Aqua America Inc. (NYSE:WTR) filed Quarterly Report for the period ended 2010-06-30.
Aqua America Inc. has a market cap of $2.74 billion; its shares were traded at around $19.99 with a P/E ratio of 24.9 and P/S ratio of 4.1. The dividend yield of Aqua America Inc. stocks is 2.9%. Aqua America Inc. had an annual average earning growth of 7% over the past 10 years. GuruFocus rated Aqua America Inc. the business predictability rank of 5-star.WTR is in the portfolios of Chuck Royce of Royce& Associates, Bruce Kovner of Caxton Associates, John Keeley of Keeley Fund Management, Jeremy Grantham of GMO LLC.
Highlight of Business Operations:During the first six months of 2010, we had $140,767 of capital expenditures, issued $101,329 of long-term debt, repaid debt and made sinking fund contributions and other loan repayments of $50,897, and repaid $4,818 of customer advances for construction. The capital expenditures were related to improvements to treatment plants, new and rehabilitated water mains, tanks, hydrants, and service lines, well and booster improvements, and other enhancements and improvements. The issuance of $101,329 of long-term debt was comprised principally of the proceeds received from the June 2010 issuance of senior unsecured notes payable of $70,000, and the funds borrowed under our revolving credit facility of $30,000.
At June 30, 2010, our $95,000 unsecured revolving credit facility, which expires in May 2012, had $11,521 available for borrowing. At June 30, 2010, we had short-term lines of credit of $137,000, of which $85,567 was available. One of our short-term lines of credit is an Aqua Pennsylvania $70,000 364-day unsecured revolving credit facility with two banks, which is used to provide working capital.
Operations and maintenance expenses increased by $1,373 or 1.0% primarily due to additional expenses resulting from the first quarter write-off of previously deferred regulatory expenses of $1,011, the absence of the June 2009 gain on sale of a utility system of $1,009, which had the effect of reducing operations and maintenance expense in 2009, a write-off of capitalized costs of $715, increases in operating costs associated with acquisitions of $612, increases in fuel costs for our service vehicles of $484, and normal increases in other operating costs. Offsetting these increases were decreases in water production costs of $1,167, decreased bad debt expense of $883, and reduced expenses of $158 associated with the dispositions of utility systems. The decreased water production costs, principally chemicals, was associated with vendor price decreases.
Revenues increased $11,111 or 6.6% primarily due to additional revenues associated with increased water consumption as compared to the second quarter of 2009, increased water and wastewater rates of $3,129, additional revenues associated with increased infrastructure rehabilitation surcharges of $2,584, and additional water and wastewater revenues of $663 associated with a larger customer base due to acquisitions. The increase in customer water consumption is largely due to favorable weather conditions in our service territories during the second quarter of 2010 that increased water usage.
Operations and maintenance expenses increased by $761 or 1.1% primarily due to the absence of the June 2009 gain on sale of a utility system of $1,009, which had the effect of reducing operations and maintenance expense in 2009, a write-off of capitalized costs of $715, increases in operating costs associated with acquisitions of $344, increases in fuel costs for our service vehicles of $235, and normal increases in other operating costs. Offsetting these increases were decreased bad debt expense of $504, decreased water production costs of $446, and reduced expenses of $100 associated with the dispositions of utility systems. The decreased water production costs, principally chemicals, was associated with vendor price decreases.
Two homeowners associations comprised of approximately 180 homes located next to a wastewater plant owned by one of the Company s subsidiaries in Indiana claim that the subsidiary s prior management, before our acquisition of the subsidiary in 2003, allegedly entered into an agreement to cease the majority of operations at the wastewater plant and to remove most of the facilities located at the plant site by April 2009. The plant treats approximately 75% of wastewater flow from the subsidiary s 12,000 customers in the area. The Company filed a formal request for review of the purported agreement with the Indiana Utility Regulatory Commission (IURC). In September 2009, the homeowners associations filed suit in Allen County, Indiana Superior Court claiming breach of contract, breach of warranty, fraud, unjust enrichment, promissory estoppel and constructive fraud. If the purported agreement is ultimately determined to be valid, the subsidiary may be subject to liability to the homeowners for failure to remove the plant and/or, if the agreement is enforced, the subsidiary may be required to expand another existing plant or construct a new plant elsewhere and close and remove the existing plant. The scope of any such possible expansion or construction is difficult to determine at this time, but the construction costs for new wastewater treatment plants are estimated at anywhere from $9 to $12 per gallon of flow per day. The current plant is treating an average flow of approximately 2.3 million gallons per day. The book value of the current plant is $5,000,000. On April 26, 2010, the Company and the homeowners associations submitted to the IURC a settlement agreement to settle the dispute. The settlement agreement includes the payment of $2,600,000 to the homeowners associations, certain conditions for future plant improvements, which should not materially interfere with the operation of the plant, and the transfer of a parcel of land to the homeowners associations for which the Company will receive a $50,000 credit to the settlement amount. The settlement agreement was approved by the membership of the homeowners associations and is pending the approval of the IURC by final non-appealable order. This matter would not be covered by any of the Company s insurance policies.
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