Without acquisitions and one-time items, Voorhees, N.J.-based American Water would have reported lower earnings. Water sales fell 4 percent during the quarter due to a weak economy and drought conditions -- including mandatory restrictions in Pennsylvania and New Jersey -- hurt sales.
American Water reported a 26 percent jump in net income to $66.7 million, or 66 cents a share vs. $49.2 million, or 50 cents a share, a year earlier. Minus one-time items, American Water earned $31.6 million, or 32 cents a share, in the latest quarter.
Market researcher Thomson Financial/First Call said that a single analyst submitted a consensus estimate and predicted earnings of 45 cents a share.
The company reported after-tax gains of $42.6 million by selling five subsidiaries, real estate and stock in Alabama telecommunications company ITC Holding Co., a holding it gained in one of its water-company acquisitions. However, American Water also wrote down $7 million worth of investments.
Acquisitions, meantime, boosted revenue 14 percent to $424 million from $364 million in second-quarter 2001. In January 2002, American Water closed on its acquisition of Citizens Communications Co. and bought the North American assets of former Enron Corp. water unit Azurix Corp. in November 2001.
The company's customer base grew 6 percent due to customers from acquisitions. However, industrial sales fell 8 percent during this year's second quarter from last year.
The divestiture of five American Water subsidiaries in Connecticut, Massachusetts, New York and New Hampshire resulted in an $18.6 million gain, along with $10 million from a sale of real estate. American Water also sold 2.2 million shares of ITC after it announced a share-repurchase program.
The company provides water to 15 million people in 27 states and three Canadian provinces.
Germany's RWE AG is expected to close on its acquisition of American Water during the first half of next year. American Water has requests for approvals pending in nine states, according to a recent filing with the Securities and Exchange Commission.
Source: Hoover's
