8-KEarnings & ResultsRegulation FDExhibits & Filings

American Water Works Company, Inc. 8-K Report, Financial Results (Jan 16, 2018)

Filed January 16, 2018For Securities:AWK

Summary

This 8-K filing from American Water Works Company, Inc. (AWK) primarily provides an update on the estimated impacts of the Tax Cuts and Jobs Act (TCJA) enacted in late December 2017 on the company's financial guidance. The TCJA introduced significant changes to U.S. tax law, requiring AWK to conduct a detailed analysis across its multiple regulatory jurisdictions and business segments to quantify its financial effects. Key updates include revised 2017 GAAP EPS guidance and affirmed 2017 adjusted EPS guidance. More importantly, the company affirmed its long-term guidance for 2018-2022, including adjusted EPS compound annual growth rate (CAGR), capital expenditure projections, and dividend growth forecasts. The TCJA is expected to be accretive to consolidated earnings due to a lower corporate tax rate and revaluation of deferred tax assets, though this is partially offset by increased debt costs. Investors should note that these estimates are based on enacted provisions of the TCJA and are subject to change and regulatory actions in various jurisdictions.

Key Highlights

  • 1American Water Works Company (AWK) has updated its 2017 GAAP EPS guidance range to $1.93 to $2.55 following the enactment of the Tax Cuts and Jobs Act (TCJA).
  • 2The company affirmed its 2017 Adjusted EPS guidance range of $3.00 to $3.06, excluding specific items like an insurance settlement, debt extinguishment charge, and a non-cash charge from TCJA-related deferred tax revaluation.
  • 3AWK affirmed its 2018 GAAP EPS guidance range of $3.22 to $3.32, inclusive of TCJA impacts.
  • 4Long-term guidance for 2018-2022 remains affirmed, projecting an adjusted EPS CAGR of 7% to 10%.
  • 5Capital expenditure projections for 2018-2022 are set between $8.0 billion and $8.6 billion, with $7.2 billion allocated to regulated system investments.
  • 6The dividend growth forecast is expected to align with the high end of the adjusted EPS CAGR target.
  • 7The TCJA is anticipated to be accretive to AWK's consolidated earnings, primarily due to a lower U.S. federal corporate income tax rate and revaluation of deferred tax assets.

Frequently Asked Questions

The primary purpose of this 8-K filing is to provide an update on American Water Works Company's (AWK) financial guidance, specifically detailing the estimated impacts of the recently enacted Tax Cuts and Jobs Act (TCJA) on its 2017 and future financial performance and projections.

The TCJA is expected to be accretive to AWK's consolidated earnings. For 2017, GAAP EPS guidance was revised, while Adjusted EPS guidance was affirmed. For 2018 and the 2018-2022 period, the company affirmed its guidance, expecting benefits from a lower corporate tax rate and revaluation of deferred tax assets, partially offset by increased debt costs.

For the 2018-2022 period, AWK projects capital expenditures between $8.0 billion and $8.6 billion, with approximately $7.2 billion designated for regulated system investments. The company also affirmed its long-term adjusted EPS CAGR target of 7% to 10%, with dividend growth forecast at the high end of this range.

Yes, the estimates are based on the enacted TCJA provisions and may be subject to change based on further regulations, interpretations, and state/local tax law changes. Regulatory actions in AWK's 14 jurisdictions are crucial, as many have opened proceedings to address TCJA impacts. The company assumes regulatory actions will be consistent with normalization provisions.