News Column

Aqua America Earnings Increased for the Second Quarter of 2014

August 23, 2014



By a News Reporter-Staff News Editor at Investment Weekly News -- Aqua America, Inc. (NYSE: WTR) reported results for the quarter ending June 30, 2014, net income rose to $55.6 million from $53.6 million in 2013. Net income per share was $0.31 for the quarter, compared to $0.30 for the same period in 2013, on approximately 0.5 percent more shares outstanding. Income from continuing operations for the quarter increased to $54.8 million from $53 million in the second quarter of 2013.

Operating revenues for the quarter increased to $195.3 million compared to $193.9 for the same period in 2013. Operating revenues increased even though Aqua Pennsylvania (the company's largest subsidiary) experienced above average rainfall and has not raised water rates since 2012 due to the strategic implementation of the repair tax accounting change.

Today, the Board of Directors declared a quarterly cash dividend payment of $0.165 per share payable on September 1, 2014, to all shareholders of record on August 15, 2014. This represents an 8.6 percent increase over the same quarter in 2013. Aqua America has paid a consecutive quarterly dividend for 69 years, and raised the dividend 24 times in the past 23 years. Over the past 10 years, the company's annualized dividend has increased at a 7.8 percent compound annual growth rate.

"We are proud to continue to deliver positive results, and of the Board's decision to, once again, significantly raise the dividend, rewarding our loyal shareholders," said Aqua America Chairman and CEO Nicholas DeBenedictis. "Management's long-term vision continues to be driven by our strategic initiatives designed to grow our customer base through acquisitions, remain one of the most efficient utilities in the nation, and invest significant capital to develop better infrastructure that can provide top-tier service to our water and wastewater customers."

Year to date, Aqua has completed seven acquisitions in Virginia, Illinois, New Jersey, and Pennsylvania, including the Penn Township, Pennsylvania wastewater system and Summit Lake, New Jersey water system, marking the twenty-fifth and twenty-sixth municipal acquisitions completed since 1992. The company's acquisition success is expected to continue for the rest of the year and should help overall customer growth exceed 1.5 percent in 2014. This would be the highest growth in customers served in more than six years.

"We are seeing an uptick in municipal acquisition opportunities," said DeBenedictis. "In addition to recent operations and maintenance contracts in Chicago Heights, two in Indiana, and one in Wyalusing Borough, Pennsylvania, we were also the successful bidders on three municipal acquisitions including North Maine Utilities (NMU) in Illinois, Mount Jewett in western Pennsylvania and Sussex Borough in New Jersey." The agreement to acquire the NMU water and wastewater systems, which was announced in May, is expected to close in 2015. NMU serves a densely populated area of more than 44,000 people through 4,700 water meters and almost 2,500 wastewater connections. The Mount Jewett system serves approximately 1,500 people in Northwest Pennsylvania, an area benefiting economically from Marcellus Shale activity. The Sussex Borough water and sewer system serves approximately 4,000 additional people in Northern New Jersey and is scheduled to move to a voter referendum in November.

Yesterday, Aqua announced that its non-regulated subsidiary Aqua Resources acquired the operations of Tri-State Grouting (TSG), in an approximate $3 million deal of which part is contingent upon satisfying certain annual financial growth targets over a three year period. Aqua Resources, which was formed in 2005, provides a wide array of services to the wastewater industry including operations and maintenance contracts, wastewater hauling, and water and wastewater system repairs and maintenance. TSG will complement these services by adding its business lines focused on televising, and trenchless cleaning and repair of, storm and sanitary sewer pipes and appurtenances. The company, which has been in business since 1976, will continue its wastewater rehabilitation operations in six states including Pennsylvania. The American Society of Civil Engineers estimates the U.S. will need to spend $298 billion on wastewater and storm water systems over the next 20 years, including $28 billion just in Pennsylvania.

Aqua continues to be the industry's most cost-efficient water company with a regulated segment efficiency ratio adjusted for purchased water of 34.8 percent for the trailing twelve months ended June 30, 2014 (a non-GAAP measure). Operations and maintenance expenses were flat for the second quarter, compared to the same quarter in 2013. The company's regulated segment operating cost per customer of $294 for the trailing 12 months ended June 30, 2014, and our number of utility customers per employee of 616 is among the most efficient in the water utility industry. DeBenedictis said, "We strive to manage rising costs, and continue to remain focused on being a leader within our industry in regards to expenses, which saves our customers millions each year."

As part of its capital investment program, the company invested nearly $132 million in regulated infrastructure improvements in the first half of 2014. Aqua continues to expect that more than $325 million will be invested in 2014 and more than $1 billion invested over the next three years. Due to the company's increasing internal cash generation, all capital investment projects will be funded entirely internally. These include pipe replacements to improve our distribution network; plant upgrades to enhance water quality; and other service reliability improvements for customers.

In Pennsylvania, the company's largest state, many of these capital improvements are eligible for tax deduction under the repair tax accounting change put into effect in 2012. DeBenedictis mentioned, "Aqua Pennsylvania's decision and the Pennsylvania Public Utility Commission's approval of the repair tax accounting method is allowing the company to invest hundreds of millions of dollars while not increasing rates for our Pennsylvania residents and businesses. Customers in Pennsylvania have not had an increase in their water bills since 2012 and the company expects they will not see an increase in 2014, despite the investment of nearly half a billion dollars since our last rate relief filing."

Thus far in 2014, Aqua America's regulated subsidiaries received rate awards or infrastructure surcharges in all eight states (including wastewater in Pennsylvania) with an expected annualized revenue increase of approximately $6.5 million. Furthermore, the company has $15.4 million of rate cases pending in New Jersey, Ohio, Texas, Virginia and Illinois. The timing and extent to which rate increases might be granted by the applicable regulatory agencies will vary by state.

As of June 30, Aqua America's weighted average cost of fixed-rate long-term debt was 5 percent, and the company had $168 million available on its credit lines. Aqua Pennsylvania has maintained an A+ rating with a Stable Outlook from Standard & Poor's for over 10 years.

The company's conference call with financial analysts will take place on Wednesday, August 6, 2014 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 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 August 6, 2014 for 10 business days following the call. To access the audio replay in the U.S., dial 888.203.1112 (pass code 3811613). International callers can dial 719.457.0820 (pass code 3811613).

Aqua America is one of the largest U.S.-based, publicly traded water utilities and serves nearly 3 million people in Pennsylvania, Ohio, North Carolina, Illinois, Texas, New Jersey, Indiana and Virginia. Aqua America is listed on the New York Stock Exchange under the ticker symbol WTR. Visit AquaAmerica.com for more information.

Keywords for this news article include: Aqua America Inc., Investment and Finance.

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Source: Investment Weekly News


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