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☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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51-0063696
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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1025 Laurel Oak Road, Voorhees, NJ
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08043
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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☒
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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(Do not check if a smaller reporting company)
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Emerging growth company
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☐
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Class
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Outstanding as of July 26, 2018
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Common Stock, $0.01 par value per share
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180,492,198 shares
(excludes 4,683,156 treasury shares as of July 26, 2018)
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Page
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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||
•
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the decisions of governmental and regulatory bodies, including decisions to raise or lower customer rates;
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•
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the timeliness and outcome of regulatory commissions’ actions concerning rates, capital structure, authorized return on equity, capital investment, system acquisitions, taxes, permitting and other decisions;
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•
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changes in customer demand for, and patterns of use of, water, such as may result from conservation efforts;
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•
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limitations on the availability of our water supplies or sources of water, or restrictions on our use thereof, resulting from allocation rights, governmental or regulatory requirements and restrictions, drought, overuse or other factors;
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•
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changes in laws, governmental regulations and policies, including with respect to environmental, health and safety, water quality and emerging contaminants, public utility and tax regulations and policies, and impacts resulting from U.S., state and local elections;
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•
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weather conditions and events, climate variability patterns, and natural disasters, including drought or abnormally high rainfall, prolonged and abnormal ice or freezing conditions, strong winds, coastal and intercoastal flooding, earthquakes, landslides, hurricanes, tornadoes, wildfires, electrical storms and solar flares;
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•
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the outcome of litigation and similar governmental and regulatory proceedings, investigations or actions, including matters related to the Freedom Industries chemical spill in West Virginia and the approved global class action settlement related to this chemical spill;
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•
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our ability to appropriately maintain current infrastructure, including our operational and information technology (“IT”) systems, and manage the expansion of our business;
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•
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exposure or infiltration of our critical infrastructure, operational technology and IT systems, including the disclosure of sensitive or confidential information contained therein, through physical or cyber attacks or other means;
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•
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our ability to obtain permits and other approvals for projects;
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•
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changes in our capital requirements;
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•
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our ability to control operating expenses and to achieve efficiencies in our operations;
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•
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the intentional or unintentional actions of a third party, including contamination of our water supplies or water provided to our customers;
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•
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our ability to obtain adequate and cost-effective supplies of chemicals, electricity, fuel, water and other raw materials that are needed for our operations;
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•
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our ability to successfully meet growth projections for our business and capitalize on growth opportunities, including our ability to, among other things:
|
•
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acquire, close and successfully integrate regulated operations and market-based businesses;
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•
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enter into contracts and other agreements with, or otherwise obtain, new customers in our market-based businesses; and
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•
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realize anticipated benefits and synergies from new acquisitions;
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•
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risks and uncertainties associated with contracting with the U.S. government, including ongoing compliance with applicable government procurement and security regulations;
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•
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cost overruns relating to improvements in or the expansion of our operations;
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•
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our ability to maintain safe work sites;
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•
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our exposure to liabilities related to environmental laws and similar matters resulting from, among other things, water and wastewater service provided to customers, including, for example, our water service and management solutions that are focused on customers in the shale natural gas exploration and production market;
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•
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changes in general economic, political, business and financial market conditions;
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•
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access to sufficient capital on satisfactory terms and when and as needed to support operations and capital expenditures;
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•
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fluctuations in interest rates;
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•
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restrictive covenants in or changes to the credit ratings on us or our current or future debt that could increase our financing costs or funding requirements or affect our ability to borrow, make payments on debt or pay dividends;
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•
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fluctuations in the value of benefit plan assets and liabilities that could increase our cost and funding requirements;
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•
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changes in federal or state general, income and other tax laws, including any further rules, regulations, interpretations and guidance by the U.S. Department of the Treasury and state or local taxing authorities related to the enactment of the TCJA, the availability of tax credits and tax abatement programs, and our ability to utilize our U.S. federal and state income tax net operating loss (“NOL”) carryforwards;
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•
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migration of customers into or out of our service territories;
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•
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the use by municipalities of the power of eminent domain or other authority to condemn our systems, or the assertion by private landowners of similar rights against us;
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•
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our difficulty or inability to obtain insurance, our inability to obtain insurance at acceptable rates and on acceptable terms and conditions, or our inability to obtain reimbursement under existing insurance programs for any losses sustained;
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•
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the incurrence of impairment charges related to our goodwill or other assets;
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•
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labor actions, including work stoppages and strikes;
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•
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our ability to retain and attract qualified employees;
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•
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civil disturbances or terrorist threats or acts, or public apprehension about future disturbances or terrorist threats or acts; and
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•
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the impact of new, and changes to existing, accounting standards.
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June 30, 2018
|
|
December 31, 2017
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||||
ASSETS
|
|||||||
Property, plant and equipment
|
$
|
22,361
|
|
|
$
|
21,716
|
|
Accumulated depreciation
|
(5,584
|
)
|
|
(5,470
|
)
|
||
Property, plant and equipment, net
|
16,777
|
|
|
16,246
|
|
||
Current assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
68
|
|
|
55
|
|
||
Restricted funds
|
27
|
|
|
27
|
|
||
Accounts receivable, net
|
324
|
|
|
272
|
|
||
Unbilled revenues
|
212
|
|
|
212
|
|
||
Materials and supplies
|
42
|
|
|
41
|
|
||
Other
|
160
|
|
|
113
|
|
||
Total current assets
|
833
|
|
|
720
|
|
||
Regulatory and other long-term assets:
|
|
|
|
|
|
||
Regulatory assets
|
1,069
|
|
|
1,061
|
|
||
Goodwill
|
1,621
|
|
|
1,379
|
|
||
Intangible assets
|
101
|
|
|
9
|
|
||
Other
|
70
|
|
|
67
|
|
||
Total regulatory and other long-term assets
|
2,861
|
|
|
2,516
|
|
||
Total assets
|
$
|
20,471
|
|
|
$
|
19,482
|
|
|
June 30, 2018
|
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December 31, 2017
|
||||
CAPITALIZATION AND LIABILITIES
|
|||||||
Capitalization:
|
|
|
|
||||
Common stock ($0.01 par value, 500,000,000 shares authorized, 185,173,388 and 182,508,564 shares issued, respectively)
|
$
|
2
|
|
|
$
|
2
|
|
Paid-in-capital
|
6,637
|
|
|
6,432
|
|
||
Accumulated deficit
|
(537
|
)
|
|
(723
|
)
|
||
Accumulated other comprehensive loss
|
(69
|
)
|
|
(79
|
)
|
||
Treasury stock, at cost (4,683,156 and 4,064,010 shares, respectively)
|
(297
|
)
|
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(247
|
)
|
||
Total common stockholders' equity
|
5,736
|
|
|
5,385
|
|
||
Long-term debt
|
6,345
|
|
|
6,490
|
|
||
Redeemable preferred stock at redemption value
|
7
|
|
|
8
|
|
||
Total long-term debt
|
6,352
|
|
|
6,498
|
|
||
Total capitalization
|
12,088
|
|
|
11,883
|
|
||
Current liabilities:
|
|
|
|
|
|
||
Short-term debt
|
1,649
|
|
|
905
|
|
||
Current portion of long-term debt
|
364
|
|
|
322
|
|
||
Accounts payable
|
139
|
|
|
195
|
|
||
Accrued liabilities
|
530
|
|
|
630
|
|
||
Taxes accrued
|
48
|
|
|
33
|
|
||
Interest accrued
|
69
|
|
|
73
|
|
||
Other
|
152
|
|
|
167
|
|
||
Total current liabilities
|
2,951
|
|
|
2,325
|
|
||
Regulatory and other long-term liabilities:
|
|
|
|
|
|
||
Advances for construction
|
263
|
|
|
271
|
|
||
Deferred income taxes, net
|
1,617
|
|
|
1,551
|
|
||
Deferred investment tax credits
|
22
|
|
|
22
|
|
||
Regulatory liabilities
|
1,713
|
|
|
1,664
|
|
||
Accrued pension expense
|
397
|
|
|
384
|
|
||
Accrued post-retirement benefit expense
|
38
|
|
|
40
|
|
||
Other
|
84
|
|
|
66
|
|
||
Total regulatory and other long-term liabilities
|
4,134
|
|
|
3,998
|
|
||
Contributions in aid of construction
|
1,298
|
|
|
1,276
|
|
||
Commitments and contingencies (See Note 11)
|
|
|
|
|
|
||
Total capitalization and liabilities
|
$
|
20,471
|
|
|
$
|
19,482
|
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Operating revenues
|
$
|
853
|
|
|
$
|
844
|
|
|
$
|
1,614
|
|
|
$
|
1,600
|
|
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Operation and maintenance
|
348
|
|
|
347
|
|
|
695
|
|
|
681
|
|
||||
Depreciation and amortization
|
134
|
|
|
126
|
|
|
263
|
|
|
250
|
|
||||
General taxes
|
69
|
|
|
63
|
|
|
139
|
|
|
131
|
|
||||
Gain on asset dispositions and purchases
|
—
|
|
|
(2
|
)
|
|
(2
|
)
|
|
(2
|
)
|
||||
Total operating expenses, net
|
551
|
|
|
534
|
|
|
1,095
|
|
|
1,060
|
|
||||
Operating income
|
302
|
|
|
310
|
|
|
519
|
|
|
540
|
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
||||||||
Interest, net
|
(86
|
)
|
|
(85
|
)
|
|
(170
|
)
|
|
(170
|
)
|
||||
Non-operating benefit costs, net
|
2
|
|
|
(2
|
)
|
|
5
|
|
|
(5
|
)
|
||||
Other, net
|
4
|
|
|
3
|
|
|
8
|
|
|
6
|
|
||||
Total other income (expense)
|
(80
|
)
|
|
(84
|
)
|
|
(157
|
)
|
|
(169
|
)
|
||||
Income before income taxes
|
222
|
|
|
226
|
|
|
362
|
|
|
371
|
|
||||
Provision for income taxes
|
60
|
|
|
95
|
|
|
94
|
|
|
147
|
|
||||
Net income attributable to common stockholders
|
$
|
162
|
|
|
$
|
131
|
|
|
$
|
268
|
|
|
$
|
224
|
|
|
|
|
|
|
|
|
|
||||||||
Basic earnings per share:
(a)
|
|
|
|
|
|
|
|
||||||||
Net income attributable to common stockholders
|
$
|
0.90
|
|
|
$
|
0.74
|
|
|
$
|
1.50
|
|
|
$
|
1.26
|
|
Diluted earnings per share:
(a)
|
|
|
|
|
|
|
|
||||||||
Net income attributable to common stockholders
|
$
|
0.91
|
|
|
$
|
0.73
|
|
|
$
|
1.50
|
|
|
$
|
1.26
|
|
Weighted-average common shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
179
|
|
|
178
|
|
|
179
|
|
|
178
|
|
||||
Diluted
|
179
|
|
|
179
|
|
|
179
|
|
|
179
|
|
||||
Dividends declared per common share
|
$
|
0.455
|
|
|
$
|
0.415
|
|
|
$
|
0.455
|
|
|
$
|
0.415
|
|
(a)
|
Amounts may not calculate due to rounding.
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net income attributable to common stockholders
|
$
|
162
|
|
|
$
|
131
|
|
|
$
|
268
|
|
|
$
|
224
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
||||||||
Pension amortized to periodic benefit cost:
|
|
|
|
|
|
|
|
||||||||
Actuarial loss, net of tax of $2 and $1 for the three months and $1 and $2 for the six months ended June 30, 2018 and 2017, respectively
|
6
|
|
|
2
|
|
|
4
|
|
|
4
|
|
||||
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
||||
Unrealized gain (loss) on cash flow hedges, net of tax of $0 and $(3) for the three months ended and $2 and $(1) for the six months ended June 30, 2018 and 2017, respectively
|
—
|
|
|
(5
|
)
|
|
6
|
|
|
(2
|
)
|
||||
Net other comprehensive income (loss)
|
6
|
|
|
(3
|
)
|
|
10
|
|
|
1
|
|
||||
Comprehensive income attributable to common stockholders
|
$
|
168
|
|
|
$
|
128
|
|
|
$
|
278
|
|
|
$
|
225
|
|
|
For the Six Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
||||
Net income
|
$
|
268
|
|
|
$
|
224
|
|
Adjustments to reconcile to net cash flows provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
263
|
|
|
250
|
|
||
Deferred income taxes and amortization of investment tax credits
|
82
|
|
|
137
|
|
||
Provision for losses on accounts receivable
|
12
|
|
|
11
|
|
||
Gain on asset dispositions and purchases
|
(2
|
)
|
|
(2
|
)
|
||
Pension and non-pension post-retirement benefits
|
16
|
|
|
29
|
|
||
Other non-cash, net
|
(2
|
)
|
|
(50
|
)
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Receivables and unbilled revenues
|
(41
|
)
|
|
(3
|
)
|
||
Pension and non-pension post-retirement benefit contributions
|
—
|
|
|
(23
|
)
|
||
Accounts payable and accrued liabilities
|
(54
|
)
|
|
(46
|
)
|
||
Other assets and liabilities, net
|
(17
|
)
|
|
(3
|
)
|
||
Net cash provided by operating activities
|
525
|
|
|
524
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
||||
Capital expenditures
|
(739
|
)
|
|
(602
|
)
|
||
Acquisitions, net of cash acquired
|
(377
|
)
|
|
(9
|
)
|
||
Proceeds from sale of assets
|
7
|
|
|
4
|
|
||
Removal costs from property, plant and equipment retirements, net
|
(40
|
)
|
|
(28
|
)
|
||
Net cash used in investing activities
|
(1,149
|
)
|
|
(635
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
||||
Proceeds from long-term debt
|
15
|
|
|
20
|
|
||
Repayments of long-term debt
|
(119
|
)
|
|
(6
|
)
|
||
Net short-term borrowings with maturities less than three months
|
746
|
|
|
268
|
|
||
Proceeds from issuances of employee stock plans and direct stock purchase plan
|
12
|
|
|
16
|
|
||
Proceeds from issuance of common stock
|
183
|
|
|
—
|
|
||
Advances and contributions for construction, net of refunds of $16 and $11 for the six months ended June 30, 2018 and 2017, respectively
|
7
|
|
|
12
|
|
||
Dividends paid
|
(155
|
)
|
|
(141
|
)
|
||
Anti-dilutive share repurchases
|
(45
|
)
|
|
(54
|
)
|
||
Taxes paid related to employee stock plans
|
(6
|
)
|
|
(10
|
)
|
||
Net cash provided by financing activities
|
638
|
|
|
105
|
|
||
Net (decrease) increase in cash and cash equivalents and restricted funds
|
14
|
|
|
(6
|
)
|
||
Cash and cash equivalents and restricted funds at beginning of period
|
83
|
|
|
99
|
|
||
Cash and cash equivalents and restricted funds at end of period
|
$
|
97
|
|
|
$
|
93
|
|
Non-cash investing activity:
|
|
|
|
||||
Capital expenditures acquired on account but unpaid as of end of period
|
$
|
180
|
|
|
$
|
145
|
|
Acquisition financed by treasury stock
|
$
|
—
|
|
|
$
|
33
|
|
|
Common Stock
|
|
Paid-in-Capital
|
|
Accumulated Deficit
|
|
Accumulated Other Comprehensive Loss
|
|
Treasury Stock
|
|
Total Stockholders' Equity
|
||||||||||||||||||
|
Shares
|
|
Par Value
|
|
|
|
|
Shares
|
|
At Cost
|
|
||||||||||||||||||
Balance as of December 31, 2017
|
182.5
|
|
|
$
|
2
|
|
|
$
|
6,432
|
|
|
$
|
(723
|
)
|
|
$
|
(79
|
)
|
|
(4.1
|
)
|
|
$
|
(247
|
)
|
|
$
|
5,385
|
|
Net income attributable to common stockholders
|
—
|
|
|
—
|
|
|
—
|
|
|
268
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
268
|
|
||||||
Direct stock reinvestment and purchase plan
|
0.1
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
||||||
Employee stock purchase plan
|
0.1
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
||||||
Stock-based compensation activity
|
0.2
|
|
|
—
|
|
|
14
|
|
|
(1
|
)
|
|
—
|
|
|
(0.1
|
)
|
|
(5
|
)
|
|
8
|
|
||||||
Issuance of common stock
|
2.3
|
|
|
—
|
|
|
183
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
183
|
|
||||||
Repurchases of common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.5
|
)
|
|
(45
|
)
|
|
(45
|
)
|
||||||
Net other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
10
|
|
||||||
Dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(81
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(81
|
)
|
||||||
Balance as of June 30, 2018
|
185.2
|
|
|
$
|
2
|
|
|
$
|
6,637
|
|
|
$
|
(537
|
)
|
|
$
|
(69
|
)
|
|
(4.7
|
)
|
|
$
|
(297
|
)
|
|
$
|
5,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Common Stock
|
|
Paid-in-Capital
|
|
Accumulated Deficit
|
|
Accumulated Other Comprehensive Loss
|
|
Treasury Stock
|
|
Total Stockholders' Equity
|
||||||||||||||||||
|
Shares
|
|
Par Value
|
|
|
|
|
Shares
|
|
At Cost
|
|
||||||||||||||||||
Balance as of December 31, 2016
|
181.8
|
|
|
$
|
2
|
|
|
$
|
6,388
|
|
|
$
|
(873
|
)
|
|
$
|
(86
|
)
|
|
(3.7
|
)
|
|
$
|
(213
|
)
|
|
$
|
5,218
|
|
Cumulative effect of change in accounting principle
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
||||||
Net income attributable to common stockholders
|
—
|
|
|
—
|
|
|
—
|
|
|
224
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
224
|
|
||||||
Direct stock reinvestment and purchase plan
|
0.1
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
||||||
Employee stock purchase plan
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
||||||
Stock-based compensation activity
|
0.4
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
(7
|
)
|
|
6
|
|
||||||
Acquisitions via treasury stock
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
|
27
|
|
|
33
|
|
||||||
Repurchases of common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.7
|
)
|
|
(54
|
)
|
|
(54
|
)
|
||||||
Net other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||||
Dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(74
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(74
|
)
|
||||||
Balance as of June 30, 2017
|
182.3
|
|
|
$
|
2
|
|
|
$
|
6,416
|
|
|
$
|
(702
|
)
|
|
$
|
(85
|
)
|
|
(4.1
|
)
|
|
$
|
(247
|
)
|
|
$
|
5,384
|
|
Standard
|
|
Description
|
|
Date of
Adoption
|
|
Application
|
|
Effect on the Consolidated Financial Statements
|
Revenue from Contracts with Customers
|
|
Changes the criteria for recognizing revenue from a contract with a customer. Replaces existing guidance on revenue recognition, including most industry specific guidance. The objective is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability within industries, across industries and across capital markets. The underlying principle is that an entity will recognize revenue to depict the transfer of goods and services to customers at an amount the entity expects to be entitled to in exchange for those goods or services. The guidance also requires a number of disclosures regarding the nature, amount, timing and uncertainty of revenue and the related cash flows.
|
|
January 1, 2018
|
|
Modified retrospective
|
|
The adoption had no material impact on the Consolidated Financial Statements. The primary impact was the additional disclosures required in the Notes to Consolidated Financial Statements. See Note 3—Revenue Recognition for additional information.
|
Clarifying the Definition of a Business
|
|
Updated the accounting guidance to clarify the definition of a business with the objective of assisting entities with evaluating whether transactions should be accounted for as acquisitions, or disposals, of assets or businesses.
|
|
January 1, 2018
|
|
Prospective
|
|
The adoption had no material impact on the Consolidated Financial Statements.
|
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-Retirement Benefit Cost
|
|
Updated authoritative guidance requires the service cost component of net periodic benefit cost to be presented in the same income statement line item(s) as other employee compensation costs arising from services rendered during the period. The remaining components of net periodic benefit cost are required to be presented separately from the service cost component in an income statement line item outside of operating income. Also, the guidance only allows for the service cost component to be eligible for capitalization. The updated guidance does not impact the accounting for net periodic benefit costs as regulatory assets or liabilities.
|
|
January 1, 2018
|
|
Retrospective for the presentation of the service cost component and the other components of net periodic benefit costs on the income statement; prospective for the limitation of capitalization to only the service cost component of net periodic benefit costs in total assets.
|
|
The Company presented in the current period, and reclassified in the prior period, net periodic benefit costs, other than the service cost component, in Non-operating benefit costs, net on the Consolidated Statements of Operations.
|
Standard
|
|
Description
|
|
Date of
Adoption
|
|
Application
|
|
Estimated Effect on the Consolidated Financial Statements
|
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
|
|
Permits an entity to reclassify tax effects stranded in accumulated other comprehensive income as a result of the Tax Cuts and Jobs Act (the “TCJA”) to retained earnings.
|
|
January 1, 2019; early adoption permitted
|
|
In the period of adoption or retrospective.
|
|
The Company is evaluating the impact on its Consolidated Financial Statements, as well as the timing of adoption.
|
Accounting for Leases
|
|
Updated the accounting and disclosure guidance for leasing arrangements. Under this guidance, a lessee will be required to recognize the following for all leases, excluding short-term leases, at the commencement date: (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the guidance, lessor accounting is largely unchanged. A package of optional transition practical expedients allows an entity not to reassess under the new guidance: (i) whether any existing contracts are or contain leases; (ii) lease classification; and (iii) initial direct costs. Additional optional transition practical expedients are available which allow an entity not to evaluate existing land easements if the easements were not previously accounted for as leases, and to apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment in the opening balance of retained earnings in the period of adoption.
|
|
January 1, 2019; early adoption permitted
|
|
Modified retrospective
|
|
The Company has not yet quantified the impact of recognizing right-of-use assets and lease liabilities but is evaluating the impact on its Consolidated Financial Statements. The Company has defined a process to meet the accounting and reporting requirements of the guidance and is assessing lease arrangements. The Company expects to elect all practical expedients available under the new lease accounting and disclosure guidance.
|
Accounting for Hedging Activities
|
|
Updated the accounting and disclosure guidance for hedging activities, which allows for more financial and nonfinancial hedging strategies to be eligible for hedge accounting. Under this guidance, a qualitative effectiveness assessment is permitted for certain hedges if an entity can reasonably support an expectation of high effectiveness throughout the term of the hedge, provided that an initial quantitative test establishes that the hedge relationship is highly effective. Also, for cash flow hedges determined to be highly effective, all changes in the fair value of the hedging instrument will be recorded in other comprehensive income with a subsequent reclassification to earnings when the hedged item impacts earnings.
|
|
January 1, 2019; early adoption permitted
|
|
Modified retrospective for adjustments related to the measurement of ineffectiveness for cash flow hedges; prospective for the updated presentation and disclosure requirements.
|
|
The Company does not expect the adoption to have a material impact on its Consolidated Financial Statements based on its hedging activities as of the balance sheet date. The Company is evaluating the timing of adoption.
|
Simplification of Goodwill Impairment Testing
|
|
Updated authoritative guidance which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under the amendments in the update, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying value exceeds the reporting unit’s fair value, however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.
|
|
January 1, 2020; early adoption permitted
|
|
Prospective
|
|
The Company is evaluating any impact on its Consolidated Financial Statements, as well as the timing of adoption.
|
Measurement of Credit Losses
|
|
Updated the accounting guidance on reporting credit losses for financial assets held at amortized cost basis and available-for-sale debt securities. Under this guidance, expected credit losses are required to be measured based on historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount of financial assets. Also, this guidance requires that credit losses on available-for-sale debt securities be presented as an allowance rather than as a direct write-down.
|
|
January 1, 2020; early adoption permitted
|
|
Modified retrospective
|
|
The Company is evaluating any impact on its Consolidated Financial Statements, as well as the timing of adoption.
|
|
2018
|
|
2017
|
||||
Cash and cash equivalents
|
$
|
68
|
|
|
$
|
64
|
|
Restricted funds
|
27
|
|
|
28
|
|
||
Restricted funds included in other long-term assets
|
2
|
|
|
1
|
|
||
Cash and cash equivalents and restricted funds as presented on the Consolidated Statements of Cash Flows
|
$
|
97
|
|
|
$
|
93
|
|
(In millions)
|
Revenues from Contracts with Customers
|
|
Other Revenues Not from Contracts with Customers (a)
|
|
Total Operating Revenues
|
||||||
Regulated Businesses:
|
|
|
|
|
|
||||||
Water services:
|
|
|
|
|
|
||||||
Residential
|
$
|
410
|
|
|
$
|
—
|
|
|
$
|
410
|
|
Commercial
|
152
|
|
|
—
|
|
|
152
|
|
|||
Industrial
|
34
|
|
|
—
|
|
|
34
|
|
|||
Public and other
|
85
|
|
|
—
|
|
|
85
|
|
|||
Total water services
|
681
|
|
|
—
|
|
|
681
|
|
|||
Wastewater services:
|
|
|
|
|
|
|
|||||
Residential
|
27
|
|
|
—
|
|
|
27
|
|
|||
Commercial
|
7
|
|
|
—
|
|
|
7
|
|
|||
Industrial
|
—
|
|
|
—
|
|
|
—
|
|
|||
Public and other
|
4
|
|
|
—
|
|
|
4
|
|
|||
Total wastewater services
|
38
|
|
|
—
|
|
|
38
|
|
|||
Miscellaneous utility charges
|
12
|
|
|
—
|
|
|
12
|
|
|||
Alternative revenue programs
|
—
|
|
|
11
|
|
|
11
|
|
|||
Lease contract revenue
|
—
|
|
|
2
|
|
|
2
|
|
|||
Total Regulated Businesses
|
731
|
|
|
13
|
|
|
744
|
|
|||
Market-Based Businesses
|
114
|
|
|
—
|
|
|
114
|
|
|||
Other
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
|||
Total operating revenues
|
$
|
840
|
|
|
$
|
13
|
|
|
$
|
853
|
|
(a)
|
Includes revenues associated with alternative revenue programs and lease contracts which are outside the scope of ASC 606 and accounted for under other existing GAAP.
|
(In millions)
|
Revenues from Contracts with Customers
|
|
Other Revenues Not from Contracts with Customers (a)
|
|
Total Operating Revenues
|
||||||
Regulated Businesses:
|
|
|
|
|
|
||||||
Water services:
|
|
|
|
|
|
||||||
Residential
|
$
|
778
|
|
|
$
|
—
|
|
|
$
|
778
|
|
Commercial
|
285
|
|
|
—
|
|
|
285
|
|
|||
Industrial
|
65
|
|
|
—
|
|
|
65
|
|
|||
Public and other
|
165
|
|
|
—
|
|
|
165
|
|
|||
Total water services
|
1,293
|
|
|
—
|
|
|
1,293
|
|
|||
Wastewater services:
|
|
|
|
|
|
|
|||||
Residential
|
54
|
|
|
—
|
|
|
54
|
|
|||
Commercial
|
14
|
|
|
—
|
|
|
14
|
|
|||
Industrial
|
1
|
|
|
—
|
|
|
1
|
|
|||
Public and other
|
7
|
|
|
—
|
|
|
7
|
|
|||
Total wastewater services
|
76
|
|
|
—
|
|
|
76
|
|
|||
Miscellaneous utility charges
|
23
|
|
|
—
|
|
|
23
|
|
|||
Alternative revenue programs
|
—
|
|
|
14
|
|
|
14
|
|
|||
Lease contract revenue
|
—
|
|
|
4
|
|
|
4
|
|
|||
Total Regulated Businesses
|
1,392
|
|
|
18
|
|
|
1,410
|
|
|||
Market-Based Businesses
|
214
|
|
|
—
|
|
|
214
|
|
|||
Other
|
(10
|
)
|
|
—
|
|
|
(10
|
)
|
|||
Total operating revenues
|
$
|
1,596
|
|
|
$
|
18
|
|
|
$
|
1,614
|
|
(a)
|
Includes revenues associated with alternative revenue programs and lease contracts which are outside the scope of ASC 606 and accounted for under other existing GAAP.
|
|
June 4, 2018
|
||
Identifiable assets:
|
|
||
Accounts receivable
|
$
|
23
|
|
Other current assets
|
1
|
|
|
Property, plant and equipment
|
21
|
|
|
Intangible assets
|
96
|
|
|
Total identifiable assets
|
141
|
|
|
Liabilities assumed:
|
|
||
Accounts payable and accrued liabilities
|
(5
|
)
|
|
Other current liabilities
|
(3
|
)
|
|
Non-current portion of warranty reserve
|
(11
|
)
|
|
Other long-term liabilities
|
(1
|
)
|
|
Total liabilities assumed
|
(20
|
)
|
|
Net identifiable assets acquired
|
121
|
|
|
Goodwill
|
242
|
|
|
Net assets acquired
|
$
|
363
|
|
|
Defined Benefit Plans
|
|
Foreign Currency Translation
|
|
Gain on Cash Flow Hedges
|
|
Accumulated Other Comprehensive Loss
|
||||||||||||||||
|
Employee
Benefit Plan Funded Status |
|
Amortization
of Prior Service Cost |
|
Amortization
of Actuarial (Gain) Loss |
|
|
|
|||||||||||||||
Beginning balance as of December 31, 2017
|
$
|
(140
|
)
|
|
$
|
1
|
|
|
$
|
49
|
|
|
$
|
1
|
|
|
$
|
10
|
|
|
$
|
(79
|
)
|
Other comprehensive income before reclassifications
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
6
|
|
||||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
||||||
Net other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
6
|
|
|
10
|
|
||||||
Ending balance as of June 30, 2018
|
$
|
(140
|
)
|
|
$
|
1
|
|
|
$
|
53
|
|
|
$
|
1
|
|
|
$
|
16
|
|
|
$
|
(69
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Beginning balance as of December 31, 2016
|
$
|
(147
|
)
|
|
$
|
1
|
|
|
$
|
42
|
|
|
$
|
2
|
|
|
$
|
16
|
|
|
$
|
(86
|
)
|
Other comprehensive loss before reclassifications
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(2
|
)
|
|
(3
|
)
|
||||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
||||||
Net other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
4
|
|
|
(1
|
)
|
|
(2
|
)
|
|
1
|
|
||||||
Ending balance as of June 30, 2017
|
$
|
(147
|
)
|
|
$
|
1
|
|
|
$
|
46
|
|
|
$
|
1
|
|
|
$
|
14
|
|
|
$
|
(85
|
)
|
Company
|
|
Type
|
|
Rate
|
|
Maturity
|
|
Amount
|
||
Other American Water subsidiaries
|
|
Private activity bonds and government funded debt—fixed rate
(a)
|
|
0.00%-5.00%
|
|
2021-2048
|
|
$
|
15
|
|
Total issuances
|
|
|
|
|
|
|
|
$
|
15
|
|
Company
|
|
Type
|
|
Rate
|
|
Maturity
|
|
Amount
|
||
American Water Capital Corp.
|
|
Senior Notes—fixed rate
|
|
6.25%
|
|
2018
|
|
$
|
110
|
|
American Water Capital Corp.
|
|
Private activity bonds and government funded debt—fixed rate
|
|
1.79%-2.90%
|
|
2021-2031
|
|
1
|
|
|
Other American Water subsidiaries
|
|
Private activity bonds and government funded debt—fixed rate
|
|
0.00%-5.40%
|
|
2018-2041
|
|
4
|
|
|
Other American Water subsidiaries
|
|
Mortgage bonds—fixed rate
|
|
9.13%
|
|
2021
|
|
1
|
|
|
Other American Water subsidiaries
|
|
Term Loan
|
|
4.83%-5.69%
|
|
2021
|
|
2
|
|
|
Other American Water subsidiaries
|
|
Mandatorily redeemable preferred stock
|
|
8.49%
|
|
2036
|
|
1
|
|
|
Total retirements and redemptions
|
|
|
|
|
|
|
|
$
|
119
|
|
Derivative Instruments
|
|
Derivative Designation
|
|
Balance Sheet Classification
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
Asset derivative:
|
|
|
|
|
|
|
|
|
|
|
||
Forward starting swaps
|
|
Cash flow hedge
|
|
Other current assets
|
|
$
|
9
|
|
|
$
|
—
|
|
Liability derivative:
|
|
|
|
|
|
|
|
|
|
|
||
Forward starting swaps
|
|
Cash flow hedge
|
|
Other current liabilities
|
|
$
|
3
|
|
|
$
|
3
|
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Components of net periodic pension benefit cost:
|
|
|
|
|
|
|
|
||||||||
Service cost
|
$
|
8
|
|
|
$
|
8
|
|
|
$
|
17
|
|
|
$
|
17
|
|
Interest cost
|
19
|
|
|
20
|
|
|
38
|
|
|
40
|
|
||||
Expected return on plan assets
|
(24
|
)
|
|
(23
|
)
|
|
(49
|
)
|
|
(47
|
)
|
||||
Amortization of actuarial loss
|
7
|
|
|
9
|
|
|
14
|
|
|
18
|
|
||||
Net periodic pension benefit cost
|
$
|
10
|
|
|
$
|
14
|
|
|
$
|
20
|
|
|
$
|
28
|
|
|
|
|
|
|
|
|
|
||||||||
Components of net periodic other post-retirement benefit (credit) cost:
|
|
|
|
|
|
|
|
||||||||
Service cost
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
5
|
|
|
$
|
5
|
|
Interest cost
|
5
|
|
|
6
|
|
|
11
|
|
|
13
|
|
||||
Expected return on plan assets
|
(6
|
)
|
|
(6
|
)
|
|
(13
|
)
|
|
(13
|
)
|
||||
Amortization of prior service credit
|
(4
|
)
|
|
(4
|
)
|
|
(9
|
)
|
|
(9
|
)
|
||||
Amortization of actuarial loss
|
1
|
|
|
2
|
|
|
2
|
|
|
5
|
|
||||
Net periodic other post-retirement benefit (credit) cost
|
$
|
(2
|
)
|
|
$
|
—
|
|
|
$
|
(4
|
)
|
|
$
|
1
|
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income attributable to common stockholders
|
$
|
162
|
|
|
$
|
131
|
|
|
$
|
268
|
|
|
$
|
224
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding—Basic
|
179
|
|
|
178
|
|
|
179
|
|
|
178
|
|
||||
Effect of dilutive common stock equivalents
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||
Weighted-average common shares outstanding—Diluted
|
179
|
|
|
179
|
|
|
179
|
|
|
179
|
|
|
Carrying Amount
|
|
At Fair Value as of June 30, 2018
|
||||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|||||||||||
Preferred stock with mandatory redemption requirements
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11
|
|
|
$
|
11
|
|
Long-term debt (excluding capital lease obligations)
|
6,706
|
|
|
4,529
|
|
|
839
|
|
|
1,739
|
|
|
7,107
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Carrying Amount
|
|
At Fair Value as of December 31, 2017
|
||||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|||||||||||
Preferred stock with mandatory redemption requirements
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14
|
|
|
$
|
14
|
|
Long-term debt (excluding capital lease obligations)
|
6,809
|
|
|
4,846
|
|
|
976
|
|
|
1,821
|
|
|
7,643
|
|
|
At Fair Value as of June 30, 2018
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Restricted funds
|
$
|
29
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
29
|
|
Rabbi trust investments
|
15
|
|
|
—
|
|
|
—
|
|
|
15
|
|
||||
Deposits
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||
Mark-to-market derivative assets
|
—
|
|
|
9
|
|
|
—
|
|
|
9
|
|
||||
Other investments
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||
Total assets
|
50
|
|
|
9
|
|
|
—
|
|
|
59
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Deferred compensation obligations
|
17
|
|
|
—
|
|
|
—
|
|
|
17
|
|
||||
Mark-to-market derivative liabilities
|
—
|
|
|
3
|
|
|
|
|
3
|
|
|||||
Total liabilities
|
17
|
|
|
3
|
|
|
—
|
|
|
20
|
|
||||
Total net assets (liabilities)
|
$
|
33
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
39
|
|
|
At Fair Value as of December 31, 2017
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Restricted funds
|
$
|
28
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
28
|
|
Rabbi trust investments
|
15
|
|
|
—
|
|
|
—
|
|
|
15
|
|
||||
Deposits
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
||||
Other investments
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||
Total assets
|
50
|
|
|
—
|
|
|
—
|
|
|
50
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Deferred compensation obligations
|
17
|
|
|
—
|
|
|
—
|
|
|
17
|
|
||||
Mark-to-market derivative liabilities
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
||||
Total liabilities
|
17
|
|
|
3
|
|
|
—
|
|
|
20
|
|
||||
Total net assets (liabilities)
|
$
|
33
|
|
|
$
|
(3
|
)
|
|
$
|
—
|
|
|
$
|
30
|
|
|
As of or for the Three Months Ended June 30, 2018
|
||||||||||||||
|
Regulated
Businesses |
|
Market-Based
Businesses |
|
Other
|
|
Consolidated
|
||||||||
Operating revenues
|
$
|
744
|
|
|
$
|
114
|
|
|
$
|
(5
|
)
|
|
$
|
853
|
|
Depreciation and amortization
|
123
|
|
|
7
|
|
|
4
|
|
|
134
|
|
||||
Total operating expenses, net
|
453
|
|
|
98
|
|
|
—
|
|
|
551
|
|
||||
Interest, net
|
(69
|
)
|
|
2
|
|
|
(19
|
)
|
|
(86
|
)
|
||||
Income before income taxes
|
226
|
|
|
18
|
|
|
(22
|
)
|
|
222
|
|
||||
Provision for income taxes
|
59
|
|
|
5
|
|
|
(4
|
)
|
|
60
|
|
||||
Net income attributable to common stockholders
|
167
|
|
|
13
|
|
|
(18
|
)
|
|
162
|
|
||||
Total assets
|
18,197
|
|
|
818
|
|
|
1,456
|
|
|
20,471
|
|
||||
Capital expenditures
|
347
|
|
|
1
|
|
|
27
|
|
|
375
|
|
|
As of or for the Three Months Ended June 30, 2017
|
||||||||||||||
|
Regulated
Businesses |
|
Market-Based
Businesses |
|
Other
|
|
Consolidated
|
||||||||
Operating revenues
|
$
|
746
|
|
|
$
|
103
|
|
|
$
|
(5
|
)
|
|
$
|
844
|
|
Depreciation and amortization
|
119
|
|
|
4
|
|
|
3
|
|
|
126
|
|
||||
Total operating expenses, net
|
450
|
|
|
89
|
|
|
(5
|
)
|
|
534
|
|
||||
Interest, net
|
(67
|
)
|
|
1
|
|
|
(19
|
)
|
|
(85
|
)
|
||||
Income before income taxes
|
230
|
|
|
15
|
|
|
(19
|
)
|
|
226
|
|
||||
Provision for income taxes
|
90
|
|
|
7
|
|
|
(2
|
)
|
|
95
|
|
||||
Net income attributable to common stockholders
|
140
|
|
|
9
|
|
|
(18
|
)
|
|
131
|
|
||||
Total assets
|
16,982
|
|
|
570
|
|
|
1,414
|
|
|
18,966
|
|
||||
Capital expenditures
|
289
|
|
|
3
|
|
|
40
|
|
|
332
|
|
|
As of or for the Six Months Ended June 30, 2018
|
||||||||||||||
|
Regulated
Businesses |
|
Market-Based
Businesses |
|
Other
|
|
Consolidated
|
||||||||
Operating revenues
|
$
|
1,410
|
|
|
$
|
214
|
|
|
$
|
(10
|
)
|
|
$
|
1,614
|
|
Depreciation and amortization
|
245
|
|
|
11
|
|
|
7
|
|
|
263
|
|
||||
Total operating expenses, net
|
915
|
|
|
184
|
|
|
(4
|
)
|
|
1,095
|
|
||||
Interest, net
|
(138
|
)
|
|
3
|
|
|
(35
|
)
|
|
(170
|
)
|
||||
Income before income taxes
|
368
|
|
|
34
|
|
|
(40
|
)
|
|
362
|
|
||||
Provision for income taxes
|
97
|
|
|
9
|
|
|
(12
|
)
|
|
94
|
|
||||
Net income attributable to common stockholders
|
271
|
|
|
25
|
|
|
(28
|
)
|
|
268
|
|
||||
Total assets
|
18,197
|
|
|
818
|
|
|
1,456
|
|
|
20,471
|
|
||||
Capital expenditures
|
677
|
|
|
7
|
|
|
55
|
|
|
739
|
|
|
As of or for the Six Months Ended June 30, 2017
|
||||||||||||||
|
Regulated
Businesses |
|
Market-Based
Businesses |
|
Other
|
|
Consolidated
|
||||||||
Operating revenues
|
$
|
1,405
|
|
|
$
|
206
|
|
|
$
|
(11
|
)
|
|
$
|
1,600
|
|
Depreciation and amortization
|
236
|
|
|
8
|
|
|
6
|
|
|
250
|
|
||||
Total operating expenses, net
|
886
|
|
|
183
|
|
|
(9
|
)
|
|
1,060
|
|
||||
Interest, net
|
(133
|
)
|
|
1
|
|
|
(38
|
)
|
|
(170
|
)
|
||||
Income before income taxes
|
384
|
|
|
25
|
|
|
(38
|
)
|
|
371
|
|
||||
Provision for income taxes
|
150
|
|
|
10
|
|
|
(13
|
)
|
|
147
|
|
||||
Net income attributable to common stockholders
|
234
|
|
|
15
|
|
|
(25
|
)
|
|
224
|
|
||||
Total assets
|
16,982
|
|
|
570
|
|
|
1,414
|
|
|
18,966
|
|
||||
Capital expenditures
|
542
|
|
|
4
|
|
|
56
|
|
|
602
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
The Company completed the acquisition of Pivotal Home Solutions (“Pivotal”),
a leading provider of home warranty protection products and services, for
$363 million
. This transaction was financed with approximately
50%
debt and
50%
equity, and included the Company’s election to physically settle the equity forward sale agreements entered into on
April 11, 2018
, resulting in the issuance of
2,320,000
shares of our common stock, in exchange for aggregate net proceeds of
$183 million
. See
Note 4—Acquisitions
in the Notes to the Consolidated Financial Statements for further discussion.
|
•
|
Effective July 16, 2018, the court issued its final approval of the global settlement related to the Freedom Industries chemical spill in West Virginia. Also, on June 1, 2018, the Company settled with its remaining general liability insurance carrier relating to this matter, resulting in a
$20 million
benefit for the Company. With these issues resolved, our West Virginia subsidiary’s contribution to the
$126 million
settlement is
$23 million
, net of insurance recoveries. See
Note 11—Commitments and Contingencies
in the Notes to the Consolidated Financial Statements for further discussion.
|
•
|
Our Pennsylvania subsidiary entered into an agreement to acquire the wastewater assets of Exeter Township, Pennsylvania, a system that serves nearly
9,000
customers, for approximately
$96 million
.
|
•
|
On
July 5, 2018
, the Company entered into an agreement for the sale of the majority of our
Contract Operations Group
to subsidiaries of Veolia Environnement S.A. for
$27 million
. The sale agreement includes the transfer of
23
of our
Contract Operations Group
’s
33
O&M contracts and is expected to fully close by the end of 2018.
|
•
|
Every five years, we negotiate national health and welfare benefits with our union-represented employees. On
July 31, 2018
, a new,
five
-year national benefits agreement was ratified, covering approximately
3,200
of our union-represented employees, which includes
17
labor unions and
69
collective bargaining agreements. Some highlights of the new agreement include union-represented employees’ participation in the Company’s cash-based annual performance plan, changes to certain retiree medical benefits and additional medical plan options for our employees and their families.
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Diluted earnings per share (GAAP):
|
|
|
|
|
|
|
|
||||||||
Net income attributable to common stockholders
|
$
|
0.91
|
|
|
$
|
0.73
|
|
|
$
|
1.50
|
|
|
$
|
1.26
|
|
|
|
|
|
|
|
|
|
||||||||
Non-GAAP adjustment:
|
|
|
|
|
|
|
|
||||||||
Impact of Freedom Industries settlement activities
|
(0.11
|
)
|
|
—
|
|
|
(0.11
|
)
|
|
—
|
|
||||
Income tax impact
|
0.03
|
|
|
—
|
|
|
0.03
|
|
|
—
|
|
||||
Total net non-GAAP adjustment
|
(0.08
|
)
|
|
—
|
|
|
(0.08
|
)
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Adjusted diluted earnings per share (non-GAAP)
|
$
|
0.83
|
|
|
$
|
0.73
|
|
|
$
|
1.42
|
|
|
$
|
1.26
|
|
•
|
$713 million
, of which the majority was in our
Regulated Businesses
for infrastructure improvements;
|
•
|
$363 million
to fund the acquisition of Pivotal, as discussed in further detail below; and
|
•
|
$14 million
to fund acquisitions in our
Regulated Businesses
, which added approximately
5,600
water and wastewater customers.
|
|
For the Twelve Months Ended June 30,
|
||||||
(In millions)
|
2018
|
|
2017
|
||||
Total operation and maintenance expenses
(a)
|
$
|
1,383
|
|
|
$
|
1,487
|
|
Less:
|
|
|
|
||||
Operation and maintenance expenses—Market-Based Businesses
|
334
|
|
|
351
|
|
||
Operation and maintenance expenses—Other
(a)
|
(40
|
)
|
|
(37
|
)
|
||
Total operation and maintenance expenses—Regulated Businesses
(a)
|
1,089
|
|
|
1,173
|
|
||
Less:
|
|
|
|
||||
Regulated purchased water expenses
|
133
|
|
|
123
|
|
||
Allocation of non-operation and maintenance expenses
|
29
|
|
|
27
|
|
||
Impact of Freedom Industries settlement activities
(b)
|
(42
|
)
|
|
65
|
|
||
Adjusted operation and maintenance expenses—Regulated Businesses
(i)
|
$
|
969
|
|
|
$
|
958
|
|
|
|
|
|
||||
Total operating revenues
|
$
|
3,371
|
|
|
$
|
3,332
|
|
Less:
|
|
|
|
||||
Pro forma adjustment for impact of the TCJA
(c)
|
87
|
|
|
164
|
|
||
Total pro forma operating revenues
|
3,284
|
|
|
3,168
|
|
||
Less:
|
|
|
|
||||
Operating revenues—Market-Based Businesses
|
430
|
|
|
428
|
|
||
Operating revenues—Other
|
(22
|
)
|
|
(22
|
)
|
||
Total pro forma operating revenues—Regulated Businesses
|
2,876
|
|
|
2,762
|
|
||
Less:
|
|
|
|
||||
Regulated purchased water revenues
(d)
|
133
|
|
|
123
|
|
||
Adjusted pro forma operating revenues—Regulated Businesses
(ii)
|
$
|
2,743
|
|
|
$
|
2,639
|
|
|
|
|
|
||||
Adjusted O&M efficiency ratio—Regulated Businesses
(i) / (ii)
|
35.3
|
%
|
|
36.3
|
%
|
NOTE
|
The adjusted O&M efficiency ratio previously reported for the twelve months ended
June 30, 2017
was
34.5%
, which did not include the adjustments for the items discussed in footnotes (a) and (c) below.
|
(a)
|
Includes the impact of the Company’s adoption of ASU 2017-07 on January 1, 2018. See
Note 2—Significant Accounting Policies
in the Notes to the Consolidated Financial Statements for further discussion.
|
(b)
|
Includes the impact of the binding global agreement in principle to settle claims in 2016, and settlements with two of our general liability insurance carriers in 2017 and 2018.
|
(c)
|
Includes the estimated impact of the TCJA on operating revenues for our Regulated Businesses for all periods presented prior to January 1, 2018, as if the lower federal corporate income tax rate was in effect for these periods. See
Note 5—Regulatory Liabilities
in the Notes to the Consolidated Financial Statements for further discussion.
|
(d)
|
The calculation assumes regulated purchased water revenues approximate regulated purchased water expenses.
|
(In millions)
|
For the Three Months Ended June 30, 2018
|
|
For the Six Months Ended June 30, 2018
|
||||
General rate cases by state:
|
|
|
|
||||
Missouri
(effective May 28, 2018)
|
$
|
33
|
|
|
$
|
33
|
|
Pennsylvania
(effective January 1, 2018)
|
—
|
|
|
62
|
|
||
Total general rate cases
|
$
|
33
|
|
|
$
|
95
|
|
|
|
|
|
||||
Infrastructure surcharges by state:
|
|
|
|
||||
Tennessee
(effective April 10, 2018)
|
$
|
1
|
|
|
$
|
1
|
|
Indiana
(effective March 14, 2018)
|
—
|
|
|
7
|
|
||
Virginia
(effective March 1, 2018)
|
—
|
|
|
1
|
|
||
Illinois
(effective January 1, 2018)
|
—
|
|
|
3
|
|
||
West Virginia
(effective January 1, 2018)
|
—
|
|
|
3
|
|
||
Total infrastructure surcharges
|
$
|
1
|
|
|
$
|
15
|
|
•
|
House File 2307 in Iowa and House Bill 1566 in Maryland allow a fair market value methodology to be included in rate base with respect to prospective acquisitions.
|
•
|
Senate Enrolled Act 362 in Indiana, which, similar to the Water Quality Accountability Act enacted in New Jersey in 2017, sets new operational standards and requirements for water and wastewater treatment plants in areas such as capital asset management, cost-benefit analysis and cybersecurity.
|
•
|
Senate Bill 705 in Missouri allows the Missouri Public Service Commission to approve a Revenue Stabilization Mechanism (“RSM”) for water utilities. In an effort to encourage conservation, a RSM adjusts rates periodically to ensure that a utility’s revenue will be sufficient to cover its costs, and customers will not overpay for service.
|
•
|
Senate Bill 592 in Missouri changes the public vote requirement for the sale of a municipal water or wastewater system to a simple majority for more than 500 small towns. Historically, only larger communities required a simple majority, while smaller communities needed a two-thirds majority. This legislation increases the options for small towns, should they decide to address their water and sewer challenges through an asset sale.
|
•
|
Legislation was passed in Iowa that allows private water utilities to use a future test year approach in rate cases, decreasing potential regulatory lag and helping to spread out the time between rate cases.
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
||||||||||||||||||||||||||
|
2018
|
|
2017
|
|
Increase (Decrease)
|
|
2018
|
|
2017
|
|
Increase (Decrease)
|
||||||||||||||||||
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating revenues
|
$
|
853
|
|
|
$
|
844
|
|
|
$
|
9
|
|
|
1.1
|
%
|
|
$
|
1,614
|
|
|
$
|
1,600
|
|
|
$
|
14
|
|
|
0.9
|
%
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operation and maintenance
|
348
|
|
|
347
|
|
|
1
|
|
|
0.3
|
%
|
|
695
|
|
|
681
|
|
|
14
|
|
|
2.1
|
%
|
||||||
Depreciation and amortization
|
134
|
|
|
126
|
|
|
8
|
|
|
6.3
|
%
|
|
263
|
|
|
250
|
|
|
13
|
|
|
5.2
|
%
|
||||||
General taxes
|
69
|
|
|
63
|
|
|
6
|
|
|
9.5
|
%
|
|
139
|
|
|
131
|
|
|
8
|
|
|
6.1
|
%
|
||||||
Gain on asset dispositions and purchases
|
—
|
|
|
(2
|
)
|
|
2
|
|
|
100.0
|
%
|
|
(2
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
%
|
||||||
Total operating expenses, net
|
551
|
|
|
534
|
|
|
17
|
|
|
3.2
|
%
|
|
1,095
|
|
|
1,060
|
|
|
35
|
|
|
3.3
|
%
|
||||||
Operating income
|
302
|
|
|
310
|
|
|
(8
|
)
|
|
(2.6
|
)%
|
|
519
|
|
|
540
|
|
|
(21
|
)
|
|
(3.9
|
)%
|
||||||
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Interest, net
|
(86
|
)
|
|
(85
|
)
|
|
(1
|
)
|
|
1.2
|
%
|
|
(170
|
)
|
|
(170
|
)
|
|
—
|
|
|
—
|
%
|
||||||
Non-operating benefit costs, net
|
2
|
|
|
(2
|
)
|
|
4
|
|
|
(200.0
|
)%
|
|
5
|
|
|
(5
|
)
|
|
10
|
|
|
(200.0
|
)%
|
||||||
Other, net
|
4
|
|
|
3
|
|
|
1
|
|
|
33.3
|
%
|
|
8
|
|
|
6
|
|
|
2
|
|
|
33.3
|
%
|
||||||
Total other income (expenses)
|
(80
|
)
|
|
(84
|
)
|
|
4
|
|
|
(4.8
|
)%
|
|
(157
|
)
|
|
(169
|
)
|
|
12
|
|
|
(7.1
|
)%
|
||||||
Income before income taxes
|
222
|
|
|
226
|
|
|
(4
|
)
|
|
(1.8
|
)%
|
|
362
|
|
|
371
|
|
|
(9
|
)
|
|
(2.4
|
)%
|
||||||
Provision for income taxes
|
60
|
|
|
95
|
|
|
(35
|
)
|
|
(36.8
|
)%
|
|
94
|
|
|
147
|
|
|
(53
|
)
|
|
(36.1
|
)%
|
||||||
Net income attributable to common stockholders
|
$
|
162
|
|
|
$
|
131
|
|
|
$
|
31
|
|
|
23.7
|
%
|
|
$
|
268
|
|
|
$
|
224
|
|
|
$
|
44
|
|
|
19.6
|
%
|
•
|
$36 million increase in our
Regulated Businesses
from authorized rate increases and increases from water and wastewater acquisitions, organic growth and higher water services demand due to weather; and
|
•
|
$11 million
increase
in our
Market-Based Businesses
from an increase in operations for Keystone as a result of market recovery in the shale natural gas industry, and an increase in our
Homeowner Services Group
from contract growth and the acquisition of Pivotal on
June 4, 2018
, offset in part by the expiration of certain contracts in our
Contract Operations Group
and lower capital upgrades in our
Military Services Group
; partially offset by a
|
•
|
$38 million
decrease in our
Regulated Businesses
from the impacts of the TCJA which have or are expected to benefit our customers.
|
•
|
$75 million
increase in our
Regulated Businesses
from authorized rate increases and increases from water and wastewater acquisitions, organic growth, and higher water services demand due to weather; and
|
•
|
$8 million
increase
in our
Market-Based Businesses
from an increase in operations for Keystone as a result of market recovery in the shale natural gas industry, and an increase in our
Homeowner Services Group
from contract growth and the acquisition of Pivotal on
June 4, 2018
, offset in part by the expiration of certain contracts in our
Contract Operations Group
and lower capital upgrades in our
Military Services Group
; partially offset by a
|
•
|
$70 million
decrease in our
Regulated Businesses
from the impacts of the TCJA which have or are expected to benefit our customers.
|
•
|
$5 million
increase
in our
Market-Based Businesses
from an increase in operations for Keystone, as discussed above, and the acquisition of Pivotal on
June 4, 2018
, offset in part by a decrease in our
Contract Operations Group
from the expiration of certain contracts; and
|
•
|
$9 million
decrease
in our
Regulated Businesses
from a
$20 million
benefit recorded in the second quarter of 2018, resulting from an insurance settlement related to the Freedom Industries chemical spill in West Virginia, offset in part by increases in production and other costs primarily driven by growth in the business.
|
•
|
$12 million
increase
in our
Regulated Businesses
from an increase in price and usage of purchase water and chemicals, along with an increase in employee-related costs and maintenance materials and supplies, related to the higher volume of main breaks and paving expense experienced in the first quarter of 2018, offset in part by a
$20 million
benefit recorded in the second quarter of 2018, resulting from an insurance settlement related to the Freedom Industries chemical spill in West Virginia; partially offset by a
|
•
|
$3 million
decrease
in our
Market-Based Businesses
from the expiration of certain contracts in our
Contract Operations Group
and lower capital upgrades in our
Military Services Group
, as well as lower claims expense in our
Homeowner Services Group
, driven by operational efficiencies gained through improved planning and relationship management of key contractor partnerships, offset in part by an increase in operations for Keystone, as discussed above, and the acquisition of Pivotal on
June 4, 2018
.
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
||||||||||||||||||||||||||
|
2018
|
|
2017
|
|
Increase (Decrease)
|
|
2018
|
|
2017
|
|
Increase (Decrease)
|
||||||||||||||||||
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating revenues
|
$
|
744
|
|
|
$
|
746
|
|
|
$
|
(2
|
)
|
|
(0.3
|
)%
|
|
$
|
1,410
|
|
|
$
|
1,405
|
|
|
$
|
5
|
|
|
0.4
|
%
|
Operation and maintenance
|
264
|
|
|
273
|
|
|
(9
|
)
|
|
(3.3
|
)%
|
|
542
|
|
|
530
|
|
|
12
|
|
|
2.3
|
%
|
||||||
Depreciation and amortization
|
123
|
|
|
119
|
|
|
4
|
|
|
3.4
|
%
|
|
245
|
|
|
236
|
|
|
9
|
|
|
3.8
|
%
|
||||||
General taxes
|
66
|
|
|
60
|
|
|
6
|
|
|
10.0
|
%
|
|
131
|
|
|
123
|
|
|
8
|
|
|
6.5
|
%
|
||||||
Income before income taxes
|
226
|
|
|
230
|
|
|
(4
|
)
|
|
(1.7
|
)%
|
|
368
|
|
|
384
|
|
|
(16
|
)
|
|
(4.2
|
)%
|
||||||
Provision for income taxes
|
59
|
|
|
90
|
|
|
(31
|
)
|
|
(34.4
|
)%
|
|
97
|
|
|
150
|
|
|
(53
|
)
|
|
(35.3
|
)%
|
||||||
Net income attributable to common stockholders
|
167
|
|
|
140
|
|
|
27
|
|
|
19.3
|
%
|
|
271
|
|
|
234
|
|
|
37
|
|
|
15.8
|
%
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
||||||||||||||||||||||||||
|
2018
|
|
2017
|
|
Increase (Decrease)
|
|
2018
|
|
2017
|
|
Increase (Decrease)
|
||||||||||||||||||
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Water services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Residential
|
$
|
410
|
|
|
$
|
413
|
|
|
$
|
(3
|
)
|
|
(0.7
|
)%
|
|
$
|
778
|
|
|
$
|
772
|
|
|
$
|
6
|
|
|
0.8
|
%
|
Commercial
|
152
|
|
|
151
|
|
|
1
|
|
|
0.7
|
%
|
|
285
|
|
|
279
|
|
|
6
|
|
|
2.2
|
%
|
||||||
Industrial
|
34
|
|
|
35
|
|
|
(1
|
)
|
|
(2.9
|
)%
|
|
65
|
|
|
67
|
|
|
(2
|
)
|
|
(3.0
|
)%
|
||||||
Public and other
|
85
|
|
|
88
|
|
|
(3
|
)
|
|
(3.4
|
)%
|
|
165
|
|
|
168
|
|
|
(3
|
)
|
|
(1.8
|
)%
|
||||||
Total water services
|
681
|
|
|
687
|
|
|
(6
|
)
|
|
(0.9
|
)%
|
|
1,293
|
|
|
1,286
|
|
|
7
|
|
|
0.5
|
%
|
||||||
Wastewater services
|
38
|
|
|
36
|
|
|
2
|
|
|
5.6
|
%
|
|
76
|
|
|
70
|
|
|
6
|
|
|
8.6
|
%
|
||||||
Other
(a)
|
25
|
|
|
23
|
|
|
2
|
|
|
8.7
|
%
|
|
41
|
|
|
49
|
|
|
(8
|
)
|
|
(16.3
|
)%
|
||||||
Total operating revenues
|
$
|
744
|
|
|
$
|
746
|
|
|
$
|
(2
|
)
|
|
(0.3
|
)%
|
|
$
|
1,410
|
|
|
$
|
1,405
|
|
|
$
|
5
|
|
|
0.4
|
%
|
(a)
|
Includes revenues from miscellaneous utility charges, alternative revenue programs and lease contracts.
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
||||||||||||||||||||
|
2018
|
|
2017
|
|
Increase (Decrease)
|
|
2018
|
|
2017
|
|
Increase (Decrease)
|
||||||||||||
(Gallons in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Billed water services volumes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Residential
|
40,783
|
|
|
41,575
|
|
|
(792
|
)
|
|
(1.9
|
)%
|
|
78,238
|
|
|
77,560
|
|
|
678
|
|
|
0.9
|
%
|
Commercial
|
19,767
|
|
|
19,817
|
|
|
(50
|
)
|
|
(0.3
|
)%
|
|
37,514
|
|
|
36,880
|
|
|
634
|
|
|
1.7
|
%
|
Industrial
|
9,198
|
|
|
9,679
|
|
|
(481
|
)
|
|
(5.0
|
)%
|
|
18,895
|
|
|
18,557
|
|
|
338
|
|
|
1.8
|
%
|
Public and other
|
12,343
|
|
|
12,342
|
|
|
1
|
|
|
—
|
%
|
|
23,923
|
|
|
23,835
|
|
|
88
|
|
|
0.4
|
%
|
Billed water services volumes
|
82,091
|
|
|
83,413
|
|
|
(1,322
|
)
|
|
(1.6
|
)%
|
|
158,570
|
|
|
156,832
|
|
|
1,738
|
|
|
1.1
|
%
|
•
|
$38 million
decrease from the impacts of the TCJA which have or are expected to benefit our customer rates. This decrease is made up of two primary components: (i) a reserve on revenue billed during the second quarter of 2018, for the estimated income tax savings resulting from the TCJA, which is expected to benefit our customers in future rates; and (ii) rate adjustments made in certain subsidiaries where our Regulators have authorized an approach to pass the benefits from the lower income tax rate to our customers; partially offset by a
|
•
|
$28 million increase from authorized rate increases, including infrastructure surcharges, principally to fund infrastructure investment growth in various states;
|
•
|
$5 million increase from water and wastewater acquisitions, as well as organic growth in existing systems; and a
|
•
|
$2 million increase from higher water services demand, largely driven by warmer and drier weather in the Midwest.
|
•
|
$50 million increase from authorized rate increases, including infrastructure surcharges, principally to fund infrastructure investment growth in various states;
|
•
|
$14 million increase from water and wastewater acquisitions, as well as organic growth in existing systems;
|
•
|
$6 million increase from higher water services demand, including $2 million driven by warmer and drier weather in the second quarter of 2018;
|
•
|
$3 million increase from surcharges and other operating revenues, primarily in our Pennsylvania subsidiary; partially offset by a
|
•
|
$70 million
decrease from the impacts of the TCJA which have or are expected to benefit our customer rates. This decrease is made up of two primary components: (i) a reserve on revenue billed during the first half of 2018, for the estimated income tax savings resulting from the TCJA, which is expected to benefit our customers in future rates; and (ii) rate adjustments made in certain subsidiaries where our Regulators have authorized an approach to pass the benefits from the lower income tax rate to our customers.
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
||||||||||||||||||||||||||
|
2018
|
|
2017
|
|
Increase (Decrease)
|
|
2018
|
|
2017
|
|
Increase (Decrease)
|
||||||||||||||||||
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Production costs
|
$
|
77
|
|
|
$
|
74
|
|
|
$
|
3
|
|
|
4.1
|
%
|
|
$
|
146
|
|
|
$
|
137
|
|
|
$
|
9
|
|
|
6.6
|
%
|
Employee-related costs
|
110
|
|
|
108
|
|
|
2
|
|
|
1.9
|
%
|
|
227
|
|
|
214
|
|
|
13
|
|
|
6.1
|
%
|
||||||
Operating supplies and services
|
53
|
|
|
51
|
|
|
2
|
|
|
3.9
|
%
|
|
101
|
|
|
99
|
|
|
2
|
|
|
2.0
|
%
|
||||||
Maintenance materials and supplies
|
17
|
|
|
16
|
|
|
1
|
|
|
6.3
|
%
|
|
39
|
|
|
34
|
|
|
5
|
|
|
14.7
|
%
|
||||||
Customer billing and accounting
|
16
|
|
|
13
|
|
|
3
|
|
|
23.1
|
%
|
|
26
|
|
|
23
|
|
|
3
|
|
|
13.0
|
%
|
||||||
Other
|
(9
|
)
|
|
11
|
|
|
(20
|
)
|
|
(181.8
|
)%
|
|
3
|
|
|
23
|
|
|
(20
|
)
|
|
(87.0
|
)%
|
||||||
Total
|
$
|
264
|
|
|
$
|
273
|
|
|
$
|
(9
|
)
|
|
(3.3
|
)%
|
|
$
|
542
|
|
|
$
|
530
|
|
|
$
|
12
|
|
|
2.3
|
%
|
•
|
$20 million
benefit recorded in the second quarter of 2018, resulting from an insurance settlement related to the Freedom Industries chemical spill in West Virginia; partially offset by a
|
•
|
$3 million
increase
in production costs from purchased water price and usage increases in our California subsidiary;
|
•
|
$5 million
combined increase in employee-related costs, operating supplies and services, and maintenance materials and supplies from acquisitions and growth of the business; and
|
•
|
$3 million
increase
in customer billing and accounting from an increase in customer uncollectible expense and higher call volumes experienced at our customer service centers.
|
•
|
$9 million
increase
in production costs from purchased water price and usage increases in our California subsidiary, along with an increase in chemical costs and usage;
|
•
|
$13 million
increase
in employee-related costs from an increase in headcount, mainly due to acquisitions, and compensation expense in support of the growth of the business, as well as an increase in overtime related to a higher volume of main breaks during the first quarter of 2018, the result of harshly frigid weather in the Midwest, Northeast and parts of the Mid-Atlantic;
|
•
|
$5 million
increase
in maintenance materials and supplies from a higher volume of main breaks and paving expense in the first quarter of 2018, driven by the colder weather experienced; and
|
•
|
$3 million
increase
in customer billing and accounting from an increase in customer uncollectible expense and higher call volumes experienced at our customer service centers; partially offset by a
|
•
|
$20 million
benefit recorded in the second quarter of 2018, resulting from an insurance settlement related to the Freedom Industries chemical spill in West Virginia.
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
||||||||||||||||||||||||||
|
2018
|
|
2017
|
|
Increase (Decrease)
|
|
2018
|
|
2017
|
|
Increase (Decrease)
|
||||||||||||||||||
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating revenues
|
$
|
114
|
|
|
$
|
103
|
|
|
$
|
11
|
|
|
10.7
|
%
|
|
$
|
214
|
|
|
$
|
206
|
|
|
$
|
8
|
|
|
3.9
|
%
|
Operation and maintenance
|
89
|
|
|
84
|
|
|
5
|
|
|
6.0
|
%
|
|
169
|
|
|
172
|
|
|
(3
|
)
|
|
(1.7
|
)%
|
||||||
Income before income taxes
|
18
|
|
|
15
|
|
|
3
|
|
|
20.0
|
%
|
|
34
|
|
|
25
|
|
|
9
|
|
|
36.0
|
%
|
||||||
Provision for income taxes
|
5
|
|
|
7
|
|
|
(2
|
)
|
|
(28.6
|
)%
|
|
9
|
|
|
10
|
|
|
(1
|
)
|
|
(10.0
|
)%
|
||||||
Net income attributable to common stockholders
|
13
|
|
|
9
|
|
|
4
|
|
|
44.4
|
%
|
|
25
|
|
|
15
|
|
|
10
|
|
|
66.7
|
%
|
•
|
$9 million
increase in Keystone from an increase in operations as a result of market recovery in the shale natural gas industry; and
|
•
|
$7 million
increase in our
Homeowner Services Group
from contract growth and the acquisition of Pivotal on
June 4, 2018
; partially offset by a
|
•
|
$3 million
decrease in our
Contract Operations Group
from the expiration of certain contracts; and
|
•
|
$2 million
decrease in our
Military Services Group
from lower capital upgrades, largely driven by reduced military base budgets.
|
•
|
$13 million increase in Keystone from an increase in operations as a result of market recovery in the shale natural gas industry; and
|
•
|
$8 million increase in our
Homeowner Services Group
from contract growth and the acquisition of Pivotal on
June 4, 2018
; partially offset by a
|
•
|
$9 million decrease in our
Military Services Group
from lower capital upgrades, largely driven by reduced military base budgets; and
|
•
|
$5 million decrease in our
Contract Operations Group
from the expiration of certain contracts.
|
•
|
$10 million increase in Keystone from an increase in operations, as discussed above; and
|
•
|
$3 million increase from the acquisition of Pivotal on
June 4, 2018
; partially offset by a
|
•
|
$5 million decrease in our
Contract Operations Group
from the expiration of certain contracts; and
|
•
|
$2 million decrease in our
Homeowner Services Group
from lower claims expense, driven by operational efficiencies gained through improved planning and relationship management of key contractor partnerships.
|
•
|
$8 million decrease in our
Military Services Group
from lower capital upgrades, as discussed above;
|
•
|
$6 million decrease in our
Contract Operations Group
from the expiration of certain contracts; and
|
•
|
$6 million decrease in our
Homeowner Services Group
from lower claims expense, driven by operational efficiencies gained through improved planning and relationship management of key contractor partnerships; partially offset by a
|
•
|
$13 million increase in Keystone from an increase in operations, as discussed above; and
|
•
|
$4 million increase related to the acquisition of Pivotal on
June 4, 2018
.
|
|
For the Six Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
(In millions)
|
|
|
|
||||
Net income
|
$
|
268
|
|
|
$
|
224
|
|
Add (less):
|
|
|
|
||||
Depreciation and amortization
|
263
|
|
|
250
|
|
||
Deferred income taxes and amortization of investment tax credits
|
82
|
|
|
137
|
|
||
Other non-cash activities
(a)
|
24
|
|
|
(12
|
)
|
||
Changes in working capital
(b)
|
(112
|
)
|
|
(52
|
)
|
||
Pension and post-retirement healthcare contributions
|
—
|
|
|
(23
|
)
|
||
Net cash flows provided by operations
|
$
|
525
|
|
|
$
|
524
|
|
(a)
|
Includes provision for losses on accounts receivable, gain on asset dispositions and purchases, pension and non-pension post-retirement benefits expense and other non-cash, net. Details of each component can be found in the Consolidated Statements of Cash Flows.
|
(b)
|
Changes in working capital include changes to receivables and unbilled revenues, accounts payable and accrued liabilities, and other current assets and liabilities, net.
|
|
For the Six Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
(In millions)
|
|
|
|
||||
Net capital expenditures
|
$
|
(739
|
)
|
|
$
|
(602
|
)
|
Acquisitions
|
(377
|
)
|
|
(9
|
)
|
||
Other investing activities, net
(a)
|
(33
|
)
|
|
(24
|
)
|
||
Net cash flows used in investing activities
|
$
|
(1,149
|
)
|
|
$
|
(635
|
)
|
(a)
|
Includes removal costs from property, plant and equipment retirements, net, and proceeds from sale of assets and securities.
|
|
For the Six Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
(In millions)
|
|
|
|
||||
Proceeds from long-term debt
|
$
|
15
|
|
|
$
|
20
|
|
Repayments of long-term debt
|
(119
|
)
|
|
(6
|
)
|
||
Net proceeds from short-term borrowings
|
746
|
|
|
268
|
|
||
Proceeds from issuance of common stock
|
183
|
|
|
—
|
|
||
Dividends paid
|
(155
|
)
|
|
(141
|
)
|
||
Anti-dilutive stock repurchases
|
(45
|
)
|
|
(54
|
)
|
||
Other financing activities, net
(a)
|
13
|
|
|
18
|
|
||
Net cash flows provided by financing activities
|
$
|
638
|
|
|
$
|
105
|
|
(a)
|
Includes proceeds from issuances of common stock under various employee stock plans and our dividend reinvestment plan, advances and contributions for construction, net of refunds, and taxes paid related to employee stock plans.
|
|
Credit Facilities Commitment (a)
|
|
Available Credit Facility Capacity (a)
|
|
Letter of Credit Sublimit
|
|
Available Letter of Credit Capacity
|
|
Commercial Paper Limit
|
|
Available Commercial Paper Capacity
|
||||||||||||
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
June 30, 2018
|
$
|
2,262
|
|
|
$
|
2,172
|
|
|
$
|
150
|
|
|
$
|
63
|
|
|
$
|
2,100
|
|
|
$
|
451
|
|
(a)
|
Includes amounts related to the revolving credit facility of Keystone. As of
June 30, 2018
, the total commitment under the Keystone revolving credit facility was
$12 million
, of which
$9 million
was available for borrowing, subject to compliance with a collateral base calculation. At
June 30, 2018
, there were no outstanding borrowings under this credit facility.
|
Securities
|
|
Moody's
Investors Service |
|
Standard & Poor's
Ratings Service |
Rating Outlook
|
|
Negative
|
|
Stable
|
Senior unsecured debt
|
|
A3
|
|
A
|
Commercial paper
|
|
P-2
|
|
A-1
|
Exhibit Number
|
|
Exhibit Description
|
2.1
|
|
|
3.1
|
|
|
3.2
|
|
|
*10.1
|
|
|
10.2
|
|
|
10.3
|
|
|
10.4
|
|
|
*31.1
|
|
|
*31.2
|
|
|
**32.1
|
|
|
**32.2
|
|
|
*99.1
|
|
|
*101
|
|
The following financial statements from American Water Works Company, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018, filed with the Securities and Exchange Commission on August 1, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Cash Flows; (v) the Consolidated Statements of Changes in Stockholders’ Equity; and (vi) the Notes to Consolidated Financial Statements.
|
|
A
MERICAN
W
ATER
W
ORKS
C
OMPANY
, I
NC
.
|
|
(R
EGISTRANT
)
|
By
|
/s/ SUSAN N. STORY
|
|
Susan N. Story
President and Chief Executive Officer
(Principal Executive Officer)
|
By
|
/s/ LINDA G. SULLIVAN
|
|
Linda G. Sullivan
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
By
|
/s/ MELISSA K. WIKLE
|
|
Melissa K. Wikle
Vice President and Controller
(Principal Accounting Officer)
|
Number of Stock Units, and Dividend Equivalents, to be Further Deferred
(All Must Be Deferred)
|
Original Specified Date
(Election Must Be Made at Least 12 Months Prior to the Specified Date)
|
Deferred Date
(Must be a date that is at least 5 years later than the Original Specified Date) |
100%
|
August 14, 2019
|
|
By:
|
/s/ SUSAN N. STORY
|
|
Susan N. Story
|
|
President and Chief Executive Officer
(Principal Executive Officer)
|
By:
|
/s/ LINDA G. SULLIVAN
|
|
Linda G. Sullivan
|
|
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
By:
|
/s/ SUSAN N. STORY
|
|
Susan N. Story
President and Chief Executive Officer
(Principal Executive Officer)
|
|
August 1, 2018
|
By:
|
/s/ LINDA G. SULLIVAN
|
|
Linda G. Sullivan
|
|
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
August 1, 2018
|
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
For the Six Months Ended June 30, 2018
|
||||||
Income from continuing operations before income taxes
|
|
608
|
|
|
710
|
|
|
782
|
|
|
770
|
|
|
912
|
|
|
362
|
|
Fixed Charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest, dividend on mandatory redeemable preferred shares and amortization of debt discount and expenses and premium on all indebtedness
|
|
315
|
|
|
305
|
|
|
316
|
|
|
331
|
|
|
350
|
|
|
178
|
|
Interest factor in rentals
|
|
8
|
|
|
7
|
|
|
7
|
|
|
8
|
|
|
9
|
|
|
5
|
|
Total fixed charges
|
|
323
|
|
|
312
|
|
|
323
|
|
|
339
|
|
|
359
|
|
|
183
|
|
Income from continuing operations plus fixed charges
|
|
931
|
|
|
1,022
|
|
|
1,105
|
|
|
1,109
|
|
|
1,271
|
|
|
545
|
|
Ratio of pre-tax income to net income
|
|
1.64
|
|
|
1.65
|
|
|
1.64
|
|
|
1.65
|
|
|
2.14
|
|
|
1.35
|
|
Total fixed charges
|
|
323
|
|
|
312
|
|
|
323
|
|
|
339
|
|
|
359
|
|
|
183
|
|
Ratio of earnings to fixed charges
|
|
2.88
|
|
|
3.27
|
|
|
3.42
|
|
|
3.27
|
|
|
3.54
|
|
|
2.98
|
|
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
For the Six Months Ended June 30, 2018
|
||||||
Income (loss) before income taxes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Fixed Charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest, dividend on mandatory redeemable preferred shares and amortization of debt discount and expenses and premium on all indebtedness
|
|
226
|
|
|
215
|
|
|
229
|
|
|
247
|
|
|
273
|
|
|
141
|
|
Interest factor in rentals
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total fixed charges
|
|
226
|
|
|
215
|
|
|
229
|
|
|
247
|
|
|
273
|
|
|
141
|
|
Income (loss) plus fixed charges
|
|
226
|
|
|
215
|
|
|
229
|
|
|
247
|
|
|
273
|
|
|
141
|
|
Ratio of pre-tax income to net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total fixed charges
|
|
226
|
|
|
215
|
|
|
229
|
|
|
247
|
|
|
273
|
|
|
141
|
|
Ratio of earnings to fixed charges
|
|
1.00
|
|
|
1.00
|
|
|
1.00
|
|
|
1.00
|
|
|
1.00
|
|
|
1.00
|
|