8-KLeadership Changes

American Water Works Company, Inc. 8-K Report, Executive Changes (Jan 21, 2022)

Filed January 21, 2022For Securities:AWK

Summary

American Water Works Company, Inc. (AWK) filed an 8-K on January 20, 2022, disclosing adjustments to its Long-Term Performance Plan (LTPP) performance share unit awards. These adjustments, approved by the Executive Development and Compensation Committee, are primarily to account for the divestiture of the Homeowner Services Group (HOS), which was completed on December 9, 2021. The adjustments involve modifying the starting Earnings Per Share (EPS) for both the 2020 and 2021 LTPP awards to exclude the historical contribution of HOS to EPS in 2019 and 2020, respectively. Additionally, the ending EPS calculations will exclude the impact of interest earned on a Secured Seller Note and revenue under a Revenue Share Agreement, both related to the HOS sale. These changes aim to ensure that the performance metrics for these long-term incentive awards remain relevant and fairly reflect the ongoing business operations of American Water, post-HOS divestiture.

Key Highlights

  • 1Adjustment to Long-Term Performance Plan (LTPP) awards for 2020 and 2021 PSU-IMs.
  • 2Adjustments are to reflect the sale of the Homeowner Services Group (HOS) completed on December 9, 2021.
  • 3Starting EPS for 2020 PSU-IMs decreased by $0.38 to exclude HOS contribution from 2019.
  • 4Starting EPS for 2021 PSU-IMs decreased by $0.40 to exclude HOS contribution from 2020.
  • 5Ending EPS calculations will exclude interest from Secured Seller Note and revenue from Revenue Share Agreement related to HOS sale.
  • 6The performance metric for these awards is compounded annual EPS growth over a three-year period.

Frequently Asked Questions

The company adjusted its LTPP awards to account for the sale of its Homeowner Services Group (HOS). The adjustments ensure that the performance targets for these awards, which are based on EPS growth, are not unfairly impacted by the divestiture of a former business segment.

The starting EPS for the awards granted in February 2020 and 2021 has been reduced to remove the EPS contribution from the HOS segment in 2019 and 2020, respectively. The ending EPS calculation will also exclude specific financial items related to the HOS sale, such as interest from a seller note and revenue from a revenue share agreement.

The purpose is to ensure that the LTPP awards accurately reflect the performance of American Water's continuing operations. By removing the impact of the divested HOS segment and related financial arrangements, the company aims to provide a clearer and more relevant measure of management's performance on the core utility business.