VOORHEES, N. J., February 7, 2002 - American Water Works Company, Inc. today reported net income to common stock of $161 million for 2001, a 2.2% increase over the previous year.
These results include a $10 million charge associated with the company's proposed acquisition by the multinational utility RWE AG, and a $3 million gain on the sale of water assets serving the City of Salisbury, Massachusetts.
The company also reported diluted earnings per share of $1.61, which equaled earnings in 2000. Prior to recording the RWE and Salisbury transactions, net income to common stock was $168 million, and per share earnings were $1.69.
Fourth Quarter Results
For the quarter ending December 31, 2001, net income to common stock was $33 million, a $5 million decline over the same period in 2000. This drop is the result of increased personnel costs that the company incurred as it completes several initiatives to centralize core functions in the financial and customer service areas.
Additionally, fourth quarter revenue and operations and maintenance expenses were impacted by the November acquisition of Azurix North America and Azurix Industrials Corporation. This single transaction represented 70% of the revenue increase and more than half of the total increase in O&M for the period. That acquisition, which adds the expertise of more than 1,300 new associates, will increase the company's annual revenues by more than $150 million.
Full Year Perspective
The company recorded 2001 revenues of $1.4 billion, which is 6.5% above prior year. While total sales increased slightly, those results were impacted by a 2 billion gallon decrease in industrial water sales. Timely rate increases, expansion of our non-utility services business and the addition of 40,000 customers all contributed to revenue growth.
Operations and maintenance expenses for the full year 2001 grew by 10%. The addition of the Azurix operations accounted for more than a third of this increase. The balance can be attributed to transition costs that the company incurred as it completes various consolidation efforts. Also, sales growth impacted power and chemical expenses, increasing total production costs for the year.
Construction projects, completed primarily by the company's utility subsidiaries, were the principle reason for a $19 million increase in depreciation expense, and a $4 million increase in the property tax portion of general taxes.
Additional Activities
In January 2002, the company's Pennsylvania utility subsidiary received and put into effect a $24 million rate increase. The company anticipates conclusion of five other applications during the year that request a total of $17 million in additional annual revenues.
Also in January, the company completed the six-state acquisition of the water and wastewater assets of Citizens Communication Company, which is formerly known as Citizens Utility Company. While this acquisition is anticipated to dilute per share earnings by an estimated six cents during 2002, it is expected to be accretive to earnings within 18 to 24 months.
The acquisition of Citizens increases the company's customer base by more than 300,000, provides $140 million in additional annual revenue, adds the expertise of 300 new associates to the company's workforce, and expands customer growth opportunities into several areas of the nation.
The company has 24 water and wastewater system acquisitions pending for the year 2002. Once approved, those acquisitions are expected to add 25,000 customers and provide more than $7 million in additional annual revenue.
Completion of the terms of the RWE AG acquisition agreement, which was approved by the company's shareholders on January 17, 2002, is anticipated in 2003. The process of obtaining approvals from federal and state regulatory agencies is in its initial stages.
As previously announced, a conference call to discuss this announcement will be conducted a 3:00 PM (Eastern) today and simultaneously broadcast from the company's web site (www.amwater.com). Rebroadcast of the call will remain available on the company's web site until February 14, 2002.
