May 08--American Water Works Company Inc., the parent company of West Virginia American Water, said Wednesday the Freedom Industries chemical spill cost the company $5.9 million in lost revenue and additional expenses during the first three months of the year.
Despite the spill, though, the company was able to make a $68.1 million profit during the first quarter.
The Voorhees, N.J.-based company, the largest publicly traded water and wastewater utility company in the U.S., reported first-quarter earnings Wednesday evening. The $68.1 million in net income, or 38 cents a share, from the first three months of 2014 was an 18 percent increase from the $57.6 million the company earned during the first quarter of last year.
The company said its total operating revenue for the quarter totaled $681.9 million, a year-over-year increase of 7.2 percent.
Stripping out one-time items, including costs related to the spill, American Water posted adjusted net income of $71.7 million, or $0.40 a share, for the quarter. That was 5 cents better than the 35 cents per-share number analysts were expecting, according to CNBC.com. The company's stock was trading up more than 1.6 percent in after-hours trading Wednesday.
The $5.9 million in spill-related costs came from lost revenue and increased operating and maintenance expenses, the company reported.
American Water said it lost a little more than $1 million in revenue related to the spill. That was tied to the 1,000-gallon credits it gave to the 100,000 customers in its nine-county service area to flush their systems.
The company said the spill increased its operating and maintenance expenses by nearly $4.86 million during the quarter.
The spill caused a $1.9 million increase in the company's employee-related expenses, mainly due to increased legal costs related to the spill, according to a company filing with the U.S. Securities and Exchange Commission.
To date, 58 lawsuits have been filed against West Virginia American Water in state and federal courts. The company said it intends to "vigorously contest" the lawsuits.
While the spill hit the company's bottom line in the first quarter, the company said the biggest challenge it faced was from the harsh weather during the first three months of the year.
"This winter's extreme weather put many water providers to the test, but our employees' commitment to reliable service did not waver," Jeff Sterba, American Water's president and CEO, said in a press release. "Despite very challenging conditions, we had a very solid first quarter, with increases in revenues and net income, growth in both our regulated and Market-based businesses, and continued improvement in our operation and maintenance efficiency ratio."
The company does expect spill-related expenses will continue to eat into its earnings for the rest of the year.
Excluding the costs of the spill, American Water expects to earn $2.35 to $2.45 a share this year. The $5.9 million in lost revenue and increased expenses cut about 2 cents a share off the company's first-quarter earnings. It said it expects spill costs will further reduce its earnings by about 1 to 2 cents a share over the final three quarters of the year.
However, the company noted the 58 lawsuits, as well as looming government action could eat into its earnings for the rest of the year.
"An adverse outcome in one or more of the lawsuits could have a material adverse effect on the Company's financial condition, results of operations, cash flows, liquidity and reputation," the company said in its filing with the SEC. "Moreover, (West Virginia American Water) and the Company are unable to predict the outcome of the ongoing government investigations or any legislative initiatives that might affect water utility operations."
Meanwhile, the company's board of directors last week approved an 11-percent increase in the company's quarterly dividend, increasing it from 28 to 31 cents a share. With 178.5 million shares outstanding, that represents a quarterly cash payout of more than $55 million.
Contact writer Jared Hunt at email@example.com or 304-348-4836.
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