portion
|
|
|
1,569,489
|
|
|
1,395,457
|
|
Current portion of long-term debt and loans payable
|
|
|
103,950
|
|
|
188,200
|
|
Other current liabilities
|
|
|
108,366
|
|
|
237,473
|
|
Deferred credits and other liabilities
|
|
|
1,335,759
|
|
|
1,275,473
|
|
|
|
$
|
4,420,247
|
|
$
|
4,348,420
|
|
|
|
|
|
|
Aqua America, Inc.
Brian Dingerdissen
Director, Investor
Relations
610-645-1191
bjdingerdissen@aquaamerica.com
or
Gretchen
Toner
610-645-1175
gmtoner@aquaamerica.com
Source: Aqua America, Inc.
News Provided by Acquire Media
