American Water Works (AWK)

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American Water Works Co. (AWK)

Q4 2011 Earnings Call

February 27, 2012 9:00 am ET

Executives

Jeffry Sterba – President, Chief Executive Officer

Ellen Wolf – Chief Financial Officer

Walter Lynch – President, Chief Executive Officer – Regulated Operations

Edward Vallejo – Vice President, Investor Relations

Analysts

Dan Eggers – Credit Suisse

Michael Roomburg – Ladenburg Thalmann

Neil Mehta – Goldman Sachs

Steve Fleishman – Bank of America Merrill Lynch

Presentation

Operator

Good morning and welcome to American Water’s year-end 2011 earnings conference call. As a reminder, this call is being recorded and also being webcast with an accompanying slide presentation through the Company’s website, www.amwater.com. Following the earnings conference call, an audio archive of the call will be available through March 5, 2012 by dialing 303-590-3030 for U.S. and international callers. The access code for replay is 4510317. The online archive of the webcast will be available through March 27, 2012 by accessing the Investor Relations page of the Company’s website located at www.amwater.com.

At this time, all participants have been placed in a listen-only mode. Following management’s prepared remarks, we will then open the call for questions. If you would like to ask a question at that time, please press star, one on your touchtone phone.

I would now like to introduce your host for today’s call, Ed Vallejo, Vice President of Investor Relations. Mr. Vallejo, you may begin.

Edward Vallejo

Thank you. Good morning everyone and welcome to American Water’s 2011 Year-End conference call. At the end of our prepared remarks, we will have time for questions.

Before we begin, I’d like to remind everyone that during the course of this conference call both in our prepared remarks and answers to your questions, we may make statements related to future performance. Our statements represent our most reasonable estimates; however, since these statements deal with future events, they are subject to numerous risks, uncertainties and other factors that may cause the actual performance of American Water to be materially different from the performance indicated or implied by such statements. Such risk factors are set forth in the Company’s SEC filings.

Now I’d like to turn the call over to American Water’s President and CEO, Jeff Sterba.

Jeffry Sterba

Thanks, Ed. Good morning to all and thanks for joining us today. Ellen Wolf, our CFO, is here with me and will join in the presentation. We also have Walter Lynch, our Head of Regulated Operations, and Kellye Walker, our General Counsel and Chief Administrative Officer with us.

We’re pleased to announce continued strong performance for 2011 on virtually all fronts. My comments will be brief since we’d previously covered our general performance during the earnings guidance call that we just held a few weeks ago. Additionally, we’ll be discussing results for the full year of 2011. Details around the year and the fourth quarter in specific will be able to be found in the 10-K, which should be filed tomorrow.

Turning to Slide 5, you can see that we delivered solid results for the year all around. Total revenues increased $111 million year-over-year to approximately $2.7 billion. Adjusted net income and earnings per share increased to approximately $320 million and $1.81 per share respectively. These adjusted earnings are presented in the same manner that we have throughout the year, and Ellen will go through those adjustments in more detail.

In 2011, our regulated O&M expense was flat to 2010 which, when coupled with a 3.6% increase in regulated revenues, drove 170 basis point improvement in our O&M efficiency ratio from 45.5% to 43.8% over the last 12 months. We also generated a 4.3 year-over-year increase in consolidated cash flow, and when you take into account a one-time tax refund that was received in 2010 and an additional pension contribution that we made at the end of 2011, cash flow from operations really increased about 16%. All of these items resulted in slightly more than 100 basis point increase in our earned ROE to just over 7.5%.

While we’re not yet where we want to be, significant progress has obviously been made. In recognition of this financial performance, as we previously announced, a quarterly cash dividend payment of $0.23 per share was declared in December; and additionally, on February 24 of this year, our Board declared a quarterly cash dividend payment of $0.23 per share, payable on June 1, 2012 to shareholders of record as of April 20, 2012. We also reaffirmed the 2012 earnings guidance range we provided a few weeks ago of between $1.90 to $2 per share for ongoing operations.

Before turning the call over to Ellen to go into more detail on this year’s financial results, let me just note that Slide 6 shows that we successfully accomplished all of the items we laid out for 2011 at our analyst day a little over a year ago. We’re very pleased with this progress and look forward to continuing that trend into and through this year.

With that said, Ellen, let me turn it over to you.

Ellen Wolf

Good morning and thank you, Jeff, and good morning to those of you who are listening to our 2011 year-end earnings conference call. As Jeff mentioned, our 2011 10-K will be filed within the next day as we continue to work with our auditors to make sure all the I’s are dotted and the T’s are crossed.

Read the rest of this transcript for free on seekingalpha.com