American Water Works Company, Inc. - 10-K filing on 2014-02-27

Long-Term Debt (Tables)

12 Months Ended

Dec. 31, 2013

The Company primarily incurs long-term debt to fund capital expenditures of the regulated subsidiaries. The components of long-term at December 31 are:


	Rate		Weighted Average Rate			Maturity Date		2013		2012
Long-term debt of American Water Capital Corp. (“AWCC”)(a)
Private activity bonds and government funded debt
Fixed rate		2.30%-6.75%		5.63	%		2018-2040	$	330,732	$	322,610
Senior notes
Fixed rate		3.85%-8.27%		5.69	%		2016-2042		3,312,761		3,389,399
Long-term debt of other subsidiaries
Private activity bonds and government funded debt
Fixed rate (b)		0.00%-6.20%		4.68	%		2014-2041		863,716		865,969
Mortgage bonds
Fixed rate		4.29%-9.71%		7.41	%		2015-2039		676,500		678,500
Mandatorily redeemable preferred stock		8.47%-9.75%		8.60	%		2019-2036		18,902		20,552
Notes payable and other(c)		12.17%		12.17	%		2026		913		1,272
Long-term debt									5,203,524		5,278,302
Unamortized debt, net(d)									35,984		39,272
Fair value adjustment to interest rate hedge									4,724		7,715
Total long-term debt								$	5,244,232	$	5,325,289

(a)	AWCC, which is a wholly-owned subsidiary of the Company, has a strong support agreement with its parent that, under certain circumstances, is the functional equivalent of a guarantee.

(b)	Includes at December 31, 2013 $11,920 of variable rate debt with variable-to-fixed rate interest swaps paying between 3.93% and 4.72% per annum. This debt was assumed via acquisitions in 2013 (see below).

(c)	Includes capital lease obligations of $913 and $1,049 at December 31, 2013 and 2012, respectively.

(d)	Primarily fair value adjustments previously recognized in acquisition purchase accounting.

Future Sinking Fund Payments and Maturities

The future sinking fund payments and maturities are as follows:

Year	Amount
2014	$	14,174
2015		60,655
2016		52,901
2017		572,314
2018		473,648
Thereafter	$	4,029,832

Long-Term Debt Issued

The following long-term debt was issued in 2013:

Company	Type	Interest Rate		Maturity		Amount
American Water Capital Corp.	Senior notes—fixed rate		3.85%		2024	$	400,000
American Water Capital Corp. (1)	Private activity bonds and government funded debt—fixed rate		2.30%-2.90%		2021-2030		8,122
Other subsidiaries	Private activity bonds and government funded debt—fixed rate		1.59-2.41%		2031-2033		2,737
Total issuances						$	410,859

(1)

Included in the issuance amounts for AWCC private activity bonds and government funded debt above was $6,702, which was initially kept in Trust pending the Company’s certification that it has incurred qualifying capital expenditures. These issuances have been presented as non-cash in the accompanying Consolidated Statements of Cash Flows. Subsequent releases of all or a lesser portion of these funds by the applicable Trust are reflected as the release of restricted funds and are included in investing activities in the accompanying Consolidated Statements of Cash Flows.

Long-Term Debt Retired Through Optional Redemption Or Payment

The following long-term debt was retired through optional redemption or payment at maturity during 2013:

Company	Type	Interest Rate		Maturity		Amount
American Water Capital Corp. (2)	Senior notes—fixed rate		5.39%-10.00%		2013-2017	$	476,638
Other subsidiaries(3)	Private activity bonds and government funded debt—fixed rate		0.00%-5.50%		2013-2041		17,663
Other subsidiaries	Mortgage bonds—fixed rate		6.59%		2013		2,000
Other subsidiaries	Mandatorily redeemable preferred stock		8.49%-9.18%		2031-2036		1,650
Other	Notes payable and other						359
Total retirements and redemptions						$	498,310

(2)

In September 2013, the Company announced a tender offer for its 6.085% Senior Notes due 2017 (the “Notes”). The offer was contingent upon the satisfaction of certain conditions, which were satisfied during the fourth quarter of 2013. At that time, the Company repurchased $225,800 in aggregate principal amount of Notes that were validly tendered. The Company paid $271,798 to effect the tender, which, in addition to the principal, included $6,603 of accrued interest, a repurchase premium of $39,395, write-off of unamortized debt issuance costs of $525 and transaction fees of $663. The sum of the repurchase premium, the debt issuance amortization and transaction fees equaled the loss on debt extinguishment of $40,583, which is disclosed separately on the accompanying Consolidated Statement of Operations.

(3)	Includes $3,565 of non-cash defeasance via the use of restricted funds.

Balance Sheet Classification

The Company has an interest-rate swap to hedge $100,000 of its 6.085% fixed-rate debt maturing 2017. The Company pays variable interest of six-month LIBOR plus 3.422%. The swap is accounted for as a fair-value hedge and matures with the fixed-rate debt in 2017. The following table provides a summary of the derivative fair value balance recorded by the Company as of December 31, 2013 and 2012 and the line item in the Consolidated Balance Sheet in which such amount is recorded:

Balance sheet classification	2013		2012
Regulatory and other long-term assets
Other	$	4,776	$	7,909
Long-term debt
Long-term debt		4,724		7,715

Income Statement Classification

For derivative instruments that are designated and qualify as fair-value hedges, the gain or loss on the hedge instrument as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current net income. The Company includes the gain or loss on the derivative instrument and the offsetting loss or gain on the hedged item in interest expense for the years ended December 31 as follows:

Income Statement Classification		2013	2012			2011
Interest, net
Gain (loss) on swap	$	(3,133)	$	2,085		$	6,722
(Loss) gain on borrowing		2,991		(1,604	)		(6,455	)
Hedge ineffectiveness		(142)		481			267