American Water Works Company, Inc. · NYSE:AWK
American Water Works — FY2018 Earnings Presentation
40 slides from American Water Works's earnings presentation, Feb 21, 2019
Slide 1: 2018 Fourth Quarter and Year-End Earnings Conference Call
Exhibit 99.2 2018 Fourth Quarter and Year-End Earnings Conference Call ® We keep life flowingExhibit 99.2 2018 Fourth Quarter and Year-End Earnings Conference Call ® We keep life flowing
Slide 2: Forward-Looking Statements
Forward-Looking Statements Ed Vallejo Vice President, Investor Relations ® We keep life flowing 2Forward-Looking Statements Ed Vallejo Vice President, Investor Relations ® We keep life flowing 2
Slide 3: Forward-Looking Statements Safe Harbor
Forward-Looking Statements Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and the Federal securities laws. They are not guarantees or assurances of any outcomes, financial resu
Slide 4: Strategy Overview
Strategy Overview Susan Story President and Chief Executive Officer ® We keep life flowing 4Strategy Overview Susan Story President and Chief Executive Officer ® We keep life flowing 4
Slide 5: Strong Full Year Adjusted Results Affirming 2019 and Long Term Guidance
Strong Full Year Adjusted Results Affirming 2019 and Long Term Guidance 2019 – 2023 Long Term EPS CAGR Guidance** Adjusted Earnings Per Share* $3.30 8.9% 2019 EPS 7-10%** Guidance $3.03 CAGR Top Half $0.69 2018 Adjusted Of Range EPS (GAAP EPS $0.69 $3.15)* 2017 Adjusted EPS (GAAP EPS $2.38)* $3.54 -
Slide 6: Our Regulated Business Remains the Foundation of our Long Term Growth Strategy
Our Regulated Business Remains the Foundation of our Long Term Growth Strategy 2019-2023 Plan* 2018 Market Based Businesses 7-10% EPS CAGR Top Half of range Homeowner Services 2018 Regulated Acquisitions • Successful acquisition and integration of Pivotal Home Market Based • Closed 14,000 customer S
Slide 7: The Regulated Businesses
The Regulated Businesses Walter Lynch Chief Operating Officer ® We keep life flowing 7The Regulated Businesses Walter Lynch Chief Operating Officer ® We keep life flowing 7
Slide 8: Regulated Rate Cases Resolved
Regulated Rate Cases Resolved 2018 2019 New Jersey Rate Case – Rates Effective on October 29 West Virginia Rate Case – Rates Effective on February 25 • Decision on October 29, 2018 • Decision on Feb 8, 2019 • Capital Investment of ~$868 million, including DSIC • Capital Investment of ~$200 million,
Slide 9: 2018 Legislative Updates
2018 Legislative Updates Indiana Maryland • Act 362 - Ensuring the long-term viability of water • Fair Market Value and wastewater utilities Pennsylvania Iowa • Act 120 - Allows recovery for customer side lead water • Future test year approach in rate cases service lines • Fair Market Value • Act 58
Slide 10: Regulated Acquisitions Update
Regulated Acquisitions Update Agreement Process Signed and Pending Regulatory 23 Total Acquisitions ≈ 61,000* PENDING Approval CA: 4 KY: 1 TN: 1 Customer HI: 1 PA: 7 WV: 1 Connections IL: 3 MO: 2 IN: 2 NJ: 1 Close & Customers Served 2018 Closed ≈14,000 Customer Connections at Initial Rates Fourth Qu
Slide 11: Efficiency through Technology: Regulated O&M Efficiency Ratio
Technology Efficiency through 46.1% Regulated O&M Efficiency Ratio* 1.9% 41.0% Regulated O&M Efficiency Ratio Tax Reform Adjustment 0.3% 39.1% 2.4% 36.6%** 35.6% 44.2% 1.6% *** 31.5% 40.7% 36.7% 34.9% 2023 Target 2012 2014 2016 2018 2010 Adjusted Operation and Maintenance Expense* ($ in millions) 20
Slide 12: Fourth Quarter Highlights
Fourth Quarter Highlights 12Fourth Quarter Highlights 12
Slide 13: 2018 Financial Results & Long Term Outlook
2018 Financial Results & Long Term Outlook Linda Sullivan Chief Financial Officer ® We keep life flowing 132018 Financial Results & Long Term Outlook Linda Sullivan Chief Financial Officer ® We keep life flowing 13
Slide 14: Continued Execution of Company Strategy
Continued Execution of Company Strategy Contribution by Business 2018 2017 Change % Change Regulated $0.71 $0.66 $0.05 7.6% Market Based (12.5%) $0.07 $0.08 ($0.01) 4Q Parent & Other ($0.09) ($0.05) ($0.04) 80.0% Total Adjusted EPS* $0.69 $0.69 $0.00 0.0% 2018 Re-measurement from Tax Reform ($0.07)
Slide 15: Fourth Quarter 2018 Adjusted EPS Detail by Business
Fourth Quarter 2018 AdjustedEPS Detail by Business* 0.18 0.02 0.16 0.69 0.69 (0.03) (0.16) (0.02) (0.02) (0.05) 0.01 (0.09) Net revenues $0.02 z Regulated $0.05 MBB ($0.01) Parent ($0.04) * Adjusted EPS is a non-GAAP Measure. Please see appendix for reconciliation and further information. 15Fourth Q
Slide 16: Full Year 2018 Adjusted EPS Detail by Business
Full Year 2018 AdjustedEPS Detail by Business* 0.72 0.08 0.06 3.30 0.63 (0.05) (0.05) 3.03 (0.61) (0.06) (0.27) Net revenues $0.11 (0.16) (0.02) ($0.08) Growth ($0.05) Maintenance z ($0.04) Uncollectible ($0.03) Claims Experience ($0.03) Other ONE-TIME ITEMS ($0.02) NY Settlement ($0.02) WV TCJA Reg
Slide 17: Rate Filings Completed and Awaiting Final Order
Rate Filings Completed and Awaiting Final Order ($ in millions) Requested Revenue Rate Filings Completed* Awaiting Final Order $30 $201 $10 $171 $20 Infrastructure $21 Charges $2 $45 $43 $150 Rate Cases 2019 2018 Total Rate Cases Infrastructure Total Annualized Annualized Effective Charges Effective
Slide 18: Creating Customer and Shareholder Value
Creating Customer and Shareholder Value Capital Investment Cash Flow from Operations AWK Shareholder Value (a) (in billions) (in billions) Adjusted Return on Equity 10.1% $2.0 9.9% $1.7 $1.4 $1.4 Other Pivotal Reg Acquisition $1.5 $1.4 Reg Investment 2017 2018 2017 2018 2017 2018 (b) 2019 Expected D
Slide 19: Affirming 2019 EPS Range Long Term Guidance in the Top Half of Range
Affirming 2019 EPS Range Long Term Guidance in the Top Half of Range 2019 – 2023 Long Term EPS CAGR Guidance** 2019 EPS Affirm 2019 EPS Guidance 7-10%** Guidance CAGR Top Half 2018 Adjusted $3.54 - $3.64 EPS Of Range (GAAP EPS $3.15)* 2017 Adjusted EPS (GAAP EPS 2019 Guidance – Major Variables $2.38
Slide 20: Concluding Remarks
Concluding Remarks Susan Story President and Chief Executive Officer ® We keep life flowing 20Concluding Remarks Susan Story President and Chief Executive Officer ® We keep life flowing 20
Slide 21: Why invest in American Water
Why invest in American Water Clear, Transparent Story into the Future Demonstrated Execution of Strategy • Decades of investment needed • Line of sight to $8-$8.6 billion of 5 year capex • Five year Total Shareholder Return (2013 – 2018) of 140% • Fragmented national water and wastewater landscape •
Slide 22: Doing Well while Doing Good
Doing Well while Doing Good • #23 on Barron’s 100 Most Sustainable Companies; Highest ranked Utility New in 2019 • Bloomberg Gender Equality Index American Water commits to American Water earns 2019 further diversity in leadership Military Friendly® Bronze through a partnership with Employer designa
Slide 23: Your Calm in the Middle of the Storms
Your Calm in the Middle of the Storms Your Calm in the Middle of the StormsYour Calm in the Middle of the Storms Your Calm in the Middle of the Storms
Slide 24: Q&A Session
Q&A Session 24 24Q&A Session 24 24
Slide 25: Investor Relations Contacts
Investor Relations Contacts Ed Vallejo Ralph Jedlicka Vice President, Investor Relations Director, Investor Relations edward.vallejo@amwater.com ralph.jedlicka@amwater.com ® We keep life flowing 25Investor Relations Contacts Ed Vallejo Ralph Jedlicka Vice President, Investor Relations Director, Inve
Slide 26: Appendix
¥*& AMERICAN WATER Appendix
Slide 27: Forward-Looking Statements
Forward-Looking Statements Certain statements in this presentation including, without limitation, with respect to dividend growth guidance; the outcome of pending or future acquisition activity; the amount and allocation of future capital investments and expenditures; estimated revenues and regulato
Slide 28: 2018 Fourth Quarter Revenue Breakdown
2018 Fourth Quarter Revenue Breakdown ($ in millions) 4 46 23 $850 (6) $821 (38) z Regulated $6m MBB 282018 Fourth Quarter Revenue Breakdown ($ in millions) 4 46 23 $850 (6) $821 (38) z Regulated $6m MBB 28
Slide 29: 2018 Fourth Quarter O&M Expense Breakdown
2018 Fourth Quarter O&M Expense Breakdown ($ in millions) 16 $394 1 3 4 7 3 1 $366 1 z MBB Parent Regulated $15m 292018 Fourth Quarter O&M Expense Breakdown ($ in millions) 16 $394 1 3 4 7 3 1 $366 1 z MBB Parent Regulated $15m 29
Slide 30: 2018 Full Year Revenue Breakdown
2018 Full Year Revenue Breakdown ($ in millions) 3 22 149 3 76 6 $3,440 (12) (16) $3,357 (148) z Regulated $26m MBB $54m Parent 302018 Full Year Revenue Breakdown ($ in millions) 3 22 149 3 76 6 $3,440 (12) (16) $3,357 (148) z Regulated $26m MBB $54m Parent 30
Slide 31: 2018 Full Year O&M Expense Breakdown
2018 Full Year O&M Expense Breakdown ($ in millions) $1,479 2 25 10 9 11 18 20 $1,369 15 z Regulated $83m MBB Parent 312018 Full Year O&M Expense Breakdown ($ in millions) $1,479 2 25 10 9 11 18 20 $1,369 15 z Regulated $83m MBB Parent 31
Slide 32: Rate Base Calculation
Rate Base Calculation* ($ in millions) Estimated Rate Base* As of $12,647 12/31/2018 Net Utility Plant $17,073 $11,637 Less $10,694 Advances for Construction 252 CIAC – Contributions in Aid of Construction 1,322 $9,987 $9,398 Net Deferred income taxes*** 2,830 Deferred investment tax credits 22 $4,4
Slide 33: Rates Effective since January 1, 2018
Rates Effective since January 1, 2018 Annualized Annualized Revenue Increases Revenue Increases Effective Since Date Effective Effective in 2018 January 1, 2019 Infrastructure Charges West Virginia (DSIC) 1/1/2018 $3 Illinois (QIP) 1/1/2018 3 Virginia (WWISC) 3/1/2018 1 Indiana (DSIC) 3/14/2018 7 Te
Slide 34: Rate Filings Awaiting Final Order
Rate Filings Awaiting Final Order Rate Cases Filed Revenue Increase Company Docket / Case Number Date Filed Adj for TCJA ROE Requested Rate Base (a) Indiana Case No. 45142 9/14/2018 $18 10.80% $1,065 (b) Virginia Case No. PUR-2018-00175 11/2/2018 $5 10.80% $196 Kentucky Case No. 2018-00358 11/28/201
Slide 35: Regulated Utilities: Rate Base & Authorized Return on Equity
Regulated Utilities: Rate Base & Authorized Return on Equity Last Rate Case Awarded - Largest Regulated Subsidiaries (b) (b) (b) Authorized Rate Base* $498,135 $883,386 $841,915 $405,704 $1,249,293 (a) (e) (e) Authorized ROE 9.20% 9.79% 9.75% 9.70% 10.00% (d) (a) (c) (d) Authorized Equity 55.39% 49.
Slide 36: Closed and Pending Acquisitions as of January 31, 2019
Closed and Pending Acquisitions as of January 31, 2019 2018 Closed Acquisitions* No. of Water Wastewater Total State Acquisitions Customers Customers Customers California 1 50 50 100 Indiana 2 1,250 1,250 2,500 Illinois 4 2,400 2,400 4,800 Kentucky 1 600 - 600 Missouri 3 1,050 1,050 2,100 New Jersey
Slide 37: Reconciliation Table: Consolidated Adjusted Earnings Per Share
Reconciliation Table: Consolidated Adjusted Earnings Per Share* For the Three Months For the Twelve Months Ended December 31, Ended December 31, Consolidated Adjusted EPS 2018 2017 2018 vs. 2017 Percentage 2018 2017 2018 vs. 2017 Percentage Diluted earnings per share (GAAP): Net income attributable
Slide 38: Reconciliation Tables: Segment Adjusted Earnings Per Share
Reconciliation Tables: Segment Adjusted Earnings Per Share* For the Three Months For the Twelve Months Ended December 31, Ended December 31, Regulated Businesses Adjusted EPS 2018 2017 2018 vs. 2017 Percentage 2018 2017 2018 vs. 2017 Percentage Diluted earnings per share (GAAP): Net income attributa
Slide 39: Reconciliation Tables: Adjusted Return on Equity
Reconciliation Tables: Adjusted Return on Equity LTM LTM December 31, 2017 December 31, 2018 Net Income $426 $567 Adjustments: Freedom Industries Insurance Settlement (22) (20) Early Debt Extinguishment at Parent 6 - Keystone Impairment - 54 Contract Services Gain on Sale - (14) Tax Impact for items
Slide 40: Reconciliation Table: Regulated Segment O&M Efficiency Ratio
Reconciliation Table: Regulated Segment O&M Efficiency Ratio Regulated Segment O&M Efficiency Ratio FY FY FY FY FY (A Non-GAAP Unaudited Number) 2010 2012 2014 2016 2018 ($ in millions) Total operations and maintenance expense $1,291 $1,330 $1,350 $1,504 $1,479 Less: Operations and maintenance expen
American Water Works Company — FY2018 Earnings Presentation on 6ix