VOORHEES N.J., May 1, 2002 -- American Water Works Co. Inc. Tuesday reported first quarter net income to common stock of $17.7 million compared to $23.3 million for the same quarter in 2001.
As a consequence, earnings per share (EPS) declined to 18 cents for the first three months versus 24 cents during the same period last year. Included in EPS for the first quarter of 2002 is three cents for the cumulative effect of the adoption of new financial accounting standards associated with business combinations and a six cent impact associated with various acquisition activities.
Total consolidated revenues for the quarter grew by 22% over the first quarter 2001 to $385 million. Increased revenues are the result of the addition of more than 330,000 customers, added revenues from unregulated businesses, and rate increases in various jurisdictions.
Overall 1Q Performance
First quarter 2002 results were influenced by lingering weak economic conditions that continued to force industrial water use downward - especially in the Midwestern states the company serves. During the quarter, water sales to industrial customers declined by one billion gallons, or 10%, in comparison with the same period last year. This continues a trend experienced by the company throughout the latter half of 2001.
Water restrictions in several Eastern states also contributed to lower per-customer water sales during the period. The company reported that if drought conditions persist and current restrictions remain in effect into the second and third quarters, when water sales are traditionally highest, earnings per share will be further impacted.
Results were negatively impacted $2 million or two cents a share by a shift in the company's business model with the November 2001 acquisition of Azurix North America Corp. and Azurix Industrials Corp. Revenues and net income from key components of this business, such as the residuals market, are more seasonal in nature and will be more fully realized during the second and third quarter of this year.
As previously reported, in January 2002 the company completed the acquisition of the water and wastewater assets of Citizens Communications Company. Results for first quarter 2002 for the acquired Citizens utilities was a loss of $3 million or three cents a share. This result includes interest expense associated with the debt to finance the acquisition and depreciation on the fair value of the property in excess of its original cost. The company previously reported that this acquisition is expected to be accretive to net income within 12 to 18 months, following rate increases needed to reflect investments in utility plant.
The company incurred expenses of one cent a share during the first quarter related to the RWE transaction and the regulatory approval process, and expects these expenses to continue throughout the year.
April 2002 Activity
On April 25, the company completed the divestiture of its New England subsidiaries to the Aquarion Company for $243 million including a cash payment of $120 million and the buyer's assumption of $125 million in debt. This transaction furthers the company's strategy to advance the consolidation of the water and wastewater industry while creating benefits for customers and shareholders.
Earlier in the month, the company tendered approximately 2.2 million shares of the 3.5 million shares of ITC Holding Company's common stock it acquired as part of the acquisition of National Enterprise Inc. The sale, which was carried out through ITC Holding Company's repurchase program, resulted in a $13 million after-tax gain that will be reflected in second quarter 2002 results.
About American Water Works
American Water Works Company is the largest publicly traded US corporation devoted exclusively to the business of water. Its 6,600 associates provide water, wastewater and other related services to more than 15 million people in 29 states and three Canadian provinces. More information can be found on the web at www.amwater.com.
