8-KEarnings & ResultsRegulation FDExhibits & Filings

American Water Works Company, Inc. 8-K Report, Financial Results (Jan 2, 2018)

Filed January 2, 2018For Securities:AWK

Summary

American Water Works Company, Inc. (AWK) filed an 8-K on January 2, 2018, primarily to address the potential impact of the Tax Cuts and Jobs Act (TCJA) signed into law on December 22, 2017. The company indicated that the TCJA, which significantly reduced the U.S. federal corporate income tax rate to 21% effective January 1, 2018, could materially impact its previously issued financial guidance for fiscal year 2017 and its future financial and operational performance projections for the 2018-2022 period. The company noted that while the revaluation of deferred tax assets and liabilities at its utility subsidiaries, due to the new tax rate, is expected to result in a regulatory liability to be returned to customers, the revaluation at the parent company and other non-utility subsidiaries may lead to a potentially material charge against its 2017 results. AWK stated it could not yet quantify the precise impact but expected to provide an estimate in its upcoming Form 10-K filing for the year ended December 31, 2017.

Key Highlights

  • 1Enactment of the Tax Cuts and Jobs Act (TCJA) on December 22, 2017, is expected to materially impact AWK's financial results and guidance.
  • 2The TCJA reduces the U.S. federal corporate income tax rate from 35% to 21% starting January 1, 2018.
  • 3The company's previously issued guidance for 2017 and 2018-2022 did not account for the TCJA's changes.
  • 4Revaluation of deferred tax assets/liabilities at utility subsidiaries is expected to create a regulatory liability to be passed back to customers.
  • 5Revaluation of deferred tax assets/liabilities at the parent and non-utility subsidiaries could result in a material charge to 2017 earnings.
  • 6AWK is unable to quantify the exact impact of the TCJA at this time.
  • 7An estimate of the TCJA's impact is expected to be provided in the Company's Form 10-K filing for the year ended December 31, 2017, anticipated in February 2018.

Frequently Asked Questions

This 8-K filing is primarily to inform investors that the recently enacted Tax Cuts and Jobs Act (TCJA) could materially impact American Water Works Company's (AWK) financial guidance and results of operations. The company needs to assess and quantify these impacts.

The TCJA significantly lowers the U.S. federal corporate income tax rate to 21% from 35%, effective January 1, 2018. AWK must revalue its deferred tax assets and liabilities at this new rate. While this revaluation at utility subsidiaries is expected to be a regulatory matter, revaluation at the parent and non-utility subsidiaries may result in a material charge to earnings for fiscal year 2017.

American Water Works Company expects to provide an estimate of the TCJA's impact in conjunction with the filing of its Annual Report on Form 10-K for the fiscal year ended December 31, 2017, which is anticipated to be filed in February 2018.

Yes, the company explicitly states that its previously issued guidance for fiscal year 2017, and its projected compound annual growth rate in earnings per share and other financial guidance for the five-year period from 2018 to 2022, does not take into account the changes introduced by the TCJA and may be materially impacted.