Aqua America Reports Second Quarter 2013 Earnings

  Aqua America Reports Second Quarter 2013 Earnings

 EPS grows 27 percent; Previously announced 5-for-4 stock split and 9 percent
                  dividend increase effective September 1st

Business Wire

BRYN MAWR, Pa. -- August 6, 2013

Aqua America, Inc. (NYSE: WTR) today reported results for the quarter ending
June 30, 2013. Revenues for the quarter were $195.7 million compared to $191.7
million for the same period of 2012. Net income for the quarter rose to $53.6
million from $41.4 million for the same period in 2012. Corresponding diluted
earnings per share for the quarter were $0.38, compared to $0.30 for the same
quarter in 2012, an increase of 27 percent.

For the first six months of 2013, net income increased to $100.2 million from
$79.3 million and corresponding diluted earnings per share increased 25
percent to $0.71 from $0.57 for the same period in 2012. Operating revenues
for the first six months of 2013 totaled $375.7 million, an increase of $20.0
million from revenues of $355.7 million for the six months ending June 30,
2012.

Aqua America Chairman and CEO Nicholas DeBenedictis said, “Our company
continued its strong performance in the second quarter. The benefits of the
company’s long-term strategy of growth through acquisition, pruning
underperforming assets, operational efficiency, and investing in needed
infrastructure improvements, complemented by the benefit of the repair tax
accounting change delivered increased net income in the quarter.”

The benefit of the repair tax accounting change announced in December 2012
allows the company to continue investing in needed infrastructure improvements
in excess of $200 million annually in Pennsylvania (more than $300 million
companywide annually) without seeking rate increases from its customers in
Pennsylvania. In essence the company, by adopting the repair tax accounting
change, has instituted a rate freeze in its largest state, Pennsylvania, and
replaced the foregone revenues from rate increases with the flow-through
accounting treatment of income tax benefits permitted under the Pennsylvania
Public Utility Commission Order of June 2012.

Aqua America invested $134.9 million in regulated infrastructure improvements
in the first six months of 2013 as part of its capital investment program. All
of these investments were funded through internally generated funds, which for
the first six months of 2013 totaled $158.8 million. These investments
include: pipe replacement to improve distribution networks; plant upgrades to
enhance water quality; and other service reliability improvements for its
customers.

In May, the Board of Directors declared a 9 percent increase to its quarterly
cash dividend from the current quarterly dividend rate of $0.175 per share to
$0.19 per share for the September 1, 2013 dividend. The annualized dividend
rate after this increase is equivalent to $0.76 per share, or $0.06 more than
the current annualized dividend rate of $0.70 per share. Additionally, for the
seventh time in 17 years, the Board approved a stock split to be effected
September 1 in the form of a 5-for-4 (25 percent) stock distribution. Both the
increased cash dividend and the subsequent stock distribution will be
effective on September 1, 2013 for shareholders of record on August 16, 2013.

The increased September 1, 2013 dividend will be applied to the shares prior
to the stock split. The equivalent quarterly dividend rate after the stock
split would be $0.152 per share on the increased number of shares resulting
from the stock distribution or $0.608 per share on an annualized basis. The
stock split will be effected through a stock distribution on September 1, 2013
of one share for each four shares outstanding as of August 16, 2013.

DeBenedictis said, “We continue to strive to deliver strong total returns
through the reinvestment of capital to grow the business and returning
earnings in the form of dividends, while controlling costs for our customers.”

In 2013, the company has received rate awards and infrastructure surcharges in
New Jersey, Texas, Illinois, Ohio, and Virginia estimated to increase
annualized revenues by approximately $11.3 million. The company has more than
$11 million of rate proceedings pending in Virginia, Ohio, North Carolina, and
New Jersey. Additionally, Aqua America’s state subsidiaries are expected to
seek rate relief by filing rate requests or surcharges of approximately $7
million in the remainder of 2013. The primary driver of these filings is the
recovery of capital (infrastructure) investments and increased expenses since
the companies’ previous rate filings in those states. The timing and extent to
which rate increases might be granted by the applicable regulatory agencies
will vary by state.

Aqua America has completed the purchase of eight water and wastewater utility
systems in 2013, including four in Pennsylvania, three in North Carolina, and
one in Virginia. Two of the systems acquired were from municipalities in
Pennsylvania. Aqua Pennsylvania’s acquisitions included the water and
wastewater system assets of Total Environmental Solutions, Inc. (TESI), which
serve approximately 6,000 people in the Treasure Lake community in Sandy
Township, Clearfield County for $11.8 million and the water distribution
system assets that serve 500 people in the Concord Park section of Bensalem
Township from Bucks County Water and Sewer Authority for $399,000. It also
acquired the water assets of a community water system from Bristol Township
that serves approximately 1,800 residents in the Newportville-Ferguson area of
the township for $3.4 million. Aqua North Carolina purchased the water system
assets of Knob Creek, a subdivision with about 600 residents in the town of
Pisgah Forest, Transylvania County, for $40,000. Customer growth from
acquisitions and organic growth totaled 7,500 customers in the first six
months of 2013.

In March, Aqua America sold approximately two-thirds of its Florida operations
for $52.3 million and is in negotiations to complete the sale of its
profitable Sarasota, Florida operation in a separate transaction for $36.8
million, which could close late in 2013 or in 2014. The company has also
signed a letter of intent with the City of Fort Wayne, Indiana to sell the
company’s water operation in exchange for an additional $50.1 million to the
$16.9 million already paid by the City and obtaining wastewater treatment
flows from the City, contingent on receiving regulatory approvals and signing
of the necessary definitive agreements. If this transaction is consummated,
the company will expand its wastewater customer base in Fort Wayne. This
transaction is not expected to close until 2014.

The company’s non-regulated joint venture investment, Aqua — PVR Water
Services, LLC, was formed in 2011 by operating subsidiaries of Aqua America
and Penn Virginia Resource Partners, L.P. to construct and operate a private
pipeline system to supply raw water to certain natural gas producers drilling
in the Marcellus Shale in central Pennsylvania. The latest phase of the
construction, extending the pipeline another 20 miles into Tioga County, was
completed in the first quarter of 2013. With the completion of this phase of
the construction, it is now capable of providing water to gas drilling sites
along 56 miles of pipeline. The first half of 2013 has shown sluggish
Marcellus well drilling activity due to low gas prices and restrictive
infrastructure for gas transmission, which has resulted in low sales of water
for the joint venture. Water sales for gas drilling are expected to pick up in
the second half of 2013.

As of June 30, 2013, Aqua America’s weighted average cost of fixed-rate
long-term debt was 5.02 percent, and the company had $173 million available on
its credit lines. In July, Standard & Poor’s reiterated its A+ credit rating
for Aqua Pennsylvania. Of the 227 electric, gas, and water utilities rated by
Standard & Poor’s, only one has a higher rating than Aqua Pennsylvania.

The company’s conference call with financial analysts will take place on
Wednesday, August 7, 2013 at 11 a.m. Eastern Daylight Time. The call will be
webcast live so that interested parties may listen over the Internet by
logging on to www.aquaamerica.com and following the link for Investor
Relations. The conference call will be archived in the investor relations
section of the company’s website for 90 days following the call. Additionally,
the call will be recorded and made available for replay at 2 p.m. on August 7,
2013 for 10 business days following the call. To access the audio replay in
the U.S., dial 888.203.1112 (pass code 5562389). International callers can
dial 719.457.0820 (pass code 5562389).

Aqua America is one of the largest U.S.-based, publicly-traded water utilities
and serves almost 3 million residents in Pennsylvania, Ohio, North Carolina,
Illinois, Texas, New Jersey, Indiana, Virginia, Florida and Georgia. Aqua
America is listed on the New York Stock Exchange under the ticker symbol WTR.
Visit www.aquaamerica.com for more information.

This release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, including, among others: the
benefits of the company’s long-term strategy; management’s objective of
delivering strong total returns to the shareholders through reinvesting
capital and returning earnings to shareholders; the anticipated ongoing repair
tax accounting change; the company’s plan to continue its capital investment
program while not increasing rates in Pennsylvania in 2013; the projected
benefits from the company’s capital investment program; signs that the housing
market could be recovering; the estimated revenues from rate awards received;
the company's plans to file future rate increases and the timing of the impact
of such cases; the company’s plans to sell its Sarasota, Florida operation;
the company’s plan to sell its water operations and the anticipated expansion
of the company’s sewer customer base in Fort Wayne, Indiana; and the projected
increase in income from the joint venture in 2013. There are important factors
that could cause actual results to differ materially from those expressed or
implied by such forward-looking statements including: general economic
business conditions; housing and customer growth trends; unfavorable weather
conditions; the success of certain cost containment initiatives; the extent to
which rate increase requests are granted and the timing of rate awards;
changes in regulations or regulatory treatment; availability and the cost of
capital; disruptions in the credit markets; the success of growth initiatives;
and other factors discussed in our Annual Report on Form 10-K for the period
ending December 31, 2012, which is on file with the SEC. We undertake no
obligation to publicly update or revise any forward-looking statement.

WTRF

                                                                
Aqua America, Inc. and Subsidiaries
Selected Operating Data
(In thousands, except per share amounts)
(Unaudited)
                                                                     
                                 Quarter Ended           Six Months Ended
                                 June 30,                June 30,
                                 2013        2012        2013        2012
                                                                     
Operating revenues               $ 195,655   $ 191,690   $ 375,690   $ 355,714
                                                                     
Net income attributable to       $ 53,586    $ 41,445    $ 100,151   $ 79,349
common shareholders
                                                                     
Basic net income per common      $ 0.38      $ 0.30      $ 0.71      $ 0.57
share
Diluted net income per common    $ 0.38      $ 0.30      $ 0.71      $ 0.57
share
                                                                     
Basic average common shares        140,786     139,108     140,560     138,935
outstanding
Diluted average common shares     141,662    139,843    141,278    139,577
outstanding
                                                                     

                                                              
Aqua America, Inc. and Subsidiaries
Consolidated Statement of Income
(In thousands, except per share amounts)
(Unaudited)
                                                                   
                         Quarter Ended               Six Months Ended
                         June 30,                    June 30,
                         2013          2012          2013          2012
                                                                   
Operating revenues       $ 195,655     $ 191,690     $ 375,690     $ 355,714
                                                                   
Cost & expenses:
Operations and             70,858        63,571        139,169      128,396
maintenance
Depreciation               29,524        27,739        58,783        54,485
Amortization               1,358         1,332         2,728         2,453
Taxes other than          13,250      12,016      26,784      21,509  
income taxes
Total                     114,990     104,658     227,464     206,843 
                                                                   
Operating income           80,665        87,032        148,226       148,871
                                                                   
Other expense
(income):
Interest expense, net      19,209        19,540        38,484        38,787
Allowance for funds
used during                (490    )     (1,235  )     (1,042  )     (2,565  )
construction
Loss (gain) on sale of     109           (64     )     17            (506    )
other assets
Equity loss (earnings)    1,154       (249    )    1,810       (249    )
in joint venture
Income from continuing
operations before          60,683        69,040        108,957       113,404
income taxes
Provision for income      7,135       27,260      14,178      44,735  
taxes
Income from continuing     53,548        41,780        94,779        68,669
operations
                                                                   
Discontinued
operations:
Income (loss) from
discontinued               29            (176    )     8,331         17,994
operations before
income taxes
Provision for income      (9      )    159         2,959       7,314   
taxes
Income (loss) from
discontinued              38          (335    )    5,372       10,680  
operations
Net income
attributable to common   $ 53,586     $ 41,445     $ 100,151    $ 79,349  
shareholders
                                                                   
Income from continuing
operations per share:
Basic                    $ 0.38        $ 0.30        $ 0.67        $ 0.49
Diluted                  $ 0.38        $ 0.30        $ 0.67        $ 0.49
                                                                   
Income from
discontinued
operations per share:
Basic                    $ 0.00        $ 0.00        $ 0.04        $ 0.08
Diluted                  $ 0.00        $ 0.00        $ 0.04        $ 0.08
                                                                   
Net income per common
share:
Basic                    $ 0.38        $ 0.30        $ 0.71        $ 0.57
Diluted                  $ 0.38        $ 0.30        $ 0.71        $ 0.57
                                                                   
Average common shares
outstanding:
Basic                     140,786     139,108     140,560     138,935 
Diluted                   141,662     139,843     141,278     139,577 
                                                                             

                                                               
Aqua America, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands of dollars)
(Unaudited)
                                                                  
                                                                  
                                                                  
                                                    June 30,      December 31,
                                                    2013          2012
                                                                  
Net property, plant and equipment                   $ 4,025,138   $  3,936,163
Current assets                                        221,586        260,894
Regulatory assets and other assets                   711,593       661,460
                                                    $ 4,958,317   $  4,858,517
                                                                  
                                                                  
Total equity                                        $ 1,428,319   $  1,385,892
Long-term debt, excluding current portion             1,489,842      1,543,954
Current portion of long-term debt and loans           158,629        125,421
payable
Other current liabilities                             148,086        148,743
Deferred credits and other liabilities               1,733,441     1,654,507
                                                    $ 4,958,317   $  4,858,517
                                                                  

Contact:

Aqua America, Inc.
Brian Dingerdissen, 610-645-1191
Director, Investor Relations
bjdingerdissen@aquaamerica.com
or
Donna Alston, 610-645-1095
Manager, Communications
dpalston@aquaamerica.com
 
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